What The Wealthy Do

If you have changed jobs in the past 10 years and never rolled over your 401k, you have money sitting somewhere right now with high fees, limited investment options, and zero attention. That money could be working for you. Today we are fixing that.This is Episode 21 of What the Wealthy Do, part of the Step by Step Series. Today Stephanie Dorsey walks through exactly what to do with your old 401k when you leave a job, step by step, click by click.When you leave an employer you have four options: leave it, roll into your new employer's plan, roll into an IRA, or cash it out. Cashing out means losing 30 to 40% instantly in taxes and penalties. The right move for most people is an IRA rollover. But here is what most people do not know: there are two types of IRAs to consider.A traditional IRA at a brokerage like Fidelity, Vanguard, or Schwab gives you stocks, bonds, ETFs, and mutual funds. A self-directed IRA gives you access to alternatives like real estate, private equity, private credit, venture capital, and crypto — the investments the ultra wealthy use to build generational wealth.Stephanie walks through how to choose between them, how to execute a direct rollover without triggering taxes, what to do with multiple old 401ks scattered across employers, and the mistakes that can blow up your backdoor Roth strategy. Also covered: Roth 401k rollovers, the five year rule, and why you should open a Roth IRA today even with just $100.Browse all What the Wealthy Do episodes: https://docs.google.com/spreadsheets/d/1TaUUVivqfjSckA1oyhbjNRlbY_m0DMPLWbfH-eoHnDY/editJoin the next Sovereign Collective cohort: joinsovereign.coThis podcast provides financial education and not financial advice.

Peter Thiel used a Roth account to turn a small investment in PayPal stock into $5 billion the IRS cannot touch. That is not a loophole. That is a strategy. And today Stephanie Dorsey breaks down exactly how Roth conversions work and how to use them to pay less tax over your lifetime.This is Episode 20 of What the Wealthy Do, part of the How Does This Actually Work series. Every dollar in your traditional 401k or IRA will get taxed eventually. The question is not whether you pay. It is when and at what rate. A Roth conversion lets you choose to pay tax now at today's rate so that everything inside your Roth grows tax free forever and your heirs inherit it tax free too.This episode covers why the wealthy convert even when they do not have to, including rising future tax rates, required minimum distributions at 73, and estate planning. Stephanie walks through a real case study showing how a 15-year conversion window saves a family from a brutal tax bill in retirement, covers the five best times to convert, and explains when you should absolutely not convert.For entrepreneurs: the ROBS 401k Roth conversion strategy is also covered, the exact move Stephanie is personally executing at Margins Capital, where converting your business stock to a Roth while the valuation is still low could save you over a million dollars in taxes at exit.Browse all What the Wealthy Do episodes: https://docs.google.com/spreadsheets/d/1TaUUVivqfjSckA1oyhbjNRlbY_m0DMPLWbfH-eoHnDY/edit?usp=sharingJoin the next Sovereign Collective cohort: joinsovereign.coThis podcast provides financial education and not financial advice.

If you earn too much to contribute directly to a Roth IRA, the wealthy found a completely legal way around that. It is called the backdoor Roth IRA. And today Stephanie Dorsey walks you through every single step.This is Episode 19 of What the Wealthy Do, part of the How Does This Actually Work series breaking down the exact mechanics of wealth building strategies so you can actually execute them.A backdoor Roth IRA works because Congress removed the income limits on Roth conversions in 2010 while keeping the limits on direct contributions. That created a loophole: contribute to a traditional IRA, immediately convert it to a Roth IRA, and pay zero taxes if you do it right. The IRS knows about it. It is completely legal.This episode covers every step from opening your accounts to contributing, converting within one to two days, investing the cash in your Roth, and filing Form 8606 with your taxes. Stephanie also breaks down the pro rata rule, the number one thing that trips people up, and exactly how to deal with old traditional IRA money before you do your first backdoor conversion.Join the next Sovereign Collective cohort: joinsovereign.coBrowse all What the Wealthy Do episodes: https://docs.google.com/spreadsheets/d/1TaUUVivqfjSckA1oyhbjNRlbY_m0DMPLWbfH-eoHnDY/edit?usp=sharingBACKDOOR ROTH IRA QUICK START CHECKLISTStep 1: Open accounts if you do not have them- Open a traditional IRA- Open a Roth IRA- Use the same brokerage (Fidelity, Vanguard, or Schwab)Step 2: Clear out any existing traditional IRAs- Roll old traditional IRAs into your 401k to avoid the pro-rata ruleStep 3: Contribute to your traditional IRA- Transfer $7,000 (or $8,000 if 50 or older) to your traditional IRA- Keep it in cash, do not invest it yetStep 4: Convert to Roth IRA (1 to 2 days later)- Log into your brokerage- Convert the entire traditional IRA balance to your Roth IRAStep 5: Invest your Roth IRA- Buy index funds or target date fundsStep 6: File Form 8606 with your taxes- Use tax software or work with a CPAStep 7: Repeat every JanuaryThis podcast provides financial education and not financial advice.

You have probably heard that you should open an HSA. But has anyone actually walked you through what to do after you open it? That is what today is about.This is Episode 18 of What the Wealthy Do and the first episode of the Logistics Series, breaking down the exact mechanics of how these wealth building strategies actually work in real life.The health savings account is the only account with a triple tax advantage: tax deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses. Most people open one, get the debit card, and spend it on copays. That is the wrong move.Stephanie Dorsey walks through every step: how to check eligibility, employer HSA versus opening your own, how to invest the contributions, and how the wealthy use the HSA as a stealth retirement account worth hundreds of thousands of dollars by paying medical expenses out of pocket, saving every receipt, and reimbursing themselves tax-free decades later.A real example: maxing out your HSA at 40 for 25 years at 7% annual growth gives you $290,000 tax free at 65 from $107,500 in contributions.The HSA Quick Start Checklist is in the show notes below.Join the next Sovereign Collective cohort: joinsovereign.coHSA QUICK START CHECKLISTWeek 1:- Check if you have an HDHP (ask HR or check benefits portal)- If yes, check if your employer offers an HSA- If yes, enroll during next open enrollment- If no, open one with FidelityWeek 2:- Max out contributions ($4,300 individual / $8,550 family)- Set payroll deduction or automatic monthly bank transferWeek 3:- Log into your HSA provider- Move funds to investments (keep $1,000 to $2,000 in cash)- Invest in low-cost index fundsWeek 4:- Set up a system to track medical expenses- Pay all medical expenses out of pocket- Save every receiptEvery Year:- Max out contributions- Rebalance investments- Keep saving receipts- Watch it grow tax-freeThis podcast provides financial education and not financial advice.

This is the episode where everything comes together.This is Episode 17 of What the Wealthy Do, Part 3 and the finale of the Bonds Series. In Part 1 we covered what bonds are and why smart money never ignores them. In Part 2 we broke down how interest rates and the yield curve affect bond prices. Today Stephanie Dorsey builds the actual strategy.How much should you allocate to bonds? The old school rule of investing your age in bonds is outdated. The wealthy allocate based on where they are in life, what is happening in the market, and what their goals are. This episode walks through a framework by life stage, from investors in their 20s through 40s holding 5 to 15% in bonds, all the way to investors 60 and beyond thinking about 40 to 60% bond allocation and using bond ladders to create predictable retirement income without selling stocks during a downturn.Which bonds should you buy? This episode covers US Treasury bonds, TIPS, I-bonds, municipal bonds for high earners, investment grade corporate bonds, and bond ETFs for investors with less than $50,000 to put into bonds.The bond ladder strategy is explained in full, including how to reduce interest rate risk, create regular cash flow, and control when and how you reinvest as bonds mature. Stephanie also covers when to increase or pull back bond exposure and the most common mistakes to avoid.Join the next Sovereign Collective cohort for high-earning Black women ready to build real generational wealth: joinsovereign.coIf this series changed how you think about your portfolio, share it with someone who needs to hear it. Leave us a five-star review and follow the podcast so you never miss an episode. See you next week.BACKDOOR ROTH IRA QUICK START CHECKLISTHere is your action plan:Step 1: Open accounts if you do not have themOpen a traditional IRAOpen a Roth IRAUse the same brokerage (Fidelity, Vanguard, or Schwab)Step 2: Clear out any existing traditional IRAsRoll old traditional IRAs into your 401k to avoid the pro-rata ruleStep 3: Contribute to your traditional IRATransfer $7,000 (or $8,000 if 50 or older) from your bank to your traditional IRAKeep it in cash, do not invest it yetStep 4: Convert to Roth IRA (1 to 2 days later)Log into your brokerageConvert the entire traditional IRA balance to your Roth IRAStep 5: Invest your Roth IRABuy index funds or target date fundsStep 6: File Form 8606 with your taxesUse tax software or work with a CPAStep 7: Repeat every JanuaryHSA QUICK START CHECKLISTHere is your action plan:Week 1:Check if you have an HDHP (ask HR or check benefits portal)If yes, check if your employer offers an HSAIf your employer offers an HSA, enroll during next open enrollmentIf your employer does not offer an HSA, open one with FidelityWeek 2:Set up automatic contributions to max out the HSA ($4,300 individual / $8,550 family)If employer HSA: set payroll deductionIf self-directed: set automatic monthly transfer from bankWeek 3:Log into your HSA providerMove funds from cash to investments (leave $1,000 to $2,000 in cash)Invest in low-cost index funds (80% stocks, 20% bonds or target date fund)Week 4:Set up a system to track medical expenses (spreadsheet or app)Commit to paying medical expenses out of pocket, do not touch the HSASave all medical receiptsEvery Year:Max out contributionsRebalance investments if neededContinue saving receiptsWatch it grow tax-freeThis podcast provides financial education and not financial advice.

Bonds do not exist in a vacuum. They respond to what is happening in the economy, what the Federal Reserve is doing, and what risks are present in the market. And if you understand those relationships, you can predict how bonds will perform, how stocks will perform, and how to protect your portfolio when things get volatile.This is Episode 16 of What the Wealthy Do, Part 2 of the Bonds Series. Last week we covered the basics of what bonds are and how they work. Today Stephanie Dorsey goes deeper into two of the most powerful concepts in finance: the relationship between interest rates and bond prices, and the yield curve.The single most important rule in bond investing is that bond prices and interest rates move in opposite directions. When rates go up, bond prices go down. When rates go down, bond prices go up. Stephanie walks through exactly why using a real example, and what it meant for everyday investors when the Federal Reserve raised interest rates from near zero to 5% in just 18 months in 2022. Some bond funds lost 15 to 20% of their value that year. Investors who understood this relationship either held to maturity or bought bonds at a discount to lock in higher yields. The ones who did not understand it got crushed.The second concept is the yield curve, which Stephanie calls the bond market's crystal ball. The yield curve shows what return you would earn today if you lent money for different lengths of time. A normal yield curve slopes upward because longer term bonds pay more than shorter term ones. But when it inverts, meaning short term bonds start paying more than long term ones, it has predicted every major recession in the last 50 years, typically six to 18 months before it happens. It happened in 2006 before the Great Recession. It happened in 2019 before the COVID crash.Sophisticated investors watch the yield curve obsessively. And now you will too.Join the next Sovereign Collective cohort for high-earning Black women ready to build real generational wealth: joinsovereign.coThis podcast provides financial education and not financial advice.

Nobody is making TikToks about bonds. Nobody is talking about treasuries going to the moon. But the bond market is two to three times bigger than the stock market. It is the foundation of the global financial system. And if you do not understand bonds, you really do not understand how money works.This is Episode 15 of What the Wealthy Do and the first episode of the Bonds Series. Today Stephanie Dorsey breaks down everything you need to know about bonds starting from scratch, in plain language, no finance degree required.A bond is simply an IOU. Instead of borrowing money from the bank, you are the bank. You lend money to a government or a corporation. They pay you interest every six months and return your full principal at maturity. It is predictable, stable income that the wealthy have always used to preserve capital, generate cashflow, and balance the risk in their portfolios alongside stocks and alternatives.This episode covers what a bond is and how it actually works, the key vocabulary you need to know including face value, coupon rate, maturity date, yield, and credit ratings, the different types of bonds including Treasury bonds, municipal bonds, corporate bonds, international bonds, and savings bonds, the two ways to make money from bonds, why the wealthy never ignore bonds even when the stock market is performing well, and the most common myths about bonds that keep most everyday investors from ever using them.Next week we go deeper into how interest rates and geopolitics affect bond prices. In the coming weeks we will also cover what a potential dollar devaluation could mean and how to start incorporating bonds into your own portfolio.Join the next Sovereign Collective cohort for high-earning Black women ready to build real generational wealth: joinsovereign.coThis podcast provides financial education and not financial advice.

Last week was the problem. This week is the solution.This is Episode 14 of What the Wealthy Do, Part 2 of the Retirement Strategy Series. In Part 1 we covered why relying solely on your 401k is risky, how the retirement tax trap works, and what required minimum distributions will do to your money at 73 if you have not planned for them. Today Stephanie Dorsey builds the actual blueprint.The framework covers three pillars. The first is tax diversification, which means spreading your retirement money across four buckets: tax deferred accounts like your traditional 401k and IRA, tax free accounts like your Roth IRA and Roth 401k, a regular brokerage account, and alternative investments like real estate, private equity, and venture capital. Each bucket has different tax treatment, different rules, and different advantages depending on where you are in your career and what tax bracket you expect to be in at retirement.The second pillar is asset diversification across stocks, bonds, real estate, and alternative assets. The third pillar is income stream diversification so that no single account or market crash can wipe out your retirement income.This episode also breaks down how your retirement strategy should shift by age, from aggressive wealth building in your late 30s and early 40s, to tax optimization in your late 40s and early 50s, to preservation and income planning in your late 50s and early 60s, to tax smart withdrawals and legacy planning in retirement. The backdoor Roth IRA strategy for high earners is covered, along with how the wealthy use portfolio loans to avoid selling their investments, how to think about Social Security timing at 62 versus 70, and the specific action steps you need to take right now to audit and rebalance your accounts.This is one of the most practical episodes in the series. By the end you will have a clear picture of what your retirement strategy should look like and exactly what to do next.Join the next Sovereign Collective cohort for high-earning Black women ready to build real generational wealth: joinsovereign.coThis podcast provides financial education and not financial advice.

Most of us think we know what retirement is going to look like. But here is the truth that nobody really says out loud. For most people, a 401k alone will not be enough to fund the retirement they actually envision for themselves.This is Episode 13 of What the Wealthy Do, Part 1 of a two-part series on retirement strategy. If you are between 38 and 55, this episode is for you.Stephanie Dorsey, CEO and Co-Founder of Margins Capital, breaks down why relying solely on your 401k puts your retirement at serious risk and what the wealthy do differently to protect their money from taxes before and after they retire.The 401k was introduced in 1978 as a supplement to pensions, not a replacement. Corporations eventually shifted the entire weight of retirement planning onto employees, and now millions of Americans are trying to retire on a savings vehicle that was never designed to carry 20, 30, or 40 years of retirement on its own.Three core problems get covered in this episode. The first is that contribution limits are simply too low to build the retirement wealth most people need. The second is zero tax diversification, meaning every dollar in a traditional 401k will be taxed at ordinary income rates when you withdraw it, and the IRS will force you to start withdrawing at age 73 whether you need the money or not. The third is limited investment options that keep most 401k savers locked out of the asset classes where the wealthy actually build wealth.Stephanie also walks through what required minimum distributions really mean for your finances, how the retirement tax trap works in practice, and how the wealthy spread their money across tax deferred, tax free, and taxable accounts to control their taxable income in retirement.Next week in Part 2, we build an actual retirement portfolio strategy. But today is about making sure you understand what is at stake and what needs to change right now while you still have time.Join the next Sovereign Collective cohort for high-earning Black women ready to build real generational wealth: joinsovereign.coThis podcast provides financial education and not financial advice.