Seth: Hey, everybody. How's it going? This is Seth Williams from retipster.com. Today, I'm talking with Henry Yoshida, the CEO of RocketDollar. So Henry's career is an interesting blend of Wall Street credibility and entrepreneurial risk. He spent 10 years at Merrill Lynch. He built a venture-backed robo-advisor called Honest Dollar, which was acquired by Goldman Sachs. And now he leads RocketDollar, a company helping people invest their retirement accounts into alternative assets like real estate, startups, private deals, and more.

He is a certified financial planner and a licensed real estate agent. He holds an MBA from Cornell University. Today, we're going to talk about his journey, but more importantly, we're going to unpack one of the most underutilized tools in real estate investing, which is using your retirement accounts to buy real estate. So, Henry, welcome to the show. How's it going?

Henry: Great. Thank you very much for having me, Seth.

Seth: I know we talked about where we are in the country, so it's kind of nuts, but it's already like in the mid-80s here. Henry is in Austin, I am in Grand Rapids, and the climate is very different between where we're at.

So I'm curious if we wind back the clock a bit, what originally pulled you into the world of retirement investing in financial services?

Henry: It was almost by accident. So, you know, you talked about where I started my career. So it was Merrill Lynch in the year 2000.

People recall so I'll probably age divide the audience here but there was a big concern there at that point called Y2K so people thought that you know when the year 2000 was going to happen that the internet bubble would burst and and for the most part actually there was a pretty severe recession in the stock market at that time and since I was starting right out of my undergrad days at Merrill Lynch I was supposed to go try to find individuals to open accounts with Merrill Lynch manage their money. But there was a three-year decline in the stock market in 2000, 2001, and 2002.

And quite frankly, the way that I learned to survive was actually switching my focus inside of Merrill Lynch from individual clients to small business owners and helping them set up a starter 401k plan. So that's what kind of led me down this path of now for 25, 26 years, becoming an expert in tax advantage retirement plans. So it started with group plans for small businesses, then went to large plans for large businesses, and then back down to IRAs and 401ks for individuals.

Seth: Did your time at Cornell teach you anything about finance that turned out to be kind of incomplete or just not true in the real world?

Henry: A lot of it depends on maybe who you might have as the professor. So I think that the philosophies, what they choose to teach you, teach you different things. And we had good finance professors who I think they were correct in certain parts where they would tell you how to use leverage to basically increase the net equity of the real estate you own. A lot of real estate people in your community would know this, but.

You usually are going to build the equity before you build the cash flow. You know, you have to kind of plant the seeds for the equity. The equity grows, the equity then transforms into the cash flow. But, you know, if you start out in real estate trying to get great cash flow, right? I mean, you'll never get started, first of all, because I talk to folks. I'm sure Seth, you do too. They say, hey, I want to get into real estate and I want to create and replace $120,000 a year income.

And then they work out that a decent property, single family rental property, might only cash flow for them if they have leverage against it. $100 to $500 a month. So then they started working out the math that now I don't think I want to own 200 to 300 homes. So I'm going to do something else to go replace this cashflow and so forth.

So I think that some of those lessons I've learned, but you know, what's funny is I actually concentrated more in my MBA studies on the marketing side. So I really thought that being able to clearly articulate what you wanted to do and what you wanted to sell or what you wanted to present. Actually, then I think those were the biggest takeaways I'd had from my in graduate studies more than the actual nuts and bolts of the numbers itself.

Seth: Somebody told me a few years ago something that kind of stuck with me. He was saying that you make your money in your business and you preserve it in the market, not the other way around. Some people kind of get that backwards. They think they invest in real estate or the stock market and that's how you get rich. It's like, no, no, you need your cash building machine. And once you make the money, then you just make it multiply in the market. Would you agree with that? Or is there anything misguided or not complete about that statement?

Henry: I think that's true for sure that, you know, a lot of these vehicles that you might invest in are a way for you to preserve wealth and or perpetuate wealth or cash flow in a way that might outpace inflation, which would be you accumulating money and then not doing anything with it. Right. If you actually do nothing with it, then it's eventually going to end up. Being worth less than the buying power that it would afford it over time. So yeah, I think that's a very, very fair statement for sure.

Seth: I hear a lot of people citing this stat that, you know, you look at, you know, nine out of 10 billionaires and they all have a lot of real estate in their portfolio. You know, it's a, yeah, that's true. But like real estate wasn't their cash machine. Like they had a business that made them a ton of money and then they parked their money in real estate.

And sometimes I'll hear real estate investing educators use that without mentioning the other part that like it was actually a totally different business that made them most of their money. I think it's an important distinction to know if you're teaching people that, you know, you can just get rich just by buying raw properties. I don't know. I mean, maybe if you're really good at finding seriously undervalued deals or something, but I just curious your thoughts on that.

Henry: Well, but even if you do, even if you are really good at finding a seriously undervalued deal, right? I mean, there are basically three prongs to how you make money. Unless since you, since you mentioned real estate, let's just use real estate as an example. Okay. So my finance background leads me to think that, okay, if someone purchases real estate, there are three levers in terms of the way you make money over time in that particular property.

The appreciation of the property, the pay down of the debt, which then increases your equity over time. So hopefully that's being done by tenants and not yourself. Otherwise that would defeat the purpose and kill essentially the third one, which is the cashflow. Okay, of those three, typically let's say over a longer period of time.

I would bet that the one that has no cap, two of the three that have no cap are the cash flow and then the growth of the price appreciation. Okay. The one with the cap is actually the equity pay down because the most you can get out of that is that you eventually just pay down the debt to zero.

But over a 10 year time period, you're probably going to find a distribution to where 60% of the gain you made in equity or wealth actually came from the price appreciation of the property. The longer you go, so 10 years, 15 years, 20 years, it's going to be a higher percentage. But let's just say anything over 10, 12 years is probably going to be 60% from that price appreciation. Another 20%, 25% may come from the debt pay down because depending on how much leverage you started at, and then it gets paid down to maybe zero if it's been long enough.

And then the third one is the cashflow increase. May have started at only 100 bucks. And then as you have no debt against that property, maybe it goes all the way up to, I don't know, 1,500 a month net operating income, like a net income after all operating expenses, for example. So So, you know, that being the case, that one grows that the other 15%.

So like when you look at your distributing out this 100% proportion of the three ways you make gains in wealth, it's usually the price appreciation and there's no upside. There's no cap on that. I mean, it could go forever, right? I mean, you're in Grand Rapids, I'm in Austin, Texas, Austin has been a highly appreciated market. But for people who listen to you in Los Angeles, right? They all know someone who's 65 years old, who bought a home.

$118,000 in Los Angeles is now worth $1.18 million.

Seth: You have an interesting background in that you are a certified financial planner and a real estate agent. So you kind of understand both worlds to some degree or to a lot of a degree. Do you think traditional financial planners misunderstand real estate? When I think of like one of the financial planners that I have, who basically just tells me what fun to put money in, he's like completely blind to my real estate portfolio. He doesn't even really know it exists. It's not even part of the picture. Like, is he really even a financial planner if he's not actually looking at the whole plan?

Henry: Well, I mean, I think that if you're really going to label them, it'd probably be that they're an investment advisor, but specific to, let's say, traditional or packaged investments, right? Index funds, ETFs, mutual funds, and maybe stocks and so forth, but they don't see that whole picture, right?

But I think there's more and more. There's a new class of financial planners slash advisors who I think take into consideration the holistic. Now, they may, this could be a little controversial, but there's a little bit self-serving that they don't include the rest, the other part of the picture, because you do not pay any of the money for management fees on the real estate part of your investment portfolio set to your financial advisor, right?

The best that the advisor could hope for is that they become the place where you decide to park money as you harvest it. So you built a rental property portfolio, you have 10 of them, you decide to sell three, pay down the debt on the remaining seven that you own. And now you're creating significant cashflow in excess of what you need or want to use to live on a daily basis. And that excess now gets sent to your financial advisor to then be distributed into the stock market as opposed to additional real estate.

At this point, you've kind of hit the peak, let's say for your personal preferences of how much you want your portfolio to be worth or the size of it from a real estate standpoint. So now you're looking for another bucket to park it. Like you said, the stock market itself or real estate is not the money-making machine. It's where you divert the money to, to make sure that it keeps up and exceeds the rate of inflation or the cost of living on those dollars. So the short answer to your question is that...

Yes, they're myopic. I wouldn't say it's that they're clueless, but it's probably more rooted in self-serving interest that there's no economic incentive for them to consider any part of that. Right. Because when you meet them, they'll say that, Seth, you got debt. You shouldn't have debt. You own, let's say, 10 properties. You should sell all of them and then let me put the money into a fund for you. There's a reason for that because that's the only way that they're going to benefit financially.

Seth: You know, I can't stand that, but that's just how the world works. Like, if I go to my doctor, you know, some other advisor, it's like the recommendation is probably going to be something that serves them in some way.

Henry: I mean, that happens in the medical profession, right? You go to the doctor and they are recommending that you get some sort of like, you know, medication or try this. And I'll single out one part of I don't know if it's like medical, but let's say it's something related to medical care. But it's dentists, right?

I mean, the funny thing is you could literally go to a dentist, one dentist for a year. And at that point, let's say you fix everything and your teeth are perfect. I'd be willing to bet money that if you go see a new dentist, they're going to find something wrong with your teeth that they want you to charge you for. I'm just going to go out on a limb. That may be controversial. You may have dentists that listen to you, but no one's teeth are perfect to any dentist the first time they see a patient.

Seth: The next time I go out and buy a brand new car, the first thing I'm going to do is take it to one of those instant oil change places just to see how many things they say are like worn out or filters that I have to replace. And I'm like, ha ha, joke's on you. This is a brand new car. But I can almost guarantee they're going to find something, right? That'd be good online content, by the way.

Henry: Yeah, maybe I'll do that.

Seth: So let's talk about RocketDollar. What is this? What was the original idea behind this when you started it? Tell us a little about that.

Henry: Well, my own sort of life journey took me to sort of thinking about this. So the economic circumstances in the macro environment are what got me into retirement plans when I was in my early 20s, just graduating college. And I'd become pretty well known, pretty knowledgeable in these tax-advantaged account spaces. So one of the things from, you'd mentioned the company Honest Dollar.

The digital role advisor that was eventually acquired, the assets were acquired by Goldman Sachs. You know, one of the reasons why that company actually didn't work from a continued operating standpoint was that we were not actually targeting with that particular product, a large enough value client. So the end client was someone who didn't have a lot of dollars to save. It was just helping them get started.

So, so in finance terms, we call that lifetime value, right? So the lifetime value, the customers that we were targeting with Honest Dollar didn't really exceed the acquisition cost of acquiring those customers. So customer acquisition cost, CAC. So that learning forced us into selling that company and the assets to Goldman Sachs.

And then that started a reflective journey for me of thinking that, okay, I'm this person now at this point, this is 2016. I'm about 15, 16, 17 years into basically being a person from a career standpoint who is a mile wide and only one inch deep or a mile deep, an inch wide, and only one particular area in retirement plans. So where can I stay within that particular realm yet go after a customer segment with a product I can create where the value is higher, there's not a lot of competition, and I could acquire the customer from a value standpoint in a way where it was less from a customer acquisition cost standpoint and that kind of led me to.

I had raised venture money I wasn't seeking it but venture money was offered to us for Honest Dollars so in that process I'd met a lot of venture capitalists private equity folks startup entrepreneurs who were raising funds angel investments and so forth and it's kind of hit me that a lot of these people actually want to do these deals but the only monies they had because they spent let's say 10 years at Amazon or 15 years at Microsoft and so forth where they had these gigantic 401k plans that they couldn't access.

They'd since left, right? They left Microsoft. Now they're doing this startup or they went to a much smaller company. They got burnt out working for the 100,000 employee company. So they decided to go work for the 200 employee, much smaller company. They have access to that plan, but it's not liquid to them from the standpoint of being able to do anything outside of stocks, bonds, and mutual funds.

So I started looking it up that people actually were doing this. There were famous people, founder of PayPal, Peter Thiel, Mitt Romney, who was a U.S.

Presidential candidate, current senator, U.S. senator. These people did not know each other, had completely different circles, yet somehow figured out a way to access their retirement accounts to go do private investments. And it kind of dawned on me that it's the ability to do this exists within the IRS code. The ease of doing it from a regular person standpoint did not really exist.

So that's what led to the creation of Rocket Dollar and meeting all these people who wanted to do private deals and said, look, I would love to do this deal, but I don't have $50,000 sitting around. The irony is I got $550,000 sitting in my 401k because I worked at a company with a great match for many, many years before switching jobs a couple of times since then. But the first job I had in my career, I spent a long time there and I got all the money.

But the only thing I can invest in there are stocks, bonds, and mutual funds. Or even worse, if they never took it out of that company, they only have choices of 18 to 22 mutual funds to go into. So they think it's locked up. And I've started realizing that I could create a company called Rocket Dollar. The name implies that you can go further and farther and do different things with your money than you could do.

I had named the company car dollar or bicycle dollar or jogging dollar and so forth. That's hence the name. And that's where the idea came about was just meeting all these people who wanted to get into private deals and telling me that they had access to the deals. They knew about the deals. They knew the deals were great, whether it's real estate, private equity, venture, angel investments and so forth. But then the caveat then telling me that they just the irony is they have money in one account. They can't use towards that investment, but they know about the deal.

And then I sought out to solve that problem by starting a company called RocketBeller, And that's what we do.

Seth: You mentioned the ease of getting the money into RocketDollar so that you can then use the money to buy real estate or do whatever kind of deal you want to do within the limits that are allowed. But how easy is it? Like if I have a bunch of money in a traditional IRA and then a solo 401k over here and then a Roth IRA over here, which of those would actually make sense or which of them could I bring into RocketDollar to start working with there?

Henry: So technically you can bring all three of those in. It's just that you would open the same like kind account at Rocket Dollar. So Rocket Dollar itself, we're an IRA provider, no different than a Fidelity, Vanguard, Merrill Lynch, UBS, Morgan Stanley, Edward Jones.

LPL Financial, Raymond James, wherever your planner might be or wherever you decide to manage those, quote unquote, more traditional investments. So if you have a traditional IRA over there that you want to transfer funds from, then you would need to open a traditional IRA with us at Rocket Dollar. Same thing if you have a Roth IRA, you need to open a Roth IRA to keep the account.

And then you mentioned solo 401k. So for those in the community that don't know, that's a one person or very small business 401k plan that you set up. And if you want to roll those funds over, we have either a solo 401k product that you open at Rocket Dollar, except ours allow you to do private and alternative investments. Or if you're going to terminate the plan in any way, then most likely it's going to be with the type of money that would be traditional. So it's never been taxed. So you'd roll that in to our traditional IRA at Rocket Dollar and then access it.

And the part of the question you asked about is how easy is it to do private investments and get money into these accounts? Well, the way that we do it is and it's easiest for me to speak in terms of analogy, which is that we have created a methodology to where our technology technically opens up a trust entity in the name of the account holder. And that trust entity allows us to then open a bank account. That bank account is inside of your IRA, whether traditional or Roth here at Rocket Dollar.

And because it's a bank account and because it's inside of an IRA and we automatically do this with our technology, once cash goes in there, it has the treatment and the shield of IRA dollars. So then if you have a private deal, let's say real estate's a great example, you need to make a closing, you need to go buy this property and you need to go disperse $150,000. Well, you're operating and just wiring the money from the bank account that's nested inside your IRA to do the deal probably no differently than how you do that deal now.

Now, the caveat I'll mention, though, is that if you use these funds for real estate specifically, the IRS rules do not allow you to have leverage against it. So most of our all of our customers who are doing single family property rental buys, they're buying the whole house because they had this five hundred thousand dollar old 401k.

Now they're going to buy two two hundred thousand dollar houses in the Grand Rapids, Michigan area. They would deploy all 200 and 200. So hence, high cash flow, no leverage because it's inside of an IRA. And then if you don't have that amount of money, what we see a lot of our customers doing is actually more real estate syndication. So they would then be doing $25,000 investment into the syndication. We're processing those kinds of deals day in and day out.

Seth: So it sounds like if I actually wanted to access my retirement money to use as a down payment for something, that's not what I can do here because you can't have leverage against it. Am I following that?

Henry: Yes. You don't, you don't do leverage.

Seth: Gotcha. So is the assumption that everything with RocketDollar is all self-directed stuff or is there any stuff that's like, no, I just want to throw money in there and you invest it for me. Have that kind of thing too, or is it?

Henry: Actually, we're working on some particular products in the private space where we might offer packages or we might offer access to, I would say like the more broad market type of private investment.

So let me define that real quick for you. The private investment world, and I did see this after the Honest Dollar deal. The other reason was that I started realizing that private investments were actually becoming a bigger and bigger part. And then history also shows that your largest, most sophisticated investors. So think of your college endowment funds, your retirement pension funds for the entire state of Michigan or the entire state of Texas.

For example, or multi multi billionaires or just billionaire family offices, for example, those people do not, you know, call a financial advisor and have 95% of the money in the stock market and maybe a couple of rentals here and there. They typically had a percentage over time and the Yale endowment fund was actually the sort of flagship. So it was run by a gentleman named David Swenson for almost three decades. He passed away now about five years ago, but very famous pioneer in the investment management world.

And he had said for the entirety of his reign, heading up the Yale endowment fund, that they were 50% in private investments and only 50% in public. So it's always a 50, 50 portfolio, which is very unusual to a retail investor. But now that's starting to become more and more available, more and more known to retail individual investors. So people want to do more and more private. And because of that, some of these giant private equity firms are creating versions of their funds.

That are accessible through intermediaries but technically still private funds they invest in things like private credit real estate infrastructure infrastructure being things like you know the private part of funding things like bridges airports highway construction and so forth but we're working on a deal to make some of those available because right now every deal we have is what we call like a BYOD like a bring your own deal people find out about the deal let's say, through a syndication that someone's putting together or a real estate investor who's putting together deals or a founder who's raising money or a small private equity fund who's raising capital and willing to take small investments in 50 to $100,000 chunks from IRA investors or just individual investors.

So they have that deal. They become a customer of ours. But again, after that, they start to reach out or wonder like, what else could I do? Because at the end of the day, hey, I did bring over $100,000 from this old 401k. There's another 450 there. I need to leave some in the stock market, but it's gone up for a long time, much higher than what I originally put in from a principal basis. And I'm kind of worried that the bottom could drop out because I've seen this now in 25 years, right?

There've been actually, you know, people don't realize this, but there've been 30% drawdowns in the S&P 500 about six to nine times in 25 years.

Some are sustained over a couple of year periods. Other ones only last for three to four months. The most recent being, actually there were two. And the funny thing is people remember when I bring it up, but they don't remember it just in regular day-to-day living. So one was when the pandemic started, March of 2020. We had a 30% plus drop in the S&P 500. And then the other one was Liberation Day last year, April. We had a big drop. You know, that's when we threatened to basically tariff the entire universe.

Seth: Why do you think most Americans don't realize they can buy real estate in their IRA like this? Is this like a lack of education or is it like a structural incentive problem in the financial industry?

Henry: So structural incentive is a very politically correct way of saying it. But I think I'll be a little more direct and say that the largest providers of IRA accounts, brokerage houses, financial advisory firms, broker dealers and so forth. On the one side, they provide these types of accounts. So we'll use Fidelity. They're the biggest. Vanguard's number two. Let's just use Fidelity, Vanguard, and Schwab.

On the one side, if we were to go to any of their three websites right now, it's very easy for us to open a Roth IRA or traditional IRA on their digital platform. But the other half of their house actually is in the business of manufacturing packages, investment products. The package is being wrapped around public stocks, so mutual funds, index funds, right? VTI, VOO, very famous, you know, S&P 500 index funds covering total stock market and S&P 500, respectively. Those are manufactured by the other half of Vanguard's house.

So when you open an IRA at a place like Vanguard, they don't really want to let that customer then go out and buy a single family home in the greater Grand Rapids, Michigan area because there's no financial incentive for them to do so. But if they were to purchase VOO.

A product that they package and distribute, you know, it's a win-win for both sides of that house. So, you know, I kind of liken it to where Costco is going to sell Kirkland Signature and then have incentive deals for the other products that they offer from brands, but they're not going to offer, you know, great value products from Walmart on the shelves at Costco.

Seth: I once had a self-directed Roth IRA with a different custodian. And I remember I would use it to buy and sell land. I mean, it was great in the end because I would make a ton of profit And it was Roth, so it was post-tax. And of course, I can't touch it until I'm 59 and a half. But I remember it was kind of a pain.

Henry: In Roth, you can, by the way. So I can tell you a little bit about that in a second. But continue your story. I'd love to get into that.

Seth: But one of the things I remember is that when I was trying to tell the company, hey, send the money over here to this title company so we can close, I had to fill out this direction of investment form. And it felt like a big hassle to do that. Does RocketDollar have a way around that? Because it sounds like, from what you were explaining earlier, do I have checkbook access? Like I can just write these checks myself or tell the bank to send the money somewhere. How does that work?

Henry: So you do have checkbook access for being able to do it, but to do those investments, but you still have to have the direction of investment because the funds itself, if you wanted to get them back to yourself or redistribute them somewhere else, they need to get pushed back up to the IRA level to then get pushed out.

We have these DOIs sort of pre-filled out inside the system. So we've thought about that and tried to remove the friction. So because it's in an IRA and you get the tax advantages, it's not quite as easy as moving cash around in your Venmo account to your friend, for example. And it's also not quite as easy as just a traditional bank account. But it's not as bad as, I think, what you experienced with the old self-directed custodian.

And then, Seth, if you're interested on the Roth one, this could be good for people to know. But the Roth IRA itself is very different than the traditional. So the basics here are that the Roth IRA, you pay tax upfront on the money that you put into your IRA. So let's just use a simple example, $10,000 or $5,000, because that's under the limit. So if someone is eligible to open a Roth IRA, you can put $5,000 in today. The money you put in is your after-tax money.

If you open a traditional IRA and you put $5,000 in, you could then ask your tax advisor to take a deduction for the $5,000 contribution. So you have not paid taxes on the $5,000. The $5,000 goes into two investments. Both of them grow because they're the exact same investment to $15,000. So 200% return, $15,000 on your initial five.

If you're over 59 and a half, like you mentioned in the traditional and you take the money out, you will pay tax on the amount of money that it grew, so the 10,000 that it grew. In the Roth, you paid taxes on the 5,000 initial ones, so whatever it grew to, the 15,000, if you wanna take all of it out, there's no taxes due on the entire 15.

The additional part that most people don't talk about, people know that what I just explained in a Roth at a general level, enough to be able to have this conversation with their tax advisor. What a lot of people don't know about the Roth is that when a Roth IRA is established, any monies that you put in there, because you've already paid tax.

Technically you can take back out at any time you want with no penalty because you've already paid tax. So it's already after tax money. So if you put 5,000 in each year for 20 years, that's 100,000 in principle. You could take 100,000 out of your Roth IRA.

The other one that a lot of people don't know is that once a Roth IRA has been in place for five years, you can still also take money out of the IRA to back to yourself. So you can take money out of it.

Seth: Is it only the principle you can take out then? Like the original mob, but not the growth? You couldn't take the growth out till you're 59 and a half?

Henry: You could take out the growth, some of the growth. So you remember, you're just removing it from that shield. So the Roth is more flexible in terms of what you could take out.

So I just wanted to, you know, kind of give people this caveat that it's a lot more flexible. And then, you know, just from a more historical financial trivia standpoint, it's actually named after a late U.S. Senator who came up with the idea in the late 90s, thinking that it was more accessible.

Now, before you do all that, though, a lot of people who I think like might see you or might see me on a show, they may not be eligible because there are income restrictions. So basically in this one, like a lot of the incentives that you might get from the IRS for certain things, if you make too much money, you phase out and you don't get to do these accounts.

So roughly if you file jointly and that income is over 250, this isn't the exact number there's phase out ranges, but I just like to use round numbers to make it easy for people. If you make over 250 and you file jointly, can't start it off. If you make over 150 and you file single.

Can't file for, I can't do a Roth either. So those aren't the exact numbers again, but people don't, if I tell the exact ones in the phase out ranges, no one will remember.

Seth: Let's say I do this with RocketDollar. I set up a self-directed IRA of some kind. What kinds of investments can I put that money in? Is it like literally anything? I know real estate is an option, but what are examples of things that I could not do with that?

Henry: The easier way to think of it is that the first one is that ever since 1974, when ERISA, Employees Retirement Income Security Act of 1974, the law was created. That's what established IRAs in historical terms. At that time, the code only wrote that the investments that are specifically excluded from being held in an IRA are life insurance and collectibles.

So life insurance, I think, is pretty self-explanatory. Collectibles, I sort of try to put it in layman's terms as a show-me asset. So you can't put things like the artwork that you hang, famous valuable artwork, a collector's baseball card, a hobby car, an antique car, for example, you can't own those types of things like show me type assets inside of an IRA. So that being said, by virtue of elimination, if those are the only things you cannot specifically own an IRA.

Everything else that's an investment can be owned inside of an IRA. OK, now, the bigger caveat is that the investments that you own, you just can't have a personal interest in them. So there's a you can't buy a property and then using your IRA and then lease that house to your brother or your daughter or your father, because, you know, the idea is that you probably won't evict those people.

Ironically enough again another trivia is that it's weird if it's a direct step relative left right so that sibling up is parent down is child but if it goes diagonally so like mother-in-law is a good example that's actually allowed so I guess the theory is that you know maybe you wouldn't cut a break to that person at least in the IRS's eyes but those are called prohibited transactions because there's a personal conflict and so that using that same thinking line that That also prevents you from investing in your own business that you operate and run and.

Like buying the shares of your own business and now for anyone and this is even in the traditional investment world it probably makes sense to where whenever you open an investment account online they always ask you questions like do you work for the SEC or any other financial regulatory agency.

And are you a 10 or more shareholder of a publicly traded company and I always think to myself the answers are always no for those questions for me and then when I get to the 10 one I always think to myself, I wish, I wish I was Elon Musk and own 16% of Tesla, you know, and so forth. I mean, why would I be filling out this form myself if that were the case?

Seth: Yeah, man. But there's a reason why they ask those questions is so they have it recorded in their database that there's a company that you might control. And if you happen to have an IRA there or certain accounts, you can't invest in them without getting specific approval. There's a rhyme and reason to it why they ask you those questions.

What are the most common account structures people use through Rocket Dollar? Because there's something called direct custody versus checkbook control.

Right? What's the difference between those things?

Henry: The direct custody is appropriate if you're, if you got referred to us just to do one particular deal. So let's say it's a deal that you want to do, but you want to tap into some of your retirement dollars. It's the only thing you plan on doing with your IRA. The direct custody is that one that you were, you were describing where the custodian in our case, our backend custody, we're the same company, but we name it Digital Trust basically is the one who oversees the account for the benefit of Seth Williams or for the benefit of Henry Yoshida.

So when we want to make that investment is Seth, you would be sending us those investment docs at Digital Trust. We would do a one business day review just to make sure it's eligible to be held in an IRA, not to evaluate the merits of the investment. But we do that and then we give authorization and say, hey, it's good. And then we basically will fill out those subscription docs as the custodian, but for your benefit. And then when you authorize us, then that money comes out from our omnibus account. It's your money.

But we disperse it and we sign those subscription documents for you because we're the custody of the funds for your benefit. And that's the same as your traditional IRA at Fidelity. If you read the fine print, technically the name of that account is your Fidelity Trust Management Company, FTMC or FMTC, Fidelity Management Trust Company, for the benefit of Seth Williams' traditional IRA. That's the technical name of the account. It's not your name first.

In the checkbook control one, what we custody at Digital Trust is just that entity. That entity is able to create the bank account. So then you operate that bank account. But when money leaves the ecosystem, us, a DOI is required, but we have one that's automatically filled out.

So I tell people that the checkbook control is better if you plan on doing multiple investments over time and you just want the ability to be a little more agile and quick. And real estate deals, direct real estate deals usually require that because it'd be hard to communicate to the custodian that I need funds dispersed on X date because my closing is on the day following. It needs to be in the escrow account and so forth. So that's difficult because you're relying on an outside party to go do that for you.

But with the checkbook control, you can basically go into the integrated bank portal, set up the wire, make sure it's there. And when you show up to the closing, the funds have already arrived. And so we're closing.

Seth: So that direction of investment thing is that needed just so that Rocket Dollar can make sure I don't mess something up because that way that's required.

Henry: It's required because technically the money has to pass through the IRA part of the account to make sure it maintains that treatment. So it's more for that purpose, because if you were to send it directly, then it'd be hard to track that, you know, it really wasn't IRA money. So it stops in one place first.

So it's very similar to a real estate transaction. So if I were to kind of speak.

I think in a way that your audience understands that when you and I or anybody listening to us right now on your show purchases a property, we don't technically send the money directly to the person we're buying the property from, right? Like we both agree to send it to one particular place. They settle the funds. And then they disperse out the end.

So we send our down payment up. The lender sends their part up. This is a non IRA transaction, obviously. It sits there. And then at the closing, those funds then get distributed to the seller of the property. We're never sending the money directly to the seller. There's an intermediary in between.

Seth: So the direction investment, it's not like there's somebody saying, nope, I'm not going to do it because this isn't right. It's more just like a technicality or.

Henry: Yeah, it's just a necessary step. So it's like before you can exit the house, you have to walk through the hallway. It'd be impossible to go directly from bedroom to front door. Like it's physically not possible, right? You have to walk through some hallway or some in-between space.

Seth: I got you. Unless I guess it's the matrix, right? And then I guess the door opens you're immediately somewhere else. As you're talking, I'm trying to think of some way that that's actually possible, but I can't think of anything.

So what types of real estate deals work best inside one of these retirement accounts? Like do you have any examples or common types of real estate deals that you see your clients doing with this?

Henry: I think it depends on the type of account. So syndications, becoming an LP and a small real estate fund, those can be done just fine with a custodial account, even if it's actually more than one. Those are fine. If you're operating a direct property yourself, I think the checkbook one lends itself much better and not on the front end.

So I spent a little bit too much time probably talking about how the mechanics might work of a checkbook account, buying the property on the front end. But think of the ongoing after the first purchase, which is that now you're going to have multiple payments coming in in the form of rent. And then you'll have to disperse payments for operating that particular property. All that money has to come in and out of the IRA itself.

So you'll hopefully have 12 months and 12 different rent checks, right? Assuming no vacancies coming in. So that's 12 transactions right there. And let's say that you have, you know, routine maintenance that you might apply or bills that you pay or property taxes, like, you know, inside the checkbook account, you're effectively operating a bank account to manage transactions. So it's fine. But remember, the thing is that if you ultimately sell the property, you'd need a DOI because it would go through a different step.

The idea is that if there's a lot of transactions and a lot of sort of manual work involved and one where it'd be really hard for you to rely on a custodian to disperse funds to pay for the property taxes on X date exactly.

Then the checkbook control one lends itself better for operating a direct property. And the custodial one really works when you're, quite frankly, just more of a passive investor generally in any deal, whether that's real estate syndication, becoming an LP in some fund, whether that's a real estate fund, venture fund, private equity fund, or just an angel investor in a small company.

So those are very passive, right? So you don't really expect payments to keep coming in and out.

Seth: What I hope people are taking away from this is specifically in the land investing space. Henry, I'm not sure how much you know about land flipping, but one of the biggest hassles or roadblocks that we land investors have is funding deals. Because a lot of times it's not impossible, but it's harder to get a traditional bank to just finance a land flip when you're buying land and doing nothing to it and then selling it for more. Banks want to see that you're improving the property in some way, or they want to see that you have some massive net worth to secure the money that they're lending to you.

So what a lot of us have to do is if we want to do the deal at all, we have to find a funder who basically partners with us. They come in and they fund the whole thing. And then when it's all done, we have to split the profits with them. And some of us just see this as well. That's just how it has to be done.

But they may not be thinking of the fact that like, hey, I've got half a million bucks in my 401k or IRA or something. That's just untapped money. It's ready to go. And I could use that and keep all the profits. And especially if RocketDollar makes it particularly easy and quick to get it over there and make this happen. That's a big advantage. I think a lot of people, it's not even on their radar that they can do this.

Henry: Yeah. And that's one thing that people don't know. But I liken what you said. You mentioned earlier, you just said that a lot of people may not know this. And I was thinking that there's been phases in just recent history where a lot of people don't know this, there's a lot of the.

People didn't know that this market existed or this business existed type of moments. I would say, especially in the last 25 years, we're now a quarter of the way through the current century. And I was just thinking to myself, well, maybe like private folks offering car rides in the form of fancier ones like black cars. That's existed actually since the 1980s. You watch movies.

I mean, I was just thinking to myself that I watched Die Hard again around Christmas time, right? Because it's kind of a joke to watch it at Christmas time. Well, Argyle is like a black car limousine driver. And that existed then.

And those are a lot of times personal cars. Well, now Uber sort of exists. And now it's more just mainstream that you would take someone else's private car to get from point A to point B. And the same thing, calpsurfing.com existed for 15 years before Airbnb ever started or threw up their website and so forth.

So what I tell people is that the ability to invest in private assets using an IRA has legally been allowed since 1974 has actually been used by certain people, certain very powerful, wealthy.

Connected people like billionaire venture capitalists in Silicon Valley and people who ran for president and used to be the governor of Massachusetts. And now, you know, the consolation prizes, they're a sitting United States senator. These people did this. And now it's starting to become more mainstream with platforms like a Rocket Dollar that now someone can just go access 150,000 or 200,000 of their old 401k or IRA to go do a land deal, a private investment and so forth.

So I just think that it's at the tipping point where probably five to 10 years from now, and I've said this before publicly, that when you ask someone about their IRAs and what they do, they're going to start referencing it as a, oh, you know, I like to split it up. So I keep my traditional stuff at a place like Vanguard, but then the other

half of my money in IRAs, I'm always going in and out. I'm doing I'm doing private credit deals, I'm doing land deals, I'm doing real estate deals, or I invest in late stage private technology companies and so forth, it'll be a 50-50, which, and maybe it even tips over more because you think about the last 10 times you went to the airport.

Went to your hotel from the airport. What percentage of those was a friend of yours picking you up at the airport? And what percentage did you just hire a car?

Seth: Nine out of 10, probably. I mean, you know, every time for me, one of your friends, I got to pick you up sometime, you know, I'm too nice. We got to make them do that.

Henry: Okay. Yeah, yeah, probably. That's, that's true. It's a hassle now, but you get the point, right? Like it was, it was a period where it was like, no one knew about it. Then there was like this little gap period where it was maybe 50, 50. And now it's like 99.1 or 90, 90, 10. And IRAs haven't even gotten to the 50, 50. I think the 50, 50 would be 10 years from now. And then I think that there's a possibility it might be a majority, 15 years and beyond.

Seth: I got a couple of friends where whenever we're talking about retirement stuff.

Their whole mindset is like, I don't want to think about it. Like, I just want to throw money over there and let it grow. And somehow magically I'll have more money. This idea of them having to be active in the process and put the money in retirement and then keep working to fine deals. I mean, they could certainly make a lot more money that way. But for somebody who just doesn't want to do that, it sounds like RocketDollar probably is not for them. Is that accurate or am I missing anything?

Henry: It isn't for them unless they basically do it one time and they've committed to just doing a bunch of syndications or partner deals. So that's one thing. Or they wait until someone like us launches the ability for them to go into package deals. Then the question becomes that I got a bunch of money here. I don't want to deal with it. But.

I'm comfortable with it being in the public stock market, the S&P 500, where earnings are largely driven by the top seven companies today, all in the same industry and technology and so forth. Five of which have major contracts that created most of those earnings in 2025 by doing a partnership with a company called OpenAI, who's not profitable. You could leave it there if you're comfortable.

So it's a question of where you're comfortable having this park money, because if you still want to be passive, you could open up a Rocket Dollar account, get it over there. No differently than you moving your old 401k and rolling it over to an IRA, Fidelity, or Rocket Dollar. And then once it's there, maybe you go talk to someone and say that, hey, I want to go into only XYZ syndication deals or XYZ passive investments. So then maybe tap your network to go find like five different storage property deals, land deals, and real estate or apartment multifamily deals, syndication deals. You're not owning, operating anything.

Seth: Where do people most often get themselves in trouble when they're trying to use retirement funds to invest in real estate? Like what are some other common issues or what would say are the biggest problems people don't even think about when they get in trouble?

Henry: I think that they don't realize about the leverage one that you can't use leverage. And then two, just avoiding that you do any prohibited type of transactions. You know, you kind of have these properties, you got to make sure that they're very separated.

So one of the questions that we answer a lot in our inbound calls are that.

Hey, this is And you know, what if I use it to go buy a property and operate as an Airbnb, X percent of the time, and then other times I use it? Well, you can't use it at all. Like this needs to be a pure arm's length. Investment for you.

So I would say that it's just if you kind of keep in your mind that you get certain things from the government, you get the tax deferred treatment or tax free growth, depending on if it's a Roth or traditional for decades and maybe even beyond your lifetime to a certain extent, right, by being able to pass these down to your beneficiaries.

But the one caveat the government says is that you cannot use any of the money in the account for the privileges that we give you and the tax deferral advantages that we give you, you can't have any personal connection to it.

There's no conflict. There's no prohibited transaction. So just keeping that in mind and remembering it is the big thing.

Seth: When you look at RocketDollar 10 years from now, what problem do you hope is going to be permanently solved?

Henry: I think, so the big one for me is that someone cracks the code on a way, and I think that this would have to be a government-driven thing, just like how the tracking in the stock market is standardized because there's a government and financial regulatory division that oversees that.

So I know that probably a lot of private investment folks don't want to do that, but I think that what would really open it up is if there was a reporting structure and a centralized database that only the government would sponsor because there's no financial incentive for a private company to do it to where it makes it much easier to track so if someone needs to transfer the property from one provider to another even if it's private inside of an IRA it's easier done so when that code gets cracked it's not a way for government to play big brother and know what everyone's invested in it actually creates the ability and the network and the transaction movements that's probably necessary to allow it to become really, really big and become the majority.

Private investments are already the majority by market value, but it's concentrated and held by a very small number of people. So the N of the people who own it is small. The absolute value is actually larger than the public investments.

Seth: What do you think the chances are that the government is actually going to do that?

Henry: I actually do think that they will do it like somewhere down the road.

So, because if it, if it is the majority of the investments out there and the reason why is there is an incentive for the government to do this. So there's not an incentive for private company, but the incentive for the government is that if the ability to distribute the holdings of private investments is more broadly held by people that actually creates more economic output.

And then selfishly from my side, if it were easier to deploy the, the $46.8 trillion in U.S. retirement accounts right now. And I just told you that the only way you keep those tax treatment is you have to go into investments. You can't buy stuff for yourself. You can't buy your vacation home. You can't buy your dream car.

What do you think would happen if even 10% of $46.8 trillion, and this is only U.S. Money, got distributed? And I also tell you that roughly 70% of all the money in self-directed IRAs goes into real estate by dollar value. What would an extra three, three and a half trillion dollars of money going into United States real estate being held not by one wealthy company or one wealthy individual, but being held by, you know, let's say tens of thousands, hundreds of thousands, maybe even millions of people. That's a huge win.

Seth: Yeah, that's a good point. I never thought about that. That makes sense, though.

Henry: Yeah, it's a big, big win. That's a seismic shift in how wealth is held.

Seth: Well, given where you're at in life right now, all the different companies you've started and worked for.

If you could go back and give your younger self one piece of financial advice about building long-term wealth, what would that be?

Henry: I think it might be. Oddly enough, it might be just maybe having a little bit more of a safety net before taking the risk. I think there were points in my life for sure where I probably cut it a little bit too close to the bone and didn't start early.

You know, I worked at Merrill Lynch out of college. I was making good income, but I didn't really have anyone to tell me the basics of just save more in that 401k plan. So I describe and I see a lot of people today who had that great corporate job, accumulated that two, three, five, six hundred thousand dollars in their 401k. But I squandered a lot of those years myself.

So this is someone who's had a CFP through all that telling you that I should have done like 10% when 10% of my salary coming out of college was a lot more than the zero I made eating ramen as a senior in college. But instead, I probably just did like, you know, some sort of the minimus amount, like, you know, only one and 2% and so forth. So looking back, even the basics would have made a big difference for me back then.

Seth: If we looked inside your retirement account right now, would anything surprise us?

Henry: You know, I have a pretty good base of just traditional index fund investments. Pretty much like a barbell strategy. I think it mirrors what I think these institutional people do. So it's private investments in one half, and then it's public investments in the other. And then I kind of missed the crypto train. So that's not really my thing.

Seth: Yeah, me too. It's okay. You're not alone.

Yeah. Well, Henry, it was great talking to you. For the listeners out there, if you want to check out RocketDollar, you can use the REtipster link. It's retipster.com/RocketDollar. And if you use the code REtipster at checkout, you'll get a $100 discount.

And you can also check out the show notes for this episode, retipster.com/261.

And Henry, any last thoughts you would leave us with?

Henry: Just be open-minded. Just understand that I think that private investments are where you're going to generate a lot of your returns. I'm not necessarily advocating that you need to make those investments using your retirement funds, but... Don't discount. And I think that the days of just sitting in an index fund for 20, 30, 40 years, like our parents did, may not work. And I know that people have said that over the years, and they've been proven wrong, but the world is fundamentally different now.

Seth: Do you think the perfect balance in an investment portfolio, what percentage of it should be just sitting in the stock market versus in a private thing? Is there some ideal we should all shoot for, or is it just too much of an individual question to where they know that?

Henry: It's probably individually adjusted based on wealth and age, but I'd probably say a rough rule of thumb might be somewhere between 50% to 65%. So this goes on the backs of the old 60-40 portfolio, except the difference is that that 60-40 portfolio that everyone always heard about growing up, the balanced portfolio, was 60% equity stocks, 40% bonds.

Well, the problem is that, you know, bonds themselves underperform and now they're completely correlated to the actual stocks and the corporations that they, they're basically the debts instrument of the same companies who issue stocks.

So 60% goes into equities and now probably there's a better opportunity to split 40% and something that's private that you're comfortable with. And that could be passive investments and that can go into things like infrastructure and private credit.

But if you're more comfortable and this is more your thing, that 40% should be somewhere real estate. If you don't want to be active in it and don't want to be doing things like flipping land or fixing toilets and rental properties, then go into passive funds or syndications that might do that part. But you need something that's actually going to zig when the stock market itself zags. And bonds did that for many, many decades. They don't do that anymore.

Seth: Henry, thanks again. Great to talk to you again. Check out retipster.com/RocketDollar or the show notes retipster.com/261. Thanks everybody for listening. We will talk to you next time.