The Money Cruncher, CPA

People often ask “How do you invest your 401k?”

I do 100% into Vanguard Institutional 500 Index Trust ($VFFSX)

It has a 0.01% expense ratio

One of the best S&P 500 funds out there.

Having a solid tax strategy is crucial. You need to think long term and minimize your tax exposure.

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Since the Nvidia stock is now owned in his name, he will receive a step-up basis adjustment to the fair market value (FMV).

His heirs will then sell the assets and pay $0 in income tax on the Nvidia shares.

He could swap cash (borrowed against the trust's assets) into the trust, along with a promissory note.

After the swap, he would personally own Nvidia stock, offset by liabilities.

As a result, he would receive an indebtedness deduction and $0 in estate tax.

But what about the step-up basis?

Good question.

Jensen would most likely use the "power of substitution" which allows him to exchange assets in the trust for assets of equal value.

A GRAT freezes the estate's value at today's value.

Any future appreciation of assets passed to heirs would be free of gift and estate taxes, potentially avoiding ~$3.5 billion in taxes.

He also further diversified his tax strategy by establishing a Grantor Retained Annuity Trust (GRAT) and moving 3,078,820 shares into it.

Today, after accounting for stock splits, those shares are worth approximately $3.4 billion.

Without the irrevocable trust strategy, his estate could have faced a $1.6 billion tax upon his passing.

According to SEC filings, Jensen transferred 584,000 shares to this trust on December 28, 2012.

At the time, these shares were valued at ~$6.5 million.

He paid a small gift tax on the transfer.

In 2012, he created an Irrevocable Trust.

This type of trust allows you to transfer assets out of your personal name and into the trust.

The key advantage? Assets within the trust aren't subject to estate taxes.

Beyond the exemption amount, the remaining assets are taxed at up to 40% at the federal level.

Wealthy individuals, like Jensen Huang, use creative strategies to minimize this tax impact.

How?

When your net worth exceeds a certain threshold ($13M in 2025), you become subject to the estate tax.

This tax applies to everything you own: cash, stocks, real estate, and other assets based on their total value.

Nvidia's CEO is avoiding $5 billion in taxes.

How? By using sophisticated tax strategies 99% of people have never heard of.

Here's how it works:

11 ways to save on taxes:

1. Max retirement contributions
2. Mega Backdoor Roth
3. Roth IRA/Backdoor Roth
4. Optimize charitable donations (stock/DAF)
5. Tax Loss Harvest
6. Tax Gain Harvest
7. Roth Conversions
8. T-bills instead of HYSA
9. Maximize HSA
10. 529 plan
11. Buy real estate

If you earn $150,000 W-2, you will pay $25,247 in federal taxes.

If you contribute just $5,000 to a traditional 401(k), your federal taxes drop to $24,047.

That’s $1,200 in deferred taxes.

401(k) is not a scam.

How should you prioritize your money?

Here’s a general rule of thumb:

1. Build emergency fund
2. Get a 401k/403b match
3. Pay off high interest debt (8%+)
4. ESPP
5. HSA
6. Roth IRA
7. Max out 401k/403b
8. Mega Backdoor Roth
9. Pay off medium debt (4-8%) or taxable brokerage

The IRS received 23,589,000 tax returns for the week ending Feb 7, 2025.

In the prior year, it received 25,553,000 tax returns.

This is a drop of 7.7%, or ~1.9M tax returns.

Fewer people are filing their 2024 tax returns vs 2023 so far.

Growth of $5,000 since 2016:

High yield savings account - $6,362

$VTI (Total US Market ETF) - $16,672

You must invest to protect your money from inflation & build wealth.

How to make your child a millionaire:

- Invest $200/mo in a 529 plan.
- By age 18, they can have ~$90,000 to pay for college tax-free.
- As soon as they have income (summer job), invest $550/mo until age 23 in a Roth IRA, then stop.
- By age 65, they can have a $1M portfolio tax-free (8% return)

My entire $250,000+ brokerage portfolio is invested in just 2 ETFs.

$VTI (20.38% 1y, 0.03% expense ratio) and $VGT (21.36% 1y, 0.09% expense ratio)

That's all I buy.

Stop overcomplicating your investments. Keep it simple & watch the fees.

Many people don't want to get rich slowly.

Instead, they buy meme coins, day trade, or invest in penny stocks.

In 99% of the cases, they realize that it’s a losing game.

You can skip all that and just buy good ETFs instead (e.g. $VTI).

If you contribute to a 401(k), you MUST know this:

Vesting schedule.

In simple terms, this means how long you need to work until the employer's match is truly yours (your contributions are always yours)

You don't want to quit a job 10 days before you get "cliff" vested...

I saw someone celebrating a $15,258 refund.

But it’s nothing to celebrate.

You gave the IRS a 0% interest loan for $15,258 throughout the year.

That’s $680 you could’ve earned with a 4.5% HYSA instead in a year. Adjust your W-4.

Tomorrow I’m sharing how to file your own taxes for under $20, regardless of how much money you made or how complex it is (rentals or business income), in my free newsletter.

Link in bio.

I ditched my savings account 1.5 years ago.

I use Vanguard Money Market Funds instead.

Their yields:
• Treasury 4.26% $VUSXX (state/local tax exempt)
• Muni 2.08% $VMSXX (federal tax exempt)
• Federal 4.28% $VMFXX

Fidelity/Schwab have their own MMFs.

If you don't know where to invest, look at $VTI. $100 of it gets you:

> Apple - $6.65
> Microsoft - $5.51
> Nvidia - $5.49
> Amazon - $3.65
> Meta - $2.24

And $76.46 worth of 3,604 other U.S. stocks with a 0.03% expense ratio.

If you make $150,000 in W-2 in 2025 you will pay:

• $25,247 fed tax
• $11,475 payroll tax

If you make $150,000 from long term capital gains/qdividends, you will pay:

• $12,998 fed tax

Almost 3 times less tax. The tax code favors investors.

The national average savings account yield is 0.55%.

Yet the 4 week Treasury Bills are paying ~4.32% and no state/local taxes. Buy from Treasury Direct.

Or explore a Treasury ETF (i.e. $SGOV) or Treasury MMF (i.e $VUSXX)

Don't let banks rip you off.

For those of you with modest incomes:

Long-term capital gains on stocks/ETFs can be taxed at 0%.

This means that you can harvest (sell then re-buy) these stocks/ETFs to increase your cost basis & pay less federal taxes in the future.

(might be subject to state tax)

Big misconception about Roth IRAs:

"I don't want ALL my money to be locked up until 59 ½"

That's not true.

You can always withdraw contributions (money you put in) at any time without penalty or taxes from a Roth IRA.