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Speaker 1: Tonight. As January goes, so does the market? Is that

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Speaker 1: really the case every single year you're listening to Simply

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Speaker 1: Money presented by all Worth Financial on Bob Spunseller along

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Speaker 1: with Brian James. Well, it's one of those age long sayings.

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Speaker 1: As January goes, so does so does the market. Meaning

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Speaker 1: the performance of the S and P five hundred in

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Speaker 1: January tends to foreshadow, positively or negatively, how the rest

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Speaker 1: of the year is likely to go. And since the

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Speaker 1: S and P five hundred was up about one point

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Speaker 1: four percent one point four percent in January, Brian, does

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Speaker 1: this mean all systems are go? We're off to the

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Speaker 1: races and we're looking at what eighteen percent returns for

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Speaker 1: this year?

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Speaker 2: Yes, Bob, check the box on twenty twenty six. We

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Speaker 2: are good. Nothing bad can happen from here, nothing unexpected,

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Speaker 2: and nothing to make us sad.

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Speaker 1: All right, let's end the show right there. Everybody could

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Speaker 1: show indext fun, turn off the radio. Let's all have

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Speaker 1: a great year exactly, that's all it takes. Right.

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Speaker 2: Well, we we love our history, but it only tells

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Speaker 2: us so much. So let's look at this. This is

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Speaker 2: one we do tend to hear about from time to time.

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Speaker 2: People talk about these things when they work, and nobody

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Speaker 2: talks about them when they don't work. So let's look

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Speaker 2: at the one related to January. So, in the last

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Speaker 2: forty years, January returns for the S and P five

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Speaker 2: hundred were positive twenty five times and negative fifteen times.

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Speaker 2: Two out of three chance ish or so. In those

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Speaker 2: twenty five instances where January was higher, the next eleven

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Speaker 2: months were higher eighty percent of the time. Now, the

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Speaker 2: other thing I would throw out to this is the

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Speaker 2: market goes up, not down, So most of the time

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Speaker 2: it's moving higher. We are truly fixated and focused on

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Speaker 2: those really bad years out there, you know. So on average,

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Speaker 2: the rest of the year was about eleven percent, with

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Speaker 2: the media in return even higher, about over fourteen percent.

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Speaker 2: That brings the average full year return when January is

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Speaker 2: positive to roughly fifteen percent.

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Speaker 1: Now that's the average.

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Speaker 2: That means anything above zero with an average around fifteen,

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Speaker 2: that can be one or two percent, it can mean

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Speaker 2: twenty five percent. Who knows.

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Speaker 1: All right, you're throwing out a lot of data, and

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Speaker 1: the history is great, but do we want to make

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Speaker 1: decisions based on that historical data alone? Brian I'm going

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Speaker 1: to go off topic just a bit here. You know,

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Speaker 1: the S and P up. You know, one point four

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Speaker 1: percent is great, but shoot, if you look at the

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Speaker 1: Russell two thousand in the small cap index for January,

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Speaker 1: it was up five point four percent. European stocks, the

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Speaker 1: developed European stocks up five point two percent in January,

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Speaker 1: Emerging markets up almost nine percent, and gold up over

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Speaker 1: thirteen percent. So you know, we've talked about this, you know,

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Speaker 1: many times over the last several months, you know, looking

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Speaker 1: at mag seven stocks and everybody getting glued to that.

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Speaker 1: I mean, diversification is important here. It was very important

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Speaker 1: in twenty twenty five, and it seems to be taking

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Speaker 1: hold in twenty twenty six.

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Speaker 2: It does, but I guess I would still point out

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Speaker 2: the overall direction. Things tend to move in the same

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Speaker 2: direction just fast, right, So you highlighted some other asset classes, International,

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Speaker 2: small cap and so forth. Everything generally, as we're sitting

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Speaker 2: here right now, is moving up. But at the same time,

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Speaker 2: the general motion is up. Things tend to move in

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Speaker 2: the same direction. So we have a situation now where

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Speaker 2: all these different asset classes are generally moving but just

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Speaker 2: a little bit quicker. So International stocks and small stocks

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Speaker 2: generally will do well. Small stocks will do well in

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Speaker 2: a strong economy because they've gotten more potential ahead of them.

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Speaker 2: International stocks, on the other hand, those are benefiting this

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Speaker 2: year and last year because of the way the United

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Speaker 2: States has positioned itself against the rest of the world.

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Speaker 2: The decisions we're making, the tariffs we're making, is driving

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Speaker 2: international countries and companies to forge relationships between themselves. None

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Speaker 2: of this matters if as long as you have it

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Speaker 2: all represented in your portfolio. I hope nobody out there

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Speaker 2: is thinking this is a threat to the S and

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Speaker 2: P five hundred, therefore it's a threat to everything. That's

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Speaker 2: not really the case, because I don't think we're going

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Speaker 2: to see a situation where the American market goes down

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Speaker 2: international markets go up. But the investors currently are recognized

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Speaker 2: better opportunities in the international markets because of this major

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Speaker 2: shift we've had.

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Speaker 1: Well. I think it also comes down to valuations more

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Speaker 1: than anything. I mean, the international developed countries have gotten

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Speaker 1: ignored for several years. We've talked about that many times,

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Speaker 1: and the valuations are just better. You know, everything comes down.

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Speaker 1: You know, people at a certain point in time start

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Speaker 1: to look at you know, risk and reward, and I

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Speaker 1: think I think international stocks are a good value relative

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Speaker 1: to their earnings, and the market is starting to reflect that.

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Speaker 1: All right, let's talk about when January is negative, Brian,

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Speaker 1: what tends to happen then, So.

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Speaker 2: A little more history just because this mean kind of

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Speaker 2: idea comes up about January. So let's talk about the

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Speaker 2: other side of things. So when January is negative, the

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Speaker 2: next eleven months end up being positive seventy three percent

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Speaker 2: of the time. So, in other words, when we have

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Speaker 2: a negative January, most of the time, it doesn't matter.

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Speaker 2: The market goes up anyway. Now, remember that is not

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Speaker 2: an anomaly. Look at a chart of the S and

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Speaker 2: P five hundred. It goes up, not down. With the

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Speaker 2: exception of a handful of years. Here, the average gain

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Speaker 2: over these negative January years has been about just a

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Speaker 2: little over six percent. The four instances where January was

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Speaker 2: negative and you hear that, that was just four out

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Speaker 2: of all these years. We're looking at. The four instances

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Speaker 2: where January was negative and the rest of the year

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Speaker 2: stayed negative were in twenty two, two thousand and eight,

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Speaker 2: two thousand and two, and two thousand. When the year

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Speaker 2: starts bad, there's a decent chance, it could get a

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Speaker 2: whole lot worse. And by the way, three of those

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Speaker 2: years I just cited twenty two, eight and two are

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Speaker 2: among the five worst years the S and P five

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Speaker 2: hundred has ever had. So of course it started off

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Speaker 2: bad and January got worse from there. We all remember

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Speaker 2: the stories from those years. There was a huge catalyst.

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Speaker 2: We had the of course, the financial crisis, we had

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Speaker 2: the tech bubble bursting, and in twenty twenty two was

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Speaker 2: the unwinding of the overvaluation post COVID. So in summary,

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Speaker 2: over the past forty years, when January is positive for

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Speaker 2: the S and P five hundred, the average return is

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Speaker 2: about fifteen percent and is positive eighty four percent of

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Speaker 2: the time. When January is negative, the average four year

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Speaker 2: return is about two to three percent. That's a positive return,

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Speaker 2: it's not a loss, and it's positive just sixty percent

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Speaker 2: of the time. Put differently, the majority of the time

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Speaker 2: the market is up, so stop carrying what it does

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Speaker 2: in January.

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Speaker 1: And the market the market always tends to trend up

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Speaker 1: in periods where kind of like where we are now.

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Speaker 1: I know we talk about persistent inflation, but inflation is

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Speaker 1: just kind of hovering around three percent. It's not expected

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Speaker 1: to go much higher. You know, the question is how

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Speaker 1: much lower does it go. Interest rate policy is pretty

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Speaker 1: stable right now. You know, people are you know, anticipating

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Speaker 1: maybe a couple of rate cuts this year. That tends

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Speaker 1: to be bullish for the market. We're getting a huge

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Speaker 1: productivity boost in this economy based on technology gains and

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Speaker 1: you know, AI investment. That's bullish for the market. So again,

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Speaker 1: I think the thing to look at here is the

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Speaker 1: stock market's going to react to the cost of money

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Speaker 1: and inflation and productivity gains, and all those appear to

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Speaker 1: be moving in a post positive direction. We can always

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Speaker 1: have shocks to the system, you know, teariffs, geopolitical conflict,

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Speaker 1: all that, but in terms of economic fundamentals, we're in

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Speaker 1: a pretty good place right now as long as we

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Speaker 1: don't go break it.

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Speaker 2: Yeah, I would completely agree with I mean, we have

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Speaker 2: an administration that, again setting the vitriol aside in the

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Speaker 2: day to day politics, this is a business friendly administration

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Speaker 2: and hopefully out nobody out there is reacting to that

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Speaker 2: with their investments anymore than they did over the prior

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Speaker 2: of several administrations. We've done a number of studies, our

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Speaker 2: ro Chief investment Officer Andy Stout reassures us every time

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Speaker 2: we have a major political swing that the market does

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Speaker 2: not care who's sitting on the throne in DC. It

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Speaker 2: just doesn't make any difference, because at the end of

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Speaker 2: the day, we are still a country that coordinates itself

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Speaker 2: as much as possible around the profitability of our biggest entities.

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Speaker 2: This isn't necessarily one percent good one hundred percent of

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Speaker 2: the time. But when you look at things like the

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Speaker 2: tax codes that are highly favorable toward corporations, Remember the

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Speaker 2: gigantic tax cut the corporation's got just a few years

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Speaker 2: ago in twenty seventeen, and the one or two percent

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Speaker 2: that the average individual got in their tax return. Remember

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Speaker 2: that corporations were, within the last ten to fifteen years

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Speaker 2: determined to be people with regard to political contributions. There's

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Speaker 2: a whole bunch of things that we do that show

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Speaker 2: where our allegiances lie. So rely on that, and if

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Speaker 2: that changes permanently, then I will worry about it. I

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Speaker 2: don't see it happening.

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Speaker 1: All right, Let's pivot and talk about what we should

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Speaker 1: be doing even in a positive market, because even in

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Speaker 1: a positive trending market, take last year, for example, there

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Speaker 1: are going to be hiccups along the way, meaning volatility.

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Speaker 1: We had a very quick, you know, fifteen seventeen percent

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Speaker 1: pullback in the market last year, which was a great

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Speaker 1: year for the stock market, when the initial tariffs came out.

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Speaker 1: So there's always going to be bumps in the road.

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Speaker 1: So the risks that we need to be thinking about

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Speaker 1: here in terms of building an overall financial plan and

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Speaker 1: an income strategy for those that are retired are things

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Speaker 1: like sequence of return risk, overreacting to short term data,

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Speaker 1: and trying to time the market, either by piling in,

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Speaker 1: taking too much risk in the short term, or moving

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Speaker 1: too much money to cash. Those are these emotional I'll

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Speaker 1: call it media in news driven you know, tidbits that

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Speaker 1: go out there that tend to make people make irrational

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Speaker 1: decisions in the short term.

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Speaker 2: And I want to point out that those risks that

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Speaker 2: Bob just pointed out, you know what they all have

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Speaker 2: in common, They're specific to one individual or one household situation.

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Speaker 2: We talked about sequence of returns risk in near retirement,

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Speaker 2: Well that's your retirement, not the rest of the world.

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Speaker 2: Overreacting to short term data, that's your reaction to news.

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Speaker 2: We get on a every day basis and then making

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Speaker 2: allocation changes without tying them to cash flow needs. Those

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Speaker 2: are your cash flow needs, your tax strategy, your state

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Speaker 2: planning goal. The key question and all of that, the

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Speaker 2: keyword everything I'm saying.

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Speaker 1: Is your your.

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Speaker 2: The real risks are how am I implying my own

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Speaker 2: changing situation to the things that I cannot control in

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Speaker 2: the outside world, meaning the market. So January statistics got

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Speaker 2: nothing to do with that. They affect everybody.

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Speaker 1: Yeah, set another way, you know we all need to

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Speaker 1: look at is our near term spending, whether that's spending

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Speaker 1: to buy groceries or spending to go on a vacation

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Speaker 1: or remodel the kitchen or buy a new vehicle. Are

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Speaker 1: are those short term spending needs or wants insulated from

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Speaker 1: any short term market volatility? Because again, even in a

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Speaker 1: raging bowl market, and I'm not predicting, you know we're

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Speaker 1: gonna be in one or not be in one, You're

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Speaker 1: gonna have volatility along the way. And we've talked about

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Speaker 1: this several times on this show, Brian. In midterm election years,

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Speaker 1: volatility tends to go up, not down. So as part

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Speaker 1: of the overall financial plan, you do need to be

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Speaker 1: looking at what are the short term spending needs and wants,

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Speaker 1: and do you at least have that amount of your

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Speaker 1: portfolio insulated from short term market volatility. That's really the

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Speaker 1: key here.

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Speaker 2: Yeah, And I think another question is because with this

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Speaker 2: this January thing we keep beaten to death here could

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Speaker 2: be triggering some people to say, should we be more aggressive?

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Speaker 2: This was a good January. That means that eighty percent

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Speaker 2: of the time or whatever we just said, the market

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Speaker 2: is up, So therefore maybe we should mortgage the house

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Speaker 2: and buy more stocks. No, I would think about it differently.

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Speaker 2: What I would be looking at is, you know that

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Speaker 2: big trip we're supposed to take in the summer, or

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Speaker 2: we're gonna put the porch on the house, or we're

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Speaker 2: gonna do whatever that's gonna cost a lot of money.

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Speaker 2: I would be saying, January was good. Let's take those

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Speaker 2: dollars off the table and protect them from risk so

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Speaker 2: we can go ahead and execute on the things that

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Speaker 2: we knew we were going to do this year anyway,

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Speaker 2: rather than just letting it ride and eating whatever the

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Speaker 2: market gives us.

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Speaker 1: Yeah, set another way. Recency bias is a real thing,

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Speaker 1: and it has to be managed, all right, here's the

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Speaker 1: all Worth advice. Don't let short term market patterns or

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Speaker 1: predictions rewrite your long term financial plan. Discipline beats prediction

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Speaker 1: virtually every time. All Right, the world's largest asset manager,

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Speaker 1: says bonds may no longer protect your portfolio? Is that true?

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Speaker 1: And if so, what are retirees supposed to do? Now?

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Speaker 1: We're going to try to break all that down. Next.

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Speaker 1: You're listening to Simply Money presented by all Worth Financial

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Speaker 1: on fifty five KRC, the talk station. You were listening

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Speaker 1: to Simply Money presented by all Worth Financial. I'm Bob

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Speaker 1: Sponsller along with Brian James. If you can't listen to

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Speaker 1: Simply Money live every night, subscribe and get our daily podcast.

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Speaker 1: Just search Simply Money on the iHeart app or wherever

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Speaker 1: you find your podcast. When do you actually sell a

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Speaker 1: highly appreciated investment? And if you're trying to lower risk,

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Speaker 1: is changing investments the right move or is there a

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Speaker 1: smarter way? We're going to answer those questions and more

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Speaker 1: straight ahead at six forty three. Brian, this headline caught

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Speaker 1: our eye. Quote the world's largest asset manager says you

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Speaker 1: can't count on bonds anymore? Who said that? Well, it's

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Speaker 1: black Rock, the world's largest money manager in terms of

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Speaker 1: assets under management. And this is a bit surprising because,

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Speaker 1: let's face it, for a lot of folks, bonds have

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Speaker 1: always been that shock absorber, that source of stability in

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Speaker 1: an otherwise volletle portfolio. You know, they're supposed to zig

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Speaker 1: when stocks zag, they're supposed to be that shock absorber.

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Speaker 1: And Black Rocks kind of calling out, you know, don't

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Speaker 1: assume that bonds are going to do the job over

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Speaker 1: the next five to ten years that they've done over

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Speaker 1: the last thirty to forty years.

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Speaker 2: So the argument they're making, Bob, what they're saying is

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Speaker 2: that for decades, long term government bonds, especially you know,

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Speaker 2: focusing on US treasuries, did two things really well. They

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Speaker 2: paid income, and they usually went up when stocks went down.

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Speaker 2: Like you were just saying, that's called negative correlation and

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Speaker 2: that's what made that classic sixty forty portfolio work for

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Speaker 2: so long. But Blackrocks point is that the world has

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Speaker 2: now changed. You know, higher inflation, massive government debt out there,

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Speaker 2: geopolitical risk, and interest rates that aren't near zero anymore.

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Speaker 2: Those have altered how bonds behave. And we saw that

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Speaker 2: in real time in twenty twenty two, stocks went down

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Speaker 2: and bonds got dragged down with it, so it felt

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Speaker 2: like there was nowhere to hide. Long duration bonds got

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Speaker 2: crushed as rates rose. That doesn't make any sense, that

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Speaker 2: should go the other direction. But instead of pushing portfolios,

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Speaker 2: they amplified losses. You know, so black Rocks concerned. Really

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Speaker 2: isn't that bonds are a bad thing. It's that long

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Speaker 2: term bonds may no longer be a reliable way to

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Speaker 2: hedge risk away from the stock market the way retirees

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Speaker 2: currently have come to expect them to do.

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Speaker 1: Yeah, I tend to agree with BlackRock's assessment here, and

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Speaker 1: it's an assessment I've been making to clients, I'd say

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Speaker 1: for almost ten years now. Brian. I mean, we went

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Speaker 1: through I got in this business back in nineteen ninety one,

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Speaker 1: and we enjoyed a real long term bull market in

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Speaker 1: bonds because long term interest rates in general trended down

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Speaker 1: for many, many years. Now that our national debt is ballooned,

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Speaker 1: you know, the thing I always focus on, in spite

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Speaker 1: of all this vitriol about short term interest rates, you

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Speaker 1: got to look at the ten year treasury. Is that

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Speaker 1: gooing up down sideways staying that it's not moving at all,

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Speaker 1: and so there's very little premi out there, in my opinion,

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Speaker 1: to be invested at the long end of the yield

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Speaker 1: curve because you're not getting compensated for the risk that

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Speaker 1: you're taking. And you go back to twenty twenty two,

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Speaker 1: you know, as a reminder, the fed rais interest rates

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Speaker 1: seven times during that year to combat inflation, you know,

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Speaker 1: coming out of the COVID pandemic, and that really killed

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Speaker 1: bonds that year. So I just an opinion here. I

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Speaker 1: don't see these long term you know, bond rates coming

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Speaker 1: down much because we owe almost thirty nine trillion dollars

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Speaker 1: and you've got to pay somebody to take on that

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Speaker 1: risk to loan money to the federal government.

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Speaker 2: You know, I can't remember the last administration we elected

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Speaker 2: that actually truly cared about that. Once the election was

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Speaker 2: over with the deficit gets and the federal the national

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Speaker 2: debt that we have gets kicked to the curb instantly,

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Speaker 2: because that would require someone telling the American populace that

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Speaker 2: we cannot afford ourselves, and that's just not going to

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Speaker 2: happen anytime soon. So, you know, and this is why

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Speaker 2: we're starting to hear more and more things about about

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Speaker 2: alternative investments, things like private credit, real assets, gold, and

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Speaker 2: bitcoin getting mentioned in the same breath. This it's kind

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Speaker 2: of under the under the heading of anything but the

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Speaker 2: stock market. If I'm going to diversify, it's got to

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Speaker 2: be away from the stock market and this. So these

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Speaker 2: are things that people are considering now over bonds these days. Now,

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Speaker 2: that doesn't mean they're a better investment necessarily, it's just

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Speaker 2: more indicative that investors are willing to consider things that

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Speaker 2: in the past they haven't been.

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Speaker 1: Yeah, I think, like everything else in life, Brian, it

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Speaker 1: comes down to you know, one of my favorite phrases,

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Speaker 1: know your why, meaning know why you're doing something or

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Speaker 1: owning something. And when it comes to bonds, you know

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Speaker 1: where I'm going with this is I think everybody should understand,

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Speaker 1: you know, with and with their advisor, if they're working

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Speaker 1: with with an advisor, is why do you own bonds

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Speaker 1: in your portfolio? Is it to generate yield or is

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Speaker 1: it to cushion volatility? And there's still a place for

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Speaker 1: bonds in a portfolio, but I you know, you can't

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Speaker 1: just throw money at bonds and say, well, it's going

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Speaker 1: to be this shock absorber all day, every day in

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Speaker 1: case the stock market goes down. And I think that's

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Speaker 1: the point Blackrock is making. So you know, when I

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Speaker 1: talk about when I sit down and talk to a

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Speaker 1: client and we look at their actual portfolio and getting

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Speaker 1: into this reason or why, you know, you've got people

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Speaker 1: that are just risk averse investors. They do not want

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Speaker 1: the volatility of the stock market. They're willing to give

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Speaker 1: up the upside return. They're just looking for a little

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Speaker 1: bit of yield that hopefully keeps pace with inflation, you know,

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Speaker 1: netive taxes. That's getting harder and harder to do. I

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Speaker 1: love going shorter term on the duration side for reasons

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Speaker 1: I've already stated. You're not getting compensated very much to

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Speaker 1: move out on the long end of the curve because

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Speaker 1: if you do that, the longer the maturity or the

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Speaker 1: duration of your bond, the more volatile it's going to

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Speaker 1: be if interest rates start to go back up.

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Speaker 2: Yeah, I think that's a really good way to look

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Speaker 2: at it. So we just need to remember, you know,

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Speaker 2: the things that are still working. If you're within say

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Speaker 2: five to ten years of retirement, don't worry about our

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Speaker 2: bond's going to outperform stocks. You know, it's really again

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Speaker 2: about that individual financial plan. Do I have the money

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Speaker 2: I need set aside so that I don't have to

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Speaker 2: sell on a bad market. That's what we were just

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Speaker 2: talking about before. It's not about January what January did.

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Speaker 2: It's about what I need this year, and if I

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Speaker 2: know it's coming up, I better carve that out when

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Speaker 2: the market is at a high because I can't.

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Speaker 1: Yeah, and then another thing to consider, and these products

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Speaker 1: have come on board and they're they're in the right situation,

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Speaker 1: they really work well. And you mentioned BUFFERDTF. So another

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Speaker 1: strategy is just a structured note, meaning you can use options.

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Speaker 1: You can use structured products where you're buying put protection

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Speaker 1: on the stock market. You're buying insurance against the stock

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Speaker 1: market going down and leaving the rest of that instrument

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Speaker 1: or that allocation to the buffer ETF or the structured

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Speaker 1: note to grow if and when the stock market goes up.

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Speaker 1: That's replacing bonds with some of these structured products as

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Speaker 1: that true pure volatility insulator, you know, for people that

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Speaker 1: are just looking at this as a rate of return

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Speaker 1: and risk buffer really so to speak, those are things

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Speaker 1: that might make sense as part of your portfolio rather

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Speaker 1: than just counting on long term bonds to do their job.

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Speaker 2: Yeah, I think that's the right way to think about it.

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Speaker 2: Just don't don't throw the baby out with the bath water,

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Speaker 2: don't assume that things are permanent, but just understand the

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Speaker 2: limitations and the ups and downs of what anything can

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Speaker 2: do for you.

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Speaker 1: Here's the all Worth advice. Bonds aren't broken, but blind

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Speaker 1: assumptions perhaps are. Use bonds for stability and spending, not

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Speaker 1: as a one size fits all safety net for your portfolio.

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Speaker 1: Coming up next, how to handle in a state plan

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Speaker 1: if you're part of a blended family. You're listening to

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Speaker 1: Simply Money presented by all Worth Financial on fifty five KRC,

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Speaker 1: the talk station. You're listening to Simply Money presented by

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Speaker 1: all Worth Financial. I bob'spondseller along with Ryan James, joined

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Speaker 1: tonight by one of all Work's senior estate planning specialists,

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Speaker 1: mister Paul Schwartz, who works right here in our Cincinnati office,

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Speaker 1: and he's got decades of experience working with families as

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Speaker 1: an attorney, and most importantly, he is a proud graduate

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Speaker 1: of the Elder High School. Paul, welcome to the show.

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Speaker 1: Thank you for making time for us. Tonight. We want

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Speaker 1: to talk about estate planning for blended families tonight. So

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Speaker 1: I just want to start with an open ended question.

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Speaker 1: I know you've worked for families for decades doing their

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Speaker 1: estate planning, and I'm sure you've run across several blended families.

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Speaker 1: What are some of the biggest things we need to

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Speaker 1: be looking for and planning for when we create this

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Speaker 1: Brady Bunch like scenario and we blend two families together

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Speaker 1: and try to make an estate plan out of the

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Speaker 1: whole thing.

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Speaker 3: Well, I think normally what you'll see is a lot

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Speaker 3: of folks who enter into second marriages have not updated

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Speaker 3: their state plans. So their wills are old, their trust

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Speaker 3: or old, their durable power of attorneys are old, and

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Speaker 3: their health care power of attorneys are old. And even

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Speaker 3: more importantly, they haven't updated their beneficiary designations for life insurance,

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Speaker 3: retirement plans or brokeraach accounts. Normally, the only updated beneficiary

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Speaker 3: designations is usually on bank accounts in that situation.

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Speaker 1: So when do you discover, generally that these things haven't

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Speaker 1: been updated. I mean, people get married, they go on

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Speaker 1: with life, and then they come into you what years later,

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Speaker 1: and you discover that none of this stuff's even been

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Speaker 1: talked about.

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Speaker 3: Usually it's in their fifties or sixties, when they're thinking

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Speaker 3: about retirement, when they're thinking about their A state plan,

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Speaker 3: when they're thinking about mortality.

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Speaker 2: Yeah, that makes a lot of sense because that's when

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Speaker 2: we get started thinking about exactly how how things are

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Speaker 2: going to go when I pass. And by the way,

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Speaker 2: welcome to the team. I'm glad you're here in Gobomber's

434
00:21:55,440 --> 00:21:59,480
Speaker 2: moving on. So I had to sneak that in there

435
00:22:00,119 --> 00:22:04,480
Speaker 2: fend my flock. But so so, how are these rough conversations?

436
00:22:04,520 --> 00:22:06,480
Speaker 2: Do people get into arguments over this or is it

437
00:22:06,560 --> 00:22:08,480
Speaker 2: just something where they feel like it's a it's just

438
00:22:08,480 --> 00:22:10,479
Speaker 2: something we overlooked, we never got around it doing. How

439
00:22:10,480 --> 00:22:13,040
Speaker 2: do you navigate them through this with all the emotions involved.

440
00:22:13,200 --> 00:22:15,760
Speaker 3: Everything is a little bit different for every family and

441
00:22:15,760 --> 00:22:16,960
Speaker 3: every family dynamic.

442
00:22:17,359 --> 00:22:20,320
Speaker 4: Most of the time there aren't arguments involved in.

443
00:22:20,280 --> 00:22:23,840
Speaker 3: That the the husband and wife are usually on the

444
00:22:23,840 --> 00:22:27,360
Speaker 3: same page when the communication goes down to the children.

445
00:22:27,440 --> 00:22:30,240
Speaker 3: If there is a communication at that point, that is

446
00:22:30,320 --> 00:22:35,119
Speaker 3: when the there can be some conflict, and it's usually

447
00:22:35,520 --> 00:22:38,879
Speaker 3: the conflict with the you know, with the surviving spouse,

448
00:22:38,920 --> 00:22:40,879
Speaker 3: after with the second spouse, basic.

449
00:22:40,920 --> 00:22:42,520
Speaker 2: Okay, let me let me give you an example, and

450
00:22:42,520 --> 00:22:44,280
Speaker 2: you've actually helped me out with some of the situations,

451
00:22:44,280 --> 00:22:46,240
Speaker 2: but we're just kind of sharing for the listening audience.

452
00:22:46,280 --> 00:22:48,520
Speaker 2: This This is how I normally walk people through. How

453
00:22:48,520 --> 00:22:50,960
Speaker 2: can I start thinking about this because a lot of

454
00:22:50,960 --> 00:22:53,480
Speaker 2: times we have this Brady Bunch type situation. You know,

455
00:22:53,600 --> 00:22:56,119
Speaker 2: sometimes there are things where there's some people want to

456
00:22:56,160 --> 00:22:58,119
Speaker 2: keep it in a silo. These are my assets and

457
00:22:58,160 --> 00:23:01,440
Speaker 2: they will benefit you, new spouse, but after you are gone,

458
00:23:01,480 --> 00:23:04,000
Speaker 2: they'll go back to my kids. Other people over time

459
00:23:04,119 --> 00:23:06,479
Speaker 2: eventually start to think of all, these kids are not his,

460
00:23:06,680 --> 00:23:09,480
Speaker 2: not hers, they're hours. So in those cases, what I've

461
00:23:09,480 --> 00:23:12,160
Speaker 2: been recommending people do, if you really believe that, then

462
00:23:12,200 --> 00:23:15,360
Speaker 2: simply figure out exactly what percentage that you want each,

463
00:23:15,680 --> 00:23:17,800
Speaker 2: each and every person to receive at your death, and

464
00:23:17,840 --> 00:23:20,919
Speaker 2: then name those beneficiaries across every last asset you have.

465
00:23:21,240 --> 00:23:23,240
Speaker 2: Don't only focus on well, I'm going to name my

466
00:23:23,320 --> 00:23:26,040
Speaker 2: kids on my accounts. You name your kids and your accounts,

467
00:23:26,080 --> 00:23:28,880
Speaker 2: because that could you could wind up disinheriting somebody. If

468
00:23:28,920 --> 00:23:32,439
Speaker 2: somebody names that new spouse as the primary beneficiary and

469
00:23:32,520 --> 00:23:35,120
Speaker 2: nothing else is in place, then you will have basically

470
00:23:35,160 --> 00:23:37,600
Speaker 2: just disinherited your own children if you pass first, how

471
00:23:37,600 --> 00:23:39,440
Speaker 2: do you help people navigate through that situation?

472
00:23:39,680 --> 00:23:41,399
Speaker 4: So we just look at the whole situation.

473
00:23:41,640 --> 00:23:44,000
Speaker 3: We just we look at all the estate planning documents

474
00:23:44,000 --> 00:23:46,879
Speaker 3: that they currently have in place, and then we review

475
00:23:46,960 --> 00:23:49,119
Speaker 3: all of the assets that they have, and then we

476
00:23:49,119 --> 00:23:51,800
Speaker 3: look at the beneficiary designations, and then we have that

477
00:23:51,880 --> 00:23:55,159
Speaker 3: conversation with both couples, is this how you want it

478
00:23:55,200 --> 00:23:55,639
Speaker 3: to go.

479
00:23:55,560 --> 00:23:58,000
Speaker 4: In case of your you know, in case of your death?

480
00:23:58,440 --> 00:24:01,440
Speaker 3: And so I would say eight times out of ten

481
00:24:01,560 --> 00:24:04,000
Speaker 3: it's not, and so they need to revise their estate

482
00:24:04,040 --> 00:24:05,119
Speaker 3: plan at that point.

483
00:24:06,160 --> 00:24:08,639
Speaker 1: Paul, do you find that in blended families this is

484
00:24:08,720 --> 00:24:12,760
Speaker 1: where more often than not you see trust used? And

485
00:24:12,800 --> 00:24:15,800
Speaker 1: I realize a trust isn't going to necessarily take care

486
00:24:15,920 --> 00:24:19,680
Speaker 1: of these beneficiary designation unless you name the trust as

487
00:24:19,680 --> 00:24:23,160
Speaker 1: the beneficiary. But as things get more complex, is that

488
00:24:23,200 --> 00:24:26,240
Speaker 1: maybe a reason to sit down and do a well crafted,

489
00:24:26,400 --> 00:24:29,800
Speaker 1: thoroughly thought through trust so that we get these assets

490
00:24:29,920 --> 00:24:32,679
Speaker 1: going exactly to where they want to go when we

491
00:24:32,720 --> 00:24:33,600
Speaker 1: want them to go there.

492
00:24:34,080 --> 00:24:37,439
Speaker 3: I would say in most situations, a trust can solve

493
00:24:37,720 --> 00:24:40,840
Speaker 3: nine out of the ten problems. And what we normally

494
00:24:40,880 --> 00:24:44,160
Speaker 3: see is what's called a q TIP trust qualified terminable

495
00:24:44,200 --> 00:24:47,400
Speaker 3: Interest property trust, and what it does is it provides

496
00:24:47,440 --> 00:24:52,520
Speaker 3: for the surviving spouse and income for their life, and

497
00:24:52,560 --> 00:24:55,239
Speaker 3: you can also provide for the home to go to

498
00:24:55,280 --> 00:24:58,000
Speaker 3: the surviving spouse for their lifetime, and then when the

499
00:24:58,080 --> 00:25:02,440
Speaker 3: surviving spouse passes away, it goes to the children of

500
00:25:02,480 --> 00:25:03,399
Speaker 3: the first marriage.

501
00:25:03,720 --> 00:25:06,439
Speaker 1: Yeah. I've seen that done many times, and that works

502
00:25:06,480 --> 00:25:10,240
Speaker 1: well because you know, it helps eliminate that that this

503
00:25:10,320 --> 00:25:14,000
Speaker 1: is yours, this is mine stuff, because hopefully you're getting

504
00:25:14,040 --> 00:25:17,440
Speaker 1: married to this person because you love them and you

505
00:25:17,800 --> 00:25:20,600
Speaker 1: want to you want to take on that primary responsibility

506
00:25:20,600 --> 00:25:22,600
Speaker 1: to make sure that he or she are taken care

507
00:25:22,640 --> 00:25:25,720
Speaker 1: of when you pass away. So I love that idea is, Hey,

508
00:25:26,040 --> 00:25:28,119
Speaker 1: you sit down with the kids and say, this is

509
00:25:28,160 --> 00:25:32,080
Speaker 1: what we've put together. You know this, I'll use you know,

510
00:25:32,800 --> 00:25:35,159
Speaker 1: the example of a man. This is the woman I've married.

511
00:25:35,240 --> 00:25:37,000
Speaker 1: I love her, I'm going to take care of her,

512
00:25:37,320 --> 00:25:40,199
Speaker 1: and we are all in agreement here, including herself, that

513
00:25:41,200 --> 00:25:43,240
Speaker 1: she's going to get to live in the house and

514
00:25:43,280 --> 00:25:45,320
Speaker 1: she's going to have an income stream, and then when

515
00:25:45,320 --> 00:25:48,760
Speaker 1: she passes away, that's when you're going to inherit quote

516
00:25:48,840 --> 00:25:50,280
Speaker 1: unquote your assets.

517
00:25:50,560 --> 00:25:53,520
Speaker 3: Well, there's one other dynamic to that, and it's the

518
00:25:53,600 --> 00:25:57,919
Speaker 3: personal property. Some of the personal property has that sentimental value,

519
00:25:58,280 --> 00:26:00,400
Speaker 3: and you have to make sure that you take of

520
00:26:00,480 --> 00:26:03,520
Speaker 3: that personal property that has the sentimental value to your children.

521
00:26:04,280 --> 00:26:06,520
Speaker 1: Do you find sometimes that it just makes sense to

522
00:26:06,640 --> 00:26:10,080
Speaker 1: start to distribute some of that personal property while you're alive.

523
00:26:10,200 --> 00:26:12,520
Speaker 1: I mean, if we're talking about pieces of china or

524
00:26:12,640 --> 00:26:16,560
Speaker 1: jewelry or things like that that the person's probably not

525
00:26:16,640 --> 00:26:19,800
Speaker 1: going to use or value while they're living. You know,

526
00:26:19,840 --> 00:26:22,760
Speaker 1: as we get in advanced age, isn't that the time

527
00:26:22,800 --> 00:26:24,680
Speaker 1: to just kind of get this stuff to the kids

528
00:26:24,720 --> 00:26:25,800
Speaker 1: you really wanted to go to.

529
00:26:26,040 --> 00:26:27,080
Speaker 4: I always encourage that.

530
00:26:27,760 --> 00:26:30,440
Speaker 2: All Right, anything else you want to add, Brian, Now,

531
00:26:30,480 --> 00:26:32,520
Speaker 2: I just really appreciate that we have Paul on our team.

532
00:26:32,560 --> 00:26:35,439
Speaker 2: This is a great ability for us to kind of

533
00:26:35,440 --> 00:26:38,359
Speaker 2: expand these conversations in the financial planning realm to what

534
00:26:38,400 --> 00:26:40,560
Speaker 2: happens to all this after I'm gone.

535
00:26:40,880 --> 00:26:42,959
Speaker 1: Yeah, thank you so much, Paul. Great to have you

536
00:26:43,040 --> 00:26:45,840
Speaker 1: and appreciate all the great advice. Tonight, you're listening to

537
00:26:46,200 --> 00:26:49,400
Speaker 1: Simply Money presented by all Worth Financial on fifty five KRC.

538
00:26:49,880 --> 00:26:58,320
Speaker 1: The talk station. You're listening to simply money presented by

539
00:26:58,320 --> 00:27:01,520
Speaker 1: all Worth Financial on Bob's Funds along with Brian James.

540
00:27:02,160 --> 00:27:04,520
Speaker 1: You have a financial question you'd like for us to answer,

541
00:27:04,560 --> 00:27:06,840
Speaker 1: There's a red button you can click while you're listening

542
00:27:06,840 --> 00:27:09,959
Speaker 1: to the show. If you're listening on the iHeart app,

543
00:27:10,320 --> 00:27:13,800
Speaker 1: simply record your question and it will come straight to us.

544
00:27:14,600 --> 00:27:17,600
Speaker 1: All right, Brian, Bob and Marymont leads us off tonight.

545
00:27:17,640 --> 00:27:20,760
Speaker 1: He says, we hold both active and passive funds in

546
00:27:20,800 --> 00:27:24,719
Speaker 1: the same asset classes. How do you evaluate whether the

547
00:27:24,800 --> 00:27:29,480
Speaker 1: active side is editing anything but extra cost and fees.

548
00:27:29,280 --> 00:27:31,840
Speaker 2: For any common question? So let's let's first all I'd

549
00:27:31,880 --> 00:27:34,800
Speaker 2: identify some terms here. Active means there's somebody or a

550
00:27:34,800 --> 00:27:36,720
Speaker 2: group of somebody sitting on top of the pile of

551
00:27:36,720 --> 00:27:39,159
Speaker 2: money deciding we're going to buy this and sell that,

552
00:27:39,359 --> 00:27:42,040
Speaker 2: versus a passive fund which is just following an index

553
00:27:42,080 --> 00:27:44,119
Speaker 2: such as Y S and P five hundred and Bob's

554
00:27:44,160 --> 00:27:46,359
Speaker 2: wondering whether it's worth it at all. So here's a

555
00:27:46,400 --> 00:27:49,520
Speaker 2: way to think about this. Step one. Compare it net

556
00:27:49,600 --> 00:27:52,399
Speaker 2: of fees and over a full market cycle. Don't just

557
00:27:52,400 --> 00:27:54,320
Speaker 2: look at last year, don't just look at two years ago.

558
00:27:54,560 --> 00:27:57,320
Speaker 2: Look over a full market cycle from peak to trough

559
00:27:57,320 --> 00:27:58,280
Speaker 2: and then back to the peak.

560
00:27:58,320 --> 00:27:59,199
Speaker 1: That's a full cycle.

561
00:27:59,480 --> 00:28:03,040
Speaker 2: Active management only matters after those expensive because the expenses

562
00:28:03,040 --> 00:28:05,040
Speaker 2: because they're going to be guaranteed to be more expensive.

563
00:28:05,480 --> 00:28:09,360
Speaker 2: Second step here is I isolate how any outperformance shows up.

564
00:28:09,520 --> 00:28:11,560
Speaker 2: A lot of times you might see that some of

565
00:28:11,600 --> 00:28:13,720
Speaker 2: these funds just own a bunch of the same stocks

566
00:28:13,760 --> 00:28:15,600
Speaker 2: that happened. They happened to catch lightning in a bottle.

567
00:28:16,000 --> 00:28:20,240
Speaker 2: I think Janis, the old Janis funds are poster children

568
00:28:20,320 --> 00:28:22,159
Speaker 2: for this because in the original tech boom in the

569
00:28:22,160 --> 00:28:25,600
Speaker 2: early two thousands, they had four funds, Janis Worldwide, Janis

570
00:28:25,640 --> 00:28:27,960
Speaker 2: twenty and Janas and Jana something else. I forget the

571
00:28:27,960 --> 00:28:30,320
Speaker 2: other two, but anyway, they all were just going great

572
00:28:30,320 --> 00:28:32,439
Speaker 2: guns and everybody thought, this is all I need to have.

573
00:28:32,480 --> 00:28:34,440
Speaker 2: I'm gonna dump everything in mortgage the house and throw

574
00:28:34,440 --> 00:28:36,480
Speaker 2: it all in Janis. And then when you looked under

575
00:28:36,520 --> 00:28:38,640
Speaker 2: the hood, it was all technology stocks. And guess what,

576
00:28:38,680 --> 00:28:41,240
Speaker 2: that bubble burst. All four funds went down, and we're

577
00:28:41,280 --> 00:28:43,959
Speaker 2: basically essentially just about never heard from again. So make

578
00:28:44,000 --> 00:28:46,400
Speaker 2: sure you know why it's happening out there, right.

579
00:28:46,480 --> 00:28:49,440
Speaker 1: I got to share a story along the same lines. Yeah,

580
00:28:49,520 --> 00:28:52,440
Speaker 1: you remember the Aim family of funds, the Aim White

581
00:28:52,600 --> 00:28:55,280
Speaker 1: Garden Fund. It was a large cap growth fund, and

582
00:28:55,320 --> 00:28:57,920
Speaker 1: I remember their wholesaler coming in This is right again

583
00:28:58,040 --> 00:29:01,000
Speaker 1: before the tech bubble, trying to tell us that, hey,

584
00:29:01,000 --> 00:29:03,760
Speaker 1: this fun never goes down. You could put all your

585
00:29:03,760 --> 00:29:06,600
Speaker 1: widow and orphan clients in it and just let it ride.

586
00:29:06,760 --> 00:29:09,360
Speaker 2: Another one that had their marketing piece was literally a

587
00:29:09,440 --> 00:29:11,840
Speaker 2: checkbook problem. You could write checks off of it every

588
00:29:11,880 --> 00:29:12,440
Speaker 2: month or something.

589
00:29:12,520 --> 00:29:15,240
Speaker 1: Yeah. Yeah, And so when the tech bubble happened and

590
00:29:15,320 --> 00:29:18,320
Speaker 1: this thing came literally crashing down, I'm in a lunch

591
00:29:18,400 --> 00:29:20,920
Speaker 1: meeting and this guy comes back, and you know, I

592
00:29:21,000 --> 00:29:23,719
Speaker 1: was fairly young in the industry at that time, and

593
00:29:23,800 --> 00:29:26,479
Speaker 1: I stood up in a room full of about fifty

594
00:29:26,520 --> 00:29:29,600
Speaker 1: people and kind of went after this guy. And I

595
00:29:29,640 --> 00:29:32,640
Speaker 1: didn't drop any four letter words, but it got close.

596
00:29:33,600 --> 00:29:36,280
Speaker 1: My point being, and I think the point you're making too,

597
00:29:36,880 --> 00:29:41,840
Speaker 1: is outperformance tends to come when you overweight to a

598
00:29:41,880 --> 00:29:47,200
Speaker 1: sector or overweight, you know, outside the parameters. And if

599
00:29:47,200 --> 00:29:49,400
Speaker 1: you're right, you look like a genius, and boy, if

600
00:29:49,440 --> 00:29:52,880
Speaker 1: you're wrong, you look like a complete idiot. More importantly,

601
00:29:53,520 --> 00:29:56,120
Speaker 1: investors get left holding the bag in a down market.

602
00:29:56,120 --> 00:29:57,120
Speaker 1: It's not a good situation.

603
00:29:57,240 --> 00:29:58,680
Speaker 2: And I bet that was the last time he gave

604
00:29:58,720 --> 00:29:59,880
Speaker 2: you any bagels or golf balls.

605
00:30:00,040 --> 00:30:02,040
Speaker 1: Yeah. I didn't get any free subs after that.

606
00:30:02,200 --> 00:30:04,720
Speaker 2: Yeah, all right, let's move on to Tom and Mason.

607
00:30:05,000 --> 00:30:08,360
Speaker 2: Tom's got questions about bonds, popular topic today. Our bonds

608
00:30:08,360 --> 00:30:11,760
Speaker 2: are sped spread across short, medium, and long term funds,

609
00:30:11,800 --> 00:30:14,239
Speaker 2: and he's wondering does that really reduce risk or are

610
00:30:14,240 --> 00:30:16,120
Speaker 2: we just spreading it around and hoping for the best. Well,

611
00:30:16,120 --> 00:30:18,280
Speaker 2: hopefully you listen to the segment we did a second

612
00:30:18,280 --> 00:30:20,640
Speaker 2: ago about this very topic. But Bob, what else can

613
00:30:20,680 --> 00:30:21,680
Speaker 2: you add for Tom here?

614
00:30:21,800 --> 00:30:24,479
Speaker 1: Well, I would say, in today's day and age, I

615
00:30:24,520 --> 00:30:27,280
Speaker 1: do think, and I mean this with all due respect,

616
00:30:27,360 --> 00:30:29,479
Speaker 1: I think you're just kind of spreading it around and

617
00:30:29,520 --> 00:30:33,800
Speaker 1: hoping for the best, meaning we're not getting compensated very

618
00:30:33,800 --> 00:30:36,480
Speaker 1: well at all right now in my view on the

619
00:30:36,560 --> 00:30:40,760
Speaker 1: risk and return spectrum by holding long term bonds, and then,

620
00:30:40,800 --> 00:30:43,160
Speaker 1: to make matters worse, when you're in a mutual fund,

621
00:30:43,600 --> 00:30:47,640
Speaker 1: you are mutually participating with everyone else that owns that fund.

622
00:30:48,200 --> 00:30:51,719
Speaker 1: And people own these funds for different reasons. Some people

623
00:30:52,440 --> 00:30:55,080
Speaker 1: are going to be long term holders, other people are

624
00:30:55,200 --> 00:30:57,720
Speaker 1: using it to pay their grocery bill or mortgage this month,

625
00:30:57,800 --> 00:31:01,120
Speaker 1: and the bond manager they've got to liquidate you know,

626
00:31:01,280 --> 00:31:05,360
Speaker 1: assets when people redeem shares, and that may or may

627
00:31:05,440 --> 00:31:07,960
Speaker 1: not be the right time to do that, especially on

628
00:31:08,040 --> 00:31:11,360
Speaker 1: the long term side, if interest rates, you know, elevate

629
00:31:11,440 --> 00:31:13,960
Speaker 1: in the bond and the prices are down at that time.

630
00:31:14,080 --> 00:31:17,320
Speaker 1: So I'm not a big fan of just holding these

631
00:31:17,600 --> 00:31:21,200
Speaker 1: managed mutual funds, especially the longer term you go out

632
00:31:21,240 --> 00:31:24,600
Speaker 1: on the yield curve. I'm a big believer if you can,

633
00:31:24,680 --> 00:31:27,320
Speaker 1: if you can do it, get some individual bonds where

634
00:31:27,360 --> 00:31:30,640
Speaker 1: you know which company you're loaning to and for how long,

635
00:31:30,960 --> 00:31:33,360
Speaker 1: and structure your financial plan so that you're going to

636
00:31:33,440 --> 00:31:37,160
Speaker 1: own these bonds to maturity and then just reinvest based

637
00:31:37,200 --> 00:31:40,160
Speaker 1: on the current interst rate UH situation at the time.

638
00:31:40,280 --> 00:31:43,520
Speaker 1: That that's my preferred you know, way of operating. Brian,

639
00:31:43,640 --> 00:31:46,520
Speaker 1: anything to add to that, because this is an important topic, Yeah,

640
00:31:46,520 --> 00:31:46,840
Speaker 1: I think I.

641
00:31:46,840 --> 00:31:48,800
Speaker 2: Think it really is. But just understand what's under the

642
00:31:48,800 --> 00:31:50,880
Speaker 2: hood of the things that you own and and and

643
00:31:51,200 --> 00:31:53,960
Speaker 2: whether it fits your overall portfolio, and also look for

644
00:31:54,040 --> 00:31:55,920
Speaker 2: places where you might have doubled up on and there

645
00:31:56,000 --> 00:31:57,520
Speaker 2: might be overlap between all these things.

646
00:31:57,560 --> 00:31:59,440
Speaker 1: Yeah, and one one further thing on that, if you

647
00:31:59,480 --> 00:32:02,000
Speaker 1: want to look at what your volatility really is, go

648
00:32:02,200 --> 00:32:04,760
Speaker 1: try to pull up a chart, you know, on Yahoo

649
00:32:04,800 --> 00:32:07,400
Speaker 1: Finance or what have you, of your long term bond

650
00:32:07,440 --> 00:32:11,480
Speaker 1: fund and just see how it has performed during volatile times.

651
00:32:11,640 --> 00:32:13,440
Speaker 1: And you only have to go back to twenty twenty

652
00:32:13,480 --> 00:32:16,280
Speaker 1: two to see that. You know, if you're not comfortable

653
00:32:16,320 --> 00:32:19,480
Speaker 1: with the potential up and down movement of that bond fund,

654
00:32:19,560 --> 00:32:23,920
Speaker 1: that might be another reason to look at responsibly repositioning

655
00:32:23,960 --> 00:32:27,320
Speaker 1: that position in your portfolio. All right, let's move on

656
00:32:27,400 --> 00:32:30,120
Speaker 1: to Ron and Fort Thomas. He says, I'm stuck on

657
00:32:30,200 --> 00:32:35,440
Speaker 1: this decision about selling appreciated investments now versus holding for

658
00:32:35,600 --> 00:32:38,400
Speaker 1: a step up later. He means, when you know, somebody

659
00:32:38,480 --> 00:32:42,560
Speaker 1: passes away, what should I really be focused on right now?

660
00:32:42,880 --> 00:32:44,160
Speaker 1: You know, to make the proper call.

661
00:32:44,320 --> 00:32:46,160
Speaker 2: Yeah, So so let's flesh that out a little bit more.

662
00:32:46,160 --> 00:32:48,440
Speaker 2: Of the step up that he's referring to basically means

663
00:32:48,440 --> 00:32:50,640
Speaker 2: that he bought something for let's say ten bucks of share,

664
00:32:50,640 --> 00:32:52,520
Speaker 2: and it's now worth one hundred bucks of share. Therefore,

665
00:32:52,560 --> 00:32:55,480
Speaker 2: there's a ninety dollars gain if he simply sits on

666
00:32:55,520 --> 00:32:57,760
Speaker 2: that and lets it go to his heirs. When he passes,

667
00:32:58,080 --> 00:33:00,400
Speaker 2: his heirs will will own it at a one hundred

668
00:33:00,440 --> 00:33:02,640
Speaker 2: dollars a share. That's sort of what they will have

669
00:33:02,720 --> 00:33:05,600
Speaker 2: purchased is at. Because the step up means you basically

670
00:33:05,600 --> 00:33:08,360
Speaker 2: bought it as of the day that your benefactor passed away,

671
00:33:08,400 --> 00:33:10,560
Speaker 2: so that's the step up in cost basis. So this

672
00:33:10,640 --> 00:33:12,920
Speaker 2: feels like a technical decision, but really it's about risk

673
00:33:13,000 --> 00:33:17,680
Speaker 2: management and uncertainty, you know, not tax optimization in a vacuum.

674
00:33:17,720 --> 00:33:20,239
Speaker 2: Separate what you can control from what you don't. You

675
00:33:20,280 --> 00:33:23,680
Speaker 2: control today's tax law in today's portfolio risk because we

676
00:33:23,760 --> 00:33:26,840
Speaker 2: know what they are. You do not control future tax rates,

677
00:33:27,080 --> 00:33:29,840
Speaker 2: future step up rules, or even your own time horizon.

678
00:33:30,120 --> 00:33:33,000
Speaker 2: So that step up strategy is by definition, you're betting

679
00:33:33,080 --> 00:33:36,080
Speaker 2: on unchanged law and not needing or reallocating that capital.

680
00:33:36,080 --> 00:33:37,840
Speaker 2: One of the common discussions I have with folks in

681
00:33:37,880 --> 00:33:41,160
Speaker 2: this situation is if you are bound and determined to

682
00:33:41,360 --> 00:33:43,600
Speaker 2: not consider that an asset of your own because you

683
00:33:43,640 --> 00:33:45,640
Speaker 2: will not sell it because you want that tax or

684
00:33:45,640 --> 00:33:48,360
Speaker 2: that tech step up. Now, I get the logic behind

685
00:33:48,400 --> 00:33:50,200
Speaker 2: the decision, but that means I can't count it as

686
00:33:50,200 --> 00:33:52,320
Speaker 2: a financial asset if you're saying you'll never sell it.

687
00:33:52,320 --> 00:33:54,480
Speaker 2: It's not a financial asset. It's a piece of artwork.

688
00:33:54,520 --> 00:33:56,760
Speaker 2: You're going to hang on the wall until somebody inherits it.

689
00:33:56,800 --> 00:33:58,240
Speaker 2: So we got to do your math for your financial

690
00:33:58,280 --> 00:34:00,520
Speaker 2: plan just a little bit differently. Take that out of

691
00:34:00,520 --> 00:34:00,840
Speaker 2: the mix.

692
00:34:01,440 --> 00:34:04,000
Speaker 1: All right, Coming up next, I've got my two cents

693
00:34:04,040 --> 00:34:07,440
Speaker 1: on some discussions we need to be having as family

694
00:34:07,520 --> 00:34:12,040
Speaker 1: members to take proper care of our aging loved ones,

695
00:34:12,120 --> 00:34:15,560
Speaker 1: meaning what decisions we need to be having and more importantly,

696
00:34:15,680 --> 00:34:18,640
Speaker 1: when we might want to start having them. You're listening

697
00:34:18,680 --> 00:34:21,080
Speaker 1: to Simply Money presented by all Worth Financial on fifty

698
00:34:21,120 --> 00:34:29,520
Speaker 1: five KRC, the talk station. You're listening to Simply Money

699
00:34:29,560 --> 00:34:32,319
Speaker 1: presented by all Worth Financial on Bob Sponsorer along with

700
00:34:32,360 --> 00:34:35,840
Speaker 1: Brian James. Brian, I want to talk about a topic

701
00:34:35,880 --> 00:34:38,360
Speaker 1: that just came up yesterday and it's coming up a

702
00:34:38,400 --> 00:34:41,600
Speaker 1: lot for my clients, and I'm just going to relate

703
00:34:41,640 --> 00:34:44,560
Speaker 1: an actual phone call that came in yesterday and it's

704
00:34:44,600 --> 00:34:48,880
Speaker 1: just the husband passed away a few years ago, the

705
00:34:48,960 --> 00:34:52,440
Speaker 1: wife is still living. And these were actually my first

706
00:34:52,520 --> 00:34:56,200
Speaker 1: ever clients, so I've known them for thirty five years.

707
00:34:56,239 --> 00:35:00,840
Speaker 1: I love them dearly, and things are declined health wise

708
00:35:01,000 --> 00:35:04,680
Speaker 1: for their surviving spouse. And the main point I'm trying

709
00:35:04,680 --> 00:35:08,040
Speaker 1: to make here is when I talk to their children.

710
00:35:08,120 --> 00:35:11,359
Speaker 1: You know, there's two girls and a boy. The son

711
00:35:11,480 --> 00:35:16,680
Speaker 1: is the power of attorney. They're not communicating well together.

712
00:35:16,840 --> 00:35:21,319
Speaker 1: They're not taking a united stance on anything. And this

713
00:35:21,440 --> 00:35:25,160
Speaker 1: poor lady has fallen three times since Christmas. She's now

714
00:35:25,200 --> 00:35:29,320
Speaker 1: in a care facility. They do have long term care insurance,

715
00:35:29,480 --> 00:35:32,680
Speaker 1: but assets are starting to get spent. She thinks she's

716
00:35:32,719 --> 00:35:34,880
Speaker 1: going to be going back home. That's not going to

717
00:35:34,960 --> 00:35:38,680
Speaker 1: be possible. And no one is just leveling with her

718
00:35:38,840 --> 00:35:41,920
Speaker 1: and really leveling with one another as the siblings on

719
00:35:42,080 --> 00:35:44,839
Speaker 1: what is the new reality here and what do we

720
00:35:44,880 --> 00:35:47,759
Speaker 1: need to do to a care for mom and to

721
00:35:48,360 --> 00:35:51,359
Speaker 1: you know, do it in a financially responsible manner. And

722
00:35:51,840 --> 00:35:54,279
Speaker 1: the I think the point I'm trying to make here is,

723
00:35:54,760 --> 00:35:57,640
Speaker 1: you know, I've seen this coming now for three years.

724
00:35:57,680 --> 00:36:02,440
Speaker 1: I've tried to spearhead these discussions with some success and

725
00:36:02,520 --> 00:36:05,879
Speaker 1: some failure. It's an issue and it's coming up more

726
00:36:05,960 --> 00:36:08,920
Speaker 1: and more and more, and so you know, my advice

727
00:36:09,000 --> 00:36:12,920
Speaker 1: here is at the first sign of any cognitive decline

728
00:36:13,200 --> 00:36:17,279
Speaker 1: or physical decline of a loved one, parent, uncle, and

729
00:36:17,480 --> 00:36:21,680
Speaker 1: anyone that we're responsible for or care deeply about. It's

730
00:36:21,840 --> 00:36:25,480
Speaker 1: just critical that we get the family together and talk

731
00:36:25,560 --> 00:36:29,520
Speaker 1: about how we're going to handle this together. Because schedules

732
00:36:29,520 --> 00:36:32,799
Speaker 1: get involved. People are working full time jobs, they're having

733
00:36:32,840 --> 00:36:36,000
Speaker 1: to drop everything if our loved one goes to the

734
00:36:36,320 --> 00:36:39,200
Speaker 1: er and has to be in the hospital, and things

735
00:36:39,239 --> 00:36:41,359
Speaker 1: can get out of whack in a hurry, and it's

736
00:36:41,480 --> 00:36:44,560
Speaker 1: it's difficult for me to sit and watch happen. We

737
00:36:44,640 --> 00:36:47,160
Speaker 1: can't prevent any of this, but I think we can

738
00:36:47,200 --> 00:36:49,600
Speaker 1: get out in front of it. If again, at the

739
00:36:49,680 --> 00:36:52,000
Speaker 1: first sign of any of this kind of decline, we

740
00:36:52,480 --> 00:36:55,680
Speaker 1: pull people together and just you know, have these tough

741
00:36:55,719 --> 00:36:59,960
Speaker 1: conversations before it just becomes a hornet's nest of activit.

742
00:37:00,400 --> 00:37:01,880
Speaker 2: Yeah, and I think you hit the nail on the

743
00:37:01,880 --> 00:37:04,759
Speaker 2: head with that reference to schedules and busy and all

744
00:37:04,760 --> 00:37:07,080
Speaker 2: that kind of we all look to hide behind things

745
00:37:07,080 --> 00:37:10,080
Speaker 2: so that we can avoid scary decisions and scary conversations.

746
00:37:10,120 --> 00:37:11,879
Speaker 2: We see people do it every single day with when

747
00:37:11,920 --> 00:37:13,680
Speaker 2: am I going to retire? You know, when am I

748
00:37:13,719 --> 00:37:15,480
Speaker 2: going to do Social Security? And how am I going

749
00:37:15,520 --> 00:37:17,000
Speaker 2: to pay the bills? And all that. People who are

750
00:37:17,040 --> 00:37:19,320
Speaker 2: perfectly capable of doing these things, can't pull the trigger

751
00:37:19,360 --> 00:37:22,200
Speaker 2: and make a decision. But it really comes in. Now

752
00:37:22,200 --> 00:37:24,960
Speaker 2: we're talking about a loved one's comfort and health and

753
00:37:25,200 --> 00:37:27,200
Speaker 2: well being and all those kinds of things. And we

754
00:37:27,280 --> 00:37:30,680
Speaker 2: may be having this conversation well before it's actually time

755
00:37:30,719 --> 00:37:32,160
Speaker 2: to pull the trigger. But you know what, that's the

756
00:37:32,239 --> 00:37:34,440
Speaker 2: time to have it. That is the time when you

757
00:37:34,480 --> 00:37:37,400
Speaker 2: are of clear and sound mind to share your own experiences.

758
00:37:37,400 --> 00:37:39,040
Speaker 2: Maybe you did this with your own parents and you

759
00:37:39,040 --> 00:37:41,799
Speaker 2: remember how painful it was and you have opinions as

760
00:37:41,840 --> 00:37:43,680
Speaker 2: to how you would like to be treated at that time.

761
00:37:44,000 --> 00:37:46,160
Speaker 2: Share that when everybody knows that you were in a

762
00:37:46,200 --> 00:37:49,560
Speaker 2: clear mind and have these conversations, because you'll be setting

763
00:37:49,640 --> 00:37:52,200
Speaker 2: your own children up for things you may have gone

764
00:37:52,200 --> 00:37:54,759
Speaker 2: through and may have at one point said you'll never

765
00:37:54,800 --> 00:37:56,520
Speaker 2: do this to your own family. Well, you got to

766
00:37:56,560 --> 00:37:58,920
Speaker 2: do that sooner rather than later. And it doesn't necessarily

767
00:37:59,000 --> 00:38:00,239
Speaker 2: mean you have to set up in a ever a

768
00:38:00,320 --> 00:38:02,520
Speaker 2: trust her and worry about that stuff later. Just start

769
00:38:02,560 --> 00:38:03,239
Speaker 2: the conversation.

770
00:38:03,400 --> 00:38:06,040
Speaker 1: Well, I'm going beyond the legal documents here, because you

771
00:38:06,080 --> 00:38:08,600
Speaker 1: can have the best healthcare power of attorney and the

772
00:38:08,640 --> 00:38:11,120
Speaker 1: best financial power of attorney ever written. I mean, those

773
00:38:11,160 --> 00:38:14,400
Speaker 1: are legal documents that give people authority to do things

774
00:38:14,480 --> 00:38:17,359
Speaker 1: or not do things. But what I'm talking about is

775
00:38:17,640 --> 00:38:21,839
Speaker 1: harmony in the family, the emotions around this, because you know,

776
00:38:22,120 --> 00:38:26,960
Speaker 1: sometimes people they they can or cannot face reality, and

777
00:38:27,000 --> 00:38:30,280
Speaker 1: they need to be talked through these situations. That goes

778
00:38:30,360 --> 00:38:34,120
Speaker 1: beyond what the legal documents say. It's about keeping harmony

779
00:38:34,120 --> 00:38:37,960
Speaker 1: in the family, and you've got to proactively communicate and

780
00:38:38,000 --> 00:38:40,120
Speaker 1: all get on the same page to make that happen.

781
00:38:40,200 --> 00:38:43,319
Speaker 1: Easier said than done, but it's very important. Thanks for

782
00:38:43,400 --> 00:38:45,839
Speaker 1: listening tonight. You've been listening to Simply Money, presented by

783
00:38:45,840 --> 00:38:49,200
Speaker 1: all Worth Financial on fifty five KRC, the talk station