1 00:00:06,600 --> 00:00:10,800 Speaker 1: Tonight, a new nominee to run the Federal Reserve. How 2 00:00:10,840 --> 00:00:15,120 Speaker 1: to protect your portfolio from a potential lost decade, And 3 00:00:15,400 --> 00:00:18,640 Speaker 1: as always we answer your questions you're listening to simply 4 00:00:18,640 --> 00:00:21,480 Speaker 1: money becaused by all Worth Financial. I'm Bob Sponseller along 5 00:00:21,480 --> 00:00:24,880 Speaker 1: with Brian James. Well, at least we know there's going 6 00:00:24,920 --> 00:00:28,800 Speaker 1: to be a nominee to lead the Federal Reserve come May. 7 00:00:29,880 --> 00:00:32,760 Speaker 1: A new candidate has emerged joining us now is all 8 00:00:32,840 --> 00:00:36,959 Speaker 1: Worth Chief Investment Officer Andy Stout. Andy manages more than 9 00:00:37,040 --> 00:00:40,920 Speaker 1: thirty billion dollars in investments for Allworth Financial from right 10 00:00:41,000 --> 00:00:43,879 Speaker 1: here in Cincinnati. Andy, let's get into it. I know 11 00:00:44,120 --> 00:00:48,360 Speaker 1: Kevin Warsh has been a Federal Reserve Board you know 12 00:00:48,520 --> 00:00:52,800 Speaker 1: governor before. Tell us about him. We know that gold 13 00:00:52,840 --> 00:00:55,520 Speaker 1: and silver and the dollar flew all over the place, 14 00:00:55,920 --> 00:00:59,560 Speaker 1: you know late last week after this nomination came out. 15 00:00:59,600 --> 00:01:02,480 Speaker 1: Tell us about mister Warsh and why we're seeing all 16 00:01:02,480 --> 00:01:06,280 Speaker 1: these moves in the precious metals markets late last week. 17 00:01:06,920 --> 00:01:09,560 Speaker 2: Oh, it was a wild ride on Friday when this 18 00:01:09,600 --> 00:01:13,400 Speaker 2: announcement came out for Kevin ors. And also this morning 19 00:01:13,440 --> 00:01:16,520 Speaker 2: we saw a pretty sizable drop and bit of a 20 00:01:16,560 --> 00:01:20,280 Speaker 2: recovery when the Asian markets opened as well. And the 21 00:01:20,319 --> 00:01:22,840 Speaker 2: reason is, first of all, to your point, you know, 22 00:01:22,880 --> 00:01:25,720 Speaker 2: Bob Kevin Orsh is not an unknown quantity. I mean, 23 00:01:25,760 --> 00:01:27,959 Speaker 2: he did serve as a FED governor from two thousand 24 00:01:28,000 --> 00:01:31,520 Speaker 2: and six to twenty eleven, so he has a lot 25 00:01:31,560 --> 00:01:34,440 Speaker 2: of experience with the financial crisis, and you know, the 26 00:01:34,520 --> 00:01:39,440 Speaker 2: early years of quantitative easing, and early on he supported 27 00:01:39,440 --> 00:01:43,200 Speaker 2: those measures. Okay, and this this matters. I'm get to 28 00:01:43,240 --> 00:01:45,800 Speaker 2: the point here in a second. On quantitative easing, what 29 00:01:45,840 --> 00:01:48,400 Speaker 2: that means is the Federal Reserve bought a bunch of 30 00:01:48,440 --> 00:01:51,560 Speaker 2: bonds to encourage economic growth, and that's when you saw 31 00:01:51,600 --> 00:01:54,680 Speaker 2: the balance sheet really balloon from started off a right 32 00:01:54,720 --> 00:01:58,440 Speaker 2: around like nine hundred you know, billion or so to 33 00:01:59,600 --> 00:02:02,920 Speaker 2: ultimately nine trillion a year as of twenty twenty two. 34 00:02:03,360 --> 00:02:05,120 Speaker 2: So he was a pretty big critic, but in twenty 35 00:02:05,160 --> 00:02:07,440 Speaker 2: eleven it was still much smaller than where it was. 36 00:02:08,400 --> 00:02:11,760 Speaker 2: And one thing that's really interesting about worst is he 37 00:02:11,800 --> 00:02:14,520 Speaker 2: became one of the Fed's most vocal critics around the 38 00:02:14,520 --> 00:02:17,040 Speaker 2: balance sheet expansion and what he sees as like the 39 00:02:17,080 --> 00:02:20,280 Speaker 2: FEDS growing footprint in the market. And by the way, 40 00:02:20,440 --> 00:02:24,680 Speaker 2: he quit the FED because of quantitative easing, so he 41 00:02:24,840 --> 00:02:29,600 Speaker 2: comes in now with an eye to possibly reduce the 42 00:02:29,600 --> 00:02:33,160 Speaker 2: balance sheet from where it is currently, which is actually 43 00:02:33,200 --> 00:02:37,200 Speaker 2: six point six trillion. And yes, he is open to 44 00:02:37,200 --> 00:02:41,799 Speaker 2: cutting rates. Yes, he probably will push for lower interest rates, 45 00:02:41,800 --> 00:02:44,040 Speaker 2: and markets are pricing in two rate cuts, but that 46 00:02:44,120 --> 00:02:47,640 Speaker 2: may not matter if he shrinks the balance sheet so 47 00:02:47,760 --> 00:02:50,840 Speaker 2: much that it actually tightens more than the rates loose 48 00:02:50,880 --> 00:02:54,239 Speaker 2: in policy, so you could actually see rates longer term 49 00:02:54,280 --> 00:02:57,959 Speaker 2: rates increase even as short term rates are getting cut 50 00:02:58,000 --> 00:03:00,520 Speaker 2: because of what's going on in the balance sheet. And 51 00:03:00,680 --> 00:03:03,520 Speaker 2: if you recall, the Fed had been shrinking its bountet 52 00:03:03,560 --> 00:03:08,119 Speaker 2: until basically two months ago, and they stopped because what 53 00:03:08,360 --> 00:03:11,080 Speaker 2: happened was there was a lot of liquidity concerns and 54 00:03:11,200 --> 00:03:14,320 Speaker 2: funding concerns in the markets with money market rates jumping 55 00:03:14,360 --> 00:03:16,560 Speaker 2: all over the place, and it started to show some 56 00:03:17,520 --> 00:03:21,240 Speaker 2: funding strings where it could be difficult for businesses and 57 00:03:21,440 --> 00:03:24,519 Speaker 2: individuals to borrow money to keep the economy growing. So 58 00:03:24,639 --> 00:03:29,120 Speaker 2: essentially the financial plumbing started to break when the Fed 59 00:03:29,760 --> 00:03:31,840 Speaker 2: was reducing its balance so they got it down from 60 00:03:31,919 --> 00:03:34,760 Speaker 2: nine trillion to six point six trillion, and that's where 61 00:03:34,800 --> 00:03:38,560 Speaker 2: the real concern happened with the gold and silver markets 62 00:03:38,720 --> 00:03:41,400 Speaker 2: because they see this as an issue right. 63 00:03:41,280 --> 00:03:44,480 Speaker 1: Now, All right, Andy, if you would break this down 64 00:03:44,520 --> 00:03:46,960 Speaker 1: so even a seventh grader can understand it. When we 65 00:03:47,040 --> 00:03:51,680 Speaker 1: throw around terms like quantitative easing, balance sheet expansion, and contraction, 66 00:03:51,840 --> 00:03:54,720 Speaker 1: what are we really talking about here in layman's terms. 67 00:03:55,680 --> 00:03:58,320 Speaker 2: So that's where the Federal Reserve is buying mortgage bonds 68 00:03:58,600 --> 00:04:01,080 Speaker 2: and buying treasury bonds. When we're talking and quantitative easing, 69 00:04:01,080 --> 00:04:04,640 Speaker 2: they're increasing what they're buying. And when they buy bonds, 70 00:04:05,320 --> 00:04:07,400 Speaker 2: the money from those bonds makes its way into the 71 00:04:07,400 --> 00:04:11,600 Speaker 2: economy and should encourage economic growth and make it easier 72 00:04:12,040 --> 00:04:16,480 Speaker 2: for banks to lend to one another, to businesses and 73 00:04:16,560 --> 00:04:19,599 Speaker 2: to individuals. So when they start to pull money out 74 00:04:19,600 --> 00:04:23,599 Speaker 2: where they essentially remove those bonds or shrink the bonds 75 00:04:23,600 --> 00:04:26,839 Speaker 2: from their balance sheet, they're taking money out of the economy, 76 00:04:27,040 --> 00:04:29,720 Speaker 2: and you can see the money supply, the money that's 77 00:04:29,760 --> 00:04:35,120 Speaker 2: slashing around, they're actually shrink and that can reduce inflation, 78 00:04:35,960 --> 00:04:39,479 Speaker 2: but it is a way to tighten monetary policy. And 79 00:04:39,960 --> 00:04:43,960 Speaker 2: so what you saw was the Federal Reserve at least 80 00:04:43,960 --> 00:04:47,520 Speaker 2: the view of what a warsh lead FED might look like. 81 00:04:47,600 --> 00:04:50,760 Speaker 2: So if they shrink its footprint too aggressively, you can 82 00:04:50,800 --> 00:04:54,040 Speaker 2: see these longer term inters right, it's like mortgage rates 83 00:04:54,080 --> 00:04:57,800 Speaker 2: actually going higher, and that is the exact opposite of 84 00:04:57,880 --> 00:05:01,240 Speaker 2: what President Trump wants. So if they move too quickly, 85 00:05:01,279 --> 00:05:03,800 Speaker 2: you're going to have a president who was not very happy. 86 00:05:03,880 --> 00:05:06,800 Speaker 2: And we've seen what a not happy president it looks like, 87 00:05:07,040 --> 00:05:09,680 Speaker 2: especially as it rates to the Federal Reserve where there's 88 00:05:09,680 --> 00:05:12,360 Speaker 2: a lot of political pressure on the Fed because of that, 89 00:05:12,720 --> 00:05:15,200 Speaker 2: and when you look at that backdrop, that's where the 90 00:05:15,240 --> 00:05:17,880 Speaker 2: balance sheet focus really sets the stage for that collapse 91 00:05:17,920 --> 00:05:22,159 Speaker 2: we saw on Friday and precious metals where gold had 92 00:05:22,160 --> 00:05:24,719 Speaker 2: its six worst day ever. It was down about nine percent. 93 00:05:24,760 --> 00:05:26,800 Speaker 2: It was actually down more early in the day about 94 00:05:26,839 --> 00:05:30,520 Speaker 2: twelve percent. Silver had a record collapse. It will fell 95 00:05:30,640 --> 00:05:33,080 Speaker 2: twenty six percent. At one point on Friday it was 96 00:05:33,120 --> 00:05:36,400 Speaker 2: actually off thirty six percent, and we saw some more 97 00:05:36,480 --> 00:05:39,080 Speaker 2: volatility this morning. And really when we look at that 98 00:05:39,160 --> 00:05:42,160 Speaker 2: gold and silver trade, as details started to merge over 99 00:05:42,200 --> 00:05:44,880 Speaker 2: the weekend, you know a lot of reports what they 100 00:05:44,960 --> 00:05:47,080 Speaker 2: revealed was that was kind of like i'll call it 101 00:05:47,120 --> 00:05:51,440 Speaker 2: a classic crowded trade underwined. You had precious metals that 102 00:05:51,480 --> 00:05:54,800 Speaker 2: were everyone was leaning one way, there was a lot 103 00:05:54,800 --> 00:05:58,960 Speaker 2: of leverage. Then you had people start to remove some 104 00:05:59,120 --> 00:06:01,960 Speaker 2: of those price or remove some of those trades they had, 105 00:06:02,200 --> 00:06:04,640 Speaker 2: and that's selling just led to more selling and really 106 00:06:04,680 --> 00:06:08,640 Speaker 2: created a vicious cycle where trades really unwound, and that's 107 00:06:08,680 --> 00:06:10,919 Speaker 2: why you saw a lot of that stress. It's still 108 00:06:10,960 --> 00:06:13,800 Speaker 2: to be determined if the worst of it's over or 109 00:06:13,880 --> 00:06:17,839 Speaker 2: all of it's over. Typically when you see you know, aggressive, 110 00:06:18,400 --> 00:06:21,440 Speaker 2: violent unwinding trades like we saw in silver last week, 111 00:06:21,560 --> 00:06:23,680 Speaker 2: there tends to be a bit more of alatility. Doesn't 112 00:06:23,839 --> 00:06:26,120 Speaker 2: all happen in one day, you know, we'll see how 113 00:06:26,160 --> 00:06:28,240 Speaker 2: it all plays out, but it's something to keep an 114 00:06:28,279 --> 00:06:29,080 Speaker 2: eye on, that's for sure. 115 00:06:29,440 --> 00:06:33,640 Speaker 3: Hey, Andy, So, Kevin worsh is a bit of a 116 00:06:33,680 --> 00:06:37,039 Speaker 3: hawk on on things, and it seems like some of 117 00:06:37,080 --> 00:06:39,680 Speaker 3: this is a reaction to him and what his policies, 118 00:06:39,720 --> 00:06:41,960 Speaker 3: what his thoughts will be. You know, for example, President 119 00:06:42,000 --> 00:06:45,680 Speaker 3: Trump has famously been a big supporter of cryptocurrency, hasn't 120 00:06:45,720 --> 00:06:48,200 Speaker 3: talked much about it lately that I can recall. But 121 00:06:48,320 --> 00:06:50,840 Speaker 3: Kevin worsh is would the thing he wants to do, 122 00:06:50,920 --> 00:06:54,160 Speaker 3: Things he wants to do to strengthen the dollar or 123 00:06:54,240 --> 00:06:57,880 Speaker 3: are directly in opposition to what cryptocurrency would want. And 124 00:06:58,000 --> 00:07:00,359 Speaker 3: that's why we saw crypto get hammered last week as well. 125 00:07:00,520 --> 00:07:03,279 Speaker 3: So do you think that the part of this feels 126 00:07:03,360 --> 00:07:05,400 Speaker 3: like a I don't. I don't want to say that 127 00:07:05,440 --> 00:07:08,080 Speaker 3: people feel like everything is better all of a sudden 128 00:07:08,160 --> 00:07:10,600 Speaker 3: and we don't need these precious metals type things, But 129 00:07:10,640 --> 00:07:14,520 Speaker 3: it seems like people might be coming back into Are 130 00:07:14,560 --> 00:07:17,120 Speaker 3: people being more willing to invest in the capital markets 131 00:07:17,160 --> 00:07:19,679 Speaker 3: now than we have been? Is the is the panic 132 00:07:19,800 --> 00:07:21,920 Speaker 3: kind of residing a little bit or not panic but paranoia? 133 00:07:21,920 --> 00:07:25,640 Speaker 2: I'd say, yeah, I don't know if the paranoia out 134 00:07:25,680 --> 00:07:30,040 Speaker 2: there is fully fading from that perspective. I mean, crypto 135 00:07:30,120 --> 00:07:33,680 Speaker 2: has seen, you know, some a number of rough days, 136 00:07:33,680 --> 00:07:37,280 Speaker 2: not just this past week. You know, they well off 137 00:07:37,280 --> 00:07:38,760 Speaker 2: its eyes. When you look at you know, the price 138 00:07:38,800 --> 00:07:42,640 Speaker 2: of either bitcoin or ether or whichever pin you want 139 00:07:42,680 --> 00:07:45,280 Speaker 2: to look at out there, there's definitely been some pressure. 140 00:07:45,920 --> 00:07:47,800 Speaker 2: And then when you look at you know, the precious 141 00:07:47,840 --> 00:07:50,520 Speaker 2: metal markets and they're actually still up for the year. 142 00:07:51,520 --> 00:07:54,480 Speaker 2: I mean that just kind of shows you how strong 143 00:07:54,800 --> 00:07:58,040 Speaker 2: January was on the precious metal side and how crowded 144 00:07:58,080 --> 00:08:00,000 Speaker 2: of a trade it was. So when you look at 145 00:08:00,120 --> 00:08:03,360 Speaker 2: cryptocurrency and you look even more broadly, I mean, we 146 00:08:03,440 --> 00:08:06,440 Speaker 2: have not seen people run away from equities. We have 147 00:08:06,480 --> 00:08:09,840 Speaker 2: not seen people run away from bonds. When you look 148 00:08:09,880 --> 00:08:12,760 Speaker 2: at you know, unwins like we saw last week, you 149 00:08:12,800 --> 00:08:16,960 Speaker 2: typically see something maybe spill over to adjacent markets, and 150 00:08:17,000 --> 00:08:19,240 Speaker 2: that's why you saw that stress and currencies, you know, 151 00:08:19,320 --> 00:08:23,200 Speaker 2: toed the dollar getting stronger, commodities being weaker. But for now, 152 00:08:23,320 --> 00:08:26,680 Speaker 2: equities appear to be at least initially insulated from a 153 00:08:26,680 --> 00:08:29,160 Speaker 2: lot of this. Part of that's because earning's momentum is 154 00:08:29,200 --> 00:08:33,480 Speaker 2: still really solid and the economy is still not flashing 155 00:08:33,480 --> 00:08:38,440 Speaker 2: any major recession signals. So when you look at those together, 156 00:08:38,960 --> 00:08:42,280 Speaker 2: you still see stability in your more I'll call them 157 00:08:42,320 --> 00:08:45,640 Speaker 2: traditional markets if you will, even though there are some 158 00:08:45,679 --> 00:08:47,760 Speaker 2: week there's some weakness at the edges there. 159 00:08:48,160 --> 00:08:50,320 Speaker 1: All right, Andy, going back to the Federal Reserve, we 160 00:08:50,400 --> 00:08:53,840 Speaker 1: actually did have a Federal Reserve meeting last week, and 161 00:08:53,960 --> 00:08:57,559 Speaker 1: to literally no one's surprised, they did leave interest rates 162 00:08:57,600 --> 00:09:01,160 Speaker 1: exactly where they are. Andy, what's your take on chair 163 00:09:01,320 --> 00:09:04,679 Speaker 1: pal expressing, you know, some confidence at this point that 164 00:09:04,800 --> 00:09:09,040 Speaker 1: much of the terraff related inflation seems to be behind 165 00:09:09,120 --> 00:09:12,200 Speaker 1: us for the most part. And then you know, follow 166 00:09:12,240 --> 00:09:14,280 Speaker 1: up question to that, as we do have an important 167 00:09:14,360 --> 00:09:18,680 Speaker 1: January jobs report coming out later this week. What are 168 00:09:18,760 --> 00:09:21,360 Speaker 1: we expecting, you know, from the jobs report? And what's 169 00:09:21,360 --> 00:09:25,320 Speaker 1: your take on Chair Pal's comments following the Federal Reserve 170 00:09:25,400 --> 00:09:26,200 Speaker 1: meeting last week. 171 00:09:26,800 --> 00:09:29,360 Speaker 2: No, I think he's right. It does appear that most 172 00:09:29,360 --> 00:09:31,240 Speaker 2: of the terraf fresher is behind us, and that does 173 00:09:31,320 --> 00:09:33,880 Speaker 2: open the door up for the Fed to be more 174 00:09:35,320 --> 00:09:38,520 Speaker 2: open to cutting rates. Right now, the market's not pricing 175 00:09:38,559 --> 00:09:41,160 Speaker 2: any rate cuts until actually Chair Pal's term is over, 176 00:09:41,200 --> 00:09:45,839 Speaker 2: which is May fifteenth, So we'll see how that actually transpires, 177 00:09:46,120 --> 00:09:49,640 Speaker 2: you know, as the year progresses. But I think he's 178 00:09:49,720 --> 00:09:55,240 Speaker 2: right on that cool inflation cooling. And they also took 179 00:09:55,440 --> 00:09:57,360 Speaker 2: someone of what we'll call it duvish tone, so the 180 00:09:57,440 --> 00:10:00,360 Speaker 2: more open to you know, focusing on the labor market 181 00:10:00,360 --> 00:10:02,640 Speaker 2: and the economy when it comes to the meaning. So 182 00:10:02,840 --> 00:10:07,320 Speaker 2: you know, they did talk about how the inflation pressures 183 00:10:07,320 --> 00:10:10,840 Speaker 2: are fading, but the labor market, you know, is still cooling, 184 00:10:10,880 --> 00:10:14,360 Speaker 2: but maybe not as bad. What I found really most 185 00:10:14,400 --> 00:10:17,760 Speaker 2: interesting was it as press conference, palas asked four times 186 00:10:17,800 --> 00:10:20,760 Speaker 2: about his future at the FED. Each time he basically 187 00:10:20,760 --> 00:10:24,160 Speaker 2: said no, no comment. Essentially, what he is doing, he's 188 00:10:24,280 --> 00:10:26,880 Speaker 2: leaving the door open to remain at the FED, which 189 00:10:26,920 --> 00:10:30,720 Speaker 2: is actually extremely unusual, by the way, but to remain 190 00:10:30,800 --> 00:10:33,760 Speaker 2: at the FAT as a way to act as a 191 00:10:33,800 --> 00:10:37,800 Speaker 2: counter to any sort of potential political pressure from President 192 00:10:37,800 --> 00:10:40,080 Speaker 2: Trump if he were to pressure the FED kind of 193 00:10:40,120 --> 00:10:43,520 Speaker 2: like you know he has been doing so. Palace term 194 00:10:43,880 --> 00:10:46,840 Speaker 2: as a FED member ends in twenty twenty eight, so 195 00:10:46,880 --> 00:10:49,600 Speaker 2: he could stick around for a couple more years on 196 00:10:49,640 --> 00:10:52,120 Speaker 2: the FED. It's going to be really really interesting to 197 00:10:52,120 --> 00:10:53,640 Speaker 2: see how this plays out. And as far as a 198 00:10:53,720 --> 00:10:57,560 Speaker 2: labor market goes, Yeah, we do get the jobs report 199 00:10:57,720 --> 00:11:01,280 Speaker 2: this week on Friday, the January Jaws Report, and it's 200 00:11:01,320 --> 00:11:05,600 Speaker 2: expected to show modeston degrees sixty five thousand new jobs 201 00:11:05,800 --> 00:11:08,920 Speaker 2: that employers are expected to say we're at and it's 202 00:11:08,960 --> 00:11:11,960 Speaker 2: expected at the unemployment rate remains at four point four percent. 203 00:11:12,120 --> 00:11:15,000 Speaker 2: And when we put that all together, it shows a 204 00:11:15,160 --> 00:11:18,680 Speaker 2: somewhat stable labor market, but not strong and that's why 205 00:11:19,040 --> 00:11:21,280 Speaker 2: there's a lot of pressure on the FAT lower rates. 206 00:11:22,120 --> 00:11:24,440 Speaker 1: All right, good stuff, As always, Andy, we know you 207 00:11:24,480 --> 00:11:28,360 Speaker 1: have to run really appreciate the time. Tonight coming up next, 208 00:11:28,400 --> 00:11:31,560 Speaker 1: are we about to stare down ten years of flat 209 00:11:31,679 --> 00:11:34,920 Speaker 1: stock market returns. We're going to break down what a 210 00:11:35,120 --> 00:11:38,600 Speaker 1: lost decade in stock returns really means and why some 211 00:11:38,760 --> 00:11:43,280 Speaker 1: analysts might be might think we're heading toward a lost decade, 212 00:11:43,840 --> 00:11:46,560 Speaker 1: and more importantly, how should you react to it. You're 213 00:11:46,559 --> 00:11:49,000 Speaker 1: listening to Simply Money presented by all Worth Financial on 214 00:11:49,080 --> 00:11:58,480 Speaker 1: fifty five KRC the talk station. You're listening to Simply 215 00:11:58,520 --> 00:12:01,079 Speaker 1: Money presented by all Worth Finance. So I'm Bob Sponseller 216 00:12:01,120 --> 00:12:04,160 Speaker 1: along with Brian James, straight ahead of six forty three. 217 00:12:04,320 --> 00:12:07,560 Speaker 1: Some of the most nuanced money questions we've gotten in 218 00:12:07,640 --> 00:12:13,000 Speaker 1: quite a while. One investor's juggling trust with complex tax situations. 219 00:12:13,040 --> 00:12:14,920 Speaker 1: I'm going to give that one to you, Brian. Another 220 00:12:15,400 --> 00:12:19,960 Speaker 1: with an entire retirement plan that's dependent on early retirement 221 00:12:20,080 --> 00:12:23,199 Speaker 1: big returns. We're going to tackle all of that coming 222 00:12:23,280 --> 00:12:26,040 Speaker 1: up in a few minutes. All right. It's a phrase 223 00:12:26,120 --> 00:12:30,760 Speaker 1: starting to creep back into headlines in some investment blogs, 224 00:12:30,800 --> 00:12:35,120 Speaker 1: the whole concept of a lost decade in stocks, and 225 00:12:35,160 --> 00:12:38,200 Speaker 1: that one always gets people's attention, the idea that we 226 00:12:38,240 --> 00:12:42,000 Speaker 1: could be staring down perhaps ten years of flat or 227 00:12:42,200 --> 00:12:46,280 Speaker 1: near zero market returns. Brian, what's this all about? Take 228 00:12:46,360 --> 00:12:49,800 Speaker 1: us back, you know, walk us through another point, a 229 00:12:49,880 --> 00:12:53,160 Speaker 1: period in time where this actually happened, and I guess 230 00:12:53,280 --> 00:12:56,040 Speaker 1: why it happened. And you know, should we even be 231 00:12:56,120 --> 00:12:59,280 Speaker 1: worried about a lost decade in stock returns going forward? 232 00:13:00,240 --> 00:13:03,600 Speaker 3: I think the lost decade brings back PTSD for a 233 00:13:03,600 --> 00:13:06,000 Speaker 3: lot of Cincinnati people, because when I hear that, I think, 234 00:13:06,160 --> 00:13:08,080 Speaker 3: I don't think stock market, I think bangles. 235 00:13:08,240 --> 00:13:10,240 Speaker 1: So anyway, that's. 236 00:13:10,080 --> 00:13:14,000 Speaker 3: Not what we're talking about today, although maybe we're into 237 00:13:14,120 --> 00:13:16,560 Speaker 3: a partial loss decade right now. 238 00:13:16,760 --> 00:13:17,360 Speaker 1: AnyWho. 239 00:13:18,000 --> 00:13:21,240 Speaker 3: So what we're talking about here is the lost decade 240 00:13:21,280 --> 00:13:24,360 Speaker 3: is basically a period where the major stock indexes like 241 00:13:24,400 --> 00:13:26,360 Speaker 3: the S and P five hundred, really don't generate any 242 00:13:26,400 --> 00:13:28,440 Speaker 3: meaningful gains after adjusting for inflation. 243 00:13:28,559 --> 00:13:29,800 Speaker 1: And we have seen this before. 244 00:13:30,040 --> 00:13:31,839 Speaker 3: From two thousand and two thousand and nine, the S 245 00:13:31,920 --> 00:13:34,880 Speaker 3: and P basically didn't do much of anything. Two major 246 00:13:34,920 --> 00:13:36,880 Speaker 3: market crashes in two thousand and two, and then of 247 00:13:36,880 --> 00:13:39,400 Speaker 3: course two thousand and eight. If you were just buying 248 00:13:39,400 --> 00:13:41,720 Speaker 3: and holding those large cap us stocks, it was a 249 00:13:41,720 --> 00:13:45,160 Speaker 3: painful stretch, especially for retirees drawing out income at that time. 250 00:13:45,440 --> 00:13:48,240 Speaker 3: That's something called sequence of returns risk. When do I 251 00:13:48,280 --> 00:13:50,800 Speaker 3: get my good returns? When do I get my bad returns? 252 00:13:51,040 --> 00:13:54,080 Speaker 3: And that hit people in that decade because we were 253 00:13:54,120 --> 00:13:56,720 Speaker 3: trying to obviously, we want the portfolio to grow and 254 00:13:56,720 --> 00:13:59,760 Speaker 3: then draw down income off of it to pay the bills, 255 00:14:00,040 --> 00:14:02,480 Speaker 3: and that became a challenge during that decade. 256 00:14:03,559 --> 00:14:06,000 Speaker 1: Well, and it also we've talked about this before, that 257 00:14:06,120 --> 00:14:11,120 Speaker 1: also kind of ruined the confidence of you know, younger investors. 258 00:14:11,160 --> 00:14:15,319 Speaker 1: I mean, when you have two fifty plus return fifty 259 00:14:15,320 --> 00:14:18,840 Speaker 1: plus percent declines in the Nasdaq within two years or 260 00:14:18,880 --> 00:14:21,480 Speaker 1: within ten years, one due to the tech bubble, the 261 00:14:21,520 --> 00:14:24,720 Speaker 1: other the housing crisis, that's going to get people's attention 262 00:14:24,800 --> 00:14:26,760 Speaker 1: and ruin a lot of confidence in the hurry, but 263 00:14:26,840 --> 00:14:30,360 Speaker 1: in a hurry, but that is a rare ten years 264 00:14:30,400 --> 00:14:33,320 Speaker 1: with those two shocks to the system coming. Why do 265 00:14:33,360 --> 00:14:36,200 Speaker 1: you think people are even bringing this topic up back 266 00:14:36,280 --> 00:14:37,000 Speaker 1: up right now? 267 00:14:37,920 --> 00:14:40,920 Speaker 3: Because whenever it feels like, you know, it just feels 268 00:14:40,960 --> 00:14:43,440 Speaker 3: like the market may We've had a good run. We've 269 00:14:43,440 --> 00:14:46,560 Speaker 3: had three really solid years, and we've made new highs 270 00:14:46,600 --> 00:14:48,880 Speaker 3: basically every just about every month, it seems like, for 271 00:14:48,920 --> 00:14:51,920 Speaker 3: the past three years plus. And you know, at some point, 272 00:14:51,960 --> 00:14:53,760 Speaker 3: we know the air has to come out of the balloon. 273 00:14:54,080 --> 00:14:56,200 Speaker 3: That's a conversation I'm having more and more often when 274 00:14:56,240 --> 00:14:58,120 Speaker 3: I'm sitting down with my clients and we're viewing their 275 00:14:58,120 --> 00:15:00,440 Speaker 3: financial plans we've had in place for eevery you're probably 276 00:15:00,480 --> 00:15:02,920 Speaker 3: doing this too. Let's look at that stress test, right, 277 00:15:03,000 --> 00:15:05,200 Speaker 3: Let's look at that whole bad timing scenario. What if 278 00:15:05,200 --> 00:15:07,160 Speaker 3: the market takes a chunk right now? Do I have 279 00:15:07,240 --> 00:15:10,480 Speaker 3: to change my spending? And it's one thing to look 280 00:15:10,520 --> 00:15:13,800 Speaker 3: at that and to look at a simulation on a 281 00:15:13,840 --> 00:15:15,600 Speaker 3: screen to say, ah, your money will look like this, 282 00:15:15,720 --> 00:15:17,200 Speaker 3: but you can still afford to pay your bills and 283 00:15:17,200 --> 00:15:19,520 Speaker 3: you'll still be okay in thirty years. It's another thing 284 00:15:19,720 --> 00:15:22,040 Speaker 3: entirely for that to actually happen, even though we're going 285 00:15:22,080 --> 00:15:23,720 Speaker 3: to be pretty close on what the numbers look like, 286 00:15:23,920 --> 00:15:27,240 Speaker 3: because we've seen market pullbacks before. But it's another thing 287 00:15:27,240 --> 00:15:29,320 Speaker 3: when it comes along with headlines, when it comes along 288 00:15:29,320 --> 00:15:31,120 Speaker 3: with friends and family saying you need to get out 289 00:15:31,120 --> 00:15:32,640 Speaker 3: of the market, you need to panic, you need to 290 00:15:32,720 --> 00:15:34,640 Speaker 3: run and head for the hills. That is hard to 291 00:15:34,680 --> 00:15:37,360 Speaker 3: deal with. But that's why it's so important to simulate 292 00:15:37,360 --> 00:15:39,760 Speaker 3: it now and understand what the numbers might look like, 293 00:15:40,040 --> 00:15:42,360 Speaker 3: so that when it actually does happen, you will have 294 00:15:42,400 --> 00:15:44,680 Speaker 3: already looked at whether you need to make any changes 295 00:15:44,720 --> 00:15:46,560 Speaker 3: and hopefully you don't. That's the whole point of having 296 00:15:46,600 --> 00:15:48,040 Speaker 3: a plan in place in the first place. 297 00:15:48,640 --> 00:15:51,840 Speaker 1: Yeah, and there is a difference between making some changes 298 00:15:51,920 --> 00:15:55,440 Speaker 1: and making you wholesale changes trying to time the market 299 00:15:55,480 --> 00:15:59,080 Speaker 1: with your entire portfolio. Brian, one of my favorite things 300 00:15:59,080 --> 00:16:02,120 Speaker 1: to do, just to refresh my own you know, a 301 00:16:02,160 --> 00:16:04,880 Speaker 1: reset from my own brain from time to time, and 302 00:16:05,000 --> 00:16:07,800 Speaker 1: also put this in front of clients is pull up 303 00:16:07,800 --> 00:16:09,800 Speaker 1: a chart, you know, pull it out, a chart of 304 00:16:09,840 --> 00:16:13,040 Speaker 1: the S and P five hundred going back to nineteen 305 00:16:13,160 --> 00:16:16,720 Speaker 1: twenty six. And you know, there's charts available that have 306 00:16:16,920 --> 00:16:21,400 Speaker 1: all of these geopolitical events and trade wars and elections 307 00:16:21,480 --> 00:16:24,520 Speaker 1: and you know, you name it, well, everything that's happened 308 00:16:24,560 --> 00:16:28,320 Speaker 1: to this country since nineteen twenty six. And I sometimes 309 00:16:28,400 --> 00:16:31,960 Speaker 1: for with clients, I'll say, hey, please please pull out 310 00:16:32,000 --> 00:16:35,600 Speaker 1: your index figure finger and place it on that chart 311 00:16:35,720 --> 00:16:38,080 Speaker 1: telling me when the perfect time to get in the 312 00:16:38,080 --> 00:16:41,680 Speaker 1: market was. And you know, no one can do it. 313 00:16:41,920 --> 00:16:43,840 Speaker 1: I can't do it, you can't do it. And I 314 00:16:43,880 --> 00:16:48,880 Speaker 1: think sometimes it's important to study history and realize that, hey, 315 00:16:49,000 --> 00:16:53,320 Speaker 1: we do recover. The economy moves on, people adjust, you know, 316 00:16:53,440 --> 00:16:57,240 Speaker 1: governments get involved, you know, you name it. Yes, we're 317 00:16:57,240 --> 00:17:00,200 Speaker 1: going to have volatility, but you it is. It is 318 00:17:00,240 --> 00:17:03,760 Speaker 1: a fool's errand to try to time this market, you know, 319 00:17:03,840 --> 00:17:06,959 Speaker 1: on the wholesale level and say, yep, let's get everything 320 00:17:07,000 --> 00:17:09,760 Speaker 1: out of the market because such and such is likely 321 00:17:09,800 --> 00:17:12,280 Speaker 1: to happen, and then I'll get back in when it 322 00:17:12,359 --> 00:17:14,480 Speaker 1: quote unquote feels better. Yeah. 323 00:17:14,560 --> 00:17:16,800 Speaker 3: And then another little game I like to play sometimes 324 00:17:16,800 --> 00:17:18,919 Speaker 3: when people are kind of going taking themselves down this 325 00:17:19,080 --> 00:17:21,320 Speaker 3: rabbit hole, is you know, let's look at the headlines, 326 00:17:21,400 --> 00:17:23,720 Speaker 3: let's google or now I guess I can say chat 327 00:17:23,760 --> 00:17:28,240 Speaker 3: GPT the headlines from March ninth of two thousand and nine. 328 00:17:28,280 --> 00:17:30,639 Speaker 3: March ninth, two thousand and nine, that was the bottom 329 00:17:30,760 --> 00:17:33,119 Speaker 3: of the two thousand and eight market crash. From there 330 00:17:33,320 --> 00:17:35,400 Speaker 3: we went to the moon. But if you go read 331 00:17:35,440 --> 00:17:37,560 Speaker 3: the headlines for the weeks prior to that, and even 332 00:17:37,680 --> 00:17:39,919 Speaker 3: on that date, there's nothing in there that says anything 333 00:17:39,920 --> 00:17:42,080 Speaker 3: about everybody back in the pool, all the sharks are gone. 334 00:17:42,119 --> 00:17:44,720 Speaker 3: That's not how it works. That didn't start really until 335 00:17:44,760 --> 00:17:46,840 Speaker 3: that following summer where we were able to say, Okay, 336 00:17:46,880 --> 00:17:48,960 Speaker 3: it looks like these green shoots are actually going to stick. 337 00:17:49,119 --> 00:17:51,119 Speaker 3: The economy has righted itself and it looks like we 338 00:17:51,200 --> 00:17:53,040 Speaker 3: might be able to to kind of move on from here, 339 00:17:53,440 --> 00:17:55,280 Speaker 3: but over the long haul. So we were just talking 340 00:17:55,320 --> 00:17:57,520 Speaker 3: about two thousand to two thousand and nine, Bob, where 341 00:17:57,560 --> 00:18:01,040 Speaker 3: the market inflation adjusted. Right, Remember we're talking about inflation adjusted. 342 00:18:01,720 --> 00:18:03,280 Speaker 3: The market didn't do a whole lot. You can see 343 00:18:03,280 --> 00:18:06,920 Speaker 3: positive returns, but they were largely wiped out by inflation. 344 00:18:07,040 --> 00:18:09,440 Speaker 3: This but we're not talking about inflation like we had 345 00:18:09,560 --> 00:18:12,159 Speaker 3: very recently. It wasn't ridiculous, but it was enough to 346 00:18:12,200 --> 00:18:16,359 Speaker 3: take a decade of doldrums to take that return away. 347 00:18:16,600 --> 00:18:19,119 Speaker 3: That was followed by the twenty ten to twenty twenty 348 00:18:19,160 --> 00:18:21,760 Speaker 3: timeframe where the S and P five hundred average more 349 00:18:21,800 --> 00:18:25,320 Speaker 3: like thirteen percent. So it's a long, long haul to say, hey, 350 00:18:25,359 --> 00:18:27,520 Speaker 3: you know, this is a twenty year time period. Everything 351 00:18:27,600 --> 00:18:29,520 Speaker 3: is great over twenty years. So that doesn't help somebody 352 00:18:29,520 --> 00:18:31,399 Speaker 3: who's looking this week at their budget trying to make 353 00:18:31,440 --> 00:18:33,320 Speaker 3: the ends meet. But this is why we say what 354 00:18:33,359 --> 00:18:35,359 Speaker 3: we do. And I have more and more clients, Bob, 355 00:18:35,560 --> 00:18:37,600 Speaker 3: who are saying, you know what, I've never panicked about 356 00:18:37,640 --> 00:18:40,280 Speaker 3: the market anyway. I get mad, I get annoyed, But 357 00:18:40,359 --> 00:18:42,280 Speaker 3: why do I need to Maybe we shouldn't known any 358 00:18:42,280 --> 00:18:44,520 Speaker 3: fixed income, the heck with it, Let's just ride it out. 359 00:18:44,560 --> 00:18:47,119 Speaker 3: And there's some logic to that. That doesn't necessarily mean 360 00:18:47,119 --> 00:18:48,960 Speaker 3: we pull the trigger, but it's good to know that 361 00:18:49,000 --> 00:18:52,680 Speaker 3: people are able to think nowadays about an approach where we, 362 00:18:53,359 --> 00:18:55,679 Speaker 3: rather than try to protect from risk, realize that the 363 00:18:55,680 --> 00:18:57,840 Speaker 3: pendulum just swings back and forth and as long as 364 00:18:57,840 --> 00:19:00,000 Speaker 3: I don't have my right now money exposed to it, 365 00:19:00,280 --> 00:19:02,080 Speaker 3: then it really doesn't matter because I'm going to be 366 00:19:02,080 --> 00:19:04,080 Speaker 3: able to ride it back up when the thing turns around. 367 00:19:04,560 --> 00:19:06,439 Speaker 1: No, and you just hit on the vein point, have 368 00:19:06,600 --> 00:19:10,440 Speaker 1: the righted out money. For some that's having an allocation 369 00:19:10,640 --> 00:19:13,960 Speaker 1: in bonds. For others it's being you know, pedal to 370 00:19:14,040 --> 00:19:18,200 Speaker 1: the floor with stocks all day every day. But have 371 00:19:18,440 --> 00:19:21,879 Speaker 1: you know one three four years perhaps worth of cash 372 00:19:21,920 --> 00:19:25,480 Speaker 1: flow out of the market in cash equivalence? Uh? Because 373 00:19:25,480 --> 00:19:27,600 Speaker 1: if you if you do go back and look at 374 00:19:27,640 --> 00:19:31,680 Speaker 1: past volatility and then recoveries, usually within two to three, 375 00:19:31,840 --> 00:19:34,000 Speaker 1: three and a half to four years, the market completely 376 00:19:34,040 --> 00:19:37,240 Speaker 1: recovers and goes up. So the important thing here is 377 00:19:37,280 --> 00:19:40,440 Speaker 1: to build a financial plan, you know, based on your 378 00:19:40,480 --> 00:19:45,360 Speaker 1: personal risk tolerance, and look at what historically has happened 379 00:19:45,480 --> 00:19:49,520 Speaker 1: to a portfolio with your withdrawal strategy and retirement and 380 00:19:49,600 --> 00:19:52,800 Speaker 1: just make sure you're comfortable that your plan is going 381 00:19:52,880 --> 00:19:55,439 Speaker 1: to work. If we have a return to more, what 382 00:19:55,480 --> 00:19:58,919 Speaker 1: will cause severe volatility. Here's the r with advice, don't 383 00:19:59,000 --> 00:20:03,200 Speaker 1: fear the next deck plan for it. Coming up next, 384 00:20:03,280 --> 00:20:06,200 Speaker 1: how much real estate is too much to own? We'll 385 00:20:06,240 --> 00:20:10,200 Speaker 1: break down some of the challenges real estate investing can cause. 386 00:20:10,560 --> 00:20:13,040 Speaker 1: You're listening to Simply Money presented by all Worth Financial 387 00:20:13,040 --> 00:20:20,960 Speaker 1: on fifty five KRC, the talk station. You're listening to 388 00:20:20,960 --> 00:20:24,000 Speaker 1: Simply Money presented by all Worth Financial and Bob Sponseller 389 00:20:24,040 --> 00:20:27,959 Speaker 1: along with Brian James. Now, for a lot of higher 390 00:20:27,960 --> 00:20:31,879 Speaker 1: net worth investors, real estate isn't just part of their portfolio. 391 00:20:32,080 --> 00:20:35,400 Speaker 1: It can sometimes become a big part. We're talking about 392 00:20:35,440 --> 00:20:40,800 Speaker 1: second homes, vacation homes, income properties, for some even commercial buildings. 393 00:20:41,040 --> 00:20:44,080 Speaker 1: Tonight we're asking how much real estate is too much 394 00:20:44,160 --> 00:20:47,240 Speaker 1: real estate? Because there can come a point where what 395 00:20:47,480 --> 00:20:54,119 Speaker 1: feels like diversification can actually start creating some real financial drag. Brian, 396 00:20:54,200 --> 00:20:56,080 Speaker 1: let's get into it. But first I think we need 397 00:20:56,119 --> 00:20:59,400 Speaker 1: to distinguish between you know, whether people are treating real 398 00:20:59,520 --> 00:21:03,479 Speaker 1: estate is really part of their investment portfolio that's gonna, 399 00:21:03,800 --> 00:21:06,639 Speaker 1: you know, help them retire, or whether it's just another 400 00:21:06,720 --> 00:21:09,520 Speaker 1: asset to own for you know, for something like a vacation. 401 00:21:10,480 --> 00:21:12,560 Speaker 3: Right, yeah, Well, a lot of this is is because 402 00:21:12,600 --> 00:21:15,840 Speaker 3: people feel like I want something, something somehow tangible that 403 00:21:15,880 --> 00:21:18,240 Speaker 3: I can kind of understand, and so part a lot 404 00:21:18,240 --> 00:21:21,159 Speaker 3: of this is control. You know, unlike unlike the stock market, 405 00:21:21,160 --> 00:21:23,080 Speaker 3: you can see and touch your real estate investment. You 406 00:21:23,080 --> 00:21:25,760 Speaker 3: can go visit it, you can understand, you literally see 407 00:21:25,760 --> 00:21:29,000 Speaker 3: those rent checks coming in hitting your checking account. And 408 00:21:29,040 --> 00:21:30,920 Speaker 3: then of course there's always the story of long term 409 00:21:30,960 --> 00:21:33,080 Speaker 3: appreciation of real estate which has led us to where 410 00:21:33,080 --> 00:21:35,520 Speaker 3: we are now. Uh, you know, and there's the there's 411 00:21:35,520 --> 00:21:37,760 Speaker 3: an emotional side of this, right, So a second home 412 00:21:37,800 --> 00:21:40,080 Speaker 3: in Naples, Scottsdale, what it feels good to kind of 413 00:21:40,080 --> 00:21:42,560 Speaker 3: spike the football and say that that's something you accomplished 414 00:21:42,560 --> 00:21:45,080 Speaker 3: because you know, people who did that generally have thought 415 00:21:45,119 --> 00:21:48,320 Speaker 3: about it for decades before actually pulling the trigger, visited 416 00:21:48,320 --> 00:21:51,919 Speaker 3: there with their families on vacations, and then accomplished the 417 00:21:51,960 --> 00:21:55,040 Speaker 3: goal of putting down a permanent stake there. So, but 418 00:21:55,160 --> 00:21:58,080 Speaker 3: that's not the same as portfolio value, and of course 419 00:21:58,080 --> 00:22:00,600 Speaker 3: sometimes we do we do see portfolios with forty fifty 420 00:22:00,640 --> 00:22:02,879 Speaker 3: percent sometimes more tied up in real estate, and that 421 00:22:02,920 --> 00:22:06,600 Speaker 3: can be very risky because inflation has driven up the 422 00:22:06,640 --> 00:22:09,000 Speaker 3: cost of property management, whether you do it yourself or 423 00:22:09,040 --> 00:22:10,679 Speaker 3: whether you have a company to do it for you, 424 00:22:10,960 --> 00:22:13,760 Speaker 3: those costs have gone up too, just like anything else, 425 00:22:13,800 --> 00:22:16,719 Speaker 3: and it really seems like unless you have actual liquid 426 00:22:16,800 --> 00:22:18,280 Speaker 3: cash that you're going to do this with and a 427 00:22:18,280 --> 00:22:21,320 Speaker 3: really good deal with the property manager, then you're going 428 00:22:21,400 --> 00:22:24,040 Speaker 3: to struggle to make this to make it generate more 429 00:22:24,080 --> 00:22:26,720 Speaker 3: income than you could in a simple portfolio, sometimes of 430 00:22:26,760 --> 00:22:29,720 Speaker 3: bonds if you're when I've done comparisons recently Bob for 431 00:22:29,720 --> 00:22:31,720 Speaker 3: people who are sitting on real estate that they're kind 432 00:22:31,720 --> 00:22:34,200 Speaker 3: of tired of dealing with, but they're feeling like they're 433 00:22:34,359 --> 00:22:37,080 Speaker 3: being irresponsible by selling it off when we do the math. 434 00:22:37,320 --> 00:22:39,240 Speaker 3: But there because again these are people who have kind 435 00:22:39,240 --> 00:22:40,920 Speaker 3: of burned out on it and they're wanting to farm 436 00:22:40,960 --> 00:22:43,280 Speaker 3: out absolutely everything they possibly can not do in their 437 00:22:43,320 --> 00:22:45,680 Speaker 3: own work to maintain. But it really seems like they're 438 00:22:45,720 --> 00:22:49,240 Speaker 3: generating maybe six seven percent if there's debt involved, And 439 00:22:49,320 --> 00:22:50,680 Speaker 3: at that point you have to look and say, what 440 00:22:51,000 --> 00:22:52,680 Speaker 3: are we doing all this extra work force to get 441 00:22:52,720 --> 00:22:54,880 Speaker 3: a return that is very similar to what I could 442 00:22:54,920 --> 00:22:56,639 Speaker 3: do if I stuck it in the stock market ignored it. 443 00:22:57,640 --> 00:23:00,560 Speaker 1: Yeah, and and there is there is a different between 444 00:23:00,720 --> 00:23:04,560 Speaker 1: just you know, comparing potential net rate of return on 445 00:23:04,680 --> 00:23:07,520 Speaker 1: different asset classes. You know, the other part of this 446 00:23:07,760 --> 00:23:11,320 Speaker 1: is liquidity is important, especially if you're trying to create 447 00:23:11,760 --> 00:23:15,920 Speaker 1: a you know, a paycheck to replace your paycheck from working. 448 00:23:16,119 --> 00:23:18,560 Speaker 1: And you know, the major thing with real estate, as 449 00:23:18,600 --> 00:23:21,280 Speaker 1: we all know, is it's an ill liquid asset. You know, 450 00:23:21,320 --> 00:23:23,480 Speaker 1: if you do have rental income coming in, that that 451 00:23:23,640 --> 00:23:26,720 Speaker 1: changes the game here. But again, I I think when 452 00:23:26,760 --> 00:23:28,880 Speaker 1: people come in and talk about a retirement plan, they 453 00:23:28,960 --> 00:23:33,440 Speaker 1: just want to have dependable income every month coming in 454 00:23:33,800 --> 00:23:36,160 Speaker 1: to fuel what they want to do in their life, 455 00:23:36,200 --> 00:23:38,160 Speaker 1: what they want to spend, you know, what they have 456 00:23:38,240 --> 00:23:41,639 Speaker 1: to spend on groceries, gas, property taxes, all of that. 457 00:23:42,160 --> 00:23:44,760 Speaker 1: And you just want to make sure that you know, 458 00:23:44,880 --> 00:23:49,320 Speaker 1: something that feels good as an investment, doesn't tie up 459 00:23:49,359 --> 00:23:52,240 Speaker 1: too much money in an ill liquid situation and doesn't 460 00:23:52,240 --> 00:23:55,680 Speaker 1: give you enough income on a monthly basis to live 461 00:23:55,760 --> 00:23:57,320 Speaker 1: in the manner that you want to live. And we 462 00:23:57,359 --> 00:23:59,440 Speaker 1: see that from time to time. You know, I think 463 00:23:59,440 --> 00:24:03,399 Speaker 1: people get a little over allocated in vacation real estate. 464 00:24:03,800 --> 00:24:06,119 Speaker 1: You know, for all the right reasons, you want to 465 00:24:06,119 --> 00:24:07,960 Speaker 1: pull your family together, you want to go to a 466 00:24:08,040 --> 00:24:10,760 Speaker 1: nice place, but people forget that that's not going to 467 00:24:10,760 --> 00:24:13,000 Speaker 1: pay the bills every month. That's true. 468 00:24:13,080 --> 00:24:14,879 Speaker 3: So what can we do about this if we're in 469 00:24:14,880 --> 00:24:17,840 Speaker 3: a situation where we've maybe got more real estate than 470 00:24:17,840 --> 00:24:19,600 Speaker 3: we want or just kind of wanting to change how 471 00:24:19,640 --> 00:24:22,160 Speaker 3: we have to deal with our lives. So if you're 472 00:24:22,160 --> 00:24:24,960 Speaker 3: carrying multiple properties, well think about the role they play 473 00:24:25,000 --> 00:24:27,119 Speaker 3: for you. Are they income producing? Is this part of 474 00:24:27,160 --> 00:24:28,639 Speaker 3: a legacy plan where you want to give it to 475 00:24:28,680 --> 00:24:30,679 Speaker 3: your kids? And bear in mind you should ask your 476 00:24:30,720 --> 00:24:33,199 Speaker 3: kids whether they want these things. They've been listening to 477 00:24:33,240 --> 00:24:36,240 Speaker 3: you saying whatever you said about dealing with tenants and 478 00:24:36,960 --> 00:24:39,000 Speaker 3: however the investment's going. They've heard that for a long time, 479 00:24:39,080 --> 00:24:40,359 Speaker 3: so they may or may not feel the same way 480 00:24:40,359 --> 00:24:42,719 Speaker 3: about it that you might. Or are these just vacation 481 00:24:42,800 --> 00:24:45,360 Speaker 3: homes you visit once a year and they sit empty otherwise? 482 00:24:45,720 --> 00:24:48,560 Speaker 3: So you can simplify, right, somebody we know sold a 483 00:24:48,560 --> 00:24:51,600 Speaker 3: couple rentals they were in their sixties, took those proceeds, 484 00:24:51,680 --> 00:24:54,000 Speaker 3: rolled it into a diversified portfolio, of real estate. So 485 00:24:54,040 --> 00:24:56,400 Speaker 3: they could still say they own a bunch of real estate, 486 00:24:56,440 --> 00:24:58,480 Speaker 3: but they're just not dealing with plumbing toilets and fixing 487 00:24:58,520 --> 00:25:01,480 Speaker 3: water heaters. Those kinds of things still exposed to real estate, 488 00:25:01,560 --> 00:25:04,600 Speaker 3: but without those two am plumbing calls. That's not the 489 00:25:04,680 --> 00:25:06,480 Speaker 3: same feeling. Right, It's still going to feel like a 490 00:25:06,480 --> 00:25:09,040 Speaker 3: stock market investment because rather than looking at checks rolling 491 00:25:09,080 --> 00:25:11,639 Speaker 3: into your account regularly, you're going to be looking at 492 00:25:11,640 --> 00:25:13,679 Speaker 3: a dollar amount on a statement for whatever the public 493 00:25:13,720 --> 00:25:16,080 Speaker 3: markets think that particular red is worth. So it doesn't 494 00:25:16,119 --> 00:25:19,760 Speaker 3: necessarily feel like real estate even though it is. Remember, 495 00:25:19,760 --> 00:25:21,639 Speaker 3: don't forget you have a team behind this too. You 496 00:25:21,680 --> 00:25:24,960 Speaker 3: need a financial planner CPA, A state attorney can help 497 00:25:25,000 --> 00:25:27,880 Speaker 3: you put all this together. Owning real estate not bad, 498 00:25:27,880 --> 00:25:31,040 Speaker 3: but owning too much can quietly weigh down that flexibility. 499 00:25:31,160 --> 00:25:32,840 Speaker 3: There are moving parts to it you need to keep 500 00:25:32,840 --> 00:25:33,199 Speaker 3: track of. 501 00:25:33,960 --> 00:25:36,280 Speaker 1: Well. We talked about the emotional part of this at 502 00:25:36,280 --> 00:25:39,000 Speaker 1: the beginning of the segment. Yeah, doing a ten thirty 503 00:25:39,040 --> 00:25:42,679 Speaker 1: five exchange and going from actively managing real estate into 504 00:25:42,840 --> 00:25:45,800 Speaker 1: maybe a diversified read or something like that, it can 505 00:25:45,920 --> 00:25:49,760 Speaker 1: simplify things, but emotionally you do as you've already pointed out, 506 00:25:50,000 --> 00:25:53,040 Speaker 1: you're giving up a lot of control there, and I 507 00:25:53,040 --> 00:25:55,360 Speaker 1: think that's why it's good to have, as you said, 508 00:25:55,400 --> 00:25:58,480 Speaker 1: a team behind you. A good financial planner CPA, a 509 00:25:58,520 --> 00:26:01,359 Speaker 1: state planning attorney can help you remove some of the 510 00:26:01,960 --> 00:26:05,600 Speaker 1: emotion from making some of these decisions and make sure 511 00:26:05,640 --> 00:26:09,000 Speaker 1: you're just making good principal decisions based on what your 512 00:26:09,000 --> 00:26:12,760 Speaker 1: financial goals are today and for the next ten years, 513 00:26:13,160 --> 00:26:15,240 Speaker 1: not what might have worked over the last ten or 514 00:26:15,280 --> 00:26:18,520 Speaker 1: fifteen years. Here's the all Worth advice. Don't let bricks 515 00:26:18,560 --> 00:26:23,000 Speaker 1: and mortar weigh down your portfolio's flexibility. Real estate should 516 00:26:23,040 --> 00:26:27,920 Speaker 1: support your goals, not limit your options. Coming up next, 517 00:26:27,960 --> 00:26:31,200 Speaker 1: should you harvest capital gains now? What if your financial 518 00:26:31,280 --> 00:26:35,879 Speaker 1: plan hinges on outsized returns over the next few years 519 00:26:35,880 --> 00:26:39,600 Speaker 1: as you enter retirement, And how to complex trust complicate 520 00:26:39,680 --> 00:26:42,960 Speaker 1: your tax picture. These are questions we'll be answering coming 521 00:26:43,000 --> 00:26:45,480 Speaker 1: up next. You're listening to Simply Money presented by all 522 00:26:45,480 --> 00:26:53,840 Speaker 1: Worth Financial on fifty five KRC the talk station. You're 523 00:26:53,840 --> 00:26:56,320 Speaker 1: listening to Simply Money presented by all Worth Financial on 524 00:26:56,400 --> 00:26:59,320 Speaker 1: Bob Sponseller along with Brian James. Do you have a 525 00:26:59,320 --> 00:27:01,520 Speaker 1: financial question you'd like for us to answer there's a 526 00:27:01,560 --> 00:27:03,840 Speaker 1: red button you can click while you're listening to the show. 527 00:27:04,000 --> 00:27:07,520 Speaker 1: If you're listening on the iHeart app, simply record your 528 00:27:07,600 --> 00:27:12,080 Speaker 1: question and it will come straight to us. Speaking of questions, Brian, 529 00:27:12,160 --> 00:27:14,560 Speaker 1: we're loaded up with a bunch of them tonight. Let's 530 00:27:14,600 --> 00:27:17,240 Speaker 1: start off with Scott in deer Park. He says, we're 531 00:27:17,320 --> 00:27:21,720 Speaker 1: drawing income from both taxable and IRA accounts. How do 532 00:27:21,800 --> 00:27:24,199 Speaker 1: I decide which one to use in a down market 533 00:27:24,480 --> 00:27:28,880 Speaker 1: without creating a bigger tax problem? Later ask that location. 534 00:27:29,080 --> 00:27:31,480 Speaker 1: That's what Scott is thinking about, what kinds of accounts. 535 00:27:31,480 --> 00:27:33,360 Speaker 1: It's one thing to think about the types of investments 536 00:27:33,400 --> 00:27:36,000 Speaker 1: I own, but also what types of account treatment or 537 00:27:36,040 --> 00:27:37,720 Speaker 1: tax treatments do I have these city? 538 00:27:37,720 --> 00:27:40,040 Speaker 3: What kind of accounts is it? So let's first of 539 00:27:40,040 --> 00:27:43,040 Speaker 3: all off separate the market risk from the tax risk. Right, 540 00:27:43,040 --> 00:27:44,760 Speaker 3: tax is going to be what it is. Taxing on 541 00:27:44,800 --> 00:27:46,560 Speaker 3: one hand, isn't necessarily a bad thing. It means you 542 00:27:46,600 --> 00:27:48,080 Speaker 3: made money somehow, one way or another. 543 00:27:48,160 --> 00:27:49,400 Speaker 1: So in a. 544 00:27:49,359 --> 00:27:51,919 Speaker 3: Market downturn, the instinct can be to protect that IRA 545 00:27:52,040 --> 00:27:55,679 Speaker 3: because it's tax deferred. But remember every IRA dollar is 546 00:27:55,760 --> 00:27:58,840 Speaker 3: already spoken for by the irs. If those markets are down, 547 00:27:59,040 --> 00:28:01,440 Speaker 3: with drawing from that io. It means locking those losses 548 00:28:01,480 --> 00:28:04,760 Speaker 3: in and accelerating your taxible income, So you might use 549 00:28:04,760 --> 00:28:08,120 Speaker 3: that taxable account, use that as a shock absorber. So 550 00:28:08,160 --> 00:28:11,080 Speaker 3: in a down market, taxable assets are often that first 551 00:28:11,160 --> 00:28:13,680 Speaker 3: line of defense because now you're selling positions with either 552 00:28:13,760 --> 00:28:18,320 Speaker 3: lower embedded gains or even losses. Remember, if you need cash, 553 00:28:18,440 --> 00:28:20,239 Speaker 3: it's got to come from somewhere. You can take a 554 00:28:20,240 --> 00:28:22,000 Speaker 3: loss and you'll get a bit of a deduction on it. 555 00:28:22,240 --> 00:28:24,880 Speaker 3: Even if you have to pay capital gain taxes, then 556 00:28:24,920 --> 00:28:27,480 Speaker 3: that's usually going to be lower than your ordinary income taxes. 557 00:28:27,760 --> 00:28:30,840 Speaker 3: Loss harvesting can partially fully offset that tax hit. Lots 558 00:28:30,880 --> 00:28:33,280 Speaker 3: of flexibility there, and also you want to think about 559 00:28:33,280 --> 00:28:35,800 Speaker 3: your future tax brackets, not just this year's bill. That's 560 00:28:35,880 --> 00:28:37,800 Speaker 3: kind of what you're already hinting at here. If you 561 00:28:37,920 --> 00:28:41,280 Speaker 3: avoid IRARA withdrawals too long, eventually you're going to wind 562 00:28:41,320 --> 00:28:44,280 Speaker 3: up with larger required minimum distributions later, which is going 563 00:28:44,320 --> 00:28:48,560 Speaker 3: to trigger higher Medicare premiums via something called erma AREMAA 564 00:28:48,640 --> 00:28:51,040 Speaker 3: for those of you keeping score at home. As well 565 00:28:51,080 --> 00:28:53,760 Speaker 3: as losing time for those ROTH conversions, take advantage of 566 00:28:53,760 --> 00:28:56,640 Speaker 3: that window where your salaries are gone but your rmds 567 00:28:56,640 --> 00:28:59,080 Speaker 3: have not yet kicked in and you're living off savings 568 00:28:59,200 --> 00:29:01,200 Speaker 3: or other other sources of income. That's the lowest bracket 569 00:29:01,200 --> 00:29:03,600 Speaker 3: you will have seen in decades. Use it to convert. 570 00:29:04,840 --> 00:29:06,880 Speaker 3: So now we're going to move on to Brian in 571 00:29:07,040 --> 00:29:10,520 Speaker 3: pleasant Ridge. Brian is trying to compare two income strategies. 572 00:29:10,720 --> 00:29:13,280 Speaker 3: One draws a fixed percentage every year and another one 573 00:29:13,320 --> 00:29:15,280 Speaker 3: has guardrails on it. I'm not sure what he means 574 00:29:15,280 --> 00:29:17,320 Speaker 3: by that, but how do you model the long term 575 00:29:17,360 --> 00:29:17,920 Speaker 3: impact of. 576 00:29:17,840 --> 00:29:18,600 Speaker 1: Each of these things? 577 00:29:18,600 --> 00:29:20,440 Speaker 3: This is I feel like we need more info here, Bob, 578 00:29:20,440 --> 00:29:21,360 Speaker 3: but let's see what you think. 579 00:29:21,800 --> 00:29:24,160 Speaker 1: Yeah, well, I'm going to do something dangerous here. I'm 580 00:29:24,160 --> 00:29:26,800 Speaker 1: going to guess at what Brian's talking about here, and 581 00:29:26,840 --> 00:29:30,080 Speaker 1: that that might either answer his question or he might 582 00:29:30,120 --> 00:29:32,480 Speaker 1: be sitting there saying, what is this guy even talking about? 583 00:29:32,520 --> 00:29:35,280 Speaker 1: So when you say guardrails, what that means to me 584 00:29:35,680 --> 00:29:38,280 Speaker 1: is you're you are going to build a plan that 585 00:29:38,360 --> 00:29:42,040 Speaker 1: allows you to spend more money in years when the 586 00:29:42,080 --> 00:29:45,440 Speaker 1: market returns are good. And I understand the logic there, 587 00:29:45,480 --> 00:29:49,160 Speaker 1: but you also need to understand most people are not 588 00:29:49,400 --> 00:29:53,800 Speaker 1: going to want to, you know, reduce their lifestyle in 589 00:29:53,960 --> 00:29:56,960 Speaker 1: years where the markets don't return very much. So what 590 00:29:57,000 --> 00:29:59,640 Speaker 1: we like to do, and I Brian and I both 591 00:29:59,680 --> 00:30:02,440 Speaker 1: do this is we put we put our spending into 592 00:30:02,480 --> 00:30:05,600 Speaker 1: different buckets. You know, the half to bucket is what 593 00:30:05,640 --> 00:30:07,480 Speaker 1: it means. This is stuff that's going to have to 594 00:30:07,520 --> 00:30:11,000 Speaker 1: happen irrespective of what the market does from year to year, 595 00:30:11,040 --> 00:30:12,760 Speaker 1: and you want to make sure your plan is going 596 00:30:12,840 --> 00:30:17,200 Speaker 1: to work with historical market volatility baked in, and that's 597 00:30:17,240 --> 00:30:20,680 Speaker 1: where that you know, that analysis helps you set your 598 00:30:20,800 --> 00:30:24,480 Speaker 1: tolerance for investment risk. I think more to your point, 599 00:30:24,520 --> 00:30:26,400 Speaker 1: there might be some other things you want to do. 600 00:30:26,560 --> 00:30:28,760 Speaker 1: You know, are we going to take an expensive cruise 601 00:30:29,280 --> 00:30:32,800 Speaker 1: or maybe just to stay a staycation or something like that, 602 00:30:33,160 --> 00:30:35,120 Speaker 1: you know, depending on how the economy is doing. I 603 00:30:35,200 --> 00:30:39,040 Speaker 1: think that's fine to do that, but just stress tests 604 00:30:39,560 --> 00:30:42,960 Speaker 1: all the different buckets of your spending strategy going into 605 00:30:43,080 --> 00:30:46,800 Speaker 1: retirement and make sure that you're going to have you know, 606 00:30:47,120 --> 00:30:50,200 Speaker 1: all of those half two items and maybe even some 607 00:30:50,240 --> 00:30:53,400 Speaker 1: of the want to so that you have a retirement 608 00:30:53,520 --> 00:30:57,400 Speaker 1: plan and a retirement lifestyle that's really going to be 609 00:30:58,000 --> 00:31:01,040 Speaker 1: something that makes you happy long term, so you're not 610 00:31:01,240 --> 00:31:04,960 Speaker 1: just changing everything and dependent year to year on what 611 00:31:05,080 --> 00:31:07,560 Speaker 1: the stock and bond market do that's a that can 612 00:31:07,600 --> 00:31:10,920 Speaker 1: be a fairly stressful and sometimes depressing way to go 613 00:31:11,040 --> 00:31:14,800 Speaker 1: through life. I hope that helps Mark and Indian Hills. 614 00:31:14,880 --> 00:31:17,160 Speaker 1: Brian He says, some of our assets are held in 615 00:31:17,240 --> 00:31:22,760 Speaker 1: trust with compressed tax brackets. How does that change investment 616 00:31:22,880 --> 00:31:27,360 Speaker 1: selections that we make and turnover decisions. I'm assuming turnover 617 00:31:27,480 --> 00:31:29,760 Speaker 1: of assets owned inside the trust. 618 00:31:30,720 --> 00:31:33,280 Speaker 3: Right, So this is where trust stopped just being just 619 00:31:33,360 --> 00:31:35,520 Speaker 3: another account and kind of study. They can actually act 620 00:31:35,560 --> 00:31:37,920 Speaker 3: like a tax accelerator if you're not careful with them. 621 00:31:37,960 --> 00:31:42,240 Speaker 3: So let's remember sometimes in some situations, tax trust tax 622 00:31:42,320 --> 00:31:46,400 Speaker 3: brackets can be absolutely brutal non grant or trusts. Right, 623 00:31:46,440 --> 00:31:48,680 Speaker 3: So this is this is an irrevocable trust that is 624 00:31:48,760 --> 00:31:51,080 Speaker 3: its own entity. I'm not talking about a revocable trust. 625 00:31:51,120 --> 00:31:52,880 Speaker 3: I don't want to alarm anybody. If you and your 626 00:31:53,040 --> 00:31:55,280 Speaker 3: spouse opened up a trust and you're both in full 627 00:31:55,320 --> 00:31:57,960 Speaker 3: control of that trust and it's revocable and all that stuff, 628 00:31:57,960 --> 00:32:00,400 Speaker 3: then those those are just the income and the taxation 629 00:32:00,520 --> 00:32:02,840 Speaker 3: is simply just passing through to you. Normally, you're really 630 00:32:02,920 --> 00:32:05,800 Speaker 3: not noticing a difference. I'm referring to more complicated entities 631 00:32:06,720 --> 00:32:10,480 Speaker 3: that are their own businesses effectively so in that case, 632 00:32:10,600 --> 00:32:13,960 Speaker 3: ordinary income becomes expensive almost immediately. Short term gains or 633 00:32:14,000 --> 00:32:17,400 Speaker 3: tax like wages, even long term gains reach those higher 634 00:32:17,400 --> 00:32:20,800 Speaker 3: effective rates. First turnover is very, very important. If you've 635 00:32:20,840 --> 00:32:22,640 Speaker 3: got a mutual fund or something in there that's spitting 636 00:32:22,680 --> 00:32:24,480 Speaker 3: out a lot of gains, a lot of the dividends, 637 00:32:25,320 --> 00:32:28,040 Speaker 3: then that's going to get passed through at a very 638 00:32:28,120 --> 00:32:31,160 Speaker 3: high tax rate because those types of trust pay taxes 639 00:32:31,160 --> 00:32:34,440 Speaker 3: at corporate levels. Again, not talking about revocable trusts. We're 640 00:32:34,480 --> 00:32:37,920 Speaker 3: talking about erev trusts that are their own entities. So 641 00:32:37,960 --> 00:32:40,320 Speaker 3: then you also have to think about who who should 642 00:32:40,360 --> 00:32:41,600 Speaker 3: recognize this income. 643 00:32:42,000 --> 00:32:42,240 Speaker 1: Well. 644 00:32:42,360 --> 00:32:45,800 Speaker 3: Trusts have one powerful level lever that individuals don't, that's 645 00:32:45,840 --> 00:32:49,960 Speaker 3: the timing of distributions. Income distributed to beneficiaries is usually 646 00:32:50,000 --> 00:32:54,200 Speaker 3: taxed at their rates. Income retained is usually taxed at 647 00:32:54,240 --> 00:32:56,800 Speaker 3: the trust compressed rate. So you're gonna want to make 648 00:32:56,800 --> 00:32:59,480 Speaker 3: sure you have sounds like this is a fairly complicated situation. 649 00:32:59,760 --> 00:33:01,080 Speaker 3: So I think you want to make sure and I 650 00:33:01,080 --> 00:33:03,320 Speaker 3: hope you do have a CPA involved and in a 651 00:33:03,360 --> 00:33:05,560 Speaker 3: state attorney to kind of explain all the moving parts 652 00:33:05,560 --> 00:33:08,600 Speaker 3: of this to you, because there are benefits to this, 653 00:33:08,640 --> 00:33:11,440 Speaker 3: and there are also again, this is a great example 654 00:33:11,440 --> 00:33:13,640 Speaker 3: of why a trust is not the answer to everything. 655 00:33:13,880 --> 00:33:15,880 Speaker 3: A lot of times introduces a whole bunch of things 656 00:33:15,880 --> 00:33:18,480 Speaker 3: people weren't even thinking about before they put the trust 657 00:33:18,520 --> 00:33:22,360 Speaker 3: in place. So David and Hyde Park, David has got 658 00:33:22,360 --> 00:33:25,600 Speaker 3: a question about the timing of retirement. So he says, 659 00:33:25,600 --> 00:33:28,560 Speaker 3: our plan success depends heavily on these early retirement years. 660 00:33:28,600 --> 00:33:31,560 Speaker 3: How do you stress tests for poor early returns without 661 00:33:31,600 --> 00:33:34,360 Speaker 3: assuming permanent underperformance, Bob, how would you handle that? 662 00:33:35,560 --> 00:33:38,000 Speaker 1: Well, this is something we cover and you should cover 663 00:33:38,200 --> 00:33:41,920 Speaker 1: David as you prepare your retirement income analysis. And then 664 00:33:41,960 --> 00:33:45,560 Speaker 1: the industry term is called sequence of return risk, and 665 00:33:45,600 --> 00:33:50,600 Speaker 1: that's just a industry term for factoring in the impact 666 00:33:50,760 --> 00:33:55,520 Speaker 1: of investment return volatility on your long term withdrawal strategy. 667 00:33:56,000 --> 00:33:58,280 Speaker 1: And it kind of flips on its head. How most 668 00:33:58,320 --> 00:34:00,360 Speaker 1: people think about this when they're in there or so 669 00:34:00,520 --> 00:34:04,280 Speaker 1: called accumulation years where you're just socking money away, you know, 670 00:34:04,320 --> 00:34:06,440 Speaker 1: into your four to one k plant. You really don't 671 00:34:06,480 --> 00:34:09,319 Speaker 1: care what the market does, you know, year to year, 672 00:34:09,360 --> 00:34:11,920 Speaker 1: as long as you get an average return over time 673 00:34:12,320 --> 00:34:14,200 Speaker 1: that gets your where to need where you need to 674 00:34:14,239 --> 00:34:18,120 Speaker 1: go in terms of accumulating assets to fund your future retirement. 675 00:34:18,560 --> 00:34:21,480 Speaker 1: When you turn that pile of money into a paycheck 676 00:34:21,520 --> 00:34:25,440 Speaker 1: when you retire, the year to year volatility of returns 677 00:34:25,480 --> 00:34:29,320 Speaker 1: matters a lot. And that's why you know some good software. 678 00:34:29,480 --> 00:34:32,120 Speaker 1: A good advisor will have this kind of software that 679 00:34:32,160 --> 00:34:36,200 Speaker 1: can model out this sequence of return risk and the 680 00:34:36,280 --> 00:34:40,000 Speaker 1: impact that has on your pile of money either continuing 681 00:34:40,040 --> 00:34:44,200 Speaker 1: to grow, stay level, or dwindle too quickly in retirement. 682 00:34:44,600 --> 00:34:47,600 Speaker 1: It's an important piece of the puzzle here, and it 683 00:34:47,719 --> 00:34:51,680 Speaker 1: should help determine help you determine how much risk you 684 00:34:51,719 --> 00:34:55,279 Speaker 1: should or should not be taking with your overall portfolio 685 00:34:55,480 --> 00:34:58,880 Speaker 1: in retirement. Rian, we got time for one more quick 686 00:34:58,920 --> 00:35:02,759 Speaker 1: one here. Robert Merrymont says he's considering harvesting gains this 687 00:35:02,920 --> 00:35:06,759 Speaker 1: year to reset the cost basis of some of his holdings. 688 00:35:06,880 --> 00:35:10,480 Speaker 1: How do you determine the optimal amount to realize without 689 00:35:10,520 --> 00:35:12,680 Speaker 1: pushing into higher tax brackets. 690 00:35:12,880 --> 00:35:15,000 Speaker 3: It sounds like we're doing some tax engineering here. The 691 00:35:15,080 --> 00:35:17,400 Speaker 3: right answer comes from thinking and layers don't go with 692 00:35:17,480 --> 00:35:20,319 Speaker 3: your gut. So first step is map out that income stack. 693 00:35:20,400 --> 00:35:23,280 Speaker 3: Start with everything that already fills those brackets before capital 694 00:35:23,280 --> 00:35:25,920 Speaker 3: gains come in. So that's wages, pensions, social security, I 695 00:35:25,960 --> 00:35:29,120 Speaker 3: A ray withdrawals, interests on your bank accounts, and so forth. 696 00:35:29,480 --> 00:35:31,600 Speaker 3: Then figure out what is the real cliff. It's not 697 00:35:31,840 --> 00:35:34,480 Speaker 3: just the brackets, capital gains rate changes. We all have 698 00:35:34,560 --> 00:35:36,520 Speaker 3: fifteen percent in our heads, but if you're going above 699 00:35:36,560 --> 00:35:38,520 Speaker 3: four hundred thousand, we don't know this from this question, 700 00:35:38,719 --> 00:35:40,759 Speaker 3: but you also might go over a cliff of paying 701 00:35:40,760 --> 00:35:44,600 Speaker 3: a twenty percent bracket there. Net Investment income tax is 702 00:35:44,600 --> 00:35:47,359 Speaker 3: a newer thing. That's a three point eight percent tax 703 00:35:47,360 --> 00:35:50,840 Speaker 3: that kicks in at a higher modify or higher modified 704 00:35:50,840 --> 00:35:54,880 Speaker 3: adjusted growth IRMA, brackets, state tax interactions. Lots of different 705 00:35:54,920 --> 00:35:57,440 Speaker 3: moving parts there, so you're gonna need to It's not 706 00:35:57,480 --> 00:35:59,040 Speaker 3: a quick question here. You need to make sure you 707 00:35:59,200 --> 00:36:01,560 Speaker 3: understand all the different bells and whistles and all the 708 00:36:01,560 --> 00:36:04,640 Speaker 3: different levels of taxation you might be venturing into, some 709 00:36:04,680 --> 00:36:07,400 Speaker 3: of which you could be creating voluntarily by the actions 710 00:36:07,440 --> 00:36:09,799 Speaker 3: you're taking. Not a bad thing, but understand those moving 711 00:36:09,840 --> 00:36:11,640 Speaker 3: parts all right. 712 00:36:11,640 --> 00:36:13,759 Speaker 1: Coming up next, do you treat your money like it's 713 00:36:13,800 --> 00:36:17,880 Speaker 1: groundhog Day? We've got some simple reminders to share as 714 00:36:17,960 --> 00:36:20,680 Speaker 1: we come upon this year every year where we try 715 00:36:20,719 --> 00:36:23,319 Speaker 1: to figure out how much more winter we're gonna have. 716 00:36:23,400 --> 00:36:26,280 Speaker 1: In twenty twenty six, you're listening to Simply Money presented 717 00:36:26,320 --> 00:36:29,719 Speaker 1: by all Worth Financial on fifty five KRC the talk station. 718 00:36:35,280 --> 00:36:38,000 Speaker 1: You're listening to Simply Money presented by Allworth Financial. I'm 719 00:36:38,040 --> 00:36:42,640 Speaker 1: Bob Sponseller along with Brian James. Well, today it's Groundhog Day, 720 00:36:42,800 --> 00:36:46,560 Speaker 1: and in honor of all those rodents making predictions out there, 721 00:36:46,719 --> 00:36:50,040 Speaker 1: we're gonna ask you, is your financial plan stuck in 722 00:36:50,080 --> 00:36:53,600 Speaker 1: a time loop? Meaning are you doing the same things 723 00:36:53,680 --> 00:36:57,319 Speaker 1: every year and expecting a different result? Brian walk us 724 00:36:57,360 --> 00:37:00,680 Speaker 1: through some things are what are a handful of thing people? 725 00:37:00,880 --> 00:37:03,920 Speaker 1: We all tell ourselves we're gonna do differently each year, 726 00:37:04,520 --> 00:37:07,280 Speaker 1: and then you know what ends up really happening. 727 00:37:07,600 --> 00:37:09,760 Speaker 3: Well, first off, yes, I want to wish a happy 728 00:37:09,800 --> 00:37:13,080 Speaker 3: Groundhog Day out there to everybody, rise and shine campers. 729 00:37:13,320 --> 00:37:16,359 Speaker 3: I have a neighbor whose daughter was born on Groundhog Day, 730 00:37:16,400 --> 00:37:18,680 Speaker 3: and today they took a father daughter trip to Punk 731 00:37:18,719 --> 00:37:21,120 Speaker 3: Satani stayed up all night and watched that stupid rat 732 00:37:21,120 --> 00:37:22,600 Speaker 3: come out and tell us to suck it up and 733 00:37:22,600 --> 00:37:24,520 Speaker 3: get used to the winner. So I asked them to 734 00:37:24,760 --> 00:37:26,520 Speaker 3: bring him home so we can deep fry him in 735 00:37:26,520 --> 00:37:29,920 Speaker 3: the driveway. AnyWho, back to our normal topic here. If 736 00:37:29,960 --> 00:37:32,359 Speaker 3: you find yourself saying the same things every year, you know, 737 00:37:32,480 --> 00:37:34,279 Speaker 3: just like Groundhog Day, just like the movie, this is 738 00:37:34,320 --> 00:37:36,480 Speaker 3: the year we'll get serious about retirement. This time, we're 739 00:37:36,520 --> 00:37:38,799 Speaker 3: gonna get it right. We really should review that estate 740 00:37:38,840 --> 00:37:40,480 Speaker 3: plan and we need to sit down and talk to 741 00:37:40,520 --> 00:37:43,440 Speaker 3: that advisor. And then nothing changes. Well, what keeps people 742 00:37:43,480 --> 00:37:46,160 Speaker 3: stuck up a lot of times not fear. It's inertia. 743 00:37:46,200 --> 00:37:49,240 Speaker 3: You've accumulated this wealth. Maybe you've had some success running 744 00:37:49,239 --> 00:37:52,000 Speaker 3: a business or selling one, and that's where your focus 745 00:37:52,080 --> 00:37:54,879 Speaker 3: is because that's where your routine thinking is. And now 746 00:37:54,920 --> 00:37:57,920 Speaker 3: you're more worried about protecting what you have than changing 747 00:37:57,920 --> 00:38:01,760 Speaker 3: anything around. Well, the cost of standings still can be significant. Remember, 748 00:38:01,960 --> 00:38:04,960 Speaker 3: you might be missing tax loss harvesting opportunities along the way, 749 00:38:05,280 --> 00:38:07,440 Speaker 3: or not using direct indexing when it could be working 750 00:38:07,440 --> 00:38:09,880 Speaker 3: harder for you, failing to gift your assets in a 751 00:38:09,880 --> 00:38:12,360 Speaker 3: tax efficient way. So if these things all sound familiar, 752 00:38:12,480 --> 00:38:14,400 Speaker 3: you could be paying more than you need to the 753 00:38:14,440 --> 00:38:16,080 Speaker 3: irs and we don't want to do that. So here's 754 00:38:16,080 --> 00:38:19,120 Speaker 3: the challenge this groundhog Day. Don't let the cycle repeat. 755 00:38:19,400 --> 00:38:21,840 Speaker 3: Don't let that future future of financial future be a 756 00:38:21,880 --> 00:38:24,120 Speaker 3: repeat of the past. If your financial strategy has not 757 00:38:24,200 --> 00:38:26,439 Speaker 3: evolved in the last five ten years. It's probably time 758 00:38:26,440 --> 00:38:28,200 Speaker 3: to break that cycle and make sure you're doing what 759 00:38:28,239 --> 00:38:28,759 Speaker 3: you need to do. 760 00:38:30,040 --> 00:38:32,680 Speaker 1: Sounds like great advice. Thanks for listening tonight, everyone, you've 761 00:38:32,680 --> 00:38:35,320 Speaker 1: been listening to Simply Money, presented by all Worth Financial 762 00:38:35,320 --> 00:38:38,000 Speaker 1: on fifty five KRC, the talk station