1 00:00:06,720 --> 00:00:09,880 Speaker 1: Tonight, how to know if your advisor is playing offense, 2 00:00:10,200 --> 00:00:14,440 Speaker 1: playing defense, or maybe just running out the clock. You're 3 00:00:14,440 --> 00:00:16,759 Speaker 1: listening to Simply Money, presented by all Worth Financial on 4 00:00:16,880 --> 00:00:21,080 Speaker 1: Bob Sponseller along with Brian James. Here's a question most 5 00:00:21,079 --> 00:00:24,560 Speaker 1: people with real money rarely stop to ask. Is my 6 00:00:24,720 --> 00:00:29,200 Speaker 1: advisor really earning his or her keep think about it. 7 00:00:29,240 --> 00:00:31,640 Speaker 1: Maybe they helped you get to where you are. You've 8 00:00:31,640 --> 00:00:35,040 Speaker 1: built up maybe three million, five million dollars, maybe even more. 9 00:00:35,520 --> 00:00:39,960 Speaker 1: But now that you're there you is your advisor evolving 10 00:00:40,159 --> 00:00:44,440 Speaker 1: with you or just babysitting your portfolio? Brian, There's a 11 00:00:44,440 --> 00:00:46,920 Speaker 1: few things to evaluate here. Let's get into some of 12 00:00:47,000 --> 00:00:50,840 Speaker 1: these telltale signs of what good advisors should be doing 13 00:00:50,880 --> 00:00:52,839 Speaker 1: for their clients on a regular basis. 14 00:00:53,000 --> 00:00:55,160 Speaker 2: Yeah, and so here's how this commonly goes down, Bob. 15 00:00:55,400 --> 00:00:58,120 Speaker 2: Once you hit those big milestones have three million dollars 16 00:00:58,160 --> 00:01:00,680 Speaker 2: five million dollar figure you were referring to, sometimes the 17 00:01:00,720 --> 00:01:03,560 Speaker 2: planning can get lazy, meetings become routine, and all be 18 00:01:03,560 --> 00:01:06,520 Speaker 2: honest that this goes both directions. Uh, you know, sometimes 19 00:01:07,200 --> 00:01:09,600 Speaker 2: we hear stories about the advisor having gotten board with 20 00:01:09,640 --> 00:01:12,680 Speaker 2: the whole process. Sometimes the clients check out because we 21 00:01:12,720 --> 00:01:15,680 Speaker 2: just don't want to talk about those heavier duty things, right, So, 22 00:01:15,920 --> 00:01:18,840 Speaker 2: and and and these are often things where the decisions, 23 00:01:18,920 --> 00:01:22,000 Speaker 2: the planning decisions are much more about being efficient, not 24 00:01:22,160 --> 00:01:24,600 Speaker 2: more about the difference between success and failure. Once we've 25 00:01:24,640 --> 00:01:27,000 Speaker 2: hit these milestones usually means you've kind of won the game. 26 00:01:27,040 --> 00:01:29,800 Speaker 2: You're in really good shape for the for the road forward. Uh, 27 00:01:29,840 --> 00:01:33,119 Speaker 2: you know, obviously barring individual situations and all these other 28 00:01:33,160 --> 00:01:35,840 Speaker 2: things become again, like I said, more about efficiency, less 29 00:01:35,840 --> 00:01:37,720 Speaker 2: about you got to do this or you know, it's 30 00:01:37,720 --> 00:01:40,360 Speaker 2: a it's a huge sacrifice. So so here's the trap though, 31 00:01:40,360 --> 00:01:42,400 Speaker 2: if you're if you've got an advisor in this situation, 32 00:01:42,480 --> 00:01:44,920 Speaker 2: you're still kind of paying for that advice. But if 33 00:01:44,920 --> 00:01:46,960 Speaker 2: that advisor is stuck in the mud just talking about 34 00:01:47,040 --> 00:01:51,600 Speaker 2: last quarter's returns, that's not planning, that's just investment, uh management. 35 00:01:52,000 --> 00:01:52,160 Speaker 1: Uh. 36 00:01:52,200 --> 00:01:54,320 Speaker 2: And they're just reporting to you what happened last quarter, 37 00:01:54,360 --> 00:01:57,120 Speaker 2: what happened this quarter. They're not talking about whether that 38 00:01:57,160 --> 00:01:58,800 Speaker 2: matters to you, Does that have an impact on your 39 00:01:58,800 --> 00:02:00,960 Speaker 2: plan to just things need to change? Do you need 40 00:02:00,960 --> 00:02:03,440 Speaker 2: to change your expectations? Those kinds of things. So we're 41 00:02:03,440 --> 00:02:05,440 Speaker 2: gonna again, We're gonn We're gonna focus tonight about the 42 00:02:05,440 --> 00:02:08,480 Speaker 2: difference between an advisor who is playing defense and one 43 00:02:08,480 --> 00:02:11,120 Speaker 2: who is actually on offense looking for opportunities. 44 00:02:12,160 --> 00:02:13,919 Speaker 1: All right, well, let's give it. Let's give a couple 45 00:02:14,200 --> 00:02:16,480 Speaker 1: of examples. Here. Here's one of what we'll call a 46 00:02:16,520 --> 00:02:20,799 Speaker 1: defensive advisor. You've had the same portfolio mix for say, 47 00:02:20,840 --> 00:02:23,040 Speaker 1: the last five or ten years. You know, you're stuck 48 00:02:23,040 --> 00:02:27,000 Speaker 1: in that sixty forty seventy thirty allocation. Maybe there's been 49 00:02:27,000 --> 00:02:30,400 Speaker 1: a little bit of rebalancing. But have things changed at 50 00:02:30,440 --> 00:02:34,520 Speaker 1: all as you've gotten older. Have any questions been asked 51 00:02:34,560 --> 00:02:39,040 Speaker 1: about your current risk tolerance, or income needs, or gifting strategies, 52 00:02:39,120 --> 00:02:42,799 Speaker 1: anything like that that might or should impact the composition 53 00:02:42,840 --> 00:02:46,800 Speaker 1: of your portfolio. And here's a big one. And we 54 00:02:46,880 --> 00:02:49,440 Speaker 1: see this all the time, you know, especially as the 55 00:02:49,520 --> 00:02:54,200 Speaker 1: dollar amounts get larger. You know, folks start social Security early, 56 00:02:54,520 --> 00:02:58,200 Speaker 1: but their advisor never mentions the idea of even possibly 57 00:02:58,280 --> 00:03:02,720 Speaker 1: waiting until age seventy to social security. Why because that 58 00:03:02,760 --> 00:03:06,200 Speaker 1: would have required doing some planning, a full income plan, 59 00:03:06,840 --> 00:03:09,359 Speaker 1: not just an investment plan. In other words, And you've 60 00:03:09,360 --> 00:03:12,840 Speaker 1: already made the point one time, Brian. The advisor is 61 00:03:12,919 --> 00:03:17,800 Speaker 1: just reporting past investment returns, not focusing on an income 62 00:03:17,880 --> 00:03:20,160 Speaker 1: strategy and on tax efficiency. 63 00:03:20,320 --> 00:03:21,800 Speaker 2: Yeah, and I want to add a point to that too, 64 00:03:21,919 --> 00:03:24,160 Speaker 2: So it's not a bad thing necessarily if you've had 65 00:03:24,160 --> 00:03:26,680 Speaker 2: the same mix for the last five years. We're definitely 66 00:03:26,680 --> 00:03:27,400 Speaker 2: not advocates. 67 00:03:27,440 --> 00:03:27,600 Speaker 1: You know. 68 00:03:27,639 --> 00:03:29,320 Speaker 2: That kind of speaks to what I talk about all 69 00:03:29,320 --> 00:03:31,760 Speaker 2: the time of when I started in this industry, the 70 00:03:31,880 --> 00:03:34,560 Speaker 2: rule of thumb, quote unquote was your age in bonds, 71 00:03:34,560 --> 00:03:37,880 Speaker 2: which is ridiculous in my mind. But so your age 72 00:03:37,920 --> 00:03:40,600 Speaker 2: is irrelevant. What your plan is what matters when do 73 00:03:40,680 --> 00:03:43,480 Speaker 2: you need this particular pile of dollars. So perhaps you 74 00:03:43,520 --> 00:03:46,360 Speaker 2: set that allocation up five, six, seven, eight, even ten 75 00:03:46,440 --> 00:03:48,920 Speaker 2: years ago, it may still be appropriate. So it's not 76 00:03:49,000 --> 00:03:52,640 Speaker 2: the idea that you must change your allocation as time 77 00:03:52,680 --> 00:03:55,520 Speaker 2: has passed. The idea would be make sure you're having 78 00:03:55,560 --> 00:03:57,960 Speaker 2: a conversation with it, because your life will have changed, 79 00:03:58,160 --> 00:04:01,240 Speaker 2: You will have evolved, your financial stations, situation will have evolved, 80 00:04:01,520 --> 00:04:04,480 Speaker 2: and that may drive some some need to change the 81 00:04:04,480 --> 00:04:07,400 Speaker 2: asset allocation. But the important thing is that that conversation 82 00:04:07,520 --> 00:04:10,080 Speaker 2: be occurring, not once a decade, but at least once 83 00:04:10,120 --> 00:04:11,840 Speaker 2: a year, just to kind of make sure that whatever 84 00:04:11,920 --> 00:04:15,120 Speaker 2: tools are being employed are still appropriate. So let's move 85 00:04:15,120 --> 00:04:18,719 Speaker 2: on to the other side of this, the proactive offensive advisor. 86 00:04:18,720 --> 00:04:20,960 Speaker 2: If we're going to say that the defensive side might 87 00:04:21,000 --> 00:04:23,240 Speaker 2: have some weaknesses, well what are we actually looking for? 88 00:04:23,320 --> 00:04:24,200 Speaker 3: So here's an example. 89 00:04:24,960 --> 00:04:28,320 Speaker 2: Let's take a couple, you know, both retired, age sixty five. 90 00:04:28,839 --> 00:04:31,039 Speaker 2: They got four million dollars across a few different things. 91 00:04:31,080 --> 00:04:33,640 Speaker 2: Maybe half of it's in IRA's retirement plans, about one 92 00:04:33,640 --> 00:04:36,960 Speaker 2: point two on the broker's taxable side, eight hundred thousand 93 00:04:37,080 --> 00:04:39,560 Speaker 2: or so in cash and WROTH accounts, and that advisor says, well, 94 00:04:39,600 --> 00:04:42,320 Speaker 2: let's do some tax projections from now to age seventy five. 95 00:04:42,360 --> 00:04:43,360 Speaker 3: We've got a ten year window. 96 00:04:43,400 --> 00:04:45,599 Speaker 2: Remember they're sixty five years old, so they've got ten 97 00:04:45,720 --> 00:04:48,800 Speaker 2: years until required minimum distributions kick in at their full 98 00:04:49,000 --> 00:04:51,440 Speaker 2: full breadth. And so what if we do these partial 99 00:04:51,480 --> 00:04:54,240 Speaker 2: roth conversions every year, say one hundred thousand dollars while 100 00:04:54,240 --> 00:04:56,880 Speaker 2: staying in that twenty four percent tax bracket. So what 101 00:04:56,920 --> 00:04:58,600 Speaker 2: that means is that they'd be paying it. You know, 102 00:04:58,640 --> 00:05:00,960 Speaker 2: they're done twenty four percent. That means they might be 103 00:05:01,000 --> 00:05:03,800 Speaker 2: blending together around twenty. So in other words, what the 104 00:05:03,800 --> 00:05:06,760 Speaker 2: advisor is challenging them to do is to consider writing 105 00:05:06,760 --> 00:05:09,960 Speaker 2: a check voluntarily for approximately twenty thousand dollars to the 106 00:05:10,000 --> 00:05:11,880 Speaker 2: irs and yes, maybe some of the state, depending on 107 00:05:11,920 --> 00:05:15,359 Speaker 2: where these fake people live in exchange for converting a 108 00:05:15,440 --> 00:05:18,640 Speaker 2: million dollars over a ten year time period. It's not sexy, right, 109 00:05:18,680 --> 00:05:22,320 Speaker 2: This is the opposite of sexy. We're voluntarily giving money 110 00:05:22,320 --> 00:05:23,000 Speaker 2: to the irs. 111 00:05:23,040 --> 00:05:23,680 Speaker 3: Nobody like that. 112 00:05:24,000 --> 00:05:26,159 Speaker 2: But over ten years now, suddenly we've got a million 113 00:05:26,200 --> 00:05:29,560 Speaker 2: dollars that's going to grow tax free forever, no requirementum 114 00:05:29,600 --> 00:05:32,920 Speaker 2: distributions on that chunk, no tax bill later for their heirs, 115 00:05:33,279 --> 00:05:36,640 Speaker 2: and as a special bonus, those airs get another ten 116 00:05:36,760 --> 00:05:39,640 Speaker 2: years of tax free growth beyond the death of the 117 00:05:39,680 --> 00:05:42,520 Speaker 2: owner of the roth Ira. That's offense and that is 118 00:05:42,640 --> 00:05:43,679 Speaker 2: value among an advisor. 119 00:05:44,640 --> 00:05:47,240 Speaker 1: Yeah, it's a great point. And to the point you 120 00:05:47,279 --> 00:05:49,440 Speaker 1: made at the beginning of the segment. I mean, this 121 00:05:49,520 --> 00:05:52,040 Speaker 1: is a two way street. It requires some work. It 122 00:05:52,120 --> 00:05:54,800 Speaker 1: requires a little bit of mental energy and time on 123 00:05:54,880 --> 00:05:58,080 Speaker 1: the part of the advisor and the client, meaning you know, 124 00:05:58,120 --> 00:06:00,240 Speaker 1: and Brian, you and I have meetings like this all 125 00:06:00,279 --> 00:06:03,880 Speaker 1: the time with folks. You actually run different scenarios, you 126 00:06:04,000 --> 00:06:08,480 Speaker 1: discuss different assumptions, you run some numbers in some sophisticated 127 00:06:08,520 --> 00:06:12,240 Speaker 1: tax software, and you can you know, generate a projection 128 00:06:12,360 --> 00:06:15,720 Speaker 1: on the impact of making some of these changes. And yes, 129 00:06:15,800 --> 00:06:18,880 Speaker 1: it can sometimes be assumption based, but that's where you 130 00:06:18,920 --> 00:06:22,040 Speaker 1: have a dialogue with the client. You discuss the pros 131 00:06:22,040 --> 00:06:24,960 Speaker 1: and cons. Everybody's on the same page as far as 132 00:06:25,000 --> 00:06:27,919 Speaker 1: what we want to do and why. And that's playing offense. 133 00:06:28,200 --> 00:06:30,880 Speaker 1: But yet it does require a little bit of time 134 00:06:30,920 --> 00:06:33,920 Speaker 1: and effort to come in and sit down and talk 135 00:06:33,960 --> 00:06:37,039 Speaker 1: about this stuff. But man, it can make a huge difference, 136 00:06:37,480 --> 00:06:39,400 Speaker 1: you know, over the next ten to twenty years, not 137 00:06:39,440 --> 00:06:42,640 Speaker 1: only for you, but for your kids and grandkids if 138 00:06:42,680 --> 00:06:45,200 Speaker 1: you get a little proactive and have a strategy in place. 139 00:06:45,320 --> 00:06:46,920 Speaker 2: Yeah, and I'll add, you know, before we came on 140 00:06:46,920 --> 00:06:50,120 Speaker 2: the air tonight, like literally just before, I've sent an 141 00:06:50,120 --> 00:06:52,680 Speaker 2: email to a client who has been really struggling with 142 00:06:53,040 --> 00:06:55,680 Speaker 2: whether they want to perform a Roth conversion here in 143 00:06:55,760 --> 00:06:59,200 Speaker 2: the in the waning weeks of this year. In the 144 00:06:59,240 --> 00:07:01,320 Speaker 2: conclusion I gave them was, look, if it's causing this 145 00:07:01,480 --> 00:07:03,279 Speaker 2: much stress, whether you want to pull the trigger on it, 146 00:07:03,320 --> 00:07:05,599 Speaker 2: then that's a no for me because it shouldn't be. 147 00:07:05,760 --> 00:07:08,440 Speaker 2: You know, these aren't these types of strategies are not 148 00:07:08,760 --> 00:07:09,359 Speaker 2: no brainers. 149 00:07:09,440 --> 00:07:10,840 Speaker 3: Right, they're not appropriate for everybody. 150 00:07:10,880 --> 00:07:13,680 Speaker 2: They definitely involve sacrifice in exchange for a benefit down 151 00:07:13,680 --> 00:07:16,840 Speaker 2: the road. For some people that is ideal and it 152 00:07:17,120 --> 00:07:19,200 Speaker 2: makes all the sense in the world to make that sacrifice. 153 00:07:19,480 --> 00:07:21,600 Speaker 2: But for other people it's too much of a sacrifice 154 00:07:21,600 --> 00:07:23,800 Speaker 2: and they simply won't be comfortable having pulled the trigger. 155 00:07:24,200 --> 00:07:25,400 Speaker 3: Either way is fine. 156 00:07:25,480 --> 00:07:28,800 Speaker 2: The goal is not to get everyone to pursue, you know, 157 00:07:28,880 --> 00:07:31,200 Speaker 2: option A or B or C. It's to make sure 158 00:07:31,240 --> 00:07:34,160 Speaker 2: that everybody understands the pros and cons of those options 159 00:07:34,240 --> 00:07:36,160 Speaker 2: and then they can make a decision for themselves. So 160 00:07:36,200 --> 00:07:38,200 Speaker 2: this particular client, we said, you know what, this is 161 00:07:38,240 --> 00:07:40,080 Speaker 2: not the last year you'll ever be able to do one. 162 00:07:40,280 --> 00:07:42,920 Speaker 2: Got a few more years to require minimum distributions kick in. 163 00:07:43,120 --> 00:07:46,520 Speaker 2: We've had a long conversation all through Q four this year. 164 00:07:46,760 --> 00:07:50,080 Speaker 2: Now we know the basics. Let's regather ourselves next year 165 00:07:50,120 --> 00:07:52,840 Speaker 2: sometime and you'll have a cleaner conversation about it. 166 00:07:52,880 --> 00:07:53,720 Speaker 3: So that's okay. 167 00:07:53,760 --> 00:07:55,800 Speaker 2: It's not a bad thing to not pull the trigger 168 00:07:55,840 --> 00:07:56,640 Speaker 2: on these types of things. 169 00:07:57,200 --> 00:07:59,360 Speaker 1: Yeah, and I've got a few clients like that, Brian, 170 00:07:59,400 --> 00:08:01,920 Speaker 1: that I've worked with for over thirty years, and they've 171 00:08:01,960 --> 00:08:04,480 Speaker 1: told me year after year. I just want to keep 172 00:08:04,520 --> 00:08:08,239 Speaker 1: this simple, and they really they know they have enough money, 173 00:08:08,280 --> 00:08:10,240 Speaker 1: they know they're never going to spend all the money 174 00:08:10,320 --> 00:08:13,440 Speaker 1: that they have, and they just frankly don't want to 175 00:08:13,480 --> 00:08:16,440 Speaker 1: go through all these gyrations of running all these numbers, 176 00:08:16,920 --> 00:08:19,120 Speaker 1: and to the extent that we try to force them 177 00:08:19,160 --> 00:08:21,640 Speaker 1: to do it, you know, to the point you just made, 178 00:08:21,680 --> 00:08:24,560 Speaker 1: that's going to create stress in their life and keep 179 00:08:24,560 --> 00:08:26,800 Speaker 1: them up at night thinking about things they don't even 180 00:08:26,840 --> 00:08:29,760 Speaker 1: want to think about. So, yeah, it's a two way street, 181 00:08:29,800 --> 00:08:32,440 Speaker 1: and you've got to find out where people's comfort level 182 00:08:32,960 --> 00:08:36,480 Speaker 1: is or isn't with respect to looking into some of 183 00:08:36,520 --> 00:08:39,880 Speaker 1: these things. But at least an advisor should be proactive, 184 00:08:40,240 --> 00:08:43,600 Speaker 1: proactive enough to tee up the topics, give people an 185 00:08:43,640 --> 00:08:46,280 Speaker 1: option of engaging about it, and then you go from there. 186 00:08:46,720 --> 00:08:48,720 Speaker 1: And I guess that leads to the last point we 187 00:08:48,760 --> 00:08:52,200 Speaker 1: want to make here is your plan stale, Meaning if 188 00:08:52,240 --> 00:08:55,360 Speaker 1: you've never had a deep conversation about how your goals 189 00:08:55,400 --> 00:08:59,120 Speaker 1: have changed and evolved over five, ten, fifteen, twenty years 190 00:08:59,120 --> 00:09:03,440 Speaker 1: with your advisor, there there might be some real missed opportunities, 191 00:09:03,440 --> 00:09:06,400 Speaker 1: and it might have less to do with taxes, but 192 00:09:06,640 --> 00:09:11,080 Speaker 1: just planning for your legacy and your family, maybe charities, 193 00:09:11,360 --> 00:09:15,000 Speaker 1: you know, really putting this money to work in ways 194 00:09:15,000 --> 00:09:18,240 Speaker 1: that could be meaningful to you if your advisor sits 195 00:09:18,280 --> 00:09:22,040 Speaker 1: down and gives you some options. I come up against 196 00:09:22,040 --> 00:09:24,440 Speaker 1: this all the time, Brian, where you know, people just 197 00:09:24,480 --> 00:09:28,319 Speaker 1: have never been asked questions that should be asked about 198 00:09:28,400 --> 00:09:31,240 Speaker 1: how they want their money or their wealth to be utilized. 199 00:09:31,920 --> 00:09:34,960 Speaker 2: Yeah, and then most people just stare at the pile 200 00:09:35,000 --> 00:09:37,760 Speaker 2: and watch it grow bigger. That's that's really the for 201 00:09:37,800 --> 00:09:40,240 Speaker 2: a lot of people, that's the financial plan. And that's 202 00:09:40,280 --> 00:09:42,360 Speaker 2: not terrible. I mean you usually what that means is 203 00:09:42,400 --> 00:09:44,480 Speaker 2: those are people who wind up sacrificing a lot more 204 00:09:44,480 --> 00:09:46,800 Speaker 2: than they had to. They wind up and invested too 205 00:09:46,840 --> 00:09:49,080 Speaker 2: aggressively because that's just what the growth. They stay in 206 00:09:49,120 --> 00:09:52,640 Speaker 2: growth mode for throughout their retirement years, or they wind 207 00:09:52,760 --> 00:09:55,120 Speaker 2: up since they've never looked at what that pile can 208 00:09:55,200 --> 00:09:57,280 Speaker 2: do for them, they only focus on the size of it. 209 00:09:57,440 --> 00:09:58,560 Speaker 3: Then they end up working too long. 210 00:09:58,760 --> 00:10:00,679 Speaker 2: So that that's the whole point of making sure that 211 00:10:00,760 --> 00:10:03,000 Speaker 2: you know, like Bob says, is your plan stale, well, 212 00:10:03,280 --> 00:10:05,600 Speaker 2: just make sure it's relevant to the topics you are 213 00:10:05,600 --> 00:10:08,480 Speaker 2: discussing now. When you're twenty thirty forties, then yeah, you're 214 00:10:08,480 --> 00:10:10,880 Speaker 2: thinking about growth, growth the pile. That's a pretty easy answer. 215 00:10:11,040 --> 00:10:13,520 Speaker 2: But as you hit your fifties and sixties, obviously we 216 00:10:13,559 --> 00:10:15,360 Speaker 2: want to figure out what did we do all this 217 00:10:15,400 --> 00:10:17,560 Speaker 2: for in the first place? What can this machine do 218 00:10:17,679 --> 00:10:20,040 Speaker 2: that I have actually built in? How do I even 219 00:10:20,120 --> 00:10:20,880 Speaker 2: know how to turn it on? 220 00:10:22,000 --> 00:10:24,400 Speaker 1: All? Right? Well, now let's get into some questions that 221 00:10:24,440 --> 00:10:28,000 Speaker 1: folks out there who are who have the time and 222 00:10:28,040 --> 00:10:30,520 Speaker 1: the inclination to want to get involved in some of 223 00:10:30,880 --> 00:10:33,480 Speaker 1: these this planning and want an advisor who's going to 224 00:10:33,559 --> 00:10:35,920 Speaker 1: help them do it. Here's some of the questions that 225 00:10:35,960 --> 00:10:38,760 Speaker 1: you should be asking your advisor, just as an example. 226 00:10:39,160 --> 00:10:43,960 Speaker 1: Number one, what's your strategy for reducing my lifetime tax burden? 227 00:10:44,480 --> 00:10:47,480 Speaker 1: How are we preparing for taxes in twenty twenty six? 228 00:10:48,360 --> 00:10:51,440 Speaker 1: Have you modeled my income plan with different social Security 229 00:10:51,440 --> 00:10:55,120 Speaker 1: claiming strategies? Can you show me how my investments are 230 00:10:55,120 --> 00:10:59,000 Speaker 1: aligned with my cash flow needs over the next five 231 00:10:59,040 --> 00:11:03,360 Speaker 1: to ten years. If your advisor dodges those questions or 232 00:11:03,440 --> 00:11:05,720 Speaker 1: gives you kind of a deer in the headlights, look, 233 00:11:06,160 --> 00:11:09,520 Speaker 1: you're not getting customized planning at all. You're just getting 234 00:11:09,559 --> 00:11:14,319 Speaker 1: an off the shelf portfolio and most likely overpaying for 235 00:11:14,880 --> 00:11:15,920 Speaker 1: investment management. 236 00:11:16,440 --> 00:11:16,640 Speaker 3: Yeah. 237 00:11:16,640 --> 00:11:18,920 Speaker 2: And I would also say that if there's a there 238 00:11:18,960 --> 00:11:21,360 Speaker 2: are no blanket answers right there are. There are very 239 00:11:21,480 --> 00:11:23,720 Speaker 2: very very few topics that have a quick yes or 240 00:11:23,760 --> 00:11:26,280 Speaker 2: no answer. So if your advisor is saying things like, well, 241 00:11:26,320 --> 00:11:27,960 Speaker 2: you know, age seventy is going to give you the 242 00:11:27,960 --> 00:11:30,320 Speaker 2: most income you can possibly have, so just do that, Well, 243 00:11:30,320 --> 00:11:32,719 Speaker 2: that's not advice. That's that's rules of thumb, and you 244 00:11:32,760 --> 00:11:34,760 Speaker 2: can find those on the internet anywhere you want to look. 245 00:11:34,840 --> 00:11:37,600 Speaker 2: So a real advisor is going to help you understand, 246 00:11:37,600 --> 00:11:39,400 Speaker 2: like I said before, the pros and cons of each 247 00:11:39,880 --> 00:11:43,480 Speaker 2: educating not dictating. So therefore that rules out completely those 248 00:11:43,600 --> 00:11:45,720 Speaker 2: rules of thumb that are intended to be black and white. 249 00:11:45,760 --> 00:11:47,440 Speaker 2: Just do this and never worry about it again. No, 250 00:11:47,760 --> 00:11:50,440 Speaker 2: you need to make decisions. You need to be equipped 251 00:11:50,440 --> 00:11:52,400 Speaker 2: to make decisions that are going to affect you and 252 00:11:52,440 --> 00:11:54,080 Speaker 2: your family and your loved ones for the rest of 253 00:11:54,120 --> 00:11:56,120 Speaker 2: your life, and a lot of those you only get 254 00:11:56,120 --> 00:11:58,040 Speaker 2: one chance at, so make sure you understand it from 255 00:11:58,080 --> 00:12:00,320 Speaker 2: all standpoints before you pull the trigger. 256 00:12:00,480 --> 00:12:03,560 Speaker 1: Here's the all worth advice. A good advisor keeps you safe. 257 00:12:04,000 --> 00:12:08,120 Speaker 1: A great advisor keeps you sharp. Coming up next, how 258 00:12:08,240 --> 00:12:12,720 Speaker 1: Vanguard's latest plan could start treating your retirement account kind 259 00:12:12,720 --> 00:12:15,559 Speaker 1: of like a pension plan. You're listening to Simply Money, 260 00:12:15,559 --> 00:12:18,840 Speaker 1: presented by all Worth Financial on fifty five KRC, the 261 00:12:18,880 --> 00:12:27,080 Speaker 1: talk station. You're listening to Simply Money. You're presented by 262 00:12:27,080 --> 00:12:30,240 Speaker 1: all Worth Financial on Bob Sponseller along with Brian James. 263 00:12:30,640 --> 00:12:33,359 Speaker 1: If you can't listen to Simply Money every night, subscribe 264 00:12:33,440 --> 00:12:36,440 Speaker 1: and get our daily podcast. Just search Simply Money on 265 00:12:36,480 --> 00:12:41,120 Speaker 1: the iHeart app or wherever you find your podcast. Straight 266 00:12:41,120 --> 00:12:44,400 Speaker 1: Ahead at six forty three, we tackle some high level 267 00:12:44,480 --> 00:12:49,440 Speaker 1: listener questions that it savvy investor should be probably thinking about. 268 00:12:50,600 --> 00:12:52,440 Speaker 1: All right, Brian, what if your four oh one k 269 00:12:52,600 --> 00:12:56,240 Speaker 1: could start acting more like a pension with predictable monthly 270 00:12:56,360 --> 00:13:00,480 Speaker 1: income without you having to buy a separate auity of 271 00:13:00,520 --> 00:13:04,080 Speaker 1: any kind. This will peak some interest because, let's face it, 272 00:13:04,160 --> 00:13:07,600 Speaker 1: a lot of folks out there love the concept of 273 00:13:07,760 --> 00:13:11,839 Speaker 1: quote unquote guaranteed income. Those are big buzzwords that get 274 00:13:11,880 --> 00:13:14,480 Speaker 1: a lot of attention from folks. Let's dig into what 275 00:13:14,640 --> 00:13:17,880 Speaker 1: Vanguard is up to starting in twenty twenty six. 276 00:13:17,960 --> 00:13:21,079 Speaker 2: Bryan, So, yeah, Vanguards that I'm putting some new features 277 00:13:21,120 --> 00:13:22,960 Speaker 2: into their four oh one ks. They're gonna offer a 278 00:13:23,000 --> 00:13:25,160 Speaker 2: four to oh one K target date fund that has 279 00:13:25,200 --> 00:13:28,520 Speaker 2: a built in regular payout functionality. So if you're a 280 00:13:28,559 --> 00:13:30,520 Speaker 2: four roh one K participant, this means you might have 281 00:13:30,559 --> 00:13:33,200 Speaker 2: access to an annuity type income stream right inside your 282 00:13:33,200 --> 00:13:36,280 Speaker 2: four oh one k workplace retirement plan. So this is 283 00:13:36,280 --> 00:13:40,560 Speaker 2: gonna be called the Vanguard Target Retirement Lifetime Income Trust. 284 00:13:41,120 --> 00:13:43,719 Speaker 3: And here's how it works. Bob, is you approach retirement. 285 00:13:43,360 --> 00:13:45,120 Speaker 1: Say that three times fast, and. 286 00:13:45,320 --> 00:13:47,240 Speaker 2: Let's let me do an acronym out of that, vt 287 00:13:47,559 --> 00:13:50,199 Speaker 2: r l T vitter lit. We're gonna go with vitter 288 00:13:50,240 --> 00:13:51,080 Speaker 2: lit from now on. 289 00:13:52,400 --> 00:13:53,600 Speaker 1: That's even worse, I. 290 00:13:53,640 --> 00:13:55,480 Speaker 3: Know, and I'm gonna say it a lot, all right. 291 00:13:55,520 --> 00:13:59,200 Speaker 2: So, speaking of vitter lit u, as you approach retirement 292 00:13:59,280 --> 00:14:01,320 Speaker 2: age sixty five, if you can have about twenty five 293 00:14:01,360 --> 00:14:03,520 Speaker 2: percent of your four to win k balance moved into 294 00:14:03,520 --> 00:14:06,960 Speaker 2: a contract with a with a well known insurance provider TIAA, 295 00:14:07,400 --> 00:14:09,920 Speaker 2: which is a big, big, huge insurance company out there, 296 00:14:10,679 --> 00:14:14,000 Speaker 2: more prevalent in the government, public spaces, education spaces. 297 00:14:13,679 --> 00:14:16,040 Speaker 3: That kind of thing, but not certainly not a newcomer 298 00:14:16,280 --> 00:14:16,960 Speaker 3: to the industry. 299 00:14:17,200 --> 00:14:19,960 Speaker 2: And that portion again up to twenty five percent that 300 00:14:20,000 --> 00:14:22,400 Speaker 2: becomes a guaranteed income stream, kind of like a pension 301 00:14:22,440 --> 00:14:25,040 Speaker 2: or a steady monthly paycheck. The rest of your four 302 00:14:25,080 --> 00:14:27,640 Speaker 2: oh one K stays the same way as always, stocks, bonds, 303 00:14:27,640 --> 00:14:29,840 Speaker 2: whatever you've chosen via those mutual funds in there. 304 00:14:30,200 --> 00:14:31,880 Speaker 3: So let's take an example here, Bob. 305 00:14:31,920 --> 00:14:33,400 Speaker 2: If you're if I'm sixty five and I've got a 306 00:14:33,400 --> 00:14:35,920 Speaker 2: million dollars and I'll put twenty five percent into that option, 307 00:14:36,000 --> 00:14:38,560 Speaker 2: So that's about a quarter million dollars that could generate 308 00:14:38,640 --> 00:14:41,320 Speaker 2: something like one six hundred and seventy dollars per month 309 00:14:41,360 --> 00:14:43,600 Speaker 2: pre tax. Remember you're still going to be impacted by 310 00:14:43,640 --> 00:14:46,840 Speaker 2: whether you've chosen traditional or wroth off of this, and 311 00:14:46,880 --> 00:14:49,760 Speaker 2: that's going to depend on that calculation, just like any 312 00:14:49,800 --> 00:14:52,720 Speaker 2: other pension is dependent on interest rates in the terms 313 00:14:52,720 --> 00:14:55,000 Speaker 2: of the annuity. But at some point you will be 314 00:14:55,040 --> 00:14:59,120 Speaker 2: committing to some kind of payout that where you're gonna 315 00:14:59,120 --> 00:15:00,880 Speaker 2: sign your name on the dotted and that payout is 316 00:15:00,920 --> 00:15:04,080 Speaker 2: what it is and which can be a good thing. 317 00:15:04,080 --> 00:15:07,440 Speaker 2: That's the whole point of guaranteed, but also not necessarily flexible. 318 00:15:07,480 --> 00:15:09,400 Speaker 2: But it's important to remember that's why you can only 319 00:15:09,400 --> 00:15:11,680 Speaker 2: put about a quarter into this anyway, This is not 320 00:15:11,800 --> 00:15:14,080 Speaker 2: the panacea. This is not the I never have to 321 00:15:14,080 --> 00:15:17,640 Speaker 2: worry about money solution ever. Again, no such thing exists. 322 00:15:18,040 --> 00:15:20,120 Speaker 2: But this is a new tool for people out there 323 00:15:20,120 --> 00:15:22,200 Speaker 2: who are kind of keeping their own money under their 324 00:15:22,240 --> 00:15:23,920 Speaker 2: own control and want to stay inside that. 325 00:15:23,960 --> 00:15:24,400 Speaker 3: For one K. 326 00:15:25,920 --> 00:15:27,720 Speaker 1: Well, I kind of like the idea. I mean, as 327 00:15:27,760 --> 00:15:30,040 Speaker 1: I've talked about several times on this show, I used 328 00:15:30,040 --> 00:15:33,000 Speaker 1: to be the advisor for a few very large four 329 00:15:33,040 --> 00:15:34,880 Speaker 1: to one K plans and I'd go in and do 330 00:15:34,960 --> 00:15:38,320 Speaker 1: those participant meetings. And for a lot of folks in 331 00:15:38,360 --> 00:15:41,080 Speaker 1: four to one K plans, they're not getting any investment 332 00:15:41,120 --> 00:15:44,200 Speaker 1: advice whatsoever. And when you start to talk about these 333 00:15:44,280 --> 00:15:46,000 Speaker 1: kind of things, you do get that deer in a 334 00:15:46,000 --> 00:15:50,040 Speaker 1: headlights look. And let's face it, everybody needs a chunk 335 00:15:50,080 --> 00:15:53,560 Speaker 1: of guaranteed income in their life, especially when they retire. 336 00:15:53,640 --> 00:15:56,280 Speaker 1: So I think this is a good thing. Along with 337 00:15:56,360 --> 00:15:59,000 Speaker 1: a lot of things we talk about here, options and 338 00:15:59,080 --> 00:16:02,920 Speaker 1: choices are rate. I'm gonna make one prediction on how 339 00:16:03,040 --> 00:16:07,520 Speaker 1: some of this might could go haywire here, because anytime 340 00:16:07,560 --> 00:16:10,640 Speaker 1: you get into any kind of an annuity arrangement, you're 341 00:16:10,640 --> 00:16:13,960 Speaker 1: going to be attracted by the highest possible monthly check, 342 00:16:14,080 --> 00:16:16,880 Speaker 1: and you might you know, paycheck, I mean, and you 343 00:16:16,960 --> 00:16:20,120 Speaker 1: might forget to think about doing what does my survivor 344 00:16:20,200 --> 00:16:23,040 Speaker 1: benefit look like if you just take a life only 345 00:16:23,160 --> 00:16:26,480 Speaker 1: annuity for yourself and forget about the fact that if 346 00:16:26,520 --> 00:16:30,720 Speaker 1: you die, your spouse would get nothing. That could really 347 00:16:30,800 --> 00:16:33,880 Speaker 1: create a problem. And a lot of these annuity decisions, 348 00:16:33,960 --> 00:16:37,240 Speaker 1: just like pension decisions when folks retire, there's no do 349 00:16:37,360 --> 00:16:40,400 Speaker 1: overs here. You know, it is an irrevocable decision. So 350 00:16:41,160 --> 00:16:43,520 Speaker 1: you know, choices are good, but we say it all 351 00:16:43,560 --> 00:16:46,200 Speaker 1: the time. You know, you gotta get a little bit 352 00:16:46,200 --> 00:16:49,000 Speaker 1: of advice and have somebody that knows what they're doing 353 00:16:49,120 --> 00:16:52,040 Speaker 1: sit down with you and Brian for a lot of 354 00:16:52,040 --> 00:16:55,840 Speaker 1: folks that rarely happens to help them make these decisions 355 00:16:55,880 --> 00:16:59,000 Speaker 1: before you make a you know, pull an irrevocable trigger. 356 00:16:59,280 --> 00:17:01,840 Speaker 2: Yeah, and I don't want this headline to you know, 357 00:17:01,920 --> 00:17:04,320 Speaker 2: to get people to conclude that, oh my gosh, finally 358 00:17:04,359 --> 00:17:07,000 Speaker 2: something that works for me. There's nothing new going on here. 359 00:17:06,560 --> 00:17:09,040 Speaker 2: There's really because remember we're talking about people who are 360 00:17:09,119 --> 00:17:11,879 Speaker 2: effectively retired. You don't want this if you're still working, 361 00:17:12,440 --> 00:17:14,439 Speaker 2: because you're wanting to grow your money and leave it 362 00:17:14,480 --> 00:17:16,639 Speaker 2: invested in a growth mode. So this is for somebody 363 00:17:16,640 --> 00:17:19,359 Speaker 2: who is retired and inn is actively looking to have 364 00:17:19,400 --> 00:17:21,320 Speaker 2: money spit into their checking account to pay the bills. 365 00:17:21,400 --> 00:17:24,040 Speaker 2: There's nothing stopping anybody from doing that right now or 366 00:17:24,080 --> 00:17:26,719 Speaker 2: for the past five decades, because you could roll your 367 00:17:26,760 --> 00:17:28,720 Speaker 2: money to an IRA and put it in an annuity 368 00:17:28,760 --> 00:17:31,439 Speaker 2: and annuitize the income stream. Annuities do get a bit 369 00:17:31,480 --> 00:17:33,280 Speaker 2: of a bad rap because of the commission based thing. 370 00:17:33,320 --> 00:17:35,760 Speaker 2: That's a little bit of a different scenario. This is 371 00:17:35,800 --> 00:17:38,119 Speaker 2: the actually annuity for its core purpose, which is to 372 00:17:38,200 --> 00:17:40,760 Speaker 2: generate a stream of income. That's all the word annuity means. 373 00:17:41,000 --> 00:17:42,560 Speaker 2: So it's not a bad thing, but it's not a 374 00:17:42,600 --> 00:17:45,239 Speaker 2: new thing either. So you know, I feel like this 375 00:17:45,359 --> 00:17:47,919 Speaker 2: is this is sort of a solution in search of 376 00:17:47,960 --> 00:17:50,720 Speaker 2: a problem because again this does not create anything I 377 00:17:50,720 --> 00:17:53,040 Speaker 2: couldn't have done before. Great, I can do it in 378 00:17:53,040 --> 00:17:55,639 Speaker 2: my four oh one K, but it I can do 379 00:17:55,680 --> 00:17:57,800 Speaker 2: it outside in an IRA. You know, for a lot 380 00:17:57,800 --> 00:17:59,960 Speaker 2: of other there are reasons to maintain only a four, 381 00:18:00,640 --> 00:18:04,320 Speaker 2: but those are very specific types of situations. So anyway, 382 00:18:04,400 --> 00:18:06,440 Speaker 2: you like you said, choice is good, but this isn't 383 00:18:06,440 --> 00:18:08,840 Speaker 2: the shining panacea that some might view it. 384 00:18:08,880 --> 00:18:09,240 Speaker 3: That it is. 385 00:18:10,560 --> 00:18:13,520 Speaker 1: Yeah, if we look across the whole landscape of four 386 00:18:13,520 --> 00:18:16,560 Speaker 1: to one K retirement plan fund only about four percent 387 00:18:16,680 --> 00:18:19,720 Speaker 1: of four to one K plans now offer such an option, 388 00:18:19,960 --> 00:18:24,480 Speaker 1: you know, like the one we're talking about. Vanguard's rivals, 389 00:18:24,520 --> 00:18:28,360 Speaker 1: including State Street, JP, Morgan Asset Management, and black Rock 390 00:18:28,760 --> 00:18:32,400 Speaker 1: are also going to introduce some version of this annuity 391 00:18:32,440 --> 00:18:37,960 Speaker 1: based thing. Interestingly enough, Brian Fidelity Investments, the second largest 392 00:18:38,080 --> 00:18:41,680 Speaker 1: manager of target date funds, says they have no immediate 393 00:18:41,720 --> 00:18:46,040 Speaker 1: plans to incorporate annuities into these products. I'm curious as 394 00:18:46,119 --> 00:18:49,639 Speaker 1: to know by. Hopefully there's good reasons behind that. And 395 00:18:50,320 --> 00:18:54,320 Speaker 1: you know it again, not to beat a dead horse here, 396 00:18:54,320 --> 00:18:56,560 Speaker 1: but you gotta you gotta watch out for fees. You 397 00:18:56,640 --> 00:18:59,600 Speaker 1: got to look at look at your overall income plan, 398 00:19:00,200 --> 00:19:03,760 Speaker 1: make sure you've got inflation protection, because once you put 399 00:19:03,800 --> 00:19:05,800 Speaker 1: money in one of these annuities, you're going to give 400 00:19:05,880 --> 00:19:09,080 Speaker 1: up some growth. And the point we already made is 401 00:19:09,119 --> 00:19:11,840 Speaker 1: it's irreversible. Once you pull the trigger on this thing, 402 00:19:12,160 --> 00:19:16,400 Speaker 1: you can't go back, you can't undo it. And yeah, 403 00:19:16,760 --> 00:19:19,359 Speaker 1: we're just calling it out that these options are going 404 00:19:19,400 --> 00:19:22,359 Speaker 1: to start to come down the pike for folks retiring 405 00:19:23,040 --> 00:19:26,919 Speaker 1: good to have these options, but in situations, if at 406 00:19:26,920 --> 00:19:30,600 Speaker 1: all possible, get some help from a good fiduciary advisor 407 00:19:31,040 --> 00:19:34,200 Speaker 1: to make sure you thoroughly evaluate these options and pick 408 00:19:34,240 --> 00:19:36,560 Speaker 1: one that makes sense for you. Here's the all Worth 409 00:19:36,600 --> 00:19:40,520 Speaker 1: advice by locking in any kind of guaranteed income. Before 410 00:19:40,600 --> 00:19:44,080 Speaker 1: you do that, talk to a fiduciary advisor about how 411 00:19:44,160 --> 00:19:49,280 Speaker 1: annuitizing part of your portfolio fits or doesn't fit with 412 00:19:49,359 --> 00:19:55,040 Speaker 1: your overall retirement strategy, tax picture, and long term goals. Next, 413 00:19:55,080 --> 00:19:58,040 Speaker 1: we'll break down the smart way to help your kids 414 00:19:58,200 --> 00:20:03,120 Speaker 1: now without creating life long dependency or blowing up your 415 00:20:03,119 --> 00:20:06,359 Speaker 1: own retirement plan in the process. You're listening to Simply 416 00:20:06,359 --> 00:20:09,240 Speaker 1: Money presented by all Worth Financial on fifty five KRC 417 00:20:09,720 --> 00:20:17,000 Speaker 1: the talk station. You're listening to Simply Money presented by 418 00:20:17,080 --> 00:20:20,480 Speaker 1: all Worth Financial. I'm Bob sponsorer along with Brian James. 419 00:20:21,520 --> 00:20:24,200 Speaker 1: If you're like a lot of successful families, you've built 420 00:20:24,200 --> 00:20:27,320 Speaker 1: a strong nest egg and now you might be asking 421 00:20:27,359 --> 00:20:30,719 Speaker 1: a big question. Should I start helping my kids financially 422 00:20:30,920 --> 00:20:35,919 Speaker 1: now or possibly even grandkids instead of waiting until after 423 00:20:36,000 --> 00:20:39,440 Speaker 1: I passed away. Brian, you know this is a discussion 424 00:20:39,480 --> 00:20:42,639 Speaker 1: that's coming up more and more often, and it's something 425 00:20:42,720 --> 00:20:45,719 Speaker 1: we're bringing up with clients, and I think especially in 426 00:20:45,760 --> 00:20:48,960 Speaker 1: this you know era we're living in now, you know, 427 00:20:49,080 --> 00:20:53,720 Speaker 1: with this seemingly large affordability gap between the Baby boom 428 00:20:53,760 --> 00:20:57,879 Speaker 1: generation and younger generations. I love this topic and I 429 00:20:57,920 --> 00:21:00,159 Speaker 1: think it's something that should be talked about as or 430 00:21:00,240 --> 00:21:07,120 Speaker 1: of everyone's financial plan doing more multi generational planning, because 431 00:21:07,240 --> 00:21:10,960 Speaker 1: you can really make a sizable impact in a young 432 00:21:11,000 --> 00:21:13,920 Speaker 1: person or young people's life if they get a little 433 00:21:13,960 --> 00:21:17,439 Speaker 1: bit of help in their thirties rather than waiting until 434 00:21:17,520 --> 00:21:20,359 Speaker 1: they're in their sixties doing here in a big chunk 435 00:21:20,359 --> 00:21:22,679 Speaker 1: of money, and you know, after that, it's gonna have 436 00:21:23,160 --> 00:21:26,280 Speaker 1: less impact on their life in a positive way than, 437 00:21:27,119 --> 00:21:29,720 Speaker 1: you know, than what otherwise could be achieved. 438 00:21:30,000 --> 00:21:30,800 Speaker 3: Yeah, these are common. 439 00:21:30,920 --> 00:21:33,240 Speaker 2: Like you said, I'm hearing the same thing from people 440 00:21:33,320 --> 00:21:36,879 Speaker 2: will want with life expectancy being a lot longer than 441 00:21:36,920 --> 00:21:39,840 Speaker 2: it was then, you know, when when in earlier generations 442 00:21:40,000 --> 00:21:42,280 Speaker 2: people are saying, you know what, I'm doing fine now, 443 00:21:42,359 --> 00:21:42,800 Speaker 2: I don't. 444 00:21:42,600 --> 00:21:44,159 Speaker 3: Really feel like I'm gonna need all of this. 445 00:21:45,119 --> 00:21:47,719 Speaker 2: And you know, I understand the concept of step up 446 00:21:47,720 --> 00:21:48,720 Speaker 2: and cost bases. 447 00:21:48,440 --> 00:21:49,240 Speaker 3: And all those kinds of things. 448 00:21:49,280 --> 00:21:51,880 Speaker 2: Maybe it is more efficient to wait, and that's true 449 00:21:51,920 --> 00:21:54,320 Speaker 2: for some assets, but for other assets, why not just 450 00:21:54,800 --> 00:21:57,160 Speaker 2: help them out now when they're trying to get family started, 451 00:21:57,200 --> 00:21:59,719 Speaker 2: and you know, because people remember those were the more 452 00:21:59,720 --> 00:22:01,760 Speaker 2: st RESTful times and they want to help out their 453 00:22:01,840 --> 00:22:06,280 Speaker 2: kids at this point. So there's of course pros and 454 00:22:06,359 --> 00:22:08,400 Speaker 2: cons to this. There's tax rules involved here, so let's 455 00:22:08,400 --> 00:22:11,119 Speaker 2: get into the mechanics of that. The IRS allows you 456 00:22:11,160 --> 00:22:14,080 Speaker 2: to give up to nineteen thousand dollars per person per year, 457 00:22:14,119 --> 00:22:16,399 Speaker 2: doesn't have to be related. Anybody walking down the street, 458 00:22:16,400 --> 00:22:18,280 Speaker 2: you can give them a check for nineteen thousand dollars, 459 00:22:18,280 --> 00:22:22,159 Speaker 2: no harm, no foul, without filing even a gift tax return. 460 00:22:22,240 --> 00:22:24,199 Speaker 2: So you can literally write a check, you're done with it. 461 00:22:24,480 --> 00:22:27,040 Speaker 2: If you're married, you can double that thirty eight thousand 462 00:22:27,080 --> 00:22:30,719 Speaker 2: to each child or grandchild. If those children are married 463 00:22:30,840 --> 00:22:33,440 Speaker 2: and you trust that in law, then you can each 464 00:22:33,520 --> 00:22:37,760 Speaker 2: give nineteen thousand dollars in four gifts. Right, so spouse 465 00:22:37,760 --> 00:22:40,359 Speaker 2: one gives nineteen thousand dollars to their own child, and 466 00:22:40,400 --> 00:22:42,679 Speaker 2: then the spouse of that child, and then spouse two 467 00:22:42,760 --> 00:22:43,480 Speaker 2: does the same thing. 468 00:22:43,520 --> 00:22:45,360 Speaker 3: So that's seventy six thousand dollars. 469 00:22:45,200 --> 00:22:48,600 Speaker 2: That can be handed down right now today, without worrying 470 00:22:48,680 --> 00:22:52,040 Speaker 2: about gift taxes. Now, there's also something called a lifetime 471 00:22:52,119 --> 00:22:56,720 Speaker 2: gift exemption, and that's the total amount above and beyond 472 00:22:56,720 --> 00:22:59,240 Speaker 2: that nineteen thousand per kid that you can give away 473 00:22:59,359 --> 00:23:01,920 Speaker 2: during life or pass that death before the federal and 474 00:23:01,960 --> 00:23:04,679 Speaker 2: the state gift tax applies. That currently in twenty twenty six, 475 00:23:04,760 --> 00:23:07,200 Speaker 2: that's fifteen million dollars per individual in twenty six. 476 00:23:07,440 --> 00:23:08,440 Speaker 3: Now that's that is you. 477 00:23:08,440 --> 00:23:10,920 Speaker 2: Have to report those, That's how it's tracked. That's kind 478 00:23:10,920 --> 00:23:13,119 Speaker 2: of the difference, But it doesn't mean that taxes are 479 00:23:13,119 --> 00:23:16,120 Speaker 2: going to apply. Reporting and taxation are two different things. 480 00:23:17,320 --> 00:23:20,280 Speaker 1: Yeah, and the numbers work here, and it's very easy, 481 00:23:20,280 --> 00:23:23,359 Speaker 1: as Brian's just outlined, it's very easy to move around 482 00:23:23,400 --> 00:23:26,520 Speaker 1: a lot of money very quickly without falling, you know, 483 00:23:26,560 --> 00:23:29,480 Speaker 1: into any gift tax problems. I don't think that's the issue. 484 00:23:29,520 --> 00:23:33,040 Speaker 1: I think the issue is are these kids ready? Have 485 00:23:33,119 --> 00:23:37,760 Speaker 1: they been prepared to handle receiving a chunk of money responsibly? 486 00:23:38,160 --> 00:23:40,320 Speaker 1: And that's where I see more and more of a 487 00:23:40,359 --> 00:23:44,040 Speaker 1: gap sometimes is you know, people just don't talk about 488 00:23:44,080 --> 00:23:49,360 Speaker 1: financial planning with their kids, and if there are behaviors 489 00:23:49,400 --> 00:23:52,560 Speaker 1: going on that you know, the next generation is handling 490 00:23:52,600 --> 00:23:56,400 Speaker 1: money differently than the parents, or not managing it very 491 00:23:56,400 --> 00:23:59,280 Speaker 1: well at all. I think that's why some parents are 492 00:23:59,320 --> 00:24:02,359 Speaker 1: just read as an to start put giving money to 493 00:24:02,440 --> 00:24:05,720 Speaker 1: them because they they're not sure how it's gonna be handled. 494 00:24:05,760 --> 00:24:08,119 Speaker 1: And I think that's why, you know, these discussions have 495 00:24:08,200 --> 00:24:11,640 Speaker 1: to take place. You don't want to run your kid's life, 496 00:24:11,680 --> 00:24:14,480 Speaker 1: but you you do, I think, have a responsibility to 497 00:24:14,520 --> 00:24:17,840 Speaker 1: be a good steward of this money and at least 498 00:24:17,840 --> 00:24:20,359 Speaker 1: make sure some good habits are in place. Does it 499 00:24:20,400 --> 00:24:23,439 Speaker 1: have to be perfect, you know, No, are kids going 500 00:24:23,480 --> 00:24:27,359 Speaker 1: to make some mistakes, absolutely, just like everyone's made some mistakes, 501 00:24:27,440 --> 00:24:30,639 Speaker 1: you know, when they were younger and less experienced. But 502 00:24:30,760 --> 00:24:34,240 Speaker 1: I think, you know, handling money, having a good dialogue 503 00:24:34,640 --> 00:24:37,760 Speaker 1: and getting some good habits in place and some good 504 00:24:37,920 --> 00:24:40,960 Speaker 1: you know dialogue and discussion going on with family members, 505 00:24:41,200 --> 00:24:44,800 Speaker 1: I think that's going to help everybody feel more confident 506 00:24:44,840 --> 00:24:48,679 Speaker 1: and comfortable with deploying some assets and ways. Again, that 507 00:24:48,720 --> 00:24:52,320 Speaker 1: could make some huge, you know, benefits to create to 508 00:24:52,359 --> 00:24:58,000 Speaker 1: the next generation, but it involves communication and being proactive, 509 00:24:58,160 --> 00:25:00,399 Speaker 1: and Brian, a lot of people just aren't willing to 510 00:25:00,440 --> 00:25:03,000 Speaker 1: sit down and have those conversations. 511 00:25:02,480 --> 00:25:04,359 Speaker 2: Right, So let's get into some of the mechanics of 512 00:25:04,480 --> 00:25:06,040 Speaker 2: if I'm going to do this, if I believe it this, 513 00:25:06,119 --> 00:25:07,840 Speaker 2: what are the things that I can be looking at? Well, 514 00:25:07,960 --> 00:25:09,920 Speaker 2: first and foremost, one of my favorite things to help 515 00:25:09,960 --> 00:25:13,240 Speaker 2: people understand is five twenty nine plans. So you can 516 00:25:13,320 --> 00:25:16,520 Speaker 2: fund a five twenty nine plan and front load five 517 00:25:16,720 --> 00:25:18,520 Speaker 2: years worth of these gifts. Right, So we just got 518 00:25:18,560 --> 00:25:21,280 Speaker 2: done saying nineteen thousand dollars per year. Well, if you're 519 00:25:21,320 --> 00:25:23,040 Speaker 2: going to do it through a five twenty nine, well, 520 00:25:23,080 --> 00:25:25,840 Speaker 2: now you can do ninety five thousand dollars per beneficiary 521 00:25:25,840 --> 00:25:28,800 Speaker 2: in a single year. But you can still do the 522 00:25:28,840 --> 00:25:31,440 Speaker 2: reporting over those five years, no harm, no foul, and 523 00:25:31,960 --> 00:25:35,400 Speaker 2: you know, not too burdensome. So a married couple of course, 524 00:25:35,400 --> 00:25:37,800 Speaker 2: can double that one hundred ninety thousand. Those are gift 525 00:25:37,840 --> 00:25:40,080 Speaker 2: tax free as long as no additional gifts to that 526 00:25:40,119 --> 00:25:42,400 Speaker 2: same person are made in the following four years. 527 00:25:42,400 --> 00:25:43,240 Speaker 3: That's important to remember. 528 00:25:43,359 --> 00:25:44,760 Speaker 2: Now, a lot of people get hung up on the 529 00:25:44,800 --> 00:25:46,960 Speaker 2: idea that, well, you know, I don't five twenty nine 530 00:25:47,000 --> 00:25:48,639 Speaker 2: that's for college. I don't know that I want to 531 00:25:48,680 --> 00:25:51,520 Speaker 2: fund this for that because maybe that's just not in 532 00:25:51,560 --> 00:25:51,960 Speaker 2: the picture. 533 00:25:52,000 --> 00:25:52,680 Speaker 3: We just don't know. 534 00:25:53,000 --> 00:25:55,000 Speaker 2: Well, they've changed the rules over the last couple of years. 535 00:25:55,000 --> 00:25:59,280 Speaker 2: Now any unused amounts, well not any up to thirty 536 00:25:59,280 --> 00:26:01,880 Speaker 2: five thousand dollars dollars of an unused amount left over 537 00:26:01,920 --> 00:26:03,800 Speaker 2: in a five to twenty nine can now become a 538 00:26:03,880 --> 00:26:07,200 Speaker 2: wroth contribution for that individual. So, in other words, the 539 00:26:07,240 --> 00:26:10,240 Speaker 2: annual contribution is, you know, depending on their age seventy 540 00:26:10,280 --> 00:26:13,120 Speaker 2: five eighty five hundred dollars, then they can put those 541 00:26:13,200 --> 00:26:16,240 Speaker 2: into the roth ira, you know, using those five twenty 542 00:26:16,320 --> 00:26:16,879 Speaker 2: nine dollars. 543 00:26:17,000 --> 00:26:18,040 Speaker 3: There's there's caveats to. 544 00:26:18,040 --> 00:26:19,960 Speaker 2: This, it has to have sat there for fifteen years, 545 00:26:20,560 --> 00:26:23,440 Speaker 2: but the point is that it can be tax free 546 00:26:23,480 --> 00:26:26,280 Speaker 2: growth for a very, very, very long time. I really 547 00:26:26,320 --> 00:26:28,800 Speaker 2: would look strongly at the five twenty nine plan for that. 548 00:26:29,160 --> 00:26:31,480 Speaker 2: Beyond that, we can look into family trusts. You can 549 00:26:31,480 --> 00:26:34,200 Speaker 2: gift into an irrevocable trust and leave clear rules on 550 00:26:34,280 --> 00:26:36,439 Speaker 2: how and when those funds are be distributed and you 551 00:26:36,480 --> 00:26:39,160 Speaker 2: can still control it after your death. That's the point 552 00:26:39,200 --> 00:26:41,440 Speaker 2: of a trust and keep it out of your estate. 553 00:26:43,480 --> 00:26:45,679 Speaker 1: All right, good stuff there. Here's the r Worth advice. 554 00:26:45,720 --> 00:26:48,960 Speaker 1: Before you write that check, talk to a fiduciary advisor 555 00:26:49,000 --> 00:26:53,440 Speaker 1: about how gifting fits into your financial plan and your 556 00:26:53,480 --> 00:26:57,200 Speaker 1: family dynamic. The smartest gifts are the ones that support 557 00:26:57,280 --> 00:27:03,240 Speaker 1: your kids without undermining their independence. Next, Aaron's riding high 558 00:27:03,320 --> 00:27:08,080 Speaker 1: on investment gains and Sandy's digging into roth conversion strategies. 559 00:27:08,600 --> 00:27:10,760 Speaker 1: If you're sitting on a solid nest egg, these are 560 00:27:10,800 --> 00:27:13,720 Speaker 1: the kind of questions decisions you need to make that 561 00:27:13,880 --> 00:27:16,320 Speaker 1: you are probably facing two. We're going to try to 562 00:27:16,320 --> 00:27:19,080 Speaker 1: tackle all of them coming up. Next. You're listening to 563 00:27:19,119 --> 00:27:22,240 Speaker 1: Simply Money presented by Allworth Financial on fifty five KRZ, 564 00:27:22,800 --> 00:27:30,359 Speaker 1: the talk station. You're listening to Simply Money presented by 565 00:27:30,359 --> 00:27:33,680 Speaker 1: all Worth Financial on Bob Sponsorer along with Brian James. 566 00:27:34,160 --> 00:27:36,040 Speaker 1: Do you have a financial question you'd like for us 567 00:27:36,040 --> 00:27:38,400 Speaker 1: to answer. There's a red button you can click while 568 00:27:38,400 --> 00:27:41,520 Speaker 1: you're listening to the show right there on the iHeart app. 569 00:27:41,600 --> 00:27:45,120 Speaker 1: Simply record your question and it will come straight to us. 570 00:27:46,320 --> 00:27:49,160 Speaker 1: John and Terris Park says, we're running into a situation 571 00:27:49,240 --> 00:27:53,000 Speaker 1: where our taxable portfolio is throwing off way more gains 572 00:27:53,040 --> 00:27:56,800 Speaker 1: than we spend. How do you restructure your investment portfolio 573 00:27:56,920 --> 00:28:01,720 Speaker 1: so your tax bill isn't dictating your entire withdraw strategy? Brian, 574 00:28:01,840 --> 00:28:04,199 Speaker 1: here's a guy that wants to do some proactive planning. 575 00:28:04,240 --> 00:28:05,119 Speaker 1: I love this question. 576 00:28:05,359 --> 00:28:07,160 Speaker 3: Yeah, this to me, this is where it gets fun. 577 00:28:07,200 --> 00:28:09,040 Speaker 2: This is kind of where the rubber meets the road, 578 00:28:09,080 --> 00:28:10,359 Speaker 2: when you know, more meat on the bone and the 579 00:28:10,359 --> 00:28:12,720 Speaker 2: financial planning process. And I can tell that John's been 580 00:28:12,760 --> 00:28:15,159 Speaker 2: paying attention to how stuff works over the years, because 581 00:28:15,800 --> 00:28:17,560 Speaker 2: when you're when you're younger, we're just growing a big 582 00:28:17,600 --> 00:28:19,840 Speaker 2: pile of money. Uh, then you don't really pay attention 583 00:28:19,880 --> 00:28:21,520 Speaker 2: to these things. But obviously he's been around the block 584 00:28:21,560 --> 00:28:22,959 Speaker 2: of time or two and he's kind of wondering how 585 00:28:22,960 --> 00:28:24,040 Speaker 2: to make things more efficient. 586 00:28:24,160 --> 00:28:26,520 Speaker 3: So the real issue here is that the that we 587 00:28:26,560 --> 00:28:26,960 Speaker 3: want to be. 588 00:28:26,920 --> 00:28:29,520 Speaker 2: Careful to that the tax tail doesn't start wagging the 589 00:28:29,600 --> 00:28:32,440 Speaker 2: retirement income dog. The goal here is to rebuild that 590 00:28:32,480 --> 00:28:35,080 Speaker 2: portfolio so that withdrawal strategy when it's time for it 591 00:28:35,080 --> 00:28:37,720 Speaker 2: to kick in, is driven by the needs of your lifestyle, 592 00:28:37,840 --> 00:28:40,400 Speaker 2: not i RS distribution. So let's think of this in 593 00:28:40,520 --> 00:28:42,880 Speaker 2: three steps. First, figure out where your tax drag is 594 00:28:42,920 --> 00:28:45,560 Speaker 2: coming from. In the first place, h Historically, the biggest 595 00:28:45,600 --> 00:28:48,360 Speaker 2: culprits there are those legacy mutual funds that have big turnover. 596 00:28:48,720 --> 00:28:50,600 Speaker 2: That's this time of years when we see those big 597 00:28:50,600 --> 00:28:53,920 Speaker 2: capital gains. Maybe you've got individual positions with huge embedded gains. 598 00:28:53,920 --> 00:28:55,840 Speaker 2: Every time you sell anything, all of a sudden you've 599 00:28:55,880 --> 00:28:57,120 Speaker 2: got a big tax bill. 600 00:28:57,640 --> 00:28:57,880 Speaker 1: Uh. 601 00:28:57,920 --> 00:28:59,960 Speaker 2: And then then the second step, you know you want 602 00:29:00,000 --> 00:29:02,239 Speaker 2: to start to a sort of manage transition rather than 603 00:29:02,240 --> 00:29:05,360 Speaker 2: a wholesale reset. We're not starting from scratch, Harvest those 604 00:29:05,400 --> 00:29:09,360 Speaker 2: losses when they're available, peel back overweight positions slowly by 605 00:29:09,480 --> 00:29:12,560 Speaker 2: offsetting those those gains with the losses you just set up, 606 00:29:12,680 --> 00:29:14,719 Speaker 2: and then redirect all your future cash flows to that 607 00:29:14,760 --> 00:29:18,239 Speaker 2: newly organized portfolio. And then third, finally, a build out 608 00:29:18,240 --> 00:29:21,280 Speaker 2: withdrawal strategy that's going to deliberately separate your cash flow 609 00:29:21,320 --> 00:29:23,719 Speaker 2: from your tax events. That means you're gonna set up 610 00:29:23,720 --> 00:29:25,360 Speaker 2: you're gonna sit down and think about it, and you're 611 00:29:25,360 --> 00:29:27,400 Speaker 2: gonna set up a spending policy maybe at three to 612 00:29:27,440 --> 00:29:30,120 Speaker 2: four percent of that tax bill accounts value, raise that 613 00:29:30,200 --> 00:29:32,320 Speaker 2: cash for it once or twice a year by trimming 614 00:29:32,400 --> 00:29:36,360 Speaker 2: those lowest gain lots first, in spending those down to 615 00:29:36,360 --> 00:29:38,000 Speaker 2: pay the bills over time, this is going to get 616 00:29:38,000 --> 00:29:40,600 Speaker 2: you to a structure where that portfolio behaves the way 617 00:29:40,640 --> 00:29:42,720 Speaker 2: you spend and it doesn't just sit there and spit 618 00:29:42,760 --> 00:29:45,560 Speaker 2: out tax obligations. When you didn't necessarily need that distribution 619 00:29:45,600 --> 00:29:47,640 Speaker 2: in the first place, So hope that helps. We'll move 620 00:29:47,680 --> 00:29:50,360 Speaker 2: on to now to Trevor and hyde Park. Trevor says 621 00:29:50,520 --> 00:29:53,800 Speaker 2: their advisor has mentioned that their portfolio isn't quite liquid 622 00:29:53,920 --> 00:29:57,240 Speaker 2: enough and it lacks liquidity staging, and so he's wondering, 623 00:29:57,280 --> 00:29:59,680 Speaker 2: how do you set up these multiple liquidity tiers, cash, 624 00:30:00,080 --> 00:30:02,040 Speaker 2: short term bonds, and growth by I think, Bob, we 625 00:30:02,080 --> 00:30:05,560 Speaker 2: call these buckets often, so that the portfolio supports these 626 00:30:05,560 --> 00:30:06,480 Speaker 2: different time horizons. 627 00:30:06,480 --> 00:30:09,400 Speaker 1: What would you say, Well, first of all, Trevor, it 628 00:30:09,480 --> 00:30:11,960 Speaker 1: sounds like, you know, you've got a good advisor that's 629 00:30:11,960 --> 00:30:14,720 Speaker 1: thinking ahead for you and doing some proactive planning. So 630 00:30:14,800 --> 00:30:17,520 Speaker 1: that's great. I think what he or she is talking 631 00:30:17,560 --> 00:30:21,000 Speaker 1: about here is you got to make a You got 632 00:30:21,000 --> 00:30:23,240 Speaker 1: to take a look at how your portfolio is structured 633 00:30:23,600 --> 00:30:26,520 Speaker 1: to make sure that the money is there and in 634 00:30:26,560 --> 00:30:30,200 Speaker 1: a low enough risk situation to support what you need 635 00:30:30,280 --> 00:30:31,880 Speaker 1: it to do. And I'll give you a couple of 636 00:30:31,880 --> 00:30:35,360 Speaker 1: examples that I run into sometimes folks. You know, with 637 00:30:35,720 --> 00:30:39,200 Speaker 1: these higher interest rates, savings accounts and CDs, sometimes people 638 00:30:39,240 --> 00:30:43,600 Speaker 1: will lock up their CDs for five years, and you know, 639 00:30:43,680 --> 00:30:46,760 Speaker 1: it's great that you're getting that higher interest or we're 640 00:30:46,800 --> 00:30:49,120 Speaker 1: getting it one or two years ago, but you know 641 00:30:49,160 --> 00:30:52,240 Speaker 1: that money's tied up. So if the new car purchase 642 00:30:52,280 --> 00:30:54,440 Speaker 1: comes up, or the crews comes up, you got to 643 00:30:54,480 --> 00:30:57,440 Speaker 1: go find some money, you know, to come up with 644 00:30:57,520 --> 00:30:59,240 Speaker 1: to support these things that you want to do in 645 00:30:59,280 --> 00:31:01,640 Speaker 1: your life. And that might involve having to go sell 646 00:31:01,720 --> 00:31:05,200 Speaker 1: something and create a tax burden, whether that's pulling money 647 00:31:05,200 --> 00:31:08,320 Speaker 1: out of an IRA or selling stocks with capital gains. 648 00:31:08,520 --> 00:31:11,200 Speaker 1: So I think that's what, Trevor, what your advisor is 649 00:31:11,240 --> 00:31:13,960 Speaker 1: talking about here is let's let's sit down and look 650 00:31:14,000 --> 00:31:17,680 Speaker 1: at what your goals are and then making sure we've 651 00:31:17,720 --> 00:31:20,680 Speaker 1: got liquid assets available at the right time to meet 652 00:31:20,720 --> 00:31:23,640 Speaker 1: those goals. I'll give you an example that just came 653 00:31:23,760 --> 00:31:26,680 Speaker 1: up yesterday of how this works. Well, this is a 654 00:31:26,720 --> 00:31:29,640 Speaker 1: client and I know you know this couple listens to 655 00:31:29,720 --> 00:31:31,840 Speaker 1: this show every night, so this is a shout out 656 00:31:31,880 --> 00:31:34,560 Speaker 1: to them. We had their annual review meeting back in 657 00:31:34,680 --> 00:31:37,800 Speaker 1: September and they and they talked about what they had 658 00:31:37,840 --> 00:31:40,840 Speaker 1: coming down the pike. They were looking at maybe moving 659 00:31:41,360 --> 00:31:43,720 Speaker 1: to a different home and how much money that was 660 00:31:43,760 --> 00:31:48,160 Speaker 1: going to involve, and maybe buying a custom car. Because 661 00:31:48,200 --> 00:31:51,480 Speaker 1: this gentleman just retired, we put those dollar amounts into 662 00:31:51,520 --> 00:31:55,760 Speaker 1: the plan, and then he called me yesterday and said, hey, 663 00:31:56,480 --> 00:31:59,640 Speaker 1: you know, remember that conversation back in September. Some things 664 00:31:59,680 --> 00:32:02,560 Speaker 1: of check. I'm going to custom car off the table 665 00:32:02,600 --> 00:32:05,680 Speaker 1: here because the amount that we think we're likely going 666 00:32:05,760 --> 00:32:08,719 Speaker 1: to spend on this change in homes has gone up 667 00:32:08,720 --> 00:32:11,040 Speaker 1: a little bit. Just wanted you to know about that, 668 00:32:11,160 --> 00:32:14,360 Speaker 1: and that I love that because that allows me to 669 00:32:14,480 --> 00:32:18,280 Speaker 1: update their plan, take a look at things, and we're 670 00:32:18,320 --> 00:32:21,880 Speaker 1: staying in contact with one another in being proactive. So 671 00:32:21,920 --> 00:32:24,040 Speaker 1: when the time comes to pull the trigger on some 672 00:32:24,080 --> 00:32:27,760 Speaker 1: of these things, we know exactly which bucket, to Bryant's point, 673 00:32:28,000 --> 00:32:30,040 Speaker 1: that money's going to come out of, and we could 674 00:32:30,080 --> 00:32:32,680 Speaker 1: try to minimize the tax burden in the process. So 675 00:32:33,040 --> 00:32:36,440 Speaker 1: that's what we're talking about here in terms of liquidity tiers. 676 00:32:37,080 --> 00:32:40,960 Speaker 1: All right, Aaron in Addison says, our investments have grown nicely, 677 00:32:41,520 --> 00:32:46,560 Speaker 1: but I'm realizing our tax exposure has seemingly grown even faster. 678 00:32:46,760 --> 00:32:50,800 Speaker 1: How do you run forward looking tax projections, Brian, So 679 00:32:50,840 --> 00:32:54,040 Speaker 1: you're managing future brackets, not just current ones. 680 00:32:54,520 --> 00:32:56,120 Speaker 2: Well, a lot of advisors kind of hit this point 681 00:32:56,120 --> 00:32:59,160 Speaker 2: where the portfolio starts growing faster than your ability to 682 00:32:59,200 --> 00:33:00,680 Speaker 2: do the tax planning for it, and all of a 683 00:33:00,720 --> 00:33:03,920 Speaker 2: sudden you're reacting to tax surprizes and instead of managing 684 00:33:03,960 --> 00:33:07,160 Speaker 2: those future brackets. So the real discipline is shifting from 685 00:33:07,200 --> 00:33:09,440 Speaker 2: what's my tax bill this year to what does my 686 00:33:09,520 --> 00:33:11,560 Speaker 2: lifetime tax bill look like? You know, what can I 687 00:33:11,600 --> 00:33:13,400 Speaker 2: be doing now to change things in the future. So 688 00:33:13,560 --> 00:33:16,120 Speaker 2: here's three steps to kind of to start looking forward there. 689 00:33:16,360 --> 00:33:19,120 Speaker 2: Figure out that trajectory is the first step. So tax 690 00:33:19,160 --> 00:33:22,080 Speaker 2: exposure will tend to spike in two places when wages 691 00:33:22,160 --> 00:33:25,160 Speaker 2: fall and require minimum distribution start. This is that window 692 00:33:25,520 --> 00:33:29,520 Speaker 2: after you've retired and you'll start to need to draw 693 00:33:29,520 --> 00:33:33,120 Speaker 2: off of your investments in generating different taxes than those 694 00:33:33,160 --> 00:33:35,120 Speaker 2: to which you are accustomed. And then when you hit 695 00:33:35,120 --> 00:33:38,000 Speaker 2: age seventy three or seventy five and require minimum distribution 696 00:33:38,160 --> 00:33:41,040 Speaker 2: start to start to kick in. So project that income 697 00:33:41,120 --> 00:33:43,760 Speaker 2: year over year, earned income, dividends, capital gains, wherever it's 698 00:33:43,760 --> 00:33:46,800 Speaker 2: all coming from. Even a rough assumption is better than nothing. 699 00:33:47,040 --> 00:33:49,360 Speaker 2: That'll help you see if your current twenty two percent bracket, 700 00:33:49,440 --> 00:33:51,840 Speaker 2: for example, might spike to thirty two once those are 701 00:33:51,960 --> 00:33:55,720 Speaker 2: mds kick in. Second, just like the financial planning process, 702 00:33:55,720 --> 00:33:58,080 Speaker 2: we're going to use scenario modeling to compare these strategic 703 00:33:58,120 --> 00:34:01,360 Speaker 2: moves make sure that different out comes can be handled 704 00:34:01,600 --> 00:34:03,280 Speaker 2: by different different strategies. 705 00:34:03,360 --> 00:34:05,360 Speaker 3: But the whole point is run the numbers. 706 00:34:05,040 --> 00:34:07,720 Speaker 2: And see what it actually looks like and then use 707 00:34:07,760 --> 00:34:10,279 Speaker 2: different tax tax brackets. We don't know where taxes are 708 00:34:10,280 --> 00:34:14,000 Speaker 2: going to go based on the various administrations that could come. Finally, 709 00:34:14,040 --> 00:34:16,319 Speaker 2: what is your annual tax budget instead of just letting 710 00:34:16,320 --> 00:34:19,279 Speaker 2: these gains or conversions happen accidentally. Decide how much you're 711 00:34:19,280 --> 00:34:21,920 Speaker 2: willing to recognize every year to keep your long term 712 00:34:21,960 --> 00:34:24,680 Speaker 2: bracket and healthy range. This could mean figuring out how 713 00:34:24,719 --> 00:34:26,279 Speaker 2: fat of a check you're willing to write to the 714 00:34:26,280 --> 00:34:30,239 Speaker 2: irs voluntarily now to control your traditional IRA requirement and 715 00:34:30,280 --> 00:34:32,400 Speaker 2: distributions by converting into a WROTH. 716 00:34:32,920 --> 00:34:35,040 Speaker 3: All good things to look at and hope that helps. 717 00:34:35,680 --> 00:34:38,000 Speaker 1: Coming up next, I've got my two cents on some 718 00:34:38,200 --> 00:34:42,160 Speaker 1: possible year end estate planning discussions you might want to 719 00:34:42,239 --> 00:34:45,960 Speaker 1: have with your kids as families start to gather together 720 00:34:46,080 --> 00:34:49,239 Speaker 1: to celebrate the holidays. You're listening to Simply Money present 721 00:34:49,320 --> 00:34:51,880 Speaker 1: up by all Worth Financial on fifty five KRC the 722 00:34:52,200 --> 00:34:59,480 Speaker 1: talk station. You're listening to Simply Money set up by 723 00:34:59,520 --> 00:35:04,880 Speaker 1: all Worth FI Final. I'm Bob Sponseller along with Brian James. Well, Brian, 724 00:35:04,920 --> 00:35:07,400 Speaker 1: I had a meeting with a client last week. You know, 725 00:35:07,440 --> 00:35:10,400 Speaker 1: this is somebody I've worked with for over thirty years. 726 00:35:10,440 --> 00:35:13,360 Speaker 1: And this gentleman came in loaded for bear with all 727 00:35:13,440 --> 00:35:15,880 Speaker 1: kinds of questions about his estate plan, and he was 728 00:35:15,920 --> 00:35:19,719 Speaker 1: wanting to talk about tax avoidance and probate avoidance and 729 00:35:19,760 --> 00:35:22,759 Speaker 1: all that. And after five minutes I was able to 730 00:35:22,760 --> 00:35:24,800 Speaker 1: tell him, I'm like, hey, we've had all this stuff 731 00:35:24,840 --> 00:35:27,680 Speaker 1: taken care of for twenty five years. You're not paying 732 00:35:27,719 --> 00:35:31,560 Speaker 1: any taxes, everything's protected by probate. You know, we're good. 733 00:35:32,960 --> 00:35:37,160 Speaker 1: But we got into some other discussions about personal property 734 00:35:37,560 --> 00:35:40,000 Speaker 1: and he had shared a couple stories about some struggles 735 00:35:40,040 --> 00:35:42,400 Speaker 1: a couple of his kids are having, and just you know, 736 00:35:42,520 --> 00:35:46,560 Speaker 1: relational dynamics with kids and spouses and all that. And again, 737 00:35:46,640 --> 00:35:50,520 Speaker 1: these legal documents have been drafted in his case probably 738 00:35:50,600 --> 00:35:53,920 Speaker 1: ten to fifteen years ago. Here's my point. I started 739 00:35:53,920 --> 00:35:56,880 Speaker 1: to ask him, just have you made provisions about some 740 00:35:57,200 --> 00:36:02,280 Speaker 1: of your personal property items that might have sentimental value 741 00:36:02,360 --> 00:36:06,600 Speaker 1: to your kids, things like jewelry, tools, maybe a piece 742 00:36:06,640 --> 00:36:09,440 Speaker 1: of furniture something like that. Where one of your kids, 743 00:36:09,480 --> 00:36:12,440 Speaker 1: it would definitely mean the world to them to receive 744 00:36:12,520 --> 00:36:15,680 Speaker 1: that item, and to the other kid, not so much. 745 00:36:15,880 --> 00:36:19,880 Speaker 1: And that launched into a wonderful conversation, and he shared 746 00:36:19,960 --> 00:36:23,360 Speaker 1: some regrets that he had when his unfortunately his wife 747 00:36:23,440 --> 00:36:27,879 Speaker 1: died several years ago, and and he quickly gave all 748 00:36:28,040 --> 00:36:32,040 Speaker 1: her jewelry to one of the dollars in laws. And 749 00:36:32,080 --> 00:36:35,080 Speaker 1: he regretted that because some people, you know, got a 750 00:36:35,080 --> 00:36:37,600 Speaker 1: little bent out of shape about that. So here's my 751 00:36:37,719 --> 00:36:41,400 Speaker 1: point is, you don't have Sometimes the simplest things are 752 00:36:41,440 --> 00:36:44,680 Speaker 1: the most impactful things. And you know, even if you've 753 00:36:44,680 --> 00:36:47,200 Speaker 1: got a trust and you've got everything tied up, you know, 754 00:36:47,239 --> 00:36:50,799 Speaker 1: with IRA beneficiaries and all that, to avoid probate, you 755 00:36:50,960 --> 00:36:53,640 Speaker 1: still got to or or I would encourage you to 756 00:36:53,760 --> 00:36:58,080 Speaker 1: think about some of those personal propertys and a lot 757 00:36:58,080 --> 00:37:00,359 Speaker 1: of attorneys will agree with what I'm going to say 758 00:37:00,440 --> 00:37:03,760 Speaker 1: right here. You don't have to redo your will. Simply 759 00:37:04,000 --> 00:37:07,560 Speaker 1: write down what some of these personal property items are 760 00:37:07,960 --> 00:37:10,440 Speaker 1: to whom you want them to go, sign it and 761 00:37:10,520 --> 00:37:13,279 Speaker 1: date it, attach it to your will, and that way 762 00:37:13,360 --> 00:37:16,600 Speaker 1: your executor, you know, it's in writing, it's documented, and 763 00:37:16,680 --> 00:37:20,239 Speaker 1: your executor can you know, take care of things accordingly, 764 00:37:20,600 --> 00:37:23,160 Speaker 1: I think that's a great conversation to maybe have with 765 00:37:23,320 --> 00:37:26,279 Speaker 1: kids as you gather for the holidays. Just get a 766 00:37:26,360 --> 00:37:29,040 Speaker 1: pulse beat on is there anything out there that I 767 00:37:29,080 --> 00:37:32,480 Speaker 1: want to be proactive about to leave to certain kids 768 00:37:32,760 --> 00:37:35,359 Speaker 1: for a certain reason. Brian, do you ever run into 769 00:37:35,400 --> 00:37:36,200 Speaker 1: this topic at all? 770 00:37:36,480 --> 00:37:38,960 Speaker 2: Yeah, more and more of these days. And I want 771 00:37:39,000 --> 00:37:41,240 Speaker 2: to encourage people to to give your kids a credit. 772 00:37:41,440 --> 00:37:43,879 Speaker 2: They may be more ready to have these conversations than 773 00:37:43,920 --> 00:37:46,680 Speaker 2: you've been thinking. If you've got younger kids, maybe late 774 00:37:46,760 --> 00:37:49,640 Speaker 2: high school, early college age, and you you've noticed they're 775 00:37:49,680 --> 00:37:52,359 Speaker 2: starting to pay attention to money a little bit, that's 776 00:37:52,360 --> 00:37:54,439 Speaker 2: a good sign and it can be okay to give 777 00:37:54,480 --> 00:37:56,480 Speaker 2: them let them, let them peek at the vault, You 778 00:37:56,640 --> 00:37:58,640 Speaker 2: show them where you are and how you got there, 779 00:37:59,040 --> 00:38:01,799 Speaker 2: and then that starts an that maybe over the next five, seven, 780 00:38:01,840 --> 00:38:03,920 Speaker 2: ten years, you can start to have these more in 781 00:38:03,960 --> 00:38:07,120 Speaker 2: depth planning conversations for you know, what really want do 782 00:38:07,400 --> 00:38:09,200 Speaker 2: do you guys want to happen when mom and dad 783 00:38:09,200 --> 00:38:09,560 Speaker 2: are gone? 784 00:38:10,040 --> 00:38:10,200 Speaker 3: You know? 785 00:38:10,239 --> 00:38:12,680 Speaker 2: For those of you with older kids, then perhaps you've 786 00:38:12,719 --> 00:38:13,800 Speaker 2: gotten them to that point. 787 00:38:13,880 --> 00:38:15,360 Speaker 3: But again, it's it's okay. 788 00:38:15,440 --> 00:38:17,640 Speaker 2: For whatever reason in this country, it's taboo to talk 789 00:38:17,680 --> 00:38:19,600 Speaker 2: about these things. I'm here to tell you that I 790 00:38:19,640 --> 00:38:21,160 Speaker 2: have done this with my own family, and I've seen 791 00:38:21,200 --> 00:38:23,440 Speaker 2: clients do it too, and it doesn't cause the problems 792 00:38:23,480 --> 00:38:24,480 Speaker 2: that we've been raised to think. 793 00:38:24,520 --> 00:38:27,759 Speaker 1: It does. Be open excellent point, all right, thank you 794 00:38:27,800 --> 00:38:30,400 Speaker 1: for listening tonight. You've been listening to Simply Money, presented 795 00:38:30,400 --> 00:38:33,680 Speaker 1: by all Worth Financial on fifty five KRC, the talk 796 00:38:33,719 --> 00:38:34,000 Speaker 1: station