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Speaker 1: Tonight. Why the most expensive financial decisions aren't the ones

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Speaker 1: you actually make. Sometimes they're the ones you simply avoid.

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

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Speaker 1: on Bob's Fond Seller along with Brian James. Well, most

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Speaker 1: people think financial mistakes come from bad decisions that in reality,

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Speaker 1: sometimes the most expensive ones come from making no decision

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Speaker 1: at all, simply waiting, putting things off, procrastinating, leaving money

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Speaker 1: on autopilot because well, nothing feels broken. Doing nothing is

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Speaker 1: still a decision, however, and over time it can be

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Speaker 1: some of the costliest decisions you make, you know, depending

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Speaker 1: on your situation. Brian, let's get into this whole indecision problem.

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Speaker 2: Well, let's talk about why smart people delay important decisions.

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Speaker 2: Why don't we tackle these things and just kind of

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Speaker 2: get them done and move on with their lives. Well,

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Speaker 2: if you're doing well, nothing urgent, If I'm doing okay,

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Speaker 2: and I'm looking at my balance sheet and I'm looking

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Speaker 2: at my income and all that and things feels okay,

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Speaker 2: then I don't really want to think about it. Especially

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Speaker 2: when the portfolio is up. It's very easy to say

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Speaker 2: I've got more money than I've ever had in my life.

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Speaker 2: I'm not gonna think about it today. Income is strong,

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Speaker 2: life is busy. So instead of I'm making making any

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Speaker 2: kind of change, people will just say, well, look at

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Speaker 2: this next year, after the election, or after the wedding,

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Speaker 2: this summer, once thing's settled down. Well, markets don't wait.

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Speaker 2: There's always something out there. There's always a pivot point

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Speaker 2: out there that we can point to to say after that,

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Speaker 2: everything will be okay and my head is clear.

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Speaker 3: Taxes don't wait.

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Speaker 2: Market doesn't care what you think or what you've got

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Speaker 2: going on in your life, and time of course marches on.

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Speaker 3: So this has cost to it.

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Speaker 2: So let's go through some of those the cost of

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Speaker 2: avoiding portfolio changes. As we like to do, We're going

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Speaker 2: to take through some hypotheticals to give some real examples,

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Speaker 2: again changing the names to protect the innocent, but still

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Speaker 2: real stories from the files of.

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Speaker 3: All Worth Financial.

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Speaker 2: I know well to not get sued by the innos

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Speaker 2: necessarily thing.

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Speaker 3: Think what we're really doing here.

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Speaker 2: Take an example of the comfortable executive fifty eight years

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Speaker 2: old here in Cincinnati, working for one of our esteemed

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Speaker 2: fortune five hundred companies here based in Cincinnati, worth about

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Speaker 2: five million dollars a lot of that portfolio, though, is

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Speaker 2: still invested like they're forty five, and they're actually about

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Speaker 2: thirteen years older than that. Aggressive growth, lots of stocks,

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Speaker 2: almost all stocks, very little planning for the downside. Always

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Speaker 2: been meaning to dial back that risk, but the market's

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Speaker 2: been so strong they just continue to wait. So then

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Speaker 2: major market pullback hits right as they're planning to retire.

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Speaker 2: So this story happened in twenty two. These folks who

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Speaker 2: are in twenty twenty one feeling fat, dumb and happy,

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Speaker 2: and then twenty two came along, took away a large

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Speaker 2: chunk of that nest egg, and it really changed the conversation.

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Speaker 2: Now they're not able to be proactive, they have to

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Speaker 2: be reactive, and they're forced to do things they didn't

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Speaker 2: want to do. Avoiding that decision didn't reduce any risk

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Speaker 2: at all. It just delayed it to a worse moment

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Speaker 2: and made everything way more stressful than it had to be.

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Speaker 2: Right at a time of their lives, it should have

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Speaker 2: been one of the most joyous they'll ever have.

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Speaker 1: Ryan. This reminds me of a situation I actually had

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Speaker 1: come up late last year year, and this was a

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Speaker 1: this was a client, you know, worth ten twelve thirteen

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Speaker 1: million dollars, a lot of money, and they had sold

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Speaker 1: a business, a very successful business owner. But they had

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Speaker 1: some old four to oh one K retirement plans that

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Speaker 1: had just been sitting there dormant for fifteen twenty years.

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Speaker 1: No one had looked at them at all. And you know,

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Speaker 1: I just brought it up in the course of our

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Speaker 1: regular annual review meeting because these folks they had enough money,

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Speaker 1: you know, they they were going to be fine. They

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Speaker 1: hey had become very risk averse people and were very

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Speaker 1: adamant about it. Did not want much exposure at all

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Speaker 1: to the stock market. You know, as the saying goes,

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Speaker 1: you only need to get rich twice, don't screw it up.

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Speaker 1: And I said, do you do you want me to

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Speaker 1: at least look at these old four oh one K plans?

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Speaker 1: And they said, wow, sure, I guess. And after kicking

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Speaker 1: and screaming for several months, they finally got me the statements. Brian.

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Speaker 1: They were one hundred percent invested in the stock market.

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Speaker 1: These people had no idea. Thankfully we were able to

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Speaker 1: get out of those and get them rolled into the

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Speaker 1: rest of their portfolio before a catastrophe or a big

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Speaker 1: market decline like the one you hypothetically just described happen.

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Speaker 1: But case in point, you just always want to keep

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Speaker 1: your eyes on things, and you know, ignorance is bliss.

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Speaker 1: Sometimes you look at that big chunk of money and

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Speaker 1: you forget about some of the other components that make

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Speaker 1: up that portfolio, and it's it's just important to have

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Speaker 1: somebody reviewing the whole thing and being another set of

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Speaker 1: eyes and ears on your risk of your portfolio.

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Speaker 2: Yeah, and I have zero problem with somebody staying aggressive

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Speaker 2: throughout retirement. You know, well, if that's what you want,

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Speaker 2: if that's what you want, and if that's what the

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Speaker 2: plan supports. So for example, if your if your situation

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Speaker 2: is such that maybe you've got several pensions coming in,

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Speaker 2: rental income, or you've got streams of income coming in

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Speaker 2: and that basically covers the bills. And in addition to that,

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Speaker 2: where there's a sizeable nest egg out there, well I

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Speaker 2: would just make sure we've got a sizeable you know,

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Speaker 2: short and mid term bucket.

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Speaker 3: But it's not gonna.

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Speaker 2: It's not super likely that you're going to need to

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Speaker 2: dip into that because you have to think that there

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Speaker 2: can't be that many risks out there that aren't ensured

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Speaker 2: somehow that can cost hundreds.

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Speaker 3: Of thousands of dollars.

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Speaker 2: Everybody has that horror story about somebody who got sick

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Speaker 2: and had to basically spend every nickel dealing with dealing

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Speaker 2: with situations. Now that that's all that stuff is out there,

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Speaker 2: that's possible, but it's not very likely, you know. So

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Speaker 2: if you have a situation where you truly do are

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Speaker 2: able to say, you know what, this particular pile of

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Speaker 2: dollars I don't need. I just don't need it for

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Speaker 2: even a foreseeable time amount of time, and you know

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Speaker 2: you've got twenty thirty years left to wander around this planet, be.

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Speaker 3: Aggressive with it. It's okay, that's okay to do.

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Speaker 2: But if you don't have that situation, don't fall asleep

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Speaker 2: on what's happening right now. Just because you know the

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Speaker 2: markets have been really, really strong these last several years

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Speaker 2: doesn't mean that they will be forever. And the next

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Speaker 2: downturn we take will feel a lot more painful because

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Speaker 2: now you're a lot closer retirement, it's going to feel

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Speaker 2: like a life changer as opposed to just a brief

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Speaker 2: inconvenience as it did when you were in your thirties

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Speaker 2: and forties.

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Speaker 1: All right, Well, let's get into another situation that a

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Speaker 1: lot of people tend to avoid, and that's just having

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Speaker 1: any discussion or proactive planning at all around the topic

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Speaker 1: of taxes and Brian. Sometimes this happens, you know, especially

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Speaker 1: as people's net worth goes up again. They feel comfortable,

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Speaker 1: they know they have enough money. It's not an issue

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Speaker 1: of being able to afford, you know, being able to

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Speaker 1: afford to retire. It comes down to efficiency. Yet people

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Speaker 1: avoid doing tax planning or talking about you know, taxes

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Speaker 1: at all. Uh, somewhat like people avoid talking about politics

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Speaker 1: and religion at the Thanksgiving dinner table. It's just not

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Speaker 1: something they want to talk about. And in the way

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Speaker 1: of taxes, it requires a little bit of work. You

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Speaker 1: got to go dig out some statements. God forbid, you

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Speaker 1: should have to look up what your cost basis of

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Speaker 1: investments are. People just don't feel like doing that. They'd

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Speaker 1: rather go on a vacation or go play golf. But

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Speaker 1: it can make a huge difference just to do a

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Speaker 1: little bit of planning and look at what some of

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Speaker 1: the opportunities are out there. Walk us through another you know,

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Speaker 1: actual situation here where that kind of planning can make

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Speaker 1: a huge difference.

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Speaker 2: Yeah, no, this this is of course an actual situation.

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Speaker 2: But I've got three that sound like this, that that

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Speaker 2: sounds just like this that I'm dealing with right now.

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Speaker 2: So let's let's let's picture a couple here's got seven

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Speaker 2: million dollars, but a large chunk of that is in

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Speaker 2: a single stock that they've owned for decades. You know,

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Speaker 2: we see this frequently where sometimes it's Apple, or you

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Speaker 2: know lately it's in Nvidia or something like that, where

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Speaker 2: somebody did make it, make the right call decades ago

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Speaker 2: and have sat on this forever. They know they need

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Speaker 2: to diversify, right, we can't have if we if we

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Speaker 2: sit with that much Apple stock or any individual stock.

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Speaker 3: My response to that is, that's great. I'm glad it

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Speaker 3: worked out for you.

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Speaker 2: But I hope you enjoy earnings calls and paying attention

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Speaker 2: to what the market thinks of your of your single stock,

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Speaker 2: because that's on you. If your your people will will

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Speaker 2: come and they'll want financial planning built around this, well,

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Speaker 2: do I count that as an asset or do I not?

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Speaker 2: Because if you're if you are bound to determine, you're

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Speaker 2: never going to sell it because you think it's going

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Speaker 2: to continue to go to the moon. That's great, but

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Speaker 2: that means we're not going to generate income.

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Speaker 3: You don't have it.

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Speaker 2: How do I treat that as a financial asset for you?

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Speaker 2: If it's just going to sit there and be something

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Speaker 2: that we look at. Uh, So you know the risk there,

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Speaker 2: of course, there's there's it's twofold. We've got tax risk anyway, right,

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Speaker 2: there's a capital game built up in there, but there's

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Speaker 2: also market risk. We can make decisions assuming that we

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Speaker 2: are a seven million dollar couple, but at the same time,

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Speaker 2: if that stock goes the wrong direction, and we've seen

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Speaker 2: this recently, right with with uh some some pullbacks over

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Speaker 2: the over the past several months of individual stocks, then

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Speaker 2: that's going to change the decision making that you are

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Speaker 2: able to do. So have to understand what the impact is,

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Speaker 2: what your goals are, and prioritize if you're if you're

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Speaker 2: a number one priority is owning this stock for the

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Speaker 2: rest of your life, well then so be it.

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Speaker 3: But you got to make sure you're able to pay

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Speaker 3: the bills otherwise.

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Speaker 1: All right, A third decision that tends to get avoided

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Speaker 1: or just shoved to the side that can be expensive,

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Speaker 1: not in terms of money, but in terms of just

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Speaker 1: what we'll call life, you know, enjoyment and fulfillment. Is

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Speaker 1: that it's the decision on when to retire, not because

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Speaker 1: people don't want to retire because they're afraid of giving

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Speaker 1: it wrong. Here's what we mean. The business owner or

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Speaker 1: the successful executive that has more than enough on paper,

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Speaker 1: and they already know that to comfortably retire, but they

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Speaker 1: just keep saying, just one more year, and the one

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Speaker 1: year turns into three years, the three years turns into

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Speaker 1: five years, and now lo and behold, their health situation changes,

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Speaker 1: their energy level changes. A lot of these things that

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Speaker 1: they were planning and saving for for years and decades

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Speaker 1: are now not as much of an option, not because

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Speaker 1: they don't have enough money, but because they don't have

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Speaker 1: the health and energy to go enjoy the money they've built.

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Speaker 1: And Brian, that's that's one I know you do a

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Speaker 1: great job of counseling people through. I had this situation

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Speaker 1: come up yesterday a good client. We've already demonstrated that

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Speaker 1: this couple could retire tomorrow if they wanted to, no problem,

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Speaker 1: And he sent me an email and just said, hey,

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Speaker 1: I want to want you to run me a couple

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Speaker 1: of scenarios, and even said, I know it's not going

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Speaker 1: to move the needle at all. I just want to

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Speaker 1: see him and scenario one was retiring three years from

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Speaker 1: now and the other was retiring four years from now,

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Speaker 1: and yep, the plan looks even better. And I sent

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Speaker 1: him the scenarios that he wanted. But I just said, hey,

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Speaker 1: at this point, you're you're literally just trading time for money.

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Speaker 1: So you got to ask yourself how much of your

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Speaker 1: time is worth trading for this amount of money. And

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Speaker 1: hopefully they'll they'll think and pray about it. But we

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Speaker 1: see this way too often.

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Speaker 2: Yeah, and sometimes it's not just the time one more year,

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Speaker 2: two more years, it's one more digit on the front

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Speaker 2: of my net worth. You know, I had a client

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Speaker 2: several years ago was worth one point eight million dollars

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Speaker 2: and just didn't for whatever reason, was so hung up.

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Speaker 2: I want to see a piece of paper with my

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Speaker 2: name on it that says I have a two million

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Speaker 2: dollar network, so I'm going to retire when this grows

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Speaker 2: to one point eight million. Well that was right before

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Speaker 2: the market took a little bit of a downturn, and

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Speaker 2: it just didn't happen for him. And then sure enough,

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Speaker 2: just like you said, the health problems came along. So

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Speaker 2: with the three of us sat down. This is this

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Speaker 2: is a married cup. All three of us sat down

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Speaker 2: and said, look, if you want to see a net

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Speaker 2: worth statement with your name on it, then let's throw

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Speaker 2: your home equity into it. Now you got two million

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Speaker 2: dollars even though your portfolio is only worth one point six.

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Speaker 3: Are you happy now? And can we move forward? And

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Speaker 3: he've eventually did decide, you know what, this is not

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Speaker 3: worth it. The health.

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Speaker 2: The Really though, it was the health decisions, the health

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Speaker 2: concerns that pushed him out, and that was kind of sad.

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Speaker 1: Is this the client that that actually said to you,

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Speaker 1: I'd even be happier, Brian if you agreed to waive

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Speaker 1: your advisory fees for the next five years.

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Speaker 2: Well they'll say that, of course, But yeah, no, uh no,

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Speaker 2: this this is just this is somebody. He's a great client,

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Speaker 2: and they're they're both wonderful people. But it was just

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Speaker 2: just a situation where just hung up on one tiny, little,

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Speaker 2: silly little detail and had let's say, the market had

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Speaker 2: gone great guns and all of a sudden we were

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Speaker 2: two and a half million. Well, the next thing would

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Speaker 2: have been, I want to wait till three and then

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Speaker 2: all of a sudden we're working ourselves into an early grave.

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Speaker 2: So so understand, really, what what what you what you

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Speaker 2: need and figure out what We're not here to grow

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Speaker 2: a pile of money and stare at it. Figure out

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Speaker 2: what your priorities are and act accordingly. And it's probably

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Speaker 2: not going to be a number on a spreadsheet.

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Speaker 1: Here's the all Worth advice. Avoidance is a decision. Remember that,

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Speaker 1: and over time it could become the most expensive decisions

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Speaker 1: you make, or more importantly, don't make. Coming up next,

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Speaker 1: why a good investment can still be a bad financial decision.

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

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Speaker 1: on fifty five KRC the talk station. You're listening to

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Speaker 1: Simply Money presented by all Worth Financial on Bob Sponsller

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

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

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

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Speaker 1: you find your podcast. When markets get rough, what do

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Speaker 1: you tend to adjust first the risk level of your portfolio,

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Speaker 1: your spending, or just your expectations overall. It's one of

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Speaker 1: several questions we will answer straight ahead at six forty three.

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Speaker 1: One of the most dangerous phrases in personal finance is

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Speaker 1: quote it's a good investment, because many times smart investments

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Speaker 1: can still create some bad outcomes. Brian, talk about what

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Speaker 1: we mean here.

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Speaker 2: Well, let's start with the most misleading compliment in finance.

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Speaker 2: One of the most common things we hear from people

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Speaker 2: who have done really, really well financially is this sentence, Well,

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Speaker 2: I know it's a good investment. I'm just not sure

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Speaker 2: it was the right move. And that sounds something important

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Speaker 2: because that, to me, that sounds like two things that

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Speaker 2: are just exactly the opposite.

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Speaker 3: Those two things are not the same.

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Speaker 2: A good investment, while we assume that means it has

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Speaker 2: the potential to make money, a good financial decision means

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Speaker 2: it actually improves your financial life.

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Speaker 3: And once you've got more money.

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Speaker 2: Those two ideas, though, start to separate pretty quickly, because

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Speaker 2: at that point, Bob, the goal isn't squeezing out every

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Speaker 2: last basis point. It's protecting flexibility, managing risk, keeping taxes

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Speaker 2: from quietly draining your progress.

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Speaker 1: Brian, I want to put a little bit of a

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Speaker 1: tightly different spin on this one, because how many times,

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Speaker 1: you know, have you heard people come in when they're

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Speaker 1: talking about buying that vacation home or that impulse condo,

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Speaker 1: purchasing Florida and they know they can't afford it, they

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Speaker 1: know it's going to raise the whole spending profile of

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Speaker 1: their plan, But the first words out of their mouth are,

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Speaker 1: it's a good investment, it's really want they want to, well,

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Speaker 1: they want to, And then they want us to rationalize

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Speaker 1: the decision that oftentimes they've already made by running all

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Speaker 1: these numbers and making a square peg fitting a round hole,

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Speaker 1: by proving to them that their financial plan is going

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Speaker 1: to work. Have you ever run across that situation all the.

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Speaker 3: Time, because I sure have.

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Speaker 2: The point is not to not to paint the idea

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Speaker 2: as a bad investment. The point is usual to stop

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Speaker 2: treating as an investment. If it's something you want to do,

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Speaker 2: more power to you. Let's work it out in your plan,

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Speaker 2: that's our job. But let's not pretend you know that

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Speaker 2: that condo in Florida is a fabulous investment. You're going

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Speaker 2: to pay property taxes, hoa feesh every.

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Speaker 3: Time there's a hurricane. Your property taw or your your

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Speaker 3: your insurance is going to go up all that stuff.

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Speaker 2: That doesn't mean don't do it, but that means don't

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Speaker 2: think of it as a p deductive investment. At best,

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Speaker 2: you're going to be burying your money in an ill

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Speaker 2: liquid asset, but enjoying that with your family and spending

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Speaker 2: the time down there and all those kinds of things.

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Speaker 2: But at the same time, don't look at it as

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Speaker 2: a growing pile of money just because of what it's

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Speaker 2: done over the past thirty years. You have to take

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Speaker 2: all the ins and outs of owning a piece of

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Speaker 2: property like that into account.

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Speaker 1: All right. Another one that we run across, you know,

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Speaker 1: somewhat frequently here is the old saying that a good

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Speaker 1: return can still create bad concentration in an overall portfolio.

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Speaker 1: And the example here we're talking about is, let's take

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Speaker 1: a fifty five year old couple net worth of around

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Speaker 1: six million dollars, but three million dollars of that is

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Speaker 1: tied up in a closely held business, another million and

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Speaker 1: a half is tied up in the commercial real estate

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Speaker 1: tied to that closely held business, and another million and

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Speaker 1: a half is invested in the stock market. And then

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Speaker 1: along comes a friend bringing you a private real estate

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Speaker 1: deal projecting eleven to twelve percent in returns like and

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Speaker 1: they come and say, hey, what do you think this

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Speaker 1: looks like a what a good investment? And we got

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Speaker 1: to zoom out here and take a look at what's

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Speaker 1: really going on. You know, in this situation, you're already

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Speaker 1: heavily exposed to a local economy with a local with

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Speaker 1: a closely held business, real estate tied to that same business,

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Speaker 1: and the big one here illiquidity. You've got a lot

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Speaker 1: of net worth, you don't have a lot of spendable money,

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Speaker 1: and adding another ill liquid deal to that whole pile

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Speaker 1: of assets just increases that concentration and illiquidity risk, even

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Speaker 1: if the deal itself performs well. So you got to

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Speaker 1: couple the quote unquote opportunity or good investment with what

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Speaker 1: this couple is really trying to do financially, with their

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Speaker 1: overall financial plan.

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Speaker 2: Of course, and that's that there's a lot of moving

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Speaker 2: parts too. You have to make sure it fits together.

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Speaker 2: In this particular case, we don't get into that is

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Speaker 2: how much of an investment are we talking about? Is

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Speaker 2: this you know, ten twenty thirty percent? Other net worth

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Speaker 2: is it two percent. Different things to take into account there,

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Speaker 2: So let's talk about let's talk about liquidity risk, right,

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Speaker 2: so tying your money up.

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Speaker 3: Here's another hypothetical for us.

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Speaker 2: Another couple in the early sixties retired with four and

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Speaker 2: a half million dollars.

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Speaker 3: Of course that's on paper looks great.

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Speaker 2: Two million of that those in private equity, another one

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Speaker 2: million is in real estate partnerships, and all this stuff

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Speaker 2: has multi year lockups. That speaks against directly against liquidity

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Speaker 2: because with those lockups that means you can't get to

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Speaker 2: those assets very quickly. They don't generate a lot of

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Speaker 2: income directly necessarily. Then we have a market pullback. Well,

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Speaker 2: this is the exact moment though, when opportunities show up

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Speaker 2: but they can't act. They're asset rich and cash poor.

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Speaker 2: So those investments might be doing just fine over time,

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Speaker 2: but all of a sudden they've limited options when flexibility

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Speaker 2: mattered most And you know, you could also throw in

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Speaker 2: examples here of something they want to do that has

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Speaker 2: nothing to do with financial investments, maybe something for the family.

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Speaker 2: This is how a good investment becomes a bad financial decision.

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Speaker 2: Maybe three four years ago when they put this stuff

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Speaker 2: in place, it was a fantastic idea, and then their

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Speaker 2: needs and goals and desires changed over ensuing time. Unfortunately,

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Speaker 2: the money is tied up. They can't get to it,

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Speaker 2: they can't borrow against it. Those assets just aren't financial

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Speaker 2: assets for them now until those lock up periods expire.

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Speaker 2: So just be mindful of all those things that you

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Speaker 2: get into and what those moving parts are.

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Speaker 1: All right, Hopefully we've driven this point home pretty well.

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Speaker 1: Let's get into, Brian, what we should actually should be

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Speaker 1: doing when we evaluate a potential good investment. Here's some

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Speaker 1: question to ask. Number one, what role does this potential

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Speaker 1: investment play in my overall financial plan? Number two? Does

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Speaker 1: it reduce or increase the overall risk of my plan?

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Speaker 1: Number three? How does it impact my tax situation and

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Speaker 1: flexibility in liquidity, which you've already covered? And four, most importantly,

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Speaker 1: does it support the life that I truly want? Or

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Speaker 1: does it just complicate it? I think those are great

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Speaker 1: questions to ask, Brian, and for those that are willing

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Speaker 1: to be honest with themselves and with their advisors, sometimes

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Speaker 1: we can avoid some decisions that are not not mistakes,

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Speaker 1: you know, because they might be great investments that are

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Speaker 1: just not a good fit for your overall situation, but

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Speaker 1: it's important to talk about it ahead of time.

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Speaker 3: Answer.

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Speaker 2: I think the best question to ask is not is

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Speaker 2: this a good investment? Start with do I need another investment?

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Speaker 2: Is this going to replace something I already have? Or

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Speaker 2: is it going to take up some more of my liquidity?

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Speaker 1: Here's our all Worth advice. A good investment only matters

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Speaker 1: if it fits your plan, meaning alignment beats performance every time.

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Speaker 1: All Right, everybody says they want to retire early, but

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Speaker 1: very few people stop to ask the right questions before

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Speaker 1: they retire. Before you walk away from that paycheck of

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Speaker 1: prior to age sixty five, We've got some questions that

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Speaker 1: can make or break your financial future. That's coming up next.

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

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Speaker 1: on fifty five KRC, the talk station. You're listening to

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Speaker 1: Simply Money said up by all Worth financialob sponseller along

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Speaker 1: with Brian James for people with a couple million dollars saved.

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Speaker 1: Retiring before sixty five can feel like the decision is

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Speaker 1: mostly a financial one, but not entirely so. Here are

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Speaker 1: a few questions to ask before you consider pulling the

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Speaker 1: trigger and walking away. From that paycheck and sometimes Brian

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Speaker 1: more importantly, those nice employer provided benefits including healthcare.

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Speaker 2: Yeah, and so these these you know, the question that

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Speaker 2: comes up all the time, that depends on how you

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Speaker 2: want to phrase it in your mind, is when do

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Speaker 2: I want to stop working? Well, that means a lot

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Speaker 2: of different things. That is a very underestimated question. So

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Speaker 2: for some people, stopping work means literally no earned income.

436
00:20:45,480 --> 00:20:47,560
Speaker 2: Ever again, I'm going to live off of my nest

437
00:20:47,560 --> 00:20:50,200
Speaker 2: egg and you know, pension income, social Security income, whatever

438
00:20:50,200 --> 00:20:52,480
Speaker 2: I've got going on out there. For other people, it

439
00:20:52,520 --> 00:20:54,600
Speaker 2: means I'm not doing the day job anymore, but I'm

440
00:20:54,640 --> 00:20:57,440
Speaker 2: going to be consulting, maybe doing some board work or

441
00:20:57,560 --> 00:21:00,639
Speaker 2: part time income working at a garden shop, or just

442
00:21:00,720 --> 00:21:03,320
Speaker 2: passion projects that might pay something a little bit. So

443
00:21:03,600 --> 00:21:05,560
Speaker 2: let's talk about an example here where this works out

444
00:21:05,600 --> 00:21:08,280
Speaker 2: really well. So Mark and Susan fifty seven years old,

445
00:21:08,720 --> 00:21:10,639
Speaker 2: for a net worth about four and a half million dollars.

446
00:21:10,680 --> 00:21:12,600
Speaker 2: They're thinking about stopping in two or three years at

447
00:21:12,640 --> 00:21:15,400
Speaker 2: age sixty. But Mark is assuming he's going to consult

448
00:21:15,440 --> 00:21:17,120
Speaker 2: part time for three or four years and still bring

449
00:21:17,160 --> 00:21:19,880
Speaker 2: in about seventy five thousand dollars. This is This one

450
00:21:19,920 --> 00:21:22,760
Speaker 2: comes from the files of ge aviation. This is a

451
00:21:22,840 --> 00:21:25,760
Speaker 2: very standard course for the engineers to follow out of there.

452
00:21:26,000 --> 00:21:28,440
Speaker 2: So I'm not exposing any of the hundreds of people

453
00:21:28,480 --> 00:21:30,640
Speaker 2: that we have who've gone through this. You'll never figure

454
00:21:30,640 --> 00:21:32,840
Speaker 2: out who it is, but pretty standard story. So that

455
00:21:32,880 --> 00:21:35,880
Speaker 2: income dramatically reduces the pressure on their portfolio during those

456
00:21:35,920 --> 00:21:38,960
Speaker 2: early years, helps bridge them to social Security and Medicare,

457
00:21:39,240 --> 00:21:41,800
Speaker 2: and that that's the financial solution. There's also a big

458
00:21:41,840 --> 00:21:45,280
Speaker 2: psychological element. This allowed Mark to kind of baby step

459
00:21:45,359 --> 00:21:47,480
Speaker 2: into retirement, so he was able to back away as

460
00:21:47,520 --> 00:21:49,960
Speaker 2: opposed to going cold turkey and get used to the

461
00:21:50,000 --> 00:21:52,960
Speaker 2: idea of having a little more time and being And

462
00:21:52,960 --> 00:21:55,440
Speaker 2: this is a bigger thing than people anticipate, not being

463
00:21:55,480 --> 00:21:57,520
Speaker 2: the same big important guy that he used to be,

464
00:21:57,800 --> 00:21:59,600
Speaker 2: which is what we want, right We want to reduce

465
00:21:59,640 --> 00:22:01,199
Speaker 2: the hours in the commitment we have to put in.

466
00:22:01,400 --> 00:22:03,320
Speaker 2: But that also means that there can be a little

467
00:22:03,320 --> 00:22:05,480
Speaker 2: shot to the ego there if we are no longer

468
00:22:05,560 --> 00:22:07,400
Speaker 2: the smartest, most important person in the room.

469
00:22:07,800 --> 00:22:09,159
Speaker 3: So here's where.

470
00:22:09,040 --> 00:22:10,840
Speaker 2: This doesn't work out though, So if we've got the

471
00:22:10,880 --> 00:22:13,399
Speaker 2: same couple with the same net worth, no earned income

472
00:22:13,440 --> 00:22:16,200
Speaker 2: at all starting at sixty then that spending jumps because

473
00:22:16,240 --> 00:22:19,320
Speaker 2: suddenly they didn't do that baby step, and so they

474
00:22:19,320 --> 00:22:21,280
Speaker 2: didn't get used to the idea of being retired and

475
00:22:21,320 --> 00:22:23,639
Speaker 2: having time, and we tend to fill a vacuum of

476
00:22:23,680 --> 00:22:24,639
Speaker 2: time with money.

477
00:22:24,640 --> 00:22:25,840
Speaker 3: We tend to fill it with spending.

478
00:22:26,240 --> 00:22:29,119
Speaker 2: Taxes rise because they're drawn on those retirement assets. All

479
00:22:29,119 --> 00:22:31,359
Speaker 2: of a sudden, that portfolio is under real stress before

480
00:22:31,400 --> 00:22:33,679
Speaker 2: age seventy because we didn't really have a plan for

481
00:22:33,720 --> 00:22:36,439
Speaker 2: all that spending, because we simply didn't figure out what

482
00:22:36,480 --> 00:22:37,800
Speaker 2: was it going to feel like to be retired.

483
00:22:38,760 --> 00:22:41,439
Speaker 1: Well, Brian, speaking of not having a plan, and I

484
00:22:41,480 --> 00:22:44,840
Speaker 1: agree with you. This stage into part time consulting or

485
00:22:44,880 --> 00:22:47,560
Speaker 1: part time work for these ge executives, I've seen it

486
00:22:47,600 --> 00:22:50,920
Speaker 1: work wonderfully time after time. That tends to work really well.

487
00:22:50,960 --> 00:22:54,000
Speaker 1: I'm going to give you the scenario where somebody really

488
00:22:54,040 --> 00:22:56,840
Speaker 1: did not like their job anymore and they were just looking,

489
00:22:57,000 --> 00:23:00,320
Speaker 1: begging for a way to get out, and they just

490
00:23:00,359 --> 00:23:02,919
Speaker 1: threw out that, well, I'm gonna do some part time consulting.

491
00:23:03,000 --> 00:23:06,400
Speaker 1: But they never tested the waters to see if there's

492
00:23:06,400 --> 00:23:09,520
Speaker 1: actually a demand for work for you that's going to

493
00:23:09,560 --> 00:23:12,680
Speaker 1: pay you that forty fifty sixty thousand dollars you think

494
00:23:12,680 --> 00:23:14,560
Speaker 1: you're going to be able to go out and earn,

495
00:23:15,000 --> 00:23:18,320
Speaker 1: and that's a double gut punch if that happens, meaning

496
00:23:18,400 --> 00:23:20,920
Speaker 1: you're missing out on the income. And then that's a

497
00:23:20,920 --> 00:23:23,040
Speaker 1: little bit of an ego punch too. So if you

498
00:23:23,160 --> 00:23:25,760
Speaker 1: really think, you know, if you've got a head for

499
00:23:25,800 --> 00:23:28,879
Speaker 1: the exits, for whatever reasons, your job is just not

500
00:23:28,920 --> 00:23:31,560
Speaker 1: getting it done for you anymore. Make sure you test

501
00:23:31,600 --> 00:23:35,280
Speaker 1: the waters if you're counting on that, you know, part

502
00:23:35,280 --> 00:23:38,639
Speaker 1: time consulting income, to make sure that's actually actually a

503
00:23:38,760 --> 00:23:44,080
Speaker 1: reality not just a dream out there. So three scenarios

504
00:23:44,080 --> 00:23:47,240
Speaker 1: we've walked through, you know, think about those accordingly. Let's

505
00:23:47,240 --> 00:23:50,399
Speaker 1: talk about question number two, and that's how much do

506
00:23:50,480 --> 00:23:54,080
Speaker 1: I actually spend? And is it a realistic number? Brian,

507
00:23:54,160 --> 00:23:56,679
Speaker 1: I've talked about this before on this show. Often I

508
00:23:57,160 --> 00:24:02,359
Speaker 1: sometimes am amazed, especially with people and couples with high incomes,

509
00:24:03,119 --> 00:24:06,000
Speaker 1: they've never even thought about how much they actually spend

510
00:24:06,080 --> 00:24:08,320
Speaker 1: because they haven't had to think about it. They've got

511
00:24:08,440 --> 00:24:12,080
Speaker 1: high paychecks and they just spend what comes in and

512
00:24:12,160 --> 00:24:15,240
Speaker 1: life is great, and they have no idea what they

513
00:24:15,280 --> 00:24:18,000
Speaker 1: actually spend in retirement, And you better know what those

514
00:24:18,080 --> 00:24:22,920
Speaker 1: numbers are before those paychecks turn off, because that can be.

515
00:24:23,520 --> 00:24:28,360
Speaker 3: A real weake eye opener. Yeah, yes, yeah, for sure.

516
00:24:28,440 --> 00:24:31,320
Speaker 1: Yeah, if you had the similar scenario happen oh.

517
00:24:31,280 --> 00:24:34,280
Speaker 2: Just about every you know, every meeting, because financially successful

518
00:24:34,320 --> 00:24:36,359
Speaker 2: people don't tend to keep budgets anymore.

519
00:24:36,359 --> 00:24:38,640
Speaker 3: They just know that the ends are meeting just fine.

520
00:24:38,640 --> 00:24:41,080
Speaker 2: I don't really know what I spend going out to restaurants,

521
00:24:41,080 --> 00:24:43,200
Speaker 2: but I don't end up running up credit cards. I

522
00:24:43,200 --> 00:24:44,879
Speaker 2: don't have any debt, and there's money left over at

523
00:24:44,880 --> 00:24:46,240
Speaker 2: the end of the month. So whatever I spend is

524
00:24:46,280 --> 00:24:48,560
Speaker 2: below my blow my needs. And that's a good problem.

525
00:24:49,119 --> 00:24:49,280
Speaker 3: You know.

526
00:24:49,560 --> 00:24:51,560
Speaker 2: That means you're in a good situation, but it also

527
00:24:51,640 --> 00:24:53,600
Speaker 2: leads to a blind spot because we really just don't know.

528
00:24:54,200 --> 00:24:56,560
Speaker 2: So so when it comes down to, okay, we're gonna

529
00:24:56,560 --> 00:24:59,120
Speaker 2: eliminate your salary because you're gonna retire, and now we're

530
00:24:59,119 --> 00:25:01,639
Speaker 2: gonna rely on your dreams of income from retirement whatever

531
00:25:01,680 --> 00:25:03,840
Speaker 2: those are for you, Social Security pension and so forth,

532
00:25:04,080 --> 00:25:06,880
Speaker 2: and distributions from your nest egg. If we don't really

533
00:25:06,960 --> 00:25:09,280
Speaker 2: know what you're spending, it's tough to say, here's how

534
00:25:09,320 --> 00:25:11,879
Speaker 2: long your money's gonna last. So there's easier ways to

535
00:25:11,920 --> 00:25:13,720
Speaker 2: get to this though. You don't have to do a

536
00:25:13,760 --> 00:25:16,040
Speaker 2: full detailed budget and figure out exactly what the cell

537
00:25:16,080 --> 00:25:18,000
Speaker 2: phone bill was and exactly how much you spend at

538
00:25:18,000 --> 00:25:19,719
Speaker 2: Applebee's last month and all that stuff.

539
00:25:19,960 --> 00:25:21,040
Speaker 3: We can simply.

540
00:25:20,720 --> 00:25:23,320
Speaker 2: Figure out what are the dollars that arrive in your

541
00:25:23,400 --> 00:25:25,800
Speaker 2: checking account on a monthly basis right now. So now

542
00:25:25,800 --> 00:25:28,560
Speaker 2: we're talking after tax, withholding, after four oh one K

543
00:25:28,680 --> 00:25:31,960
Speaker 2: contributions and so forth, and then what's left over at

544
00:25:31,960 --> 00:25:33,520
Speaker 2: the end of the month. Is there a few thousand

545
00:25:33,520 --> 00:25:36,840
Speaker 2: dollars more every month? Are you saving? If you're systematically

546
00:25:36,840 --> 00:25:38,920
Speaker 2: putting money into some kind of savings account, you don't

547
00:25:38,920 --> 00:25:41,159
Speaker 2: really have to do that anymore, So don't count that

548
00:25:41,200 --> 00:25:43,879
Speaker 2: part as spending. Are there things you're going to stop

549
00:25:43,920 --> 00:25:46,480
Speaker 2: doing when you're no longer working? So whatever if you

550
00:25:46,520 --> 00:25:48,760
Speaker 2: once you knock those things out, and maybe there's a mortgage,

551
00:25:48,760 --> 00:25:50,320
Speaker 2: it's only got a couple more years on it, well,

552
00:25:50,359 --> 00:25:52,080
Speaker 2: don't take that into account over the next.

553
00:25:52,000 --> 00:25:53,720
Speaker 3: Thirty years of your life. That'll go away.

554
00:25:54,000 --> 00:25:56,640
Speaker 2: Once we've got a clear picture what all those ins

555
00:25:56,640 --> 00:25:59,280
Speaker 2: and outs are, then we can truly say, and that's

556
00:25:59,280 --> 00:26:01,280
Speaker 2: an easier way to get to here's what we actually

557
00:26:01,280 --> 00:26:04,280
Speaker 2: spend to maintain our lifestyle in our current format. So

558
00:26:04,560 --> 00:26:05,879
Speaker 2: let's shoot for that as a target.

559
00:26:06,760 --> 00:26:09,560
Speaker 1: Here's the all Worth advice before you stop working early.

560
00:26:09,720 --> 00:26:14,360
Speaker 1: Make sure your comprehensive financial plan, not just your investment portfolio,

561
00:26:15,040 --> 00:26:18,520
Speaker 1: is ready to fully carry the load. You know your

562
00:26:18,520 --> 00:26:21,879
Speaker 1: target allocation, but how do you actually manage it without

563
00:26:21,960 --> 00:26:25,800
Speaker 1: overthinking every single market move. We'll get into that and

564
00:26:25,880 --> 00:26:28,959
Speaker 1: some other questions next. You're listening to Simply Money presented

565
00:26:29,000 --> 00:26:32,400
Speaker 1: by all Worth Financial on fifty five KRC, the talk station.

566
00:26:36,920 --> 00:26:39,520
Speaker 1: You're listening to Simply Money presented by Allworth Financial. I'm

567
00:26:39,560 --> 00:26:42,560
Speaker 1: Bob Sponseller along with Brian James. Do you have a

568
00:26:42,600 --> 00:26:45,560
Speaker 1: financial question you'd like for us to answer? There's a

569
00:26:45,600 --> 00:26:48,000
Speaker 1: red button you could click while you're listening to the show.

570
00:26:48,160 --> 00:26:52,080
Speaker 1: If you are listening on the iHeart app, simply record

571
00:26:52,119 --> 00:26:56,720
Speaker 1: your question and it will come straight to us. All right,

572
00:26:56,760 --> 00:26:59,360
Speaker 1: Brian Alex in Hyde Park leads us off tonight. He says,

573
00:26:59,400 --> 00:27:02,679
Speaker 1: I'm holding me insipal bonds in both my taxable account

574
00:27:02,800 --> 00:27:06,160
Speaker 1: and my IRA. How do I know when that placement

575
00:27:06,280 --> 00:27:10,720
Speaker 1: is actually hurting me instead of helping me? Boy, there's

576
00:27:11,359 --> 00:27:12,280
Speaker 1: a lay up for you.

577
00:27:12,800 --> 00:27:15,120
Speaker 2: Yeah, So, Alex you're gonna know this because I'm gonna

578
00:27:15,119 --> 00:27:17,160
Speaker 2: tell you straight up that is hurting you, at least

579
00:27:17,200 --> 00:27:19,600
Speaker 2: part of it is. So the municipal bonds and your

580
00:27:19,600 --> 00:27:20,640
Speaker 2: taxable account, that's fine.

581
00:27:20,720 --> 00:27:21,520
Speaker 3: What those are generating.

582
00:27:21,520 --> 00:27:24,800
Speaker 2: Those are obviously obligations of presumably the state you live.

583
00:27:24,800 --> 00:27:26,920
Speaker 2: Oh you said Hyde Park, So you're Ohio. So presumably

584
00:27:26,960 --> 00:27:29,359
Speaker 2: you're talking about Ohio bonds. If that's the case, then

585
00:27:29,400 --> 00:27:31,800
Speaker 2: of course state and income and federal income tax free.

586
00:27:31,840 --> 00:27:32,200
Speaker 3: All good.

587
00:27:32,200 --> 00:27:35,720
Speaker 2: That's your taxable account. Your IRA isn't helping you a bit.

588
00:27:35,920 --> 00:27:38,359
Speaker 2: Matter of fact, I'd be a little mifted whoever allowed

589
00:27:38,400 --> 00:27:41,840
Speaker 2: that transaction to happen, because your IRA is already tax sheltered.

590
00:27:41,840 --> 00:27:44,879
Speaker 2: Whatever happens inside of it is not going You're not

591
00:27:44,880 --> 00:27:46,919
Speaker 2: paying any income taxes on you don't pay any income

592
00:27:46,960 --> 00:27:48,880
Speaker 2: taxes or if this is a row of course you'd

593
00:27:48,880 --> 00:27:49,720
Speaker 2: never pay taxes.

594
00:27:50,320 --> 00:27:52,040
Speaker 3: But you don't pay any kind of there's.

595
00:27:51,840 --> 00:27:55,400
Speaker 2: No taxable activity, period or even reportable activity that happens

596
00:27:55,400 --> 00:27:57,720
Speaker 2: inside the IRA. It's when the dollars cross the line

597
00:27:57,720 --> 00:27:59,879
Speaker 2: and land in your checking account to be spent. So

598
00:28:00,200 --> 00:28:03,800
Speaker 2: if you're owning municipal bonds inside of a tax sheltered account,

599
00:28:03,880 --> 00:28:06,840
Speaker 2: you are sacrificing return. I'll give you an example here

600
00:28:07,200 --> 00:28:08,840
Speaker 2: we might be able. Maybe we can get a CD

601
00:28:09,040 --> 00:28:12,959
Speaker 2: for four percent right now, that's fully taxable. A municipal

602
00:28:13,000 --> 00:28:14,880
Speaker 2: bond might end up being two and a half two

603
00:28:14,880 --> 00:28:18,639
Speaker 2: point seventy five maybe three percent. Municipal bonds do not

604
00:28:18,840 --> 00:28:20,960
Speaker 2: have to pay as much an interest because of that,

605
00:28:20,960 --> 00:28:24,359
Speaker 2: that tax free benefit is attractive to people, so therefore

606
00:28:24,400 --> 00:28:26,320
Speaker 2: the interest rates aren't as high. So therefore, if you

607
00:28:26,320 --> 00:28:28,160
Speaker 2: own them an IRA, not only are you not getting

608
00:28:28,160 --> 00:28:31,400
Speaker 2: the tax benefit, any tax benefit for them, because it's

609
00:28:31,400 --> 00:28:35,199
Speaker 2: already tax deferred, you are actually sacrificing return because municipal

610
00:28:35,240 --> 00:28:37,720
Speaker 2: bonds will yield less than taxable instruments.

611
00:28:37,800 --> 00:28:40,120
Speaker 3: So make sure and I would do this today. If

612
00:28:40,120 --> 00:28:40,640
Speaker 3: you really have.

613
00:28:40,640 --> 00:28:42,960
Speaker 2: This situation the way it sounds like, you might figure

614
00:28:43,000 --> 00:28:45,480
Speaker 2: out which of those bonds you know, if anything has

615
00:28:45,560 --> 00:28:47,240
Speaker 2: come and do pretty soon and it's pretty close to

616
00:28:47,280 --> 00:28:50,239
Speaker 2: its par value, meaning it's worth what roughly what it's

617
00:28:50,280 --> 00:28:52,120
Speaker 2: going to come do, sell it today and get that

618
00:28:52,200 --> 00:28:55,280
Speaker 2: money in CDs or something else, maybe corporate bond, something

619
00:28:55,280 --> 00:28:58,480
Speaker 2: else more appropriate. Free for a tax sheltered account. Again

620
00:28:58,520 --> 00:29:00,720
Speaker 2: only talking about your IRA that is hurting you so

621
00:29:00,760 --> 00:29:03,560
Speaker 2: hopefully we answer that question. All right, let's move on

622
00:29:03,640 --> 00:29:07,400
Speaker 2: to the wonderfully named Brian in Westchester who is comparing

623
00:29:07,440 --> 00:29:12,160
Speaker 2: two withdrawal strategies fixed dollar withdrawals versus percentage based withdrawals,

624
00:29:12,160 --> 00:29:14,720
Speaker 2: and he's wondering, how do you model which one creates

625
00:29:14,800 --> 00:29:17,040
Speaker 2: less long term damage in bad markets?

626
00:29:17,680 --> 00:29:19,760
Speaker 1: First of all, Brian, you don't have to ask these

627
00:29:19,800 --> 00:29:22,600
Speaker 1: personal questions on the show. My office is right next

628
00:29:22,680 --> 00:29:26,240
Speaker 1: door to your cool over and when people know that

629
00:29:26,280 --> 00:29:32,320
Speaker 1: I'm incompetent cool All right, Uh, two withdrawal strategies, how

630
00:29:32,360 --> 00:29:34,959
Speaker 1: do you model which one creates less long term damage

631
00:29:34,960 --> 00:29:38,040
Speaker 1: in bad markets? This is the beauty of you know,

632
00:29:38,720 --> 00:29:42,240
Speaker 1: state of the art twenty twenty six software where we

633
00:29:42,320 --> 00:29:46,120
Speaker 1: can actually model these things. We can stress test how

634
00:29:46,160 --> 00:29:51,120
Speaker 1: different portfolios are different withdrawal strategies. Actually, you know, work

635
00:29:51,720 --> 00:29:56,080
Speaker 1: in bad markets using something called Monte Carlo analysis that

636
00:29:56,160 --> 00:30:00,160
Speaker 1: looks at you know, eleven hundred different historical iterations of

637
00:30:00,160 --> 00:30:06,240
Speaker 1: how volatility impacts certain portfolios and withdrawal strategies. So it's

638
00:30:06,280 --> 00:30:09,000
Speaker 1: not something that's easily done, you know, with a pencil

639
00:30:09,040 --> 00:30:12,560
Speaker 1: and a cocktail napkin, utilize some software, get with a

640
00:30:12,600 --> 00:30:16,720
Speaker 1: good fiduciary financial advisor or a CPA if they do

641
00:30:16,840 --> 00:30:19,720
Speaker 1: this kind of work and just model these scenarios out

642
00:30:20,280 --> 00:30:24,960
Speaker 1: and most importantly, come walking away feeling comfortable that your

643
00:30:25,040 --> 00:30:27,800
Speaker 1: strategy is going to work for you depending on which

644
00:30:27,880 --> 00:30:30,960
Speaker 1: way this thing goes. And as always, you can do

645
00:30:31,000 --> 00:30:33,200
Speaker 1: a financial plan in twenty twenty six and it's not

646
00:30:33,320 --> 00:30:37,720
Speaker 1: engraved in stone forever. It should evolve and adapt over

647
00:30:37,840 --> 00:30:43,320
Speaker 1: time based on your changing needs and goals and economic circumstances.

648
00:30:43,680 --> 00:30:47,400
Speaker 1: So yeah, definitely model these scenarios out and you'll feel

649
00:30:47,440 --> 00:30:50,479
Speaker 1: a lot more confident about how to proceed moving forward.

650
00:30:50,680 --> 00:30:53,840
Speaker 1: Hope that helps Tom and Anderson says, Hey, I know

651
00:30:53,880 --> 00:30:56,400
Speaker 1: what our target allocation is, but I don't know how

652
00:30:56,480 --> 00:31:01,160
Speaker 1: much drift portfolio drift he's talking about is accept before

653
00:31:01,200 --> 00:31:04,840
Speaker 1: some action is required. Where do you draw that line, Brian.

654
00:31:04,720 --> 00:31:06,360
Speaker 3: Yeah, I think this is a real common question.

655
00:31:06,480 --> 00:31:08,360
Speaker 2: Is because we harp so much on the importance of

656
00:31:08,360 --> 00:31:10,960
Speaker 2: asset allocation and rebalancing and those kinds of things.

657
00:31:11,480 --> 00:31:12,000
Speaker 3: But you know, the.

658
00:31:12,760 --> 00:31:17,239
Speaker 2: Frequently accounts will stay roughly balanced in themselves without too

659
00:31:17,280 --> 00:31:19,720
Speaker 2: much activity. I'm speaking specifically of your four one ks

660
00:31:19,720 --> 00:31:21,520
Speaker 2: people coming off. I've got to rebalance my four one K,

661
00:31:21,600 --> 00:31:23,200
Speaker 2: and then we look under the hood and it looks

662
00:31:23,240 --> 00:31:24,880
Speaker 2: an awful lot like what we set it up for

663
00:31:24,920 --> 00:31:28,600
Speaker 2: a year or two before, and it's just got more

664
00:31:28,640 --> 00:31:31,600
Speaker 2: dollars in it. And that happens because you know, in

665
00:31:31,640 --> 00:31:33,400
Speaker 2: a case like that, you're throwing money in every week,

666
00:31:33,400 --> 00:31:35,760
Speaker 2: every two weeks, maybe every month. However often you get paid,

667
00:31:35,960 --> 00:31:39,080
Speaker 2: that new cash will automatically that's dollar cost averaging. You

668
00:31:39,160 --> 00:31:41,360
Speaker 2: don't really think of it that way, but that will

669
00:31:41,440 --> 00:31:43,760
Speaker 2: kind of fill in those gaps. So portfolios don't tend

670
00:31:43,800 --> 00:31:45,920
Speaker 2: to drift that much. I always think of drift as

671
00:31:46,280 --> 00:31:49,040
Speaker 2: you drift itself is not a failure. If your portfolio

672
00:31:49,120 --> 00:31:51,680
Speaker 2: has drifted away from your intended asset allocation, that's not

673
00:31:51,760 --> 00:31:54,280
Speaker 2: a failure. That's just information. I always think of it

674
00:31:54,280 --> 00:31:57,120
Speaker 2: as wearing layers, right, you know, during those times a

675
00:31:57,200 --> 00:31:59,280
Speaker 2: year where where it can't decide whether it's going to

676
00:31:59,320 --> 00:32:01,080
Speaker 2: be hot or cold out side, then we wear a

677
00:32:01,120 --> 00:32:03,440
Speaker 2: lot of layers and then you realize the temperature has drifted,

678
00:32:03,480 --> 00:32:05,040
Speaker 2: So I'm gonna take off some of these layers, or

679
00:32:05,080 --> 00:32:07,080
Speaker 2: I'm gonna add some more layers, or something like that.

680
00:32:07,680 --> 00:32:10,160
Speaker 2: So the real question is at what point does the

681
00:32:10,240 --> 00:32:14,160
Speaker 2: drift materially change your your risk profile. So you know,

682
00:32:14,320 --> 00:32:17,120
Speaker 2: a common institutional framework is maybe maybe five percent. In

683
00:32:17,160 --> 00:32:19,480
Speaker 2: other words, if I want sixty percent of my portfolio

684
00:32:19,560 --> 00:32:21,280
Speaker 2: in stocks and it gets to sixty five or it

685
00:32:21,320 --> 00:32:23,920
Speaker 2: drops to fifty five, that could be a trigger for

686
00:32:23,920 --> 00:32:26,520
Speaker 2: a rebalance. If it gets to six or seven percent,

687
00:32:26,600 --> 00:32:29,400
Speaker 2: that's really not a problem. Again, these are not These

688
00:32:29,440 --> 00:32:31,959
Speaker 2: don't have to be precise times and precise numbers here.

689
00:32:31,960 --> 00:32:34,040
Speaker 2: We're just trying to stay on top and have a

690
00:32:34,240 --> 00:32:35,280
Speaker 2: have a better picture there.

691
00:32:35,640 --> 00:32:36,960
Speaker 3: But it doesn't bother me a little bit.

692
00:32:37,000 --> 00:32:39,840
Speaker 2: If somebody has a sixty percent portfolio that has drifted

693
00:32:39,840 --> 00:32:42,040
Speaker 2: to sixty seven, sixty eight, that's really not a major

694
00:32:42,080 --> 00:32:45,560
Speaker 2: crisis to me. Okay, So let's move on. We've got

695
00:32:45,560 --> 00:32:47,400
Speaker 2: time for one more here, and we're gonna talk to

696
00:32:47,400 --> 00:32:50,040
Speaker 2: Anne in Newport. And Anne is trying to lower her risk,

697
00:32:50,080 --> 00:32:52,000
Speaker 2: but she's not sure whether it's better to change how

698
00:32:52,040 --> 00:32:54,920
Speaker 2: they're invested or just be more flexible with their spending.

699
00:32:55,040 --> 00:32:57,400
Speaker 2: Chicken an egg situation here, Which do we fix first?

700
00:32:57,400 --> 00:33:00,960
Speaker 1: Bob, Well, I'm gonna go I'm gonna I'm gonna throw

701
00:33:01,000 --> 00:33:03,800
Speaker 1: this out here. And you mentioned how we are invested,

702
00:33:03,880 --> 00:33:06,040
Speaker 1: so I'm going to assume here that you're married or

703
00:33:06,040 --> 00:33:09,400
Speaker 1: have a significant other that's part of your whole financial plan,

704
00:33:10,040 --> 00:33:13,760
Speaker 1: and anytime you talk about changing the spending profile of

705
00:33:13,800 --> 00:33:18,480
Speaker 1: a family, that can cause some issues. So this is

706
00:33:18,480 --> 00:33:21,280
Speaker 1: where it's very important to be on the same page

707
00:33:21,560 --> 00:33:25,000
Speaker 1: with your spouse or significant other on your overall risk

708
00:33:25,080 --> 00:33:29,320
Speaker 1: profile of your portfolio, because if you can agree on that,

709
00:33:29,880 --> 00:33:33,280
Speaker 1: it's much easier to agree on if and when some

710
00:33:33,440 --> 00:33:37,040
Speaker 1: spending decisions need to change depending on what happens in

711
00:33:37,080 --> 00:33:39,400
Speaker 1: the market. So I would start there and make sure

712
00:33:39,560 --> 00:33:43,440
Speaker 1: you and your significant other are aligned as far as

713
00:33:43,480 --> 00:33:47,320
Speaker 1: your portfolio risk is concerned, and that should help you

714
00:33:47,400 --> 00:33:50,200
Speaker 1: make some of these other decisions if and when they

715
00:33:50,280 --> 00:33:53,840
Speaker 1: might become warranted. All right, coming up next, one sign

716
00:33:54,040 --> 00:33:58,400
Speaker 1: you could be just simply overthinking your finances. You're listening

717
00:33:58,440 --> 00:34:00,920
Speaker 1: to Simply Money presented by all Worth Financial on fifty

718
00:34:00,920 --> 00:34:09,640
Speaker 1: five KRC the talk station. You're listening to Simply Money

719
00:34:09,680 --> 00:34:12,360
Speaker 1: presented by all Worth Financial on Bob spun Seller along

720
00:34:12,360 --> 00:34:15,440
Speaker 1: with Brian James. You know, one of the most common

721
00:34:15,520 --> 00:34:19,640
Speaker 1: things we see, especially with really successful people, is not

722
00:34:20,000 --> 00:34:26,120
Speaker 1: underthinking their finances, it's overthinking them. Brian, we're talking about

723
00:34:26,160 --> 00:34:30,040
Speaker 1: the spreadsheet nerds out there. Sometimes that just wear us

724
00:34:30,120 --> 00:34:33,799
Speaker 1: out with numbers and wanting to see different scenarios. And

725
00:34:33,880 --> 00:34:35,800
Speaker 1: at the end of the day, Brian, if you're anything

726
00:34:35,880 --> 00:34:38,520
Speaker 1: like me, sometimes you got to just call a time

727
00:34:38,560 --> 00:34:42,239
Speaker 1: out and ask the client, are we really? Are we

728
00:34:42,320 --> 00:34:46,399
Speaker 1: really moving the needle here? Regardless of which decision to make.

729
00:34:46,480 --> 00:34:48,560
Speaker 1: You ever run into situations.

730
00:34:47,960 --> 00:34:49,719
Speaker 3: Like that, oh, absolutely all the time.

731
00:34:50,800 --> 00:34:54,200
Speaker 2: A lot of folks out there, we've been so ingrained

732
00:34:54,280 --> 00:34:56,439
Speaker 2: in building wealth, right, That's why we have to work

733
00:34:56,440 --> 00:34:58,080
Speaker 2: for thirty forty years of our lives, and it just

734
00:34:58,200 --> 00:35:00,480
Speaker 2: kind of gets ingrained in some people. And then that

735
00:35:00,520 --> 00:35:02,479
Speaker 2: continues and then all of a sudden, I have more

736
00:35:02,600 --> 00:35:05,240
Speaker 2: time to think about it. That's when the spreadsheet comes out,

737
00:35:05,440 --> 00:35:07,160
Speaker 2: and gonna get out of bed, and I'm gonna pour

738
00:35:07,200 --> 00:35:10,480
Speaker 2: my coffee and I'm gonna enter by hand all of

739
00:35:10,520 --> 00:35:13,239
Speaker 2: the values of my various holdings, my various positions, my

740
00:35:13,320 --> 00:35:15,600
Speaker 2: various accounts. Even though this could really be done pretty

741
00:35:15,640 --> 00:35:17,080
Speaker 2: much automatically.

742
00:35:17,160 --> 00:35:21,759
Speaker 1: And sometimes the columns are color coded like meet, four, five,

743
00:35:21,920 --> 00:35:25,359
Speaker 1: six different colors just to highlight the excellent work that's

744
00:35:25,360 --> 00:35:28,080
Speaker 1: been done on the spreadsheet. Yep, I've seen those I've

745
00:35:28,120 --> 00:35:29,360
Speaker 1: seen those come across by this.

746
00:35:29,560 --> 00:35:31,600
Speaker 2: And the final piece of this kit is the spouse

747
00:35:31,600 --> 00:35:32,759
Speaker 2: that rolls their eyes at this.

748
00:35:33,040 --> 00:35:34,720
Speaker 3: This is all he or she does anymore.

749
00:35:34,760 --> 00:35:36,680
Speaker 2: I really want to go on vacation, but we gotta

750
00:35:36,760 --> 00:35:40,280
Speaker 2: do the spreadsheetl anyway being I mean here, but anyway.

751
00:35:40,320 --> 00:35:42,960
Speaker 2: So this is a lot of people. This is people

752
00:35:43,000 --> 00:35:44,680
Speaker 2: who have done very well and they're just used to

753
00:35:44,719 --> 00:35:46,279
Speaker 2: always setting a goal and meeting it.

754
00:35:46,320 --> 00:35:47,319
Speaker 3: That's how they got where they are.

755
00:35:47,360 --> 00:35:51,640
Speaker 2: So this is this and this runs the gamut business owners, executives, physicians, engineers.

756
00:35:51,680 --> 00:35:53,840
Speaker 2: People just used to thinking about what should I do

757
00:35:53,960 --> 00:35:56,560
Speaker 2: now to make this a better situation? Will they go out?

758
00:35:56,560 --> 00:35:59,120
Speaker 2: They read an article, they hear a podcast, possibly this

759
00:35:59,160 --> 00:36:02,719
Speaker 2: one friend of dinner maybe mentioned some new strategy, and

760
00:36:02,719 --> 00:36:04,480
Speaker 2: all of a sudden, should I change things? Am I

761
00:36:04,560 --> 00:36:06,719
Speaker 2: missing an opportunity? Should I move that? This is all

762
00:36:06,840 --> 00:36:10,680
Speaker 2: fomo fomo fomo, fear of missing out, and so you know,

763
00:36:10,960 --> 00:36:13,200
Speaker 2: this happens. It doesn't matter what the dollar amount is.

764
00:36:13,200 --> 00:36:15,760
Speaker 2: This is households with two million, five million, even ten million,

765
00:36:15,760 --> 00:36:18,000
Speaker 2: who really don't have any reason to worry that there's

766
00:36:18,000 --> 00:36:20,960
Speaker 2: not going to be enough, but they're just geared toward

767
00:36:21,040 --> 00:36:23,200
Speaker 2: looking for that next opportunity. There's got to be something

768
00:36:23,200 --> 00:36:25,920
Speaker 2: I'm missing. I always want to optimize, optimize at all times,

769
00:36:25,960 --> 00:36:27,840
Speaker 2: and we can get way too wrapped up in this

770
00:36:27,840 --> 00:36:30,040
Speaker 2: stuff and it can cause more problems than it's solved.

771
00:36:30,040 --> 00:36:33,920
Speaker 1: Frankly, Yeah, Brian, And again, we're not making lighter or

772
00:36:34,000 --> 00:36:36,600
Speaker 1: making fun of people that are responsible with their money.

773
00:36:36,640 --> 00:36:40,360
Speaker 1: I mean, I appreciate it when people come in very organized,

774
00:36:40,360 --> 00:36:42,200
Speaker 1: but you know the point we're trying to make here

775
00:36:42,400 --> 00:36:45,440
Speaker 1: is you know that there can become we can get

776
00:36:45,440 --> 00:36:49,080
Speaker 1: to the point of analysis, paralysis and just making this

777
00:36:49,280 --> 00:36:51,799
Speaker 1: thing way more complicated than it needs to be and

778
00:36:51,840 --> 00:36:54,960
Speaker 1: more importantly, robbing a family of some of the joy

779
00:36:55,280 --> 00:36:57,840
Speaker 1: of having money in the first place. I've mentioned this story,

780
00:36:57,880 --> 00:37:00,760
Speaker 1: I think before on the show, but it bears repeating

781
00:37:00,800 --> 00:37:03,480
Speaker 1: again because I'm thinking of one client that does have

782
00:37:03,560 --> 00:37:08,200
Speaker 1: that multicolored Excel spreadsheet and his wife comes to the

783
00:37:08,280 --> 00:37:11,880
Speaker 1: meeting dutifully every year. She just slumps her in her

784
00:37:11,960 --> 00:37:14,319
Speaker 1: chair because she knows what's gonna go on for the

785
00:37:14,360 --> 00:37:16,960
Speaker 1: next hour. And a couple of years ago, I just

786
00:37:17,160 --> 00:37:19,600
Speaker 1: took took a chance here and I just asked, Hey,

787
00:37:19,960 --> 00:37:23,560
Speaker 1: when's the last time you took a family vacation, and

788
00:37:23,560 --> 00:37:25,719
Speaker 1: all of a sudden I saw her sit up in

789
00:37:25,800 --> 00:37:27,399
Speaker 1: her chair and now she.

790
00:37:27,520 --> 00:37:29,759
Speaker 3: Was interested in the room.

791
00:37:29,840 --> 00:37:31,320
Speaker 2: Yeah, go get a cup of coffee and let the

792
00:37:31,400 --> 00:37:32,560
Speaker 2: argument happen without you.

793
00:37:32,680 --> 00:37:35,520
Speaker 1: Well, and and they get along great, great marriage. But

794
00:37:35,719 --> 00:37:38,359
Speaker 1: you know, the husband is scirmming around a little bit

795
00:37:38,400 --> 00:37:40,520
Speaker 1: and said, yeah, we haven't done much of that. And

796
00:37:40,560 --> 00:37:42,759
Speaker 1: I said, do me a favor. We're gonna do the

797
00:37:42,800 --> 00:37:46,280
Speaker 1: Wroth conversion today. We're going to make your portfolio tax efficient.

798
00:37:46,560 --> 00:37:49,920
Speaker 1: But will you please let your wife plan a vacation

799
00:37:50,280 --> 00:37:53,160
Speaker 1: to Hilton Head, take the grandkids, pay for them to

800
00:37:53,200 --> 00:37:55,680
Speaker 1: go down there and go have fun for a week,

801
00:37:55,760 --> 00:37:57,799
Speaker 1: and come back, you know, the next time we meet

802
00:37:57,840 --> 00:38:00,319
Speaker 1: and tell me all about it. And he actually did

803
00:38:00,360 --> 00:38:03,480
Speaker 1: do that. They did the vacation, and they came back

804
00:38:03,520 --> 00:38:07,080
Speaker 1: the next year and showed me pictures of that family vacation.

805
00:38:07,200 --> 00:38:10,040
Speaker 1: And I'll tell you, Brian, that was worth way more

806
00:38:10,560 --> 00:38:13,520
Speaker 1: than saving you know, zero point h two percent on

807
00:38:13,600 --> 00:38:17,040
Speaker 1: their effective tax rate by moving the columns around on

808
00:38:17,080 --> 00:38:19,799
Speaker 1: the spreadsheet. You know, So just a good, you know

809
00:38:19,920 --> 00:38:22,600
Speaker 1: reminder to just you know, don't let the tax tail

810
00:38:22,640 --> 00:38:27,120
Speaker 1: wag the dog, or let complexity rob you of using

811
00:38:27,160 --> 00:38:30,319
Speaker 1: this money to actually create some memories and joy for

812
00:38:30,400 --> 00:38:33,360
Speaker 1: your family. Here's the all Worth advice. If your financial

813
00:38:33,400 --> 00:38:38,040
Speaker 1: plan needs constant adjusting, it just may be too complicated

814
00:38:38,080 --> 00:38:40,600
Speaker 1: to give you real peace of mind and more importantly,

815
00:38:41,000 --> 00:38:44,040
Speaker 1: real joy. Thanks for listening tonight. You've been listening to

816
00:38:44,040 --> 00:38:46,560
Speaker 1: Simply Money, presented by all Worth Financial on fifty five

817
00:38:46,640 --> 00:38:48,359
Speaker 1: krc D talk station