1
00:00:06,880 --> 00:00:12,040
Speaker 1: Tonight the January Financial stress Tests Can your plans survive

2
00:00:12,400 --> 00:00:15,920
Speaker 1: twenty twenty six? You're listening to Simply Money Presided by

3
00:00:15,920 --> 00:00:18,880
Speaker 1: all Worth Financial on Bob Sponseller along with Brian James.

4
00:00:19,760 --> 00:00:23,120
Speaker 1: So we're about a week into twenty twenty six, New year,

5
00:00:23,360 --> 00:00:26,600
Speaker 1: fresh start. But also, let's be honest, we always have

6
00:00:26,800 --> 00:00:31,360
Speaker 1: fresh uncertainties as well. No one really knows where the

7
00:00:31,400 --> 00:00:34,680
Speaker 1: markets are headed next, what interest rate policy is gonna be,

8
00:00:34,920 --> 00:00:38,280
Speaker 1: so on and so forth. So tonight we're asking can

9
00:00:38,360 --> 00:00:41,760
Speaker 1: your financial plan survive twenty twenty six? Are you ready

10
00:00:41,760 --> 00:00:45,519
Speaker 1: for it? Before the markets test you, it's time to

11
00:00:45,640 --> 00:00:48,720
Speaker 1: test your plan. So we're gonna call this segment a

12
00:00:48,760 --> 00:00:53,280
Speaker 1: good old January financial stress test. Brian walk us through

13
00:00:53,320 --> 00:00:54,080
Speaker 1: what we mean here.

14
00:00:54,840 --> 00:00:57,160
Speaker 2: Well, let's start with interest rate risk, Bob. That's been

15
00:00:57,160 --> 00:01:00,440
Speaker 2: a hot topic for better part of the last seven years.

16
00:01:00,760 --> 00:01:03,240
Speaker 2: So right now we're in a falling interest rate environment.

17
00:01:03,280 --> 00:01:05,200
Speaker 2: But what does that mean for your investments? Well, if

18
00:01:05,200 --> 00:01:07,920
Speaker 2: you're holding long term bonds, well that's great. You've probably

19
00:01:07,920 --> 00:01:11,480
Speaker 2: seen some nice price appreciation because bonds tend to move

20
00:01:11,520 --> 00:01:14,000
Speaker 2: in the opposite of interest rates. And the reason for that,

21
00:01:14,040 --> 00:01:17,120
Speaker 2: by the way, is because is because if rates are falling,

22
00:01:17,400 --> 00:01:21,000
Speaker 2: then the value of already existing bonds versus new bonds

23
00:01:21,040 --> 00:01:24,679
Speaker 2: becomes becomes greater. Simply supplying demand, what do I want

24
00:01:24,680 --> 00:01:26,679
Speaker 2: the higher rate or do I want the new lower rates? Well,

25
00:01:26,680 --> 00:01:29,880
Speaker 2: that's why that that relationship moves in that direction. So

26
00:01:29,920 --> 00:01:32,880
Speaker 2: what happens if these cuts stall though, or if inflation

27
00:01:32,959 --> 00:01:35,119
Speaker 2: rears it's had again and the Fed you know, has

28
00:01:35,200 --> 00:01:37,160
Speaker 2: to pause or kind of reverse course of what they've

29
00:01:37,160 --> 00:01:40,480
Speaker 2: been doing. So, you know, let's go through an example here. Hypothetically,

30
00:01:40,480 --> 00:01:42,760
Speaker 2: we've got a sixty three year old retiree. This isn't

31
00:01:42,760 --> 00:01:44,960
Speaker 2: all that hypothetically. This is a lot of our clients really,

32
00:01:44,959 --> 00:01:47,600
Speaker 2: we're just putting a name on this. But anyway, sixty

33
00:01:47,600 --> 00:01:49,600
Speaker 2: three years old, three and a half million dollars, with

34
00:01:49,680 --> 00:01:52,680
Speaker 2: a six hundred thousand dollars bond ladder, and you know,

35
00:01:52,720 --> 00:01:56,160
Speaker 2: let's say they switch to longer duration bonds expecting rates

36
00:01:56,160 --> 00:01:58,400
Speaker 2: to continue to fall. That's a logical move as long

37
00:01:58,440 --> 00:02:00,640
Speaker 2: as that's right, As long as rates can keep dropping,

38
00:02:00,880 --> 00:02:03,120
Speaker 2: then that's that's what you would do. But if that

39
00:02:03,200 --> 00:02:06,640
Speaker 2: doesn't happen, orf inflation sticks around, those bond values might

40
00:02:06,640 --> 00:02:09,040
Speaker 2: take a hit. So so here's the real question, are

41
00:02:09,040 --> 00:02:12,600
Speaker 2: you diversified enough across duration and duration is a little

42
00:02:12,639 --> 00:02:15,280
Speaker 2: bit different than the than the time to maturity. Duration

43
00:02:15,440 --> 00:02:18,480
Speaker 2: is a calculation that takes into account the actual cast flow,

44
00:02:18,560 --> 00:02:21,480
Speaker 2: the interest rate you're getting off of something, and in

45
00:02:21,520 --> 00:02:25,480
Speaker 2: addition to the time value of it. Though, so should

46
00:02:25,480 --> 00:02:27,600
Speaker 2: you be locking that in now or maybe keeping some

47
00:02:27,600 --> 00:02:30,200
Speaker 2: powder dry and these shorter term instruments like T bills

48
00:02:30,240 --> 00:02:33,600
Speaker 2: or high quality bufferdts. Maybe you're a business owner, real

49
00:02:33,680 --> 00:02:36,040
Speaker 2: estate investor, you know you've got some floating rate debt.

50
00:02:36,120 --> 00:02:38,760
Speaker 2: Maybe this is the window to refinance. Don't assume you're

51
00:02:38,760 --> 00:02:40,880
Speaker 2: gonna have forever because rates don't stay the same. They

52
00:02:40,880 --> 00:02:43,680
Speaker 2: can move quickly if economic data surprises us.

53
00:02:44,600 --> 00:02:46,480
Speaker 1: Yeah, Brian, I mean to your point that I think

54
00:02:46,480 --> 00:02:49,520
Speaker 1: you're making here, is as difficult as it is for

55
00:02:49,600 --> 00:02:52,359
Speaker 1: anyone to time the direction of the stock market in

56
00:02:52,440 --> 00:02:55,720
Speaker 1: the short term. Boy is it really hard, you know,

57
00:02:55,960 --> 00:03:00,400
Speaker 1: even more difficult to time the bond mark market in

58
00:03:00,440 --> 00:03:03,360
Speaker 1: the movement of interest rates. And that's why laddering or

59
00:03:03,400 --> 00:03:07,120
Speaker 1: diversifying you know your duration of your bond portfolio as

60
00:03:07,200 --> 00:03:09,440
Speaker 1: long you know as well as your credit quality of

61
00:03:09,480 --> 00:03:12,280
Speaker 1: your bond portfolio makes a ton of sense. Because we

62
00:03:12,480 --> 00:03:14,960
Speaker 1: literally don't know what's gonna happen. We don't know what

63
00:03:15,000 --> 00:03:18,040
Speaker 1: the Fed's gonna do, we don't know what geopolitical stuff's

64
00:03:18,080 --> 00:03:21,480
Speaker 1: gonna happen. And to put too many eggs in a

65
00:03:21,520 --> 00:03:24,880
Speaker 1: basket in a bond portfolio, especially something that you're buying

66
00:03:24,919 --> 00:03:28,799
Speaker 1: it expecting it to stay stable and and and give

67
00:03:28,840 --> 00:03:31,200
Speaker 1: you a good interest rate with a lot of volatility,

68
00:03:31,560 --> 00:03:34,200
Speaker 1: just make sure that you've spread out your risk, both

69
00:03:34,240 --> 00:03:37,840
Speaker 1: credit wise and duration wise, so that you don't take

70
00:03:37,880 --> 00:03:40,800
Speaker 1: an unexpected hit. All right, let's move on to stress

71
00:03:40,880 --> 00:03:43,640
Speaker 1: testing good old stock market volatility.

72
00:03:43,680 --> 00:03:47,440
Speaker 2: Brian, Yeah, So guess what this is a mid term

73
00:03:47,520 --> 00:03:50,040
Speaker 2: election year, right, we had we we had one year

74
00:03:50,080 --> 00:03:52,320
Speaker 2: after the presidential election. Now we're going to be talking

75
00:03:52,360 --> 00:03:55,920
Speaker 2: midterms and that always means policy headlines. It could be

76
00:03:55,920 --> 00:03:59,240
Speaker 2: a major shift in control in Congress, h and plumb.

77
00:03:59,240 --> 00:04:02,080
Speaker 2: But the point is plenty of market moving noise out there,

78
00:04:02,200 --> 00:04:03,560
Speaker 2: and that's going to be you know that that's going

79
00:04:03,640 --> 00:04:06,840
Speaker 2: to get ramped up almost immediately here, early in January

80
00:04:07,320 --> 00:04:09,640
Speaker 2: as we started, because again we're past the holidays and

81
00:04:09,680 --> 00:04:11,560
Speaker 2: it's going to be an election year, so for sure

82
00:04:12,160 --> 00:04:13,680
Speaker 2: that that's gonna be there's gonna be a lot of

83
00:04:13,720 --> 00:04:16,760
Speaker 2: people out there with bullhorns screaming one direction versus the other.

84
00:04:17,080 --> 00:04:17,800
Speaker 3: So this is interesting.

85
00:04:17,920 --> 00:04:20,280
Speaker 2: We do always hear clients say, oh, I'm a I'm

86
00:04:20,279 --> 00:04:24,280
Speaker 2: conservative until the market drops fifteen percent, and then suddenly

87
00:04:24,320 --> 00:04:26,240
Speaker 2: they want to go to cash and they're a lot

88
00:04:26,279 --> 00:04:28,320
Speaker 2: more conservative than they thought they were.

89
00:04:28,400 --> 00:04:28,560
Speaker 3: Right.

90
00:04:28,800 --> 00:04:30,640
Speaker 2: So this reminds me of that old you know, Mike

91
00:04:30,680 --> 00:04:32,600
Speaker 2: Tyson saying that everybody has a plan until they get

92
00:04:32,600 --> 00:04:35,320
Speaker 2: punched in the face. That's why we stress test with

93
00:04:35,400 --> 00:04:37,960
Speaker 2: Monte Carlos simulations. And so what we want to ask

94
00:04:38,080 --> 00:04:42,080
Speaker 2: is what happens if my financial plan is rock solid now,

95
00:04:42,120 --> 00:04:44,880
Speaker 2: assuming nothing bad ever happens again? Then what happens if

96
00:04:44,920 --> 00:04:47,000
Speaker 2: I lose say twenty to maybe twenty five percent of

97
00:04:47,040 --> 00:04:47,920
Speaker 2: my financial network?

98
00:04:48,000 --> 00:04:50,359
Speaker 3: Am I still okay? Or do I have to exit?

99
00:04:50,360 --> 00:04:50,560
Speaker 1: Do it?

100
00:04:50,600 --> 00:04:52,480
Speaker 2: Do I have to change my expectations to what I'm

101
00:04:52,480 --> 00:04:54,200
Speaker 2: going to be able to do? So what if that

102
00:04:54,279 --> 00:04:56,960
Speaker 2: market has a down year? Are you still doing okay?

103
00:04:57,480 --> 00:05:00,599
Speaker 2: So we'll walk through. Go ahead, Bob, No, I just

104
00:05:00,600 --> 00:05:02,720
Speaker 2: wanted to throw in here. You know, you talked about,

105
00:05:03,120 --> 00:05:05,839
Speaker 2: you know, the midterm election year, and it's a good point.

106
00:05:05,960 --> 00:05:08,200
Speaker 2: It's a good time to point out and I talked

107
00:05:08,200 --> 00:05:10,080
Speaker 2: about this a few weeks ago on the show, but

108
00:05:10,120 --> 00:05:13,599
Speaker 2: it bears repeating. I heard a good interview with a

109
00:05:13,680 --> 00:05:17,760
Speaker 2: very respected you know, market analyst and money manager.

110
00:05:18,000 --> 00:05:20,520
Speaker 1: Just remind all of us, and this is not an opinion,

111
00:05:20,560 --> 00:05:24,120
Speaker 1: This is just data. If you look at historic volatility

112
00:05:24,120 --> 00:05:28,440
Speaker 1: of the stock market in mid term elections versus off

113
00:05:28,520 --> 00:05:32,960
Speaker 1: year elections, you know, the average drop or mid mid

114
00:05:33,040 --> 00:05:36,480
Speaker 1: year volatility of the stock market in a non election

115
00:05:36,680 --> 00:05:39,920
Speaker 1: year is about twelve percent, but in a mid term

116
00:05:39,920 --> 00:05:45,120
Speaker 1: election year it's nineteen percent. So we should expect volatility,

117
00:05:45,520 --> 00:05:48,440
Speaker 1: you know, more than we did in twenty twenty five,

118
00:05:48,880 --> 00:05:51,000
Speaker 1: you know, coming up here at some point in twenty

119
00:05:51,040 --> 00:05:53,719
Speaker 1: twenty six. And the key point here that I that

120
00:05:53,800 --> 00:05:55,360
Speaker 1: I think you're trying to make and doing a good

121
00:05:55,440 --> 00:05:58,960
Speaker 1: job of here, Brian, is expect it because it's probably

122
00:05:59,040 --> 00:06:02,520
Speaker 1: coming in some way, shape or form, because mid term

123
00:06:02,600 --> 00:06:06,919
Speaker 1: elections do introduce uncertainty to the market, and let's face it,

124
00:06:07,040 --> 00:06:08,240
Speaker 1: everybody likes certainty.

125
00:06:09,000 --> 00:06:11,200
Speaker 2: Yeah, So let's let's walk through an example here just

126
00:06:11,200 --> 00:06:13,239
Speaker 2: to kind of give everybody a little frame of reference,

127
00:06:13,279 --> 00:06:15,279
Speaker 2: that is to how this goes down and what what

128
00:06:15,320 --> 00:06:18,240
Speaker 2: should be expected there's nothing. There's nothing crazy going on here.

129
00:06:18,240 --> 00:06:21,680
Speaker 2: This is historically you know, what has happened. So here,

130
00:06:21,720 --> 00:06:24,760
Speaker 2: here's a hypothetical sixty eight year old couple. Maybe they're

131
00:06:24,760 --> 00:06:26,919
Speaker 2: pulling one hundred and twenty thousand dollars ten thousand a

132
00:06:26,920 --> 00:06:28,120
Speaker 2: month from their portfolio.

133
00:06:28,720 --> 00:06:29,040
Speaker 1: Right now.

134
00:06:29,080 --> 00:06:31,799
Speaker 2: There are seventy five percent stocks, twenty five percent fawns,

135
00:06:31,800 --> 00:06:33,919
Speaker 2: and they're really happy with returns because we've had that.

136
00:06:33,960 --> 00:06:35,520
Speaker 2: You know, let's face it, the last three years have

137
00:06:35,600 --> 00:06:38,760
Speaker 2: been fantastic for the stock market. But we run their

138
00:06:38,760 --> 00:06:41,480
Speaker 2: plan through a twenty percent downturn in year one. This

139
00:06:41,520 --> 00:06:44,280
Speaker 2: is stress testing, right, So stress testing again is run

140
00:06:44,320 --> 00:06:46,599
Speaker 2: it assuming nothing bad ever happens, and then now let's

141
00:06:46,640 --> 00:06:48,719
Speaker 2: see what takes to break it. Now, all of a sudden,

142
00:06:48,720 --> 00:06:51,279
Speaker 2: there's success rate drops from ninety two percent to sixty

143
00:06:51,279 --> 00:06:54,000
Speaker 2: eight percent. You know, from basically a nine out of

144
00:06:54,000 --> 00:06:56,240
Speaker 2: ten batting average to a to a maybe two out

145
00:06:56,279 --> 00:06:58,400
Speaker 2: of three, which is actually still pretty strong. That is

146
00:06:58,400 --> 00:07:00,560
Speaker 2: not a reason to panic, but that could be a

147
00:07:00,600 --> 00:07:01,960
Speaker 2: reason to consider rebalancing.

148
00:07:02,000 --> 00:07:04,560
Speaker 3: What that means is that is that maybe.

149
00:07:04,279 --> 00:07:07,520
Speaker 2: Their portfolio has too much risk in it, that that

150
00:07:08,240 --> 00:07:10,960
Speaker 2: perhaps they don't need so much return as they do

151
00:07:11,440 --> 00:07:13,840
Speaker 2: a reduction in the volatility, because it could be one

152
00:07:13,840 --> 00:07:16,440
Speaker 2: of these black Swan type years that could ruin them.

153
00:07:16,840 --> 00:07:19,640
Speaker 2: But a standard downturn and a more conservative portfolio is

154
00:07:19,680 --> 00:07:21,280
Speaker 2: not going to hurt them at all. So again, but

155
00:07:21,680 --> 00:07:23,960
Speaker 2: I'm not overly worried when I see that happen in

156
00:07:24,000 --> 00:07:26,520
Speaker 2: a financial plan. That's not cause to tell somebody they

157
00:07:26,520 --> 00:07:30,080
Speaker 2: have to change their expectations entirely, because time tends to

158
00:07:30,120 --> 00:07:32,480
Speaker 2: heal these things in a financial plan. So as long

159
00:07:32,520 --> 00:07:34,960
Speaker 2: as we can prevent panic and as long as we

160
00:07:35,280 --> 00:07:37,000
Speaker 2: are able to let the market recover.

161
00:07:37,080 --> 00:07:38,320
Speaker 3: Now, that is very very.

162
00:07:38,120 --> 00:07:40,160
Speaker 2: Hard to do when you are retired and you've got

163
00:07:40,200 --> 00:07:41,800
Speaker 2: what you've got. The nest egg is what it is.

164
00:07:41,840 --> 00:07:44,840
Speaker 2: It's in place, and it takes a hit. It's a

165
00:07:44,960 --> 00:07:47,720
Speaker 2: very difficult thing to say, let's just hang on and

166
00:07:47,800 --> 00:07:49,800
Speaker 2: ride it out far different than it was when you

167
00:07:49,800 --> 00:07:52,960
Speaker 2: were working. But if as long as you understand that's

168
00:07:52,960 --> 00:07:55,600
Speaker 2: the important of stress testing this way, understand what it

169
00:07:55,640 --> 00:07:58,080
Speaker 2: could look like, and then you'll get some time to

170
00:07:58,200 --> 00:08:00,920
Speaker 2: think about how you will react. If your dollar amount

171
00:08:00,960 --> 00:08:03,360
Speaker 2: suddenly look that way, Is that something you can handle?

172
00:08:03,680 --> 00:08:05,840
Speaker 2: If not, then that's maybe where you do need to

173
00:08:05,880 --> 00:08:08,200
Speaker 2: consider changing your expectations. But the important thing is you

174
00:08:08,240 --> 00:08:11,080
Speaker 2: will have done it before it actually happens exactly. And

175
00:08:11,120 --> 00:08:14,520
Speaker 2: speaking of putting time on your side, along with maybe

176
00:08:14,560 --> 00:08:17,600
Speaker 2: doing a you know, a regular old rebalance of your portfolio,

177
00:08:17,680 --> 00:08:20,840
Speaker 2: getting your wrisk tolerance and check, you know, the other

178
00:08:20,920 --> 00:08:23,720
Speaker 2: thing is to examine, you know, something we refer to

179
00:08:23,800 --> 00:08:27,120
Speaker 2: all the time as a bucket strategy. Maybe have two

180
00:08:27,200 --> 00:08:30,320
Speaker 2: two and a half years worth of living expenses in

181
00:08:30,400 --> 00:08:35,360
Speaker 2: a very liquid, non volatile asset class, think money markets, treasury,

182
00:08:35,480 --> 00:08:38,760
Speaker 2: something like that where you can weather the storm of

183
00:08:38,840 --> 00:08:42,199
Speaker 2: even a severe market downturn like at two thousand and

184
00:08:42,240 --> 00:08:45,800
Speaker 2: eight and nine scenario, because history shows that even when

185
00:08:45,800 --> 00:08:49,280
Speaker 2: we have these big pullbacks or declines or recessions, the

186
00:08:49,400 --> 00:08:51,800
Speaker 2: market usually recovers.

187
00:08:51,200 --> 00:08:54,720
Speaker 1: In around three years. But boy, those three years are

188
00:08:54,760 --> 00:08:57,960
Speaker 1: tough to stomach if you've got to sell, you know,

189
00:08:58,080 --> 00:09:00,600
Speaker 1: assets that are down to pay the bills every month.

190
00:09:00,640 --> 00:09:04,040
Speaker 1: So along with just rebalancing and doing a risk assessment

191
00:09:04,080 --> 00:09:06,800
Speaker 1: and the Monte Carlo analysis that you referred to, Brian,

192
00:09:07,160 --> 00:09:10,520
Speaker 1: you know, just some good old cash management, having some

193
00:09:10,600 --> 00:09:13,160
Speaker 1: money put away that you can access if and when

194
00:09:13,559 --> 00:09:16,280
Speaker 1: we do get a more severe decline. That could serve

195
00:09:16,360 --> 00:09:21,320
Speaker 1: you well. Also, hey, finally, let's talk about just insurance

196
00:09:21,360 --> 00:09:25,600
Speaker 1: buffers here. If the market tanks in your income takes

197
00:09:25,679 --> 00:09:28,560
Speaker 1: a hit, especially if you're a business owner, you got

198
00:09:28,559 --> 00:09:30,920
Speaker 1: to look at how much cash you can access without

199
00:09:30,960 --> 00:09:33,920
Speaker 1: having to sell something in a down market. Here's a

200
00:09:33,960 --> 00:09:37,400
Speaker 1: real example. A business owner, let's say has a five

201
00:09:37,440 --> 00:09:40,400
Speaker 1: million dollar net worth, but three million and that is

202
00:09:40,440 --> 00:09:42,800
Speaker 1: tied up in their business and another million and a

203
00:09:42,840 --> 00:09:46,360
Speaker 1: half is tied up in their real estate. So you know,

204
00:09:46,400 --> 00:09:48,640
Speaker 1: with a five million dollar net worth of only five

205
00:09:48,720 --> 00:09:52,800
Speaker 1: hundred thousand dollars of that is really liquid, this could

206
00:09:52,880 --> 00:09:55,480
Speaker 1: present a problem if you've got payroll to meet and

207
00:09:55,520 --> 00:09:59,439
Speaker 1: other expenses. So this is another reason to just stress

208
00:09:59,480 --> 00:10:02,720
Speaker 1: test the overall plan. And in the example that we

209
00:10:02,760 --> 00:10:04,880
Speaker 1: want to cite here, we did have an advisor go

210
00:10:04,920 --> 00:10:07,679
Speaker 1: in and do that stress test the plan, and they

211
00:10:07,920 --> 00:10:11,480
Speaker 1: quickly realize that if the revenue of the business dropped

212
00:10:11,520 --> 00:10:15,240
Speaker 1: by say thirty percent, they can't cover their own personal

213
00:10:15,280 --> 00:10:18,680
Speaker 1: expenses for more than three months without going out and

214
00:10:18,720 --> 00:10:22,120
Speaker 1: taking out a loan. So in this case, the good

215
00:10:22,160 --> 00:10:26,640
Speaker 1: advisor recommended, hey, let's get really proactive and diligent about

216
00:10:26,760 --> 00:10:32,240
Speaker 1: building that twelvemonth liquidity buffer. Even if it means taking

217
00:10:32,280 --> 00:10:35,640
Speaker 1: some chips off the table from you know, a quote

218
00:10:35,679 --> 00:10:39,400
Speaker 1: unquote growth asset and insurance can play a role here too,

219
00:10:40,120 --> 00:10:43,840
Speaker 1: especially if you're the key income earner in a family business.

220
00:10:44,280 --> 00:10:46,880
Speaker 1: You know what happens if something happens to you in

221
00:10:46,880 --> 00:10:49,680
Speaker 1: the short term from a health standpoint, Walk us through

222
00:10:49,679 --> 00:10:51,240
Speaker 1: what we need to do there, Brian.

223
00:10:51,240 --> 00:10:54,480
Speaker 2: Yeah, this is where disability insurance comes in, you know,

224
00:10:54,520 --> 00:10:56,320
Speaker 2: and disability of course that there's a lot of moving

225
00:10:56,360 --> 00:10:59,080
Speaker 2: parts to that. Disability You probably already have through your

226
00:10:59,440 --> 00:11:02,720
Speaker 2: your group benefits, through your employer. Uh, but sometimes if

227
00:11:02,760 --> 00:11:05,280
Speaker 2: you are the employer that's been that's a little bit different.

228
00:11:05,320 --> 00:11:06,680
Speaker 2: You might need to go out and get your own

229
00:11:06,840 --> 00:11:09,079
Speaker 2: policy uh there as well, and there are there are

230
00:11:09,120 --> 00:11:13,960
Speaker 2: important uh differences between the disability policies, right, you want

231
00:11:14,000 --> 00:11:16,400
Speaker 2: something that is triggered by not being able to perform

232
00:11:16,480 --> 00:11:17,800
Speaker 2: your own occupation.

233
00:11:18,400 --> 00:11:18,559
Speaker 1: Uh.

234
00:11:18,640 --> 00:11:20,960
Speaker 2: Some policies out there look really cheap and if you're

235
00:11:21,000 --> 00:11:23,400
Speaker 2: reading the fine print, they're basically only going to kick

236
00:11:23,400 --> 00:11:26,520
Speaker 2: in if you are able to unable to perform any occupation,

237
00:11:26,640 --> 00:11:28,880
Speaker 2: which that's that's a pretty wide range there, So make

238
00:11:28,920 --> 00:11:31,160
Speaker 2: sure you understand if you're looking into disability insurance what

239
00:11:31,200 --> 00:11:32,040
Speaker 2: you are covered for.

240
00:11:32,760 --> 00:11:32,960
Speaker 1: Uh.

241
00:11:33,000 --> 00:11:34,360
Speaker 2: And then the other things you want to look into

242
00:11:34,360 --> 00:11:37,480
Speaker 2: too is umbrella liability. UH that this these are the

243
00:11:37,520 --> 00:11:40,560
Speaker 2: types of things out there that you can that they're

244
00:11:40,640 --> 00:11:43,120
Speaker 2: very cheap to cover these risks as they're very rare,

245
00:11:43,120 --> 00:11:45,680
Speaker 2: but if they do happen, uh, then they are definitely

246
00:11:45,679 --> 00:11:47,720
Speaker 2: ship sinkers. So you can get that through your property

247
00:11:47,720 --> 00:11:50,320
Speaker 2: casualty ensure and just to kind of remove the risk,

248
00:11:50,400 --> 00:11:52,839
Speaker 2: it's going to cost you maybe maybe six eight hundred

249
00:11:52,880 --> 00:11:56,440
Speaker 2: dollars if that even to add on a typical million

250
00:11:56,520 --> 00:11:59,600
Speaker 2: dollar umbrella policy. Uh there to uh to to to

251
00:11:59,679 --> 00:12:02,280
Speaker 2: reduce the risk of anything else crazy happening. Then of

252
00:12:02,360 --> 00:12:04,360
Speaker 2: course there's long term care coverage out there. All this

253
00:12:04,400 --> 00:12:07,160
Speaker 2: is part of a stress test because twenty twenty six

254
00:12:07,200 --> 00:12:09,199
Speaker 2: it's not just the markets that are unpredictable.

255
00:12:09,320 --> 00:12:10,200
Speaker 3: Life is two.

256
00:12:11,040 --> 00:12:14,400
Speaker 1: Here's the all Worth advice. You can't control the markets

257
00:12:14,400 --> 00:12:17,280
Speaker 1: in twenty twenty six, but you can control how well

258
00:12:17,400 --> 00:12:22,160
Speaker 1: your financial plan is prepared to face the uncertainty. Coming

259
00:12:22,200 --> 00:12:24,880
Speaker 1: up next, we're gonna break down some nuances of long

260
00:12:25,000 --> 00:12:29,200
Speaker 1: term care insurance that even savvy investors often miss. You're

261
00:12:29,200 --> 00:12:31,680
Speaker 1: listening to simply money presented by all Worth Financial on

262
00:12:31,760 --> 00:12:42,320
Speaker 1: fifty five KRC the talk station. You're listening to Simply Money,

263
00:12:42,440 --> 00:12:46,240
Speaker 1: presented by Allworth Financial on Bobsponseller along with Brian James.

264
00:12:46,640 --> 00:12:49,119
Speaker 1: If you can't listen to Simply Money every night, subscribing

265
00:12:49,160 --> 00:12:51,880
Speaker 1: get our daily podcast. You can listen the following morning

266
00:12:51,960 --> 00:12:55,240
Speaker 1: during your commute or at the gym or whatever else

267
00:12:55,320 --> 00:12:57,400
Speaker 1: you do in the evenings where you might want a

268
00:12:57,400 --> 00:13:00,560
Speaker 1: little bit of financial advice, just search Simple Money on

269
00:13:00,600 --> 00:13:04,040
Speaker 1: the iHeart app or wherever you find your podcasts. Straight

270
00:13:04,080 --> 00:13:07,040
Speaker 1: Ahead at six forty three it's our ever popular Ask

271
00:13:07,200 --> 00:13:12,480
Speaker 1: the Advisors segment, where nuanced advice meets real life wealth decisions.

272
00:13:13,440 --> 00:13:17,200
Speaker 1: We talk a lot about risk in retirement, market risk, inflation,

273
00:13:17,440 --> 00:13:22,040
Speaker 1: risk taxes, but there's one that often flies under the radar,

274
00:13:22,200 --> 00:13:25,960
Speaker 1: the cost of needing long term care. And just because

275
00:13:26,000 --> 00:13:28,880
Speaker 1: you might have looked into insurance in the past, or

276
00:13:28,960 --> 00:13:32,080
Speaker 1: might even have a policy that's fifteen twenty years old,

277
00:13:32,440 --> 00:13:35,720
Speaker 1: that doesn't mean you understand what you're really getting or

278
00:13:35,760 --> 00:13:40,120
Speaker 1: what you actually own today. Let's jump into this topic, Brian,

279
00:13:40,200 --> 00:13:43,160
Speaker 1: because it is coming up more and more and more.

280
00:13:43,160 --> 00:13:45,560
Speaker 1: I don't know about you, but I'm I'm running into

281
00:13:45,600 --> 00:13:49,959
Speaker 1: this often now with folks in their mid to late

282
00:13:50,040 --> 00:13:53,199
Speaker 1: eighties and the and their children. It's an important topic to.

283
00:13:53,160 --> 00:13:56,240
Speaker 3: Cover, yeah, and especially earlier in retirement.

284
00:13:56,320 --> 00:13:57,920
Speaker 2: This doesn't mean you should rush out and buy long

285
00:13:57,960 --> 00:14:00,160
Speaker 2: term caricters because we're talking about it, but there are

286
00:14:00,160 --> 00:14:02,160
Speaker 2: a lot of topics out there that sometimes we just

287
00:14:02,200 --> 00:14:03,959
Speaker 2: need to plan a seed and make sure that the

288
00:14:04,160 --> 00:14:06,040
Speaker 2: basics are there and we start thinking about it so

289
00:14:06,040 --> 00:14:08,360
Speaker 2: that when the time actually comes, it won't be the

290
00:14:08,360 --> 00:14:10,360
Speaker 2: first time you've started learning about these kinds of things.

291
00:14:10,360 --> 00:14:12,280
Speaker 2: So and really speaking to those of you who might

292
00:14:12,280 --> 00:14:13,880
Speaker 2: be in that kind of weird middle zone where you

293
00:14:14,440 --> 00:14:16,720
Speaker 2: too much money to qualify for Medicaid, which is the

294
00:14:16,840 --> 00:14:19,160
Speaker 2: that's the uh that's in the headlines a lot lately.

295
00:14:19,240 --> 00:14:21,280
Speaker 2: That's what we provide for people who don't have a

296
00:14:21,280 --> 00:14:24,920
Speaker 2: lot of resources to cover their healthcare, but at the

297
00:14:24,960 --> 00:14:27,920
Speaker 2: same time also not wealthy enough to self ensure, meaning

298
00:14:27,920 --> 00:14:29,720
Speaker 2: you've just got enough to pay for whatever comes down

299
00:14:29,720 --> 00:14:32,240
Speaker 2: the pike. And so that is where that that middle

300
00:14:32,320 --> 00:14:34,320
Speaker 2: zone there, that's where long term care insurance can make

301
00:14:34,400 --> 00:14:36,200
Speaker 2: some sense. But there's some things that people often miss.

302
00:14:36,200 --> 00:14:38,080
Speaker 2: That's what we want to talk about today. First off,

303
00:14:38,240 --> 00:14:40,880
Speaker 2: it's not just nursing homes. We instantly think, as soon

304
00:14:40,880 --> 00:14:43,080
Speaker 2: as I'm thinking long term care, that's a nursing home.

305
00:14:43,120 --> 00:14:44,520
Speaker 2: Well that's yes, that's of course.

306
00:14:44,320 --> 00:14:46,440
Speaker 3: Part of it. But a lot of policies actually cover

307
00:14:46,520 --> 00:14:47,360
Speaker 3: in home care, and.

308
00:14:47,360 --> 00:14:49,520
Speaker 2: A matter of fact, the insurance companies prefer it because

309
00:14:49,560 --> 00:14:51,720
Speaker 2: in the long run it's cheaper. People are happier and

310
00:14:51,760 --> 00:14:55,080
Speaker 2: healthier when they're in their own environments, and so you know,

311
00:14:55,120 --> 00:14:57,040
Speaker 2: sending a nurse or somebody there to kind of help

312
00:14:57,080 --> 00:14:59,000
Speaker 2: them through the day can be a lot a lot

313
00:14:59,040 --> 00:15:02,360
Speaker 2: better for every nobody all around. Also, assisted living, moving

314
00:15:02,400 --> 00:15:04,960
Speaker 2: into a facility that you're still pretty much independent, but

315
00:15:04,960 --> 00:15:08,600
Speaker 2: at the same time there's medical staff on on on site.

316
00:15:08,600 --> 00:15:12,120
Speaker 2: There even adult daycare somewhere you would go once a

317
00:15:12,160 --> 00:15:13,960
Speaker 2: day and come home at night. So if your goal

318
00:15:14,040 --> 00:15:16,040
Speaker 2: is to stay in your home longer, long term care

319
00:15:16,080 --> 00:15:18,600
Speaker 2: insurance can cover those things if you pick the right policy.

320
00:15:19,160 --> 00:15:20,600
Speaker 1: All right, I want to jump in with a couple

321
00:15:20,640 --> 00:15:22,600
Speaker 1: of things here. You talked about folks that are in

322
00:15:22,640 --> 00:15:26,440
Speaker 1: that middle zone, and Brian, you know, this is the

323
00:15:26,560 --> 00:15:30,200
Speaker 1: unfortunate situation that I find, you know, in doing retirement

324
00:15:30,200 --> 00:15:32,840
Speaker 1: planning for well over thirty years now, you've got the

325
00:15:32,840 --> 00:15:35,880
Speaker 1: folks that you know, they're in danger of running out

326
00:15:35,880 --> 00:15:38,200
Speaker 1: of money, and they're they're the ones that are in

327
00:15:38,280 --> 00:15:41,520
Speaker 1: danger of having to need to qualify for Medicaid. And

328
00:15:41,560 --> 00:15:44,760
Speaker 1: then you've got the folks that have way more than

329
00:15:44,880 --> 00:15:47,600
Speaker 1: enough money to self ensure. They're not worried about this

330
00:15:47,760 --> 00:15:51,680
Speaker 1: cost because if they need long term care coverage, their

331
00:15:51,800 --> 00:15:55,360
Speaker 1: lifestyle economically really isn't going to change in terms of

332
00:15:55,400 --> 00:15:58,120
Speaker 1: how much money is spent, you know, every month. It's

333
00:15:58,160 --> 00:16:00,560
Speaker 1: those folks in the middle, and that's where things get

334
00:16:00,680 --> 00:16:03,720
Speaker 1: challenging because if folks are just trying to get enough

335
00:16:03,760 --> 00:16:08,520
Speaker 1: money saved to retire, and their retirement income need or

336
00:16:08,560 --> 00:16:12,280
Speaker 1: want is about half of what it would be if

337
00:16:12,320 --> 00:16:14,640
Speaker 1: one of the two spouses goes on any kind of

338
00:16:14,640 --> 00:16:18,480
Speaker 1: long term care situation. That's the challenge because you can

339
00:16:18,520 --> 00:16:22,680
Speaker 1: make people borderline insurance poor by having them buy long

340
00:16:22,800 --> 00:16:25,920
Speaker 1: term care insurance. And there's the conundrum, what happens if

341
00:16:25,960 --> 00:16:28,400
Speaker 1: you don't get it, you know, in the worst case

342
00:16:28,440 --> 00:16:32,600
Speaker 1: scenario happens. That's where it's really critical to sit out

343
00:16:32,640 --> 00:16:35,480
Speaker 1: and look at the pros and cons of even doing insurance.

344
00:16:36,440 --> 00:16:38,840
Speaker 1: The other thing, you know, and I'm finding this I

345
00:16:38,880 --> 00:16:41,200
Speaker 1: have found this for the last ten fifteen years where

346
00:16:41,200 --> 00:16:45,000
Speaker 1: I've had clients actually use this stuff or need some

347
00:16:45,160 --> 00:16:48,640
Speaker 1: type of care. I mean the claims. The claims data

348
00:16:48,680 --> 00:16:52,840
Speaker 1: bears this well over eighty percent of all claims for

349
00:16:52,960 --> 00:16:56,600
Speaker 1: long term care coverage or for in home care. People

350
00:16:56,760 --> 00:17:01,080
Speaker 1: want to stay in their home, and understandably so, so

351
00:17:01,800 --> 00:17:04,800
Speaker 1: remember that when you're looking at this stuff, everybody wants

352
00:17:04,880 --> 00:17:07,760
Speaker 1: to stay in their home if possible. It's about getting

353
00:17:07,800 --> 00:17:11,080
Speaker 1: the right type of assistance at the right price to

354
00:17:11,200 --> 00:17:15,679
Speaker 1: make sure staying in your home is economically feasible, and

355
00:17:15,840 --> 00:17:19,760
Speaker 1: most importantly, keeping people safe in that process and not

356
00:17:20,400 --> 00:17:23,719
Speaker 1: burning out or overburdening loved ones. So we've got some

357
00:17:23,760 --> 00:17:24,840
Speaker 1: assistance coming in.

358
00:17:25,240 --> 00:17:26,720
Speaker 2: Yeah, So let's talk about some of things that do

359
00:17:26,760 --> 00:17:29,760
Speaker 2: trip people up when we're looking at what our solutions

360
00:17:29,840 --> 00:17:30,399
Speaker 2: might be for this.

361
00:17:30,480 --> 00:17:33,439
Speaker 3: So, first off, Medicare does not cover it.

362
00:17:33,440 --> 00:17:36,119
Speaker 2: There's Medicaid, which is which we'll cover because that assumes

363
00:17:36,119 --> 00:17:38,560
Speaker 2: you really don't have enough resources to support yourself. That's

364
00:17:38,600 --> 00:17:42,120
Speaker 2: what medicaid is, or the dagen Medicare does not cover it.

365
00:17:42,160 --> 00:17:43,240
Speaker 2: So I want to say that a couple of times

366
00:17:43,240 --> 00:17:45,000
Speaker 2: Medicare does not cover long term care.

367
00:17:45,520 --> 00:17:48,160
Speaker 3: So it might cover like a rehabs day.

368
00:17:48,200 --> 00:17:50,200
Speaker 2: It'll give you thirty days after some kind of major

369
00:17:50,240 --> 00:17:52,520
Speaker 2: medical procedure, but that is limited and it is temporary,

370
00:17:52,520 --> 00:17:53,959
Speaker 2: so you can't rely on the government for that.

371
00:17:54,560 --> 00:17:56,920
Speaker 3: Premiums do go up even after you buy.

372
00:17:57,000 --> 00:17:59,880
Speaker 2: You know, I think back to thirty years ago when

373
00:18:00,119 --> 00:18:02,680
Speaker 2: when I believe it was General Electric was a last

374
00:18:02,720 --> 00:18:04,680
Speaker 2: or maybe it John Hand, It doesn't matter, It doesn't

375
00:18:04,680 --> 00:18:06,879
Speaker 2: matter anymore. But anyway, somebody was so proud of the

376
00:18:06,920 --> 00:18:08,960
Speaker 2: fact that they had never ever ever raised their premiums.

377
00:18:09,040 --> 00:18:10,520
Speaker 2: That was in the history of the company, and that

378
00:18:10,600 --> 00:18:12,760
Speaker 2: was their big marketing Taglinel. And then all of a sudden

379
00:18:12,800 --> 00:18:15,360
Speaker 2: they realized that they too had missedpriced the risk and

380
00:18:15,680 --> 00:18:17,919
Speaker 2: weren't able to cover the things that they had taken on.

381
00:18:18,240 --> 00:18:22,280
Speaker 1: So these General Warth policies, yeah, these gener Warth policies.

382
00:18:22,280 --> 00:18:24,399
Speaker 1: And this is no slam on General Electric. I mean,

383
00:18:24,440 --> 00:18:28,040
Speaker 1: they I think wisely vested themselves being again and it.

384
00:18:27,920 --> 00:18:30,160
Speaker 3: So nobody remembers that Jen Warth is General Electric.

385
00:18:30,240 --> 00:18:33,639
Speaker 1: But Brian, I'm having people every two to four years

386
00:18:33,720 --> 00:18:35,879
Speaker 1: or getting these letters in the mail saying, hey, if

387
00:18:35,920 --> 00:18:38,040
Speaker 1: you want to keep what you have, great, But the

388
00:18:38,080 --> 00:18:40,760
Speaker 1: premiums are going up fifteen to twenty percent. I mean,

389
00:18:40,800 --> 00:18:42,560
Speaker 1: this is happening, and I know a lot of our

390
00:18:42,600 --> 00:18:47,000
Speaker 1: listeners out there have experienced this happening. It's real, and

391
00:18:47,200 --> 00:18:50,359
Speaker 1: because twenty five thirty years ago, when these policies first

392
00:18:50,359 --> 00:18:53,399
Speaker 1: came out, there was not a lot of underwriting history

393
00:18:53,400 --> 00:18:57,680
Speaker 1: on these things, and they were too inexpensively priced based

394
00:18:57,680 --> 00:19:00,480
Speaker 1: on the claims data. So you know, it's dollars in

395
00:19:00,640 --> 00:19:03,080
Speaker 1: dollars out from an insurance company standpoint, they got to

396
00:19:03,080 --> 00:19:05,320
Speaker 1: make a little bit of profit. But if they pay

397
00:19:05,480 --> 00:19:08,320
Speaker 1: way more out in claims than they're taking in in premiums,

398
00:19:08,359 --> 00:19:11,040
Speaker 1: they obviously go out of business and then nobody gets

399
00:19:11,040 --> 00:19:15,000
Speaker 1: their their benefits. So that's a real situation that has

400
00:19:15,040 --> 00:19:17,520
Speaker 1: been happening to people. I didn't mean to interrupt.

401
00:19:17,240 --> 00:19:17,960
Speaker 3: No, it's okay.

402
00:19:18,160 --> 00:19:19,920
Speaker 2: So yeah, and this is something to look at now.

403
00:19:19,960 --> 00:19:22,600
Speaker 2: If you wait, you might not qualify. So early sixties,

404
00:19:22,640 --> 00:19:24,919
Speaker 2: even late fifties, that's the good window there. There are

405
00:19:24,960 --> 00:19:26,840
Speaker 2: policies out there that will let you share benefits with

406
00:19:26,840 --> 00:19:29,159
Speaker 2: a spouse. You can pay with health savings accounts, and

407
00:19:29,200 --> 00:19:31,520
Speaker 2: there's also something called a hybrid policy that will offer

408
00:19:31,520 --> 00:19:32,400
Speaker 2: a death benefit too.

409
00:19:32,440 --> 00:19:34,040
Speaker 3: So lots of moving parts to look at. There.

410
00:19:35,119 --> 00:19:37,879
Speaker 1: Here's the all Worth advice. Long term care insurance is

411
00:19:38,000 --> 00:19:42,200
Speaker 1: more complicated, but it's also more flexible than most people realize.

412
00:19:42,320 --> 00:19:44,919
Speaker 1: Understand the fine print. Now get out in front of

413
00:19:44,960 --> 00:19:48,119
Speaker 1: this so that you're not caught off guard later next

414
00:19:48,200 --> 00:19:51,320
Speaker 1: why the next few years could present a once in

415
00:19:51,400 --> 00:19:54,840
Speaker 1: a generation opportunity to keep more of what you've worked

416
00:19:54,880 --> 00:19:57,879
Speaker 1: hard and earned. You're listening to Simply Money presented by

417
00:19:57,880 --> 00:20:01,159
Speaker 1: all Worth Financial on fifty five KRC, the talk station.

418
00:20:06,080 --> 00:20:08,680
Speaker 1: You're listening to Simply Money presented by all Worth Financial.

419
00:20:08,680 --> 00:20:13,359
Speaker 1: I'm Bob Sponsorer along with Brian James, Markets fluctuate and

420
00:20:13,440 --> 00:20:17,640
Speaker 1: tax laws of alve Investors are navigating a financial environment

421
00:20:17,720 --> 00:20:22,560
Speaker 1: that demands more foresight and examination than ever for those

422
00:20:22,640 --> 00:20:27,600
Speaker 1: with significant wealth. These shifts don't just impact annual tax filings.

423
00:20:28,119 --> 00:20:33,160
Speaker 1: They carry long term implications for investment outcomes, retirement readiness

424
00:20:33,560 --> 00:20:36,800
Speaker 1: and legacy planning. Brian, let's get into some of the

425
00:20:36,840 --> 00:20:39,800
Speaker 1: complexities here. What's going on and what should we be

426
00:20:39,880 --> 00:20:43,359
Speaker 1: thinking about as we juggle all these balls in the

427
00:20:43,400 --> 00:20:46,879
Speaker 1: air about tax efficiency, investment returns and making sure we

428
00:20:46,880 --> 00:20:48,639
Speaker 1: don't run out of money in retirement.

429
00:20:48,920 --> 00:20:50,760
Speaker 2: Well, That's what it's all about, isn't it, Bob, Just

430
00:20:50,800 --> 00:20:53,399
Speaker 2: not letting the bucket run dry. So yeah, lots of

431
00:20:53,400 --> 00:20:55,520
Speaker 2: moving parts. People have to think about that they didn't

432
00:20:55,640 --> 00:20:59,560
Speaker 2: used to. Because you're a high earner, there's just more

433
00:20:59,560 --> 00:21:02,000
Speaker 2: moving part all this. You often hit hit your deductions

434
00:21:02,000 --> 00:21:06,320
Speaker 2: and your credit limits faster. And the capital gains income

435
00:21:06,320 --> 00:21:08,399
Speaker 2: tax management. So capital gain is one of the biggest

436
00:21:08,480 --> 00:21:10,560
Speaker 2: drivers of tax exposure. If I own, if I bought

437
00:21:10,600 --> 00:21:12,399
Speaker 2: something for ten and I sold it for twenty, that

438
00:21:12,440 --> 00:21:14,320
Speaker 2: means I made ten bucks to share on it or

439
00:21:14,320 --> 00:21:16,440
Speaker 2: whatever that is. That means the I r S gets

440
00:21:16,440 --> 00:21:18,359
Speaker 2: a chunk of it too, in the form of capital gains.

441
00:21:18,600 --> 00:21:19,160
Speaker 3: And a lot of.

442
00:21:19,119 --> 00:21:21,520
Speaker 2: Cases, if I'm a you know, if I'm a high earner,

443
00:21:21,560 --> 00:21:23,240
Speaker 2: then i may be in a situation where I've now

444
00:21:23,320 --> 00:21:25,760
Speaker 2: got a concentrated stock position. This is where we know

445
00:21:25,840 --> 00:21:28,320
Speaker 2: locally it's a lot of Procter and Gamble people and

446
00:21:28,400 --> 00:21:30,359
Speaker 2: Kroger people who have been there, you know, spend twenty

447
00:21:30,359 --> 00:21:33,159
Speaker 2: thirty years at those large fortune five hundred companies. A

448
00:21:33,200 --> 00:21:36,119
Speaker 2: lot of the compensation is made up of stock grants

449
00:21:36,320 --> 00:21:38,159
Speaker 2: and or options. That means you ended but with the

450
00:21:38,160 --> 00:21:40,679
Speaker 2: giant pile of it, and there's risk in that we

451
00:21:40,720 --> 00:21:42,520
Speaker 2: don't have to look too far and that there's nothing

452
00:21:42,520 --> 00:21:44,240
Speaker 2: wrong with Proctor, Gamble, Kroger and all that, But there

453
00:21:44,240 --> 00:21:47,600
Speaker 2: are plenty of Life is littered with lots of companies

454
00:21:47,720 --> 00:21:50,120
Speaker 2: with terrifying stories about how they evaporated, even if it's

455
00:21:50,119 --> 00:21:52,000
Speaker 2: in the short term. I was just having a conversation

456
00:21:52,040 --> 00:21:54,760
Speaker 2: with somebody last week who's in this exact situation. Procter

457
00:21:54,840 --> 00:21:57,600
Speaker 2: and Gamble is, you know, goes through these waves of

458
00:21:57,680 --> 00:21:59,879
Speaker 2: laying off people in that kind of thing, So everybody

459
00:22:00,040 --> 00:22:01,399
Speaker 2: has to start thinking about what they want to do

460
00:22:01,920 --> 00:22:05,159
Speaker 2: and what winds up happening. Is they all remember the

461
00:22:05,280 --> 00:22:08,480
Speaker 2: Dirk Yager years from the early two thousand when Dirk

462
00:22:08,520 --> 00:22:10,679
Speaker 2: Yager was installed as the CEO. He came up with

463
00:22:10,720 --> 00:22:12,800
Speaker 2: his Millennium two thousand plan or whatever it was, and

464
00:22:12,800 --> 00:22:15,920
Speaker 2: the market insta hated it and took away about fifty

465
00:22:15,960 --> 00:22:18,240
Speaker 2: percent of the value of Procter and Gamble in a

466
00:22:18,280 --> 00:22:19,600
Speaker 2: matter of about six weeks.

467
00:22:20,160 --> 00:22:20,920
Speaker 3: And that can happen.

468
00:22:20,960 --> 00:22:22,960
Speaker 2: You know, if you make the stock market mad, the

469
00:22:23,000 --> 00:22:24,879
Speaker 2: hert is going to stampede and take your retirement with it.

470
00:22:25,000 --> 00:22:28,040
Speaker 2: Procter and gambled itself, obviously, is in fine condition today

471
00:22:28,080 --> 00:22:30,639
Speaker 2: and it came back roaring and better than ever. But

472
00:22:30,680 --> 00:22:32,600
Speaker 2: if you were somebody who wanted to retire from P

473
00:22:32,640 --> 00:22:34,880
Speaker 2: ANDNG in two thousand and one, two thousand and two

474
00:22:35,080 --> 00:22:38,040
Speaker 2: when that happened, that probably changed your life because you

475
00:22:38,119 --> 00:22:40,240
Speaker 2: had so much tied up. And again that has nothing

476
00:22:40,240 --> 00:22:41,840
Speaker 2: to do with P ANDNG being a bad company, but

477
00:22:41,880 --> 00:22:45,000
Speaker 2: the market can smack anything around in the relatively short term.

478
00:22:45,680 --> 00:22:48,679
Speaker 1: Yeah, And that's the unfortunate thing. And we're not calling

479
00:22:48,720 --> 00:22:52,200
Speaker 1: a doomsday scenario for Procter and Gamble, a great company,

480
00:22:52,200 --> 00:22:55,600
Speaker 1: well run company. But the unfortunate thing, Brian, is these

481
00:22:55,680 --> 00:22:58,360
Speaker 1: kind of what i'll call black Swan type of events.

482
00:22:58,400 --> 00:23:02,320
Speaker 1: They usually only happened about every twenty to twenty five years.

483
00:23:03,000 --> 00:23:07,199
Speaker 1: And the generation that experienced that is way past, you know,

484
00:23:07,800 --> 00:23:10,639
Speaker 1: gone and retired, and the folks that are retiring today

485
00:23:10,760 --> 00:23:14,720
Speaker 1: don't remember that those days twenty to twenty five years ago.

486
00:23:14,840 --> 00:23:18,200
Speaker 1: And history doesn't always repeat itself, but it often rhymes.

487
00:23:18,800 --> 00:23:20,520
Speaker 1: And that's where you got to stay, you know, you

488
00:23:20,600 --> 00:23:22,840
Speaker 1: got to remember too much of any one thing can

489
00:23:22,960 --> 00:23:25,879
Speaker 1: blow up on you, no matter how well managed or

490
00:23:25,880 --> 00:23:28,439
Speaker 1: how well intentioned people are, and that get you know,

491
00:23:28,480 --> 00:23:30,800
Speaker 1: there's ways to get around this. As far as this

492
00:23:30,920 --> 00:23:34,200
Speaker 1: over concentration thing, you can stage it in over time.

493
00:23:34,720 --> 00:23:38,280
Speaker 1: You can put collar strategies in place, you can direct index.

494
00:23:38,359 --> 00:23:41,080
Speaker 1: There's a lot of things you can do to you know,

495
00:23:41,160 --> 00:23:48,080
Speaker 1: responsibly and tax efficiently, unwind a concentrated a concentrated position

496
00:23:48,160 --> 00:23:50,960
Speaker 1: in anyone's stock and to say nothing of some of

497
00:23:51,000 --> 00:23:54,760
Speaker 1: the charitable you know, opportunities out there with donor advise funds,

498
00:23:54,840 --> 00:23:57,199
Speaker 1: charitable remainder trust. There's a lot of things you can

499
00:23:57,240 --> 00:24:00,879
Speaker 1: do out there. Let's get into a state gift tax

500
00:24:01,119 --> 00:24:03,840
Speaker 1: exemption planning. I mean, I know, with the the new

501
00:24:03,840 --> 00:24:05,720
Speaker 1: bill that just got passed that took a lot of

502
00:24:05,800 --> 00:24:08,520
Speaker 1: uncertainty out of there as far as you know, making

503
00:24:08,560 --> 00:24:12,080
Speaker 1: permanent the large unified credit which will now be up

504
00:24:12,119 --> 00:24:16,120
Speaker 1: to you almost fifteen million dollars per person. But there

505
00:24:16,160 --> 00:24:18,159
Speaker 1: are some things that you got to plan around, you know,

506
00:24:18,200 --> 00:24:20,040
Speaker 1: in that regard to right, Brian.

507
00:24:19,840 --> 00:24:22,760
Speaker 2: You know, one of the more most impactful provisions for

508
00:24:22,800 --> 00:24:25,480
Speaker 2: these high network families, that is the preservation of the

509
00:24:25,560 --> 00:24:28,639
Speaker 2: pretty high historically speaking, the relatively high federal estate and

510
00:24:28,680 --> 00:24:31,520
Speaker 2: gift tax exemptions. Those are going to increase to fifteen

511
00:24:31,600 --> 00:24:33,800
Speaker 2: million dollars per person. In other words, what I'm saying

512
00:24:33,880 --> 00:24:37,040
Speaker 2: to you out there, dear listener, is that don't worry

513
00:24:37,040 --> 00:24:41,000
Speaker 2: about estate taxes unless you yourself individually own more than

514
00:24:41,040 --> 00:24:44,280
Speaker 2: fifteen million dollars worth of assets. I mean thirty million

515
00:24:44,320 --> 00:24:47,360
Speaker 2: dollars for a for a married couple, if titled properly.

516
00:24:47,400 --> 00:24:49,640
Speaker 2: That's its own radio segment. We'll leave that there for now.

517
00:24:50,280 --> 00:24:53,159
Speaker 2: But state taxes are not an issue. There was the

518
00:24:53,160 --> 00:24:54,960
Speaker 2: threat that it might come back where this all comes from,

519
00:24:55,000 --> 00:24:58,280
Speaker 2: as President George Bush the second a long time ago

520
00:24:58,720 --> 00:25:01,080
Speaker 2: started the process of incre seeing how much was being

521
00:25:01,119 --> 00:25:03,199
Speaker 2: passed through, and I believe it would used to be

522
00:25:03,240 --> 00:25:06,199
Speaker 2: six hundred thousand dollars. Anything above that, which is not

523
00:25:06,200 --> 00:25:07,720
Speaker 2: that hard of a level to get to anymore. Anything

524
00:25:07,760 --> 00:25:10,280
Speaker 2: above that was deemed with the state taxes. But now

525
00:25:10,320 --> 00:25:12,480
Speaker 2: that number is fifteen million. So state taxes are not

526
00:25:12,520 --> 00:25:14,640
Speaker 2: a thing anymore. That could have gone away, but those

527
00:25:14,640 --> 00:25:16,640
Speaker 2: were extended and actually increased as.

528
00:25:16,520 --> 00:25:19,160
Speaker 3: A result of the Big Beautiful Bill and so forth.

529
00:25:19,200 --> 00:25:21,560
Speaker 3: So other things out there.

530
00:25:21,600 --> 00:25:24,159
Speaker 2: In your vocable life insurance trust, that's a way to

531
00:25:24,240 --> 00:25:27,159
Speaker 2: keep life insurance proceeds out of your estate. And you

532
00:25:27,160 --> 00:25:29,880
Speaker 2: can also apply valuation discounts. If you've got a business

533
00:25:30,080 --> 00:25:32,600
Speaker 2: or real estate interest, there are ways that the tax

534
00:25:32,680 --> 00:25:35,560
Speaker 2: laws will allow you to affect that valuation to make

535
00:25:35,560 --> 00:25:37,719
Speaker 2: it a little more different than here's what it is.

536
00:25:38,000 --> 00:25:39,520
Speaker 2: If I could if I sold it on the open market,

537
00:25:39,560 --> 00:25:41,800
Speaker 2: it's worth this. But there are different things you can

538
00:25:41,800 --> 00:25:44,359
Speaker 2: take advantage of the tax code, if you'll understand all

539
00:25:44,400 --> 00:25:44,880
Speaker 2: that properly.

540
00:25:45,720 --> 00:25:47,359
Speaker 1: All right, those are some of the kind of what

541
00:25:47,520 --> 00:25:50,000
Speaker 1: off unique strategies out there. But I want to talk

542
00:25:50,040 --> 00:25:53,480
Speaker 1: about what most people should be doing, and Brian, what

543
00:25:53,520 --> 00:25:55,960
Speaker 1: we do every day and we run into this situation

544
00:25:56,080 --> 00:25:58,879
Speaker 1: with almost everybody we work with, and that's doing just

545
00:25:59,040 --> 00:26:02,959
Speaker 1: good old proactive cash flow and tax planning. What do

546
00:26:03,040 --> 00:26:06,159
Speaker 1: I mean by that? During that window between when you

547
00:26:06,240 --> 00:26:11,040
Speaker 1: retire and when required minimum distributions kick in, examine whether,

548
00:26:11,280 --> 00:26:15,400
Speaker 1: if or when and how much rawth conversions makes sense

549
00:26:15,440 --> 00:26:18,239
Speaker 1: for you, factoring in how that's going to impact your

550
00:26:18,240 --> 00:26:22,440
Speaker 1: overall tax strategy. You dovetail that with your social security

551
00:26:22,480 --> 00:26:25,679
Speaker 1: claiming strategy. How to take some capital gains. There's a

552
00:26:25,680 --> 00:26:27,600
Speaker 1: lot of things you can do there if you do

553
00:26:27,680 --> 00:26:32,080
Speaker 1: some planning and get with a good CPA financial advisor

554
00:26:32,280 --> 00:26:34,760
Speaker 1: or in the best case, scenario, a combination of both

555
00:26:34,800 --> 00:26:37,520
Speaker 1: of them working together. Here's the all Worth advice. A

556
00:26:37,560 --> 00:26:41,040
Speaker 1: flexible strategy that aligns with your goals and adapts to

557
00:26:41,160 --> 00:26:45,920
Speaker 1: policy changes can help reduce risk, boost after tax returns,

558
00:26:46,240 --> 00:26:49,439
Speaker 1: and preserve more of your wealth. Coming up next, we

559
00:26:49,520 --> 00:26:53,600
Speaker 1: are tackling the real questions that listeners are asking, maybe

560
00:26:53,640 --> 00:26:56,720
Speaker 1: even ones you've been wondering about yourself. You're listening to

561
00:26:56,760 --> 00:26:59,840
Speaker 1: Simply Money presented by all Worth Financial on fifty five KRC,

562
00:27:00,000 --> 00:27:08,159
Speaker 1: the talk station. You're listening to Simply Money presented by

563
00:27:08,160 --> 00:27:11,280
Speaker 1: all Worth Financial. I'm Bob Sponseller along with Brian James.

564
00:27:11,680 --> 00:27:13,639
Speaker 1: If you have a financial question you'd like for us

565
00:27:13,680 --> 00:27:15,920
Speaker 1: to answer, there's a red button you can click while

566
00:27:15,960 --> 00:27:18,680
Speaker 1: you're listening to the show right there on the iHeart app.

567
00:27:18,760 --> 00:27:22,280
Speaker 1: Simply record your question and it will come straight to us.

568
00:27:22,280 --> 00:27:26,080
Speaker 1: Speaking of questions, Brian, let's hear from Brad and mount

569
00:27:26,119 --> 00:27:27,760
Speaker 1: look up in Mountains.

570
00:27:27,480 --> 00:27:32,280
Speaker 3: Please explain what the survivor penalty is? Yeah, Brad, great question.

571
00:27:32,359 --> 00:27:34,680
Speaker 2: So that's that's something that has come up that comes

572
00:27:34,760 --> 00:27:37,520
Speaker 2: up all the time. We're talking about taxes and what

573
00:27:37,680 --> 00:27:40,159
Speaker 2: happens after you lose a spouse and all of a sudden.

574
00:27:40,200 --> 00:27:42,760
Speaker 2: You have to switch from married and set us out

575
00:27:42,760 --> 00:27:45,199
Speaker 2: all the emotional that goes of that. You also have

576
00:27:45,240 --> 00:27:48,679
Speaker 2: to insult injury switch from married filing jointly to single.

577
00:27:49,040 --> 00:27:50,719
Speaker 2: So the reason this is the thing is because the

578
00:27:50,720 --> 00:27:53,280
Speaker 2: income thresholds for the tax brackets are much lower for

579
00:27:53,400 --> 00:27:56,159
Speaker 2: single filers. Right when I hear the word lower and taxes,

580
00:27:56,160 --> 00:27:57,679
Speaker 2: I usually get a good feeling, but this is a

581
00:27:57,680 --> 00:27:58,080
Speaker 2: bad one.

582
00:27:58,200 --> 00:27:58,240
Speaker 3: Me.

583
00:27:58,359 --> 00:28:00,000
Speaker 2: What that means is that if you hit the threat

584
00:28:00,040 --> 00:28:02,720
Speaker 2: usholds sooner because they're lower, that means your taxes go

585
00:28:02,800 --> 00:28:04,960
Speaker 2: up quicker, so the survivor can get pushed into a

586
00:28:05,040 --> 00:28:05,960
Speaker 2: high tax bracket.

587
00:28:06,040 --> 00:28:07,159
Speaker 3: You also lose.

588
00:28:06,920 --> 00:28:10,399
Speaker 2: The one standard deduction, and so that the standard deduction

589
00:28:10,440 --> 00:28:12,800
Speaker 2: in twenty twenty five is around fourteen six versus twenty

590
00:28:12,880 --> 00:28:15,400
Speaker 2: nine two for joint filers over sixty five.

591
00:28:15,480 --> 00:28:16,119
Speaker 3: That's a problem.

592
00:28:16,440 --> 00:28:18,359
Speaker 2: Single person may get taxed a little more in the

593
00:28:18,440 --> 00:28:21,560
Speaker 2: Social Security IRMA kicks in a little sooner because of again,

594
00:28:21,600 --> 00:28:24,040
Speaker 2: because of the way all this math works. So again,

595
00:28:24,720 --> 00:28:27,400
Speaker 2: this is really the way to avoid this. You can't

596
00:28:27,440 --> 00:28:29,240
Speaker 2: change the tax brackets, they are what they are, but

597
00:28:29,359 --> 00:28:30,720
Speaker 2: control what you can control.

598
00:28:30,760 --> 00:28:32,440
Speaker 3: This is where roth conversions come in.

599
00:28:33,000 --> 00:28:35,000
Speaker 2: If you have a significant pile of money and a

600
00:28:35,000 --> 00:28:38,200
Speaker 2: pre tax IRA, you might look at paying taxes on

601
00:28:38,240 --> 00:28:40,520
Speaker 2: then now pulling that taxation forward.

602
00:28:40,240 --> 00:28:42,320
Speaker 3: So that your rmds will be reduced.

603
00:28:42,800 --> 00:28:45,120
Speaker 2: You can also, if it's a concern of draining your

604
00:28:45,120 --> 00:28:47,480
Speaker 2: own estate and therefore taking it away from your kids

605
00:28:47,520 --> 00:28:50,200
Speaker 2: life insurance, might make some sense to create an estate

606
00:28:50,240 --> 00:28:52,719
Speaker 2: at your death to offset some of that. And jo

607
00:28:52,880 --> 00:28:54,880
Speaker 2: just make sure you this all starts with what we

608
00:28:54,920 --> 00:28:56,720
Speaker 2: always say, Bob. This all starts with knowing where you

609
00:28:56,760 --> 00:28:58,880
Speaker 2: are in the first place. So understand where your situation

610
00:28:58,960 --> 00:29:01,520
Speaker 2: is now, then you can look what if Heaven forbid

611
00:29:01,560 --> 00:29:03,360
Speaker 2: I lose my spouse. Let's move on to Joe in

612
00:29:03,360 --> 00:29:05,360
Speaker 2: Blue Ash, who has a question about, Hey, go figure

613
00:29:05,360 --> 00:29:08,520
Speaker 2: it roth conversion. How do you balance wroth conversions with

614
00:29:08,680 --> 00:29:10,960
Speaker 2: staying under medicare premium cliffs?

615
00:29:12,320 --> 00:29:15,120
Speaker 1: Great question, Joe. Let's talk about what these medicare premium

616
00:29:15,120 --> 00:29:17,880
Speaker 1: cliffs are. There's something called IERMA, and I'm not going

617
00:29:17,920 --> 00:29:19,920
Speaker 1: to get into it's a big long acronym, but it

618
00:29:19,960 --> 00:29:23,200
Speaker 1: basically means what Joe's asking about. If you have too

619
00:29:23,320 --> 00:29:27,000
Speaker 1: much earned income, you pay more in premium on your Medicare.

620
00:29:27,480 --> 00:29:30,560
Speaker 1: So what we do what it sts with is what

621
00:29:30,600 --> 00:29:34,160
Speaker 1: we talk about all the time. You developing an income

622
00:29:34,520 --> 00:29:38,160
Speaker 1: strategy and along with that a Wroth conversion strategy. So

623
00:29:38,240 --> 00:29:41,280
Speaker 1: when you layer in things like a potential Wroth conversion

624
00:29:41,360 --> 00:29:45,080
Speaker 1: along with maybe pension, social Security, other income you've got

625
00:29:45,120 --> 00:29:47,760
Speaker 1: coming in, we want to make sure we walk right

626
00:29:47,840 --> 00:29:51,200
Speaker 1: up to that line where you take advantage of the

627
00:29:51,240 --> 00:29:55,280
Speaker 1: great opportunities that Wroth conversions give you, but don't cross

628
00:29:55,400 --> 00:29:59,080
Speaker 1: over that line from an income standpoint and start to

629
00:29:59,160 --> 00:30:03,160
Speaker 1: irrevocably drive up your Medicare premiums. There's some great there

630
00:30:03,200 --> 00:30:05,640
Speaker 1: are some great tools out there that help us do that.

631
00:30:05,760 --> 00:30:07,760
Speaker 1: We sit down and do that with every client. I

632
00:30:07,800 --> 00:30:10,280
Speaker 1: know a lot of good CPAs are doing that as well.

633
00:30:10,600 --> 00:30:14,760
Speaker 1: But again it comes down to the difference between tax preparation,

634
00:30:15,000 --> 00:30:17,720
Speaker 1: which is what eighty to ninety percent of people just do.

635
00:30:17,960 --> 00:30:20,200
Speaker 1: They just mail in all their stuff and wait for

636
00:30:20,240 --> 00:30:24,440
Speaker 1: the answer to come back from their CPA versus proactive

637
00:30:24,560 --> 00:30:27,640
Speaker 1: tax planning where you sit down and run some actual

638
00:30:27,680 --> 00:30:30,960
Speaker 1: scenarios on if I do this, what happens over here,

639
00:30:31,400 --> 00:30:35,080
Speaker 1: and you balance it out and you maximize your income strategy.

640
00:30:35,280 --> 00:30:37,560
Speaker 1: All right, let's hear from Laura and Villa Hills.

641
00:30:38,240 --> 00:30:41,120
Speaker 3: I've got a concentrated stock position from a former employer.

642
00:30:41,640 --> 00:30:43,920
Speaker 1: What's the best way to onwind that without triggering a

643
00:30:44,000 --> 00:30:44,840
Speaker 1: huge tax bill.

644
00:30:45,760 --> 00:30:48,400
Speaker 2: Well, congratulations, Laura, this is a good problem to have.

645
00:30:48,520 --> 00:30:50,480
Speaker 2: Concentrated stock means just that I got a lot of

646
00:30:50,480 --> 00:30:53,160
Speaker 2: my networth tied up in a stock that is mostly

647
00:30:53,240 --> 00:30:55,760
Speaker 2: because of an employment, or perhaps you own the company

648
00:30:56,400 --> 00:30:56,840
Speaker 2: or whatever.

649
00:30:56,920 --> 00:30:58,840
Speaker 3: But so then the risk there if it's.

650
00:30:58,760 --> 00:31:01,280
Speaker 2: A concentrated stock position usually implies that the thing did

651
00:31:01,280 --> 00:31:03,520
Speaker 2: pretty well, So congratulations, it must have grown a lot.

652
00:31:03,560 --> 00:31:06,400
Speaker 2: But that also means that there's usually capital gains in

653
00:31:06,400 --> 00:31:09,680
Speaker 2: the mix here, So that's usually the concern.

654
00:31:09,720 --> 00:31:12,520
Speaker 3: If it is a position that is not inside.

655
00:31:12,240 --> 00:31:14,160
Speaker 2: Of a retirement plan, not an IRA, not a four

656
00:31:14,200 --> 00:31:16,560
Speaker 2: oh one K, nothing like that, then it's exposed to

657
00:31:16,720 --> 00:31:19,560
Speaker 2: capital gains taxes, which actually are slightly more favorable than

658
00:31:19,640 --> 00:31:20,520
Speaker 2: income taxes.

659
00:31:20,600 --> 00:31:22,600
Speaker 3: But taxes are still taxes. So what do we do

660
00:31:22,640 --> 00:31:23,120
Speaker 3: about that?

661
00:31:23,440 --> 00:31:26,440
Speaker 2: Well, the first thing I would look at is if

662
00:31:26,480 --> 00:31:28,360
Speaker 2: you are some of the easier things to handle, If

663
00:31:28,360 --> 00:31:31,000
Speaker 2: you are already charitably inclined, then you might look at

664
00:31:31,160 --> 00:31:32,920
Speaker 2: if you write checks to a church or you know,

665
00:31:33,040 --> 00:31:35,800
Speaker 2: some five oh one C three type organization every single year,

666
00:31:36,280 --> 00:31:38,200
Speaker 2: then First off, you may have lost your deduction on

667
00:31:38,240 --> 00:31:40,800
Speaker 2: that a few years ago twenty seventeen when the Tax

668
00:31:40,840 --> 00:31:44,400
Speaker 2: Cuts and Jobs Act increased the standard deduction and therefore

669
00:31:44,520 --> 00:31:47,800
Speaker 2: losing the deduction or just getting it for free basically.

670
00:31:48,000 --> 00:31:50,400
Speaker 2: So that's a case where you might donate some of

671
00:31:50,400 --> 00:31:52,520
Speaker 2: that stocks, just donate the shares. If you do that

672
00:31:53,080 --> 00:31:56,720
Speaker 2: donation of appreciated shares, then will you're passing the gain

673
00:31:56,800 --> 00:31:59,280
Speaker 2: on to an entity that doesn't pay taxes Anyway, you

674
00:31:59,320 --> 00:32:01,520
Speaker 2: get the deduction and for the full dollar amount whatever

675
00:32:01,560 --> 00:32:03,600
Speaker 2: it was worth a day you donated it, that five

676
00:32:03,640 --> 00:32:05,800
Speaker 2: OHO one C three will turn around and immediately sell

677
00:32:05,800 --> 00:32:08,200
Speaker 2: it and you use it for whatever their purposes are,

678
00:32:08,360 --> 00:32:10,840
Speaker 2: they will not pay any capital gains. So matter of fact,

679
00:32:10,840 --> 00:32:12,680
Speaker 2: I run across people all the time that are writing

680
00:32:12,800 --> 00:32:16,000
Speaker 2: checks to these organizations, which to me is a waste

681
00:32:16,040 --> 00:32:19,640
Speaker 2: of everybody's tax dollars because they could simply give the

682
00:32:19,640 --> 00:32:21,560
Speaker 2: shares if five oh one C three gets the same

683
00:32:21,560 --> 00:32:24,400
Speaker 2: amount of money and no sacrifice by really by anybody.

684
00:32:24,600 --> 00:32:26,440
Speaker 2: But if that's not what you have in mind, then

685
00:32:26,480 --> 00:32:28,280
Speaker 2: you're going to be looking at something called an exchange

686
00:32:28,280 --> 00:32:30,640
Speaker 2: fund or a swap fund. This is where if I

687
00:32:30,640 --> 00:32:33,320
Speaker 2: have a big pile of PNG. I can band together

688
00:32:33,360 --> 00:32:35,120
Speaker 2: with people who have a bunch of Kroger, or a

689
00:32:35,120 --> 00:32:37,040
Speaker 2: bunch of IBM, or a bunch of Apple and Video,

690
00:32:37,080 --> 00:32:40,000
Speaker 2: whatever it is. We all throw our shares into a pile,

691
00:32:40,080 --> 00:32:42,600
Speaker 2: and then we each take a proportionate share of the

692
00:32:42,640 --> 00:32:46,000
Speaker 2: resulting pile of stuff. This is not a sale. It's

693
00:32:46,000 --> 00:32:47,720
Speaker 2: not nearly as simply as I'm making it right now.

694
00:32:47,760 --> 00:32:50,000
Speaker 2: It's not a sales, so it doesn't trigger taxes. But

695
00:32:50,080 --> 00:32:52,080
Speaker 2: I do have now I have a representation of a

696
00:32:52,080 --> 00:32:53,800
Speaker 2: lot of different companies. It's a way to spread that

697
00:32:53,920 --> 00:32:56,440
Speaker 2: risk out. So those are two you're either charitab being inclined,

698
00:32:56,600 --> 00:32:58,600
Speaker 2: or you want to spread out of diversification, and sometimes

699
00:32:58,640 --> 00:33:01,880
Speaker 2: both of those can help. Bill and Mason is retired

700
00:33:01,920 --> 00:33:04,240
Speaker 2: and has got some questions about rmds.

701
00:33:04,680 --> 00:33:06,680
Speaker 3: My wife and I are retired and we don't need

702
00:33:06,720 --> 00:33:09,760
Speaker 3: our rm ds to live on. What's the smartest options

703
00:33:09,760 --> 00:33:10,960
Speaker 3: for putting our money to work?

704
00:33:12,560 --> 00:33:15,720
Speaker 1: Well, Bill, I obviously don't know whether you're retired and

705
00:33:15,840 --> 00:33:19,160
Speaker 1: not yes yet at RMD AGE or whether you're already

706
00:33:19,200 --> 00:33:22,200
Speaker 1: at rmd AD, so the answer is slightly different depending

707
00:33:22,200 --> 00:33:25,320
Speaker 1: on what situation you're in. So let's brief the cover

708
00:33:25,440 --> 00:33:29,520
Speaker 1: both if you're tired and not yet at that RMD age,

709
00:33:30,520 --> 00:33:33,320
Speaker 1: there's where the opportunity is and a big one. You know,

710
00:33:33,360 --> 00:33:36,360
Speaker 1: you just retired, your income is lower, and you've got

711
00:33:36,400 --> 00:33:39,480
Speaker 1: an opportunity to do these WROTH conversions that we've been

712
00:33:39,480 --> 00:33:42,200
Speaker 1: talking about. You know, you sit down and sketch that

713
00:33:42,360 --> 00:33:44,760
Speaker 1: out and try to get as much money moved into

714
00:33:44,840 --> 00:33:47,760
Speaker 1: roth IRA's at the lowest possible tax rate. You can.

715
00:33:48,200 --> 00:33:52,080
Speaker 1: Wonderful strategy there if you're already at RMD age. And

716
00:33:52,160 --> 00:33:55,080
Speaker 1: I run into this a lot with folks that are

717
00:33:55,080 --> 00:33:58,000
Speaker 1: in their late seventies and are still writing checks to

718
00:33:58,040 --> 00:34:01,600
Speaker 1: their church. If you're charitably inclined to tie to your church,

719
00:34:02,240 --> 00:34:05,800
Speaker 1: you give other money to other ministries or other charities.

720
00:34:06,120 --> 00:34:09,280
Speaker 1: A lot of people are still making cash gifts where

721
00:34:09,320 --> 00:34:12,440
Speaker 1: they could be taking IRA money beginning at age seventy

722
00:34:12,480 --> 00:34:16,640
Speaker 1: and a half and diverting that IRA money directly to charity.

723
00:34:17,040 --> 00:34:19,880
Speaker 1: And if you do that, the amount of that charitable

724
00:34:19,920 --> 00:34:22,480
Speaker 1: gift does not even hit your ten forty and is

725
00:34:22,520 --> 00:34:25,279
Speaker 1: not even counted as taxable income. You don't get a

726
00:34:25,320 --> 00:34:29,600
Speaker 1: deduction for that gift. But it's even better, the RMD

727
00:34:29,800 --> 00:34:33,520
Speaker 1: does not hit your tax returns taxable income. So that's

728
00:34:34,440 --> 00:34:37,480
Speaker 1: those are two scenarios you can look at. And then

729
00:34:37,600 --> 00:34:40,439
Speaker 1: if worst case scenario, if you don't need the rm ds,

730
00:34:40,480 --> 00:34:42,520
Speaker 1: you've maxed out what you want to give to charity,

731
00:34:42,920 --> 00:34:45,640
Speaker 1: you just convert whatever is left in those rm ds

732
00:34:45,719 --> 00:34:48,759
Speaker 1: over to a taxable investment account. Because you brought up

733
00:34:48,840 --> 00:34:51,240
Speaker 1: keeping that money, you know, working for you and putting

734
00:34:51,280 --> 00:34:54,240
Speaker 1: it to work. Put it in a taxable, tax efficient

735
00:34:54,600 --> 00:34:57,319
Speaker 1: brokerage fund and let it grow long term for your

736
00:34:57,400 --> 00:35:00,279
Speaker 1: kids and grand kids. Coming up next, why you could

737
00:35:00,280 --> 00:35:04,280
Speaker 1: be eating your retirement literally eating it one mimosa brunch

738
00:35:04,320 --> 00:35:07,040
Speaker 1: at a time. You're listening to Simply Money presented by

739
00:35:07,040 --> 00:35:10,480
Speaker 1: all Worth Financial on fifty five KRC the talk station.

740
00:35:15,080 --> 00:35:17,400
Speaker 1: You're listening to Simply Money presented by all Worth Financial

741
00:35:17,480 --> 00:35:21,080
Speaker 1: on Bob Sponseller along with Brian James. So get this Brian.

742
00:35:21,200 --> 00:35:25,440
Speaker 1: MarketWatch recently published an article that got our attention. If

743
00:35:25,480 --> 00:35:28,439
Speaker 1: a couple spends one hundred dollars a day eating out

744
00:35:29,200 --> 00:35:32,359
Speaker 1: or just fifty dollars a person over the course of

745
00:35:32,440 --> 00:35:36,040
Speaker 1: forty years, which is you know which is I guess

746
00:35:36,120 --> 00:35:39,320
Speaker 1: a long but not out of the question retirement shold.

747
00:35:39,400 --> 00:35:43,440
Speaker 1: Now they'll have spent nearly two million dollars just on

748
00:35:43,880 --> 00:35:47,600
Speaker 1: restaurant meals. Something to keep an eye on here. Two

749
00:35:47,600 --> 00:35:50,279
Speaker 1: million dollars is a lot of money, Brian, and that

750
00:35:50,360 --> 00:35:54,680
Speaker 1: can make or break the viability of one's retirement plan.

751
00:35:55,120 --> 00:35:57,279
Speaker 2: Yeah, and that that one hundred bucks a day eating out.

752
00:35:57,280 --> 00:35:58,840
Speaker 2: That used to sound like a lot. Remember when a

753
00:35:58,920 --> 00:36:01,360
Speaker 2: hundred dollars meal that meant you were celebrating somebody's birthday

754
00:36:01,440 --> 00:36:02,520
Speaker 2: or graduation or whatever.

755
00:36:02,600 --> 00:36:03,399
Speaker 3: It was a big deal.

756
00:36:03,640 --> 00:36:06,280
Speaker 2: But now you know, if I'm eating lunch and dinner

757
00:36:06,320 --> 00:36:08,920
Speaker 2: out there, and I'm a married couple, well then that's

758
00:36:08,960 --> 00:36:11,799
Speaker 2: fifty bucks apiece, that's twenty five bucks apiece per meal. Well,

759
00:36:11,800 --> 00:36:14,440
Speaker 2: that's that's lunch of skyline, love my skyline. But that's

760
00:36:14,440 --> 00:36:18,000
Speaker 2: where that's about where they are now. And so again

761
00:36:18,120 --> 00:36:20,359
Speaker 2: that all sneaks up, and that's two million dollars, right,

762
00:36:20,360 --> 00:36:22,920
Speaker 2: this is the problem with the snowball and so forth.

763
00:36:23,040 --> 00:36:24,719
Speaker 3: That's before you factor in the.

764
00:36:24,680 --> 00:36:26,760
Speaker 2: Tip if that's a thing, and maybe that extra glass

765
00:36:26,760 --> 00:36:28,640
Speaker 2: of wine and all that stuff. You know, where the

766
00:36:28,800 --> 00:36:30,680
Speaker 2: two million dollars that that's a nest egg for a

767
00:36:30,719 --> 00:36:32,560
Speaker 2: lot of people. So again, one hundred bucks a day

768
00:36:32,600 --> 00:36:35,040
Speaker 2: eating out over forty years is going to add up

769
00:36:35,040 --> 00:36:36,719
Speaker 2: a lot. So you can apply this to a lot

770
00:36:36,760 --> 00:36:39,640
Speaker 2: of different things, but different expenses that maybe you can

771
00:36:40,040 --> 00:36:43,840
Speaker 2: seem to be fairly innocuous but end up sneaking up

772
00:36:43,880 --> 00:36:45,840
Speaker 2: on us. So if you've done the right things and

773
00:36:45,880 --> 00:36:47,799
Speaker 2: you built up a solid nestick, it's probably not a

774
00:36:47,840 --> 00:36:48,640
Speaker 2: major concern.

775
00:36:48,920 --> 00:36:50,720
Speaker 3: It's more of an expensive hobby.

776
00:36:50,760 --> 00:36:54,160
Speaker 1: I think, yeah, I think the key here, and we

777
00:36:54,200 --> 00:36:56,640
Speaker 1: can make fun of, you know, one hundred dollars skyline

778
00:36:56,680 --> 00:36:58,600
Speaker 1: bill and eating out and all that, But I think

779
00:36:58,640 --> 00:37:01,080
Speaker 1: the point we're trying to make here is when you

780
00:37:01,200 --> 00:37:05,000
Speaker 1: examine your retirement budget, what you're actually going to spend

781
00:37:05,120 --> 00:37:08,520
Speaker 1: or want to spend. And what I what I always

782
00:37:08,560 --> 00:37:10,799
Speaker 1: tell people Brian, is I don't need to know how

783
00:37:10,880 --> 00:37:13,480
Speaker 1: much you spend on a pack of gum or something

784
00:37:13,560 --> 00:37:16,440
Speaker 1: like that, but numbers that start to add up to,

785
00:37:16,760 --> 00:37:19,560
Speaker 1: you know, in the hundreds of dollars per month, it's

786
00:37:19,600 --> 00:37:22,640
Speaker 1: worth taking a look at, especially if you're on the

787
00:37:22,760 --> 00:37:27,200
Speaker 1: margins in the area being able to viably retire, and say, hey,

788
00:37:27,239 --> 00:37:30,080
Speaker 1: are there things that we can trim back on just

789
00:37:30,160 --> 00:37:33,640
Speaker 1: a little bit without ruining our life and taking all

790
00:37:33,680 --> 00:37:36,160
Speaker 1: the fun out of our life. As opposed to just

791
00:37:36,640 --> 00:37:39,480
Speaker 1: letting it rip, do whatever we want and hoping it

792
00:37:39,520 --> 00:37:41,839
Speaker 1: works out in the end. That's really what we're talking

793
00:37:41,880 --> 00:37:42,720
Speaker 1: about here, Brian.

794
00:37:43,400 --> 00:37:46,120
Speaker 3: Yeah, and again this is not at all about stop doing.

795
00:37:46,120 --> 00:37:46,200
Speaker 1: You know.

796
00:37:46,239 --> 00:37:48,200
Speaker 2: I always tell my clients everybody comes in wanting to

797
00:37:48,239 --> 00:37:50,720
Speaker 2: build a retirement plan, and most people who have built

798
00:37:50,719 --> 00:37:53,239
Speaker 2: something are relatively frugal people to begin with. So they'll

799
00:37:53,239 --> 00:37:55,240
Speaker 2: walk in and they'll say, we're gonna build a vegetable

800
00:37:55,280 --> 00:37:57,320
Speaker 2: garden in the backyard. We're gonna eat out of that,

801
00:37:57,360 --> 00:37:59,279
Speaker 2: and we're never gonna leave the house. And I always say, no,

802
00:37:59,360 --> 00:38:01,600
Speaker 2: you're not going to do that. You'd have done it already.

803
00:38:01,600 --> 00:38:04,160
Speaker 2: That sounds awful, and it sounds like a terrible retirement.

804
00:38:04,200 --> 00:38:04,839
Speaker 3: I just keep working.

805
00:38:04,880 --> 00:38:07,359
Speaker 2: If that's your plan, So let's not start there. Let's

806
00:38:07,360 --> 00:38:09,480
Speaker 2: figure out what you do now. If eating out is

807
00:38:09,520 --> 00:38:11,720
Speaker 2: a social thing, if that's an important thing, that's important

808
00:38:11,719 --> 00:38:13,400
Speaker 2: stuff it is. No, we're not on this planet's to

809
00:38:13,440 --> 00:38:15,439
Speaker 2: stare at a growing pile of money. We are here

810
00:38:15,440 --> 00:38:17,680
Speaker 2: to enjoy each other's company and help out where we can,

811
00:38:17,760 --> 00:38:19,839
Speaker 2: and so on and so forth. So understand what your

812
00:38:19,840 --> 00:38:22,799
Speaker 2: life is like and then build your financial plan around that.

813
00:38:23,920 --> 00:38:26,480
Speaker 1: Yeah, if you really love eating out and you want

814
00:38:26,480 --> 00:38:29,239
Speaker 1: to keep doing that, great, Maybe just trim back from

815
00:38:29,239 --> 00:38:34,319
Speaker 1: having four paid movie subscriptions or streaming services to maybe two.

816
00:38:34,600 --> 00:38:36,759
Speaker 1: There's always a way to skin the cat here. Here's

817
00:38:36,800 --> 00:38:39,919
Speaker 1: the all Worth advice. You've saved, well don't. You don't

818
00:38:39,960 --> 00:38:43,280
Speaker 1: need to skip the stake, just maybe skip the third course.

819
00:38:43,520 --> 00:38:46,280
Speaker 1: Thanks for listening. You've been listening to Simply Money, presented

820
00:38:46,280 --> 00:38:50,000
Speaker 1: by all Worth Financial on fifty five KRC, the talk

821
00:38:50,040 --> 00:38:50,320
Speaker 1: station