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Speaker 1: Tonight the Fed lowers interest rates again, and our take

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Speaker 1: on a claims being floated out there that passive investing is,

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Speaker 1: believe it or not, worse than Marxism. And we answer

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Speaker 1: your pressing financial questions. You're listening to Simply Money, presented

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Speaker 1: by all Worth Financial. I'm Bob Sponseller along with Brian James. Hey, Brian,

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Speaker 1: it's always interesting in December we get these sensational articles

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Speaker 1: out there in the financial media. More on that later,

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Speaker 1: but hey to virtually no one's surprised. The Federal Reserve

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Speaker 1: decided to cut interest rates a quarter point earlier today,

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Speaker 1: so the cost to borrow money fell a little bit.

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Speaker 1: And you know, I we don't know what's going to

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Speaker 1: happen in January. I think that's what everybody's focused on

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Speaker 1: right now. Interestingly enough, the ten year interest rate that's

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Speaker 1: really going to move the needle here as far as

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Speaker 1: interest rates concerned, it continues to just hover where it is.

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Speaker 1: It doesn't drop at all. But needless to say, we

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Speaker 1: got a quarter point cutting rates that might help short

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Speaker 1: term debt and help corporate profits. What do you think

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Speaker 1: of the interest rate cut?

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Speaker 2: Well, at this point, I'm paying attention to this a

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Speaker 2: lot lately because there's a lot of people over the

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Speaker 2: past several years who have gone out and had to

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Speaker 2: get mortgages at rates that historically aren't that bad really,

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Speaker 2: I mean, a seven percent mortgage again looking over decades, is.

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Speaker 3: Not historically all of that debt.

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Speaker 2: But we become very accustomed and we really got super

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Speaker 2: in love with those really low two and three percent

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Speaker 2: mortgage rates.

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Speaker 3: Those aren't coming back tomorrow.

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Speaker 2: But there are a lot of people out there that

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Speaker 2: who did get mortgages, you know, at that seven maybe

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Speaker 2: even eight percent rate over the past three four years,

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Speaker 2: and they're looking for opportunities to refinance. So whenever these

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Speaker 2: headlines hit, I always reach out to some friends out

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Speaker 2: in the mortgage industry to see what's going on. And so,

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Speaker 2: because remember there are two things that the mortgage rates

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Speaker 2: are not only driven by what the Federal Reserve wants

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Speaker 2: to do, it's also demand driven. So you can look

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Speaker 2: at what the bond market does and you can figure out,

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Speaker 2: like that's why you just cited the ten year.

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Speaker 3: Treasury that drives a lot of different interest rates.

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Speaker 2: So the Federal Reserve has an impact, of course, but

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Speaker 2: also market demand for debt as well, and so Actually

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Speaker 2: the trend for mortgage rates has been down until just

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Speaker 2: the last few days. The market was kind of anticipating,

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Speaker 2: you know, the demand on mortgages might pop a little bit,

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Speaker 2: and so actually mortgage has popped up to six and

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Speaker 2: a quarter at some banks on the thirty year yesterday.

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Speaker 2: And looking for not a whole lot of activity based

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Speaker 2: on the decision today, kind of the one the people

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Speaker 2: that I've talked to are looking for basically steady, you know,

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Speaker 2: steady as she goes right now, because the market was

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Speaker 2: already anticipating.

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Speaker 3: It's not really a surprise.

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Speaker 1: No, that makes total sense to me. And I know

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Speaker 1: the Fed has a tough job here, this dual mandate

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Speaker 1: of unemployment and inflation, and you know, inflation has just

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Speaker 1: kind of been sticking there all year. It's not spiking,

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Speaker 1: it's not coming down much at all. You know, you

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Speaker 1: and I have talked about this, you know, off and

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Speaker 1: on this show. I think we're both in agreement here.

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Speaker 1: It's going to be a long time until we see

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Speaker 1: two percent inflation unless we see a you know, a

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Speaker 1: massive recession, which will hurt everybody. But I think this

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Speaker 1: home affordability thing is real, especially for first time home buyers.

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Speaker 1: I saw recent data Brian that the average homeowner, the

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Speaker 1: average age of a homeowner in the United States of

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Speaker 1: America is now forty years of age. That's pretty old.

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Speaker 1: There might be some reasons for that, which is the

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Speaker 1: older people. A lot of people have two homes. So

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Speaker 1: if people own two homes and they're sixty five years old,

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Speaker 1: that's going to raise the average rate of homeownership. But

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Speaker 1: you know, younger people trying to get into this market,

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Speaker 1: get a home, build some equity. You know, obviously they're

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Speaker 1: facing sky high in a lot of cases, student debt,

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Speaker 1: interest and student loan balances. You know, it's tricky for

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Speaker 1: these younger folks to get on their feet and get

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Speaker 1: into this home market. And supply supply of homes is

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Speaker 1: still an issue as well. So I don't think the

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Speaker 1: Federal Reserve is going to be able to fix those

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Speaker 1: kind of systemic issues in the economy. It'll be interested

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Speaker 1: to see, interesting to see how this all plays out

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Speaker 1: in twenty twenty six and beyond.

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Speaker 3: Yeah, so let's look at some of the other underlying

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Speaker 3: factors here.

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Speaker 2: So, for example, labor market data, we're getting mixed signals

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Speaker 2: out of the labor market. Recent rises and job openings

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Speaker 2: suggest some demand for more workers, but hiring is still

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Speaker 2: a little bit of weak. And to quit rate, which

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Speaker 2: is a gauge of worker confidence that has dropped sharply.

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Speaker 1: That's just literally.

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Speaker 2: People walking away from their jobs because they're just lost

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Speaker 2: faith in the company or for whatever reason, moving on

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Speaker 2: to something else. In the private sector, employees reportedly cut

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Speaker 2: about thirty two thousand jobs in November. That's the third

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Speaker 2: decline in four months. And so there's going to be

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Speaker 2: increased pressure on the FED to support the economy, which

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Speaker 2: that speaks to this rate cut. Maybe let's get businesses

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Speaker 2: more interested in growth again. And at the same time,

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Speaker 2: the fed's decision makers always faced uncertainty with government shutdowns disrupted.

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Speaker 3: Key data releases.

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Speaker 2: We talk about that every day anymore, are we really

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Speaker 2: are we shooting blind here?

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Speaker 1: You know?

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Speaker 2: But with without the same data we've had in the past,

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Speaker 2: but so mixed signals coming out of the other other markets.

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Speaker 2: I think that's why we're gonna kind of hold steady

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Speaker 2: on interest rates here for a little bit in terms

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Speaker 2: of the demand the bond side of this.

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Speaker 1: Yeah, and you and I talked to, you know, with

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Speaker 1: Andy Stout about this earlier in the week in terms

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Speaker 1: of what kind of data we're actually gonna see come

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Speaker 1: out between now in the next FED meeting in January.

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Speaker 1: And there's gonna be a lot of data coming out

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Speaker 1: to your point that the FED has not had in

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Speaker 1: their hands when they had to sit in a room

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Speaker 1: and make, you know, the decision they made today. So

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Speaker 1: you know, there's gonna be a lot of data coming

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Speaker 1: down the pike here in the next few weeks. And

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Speaker 1: you know, in terms of movement of what anybody should

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Speaker 1: be doing as far as their asset allocation now between

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Speaker 1: now and the end of the year as a result

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Speaker 1: of this FED, uh, you know rate cut today, I

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Speaker 1: don't see any need to make any you know, massive

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Speaker 1: moves here other than just check the interest rate on

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Speaker 1: short term savings accounts and CDs and all that, because

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Speaker 1: the trend continues to come down, and as some of

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Speaker 1: these CDs mature, or Treasury bills mature, or other short

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Speaker 1: term instruments that you have mature, you want to be

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Speaker 1: you know, just not automatically rolling these things. Sit down

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Speaker 1: with your fiduciary advisor and map out a plan here

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Speaker 1: on what the best way is to deploy this month.

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Speaker 1: You know, moving into twenty twenty six according to your

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Speaker 1: personal financial plan and goals.

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Speaker 3: Yeah, I couldn't agree with that, bob up anymore.

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Speaker 2: I mean, I think that every topic we talk about

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Speaker 2: comes down to how does this affect me?

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Speaker 3: Well, what was your plan to begin with?

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Speaker 2: So make sure you understand what your resources are and

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Speaker 2: what you're trying to do with them, and then you

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Speaker 2: can start to think about those guys.

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Speaker 1: All right, let's get into something that we can control,

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Speaker 1: because you and I can't control what the Federal Reserve does.

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Speaker 1: But this next story is interesting, and I know it's

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Speaker 1: something you and I are dealing with literally every day

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Speaker 1: right now here in the month of December with our clients.

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Speaker 1: And this is the race to get these required minimum

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Speaker 1: distributions from iras taken care of before the clock strikes

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Speaker 1: midnight on December thirty first. And for folks that don't

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Speaker 1: get this rm D done, you know you're looking at

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Speaker 1: twenty five percent penalties from the IRS. Talk about a

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Speaker 1: recent survey from Fidelity, which which is very interesting and

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Speaker 1: it confirms what I'm seeing personally was some of my

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Speaker 1: clients as I scramble around and get some of this

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Speaker 1: stuff done between now and the end of the year.

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Speaker 2: Yeah, this isn't too surprising to me because you know

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Speaker 2: what this is. This is what we do during this

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Speaker 2: time of year. We all know, all advisors know how

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Speaker 2: many clients they have who have iras and are of

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Speaker 2: our require minimum distribution age or it's an inherited IRA,

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Speaker 2: a little different situation, but the same same net got

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Speaker 2: to get it done by New Year's eve. So we've

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Speaker 2: all got our lists of clients we have to get

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Speaker 2: in touch with and make sure that we're on top

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Speaker 2: of that. But anyway, Fidelity came out with a study,

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Speaker 2: and obviously Fidelity is one of the trillionaires, one of

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Speaker 2: the biggest custodians out there, so they would know fifty

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Speaker 2: three percent of Fidelity and who needed a twenty twenty

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Speaker 2: five RMD hadn't yet taken one, and about twenty nine

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Speaker 2: percent of those outstanding rmds are from inherited iras. This

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Speaker 2: data does not consider possible rm ds from a council

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Speaker 2: without the firms. This is just Fidelity talking about their

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Speaker 2: own clients, their own assets. Not surprising on the inherited

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Speaker 2: iras thing because there are some new requirements there. Specifically,

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Speaker 2: this is the first year where if you are somebody

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Speaker 2: who inherited an IRA from a deceased person who passed

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Speaker 2: after twenty twenty, but was themselves of required minimum distribution age,

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Speaker 2: then yes, you have ten years to liquidate the whole thing.

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Speaker 3: But this year there a new rule.

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Speaker 2: There is a required minimal distribution that you still have

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Speaker 2: to take every year. You can't just let it all

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Speaker 2: go in that case. Remember that the deceased person had

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Speaker 2: to have been of RMD age themselves. So I'm going

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Speaker 2: to go ahead and guess that that is news to

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Speaker 2: a lot of people, which is why Fidelity is seeing

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Speaker 2: a higher percentage of those overdated rm ds sitting in

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Speaker 2: those inherited dirays at this point.

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Speaker 1: No, Brian, I think you're absolute spot on, and this

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Speaker 1: is why I asked you to highlight this topic earlier

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Speaker 1: in the week, and we're gonna harp on it again

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Speaker 1: for a couple of minutes right now, because you know,

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Speaker 1: let's face it, we're down to twenty days left in

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Speaker 1: the year. We got Christmas mixed in there too. People

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Speaker 1: are not thinking about this stuff. They're thinking about hanging

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Speaker 1: up their Christmas lights, finishing up their shopping all that.

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Speaker 1: But this is a big deal. I'm running into it personally.

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Speaker 1: You know, people think that they just had ten years,

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Speaker 1: you know, over which they didn't have to touch these inherited iras.

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Speaker 1: That is not the case. And again to repeat Brian's point,

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Speaker 1: if the person you inherited this IRA from was at

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Speaker 1: rm D age on the date that they die, you

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Speaker 1: do have to take an R and D this year.

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Speaker 1: Somebody needs to make this calculation and get it done.

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Speaker 1: And if accounts moved from firm to firm through the year,

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Speaker 1: which is what I'm running into right now, in a

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Speaker 1: few cases, I'm tracking down that December thirty one, twenty

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Speaker 1: twenty four that from my clients, so I can go

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Speaker 1: in and manually make this calculation and make sure this

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Speaker 1: gets done. You know, I implore everyone out there please

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Speaker 1: check for any inherited iras, make sure you've done this

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Speaker 1: work here, to take the RMD because again the penalties

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Speaker 1: are severe twenty five percent penalty taxes from the irs.

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Speaker 1: If you don't get this done.

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Speaker 3: Yeah, big big deal here.

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Speaker 2: And remember this, some of this is changing from the

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Speaker 2: Secure Act two point zero. There was a period here

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Speaker 2: where some of these iras got a sort of a

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Speaker 2: period of relief, if you will. That was through the

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Speaker 2: year twenty four. Well it's not twenty four anymore. It's

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Speaker 2: twenty five. So make sure you've got time. You've got

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Speaker 2: several weeks, but make sure that you know what you're doing.

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Speaker 2: Now you have options here, right. A lot of people

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Speaker 2: get spooked by this though. First of all, some people

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Speaker 2: out there think that the require minimum distribution dollar amount

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Speaker 2: is what the IRS is going to take.

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Speaker 3: That's not the case. That's not the taxes.

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Speaker 2: That's how much money you must remove from the tax shelter,

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Speaker 2: and that dollar amount.

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Speaker 3: Will be taxed at whatever the rest of your bracket is.

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Speaker 2: It gets lumped in with your Social Security and your

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Speaker 2: pension income, and your investment income any other type of

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Speaker 2: income you have, and then that's how you'll know what

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Speaker 2: you'll be tax on it. But you don't have to

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Speaker 2: the buyer es could care less what you do with it.

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Speaker 2: You don't have to take it out stick in the bank.

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Speaker 2: A lot of people do that, which I think is silly,

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Speaker 2: because now you're just liquidating your portfolio systematically because the

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Speaker 2: IRSTLS you have to. So what a lot of clients

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Speaker 2: do if they don't need the money. I mean, first

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Speaker 2: of all, if you need the money, you got an

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Speaker 2: expense coming up, you know sometime next few months, we'll

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Speaker 2: just take it stick in the bank and then write

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Speaker 2: a check out of it and just be happy that

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Speaker 2: you were able to do that. But if you truly

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Speaker 2: did not need the money for that, then you can

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Speaker 2: move it to simply a taxable account. Because then the

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Speaker 2: next question we get is, well should I do this

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Speaker 2: early in the year. What's the right timing for this? Well,

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Speaker 2: if we're going to keep it invested and just move

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Speaker 2: it from the IRA to the taxable account, really doesn't

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Speaker 2: make any difference because it's only going to be uninvested

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Speaker 2: for maybe a twenty four hour period while it moves

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Speaker 2: from one account to another.

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Speaker 3: While you fulfill your obligation there.

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Speaker 2: So just figure out exactly how the rules work, what

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Speaker 2: do you need, and then don't worry too much about it.

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Speaker 2: It's not nearly as complicated and scary as it might seem.

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Speaker 1: Here's to go with advice. It's simple, is simple. Tonight

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Speaker 1: take your R and D by December thirty first, or

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Speaker 1: face possible severe financial consequences. Coming up next, we've got

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Speaker 1: our take on acclaim out there by one fund manager

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Speaker 1: affirm that passive investing is quote unquote worse than Marxism.

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Speaker 1: Listening to Simply Money presented by all Worth Financial on

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Speaker 1: fifty five KRC, the talk station.

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Speaker 3: A US.

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Speaker 4: You're listening to Simply Money presented by all Worth Financial.

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Speaker 4: I'm Bob sponseller along with Brian James. If you can't

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Speaker 4: listen to Simply Money every night, subscribe and get our

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Speaker 4: daily podcast. Just search Simply Money on the iHeart app

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Speaker 4: or wherever you find your podcast. Straight ahead of six

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Speaker 4: forty three, we're answering questions about managing appreciated stock, surprise

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Speaker 4: taxes from mutual fund and a bond ladder. That's U

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Speaker 4: seeing the anxiety some and more. All right, love that

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Speaker 4: bumper music from Joe Strecker, our executive producer. Back in

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Speaker 4: the USSR, Brian, there is one active management firm out

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Speaker 4: there that is implying that passive investing is the same

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Speaker 4: thing as Marxism. I find some of these headline stories comical,

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Speaker 4: but rather than go off on a rant, tell us

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Speaker 4: what's really going.

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Speaker 1: On with this story.

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Speaker 2: What's really going on with this is financial pornography. It's

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Speaker 2: something to read, it's something that catches our eye. We

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Speaker 2: need to talk about these things because there are people

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Speaker 2: out there who will react to these types of headlines

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Speaker 2: and make decisions based off of it because it is

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Speaker 2: an eye catching headline. And we are definitely in a mood,

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Speaker 2: you know, we're in a mood where we're looking for

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Speaker 2: anything because things just feel dicey. You know, everybody's on

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Speaker 2: edge politically and all that other stuff, and it just

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Speaker 2: feels like, actually, this is one of those times where

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Speaker 2: there is a danger of action feeling so much more

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Speaker 2: comfortable than in action. Therefore, I have to find something

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Speaker 2: to do, a button to push, a lever to pull,

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Speaker 2: and you know, sometimes these crazy headlines get people to

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Speaker 2: move when they should.

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Speaker 3: So anyway, here's what's going on. This is a gentleman

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Speaker 3: who is.

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Speaker 2: The co head of institutional Solutions for Alliance Bernstein. This

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Speaker 2: is not a small company, big old mutual fun company

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Speaker 2: been around for a long time in ago Fraser Jenkins,

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Speaker 2: and his argument is that the rise of passive investments

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Speaker 2: and investing has morphed into something a little more dangerous

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Speaker 2: than just a simple cost savvy trend.

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Speaker 3: Right.

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Speaker 2: This is what he's talking about is indexing here and

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Speaker 2: the idea of buying you know, super cheap type investments

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Speaker 2: that just follow an index as opposed to someone sitting

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Speaker 2: on the top of a pile of money making decisions

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Speaker 2: about this is a good investment, this is a bad investment.

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Speaker 2: In other words, simply own a broad swath of the market.

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Speaker 2: So his point is that this type of passive investing

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Speaker 2: that has gotten so big over the past several decades

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Speaker 2: creates a dystopian symbiosis, right, that's that's what That's a word.

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Speaker 3: That I woke up thinking I was going to be

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Speaker 3: talking about today.

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Speaker 2: It would because it dominates, It allows a few of

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Speaker 2: these megacap tech companies to dominate another.

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Speaker 3: It's a bigger you are, the more money you get.

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Speaker 2: Because every time somebody gets paid, you know they're they're

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Speaker 2: gonna put money into their four O one K and

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Speaker 2: that's gonna flow ultimately into an index fund. And indexes

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Speaker 2: are largely cap weighted, which means the biggest companies get

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Speaker 2: the lion's share of the assets there.

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Speaker 3: So when trillions flow.

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Speaker 2: Into these index funds ETFs, these are these are the

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Speaker 2: funds that simply mirror index weights, and that's mostly what

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Speaker 2: you're seeing in your four O one ks nowadays. That

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Speaker 2: capital just ends up getting dumped into these bigger companies,

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Speaker 2: just regardless of how they how well they.

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Speaker 3: Actually perform or innovate. You know, this is already very measurable.

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Speaker 2: So we we talk often on these airwaves, Bob, about

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Speaker 2: how some of these major industries, the top ten companies

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Speaker 2: can account for roughly forty percent of the total value

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Speaker 2: of the index, depending on the one you're talking about.

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Speaker 1: Yeah, and and just to cut the chase here, all right,

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Speaker 1: you and I have been covering this topic for weeks

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Speaker 1: and months. We don't we just don't use these complex,

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Speaker 1: multi syllable words like you know, mister Fraser Jenkins, Yeah, yeah,

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Speaker 1: stuff like that, you know. But again, we've talked about

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Speaker 1: the concentration in the S and P five hundred. To

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Speaker 1: get a little bit serious here for a minute, because

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Speaker 1: you and I have been talking about this for weeks

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Speaker 1: and months now. It's we're not heading into a Marxist economy.

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Speaker 1: We're just calling out the fact that the S and

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Speaker 1: P five hundred does not give you quite the diversified

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Speaker 1: risk adjusted acid allocation that it used to. I mean,

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Speaker 1: you mentioned ten companies accounting for roughly forty percent of

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Speaker 1: the indexes value. Shoot, Brian, I think about the top

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Speaker 1: three or four companies account for ten percent of the

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Speaker 1: indexes value. So the point here is you can't just

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Speaker 1: sit there, well you can, but you know, the advice

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Speaker 1: is not just to sit there with an S and

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Speaker 1: P five hundred index fund with your entire portfolio, because

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Speaker 1: if and when and it always happens, even to the

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Speaker 1: best sectors, the best companies, market corrections happen, and I

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Speaker 1: think people in for are a rude awakening. If and

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Speaker 1: when we get a correction in some of these big,

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Speaker 1: big cap tech stocks, their portfolio is gonna have way

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Speaker 1: more volatility to the downside. People don't mind upside volatility,

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Speaker 1: by the way, They only get concerned when the market

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Speaker 1: goes down. And it's a reason to have a more

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Speaker 1: diversified portfolio with things other than just big cap indicies.

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Speaker 1: That's really the point here, and it's a point we've

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Speaker 1: been driving home for weeks and months now.

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Speaker 2: Yeah, So let's take this from the point of view

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Speaker 2: of a fiduciary advisor, which is what you should be

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Speaker 2: working with anyway, if you're gonna pay anybody.

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Speaker 3: To help you with this stuff.

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Speaker 2: So, I mean, there's a little bit of merit to this,

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Speaker 2: and you know, in a sense really, what we're saying

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Speaker 2: here is the biggest companies out there are going to

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Speaker 2: essentially get the most dollars regardless of whether they appear

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Speaker 2: to be on the right track or not, just because

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Speaker 2: that's you know, that that's just the way those market

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Speaker 2: cap weighted in nex ones work. So but that doesn't

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Speaker 2: mean that that this is bad for every investor. You know,

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Speaker 2: some people just don't have time, interest resources picking vigual stocks.

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Speaker 2: Passive index funds are going to remain a low cost, diversified,

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Speaker 2: efficient way. Nobody's gonna go out there and dump everything

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Speaker 2: they own and suddenly switch into active investing. And you know,

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Speaker 2: I'm not exactly sure what mister Fraser Jenkins's ultimate goal

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Speaker 2: was in getting this out there, other than they got

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Speaker 2: our attention. We're talking about it, so I guess there's

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Speaker 2: a little bit of publicity involved in it.

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Speaker 1: Well, his goal is he works for an actively managed

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Speaker 1: mutual fund company, So the goal is to drive more

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Speaker 1: assets into actively managed funds. That's what I think the

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Speaker 1: goal is. But please continue, Brian.

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Speaker 3: No, I would agree with you. I mean, at the

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Speaker 3: end of the day, all these talking every.

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Speaker 1: Time these people go on television or write these articles,

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Speaker 1: they're they're they're talking their book and sometimes rarely they're

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Speaker 1: trying to help individual investors, but they're always trying to

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Speaker 1: help their book or their business.

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Speaker 5: Uh.

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Speaker 1: There, I did slip in a rant there, but go ahead, Brian.

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Speaker 2: No, no, no, you rant away. This is that is

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Speaker 2: the season for Bob Randt. So no, I know, I

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Speaker 2: get it anyway. At the end of the day. This

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Speaker 2: is just another example of those types of articles that

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Speaker 2: grab your tension and make you feel like this might

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Speaker 2: be that black and white thing that I should grab

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Speaker 2: a hold of and look at and go make some

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Speaker 2: changes so that I can scratch the itch that I

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Speaker 2: should be doing more than I am. And a lot

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Speaker 2: of people have that concern. It's not without merit. We

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Speaker 2: all feel like we should be doing more than we are.

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Speaker 2: We worry that we're going to miss opportunities. However, getting

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Speaker 2: too wound up about that risk of missing perceived opportunities

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Speaker 2: can actually cost you in other opportunities.

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Speaker 3: Sometimes the opportunity is to leave it alone.

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Speaker 1: Here's the all Worth advice. Work with a fiduciary advisor

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Speaker 1: to tailor your investment allocation to your goals, your risk

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Speaker 1: and your long term plan. Whatever the components of that

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Speaker 1: portfolio need to be from fake delivery text to luxury knockoffs.

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Speaker 1: We're breaking down the latest holiday scams you need to

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Speaker 1: watch out for. Next, you're listening to Simply Money presented

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Speaker 1: by all Worth Financial on fifty five KRC, the talk station.

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Speaker 1: You're listening to Simply Money pres outed by all Worth

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Speaker 1: Financial on Bobs Fonseller along with Brian James, joined tonight

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Speaker 1: by the president of the Greater Cincinnati Better Business Bureau,

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Speaker 1: our good friend, Josile Erlik Josial Happy holidays to you,

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Speaker 1: and we know we can only imagine with Black Friday

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Speaker 1: and Cyber Monday and everybody just you know, pounding away

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Speaker 1: at their smartphones looking at the latest deals that are

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Speaker 1: out there. These scammers are taking full advantage or trying to.

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Speaker 1: So update this here with about fourteen days left before Christmas.

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Speaker 1: What's going on out there in scam world. I can

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Speaker 1: only imagine what you're finding, what you and your team

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Speaker 1: are finding out there.

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Speaker 5: So the first bit of advice is don't let your

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Speaker 5: guard down. Now. Things are crazy out there. This is

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Speaker 5: a season everybody's doing a ton of online shopping, more

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Speaker 5: packages are being delivered. Scammers know this and they use

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Speaker 5: this chaos to trick you with the fake package scam.

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Speaker 5: Here's how it works. You get a text that looks

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Speaker 5: like it's from a delivery driver saying they can't find

438
00:21:05,600 --> 00:21:09,240
Speaker 5: your house and please call them if you hesitate. They're

439
00:21:09,280 --> 00:21:11,359
Speaker 5: going to try to convince you that the package is

440
00:21:11,400 --> 00:21:13,679
Speaker 5: a gift from your friend or a relative. You know

441
00:21:13,680 --> 00:21:15,720
Speaker 5: it's a package you don't want to miss, so of

442
00:21:15,760 --> 00:21:18,800
Speaker 5: course you're going to cooperate so you can get this package.

443
00:21:19,400 --> 00:21:23,200
Speaker 5: These guys are going to sound really friendly, really engaging,

444
00:21:23,480 --> 00:21:26,960
Speaker 5: really professional. It's just a way to disarm you and

445
00:21:27,119 --> 00:21:30,720
Speaker 5: win your trust. It's just an act to get you

446
00:21:30,760 --> 00:21:34,639
Speaker 5: to disclose your personal information. In another version of the scam,

447
00:21:34,680 --> 00:21:36,960
Speaker 5: you get a text claiming that your package can't be

448
00:21:37,000 --> 00:21:40,199
Speaker 5: delivered because your address isn't accurate, or you need to

449
00:21:40,240 --> 00:21:43,160
Speaker 5: reschedule delivery, or you have to pay a delivery fee

450
00:21:43,160 --> 00:21:45,880
Speaker 5: for some odd reason. The text tells you to click

451
00:21:45,880 --> 00:21:48,840
Speaker 5: a link and correct whatever the issue is. The link

452
00:21:48,920 --> 00:21:50,879
Speaker 5: is going to take you to a very official looking

453
00:21:50,880 --> 00:21:54,640
Speaker 5: website with a very official looking ups FedEx or Amazon

454
00:21:54,720 --> 00:21:59,680
Speaker 5: logo and very polished language.

455
00:21:58,840 --> 00:22:02,320
Speaker 3: Desil credit card numbers. What are they trying to steal here?

456
00:22:03,520 --> 00:22:07,680
Speaker 5: They're strying to get your personal information whatever. They can

457
00:22:07,720 --> 00:22:10,320
Speaker 5: get your name, your address to, your phone number, your

458
00:22:10,480 --> 00:22:15,160
Speaker 5: website or not, your email address, and your credit card information.

459
00:22:15,760 --> 00:22:19,360
Speaker 5: Hence the you have to pay a delivery fee if

460
00:22:19,359 --> 00:22:22,159
Speaker 5: you click the link. The scammers are going to collect

461
00:22:22,160 --> 00:22:26,159
Speaker 5: this information, possibly your credit card information as well, or

462
00:22:26,320 --> 00:22:29,919
Speaker 5: maybe the link is going to install malware that's going

463
00:22:30,000 --> 00:22:34,040
Speaker 5: to monitor your online activity, including your passwords, your bank password,

464
00:22:34,119 --> 00:22:37,800
Speaker 5: your credit card password, and your contact list. They will

465
00:22:37,840 --> 00:22:41,760
Speaker 5: have access to that. The fact is there is no package.

466
00:22:42,040 --> 00:22:44,760
Speaker 5: It's all just a phishing attempt, so scammers can steal

467
00:22:44,800 --> 00:22:48,840
Speaker 5: your identity or worse. Keep track of what you've ordered

468
00:22:48,880 --> 00:22:52,560
Speaker 5: and when it's coming, and remember that delivery companies won't

469
00:22:52,600 --> 00:22:55,920
Speaker 5: send you random texts or ask for your personal information.

470
00:22:57,000 --> 00:22:57,160
Speaker 3: Now.

471
00:22:57,160 --> 00:22:59,480
Speaker 5: Another thing that's really hot right now and has been

472
00:22:59,520 --> 00:23:03,400
Speaker 5: for a number of years is the secret Sister gift exchange.

473
00:23:03,760 --> 00:23:07,000
Speaker 5: It's another scam that keeps getting recycled, especially this time

474
00:23:07,000 --> 00:23:10,439
Speaker 5: of year. It may sound fun and harmless. You send

475
00:23:10,520 --> 00:23:13,320
Speaker 5: one gift and supposedly you're going to get a few

476
00:23:13,359 --> 00:23:18,120
Speaker 5: dozen gifts in return. These gift exchanges are often seemed

477
00:23:18,200 --> 00:23:20,480
Speaker 5: maybe you're supposed to send bottles of wine and you're

478
00:23:20,480 --> 00:23:24,520
Speaker 5: going to get a whole arsenal of wine back, or

479
00:23:24,840 --> 00:23:27,359
Speaker 5: maybe you're supposed to send just a small ten dollars gift.

480
00:23:27,480 --> 00:23:31,399
Speaker 5: Another popular version is you send a dog toy and

481
00:23:31,480 --> 00:23:35,480
Speaker 5: you get dog toys in return. Here's the problem. It's

482
00:23:35,760 --> 00:23:38,720
Speaker 5: just an online version of the old fashioned pyramid scheme.

483
00:23:39,359 --> 00:23:41,840
Speaker 5: Back then, you mailed a dollar to the first name

484
00:23:41,920 --> 00:23:44,040
Speaker 5: on the list. You added your name to the bottom

485
00:23:44,080 --> 00:23:47,159
Speaker 5: of the list. You sent the letter to ten friends,

486
00:23:47,200 --> 00:23:48,640
Speaker 5: and they were supposed to do the same.

487
00:23:49,359 --> 00:23:53,040
Speaker 2: Joseille, you lost me after arsenal of wine, and I'm

488
00:23:53,080 --> 00:23:55,119
Speaker 2: furiously googling for how I can sign up for an

489
00:23:55,200 --> 00:23:56,000
Speaker 2: arsenal of wine.

490
00:23:56,040 --> 00:23:58,640
Speaker 3: So this is a safe thing, right, I really got excited.

491
00:24:00,400 --> 00:24:04,080
Speaker 5: It's absolutely not safe. It's a pyramid scheme. It's a

492
00:24:04,119 --> 00:24:07,560
Speaker 5: pyramid scheme. People at the top of the pyramid might

493
00:24:07,640 --> 00:24:11,439
Speaker 5: get the gifts, might get the wine. Eventually, you're going

494
00:24:11,520 --> 00:24:14,120
Speaker 5: to run out of people to provide the wine.

495
00:24:14,320 --> 00:24:17,800
Speaker 1: So Bryant, I have to interject here, take your focus

496
00:24:17,840 --> 00:24:20,199
Speaker 1: off of wine here and focus on the big picture

497
00:24:20,359 --> 00:24:23,320
Speaker 1: secret sister, because I know for a fact, if either

498
00:24:23,520 --> 00:24:27,840
Speaker 1: you or myself ever have a secret sister of any kind,

499
00:24:27,880 --> 00:24:30,119
Speaker 1: We're gonna end up getting divorced and it's just not

500
00:24:30,240 --> 00:24:32,960
Speaker 1: worth it. So this is another example of why I'm

501
00:24:33,040 --> 00:24:35,520
Speaker 1: so blessed to have been married to a great wife,

502
00:24:35,840 --> 00:24:38,320
Speaker 1: wife for thirty five years, who does virtually all of

503
00:24:38,359 --> 00:24:41,520
Speaker 1: our Christmas shopping. I will never fall prey to the

504
00:24:42,119 --> 00:24:48,520
Speaker 1: Sister Sister, Secret, Sister scam. Joe Sial. Please continue, though,

505
00:24:48,840 --> 00:24:49,480
Speaker 1: I will.

506
00:24:49,280 --> 00:24:52,840
Speaker 5: Tell you that your advice is probably even more important

507
00:24:52,840 --> 00:24:56,920
Speaker 5: than anything I could say right now. Don't fall victims. Now,

508
00:24:57,000 --> 00:25:00,600
Speaker 5: let's not mention that this is also illegal. Postal inspectors

509
00:25:00,640 --> 00:25:04,240
Speaker 5: consider this gambling. You could be fined or even charged

510
00:25:04,280 --> 00:25:06,879
Speaker 5: with mail fraud, which might not be as bad as

511
00:25:06,880 --> 00:25:09,440
Speaker 5: having to deal with your wife. But let's keep going.

512
00:25:10,960 --> 00:25:14,840
Speaker 5: We have the luxury brand scam. Luxury and tech brands

513
00:25:14,960 --> 00:25:19,919
Speaker 5: are a big target for scammers, especially now think Apple, Coach, Nintendo,

514
00:25:20,800 --> 00:25:24,600
Speaker 5: you name it. Names people trust. These guys are creating

515
00:25:24,640 --> 00:25:27,919
Speaker 5: fake websites and ads that look almost identical to the

516
00:25:27,960 --> 00:25:31,600
Speaker 5: real thing. They use the fancy logos, the professional language,

517
00:25:31,760 --> 00:25:35,400
Speaker 5: even fake customer reviews to make it all seem legitimate.

518
00:25:36,160 --> 00:25:38,560
Speaker 5: Here's what's going on here. You see a social media

519
00:25:38,600 --> 00:25:41,639
Speaker 5: ad for a flash sale on a designer bag or

520
00:25:41,680 --> 00:25:45,320
Speaker 5: the latest gaming console at a price that you can't

521
00:25:45,359 --> 00:25:48,320
Speaker 5: pass up. You click, you land on the site that

522
00:25:48,359 --> 00:25:52,120
Speaker 5: looks official, You order, and you pay, but it never arrives,

523
00:25:52,960 --> 00:25:55,600
Speaker 5: or worse, you get a cheap knockoff and your credit

524
00:25:55,600 --> 00:25:59,560
Speaker 5: card info is now in the hands of scammers. BBBS

525
00:25:59,600 --> 00:26:02,880
Speaker 5: Scam Tracker has received thousands of reports of these fake

526
00:26:02,960 --> 00:26:07,240
Speaker 5: websites impersonating luxury brands, and they ramp up this time

527
00:26:07,280 --> 00:26:10,320
Speaker 5: of year, so be careful. The best way to protect

528
00:26:10,320 --> 00:26:14,159
Speaker 5: yourself is to stick to official websites, avoid clicking on

529
00:26:14,240 --> 00:26:16,520
Speaker 5: ads for deals that seem too good to be true.

530
00:26:17,560 --> 00:26:20,800
Speaker 5: The caution here is if you're looking for the official site,

531
00:26:21,119 --> 00:26:23,639
Speaker 5: it likely isn't going to be the first one that

532
00:26:23,720 --> 00:26:26,440
Speaker 5: pops up on a Google list, so check the web

533
00:26:26,480 --> 00:26:31,280
Speaker 5: address closely before you assume that you're on the right website.

534
00:26:32,080 --> 00:26:35,240
Speaker 1: All right, great advice as always, Josio, thank you so

535
00:26:35,320 --> 00:26:37,639
Speaker 1: much for joining us tonight. You're listening to Simply Money

536
00:26:37,640 --> 00:26:41,800
Speaker 1: presented by Allworth Financial on fifty five KRC the talkstation.

537
00:26:46,720 --> 00:26:49,320
Speaker 1: You're listening to Simply Money presented by Allworth Financial on

538
00:26:49,480 --> 00:26:53,000
Speaker 1: pop Sponsller along with Brian James. You have a financial

539
00:26:53,080 --> 00:26:55,320
Speaker 1: question you'd like for us to answer. There's a red

540
00:26:55,359 --> 00:26:58,040
Speaker 1: button you can click if you're listening to the show

541
00:26:58,119 --> 00:27:01,520
Speaker 1: on the iHeart app. Simply we're hoard your question and

542
00:27:01,560 --> 00:27:05,640
Speaker 1: it will come straight to us. Paul and Mason leads

543
00:27:05,720 --> 00:27:08,359
Speaker 1: us off tonight. Brian, he says, our taxes are starting

544
00:27:08,400 --> 00:27:11,600
Speaker 1: to become a bigger drag than fees. How do you

545
00:27:11,720 --> 00:27:17,480
Speaker 1: calculate your portfolio's tax alpha to see if tax efficiency

546
00:27:17,600 --> 00:27:21,440
Speaker 1: is adding or subtracting value each year from his portfolio?

547
00:27:21,560 --> 00:27:22,200
Speaker 1: Great question.

548
00:27:23,240 --> 00:27:25,800
Speaker 2: Yeah, so tax alpha, you know, that's another term that

549
00:27:25,800 --> 00:27:27,719
Speaker 2: gets financial term he gets thrown around a little bit.

550
00:27:27,720 --> 00:27:29,040
Speaker 3: But what that's talking about, that's.

551
00:27:28,920 --> 00:27:31,480
Speaker 2: The portion of your portfolio is ready to return that

552
00:27:31,600 --> 00:27:34,800
Speaker 2: comes from smart tax management rather than just market performance

553
00:27:34,840 --> 00:27:36,640
Speaker 2: ups and downs of whatever the investments are doing.

554
00:27:36,680 --> 00:27:37,160
Speaker 3: Inside.

555
00:27:37,320 --> 00:27:39,320
Speaker 2: So a lot of people watch fees and performance. That's

556
00:27:39,359 --> 00:27:41,600
Speaker 2: you know, kind of the most some of the most

557
00:27:41,640 --> 00:27:43,399
Speaker 2: impactful things you want to pay attention to when it

558
00:27:43,440 --> 00:27:46,040
Speaker 2: comes to performance. But as that account gets bigger, taxes

559
00:27:46,080 --> 00:27:48,800
Speaker 2: become that hidden cost that can overwhelm both of those.

560
00:27:48,920 --> 00:27:50,639
Speaker 2: Depending on what's happening, especially this time of year, we

561
00:27:50,720 --> 00:27:53,480
Speaker 2: got capital gain distribution, So think of it this way. First,

562
00:27:53,520 --> 00:27:55,760
Speaker 2: off measure that pre tax return for the year, What

563
00:27:55,800 --> 00:27:58,800
Speaker 2: did the portfolio earn before any distributions were tax there's

564
00:27:58,800 --> 00:28:01,680
Speaker 2: your baseline. Then figure out what your after tax return was.

565
00:28:01,680 --> 00:28:02,919
Speaker 2: It's gonna be a little tough to do this till

566
00:28:02,920 --> 00:28:04,760
Speaker 2: you've actually done your taxes. This is going to be

567
00:28:04,760 --> 00:28:08,280
Speaker 2: a sharpen some pencils and and and find some time

568
00:28:08,280 --> 00:28:10,080
Speaker 2: to sit at the table and do this, but you're

569
00:28:10,119 --> 00:28:12,200
Speaker 2: what you're going to do is make an estimate of

570
00:28:12,240 --> 00:28:14,040
Speaker 2: what taxes are going to get paid off off of

571
00:28:14,080 --> 00:28:17,000
Speaker 2: the dividends that have been generated, interest and realize gains.

572
00:28:17,040 --> 00:28:19,760
Speaker 2: All those things get taxed, probably differently at different rates,

573
00:28:20,040 --> 00:28:22,200
Speaker 2: but you can use your real marginal rates, don't use

574
00:28:22,240 --> 00:28:23,960
Speaker 2: averages on those, and you can get those off of

575
00:28:24,000 --> 00:28:26,320
Speaker 2: your tax return. You should hopefully have a summary that

576
00:28:26,440 --> 00:28:31,040
Speaker 2: shows what you roughly what your effective rates are off.

577
00:28:30,840 --> 00:28:32,280
Speaker 3: Of your various income sources.

578
00:28:32,680 --> 00:28:34,960
Speaker 2: And then if you reinvestment, remember you pretend you have

579
00:28:35,000 --> 00:28:36,840
Speaker 2: to pay the tax anyway, even though you're not seeing

580
00:28:36,840 --> 00:28:38,320
Speaker 2: the dollars, you still have to pay the taxes on

581
00:28:38,320 --> 00:28:41,560
Speaker 2: the stuff that's getting reinvested. And then third, compare that

582
00:28:41,600 --> 00:28:44,760
Speaker 2: after tax return with a tax aware benchmarks. So for example,

583
00:28:44,800 --> 00:28:47,040
Speaker 2: take the same index or the same allocation you've been

584
00:28:47,080 --> 00:28:49,320
Speaker 2: investing in and adjust it for the taxes. It would

585
00:28:49,320 --> 00:28:52,080
Speaker 2: reasonably incur. You can find sources out there for this

586
00:28:52,600 --> 00:28:55,440
Speaker 2: on the internet. And then so therefore the difference between

587
00:28:55,480 --> 00:28:58,080
Speaker 2: your after tax return and that benchmarks after tax return

588
00:28:58,160 --> 00:29:00,640
Speaker 2: is whatever your tax alpha is. Is it worth me

589
00:29:00,720 --> 00:29:02,920
Speaker 2: doing whatever I'm doing? Am I getting the benefit of

590
00:29:03,000 --> 00:29:07,280
Speaker 2: the of this investment process after taxes? So hopefully that helps.

591
00:29:07,400 --> 00:29:09,040
Speaker 2: Again a little bit of work there, but it sounds

592
00:29:09,080 --> 00:29:10,680
Speaker 2: like you wanted to. We were looking for a little

593
00:29:10,680 --> 00:29:12,920
Speaker 2: bit of work there, Paul, So hopefully that helps. Now

594
00:29:12,920 --> 00:29:14,520
Speaker 2: we're going to move back to a move down to

595
00:29:14,600 --> 00:29:16,680
Speaker 2: a Rich and fort Wright and he's asking about the

596
00:29:16,720 --> 00:29:18,840
Speaker 2: S and P five hundred. He's always used that as

597
00:29:18,840 --> 00:29:20,760
Speaker 2: a best as a benchmark, but now he's got a

598
00:29:20,760 --> 00:29:23,120
Speaker 2: portfolio of bonds, alternatives, global stocks.

599
00:29:23,120 --> 00:29:25,920
Speaker 3: He just owns a lot more than just the largest five.

600
00:29:25,840 --> 00:29:28,000
Speaker 2: Hundred companies in the United States, and so he's wondering,

601
00:29:28,040 --> 00:29:30,000
Speaker 2: is that still the best benchmark? What do you do

602
00:29:30,040 --> 00:29:32,640
Speaker 2: when you have a multi asset portfolio in terms of

603
00:29:32,640 --> 00:29:33,520
Speaker 2: benchmarking about.

604
00:29:34,400 --> 00:29:38,120
Speaker 1: Well, speaking of doing a little work again, great question

605
00:29:38,240 --> 00:29:41,600
Speaker 1: from Rich. You know, here's my take on this, they're there.

606
00:29:42,160 --> 00:29:45,080
Speaker 1: The reason people want to look at benchmarks typically or

607
00:29:45,120 --> 00:29:48,760
Speaker 1: twofold one. They want to evaluate fees. Are the managers

608
00:29:48,840 --> 00:29:52,240
Speaker 1: that are you know, managing certain components of your you

609
00:29:52,240 --> 00:29:55,200
Speaker 1: know account? Are they adding value net of the fees

610
00:29:55,240 --> 00:29:57,600
Speaker 1: they're charging to manage the money? And then the second

611
00:29:58,160 --> 00:30:02,920
Speaker 1: how how is my overall performance doing? So I agree

612
00:30:02,960 --> 00:30:06,000
Speaker 1: with you Rich if you've got a more diversified portfolio,

613
00:30:06,080 --> 00:30:08,640
Speaker 1: and good for you for doing that. Yeah, you don't

614
00:30:08,680 --> 00:30:10,600
Speaker 1: want to just compare this to the S and P

615
00:30:10,760 --> 00:30:14,520
Speaker 1: five hundred. That's kind of comparing apples to oranges, you

616
00:30:14,520 --> 00:30:17,160
Speaker 1: know at this point, especially if you've got a significant

617
00:30:17,160 --> 00:30:20,400
Speaker 1: allocation to bonds and alternatives. So there's a couple of

618
00:30:20,400 --> 00:30:23,040
Speaker 1: ways to do this. One you can peel out each

619
00:30:23,120 --> 00:30:27,760
Speaker 1: component of your portfolio, say the bond component or the

620
00:30:28,000 --> 00:30:31,880
Speaker 1: large cap growth component, and go compare that to a

621
00:30:31,920 --> 00:30:35,680
Speaker 1: given index for that asset class and see if you're

622
00:30:35,720 --> 00:30:38,680
Speaker 1: getting value add you know, out of that asset class.

623
00:30:39,640 --> 00:30:42,400
Speaker 1: The other thing that most people never talk about, and

624
00:30:42,440 --> 00:30:44,680
Speaker 1: what you know, Brian and I always like to remind

625
00:30:44,720 --> 00:30:48,520
Speaker 1: people of, is the reason you're doing diversification in the

626
00:30:48,520 --> 00:30:52,200
Speaker 1: first place, and an asset allocation strategy is not just

627
00:30:52,240 --> 00:30:57,280
Speaker 1: to manage return, it's to manage risk adjusted return. But

628
00:30:57,400 --> 00:30:59,520
Speaker 1: back to your question, the other thing you can do

629
00:30:59,760 --> 00:31:04,240
Speaker 1: is there are blended bendmarks out there, if you can

630
00:31:04,280 --> 00:31:08,080
Speaker 1: go find one that's roughly similar to how your portfolio

631
00:31:08,200 --> 00:31:12,080
Speaker 1: is constructed. You know, there are sixty forties, seventy thirty

632
00:31:12,440 --> 00:31:16,400
Speaker 1: benchmarks out there if you're interested just to evaluate performance.

633
00:31:16,720 --> 00:31:18,800
Speaker 1: That's another thing that you can do out there. It

634
00:31:18,840 --> 00:31:21,880
Speaker 1: takes a little work, takes a little searching, but those

635
00:31:21,920 --> 00:31:26,600
Speaker 1: are the two reasons people you know usually benchmark their portfolio,

636
00:31:26,720 --> 00:31:28,840
Speaker 1: and a couple of ideas or ways to do that.

637
00:31:29,360 --> 00:31:33,120
Speaker 1: Hope that helps. Let's go to Evan and Edgewood. He says,

638
00:31:33,160 --> 00:31:36,600
Speaker 1: We've got a lot of appreciated positions in our taxable account,

639
00:31:36,600 --> 00:31:41,080
Speaker 1: and I'm worried about the compounding effect of capital gains drag.

640
00:31:41,760 --> 00:31:45,880
Speaker 1: How do you unwind gains strategically, Brian without blowing up

641
00:31:46,080 --> 00:31:47,120
Speaker 1: your tax return?

642
00:31:48,000 --> 00:31:50,200
Speaker 2: Yeah, you know, Evan, what you're running into is what

643
00:31:50,240 --> 00:31:51,960
Speaker 2: a lot of people see is that every time, you know,

644
00:31:51,960 --> 00:31:55,280
Speaker 2: I'm built up a sizeable portfolio in a taxable account,

645
00:31:55,720 --> 00:31:57,240
Speaker 2: and maybe I want to pull some money out to

646
00:31:57,240 --> 00:31:58,800
Speaker 2: buy a car or do something with a family, or

647
00:31:58,800 --> 00:32:01,160
Speaker 2: accomplish some funny as a goal, playoff, some debt or whatever.

648
00:32:01,400 --> 00:32:03,080
Speaker 2: But the very first thing I get smacked in the

649
00:32:03,080 --> 00:32:05,560
Speaker 2: face with is what's something that feels like a tax penalty?

650
00:32:05,760 --> 00:32:07,400
Speaker 2: If I want to access my own money, I'm going

651
00:32:07,440 --> 00:32:09,000
Speaker 2: to have to write a check to the irs and

652
00:32:09,080 --> 00:32:11,320
Speaker 2: give them a cut of it. This leads to people

653
00:32:12,000 --> 00:32:14,200
Speaker 2: just ignoring those assets, but it doesn't make any sense.

654
00:32:14,240 --> 00:32:16,160
Speaker 2: You're going to pay taxes one way or another, and

655
00:32:16,200 --> 00:32:17,760
Speaker 2: this money is not here to stare at, so you

656
00:32:17,760 --> 00:32:19,280
Speaker 2: may as well figure out what the impact is.

657
00:32:19,320 --> 00:32:20,880
Speaker 3: I think that's what Evans is running into there.

658
00:32:21,160 --> 00:32:23,760
Speaker 2: So the challenge here is that, of course that every

659
00:32:23,800 --> 00:32:27,160
Speaker 2: sale feels like that tax penalty, but the real risk

660
00:32:27,320 --> 00:32:29,800
Speaker 2: is there is not letting that stop you from executing

661
00:32:29,800 --> 00:32:32,520
Speaker 2: your financial plans. So start with diagnosing what the real

662
00:32:32,560 --> 00:32:35,000
Speaker 2: issue is. Make sure you know what each position's cost

663
00:32:35,040 --> 00:32:37,880
Speaker 2: basis is unrealized gain and get that down to the

664
00:32:37,920 --> 00:32:40,240
Speaker 2: tax lot. You probably have more than one tax lot

665
00:32:40,240 --> 00:32:42,680
Speaker 2: in each of these. The tax lot is literally that

666
00:32:42,920 --> 00:32:45,280
Speaker 2: you know you reinvested a dividend in March of two

667
00:32:45,360 --> 00:32:48,360
Speaker 2: thousand and seven, and that that particular pile of shares

668
00:32:48,440 --> 00:32:50,720
Speaker 2: is now worth this gain or that loss or whatever.

669
00:32:51,040 --> 00:32:53,720
Speaker 2: Make sure you understand that level, and then layer your

670
00:32:54,160 --> 00:32:57,760
Speaker 2: sales over calendar years, harvest just enough each year to

671
00:32:57,800 --> 00:33:00,400
Speaker 2: fill those lower brackets, but stop just before your marginal

672
00:33:00,440 --> 00:33:02,560
Speaker 2: rate jumps. So this is an ideal time to do it.

673
00:33:02,560 --> 00:33:04,960
Speaker 2: You've got a few weeks left in this year, but

674
00:33:05,120 --> 00:33:06,880
Speaker 2: just in a month, we're going to be in a

675
00:33:07,400 --> 00:33:10,320
Speaker 2: second tax year, and if you tack on another twelve months,

676
00:33:10,360 --> 00:33:12,360
Speaker 2: we'll be in a third. So literally over a thirteen

677
00:33:12,360 --> 00:33:14,920
Speaker 2: month time period right now, Evan, you can get into

678
00:33:15,000 --> 00:33:17,440
Speaker 2: three different tax years. But it all starts with knowing

679
00:33:17,480 --> 00:33:19,480
Speaker 2: what you're trying to accomplish in the first place. Don't

680
00:33:19,600 --> 00:33:22,200
Speaker 2: don't face this with the idea of I must not

681
00:33:22,280 --> 00:33:24,560
Speaker 2: have any taxes. Taxes or evil. They're gonna You're gonna

682
00:33:24,560 --> 00:33:26,200
Speaker 2: pay taxes no matter what. You're not looking to avoid,

683
00:33:26,200 --> 00:33:28,480
Speaker 2: you're looking to mitigate. So take advantage of the time

684
00:33:28,480 --> 00:33:31,360
Speaker 2: that you have to go ahead and spread that into

685
00:33:31,400 --> 00:33:32,600
Speaker 2: those three different tax years.

686
00:33:34,040 --> 00:33:37,280
Speaker 1: Coming up next, Brian has his bottom line from a

687
00:33:37,360 --> 00:33:42,040
Speaker 1: practical standpoint on how to navigate this ever changing interest

688
00:33:42,120 --> 00:33:44,920
Speaker 1: rate environment. You're listening to Simply Money presented by all

689
00:33:44,920 --> 00:33:52,880
Speaker 1: Worth Financial on fifty five KRC. The talk station you're

690
00:33:52,920 --> 00:33:55,520
Speaker 1: listening to Simply Money presided by all Worth Financial. I'm

691
00:33:55,520 --> 00:33:59,440
Speaker 1: Bob sponsorller along with Brian James. And speaking of Brian James,

692
00:33:59,480 --> 00:34:04,160
Speaker 1: Brian has his bottom line with some great practical common

693
00:34:04,240 --> 00:34:08,400
Speaker 1: sense advice on how to navigate this seemingly ever changing

694
00:34:08,680 --> 00:34:11,440
Speaker 1: interest rate environment. What do you have for us tonight, Brian.

695
00:34:11,640 --> 00:34:14,160
Speaker 2: Well, we talked earlier in the show Bob about you know,

696
00:34:14,200 --> 00:34:16,400
Speaker 2: today's interest rate cut and which is which is not

697
00:34:16,440 --> 00:34:17,160
Speaker 2: the first one of the year.

698
00:34:17,160 --> 00:34:18,280
Speaker 3: We've had a few now.

699
00:34:18,719 --> 00:34:22,120
Speaker 2: And you know a lot of people are really looking

700
00:34:22,160 --> 00:34:23,960
Speaker 2: forward to getting back to those two to three percent

701
00:34:24,000 --> 00:34:26,120
Speaker 2: mortgages when rate interest rates were on the floor and

702
00:34:26,160 --> 00:34:28,279
Speaker 2: stayed there for a very long time. Well, you know

703
00:34:29,120 --> 00:34:31,560
Speaker 2: what we're seeing now is that that that is not

704
00:34:31,840 --> 00:34:34,920
Speaker 2: likely to return. The market doesn't believe that we're headed

705
00:34:34,960 --> 00:34:38,640
Speaker 2: back that way in general, but that doesn't mean that

706
00:34:38,680 --> 00:34:40,719
Speaker 2: there aren't There isn't a way to be thinking about this.

707
00:34:40,800 --> 00:34:43,160
Speaker 2: I want to talk today about the new interest rate normal.

708
00:34:43,440 --> 00:34:46,279
Speaker 2: Are we investing where for a world where four to

709
00:34:46,400 --> 00:34:48,600
Speaker 2: five percent might be here to stay for these more

710
00:34:48,640 --> 00:34:51,320
Speaker 2: liquid types of assets, and so about for about fifteen

711
00:34:51,440 --> 00:34:54,439
Speaker 2: years ever since the financial crisis of two thousand and eight,

712
00:34:54,520 --> 00:34:57,320
Speaker 2: we had this ultra low rate environment, right, so, mortgages

713
00:34:57,360 --> 00:34:59,880
Speaker 2: were three percent, savings accounts were under one, and people's

714
00:35:00,239 --> 00:35:03,160
Speaker 2: thinking about the ability to earn money on their depository assets.

715
00:35:03,360 --> 00:35:06,200
Speaker 2: Bonds were barely yielding more than inflation. But after that

716
00:35:06,239 --> 00:35:08,680
Speaker 2: inflation shock of twenty one to twenty three, we kind

717
00:35:08,719 --> 00:35:13,120
Speaker 2: of entered a different environment. Federal Reserve started fighting with inflation,

718
00:35:13,360 --> 00:35:16,279
Speaker 2: and now this is resulting in a place where interest

719
00:35:16,360 --> 00:35:19,520
Speaker 2: rates may stay structurally higher. In practice, this means that

720
00:35:19,560 --> 00:35:21,760
Speaker 2: four to five percent short term rates may be the norm,

721
00:35:21,840 --> 00:35:24,640
Speaker 2: not the exception for years. So the Fed has slowed

722
00:35:24,680 --> 00:35:26,200
Speaker 2: but not stopped rate cuts.

723
00:35:26,239 --> 00:35:26,719
Speaker 3: Right, we didn't.

724
00:35:26,760 --> 00:35:28,880
Speaker 2: We haven't come screaming back down to zero like we

725
00:35:28,920 --> 00:35:32,319
Speaker 2: thought we might after all the political rhetoric in a

726
00:35:32,320 --> 00:35:35,680
Speaker 2: presidential year. Bond markets are recalibrating this so ten year

727
00:35:35,719 --> 00:35:38,879
Speaker 2: treasuries have spent months between four point three, say four

728
00:35:38,880 --> 00:35:41,400
Speaker 2: point seven percent. Those are levels that we have not

729
00:35:41,520 --> 00:35:44,480
Speaker 2: seen for the last decade. Banks across the region have

730
00:35:44,600 --> 00:35:47,080
Speaker 2: finally begun raising deposit rates. I remember I was sitting

731
00:35:47,080 --> 00:35:49,480
Speaker 2: in the room, Bob, when one of the leaders of

732
00:35:49,480 --> 00:35:51,200
Speaker 2: a local bank said, we are not going to be

733
00:35:51,200 --> 00:35:53,759
Speaker 2: the first to raise interest rates on depository accounts just

734
00:35:53,760 --> 00:35:56,040
Speaker 2: because rates are going up. This goes back ten twelve

735
00:35:56,120 --> 00:35:59,239
Speaker 2: years when we had a headfake on interest rates going up.

736
00:35:59,239 --> 00:36:01,920
Speaker 2: But anyway, banks were really, really in love with those

737
00:36:02,000 --> 00:36:03,600
Speaker 2: low rates, and as soon as we got a spike

738
00:36:03,640 --> 00:36:05,319
Speaker 2: in mortgage rates, they could earn a little bit more

739
00:36:05,320 --> 00:36:08,600
Speaker 2: in the spread. And so but now they're finally reacting.

740
00:36:08,640 --> 00:36:10,880
Speaker 2: Those big banks, the big brick and mortars, are finally

741
00:36:10,960 --> 00:36:13,920
Speaker 2: raising depository rates. That's how you know that those are

742
00:36:13,960 --> 00:36:17,040
Speaker 2: the last ones to go corporate borrowing costs or resetting

743
00:36:17,040 --> 00:36:19,279
Speaker 2: a little bit higher, and you know that kind of

744
00:36:19,320 --> 00:36:22,799
Speaker 2: changes the calculus for stocks because that's going to change profitability.

745
00:36:23,080 --> 00:36:24,920
Speaker 2: So what should you be doing about this, Well, make

746
00:36:24,960 --> 00:36:28,080
Speaker 2: sure you rebuild that safe bucket with real yield. For

747
00:36:28,120 --> 00:36:30,720
Speaker 2: the first time in years, high quality bonds are producing

748
00:36:30,760 --> 00:36:35,080
Speaker 2: positive real income, meaning even inflation adjusted, it's still a

749
00:36:34,800 --> 00:36:37,800
Speaker 2: better better outcome for you. Short term treasury CDs money markets,

750
00:36:37,800 --> 00:36:40,439
Speaker 2: you can still get four sometimes five percent in those,

751
00:36:41,120 --> 00:36:43,279
Speaker 2: you know, but I would think about locking some of

752
00:36:43,280 --> 00:36:45,080
Speaker 2: that in if you've got a significant pile of cash

753
00:36:45,120 --> 00:36:47,800
Speaker 2: that you've considered your emergency fund and you've been enjoying

754
00:36:47,840 --> 00:36:49,719
Speaker 2: the fact that it's completely liquid and you're getting that

755
00:36:49,760 --> 00:36:52,120
Speaker 2: four to five percent. Well, we are seeing declines and

756
00:36:52,200 --> 00:36:54,439
Speaker 2: rates and that might be closer to three percent now.

757
00:36:54,600 --> 00:36:57,200
Speaker 2: So you might consider locking that in up put some

758
00:36:57,280 --> 00:36:59,920
Speaker 2: kind of maybe a CD ladder or something together one, two,

759
00:37:00,160 --> 00:37:02,080
Speaker 2: three years, so that you know, as we continue to

760
00:37:02,120 --> 00:37:04,440
Speaker 2: go down in interest rates, if they continue to slip downward,

761
00:37:04,600 --> 00:37:07,480
Speaker 2: you're still going to have something locked in over a

762
00:37:07,520 --> 00:37:09,319
Speaker 2: period of time. Bob, Are you seeing the same thing,

763
00:37:09,400 --> 00:37:10,960
Speaker 2: same concerns from from your clients.

764
00:37:11,560 --> 00:37:11,799
Speaker 3: Yeah.

765
00:37:11,840 --> 00:37:14,560
Speaker 1: I think the main thing here is to just pay attention.

766
00:37:14,640 --> 00:37:17,200
Speaker 1: And we've talked about this. I mean, and I'm not

767
00:37:17,239 --> 00:37:19,920
Speaker 1: slamming banks here. I mean they run a business like

768
00:37:19,960 --> 00:37:22,520
Speaker 1: everyone else. They got to make a profit. And you

769
00:37:22,520 --> 00:37:24,719
Speaker 1: you already brought up you know the fact that their

770
00:37:24,760 --> 00:37:29,080
Speaker 1: profit in general comes from the spread between short term

771
00:37:29,120 --> 00:37:32,360
Speaker 1: rates that they grant to depositors and longer term rates

772
00:37:32,400 --> 00:37:35,920
Speaker 1: that they charge to people to borrow money. And I

773
00:37:35,960 --> 00:37:39,160
Speaker 1: think banks, like everyone else, have to compete here, and

774
00:37:39,600 --> 00:37:43,000
Speaker 1: they don't give if they if they give people too

775
00:37:43,200 --> 00:37:45,080
Speaker 1: low of a rate, people are going to take their

776
00:37:45,120 --> 00:37:47,120
Speaker 1: money out of that bank and put it somewhere else,

777
00:37:47,239 --> 00:37:50,320
Speaker 1: and we've seen that happen here over the last few years.

778
00:37:50,360 --> 00:37:52,120
Speaker 1: And I think banks are in a tough spot right

779
00:37:52,200 --> 00:37:55,560
Speaker 1: now because you know, they still they still want to

780
00:37:55,640 --> 00:37:59,040
Speaker 1: and need to make money, but you know it's a

781
00:37:59,080 --> 00:38:02,560
Speaker 1: competitive environment out there. So again, don't just sit there

782
00:38:02,600 --> 00:38:05,640
Speaker 1: and ignore your short term savings and checking shop it

783
00:38:05,680 --> 00:38:08,400
Speaker 1: around and work with your advisor to make sure you

784
00:38:08,400 --> 00:38:11,000
Speaker 1: don't have too much money sitting in cash at a

785
00:38:11,080 --> 00:38:14,960
Speaker 1: very low interest rate if your financial plan allows for it.

786
00:38:15,239 --> 00:38:17,200
Speaker 1: And to Bryan's point, if you're willing to take a

787
00:38:17,360 --> 00:38:19,839
Speaker 1: little bit more risk on the credit side and get

788
00:38:19,840 --> 00:38:24,080
Speaker 1: into some of these attractive bond opportunities and ladder the maturities,

789
00:38:24,400 --> 00:38:26,719
Speaker 1: there's a way to juice that yield a little bit

790
00:38:26,840 --> 00:38:30,440
Speaker 1: without putting too much risk into your portfolio. Thanks for

791
00:38:30,520 --> 00:38:33,040
Speaker 1: listening tonight. You've been listening to Simply Money, presented by

792
00:38:33,040 --> 00:38:36,320
Speaker 1: all Worth Financial on fifty five KRC, the talk station