1 00:00:06,240 --> 00:00:08,800 Speaker 1: Tonight how to know if you are the right fit 2 00:00:09,160 --> 00:00:12,600 Speaker 1: for some advanced financial planning. You're listening to Simply Money, 3 00:00:12,640 --> 00:00:17,000 Speaker 1: presented by all Worth Financial on Bobspondseller along with Brian James. Tonight, 4 00:00:17,079 --> 00:00:20,080 Speaker 1: we're gonna walk you through the real life signs that 5 00:00:20,200 --> 00:00:24,160 Speaker 1: you might be the perfect candidates for some financial planning 6 00:00:24,200 --> 00:00:29,080 Speaker 1: that goes way beyond just investment advice. Brian, let's let's 7 00:00:29,080 --> 00:00:30,440 Speaker 1: walk through a couple scenarios. 8 00:00:30,640 --> 00:00:32,920 Speaker 2: So let's talk about some We got a couple examples 9 00:00:32,960 --> 00:00:35,280 Speaker 2: of kind of perfect candidates for these types of things. 10 00:00:35,360 --> 00:00:37,199 Speaker 3: So first one, if you are if you are a 11 00:00:37,240 --> 00:00:42,559 Speaker 3: pre retiree with multiple buckets of financial resources. So let's start. 12 00:00:42,600 --> 00:00:45,279 Speaker 2: But we'll call these folks Dan and Karen fifty nine 13 00:00:45,320 --> 00:00:47,640 Speaker 2: and sixty one. They're thinking about retiring in five years. 14 00:00:47,640 --> 00:00:49,479 Speaker 2: That's a pretty common age to think about because that 15 00:00:49,520 --> 00:00:51,919 Speaker 2: would put them square in the where they can get 16 00:00:51,920 --> 00:00:55,080 Speaker 2: access to Medicare, so in barring anything else, that's usually 17 00:00:55,080 --> 00:00:57,520 Speaker 2: what people you know, kind of target. They save well 18 00:00:57,520 --> 00:01:00,120 Speaker 2: about two point eight million dollars between their IRA a 19 00:01:00,160 --> 00:01:02,120 Speaker 2: broker's account for a one K. They've got a health 20 00:01:02,160 --> 00:01:04,680 Speaker 2: savings account because they've been listening to us and a 21 00:01:04,720 --> 00:01:07,120 Speaker 2: small rental property out there. So these are kind of 22 00:01:07,120 --> 00:01:10,240 Speaker 2: the poster children for advanced planning because they're in their 23 00:01:10,319 --> 00:01:13,160 Speaker 2: highest earning years, they are still young enough to be 24 00:01:13,200 --> 00:01:16,960 Speaker 2: doing ROTH conversions and in counting on that for future 25 00:01:17,040 --> 00:01:20,200 Speaker 2: tax free income. And there they have a lot of 26 00:01:20,200 --> 00:01:23,800 Speaker 2: investments across different asset locations. Right, we talk about this 27 00:01:23,840 --> 00:01:26,160 Speaker 2: all the time. Asset location is not physically where the 28 00:01:26,200 --> 00:01:29,480 Speaker 2: dollars are. It's the tax treatment. What kind of tax 29 00:01:29,560 --> 00:01:31,960 Speaker 2: treatment is this particular account going to get? Is it 30 00:01:32,000 --> 00:01:34,880 Speaker 2: pre tax, is it after tax and therefore also known 31 00:01:34,880 --> 00:01:37,480 Speaker 2: as taxable, or is it tax free meaning. 32 00:01:37,240 --> 00:01:38,919 Speaker 3: WROTH or possibly municipal bonds. 33 00:01:39,120 --> 00:01:42,000 Speaker 2: Also, they haven't started Social Security yet, so they're still 34 00:01:42,000 --> 00:01:44,480 Speaker 2: controlling their income to some extent. Now, this is this 35 00:01:44,520 --> 00:01:47,280 Speaker 2: is a situation where any good financial fiduciary advisor is 36 00:01:47,280 --> 00:01:49,640 Speaker 2: going to map out which accounts to draw from in 37 00:01:49,680 --> 00:01:53,440 Speaker 2: which years, how to reduce those future required minimum distributions, 38 00:01:53,480 --> 00:01:57,120 Speaker 2: which which may mean consciously pulling some taxation forward into 39 00:01:57,160 --> 00:01:57,840 Speaker 2: current years. 40 00:01:58,080 --> 00:01:59,040 Speaker 3: Even if we don't like that. 41 00:01:59,200 --> 00:02:01,080 Speaker 2: We would be wanting to to pay lower taxes for 42 00:02:01,120 --> 00:02:03,880 Speaker 2: a longer period of time versus no taxes now. Are 43 00:02:03,920 --> 00:02:07,040 Speaker 2: extremely low taxes now and extremely high taxes later and also, 44 00:02:07,200 --> 00:02:08,960 Speaker 2: you know, finally that advisor hopefully is going to help 45 00:02:09,000 --> 00:02:11,760 Speaker 2: teach them how to offset using that income using tax 46 00:02:11,840 --> 00:02:14,440 Speaker 2: loss harvesting or charitable giving strategies. 47 00:02:14,639 --> 00:02:18,000 Speaker 3: So here's the point. They've given themselves options. That's great. 48 00:02:18,040 --> 00:02:19,120 Speaker 3: Options are wonderful. 49 00:02:19,320 --> 00:02:21,440 Speaker 2: The job of an advisor is to make sure that 50 00:02:21,480 --> 00:02:23,880 Speaker 2: a client understands the pros and cons of each of 51 00:02:23,919 --> 00:02:26,800 Speaker 2: those options. They're probably all good ideas, but there's always 52 00:02:26,840 --> 00:02:30,000 Speaker 2: a good versus better versus best. That's the key. You 53 00:02:30,040 --> 00:02:32,960 Speaker 2: need a strategy to make the most and optimize which 54 00:02:33,000 --> 00:02:35,080 Speaker 2: option you choose well. 55 00:02:35,360 --> 00:02:37,960 Speaker 1: In order to be effective with this, the advisor not 56 00:02:38,000 --> 00:02:40,960 Speaker 1: only has to have some good tools to use, but 57 00:02:41,120 --> 00:02:44,360 Speaker 1: know how to use them and implement them. Meaning, you know, 58 00:02:44,720 --> 00:02:48,279 Speaker 1: there are a ton and the growing number of nuances 59 00:02:48,320 --> 00:02:51,000 Speaker 1: in the tax code, which makes some of these decisions 60 00:02:51,440 --> 00:02:54,440 Speaker 1: very complicated to make if you don't have the numbers 61 00:02:54,440 --> 00:02:57,360 Speaker 1: in front of you. So thankfully, you know, I know, 62 00:02:57,400 --> 00:02:59,640 Speaker 1: we've got some really good software that we use. I 63 00:02:59,639 --> 00:03:02,440 Speaker 1: know other advisors out there do as well, but you 64 00:03:02,520 --> 00:03:04,040 Speaker 1: got to have the right tools and know how to 65 00:03:04,160 --> 00:03:06,600 Speaker 1: use them to help people make these kind of very 66 00:03:06,600 --> 00:03:10,880 Speaker 1: important decisions. Let's talk about a situation the retired couple 67 00:03:11,040 --> 00:03:14,640 Speaker 1: with a tax problem. We'll call them Susan and David. 68 00:03:14,680 --> 00:03:17,320 Speaker 1: They've already retired, they're both in their late sixties. They're 69 00:03:17,320 --> 00:03:20,160 Speaker 1: living comfortably on Social Security, a pension, and about a 70 00:03:20,160 --> 00:03:22,520 Speaker 1: three and a half million dollar portfolios. So they're doing 71 00:03:22,639 --> 00:03:26,680 Speaker 1: just fine. But they hit their first required minimum distribution 72 00:03:26,840 --> 00:03:30,359 Speaker 1: here and suddenly their tax bill out of nowhere jumped 73 00:03:30,440 --> 00:03:33,840 Speaker 1: forty percent and they didn't see it coming. Their withdrawal 74 00:03:33,840 --> 00:03:37,560 Speaker 1: strategy wasn't coordinated with their tax bracket. They also did 75 00:03:37,600 --> 00:03:41,720 Speaker 1: not consider rough conversions in those gap years between when 76 00:03:41,720 --> 00:03:45,040 Speaker 1: they retired and when the rmds kicked in, So now 77 00:03:45,080 --> 00:03:48,760 Speaker 1: they're paying higher taxes on things like capital gains and 78 00:03:48,840 --> 00:03:52,520 Speaker 1: Medicare premiums. All of that could have been mitigated with 79 00:03:52,600 --> 00:03:55,600 Speaker 1: better planning. But we can't redo the past. All we 80 00:03:55,640 --> 00:03:58,600 Speaker 1: can do is pick things up and move forward. So 81 00:03:58,920 --> 00:04:01,920 Speaker 1: David and Susan are there still perfect candidates for some 82 00:04:02,320 --> 00:04:06,800 Speaker 1: active strategic planning because they do have the opportunity to 83 00:04:07,040 --> 00:04:11,280 Speaker 1: layer their income with different different buckets of assets where 84 00:04:11,280 --> 00:04:14,120 Speaker 1: we can control the r and ds through some charitable giving, 85 00:04:15,000 --> 00:04:19,000 Speaker 1: some strategic estate planning to leave some kids, perhaps leave 86 00:04:19,040 --> 00:04:21,960 Speaker 1: some money to the kids perhaps now, you know, because 87 00:04:21,960 --> 00:04:24,280 Speaker 1: that's one of their big goals. So you know, in 88 00:04:24,320 --> 00:04:27,000 Speaker 1: this case, they don't need to focus much at all 89 00:04:27,080 --> 00:04:29,960 Speaker 1: on investing more money. They just need to coordinate what 90 00:04:30,000 --> 00:04:32,960 Speaker 1: they already have. And Brian, we see this all the time. 91 00:04:33,320 --> 00:04:36,480 Speaker 2: Yeah, exactly, the situations where where they're kind of set 92 00:04:36,480 --> 00:04:38,680 Speaker 2: and not quite set in stone. That's not the right expression, 93 00:04:38,720 --> 00:04:40,800 Speaker 2: but but things are pretty much set versus you know, 94 00:04:40,839 --> 00:04:42,560 Speaker 2: we just talked about Dan and Karen, who are still 95 00:04:42,600 --> 00:04:44,680 Speaker 2: in that more flexible stage where they can do some 96 00:04:44,720 --> 00:04:48,159 Speaker 2: planning ahead of the requirementimum distributions. Well, it's unfortunate Susan 97 00:04:48,160 --> 00:04:50,160 Speaker 2: and David didn't get that chance because they didn't have 98 00:04:50,200 --> 00:04:52,560 Speaker 2: that fiducial advisor, but that doesn't mean there's nothing they 99 00:04:52,560 --> 00:04:55,440 Speaker 2: can do at all. So yeah, absolutely need to understand 100 00:04:55,440 --> 00:04:57,840 Speaker 2: what you have, what are you required to do via 101 00:04:57,960 --> 00:05:00,240 Speaker 2: via those r and ds, and then what strategies are 102 00:05:00,279 --> 00:05:03,200 Speaker 2: out there that could offset. Again, just like Bob said, 103 00:05:03,240 --> 00:05:06,240 Speaker 2: coordinate what you've got, all right, So another let's. 104 00:05:06,240 --> 00:05:09,719 Speaker 1: Let's let's talk about ricks owner. Brian, I know that 105 00:05:10,160 --> 00:05:12,760 Speaker 1: and this is a fictitious situation that we made up, 106 00:05:12,760 --> 00:05:15,160 Speaker 1: but I know, you know, because you shared this with me. 107 00:05:15,279 --> 00:05:16,240 Speaker 3: You just helped a. 108 00:05:16,240 --> 00:05:21,040 Speaker 1: Very successful business owner put together a very sound financial 109 00:05:21,120 --> 00:05:24,520 Speaker 1: strategy and it was wonderfully constructed. Talk about some of 110 00:05:24,520 --> 00:05:26,560 Speaker 1: the things that you can do for business owners. 111 00:05:26,680 --> 00:05:28,440 Speaker 3: Yeah, so we're going we'll do this with an example. 112 00:05:28,520 --> 00:05:30,839 Speaker 2: So so Rick is sixty two and this is this 113 00:05:30,920 --> 00:05:33,040 Speaker 2: example is based off of real you know, we make 114 00:05:33,040 --> 00:05:35,000 Speaker 2: them up, yes for the show here, but they're based 115 00:05:35,000 --> 00:05:36,520 Speaker 2: off of real clients because that's all that we know. 116 00:05:36,680 --> 00:05:38,600 Speaker 2: After Bob and I have been doing this for sixty 117 00:05:38,680 --> 00:05:40,680 Speaker 2: years between us, so it's kind of a we're not 118 00:05:40,680 --> 00:05:44,240 Speaker 2: fun at parties anyway. So Rick is sixty two six, 119 00:05:45,760 --> 00:05:50,440 Speaker 2: I've been at parties with you. You're right, So small business owner. 120 00:05:50,480 --> 00:05:52,480 Speaker 2: He's got a business worth about four and a half million, 121 00:05:52,520 --> 00:05:54,640 Speaker 2: and he's eyeing that sale. Right, So this is two 122 00:05:54,640 --> 00:05:56,840 Speaker 2: three years out. This is for those of you who 123 00:05:56,880 --> 00:05:58,640 Speaker 2: are business owners out there, even those of you are not, 124 00:05:59,000 --> 00:06:00,719 Speaker 2: just know that this is a huge, huge, a decision 125 00:06:00,880 --> 00:06:02,600 Speaker 2: and so you do want to start thinking about it. 126 00:06:02,720 --> 00:06:04,520 Speaker 2: Well in advance. You can't decide that. You know what, 127 00:06:04,600 --> 00:06:06,280 Speaker 2: it's Friday, I'm super tired. I'm going to sell the 128 00:06:06,320 --> 00:06:06,960 Speaker 2: business on Monday. 129 00:06:06,960 --> 00:06:07,880 Speaker 3: It's not going to work that way. 130 00:06:08,240 --> 00:06:11,119 Speaker 2: So Rick knows that he's sitting on a ticking tax 131 00:06:11,160 --> 00:06:13,440 Speaker 2: time bomb. If he sells without a plan, just like 132 00:06:13,480 --> 00:06:16,479 Speaker 2: we just said, you know, he could pay hundreds of thousands, 133 00:06:16,480 --> 00:06:19,919 Speaker 2: if not more, in unnecessary taxes. Unnecessary meaning if you 134 00:06:19,920 --> 00:06:21,560 Speaker 2: plan for these things, you need to do it right, 135 00:06:22,000 --> 00:06:24,839 Speaker 2: then you can potentially control some of this taxation. So, 136 00:06:25,200 --> 00:06:27,800 Speaker 2: for example, he could be looking at strategies such as 137 00:06:28,120 --> 00:06:31,240 Speaker 2: installment sales spread that tax hit over time. That can 138 00:06:31,279 --> 00:06:34,280 Speaker 2: simply mean that you're maybe you're self financing, you are 139 00:06:34,320 --> 00:06:36,880 Speaker 2: allowing a buyer to pay you over time, taking the 140 00:06:36,960 --> 00:06:39,479 Speaker 2: risk yourself, or perhaps there's a bank that is a 141 00:06:39,520 --> 00:06:43,200 Speaker 2: middleman so that so you can shift that risk to 142 00:06:43,200 --> 00:06:45,200 Speaker 2: the buyer. But the point is changing those payments so 143 00:06:45,200 --> 00:06:47,640 Speaker 2: they don't happen all at once. You can also look 144 00:06:47,680 --> 00:06:50,760 Speaker 2: at something called qualified small business stock exclusions. 145 00:06:50,800 --> 00:06:51,479 Speaker 3: If eligible. 146 00:06:51,880 --> 00:06:54,000 Speaker 2: There's lots of moving parts to that. That would be 147 00:06:54,080 --> 00:06:56,719 Speaker 2: a long, fascinating segment, I think if we ever got 148 00:06:56,760 --> 00:07:00,000 Speaker 2: into that level, But for now, just take the keyword 149 00:07:00,040 --> 00:07:04,640 Speaker 2: qualified small business stock exclusions. You can also use charitable trusts. 150 00:07:04,680 --> 00:07:06,560 Speaker 2: He's gonna have a of course, he's gonna have a 151 00:07:07,360 --> 00:07:09,479 Speaker 2: windfall here that's the whole point of this. He will 152 00:07:09,480 --> 00:07:11,520 Speaker 2: have a windfall, and he could use charitable trust or 153 00:07:11,560 --> 00:07:14,680 Speaker 2: perhaps donor advise funds to offset some of these capital gains, 154 00:07:14,800 --> 00:07:16,880 Speaker 2: because a lot of people already have in mind that 155 00:07:16,960 --> 00:07:19,480 Speaker 2: if I've come into a windfall, I'm going to benefit 156 00:07:19,560 --> 00:07:22,480 Speaker 2: these various charities, my church, whatever, And that's fine plan 157 00:07:22,640 --> 00:07:24,400 Speaker 2: to do that, though in the same year where the 158 00:07:24,440 --> 00:07:26,800 Speaker 2: tax hit is is gonna kick in, and. 159 00:07:26,800 --> 00:07:27,760 Speaker 3: That does take some time. 160 00:07:27,800 --> 00:07:30,200 Speaker 2: You can't just flip those together quickly, so you want 161 00:07:30,240 --> 00:07:31,800 Speaker 2: to make sure you know, if you're thinking about this 162 00:07:31,920 --> 00:07:34,080 Speaker 2: right now, really now is the time get on the 163 00:07:34,120 --> 00:07:36,240 Speaker 2: horn and get talking to your advisors to get all 164 00:07:36,240 --> 00:07:39,440 Speaker 2: this stuff coordinated. So he can also look at something 165 00:07:39,480 --> 00:07:41,600 Speaker 2: called it. Now he's got two three years left, he 166 00:07:41,640 --> 00:07:44,360 Speaker 2: could potentially look at setting up a defined benefit plan 167 00:07:45,000 --> 00:07:47,680 Speaker 2: for himself and its employees to load up on tax 168 00:07:47,720 --> 00:07:50,480 Speaker 2: deferred savings before exit. This is basically something where he's 169 00:07:50,480 --> 00:07:52,880 Speaker 2: funding a pension for a few years, but a defined 170 00:07:52,920 --> 00:07:56,120 Speaker 2: benefit plan allows you to focus on your older employees 171 00:07:56,560 --> 00:07:59,640 Speaker 2: first in terms of finances and smaller amounts going to 172 00:07:59,680 --> 00:08:02,080 Speaker 2: the younger employees because of the way pensions work. So 173 00:08:02,160 --> 00:08:04,240 Speaker 2: if if Rick is somebody who is you know, let's 174 00:08:04,240 --> 00:08:06,720 Speaker 2: say he's he's sixty two and he's got a bunch 175 00:08:06,760 --> 00:08:08,640 Speaker 2: of employees in their twenties. This could be a really, 176 00:08:08,640 --> 00:08:11,480 Speaker 2: really good way for him to benefit himself as well 177 00:08:11,520 --> 00:08:13,679 Speaker 2: as give his employees something as well. But let's remember 178 00:08:13,720 --> 00:08:17,160 Speaker 2: his situation isn't just about taxes. He needs a post 179 00:08:17,280 --> 00:08:19,800 Speaker 2: sale income strategy. What's he gonna do after this money 180 00:08:19,840 --> 00:08:22,040 Speaker 2: drops out of the sky. Right now, he knows how 181 00:08:22,080 --> 00:08:24,240 Speaker 2: the income works because he goes and sells his products 182 00:08:24,280 --> 00:08:27,000 Speaker 2: and services and he's been very successful at that. 183 00:08:27,240 --> 00:08:28,760 Speaker 3: But now he's gonna have a pile of money that 184 00:08:28,800 --> 00:08:30,760 Speaker 3: has nothing to do with those products and services. 185 00:08:30,760 --> 00:08:34,600 Speaker 2: So he's gonna need coordination between a CPA, a financial advisor, 186 00:08:34,640 --> 00:08:37,680 Speaker 2: and an attorney to make this new machine work to 187 00:08:37,720 --> 00:08:39,560 Speaker 2: spit out the income that he needs in a tax 188 00:08:39,600 --> 00:08:42,640 Speaker 2: efficient manner. Synchronizing all those moving parts. That's the whole 189 00:08:42,640 --> 00:08:43,680 Speaker 2: point of a financial plan. 190 00:08:44,480 --> 00:08:46,520 Speaker 1: You're listening to Simple Money present up by all Worth 191 00:08:46,520 --> 00:08:49,360 Speaker 1: Financial on Bob spunt Seller along with Brian James. Brian, 192 00:08:49,440 --> 00:08:52,120 Speaker 1: let's get into one more scenario and we run across 193 00:08:52,160 --> 00:08:56,480 Speaker 1: this often the charitably inclined empty nester couple. We'll call 194 00:08:56,559 --> 00:08:59,960 Speaker 1: them Mark and Teresa. They're in their early seventies. They're retired. 195 00:09:00,120 --> 00:09:01,760 Speaker 1: They got about a six and a half million dollar 196 00:09:01,880 --> 00:09:05,640 Speaker 1: net worth, comfortable income coming in from a pension, investments 197 00:09:05,640 --> 00:09:08,960 Speaker 1: in Social Security. They have no mortgage, Their kids are 198 00:09:09,000 --> 00:09:12,439 Speaker 1: grown and are all financially stable, so you know, they're 199 00:09:12,520 --> 00:09:15,920 Speaker 1: just humming along here. They do annual charitable giving of 200 00:09:15,960 --> 00:09:18,720 Speaker 1: around twenty five thousand dollars and they have a strong 201 00:09:18,840 --> 00:09:23,199 Speaker 1: desire to lead a meaningful legacy to their kids and grandkids, 202 00:09:23,480 --> 00:09:26,440 Speaker 1: but they don't want to spoil them. So they're in 203 00:09:26,720 --> 00:09:30,000 Speaker 1: what we call this beautiful what now phase of life. 204 00:09:30,040 --> 00:09:33,320 Speaker 1: Their plan has been very successful, but now they need 205 00:09:33,360 --> 00:09:37,160 Speaker 1: to define some purpose and some legacy, and that's where 206 00:09:37,240 --> 00:09:42,199 Speaker 1: advance planning really shines. You talk about donor advised funds before. 207 00:09:42,360 --> 00:09:44,679 Speaker 1: I mean, we use these all the time. The other thing, 208 00:09:45,200 --> 00:09:49,400 Speaker 1: qualified charitable distributions from their iras can come into play 209 00:09:49,440 --> 00:09:54,480 Speaker 1: here to really reduce the require minimum distribution tax impact 210 00:09:54,720 --> 00:09:57,840 Speaker 1: that gets overlooked so often with people we talk to. 211 00:09:58,480 --> 00:10:01,680 Speaker 1: And then if you are really charitably incline and want 212 00:10:01,679 --> 00:10:03,640 Speaker 1: to get some bang for your buck in terms of 213 00:10:03,760 --> 00:10:07,560 Speaker 1: tax deductions during your lifetime, a charitable remainder trust can 214 00:10:07,640 --> 00:10:11,960 Speaker 1: be a wonderful strategy to retain some income and get 215 00:10:11,960 --> 00:10:16,160 Speaker 1: some nice tax deductions during your lifetime. So a lot 216 00:10:16,200 --> 00:10:19,640 Speaker 1: of planning opportunities there. Again, you just got to sit 217 00:10:19,720 --> 00:10:21,559 Speaker 1: down and look at what some of the options are, 218 00:10:21,640 --> 00:10:24,679 Speaker 1: and then Brian walk us through one more. The widow's 219 00:10:24,679 --> 00:10:26,880 Speaker 1: spouse who's in transition. 220 00:10:27,280 --> 00:10:29,839 Speaker 2: Yeah, this can be a scary time for people because 221 00:10:29,840 --> 00:10:32,120 Speaker 2: a lot of times only one spouse really knows where 222 00:10:32,120 --> 00:10:34,679 Speaker 2: all the finances are because the other generally doesn't have 223 00:10:34,720 --> 00:10:37,280 Speaker 2: interest or doesn't have time because it does take a 224 00:10:37,320 --> 00:10:38,920 Speaker 2: team to raise a family and so forth. 225 00:10:38,960 --> 00:10:42,280 Speaker 3: So anyway, Ellen is aged sixty six, recently widowed. 226 00:10:42,600 --> 00:10:45,120 Speaker 2: She's got to have three point two million dollars across 227 00:10:45,120 --> 00:10:47,920 Speaker 2: her assets. These are IRA's taxable investment accounts and a 228 00:10:48,240 --> 00:10:49,000 Speaker 2: rental property. 229 00:10:49,360 --> 00:10:50,800 Speaker 3: She's not sure how to take over these. 230 00:10:50,640 --> 00:10:52,960 Speaker 2: Financial decisions because her spouse, like we were just discussing, 231 00:10:53,000 --> 00:10:54,000 Speaker 2: had always handled them. 232 00:10:54,160 --> 00:10:55,760 Speaker 3: She of course wants to stay independent. 233 00:10:55,840 --> 00:10:59,120 Speaker 2: She doesn't want people making decisions for her because she 234 00:10:59,160 --> 00:11:01,160 Speaker 2: wants to be on her own. She wants to be 235 00:11:01,200 --> 00:11:03,360 Speaker 2: empowered to make those decisions, and she also doesn't want 236 00:11:03,360 --> 00:11:05,320 Speaker 2: to be a burden on her family in addition to 237 00:11:05,360 --> 00:11:06,400 Speaker 2: supporting her grandkids. 238 00:11:06,720 --> 00:11:09,600 Speaker 3: This is a very very common and a critical story. 239 00:11:09,640 --> 00:11:11,920 Speaker 2: All of a sudden, she very quickly, because her spouse 240 00:11:12,000 --> 00:11:15,720 Speaker 2: died unexpectedly, very quickly, She's suddenly the CFO, chief financial 241 00:11:15,760 --> 00:11:18,640 Speaker 2: officer of her own household, not to mention the CEO, 242 00:11:18,720 --> 00:11:20,640 Speaker 2: which she probably has been for decades anyway. 243 00:11:20,760 --> 00:11:22,200 Speaker 3: Now she's responsible for all of it. 244 00:11:22,640 --> 00:11:25,400 Speaker 2: So why is she the perfect plan and candidate. Well, 245 00:11:25,480 --> 00:11:27,880 Speaker 2: big changes in her life, big shift in the income 246 00:11:27,960 --> 00:11:31,079 Speaker 2: sources and the tax filing status that changes the calculus 247 00:11:31,120 --> 00:11:33,480 Speaker 2: of what she has to do every April. She's going 248 00:11:33,520 --> 00:11:35,840 Speaker 2: to have required minium distributions to deal with on a 249 00:11:35,880 --> 00:11:38,679 Speaker 2: sizable pile of pre tax money, and she's going to 250 00:11:38,760 --> 00:11:41,120 Speaker 2: have Medicare decisions coming at her fast and furious. And 251 00:11:41,160 --> 00:11:42,959 Speaker 2: she's the only one. She doesn't get to bounce off it, 252 00:11:43,080 --> 00:11:45,640 Speaker 2: bounce it off anybody at the dinner table anymore, unfortunately, 253 00:11:46,040 --> 00:11:49,040 Speaker 2: So she's going to need to simplify it, consolidate her accounts. 254 00:11:49,280 --> 00:11:51,880 Speaker 2: A lot of emotions and financial transitions are happening at 255 00:11:51,880 --> 00:11:54,400 Speaker 2: the same time. That's where a financial advisor, a financial 256 00:11:54,440 --> 00:11:56,320 Speaker 2: planner is going to be able to be that buffer 257 00:11:56,520 --> 00:11:59,199 Speaker 2: to kind of help her understand, here's what other people 258 00:11:59,240 --> 00:12:01,920 Speaker 2: in your situation have done, here's the mistakes they made, 259 00:12:01,960 --> 00:12:04,240 Speaker 2: and here's the successes that they had. So if you're 260 00:12:04,280 --> 00:12:07,240 Speaker 2: wondering and listening whether this advanced planning type stuff is 261 00:12:07,280 --> 00:12:08,680 Speaker 2: for you, look at your life. 262 00:12:08,760 --> 00:12:09,240 Speaker 3: Do you have. 263 00:12:09,240 --> 00:12:12,640 Speaker 2: Overlapping income sources, are you close to retirement you're already 264 00:12:12,679 --> 00:12:15,040 Speaker 2: drawing on it? Or maybe tax planning is starting to 265 00:12:15,040 --> 00:12:17,200 Speaker 2: grab your attention more than it used to, and even 266 00:12:17,240 --> 00:12:19,640 Speaker 2: more so than just growing our pile of money. And 267 00:12:19,800 --> 00:12:21,800 Speaker 2: do we want to leave money behind efficiently? If those 268 00:12:21,800 --> 00:12:24,520 Speaker 2: are questions you think about, then advance financial planning is 269 00:12:24,559 --> 00:12:25,520 Speaker 2: probably a good thing. 270 00:12:25,360 --> 00:12:26,480 Speaker 3: For you to look into. 271 00:12:26,920 --> 00:12:29,719 Speaker 1: Here's the all Worth Advice Advanced financial planning. Is it 272 00:12:29,800 --> 00:12:32,600 Speaker 1: about how much money you have, It's about how many 273 00:12:32,640 --> 00:12:35,840 Speaker 1: decisions you need to get right? Coming up next, what 274 00:12:35,960 --> 00:12:41,040 Speaker 1: two Nobel Prize winners think about Navidia's dominance and why 275 00:12:41,080 --> 00:12:44,559 Speaker 1: that should give you some comfort not fear as an investor. 276 00:12:44,840 --> 00:12:47,280 Speaker 1: You're listening to Simply Money presented by all Worth Financial 277 00:12:47,280 --> 00:12:55,000 Speaker 1: on fifty five KRC the talk station. You're listening to 278 00:12:55,000 --> 00:12:57,880 Speaker 1: Simply Money presented by all Worth Financial on Bob Sponseller 279 00:12:57,920 --> 00:13:00,400 Speaker 1: along with Brian James straight up we had at six 280 00:13:00,559 --> 00:13:03,480 Speaker 1: forty three. We've got advice on roth versus pre tax, 281 00:13:03,600 --> 00:13:10,959 Speaker 1: saving private roots, pensions and caring for aging parents. Remember RCA. 282 00:13:11,480 --> 00:13:15,520 Speaker 1: How about Pan America Airlines or Eastman Kodak, all companies 283 00:13:15,559 --> 00:13:18,920 Speaker 1: that in their prime were the market, they were dominant, 284 00:13:18,960 --> 00:13:23,080 Speaker 1: they were untouchable, and now they're just distant memories. Or 285 00:13:23,120 --> 00:13:25,520 Speaker 1: if you're under the age of forty, they're companies you've 286 00:13:25,559 --> 00:13:29,440 Speaker 1: made the only heard about from your grandparents. Which brings 287 00:13:29,520 --> 00:13:32,720 Speaker 1: us to Navidia, one of the hottest stocks on the planet. 288 00:13:33,040 --> 00:13:37,200 Speaker 1: Investors can't stop talking about AI and Navidia's chips are 289 00:13:37,240 --> 00:13:42,200 Speaker 1: basically the heartbeat of AI. But here's the reality. According 290 00:13:42,240 --> 00:13:46,520 Speaker 1: to not one, but two Nobel Prize winning economists, Navidia 291 00:13:46,640 --> 00:13:51,280 Speaker 1: won't dominate forever. And get this, that's actually great news, Brian. 292 00:13:51,320 --> 00:13:52,600 Speaker 1: Why is that good news? 293 00:13:53,200 --> 00:13:54,680 Speaker 3: Well, so let's talk about uh. 294 00:13:54,760 --> 00:13:56,480 Speaker 1: Let's first of all, what is in Vidio? 295 00:13:56,520 --> 00:13:58,360 Speaker 2: Did Nvidio drop out of the guys at a brand 296 00:13:58,400 --> 00:14:00,400 Speaker 2: new company? Know, they've been around for a very long time, 297 00:14:00,440 --> 00:14:03,400 Speaker 2: but really only known to video gamers and people whose 298 00:14:03,440 --> 00:14:08,080 Speaker 2: companies use heavy duty graphical design software. That kind of 299 00:14:08,080 --> 00:14:14,320 Speaker 2: thing that, however, is now the it's now the core 300 00:14:14,480 --> 00:14:17,520 Speaker 2: of the brains that go behind artificial intelligence. The types 301 00:14:17,520 --> 00:14:19,400 Speaker 2: of chips that were used in graphic cards once are 302 00:14:19,440 --> 00:14:21,240 Speaker 2: now at artificial brains. 303 00:14:21,240 --> 00:14:22,440 Speaker 3: So where this is coming from. 304 00:14:22,520 --> 00:14:25,760 Speaker 2: So Nobel laureates, these are smart guys. Robert Schiller, William Sharp. 305 00:14:25,880 --> 00:14:28,840 Speaker 2: Financial advisors know them well because there are ratios and things. 306 00:14:28,680 --> 00:14:29,440 Speaker 3: Named after them. 307 00:14:29,840 --> 00:14:33,200 Speaker 2: But they both emphasize that over time, markets evolved, companies 308 00:14:33,240 --> 00:14:35,280 Speaker 2: fall in and out of favor. It really is just 309 00:14:35,360 --> 00:14:36,760 Speaker 2: the natural cycle of innovation. 310 00:14:36,880 --> 00:14:37,000 Speaker 3: Right. 311 00:14:37,000 --> 00:14:38,680 Speaker 2: You can name any company that was a big thing 312 00:14:38,720 --> 00:14:41,720 Speaker 2: fifty years ago, maybe not so much anymore. So let's 313 00:14:41,920 --> 00:14:45,280 Speaker 2: let's talk about some of those examples. Exxon, General, Motors, 314 00:14:45,280 --> 00:14:48,280 Speaker 2: and Seers. Those were the darlings of industry fifty years 315 00:14:48,320 --> 00:14:51,760 Speaker 2: ago and their various their various industries. Today we don't 316 00:14:51,800 --> 00:14:55,120 Speaker 2: really talk about them so much. We now talk about Apple, Microsoft, Amazon, 317 00:14:55,160 --> 00:14:57,200 Speaker 2: and of course in video like we're talking about today. 318 00:14:57,680 --> 00:15:00,200 Speaker 2: But you didn't have to chase them individually. As long 319 00:15:00,200 --> 00:15:02,000 Speaker 2: as you sat in the index, the market did that 320 00:15:02,080 --> 00:15:04,400 Speaker 2: work for you, and you owned a little of those 321 00:15:04,480 --> 00:15:07,240 Speaker 2: and a little of everything else. That's exactly why investing 322 00:15:07,280 --> 00:15:09,240 Speaker 2: in the broader market bob through the s and P 323 00:15:09,280 --> 00:15:11,880 Speaker 2: five hundred is so powerful and important. You don't have 324 00:15:11,920 --> 00:15:13,880 Speaker 2: to guess who the next Nvidia is. A lot of 325 00:15:13,920 --> 00:15:15,760 Speaker 2: people try to try to do this just so they 326 00:15:15,800 --> 00:15:18,160 Speaker 2: can talk about it at cocktail parties. Most people are 327 00:15:18,200 --> 00:15:19,840 Speaker 2: wrong and they never admit it and never want to 328 00:15:19,880 --> 00:15:22,520 Speaker 2: talk about it again. Those who are right are obnoxious 329 00:15:22,520 --> 00:15:24,920 Speaker 2: about it at those cocktail parties. But if you're just 330 00:15:24,960 --> 00:15:27,040 Speaker 2: in the index, you already owned tomorrow's winners. We don't 331 00:15:27,040 --> 00:15:29,600 Speaker 2: know where they're coming from anyway. So that approach is 332 00:15:29,600 --> 00:15:31,480 Speaker 2: going to add something else. Gonn add a little discipline 333 00:15:31,600 --> 00:15:34,040 Speaker 2: takes the guesswork and the emotion out of the portfolio. 334 00:15:34,360 --> 00:15:36,280 Speaker 2: You don't need to feel like you have to nail 335 00:15:36,280 --> 00:15:38,200 Speaker 2: that next big thing. You just need to own the 336 00:15:38,240 --> 00:15:40,440 Speaker 2: system that will find it for you. 337 00:15:40,480 --> 00:15:44,800 Speaker 1: So we're basically talking about diversification, and diversification on steroids 338 00:15:45,000 --> 00:15:48,640 Speaker 1: is adding some tax efficiency to the whole thing. Instead 339 00:15:48,640 --> 00:15:52,000 Speaker 1: of just buying an index ETF for mutual fund, have 340 00:15:52,120 --> 00:15:57,120 Speaker 1: an active tax loss harvesting window or tax loss harvesting 341 00:15:57,160 --> 00:16:00,800 Speaker 1: algorithm or strategy working in the background to make this 342 00:16:00,840 --> 00:16:03,840 Speaker 1: thing really tax efficient and get the best of both worlds. 343 00:16:03,880 --> 00:16:09,440 Speaker 1: Tax efficiency and diversification wonderful strategies, all right, Topic number 344 00:16:09,480 --> 00:16:14,760 Speaker 1: B complete shifting of gears here. I know nothing about cruises, Brian, 345 00:16:14,880 --> 00:16:18,520 Speaker 1: I've never taken one. But some news coming down the 346 00:16:18,560 --> 00:16:22,320 Speaker 1: pike here from Norwegian Cruises. They just made a big 347 00:16:22,440 --> 00:16:26,320 Speaker 1: change and it's rubbing some loyal passengers the wrong way. 348 00:16:26,400 --> 00:16:28,280 Speaker 1: Do you know anything about this stuff at all? 349 00:16:28,760 --> 00:16:31,240 Speaker 3: Next to nothing, Bob. But we're gonna talk about it anyway, 350 00:16:31,280 --> 00:16:32,600 Speaker 3: aren't we. No, So we were never. 351 00:16:32,560 --> 00:16:35,480 Speaker 2: Big cruise people, and you know, all those ones sailing 352 00:16:35,480 --> 00:16:38,200 Speaker 2: out into the Atlantic Ocean and getting staff infections all. 353 00:16:38,080 --> 00:16:40,040 Speaker 3: Over the boats a few years ago really kind of 354 00:16:40,040 --> 00:16:44,240 Speaker 3: turned me off. AnyWho, if you're planning one of these, just. 355 00:16:44,240 --> 00:16:46,560 Speaker 2: Know that if you're considering different cruises, here's something different 356 00:16:46,600 --> 00:16:49,280 Speaker 2: coming down the pike. Norwegian just rolled out a policy 357 00:16:49,320 --> 00:16:51,400 Speaker 2: where passengers, you know, they had a program called the 358 00:16:51,840 --> 00:16:55,280 Speaker 2: Free at Sea package that was just very lucrative in 359 00:16:55,360 --> 00:16:57,520 Speaker 2: terms of food and drinks and all those kinds of things. 360 00:16:57,560 --> 00:16:58,880 Speaker 3: Well they're now putting limits on it. 361 00:16:58,920 --> 00:17:01,640 Speaker 2: This is really just the the old loyalty program not 362 00:17:01,680 --> 00:17:03,480 Speaker 2: being as rewarding as it used to be, just like 363 00:17:03,480 --> 00:17:05,240 Speaker 2: anywhere else now hitting the cruise line. 364 00:17:05,400 --> 00:17:07,280 Speaker 3: So the specialty dining options. 365 00:17:07,359 --> 00:17:10,280 Speaker 2: Nope, no longer included that, nor reason is now going 366 00:17:10,320 --> 00:17:13,200 Speaker 2: to charge five bucks for any additional entree ordered in 367 00:17:13,240 --> 00:17:15,439 Speaker 2: the main dining room beyond the first. So it's no 368 00:17:15,520 --> 00:17:17,760 Speaker 2: longer really all you can eat. It's all you can 369 00:17:17,800 --> 00:17:20,639 Speaker 2: eat plus five bucks for every plate. Room service is 370 00:17:20,640 --> 00:17:23,000 Speaker 2: going to be limited. You'll only get two meals per 371 00:17:23,040 --> 00:17:25,160 Speaker 2: I guess people are sitting in the rooms by themselves 372 00:17:25,280 --> 00:17:27,120 Speaker 2: ordering eight meals at a time or something. 373 00:17:27,920 --> 00:17:29,320 Speaker 3: So what they're trying to do. 374 00:17:29,920 --> 00:17:32,120 Speaker 1: Hey, bring me a rack of ribs and a six 375 00:17:32,240 --> 00:17:34,719 Speaker 1: pack at every quarter of the football game that I'm 376 00:17:34,760 --> 00:17:37,320 Speaker 1: watching in my in the second half, bring me to 377 00:17:37,359 --> 00:17:40,400 Speaker 1: every ideal vacation, I will have a bloody Mary. 378 00:17:40,200 --> 00:17:45,760 Speaker 2: A steak sandwich, and a steak sandwich put underhill. So 379 00:17:45,840 --> 00:17:47,960 Speaker 2: they're of course doing this the same for the same reason. 380 00:17:48,000 --> 00:17:50,480 Speaker 2: Lots of industries or moved things around. They're trying to 381 00:17:50,480 --> 00:17:52,600 Speaker 2: make up for rising costs there. They're the end of 382 00:17:52,600 --> 00:17:54,720 Speaker 2: the day, they got to make a profit. Boat gas 383 00:17:54,800 --> 00:17:56,680 Speaker 2: is a little expensive these days, so they're going to 384 00:17:56,720 --> 00:17:58,000 Speaker 2: make it up on the food side. 385 00:17:58,440 --> 00:17:59,040 Speaker 1: But this is. 386 00:17:59,000 --> 00:18:02,760 Speaker 2: Irritating some They're loyal customers, especially repeat cruisers who really 387 00:18:02,760 --> 00:18:05,000 Speaker 2: were coming back because they love this program. Well, all 388 00:18:05,000 --> 00:18:06,560 Speaker 2: of a sudden they're gonna be looking at a carnival 389 00:18:06,600 --> 00:18:08,240 Speaker 2: and all the other you know, the other different cruise 390 00:18:08,280 --> 00:18:10,320 Speaker 2: lines are out there. So they're trimming some of these 391 00:18:10,359 --> 00:18:12,560 Speaker 2: unlimited perks. But they're also they are they are changing 392 00:18:12,560 --> 00:18:15,760 Speaker 2: the destinations. Uh so great stirrup Key is going to 393 00:18:15,800 --> 00:18:18,840 Speaker 2: get a new peer. They can handle multiple ships there there. 394 00:18:18,880 --> 00:18:20,800 Speaker 2: Therefore there won't be the need to jump on a 395 00:18:20,800 --> 00:18:23,359 Speaker 2: little boat to get back to the big boat, bigger pool, 396 00:18:23,480 --> 00:18:24,520 Speaker 2: more fun stuff. 397 00:18:24,240 --> 00:18:24,760 Speaker 3: And so forth. 398 00:18:24,800 --> 00:18:26,359 Speaker 2: Anyway, So if you can look forward to that, if 399 00:18:26,400 --> 00:18:27,840 Speaker 2: if cruising is your thing. 400 00:18:28,280 --> 00:18:30,959 Speaker 1: All right, every Sunday you'll find our all worth advice 401 00:18:31,040 --> 00:18:34,720 Speaker 1: in the Cincinnati Inquire here's a preview. R. E from 402 00:18:34,720 --> 00:18:38,199 Speaker 1: Wyoming says, I added my adult son as an authorized 403 00:18:38,320 --> 00:18:41,119 Speaker 1: user to a few of my credit cards years ago 404 00:18:41,560 --> 00:18:44,240 Speaker 1: to help him build credit. Is this going to be 405 00:18:44,280 --> 00:18:47,119 Speaker 1: a problem for him later on down the line? Brian, 406 00:18:47,160 --> 00:18:52,040 Speaker 1: you always give great advice about helping young folks establish 407 00:18:52,119 --> 00:18:53,960 Speaker 1: some credit and good advice. 408 00:18:54,200 --> 00:18:56,199 Speaker 3: Uh what would you say to R. E about this? 409 00:18:56,800 --> 00:18:58,760 Speaker 1: Is he's sitting on a ticking time bomb. 410 00:18:59,160 --> 00:19:01,800 Speaker 2: Can be just a I did this for my kids, 411 00:19:01,800 --> 00:19:03,840 Speaker 2: even when my son I think was ten when I 412 00:19:03,880 --> 00:19:05,679 Speaker 2: did it, and I did it with the intent of 413 00:19:06,200 --> 00:19:09,280 Speaker 2: an authorized user will inherit some portion of a credit score, 414 00:19:09,920 --> 00:19:12,439 Speaker 2: and did it for years, and it helped my oldest 415 00:19:12,480 --> 00:19:14,719 Speaker 2: who recently moved out of the nest. She sailed through 416 00:19:14,760 --> 00:19:16,880 Speaker 2: the credit check and getting an apartment because of it. 417 00:19:17,040 --> 00:19:20,320 Speaker 2: These kids are also responsible, though, so being an authorized 418 00:19:20,400 --> 00:19:22,679 Speaker 2: user means they do have a credit card in their name. Now, 419 00:19:22,680 --> 00:19:24,960 Speaker 2: whether you have physically given it to them, that's a 420 00:19:24,960 --> 00:19:27,520 Speaker 2: different story. If you don't give it to them, then 421 00:19:27,520 --> 00:19:30,199 Speaker 2: they can't spend it, but you can get them the 422 00:19:30,200 --> 00:19:32,240 Speaker 2: benefit of the credit scores. But just make sure that 423 00:19:32,560 --> 00:19:35,400 Speaker 2: person does get to legally swipe that card for whatever 424 00:19:35,400 --> 00:19:37,159 Speaker 2: they want. So make sure that you trust them. But 425 00:19:37,240 --> 00:19:39,199 Speaker 2: it can be very, very beneficial. I liked it for 426 00:19:39,280 --> 00:19:39,760 Speaker 2: my family. 427 00:19:40,840 --> 00:19:44,280 Speaker 1: Coming up next, a deep dive into sequence of return risk. 428 00:19:44,359 --> 00:19:46,879 Speaker 1: You're listening to Simply Money presented by Allworth Financial on 429 00:19:46,960 --> 00:19:55,119 Speaker 1: fifty five KRC the talk station. You're listening to Simply 430 00:19:55,160 --> 00:19:58,159 Speaker 1: Money presented by all Worth Financial on Bob Sponseller along 431 00:19:58,160 --> 00:20:03,760 Speaker 1: with Brian James. Most seasoned investors understand that markets fluctuate 432 00:20:03,960 --> 00:20:07,640 Speaker 1: up and down. What often goes unnoticed however, is the 433 00:20:07,760 --> 00:20:12,159 Speaker 1: timing and the magnitude of those potential fluctuations and how 434 00:20:12,280 --> 00:20:17,439 Speaker 1: profoundly it can impact a retirement strategy. For those drawing 435 00:20:17,480 --> 00:20:21,640 Speaker 1: income from their portfolios, the order in which returns occur 436 00:20:21,880 --> 00:20:26,880 Speaker 1: can quietly erode wealth even when the average annual return 437 00:20:27,000 --> 00:20:30,600 Speaker 1: appears very healthy. What we're talking about here is a 438 00:20:30,800 --> 00:20:35,719 Speaker 1: very important topic for income retirement income planning called sequence 439 00:20:35,760 --> 00:20:39,200 Speaker 1: of return risk. Brian walked through some of the data here. 440 00:20:39,680 --> 00:20:42,280 Speaker 2: When does the bad stuff happen? That is a sequence 441 00:20:42,320 --> 00:20:45,880 Speaker 2: of return risk. Let's go through an example here using 442 00:20:45,920 --> 00:20:49,120 Speaker 2: two investors. Let's assume everybody earns the same average annual return. 443 00:20:49,160 --> 00:20:52,800 Speaker 2: There's no difference there over a twenty year retirement period. However, 444 00:20:52,920 --> 00:20:56,040 Speaker 2: one experiences strong market performance in those early years, while 445 00:20:56,040 --> 00:20:57,679 Speaker 2: the other one takes a punch to the face right 446 00:20:57,680 --> 00:20:59,520 Speaker 2: out of the gate. This is what we're describing here 447 00:20:59,560 --> 00:21:01,800 Speaker 2: as anybody who retired and let's say two thousand and 448 00:21:01,880 --> 00:21:05,080 Speaker 2: seven or twenty twenty one, and then right after we 449 00:21:05,119 --> 00:21:08,760 Speaker 2: had the eight and twenty two, which were some of 450 00:21:08,800 --> 00:21:10,879 Speaker 2: the worst years the market has ever had. But we 451 00:21:11,040 --> 00:21:13,639 Speaker 2: just said, their same average annual rate of return, so 452 00:21:13,760 --> 00:21:16,880 Speaker 2: their average return is identical, but the outcomes are not, 453 00:21:17,440 --> 00:21:20,440 Speaker 2: So why does this happen. Well, once withdrawals begin, as 454 00:21:20,480 --> 00:21:22,720 Speaker 2: they typically do in retirement, that's kind of the point. Right, 455 00:21:22,760 --> 00:21:24,400 Speaker 2: we retire, we're going to draw on our nest egg 456 00:21:24,440 --> 00:21:26,880 Speaker 2: and spend our own dollars. Well, the order in which 457 00:21:26,880 --> 00:21:29,840 Speaker 2: these returns really starts to matter. When losses happen early, 458 00:21:30,160 --> 00:21:33,640 Speaker 2: you're both drawing income, you're spending money down, and your 459 00:21:33,640 --> 00:21:35,800 Speaker 2: portfolio is shrinking at the same time. So, for example, 460 00:21:35,840 --> 00:21:37,640 Speaker 2: let's say we tught we always talk about that four 461 00:21:37,640 --> 00:21:38,200 Speaker 2: percent rule. 462 00:21:38,400 --> 00:21:40,160 Speaker 4: Let's use that if the. 463 00:21:40,119 --> 00:21:42,880 Speaker 2: Market pulls ten percent out of your assets and it's 464 00:21:42,920 --> 00:21:45,560 Speaker 2: down and you're withdrawing four percent based on that rule 465 00:21:45,720 --> 00:21:47,920 Speaker 2: we talk about all the time, Well, your portfolio took 466 00:21:47,920 --> 00:21:51,240 Speaker 2: a fourteen percent hit in year one. That doesn't necessarily 467 00:21:51,280 --> 00:21:53,119 Speaker 2: sink the ship, but it does change the metrics a 468 00:21:53,160 --> 00:21:57,040 Speaker 2: little bit. So every withdrawal compounds that damage locks and 469 00:21:57,080 --> 00:22:00,080 Speaker 2: losses and reduces that base that the future growth depends on. 470 00:22:01,240 --> 00:22:03,280 Speaker 1: Yeah, and this is why it's critical. And we talk 471 00:22:03,280 --> 00:22:07,119 Speaker 1: about stress testing a portfolio all the time, not only 472 00:22:07,280 --> 00:22:10,639 Speaker 1: for you know, concentrated stock exposure or things like that, 473 00:22:10,840 --> 00:22:14,320 Speaker 1: but the main reason to stress test a retirement income 474 00:22:14,400 --> 00:22:17,840 Speaker 1: plan is this sequence of return risk. And that's where 475 00:22:17,880 --> 00:22:22,120 Speaker 1: some of this sophisticated software really is worth its weight 476 00:22:22,160 --> 00:22:25,120 Speaker 1: and goal because it can go through all these different 477 00:22:25,160 --> 00:22:31,239 Speaker 1: iterations of historical market volatility based on all kinds of 478 00:22:31,280 --> 00:22:36,360 Speaker 1: different asset allocation strategies and really test how a portfolio 479 00:22:36,560 --> 00:22:39,520 Speaker 1: and a retirement you know, a retirement nest egg will 480 00:22:40,400 --> 00:22:44,480 Speaker 1: perform given the best and worst case scenarios of this 481 00:22:44,520 --> 00:22:47,880 Speaker 1: sequence of return risk. It's critical that when you sit 482 00:22:47,960 --> 00:22:50,800 Speaker 1: down and get ready to retire and develop an income 483 00:22:50,840 --> 00:22:53,960 Speaker 1: strategy that you have factored this in. What are some 484 00:22:54,119 --> 00:22:56,480 Speaker 1: other things that we can do about or should do 485 00:22:56,600 --> 00:23:00,240 Speaker 1: about sequence of return risk when we start to get 486 00:23:00,280 --> 00:23:02,919 Speaker 1: ready to retire and actually turn this pot of money 487 00:23:03,200 --> 00:23:04,280 Speaker 1: into an income stream. 488 00:23:04,320 --> 00:23:08,520 Speaker 2: Brian, Well, you might you might think about looking what 489 00:23:08,760 --> 00:23:11,320 Speaker 2: we call a multi bucket strategy, which is break down 490 00:23:11,359 --> 00:23:13,959 Speaker 2: all your spending goals into short term which might be 491 00:23:14,000 --> 00:23:17,439 Speaker 2: you know, zero to twenty four months. In that bucket, 492 00:23:17,440 --> 00:23:19,320 Speaker 2: you would want to keep that in cash or really 493 00:23:19,320 --> 00:23:23,840 Speaker 2: really short term bond funds, money market funds, highyield savings accounts, 494 00:23:23,880 --> 00:23:26,720 Speaker 2: anything you can identify your normal spending that you would 495 00:23:26,760 --> 00:23:29,480 Speaker 2: spend down Also any one time things are you going 496 00:23:29,520 --> 00:23:31,000 Speaker 2: to buy a car, or maybe you got to replace 497 00:23:31,040 --> 00:23:33,840 Speaker 2: the HVAC or something else, something else out there that's 498 00:23:33,880 --> 00:23:36,200 Speaker 2: going to be a one time significant expense. That stuff 499 00:23:36,240 --> 00:23:39,400 Speaker 2: should be very very very short term in nature and 500 00:23:39,720 --> 00:23:42,360 Speaker 2: very little risk. Then then next is the mid term, 501 00:23:42,560 --> 00:23:45,240 Speaker 2: so something like three to seven years, maybe maybe these 502 00:23:45,240 --> 00:23:47,040 Speaker 2: similar things. You know, you got to make some expenses 503 00:23:47,040 --> 00:23:48,760 Speaker 2: where this could be like maybe it's a wedding or 504 00:23:49,040 --> 00:23:50,800 Speaker 2: you know, just other things you know is out there 505 00:23:51,000 --> 00:23:52,840 Speaker 2: that might be something you put into a little more 506 00:23:52,880 --> 00:23:56,440 Speaker 2: high quality fixed fixed income, you know, even even throw 507 00:23:56,480 --> 00:23:59,480 Speaker 2: some stocks in the mix for modest growth, lower volatility. 508 00:24:00,040 --> 00:24:01,880 Speaker 2: And then of course we have our long term investments. 509 00:24:01,880 --> 00:24:04,080 Speaker 2: That's really where we spend most of our time thinking, 510 00:24:04,600 --> 00:24:07,840 Speaker 2: because this is where we have growth type orient investments, 511 00:24:08,240 --> 00:24:10,920 Speaker 2: and this is really your eight year plus bucket. 512 00:24:10,920 --> 00:24:11,120 Speaker 1: Here. 513 00:24:11,359 --> 00:24:13,879 Speaker 2: Some people bob do this with individual accounts, and I 514 00:24:14,280 --> 00:24:15,920 Speaker 2: have this account that's for the next two years, and 515 00:24:15,960 --> 00:24:18,080 Speaker 2: then this account for the midterm, and then this account 516 00:24:18,080 --> 00:24:20,680 Speaker 2: over here. Other people just kind of arrange the entire 517 00:24:20,720 --> 00:24:24,359 Speaker 2: portfolio inside one account to make sure that it covers 518 00:24:24,400 --> 00:24:26,280 Speaker 2: all these different needs. There's a few ways to do it, 519 00:24:26,400 --> 00:24:28,920 Speaker 2: but again, the whole point is breaking down your spending. 520 00:24:28,640 --> 00:24:31,000 Speaker 4: Goals in terms of when those dollars are needed. 521 00:24:32,000 --> 00:24:34,119 Speaker 1: Well, Brian, for those that listen to this show on 522 00:24:34,160 --> 00:24:36,600 Speaker 1: a somewhat regular basis, I think they hear me talk 523 00:24:36,600 --> 00:24:39,000 Speaker 1: about this all the time because this happens in my 524 00:24:39,119 --> 00:24:43,199 Speaker 1: office when people come in for meetings. I urge them, please, 525 00:24:43,280 --> 00:24:45,720 Speaker 1: if you're going to take that big cruise, or replace 526 00:24:45,760 --> 00:24:49,840 Speaker 1: a vehicle or do home, you know, large home repair projects, 527 00:24:49,960 --> 00:24:52,560 Speaker 1: please just let me know about it ahead of time 528 00:24:53,200 --> 00:24:54,920 Speaker 1: so that we can get out in front of this. 529 00:24:54,960 --> 00:24:57,879 Speaker 1: And even if we've got an account where all the 530 00:24:57,920 --> 00:25:01,040 Speaker 1: money is in kind of one acid out cation strategy, 531 00:25:01,280 --> 00:25:04,880 Speaker 1: we can segregate these short term needs, these big lump 532 00:25:04,920 --> 00:25:09,199 Speaker 1: sum needs out of a portfolio and really avoid and 533 00:25:09,240 --> 00:25:12,440 Speaker 1: bypass some of this sequence of return risks that we're 534 00:25:12,480 --> 00:25:15,560 Speaker 1: talking about. But you've got to communicate with your advisor, 535 00:25:15,640 --> 00:25:18,119 Speaker 1: if you have one, so we can help you with 536 00:25:18,160 --> 00:25:20,720 Speaker 1: this kind of stuff. Do you have similar conversations with 537 00:25:20,800 --> 00:25:21,440 Speaker 1: your clients. 538 00:25:21,880 --> 00:25:25,280 Speaker 2: Absolutely, and it's just a matter of understanding exactly you 539 00:25:25,280 --> 00:25:27,560 Speaker 2: know what somebody needs, and a lot of times this 540 00:25:27,640 --> 00:25:29,480 Speaker 2: is this is where it helps to have an advisor 541 00:25:29,520 --> 00:25:31,840 Speaker 2: simply because you've got somebody in arms length away that 542 00:25:31,920 --> 00:25:35,440 Speaker 2: can really really help you understand based on stuff you've 543 00:25:35,480 --> 00:25:37,720 Speaker 2: told them before, based on their own experience of things 544 00:25:37,720 --> 00:25:40,320 Speaker 2: that maybe you haven't mentioned but they might be aware of, 545 00:25:40,880 --> 00:25:42,720 Speaker 2: to help you look under every stone for when those 546 00:25:42,760 --> 00:25:43,840 Speaker 2: things might come up. 547 00:25:44,960 --> 00:25:48,200 Speaker 1: Here's the all Worth advice. Even the wealthiest investors aren't 548 00:25:48,240 --> 00:25:50,960 Speaker 1: immune to bad timing. Let's face it, none of us 549 00:25:51,000 --> 00:25:54,800 Speaker 1: are immune to that. Protecting your retirement from sequence of 550 00:25:54,880 --> 00:26:00,600 Speaker 1: return risk means structuring income taxes and withdraws so market 551 00:26:00,680 --> 00:26:05,119 Speaker 1: downturns don't derail your long term strategy. Coming up next, 552 00:26:05,520 --> 00:26:08,760 Speaker 1: real listener questions that could save you from some very 553 00:26:08,800 --> 00:26:12,720 Speaker 1: costly mistakes. It's our ask the advisor segment. You're listening 554 00:26:12,760 --> 00:26:15,320 Speaker 1: to Simply Money presented by all Worth Financial on fifty 555 00:26:15,320 --> 00:26:22,440 Speaker 1: five KRC the talk station. You're listening to Simply Money 556 00:26:22,560 --> 00:26:25,359 Speaker 1: presented by all Worth Financial. I'm Bob Sponseller along with 557 00:26:25,400 --> 00:26:28,359 Speaker 1: Brian James. Do you have a financial question you'd like 558 00:26:28,359 --> 00:26:30,320 Speaker 1: for us to answer. There's a red button you can 559 00:26:30,359 --> 00:26:32,800 Speaker 1: click while you're listening to the show right on the 560 00:26:32,840 --> 00:26:36,480 Speaker 1: iHeart app. Simply record your question and it will come 561 00:26:36,560 --> 00:26:39,800 Speaker 1: straight to us. All right, Brian leaving us off tonight 562 00:26:40,000 --> 00:26:43,160 Speaker 1: is Jeff in Anderson Township. Jeff says, I got one 563 00:26:43,160 --> 00:26:45,920 Speaker 1: point two million dollars in retirement accounts. Do I pull 564 00:26:46,000 --> 00:26:50,080 Speaker 1: from taxable accounts first or my IRA to make that 565 00:26:50,240 --> 00:26:51,680 Speaker 1: money last longer? 566 00:26:52,000 --> 00:26:56,520 Speaker 2: Okay, Jeff, congratulations on obviously a pretty successful career if 567 00:26:56,560 --> 00:27:00,000 Speaker 2: you put this is a largeum amount into your retirement accounts. 568 00:27:00,119 --> 00:27:02,520 Speaker 2: So yeah, so don't We don't know much about Jeff's 569 00:27:02,520 --> 00:27:04,399 Speaker 2: taxble accounts. He doesn't tell us how much there is. 570 00:27:05,480 --> 00:27:08,720 Speaker 2: Sometimes the urge is to well, I can cut these 571 00:27:08,720 --> 00:27:11,200 Speaker 2: iras are pre tax I don't want to pay taxes ever, 572 00:27:11,280 --> 00:27:13,720 Speaker 2: so I'm gonna wait, wait, wait, wait, wait until you 573 00:27:13,760 --> 00:27:16,239 Speaker 2: know as long as I possibly can before I have 574 00:27:16,280 --> 00:27:18,840 Speaker 2: to pay taxes on these dollars. Well, remember we've got 575 00:27:18,840 --> 00:27:21,159 Speaker 2: that thing hovering out there around age seventy three or 576 00:27:21,200 --> 00:27:23,520 Speaker 2: seventy five, depending on when you were born, called a 577 00:27:23,520 --> 00:27:26,399 Speaker 2: required minimum distribution. That's when the IRS shows up in 578 00:27:26,400 --> 00:27:28,800 Speaker 2: your doorstep and says, hey, the gravy training has come 579 00:27:28,840 --> 00:27:30,800 Speaker 2: to an end. It's time to start paying taxes on 580 00:27:30,840 --> 00:27:34,680 Speaker 2: these dollars via the required minimum distribution. So draining or 581 00:27:34,960 --> 00:27:38,560 Speaker 2: draining your taxable accounts first and ignoring your iras may 582 00:27:38,600 --> 00:27:40,600 Speaker 2: put you could could result in you being in a 583 00:27:40,680 --> 00:27:41,320 Speaker 2: higher bracket. 584 00:27:41,320 --> 00:27:41,480 Speaker 1: You know. 585 00:27:41,480 --> 00:27:43,359 Speaker 2: So Jeff's one point two million dollars is probably going 586 00:27:43,400 --> 00:27:47,480 Speaker 2: to generate fifty sixty thousand dollars in annual that that's 587 00:27:47,520 --> 00:27:49,119 Speaker 2: based on now depends on how far. We don't know 588 00:27:49,119 --> 00:27:51,880 Speaker 2: how old Jeff is either, but that money will grow 589 00:27:51,920 --> 00:27:53,600 Speaker 2: from here on out, and that's going to put him 590 00:27:53,600 --> 00:27:55,400 Speaker 2: in a minimal bracket at least for a long time. 591 00:27:55,640 --> 00:27:58,320 Speaker 2: So I would say, look at those different factors and 592 00:27:58,520 --> 00:28:00,600 Speaker 2: see what you need first of all, and then you 593 00:28:00,680 --> 00:28:02,800 Speaker 2: might you might consider going ahead and taking some out 594 00:28:02,800 --> 00:28:05,600 Speaker 2: of the IRA, because you can figure out which bracket 595 00:28:05,640 --> 00:28:07,919 Speaker 2: you want to stay under. You can control it, but 596 00:28:08,040 --> 00:28:10,399 Speaker 2: you could take over time. You could take those dollars 597 00:28:10,440 --> 00:28:13,159 Speaker 2: out and pay taxes at lower brackets over time, versus 598 00:28:13,200 --> 00:28:15,359 Speaker 2: letting it all go and then being stuck while holding 599 00:28:15,359 --> 00:28:16,920 Speaker 2: the bag when retire minimum. 600 00:28:16,600 --> 00:28:17,919 Speaker 1: Distribution time comes around. 601 00:28:18,320 --> 00:28:20,440 Speaker 4: So let's move on to Bill and Linda and Mason. 602 00:28:20,800 --> 00:28:23,800 Speaker 2: They've been they're hearing about private reads and private credit funds, 603 00:28:23,840 --> 00:28:26,000 Speaker 2: and they're wondering if they're worth considering at their wealth 604 00:28:26,080 --> 00:28:27,600 Speaker 2: level or are those two risky? 605 00:28:27,680 --> 00:28:31,879 Speaker 1: Bob, Well, when I read how their actual question was worded. 606 00:28:31,920 --> 00:28:35,800 Speaker 1: They said, we've been pitched private reads and private credit funds. 607 00:28:36,320 --> 00:28:40,160 Speaker 1: So yeah, I have no idea what your current wealth 608 00:28:40,240 --> 00:28:43,080 Speaker 1: level is. I don't know what your financial plan looks like, 609 00:28:43,160 --> 00:28:46,920 Speaker 1: or if you even have one. But my spidey senses 610 00:28:47,000 --> 00:28:49,280 Speaker 1: go up right away when I hear the word pitched, 611 00:28:49,400 --> 00:28:53,680 Speaker 1: because pitched often means someone is trying to sell you 612 00:28:53,720 --> 00:28:56,760 Speaker 1: some of these things that come with front end commissions. 613 00:28:57,360 --> 00:28:59,800 Speaker 1: And so my first question is do you have a 614 00:28:59,760 --> 00:29:05,400 Speaker 1: financial plan and have you factored in these potential investments 615 00:29:05,440 --> 00:29:09,360 Speaker 1: from a risk tolerance standpoint and an asset allocation standpoint 616 00:29:09,400 --> 00:29:12,719 Speaker 1: as part of a coordinated financial plan. If the person 617 00:29:12,760 --> 00:29:15,960 Speaker 1: that is pitching these things to you have never done 618 00:29:16,040 --> 00:29:18,200 Speaker 1: that kind of work for you, or all of this 619 00:29:18,320 --> 00:29:21,960 Speaker 1: sounds foreign to you, don't walk run away from this 620 00:29:22,120 --> 00:29:25,840 Speaker 1: pitch and go work with a fiduciary financial advisor. Now, 621 00:29:26,080 --> 00:29:29,720 Speaker 1: all that being said, private reads and private credit funds 622 00:29:29,880 --> 00:29:35,240 Speaker 1: can they can positively improve your yield, and they do 623 00:29:35,360 --> 00:29:37,680 Speaker 1: work in certain situations, but you got to look at 624 00:29:37,680 --> 00:29:41,480 Speaker 1: the liquidity, the fees, the risk. These things can get 625 00:29:41,680 --> 00:29:45,200 Speaker 1: awfully complex in a hurry. So I think before you 626 00:29:45,320 --> 00:29:47,720 Speaker 1: jump into any of this kind of stuff. I strongly 627 00:29:47,840 --> 00:29:50,960 Speaker 1: urge you to sit down with a good fiduciary financial 628 00:29:50,960 --> 00:29:53,760 Speaker 1: advisor if you don't already have one, or have a 629 00:29:53,760 --> 00:29:58,640 Speaker 1: good one who can truly match this stuff or discard 630 00:29:58,680 --> 00:30:02,680 Speaker 1: it based on your personal planning needs. I hope that helps, 631 00:30:02,720 --> 00:30:06,200 Speaker 1: all right. Next up is Dan and pleasant Ridge. Brian, 632 00:30:06,280 --> 00:30:08,800 Speaker 1: this is a great question, Dan says, I've heard people 633 00:30:08,840 --> 00:30:12,640 Speaker 1: talk about treating their pensions like the bond portion of 634 00:30:12,680 --> 00:30:15,480 Speaker 1: a portfolio. Can you explain that for me? 635 00:30:15,800 --> 00:30:18,080 Speaker 2: Yeah, this is a concept where you know, a lot 636 00:30:18,120 --> 00:30:21,840 Speaker 2: of people think of Social Security as the only source 637 00:30:21,880 --> 00:30:24,560 Speaker 2: of income in retirement, of true income versus just spending 638 00:30:24,560 --> 00:30:26,440 Speaker 2: down a pile of money. But there are still pensions 639 00:30:26,440 --> 00:30:29,960 Speaker 2: out there and for people in this situation, and I 640 00:30:29,960 --> 00:30:32,160 Speaker 2: always I always like to point out, you know, if 641 00:30:32,360 --> 00:30:34,160 Speaker 2: you worked in a situation where you were feeding money 642 00:30:34,200 --> 00:30:37,040 Speaker 2: into a pension that probably came somewhat at the expense 643 00:30:37,120 --> 00:30:40,320 Speaker 2: of a larger four oh one K or you know, 644 00:30:40,920 --> 00:30:43,320 Speaker 2: or some other type of a pile of money type 645 00:30:43,320 --> 00:30:45,840 Speaker 2: of retirement asset. But remember that pension a lot of 646 00:30:45,840 --> 00:30:47,520 Speaker 2: times can be your ace in the hold because if 647 00:30:47,560 --> 00:30:49,600 Speaker 2: you're you're a married person, for example, now there's three 648 00:30:49,600 --> 00:30:53,000 Speaker 2: paychecks coming in to Social Security and one pension. So 649 00:30:53,080 --> 00:30:56,240 Speaker 2: what Dan's question is is, so, since I have that 650 00:30:56,280 --> 00:30:58,600 Speaker 2: income coming in, right, I have these couple different sources 651 00:30:58,600 --> 00:31:00,520 Speaker 2: of income, Well, what is that I mean I should 652 00:31:00,560 --> 00:31:03,560 Speaker 2: do with my investments? And the answer is, well, you've 653 00:31:03,560 --> 00:31:06,400 Speaker 2: got a predictable stream of income. Probably I assume you've 654 00:31:06,400 --> 00:31:08,040 Speaker 2: got SO Security in the mix as well. We don't 655 00:31:08,040 --> 00:31:09,600 Speaker 2: know what type of pension this is, could be state 656 00:31:09,640 --> 00:31:14,320 Speaker 2: pension too, But if those pension checks and SO Security 657 00:31:14,400 --> 00:31:16,080 Speaker 2: are going to be enough to pay your bills, then 658 00:31:16,160 --> 00:31:18,720 Speaker 2: that means you could lean your portfolio much more toward 659 00:31:18,760 --> 00:31:21,800 Speaker 2: the aggressive side. I'm not a believer at all, Paul 660 00:31:22,160 --> 00:31:26,880 Speaker 2: that or I'm sorry, Dan, that you should have your 661 00:31:27,120 --> 00:31:30,080 Speaker 2: assets be super conservative just because you were retired or 662 00:31:30,120 --> 00:31:31,240 Speaker 2: just because you're a certain age. 663 00:31:31,280 --> 00:31:32,600 Speaker 4: It has everything to do with when you're going to 664 00:31:32,680 --> 00:31:33,400 Speaker 4: need these dollars. 665 00:31:33,520 --> 00:31:35,600 Speaker 2: If you've gotten multiple streams of income coming in to 666 00:31:35,640 --> 00:31:37,920 Speaker 2: support your retirement and therefore you won't need to touch 667 00:31:37,960 --> 00:31:40,320 Speaker 2: these dollars for ten twelve years, let them be aggressive. 668 00:31:40,560 --> 00:31:43,320 Speaker 2: Your pension can in that point serve as your bond portion. 669 00:31:43,400 --> 00:31:45,320 Speaker 2: So it's really kind of really a frame of thought there, 670 00:31:45,800 --> 00:31:48,960 Speaker 2: all right, Paul in Westchester Paul says their net worth 671 00:31:49,000 --> 00:31:50,760 Speaker 2: is about two million dollars, but a lot of it 672 00:31:50,800 --> 00:31:52,440 Speaker 2: is not liquid. It's tied up in their house and 673 00:31:52,520 --> 00:31:54,680 Speaker 2: the rental property they have, and they're wondering how they 674 00:31:54,720 --> 00:31:56,880 Speaker 2: deal with making sure there's enough liquidity for retirement. 675 00:31:58,160 --> 00:32:00,280 Speaker 1: Well, Paul, the simple answer here is you need a 676 00:32:00,280 --> 00:32:02,280 Speaker 1: financial plan. You need to take a look at what 677 00:32:02,360 --> 00:32:06,160 Speaker 1: your income needs and wants are in retirement and what 678 00:32:06,200 --> 00:32:09,360 Speaker 1: the sources of that income are going to be when 679 00:32:09,360 --> 00:32:13,240 Speaker 1: you factor in social Security a pension if you have one, 680 00:32:13,640 --> 00:32:15,959 Speaker 1: and if you don't have a pension, then more of 681 00:32:16,000 --> 00:32:18,440 Speaker 1: that monthly income nut is going to have to be 682 00:32:18,560 --> 00:32:23,680 Speaker 1: met through either rental property income or investment assets, or 683 00:32:23,720 --> 00:32:26,960 Speaker 1: a combination of the two. So you know, the potential 684 00:32:27,040 --> 00:32:30,080 Speaker 1: danger here is your net worth looks great on paper, 685 00:32:30,160 --> 00:32:32,880 Speaker 1: but as you just stated, you're pretty i liquid, so 686 00:32:33,040 --> 00:32:35,360 Speaker 1: it's really of no use to you because you can't 687 00:32:35,400 --> 00:32:38,040 Speaker 1: turn it into a monthly income stream at retirement. So 688 00:32:38,640 --> 00:32:41,360 Speaker 1: I think again, sit down with a good advisor, run 689 00:32:41,400 --> 00:32:44,400 Speaker 1: some scenarios based on what you and your and your 690 00:32:44,480 --> 00:32:47,760 Speaker 1: wife really need and want in terms of income and retirement, 691 00:32:48,440 --> 00:32:51,720 Speaker 1: and if it makes sense to maybe move some of 692 00:32:51,760 --> 00:32:55,160 Speaker 1: that real estate into more liquid assets that can generate 693 00:32:55,680 --> 00:32:58,440 Speaker 1: the income that you need. Might need to talk about 694 00:32:58,480 --> 00:33:01,760 Speaker 1: doing that, and you need to factor in tax ramifications 695 00:33:01,760 --> 00:33:04,320 Speaker 1: and all that in the mix. But again, sit down 696 00:33:04,400 --> 00:33:08,680 Speaker 1: and develop a good financial plan that factors in retirement 697 00:33:08,720 --> 00:33:12,240 Speaker 1: income and hopefully a good advisor will help you get 698 00:33:12,280 --> 00:33:15,120 Speaker 1: you where you need to be. All right, coming up next, 699 00:33:15,200 --> 00:33:18,400 Speaker 1: a quick mental check you can do every December that 700 00:33:18,480 --> 00:33:22,040 Speaker 1: could save you thousands and thousands of dollars in taxes 701 00:33:22,680 --> 00:33:25,280 Speaker 1: and it really only takes five seconds. You're listening to 702 00:33:25,320 --> 00:33:28,440 Speaker 1: Simply Money presented by all Worth Financial on fifty five 703 00:33:28,520 --> 00:33:36,719 Speaker 1: KRC the talk station. You're listening to Simply Money presented 704 00:33:36,760 --> 00:33:39,160 Speaker 1: by all Worth Financial on Bob's Fun Seller along with 705 00:33:39,200 --> 00:33:43,440 Speaker 1: Brian James. All Right, time for a quick December money trick. 706 00:33:43,880 --> 00:33:46,880 Speaker 1: This one could save you money on taxes and it 707 00:33:46,960 --> 00:33:50,760 Speaker 1: takes about five seconds. Brian lay it on us. This 708 00:33:50,840 --> 00:33:51,720 Speaker 1: is this is good. 709 00:33:51,560 --> 00:33:54,920 Speaker 2: Stuff right here, the five second tax filter. Here's how 710 00:33:54,960 --> 00:33:57,640 Speaker 2: it works. Every time you make a financial move in December, 711 00:33:57,680 --> 00:33:59,520 Speaker 2: whether that's you know, donating to a charity. 712 00:33:59,560 --> 00:34:01,680 Speaker 4: So this is close the book's time of year. Maybe 713 00:34:01,680 --> 00:34:02,440 Speaker 4: you're gonna look at it. 714 00:34:02,400 --> 00:34:04,640 Speaker 2: And sell an under performing stock or buy a big 715 00:34:04,680 --> 00:34:07,600 Speaker 2: ticket item, you know, a little holiday present for somebody, 716 00:34:07,840 --> 00:34:10,239 Speaker 2: Stop and ask yourself one simple question, is this going 717 00:34:10,280 --> 00:34:12,279 Speaker 2: to improve my tax situation this year? 718 00:34:12,360 --> 00:34:13,279 Speaker 4: Or is it gonna cost me? 719 00:34:13,360 --> 00:34:14,719 Speaker 2: Because you know, if this is the end of the year, 720 00:34:14,760 --> 00:34:16,560 Speaker 2: then it's only gonna be three four months where you 721 00:34:16,600 --> 00:34:18,759 Speaker 2: have to figure out do do the math for the 722 00:34:18,840 --> 00:34:21,920 Speaker 2: for the final outcome that year. So that's really it though, 723 00:34:21,920 --> 00:34:24,479 Speaker 2: that's the filter because this December is that month where 724 00:34:24,480 --> 00:34:27,879 Speaker 2: little decisions have big tax consequences. Uh So you're either 725 00:34:27,880 --> 00:34:30,520 Speaker 2: going to lock in those losses or realize some gains 726 00:34:30,880 --> 00:34:33,560 Speaker 2: or or you know, giving it away that's deductible or not, 727 00:34:33,800 --> 00:34:36,240 Speaker 2: meaning you may or may not be able to deduct 728 00:34:36,239 --> 00:34:38,600 Speaker 2: something in April, and so you need to understand what 729 00:34:38,680 --> 00:34:41,920 Speaker 2: the impact of that is. I would start by figuring 730 00:34:41,920 --> 00:34:44,680 Speaker 2: out where are you tax wise. It's November December, we're 731 00:34:44,719 --> 00:34:47,279 Speaker 2: you know, eleven months through the year, so most of 732 00:34:47,320 --> 00:34:49,839 Speaker 2: your tax situation not all, definitely, not all, but most 733 00:34:49,880 --> 00:34:52,359 Speaker 2: of your tax situation is already in stone. You can 734 00:34:52,400 --> 00:34:55,720 Speaker 2: figure out what dividends have you've received in tax bill accounts, 735 00:34:55,760 --> 00:34:58,279 Speaker 2: what capital gains have been generated. All that kind of 736 00:34:58,280 --> 00:35:00,640 Speaker 2: stuff is available from your investment cust sodians. You of 737 00:35:00,680 --> 00:35:03,839 Speaker 2: course can look at your pace dubs and your bank 738 00:35:03,880 --> 00:35:06,560 Speaker 2: accounts and things and look for what interest has been 739 00:35:06,560 --> 00:35:08,919 Speaker 2: paid so far, and you can figure out what dollar 740 00:35:09,000 --> 00:35:11,560 Speaker 2: amounts of those various items have come your way already, 741 00:35:11,920 --> 00:35:15,040 Speaker 2: and then you can reposition those decisions. Is this a 742 00:35:15,080 --> 00:35:18,680 Speaker 2: good year to make a sizeable charitable contribution? For example, 743 00:35:18,880 --> 00:35:21,040 Speaker 2: if it's been a big year for perhaps you sold 744 00:35:21,040 --> 00:35:23,080 Speaker 2: a business or something like that, then you might want 745 00:35:23,080 --> 00:35:25,240 Speaker 2: to look at a donor advice fund to support charities 746 00:35:25,239 --> 00:35:28,080 Speaker 2: that you've always supported. But as we've talked about before, 747 00:35:28,080 --> 00:35:30,440 Speaker 2: you can make one lump sum contribution and. 748 00:35:33,120 --> 00:35:34,160 Speaker 4: Dole it out from the. 749 00:35:34,120 --> 00:35:36,920 Speaker 2: Donor advised fund in a slow manner as opposed to 750 00:35:37,239 --> 00:35:39,800 Speaker 2: giving it directly to a given charity. 751 00:35:39,840 --> 00:35:43,120 Speaker 1: That's one idea, all right, Brian, Let's face it, we're 752 00:35:43,160 --> 00:35:45,239 Speaker 1: moving into the season now where we're going to start. 753 00:35:45,280 --> 00:35:48,840 Speaker 1: We're going to get inundated with advertisements for charitable giving. 754 00:35:48,960 --> 00:35:51,520 Speaker 1: Most charitable giving in the country gets done in the 755 00:35:51,520 --> 00:35:53,520 Speaker 1: fourth quarter of the year. I don't think that comes 756 00:35:53,520 --> 00:35:56,840 Speaker 1: as any surprise to most people. We're getting invited to, 757 00:35:57,320 --> 00:36:01,120 Speaker 1: you know, fundraising events and things like that, so charitable 758 00:36:01,160 --> 00:36:04,040 Speaker 1: giving is on everyone's mind, and I continue to run 759 00:36:04,040 --> 00:36:08,640 Speaker 1: into too many people who just write those checks and look, 760 00:36:08,680 --> 00:36:10,840 Speaker 1: it's out of a huge heart and a desire to 761 00:36:10,880 --> 00:36:14,399 Speaker 1: help the charity, and I love that. But what we're 762 00:36:14,440 --> 00:36:16,680 Speaker 1: saying here is just pump the brakes a little bit 763 00:36:16,800 --> 00:36:20,200 Speaker 1: and think about if there's a better way tax wise 764 00:36:20,560 --> 00:36:23,640 Speaker 1: to do this charitable giving, because we all want to see, 765 00:36:23,680 --> 00:36:26,800 Speaker 1: if possible, more and more money go to these charities 766 00:36:26,840 --> 00:36:29,839 Speaker 1: that you care about rather than to the irs. So, 767 00:36:30,160 --> 00:36:32,960 Speaker 1: you know, just as a reminder for a married couple, 768 00:36:33,120 --> 00:36:36,240 Speaker 1: you got to have you know, roughly thirty thousand dollars 769 00:36:36,680 --> 00:36:40,279 Speaker 1: in itemized deductions, you know, to even be able to itemize. 770 00:36:40,280 --> 00:36:43,759 Speaker 1: So a lot of charitable giving is not getting deducted 771 00:36:43,800 --> 00:36:46,680 Speaker 1: from your taxes right now. And that's why we're calling 772 00:36:46,719 --> 00:36:50,000 Speaker 1: this thing out. You can bunch charitable gifts, you know, 773 00:36:50,520 --> 00:36:52,799 Speaker 1: not give one year and then double up the next 774 00:36:52,920 --> 00:36:55,399 Speaker 1: year to get you over that threshold. You can give 775 00:36:55,440 --> 00:36:59,360 Speaker 1: away appreciated stocks, ETFs and mutual funds and avoid the 776 00:36:59,400 --> 00:37:03,120 Speaker 1: capital gain taxes and get the deduction you know if 777 00:37:03,160 --> 00:37:06,000 Speaker 1: you itemize, or as Brian just mentioned, use a donor 778 00:37:06,040 --> 00:37:09,200 Speaker 1: advice fund to pile in some of this money and 779 00:37:09,320 --> 00:37:11,960 Speaker 1: get the deduction and give it away later. So there's 780 00:37:12,000 --> 00:37:14,240 Speaker 1: a lot of things you can be doing out there, 781 00:37:14,600 --> 00:37:16,920 Speaker 1: but you got to think a little bit and coordinate 782 00:37:16,960 --> 00:37:19,880 Speaker 1: with your CPA and your advisor to take full advantage. 783 00:37:20,040 --> 00:37:21,759 Speaker 2: Yeah, Bobby, you touched on one thing. I want to 784 00:37:21,800 --> 00:37:23,799 Speaker 2: kind of flesh it out a little bit. Donation of 785 00:37:23,840 --> 00:37:26,360 Speaker 2: appreciated stock. If you bought something for ten bucks a 786 00:37:26,400 --> 00:37:28,719 Speaker 2: share and it's now worth twenty bucks a share, well 787 00:37:28,800 --> 00:37:31,160 Speaker 2: you now have a ten dollars gain if you sell that. 788 00:37:31,760 --> 00:37:33,719 Speaker 2: Some people might just sell it and say, stick that 789 00:37:33,760 --> 00:37:35,560 Speaker 2: money in my checking account, So I want it so 790 00:37:35,600 --> 00:37:37,440 Speaker 2: I can turn around and write a check to my 791 00:37:37,600 --> 00:37:40,080 Speaker 2: church or whatever charity I'm interested in. That's the wrong 792 00:37:40,120 --> 00:37:42,120 Speaker 2: move because what you've done in that case is you've 793 00:37:42,160 --> 00:37:45,320 Speaker 2: incurred taxes for the privilege of giving the proceeds away 794 00:37:45,320 --> 00:37:47,920 Speaker 2: from that sale. So what you can do is contact 795 00:37:47,920 --> 00:37:49,840 Speaker 2: that charity. They're going to have a financial account, a 796 00:37:49,840 --> 00:37:52,520 Speaker 2: brokerage account, investment account somewhere, and they're going to use 797 00:37:52,560 --> 00:37:54,600 Speaker 2: They'll have a little brochure with their logo on it 798 00:37:54,600 --> 00:37:57,560 Speaker 2: that explains the seven steps you got to follow, including 799 00:37:57,600 --> 00:37:59,480 Speaker 2: an account number, and it is something called a DTC 800 00:37:59,600 --> 00:38:02,759 Speaker 2: number that identifies the custodian all this stuff. They will 801 00:38:02,760 --> 00:38:04,680 Speaker 2: know how to do it and you can then transfer 802 00:38:04,760 --> 00:38:09,279 Speaker 2: those shares in kind. You're not selling, You're simply saying, hey, custodian, 803 00:38:09,920 --> 00:38:12,080 Speaker 2: please send X amount of these shares to this account 804 00:38:12,080 --> 00:38:14,320 Speaker 2: and then my charity will sell it and nobody pays taxes. 805 00:38:15,080 --> 00:38:19,440 Speaker 1: Yeah, and remember smart investors too have more tools, direct indexing, 806 00:38:19,560 --> 00:38:22,000 Speaker 1: tax loss harvesting. There's a lot of things you can 807 00:38:22,080 --> 00:38:24,640 Speaker 1: and should be thinking about that out there. So this December, 808 00:38:24,960 --> 00:38:28,279 Speaker 1: before you hit send on that donation or sell on 809 00:38:28,360 --> 00:38:32,560 Speaker 1: that stock, take five seconds and ask yourself that one question. 810 00:38:32,960 --> 00:38:35,400 Speaker 1: Thanks for listening. You've been listening to Simply Money, presented 811 00:38:35,440 --> 00:38:39,080 Speaker 1: about all Worth Financial on fifty five KRC, the talk 812 00:38:39,120 --> 00:38:39,400 Speaker 1: station