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Speaker 1: Tonight, when money stops simplifying life and can actually start

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Speaker 1: to complicate your.

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Speaker 2: Life and more importantly, what do we do about it.

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Speaker 1: This is simply Money presented by Allworth Financial on Bob

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Speaker 1: Sponseller along with Brian James. There's a moment we see

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Speaker 1: with a lot of successful families and it usually catches

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Speaker 1: them completely off guard. It's not a market crash, it's

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Speaker 1: not even a job loss, it's not a bad investment.

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Speaker 1: It's that moment when money, something that worked really hard

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Speaker 1: for you for decades, suddenly starts to feel like it's

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Speaker 1: actually working against you. Brian, let's talk about some of

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Speaker 1: those common signs we see out there.

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Speaker 3: Like one of the first things we notice when this

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Speaker 3: situation has arisen is that everything feels optimized, but nothing

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Speaker 3: feels usable. So we got way too much tied up

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Speaker 3: in pre tax retirement accounts or ill liquid investments like

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Speaker 3: real estate, private equity company stock. You know, you're wealthy

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Speaker 3: on paper, but you're just not flexible because of the

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Speaker 3: liquidity problem here. So this can lead to some paralysis

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Speaker 3: and decision making. Well, I really want to you know,

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Speaker 3: buy that second home, do the expansion on the house,

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Speaker 3: or we've got these weddings to pay for, but we

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Speaker 3: can't move forward because we're paranoid about taxes being triggered.

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Speaker 3: Maybe the market is too high. Sometimes we get scared

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Speaker 3: about that. We don't want to mess that up, so

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Speaker 3: nothing happens, and that creates more stress because these bills,

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Speaker 3: in these decisions, the things you want to do, are

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Speaker 3: going to come do anyway, and they're going to hang

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Speaker 3: over your head until they get done. But we have

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Speaker 3: all these hurdles sitting in the way. So some things

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Speaker 3: that they add complexity. Here too, are multiple accounts, multiple strategies,

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Speaker 3: multiple advisors. You know, there's nothing wrong with getting a

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Speaker 3: few opinions, but if you're going to have multiple advisors,

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Speaker 3: you're going to be getting sometimes conflicting information, and that

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Speaker 3: makes you the advisor of last resort. You have to

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Speaker 3: decide which combination of information you're going to use to

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Speaker 3: move forward. So tons of smart ideas just piled on

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Speaker 3: top of each other. But at some point, all that

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Speaker 3: complexity stops adding value and just just does nothing but

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Speaker 3: add confusion.

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Speaker 1: And this comes down to people having a collection of

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Speaker 1: products and strategies like you said, or maybe even a

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Speaker 1: collection of advisors and actually having a coordinated strategy in

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Speaker 1: a relationship with somebody that can actually make sense of

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Speaker 1: this for you and create a scenario where this money

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Speaker 1: is going to do what it was all set aside

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Speaker 1: and built to do in the first place, and that's

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Speaker 1: allow you to have a meaningful life during retirement and

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Speaker 1: do a lot of the things that you've always dreamt

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Speaker 1: and worked hard to be able to do. And you

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Speaker 1: know you already mentioned taxes. You know, when you've got

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Speaker 1: all these multiple accounts and multiple advisors, you're getting all

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Speaker 1: these different isolated ideas and thoughts running through your head.

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Speaker 1: People think sometimes it's it's it's nearly impossible to get

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Speaker 1: out of some of these tax situations, and Brian, we

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Speaker 1: are all finding out, you know, to the good to

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Speaker 1: the good side here, that that's not the case. You

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Speaker 1: can stage out of some of these capital gains or

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Speaker 1: eliminate them all together just by having a plan in

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Speaker 1: a coordinated strategy.

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Speaker 3: So let's walk through some hypotheticals here. As we like

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Speaker 3: to do, we're going to talk about some specific examples

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Speaker 3: straight from the files of all Worth Financial. So hypothetical

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Speaker 3: number one here is the perfectly built yet completely stuck family.

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Speaker 3: So a couple in the early sixties networth around six

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Speaker 3: million dollars. On paper, everything looks fantastic. Their situation is enviable.

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Speaker 3: Three and a half million dollars in four to oh

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Speaker 3: one ks and iras, those tax shelters another million and

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Speaker 3: a half in company stock. That home is paid off

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Speaker 3: very little in taxable or easily accessible accounts. On the

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Speaker 3: other hand, and that's where the problem is. They retire

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Speaker 3: and they quickly realize that whoa something doesn't feel right.

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Speaker 3: Every spending decision now feels very complicated. You know, we

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Speaker 3: want to remodel the house. We've been talking about it forever,

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Speaker 3: but now it's time to go find the dollars with

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Speaker 3: which to do it. Helping a child with a down payment,

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Speaker 3: well that's going to mean taxes too. We want to

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Speaker 3: travel more, take that big family vacation with their kids

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Speaker 3: and their grandkids. Well, all of a sudden, we got

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Speaker 3: to pay taxes, taxes, taxes. They're not worried about running

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Speaker 3: out of money. The problem here is they're worried about

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Speaker 3: using it in the first place because of those tax

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Speaker 3: decisions that we've never really considered. And these aren't things

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Speaker 3: we never want to let the tax tail wag the dog.

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Speaker 3: But that's precisely what's happening here. So the end result

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Speaker 3: is we start delaying decisions, second guessing, and just feeling

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Speaker 3: boxed in by our own assets that we built. We

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Speaker 3: worked so hard to build and have crossed the finish

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Speaker 3: line in terms of winning the retirement game. Yet we

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Speaker 3: can't pull the trigger. Nothing is broken in this situation,

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Speaker 3: but the money that worked so well during those accumulation

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Speaker 3: years is just not built for this phase of life,

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Speaker 3: and it's time to make some changes and understand that

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Speaker 3: we might be going through some processes that we've never

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Speaker 3: seen before.

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Speaker 1: Yeah, Brian, and feel free to disagree with one of

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Speaker 1: them about to say here, but I think this comes

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Speaker 1: down to more emotion than anything else. Sometimes people just

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Speaker 1: get fixated on that gross net worth number on paper.

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Speaker 1: They just want to see that number, whether it's five, six,

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Speaker 1: seven million dollars, and they sometimes forget that in order

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Speaker 1: to turn that net worth into spendable money, yes, you've

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Speaker 1: got to pay some taxes. And what's sad is when

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Speaker 1: people you know, can't pull the trigger on that because

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Speaker 1: they're just so fixated on that gross number. And it

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Speaker 1: takes a little bit of a paradigm shift to get

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Speaker 1: people to unwind this. Sometimes you find that to be

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Speaker 1: the case. It's more it's more of an emotional hurdle

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Speaker 1: to get over than economic.

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Speaker 2: Oh absolutely right.

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Speaker 3: Then we all tend to hide behind the economic hurdle

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Speaker 3: because we just assume we don't have enough because we

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Speaker 3: started off with nothing. Nothing was not enough. Therefore I

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Speaker 3: got to go to work today. And then that lasts

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Speaker 3: for decades while we have kids and pay mortgages and

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Speaker 3: are just building wealth. And then all of a sudden,

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Speaker 3: you know, we have to face the reality of I

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Speaker 3: do have enough, and now, oh my gosh, what do

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Speaker 3: I want to do with it? And that can cause

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Speaker 3: some people to work a lot longer than they otherwise

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Speaker 3: would have to, because we simply haven't stepped back to

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Speaker 3: look at the entire forest. We're staring at that one

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Speaker 3: tree of the asset side of my balance sheet. I

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Speaker 3: just got to have more and more and more. Why

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Speaker 3: do you have to have more? I have no idea,

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Speaker 3: but I know I need to have more and more

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Speaker 3: and more.

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Speaker 1: All right. Well, speaking of another situation involving complexity, let's

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Speaker 1: imagine a Cincinnati business owner in their mid fifties who

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Speaker 1: sells a very successful company for say eight million dollars,

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Speaker 1: and they do what smart successful people do. They hire professionals,

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Speaker 1: a team, They diversify their investments, they do all the

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Speaker 1: right things. They put all the tax strategies in place,

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Speaker 1: run the clock five years down the road. However, and

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Speaker 1: the picture's very different. Now there's multiple accounts, layered investment strategies,

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Speaker 1: and maybe too many cooks in the kitchen from an

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Speaker 1: advisory standpoint, focused on different pieces of the puzzle. And

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Speaker 1: now every financial decision now requires a meeting or several meetings.

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Speaker 1: In every meeting, instead of introducing clarity, can sometimes create

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Speaker 1: confusion because you've got multiple ideas being thrown at you,

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Speaker 1: but more importantly, no coordination of the overall plan.

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Speaker 3: Yeah, in this particular case, you know this is I

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Speaker 3: remember this when this is a situation where there were

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Speaker 3: multiple advisors involved, and one of the advisors had the

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Speaker 3: tax sheltered money, the IRA dollars, and the other one

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Speaker 3: had the tax free dollars and the clients. This made

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Speaker 3: sense because I just got these two piles of money.

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Speaker 3: I want to have two advisors in the mix. And

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Speaker 3: so therefore I'm just going to give this account over

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Speaker 3: here and send that account over there, and now I've

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Speaker 3: diversified my advisors. Well, all of a sudden, we've got

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Speaker 3: our tax situations. Our asset locations are in literally two

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Speaker 3: different locations. So if we want to coordinate these distributions

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Speaker 3: and do this the most tax efficient manner possible, now

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Speaker 3: I have to as the client, I have to ferry

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Speaker 3: information back back and forth between these two advisors so

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Speaker 3: that I can do this in a more tax efficient manner.

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Speaker 3: That didn't last very long. At the end of the day,

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Speaker 3: we were able to convince them that look, if you

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Speaker 3: really want to hand this off to somebody, you've got

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Speaker 3: to let them, give them the reins and do it.

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Speaker 3: And so now we're managing all the assets for this

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Speaker 3: particular client. And that's you know, that's not a reflection

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Speaker 3: on the other advisor. It's a reflection on the idea

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Speaker 3: that if we want to spread things too thin, you're

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Speaker 3: going to make it really, really, really complicated when because

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Speaker 3: it will come to time to coordinate during the distribution

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Speaker 3: phase of retirement. During the accumulation phase, not that big

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Speaker 3: of a deal. We're just growing a pile of money.

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Speaker 3: But when it's time to make the distributions, there's got

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Speaker 3: to be some coordination, and that can be really, really

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Speaker 3: hard to.

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Speaker 2: Do, Brian.

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Speaker 1: I can think of a couple of situations where, you know,

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Speaker 1: this has gone a little bit differently and in a

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Speaker 1: good way, you know, with large, high net worth clients.

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Speaker 1: And this is where the advisors, meaning you and I

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Speaker 1: have to put our egos to the side a little

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Speaker 1: bit and say, hey, we might not be able to

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Speaker 1: be all things to all people all the time. Here's

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Speaker 1: what I mean. I could think of a situation where

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Speaker 1: the client told me, hey, I love this Muni bond manager.

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Speaker 1: He's great, I've worked with him for years. I am

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Speaker 1: not moving money away from that person. They're gonna run

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Speaker 1: my Muni bond portfolio. But he also admitted to me

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Speaker 1: that that money manager did not do coordinating financial planning.

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Speaker 1: And I said to him, fine, we'll manage a piece

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Speaker 1: of the portfolio, but we will be that coordinator for you,

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Speaker 1: and we will not attend to take money away from

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Speaker 1: that money manager. And we were able to put together,

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Speaker 1: you know, and deliver that coordination. And when it came

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Speaker 1: time to go to that other advisor and say hey,

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Speaker 1: for reasons that we've already worked out with the client,

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Speaker 1: you know, we do need to take a little bit

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Speaker 1: out of that Uni bond portfolio because this client needs

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Speaker 1: some money to buy a car to go on vacation.

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Speaker 1: And they were very cooperative. We were able to collaborate

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Speaker 1: and make it work. So you know, a lot of

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Speaker 1: times it's just everybody putting their ego to the side

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Speaker 1: a little bit and doing what's best for the client

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Speaker 1: and for the client understanding that you do need that

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Speaker 1: coordinator slash quarterback working for you in order to truly

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Speaker 1: have a financial plan and not just a collection of

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Speaker 1: products with no plan and therefore potentially a lot of confusion.

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Speaker 3: So this sounds like you, well, what should we do.

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Speaker 3: Let's talk about how to fix this. First off, recognize

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Speaker 3: clarity beats complexity. You should be able to answer this

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Speaker 3: question where does the income come from? And what I

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Speaker 3: mean by that is we who accounts get tapped first?

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Speaker 3: Talking about tax treatment there, Really it doesn't matter the

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Speaker 3: financial institution. Don't get hung up on well this account

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Speaker 3: means this to me, and this pile of dollars is

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Speaker 3: for that reason that the dollars are fungible, meaning any

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Speaker 3: dollar anywhere is the same as any dollar anywhere else.

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Speaker 3: Worry more about the taxation situation of each of these accounts,

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Speaker 3: and you'll have three flavors of taxes. There's stuff that

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Speaker 3: gets taxed all the time. Those are the accounts that

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Speaker 3: are generating a ten ninety nine DV at ten ninety

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Speaker 3: nine B to capture capital gains, and there might be

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Speaker 3: a ten ninety nine I to reflect the interest.

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Speaker 2: Those are.

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Speaker 3: That's not an IRA, that's not a row theory, not

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Speaker 3: a four to one K. That's just a plain old account.

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Speaker 3: Maybe it's an individually titled account, joint or it's in

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Speaker 3: a trust. That's what we refer to as taxable money.

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Speaker 3: Then you've got your pre tax accounts.

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Speaker 2: That's your iras.

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Speaker 3: You're gonna pay income taxes, your traditional pre tax iras,

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Speaker 3: income taxes on every nickel that leaves that account. When

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Speaker 3: it leaves, it doesn't matter what happens inside the account.

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Speaker 3: There's no such thing as capital gains inside of an

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Speaker 3: IRA doesn't exist. It's only income tax and it only happens.

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Speaker 3: It's only triggered when dollars leave the account and land

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Speaker 3: in your checking account to be spent. And then the next.

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Speaker 2: Flavor is wroth roth.

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Speaker 3: Of course, you're never gonna pay taxes on no capital gains,

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Speaker 3: no income taxes period when you take those distributions, so

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Speaker 3: all of those, you know, it's very tempting to say, well,

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Speaker 3: this is all these tax shelters. You know, if this

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Speaker 3: one's pre tax therefore I'm gonna pay income taxes, Well

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Speaker 3: I don't want to deal with that one. That sounds bad. Well,

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Speaker 3: the problem there, you're going to back in load that

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Speaker 3: pre tax IRA with taxes because at some point you're

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Speaker 3: going to have to touch that. At age seventy three

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Speaker 3: or seventy five, required minimum distributions kick in. Now the

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Speaker 3: IRS has a gun to your head. You are forced

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Speaker 3: to take out a calculated amount and pay taxes on it.

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Speaker 3: That that amount is going to be something like, let's

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Speaker 3: call it four percent of whatever that account was worth

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Speaker 3: on the prior New Year's Eve. That's roughly how require

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Speaker 3: minimum distributions are calculated. So it can make sense to

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Speaker 3: start drawing on those accounts even though you know you're

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Speaker 3: gonna pay taxes. But do it when you're already in

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Speaker 3: a lower bracket after you've retired, but before you've hit

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Speaker 3: that required minimum distribution, maybe even before you've hit Social Security.

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Speaker 3: Would I would explore that don't be afraid of the

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Speaker 3: fact that income taxes are going to hit on these distributions.

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Speaker 3: Understand what it looks like, and figure out how to

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Speaker 3: go ahead and mitigate by taking some distributions to keep

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Speaker 3: you a little lower bracket, but not huge distributions that

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Speaker 3: are going to cause other problems elsewhere.

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Speaker 1: Here's the all Worth advice. When money starts complicating life

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Speaker 1: instead of simplifying it, perhaps it's time to shift the

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Speaker 1: focus from evaluating just every individual investment strategy you have

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Speaker 1: and put the focus on asking yourself whether you truly

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Speaker 1: have a coordinated, comprehensive financial plan. All Right, some big

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Speaker 1: news for some of our most well known companies, companies

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Speaker 1: you might own stock in, and that's coming up next.

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

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

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

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Speaker 1: along with Brian James, straight ahead, Why your marginal tax

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Speaker 1: rate could be more important than you think, How aggressive

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Speaker 1: is too aggressive for a five to twenty nine plan?

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Speaker 1: And what kind of risk your health savings account should

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Speaker 1: really be taking. Your listener questions are answers straight ahead

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Speaker 1: at six forty three. Well, if you haven't heard the

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Speaker 1: news by now, Kroger has a new CEO. His name

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Speaker 1: is Greg Foreren Brian introduces to mister Foreign.

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Speaker 3: So new big name around Cincinnati. So Kroger obviously very important,

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Speaker 3: a lot of employees and other companies supporting that entitya

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Speaker 3: that has been here for a very long time. So

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Speaker 3: Craig Greg is sixty four years old, decades of experience

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Speaker 3: with very large companies, one of which you've definitely heard of.

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Speaker 3: So he was the CEO of Walmart's US businesses for

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Speaker 3: about six years and then also CEO of Air New Zealand.

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Speaker 3: I think that's probably not a very well worn path

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Speaker 3: between those two companies, a role he held until late

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Speaker 3: last year. At Walmart's he was in charge of thousands

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Speaker 3: of different stores, more than a million employees, helped expand

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Speaker 3: online ordering to help them compete with with Amazon, curbside

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Speaker 3: pick up, digital sales, all these things that we've become

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Speaker 3: used to in almost any retail environment.

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Speaker 1: So in other words, mister Foreign is well versed, well

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Speaker 1: experienced in making sure I can always pick up a

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Speaker 1: hot rotisserie chicken ready to go at a moment's notice

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Speaker 1: at my local Kroger stores that I got that about right, Brian.

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Speaker 2: That's exactly right.

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Speaker 3: And you can too fill love chickens if you need to.

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Speaker 3: I know I've seen you. So these are all important

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Speaker 3: areas to of course, anybody competing in the grocery world,

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Speaker 3: which is extremely cutthroat, razor thin margins and so forth.

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Speaker 3: So Walmart is also Kroger's biggest competitor. That's a boon

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Speaker 3: to Kroger now because he obviously knows both sides of

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Speaker 3: it and definitely that that's a competition that's pretty robust

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Speaker 3: here in Cincinnati. This is only eleven months after Rodney McMullan,

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Speaker 3: the previous CEO, hung it up and Kroger's this was

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Speaker 3: the case where all of a sudden Rodney was gone

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Speaker 3: and they just said he violated the ethics policy and

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Speaker 3: then that was the end of that. We've really never

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Speaker 3: heard the details, nor did we care. But now we're

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Speaker 3: moving on. We've got new leadership there at Kroger, and

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Speaker 3: hopefully better days to come for that business, all right.

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Speaker 1: In some other corporate news involving publicly traded local companies,

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Speaker 1: Procter and Gamble leads the list of locally headquartered companies

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Speaker 1: recognized by Fortune magazine as one of the world's most

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Speaker 1: admired companies. It finished nineteenth overall, Brian, that's something that'd

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Speaker 1: be pretty proud of. And they're not the only company

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Speaker 1: here based in Cincinnati that made this list.

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Speaker 2: This is true.

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Speaker 3: This is nothing new for P and G. Of course,

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Speaker 3: PNG has made this list every year for more than

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Speaker 3: a decade, third straight year in the top twenty and

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Speaker 3: seventh consecutive year among the top twenty five. So just

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Speaker 3: just over the past year, Bob. Pg's also been on

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Speaker 3: Fortun's list of America's Most Innovative Companies, Baron's list of

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Speaker 3: the one hundred most Sustainable Companies, and lots of other

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Speaker 3: national honors. None of this is are shocked to those

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Speaker 3: of us who've been around for a while, for whom

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Speaker 3: has provided a lot for their families and create a

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Speaker 3: lot of wealth for everybody. So other local names, as

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Speaker 3: Bob mentioned, their GE Aerospace, the artists formerly known as

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Speaker 3: Just Playing Ge down the hill from us in Evendale,

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Speaker 3: forty fourth overall and was the top ranked company in

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Speaker 3: the aerospace and Defense category. GE has seen a heck

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Speaker 3: of a turnaround over the last decade, and it's really

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Speaker 3: I'm glad for the people that worked there to have

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Speaker 3: gone through this, because there were some dark days there

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Speaker 3: as General Electric fell out of the Dow Jones. This

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Speaker 3: goes back years, but it's been a heck of a

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Speaker 3: theory arc for them.

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Speaker 1: They got out of all these businesses that they probably

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Speaker 1: had no business being in in the first place, you know, insurance,

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Speaker 1: financial services, a lot of things with debt involved, and

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Speaker 1: they got back to just doing what our good friends

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Speaker 1: here in Cincinnati are honestly some of the best in

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Speaker 1: the world at doing just making these fantastic jet engines.

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Speaker 1: So it's good to see ge Aerospace back on top,

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Speaker 1: and congratulations to all those folks. Sentas made the Most

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Speaker 1: Admirers Company list for the eighteenth time now in fifth

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Speaker 1: year in a row. It ranked second among diversified outsourcing

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Speaker 1: services companies. Congratulations to Centas, and they've also been recognized

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Speaker 1: recently by Newsweek as one of America's greatest workplaces. They

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Speaker 1: made Fortunes list of most Innovative companies and appeared again

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Speaker 1: on another Forbes list of America's best large employers. A

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Speaker 1: lot to be proud of here for all of our

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Speaker 1: Cincinnati based companies, and more importantly, all of the wonderful

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Speaker 1: people that live here in the greater Cincinnati area that

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Speaker 1: work for these companies and just make them hum along

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Speaker 1: each and every day.

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Speaker 3: Bob Let's not forget fifth third, fifth third, ranked second

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Speaker 3: among super regional banks, and they've been on the list

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Speaker 3: for three years too, also named this is a big

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Speaker 3: one just for all the banking side of things. Was

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Speaker 3: also named the US's best super Regional bank by euro Money,

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Speaker 3: and Fortunes also also made Fortunes's Most Innovative Companies list.

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Speaker 3: So lots to be proud of around here. For those

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Speaker 3: of you getting out of bed and maybe not wanting

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Speaker 3: to go to work, just know that your successes have

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Speaker 3: been recognized.

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Speaker 2: All right.

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Speaker 1: Every Sunday you'll find our all Worth Advice in the

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Speaker 1: Cincinnati Inquire And here's a preview of what you'll see

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Speaker 1: in the Sunday paper. Robert in Hamilton says, Hey, I'm

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Speaker 1: struggling to understand how medic gap insurance actually works and

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Speaker 1: is it something I have to buy once I sign

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Speaker 1: up for Medicare. This is something all of us are

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Speaker 1: going to face at some point. Brian, Yeah, So.

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Speaker 3: What we're talking about here is supplemental policies to add

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Speaker 3: on to well be a supplement, hence the name to

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Speaker 3: what Medicare covers. And I think a good, overly simplified

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Speaker 3: way to worry about this is that traditional Medicare will

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Speaker 3: cover roughly eighty percent of your health expenses. We're talking

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Speaker 3: about normal health expense, healthcare expenses. We're not talking about

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Speaker 3: long term care anything like that. That's a different story.

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Speaker 3: This is just your normal maintenance, oil checks and so forth.

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Speaker 3: Medicare will cover about eighty percent of that. A medicgap

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Speaker 3: policy will cover the other twenty percent. Now there's that's

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Speaker 3: the over Like I said, overly simplified. There are lots

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Speaker 3: of moving parts to this. There are different features within

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Speaker 3: Medicare itself where you can get these needs covered some

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Speaker 3: of the offerings that they have, or you can go

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Speaker 3: to outside insurance companies that will coordinate with Medicare. So

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Speaker 3: this is where we do rely on some partners here

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Speaker 3: to help our clients figure out what's the right answer.

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Speaker 3: Because every situation is different, there's no black and white.

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Speaker 3: Everybody should go get this policy because that's all they need.

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Speaker 3: Everybody has a different health situation and it's best to

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Speaker 3: even within a married couple. Right, two people may have

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Speaker 3: very different needs. It's best to make sure you're aligning

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Speaker 3: your solution with the healthcare needs that you specifically have

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Speaker 3: for yourself.

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Speaker 1: All right, Coming up next, should you put big money

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Speaker 1: into upgrades for your home or maybe just bite the

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Speaker 1: bullet and buy a newer home. Our real estate expert

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Speaker 1: Michelle Sloan is in next with her always excellent guidance

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Speaker 1: and advice. You're listening to Simply Money, presented by all

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Speaker 1: Worth Financial on fifty five KRC. The talk station you're

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Speaker 1: listening to Simply Money is that a buy All Works

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Speaker 1: Financial on bomps bump seller along with Brian James. Joined

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Speaker 1: tonight by our real estate expert and good friend Michelle Sloan,

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Speaker 1: owner of Remax Time. Michelle, thanks for being with us

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Speaker 1: this evening, and I know you want to cover a

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Speaker 1: topic that you know Brian and I run into all

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Speaker 1: the time. We talk to somebody that comes in and says,

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Speaker 1: we we we don't know exactly what.

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Speaker 2: We want to do, but we know we want to

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Speaker 2: do something.

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Speaker 1: We want to move into a different place, and so

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Speaker 1: the question becomes, you know, how much do we pile

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Speaker 1: into upgrades into our current house, whether it's either stay

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Speaker 1: there or prepare it to sell at the right price,

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Speaker 1: or does it make sense to just move on and

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Speaker 1: move into something newer. I know this is probably something

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Speaker 1: you go through all the time with you know, people

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Speaker 1: you help buy a home.

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Speaker 2: Walk us through the process.

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Speaker 1: What do we need to be thinking about, you know,

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Speaker 1: if we if we want to do it the right way,

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Speaker 1: the smart way.

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Speaker 4: Well, the way that I like to go about it

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Speaker 4: is sort of methodical, where we're making a list of

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Speaker 4: pros and con Okay, you've been living in your house

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Speaker 4: for twenty years. You know it needs updates. You know

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Speaker 4: it needs some just some changes so that it's going

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Speaker 4: to be a good place for you to live for

437
00:21:12,359 --> 00:21:15,400
Speaker 4: the next five to ten years. Now, does it make

438
00:21:15,440 --> 00:21:19,240
Speaker 4: sense if your primary bedroom is up a flight of

439
00:21:19,280 --> 00:21:21,640
Speaker 4: steps on the second floor? You know I went through

440
00:21:21,680 --> 00:21:25,399
Speaker 4: Scott and I went through this fairly recently in the

441
00:21:25,520 --> 00:21:29,879
Speaker 4: last year where we sold our home after twenty five years.

442
00:21:29,920 --> 00:21:31,840
Speaker 4: It was the home that we raised our kids in.

443
00:21:31,920 --> 00:21:35,040
Speaker 4: It was a pretty typical two story property with all

444
00:21:35,080 --> 00:21:39,000
Speaker 4: the bedrooms upstairs, and we realized, okay, we're getting older.

445
00:21:39,520 --> 00:21:43,840
Speaker 4: I had knee replacement surgery so you know, thinking about

446
00:21:44,040 --> 00:21:47,000
Speaker 4: having to go up and down the steps after major

447
00:21:47,040 --> 00:21:52,919
Speaker 4: surgery definitely not something that's going to be functional, and

448
00:21:52,960 --> 00:21:56,040
Speaker 4: you want your home to be functional. So part of

449
00:21:56,040 --> 00:21:58,960
Speaker 4: the pros and cons is, you know, what do you do?

450
00:21:58,960 --> 00:22:01,560
Speaker 4: Do you want to stay in your home, spend the

451
00:22:01,640 --> 00:22:05,040
Speaker 4: fifty sixty thousand dollars or whatever it might take to

452
00:22:05,280 --> 00:22:09,600
Speaker 4: update it, or spend ten thousand dollars get it ready

453
00:22:09,640 --> 00:22:12,560
Speaker 4: to sell so that someone else can move in and

454
00:22:12,720 --> 00:22:16,040
Speaker 4: use that property for the next ten or twenty years.

455
00:22:16,359 --> 00:22:19,000
Speaker 3: Michelle, do you have in your mind a like a

456
00:22:19,480 --> 00:22:22,679
Speaker 3: breaking point where you would like, like a certain certain

457
00:22:22,720 --> 00:22:25,520
Speaker 3: percentage of the value of the home that somebody wants

458
00:22:25,560 --> 00:22:27,960
Speaker 3: to improve it by that makes it not worth it?

459
00:22:28,000 --> 00:22:30,360
Speaker 3: And I'm asking this because the phrase I use frequently

460
00:22:30,359 --> 00:22:32,160
Speaker 3: in meetings. People will tell me what they have in mind,

461
00:22:32,400 --> 00:22:32,760
Speaker 3: and it's.

462
00:22:32,720 --> 00:22:33,760
Speaker 2: Usually well thought out.

463
00:22:33,800 --> 00:22:35,480
Speaker 3: They've looked at other things and it's just too much

464
00:22:35,480 --> 00:22:37,879
Speaker 3: to buy something completely new. But they might be putting

465
00:22:37,880 --> 00:22:40,520
Speaker 3: two hundred thousand dollars into a five hundred thousand dollars house.

466
00:22:40,560 --> 00:22:42,600
Speaker 3: That doesn't feel right to me yet I have not

467
00:22:42,680 --> 00:22:44,479
Speaker 3: been faced with that decision yet. What do you think

468
00:22:44,520 --> 00:22:46,480
Speaker 3: when you run across that situation, right.

469
00:22:46,359 --> 00:22:48,600
Speaker 4: That does not make a lot of sense. And if

470
00:22:48,640 --> 00:22:53,520
Speaker 4: you are over improving your home based on the neighborhood comparables,

471
00:22:53,640 --> 00:22:57,040
Speaker 4: you know, it's not really the best idea in an

472
00:22:57,080 --> 00:23:00,520
Speaker 4: investment kind of a world, know what I mean? Yeah,

473
00:23:00,640 --> 00:23:03,520
Speaker 4: that money is gone, You'll never get it back. Let's say,

474
00:23:03,640 --> 00:23:06,040
Speaker 4: you know, when you do go to sell it, you

475
00:23:06,119 --> 00:23:09,920
Speaker 4: tell you tell your agent and potential buyers. I've put

476
00:23:09,920 --> 00:23:12,440
Speaker 4: one hundred thousand dollars into this home in the last

477
00:23:12,480 --> 00:23:14,600
Speaker 4: five years. You know, I want to get all of

478
00:23:14,640 --> 00:23:16,640
Speaker 4: that back. Well, then I have to be the bad

479
00:23:16,680 --> 00:23:18,479
Speaker 4: guy and I have to say, well, you're not going

480
00:23:18,520 --> 00:23:21,159
Speaker 4: to get all of that back. So those are the

481
00:23:21,240 --> 00:23:24,840
Speaker 4: kinds of conversations that you want to have with someone

482
00:23:24,880 --> 00:23:29,240
Speaker 4: that you know and trust, and as you're real estate advisor,

483
00:23:29,600 --> 00:23:32,520
Speaker 4: I want you to talk about those kinds of things.

484
00:23:32,840 --> 00:23:35,920
Speaker 4: So you know, as far as I have a really

485
00:23:36,000 --> 00:23:41,600
Speaker 4: good example of somebody who was in a situation where

486
00:23:41,840 --> 00:23:44,680
Speaker 4: they sold their primary residence. It was a two story.

487
00:23:44,800 --> 00:23:47,160
Speaker 4: They were ready to make a move, but they didn't

488
00:23:47,160 --> 00:23:49,320
Speaker 4: know where they were going to go. So we were

489
00:23:49,359 --> 00:23:51,760
Speaker 4: looking at we were looking at all the different things.

490
00:23:51,800 --> 00:23:57,040
Speaker 4: We were looking at resale we were looking at new construction,

491
00:23:57,800 --> 00:24:01,080
Speaker 4: and we were kind of all around the board. The

492
00:24:01,119 --> 00:24:03,399
Speaker 4: one constant was they wanted to be close enough to

493
00:24:03,440 --> 00:24:06,480
Speaker 4: their kids and their grandkids to be able to help out.

494
00:24:06,600 --> 00:24:09,639
Speaker 4: So they were in their early seventies, pretty typical situation

495
00:24:09,800 --> 00:24:12,560
Speaker 4: for an awful lot of people where they had to

496
00:24:12,600 --> 00:24:15,880
Speaker 4: make some decisions. And so if you're with me, I'm

497
00:24:15,880 --> 00:24:18,919
Speaker 4: going to go through this scenario of the pros and

498
00:24:19,000 --> 00:24:22,399
Speaker 4: cons of both types of properties that they were considering.

499
00:24:22,600 --> 00:24:25,679
Speaker 1: Michelle, you know, as you're preparing somebody, because I know

500
00:24:26,040 --> 00:24:28,679
Speaker 1: you're looking at these houses, like you've already talked about,

501
00:24:29,160 --> 00:24:30,840
Speaker 1: you know, what's going to work for the people that

502
00:24:30,920 --> 00:24:33,760
Speaker 1: are currently living there, and then what's going to probably

503
00:24:33,920 --> 00:24:37,160
Speaker 1: work or be marketable or attractive to somebody that might

504
00:24:37,240 --> 00:24:40,040
Speaker 1: want to buy the house that your client is selling.

505
00:24:40,080 --> 00:24:42,280
Speaker 1: What would you say are the top two or three

506
00:24:42,320 --> 00:24:45,960
Speaker 1: things perhaps that you look at right away, that say, hey,

507
00:24:46,000 --> 00:24:48,679
Speaker 1: in order to make that twenty or thirty year old home,

508
00:24:49,080 --> 00:24:51,280
Speaker 1: you know, even though it's a beautiful home and it

509
00:24:51,280 --> 00:24:53,760
Speaker 1: should sell very quickly, what are a couple of things

510
00:24:53,800 --> 00:24:57,680
Speaker 1: that folks should think about fixing or repairing that don't

511
00:24:57,720 --> 00:25:00,200
Speaker 1: break the bank financially in order to make that at

512
00:25:00,200 --> 00:25:02,119
Speaker 1: home more attractive to the next buyer.

513
00:25:02,320 --> 00:25:06,240
Speaker 4: Absolutely. The first thing is cleaning and decluttering. You know,

514
00:25:06,280 --> 00:25:08,240
Speaker 4: there's not a lot of cost involved in that, but

515
00:25:08,320 --> 00:25:12,919
Speaker 4: you may need some help neutralizing, getting rid of you know,

516
00:25:13,080 --> 00:25:16,720
Speaker 4: bold colors, those kinds of things. You know, that is

517
00:25:16,800 --> 00:25:20,280
Speaker 4: really important. And again it may if you're having someone

518
00:25:20,320 --> 00:25:23,920
Speaker 4: paint your home, you may have some sticker shock because

519
00:25:24,000 --> 00:25:28,040
Speaker 4: having the cost of having a professional painter come in

520
00:25:28,080 --> 00:25:31,840
Speaker 4: and paint could be several thousand dollars And most.

521
00:25:31,760 --> 00:25:34,359
Speaker 1: Time I just went through that personally, I was shocked

522
00:25:34,359 --> 00:25:35,439
Speaker 1: at how much it costs.

523
00:25:35,440 --> 00:25:37,960
Speaker 2: But hey, it costs what it costs if if.

524
00:25:37,880 --> 00:25:39,399
Speaker 1: You want to get somebody in there that does it

525
00:25:39,440 --> 00:25:43,040
Speaker 1: the right way. But yeah, I've experienced that firsthand here recently, but.

526
00:25:43,080 --> 00:25:46,280
Speaker 4: Go ahead, absolutely. And then flooring. I think flooring is

527
00:25:46,320 --> 00:25:50,159
Speaker 4: so important. If you have carpet and it's worn, you know,

528
00:25:50,280 --> 00:25:52,359
Speaker 4: somebody's going to walk in and go, I'm going to

529
00:25:52,440 --> 00:25:54,520
Speaker 4: have to replace that carpet. It's going to cost me,

530
00:25:55,119 --> 00:25:57,520
Speaker 4: and in the buyer's mind, it's always going to cost

531
00:25:57,640 --> 00:26:00,720
Speaker 4: more than it really will in real life. So it's

532
00:26:00,800 --> 00:26:03,800
Speaker 4: always better for you to remove you as a seller,

533
00:26:03,880 --> 00:26:08,560
Speaker 4: to remove that challenge. Yeah, and you know, go ahead

534
00:26:08,640 --> 00:26:10,200
Speaker 4: and take care of it. You don't have to put

535
00:26:10,200 --> 00:26:12,680
Speaker 4: the most expensive carpet in. As long as it's clean,

536
00:26:12,760 --> 00:26:16,320
Speaker 4: trush and new and nice and neutral, walk in and

537
00:26:16,359 --> 00:26:18,119
Speaker 4: say I can live with this. Yeah.

538
00:26:18,200 --> 00:26:18,520
Speaker 2: Yeah.

539
00:26:18,520 --> 00:26:21,919
Speaker 3: So I recently helped a friend get a house ready

540
00:26:23,800 --> 00:26:25,639
Speaker 3: via state sale, and they were kind of scrambled to

541
00:26:25,640 --> 00:26:27,439
Speaker 3: get things done, and my job was to replace all

542
00:26:27,440 --> 00:26:29,280
Speaker 3: the lighting fixtures and the ceiling fans and all that.

543
00:26:29,560 --> 00:26:31,359
Speaker 3: And we threw all this stuff in the landfill and

544
00:26:31,359 --> 00:26:33,480
Speaker 3: it felt terrible. But you're looking at this stuff, it

545
00:26:33,520 --> 00:26:36,000
Speaker 3: didn't quite match, you know. It seemed like they bought

546
00:26:36,119 --> 00:26:38,760
Speaker 3: the former owners bought a ceiling fan because it looked cool,

547
00:26:38,800 --> 00:26:40,520
Speaker 3: not because it mastered everything else. So I kind of

548
00:26:40,560 --> 00:26:42,400
Speaker 3: get it, But man, did that not feel right throwing

549
00:26:42,440 --> 00:26:45,119
Speaker 3: all that perfectly functional stuff into a landfill because nobody

550
00:26:45,119 --> 00:26:47,040
Speaker 3: else is going to buy it. The donation companies didn't

551
00:26:47,040 --> 00:26:49,400
Speaker 3: even want it. But I guess you're saying there really

552
00:26:49,440 --> 00:26:52,040
Speaker 3: is value to the plain white ceiling fan, or not.

553
00:26:52,240 --> 00:26:55,000
Speaker 4: At all value exactly, or putting a cap on it,

554
00:26:55,119 --> 00:26:56,960
Speaker 4: you know, And I'm putting a light fixture in the

555
00:26:57,000 --> 00:27:00,520
Speaker 4: place of the of the old ratty fan that has

556
00:27:01,000 --> 00:27:07,119
Speaker 4: really no appeal to a new generation of buyers, so

557
00:27:07,119 --> 00:27:09,840
Speaker 4: we're always those are the kinds of things we have

558
00:27:09,960 --> 00:27:10,240
Speaker 4: to do.

559
00:27:10,560 --> 00:27:13,200
Speaker 1: All right, Hey, great advice as always from our real

560
00:27:13,320 --> 00:27:16,879
Speaker 1: estate expert, Michelle Sloan, owner of Remax Time. Michelle, thanks

561
00:27:16,880 --> 00:27:18,840
Speaker 1: as always for spending time with us tonight.

562
00:27:19,040 --> 00:27:20,480
Speaker 2: Hope you have a great rest of the week.

563
00:27:20,800 --> 00:27:23,360
Speaker 1: You're listening to Simply Money presented by all Worth Financial

564
00:27:23,440 --> 00:27:30,840
Speaker 1: on fifty five KRC, the talk station. You're listening to

565
00:27:30,840 --> 00:27:33,800
Speaker 1: Simply Money presented by all Worth Financial on Bob Sponsorer

566
00:27:33,880 --> 00:27:36,840
Speaker 1: along with Brian James. You have a financial question you'd

567
00:27:36,920 --> 00:27:38,600
Speaker 1: like for us to answer. There's a red button you

568
00:27:38,640 --> 00:27:41,000
Speaker 1: can click while you're listening to the show. If you're

569
00:27:41,040 --> 00:27:45,080
Speaker 1: listening on the iHeart app, simply record your question and

570
00:27:45,119 --> 00:27:48,359
Speaker 1: it will come straight to us. All right, Brian Nick

571
00:27:48,480 --> 00:27:51,440
Speaker 1: and Milford leads us off tonight. He says, my retirement

572
00:27:51,600 --> 00:27:56,399
Speaker 1: projections were built years ago assuming lower tax rates. How

573
00:27:56,400 --> 00:28:00,320
Speaker 1: do I update withdrawal assumptions now that more of each

574
00:28:00,400 --> 00:28:02,600
Speaker 1: dollar is going to taxes?

575
00:28:03,200 --> 00:28:05,800
Speaker 3: Yeah? Well, this is a great question, and I'm glad

576
00:28:05,840 --> 00:28:08,280
Speaker 3: you're thinking of this rather than just your spending, because

577
00:28:08,320 --> 00:28:10,280
Speaker 3: that income to cover your spending has to come from

578
00:28:10,280 --> 00:28:12,560
Speaker 3: somewhere and it's gonna get tax, so you got to

579
00:28:12,560 --> 00:28:14,760
Speaker 3: pay attention to that. So when tax assumptions change, the

580
00:28:14,800 --> 00:28:17,080
Speaker 3: mistake a lot of people make is lowering that net

581
00:28:17,119 --> 00:28:20,080
Speaker 3: spending line in their projection. You know, that's too simple,

582
00:28:20,160 --> 00:28:22,240
Speaker 3: hides the real issue, which you actually need to do,

583
00:28:22,600 --> 00:28:26,800
Speaker 3: is update the conversion between portfolio withdrawals and usable cash.

584
00:28:26,880 --> 00:28:28,600
Speaker 3: So the first thing I want to do is rebuild

585
00:28:28,600 --> 00:28:32,040
Speaker 3: that plan and after tax dollars. You know, older projections

586
00:28:32,080 --> 00:28:34,480
Speaker 3: often assume something like withdraw a hundred bucks, spend one

587
00:28:34,520 --> 00:28:37,280
Speaker 3: hundred bucks. That doesn't really work anymore. Need three layers

588
00:28:37,280 --> 00:28:40,800
Speaker 3: of this. What's the gross withdrawal level, what leaves the account,

589
00:28:41,040 --> 00:28:43,360
Speaker 3: what's owed in taxes? And then therefore what is my

590
00:28:43,440 --> 00:28:46,240
Speaker 3: net spending, So make sure you're paying attention to that. Also,

591
00:28:46,280 --> 00:28:48,400
Speaker 3: you're gonna want to update your effective tax rates by

592
00:28:48,480 --> 00:28:50,920
Speaker 3: account type, not just a single blended rate if you

593
00:28:50,960 --> 00:28:53,800
Speaker 3: really want to get into this stuff. You know, so

594
00:28:54,440 --> 00:28:56,680
Speaker 3: your traditional IRA four one K money that's going to

595
00:28:56,720 --> 00:29:00,240
Speaker 3: get tax at ordinary income rates, Plus you have potential

596
00:29:00,280 --> 00:29:02,640
Speaker 3: Medicare premium surcharges that could come off of that. Don't

597
00:29:02,640 --> 00:29:05,240
Speaker 3: forget about that. Roth accounts are going to be zero tax,

598
00:29:05,280 --> 00:29:07,360
Speaker 3: but they have a really high strategic value because they

599
00:29:07,360 --> 00:29:09,480
Speaker 3: can continue to grow, so you might not want to

600
00:29:09,480 --> 00:29:12,880
Speaker 3: touch those early in retirement. Taxable broker's accounts are somewhere

601
00:29:12,880 --> 00:29:15,440
Speaker 3: in the middle, because capital gains rates are usually somewhere

602
00:29:15,440 --> 00:29:18,480
Speaker 3: between zero and ordinary income rates for a given situation.

603
00:29:18,760 --> 00:29:22,280
Speaker 3: Dividend taxation is also more friendly as well. So in

604
00:29:22,280 --> 00:29:24,440
Speaker 3: any case, there's a lot of moving parts to this,

605
00:29:24,520 --> 00:29:26,640
Speaker 3: and hopefully those couple ideas will give you it gets

606
00:29:26,680 --> 00:29:29,160
Speaker 3: you started how you should think about it. Moving on

607
00:29:29,240 --> 00:29:32,520
Speaker 3: to Tom and Mason. Tom says this portfolio throws off dividend's

608
00:29:32,520 --> 00:29:34,800
Speaker 3: interest in capital gains at different times of the year,

609
00:29:34,840 --> 00:29:37,680
Speaker 3: and he's wondering, how do you manage cash flow without

610
00:29:37,720 --> 00:29:40,520
Speaker 3: accidentally stacking income into the same tax here. How would

611
00:29:40,520 --> 00:29:41,440
Speaker 3: you handle that, Bob.

612
00:29:42,400 --> 00:29:44,680
Speaker 1: Well, Brian, it sounds like Tom has some of these

613
00:29:44,760 --> 00:29:47,920
Speaker 1: mutual funds that he's owned for years when we already

614
00:29:47,920 --> 00:29:49,880
Speaker 1: covered you know, kind of the pros and cons of that,

615
00:29:49,960 --> 00:29:51,680
Speaker 1: And I feel like you did a great job of

616
00:29:51,880 --> 00:29:56,320
Speaker 1: kind of already answering Tom's question as you answered Nick's question,

617
00:29:56,400 --> 00:30:00,240
Speaker 1: but in particular without getting into two analytical here, I

618
00:30:00,240 --> 00:30:02,840
Speaker 1: think most of the time in a portfolio, when we

619
00:30:02,920 --> 00:30:06,080
Speaker 1: whether we look at our bond portfolio or dividend producing

620
00:30:06,120 --> 00:30:11,880
Speaker 1: stock portfolio, we pretty much know, you know, within a

621
00:30:11,920 --> 00:30:15,440
Speaker 1: reasonable amount of proximity, what our dividends and interests are

622
00:30:15,480 --> 00:30:18,360
Speaker 1: going to be for the year. Uh, it's pretty easy

623
00:30:18,360 --> 00:30:22,000
Speaker 1: to get those numbers, and your fiduciary advisor can pretty

624
00:30:22,080 --> 00:30:25,160
Speaker 1: much help you do that. If that's not something you

625
00:30:25,240 --> 00:30:27,200
Speaker 1: feel good about doing on your own or want to

626
00:30:27,240 --> 00:30:30,120
Speaker 1: do on your own. It's this wild card of those

627
00:30:30,280 --> 00:30:33,760
Speaker 1: fourth quarter capital gains distributions that we don't know what

628
00:30:33,760 --> 00:30:36,000
Speaker 1: that number is going to be, and that might be

629
00:30:36,080 --> 00:30:38,959
Speaker 1: what Tom's getting to here in his question. So I

630
00:30:39,000 --> 00:30:42,040
Speaker 1: think as you're doing tax planning throughout the year, and

631
00:30:42,560 --> 00:30:47,000
Speaker 1: again I underline tax planning instead of just tax preparation,

632
00:30:47,480 --> 00:30:49,920
Speaker 1: I think you can run a couple of different scenarios.

633
00:30:49,920 --> 00:30:53,400
Speaker 1: If you're trying to evaluate, say Roth conversions, or whether

634
00:30:53,440 --> 00:30:56,760
Speaker 1: you're going to potentially run a foul of moving over

635
00:30:56,800 --> 00:31:00,480
Speaker 1: that irma threshold to have your Medicare cost you know,

636
00:31:00,560 --> 00:31:04,400
Speaker 1: go up, run a couple projections depending on what those

637
00:31:04,440 --> 00:31:07,640
Speaker 1: capital gain distributions might be, and then that gives you

638
00:31:07,680 --> 00:31:11,280
Speaker 1: some time to plan accordingly. And maybe shift some income

639
00:31:11,320 --> 00:31:14,960
Speaker 1: around or don't recognize income in the first place, in

640
00:31:15,000 --> 00:31:18,160
Speaker 1: the way of things like say Wroth conversion. So there's

641
00:31:18,200 --> 00:31:20,720
Speaker 1: ways to get out ahead of this. Unfortunately, it does

642
00:31:20,760 --> 00:31:23,000
Speaker 1: require a little bit of work, but you know that's

643
00:31:23,040 --> 00:31:26,400
Speaker 1: why guys like Brian and I have jobs, all right.

644
00:31:26,520 --> 00:31:30,560
Speaker 2: Brian in hyde Park says, I'm realizing my marginal tax

645
00:31:30,640 --> 00:31:34,120
Speaker 2: rate matters more than my average tax rate. When I'm

646
00:31:34,120 --> 00:31:36,720
Speaker 2: deciding whether to sell investments.

647
00:31:36,240 --> 00:31:39,240
Speaker 1: Or do a Wroth conversion, which one should I actually

648
00:31:39,280 --> 00:31:40,280
Speaker 1: be planning around.

649
00:31:40,360 --> 00:31:43,400
Speaker 3: Great question, Yeah, that's the exact right question to ask,

650
00:31:43,680 --> 00:31:46,240
Speaker 3: But the answer is not one or the other. Right,

651
00:31:46,520 --> 00:31:50,280
Speaker 3: So you plan decisions around your marginal tax rate. Maybe

652
00:31:50,280 --> 00:31:52,160
Speaker 3: on those Roth conversions, I want to stay under the

653
00:31:52,160 --> 00:31:54,080
Speaker 3: twenty two percent of the twenty four percent. That's where

654
00:31:54,080 --> 00:31:56,160
Speaker 3: you're paying attention to the margins when you're thinking about

655
00:31:56,200 --> 00:31:59,240
Speaker 3: what to decide and the outcomes, though, those get planned

656
00:31:59,280 --> 00:32:01,600
Speaker 3: around the air verage tax rate. So in other words,

657
00:32:01,640 --> 00:32:03,760
Speaker 3: when you're let's say you've pulled the trigger, you decided, yes,

658
00:32:03,800 --> 00:32:06,240
Speaker 3: I'm doing this Wroth conversion. Here's how many dollars I'm

659
00:32:06,280 --> 00:32:08,400
Speaker 3: moving from one side to the other. Then you're gonna

660
00:32:08,400 --> 00:32:11,320
Speaker 3: want to use your average or effective tax rate to

661
00:32:11,360 --> 00:32:15,040
Speaker 3: figure out what that withholding should be or not withholding.

662
00:32:15,040 --> 00:32:16,760
Speaker 3: You don't want to withhold off a Roth conversion if

663
00:32:16,800 --> 00:32:19,160
Speaker 3: you can avoid it. You want to pay those taxes

664
00:32:19,200 --> 00:32:21,440
Speaker 3: out of something else. But just make sure that you

665
00:32:21,480 --> 00:32:24,760
Speaker 3: are you're using both of those numbers. That marginal rate

666
00:32:24,840 --> 00:32:27,240
Speaker 3: is going to govern those incremental decisions because you know,

667
00:32:27,280 --> 00:32:30,080
Speaker 3: for example, roth conversion adds ordinary income on top of

668
00:32:30,120 --> 00:32:32,280
Speaker 3: what you already earn, so you're already in some kind

669
00:32:32,320 --> 00:32:35,160
Speaker 3: of margin. If you voluntarily choose to do a Roth conversion,

670
00:32:35,320 --> 00:32:37,280
Speaker 3: you're going to push further into that margin and maybe

671
00:32:37,320 --> 00:32:39,920
Speaker 3: bump up against that next one. In addition, right you

672
00:32:39,960 --> 00:32:41,960
Speaker 3: also want to think about with Roth conversions, you also

673
00:32:41,960 --> 00:32:44,360
Speaker 3: want to think about your medicare surcharges, which to me,

674
00:32:44,480 --> 00:32:45,000
Speaker 3: don't let that.

675
00:32:45,160 --> 00:32:46,520
Speaker 2: Don't let the Medicare.

676
00:32:46,120 --> 00:32:50,280
Speaker 3: Premium wag the dog, because the taxes are going to

677
00:32:50,320 --> 00:32:52,760
Speaker 3: be what they are. When you're looking at a Wroth conversion,

678
00:32:53,000 --> 00:32:54,920
Speaker 3: you're looking at something that's going to benefit you for

679
00:32:55,000 --> 00:32:58,680
Speaker 3: decades versus those IRMA increases where those surch charges might

680
00:32:58,760 --> 00:33:01,440
Speaker 3: hurt you for one year two years from now. Because

681
00:33:01,480 --> 00:33:04,440
Speaker 3: that's the you know, decisions made in twenty six, will

682
00:33:04,440 --> 00:33:07,320
Speaker 3: affect your Medicare premium church charges in twenty eight, But

683
00:33:07,400 --> 00:33:09,920
Speaker 3: in twenty thirty eight, none of it matters because you

684
00:33:09,960 --> 00:33:12,200
Speaker 3: will have already done those ROTH conversions and those dollars

685
00:33:12,360 --> 00:33:14,480
Speaker 3: are growing tax free, so it might be worthwhile to

686
00:33:14,560 --> 00:33:17,320
Speaker 3: sacrifice on those on those Medicare premiums, whether we whether

687
00:33:17,360 --> 00:33:19,240
Speaker 3: we kind of like it or not, right will do

688
00:33:19,280 --> 00:33:19,680
Speaker 3: one more.

689
00:33:19,720 --> 00:33:21,000
Speaker 2: We've got John in Westchester.

690
00:33:21,120 --> 00:33:25,280
Speaker 3: John asks, should my HSA follow the same risk profile

691
00:33:25,320 --> 00:33:27,200
Speaker 3: as the rest of his portfolio? What do you think

692
00:33:27,200 --> 00:33:27,800
Speaker 3: about that, Bob?

693
00:33:29,320 --> 00:33:32,160
Speaker 1: Well, John, Let's first of all, HSA stands for health

694
00:33:32,200 --> 00:33:35,120
Speaker 1: savings account and we love those type of accounts. In

695
00:33:35,160 --> 00:33:38,680
Speaker 1: a lot of cases, they're underutilized. So here's how I'd

696
00:33:38,720 --> 00:33:42,600
Speaker 1: answer your question, John, all other things being equal, YEP,

697
00:33:42,680 --> 00:33:46,200
Speaker 1: I think your risk profile should stay the same, especially

698
00:33:46,640 --> 00:33:49,720
Speaker 1: if you're going to take full advantage of all the

699
00:33:49,800 --> 00:33:53,360
Speaker 1: long term tax benefits associated with a health savings account.

700
00:33:53,480 --> 00:33:54,240
Speaker 2: Here's what I mean.

701
00:33:54,960 --> 00:33:56,920
Speaker 1: You know a lot of people put that money in

702
00:33:56,960 --> 00:33:59,400
Speaker 1: that HSA and then spend it right away. You know,

703
00:33:59,440 --> 00:34:01,880
Speaker 1: they use it like as they're checking account for their

704
00:34:01,920 --> 00:34:05,040
Speaker 1: out of pocket healthcare expenses in the current year, and

705
00:34:05,480 --> 00:34:07,479
Speaker 1: you know, for those that can handle it from a

706
00:34:07,520 --> 00:34:11,480
Speaker 1: cash flow standpoint, you should think about this exactly the opposite.

707
00:34:11,520 --> 00:34:14,680
Speaker 1: Think of that as a long term growth vehicle. And

708
00:34:14,760 --> 00:34:17,840
Speaker 1: the beautiful tax benefit of these hsas is if you

709
00:34:17,840 --> 00:34:20,680
Speaker 1: can make it to sixty five or beyond and not

710
00:34:20,880 --> 00:34:25,160
Speaker 1: touch your HSA for anything, now you've got complete flexibility.

711
00:34:25,200 --> 00:34:28,560
Speaker 1: You can use those funds for healthcare costs tax free,

712
00:34:28,719 --> 00:34:31,200
Speaker 1: or you can just pull the money out.

713
00:34:31,000 --> 00:34:31,920
Speaker 2: Like a regular IRA.

714
00:34:32,160 --> 00:34:35,280
Speaker 1: You avoid all penalties and you just pay ordinary income taxes.

715
00:34:35,320 --> 00:34:37,960
Speaker 1: So if you can move yourself into that kind of

716
00:34:38,000 --> 00:34:41,000
Speaker 1: thought and build that assumption into your plan, you could

717
00:34:41,040 --> 00:34:43,919
Speaker 1: take a longer term outlook with those funds and get

718
00:34:43,920 --> 00:34:46,759
Speaker 1: some nice growth, you know, potentially for decades.

719
00:34:47,480 --> 00:34:49,320
Speaker 2: Coming up next, I've got my two.

720
00:34:49,200 --> 00:34:52,960
Speaker 1: Cents on how to take advantage of some potential short

721
00:34:53,080 --> 00:34:56,600
Speaker 1: term market volatility when it happens. You're listening to Simply

722
00:34:56,640 --> 00:34:59,240
Speaker 1: Money presented by all Worth Financial on fifty five KRC

723
00:34:59,680 --> 00:35:06,040
Speaker 1: the talk station. You're listening to Simply Money, percent of

724
00:35:06,040 --> 00:35:10,360
Speaker 1: It or with Financial on Bob Sponseller along with Brian James. Brian,

725
00:35:10,400 --> 00:35:12,680
Speaker 1: I want to get into a topic that you know

726
00:35:12,800 --> 00:35:15,160
Speaker 1: you may or may not agree with and that's part

727
00:35:15,160 --> 00:35:17,040
Speaker 1: of what makes this show fun. And what I'm going

728
00:35:17,120 --> 00:35:19,719
Speaker 1: to talk about here, I'm going to mention something. You know,

729
00:35:20,080 --> 00:35:24,000
Speaker 1: God forbid. We talk about market timing, but you know,

730
00:35:24,360 --> 00:35:27,080
Speaker 1: when we head, especially when we head into mid term

731
00:35:27,200 --> 00:35:31,640
Speaker 1: election years, Historically, every year, you know, take politics out

732
00:35:31,680 --> 00:35:34,920
Speaker 1: of it, the market it's in some way, shape or

733
00:35:34,960 --> 00:35:38,600
Speaker 1: form throughout the year declines at least one time by

734
00:35:38,640 --> 00:35:43,759
Speaker 1: on average about fourteen percent. In midterm election years, historically

735
00:35:43,800 --> 00:35:48,319
Speaker 1: that number rises to nineteen percent. My point here is,

736
00:35:48,520 --> 00:35:51,759
Speaker 1: you know, somewhere along the line there there's probably going

737
00:35:51,840 --> 00:35:54,960
Speaker 1: to be an opportunity here to buy low if we

738
00:35:55,000 --> 00:35:58,680
Speaker 1: get some type of market correction for whatever reason.

739
00:35:59,120 --> 00:36:02,160
Speaker 2: A way to anticipate that and take advantage of that.

740
00:36:03,560 --> 00:36:06,880
Speaker 1: Is, you know, we got our normal emergency fund where

741
00:36:06,880 --> 00:36:09,719
Speaker 1: we're taking care of three to six months worth of expenses,

742
00:36:09,760 --> 00:36:12,279
Speaker 1: and we talk about for early retirees, in order to

743
00:36:12,800 --> 00:36:15,799
Speaker 1: avoid sequence of return risk, maybe bumping that up to

744
00:36:15,840 --> 00:36:18,960
Speaker 1: one to three years. And I look at the data,

745
00:36:19,120 --> 00:36:22,920
Speaker 1: look at you know, there's a record number of assets

746
00:36:22,960 --> 00:36:26,520
Speaker 1: now sitting in cash in bank accounts or cash equivalents.

747
00:36:26,960 --> 00:36:28,600
Speaker 1: And I just want to say, I don't think that's

748
00:36:28,640 --> 00:36:31,319
Speaker 1: a bad thing. I think it's always good to have

749
00:36:31,400 --> 00:36:34,560
Speaker 1: a little dry powder to play with if and when

750
00:36:34,840 --> 00:36:38,320
Speaker 1: we get these volatility events, kind of like what happened

751
00:36:38,400 --> 00:36:42,200
Speaker 1: last year when we got these tariff announcements in early April.

752
00:36:42,239 --> 00:36:45,520
Speaker 2: For people that didn't panic and had some dry powder

753
00:36:45,560 --> 00:36:48,359
Speaker 2: to put to work, it was a wonderful buying opportunity.

754
00:36:48,760 --> 00:36:52,000
Speaker 2: And I just love that whole concept. What do you think, Yeah,

755
00:36:52,040 --> 00:36:52,959
Speaker 2: I mean, I guess, I guess.

756
00:36:52,960 --> 00:36:55,080
Speaker 3: My question is if there, if we've got dry powder,

757
00:36:55,120 --> 00:36:57,440
Speaker 3: then how much how much powder has been sitting off

758
00:36:57,480 --> 00:36:59,680
Speaker 3: to the side, and how much has it missed out

759
00:36:59,719 --> 00:37:01,560
Speaker 3: on while it was sitting there being dried. Now let's

760
00:37:01,600 --> 00:37:04,279
Speaker 3: be clear, we're not talking about the emergency fund that.

761
00:37:04,280 --> 00:37:05,640
Speaker 2: Should always be dry powder.

762
00:37:05,680 --> 00:37:08,600
Speaker 3: That's its whole purpose is to is to exist and

763
00:37:08,640 --> 00:37:10,759
Speaker 3: be liquid, and if it spits out three maybe four

764
00:37:10,800 --> 00:37:13,759
Speaker 3: percent income, that's a bonus, that's gravy. But we're talking

765
00:37:13,800 --> 00:37:16,640
Speaker 3: about the ability to pull from some kind of pile

766
00:37:16,680 --> 00:37:19,480
Speaker 3: of cash to invest in the market when the opportunity arises,

767
00:37:19,560 --> 00:37:21,680
Speaker 3: such as when it falls. I think that the danger

768
00:37:21,680 --> 00:37:24,520
Speaker 3: here in us talking about it is that April was

769
00:37:25,120 --> 00:37:29,520
Speaker 3: largely the one and only true opportunity to have bought

770
00:37:29,520 --> 00:37:32,640
Speaker 3: on the low. So if you had money sitting in cash,

771
00:37:32,680 --> 00:37:35,200
Speaker 3: you know after twenty two you maybe you were spooked

772
00:37:35,200 --> 00:37:36,839
Speaker 3: by that market. You didn't go in right away. Well,

773
00:37:36,840 --> 00:37:38,520
Speaker 3: then you sure as heck missed out on twenty three

774
00:37:38,600 --> 00:37:41,040
Speaker 3: and twenty four in that first quarter of twenty five,

775
00:37:41,080 --> 00:37:42,359
Speaker 3: which were basically to the moon.

776
00:37:42,600 --> 00:37:44,160
Speaker 2: So well, I don't I don't.

777
00:37:43,960 --> 00:37:46,399
Speaker 3: Poopoo the idea that maybe we should we should think

778
00:37:46,400 --> 00:37:48,719
Speaker 3: about it that way. Just don't be tempted to pile

779
00:37:48,800 --> 00:37:51,040
Speaker 3: up cash cash cash and let it sit there for

780
00:37:51,080 --> 00:37:53,600
Speaker 3: three years looking for this entry opportunity, because if it

781
00:37:53,640 --> 00:37:56,600
Speaker 3: goes up ten ten percent then drops back to eight percent,

782
00:37:56,680 --> 00:37:58,520
Speaker 3: you think, hey, I got in two percent lower. And

783
00:37:58,560 --> 00:38:00,480
Speaker 3: my thought is, no, you missed out on April game

784
00:38:00,520 --> 00:38:02,480
Speaker 3: because you didn't pull the trigger on day one. I'm

785
00:38:02,520 --> 00:38:05,640
Speaker 3: not a huge fan of the idea of holding back

786
00:38:05,680 --> 00:38:08,160
Speaker 3: cash to invest lator but if the opportunity comes up

787
00:38:08,200 --> 00:38:10,279
Speaker 3: you do have a windfall, then I would say, sure

788
00:38:10,360 --> 00:38:12,280
Speaker 3: to take a look and pull the trigger quickly.

789
00:38:12,320 --> 00:38:14,920
Speaker 2: Though. There you go. Thanks for listening tonight.

790
00:38:14,960 --> 00:38:16,920
Speaker 1: You've been listening to simply Money, because I'd buy all

791
00:38:16,920 --> 00:38:20,080
Speaker 1: Worth Financial On fifty five KRC, the talk station