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Speaker 1: Tonight perspective on the latest Federal Reserve interest rate decision

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Speaker 1: that you literally won't get anywhere else locally. You're listening

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Speaker 1: to Simply Money, presented by Alworth Talon, Bob Sponseller along

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Speaker 1: with Brian James and Alworth Chief Investment Officer Andy Stout.

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Speaker 1: We're also joined tonight and this is a real treat

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Speaker 1: by Loretta Mester, who served as the President of the

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Speaker 1: Federal Reserve Bank of Cleveland for many years, where she

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Speaker 1: literally cast votes the directly shaped interest rate policy and

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Speaker 1: therefore the direction of the United States economy. And just

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Speaker 1: as a reminder, the Cleveland Fed has a branch right

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Speaker 1: here in downtown Cincinnati. Doctor Mester currently is a full

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Speaker 1: adjunct professor of finance at the Wharton School of the

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Speaker 1: University of Pennsylvania. Prior to joining the Cleveland Fed, she

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Speaker 1: served at the Federal Reserve Bank of Philadelphia, so a

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Speaker 1: ton of experience. It's here visiting with us tonight, Doctor Mester.

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Speaker 1: It is a real treat to have you with us

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Speaker 1: once again tonight. Thank you so much for making time

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Speaker 1: for us, especially during this busy holiday season.

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Speaker 2: Well thanks for having me on your show.

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Speaker 3: Hey, doctor mister, this is a Andy steu here, really

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Speaker 3: excited to have you. And we all know that the

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Speaker 3: FED cut rates yesterday by a quarter point. Obviously, we

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Speaker 3: have a significant data vacuum from the shutdown. We know generally, though,

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Speaker 3: that inflation is still well above the Fed's target. There

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Speaker 3: are cracks in the labor market, and some argue we

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Speaker 3: haven't even seen the full effects of tariffs, while others

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Speaker 3: believe differently. So it's clear the FED is in a

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Speaker 3: tough spot when it comes to its mandates of stable

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Speaker 3: prices and full employment. With that general backdrop, do you

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Speaker 3: think the FED should have cut rates yesterday?

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Speaker 4: Well, you know, it's hard to pick help in the

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Speaker 4: meeting because you don't sort of hear the whole discussion.

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Speaker 2: But I guess my feeling is I'm a.

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Speaker 4: Little more concerned about inflation than perhaps share pal is

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Speaker 4: at this point. If you listen to his press conference,

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Speaker 4: he really thinks that most of what's happening in the

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Speaker 4: inflation realm is terror related, and then if you know,

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Speaker 4: once that passes through, if you will, inflation will be

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Speaker 4: on its way back to two percent. I'm a little

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Speaker 4: more concerned about that because I think not all of

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Speaker 4: what's going on in the inflation part of the FEDS

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Speaker 4: do Manaid is terror related. If you look at service

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Speaker 4: prices and takeout housing, which of course we know is

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Speaker 4: housing prices have been rooted down, or at least housing.

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Speaker 2: Services part of inflation is moving down. The rest of

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Speaker 2: it has been really sticky.

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Speaker 4: And some of those prices have been moving up, not

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Speaker 4: moving down. So I'm a little more concerned about inflation

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Speaker 4: than it appears share Palace at this point.

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Speaker 2: And I'm also thinking that a lot of what we're

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Speaker 2: seeing the lame market.

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Speaker 4: I agree that, you know, the labor market is not

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Speaker 4: necessarily the way we want it. It's pretty static right now.

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Speaker 4: You know, young people very difficult to find a job.

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Speaker 4: And what's unusual is higher educated people are getting more.

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Speaker 2: Softening in the labor market than typical.

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Speaker 4: So again it's a softer labor market. But a lot

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Speaker 4: of it has to do with the fact that labor

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Speaker 4: supply is constrained by immigration policy and people not entering

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Speaker 4: the labor force, and that's really not anything monetary policy,

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Speaker 4: industry policy can address, you.

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Speaker 3: Know, the fat that's a very good point with inflation.

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Speaker 3: I mean, there's definitely differing views out there, and that's

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Speaker 3: you know, why the FED is in a really tough spot.

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Speaker 3: I mean, the FED has a tough job, right, but

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Speaker 3: to their credit, you know, you avoided double dip recession.

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Speaker 3: They've essentially navigated a soft landing, which pretty much every

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Speaker 3: talking head out there said it was going to be impossible.

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Speaker 3: When the interest rate hikes began. It's like, oh, and

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Speaker 3: the recessions right around the corner. But you know, recessions happen, right,

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Speaker 3: I mean, business cycles are normal, and of course a

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Speaker 3: lot can change over the next over the next few weeks,

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Speaker 3: few months, and things can change pretty quickly, you know,

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Speaker 3: with the labor market where it is may somewhat tenuous,

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Speaker 3: recessions still elevated, and some call rates still restrictive, you know,

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Speaker 3: some think they may not be restrictive enough.

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Speaker 1: You know.

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Speaker 3: With that, you know, in economic environment in right now,

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Speaker 3: do you think there's a real chance that we do

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Speaker 3: see a recession over the next you know, six months

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Speaker 3: or twelve months. I mean, the further you go out,

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Speaker 3: obviously the higher the chances are. But what do you

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Speaker 3: see as like the real economic risks out there?

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Speaker 4: So I honestly think that we might see growth pick

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Speaker 4: up next early next year in the first part half

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Speaker 4: of the year not go into recession.

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Speaker 2: I don't have a recession in my.

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Speaker 4: Forecast. And if you actually look, the FED put out

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Speaker 4: their projections for the economy for the next three years,

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Speaker 4: and they actually revised up their forecast for next year

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Speaker 4: in terms of growth.

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Speaker 2: And part of that's because.

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Speaker 4: You know, in spite of all the uncertainty out there,

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Speaker 4: firms have been investing a lot of its AI investment

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Speaker 4: but in other things as well, and the consumers held

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Speaker 4: up better than I.

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Speaker 2: Think many expected.

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Speaker 4: The consumer too, They're spending you know, lower income consumers

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Speaker 4: are feeling the real burden of higher prices. So that's unfortunate.

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Speaker 4: And that's why I think inflation.

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Speaker 2: Should still keep you know, that needs to keep both

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Speaker 2: parts of its mandate and its finder.

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Speaker 4: But I think that the economy is going to do,

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Speaker 4: you know, start to actually improve next year. Part of

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Speaker 4: it it's because the Fed has lowered its rate, and

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Speaker 4: part of it's because you know, if you think about

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Speaker 4: the stock market and other financial conditions.

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Speaker 2: They've eased off this year.

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Speaker 4: Stock market prices have gone up and that helps wealth,

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Speaker 4: so as you would know being the investment officer.

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Speaker 2: So again, you.

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Speaker 4: Know, I think we're going to see some pick up

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Speaker 4: in the economy next year. We could still see the

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Speaker 4: labor market, you know, continue to soften gradually, and that's

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Speaker 4: what the FED has to navigate. It has to balance

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Speaker 4: the inflation risk versus the labor market risks, and it

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Speaker 4: is a challenging economy for the FED to navigate. But

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Speaker 4: it has done well. I think you're right in the

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Speaker 4: sense that the most dire predictions have not come to

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Speaker 4: pass and things are actually looking up. I think people

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Speaker 4: will be a little surprised to get bigger refunds also

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Speaker 4: from their taxes next.

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Speaker 2: Year because of the.

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Speaker 4: Government policy of the you know, the Big Beautiful Bill

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Speaker 4: or whatever they've now that tax relief and I think

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Speaker 4: people will see it a little bit bigger refund and

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Speaker 4: that also will help at least boy confidence a little bit.

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Speaker 4: Consumer confidence has been low, but that'll help.

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Speaker 5: Yeah.

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Speaker 3: I think that makes a lot of sense. And the

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Speaker 3: Big Beautiful Bill, I mean, that's some very very interesting

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Speaker 3: marketing because you hear it and you're like okay, and

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Speaker 3: you hear over and over and again you're like, Okay,

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Speaker 3: maybe it is big and beautiful. To your point, the

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Speaker 3: tax refunds, I think will be a big boon, especially

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Speaker 3: in Q one, and you also have the government reopening.

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Speaker 3: There's going to be some rebound effects from that. Totally

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Speaker 3: on board with everything you're saying. Here's honestly the thing

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Speaker 3: I'm most excited to talk to you about, and that's

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Speaker 3: a little bit of inside baseball. Yesterday's meeting showed some

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Speaker 3: real fractures inside the FAD. There were three formal descents obviously,

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Speaker 3: you know, two against and one for you know something.

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Speaker 3: Even more then, there were what we call in total,

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Speaker 3: six silent descents. So that's in the form of the

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Speaker 3: top lot where members who didn't want to cut still

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Speaker 3: went along with it, and some of those obviously were

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Speaker 3: non voting members. So you take that for what it is.

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Speaker 3: But regardless, that looks like a committee that is deeply

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Speaker 3: split on the policy path. We can just dissect this

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Speaker 3: in many, many ways, but what I'm interested in from

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Speaker 3: your experience is what is it like behind the curtain?

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Speaker 3: In other words, what are those conversations actually like when

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Speaker 3: the chair is pushing a direction that many members don't support.

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Speaker 4: Well, you know, it's a great collegial group, and you know,

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Speaker 4: it's not like.

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Speaker 2: One of these drag out, you know fights.

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Speaker 4: You know, you know, I don't agree with you, and

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Speaker 4: it's very polite, and it's very much based on the

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Speaker 4: rationale for whatever policy choice you're supporting.

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Speaker 2: And you know, the chair is very good.

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Speaker 4: Chair pala is very good about listening and allowing everyone

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Speaker 4: and to speak, and then they have to come together,

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Speaker 4: because the way the committee works is you have to

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Speaker 4: come together and come up with a consensus that has

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Speaker 4: the right you know, economic.

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Speaker 2: Rationale for it.

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Speaker 4: And you know, some people who see it differently and

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Speaker 4: feel strongly enough about it will decide to dissent.

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Speaker 2: And I've just sent it. In my time at the FAT,

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Speaker 2: It's never something I really wanted to do.

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Speaker 4: I wanted to support, you know, the consensusy, but sometimes

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Speaker 4: you feel like you need to lodge.

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Speaker 2: A descent because you have different views.

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Speaker 4: And frankly, as we just were talking about how challenging

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Speaker 4: this economic environment is, with you know, downward pressure on

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Speaker 4: one part of the mandate, the employment part of the mandate,

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Speaker 4: downward risk and upward pressure on prices and inflation the

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Speaker 4: other part of the mandate, I would be more worried

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Speaker 4: if we weren't.

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Speaker 2: Seeing some descents around that.

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Speaker 4: Table, because as then you'd be worried that they all

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Speaker 4: are seeing things exactly the same way. They're not thinking,

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Speaker 4: you know that other possibilities could occur. In this environment,

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Speaker 4: you should always be thinking about, well, what if the

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Speaker 4: economy doesn't evolve the way I expect it to.

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Speaker 2: You don't want to be caught out that way. And

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Speaker 2: so seeing that they're you know, it's manifesting itself with

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Speaker 2: some descents.

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Speaker 4: And as you say, some people lodge no change in

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Speaker 4: the funds rate this year, which obviously meant that.

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Speaker 2: They weren't really in support.

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Speaker 4: Of a cut at the December meeting. Still that's a

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Speaker 4: good thing in this environment. You want to see that

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Speaker 4: kind of.

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Speaker 2: Of healthy debate, if you will, because it.

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Speaker 4: Means they're thinking about alternatives of healthy economy could perform,

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Speaker 4: and therefore keeping their policy well positioned to once we

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Speaker 4: know how the economy is involving, to be able to

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Speaker 4: change policy they have to or keep policy where it

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Speaker 4: is if they have to, given how the economy is evolving.

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Speaker 4: So I think of it as positive, and it isn't.

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Speaker 4: It isn't really contentious in the meetings, but people will

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Speaker 4: say their views about not only how they're seeing the economy,

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Speaker 4: which is the first go round around that table when

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Speaker 4: you get a chance to speak, but also how they

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Speaker 4: see policy. And it's the other thing for people to

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Speaker 4: understand is it's not always about the current decision. It's

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Speaker 4: really about, Okay, how are you expecting the economy to

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Speaker 4: evolve over the next six months, and how do you

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Speaker 4: see policy needing to be set to sort of achieve

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Speaker 4: those dual mandate goals? And so you're always thinking about

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Speaker 4: not only to the current decision, but the path of

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Speaker 4: policy going forward.

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Speaker 1: All Right, fascinating insight on how the sausage is literally

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Speaker 1: made at the Federal Reserve. The good news here is

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Speaker 1: doctor Mester is going to hold over for another segment

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Speaker 1: here as Christmas comes early for Andy Stout, he gets

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Speaker 1: to send spend another seven to eight minutes with a

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Speaker 1: Fed governor. Coming up next, you're listening to Simply Money

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Speaker 1: presented by all Worth Chelon fifty five KRC the talk station.

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

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Speaker 1: I Bob Sponsller along with Brian James and all Worth

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Speaker 1: Chief Investment Officer Andy Stout. And thankfully we get to

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Speaker 1: spend another few minutes with doctor Loretta Mester, who served

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Speaker 1: as president of the Federal Reserve Bank of Cleveland for years.

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Speaker 1: Fascinating discussion that we're going to continue right along here

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Speaker 1: for a few more minutes. Andy, the floor is yours, sir.

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Speaker 3: All right, thanks again, doctor Mester for joining us. I

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Speaker 3: know you're very busy. I was watching you yesterday an

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Speaker 3: interview you did where you were discussing how the next

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Speaker 3: BET chair because as it may not be too widely know,

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Speaker 3: but I mean, obviously it's it's still pretty widely known

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Speaker 3: that Chair Palce term ends in May of twenty twenty six,

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Speaker 3: and we're heading into a year when the White House

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Speaker 3: has openly discussed steering the FED more dubbishly. And historically,

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Speaker 3: you know, the FED independence has been a you know,

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Speaker 3: it's just been a stable right, it just has been

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Speaker 3: what it is. And there's been some pressure from President

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Speaker 3: Trump on the current BET chair, and there's been talks

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Speaker 3: about who the next Betchair might be. I mean, it

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Speaker 3: seems like right now that Bessent appears to be the

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Speaker 3: front runner, but you know, things can change. My question

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Speaker 3: for you, how worried are you that the political expectations

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Speaker 3: are going to shape the Fed's decisions next year?

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Speaker 2: Well, you know, the FED got people on the FED

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Speaker 2: that I know none of them will allow politics to

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Speaker 2: guide their decisions.

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Speaker 4: I mean, I don't know Stephen Maren, but he's putting

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Speaker 4: out at least economic reason rationales for his viewpoint, and

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Speaker 4: of course he was appointed temporarily to a governorship.

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Speaker 2: But all the people around the.

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Speaker 4: Table who were there when I was there, I know

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Speaker 4: they will not allow politics into that room. And that

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Speaker 4: has been the tradition of the FED. You know, you've

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Speaker 4: got to make monetary policy decisions based on what you

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Speaker 4: think is the best policy to achieve the congressionally mandated

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Speaker 4: goals of maximum employment and price stability, and you know

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Speaker 4: you don't let politics guide.

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Speaker 2: Your decisions, and rightfully so. I mean, it would be

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Speaker 2: a very.

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Speaker 4: Bad for the economy if political considerations were influencing FED decisions.

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Speaker 2: Because the FED has to look long term.

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Speaker 4: It's policy, monetary policy. It doesn't affect the economy quickly.

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Speaker 4: It takes some time, so they have to be looking out,

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Speaker 4: you know, down you know, how's the economy expected to

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Speaker 4: evolve and there's always risks around that, and how what

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Speaker 4: are the uncertainties affecting the economy and sending policy to

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Speaker 4: achieve price tovily imaction, unemployment and having short run political

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Speaker 4: considerations affect monetary policy. It's been shown in country after

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Speaker 4: country and study after study. When that happens, it actually

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Speaker 4: means that you have higher inflation, which nobody benefits from,

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Speaker 4: and you don't really get a better labor market. It

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Speaker 4: doesn't improve the labor market side of things. So it's

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Speaker 4: not a win if you have politics under that room.

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Speaker 2: In fact, you're better off having.

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Speaker 4: What's called independence and monetary policy making meaning and dependent

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Speaker 4: from political considerations, and you end up with the better

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Speaker 4: economy as a result.

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Speaker 2: So whether that.

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Speaker 4: Traditional end or not with new appointees, I can't tell

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Speaker 4: you because I can't see in the future.

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Speaker 2: But this, this FED right has been.

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Speaker 4: Based its decisions on economics and not politics, and it's

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Speaker 4: to everyone's benefit of that continues.

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Speaker 3: Yeah, that makes a lot of sense to me. One

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Speaker 3: more kind of related follow up question regarding independence to

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Speaker 3: a degree when the FED is making these decisions, and

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Speaker 3: obviously there's been some talk of you know what they

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Speaker 3: did yesterday with q wasn't really QB. I agree with that,

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Speaker 3: But the government has a growing deficit. Does the FED

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Speaker 3: take into consideration treasury issuance when it considers possibly restarting

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Speaker 3: quantitative easing for real, as opposed to i'll call a

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Speaker 3: you know, a minor adjustment what they did yesterday. What

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Speaker 3: do those conversation look like. Does the treasury issuance come

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Speaker 3: into consideration at all when you think about what the

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Speaker 3: FED is doing for possibly buying bonds in the future.

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Speaker 4: Yeah, so when the FED has done quantitative easing, and

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Speaker 4: you're exactly right, what.

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Speaker 2: They announced yesterday is not quantitative easing. It's really reserved management.

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Speaker 4: And we can talk about that if you if you

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Speaker 4: think anyone would be interested in it really a technic No.

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Speaker 2: Probably not that.

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Speaker 3: I'm just really curious about, like, do they do they

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Speaker 3: Does the treasury issuance come into play at all? Because

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Speaker 3: we know they're going to issue a lot more bonds.

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Speaker 4: Now, what what comes into play is, you know, once

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Speaker 4: interest rates, once the Fed is lowered interest rates to

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Speaker 4: zero and it feels that it still needs to add

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Speaker 4: more monetary accommodation because the economy is really not in

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Speaker 4: a good place, it will buy rasuries and some other

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Speaker 4: kinds of securities, mortgage backed securities in order to really

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Speaker 4: ease financial conditions to another, to another words, support that

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Speaker 4: it doesn't take into account these kind of fiscal you know,

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Speaker 4: determinants in terms of sort of issuance.

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Speaker 2: You know.

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Speaker 4: Where it does have to think about what's happening in

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Speaker 4: the financial markets is when it has to intervene because

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Speaker 4: they're just there's disruption in the financial markets, and sometimes

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Speaker 4: that disruption has shown up in the treasury market. If

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Speaker 4: you remember, at the beginning of the pandemic, right there

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Speaker 4: was very much a seizing up in financial markets, including

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Speaker 4: the all important, the globally important treasure US treasury market.

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Speaker 4: And then the FED does intervene to try to ease

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Speaker 4: that pressure by buying assets.

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Speaker 2: But that's not monetary policy.

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Speaker 4: That's about financial stability and market functioning. And so I

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Speaker 4: know it's confusing because it's sort of the same tool, right,

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Speaker 4: buying assets, you know, financial assets, but it's for a

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Speaker 4: different purpose. And that's where you'll have to look at

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Speaker 4: what's happening in the financial market to see whether it's

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Speaker 4: necessary for the SAID.

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Speaker 2: To intervene or not because of market dysfunction.

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Speaker 4: But when it's about que quantitative easing to support the economy,

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Speaker 4: that's not about.

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Speaker 2: The amount of treasuries out there.

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Speaker 4: That's about the economy isn't performing well and if that

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Speaker 4: needs to add more monetary accommodation to support the economy.

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Speaker 1: All right, doctor Mester, We're going to leave it there tonight.

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Speaker 1: We want to be very respectful of your time and

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Speaker 1: we so appreciate you joining us tonight. Thanks so much again,

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Speaker 1: and we hope you have a wonderful holiday season.

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Speaker 4: Well, it's a pleasure to be with you, and I

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Speaker 4: wish you and all your listeners of wonderful holiday season

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Speaker 4: as well.

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Speaker 1: Thank you, doctor mister. The investment you love ten years

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Speaker 1: ago could now be quietly draining your wealth, even if

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Speaker 1: it's been good for you in the past. You're listening

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

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Speaker 1: five KRC the talk station. You're listening to Simply Money

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Speaker 1: presented by all Worth Financial on Bob Sponseller along with

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Speaker 1: Brian James. You know that feeling when you've had the

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Speaker 1: same car for a decade. It's reliable, it's familiar, but

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Speaker 1: one day you realize, eh, maybe this thing is costing

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Speaker 1: me more than it's worth. Well, your financial tools can

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Speaker 1: act in the same way, Brian. Let's walk through a

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Speaker 1: couple of examples.

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Speaker 5: Yeah, a lot of people have, you know, bring in

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Speaker 5: their statements.

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Speaker 6: When we do a full financial plan, you know, bring

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Speaker 6: on a new client or whatever, we kind of get

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Speaker 6: the garbage bag full of every piece of paper that

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Speaker 6: was every cent and let's just go through and figure

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Speaker 6: out what matters and what doesn't. So one of these

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Speaker 6: things is often whole life insurance, which is often sold

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Speaker 6: as a way to build cash value and lock in

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Speaker 6: a death benefit.

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Speaker 5: And for some it can make sense.

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Speaker 6: But now that you're sixty five, your kids are grown,

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Speaker 6: and darn at all, you didn't die, so the death

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Speaker 6: benefit maybe isn't quite as necessary as it used to be.

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Speaker 6: Maybe the estate is under the tax limit, which is

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Speaker 6: ginormous nowadays, right talking eleven million dollars per person, So

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Speaker 6: maybe that's not a thing for you and yourself insured,

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Speaker 6: meaning you've just got enough of your own assets to

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Speaker 6: cover those needs. So we see that very frequently, Bob,

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Speaker 6: sometimes with you know, maybe somebody has two two to

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Speaker 6: four million dollars in net worth and they've got a

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Speaker 6: whole life policy they bought in their forties when it

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Speaker 6: made sense to have such a thing. They don't need

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Speaker 6: it anymore, but they're so emotionally tied to it. Because

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Speaker 6: they've paid into it for so long and pulling the

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Speaker 6: money out feels like a defeat. Not to mention, I

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Speaker 6: know there's taxes in there somewhere. I don't understand how

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Speaker 6: they work, but that just makes me want to ignore

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Speaker 6: all of it.

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Speaker 1: Well, the good thing about the death benefit on these

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Speaker 1: policies is they are tax free. But I think to

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Speaker 1: the point you're making, as that cash value continues to grow,

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Speaker 1: and look as people get into their seventies and eighties,

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Speaker 1: that cash value in that policy can grow up to

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Speaker 1: very close to the death benefit amount. So it kind

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Speaker 1: of turns into a tax free return on your money.

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Speaker 1: And there's not a whole lot of leverage in there anymore.

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Speaker 1: And perhaps, you know, depending on everyone's situation, perhaps that

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Speaker 1: asset could be used differently. I think that it's the

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Speaker 1: point you're making. You've talked about this, Brian oftentimes on

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Speaker 1: the show. Sometimes you can convert this policy into a

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Speaker 1: long term care kind of doing double duty, and that

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Speaker 1: that can make sense for some folks. Yeah, other things

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Speaker 1: you can.

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Speaker 5: Do, Yeah, do it's gonna say, let's drill into that

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Speaker 5: little bit.

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Speaker 6: Just make sure people understand, because that's usually the first

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Speaker 6: thing that that we go to if you've got a

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Speaker 6: life insurance policy with a decent amount of cash value

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Speaker 6: in it.

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Speaker 5: First of all, it wasn't a mistake.

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Speaker 6: You bought it when you need a death benefit, the

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Speaker 6: kids were young, and now you just don't need it anymore.

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Speaker 6: So what what is a way we could redeploy those

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Speaker 6: assets into something I actually do need. You can always

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Speaker 6: pull the cash out and stick it in your pocket

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Speaker 6: and do whatever you want to do. That's always on

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Speaker 6: the table, but you're going to get taxed as income

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Speaker 6: ordinary income on whatever the gain has been, you know,

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Speaker 6: and maybe that's not ideal anyway, if you've already got

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Speaker 6: enough cash in other places. So yeah, what Bob's referring

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Speaker 6: to there is something called a ten thirty five exchange,

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Speaker 6: which is a tax free transfer of a pile of

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Speaker 6: money inside one life insurance policy that goes to another.

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Speaker 6: And in this intent, you would be looking for a

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Speaker 6: policy that's got a long term care rid on it

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Speaker 6: still a life insurance policy, so there'd still be some

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Speaker 6: kind of minimal death benefit, but that's not its main

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Speaker 6: role anymore. Now it's pivoting to cover long term care.

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Speaker 6: So this can be a way to take some assets

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Speaker 6: that felt untouchable and also unnecessary if we don't need

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Speaker 6: death benefit, and put it into something that will make

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Speaker 6: you sleep a little better at night because you'll know

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Speaker 6: that you have coverage for something that may actually happen

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Speaker 6: to you, that you could need, and you will have

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Speaker 6: done it in a tax free manner, just filled out

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Speaker 6: a bunch of paperwork and taken some tests to do it,

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Speaker 6: So that can be worth looking into it.

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Speaker 1: Another thing to look at is a bond portfolio. Sometimes

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Speaker 1: people come into the office, Brian, and they've held bonds,

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Speaker 1: you know, individual bonds for years and years and years,

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Speaker 1: and then in this example we're talking about municipal bonds,

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Speaker 1: I mean ten years ago. UNI bonds might have made

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Speaker 1: a lot of sense for high income investors. You know,

441
00:23:47,960 --> 00:23:51,560
Speaker 1: obviously the income is federally tax free, and if they

442
00:23:51,600 --> 00:23:54,200
Speaker 1: are state of Ohio or state of Kentucky or wherever

443
00:23:54,200 --> 00:23:55,600
Speaker 1: you live, you know, if you buy them in the

444
00:23:55,640 --> 00:23:58,920
Speaker 1: state you live, state income tax free. Yes, people love

445
00:23:58,960 --> 00:24:02,600
Speaker 1: the words tax free, but you've got to always evaluate

446
00:24:02,720 --> 00:24:05,320
Speaker 1: what we'll call yield to maturity, what are we really

447
00:24:05,359 --> 00:24:08,320
Speaker 1: getting out of this on a net basis Once you

448
00:24:08,440 --> 00:24:11,600
Speaker 1: factor in the fact that they're tax free, and factor

449
00:24:11,640 --> 00:24:15,439
Speaker 1: in inflation and factor in the current yield environment. I mean,

450
00:24:15,520 --> 00:24:18,560
Speaker 1: let's say you've been sitting on ten year mini bonds

451
00:24:18,600 --> 00:24:20,920
Speaker 1: paying two to two and a half percent. Well, right

452
00:24:20,920 --> 00:24:24,520
Speaker 1: now US treasuries are yielding nearly four. So it just

453
00:24:24,560 --> 00:24:27,240
Speaker 1: makes sense to take a look at that bond portfolio.

454
00:24:27,359 --> 00:24:31,280
Speaker 1: And this is why we're big proponents of laddering bond portfolios.

455
00:24:31,640 --> 00:24:33,919
Speaker 1: So you don't tie up a bunch of money for

456
00:24:34,040 --> 00:24:38,080
Speaker 1: ten years and then you can't really pivot very easily sometimes,

457
00:24:38,359 --> 00:24:40,439
Speaker 1: you know, if you need to or want to with

458
00:24:40,560 --> 00:24:44,400
Speaker 1: a changing interest rate environment. So we got to evaluate

459
00:24:44,440 --> 00:24:46,800
Speaker 1: both the yield and maturity, and we got to factor

460
00:24:46,840 --> 00:24:50,480
Speaker 1: that in in light of a given client's tax situation.

461
00:24:50,600 --> 00:24:52,320
Speaker 1: And a lot of times people just put this on

462
00:24:52,400 --> 00:24:56,159
Speaker 1: autopilot and don't look at it, and they're literally leaving

463
00:24:56,200 --> 00:24:57,080
Speaker 1: money on the table.

464
00:24:57,640 --> 00:24:59,880
Speaker 6: Yeah, and on the assumption that they're poking the IR

465
00:25:00,160 --> 00:25:01,960
Speaker 6: in the eye. And sometimes for some people that's the goal.

466
00:25:01,960 --> 00:25:04,439
Speaker 6: They might be in an eight percent effective tax bracket,

467
00:25:04,480 --> 00:25:06,639
Speaker 6: but they're still getting tax free income and they're willing

468
00:25:06,680 --> 00:25:07,280
Speaker 6: to sacrifice.

469
00:25:07,320 --> 00:25:09,400
Speaker 5: It makes no sense to me, but to each their own.

470
00:25:09,720 --> 00:25:12,359
Speaker 6: So something else that we find out in sometimes in

471
00:25:12,520 --> 00:25:14,600
Speaker 6: back in the deep in the financial closet is an

472
00:25:14,600 --> 00:25:17,000
Speaker 6: old annuity that was bought purchase ten to fifteen, maybe

473
00:25:17,000 --> 00:25:17,680
Speaker 6: twenty years ago.

474
00:25:18,040 --> 00:25:20,119
Speaker 5: These can be very tricky. The word annuity is like

475
00:25:20,160 --> 00:25:20,880
Speaker 5: the word kleenex.

476
00:25:20,920 --> 00:25:23,560
Speaker 6: It covers every single brand out there, and sometimes it

477
00:25:23,600 --> 00:25:26,120
Speaker 6: gets a bad rap. There are lots of flavors, right,

478
00:25:26,119 --> 00:25:29,639
Speaker 6: so fixed annuities, variablenudies, index buffer. Sometimes you work for

479
00:25:29,680 --> 00:25:31,640
Speaker 6: a company that gave you a pension and they call

480
00:25:31,680 --> 00:25:32,360
Speaker 6: it an annuity.

481
00:25:32,359 --> 00:25:35,080
Speaker 5: That's a little bit different. But but here's a common scenario.

482
00:25:35,160 --> 00:25:37,240
Speaker 6: You might have bought a variable annuity with some pretty

483
00:25:37,280 --> 00:25:39,520
Speaker 6: high fees back in two thousand and nine because you

484
00:25:39,520 --> 00:25:42,000
Speaker 6: were reacting to two thousand and eight. Annuities come along

485
00:25:42,040 --> 00:25:44,119
Speaker 6: with some guarantees, and for a lot of people that

486
00:25:44,359 --> 00:25:46,119
Speaker 6: felt like a smart thing to do after market like

487
00:25:46,119 --> 00:25:48,359
Speaker 6: two thousand and eight. But now we've been through the ringer.

488
00:25:48,400 --> 00:25:50,480
Speaker 6: We survived O eight. We saw twenty two come around,

489
00:25:50,480 --> 00:25:52,919
Speaker 6: and it didn't. While it was equally as crazy, it

490
00:25:52,960 --> 00:25:54,919
Speaker 6: didn't feel as intense. And I can say that as

491
00:25:54,920 --> 00:25:56,720
Speaker 6: an advisor who answered the phone. Oh eight was a

492
00:25:56,720 --> 00:25:59,480
Speaker 6: lot scarier than twenty two. But now you know, so

493
00:25:59,520 --> 00:26:01,560
Speaker 6: you're comfort with that, or maybe there's a there's a

494
00:26:01,600 --> 00:26:03,720
Speaker 6: living benefit rider that you're not even using on it,

495
00:26:03,760 --> 00:26:06,280
Speaker 6: paying for guarantees you no longer need because your portfolio

496
00:26:06,320 --> 00:26:08,720
Speaker 6: has grown so much. So you know, here's what this

497
00:26:08,800 --> 00:26:10,600
Speaker 6: could look like. There might be a three hundred thousand

498
00:26:10,600 --> 00:26:12,800
Speaker 6: dollars annuity out there. You're paying close to three percent

499
00:26:12,840 --> 00:26:14,320
Speaker 6: and fees on it, whether you know it or not.

500
00:26:14,560 --> 00:26:16,720
Speaker 6: Haven't added money in years. Your plan shows you really

501
00:26:16,760 --> 00:26:20,080
Speaker 6: didn't need the income rider anyway. And I would love

502
00:26:20,119 --> 00:26:22,040
Speaker 6: to hear the first insurance companies say that one of

503
00:26:22,040 --> 00:26:23,680
Speaker 6: their one of their annuities went to zero and the

504
00:26:23,720 --> 00:26:25,680
Speaker 6: annuity rider kicked in. I don't think those that ever

505
00:26:25,720 --> 00:26:28,800
Speaker 6: happens mathematically anyway. Good advisor is going to walk you

506
00:26:28,840 --> 00:26:31,639
Speaker 6: through a tax efficient exit strategy which does not include

507
00:26:31,680 --> 00:26:34,439
Speaker 6: let's dump all this, pay the taxes and just eat that,

508
00:26:34,920 --> 00:26:37,040
Speaker 6: but it can mean over time it might be a

509
00:26:37,480 --> 00:26:39,280
Speaker 6: better way to kind of liquidate out of things to

510
00:26:39,320 --> 00:26:42,480
Speaker 6: reduce those fees. Simplify your retirement income situation too.

511
00:26:43,320 --> 00:26:46,359
Speaker 1: Here's the all Worth advice. What was once a smart

512
00:26:46,400 --> 00:26:50,400
Speaker 1: investment might not be smart right now or smart forever.

513
00:26:50,960 --> 00:26:53,439
Speaker 1: The advice here is to review all of your tools

514
00:26:53,440 --> 00:26:56,280
Speaker 1: in your toolbox regularly with a fiduciary advisor to make

515
00:26:56,320 --> 00:27:00,240
Speaker 1: sure everything you've got still fits your current needs and

516
00:27:00,320 --> 00:27:03,960
Speaker 1: goals of your financial plan. Next, we'll tackle your real

517
00:27:04,000 --> 00:27:08,320
Speaker 1: life money questions, from structured products to diversification myth and

518
00:27:08,480 --> 00:27:11,879
Speaker 1: why a set it and forget it approach might be

519
00:27:11,960 --> 00:27:15,280
Speaker 1: doing your portfolio more harm than good. You're listening to

520
00:27:15,280 --> 00:27:17,760
Speaker 1: Simply Money presented by all Worth Financial on fifty five

521
00:27:17,840 --> 00:27:25,800
Speaker 1: KRC the talk station. You're listening to Simply Money presided

522
00:27:25,800 --> 00:27:29,120
Speaker 1: by all Worth Financial on Bob Sponsller along with Brian James.

523
00:27:29,640 --> 00:27:31,639
Speaker 1: Do you have a financial question you'd like for us

524
00:27:31,640 --> 00:27:33,920
Speaker 1: to answer. There's a red button you can click while

525
00:27:33,960 --> 00:27:36,399
Speaker 1: you're listening to the show. If you're listening on the

526
00:27:36,440 --> 00:27:40,240
Speaker 1: iHeart app, simply record your question and of course it

527
00:27:40,280 --> 00:27:43,600
Speaker 1: will come straight to us. All right. Brian Mark in

528
00:27:43,720 --> 00:27:46,320
Speaker 1: Blue Ash leads us off tonight. He says, our tax

529
00:27:46,359 --> 00:27:49,920
Speaker 1: bill keeps creeping up even though our income hasn't changed much.

530
00:27:50,400 --> 00:27:54,720
Speaker 1: How do you figure out whether it's our investments, our distributions,

531
00:27:54,760 --> 00:27:59,560
Speaker 1: something else causing it. What's causing the damage here, Brian, Well, I've.

532
00:27:59,440 --> 00:28:01,119
Speaker 6: Ben sound a little under the hood, it seems like,

533
00:28:01,160 --> 00:28:05,520
Speaker 6: and find that squeaky part. So here's some here's three

534
00:28:05,560 --> 00:28:07,679
Speaker 6: things you should be looking for to see if this

535
00:28:07,720 --> 00:28:09,720
Speaker 6: is where it's coming from. So, perhaps you've got some

536
00:28:09,760 --> 00:28:13,080
Speaker 6: portfolio turnover going on. If you have actively managed mutual

537
00:28:13,080 --> 00:28:16,320
Speaker 6: funds in there, those very frequently distribute capital gains right

538
00:28:16,359 --> 00:28:18,359
Speaker 6: around this time of year. This is literally happening now.

539
00:28:18,400 --> 00:28:21,080
Speaker 6: It's almost always a December type of arrangement because mutual

540
00:28:21,080 --> 00:28:24,320
Speaker 6: funds are required by law to distribute any capital gains

541
00:28:24,320 --> 00:28:27,119
Speaker 6: they've generated during the year. And this may happen whether

542
00:28:27,240 --> 00:28:31,000
Speaker 6: you yourself sold shares of the fund. There are holdings inside

543
00:28:31,040 --> 00:28:32,840
Speaker 6: the fund that we're talking about. So look back at

544
00:28:32,920 --> 00:28:35,520
Speaker 6: last year's ten ninety nine DIIV. It's probably in the

545
00:28:35,560 --> 00:28:37,399
Speaker 6: stack of papers that you gave to your accountant or

546
00:28:37,480 --> 00:28:40,080
Speaker 6: uploaded to TurboTax or whatever. Without looking at the details

547
00:28:40,320 --> 00:28:42,720
Speaker 6: ten ninety nine di IV. Focus on box two A.

548
00:28:42,920 --> 00:28:46,080
Speaker 6: That's your capital gain distributions. If that line is rising

549
00:28:46,160 --> 00:28:48,760
Speaker 6: over the years, then now you know it's your portfolio,

550
00:28:48,920 --> 00:28:52,040
Speaker 6: not your spending that's driving the tax bill. So also

551
00:28:52,320 --> 00:28:55,280
Speaker 6: embedded gains can become realized too. So if you trim

552
00:28:55,320 --> 00:28:58,160
Speaker 6: positions or rebalanced even small trades, right, maybe you pulled

553
00:28:58,160 --> 00:29:00,160
Speaker 6: the trigger when the market got a little crazy back

554
00:29:00,160 --> 00:29:02,800
Speaker 6: in April when we panicked about tariffs briefly, and you

555
00:29:02,880 --> 00:29:05,400
Speaker 6: might have rebalanced at that point. That's not a bad thing,

556
00:29:05,440 --> 00:29:09,040
Speaker 6: but that activity probably resulted in some gains. So for

557
00:29:09,080 --> 00:29:10,600
Speaker 6: that one, you're gonna want to look at scheduled D

558
00:29:10,760 --> 00:29:13,680
Speaker 6: year over year are your realized gains? This is where

559
00:29:13,720 --> 00:29:16,000
Speaker 6: you are selling, not where it's been passed through to you.

560
00:29:16,000 --> 00:29:19,160
Speaker 6: You proactively sold something that's scheduled D. And another one

561
00:29:19,240 --> 00:29:21,880
Speaker 6: taxable income from distribution. So if you've got bond funds,

562
00:29:21,960 --> 00:29:24,720
Speaker 6: rates and other high yielding equity funds out there, those

563
00:29:24,760 --> 00:29:27,880
Speaker 6: can increase ordinary income exposure as well. So again, go

564
00:29:28,080 --> 00:29:30,360
Speaker 6: through your tax reports that are coming off of your investment,

565
00:29:30,760 --> 00:29:33,400
Speaker 6: your investment statements, and figure out where and what type

566
00:29:33,400 --> 00:29:34,440
Speaker 6: of income is coming.

567
00:29:34,280 --> 00:29:36,080
Speaker 5: Through Rachel Westchester.

568
00:29:36,360 --> 00:29:39,040
Speaker 6: She says they're debating downsizing, but she's just not ready

569
00:29:39,080 --> 00:29:41,640
Speaker 6: emotionally to leave that house, Bob. So she wants to

570
00:29:41,640 --> 00:29:44,080
Speaker 6: know how how have other people made financial decisions when

571
00:29:44,120 --> 00:29:46,000
Speaker 6: the math and the heart disagree.

572
00:29:46,080 --> 00:29:50,040
Speaker 1: Rachel's a bit of a poet, well, wonderful question. Rachel

573
00:29:50,120 --> 00:29:53,800
Speaker 1: and Brian feel free to weigh in here, but here's

574
00:29:53,800 --> 00:29:57,000
Speaker 1: my take on first, and I always tell people, especially

575
00:29:57,000 --> 00:30:00,880
Speaker 1: in this situation, know your why. Here's what I mean.

576
00:30:01,000 --> 00:30:03,920
Speaker 1: What are you trying to accomplish. Are you really hoping

577
00:30:03,960 --> 00:30:06,280
Speaker 1: to come out of this with pulling some equity out

578
00:30:06,280 --> 00:30:08,680
Speaker 1: of the house you're going to sell and result in

579
00:30:08,800 --> 00:30:11,920
Speaker 1: living in a lower cost house that frees up some

580
00:30:11,960 --> 00:30:15,240
Speaker 1: money for investment, or are you just simply looking to

581
00:30:15,240 --> 00:30:18,160
Speaker 1: get into a newer home. Know your why? And here's

582
00:30:18,200 --> 00:30:20,560
Speaker 1: why I bring this up. A lot of times people

583
00:30:20,680 --> 00:30:24,000
Speaker 1: think they're going to quote unquote downsize, move into a

584
00:30:24,080 --> 00:30:28,080
Speaker 1: smaller home, smaller footprint, but when you factor all the

585
00:30:28,120 --> 00:30:33,080
Speaker 1: costs in, I rarely see people actually walk away spending

586
00:30:33,160 --> 00:30:37,160
Speaker 1: less money in this situation. So Rachel, I'd say sit

587
00:30:37,200 --> 00:30:39,560
Speaker 1: down with your husband and really talk about what we're

588
00:30:39,640 --> 00:30:43,000
Speaker 1: really trying to accomplish here, and make sure you price

589
00:30:43,160 --> 00:30:46,000
Speaker 1: out ahead of time where you think you're going to

590
00:30:46,080 --> 00:30:48,720
Speaker 1: go or want to go in terms of a living situation,

591
00:30:48,760 --> 00:30:51,400
Speaker 1: and what that's really going to cost, and make sure

592
00:30:51,440 --> 00:30:53,960
Speaker 1: you're not surprised on the back end, because at the

593
00:30:54,040 --> 00:30:56,320
Speaker 1: end of the day, especially if you love the home

594
00:30:56,720 --> 00:30:58,760
Speaker 1: and you're emotionally tied to it, and that's where a

595
00:30:58,800 --> 00:31:01,400
Speaker 1: lot of memories have been made, and that's all great

596
00:31:01,520 --> 00:31:04,240
Speaker 1: stuff that we don't just want to sweep under the

597
00:31:04,320 --> 00:31:07,800
Speaker 1: rug and forget about. Make sure there's actually a benefit

598
00:31:07,880 --> 00:31:10,840
Speaker 1: coming out of making this move if you're gonna give

599
00:31:10,920 --> 00:31:14,239
Speaker 1: up some things emotionally in terms of memories. Hope that

600
00:31:14,280 --> 00:31:16,520
Speaker 1: makes sense, Brian. Anything to add there, because I'm sure

601
00:31:16,560 --> 00:31:18,680
Speaker 1: this comes up for you know, for you with your

602
00:31:18,720 --> 00:31:19,480
Speaker 1: clients as well.

603
00:31:19,880 --> 00:31:21,200
Speaker 6: You know, but I don't know if you remember the

604
00:31:21,520 --> 00:31:24,840
Speaker 6: old movie City Slickers with Billy Crystal, and I remember

605
00:31:24,920 --> 00:31:26,920
Speaker 6: one of the big points of that was the big

606
00:31:26,960 --> 00:31:29,400
Speaker 6: conclusion from it was everybody needs to find that one

607
00:31:29,480 --> 00:31:31,520
Speaker 6: thing that matters most of them. So you figure out

608
00:31:31,520 --> 00:31:33,640
Speaker 6: what it is, and then all of your other decisions

609
00:31:33,640 --> 00:31:36,280
Speaker 6: should somehow support that one thing what is most important

610
00:31:36,280 --> 00:31:36,440
Speaker 6: to me.

611
00:31:36,560 --> 00:31:38,920
Speaker 5: I think that's what you just said, saying yeah, it's.

612
00:31:39,120 --> 00:31:41,600
Speaker 1: It's another way of saying no, you're why, you know,

613
00:31:41,640 --> 00:31:43,800
Speaker 1: what are we trying to accomplish? I love that, Brian.

614
00:31:44,240 --> 00:31:46,920
Speaker 1: All right. Moving on to Tom in Montgomery, he says,

615
00:31:46,960 --> 00:31:50,600
Speaker 1: I'm hearing a lot about structured products that quote unquote

616
00:31:50,600 --> 00:31:54,200
Speaker 1: buffer downside risk. How do you figure out whether the

617
00:31:54,240 --> 00:31:58,280
Speaker 1: partition is worth giving up upside in the way of

618
00:31:58,440 --> 00:31:59,920
Speaker 1: capped caped returns.

619
00:32:00,280 --> 00:32:02,720
Speaker 6: Yeah, well, like anything, like any of these financial tools,

620
00:32:02,760 --> 00:32:04,720
Speaker 6: they've got their place, but sometimes they can be very

621
00:32:04,840 --> 00:32:06,880
Speaker 6: very specific. None of these things is a panacea that

622
00:32:06,920 --> 00:32:09,959
Speaker 6: everybody has to own. So the first off, a buffer

623
00:32:10,040 --> 00:32:13,240
Speaker 6: is never ever free. Anything that quote unquote absorbs the

624
00:32:13,280 --> 00:32:16,080
Speaker 6: first ten to twenty percent of losses has to mathematically

625
00:32:16,080 --> 00:32:19,520
Speaker 6: give up something, which is usually participation in strong upmarkets.

626
00:32:19,520 --> 00:32:21,880
Speaker 6: So the real question is whether the investor is being

627
00:32:21,880 --> 00:32:24,640
Speaker 6: fairly compensated for having sacrificed that in the first place.

628
00:32:24,880 --> 00:32:26,000
Speaker 6: So the first thing you want to do when you're

629
00:32:26,040 --> 00:32:27,840
Speaker 6: looking at these things is figure out what the buffer

630
00:32:27,880 --> 00:32:29,480
Speaker 6: size is. For example, is it going to cover the

631
00:32:29,480 --> 00:32:31,760
Speaker 6: first fifteen percent of losses, twenty percent, whatever?

632
00:32:32,080 --> 00:32:33,360
Speaker 5: What is the outcome period?

633
00:32:33,400 --> 00:32:35,480
Speaker 6: You have to understand that, right, these are not things

634
00:32:35,520 --> 00:32:37,959
Speaker 6: you should buy and hold and just permanently sit on.

635
00:32:38,360 --> 00:32:40,239
Speaker 5: You need to pay attention. You may not trade them.

636
00:32:40,280 --> 00:32:42,560
Speaker 6: That's not what I'm saying either, But these aren't things

637
00:32:42,560 --> 00:32:44,720
Speaker 6: that you just throw in there and sit on it

638
00:32:44,720 --> 00:32:46,760
Speaker 6: for twenty years. So that might be a twelve to

639
00:32:46,800 --> 00:32:49,479
Speaker 6: twenty four month period or possibly something else. What index

640
00:32:49,560 --> 00:32:51,600
Speaker 6: is it tracking s? And P five hundred is obviously

641
00:32:51,680 --> 00:32:53,600
Speaker 6: by far the most common. There's also the wrestle two

642
00:32:53,640 --> 00:32:56,320
Speaker 6: thousand and some of the larger broader market indexes too.

643
00:32:56,600 --> 00:32:59,200
Speaker 6: And then compare that cap to history. So let's say

644
00:32:59,200 --> 00:33:01,000
Speaker 6: the cap is a lie seven percent for the year.

645
00:33:01,040 --> 00:33:03,280
Speaker 6: We'll compare that to long term returns s and p's

646
00:33:03,320 --> 00:33:05,600
Speaker 6: average annual gain is about ten percent, But half of

647
00:33:05,640 --> 00:33:08,920
Speaker 6: the market's wealth creation historically BOB comes in that handful

648
00:33:08,960 --> 00:33:11,160
Speaker 6: of years that return fifteen percent of more. If you

649
00:33:11,200 --> 00:33:12,880
Speaker 6: have a low cap, that means you're giving up a

650
00:33:12,920 --> 00:33:15,840
Speaker 6: disproportionate share of the good years to protect against only

651
00:33:15,880 --> 00:33:19,840
Speaker 6: part of the bad ones. So I think these are valuable.

652
00:33:19,840 --> 00:33:21,760
Speaker 6: They do serve a purpose. But at the same time,

653
00:33:21,800 --> 00:33:24,480
Speaker 6: you are sacrificing something. If you are someone who just

654
00:33:24,520 --> 00:33:26,920
Speaker 6: gets annoyed and grumbles and maybe drops a bomb on

655
00:33:27,240 --> 00:33:29,600
Speaker 6: every now and then when you see that the financial headlines,

656
00:33:29,640 --> 00:33:31,520
Speaker 6: but you don't panic and you don't act on it.

657
00:33:31,720 --> 00:33:33,880
Speaker 6: Buffer may not be necessary. And maybe you know three

658
00:33:33,920 --> 00:33:36,840
Speaker 6: security blankets when you only needed one. So just to

659
00:33:36,920 --> 00:33:39,040
Speaker 6: understand market history, and I think you might you might

660
00:33:39,080 --> 00:33:40,520
Speaker 6: realize you don't need these kinds of things.

661
00:33:41,280 --> 00:33:44,320
Speaker 1: Well, and this is where it makes sense at least

662
00:33:44,360 --> 00:33:47,520
Speaker 1: to me to compare a buffer strategy with maybe just

663
00:33:47,640 --> 00:33:49,160
Speaker 1: what we talk about on the show all the time,

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00:33:49,240 --> 00:33:51,480
Speaker 1: a bucket strategy. You know, make sure you've got some

665
00:33:51,640 --> 00:33:55,240
Speaker 1: safe assets that you can tap into even when we

666
00:33:55,320 --> 00:33:58,200
Speaker 1: get a recession or a down market, because having short

667
00:33:58,280 --> 00:34:01,920
Speaker 1: term liquidity will give people the emotional and the economic

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00:34:02,040 --> 00:34:05,280
Speaker 1: peace of mind to hopefully ride this out and participate

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00:34:05,320 --> 00:34:08,920
Speaker 1: in those upside gains that you correctly pointed out. You know,

670
00:34:08,960 --> 00:34:11,560
Speaker 1: the market doesn't work in a linear fashion. We don't

671
00:34:11,560 --> 00:34:13,480
Speaker 1: want to give up those huge up years.

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00:34:14,000 --> 00:34:14,120
Speaker 4: Uh.

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00:34:14,320 --> 00:34:16,879
Speaker 1: And that's why you know, different strategies are out there

674
00:34:16,920 --> 00:34:19,800
Speaker 1: to look at to protect yourself in the short term.

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00:34:20,200 --> 00:34:23,480
Speaker 1: All Right, there's some surprising data showing more kids and

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00:34:23,520 --> 00:34:27,440
Speaker 1: young adults diving into investing and spending early. Are their

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00:34:27,520 --> 00:34:30,800
Speaker 1: parents applauding them or are they worried? We'll talk about

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00:34:30,800 --> 00:34:33,040
Speaker 1: what We'll talk about that next. You're listening to Simply

679
00:34:33,080 --> 00:34:35,960
Speaker 1: Money presented by all Worth Financial on fifty five KRC,

680
00:34:36,360 --> 00:34:43,680
Speaker 1: the talk station. You're listening to Simply Money presented by

681
00:34:43,760 --> 00:34:47,240
Speaker 1: all Worth Financial on Bob Sponsorller along with Brian James.

682
00:34:47,920 --> 00:34:52,000
Speaker 1: Seventy million dollars. That's how much money kids dumped into

683
00:34:52,000 --> 00:34:55,040
Speaker 1: the market in twenty twenty five, using an app that

684
00:34:55,239 --> 00:34:57,960
Speaker 1: families are now starting to use to help get their

685
00:34:58,080 --> 00:35:03,200
Speaker 1: kids started investing. Brian, I love this talk about this

686
00:35:03,280 --> 00:35:05,919
Speaker 1: new app that I guess is becoming a thing out there.

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00:35:06,480 --> 00:35:09,000
Speaker 6: Well, this is just heartwarming, isn't it, Bob. It's the

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00:35:09,000 --> 00:35:12,000
Speaker 6: holiday season. We're talking about the magic of Christmas and

689
00:35:12,160 --> 00:35:15,160
Speaker 6: children's shiny happy faces as they talk to Santa Claus

690
00:35:16,000 --> 00:35:19,040
Speaker 6: while they're investing on their phone apps online, apparently to

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00:35:19,040 --> 00:35:20,800
Speaker 6: the tune of seventy million dollars.

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00:35:21,160 --> 00:35:22,840
Speaker 5: Anyway, So, according to the green.

693
00:35:22,680 --> 00:35:26,000
Speaker 6: Light Family Money app, Kids and Teens updated seventeen also

694
00:35:26,120 --> 00:35:30,160
Speaker 6: doubled their recurring automated investments. Now that I like because

695
00:35:30,160 --> 00:35:31,880
Speaker 6: it's not about taking a tiny pile of money one

696
00:35:31,880 --> 00:35:33,800
Speaker 6: time and throwing it into something and hoping it becomes

697
00:35:33,840 --> 00:35:37,520
Speaker 6: a bazillion dollars. So anyway, they increase their average by

698
00:35:37,560 --> 00:35:40,439
Speaker 6: trade from just under fifty bucks or to just under

699
00:35:40,480 --> 00:35:43,000
Speaker 6: fifty bucks from just under forty bucks in twenty twenty four.

700
00:35:43,080 --> 00:35:47,240
Speaker 6: So more repeated investments, and we're increasing the amount average

701
00:35:47,320 --> 00:35:50,839
Speaker 6: age among these green Light youth investors. It's twelve years old, Bob,

702
00:35:50,880 --> 00:35:52,600
Speaker 6: So these kids are getting started early. I don't think

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00:35:52,600 --> 00:35:53,279
Speaker 6: that's a bad thing at all.

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00:35:53,360 --> 00:35:58,600
Speaker 1: Hey, getting twelve year olds to harness the concept of

705
00:35:58,680 --> 00:36:01,800
Speaker 1: dollar cost averaging is great. I think that that is

706
00:36:01,880 --> 00:36:04,200
Speaker 1: a good indicator of where we might be headed into

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00:36:04,200 --> 00:36:07,600
Speaker 1: the future, because someone has to pay for my social

708
00:36:07,600 --> 00:36:09,879
Speaker 1: Security down the road. So I'm glad to see these

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00:36:09,920 --> 00:36:12,560
Speaker 1: twelve year olds are starting to build. Well what are

710
00:36:12,560 --> 00:36:14,640
Speaker 1: these kids investing in, Brian.

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00:36:15,040 --> 00:36:17,680
Speaker 6: Well, just like any other investor, kids like to pour

712
00:36:17,719 --> 00:36:19,640
Speaker 6: money into what they know and love the best, which is,

713
00:36:19,640 --> 00:36:22,759
Speaker 6: of course technology. That's been the shiniest object in the

714
00:36:22,840 --> 00:36:26,280
Speaker 6: room for decades now. So top individual stockholdings, Bob, among

715
00:36:26,320 --> 00:36:30,600
Speaker 6: these kids are AI chip makers and Nvidia iPhone you know,

716
00:36:30,680 --> 00:36:34,160
Speaker 6: of course that's Apple, e commerce mammoth, Amazon, and electric

717
00:36:34,280 --> 00:36:37,960
Speaker 6: vehicle maker Tesla. Again according to green Light, so they

718
00:36:37,960 --> 00:36:40,160
Speaker 6: also heavily invested in the S and P five hundred.

719
00:36:40,160 --> 00:36:42,000
Speaker 6: So somebody's behind them and going, yeah, this is cool,

720
00:36:42,000 --> 00:36:43,880
Speaker 6: this is fun stuff, but let's at least build a

721
00:36:43,960 --> 00:36:46,480
Speaker 6: core of it. And as we've known, and we talk

722
00:36:46,520 --> 00:36:49,319
Speaker 6: about ad nauseum, it's about forty percent in technology is

723
00:36:49,320 --> 00:36:52,520
Speaker 6: the S and P five hundred these days. So Bitcoin, of course,

724
00:36:52,560 --> 00:36:55,160
Speaker 6: no shocker, crypto got some love this year from the teenagers.

725
00:36:55,640 --> 00:36:57,800
Speaker 6: There was a bitcoin ETF that jumped to number twelve

726
00:36:57,880 --> 00:37:00,520
Speaker 6: on the list of holdings from twenty one according to

727
00:37:00,600 --> 00:37:02,600
Speaker 6: what Greenlight has in their system.

728
00:37:03,320 --> 00:37:05,839
Speaker 1: Here's what I love about this story. How are these

729
00:37:05,880 --> 00:37:09,520
Speaker 1: families and kids actually using this money? The top five

730
00:37:09,640 --> 00:37:14,800
Speaker 1: reasons kids saved in twenty twenty five a car, college education,

731
00:37:15,520 --> 00:37:19,360
Speaker 1: a computer, just saving and accumulating the money, and of

732
00:37:19,440 --> 00:37:23,120
Speaker 1: course a bicycle. Brian. These kids are actually being told

733
00:37:23,200 --> 00:37:25,120
Speaker 1: by their parents, Hey, if you want to, if you

734
00:37:25,160 --> 00:37:28,680
Speaker 1: want a bike, go out and save some money, build

735
00:37:28,719 --> 00:37:31,640
Speaker 1: it up in an investment account, and then watch the

736
00:37:31,680 --> 00:37:35,239
Speaker 1: money accumulate and experience what it's like to actually go

737
00:37:35,360 --> 00:37:38,200
Speaker 1: pay for your bike, rather than just having mom and

738
00:37:38,280 --> 00:37:40,440
Speaker 1: dad go out and get one for you. I think

739
00:37:40,480 --> 00:37:44,000
Speaker 1: this is all healthy stuff. It's just an evolution from

740
00:37:44,040 --> 00:37:47,600
Speaker 1: the old past book savings account that I experienced in

741
00:37:47,880 --> 00:37:51,480
Speaker 1: the village of Green Hills, walking up to Eagle Savings

742
00:37:51,480 --> 00:37:54,440
Speaker 1: and Loan and just throwing my paper route money into account.

743
00:37:54,719 --> 00:37:58,160
Speaker 1: Now we're using apps, we're buying crypto, we're buying s

744
00:37:58,200 --> 00:38:02,319
Speaker 1: and p ETFs. The whole thing's just evolving. I think

745
00:38:02,320 --> 00:38:03,040
Speaker 1: it's good stuff.

746
00:38:03,400 --> 00:38:05,160
Speaker 6: Yeah, I agree too. And let me throw this out

747
00:38:05,200 --> 00:38:06,719
Speaker 6: there too. It's the end of the year. People are

748
00:38:06,760 --> 00:38:09,440
Speaker 6: looking for gift ideas. Sometimes high school and college kids

749
00:38:09,480 --> 00:38:11,200
Speaker 6: can get tough to buy for because they kind of

750
00:38:11,200 --> 00:38:13,319
Speaker 6: already have everything and it's just not as easy as

751
00:38:13,320 --> 00:38:15,239
Speaker 6: it used to be. Well, and I'm bringing this up

752
00:38:15,239 --> 00:38:16,880
Speaker 6: because I frequently get the question of how can I

753
00:38:16,880 --> 00:38:19,040
Speaker 6: fund a roth ira for my kid? Well, your kid

754
00:38:19,080 --> 00:38:20,759
Speaker 6: has to have earned income. So if they had a

755
00:38:20,800 --> 00:38:22,919
Speaker 6: summer job, earned a few three thousand dollars, yeah, maybe

756
00:38:22,920 --> 00:38:23,880
Speaker 6: that's the Christmas gift.

757
00:38:24,040 --> 00:38:24,359
Speaker 5: Give them.

758
00:38:24,520 --> 00:38:26,560
Speaker 6: Give them a three thousand dollars in a roth ira,

759
00:38:26,719 --> 00:38:29,359
Speaker 6: help them and you watch them do this, help them

760
00:38:29,360 --> 00:38:31,680
Speaker 6: place the buy order in some kind of index fund

761
00:38:31,719 --> 00:38:34,040
Speaker 6: or something like that. Get them started. But again, as

762
00:38:34,040 --> 00:38:35,799
Speaker 6: long as they have earned income, yes, you can do

763
00:38:35,840 --> 00:38:36,759
Speaker 6: a roth ira.

764
00:38:36,600 --> 00:38:40,360
Speaker 1: For Thanks for listening tonight. You've been listening to Simply Money,

765
00:38:40,360 --> 00:38:43,480
Speaker 1: presented by all Worth Financial on fifty five KRC, the

766
00:38:43,840 --> 00:38:44,400
Speaker 1: talk station