1 00:00:05,760 --> 00:00:09,680 Speaker 1: Tonight we go inside the mind of the millionaire. This 2 00:00:09,800 --> 00:00:12,239 Speaker 1: is simply Money presented by all Worth Financial on Bob 3 00:00:12,320 --> 00:00:16,000 Speaker 1: Spondseller along with Brian James. Oh it's Friday, so we 4 00:00:16,040 --> 00:00:19,440 Speaker 1: want to do something a little bit different. Let's talk mindset, 5 00:00:19,640 --> 00:00:22,680 Speaker 1: not just the markets and taxes and stocks and all 6 00:00:22,720 --> 00:00:26,240 Speaker 1: that stuff. Because if there's one thing we've noticed, Brian 7 00:00:26,280 --> 00:00:30,720 Speaker 1: and I both from decades of working with financially successful families, 8 00:00:30,760 --> 00:00:35,080 Speaker 1: it's this wealth. It isn't just about what you invest in, 9 00:00:35,479 --> 00:00:38,720 Speaker 1: the tax strategies you deploy all that. It's about how 10 00:00:38,800 --> 00:00:41,800 Speaker 1: you think in general about money. And one of the 11 00:00:42,000 --> 00:00:47,639 Speaker 1: biggest mind shifts mindset shifts, sorry, that we see between 12 00:00:47,840 --> 00:00:52,159 Speaker 1: successful families in those that aren't so successful, is how 13 00:00:52,159 --> 00:00:54,960 Speaker 1: they approach the entire topic of risk. That's what we 14 00:00:55,000 --> 00:00:57,120 Speaker 1: want to get into tonight. Brian, Yeah, I think. 15 00:00:57,200 --> 00:00:59,040 Speaker 2: I think one of the big debates that these folks 16 00:00:59,040 --> 00:01:01,880 Speaker 2: have is fear strategy. So let's let's serve as an 17 00:01:01,880 --> 00:01:04,880 Speaker 2: example of the typical investor when when the market dips, 18 00:01:04,920 --> 00:01:07,319 Speaker 2: that immediate reaction, like any of us, is fear right. 19 00:01:07,400 --> 00:01:08,080 Speaker 3: Is this the big one? 20 00:01:08,120 --> 00:01:09,640 Speaker 2: Is this going to be the big one that comes 21 00:01:09,680 --> 00:01:11,720 Speaker 2: to get us? Even though I know in the past, 22 00:01:12,040 --> 00:01:13,800 Speaker 2: you know, the market swings, it goes down, it comes 23 00:01:13,840 --> 00:01:15,720 Speaker 2: back up again, but this could be the big one. 24 00:01:16,040 --> 00:01:18,639 Speaker 2: So that question becomes how much could I possibly lose? 25 00:01:18,920 --> 00:01:21,120 Speaker 2: That is a natural instinct, but it leads to emotional 26 00:01:21,160 --> 00:01:24,440 Speaker 2: decisions like panic selling, running to cash, or chasing the 27 00:01:24,520 --> 00:01:25,480 Speaker 2: latest safe thing. 28 00:01:26,120 --> 00:01:26,280 Speaker 1: You know. 29 00:01:26,360 --> 00:01:29,000 Speaker 2: Right now, gold is in the headlines and occasionally getting 30 00:01:29,040 --> 00:01:30,040 Speaker 2: questions should we buy gold? 31 00:01:30,040 --> 00:01:30,880 Speaker 3: Should we buy gold? 32 00:01:31,080 --> 00:01:33,200 Speaker 2: And my answer to that is, for what what are 33 00:01:33,240 --> 00:01:35,920 Speaker 2: we protecting from? We're guessing that the market might come down. 34 00:01:35,920 --> 00:01:37,520 Speaker 2: We don't need to guess at that. I can guarantee 35 00:01:37,520 --> 00:01:40,520 Speaker 2: that it is coming down at some point, probably honestly, maybe. 36 00:01:40,319 --> 00:01:42,160 Speaker 3: Overdue for that. But that's part of that. That's just 37 00:01:42,200 --> 00:01:43,160 Speaker 3: part of how it works. 38 00:01:42,920 --> 00:01:45,679 Speaker 2: And there's plenty of history to define what that looks like. 39 00:01:46,160 --> 00:01:47,919 Speaker 2: But the problem with that is that kind of thinking 40 00:01:47,960 --> 00:01:50,400 Speaker 2: can kill long term performance because if we have stepped 41 00:01:50,440 --> 00:01:53,480 Speaker 2: outside just to protect ourselves, even whether it's out of 42 00:01:53,520 --> 00:01:55,880 Speaker 2: fear or greed, we're still trying to time the market 43 00:01:56,160 --> 00:01:58,920 Speaker 2: and there is just there's just no evidence that anybody 44 00:01:58,920 --> 00:02:00,880 Speaker 2: can do that consistently in the to make it worthwhile. 45 00:02:01,360 --> 00:02:03,680 Speaker 1: Brian, don't you think this all comes down at the 46 00:02:03,760 --> 00:02:06,120 Speaker 1: end of the day most of the time to people 47 00:02:06,160 --> 00:02:11,600 Speaker 1: that truly do have a comprehensive financial plan versus just 48 00:02:11,639 --> 00:02:14,080 Speaker 1: a bucket of investments. Because the people that have a 49 00:02:14,120 --> 00:02:18,680 Speaker 1: plan and they have you know, tested, stress tested their 50 00:02:18,840 --> 00:02:22,760 Speaker 1: entire financial plan for all these you know, hypothetical or 51 00:02:22,760 --> 00:02:26,600 Speaker 1: even historical shocks to the system, those are the people 52 00:02:26,639 --> 00:02:30,240 Speaker 1: that walk out feeling, you know, nobody likes when the 53 00:02:30,280 --> 00:02:32,919 Speaker 1: market goes down, but at least they aren't making these 54 00:02:32,960 --> 00:02:37,440 Speaker 1: emotional decisions versus somebody that just has a pile of investments. 55 00:02:37,720 --> 00:02:40,720 Speaker 1: They have no idea how it all coordinates together, and 56 00:02:40,760 --> 00:02:44,639 Speaker 1: they're just they're literally flying blind when some of these 57 00:02:44,639 --> 00:02:47,040 Speaker 1: news headlines hits, and that's where we get into some 58 00:02:47,080 --> 00:02:49,520 Speaker 1: of these poor decisions. Would you agree with that it 59 00:02:49,600 --> 00:02:53,280 Speaker 1: kind of comes down to plan or no plan. Good 60 00:02:53,320 --> 00:02:56,240 Speaker 1: fiduciary advisor versus maybe not so much. 61 00:02:58,200 --> 00:02:59,639 Speaker 3: Yeah, No, I would definitely agree with that. 62 00:03:00,040 --> 00:03:02,560 Speaker 2: Kind of like having an engine but no map for 63 00:03:02,800 --> 00:03:04,640 Speaker 2: where you're going to take your car that doesn't exist. 64 00:03:04,720 --> 00:03:07,480 Speaker 2: So a pile of investments is not a financial plan, 65 00:03:07,520 --> 00:03:09,280 Speaker 2: and it can be a significant pile, but if you 66 00:03:09,320 --> 00:03:11,800 Speaker 2: don't know what you're trying to accomplish with it. You're 67 00:03:11,840 --> 00:03:14,440 Speaker 2: going to have a lot of consternation when the market 68 00:03:14,480 --> 00:03:16,959 Speaker 2: does whatever it does, because it tends to not care 69 00:03:17,000 --> 00:03:19,880 Speaker 2: what our opinions are. So let's go through an example here. 70 00:03:20,040 --> 00:03:22,480 Speaker 3: Let's take Jane. She's a fifty eight year old executive. 71 00:03:22,680 --> 00:03:24,400 Speaker 2: She got two and a half million dollars and she 72 00:03:24,520 --> 00:03:27,120 Speaker 2: just watched it drop by ten percent during a market correction. 73 00:03:27,160 --> 00:03:29,840 Speaker 2: That's a quarter million dollars lots of money, right, So 74 00:03:29,960 --> 00:03:32,480 Speaker 2: that's not it. That doesn't feel right, that shouldn't be happening. 75 00:03:32,520 --> 00:03:34,840 Speaker 2: I lost two hundred and fifty thousand dollars. That's not 76 00:03:34,880 --> 00:03:37,280 Speaker 2: how things should work. So she panics, moves everything to 77 00:03:37,320 --> 00:03:40,720 Speaker 2: a money market account, missus that twelve percent rebound that 78 00:03:40,760 --> 00:03:43,880 Speaker 2: comes six weeks later, So that one emotional decision cost 79 00:03:43,920 --> 00:03:46,440 Speaker 2: her about three hundred thousand dollars in missed gains, not 80 00:03:46,520 --> 00:03:47,880 Speaker 2: to mention she's going to have to pay a bunch 81 00:03:47,920 --> 00:03:50,960 Speaker 2: of taxes, because she felt it was more important to 82 00:03:51,440 --> 00:03:55,040 Speaker 2: protect from any further downside than to pay attention to 83 00:03:55,080 --> 00:03:57,360 Speaker 2: exactly what the downstream effects are going to be of 84 00:03:57,400 --> 00:03:58,720 Speaker 2: such a rash, quick decision. 85 00:03:59,320 --> 00:04:01,720 Speaker 1: And Brian, this, this really isn't a hypothetical I mean, 86 00:04:02,040 --> 00:04:04,760 Speaker 1: as you share these numbers in this scenario, this is 87 00:04:04,880 --> 00:04:09,520 Speaker 1: literally what happened to virtually everybody last April when the 88 00:04:09,920 --> 00:04:13,000 Speaker 1: big tear, when the tariffs came out. Yeah, it was 89 00:04:13,000 --> 00:04:15,320 Speaker 1: worse than ten percent. You know, it all comes down 90 00:04:15,320 --> 00:04:19,039 Speaker 1: to your allocation. So let's contrast this with what people 91 00:04:19,240 --> 00:04:22,800 Speaker 1: should be doing. And it really, Brian, it has no 92 00:04:23,200 --> 00:04:25,720 Speaker 1: It really doesn't matter how much money you have. I 93 00:04:25,760 --> 00:04:30,760 Speaker 1: see a lot of multi millionaires make absolutely stupid decisions 94 00:04:30,839 --> 00:04:34,680 Speaker 1: because it's based on emotion, greed, desire to control all that. 95 00:04:34,800 --> 00:04:37,800 Speaker 1: So this really doesn't come down to how much you have, 96 00:04:38,120 --> 00:04:41,039 Speaker 1: is just how you handle the money that you do have. 97 00:04:41,160 --> 00:04:44,880 Speaker 1: So let's contrast this with having a plan. One of 98 00:04:44,920 --> 00:04:47,440 Speaker 1: the first things we do, Brian, when we sit down 99 00:04:47,480 --> 00:04:50,760 Speaker 1: with somebody is we define ahead of time what their 100 00:04:50,839 --> 00:04:54,400 Speaker 1: emotional tolerance for risk is. And I think that is 101 00:04:54,440 --> 00:04:59,080 Speaker 1: so critical because you know, if someone tells us, you know, 102 00:04:59,240 --> 00:05:02,360 Speaker 1: here's kind of and I'll throw out a term that 103 00:05:02,440 --> 00:05:05,960 Speaker 1: I use puke point, meaning hey, if we know on 104 00:05:06,000 --> 00:05:08,719 Speaker 1: the front end that if the market drops by this much, 105 00:05:09,000 --> 00:05:12,200 Speaker 1: people just can't handle it anymore emotionally, to say nothing 106 00:05:12,240 --> 00:05:15,479 Speaker 1: of their financial plan or or the financial you know 107 00:05:15,680 --> 00:05:18,719 Speaker 1: long term of the retirement plan. They we just know 108 00:05:18,880 --> 00:05:22,560 Speaker 1: upfront if the market does this, they're going to do that. Therefore, 109 00:05:22,880 --> 00:05:25,920 Speaker 1: we don't subject the portfolio to that level of risk 110 00:05:26,160 --> 00:05:28,840 Speaker 1: at the outset. I think that's a critical part of 111 00:05:28,880 --> 00:05:32,920 Speaker 1: the planning process is to give your advisor, whoever's managing 112 00:05:32,960 --> 00:05:36,960 Speaker 1: your money, kind of the proverbial guardrails here, how much play? 113 00:05:37,040 --> 00:05:42,920 Speaker 1: How much volatility can you emotionally handle before emotions take over, 114 00:05:43,400 --> 00:05:46,280 Speaker 1: you know, for fundamentals, and you just make some decisions 115 00:05:46,320 --> 00:05:50,279 Speaker 1: oftentimes from which you literally cannot recover, you know, speaking 116 00:05:50,320 --> 00:05:52,839 Speaker 1: of your three hundred thousand dollars of misgains. 117 00:05:53,200 --> 00:05:55,240 Speaker 2: Yeah, and I think this is where a stress test 118 00:05:55,320 --> 00:05:58,719 Speaker 2: and an understanding of market history can go a long way. 119 00:05:58,800 --> 00:05:59,960 Speaker 3: Stress test means. 120 00:06:00,000 --> 00:06:01,919 Speaker 2: First all that assumes you've got a financial plan in 121 00:06:01,920 --> 00:06:05,120 Speaker 2: the first place, right, So figuring out what again if 122 00:06:05,160 --> 00:06:08,159 Speaker 2: I have my hunky dory outcome, Here's here's my resources, 123 00:06:08,160 --> 00:06:10,240 Speaker 2: Here's what I'm trying to accomplish, and when I want 124 00:06:10,279 --> 00:06:12,520 Speaker 2: to retire the bills I think I have to pay, 125 00:06:13,200 --> 00:06:14,760 Speaker 2: and what does that look like when I when I 126 00:06:14,800 --> 00:06:17,279 Speaker 2: attach an inflationary figure to it over the remainder of 127 00:06:17,320 --> 00:06:20,480 Speaker 2: my lifespan if nothing bad ever happens again it looks 128 00:06:20,560 --> 00:06:22,880 Speaker 2: like this, And then right next to that, do the 129 00:06:22,920 --> 00:06:25,640 Speaker 2: exact same thing, but simulate what we're saying happened to 130 00:06:25,760 --> 00:06:27,000 Speaker 2: Jane here by the way, Yeah. 131 00:06:26,800 --> 00:06:27,320 Speaker 3: Bob, you're right. 132 00:06:27,320 --> 00:06:29,440 Speaker 2: The only thing hypothetical by that situations that her name 133 00:06:29,480 --> 00:06:31,880 Speaker 2: is Jane. I can think of twenty names of clients 134 00:06:31,960 --> 00:06:32,839 Speaker 2: have gone through this. 135 00:06:33,200 --> 00:06:36,720 Speaker 3: We all live through it exactly right, and everybody reacts differently. 136 00:06:36,720 --> 00:06:38,839 Speaker 2: But so yeah, so take right next to that to 137 00:06:39,040 --> 00:06:42,400 Speaker 2: hunky dory scenario. Do a stress test, which simply means 138 00:06:42,480 --> 00:06:45,040 Speaker 2: knock off twenty five percent of your financial net worth. Right, 139 00:06:45,080 --> 00:06:47,800 Speaker 2: that's that's among the worst types of market years that 140 00:06:47,839 --> 00:06:49,000 Speaker 2: we've ever had in history. 141 00:06:49,040 --> 00:06:51,320 Speaker 3: So see what happens. You know, if you. 142 00:06:51,279 --> 00:06:53,200 Speaker 2: Lose twenty five percent of your net worth and keep 143 00:06:53,240 --> 00:06:55,800 Speaker 2: it down right, assume that it's permanently gone. I'll come 144 00:06:55,839 --> 00:06:57,839 Speaker 2: back to that point a minute. But you're basically running 145 00:06:57,839 --> 00:07:01,520 Speaker 2: the numbers again with with without a portion of your 146 00:07:01,600 --> 00:07:04,000 Speaker 2: financial net worth. See if you can still pay your 147 00:07:04,000 --> 00:07:06,240 Speaker 2: bills and a lot of times, most of the time, 148 00:07:06,279 --> 00:07:09,560 Speaker 2: with a properly executed financial plan, it can handle that, right, 149 00:07:09,600 --> 00:07:12,400 Speaker 2: That's the whole point of Monte Carlo analysis and just 150 00:07:12,640 --> 00:07:15,480 Speaker 2: understanding statistically how likely are you to make it to 151 00:07:15,480 --> 00:07:17,400 Speaker 2: the end without running out of money, given the fact 152 00:07:17,400 --> 00:07:19,200 Speaker 2: that we can't predict what the market's going to do, 153 00:07:19,400 --> 00:07:21,280 Speaker 2: but we can rely on some history to take some 154 00:07:21,320 --> 00:07:22,040 Speaker 2: guesses at it. 155 00:07:22,400 --> 00:07:23,760 Speaker 3: So that's an important thing to do. 156 00:07:23,840 --> 00:07:26,400 Speaker 2: And then if you find that, Okay, I actually can 157 00:07:26,520 --> 00:07:27,920 Speaker 2: handle this, I might not like it. 158 00:07:28,000 --> 00:07:28,120 Speaker 1: Right. 159 00:07:28,160 --> 00:07:29,280 Speaker 3: This isn't a happy outcome. 160 00:07:29,280 --> 00:07:31,440 Speaker 2: Nobody wants to lose a quarter of their financial networth 161 00:07:31,520 --> 00:07:34,800 Speaker 2: right at retirement. But it doesn't necessarily mean that you 162 00:07:34,920 --> 00:07:38,160 Speaker 2: have to change your spending expectations. The ship can still float, 163 00:07:38,240 --> 00:07:39,640 Speaker 2: but you've got to do the math to make sure 164 00:07:39,680 --> 00:07:42,240 Speaker 2: that's the case. And then once you've gotten comfortable with that, 165 00:07:42,560 --> 00:07:45,360 Speaker 2: learn your market history. Understand what happens when the market 166 00:07:45,400 --> 00:07:48,160 Speaker 2: swings down. We've never ever had a year where we've 167 00:07:48,200 --> 00:07:51,000 Speaker 2: lost twenty twenty five percent where the following year didn't 168 00:07:51,040 --> 00:07:53,000 Speaker 2: give back a major chunk of it. And I'm looking 169 00:07:53,040 --> 00:07:55,640 Speaker 2: at big years like two thousand and eight, we were 170 00:07:55,680 --> 00:07:57,840 Speaker 2: peaked to trough. We had about a forty five percent 171 00:07:57,920 --> 00:07:59,920 Speaker 2: loss by the end of that year, I think we 172 00:08:00,080 --> 00:08:02,720 Speaker 2: ended up down twenty eight percent or something like that uh, 173 00:08:02,840 --> 00:08:05,240 Speaker 2: and then by two thousand and nine twenty ten that 174 00:08:05,280 --> 00:08:06,080 Speaker 2: had all come back. 175 00:08:06,120 --> 00:08:07,680 Speaker 3: That was not a fun period. You and I were 176 00:08:07,680 --> 00:08:09,120 Speaker 3: both in the industry. It's stunk. 177 00:08:09,760 --> 00:08:11,920 Speaker 2: But at the same time, the people who are okay 178 00:08:11,960 --> 00:08:14,880 Speaker 2: today are the people who did not panic. They grinned 179 00:08:14,960 --> 00:08:17,240 Speaker 2: or they grinted their teeth and just bore through it, 180 00:08:17,320 --> 00:08:19,880 Speaker 2: knowing that eventually the pendulum swings the other way and 181 00:08:19,920 --> 00:08:22,240 Speaker 2: we have recovery. Same thing from last April when we 182 00:08:22,240 --> 00:08:23,800 Speaker 2: had our initial panic about tariffs. 183 00:08:23,840 --> 00:08:25,720 Speaker 3: It came and it went Yeah. 184 00:08:25,720 --> 00:08:27,960 Speaker 1: So let's get into some of the tools that you 185 00:08:27,960 --> 00:08:30,840 Speaker 1: can actually use working with a good advisor to take 186 00:08:30,880 --> 00:08:34,600 Speaker 1: advantage of some of this volatility. A big one, Brian, 187 00:08:34,800 --> 00:08:38,920 Speaker 1: is just having some kind of tax loss harvesting program 188 00:08:38,920 --> 00:08:42,080 Speaker 1: going on with your taxable accounts, you know, whether that's 189 00:08:42,120 --> 00:08:45,720 Speaker 1: direct indexing or just a tax loss harvest program within 190 00:08:45,760 --> 00:08:49,559 Speaker 1: your ETF portfolio. This is a big advantage of you know, 191 00:08:49,800 --> 00:08:53,120 Speaker 1: migrating out of mutual funds over the time. Over time, 192 00:08:53,160 --> 00:08:56,800 Speaker 1: it gives you much more control over your tax exposure, 193 00:08:57,200 --> 00:09:00,360 Speaker 1: and with a good tax loss harvesting strategy, you could 194 00:09:00,360 --> 00:09:04,440 Speaker 1: stay fully invested but harvest some of these short term losses. 195 00:09:04,480 --> 00:09:07,760 Speaker 1: When they occur, and then use them later to offset 196 00:09:07,800 --> 00:09:12,640 Speaker 1: taxable gains and make the whole taxable quote unquote taxable 197 00:09:12,679 --> 00:09:17,640 Speaker 1: portfolio much more tax efficient over time. That's just something Brian, 198 00:09:17,720 --> 00:09:21,080 Speaker 1: that you know, everybody should be considering if they have 199 00:09:21,200 --> 00:09:23,760 Speaker 1: any kind of significant amount of money in a taxable 200 00:09:23,760 --> 00:09:27,880 Speaker 1: investing account. Let's use another hypothetical example. Let's use a couple. 201 00:09:27,920 --> 00:09:30,840 Speaker 1: We'll call them Mark and Susan. Let's they got four 202 00:09:30,840 --> 00:09:34,120 Speaker 1: million dollars. They do use some direct indexing in a 203 00:09:34,160 --> 00:09:39,200 Speaker 1: taxable account, and during a volatile year, they harvest sixty 204 00:09:39,280 --> 00:09:41,960 Speaker 1: thousand dollars in paper losses that they can use to 205 00:09:42,040 --> 00:09:47,079 Speaker 1: offset gains elsewhere, all while staying fully invested in the market. 206 00:09:47,440 --> 00:09:50,120 Speaker 1: And we've talked about this often, Brian. If you're in 207 00:09:50,600 --> 00:09:53,280 Speaker 1: you know, just say a big cap growth index fund, 208 00:09:53,559 --> 00:09:56,200 Speaker 1: you can just swap out one growth index fund for 209 00:09:56,280 --> 00:10:00,480 Speaker 1: another I'm talking about ETFs, harvest that loss and use 210 00:10:00,520 --> 00:10:04,720 Speaker 1: it later on. The key point here is people that 211 00:10:04,880 --> 00:10:08,439 Speaker 1: understand how this all works. They've done the risk tolerance 212 00:10:08,559 --> 00:10:12,280 Speaker 1: you know discussion. They've looked at market history, they've looked, 213 00:10:12,280 --> 00:10:14,760 Speaker 1: as you've already pointed out, real well, how and when 214 00:10:14,840 --> 00:10:19,840 Speaker 1: markets typically recover these folks have a mindset, a mindset 215 00:10:19,880 --> 00:10:22,960 Speaker 1: where they can play the long game, focus on the 216 00:10:23,120 --> 00:10:26,720 Speaker 1: long term. They don't need to have every single dollar 217 00:10:26,800 --> 00:10:31,040 Speaker 1: that they have grow tomorrow. They're again, they're playing the 218 00:10:31,120 --> 00:10:33,480 Speaker 1: long game. They got buckets of money to get them 219 00:10:33,559 --> 00:10:37,400 Speaker 1: through the short term volatility. That's the mindset that we're 220 00:10:37,400 --> 00:10:38,120 Speaker 1: talking about here. 221 00:10:38,480 --> 00:10:41,960 Speaker 2: Yeah, and that just means it also means you understand 222 00:10:42,040 --> 00:10:44,800 Speaker 2: again what the history is and what the market's capable of, 223 00:10:44,840 --> 00:10:46,840 Speaker 2: and you've been through this once or twice. We have 224 00:10:46,880 --> 00:10:48,960 Speaker 2: plenty of clients out there, you know. I often use 225 00:10:49,000 --> 00:10:50,640 Speaker 2: this example. I have clients out there with five and 226 00:10:50,720 --> 00:10:53,080 Speaker 2: ten million dollars who live like they have twenty five million. 227 00:10:53,720 --> 00:10:56,200 Speaker 2: They panic when the market drops and they want to 228 00:10:56,200 --> 00:10:58,400 Speaker 2: go to cash because they're worried that this is the 229 00:10:58,400 --> 00:10:58,840 Speaker 2: big one. 230 00:10:59,480 --> 00:10:59,680 Speaker 3: You know. 231 00:10:59,880 --> 00:11:02,079 Speaker 2: I've also got clients that, you know, maybe only have 232 00:11:02,120 --> 00:11:04,120 Speaker 2: two hundred and fifty five hundred thousand dollars, and they're 233 00:11:04,120 --> 00:11:06,120 Speaker 2: going to be just fine because they don't do those things. 234 00:11:06,240 --> 00:11:08,200 Speaker 2: So it doesn't matter how big your pile is. What 235 00:11:08,280 --> 00:11:10,000 Speaker 2: matters is how you react to it in the stream 236 00:11:10,040 --> 00:11:11,800 Speaker 2: of income that you're relying on to come out of 237 00:11:11,840 --> 00:11:13,280 Speaker 2: it all. 238 00:11:13,320 --> 00:11:15,160 Speaker 1: Right, Well, we also, you know, this is a good 239 00:11:15,200 --> 00:11:19,160 Speaker 1: time to talk about concentration risk. And let's face it, 240 00:11:19,200 --> 00:11:22,040 Speaker 1: in Cincinnati, we've got some big employers, a lot of 241 00:11:22,080 --> 00:11:25,160 Speaker 1: folks sitting on big chunks of their net worth in 242 00:11:25,240 --> 00:11:28,920 Speaker 1: their company stock. And there's a lot of loyalty here 243 00:11:28,920 --> 00:11:31,760 Speaker 1: in Cincinnati, and that's what makes this such a great town. 244 00:11:32,200 --> 00:11:35,880 Speaker 1: But you've got to manage around that as well. And 245 00:11:35,920 --> 00:11:39,480 Speaker 1: we'll use another hypothetical example. Let's call him Dave, sixty 246 00:11:39,520 --> 00:11:42,760 Speaker 1: two years old. He has three of his five million 247 00:11:42,800 --> 00:11:45,800 Speaker 1: dollar net worth tied up in his P and G stock. 248 00:11:46,240 --> 00:11:49,920 Speaker 1: His risk tolerance is high. He says he can stomach 249 00:11:50,000 --> 00:11:55,840 Speaker 1: market swings, but his risk capacity isn't aligned in terms 250 00:11:55,920 --> 00:11:59,280 Speaker 1: of his financial plan. For example, if P and G 251 00:11:59,480 --> 00:12:02,079 Speaker 1: does drop twenty five percent, he loses seven hundred and 252 00:12:02,080 --> 00:12:05,959 Speaker 1: fifty thousand dollars and that really throws a wrench into 253 00:12:06,000 --> 00:12:08,559 Speaker 1: what he really wants to do in terms of spending 254 00:12:08,920 --> 00:12:13,160 Speaker 1: giving goals, gives to kids charity. So the key here 255 00:12:13,200 --> 00:12:16,400 Speaker 1: is even if somebody has the emotional tolerance for risk, 256 00:12:16,880 --> 00:12:19,719 Speaker 1: their financial plan or they're spending goals aren't going to 257 00:12:19,800 --> 00:12:22,040 Speaker 1: handle it. And that's where we help need to help 258 00:12:22,080 --> 00:12:26,760 Speaker 1: people gradually diversify in a tax efficient manner over time, 259 00:12:27,160 --> 00:12:30,400 Speaker 1: so we can align the emotional risk with what the 260 00:12:30,640 --> 00:12:33,880 Speaker 1: financial plan needs to do, you know, at the specific 261 00:12:33,920 --> 00:12:36,439 Speaker 1: time you want to spend money. Here's the all Worth advice. 262 00:12:36,679 --> 00:12:40,520 Speaker 1: Wealthy investors don't avoid risk. They manage it, and they 263 00:12:40,559 --> 00:12:44,800 Speaker 1: manage it with purpose. Could your tax refund get up, 264 00:12:45,040 --> 00:12:47,439 Speaker 1: say one thousand dollars boost this year? We're going to 265 00:12:47,520 --> 00:12:50,520 Speaker 1: talk about that next. Plus want to beat the traffic? 266 00:12:50,880 --> 00:12:54,520 Speaker 1: How does an air taxi sound? We're getting one step 267 00:12:54,559 --> 00:12:58,240 Speaker 1: closer to having air taxis as an actual reality. You're 268 00:12:58,280 --> 00:13:00,880 Speaker 1: listening to Simply Money, presented by all Worth Financial on 269 00:13:00,960 --> 00:13:08,640 Speaker 1: fifty five KRC, the talk station. You're listening to Simply 270 00:13:08,679 --> 00:13:11,280 Speaker 1: Money said by all Worth Financial on Bob spont Seller 271 00:13:11,400 --> 00:13:14,840 Speaker 1: along with Brian James straight ahead of six forty three. 272 00:13:14,960 --> 00:13:18,600 Speaker 1: We're gonna tackle your questions about risk adjusted and what 273 00:13:18,760 --> 00:13:23,240 Speaker 1: risk adjusted returns actually mean in your portfolio, whether bond 274 00:13:23,280 --> 00:13:25,680 Speaker 1: funds still make any sense at all? Right now? And 275 00:13:25,720 --> 00:13:29,599 Speaker 1: how to align your estate plan with your investment strategy. 276 00:13:30,679 --> 00:13:33,160 Speaker 1: All right, Brian, this one didn't last long. Last week 277 00:13:33,200 --> 00:13:36,240 Speaker 1: we told you that the Trump administration had a proposal 278 00:13:36,760 --> 00:13:39,280 Speaker 1: where you could withdraw money from your four toh one 279 00:13:39,360 --> 00:13:43,800 Speaker 1: K plan now supposedly without penalties to pay make a 280 00:13:43,840 --> 00:13:47,160 Speaker 1: down payment on a home. You and I both did 281 00:13:47,200 --> 00:13:50,240 Speaker 1: not like that idea. We stated why it sounds like 282 00:13:50,280 --> 00:13:53,280 Speaker 1: a lot of people got to the president and his 283 00:13:54,280 --> 00:13:58,680 Speaker 1: administration officials. Because fast forward one week and President Trump 284 00:13:58,720 --> 00:14:01,840 Speaker 1: has kind of just, you know, put that whole idea 285 00:14:01,920 --> 00:14:04,080 Speaker 1: to the side. He's not a huge fan of doing 286 00:14:04,120 --> 00:14:07,160 Speaker 1: that anymore. And Brian, now he's talking about his Trump 287 00:14:07,200 --> 00:14:10,640 Speaker 1: accounts for new babies born from twenty nineteen twenty or 288 00:14:10,720 --> 00:14:14,319 Speaker 1: twenty twenty five to twenty twenty eight. So I'll give 289 00:14:14,400 --> 00:14:17,319 Speaker 1: him credit for this. He throws ideas against the wall. 290 00:14:17,400 --> 00:14:19,680 Speaker 1: Hope some of it doesn't stick, and the stuff that 291 00:14:19,760 --> 00:14:22,760 Speaker 1: doesn't stick, he just quickly moves on to something else. 292 00:14:22,800 --> 00:14:24,120 Speaker 1: At least he's thinking of things. 293 00:14:24,280 --> 00:14:26,200 Speaker 2: Yeah, and this really was that this was not a 294 00:14:26,200 --> 00:14:28,880 Speaker 2: major win for anybody, so we're not losing anything here. 295 00:14:28,920 --> 00:14:30,120 Speaker 3: This was simply saying. 296 00:14:29,880 --> 00:14:31,480 Speaker 2: Hey, if you want to use your own dollars to 297 00:14:31,480 --> 00:14:33,520 Speaker 2: buy a house, then we're not going to tax or 298 00:14:33,520 --> 00:14:35,080 Speaker 2: penal at well, the taxes would do it, but it 299 00:14:35,080 --> 00:14:37,680 Speaker 2: would have been the penalty that you didn't have to pay, 300 00:14:38,240 --> 00:14:40,240 Speaker 2: which to me that doesn't really help anything. It's just 301 00:14:40,280 --> 00:14:43,080 Speaker 2: going to cause people to hamstring their own retirements and 302 00:14:43,480 --> 00:14:46,200 Speaker 2: probably encourage people to buy bigger houses than they would 303 00:14:46,200 --> 00:14:48,880 Speaker 2: have otherwise, simply because they could get access to these dollars. 304 00:14:49,040 --> 00:14:52,040 Speaker 2: And that's something that would have a massive impact way downstream. 305 00:14:52,120 --> 00:14:53,960 Speaker 2: And so I never liked this idea to begin with. 306 00:14:54,360 --> 00:14:56,240 Speaker 2: Well as he had taken behind the woodshed. 307 00:14:56,520 --> 00:14:59,040 Speaker 1: Yeah, I didn't like it either. I mean, I didn't 308 00:14:59,040 --> 00:15:01,040 Speaker 1: think it was going to rese old in people buying 309 00:15:01,080 --> 00:15:03,880 Speaker 1: bigger houses. I think what everyone's trying to do is 310 00:15:03,920 --> 00:15:07,240 Speaker 1: address this whole affordability issue. We're trying to get young 311 00:15:07,320 --> 00:15:10,440 Speaker 1: people into their first home. And the point I made 312 00:15:10,440 --> 00:15:12,480 Speaker 1: that you know, a couple of weeks ago, is let's 313 00:15:12,520 --> 00:15:15,240 Speaker 1: just say that first home costs three hundred thousand dollars 314 00:15:15,320 --> 00:15:18,560 Speaker 1: and you're trying to get a conventional loan twenty percent down. 315 00:15:18,600 --> 00:15:21,560 Speaker 1: That's sixty grand. And you know a lot of these 316 00:15:21,600 --> 00:15:24,480 Speaker 1: people in their mid to late twenties, they don't have 317 00:15:24,680 --> 00:15:28,320 Speaker 1: sixty thousand dollars in their four one K plan. And 318 00:15:28,400 --> 00:15:30,320 Speaker 1: even if they had a big chunk of that, it's 319 00:15:30,320 --> 00:15:33,000 Speaker 1: not all vested money, because a lot of it came 320 00:15:33,000 --> 00:15:36,080 Speaker 1: from company match. So I think this proposal was not 321 00:15:36,160 --> 00:15:39,400 Speaker 1: going to help the people. It was intended to help, 322 00:15:39,720 --> 00:15:42,200 Speaker 1: you know, get first time home buyers into the market. 323 00:15:42,320 --> 00:15:45,280 Speaker 1: So I'm happy to see that. We're just you know, 324 00:15:45,400 --> 00:15:48,920 Speaker 1: getting back to basics. Hey, save for your retirement and 325 00:15:49,000 --> 00:15:51,240 Speaker 1: don't don't touch some money. All right, let's move on, 326 00:15:51,320 --> 00:15:55,840 Speaker 1: speaking of taxes. Tax filing season officially did open on 327 00:15:56,000 --> 00:15:59,880 Speaker 1: Monday of this week, and Americans are beginning to file 328 00:16:00,200 --> 00:16:05,600 Speaker 1: twenty twenty five tax returns and policymakers are signaling the 329 00:16:05,680 --> 00:16:09,160 Speaker 1: tax refunds are expected to be about one thousand dollars 330 00:16:09,320 --> 00:16:12,720 Speaker 1: larger than a year ago, and that's thanks to the 331 00:16:12,840 --> 00:16:15,560 Speaker 1: you know, one big beautiful bill and Brian, this all 332 00:16:15,600 --> 00:16:18,080 Speaker 1: comes down to, you know, we got the bill passed 333 00:16:18,120 --> 00:16:22,360 Speaker 1: in the middle of twenty twenty five, virtually nobody adjusted 334 00:16:22,400 --> 00:16:24,880 Speaker 1: their tax withholdings. So yeah, you're gonna get back some 335 00:16:24,960 --> 00:16:29,120 Speaker 1: of your own money, and that should help, I think 336 00:16:29,240 --> 00:16:33,320 Speaker 1: spike spending out there in the economy, because let's face it, 337 00:16:33,760 --> 00:16:36,760 Speaker 1: you give most people an extra thousand dollars, one thousand 338 00:16:36,800 --> 00:16:39,880 Speaker 1: dollars is gonna get spent on something, probably within the 339 00:16:39,880 --> 00:16:40,720 Speaker 1: next thirty days. 340 00:16:40,800 --> 00:16:43,080 Speaker 2: Yeah, and that should drive the economy of course. So yeah, 341 00:16:43,160 --> 00:16:46,760 Speaker 2: So the overall the expectation is that the average tax 342 00:16:46,760 --> 00:16:48,440 Speaker 2: refund is going to be about one thousand dollars more 343 00:16:48,440 --> 00:16:50,520 Speaker 2: than it was a year ago. And this is coming 344 00:16:50,560 --> 00:16:53,160 Speaker 2: from the House Ways and Means Committee Chairman Jason Smith 345 00:16:53,200 --> 00:16:56,160 Speaker 2: out of Missouri. He said, this month, American taxpayers are 346 00:16:56,160 --> 00:16:59,320 Speaker 2: projected to receive an additional ninety one billion dollars in 347 00:16:59,360 --> 00:17:02,760 Speaker 2: tax refund in what's expected to be a record setting 348 00:17:03,040 --> 00:17:05,760 Speaker 2: three hundred and seventy billion dollars coming back out to 349 00:17:05,920 --> 00:17:09,000 Speaker 2: and landing and pocketbooks. So and as Bob just mentioned 350 00:17:09,040 --> 00:17:10,359 Speaker 2: that a lot of that is probably going to turn 351 00:17:10,400 --> 00:17:13,000 Speaker 2: around and come back into the economy due to these 352 00:17:13,000 --> 00:17:15,400 Speaker 2: tax cuts. So again, this is coming from the one 353 00:17:15,400 --> 00:17:18,280 Speaker 2: big beautiful Act that created some some new but temporary 354 00:17:18,320 --> 00:17:21,160 Speaker 2: tax relief that's going to be retroactive to twenty twenty 355 00:17:21,200 --> 00:17:25,600 Speaker 2: five incomes. So again removing parts to this and it's 356 00:17:25,600 --> 00:17:28,720 Speaker 2: setting us up for different outcomes in the future. But 357 00:17:28,960 --> 00:17:31,119 Speaker 2: stay tuned and we'll keep your prized on what the 358 00:17:31,160 --> 00:17:31,919 Speaker 2: impact of this is. 359 00:17:32,280 --> 00:17:34,080 Speaker 1: All right, here's the one I really want to get into. 360 00:17:34,119 --> 00:17:36,119 Speaker 1: I want to see if you're willing to be a 361 00:17:36,160 --> 00:17:38,359 Speaker 1: test case for this and what I'm talking about is. 362 00:17:38,400 --> 00:17:42,199 Speaker 1: We've all used Uber and Lyft, and now there's way Mo, 363 00:17:42,440 --> 00:17:47,280 Speaker 1: the driverless taxis and get this, we are probably by 364 00:17:47,320 --> 00:17:51,200 Speaker 1: twenty twenty eight gonna have air taxis. There's a UK 365 00:17:51,440 --> 00:17:56,000 Speaker 1: based company called Vertical Aerospace that is developing an electric 366 00:17:56,200 --> 00:18:01,880 Speaker 1: vertical takeoff and landing aircraft called it ev TALL, aimed 367 00:18:01,960 --> 00:18:05,959 Speaker 1: at easing gridlock in megacities like New York, Los Angeles, 368 00:18:06,119 --> 00:18:10,960 Speaker 1: Tokyo where ground transportation is increasing. There's too many cars 369 00:18:10,960 --> 00:18:12,760 Speaker 1: on the road, Brian, So we're going to go up 370 00:18:12,800 --> 00:18:15,679 Speaker 1: in the air and fly people around at speeds of 371 00:18:15,760 --> 00:18:18,840 Speaker 1: up to one hundred and fifty miles an hour with 372 00:18:18,920 --> 00:18:23,119 Speaker 1: a range of roughly one hundred miles. And these aircraft 373 00:18:23,119 --> 00:18:26,880 Speaker 1: are supposedly going to seat four people and replace all 374 00:18:26,920 --> 00:18:30,639 Speaker 1: these taxis and ubers and what have you. Brian, I 375 00:18:31,960 --> 00:18:33,800 Speaker 1: want to know if you're willing to be in the 376 00:18:34,000 --> 00:18:36,800 Speaker 1: test case group to go up in the air at 377 00:18:36,800 --> 00:18:38,760 Speaker 1: one hundred and fifty miles an hour and hope you 378 00:18:38,840 --> 00:18:41,360 Speaker 1: get to your destination safely. 379 00:18:41,600 --> 00:18:43,360 Speaker 2: I can't say it's high on my list of things 380 00:18:43,400 --> 00:18:46,000 Speaker 2: that I want to make sure that I do before 381 00:18:46,040 --> 00:18:48,720 Speaker 2: I die, because a bucket list should be made up 382 00:18:48,720 --> 00:18:50,479 Speaker 2: of things you want to do before you die, not 383 00:18:50,520 --> 00:18:50,920 Speaker 2: things that. 384 00:18:50,880 --> 00:18:52,040 Speaker 3: Could cause you to die. 385 00:18:52,119 --> 00:18:54,119 Speaker 2: So I don't want to be in the early model 386 00:18:54,200 --> 00:18:57,560 Speaker 2: year of this idea. But one hundred years from now, 387 00:18:57,600 --> 00:18:59,480 Speaker 2: sure it's probably going to be pretty It will be 388 00:18:59,560 --> 00:19:03,120 Speaker 2: just a to the greater Cincinnati area, I would think. 389 00:19:03,200 --> 00:19:05,920 Speaker 1: So every Sunday you'll find our all Worth Advice in 390 00:19:06,000 --> 00:19:08,840 Speaker 1: the Cincinnati Inquirer. Brian, I want you to hit this 391 00:19:08,880 --> 00:19:12,240 Speaker 1: one in twenty seconds or left. Talk about a person 392 00:19:12,280 --> 00:19:14,840 Speaker 1: that's going to retire from P and G and they 393 00:19:14,920 --> 00:19:17,960 Speaker 1: got a big retirement plan with P ANDNG stock in 394 00:19:18,040 --> 00:19:21,199 Speaker 1: their four to one K send out that warning that 395 00:19:21,359 --> 00:19:23,880 Speaker 1: bat signal on what to do and not to do. 396 00:19:24,119 --> 00:19:25,399 Speaker 3: All right, well, here's what you want to do. 397 00:19:25,440 --> 00:19:27,440 Speaker 2: If you work for P ANDNG and you're in this situation, 398 00:19:27,560 --> 00:19:30,320 Speaker 2: you do have some unique tax benefits you can possibly 399 00:19:30,320 --> 00:19:32,480 Speaker 2: take advantage of because of what PNG stock has done 400 00:19:32,680 --> 00:19:34,919 Speaker 2: and how they structure their benefits. You're looking at something 401 00:19:34,920 --> 00:19:39,480 Speaker 2: called a net unrealized appreciation transaction where you are effectively 402 00:19:39,520 --> 00:19:42,679 Speaker 2: paying capital gains taxes on the sale of some of 403 00:19:42,680 --> 00:19:45,159 Speaker 2: that stock versus straight up income taxes. Because it's in 404 00:19:45,160 --> 00:19:47,040 Speaker 2: a four to oh one K, this has to start 405 00:19:47,080 --> 00:19:48,639 Speaker 2: with I need the money in the first place. I 406 00:19:48,680 --> 00:19:50,000 Speaker 2: need a big chunk because I want to pay off 407 00:19:50,000 --> 00:19:52,200 Speaker 2: my mortgage or something like that. It's not a great 408 00:19:52,240 --> 00:19:54,440 Speaker 2: opportunity if you weren't, if you don't have use for 409 00:19:54,480 --> 00:19:56,679 Speaker 2: a giant pile of money anyway, because you are removing 410 00:19:56,680 --> 00:19:59,760 Speaker 2: it from the tax shelter, so net unrealized appreciation. 411 00:20:00,080 --> 00:20:02,240 Speaker 3: Google it good? 412 00:20:02,480 --> 00:20:04,720 Speaker 1: All right? Coming up next, we're taking a deep look 413 00:20:04,800 --> 00:20:09,440 Speaker 1: at the latest analysis on social securities future, a growing 414 00:20:09,680 --> 00:20:12,840 Speaker 1: generational divide on how to fix it and what that 415 00:20:12,920 --> 00:20:15,399 Speaker 1: might mean for your own retirement planning. You're listening to 416 00:20:15,400 --> 00:20:17,880 Speaker 1: Simply Money presented by all Worth Financial on fifty five 417 00:20:18,000 --> 00:20:26,280 Speaker 1: KRC the talk station. You're listening to Simply Money presided 418 00:20:26,280 --> 00:20:29,640 Speaker 1: by all Worth Financial on Bob Sponseller along with Brian James. 419 00:20:30,680 --> 00:20:34,040 Speaker 1: Let's face it, social security is a cornerstone of retirement 420 00:20:34,119 --> 00:20:37,919 Speaker 1: security for millions of Americans, but it does face long 421 00:20:38,040 --> 00:20:43,040 Speaker 1: term funding challenges, and a new analysis shows a sharp 422 00:20:43,280 --> 00:20:47,480 Speaker 1: generational divide on how to fix the problem. Brian, and 423 00:20:48,000 --> 00:20:51,120 Speaker 1: before you get into these numbers, none of this outcome 424 00:20:51,240 --> 00:20:55,440 Speaker 1: surprises me whatsoever, because, let's face it, we all want 425 00:20:55,560 --> 00:20:58,800 Speaker 1: someone else to pay to fix the problems that are 426 00:20:58,880 --> 00:21:02,040 Speaker 1: before us. And I think these numbers you're about to 427 00:21:02,040 --> 00:21:03,240 Speaker 1: share bear this out. 428 00:21:03,440 --> 00:21:06,520 Speaker 2: I'm remind of an old Simpsons episode where Homer ran 429 00:21:06,560 --> 00:21:10,440 Speaker 2: for political office under the slogan can't someone else do it? 430 00:21:10,480 --> 00:21:14,359 Speaker 2: And this is just a survey of two thousand adults. 431 00:21:14,400 --> 00:21:16,119 Speaker 2: This is by the Cato Institute. They're known as a 432 00:21:16,119 --> 00:21:17,040 Speaker 2: libertarian think tank. 433 00:21:17,920 --> 00:21:19,919 Speaker 1: Who did he run against? By the way, was it 434 00:21:19,960 --> 00:21:21,360 Speaker 1: Montgomery Burns? Oh? 435 00:21:21,680 --> 00:21:22,320 Speaker 3: It might have been. 436 00:21:22,400 --> 00:21:24,040 Speaker 2: I'm not sure, but it had everything to do with 437 00:21:24,119 --> 00:21:25,840 Speaker 2: I don't want to bring my garbage cans in from 438 00:21:25,840 --> 00:21:28,560 Speaker 2: the curb. Why can't somebody bring them put them behind 439 00:21:28,560 --> 00:21:30,520 Speaker 2: my house? And that's now what's what we're talking about 440 00:21:30,520 --> 00:21:33,720 Speaker 2: with Social Security. So more than half of Americans under 441 00:21:33,720 --> 00:21:36,840 Speaker 2: age thirty say they'd rather cut benefits for current retirees 442 00:21:36,920 --> 00:21:39,840 Speaker 2: than pay more taxes to help keep benefits intact. Hey, 443 00:21:39,880 --> 00:21:43,120 Speaker 2: go figure, current retirees aren't a fan of that. Nine 444 00:21:43,200 --> 00:21:46,160 Speaker 2: and ten seniors age sixty five year older say younger 445 00:21:46,200 --> 00:21:49,640 Speaker 2: workers should pay higher taxes to help current retirees benefits 446 00:21:49,680 --> 00:21:50,520 Speaker 2: kind of stay steady. 447 00:21:50,560 --> 00:21:51,720 Speaker 3: Can't someone else do it? 448 00:21:51,760 --> 00:21:52,040 Speaker 1: Bob? 449 00:21:52,520 --> 00:21:56,080 Speaker 2: So the danger here is and if they do nothing right, 450 00:21:56,119 --> 00:21:58,800 Speaker 2: so the math just doesn't work. The math don't math anymore. 451 00:21:59,000 --> 00:22:01,480 Speaker 2: There's a hole in the bucket. So there's simply not 452 00:22:01,640 --> 00:22:04,439 Speaker 2: enough money flowing into the system to shore up the 453 00:22:04,440 --> 00:22:06,840 Speaker 2: benefits that were calculated years ago, simply because there are 454 00:22:06,880 --> 00:22:10,119 Speaker 2: fewer workers earning less than there have been in prior decades. 455 00:22:10,200 --> 00:22:13,200 Speaker 2: So currently, as we're sitting here right now, if nothing changes, 456 00:22:13,480 --> 00:22:16,200 Speaker 2: then we're expecting somewhere about a twenty to twenty five 457 00:22:16,240 --> 00:22:20,560 Speaker 2: percent haircut in twenty thirty three unless Congress actually does something. 458 00:22:20,600 --> 00:22:22,480 Speaker 3: Now, we could have fixed. 459 00:22:22,200 --> 00:22:24,119 Speaker 2: This all along, Bob, right, I mean, we could be 460 00:22:24,119 --> 00:22:26,280 Speaker 2: talking about this in Congress right now. We choose not 461 00:22:26,400 --> 00:22:28,840 Speaker 2: to because it is nothing but a sacrifice. No one 462 00:22:28,880 --> 00:22:33,160 Speaker 2: will gain anything because because of the way the math works, 463 00:22:33,200 --> 00:22:36,560 Speaker 2: we simply have to cut benefits on current retirees or 464 00:22:36,600 --> 00:22:39,760 Speaker 2: increased taxes on current workers, or possibly a combination of both. 465 00:22:39,800 --> 00:22:42,199 Speaker 2: There's a million ways that that can happen. But what 466 00:22:42,240 --> 00:22:44,800 Speaker 2: it's gonna take is a politician to stake their political 467 00:22:44,800 --> 00:22:48,280 Speaker 2: career on forcing people to sacrifice. There is no way 468 00:22:48,280 --> 00:22:50,639 Speaker 2: that anybody can put something together that is a gain, 469 00:22:51,000 --> 00:22:54,600 Speaker 2: giving people something they didn't have before. It's all sacrifice, 470 00:22:54,600 --> 00:22:56,159 Speaker 2: and that's why we just don't hear about it. We're 471 00:22:56,160 --> 00:22:57,960 Speaker 2: gonna kick the can until we have no choice. 472 00:22:59,320 --> 00:23:03,360 Speaker 1: Yeah, for sure. And here's another interesting thought to kick around. 473 00:23:04,000 --> 00:23:07,600 Speaker 1: Most people don't even understand how Social Security works. Again. 474 00:23:07,680 --> 00:23:10,520 Speaker 1: In this survey from the Cato Institute, half don't even 475 00:23:10,560 --> 00:23:13,520 Speaker 1: know Social Security is a pay as you go program 476 00:23:13,640 --> 00:23:18,480 Speaker 1: in which current workers payroll taxes fund current retirees benefits, 477 00:23:18,760 --> 00:23:21,480 Speaker 1: not a worker's own future retirement. You know, a lot 478 00:23:21,520 --> 00:23:24,480 Speaker 1: of people think that this money is getting put into 479 00:23:24,560 --> 00:23:28,600 Speaker 1: some type of an account for them, and nearly two 480 00:23:28,680 --> 00:23:31,600 Speaker 1: thirds of respondents believe that's what it is. They believe 481 00:23:31,640 --> 00:23:35,199 Speaker 1: it's a mandatory savings program that they pay for, you know, 482 00:23:35,320 --> 00:23:37,480 Speaker 1: kind of like a mandatory four to one K plan. 483 00:23:37,840 --> 00:23:41,840 Speaker 1: One in five people wrongly believe that their payroll taxes 484 00:23:41,840 --> 00:23:45,679 Speaker 1: are actually invested in this Social Security trust fund that 485 00:23:45,720 --> 00:23:48,480 Speaker 1: gets thrown around all the time until they retire. And 486 00:23:48,640 --> 00:23:51,480 Speaker 1: eight percent of folks think their taxes are saved in 487 00:23:51,520 --> 00:23:54,960 Speaker 1: a personal account for them. And then here's the funny thing. 488 00:23:55,040 --> 00:23:58,240 Speaker 1: Twenty one percent admit they have no idea how any 489 00:23:58,320 --> 00:24:00,280 Speaker 1: of this stuff works and really don't want to know. 490 00:24:01,600 --> 00:24:04,560 Speaker 1: Forty three percent of people Brian don't even know what 491 00:24:04,600 --> 00:24:08,560 Speaker 1: a payroll tax is. That is baffling to me, since everybody, 492 00:24:08,640 --> 00:24:11,879 Speaker 1: last time I checked, gets a paycheck stub where you 493 00:24:11,920 --> 00:24:15,119 Speaker 1: actually see where all this money disappears every two weeks, 494 00:24:15,560 --> 00:24:19,000 Speaker 1: and then finally, only about seventeen percent know that the 495 00:24:19,040 --> 00:24:23,240 Speaker 1: tax is split evenly between the employer and the employee. 496 00:24:23,359 --> 00:24:26,720 Speaker 1: So I blame a lot of people, you know, for this, 497 00:24:26,840 --> 00:24:31,040 Speaker 1: namely Congress. They just simply have not educated the American 498 00:24:31,040 --> 00:24:34,439 Speaker 1: public on how this whole system works or doesn't work. 499 00:24:34,920 --> 00:24:37,159 Speaker 1: And yet we do, to the point you made prior, 500 00:24:37,240 --> 00:24:39,720 Speaker 1: we do have a ticking time bomb here that's about 501 00:24:39,760 --> 00:24:42,640 Speaker 1: eight years away. This is going to have to get 502 00:24:42,680 --> 00:24:46,920 Speaker 1: on somebody's radar here, you know, somewhat smooth or soon, 503 00:24:47,000 --> 00:24:50,600 Speaker 1: and hopefully we can have an adult conversation, you know, 504 00:24:50,680 --> 00:24:54,040 Speaker 1: something new and different for Congress and get some things done. 505 00:24:54,160 --> 00:24:55,840 Speaker 2: Let's talk about that pay stub for a minute, because 506 00:24:55,840 --> 00:24:58,360 Speaker 2: I want to very frequently and you probably hear it too. 507 00:24:58,480 --> 00:24:59,120 Speaker 3: Very frequently. 508 00:24:59,160 --> 00:25:02,880 Speaker 2: Hear comments, just sort of one off comments from clients 509 00:25:03,080 --> 00:25:04,960 Speaker 2: about how well I can't plan on soci security. It's 510 00:25:04,960 --> 00:25:06,280 Speaker 2: not going to be there in eight years. And that's 511 00:25:06,280 --> 00:25:08,320 Speaker 2: not the case. That is simply not how it works. 512 00:25:08,320 --> 00:25:10,359 Speaker 2: The only way that could happen is is if we 513 00:25:10,440 --> 00:25:14,240 Speaker 2: proactively voted the FIKA taxation out of existence payroll taxes. 514 00:25:14,440 --> 00:25:16,680 Speaker 3: That's not going to happen. What all it. 515 00:25:16,680 --> 00:25:19,439 Speaker 2: Means is that in twenty thirty three, the amount of 516 00:25:19,480 --> 00:25:21,600 Speaker 2: dollars that will be collected via the top of your 517 00:25:21,600 --> 00:25:23,680 Speaker 2: pay step it happened, it's happening right now, it'll happen 518 00:25:23,720 --> 00:25:26,119 Speaker 2: then is only going to cover about seventy five percent 519 00:25:26,119 --> 00:25:27,320 Speaker 2: of what is currently promised. 520 00:25:27,359 --> 00:25:29,160 Speaker 3: So but that is a far cry from zero. 521 00:25:29,280 --> 00:25:32,840 Speaker 2: Social security is not going away unless we proactively voted 522 00:25:32,880 --> 00:25:35,760 Speaker 2: out of existence. And again this is coming from this 523 00:25:35,800 --> 00:25:38,119 Speaker 2: is coming from demographic changes. So the reason for this 524 00:25:38,240 --> 00:25:41,280 Speaker 2: is us population is just continuing to get older. So 525 00:25:41,440 --> 00:25:45,399 Speaker 2: in twenty twenty five, just this past year, a record 526 00:25:45,440 --> 00:25:48,000 Speaker 2: four point one million people are expected to hit age 527 00:25:48,000 --> 00:25:50,879 Speaker 2: sixty five. That's the most we've ever had reached that milestone. 528 00:25:50,880 --> 00:25:54,159 Speaker 2: By twenty fifty, this sixty five, an older group is 529 00:25:54,560 --> 00:25:58,040 Speaker 2: projected to increase forty two percent to eighty two million 530 00:25:58,080 --> 00:26:00,960 Speaker 2: from fifty eight million and twenty two So that means 531 00:26:00,960 --> 00:26:03,280 Speaker 2: the share of the population is up to almost a 532 00:26:03,359 --> 00:26:05,960 Speaker 2: quarter of the population being that age. That's the problem 533 00:26:05,960 --> 00:26:08,439 Speaker 2: that we have and we have tried to fix this 534 00:26:08,480 --> 00:26:10,720 Speaker 2: pob so over the years, policy experts have. 535 00:26:10,680 --> 00:26:11,560 Speaker 3: Thrown out ideas. 536 00:26:11,600 --> 00:26:15,679 Speaker 2: Every single year, some congress person raises a bill, but 537 00:26:15,760 --> 00:26:19,440 Speaker 2: it's shot down based on political lines. Democrats always raised 538 00:26:19,440 --> 00:26:21,760 Speaker 2: the idea of we need to increase taxes on current 539 00:26:21,800 --> 00:26:26,840 Speaker 2: workers to make this work, and then Republicans will reject 540 00:26:26,840 --> 00:26:29,720 Speaker 2: that immediately. And Republicans want to cut benefits on retirees 541 00:26:30,080 --> 00:26:32,120 Speaker 2: and Democrats shoot that out of the sky. So it's 542 00:26:32,119 --> 00:26:35,720 Speaker 2: going to take an across the aisle attempt of people 543 00:26:35,720 --> 00:26:37,920 Speaker 2: who understand math and are willing to have a rough 544 00:26:37,960 --> 00:26:40,240 Speaker 2: conversation with the American public. I don't know that we're 545 00:26:40,280 --> 00:26:42,240 Speaker 2: there yet, but that's the only way it ever gets fixed. 546 00:26:42,960 --> 00:26:44,960 Speaker 1: Well, And just as a reminder, going back to the 547 00:26:45,000 --> 00:26:48,560 Speaker 1: beginning here, Social Security is and was intended to be 548 00:26:48,720 --> 00:26:53,160 Speaker 1: a federal anti poverty program that was established in nineteen 549 00:26:53,320 --> 00:26:58,200 Speaker 1: thirty five as part of President Franklin Delana Roosevelt's New 550 00:26:58,320 --> 00:27:01,840 Speaker 1: Deal after the Great Depression, and again well intentioned. It's like, hey, 551 00:27:01,880 --> 00:27:05,080 Speaker 1: let's put some kind of social safety net in here, 552 00:27:05,160 --> 00:27:09,760 Speaker 1: not only for retirement retirees, but for widows and orphans 553 00:27:09,880 --> 00:27:12,960 Speaker 1: and folks on disability that no one ever talks about. 554 00:27:13,240 --> 00:27:16,800 Speaker 1: There is an embedded disability program in Social security too, that, 555 00:27:16,840 --> 00:27:19,199 Speaker 1: by the way, costs money. You know, it's meant to 556 00:27:19,200 --> 00:27:23,240 Speaker 1: be an anti poverty program, you know, a social safety net, 557 00:27:23,560 --> 00:27:25,840 Speaker 1: but it does cost money. And again, we're going to 558 00:27:25,920 --> 00:27:30,280 Speaker 1: have to have an adult conversation from from Congress and 559 00:27:30,320 --> 00:27:33,240 Speaker 1: whoever's president here over the next eight years to fix 560 00:27:33,320 --> 00:27:36,800 Speaker 1: this thing. And I sure hope it, sure hope it happens. Hey, 561 00:27:36,840 --> 00:27:38,960 Speaker 1: if you were if you were a betting man, going 562 00:27:39,000 --> 00:27:42,159 Speaker 1: back to that whole prop bet thing, if you had 563 00:27:42,160 --> 00:27:43,840 Speaker 1: to put money down on this thing, what do you 564 00:27:43,840 --> 00:27:45,600 Speaker 1: think is going to happen? Brian, how do you think that? 565 00:27:45,840 --> 00:27:47,679 Speaker 1: How do you think this thing is going to get fixed? 566 00:27:47,920 --> 00:27:49,520 Speaker 3: I think we're gonna fix it at the last minute. 567 00:27:49,520 --> 00:27:51,919 Speaker 2: It's probably gonna involve a government shutdown, because that's how 568 00:27:51,960 --> 00:27:53,919 Speaker 2: when when we're painted into a corner, that's what we do. 569 00:27:54,000 --> 00:27:56,520 Speaker 2: Everybody takes their ball and goes home, and then we'll 570 00:27:56,520 --> 00:27:58,639 Speaker 2: come up with some kind of compromise. I cannot see 571 00:27:58,920 --> 00:28:01,120 Speaker 2: one side winning in the side losing. I think it's 572 00:28:01,119 --> 00:28:03,320 Speaker 2: going to have to be a sacrifice among all parties. 573 00:28:04,280 --> 00:28:06,640 Speaker 1: I don't think you're wrong there. Here's the all Worth advice. 574 00:28:06,800 --> 00:28:10,560 Speaker 1: It's pretty cut and dry. Don't rely on social Security 575 00:28:11,240 --> 00:28:15,160 Speaker 1: as your main source of your retirement income. Coming up next, 576 00:28:15,240 --> 00:28:19,160 Speaker 1: we're answering your questions about managing risk in today's market, 577 00:28:19,600 --> 00:28:22,680 Speaker 1: the truth about bond funds, and why your state plan 578 00:28:23,000 --> 00:28:26,120 Speaker 1: might not be working as well as you think. You're 579 00:28:26,160 --> 00:28:28,639 Speaker 1: listening to Simply Money, presented by all Worth Financial on 580 00:28:28,680 --> 00:28:36,800 Speaker 1: fifty five KRC, the talk station. You're listening to Simply 581 00:28:36,840 --> 00:28:39,680 Speaker 1: Money presented by all Worth Financial on Bob Sponseller along 582 00:28:39,680 --> 00:28:42,880 Speaker 1: with Brian James. You have a financial question you'd like 583 00:28:42,880 --> 00:28:44,640 Speaker 1: for us to answer. There's a red button you can 584 00:28:44,640 --> 00:28:47,560 Speaker 1: click while you're listening to the show. If you're listening 585 00:28:47,640 --> 00:28:50,960 Speaker 1: to the show on the iHeart app, simply record your 586 00:28:51,040 --> 00:28:55,000 Speaker 1: question and it will come straight to us. All right, Brian, 587 00:28:55,040 --> 00:28:58,280 Speaker 1: Emily and Cole Rain is working on her finances tonight 588 00:28:58,440 --> 00:29:02,480 Speaker 1: and says We've been saving in iras and a brokerage account, 589 00:29:02,480 --> 00:29:05,320 Speaker 1: but I'm not sure how to coordinate withdraws later down 590 00:29:05,400 --> 00:29:08,000 Speaker 1: the road. How do you build a multi account with 591 00:29:08,120 --> 00:29:12,240 Speaker 1: draw strategy that adapts to taxes and markets. Wow, you 592 00:29:12,280 --> 00:29:14,800 Speaker 1: talk about a conundrum here, Brian. This you got to 593 00:29:14,800 --> 00:29:16,959 Speaker 1: build a lot of assumptions into a plan like that. 594 00:29:17,360 --> 00:29:18,640 Speaker 3: Yeah, and this is pretty common. 595 00:29:18,680 --> 00:29:21,320 Speaker 2: I mean, we all have different flavors of taxation across 596 00:29:21,320 --> 00:29:23,600 Speaker 2: our different investments accounts. So the first thing you're gonna 597 00:29:23,600 --> 00:29:25,400 Speaker 2: you're going to want to do emily you segment these 598 00:29:25,400 --> 00:29:28,120 Speaker 2: accounts by the tax treatment, not by the age. 599 00:29:28,360 --> 00:29:30,360 Speaker 3: You know. So you've got three buckets here. 600 00:29:30,360 --> 00:29:32,680 Speaker 2: You got your taxable money, that's that brokerage account that's 601 00:29:32,760 --> 00:29:34,560 Speaker 2: just in your name, spits out of ten ninety nine 602 00:29:34,600 --> 00:29:37,920 Speaker 2: every year tax deferred with those of your pre tax assets. 603 00:29:37,920 --> 00:29:39,800 Speaker 2: You didn't specify what kind of iras you have, but 604 00:29:39,800 --> 00:29:42,320 Speaker 2: I'm gonna assume you got both flavors, and then also 605 00:29:42,400 --> 00:29:44,840 Speaker 2: tax free, which is anything has a word rawth in it. Now, 606 00:29:44,840 --> 00:29:46,960 Speaker 2: this could be four O, one k's iras, doesn't matter. 607 00:29:47,360 --> 00:29:49,800 Speaker 2: But each bucket has a different tax cost in So 608 00:29:50,520 --> 00:29:53,520 Speaker 2: the question always comes which one do I tap into first? Well, 609 00:29:53,560 --> 00:29:56,680 Speaker 2: our answer to that is use those taxable assets early, 610 00:29:56,760 --> 00:29:59,120 Speaker 2: but deliberately, so consciously spend those down and you might 611 00:29:59,160 --> 00:30:01,280 Speaker 2: even you know, some people will find themselves having built 612 00:30:01,320 --> 00:30:04,320 Speaker 2: up a pile of cash in the bank for whatever reason. Right, 613 00:30:04,360 --> 00:30:05,960 Speaker 2: A lot of the times, a lot of time when 614 00:30:05,960 --> 00:30:08,760 Speaker 2: we retire. It's very frequent I see somebody has an 615 00:30:08,800 --> 00:30:11,160 Speaker 2: inheritance or something like that, some kind of windfall around 616 00:30:11,160 --> 00:30:13,040 Speaker 2: this age, and it's just sitting in the bank doing nothing, 617 00:30:13,360 --> 00:30:15,360 Speaker 2: and they mentally carve that out and say, well, no, 618 00:30:15,400 --> 00:30:17,480 Speaker 2: that's my emergency fund. Well that's like four times of 619 00:30:17,520 --> 00:30:20,040 Speaker 2: your your annual expenses. So maybe you think a little 620 00:30:20,040 --> 00:30:23,360 Speaker 2: differently about that. Use those taxable assets early on. The 621 00:30:23,360 --> 00:30:25,640 Speaker 2: iras and the wroth irays are not nearly as far 622 00:30:25,680 --> 00:30:27,520 Speaker 2: away as your brain wants to tell you. They're just 623 00:30:27,560 --> 00:30:30,000 Speaker 2: as easy to move into your checking account, and they're not. 624 00:30:30,080 --> 00:30:32,880 Speaker 2: It's not that scary to do that. So and also, 625 00:30:32,960 --> 00:30:34,680 Speaker 2: you know, so you want to make let the markets 626 00:30:34,720 --> 00:30:37,120 Speaker 2: influence which it tap you you tap into, not how 627 00:30:37,200 --> 00:30:39,400 Speaker 2: much you spend. In a down market, you're gonna want 628 00:30:39,400 --> 00:30:41,920 Speaker 2: to prioritize withdrawals from cash. It's okay to spend down 629 00:30:41,920 --> 00:30:45,280 Speaker 2: cash reserves and then replenish those when the market recovers. 630 00:30:45,480 --> 00:30:47,480 Speaker 2: Look look at the market history and understand, you know 631 00:30:47,520 --> 00:30:50,080 Speaker 2: how things kind of ebb and flow. All right, So 632 00:30:50,080 --> 00:30:52,240 Speaker 2: now we're going to move into onto Ben and Anderson. 633 00:30:52,320 --> 00:30:54,600 Speaker 2: Ben says they're thinking about some Roth conversions over the 634 00:30:54,640 --> 00:30:57,320 Speaker 2: next few years, but they also want to delay social security. 635 00:30:57,320 --> 00:30:58,760 Speaker 2: So how do you put all this That's a lot 636 00:30:58,760 --> 00:31:00,280 Speaker 2: of variables to put into a plan, and how do 637 00:31:00,280 --> 00:31:03,400 Speaker 2: you multiple model multiple tax decisions that kind of have 638 00:31:03,440 --> 00:31:04,320 Speaker 2: an impact on each other. 639 00:31:04,320 --> 00:31:07,800 Speaker 1: Bob, Well, I'm thinking about you know, since I just 640 00:31:07,880 --> 00:31:10,760 Speaker 1: recorded Brian's answer to the prior question, I think I 641 00:31:10,800 --> 00:31:13,880 Speaker 1: could hit replay and give the same answer. You know, 642 00:31:14,200 --> 00:31:16,960 Speaker 1: you got to build out. Anytime you make these long 643 00:31:17,040 --> 00:31:20,120 Speaker 1: term plans, you need to model out, model it out 644 00:31:20,160 --> 00:31:23,240 Speaker 1: based on different assumptions about rate of return, you know, 645 00:31:23,480 --> 00:31:26,800 Speaker 1: future and current tax rates, the impact of all these 646 00:31:26,840 --> 00:31:28,840 Speaker 1: cash flows and what they do you know in terms 647 00:31:28,880 --> 00:31:31,600 Speaker 1: of IRMA, solid security, taxes, all those kind of things. 648 00:31:32,080 --> 00:31:34,440 Speaker 1: And then to Brian's point in the last question, it 649 00:31:34,480 --> 00:31:36,880 Speaker 1: all comes down to what you want and need to 650 00:31:36,920 --> 00:31:39,680 Speaker 1: spend and win. So I think my answer is very 651 00:31:39,720 --> 00:31:42,120 Speaker 1: similar to what Brian just talked about. This is the 652 00:31:42,160 --> 00:31:45,720 Speaker 1: reason we do financial planning. You know, you model out 653 00:31:45,720 --> 00:31:48,400 Speaker 1: different scenarios, You kind of play the what if game, 654 00:31:48,880 --> 00:31:51,200 Speaker 1: and you do the best you can to come up 655 00:31:51,320 --> 00:31:54,600 Speaker 1: with a good strategy. You know, controlling what we can 656 00:31:54,600 --> 00:31:58,400 Speaker 1: control based on what we know in making reasonable assumptions 657 00:31:58,800 --> 00:32:01,600 Speaker 1: and that's where some of this great software comes in. 658 00:32:01,640 --> 00:32:04,520 Speaker 1: That any good fiduciary advisor is going to have it 659 00:32:04,520 --> 00:32:07,120 Speaker 1: it hits or her disposal. I think you sit down 660 00:32:07,160 --> 00:32:09,760 Speaker 1: with a good advisor and model out some strategies and 661 00:32:09,760 --> 00:32:13,320 Speaker 1: then hopefully, hopefully you feel confident about the decisions you're 662 00:32:13,360 --> 00:32:16,320 Speaker 1: making and why you're making them. All Right, Terry and 663 00:32:16,440 --> 00:32:20,400 Speaker 1: Merrymont says, our advisor set our portfolios risk adjusted return 664 00:32:20,520 --> 00:32:24,720 Speaker 1: looks great, but our actual returns have been about average. 665 00:32:25,080 --> 00:32:29,560 Speaker 1: How do you interpret risk adjusted metrics, Brian without fooling yourself? 666 00:32:30,040 --> 00:32:32,640 Speaker 2: Well, yeah, this is a pretty classic disconnect between the two, 667 00:32:32,760 --> 00:32:34,840 Speaker 2: and it kind of happens when these risk metrics are 668 00:32:34,840 --> 00:32:38,360 Speaker 2: treated as a scorecard instead of really diagnostics. So here's 669 00:32:38,400 --> 00:32:40,800 Speaker 2: how I think about this. So understand what these risk 670 00:32:40,840 --> 00:32:44,000 Speaker 2: adjusted metrics are actually measuring. They're they're looking at how 671 00:32:44,040 --> 00:32:47,120 Speaker 2: much volatility you have in your portfolio. They're not looking 672 00:32:47,200 --> 00:32:49,840 Speaker 2: at how much return you got. That's very, very different. 673 00:32:49,840 --> 00:32:52,600 Speaker 2: Most people tend to focus on how much money did 674 00:32:52,600 --> 00:32:54,760 Speaker 2: I get, how much more money, how much more growth 675 00:32:54,760 --> 00:32:55,200 Speaker 2: did I get? 676 00:32:55,280 --> 00:32:56,920 Speaker 3: Versus what I need my portfolio to do. 677 00:32:57,120 --> 00:32:59,560 Speaker 2: And frankly, we all in great markets like we've had 678 00:32:59,560 --> 00:33:01,480 Speaker 2: over the last three years, we all lose sight at risk. 679 00:33:01,480 --> 00:33:04,080 Speaker 2: We haven't had much risk, you know, really at all 680 00:33:04,120 --> 00:33:06,040 Speaker 2: since twenty twenty two, which was one of the five 681 00:33:06,080 --> 00:33:08,760 Speaker 2: worst years we've ever had. We had a hiccup last 682 00:33:08,760 --> 00:33:11,760 Speaker 2: April when everybody panicked about tariffs briefly, but then that's 683 00:33:11,760 --> 00:33:14,600 Speaker 2: settled down. So other than that, we really just kind 684 00:33:14,640 --> 00:33:16,800 Speaker 2: of get hung up on how much my portfolio is growing, 685 00:33:16,880 --> 00:33:18,440 Speaker 2: not how much it could how big of a hit 686 00:33:18,480 --> 00:33:20,280 Speaker 2: it could take. So what you're gonna want to do 687 00:33:20,320 --> 00:33:22,280 Speaker 2: here is make sure that you understand what you have 688 00:33:22,320 --> 00:33:24,560 Speaker 2: in your portfolio and don't just look at what it's 689 00:33:24,560 --> 00:33:27,040 Speaker 2: done over the past three years, which, if it's properly arranged, 690 00:33:27,080 --> 00:33:29,560 Speaker 2: should have been great. But make sure you understand what 691 00:33:29,640 --> 00:33:31,600 Speaker 2: could it do, What did that pile of stuff do 692 00:33:31,720 --> 00:33:34,320 Speaker 2: in twenty two, you know, and be prepared for that 693 00:33:34,360 --> 00:33:36,120 Speaker 2: to happen again. It doesn't mean it's a bad thing. 694 00:33:36,440 --> 00:33:39,080 Speaker 2: Mark Sometimes market goes down, sometimes it rains. Just make 695 00:33:39,120 --> 00:33:40,680 Speaker 2: sure that you have the ability to handle it. But 696 00:33:40,760 --> 00:33:43,800 Speaker 2: most importantly, make sure you understand what it's capable of. 697 00:33:43,840 --> 00:33:46,400 Speaker 2: On the downside, we simply haven't seen that in many, 698 00:33:46,400 --> 00:33:48,200 Speaker 2: many years, so be paying attention. 699 00:33:49,080 --> 00:33:49,840 Speaker 3: Another one father. 700 00:33:50,040 --> 00:33:51,640 Speaker 2: This is probably be our last one for today, Lee 701 00:33:51,680 --> 00:33:54,520 Speaker 2: and Fort Thomas, at least as they've got several bond funds. Bob, 702 00:33:55,160 --> 00:33:57,240 Speaker 2: and what he's heard is that that what matters is 703 00:33:57,280 --> 00:33:59,280 Speaker 2: their sensitivity to the yield curve, But he's not sure 704 00:33:59,320 --> 00:34:01,680 Speaker 2: what that means exactly. How do you evaluate curve risk 705 00:34:01,760 --> 00:34:03,560 Speaker 2: without becoming a fixed income expert? 706 00:34:04,360 --> 00:34:06,360 Speaker 1: All right, Lee, you're thinking about this the right way. 707 00:34:06,400 --> 00:34:09,239 Speaker 1: I'll keep this as simple as possible. Brian alluded it 708 00:34:09,280 --> 00:34:12,279 Speaker 1: to the last question. Let's just use an example like 709 00:34:12,360 --> 00:34:15,600 Speaker 1: twenty twenty two when interest rates went up. You know, 710 00:34:15,680 --> 00:34:18,560 Speaker 1: back in twenty twenty two, the Fed raised interest rates 711 00:34:18,600 --> 00:34:22,080 Speaker 1: seven times to combat inflation. And I think a lot 712 00:34:22,080 --> 00:34:24,600 Speaker 1: of people know, anybody that was sitting on bonds or 713 00:34:24,640 --> 00:34:27,640 Speaker 1: bond funds, they lost quite a bit of money in 714 00:34:27,719 --> 00:34:30,200 Speaker 1: twenty twenty two. And here's why, And this gets back 715 00:34:30,239 --> 00:34:33,920 Speaker 1: to your question. The longer term, the longer the duration 716 00:34:34,160 --> 00:34:37,520 Speaker 1: of your bond fund, the more sensitive it's going to 717 00:34:37,600 --> 00:34:40,000 Speaker 1: be in a move to a move in interest rates. 718 00:34:40,040 --> 00:34:42,480 Speaker 1: Because let's face it, when you're in a bond, you're 719 00:34:42,640 --> 00:34:46,360 Speaker 1: loaning somebody money at a given interest rates. Well, it 720 00:34:46,440 --> 00:34:49,480 Speaker 1: stands to reason if you lock in that loan rate 721 00:34:49,600 --> 00:34:54,160 Speaker 1: for say ten years, and interest rates move up, you've 722 00:34:54,280 --> 00:34:59,000 Speaker 1: locked yourself into a yield that is way lower than 723 00:34:59,080 --> 00:35:02,400 Speaker 1: what somebody can get today if they go out in 724 00:35:02,520 --> 00:35:06,560 Speaker 1: loan money in the current interst rate environment. That's what 725 00:35:06,680 --> 00:35:10,600 Speaker 1: interest rate sensitivity means, and that's why you know it's 726 00:35:10,760 --> 00:35:14,680 Speaker 1: good to just ladder your bond portfolio. Have different maturity 727 00:35:14,760 --> 00:35:16,960 Speaker 1: dates and all that, so you're not just betting the 728 00:35:17,080 --> 00:35:21,520 Speaker 1: ranch on interest rates not moving up or down over 729 00:35:21,600 --> 00:35:23,319 Speaker 1: a long period of time. You want to have a 730 00:35:23,360 --> 00:35:27,799 Speaker 1: mix of everything so your bond portfolio can adjust as 731 00:35:27,920 --> 00:35:31,879 Speaker 1: interest rates move around. Hope that helps Lee. Coming up next, 732 00:35:31,960 --> 00:35:34,840 Speaker 1: how to gift investments the smart way and why it 733 00:35:34,920 --> 00:35:38,319 Speaker 1: could be one of the most impactful financial decisions you make. 734 00:35:38,760 --> 00:35:41,400 Speaker 1: You're listening to Simply Money presented by Allworth Financial on 735 00:35:41,440 --> 00:35:48,520 Speaker 1: fifty five KRC the talk station. You're listening to Simply 736 00:35:48,520 --> 00:35:51,200 Speaker 1: Money presided by Allworth Financial on Bob spond Seller along 737 00:35:51,239 --> 00:35:55,000 Speaker 1: with Brian James. If you're thinking about helping the kids 738 00:35:55,239 --> 00:35:58,080 Speaker 1: in your life build a strong financial future, there's a 739 00:35:58,120 --> 00:36:01,960 Speaker 1: strategy that goes far beyond cash or a saving spawn, 740 00:36:02,440 --> 00:36:06,480 Speaker 1: and that's gifting your actual existing investments. Brian let's get 741 00:36:06,480 --> 00:36:07,840 Speaker 1: into how some of that works. 742 00:36:08,320 --> 00:36:11,399 Speaker 2: Yeah, this is you know, this is we often think 743 00:36:11,440 --> 00:36:15,279 Speaker 2: about inheritance and waiting until after I've passed on, but 744 00:36:15,640 --> 00:36:17,000 Speaker 2: you know, sometimes people want to think about it a 745 00:36:17,000 --> 00:36:19,640 Speaker 2: little differently. And so let's talk about the tax rules 746 00:36:19,640 --> 00:36:21,359 Speaker 2: that come into play here. And it's probably not as 747 00:36:21,360 --> 00:36:23,520 Speaker 2: scary as a lot of people think. So if you're 748 00:36:23,560 --> 00:36:25,480 Speaker 2: not thinking about this year, we're obviously sneaking up pretty 749 00:36:25,480 --> 00:36:27,040 Speaker 2: click to the end of the year here, so it 750 00:36:27,080 --> 00:36:28,200 Speaker 2: might be a little late to do this year, but 751 00:36:28,239 --> 00:36:30,240 Speaker 2: so let's talk about it next year. You can gift 752 00:36:30,280 --> 00:36:33,640 Speaker 2: up to nineteen thousand dollars per person or thirty eight 753 00:36:33,680 --> 00:36:36,800 Speaker 2: thousand dollars as a married couple without triggering any gift 754 00:36:36,800 --> 00:36:39,440 Speaker 2: taxes or without triggering any reporting or eating into your 755 00:36:39,440 --> 00:36:42,200 Speaker 2: lifetime exception. And you don't need to give new money. 756 00:36:42,200 --> 00:36:44,080 Speaker 2: This is just the value of anything you want to 757 00:36:44,120 --> 00:36:46,120 Speaker 2: you want to move over. So a lot of people 758 00:36:46,120 --> 00:36:48,200 Speaker 2: get worried about this and know it's not income to 759 00:36:48,239 --> 00:36:50,680 Speaker 2: the recipient. It's of course not deductible to the person 760 00:36:50,719 --> 00:36:53,759 Speaker 2: gift giving it away too. And as you know, as 761 00:36:53,800 --> 00:36:55,959 Speaker 2: an extra to this, let's say you're you're giving money 762 00:36:55,960 --> 00:36:57,279 Speaker 2: you want to give it to your own children. Well, 763 00:36:57,280 --> 00:37:00,600 Speaker 2: if that child is married and you trust the you're 764 00:37:00,640 --> 00:37:02,319 Speaker 2: okay with that in law, then you can give that 765 00:37:02,360 --> 00:37:05,600 Speaker 2: person nineteen thousand dollars too. So a married couple can 766 00:37:05,640 --> 00:37:08,399 Speaker 2: actually give thirty eight thousand dollars to each of their 767 00:37:08,440 --> 00:37:11,160 Speaker 2: own children's spouses, if that makes any sense. If you 768 00:37:11,160 --> 00:37:12,880 Speaker 2: want to do that, and again this is not not 769 00:37:12,960 --> 00:37:15,000 Speaker 2: nearly as scary as you as you might think. What 770 00:37:15,280 --> 00:37:19,359 Speaker 2: you're working against here is if you do more than that, 771 00:37:19,360 --> 00:37:21,319 Speaker 2: there's nothing stopping. It's not illegal, but you do have 772 00:37:21,360 --> 00:37:23,920 Speaker 2: to report it. Still not taxable, but you have to 773 00:37:23,960 --> 00:37:26,279 Speaker 2: report it because there is a lifetime maximum of a 774 00:37:26,320 --> 00:37:29,400 Speaker 2: million dollars. The reporting tracks that over your lifetime. So 775 00:37:29,440 --> 00:37:31,040 Speaker 2: if you do want to give somebody more money than that, 776 00:37:31,200 --> 00:37:33,080 Speaker 2: knock yourself out, you just have to report it. 777 00:37:33,239 --> 00:37:33,359 Speaker 1: Now. 778 00:37:33,400 --> 00:37:36,160 Speaker 2: Remember you're not passing, you are passing on the capital gain. 779 00:37:36,239 --> 00:37:38,040 Speaker 2: So if you have low cost base you bought apple 780 00:37:38,040 --> 00:37:39,440 Speaker 2: stock forty years ago, you want to give it to 781 00:37:39,480 --> 00:37:41,640 Speaker 2: your kids, Well, they have that low cost basis from 782 00:37:41,640 --> 00:37:43,440 Speaker 2: forty years ago as well. 783 00:37:43,640 --> 00:37:45,680 Speaker 1: Yeah, and let's talk about why it might make some 784 00:37:45,800 --> 00:37:49,200 Speaker 1: sense instead of writing a check to actually give away 785 00:37:49,280 --> 00:37:52,880 Speaker 1: some existing positions you mutual funds, ETF stocks that you 786 00:37:52,960 --> 00:37:55,600 Speaker 1: already own, and you already hinted at the answer, Brian, 787 00:37:55,640 --> 00:37:58,440 Speaker 1: it's because in most cases, the kids that you're giving 788 00:37:58,480 --> 00:38:00,920 Speaker 1: this money to are in a low tax bracket that 789 00:38:01,040 --> 00:38:03,719 Speaker 1: you are, and you can shift this money and have 790 00:38:03,840 --> 00:38:07,200 Speaker 1: them pay the capital gains rates at a much lower 791 00:38:07,239 --> 00:38:10,160 Speaker 1: tax rate than you. It's a great way to you know, 792 00:38:10,200 --> 00:38:13,759 Speaker 1: position your own portfolio to get rid of them, or 793 00:38:13,840 --> 00:38:16,440 Speaker 1: to give some of the gain the gainers or the 794 00:38:16,480 --> 00:38:20,040 Speaker 1: winners and put those taxes in a lower tax bracket 795 00:38:20,080 --> 00:38:23,160 Speaker 1: and then reposition your own portfolio. Let's talk about what 796 00:38:23,320 --> 00:38:25,840 Speaker 1: some accounts that we can use to do this, Brian. 797 00:38:25,920 --> 00:38:27,839 Speaker 1: What you know, what are the mechanisms we can use 798 00:38:27,880 --> 00:38:28,720 Speaker 1: to make these gifts. 799 00:38:28,880 --> 00:38:30,480 Speaker 2: Well, if you're going to do this, then you're looking 800 00:38:30,480 --> 00:38:33,240 Speaker 2: at potentially a custodial account. This is the old ugma umah. 801 00:38:33,239 --> 00:38:35,200 Speaker 2: I'm honestly not a huge fan of this. I think 802 00:38:35,239 --> 00:38:36,920 Speaker 2: sometimes this can just make a mask. But if you 803 00:38:37,040 --> 00:38:39,480 Speaker 2: this is for an underage child under age eighteen or 804 00:38:39,520 --> 00:38:41,799 Speaker 2: twenty one, depending on the state you're in, that's how 805 00:38:41,840 --> 00:38:44,799 Speaker 2: they can own these assets with a custodian involved. I'd 806 00:38:44,840 --> 00:38:47,319 Speaker 2: be looking more at roth irays than five twenty nine 807 00:38:47,360 --> 00:38:49,600 Speaker 2: college plans. That's the only cash can flow into those. 808 00:38:49,600 --> 00:38:51,359 Speaker 2: But take some tax advantages out of this. If you're 809 00:38:51,360 --> 00:38:53,520 Speaker 2: going to do it all right, here's. 810 00:38:53,280 --> 00:38:56,600 Speaker 1: The r Worth advice gifting investments. It's not just about 811 00:38:56,640 --> 00:38:59,759 Speaker 1: the money, it's about giving kids a head start on 812 00:39:00,120 --> 00:39:04,879 Speaker 1: understanding wealth, understanding investment risk and the power of long 813 00:39:04,960 --> 00:39:07,759 Speaker 1: term growth. Thanks for listening tonight. You've been listening to 814 00:39:07,800 --> 00:39:11,680 Speaker 1: Simply Money, presented by all Worth Financial on fifty five KRC, 815 00:39:12,040 --> 00:39:12,960 Speaker 1: the talk station