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Speaker 1: Station eight o six on a Monday. I hope you

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Speaker 1: know what that means. It's that time talking money matters.

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Speaker 1: It's money Monday with all Worth Financials. Brian James appreciate

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Speaker 1: all Worth loading out every Monday to talk about financial matters.

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Speaker 1: I hope you had a wonderful weekend. You're ready for

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Speaker 1: the holidays, Brian, we are. Yeah, We've got all local.

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Speaker 1: We're a good West side Cincinnati family.

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Speaker 2: So nobody ever left town very far, so we just

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Speaker 2: got a lot of places they hit over the next

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Speaker 2: few weeks.

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Speaker 1: H Yeah, I'm sure you're looking forward to it. I know,

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Speaker 1: I am. It's nice to excel a little bit and

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Speaker 1: try to enjoy something so much gloom and doom in

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Speaker 1: the news these days. Just I'm glad the holidays are

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Speaker 1: fast approaching for that reason alone. If there are any

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Speaker 1: other I gotta ask you. This Federal Reserve cut interest

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Speaker 1: rates by a quarter point and there was apparently dissension

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Speaker 1: among the ranks. We had Chicago's Fed president and the

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Speaker 1: Kansas City Fed saying no, no, you need a whole rate steady.

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Speaker 1: The Fed Governor, Stephen Moran said they've fifty percent basis

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Speaker 1: point cut, so point five and it came in at

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Speaker 1: point twenty five. What's the argument about Brian James. What

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Speaker 1: seems to be the problem here reaching a consensus?

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Speaker 3: Well, you know that people have different opinions is really

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Speaker 3: all this thing.

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Speaker 2: It really turns out we don't just move in lockstep

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Speaker 2: go figure. So, yeah, there were three descents this time around.

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Speaker 2: There were two that wanted to keep rates exactly where

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Speaker 2: they were, with concerns about elevated inflation, which is really,

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Speaker 2: you know, inflation has just never gone away. I don't

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Speaker 2: know that it's necessarily new inflation, it just hasn't gotten back.

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Speaker 3: To where we want.

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Speaker 2: And then another one wanted a steeper cutout about a

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Speaker 2: half percent. That one was concerned about a slowing labor market,

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Speaker 2: in other words, we want This person wanted to basically

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Speaker 2: kind of goose the system to sit, to entice businesses

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Speaker 2: to invest more and then re energize the hiring market.

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Speaker 2: So there's more new projections out there, some of them

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Speaker 2: painting a more optimistic, bigger picture, and so they did

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Speaker 2: increase their GDP forecast for twenty six to two point

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Speaker 2: three percent from one point eight.

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Speaker 3: So obviously that's good.

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Speaker 2: They're seeing better times ahead and reducing the twenty six

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Speaker 2: inflation projections to two point four percent.

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Speaker 3: Two point six so as we're sitting here right now.

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Speaker 2: Oh and also they kept unemployment the unemployment projections at

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Speaker 2: four point four for next year. So as we're sitting

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Speaker 2: here right now, it seems to be we are leaning

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Speaker 2: toward the opinion of the general opinion of the Fed

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Speaker 2: governors is positive. We're seeing better things coming with regard

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Speaker 2: to both inflation and economic growth. But yes, like you said,

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Speaker 2: we do still have some descent among the ranks.

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Speaker 1: Okay, and I certainly get to this sounds kind of

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Speaker 1: joke a little bit there, But let me ask you this.

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Speaker 1: You mentioned the economic forecast, and I was glad you did,

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Speaker 1: because they project where they think the economy is going,

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Speaker 1: inflation and and employment and all that is. Are there

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Speaker 1: any statistics about how accurate they are with these forecasts,

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Speaker 1: because you know, someone wrote down accurate. Is this science

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Speaker 1: or alchemy? That will be me?

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Speaker 3: Really?

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Speaker 1: What's behind this? And has anybody checked their overall accuracy

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Speaker 1: rate over the years.

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Speaker 2: Well, I think they've kind of They run hot and cold,

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Speaker 2: and we get excited about them when they're super accurate.

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Speaker 3: We get excited about.

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Speaker 2: Them when they're not accurate at all when they're in

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Speaker 2: the When they're kind of in the middle, we don't

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Speaker 2: pay attention a whole lot. So but yeah, these are

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Speaker 2: generally considered to be directionally useful but numerically wrong. So,

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Speaker 2: for example, in twenty one and twenty two, the FED

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Speaker 2: repeatedly projected inflation was going to fall quickly, only to

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Speaker 2: see it spike to forty year highs. Remember transitory inflation,

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Speaker 2: Well that wasn't exactly transitory. And over the last fifteen

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Speaker 2: fifteen years, we've repeatedly predicted slower GDP.

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Speaker 3: Growth than what has actually occurred.

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Speaker 2: Twenty thirteen to twenty nineteen growth was consistently ahead of

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Speaker 2: FED estimates. So now the FED hasn't been any more

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Speaker 2: accurate really than many other resources in terms of projecting

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Speaker 2: all this. And part of me wants to believe that

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Speaker 2: this might be because it's gonna hurt a lot more

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Speaker 2: if we tell everybody everything is wonderful, because people will

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Speaker 2: tend to take that and multiply it by ten, and

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Speaker 2: so it is reasonable to me that they might be

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Speaker 2: hesitant to really kind of light that light things on

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Speaker 2: fire too quickly, and therefore they kind of lean toward

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Speaker 2: urging caution a little more often.

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Speaker 1: Well, with hindsight, it should. Do you think they're lamenting

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Speaker 1: the fact they didn't put the brakes on a little

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Speaker 1: bit sooner considering the trillions of dollars that were infused

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Speaker 1: into the economy through all these massive government spending programs

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Speaker 1: during the COVID time.

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Speaker 3: Oh, for sure.

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Speaker 2: I mean, because we had unbridled spending and we didn't

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Speaker 2: have a whole lot of oversight over the whole thing.

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Speaker 2: But yeah, I think at the time there was just

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Speaker 2: out and out panic among you know, the decision makers

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Speaker 2: from a standpoint of we don't know what this is,

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Speaker 2: we don't know how long this is going to last.

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Speaker 3: We just know we have to do something big and

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Speaker 3: something quick.

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Speaker 2: And I think and then a lot a lot of

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Speaker 2: cases that got us back to things we've seen in

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Speaker 2: the past where we've done a lot of spending like

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Speaker 2: that with really out any any handcuffs on it, and

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Speaker 2: that gets us the inflation that we've gotten. We saw

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Speaker 2: that in the late seventies early eighties when we were

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Speaker 2: when we basically cut interest rates too low during the

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Speaker 2: Nixon administration, and that begat a bunch of inflation over

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Speaker 2: the next several several years, leading to really really high

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Speaker 2: interest rates in the late eighties, well the early eighties.

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Speaker 1: It is one of the big question marks the scenes

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Speaker 1: to be swirling about all this. And one of the

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Speaker 1: reasons I think they lowered the interest rate by our

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Speaker 1: quarter point is because of the concern over the labor market. See,

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Speaker 1: we used to be a rather moving target these days,

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Speaker 1: and I've read a number of articles where there's like

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Speaker 1: question marks over waitment. What is the true state of

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Speaker 1: the labor market. It seems that there's a lot of

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Speaker 1: people that are supposed to be in the know that

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Speaker 1: aren't quite in the know on that. But all the

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Speaker 1: arras seem to point to a deteriorating labor market. If

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Speaker 1: for no other reason, We're going to talk about artificial

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Speaker 1: intelligence in the next segment. This may be a bubble coming,

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Speaker 1: but AI is in fact replacing a lot of jobs,

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Speaker 1: and does it seems like that that trajectory is not

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Speaker 1: going to go anywhere anytime soon.

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Speaker 2: Yeah, And we do have some jobs data coming out here,

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Speaker 2: and we have to look with a little bit of

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Speaker 2: a cross eye at the at the data we're getting

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Speaker 2: because who knows what we're seeing anymore? Because we're kind

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Speaker 2: of swapping this in for that and that kind of thing.

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Speaker 2: But in any case, where we are right now, the

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Speaker 2: November payroll payroll comes out this week, but we still

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Speaker 2: got some good information this week anyway. So August was

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Speaker 2: the last time the Jolts survey was updated, and that

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Speaker 2: showed opening job openings near multi year lows. And after

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Speaker 2: the government reopened, there was a jump in September to

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Speaker 2: seven point six million from seven point two and October

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Speaker 2: data is inching higher to seven point six So most

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Speaker 2: of these increases are coming from lower skill service jobs

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Speaker 2: and those are still dealing with seasonal quirks. So we

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Speaker 2: obviously we're in the holiday so you're gonna see a

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Speaker 2: little bit of fuzziness there. But all this data tells

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Speaker 2: us that workers are feeling a little bit less confident

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Speaker 2: about leaving that current job to find a new one

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Speaker 2: without already having secured something. You know, when these indexes

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Speaker 2: look a little bit different, that's when people feel like, Okay,

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Speaker 2: the job market is healthy, so I'm going to go

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Speaker 2: ahead and leave this job that's making me miserable and

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Speaker 2: I'll find something else later. Well, we're not seeing this

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Speaker 2: is the quis rate I'm referring to. So people are

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Speaker 2: hanging on to older jobs without you know, having found

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Speaker 2: a new one yet, So a little bit of insecurity there.

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Speaker 1: So I hear what you're saying, no reason to doubt that.

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Speaker 1: But I keep again reading a bunch of articles about

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Speaker 1: how concerned people are that are looking to hire people

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Speaker 1: they can't find qualified people for the job, or the

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Speaker 1: people that they find are not well, not very good workers.

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Speaker 1: So there seems to be a demand out there for workers.

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Speaker 1: But I guess not in all sectors you mentioned the

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Speaker 1: lower level sectors, or are there other areas that have

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Speaker 1: been impacted one way or the other.

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Speaker 2: Well, I think there's just a heel. Like you said,

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Speaker 2: there's a huge disconnect. It would be wonderful to get

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Speaker 2: all these people in the same room. The people who

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Speaker 2: are saying there aren't enough jobs available. This is the

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Speaker 2: people whore saying there aren't enough workers available. I would

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Speaker 2: like to get them into one big, giant hotel conference

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Speaker 2: room and maybe just kind of have a big job

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Speaker 2: fare and see how that goes. But I have a

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Speaker 2: feeling this is more of a discrepancy of employers not

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Speaker 2: wanting to give the perks that people still feel should

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Speaker 2: be involved in a job such as a flexible work schedule, hybrid.

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Speaker 3: And remote work, those kinds of things.

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Speaker 2: And then of course there we'll never see the eye

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Speaker 2: to eye on what the compensation should be in general.

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Speaker 2: So to me, all of that speaks more to a

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Speaker 2: lack of willingness to compromise on both sides than it

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Speaker 2: does complete blindness to the other side.

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Speaker 1: All right, and the all important question the quarter point drop,

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Speaker 1: is that going to translate into lower mortgage rates.

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Speaker 2: Well it should, But at the same time, there's a

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Speaker 2: lot of people out there, Brian who bought houses and

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Speaker 2: wound up with a eight eight and a half percent

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Speaker 2: mortgage something like that, And so we're gonna see those

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Speaker 2: folks who are obviously seeing.

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Speaker 3: An opportunity to refinance.

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Speaker 2: Sure, but that also was putting, that was pushing, you know,

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Speaker 2: those higher registrates were keeping people from moving at all, deciding,

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Speaker 2: you know, we'll push it out another couple three years. Well,

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Speaker 2: now that interest rates are falling a bit, I think

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Speaker 2: we might see the demand for housing pop back up

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Speaker 2: just a little bit, because people who would would have

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Speaker 2: moved otherwise over the last couple three years held off,

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Speaker 2: and now things are more a little more favorable for

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Speaker 2: them to do so.

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Speaker 1: And under those circumstances, don't we still have an inventory

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Speaker 1: problem because I got the impression that we're kind of

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Speaker 1: short on housing supply.

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Speaker 3: Yeah, and I think there's there's a lot to be

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Speaker 3: said too. We're also moving into a slower time of

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Speaker 3: year where people just don't want to move. So if

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Speaker 3: I have the.

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Speaker 2: Cold out, it's exactly, I don't want to go get

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Speaker 2: the paper, let alone move everything. I know.

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Speaker 3: So, yeah, we're entering in that time of year.

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Speaker 2: And yeah, so there are fewer houses hitting the market.

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Speaker 2: I don't see cracks in the foundation or anything like that,

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Speaker 2: just kind of a downswing in the overall activity.

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Speaker 1: All right, fair enough, We'll continue with Brian James speaking

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Speaker 1: of artificial intelligence Wall Street seeing an AI bubble coming.

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Speaker 1: What's that mean for us generally speaking? We'll learn about

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Speaker 1: that with Brian James. Stick around me right back fast

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Speaker 1: and pro roofing a reputable company that pre.

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Speaker 3: The talk station.

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Speaker 1: It's eight nineteen at fifty five KRC, the Talk Station,

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Speaker 1: Happy Monday, Brian James.

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Speaker 3: All were financials.

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Speaker 1: Brian James going through the Money Monday segment, and we're

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Speaker 1: going to talk about owner We're going to see another

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Speaker 1: tech bubble in the form of an AI bubble. Brian James,

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Speaker 1: Billions of dollars being thrown a fit at artificial intelligence

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Speaker 1: and a real game changer in terms of our energy needs.

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Speaker 1: And maybe we'll have a reform in terms of where

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Speaker 1: we get our energy from, notably small nuclear reactors. Please,

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Speaker 1: Dear God, let us have those. But is this a

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Speaker 1: bubble getting ready to pop? The whole world's competing on

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Speaker 1: this stage.

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Speaker 2: Well, yeah, there's and this is AI has been a catalyst,

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Speaker 2: just like lots of other technological headlines over the last

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Speaker 2: thirty years. I remember remember when the Internet was very

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Speaker 2: first a brand new thing in the late nineties and

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Speaker 2: early two thousands. Well, obviously that was not a flash

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Speaker 2: in the pan, and it'd be got more bubbles. But

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Speaker 2: what we're concerned about here right now is you're seeing

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Speaker 2: a lot of sell offs on Nvidia, some of the

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Speaker 2: big names. An Oracle stock that has plunged after they

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Speaker 2: were they hit about three hundred and twenty bucks a share,

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Speaker 2: Now they're down to about one hundred and eighty eight.

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Speaker 2: A big step back for Oracle that was from October

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Speaker 2: to now, and just over a lot of AI spending

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Speaker 2: a weakening sentiment for firms tied to these platforms like

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Speaker 2: like open ai, and that's open Ai is the one

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Speaker 2: behind chat GPT.

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Speaker 3: Of course, the Microsoft is doing a lot of money

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Speaker 3: them as well.

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Speaker 2: And so I think investors are looking at the kind

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Speaker 2: of debating, okay, for twenty twenty six, how do I

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Speaker 2: want to be positioned?

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Speaker 3: Do want to do?

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Speaker 2: I want to stay as exposed given the run up

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Speaker 2: that all these stocks have had, and given the fact

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Speaker 2: that we really haven't had much of a shakeout. Remember

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Speaker 2: back two thousand and one, two thousand and two, that

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Speaker 2: was the shakeout of the original Internet bubble, and that's

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Speaker 2: when the winners and losers were first chosen. That has

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Speaker 2: not happened yet in the AI space, and I think

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Speaker 2: investors might be starting to look to that saying, okay,

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Speaker 2: it's really time for time for things to kind of

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Speaker 2: move to a little bit of a ranked order in

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Speaker 2: terms of who's going to survive and who's not.

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Speaker 1: Well, it's like crypto in a way, isn't it. There's

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Speaker 1: like eight gajillion different cryptos out there, and you know,

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Speaker 1: I guess one of them, maybe or more, are going

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Speaker 1: to emerge as the top contenders and the other one's

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Speaker 1: going to fall by the wayside? Am I close on that?

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Speaker 3: Well?

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Speaker 2: I mean I think I think the difference there is

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Speaker 2: Crypto is more speculatively based. I mean it's it's these

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Speaker 2: companies that are pursuing AI have different patented technologies, different

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Speaker 2: approaches to things, versus crypto, which is ninety percent what

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Speaker 2: does the herd want.

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Speaker 3: To buy to me? I got you so?

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Speaker 2: But yeah, so I think it's going to be a

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Speaker 2: little different than that. This will be more traditional. Let's

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Speaker 2: look at the business plans and the opportunity strengths and

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Speaker 2: weaknesses and all that of each individual company again versus

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Speaker 2: just speculative types of assets.

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Speaker 1: All right, Well, I guess in terms of exposure, I presumed,

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Speaker 1: since I have, you know, these managed funds and they're

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Speaker 1: filled with all kinds of different stocks, that anybody who's

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Speaker 1: got that kind of financial portfolio is exposed on some level.

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Speaker 1: I presume that some of my investments are in these

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Speaker 1: AI companies.

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Speaker 3: Right. Oh, it's hard, It's impossible to avoid. There's no way.

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Speaker 2: Yeah, even if you don't have anything that strictly is

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Speaker 2: itself involved in AI, it's a virtual guarantee that a

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Speaker 2: lot of the companies you've invested in via those mutual

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Speaker 2: funds and exchange traded funds are somehow themselves benefiting from AI.

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Speaker 2: There are a lot of savings and a lot of

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Speaker 2: efficiencies to be gained by allowing to allowing computers to

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Speaker 2: do more thinking pros and cons for sure, but we

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Speaker 2: can't pretend that these aren't these.

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Speaker 3: Aren't powerful tools.

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Speaker 2: So AI is going to filter its way into every

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Speaker 2: part of every industry just simply because of those efficiencies

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Speaker 2: that can be gained. If you own the S and

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Speaker 2: P five hundred, then a huge chunk of that the

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Speaker 2: largest holdings in there. And I feel like we've beaten

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Speaker 2: this to death on the radio waves here this last

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Speaker 2: several months. But a very very large chunk of the

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Speaker 2: S and P five hundred is focused in the technology

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Speaker 2: sect and just a handful of country companies. Because of

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Speaker 2: the way it's built, the S and P five hundred

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Speaker 2: is capitalization weighted. That means the bigger the company, the

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Speaker 2: more it makes up of the index. So as we

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Speaker 2: all know, technology is ruling the day at the moment,

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Speaker 2: so those tech companies are absolutely huge. If you have

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Speaker 2: the S and P five hundred index fund that's a

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Speaker 2: good fund, but.

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Speaker 3: Don't assume that you're completely diversified.

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Speaker 2: It's largely going to be driven by what technology does,

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Speaker 2: which that's just driving the market these past couple decades.

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Speaker 1: I guess it is now I'm guessing this is I

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Speaker 1: hate using the phrase piece of God, but it often

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Speaker 1: is like the passes all human understanding, and for Brian Thomas,

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Speaker 1: it passes my understanding. Now, there are different types of

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Speaker 1: artificial intelligence, the mechanism, the how it works, components behind

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Speaker 1: the scenes of computer number crunching, whatever it's doing. And

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Speaker 1: somebody is going to emerge as the predominant force at

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Speaker 1: some point, right other one is going to be better

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Speaker 1: than the other. So there's the tech component of it.

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Speaker 1: But then there's also the hardware part. Isn't Navidia don't

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Speaker 1: they manufacture the chips?

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Speaker 3: Correct? Yeah, there's a lot of components to this.

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Speaker 2: There there are, you know, and I think back always

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Speaker 2: us example, I think back to the gold Rush. The

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Speaker 2: gold Rush was not at all about people digging gold

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Speaker 2: out of the ground. In terms of who made the money.

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Speaker 2: It was the companies that realized that there was a

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Speaker 2: movement happening among society. A lot of people were moving

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Speaker 2: out west to go dig in the dirt. So the

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Speaker 2: companies that made a lot of money were Levi's because

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Speaker 2: they they invented clothing that was durable and would hold

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Speaker 2: up for that kind of thing. They were the Studebaker

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Speaker 2: company that ultimately became the automotive company that we know of.

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Speaker 3: They sold shovels. Go figure, that's a good idea.

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Speaker 2: Wells Fargo, that's where the stage coach came from. For

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Speaker 2: for all these businesses doing doing business out there on

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Speaker 2: the frontier, out on the fringes, somehow that money had

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Speaker 2: to get back to the to the financial centers. That's

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Speaker 2: where the stage coach came from. So it's same thing

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Speaker 2: is happening here. And Vidia makes the chips that will

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Speaker 2: support the demand that's out there. In Vidia is not

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Speaker 2: out there putting AI into companies and consulting with them

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Speaker 2: on how to use it. They're just creating the hardware

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Speaker 2: because they know that demand is going.

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Speaker 3: To be there for it. Are are they unique?

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Speaker 1: Because that's all the only company I hear about in

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Speaker 1: terms of chips, and I know there's got to be

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Speaker 1: more of them out there, But does Navidia have any

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Speaker 1: competitors along there? At their level. Yeah.

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Speaker 3: Yeah, so in Vidia, it is not a new company.

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Speaker 2: It's a new name to people who don't who haven't

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Speaker 2: necessarily paid much attention to the technology industry. But in

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Speaker 2: Vidia has been a graphics company for decades, right, right,

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Speaker 2: So this.

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Speaker 3: Is not They're not a you know, new on the scene.

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Speaker 2: But they have the right technology and the right patents

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Speaker 2: to make this, to make the chips that are that

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Speaker 2: that happen to be appropriate for graphical processing units. They

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Speaker 2: also happen to be the best brains for artificial intelligence.

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Speaker 2: So some of it is knowledge and some of it

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Speaker 2: is right place, right time. But but they quickly got there,

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Speaker 2: and they had the ability to scale it up in

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Speaker 2: order to basically provide enough supply for all the demand

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Speaker 2: that's out.

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Speaker 1: There, all right, And of course we have that you know,

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Speaker 1: critical question of whether they're going to be allowed to

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Speaker 1: sell chips that China and China's benefiting from official intelligence too.

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Speaker 1: The question is do we need to fund or help

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Speaker 1: our our foes if we may, in a geopolitical sense

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Speaker 1: refer to them along with their technology. So there's all

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Speaker 1: that that goes along with it.

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Speaker 2: Yeah, that's true, and there is competition out there right.

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Speaker 2: This doesn't mean that AMD and Intel have just kind

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Speaker 2: of gone away and vanished. They are still out there,

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Speaker 2: but in Vidia is the one again just has the

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Speaker 2: best technology to produce these things at scale. And there

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Speaker 2: is you know, there wasn't remember it wasn't that long

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Speaker 2: ago that China came out with a competitor that turned

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Speaker 2: out to be a little bit, a little bit fake,

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Speaker 2: a little bit plastic. But there are certainly other organizations

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Speaker 2: other countries out there looking for more you looking for

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Speaker 2: more efficiencies there that will compete with in Nvidia, and

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Speaker 2: Vidia just has that they have much more of the

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Speaker 2: vertical of producing all these types of things.

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Speaker 3: So that's why they're the leader right now.

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Speaker 1: All right, we'll continue with Brian James. What is the

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Speaker 1: required minimum distribution? When is the deadline and what you

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Speaker 1: need to know about that. That's coming up next. More

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Speaker 1: with Brian James and Money Monday. After these brief words

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Speaker 1: fifty five KRC.

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Speaker 3: This is a station.

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Speaker 1: A twenty nine to fifty five fir CED talks station,

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Speaker 1: Happy Monday, Money Money with Brian James. We're gonna talk

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Speaker 1: about required minimum distributions.

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Speaker 3: Question.

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Speaker 1: This is for folks with retirement accounts like four to

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Speaker 1: one k's, and as I understand it, at seventy three

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Speaker 1: you have to start taking this required minimum distribution. In

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Speaker 1: other words, you might not need the money for your

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Speaker 1: day to day living expenses or whatever. You might be

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Speaker 1: well off independent of your retirement account, but you have

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Speaker 1: to start taking a distribution. What is the reason or

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Speaker 1: policy behind the mandate that at age seventy three you

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Speaker 1: have to start doing this before we get into the

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Speaker 1: dates and all that, Brian James.

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Speaker 2: Jure, Well, yeah, this refers to not only four to

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Speaker 2: one k's as you mentioned, but also iras four h

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Speaker 2: three b's really any kind of tax sheltered account that

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Speaker 2: would have originated from your employment by some other company

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Speaker 2: out there. And the thought is the reason for this

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Speaker 2: is the IRS is basically saying, Okay, the gravy train

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Speaker 2: has come to a halt. You've never paid taxes on

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Speaker 2: these pre tax dollars. This only affects pre tax accounts.

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Speaker 2: We're not talking about roth, we're not talking about after tax.

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Speaker 2: So what they're basically saying is that you've contributed this

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Speaker 2: to maybe thirty forty years, you deducted it on the

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Speaker 2: way in it has grown completely tax free to something

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Speaker 2: when you turn age seventy three, it's also or seventy five,

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Speaker 2: depending on how old you are right now. If you

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Speaker 2: haven't reached that age as of yet as of by

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Speaker 2: twenty thirty, then it'll be seventy five.

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Speaker 3: But for most people now seventy.

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Speaker 2: Three, then the IRS says you do have to start

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Speaker 2: taking taxable distributions. Doesn't matter what you do with the money.

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Speaker 2: What it really means is that you just have to

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Speaker 2: start paying taxes on little bits of it. There's a

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Speaker 2: calculation you have to go through, and there's a table

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Speaker 2: in the IRS records that you'll use to do the calculation,

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Speaker 2: or just have your IRA custodian or four to one

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Speaker 2: K custodian do it for you. But essentially a good

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Speaker 2: ballpark is about four to five percent of the of

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Speaker 2: the accounts. So maybe if you've got one hundred thousand

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Speaker 2: and one of these accounts, you might have to take

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Speaker 2: out something like four to five thousand. That's not the taxes,

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Speaker 2: that is the distribution. That is what will be taxed.

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Speaker 2: So if you're in a twenty percent bracket, you might

441
00:18:55,920 --> 00:18:58,480
Speaker 2: owe eight hundred thousand bucks on that. So but the

442
00:18:58,520 --> 00:19:01,239
Speaker 2: whole point to answer your question, is basically that this

443
00:19:01,280 --> 00:19:05,160
Speaker 2: can't be a permanently tax sheltered pile of money. Does

444
00:19:05,240 --> 00:19:06,960
Speaker 2: have to get taxed at some point, and that's where

445
00:19:07,000 --> 00:19:08,880
Speaker 2: that's where they decided to start it decades ago.

446
00:19:09,240 --> 00:19:13,440
Speaker 1: Okay, well, there is a thing called an inherited IRA,

447
00:19:13,640 --> 00:19:17,080
Speaker 1: for example, and is that a taxable event when it's

448
00:19:17,080 --> 00:19:19,359
Speaker 1: passed along to airs or is this are they subject

449
00:19:19,400 --> 00:19:21,040
Speaker 1: to a separate requirementium distribution.

450
00:19:21,320 --> 00:19:23,880
Speaker 2: Yeah, as with anything, there are lots of moving parts

451
00:19:23,880 --> 00:19:26,640
Speaker 2: of this. So what you're referring to is somebody that

452
00:19:26,400 --> 00:19:29,840
Speaker 2: that you know, some benefactor of mine, passed away. They

453
00:19:29,880 --> 00:19:32,720
Speaker 2: themselves had one of these four oh one k ira

454
00:19:33,240 --> 00:19:37,200
Speaker 2: tax deferred accounts. And so generally speaking, here's what's commonly

455
00:19:37,240 --> 00:19:40,240
Speaker 2: known nowadays, as of the Secure Act of twenty twenty.

456
00:19:40,400 --> 00:19:45,600
Speaker 2: If I inherit an IRA from someone who passed after

457
00:19:45,680 --> 00:19:48,360
Speaker 2: twenty twenty, then I have ten years to drain that account.

458
00:19:48,520 --> 00:19:50,600
Speaker 2: I can drain it all day one, nothing stops me.

459
00:19:50,800 --> 00:19:53,160
Speaker 2: I can drain it all on day three, six hundred

460
00:19:53,160 --> 00:19:54,959
Speaker 2: and fifty at the end of the ten years. But

461
00:19:55,000 --> 00:19:57,080
Speaker 2: the point of that is that I now will have

462
00:19:57,119 --> 00:19:59,320
Speaker 2: to pay income taxes on every nickel of it, all

463
00:19:59,320 --> 00:20:01,240
Speaker 2: at once. Usually the best way to do that is

464
00:20:01,280 --> 00:20:03,679
Speaker 2: to find a way combine it with your other sources

465
00:20:03,680 --> 00:20:05,560
Speaker 2: of income to figure out what brackets you're going to hit,

466
00:20:05,720 --> 00:20:07,679
Speaker 2: and then figure out the right years to take it,

467
00:20:07,720 --> 00:20:11,240
Speaker 2: because most people within a decade will have some high

468
00:20:11,240 --> 00:20:13,680
Speaker 2: tax years and some low tax years. Now there's moving

469
00:20:13,760 --> 00:20:16,000
Speaker 2: parts to that too, though, Brian. If the person who

470
00:20:16,000 --> 00:20:17,880
Speaker 2: passed away, this is a new rule as of this year,

471
00:20:18,080 --> 00:20:21,760
Speaker 2: if the person who passed away was themselves of required

472
00:20:21,760 --> 00:20:24,359
Speaker 2: minimum distribution age, which which could have been any that

473
00:20:24,480 --> 00:20:27,040
Speaker 2: might have been seventy and a half several years ago,

474
00:20:27,520 --> 00:20:29,960
Speaker 2: then you will even though there's still the ten year rule,

475
00:20:30,000 --> 00:20:32,200
Speaker 2: you do still have to take a minimal amount out.

476
00:20:32,640 --> 00:20:34,480
Speaker 2: So make sure if you're in that situation that you're

477
00:20:34,560 --> 00:20:35,480
Speaker 2: that you're on top of that.

478
00:20:36,160 --> 00:20:40,000
Speaker 1: Okay, Now, the downside risk if you fail to do

479
00:20:40,119 --> 00:20:44,879
Speaker 1: the require minimum distribution by the all important deadline. What

480
00:20:45,000 --> 00:20:46,760
Speaker 1: kind of penalty you are going to the face with the

481
00:20:46,800 --> 00:20:47,760
Speaker 1: on this one.

482
00:20:47,600 --> 00:20:50,080
Speaker 3: A fat one, although not as fat as in the past.

483
00:20:50,119 --> 00:20:52,359
Speaker 2: If you fail to take this full RMD by December

484
00:20:52,440 --> 00:20:55,439
Speaker 2: thirty first, the penalty is generally twenty five percent of

485
00:20:55,440 --> 00:20:58,600
Speaker 2: the amount that wasn't withdrawn. That's a huge chunk used

486
00:20:58,640 --> 00:21:01,080
Speaker 2: to be fifty percent and there was no forgiveness for it,

487
00:21:01,560 --> 00:21:03,879
Speaker 2: but now if you correct it within two years with

488
00:21:03,960 --> 00:21:06,920
Speaker 2: an IRS form, the penalty can be reduced to ten percent.

489
00:21:07,040 --> 00:21:10,159
Speaker 2: Penalties are penalties, though, let's just avoid them. Just make

490
00:21:10,200 --> 00:21:13,480
Speaker 2: sure you know understand what your obligations are and try

491
00:21:13,480 --> 00:21:15,720
Speaker 2: to get it done by December thirty. First, you do

492
00:21:15,840 --> 00:21:17,719
Speaker 2: have a get out of jail free card in your

493
00:21:17,840 --> 00:21:22,080
Speaker 2: very first year. You have until tax time the following year.

494
00:21:22,320 --> 00:21:24,240
Speaker 2: Because a lot of people don't find out, they don't

495
00:21:24,280 --> 00:21:27,040
Speaker 2: understand until they've done their taxes that they should have

496
00:21:27,119 --> 00:21:28,399
Speaker 2: taken a distribution.

497
00:21:28,920 --> 00:21:30,240
Speaker 3: But that's only for the first year, and I.

498
00:21:30,240 --> 00:21:32,919
Speaker 2: Would not recommend taking advantage of that because that is

499
00:21:32,960 --> 00:21:35,840
Speaker 2: still going to cause you to have to take two distributions,

500
00:21:35,880 --> 00:21:37,920
Speaker 2: the one to make up for missing the first year,

501
00:21:38,440 --> 00:21:40,680
Speaker 2: which in that case is penalty free, but you also

502
00:21:40,720 --> 00:21:42,239
Speaker 2: have to take the one for the second year, so

503
00:21:42,280 --> 00:21:43,840
Speaker 2: that could push you into a higher bracket.

504
00:21:44,200 --> 00:21:47,160
Speaker 1: Fair enough, I guess for the folks that don't need

505
00:21:47,160 --> 00:21:50,040
Speaker 1: to tap into the retirement accounts, I guess they're in

506
00:21:50,160 --> 00:21:52,880
Speaker 1: decent enough financial situation. I guess you know, it might

507
00:21:52,920 --> 00:21:55,080
Speaker 1: be a good idea to pass it along to your children.

508
00:21:55,160 --> 00:21:57,399
Speaker 1: I mean, let that money work for them while they're alive,

509
00:21:57,480 --> 00:21:59,080
Speaker 1: and while you're still alive, and you can see the

510
00:21:59,080 --> 00:22:01,840
Speaker 1: fruits of the your labor in your to their benefit.

511
00:22:01,960 --> 00:22:03,760
Speaker 2: Oh for sure, there's lots of things that you can

512
00:22:03,800 --> 00:22:06,200
Speaker 2: be thinking about there. The irs, like I said, doesn't

513
00:22:06,200 --> 00:22:07,960
Speaker 2: care what you do with these dollars. A lot of

514
00:22:08,000 --> 00:22:09,879
Speaker 2: people Brian will simply say, Okay, well I got to

515
00:22:09,880 --> 00:22:12,360
Speaker 2: pull that money out. It simply can't be sheltered anymore,

516
00:22:12,400 --> 00:22:15,320
Speaker 2: that small proportion of it, and so therefore I'm going

517
00:22:15,400 --> 00:22:16,919
Speaker 2: to take it out and I'm gonna immediately stick it

518
00:22:16,920 --> 00:22:18,280
Speaker 2: over in my account.

519
00:22:18,560 --> 00:22:20,040
Speaker 3: Well, no, you can't do that. You can't put it

520
00:22:20,040 --> 00:22:23,000
Speaker 3: into a raw Oh well, okay, let this gets a

521
00:22:23,040 --> 00:22:23,760
Speaker 3: little complicated.

522
00:22:23,800 --> 00:22:26,840
Speaker 2: You can do roth conversions, but they have to happen

523
00:22:27,040 --> 00:22:30,120
Speaker 2: after your rm D comes out. Therefore, if my RMD

524
00:22:30,240 --> 00:22:33,199
Speaker 2: comes out, and my RMD my required minimum is five thousand,

525
00:22:33,440 --> 00:22:35,480
Speaker 2: and I want to convert ten thousand, well then I

526
00:22:35,480 --> 00:22:38,639
Speaker 2: take five out. It cannot go anywhere else, pay taxes

527
00:22:38,680 --> 00:22:40,400
Speaker 2: on that, and then after that has happened, I can

528
00:22:40,440 --> 00:22:43,480
Speaker 2: convert my ten thousand, hundred thousand or whatever. But remember

529
00:22:43,520 --> 00:22:46,320
Speaker 2: your RMD is already going to push up your income bracket,

530
00:22:46,480 --> 00:22:49,080
Speaker 2: so therefore conversions are going to make that even worse.

531
00:22:49,240 --> 00:22:51,360
Speaker 2: If you're wanting to do roth conversions, the best time

532
00:22:51,400 --> 00:22:53,720
Speaker 2: to do it is before you have these require minimum

533
00:22:53,720 --> 00:22:54,639
Speaker 2: distributions kicking in.

534
00:22:54,880 --> 00:22:59,400
Speaker 1: Do you as a financial planner? Is it person contingent

535
00:22:59,400 --> 00:23:01,280
Speaker 1: about whether or not you do a conversion? Because if

536
00:23:01,400 --> 00:23:03,760
Speaker 1: I converted my four oh one K, I'd have to

537
00:23:03,760 --> 00:23:06,520
Speaker 1: pay at my tax bracket the taxes that are due.

538
00:23:06,560 --> 00:23:09,000
Speaker 1: I understand that, but is it a good thing to

539
00:23:09,080 --> 00:23:11,520
Speaker 1: do that for somebody and the terrible thing for somebody

540
00:23:11,520 --> 00:23:13,120
Speaker 1: else to do I mean, it is.

541
00:23:13,240 --> 00:23:16,440
Speaker 2: Very much not a black and white everybody should figure this. Yeah,

542
00:23:17,080 --> 00:23:19,320
Speaker 2: you are very much making a sacrifice right now. I

543
00:23:19,400 --> 00:23:20,640
Speaker 2: have a lot of people that'll come in and say,

544
00:23:20,640 --> 00:23:21,919
Speaker 2: here's my four to one K. I got a half

545
00:23:21,920 --> 00:23:23,600
Speaker 2: million dollars. I want to convert that into a rock.

546
00:23:23,840 --> 00:23:25,840
Speaker 2: As if I sign a form and it suddenly poof

547
00:23:25,920 --> 00:23:28,040
Speaker 2: tax free doesn't work that way. You need to take

548
00:23:28,040 --> 00:23:31,080
Speaker 2: in that case a half million dollars worth of taxable income,

549
00:23:31,320 --> 00:23:33,960
Speaker 2: which is going to be a fat voluntary check written

550
00:23:33,960 --> 00:23:36,040
Speaker 2: to the IRSA in exchange for the rest of your

551
00:23:36,040 --> 00:23:38,280
Speaker 2: life of tax free growth. I can show you mathematically

552
00:23:38,320 --> 00:23:40,080
Speaker 2: how that's a good idea, but I'm not the one

553
00:23:40,080 --> 00:23:41,719
Speaker 2: who has to write the fat check to the irs.

554
00:23:41,760 --> 00:23:44,240
Speaker 2: It's very much a philosophical thing. My role is to

555
00:23:44,240 --> 00:23:46,320
Speaker 2: make sure people understand the pros and cons of it.

556
00:23:46,240 --> 00:23:47,920
Speaker 2: It will be a very valuable strategy, though.

557
00:23:48,160 --> 00:23:50,639
Speaker 1: I am one that am always worried about when I

558
00:23:50,640 --> 00:23:52,840
Speaker 1: start taking out my four oh one k distributions, that

559
00:23:52,880 --> 00:23:55,560
Speaker 1: they're going to come up with some just outrageous tax

560
00:23:55,560 --> 00:23:57,680
Speaker 1: scheme because we run this country into the toilet with

561
00:23:57,720 --> 00:23:59,480
Speaker 1: our debt, and they're going to say, well, there's trillions

562
00:23:59,480 --> 00:24:02,000
Speaker 1: of dollars walcked away in four to one case, let's

563
00:24:02,000 --> 00:24:04,040
Speaker 1: tax them at a much higher rate because we got

564
00:24:04,040 --> 00:24:06,160
Speaker 1: a crisis on our hands.

565
00:24:06,080 --> 00:24:09,159
Speaker 3: Right exactly, and that that's that could happen.

566
00:24:09,760 --> 00:24:12,040
Speaker 2: I don't worry too much about double taxation in these

567
00:24:12,040 --> 00:24:14,320
Speaker 2: accounts because the people who will have made that choice

568
00:24:14,400 --> 00:24:17,160
Speaker 2: will have to run for reelection having been, you know,

569
00:24:17,400 --> 00:24:19,840
Speaker 2: having just double taxed everybody and broken a promise that

570
00:24:20,040 --> 00:24:21,680
Speaker 2: had been in place for decades by that point.

571
00:24:21,840 --> 00:24:23,880
Speaker 1: Fair enough on that. I'll try to hang my hat

572
00:24:23,920 --> 00:24:26,480
Speaker 1: and get some comfort from those comments. Brian James appreciate

573
00:24:26,480 --> 00:24:28,400
Speaker 1: what you do. Thanks to all Worth again for learning out.

574
00:24:28,440 --> 00:24:30,400
Speaker 1: We'll do this again next week. Have a wonderful week,

575
00:24:30,440 --> 00:24:33,679
Speaker 1: my friend, you too, Stay warm, you too coming up

576
00:24:33,760 --> 00:24:37,240
Speaker 1: Doctor Ridikahraman not in from the v