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Speaker 1: Tonight we tackled a new inflation report, interest rates, company earnings,

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Speaker 1: and a new mean stock that has everyone sizzling. You're

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Speaker 1: listening to Simply Monty presented about all Worth Financial Lombob

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Speaker 1: sponseller along with Brian James. Well, we finally have the

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Speaker 1: inflation report for September. It was somewhat in question whether

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Speaker 1: we were going to get that number at all due

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Speaker 1: to the government shutdown, but it's a very important number

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Speaker 1: because it has an impact on twenty twenty six Social

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Speaker 1: Security benefits. We also have a FED meeting happening this week,

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Speaker 1: so to help unpack all of this is always Chief

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Speaker 1: Investment Officer Andy Stout. Andy manages over thirty billion dollars

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Speaker 1: in assets from right here in Cincinnati. Andy, thanks for

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Speaker 1: being with us tonight and talk about that headline inflation

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Speaker 1: number and the core number and what's going on with inflation.

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Speaker 2: Yeah, thanks for having me. And it's actually nice to

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Speaker 2: talk about some data. I mean, with a government shut

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Speaker 2: down still ongoing and still very little prospects of a

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Speaker 2: near term deal there, it's nice to actually have something

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Speaker 2: to talk about when we look at this inflation data,

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Speaker 2: the consumer CPI report, it basically came in a little

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Speaker 2: better than what was expected when you looked at what

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Speaker 2: economists were thinking it would come in and where it

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Speaker 2: actually came in. What it showed was that total inflation

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Speaker 2: or headlined inflation, rose about three tenths of a percent

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Speaker 2: for the month of September. While core CPI, which excludes

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Speaker 2: food and energy so it's less volatile. On the Federal

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Speaker 2: Reserve tends to look at core inflation because they can't

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Speaker 2: really control food prices too much or energy and gas.

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Speaker 2: That core CPI rose two tens of percent. Both those

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Speaker 2: were better than expect and what that resulted in was

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Speaker 2: the year over year number showing a three percent increase.

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Speaker 2: So we're seeing a consumer inflation essentially holding steady right

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Speaker 2: around three percent. So it's this is the moderation that

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Speaker 2: the federal Federal Reserve is really looking for.

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Speaker 3: Andy, I feel like we heard an awful lot about

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Speaker 3: this two percent figure that the Fed supposedly loves. We've

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Speaker 3: heard about that for a long time, but drum pile

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Speaker 3: seems to be okay with three percent at this point.

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Speaker 3: These I don't know the past over you know, two

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Speaker 3: or three months or so, you do you think he's

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Speaker 3: changed his tune in terms of being willing to cut

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Speaker 3: even though we're not quite where we want to be,

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Speaker 3: or is this is this, does this follow what he's

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Speaker 3: done in the past.

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Speaker 2: Well, they're definitely going to cut. And just for point

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Speaker 2: of clarity, when the Fed does talk about their two

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Speaker 2: percent inflation rate, they're not looking at the CPI data

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Speaker 2: we got last week. They're actually looking at something a

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Speaker 2: little different, which is more broad based inflation, and that

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Speaker 2: does tend to run a little bit lower than CPI,

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Speaker 2: But regardless, your point stands that it is higher than

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Speaker 2: where the Federal Reserve wants it to be. And what

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Speaker 2: does that mean for a pal in his rate cuts. Well,

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Speaker 2: they're not as worried as much about inflation as they

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Speaker 2: are about the job market right now, because we've seen

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Speaker 2: these massive revisions over the past few months for the

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Speaker 2: labor market data, number of jobs that employers have been adding.

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Speaker 2: And when you look at this revision lower, what it's

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Speaker 2: showing us is that the labor market, which was previously

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Speaker 2: viewed as a strength, as a just a really positive

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Speaker 2: characteristic for the US economy, it's now being viewed as

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Speaker 2: a liability. And it's this liability as the Federal reserve

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Speaker 2: is really shifting how they're thinking about rate cuts. So

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Speaker 2: you know, when the Fed does meet this week, that's

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Speaker 2: going to be one of the big things that they're

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Speaker 2: looking at very closely.

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Speaker 1: Andy, speaking of this CPI number and its impact on

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Speaker 1: social security, I mean, let's face it, you know, the

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Speaker 1: government pulled it together and however a way they could,

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Speaker 1: because this number is important because it helps dictate what

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Speaker 1: social secure payments are going to be for twenty twenty six.

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Speaker 1: What are you expecting the cost of living adjustment for

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Speaker 1: social security to be actually in twenty twenty six? And

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Speaker 1: then do you think we're actually going to get an

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Speaker 1: inflation number in October? And if we don't, if the

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Speaker 1: government remains shut down, how might that impact what the

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Speaker 1: Fed does you know at their last meeting of the

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Speaker 1: year here in December, in terms of interest rate cuts.

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Speaker 1: I know that's two questions wrapped into one, but you're

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Speaker 1: good enough to tackle them all simultaneously.

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Speaker 4: I will do my best.

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Speaker 2: So the short answer is, don't really have to guess

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Speaker 2: on what the cost of living adjustment is going to

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Speaker 2: be because that's already out there based on the CPI

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Speaker 2: report that came out, and it's fifty six dollars per

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Speaker 2: month for a beneficiary on average. Obviously, you know, changes

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Speaker 2: depending on your own situation, so you got a little.

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Speaker 4: Bit of a bump there.

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Speaker 2: And the reason we got the CPI number was because

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Speaker 2: the Social Security Administration legally need to have it in

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Speaker 2: order to do the Social Security benefit calculations for twenty

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Speaker 2: twenty six. That's why the staff was recalled to do

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Speaker 2: that CPI calculation. And when you think about just the

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Speaker 2: big picture side of it, yeah, that's great that you're

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Speaker 2: getting this adjustment right, And the BLS recalculated that CPI

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Speaker 2: number for that reason. Now they didn't do it for

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Speaker 2: the Federal Reserve, but the Federal Reserve will certainly use

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Speaker 2: that data as part of their decision making process. And

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Speaker 2: when you think ahead to the next meeting beyond the

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Speaker 2: one we have this week for the Federal Reserve, they

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Speaker 2: have one more this year and that's in December, will

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Speaker 2: we get the October inflation data? I mean, we'll see

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Speaker 2: how this government shut down plays out. I mean, it

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Speaker 2: doesn't appear that they're moving too quickly to resolve anything.

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Speaker 2: And as we move further and further along, what happens

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Speaker 2: is the Bureau of labor statistics. It becomes increasingly challenging

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Speaker 2: for them to actually collect the data if they don't

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Speaker 2: have anybody on staff to actually analyze it. The reason

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Speaker 2: we were able to get this September report is that

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Speaker 2: it was already collected before the shutdown. But now we're

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Speaker 2: in the middle of the shutdown, how are we going

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Speaker 2: to collect the data? It certainly becomes challenging. And what

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Speaker 2: you're going to see is you're probably going to see

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Speaker 2: the BLS actually kind of guess at the data, or

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Speaker 2: what they'd call imputing the data, which is really just

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Speaker 2: a fancy statistical word for guessing.

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Speaker 4: So will we get the.

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Speaker 2: October report anytime soon?

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Speaker 4: Maybe maybe not.

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Speaker 2: I'm not too optimistic, but I don't think it's going

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Speaker 2: to change the calculus for the Federal Reserve for not

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Speaker 2: even just this meeting here this week, but also the

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Speaker 2: one in December. Right now, the markets are fully pricing

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Speaker 2: in a second rate cut in December, so they have

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Speaker 2: a one hundred percent chance of a rate cut here

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Speaker 2: on Wednesday, and then another one hundred percent chance of a.

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Speaker 4: Rate cut in December. I don't think that is changing.

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Speaker 2: Let's just say, hypothetically, we stay shut down, what that

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Speaker 2: means is they're just more uncertainty out there, and that

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Speaker 2: would actually encourage the Federal Reserve to lower rates again

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Speaker 2: because they don't want to risk the economy falling off

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Speaker 2: a cliff and the labor market really weakening any further.

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Speaker 5: Andy.

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Speaker 3: So, one of the reasons that we got the data

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Speaker 3: that we did and we pulled people off a furlough

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Speaker 3: to go answer the questions was because we had a

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Speaker 3: couple seasonal things that always happen this time of year,

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Speaker 3: the Social Security cost of living being a required number.

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Speaker 5: Don't really have a chance about that.

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Speaker 3: We need the actual areas in their spreadsheets to figure

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Speaker 3: out what that's going to be. Do we have anything

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Speaker 3: Is there anything that's going to force that because we

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Speaker 3: all know, as as you said, the market is already

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Speaker 3: assuming it is going to be rate cuts. President Trump

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Speaker 3: knows what he wants. He's talked about that basically since

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Speaker 3: he got into politics that rates.

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Speaker 5: Need to be lower.

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Speaker 3: So there's little doubt is what the administration wants, which

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Speaker 3: isn't necessarily based on data anymore. So, because we don't

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Speaker 3: have any required things coming up, is there a chance

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Speaker 3: they could just back off on collecting the data and

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Speaker 3: just do what the administration wants anyway.

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Speaker 2: Well, I think the Federal Reserve is because of who

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Speaker 2: is leading it right now with Jerome Powell, which he

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Speaker 2: is really at this point of his.

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Speaker 4: Career fighting for his legacy.

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Speaker 2: Anticipate him just doing whatever someone tells him to do.

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Speaker 2: I think he's going to try to preserve his legacy

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Speaker 2: and do what he thinks is best.

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Speaker 4: For the economy in the long run.

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Speaker 2: He doesn't want to go down as someone who was

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Speaker 2: just you know, pushed around to doing what someone else

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Speaker 2: wanted him to do. Now, So putting all of that aside,

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Speaker 2: you know, what we think will probably happen is that

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Speaker 2: we do see another rate cut. And regardless of what

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Speaker 2: this data comes in or does not come in, the

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Speaker 2: data that we do have shows the labor market is

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Speaker 2: weaker than where we thought it was a few months ago.

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Speaker 2: And that's why the Federal Reserve has essentially shifted more

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Speaker 2: toward being worried about the labor market and less about inflation,

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Speaker 2: even though they have not yet fully fully squashed this inflation.

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Speaker 2: I mean, this last mile of getting inflation down to

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Speaker 2: this two percent level is proving to be extremely difficult,

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Speaker 2: and quite honestly, I don't see us getting there, probably

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Speaker 2: not even by this time next year, you know, unless

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Speaker 2: you know. The one caveat here is if we do

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Speaker 2: fall into recession, that's when you can see inflation get

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Speaker 2: below that two percent level. So barring that, I don't

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Speaker 2: really see how we get to that two percent level.

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Speaker 1: All right, Andy, Speaking of data, we did actually get

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Speaker 1: some data from SMP Global that indicates US business activity

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Speaker 1: expanded at the second fastest pace of the year. What's

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Speaker 1: your reaction to that data, and more importantly, how is

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Speaker 1: that impacting third quarter earnings so far? I know a

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Speaker 1: lot of companies still have get to report, but we've

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Speaker 1: got a lot of earnings that have come in. What's

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Speaker 1: your reaction to that SMP Global data and earning season

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Speaker 1: so far?

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Speaker 2: Well, first off, they are two independent data points from another.

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Speaker 2: Because this SMP data, what it's looking at is looking

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Speaker 2: at the growth of our manufacturing and service sector really

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Speaker 2: for the month of October, and that's where it showed

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Speaker 2: it was coming in pretty robust from an overall business

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Speaker 2: activity perspective, with momentum picking up really across both of

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Speaker 2: those major industries. Now, with that said, that is like

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Speaker 2: a snapshot in time for October and when they look ahead,

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Speaker 2: and when that SMP was looking ahead in the survey

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Speaker 2: that they're doing, you know what they did see with that?

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Speaker 2: What's confidence though looking out over the next year is

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Speaker 2: really not as strong as it has been. People are

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Speaker 2: worried about obviously tariffs is kind of the big thing,

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Speaker 2: and just general policies overall. Now shifting to the earning season,

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Speaker 2: it's still pretty early and that again is for the

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Speaker 2: third quarter, which is the July August September period, and

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Speaker 2: so far, so good. Right now, we've had about we're

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Speaker 2: about thirty percent of the way.

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Speaker 4: Through earning season.

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Speaker 2: And when you look at the S and P five

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Speaker 2: hund which are your large cap stocks, what we're seeing

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Speaker 2: as earnings are essentially almost nine percent higher over the

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Speaker 2: past year, and what economists we're looking for the start

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Speaker 2: of earning season was seven and a half percent. So

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Speaker 2: what we're seeing is we're seeing companies still be out

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Speaker 2: those earnings growth rates. And this is really important because

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Speaker 2: when companies report better than expected earnings and we see

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Speaker 2: this quicker piece of earnings and quicker pace of sales,

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Speaker 2: what it shows is that the prices we've had and

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Speaker 2: that we're seeing can be justified can't be justified by

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Speaker 2: higher earning growth because you know, I'm sure anybody watching

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Speaker 2: any sort of mainstream financial media we'll see from time

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Speaker 2: to time like, oh, we're in a bubble, the world's coming.

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Speaker 4: To an end.

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Speaker 2: You know, time to go barrier head in the sand

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Speaker 2: and you know, do whatever it is and you know,

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Speaker 2: get dive into a bomb shelter or anything like that.

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Speaker 2: But the point is we have these earnings growth and

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Speaker 2: that does help justify the current levels. That doesn't mean

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Speaker 2: that there won't be a you know, some pullback at

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Speaker 2: some point in time. Heck, it could start today for

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Speaker 2: all I know, that's impossible to know for certain. But

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Speaker 2: with that being said, you know, any sort of pullback

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Speaker 2: in the absence of a recession is probably pretty temporary.

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Speaker 2: And when we look ahead, you know, we have a

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Speaker 2: very strong corporate profit industry. And when we look at

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Speaker 2: what's going on this week, we have one hundred and

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Speaker 2: sixty two large cap companies reporting, and this week is

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Speaker 2: critical because this is where we get.

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Speaker 4: The tech heavyweights.

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Speaker 2: We're going to get Amazon, We're going to get Apple,

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Speaker 2: We're going to get Alphabet, we're going to get Meta,

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Speaker 2: we're going to get Microsoft. These are the name brand

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Speaker 2: companies that really move the market, and they're the they're

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Speaker 2: the biggest cohort of the market. So while right now

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Speaker 2: we have a nine percent year over year earnings growth rate,

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Speaker 2: we're probably going to be in the low double digits

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Speaker 2: by next week when we're having this discussion because the

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Speaker 2: earnings from those companies are really going to juice that

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Speaker 2: overall number.

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Speaker 1: All right, thanks a lot, Andy. You've probably heard ETFs

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Speaker 1: are a smart, simple way to invest, but not all

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Speaker 1: ETFs are created equal. We're going to get into what

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Speaker 1: we're talking about next. You're listening to Simply Money presented

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Speaker 1: by all Worth Financial on fifty five KRC, the talk station.

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

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Speaker 1: onbops Bond Seller along with Brian James. If you can't

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Speaker 1: listen to Simply Money every night, subscribe and get our

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Speaker 1: daily podcasts. Just search Simply Money on the iHeart app

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Speaker 1: or wherever you find your podcast. Straight ahead of six

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Speaker 1: forty three, we're going to talk about deferred compensation questions,

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Speaker 1: family LLC strategies, and even the quirks of municipal bonds.

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Speaker 1: You've probably heard that ETFs are one of the smartest

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Speaker 1: ways to invest. They're simple, they're low costs, they give

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Speaker 1: you instant diversification, and they can be very tax efficient.

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Speaker 1: In other words, you buy one ETF and you're automatically

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Speaker 1: invested in dozens, sometimes even hundreds of stocks. That's why

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Speaker 1: so many long term investors have made ETFs a core

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Speaker 1: part of their portfolios. But we want to highlight, you know,

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Speaker 1: some other ETFs out there that Wall Street has introduced

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Speaker 1: that Brian, they get people into a bit more potential volatility,

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Speaker 1: then perhaps they bargain in four.

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Speaker 3: Yeah, so these aren't brand new, but Wall Street again

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Speaker 3: doing what Wall Street does just to kind of come

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Speaker 3: up with new ideas to attract people and their money.

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Speaker 3: Let's let's call this what it is uh to invest.

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Speaker 5: In certain things.

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Speaker 3: So new breed of exchange traded funds that promises to

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Speaker 3: triple or even quintuple your money in a single day.

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Speaker 3: We're talking three times five times leverage dtfs tied to

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Speaker 3: single stocks or even even crypto these these have existed

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Speaker 3: in an index based manner for a good long time now,

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Speaker 3: but now we're finding new corners of the investment world

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Speaker 3: to do this in. So what this means for example,

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Speaker 3: what's been around for a long time. Let's say you

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Speaker 3: have a leveraged S and P five hundred and it's

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Speaker 3: three times leverage. If the S and P five one

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Speaker 3: hundred goes up one percent in one day, uh, then

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Speaker 3: that leverage DTF is going to give you a three

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Speaker 3: percent gain.

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Speaker 5: But the keyword in here is day three times?

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Speaker 2: Right?

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Speaker 1: Three times?

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Speaker 5: Yeah?

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Speaker 1: What what the index does?

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Speaker 5: Sorry, that's the whole point.

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Speaker 3: Yeah, and uh in the so, but the keyword here

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Speaker 3: is these things reset every single day. And that's where

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Speaker 3: the risk and the confusion comes in because you might

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Speaker 3: be thinking, well, if I'm a long term investor, I

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Speaker 3: don't paying attention to the market anyway, why wouldn't I

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Speaker 3: invest into three times leveraged ETF. These are not long

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Speaker 3: term type positions over time, especially in volatile markets. The

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Speaker 3: way the math works on these things, that fund's return

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Speaker 3: may not match what you expect. That if the stock

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Speaker 3: you're betting on is up over a few weeks, then

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Speaker 3: that leverage GTF literally could be even flat or down.

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Speaker 3: These are not diversified indexes. These are individual stocks. It's

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Speaker 3: this is really almost like buying option positions against the

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Speaker 3: stock because there is that there's not a time limit

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Speaker 3: in terms of you the position has has expired, but

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Speaker 3: there's a time limit in terms of the math, how

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Speaker 3: the math is calculated, what the performance is going to be.

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Speaker 3: So you're basically taking the most volatile parts of the

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Speaker 3: market and pouring gas on the fire.

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Speaker 1: Yeah, Brian, I I have followed these leveraged ETFs for

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Speaker 1: several years now, and I got one horror story.

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Speaker 3: To share, just to you know, I think this is

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Speaker 3: important for people to hear. Yeah, go ahead, Well.

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Speaker 1: There was a there's an ETF that traded it three times.

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Speaker 1: The VIX index. The VIX or the v i X

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Speaker 1: is the volatility index. So not only do you not

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Speaker 1: only can you invest in an index, you can invest

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Speaker 1: in the volatility index. Well, I'm going back, you know,

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Speaker 1: five or six years now, but in one day, the

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Speaker 1: volatility index was so volatile that the ETF completely went away.

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Speaker 1: So anybody that had money in that ETF, they woke

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Speaker 1: up the next morning and it the their balance. Their

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Speaker 1: value of their holding was zero. And if you went

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Speaker 1: back and looked at the fine print of that ETF,

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Speaker 1: it does it did disclose that it said, hey, if

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Speaker 1: this thing gets so volatile that we can't get options,

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Speaker 1: you know, to hedge our position, the whole thing goes

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Speaker 1: away and lo and behold it did so yeah, so

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Speaker 1: these things. You know, that's an extreme example, but I

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Speaker 1: think the main point we want to drive home and

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Speaker 1: some of the new things that are out there is

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Speaker 1: now individual stocks, you know, say a Tesla or an Apple.

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Speaker 1: You can have a three to five times leverage ETF

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Speaker 1: in an individual stock, not an index. And uh so

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Speaker 1: let's do a least mathematical example here, Bob, tell me

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Speaker 1: what happens if that stock drops twenty percent, if the

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Speaker 1: underlying stock goes down. Don't test. Don't test my math

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Speaker 1: abilities on a Monday.

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Speaker 5: It's it's five x, it's five x a twenty percent.

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Speaker 5: How much did it go down? Bob?

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Speaker 1: Yeah, I'm so upset about the Bengals game yesterday. I

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Speaker 1: don't want to I don't want to do math.

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Speaker 3: Sorry for making you multiply, But that can happen to

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Speaker 3: these things. And that's example that Bob just shared, which yes,

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Speaker 3: if you were a leverage and you're in a in

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Speaker 3: a something that drops twenty percent and you're five times

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Speaker 3: leverage in it, well he just lost one hundred percent.

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Speaker 5: And that does happen.

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Speaker 3: It happened to to a European based fund out there

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Speaker 3: that was leveraged against some really aggressive types of things.

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Speaker 5: So just be realistic about these things. Just know that

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Speaker 5: you're gambling. Let's call this what it is.

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Speaker 1: I thought you were going to ask me, if it

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Speaker 1: does go down three x, what does it have to

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Speaker 1: return to get back to even?

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Speaker 5: No, Bob, I asked you what five times twenty one?

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Speaker 5: And you punch?

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Speaker 1: All right? Even I can do that, all right. I

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Speaker 1: wasn't listening, which is par for the course for me.

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Speaker 5: All right.

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Speaker 1: Yeah, The key thing here is these are for momentum

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Speaker 1: traders and swing traders and day traders. Uh, not long

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Speaker 1: term investors. So let's get into let's get into the

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Speaker 1: good things about normal ETFs, why they make sense in

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Speaker 1: a portfolio.

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Speaker 3: By the term ETF is becoming like kleenex. It's just

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Speaker 3: kind of the general catch all term for what these are.

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Speaker 3: So a total market ETF or exchange traded fund.

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Speaker 5: We're not talking to e FT.

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Speaker 3: This is not electronic funds transfer exchange traded fund ETFU.

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Speaker 3: These are these are the VT. I is one of them,

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Speaker 3: or I T o T if you're looking at I shares.

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Speaker 3: These are S and P five hundred based exchange traded funds.

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Speaker 3: They trade like stocks, meaning they have a ticker symbol.

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Speaker 3: They move up and down every minute of every day,

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Speaker 3: uh and which gives us more flexibility. That's why we

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Speaker 3: prefer them as portfolio managers because we can get the

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Speaker 3: diversification and all the benefits that that brings, but we

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Speaker 3: can also participate in what the market is doing in

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Speaker 3: the warning versus what it's doing in the afternoon, versus

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Speaker 3: the older school mutual funds that only get priced at

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Speaker 3: four o'clock every day. These are all that The ETFs

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Speaker 3: are the best way to index in a low cost manner.

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Speaker 3: You can get expense ratios under a tenth of a

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Speaker 3: percent in a lot of cases, sometimes even significantly lower

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Speaker 3: than that. And those saving a quarter of a percent

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Speaker 3: annually on a five million dollar portfolio, Bob, that's twelve

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Speaker 3: thousand dollars a year.

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Speaker 5: So that's a fantastic way.

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Speaker 3: That's why we love ETFs because they give us the

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Speaker 3: diversification we need to build a proper portfolio with all

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Speaker 3: the parts, but they do it in extremely cost effective

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Speaker 3: manner well.

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Speaker 1: And then another key thing to ETFs, and this has

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Speaker 1: just been an evolution in the industry here over the

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Speaker 1: last five to ten years out of mutual funds is

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Speaker 1: they are much more tax efficient. You don't get these

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Speaker 1: fourth quarter distributions whether you participated in the fund or not.

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Speaker 1: There's what's called an in kind redemption structure of these ETFs,

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Speaker 1: so you actually get the tax performance based on your

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Speaker 1: individual performance or participate patient in these ETFs. There's no

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Speaker 1: surprise distributions and that's why they're great as well. But

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Speaker 1: here's the all Worth Advice leverage. Dtfs. They do promise excitement,

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Speaker 1: but even seasoned investors can get burned. Know the difference

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Speaker 1: between a trading tool and a long term investment. Five

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Speaker 1: years after the COVID pandemic, what's the most telling financial takeaway.

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Speaker 1: We'll discuss that next. You're listening to Simply Money presented

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Speaker 1: by Allworth Financial on fifty five KRC the talk station.

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

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Speaker 1: on Bob's fonseller along with Brian James. Brian isn't at hard.

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Speaker 1: It's hard to believe, but we're now five years removed

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Speaker 1: from one of the most disruptive global events in modern history.

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Speaker 1: The dreaded COVID nineteen pandemic. It changed the world in

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Speaker 1: ways we are still unpacking. Walk us through just for

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Speaker 1: those that forget. Yeah, the impact on the markets back

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Speaker 1: in early twenty twenty, it's.

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Speaker 3: Been five years, Bob, five years. Do you remember what

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Speaker 3: that felt like. We were in the office, and it

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Speaker 3: was the rumblings were coming from our own company and

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Speaker 3: our clients and all that stuff. It started to feel

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Speaker 3: like a weird you know, a summer if that makes

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Speaker 3: any sense, Like this is the last day of school,

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Speaker 3: I'll see you in a few months, that kind of thing,

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Speaker 3: and we all packed up and went home. Anyway, as

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Speaker 3: five years ago, So what happened then was early twenty twenty,

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Speaker 3: the market fell off a cliff. I do remember this

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Speaker 3: because you and I were watching it, but our clients weren't.

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Speaker 5: This was an interesting phenomenon.

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Speaker 3: S and P five hundred dropped about thirty four percent

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Speaker 3: in just over a month, fastest bear market in history.

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Speaker 3: Because it bounced back fast. We're not talking about how

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Speaker 3: fast it dropped. We're talking about the peak to trough

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Speaker 3: to peak, which was just a few months later. We

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Speaker 3: had it all back, But I remember nobody really called

439
00:21:49,119 --> 00:21:51,760
Speaker 3: the phones were not ringing, And I remember this kind

440
00:21:51,800 --> 00:21:53,760
Speaker 3: of phenomenon. Who everybody thought when I say this, all

441
00:21:53,760 --> 00:21:55,520
Speaker 3: the time, we were all hiding in our basements thinking

442
00:21:55,520 --> 00:21:57,359
Speaker 3: we were going to die because very early in that

443
00:21:57,840 --> 00:22:00,199
Speaker 3: whole thing, nobody really knew what was going on, just

444
00:22:00,240 --> 00:22:02,159
Speaker 3: a different thing we had ever seen. So when the

445
00:22:02,160 --> 00:22:05,119
Speaker 3: market dropped thirty percent, normally the phone's gonna ring once

446
00:22:05,200 --> 00:22:07,200
Speaker 3: or twice. But there really weren't that many phone calls.

447
00:22:07,240 --> 00:22:10,160
Speaker 3: People were just adjusting to their to their new situation.

448
00:22:10,240 --> 00:22:12,320
Speaker 3: It was one of the weirdest investment periods I've seen

449
00:22:12,359 --> 00:22:13,439
Speaker 3: in my thirty years doing this.

450
00:22:14,560 --> 00:22:16,840
Speaker 1: Yeah, I remember getting a couple of phone calls, but

451
00:22:16,880 --> 00:22:19,919
Speaker 1: they came after the big market drop, so you know,

452
00:22:20,000 --> 00:22:21,000
Speaker 1: once people pull.

453
00:22:20,840 --> 00:22:22,560
Speaker 5: Out there, yeah, yeah, it was okay.

454
00:22:22,960 --> 00:22:25,560
Speaker 1: But when they pull out their statements and see, you know,

455
00:22:25,600 --> 00:22:28,639
Speaker 1: their their account value down twenty percent, well, then a

456
00:22:28,640 --> 00:22:30,040
Speaker 1: few phone calls came in.

457
00:22:29,960 --> 00:22:31,880
Speaker 5: And the great can make this quick point on that.

458
00:22:32,400 --> 00:22:35,160
Speaker 3: So the market, yeah PA droff was down thirty four percent,

459
00:22:35,200 --> 00:22:37,320
Speaker 3: but by the time people got their statements and it

460
00:22:37,359 --> 00:22:39,320
Speaker 3: was only down twenty because it had already recovered a

461
00:22:39,400 --> 00:22:43,080
Speaker 3: huge chunk. So people weren't paying attention during the statement period.

462
00:22:43,119 --> 00:22:44,920
Speaker 3: We were just waiting. Here's what it's worth the beginning

463
00:22:44,960 --> 00:22:46,440
Speaker 3: of the quarter, here's what it was worth at the

464
00:22:46,520 --> 00:22:48,320
Speaker 3: end of the quarter. So a lot of people didn't

465
00:22:48,320 --> 00:22:51,480
Speaker 3: really notice that third of a portfolio loss.

466
00:22:51,760 --> 00:22:54,040
Speaker 5: Over until statement came out.

467
00:22:54,280 --> 00:22:56,040
Speaker 1: You pretty much took the words out of my mouth.

468
00:22:56,080 --> 00:22:57,840
Speaker 1: That's exactly what I was going to say. The phone

469
00:22:57,840 --> 00:23:00,359
Speaker 1: calls came in, and the good news this time around,

470
00:23:00,520 --> 00:23:04,119
Speaker 1: unlike two thousand and eight and nine, is by the

471
00:23:04,200 --> 00:23:06,560
Speaker 1: time they opened the statements and picked up the phone,

472
00:23:06,560 --> 00:23:09,280
Speaker 1: the market had started to recover and recover in a

473
00:23:09,320 --> 00:23:12,440
Speaker 1: big way. So it was very short lived, but it's

474
00:23:12,480 --> 00:23:14,879
Speaker 1: just proof that things can change on a dime. And

475
00:23:14,920 --> 00:23:17,000
Speaker 1: that's why you got to have a good financial plan

476
00:23:17,160 --> 00:23:20,720
Speaker 1: in place, you know, at all times, because the stuff

477
00:23:20,760 --> 00:23:24,280
Speaker 1: that usually hits the markets and hits your portfolio are

478
00:23:24,400 --> 00:23:27,120
Speaker 1: literally coming out of you know, coming out of left field,

479
00:23:27,160 --> 00:23:30,240
Speaker 1: and we don't see him coming oftentimes. So let's talk about,

480
00:23:30,280 --> 00:23:33,320
Speaker 1: you know, what was happening with inflation. Trillions of dollars

481
00:23:33,359 --> 00:23:36,760
Speaker 1: pumped into the economy in the form of stimulus checks,

482
00:23:37,200 --> 00:23:41,600
Speaker 1: personal savings rates spike to thirty three percent in April

483
00:23:41,600 --> 00:23:44,800
Speaker 1: of twenty twenty Brian, that is unheard of. People were

484
00:23:44,880 --> 00:23:48,680
Speaker 1: flushed with cash and that didn't last. But I think

485
00:23:48,800 --> 00:23:51,560
Speaker 1: what a lot of people did, Brian, and I did it.

486
00:23:51,640 --> 00:23:54,840
Speaker 1: I went and bought a house, and people, you know,

487
00:23:54,920 --> 00:23:59,160
Speaker 1: this is what started to cause the real estate spike

488
00:23:59,359 --> 00:24:03,399
Speaker 1: in Rally that is still going on right now. People

489
00:24:03,640 --> 00:24:05,800
Speaker 1: figured out they could work from anywhere, and a lot

490
00:24:05,840 --> 00:24:08,320
Speaker 1: of them did. They went and bought vacation homes and

491
00:24:08,400 --> 00:24:11,720
Speaker 1: bought real estate, and that caused the real estate market

492
00:24:11,720 --> 00:24:16,639
Speaker 1: to really fly. Real estate agents were loving life. It

493
00:24:16,720 --> 00:24:19,000
Speaker 1: was an interesting, interesting time, and.

494
00:24:19,119 --> 00:24:21,680
Speaker 3: I remember having a lot of conversations with people who

495
00:24:21,920 --> 00:24:23,919
Speaker 3: for years we had built into their plan that hey,

496
00:24:23,920 --> 00:24:26,320
Speaker 3: we're gonna buy a condo in Naples or Saint Pete

497
00:24:26,359 --> 00:24:28,120
Speaker 3: or whatever. We're gonna do something down in Florida where

498
00:24:28,160 --> 00:24:30,000
Speaker 3: the sun is. Well that kind of started. That had

499
00:24:30,040 --> 00:24:32,280
Speaker 3: started to shift anyway, because those kinds of places have

500
00:24:32,400 --> 00:24:35,480
Speaker 3: just gotten ridiculously expensive with all the hurricanes and the

501
00:24:35,640 --> 00:24:38,000
Speaker 3: HOA fees and all the other stuff. And so what

502
00:24:38,359 --> 00:24:41,879
Speaker 3: I believe happened is that a lot of the farmland

503
00:24:41,920 --> 00:24:45,960
Speaker 3: outside Cincinnati, Indiana, Kentucky and further out into Ohio. I

504
00:24:46,000 --> 00:24:48,720
Speaker 3: think that drove a lot of the values of those

505
00:24:48,720 --> 00:24:52,000
Speaker 3: places up because my clients, and this is anecdotal only,

506
00:24:52,040 --> 00:24:54,359
Speaker 3: but I had an awful lot of conversations and I

507
00:24:54,400 --> 00:24:56,080
Speaker 3: helped people get to the point where, you know what,

508
00:24:56,200 --> 00:24:58,440
Speaker 3: darn it, we can do this. If we want land

509
00:24:58,480 --> 00:25:00,600
Speaker 3: somewhere else, we can afford to do it, and we

510
00:25:00,600 --> 00:25:02,600
Speaker 3: can bridge the gap of let's buy some land and

511
00:25:02,640 --> 00:25:04,240
Speaker 3: build a house on it, and yes, we'll have kind

512
00:25:04,240 --> 00:25:06,320
Speaker 3: of two mortgage payments for a little while, but the

513
00:25:06,320 --> 00:25:08,240
Speaker 3: mass says we can do it. And there's a lot,

514
00:25:08,680 --> 00:25:10,240
Speaker 3: a lot, a lot of people out there who have

515
00:25:10,320 --> 00:25:11,959
Speaker 3: the ability to do the things that they are not

516
00:25:12,000 --> 00:25:14,280
Speaker 3: comfortable pulling the trigger on because they haven't done a

517
00:25:14,280 --> 00:25:17,119
Speaker 3: financial plan. There was an enormous amount of activity, at

518
00:25:17,200 --> 00:25:19,840
Speaker 3: least in my office, of you know, these are things

519
00:25:19,880 --> 00:25:21,840
Speaker 3: you've talked about for years. The numbers are there. If

520
00:25:21,880 --> 00:25:23,720
Speaker 3: you really want to do it, pull the trigger. But

521
00:25:23,960 --> 00:25:25,959
Speaker 3: I do think that drove a lot of where we are.

522
00:25:26,000 --> 00:25:27,760
Speaker 3: We still are, as you mentioned here in the real

523
00:25:27,840 --> 00:25:28,359
Speaker 3: estate market.

524
00:25:29,240 --> 00:25:33,119
Speaker 1: Well, and like always, you eventually have to pay the piper.

525
00:25:33,240 --> 00:25:35,440
Speaker 1: And what I mean by that is inflation. I mean

526
00:25:35,440 --> 00:25:39,639
Speaker 1: we had inflation, just spike. And the tough thing about

527
00:25:39,640 --> 00:25:45,000
Speaker 1: inflation and asset bubbles is prices rarely, if ever come down,

528
00:25:45,440 --> 00:25:48,040
Speaker 1: They just continue to go up at a slower rate.

529
00:25:48,400 --> 00:25:51,000
Speaker 1: So you know, we get this six seven, eight nine

530
00:25:51,000 --> 00:25:54,400
Speaker 1: percent inflation that is permanent. That is a permanent increase

531
00:25:54,480 --> 00:25:57,320
Speaker 1: in costs of goods and services. And I think we

532
00:25:57,359 --> 00:26:01,200
Speaker 1: are still you know, impacted by that today and still

533
00:26:01,280 --> 00:26:04,400
Speaker 1: dealing with that. And that's what is causing a lot

534
00:26:04,440 --> 00:26:07,840
Speaker 1: of the affordability problems that we have in society. When

535
00:26:07,920 --> 00:26:11,040
Speaker 1: when the government pumps a lot of money, well intentioned

536
00:26:11,119 --> 00:26:14,159
Speaker 1: into the economy, people are going to use it to

537
00:26:14,160 --> 00:26:17,800
Speaker 1: buy stuff, and you get asset inflation. And like I said,

538
00:26:17,880 --> 00:26:22,080
Speaker 1: inflation is awfully hard to unwind. Let's look at the

539
00:26:22,119 --> 00:26:27,920
Speaker 1: impact of just general behavior of people, especially the younger generation,

540
00:26:28,240 --> 00:26:31,240
Speaker 1: being you know, locked up in their apartments and dorm

541
00:26:31,320 --> 00:26:34,040
Speaker 1: rooms and homes for you know, six to eight months.

542
00:26:34,080 --> 00:26:37,000
Speaker 1: It really took a mental toll on a lot of folks.

543
00:26:37,320 --> 00:26:40,200
Speaker 3: Yeah, it really did, and it was it's very stressful.

544
00:26:40,240 --> 00:26:43,480
Speaker 3: So this was this created some kind of permanent financial anxiety.

545
00:26:43,520 --> 00:26:44,760
Speaker 5: And the market goes up and down.

546
00:26:44,760 --> 00:26:46,880
Speaker 3: A lot of people know that, but it just makes

547
00:26:46,920 --> 00:26:49,080
Speaker 3: you think of it makes you remember, it reminds us

548
00:26:49,119 --> 00:26:50,720
Speaker 3: of the two thousand and eighths of the world and

549
00:26:50,800 --> 00:26:53,920
Speaker 3: the scarier times. But that said, the fundamentals didn't change

550
00:26:53,960 --> 00:26:56,080
Speaker 3: at all, Bob, as long as we didn't panic. So

551
00:26:56,160 --> 00:26:58,240
Speaker 3: what happened to that case, Well, the market came back,

552
00:26:58,280 --> 00:27:00,560
Speaker 3: as it always does. From the bottom of March of

553
00:27:00,600 --> 00:27:02,720
Speaker 3: twenty twenty to the end of twenty one, the S

554
00:27:02,760 --> 00:27:05,719
Speaker 3: and P five hundred gained nearly one hundred percent. As always,

555
00:27:05,760 --> 00:27:08,000
Speaker 3: if you panicked and sold out, you missed out on

556
00:27:08,080 --> 00:27:10,760
Speaker 3: that and that's that's unfortunate. Don't do it again. But

557
00:27:10,880 --> 00:27:13,280
Speaker 3: the plan works. The rules didn't break. We're sitting here

558
00:27:13,600 --> 00:27:15,360
Speaker 3: at the moment right now. We're near an all time

559
00:27:15,440 --> 00:27:17,520
Speaker 3: high once again. And that is not as scary of

560
00:27:17,560 --> 00:27:19,760
Speaker 3: a statement as you might think. The market is usually

561
00:27:19,840 --> 00:27:20,760
Speaker 3: at an all time high.

562
00:27:21,280 --> 00:27:24,240
Speaker 1: Here's the all with advice. The pandemic didn't rewrite the

563
00:27:24,320 --> 00:27:28,200
Speaker 1: investing playbook. It just proved that having one and sticking

564
00:27:28,240 --> 00:27:32,000
Speaker 1: to it is what really builds long term wealth. Coming

565
00:27:32,080 --> 00:27:36,080
Speaker 1: up next, we answer real life questions about investing, taxes,

566
00:27:36,400 --> 00:27:39,760
Speaker 1: and business planning and more. You're listening to Simply Money,

567
00:27:39,920 --> 00:27:42,960
Speaker 1: presented by all Worth Financial on fifty five KRC the

568
00:27:43,320 --> 00:27:49,680
Speaker 1: talk station. You're listening to Simply Money, presented by all

569
00:27:49,680 --> 00:27:53,280
Speaker 1: Worth Financial. I'm Bob sponseller along with Brian James. Do

570
00:27:53,320 --> 00:27:55,840
Speaker 1: you have a financial question for us? There is a

571
00:27:55,880 --> 00:27:58,879
Speaker 1: red button you can click if you're listening to the

572
00:27:58,880 --> 00:28:02,719
Speaker 1: show on the I Heart Radio app. Simply record your

573
00:28:02,800 --> 00:28:05,919
Speaker 1: question and it will come straight to us. Ken in

574
00:28:06,040 --> 00:28:08,440
Speaker 1: Blue Ash leads us off tonight Brian. He says, I'm

575
00:28:08,440 --> 00:28:11,480
Speaker 1: in my late fifties and I am burned out at work.

576
00:28:11,840 --> 00:28:14,760
Speaker 1: We could technically retire early, he and his wife. But

577
00:28:14,920 --> 00:28:18,600
Speaker 1: how do you plan for an unpredictable retirement that might

578
00:28:18,720 --> 00:28:20,439
Speaker 1: last up the thirty five years?

579
00:28:20,720 --> 00:28:23,919
Speaker 3: Well, congratulations Ken and missus Ken whose name we don't know,

580
00:28:24,600 --> 00:28:27,240
Speaker 3: but it sounds like you've put a good, good amount

581
00:28:27,280 --> 00:28:29,560
Speaker 3: of effort into a financial plan, because it seems like

582
00:28:29,600 --> 00:28:31,399
Speaker 3: if you know you could retire earlier, and you're using

583
00:28:31,440 --> 00:28:33,320
Speaker 3: the word technically, it sounds like you've done the math

584
00:28:33,359 --> 00:28:34,000
Speaker 3: and run the number.

585
00:28:34,080 --> 00:28:35,280
Speaker 5: So that's great, But.

586
00:28:35,560 --> 00:28:37,920
Speaker 3: I think the keyword in your explanation there is unpredictable.

587
00:28:38,160 --> 00:28:40,000
Speaker 3: So first of all, I want to throw out there,

588
00:28:40,240 --> 00:28:41,560
Speaker 3: and maybe you know this, but I'll throw it out

589
00:28:41,600 --> 00:28:43,600
Speaker 3: for people. Don't you said late fifties? That's a little

590
00:28:43,640 --> 00:28:46,000
Speaker 3: earlier than what we normally think of. We normally think

591
00:28:46,000 --> 00:28:48,360
Speaker 3: of fifty nine and a half as go time for retirement.

592
00:28:48,520 --> 00:28:50,280
Speaker 3: But if you've got money in a four oh one K,

593
00:28:50,480 --> 00:28:50,880
Speaker 3: you can.

594
00:28:50,720 --> 00:28:51,320
Speaker 5: Tap into that.

595
00:28:51,400 --> 00:28:54,160
Speaker 3: Actually, at age fifty five, you will always pay taxes

596
00:28:54,160 --> 00:28:55,440
Speaker 3: on the pre tax dollars in there.

597
00:28:55,520 --> 00:28:57,000
Speaker 5: You're not getting away with that no matter what your

598
00:28:57,040 --> 00:28:57,360
Speaker 5: age is.

599
00:28:57,560 --> 00:28:59,960
Speaker 3: But you get to avoid the penalty, the ten percent

600
00:29:00,080 --> 00:29:02,000
Speaker 3: early withdrawal penalty at age fifty five.

601
00:29:02,200 --> 00:29:04,240
Speaker 5: That's different from an IRA where it's fifty nine and

602
00:29:04,280 --> 00:29:04,600
Speaker 5: a half.

603
00:29:05,120 --> 00:29:06,800
Speaker 3: But anyway, so what I would say there, Ken is

604
00:29:06,800 --> 00:29:09,440
Speaker 3: take that financial plan that you've apparently done and stress

605
00:29:09,480 --> 00:29:12,640
Speaker 3: test it, run some numbers out there, and then build

606
00:29:12,720 --> 00:29:16,480
Speaker 3: in some unpredictable markets right or unpredictable expenses.

607
00:29:17,000 --> 00:29:18,880
Speaker 5: That this is the whole purpose of building.

608
00:29:18,560 --> 00:29:21,920
Speaker 3: A financial plan using something more powerful than Excel, because

609
00:29:21,960 --> 00:29:23,760
Speaker 3: you've got to be able to build in some periods

610
00:29:23,800 --> 00:29:25,400
Speaker 3: to say, you know, what happens if we have a

611
00:29:25,400 --> 00:29:27,760
Speaker 3: long term care situation for one of us, What happens

612
00:29:27,800 --> 00:29:30,000
Speaker 3: if the market decides to take away twenty percent. That's

613
00:29:30,000 --> 00:29:31,640
Speaker 3: one of the guarantees I get to give is that's

614
00:29:31,680 --> 00:29:34,000
Speaker 3: gonna happen. So what will we do in those years.

615
00:29:34,160 --> 00:29:36,920
Speaker 3: So beat those numbers to death, make sure you're comfortable

616
00:29:36,920 --> 00:29:39,200
Speaker 3: with all the crazy that might happen, and then decide

617
00:29:39,200 --> 00:29:41,160
Speaker 3: what you're going to do with the options you've given yourself.

618
00:29:41,200 --> 00:29:43,040
Speaker 3: And it is okay for you to realize that that

619
00:29:43,160 --> 00:29:45,200
Speaker 3: is a hard thing. When we reach the point where

620
00:29:45,200 --> 00:29:48,320
Speaker 3: we realize that our own situation we've constructed has given

621
00:29:48,400 --> 00:29:50,880
Speaker 3: us options, that's terrifying because now you got to pick one.

622
00:29:51,160 --> 00:29:53,080
Speaker 3: It's a lot easier to say I can't afford to retire,

623
00:29:53,080 --> 00:29:54,200
Speaker 3: so I'm going to go back to work today.

624
00:29:54,600 --> 00:29:57,000
Speaker 5: All right, let's move into Montatonian Lebanon.

625
00:29:57,440 --> 00:29:59,680
Speaker 3: Tony has a question for Bob, and he says, they

626
00:29:59,680 --> 00:30:02,920
Speaker 3: have a appreciated stock in a taxable account, and what

627
00:30:02,960 --> 00:30:05,280
Speaker 3: should they do with that? They are charitably inclined, So

628
00:30:05,320 --> 00:30:09,640
Speaker 3: would a charitable remainder trust or a CRT actually diversify

629
00:30:09,680 --> 00:30:11,800
Speaker 3: that without realizing the game? Is that how that works?

630
00:30:11,800 --> 00:30:12,040
Speaker 2: Bob?

631
00:30:12,960 --> 00:30:16,200
Speaker 1: Yeah, Tony, this can work beautifully. So just to walk

632
00:30:16,240 --> 00:30:18,959
Speaker 1: through how this works. You know, you take those appreciated

633
00:30:19,000 --> 00:30:21,960
Speaker 1: stocks and you actually give them away, you put them

634
00:30:21,960 --> 00:30:25,760
Speaker 1: into a trust, and you retain an income stream that

635
00:30:25,840 --> 00:30:29,120
Speaker 1: will help you, you know, in retirement, presumably with some

636
00:30:29,200 --> 00:30:33,840
Speaker 1: income coming in the real downside potential downside to a

637
00:30:33,920 --> 00:30:36,200
Speaker 1: charitable remainder trust. And you've got to remember this. Once

638
00:30:36,240 --> 00:30:39,720
Speaker 1: you pulled the trigger on this, you have irrevocably given

639
00:30:39,720 --> 00:30:43,320
Speaker 1: away that principle to charities. Now you have control over

640
00:30:43,360 --> 00:30:46,760
Speaker 1: which charities that money will go to when you and

641
00:30:47,040 --> 00:30:49,280
Speaker 1: if you're married, you and your spouse pass away. But

642
00:30:49,400 --> 00:30:52,960
Speaker 1: this is an irrevocable gift that you cannot pull back.

643
00:30:53,040 --> 00:30:56,200
Speaker 1: That's the only potential downside. So you do want to

644
00:30:56,240 --> 00:30:58,600
Speaker 1: have your ducks in a row here and know that

645
00:30:58,680 --> 00:31:01,920
Speaker 1: this your financial plan can sustain a big gift like

646
00:31:02,000 --> 00:31:05,880
Speaker 1: this before obviously pulling the trigger. But in answer to

647
00:31:05,920 --> 00:31:10,520
Speaker 1: your question, you completely avoid all capital gains taxes on

648
00:31:10,600 --> 00:31:13,000
Speaker 1: the appreciated stocks that you give away. So it's a

649
00:31:13,120 --> 00:31:17,520
Speaker 1: wonderful opportunity if you are charitably inclined to retain an

650
00:31:17,560 --> 00:31:21,760
Speaker 1: income stream, reposition your portfolio, diversify and not have to

651
00:31:21,800 --> 00:31:25,960
Speaker 1: pay any capital gains taxes. I've done many of these

652
00:31:26,000 --> 00:31:28,800
Speaker 1: over the years for clients and they love them. It's

653
00:31:28,840 --> 00:31:32,800
Speaker 1: a great strategy in the right situation, all right, Brian

654
00:31:32,840 --> 00:31:35,840
Speaker 1: Scott and Anderson says, we have a large deferred compensation

655
00:31:36,000 --> 00:31:39,400
Speaker 1: balance that pays out over five years. How can we

656
00:31:39,480 --> 00:31:43,840
Speaker 1: coordinate that with roth conversions or other income to avoid

657
00:31:44,080 --> 00:31:45,320
Speaker 1: stacking taxes.

658
00:31:46,120 --> 00:31:48,880
Speaker 3: So this is a great situation and not too unique

659
00:31:48,880 --> 00:31:51,000
Speaker 3: to Scott, but it's not something everybody deals with. So

660
00:31:51,040 --> 00:31:52,600
Speaker 3: this a lot of some people might hear this and

661
00:31:52,640 --> 00:31:54,080
Speaker 3: think that we're talking about a four oh one k

662
00:31:54,240 --> 00:31:54,920
Speaker 3: or something like that.

663
00:31:55,080 --> 00:31:56,280
Speaker 5: No, this is a little different.

664
00:31:56,280 --> 00:31:59,800
Speaker 3: So Scott apparently has some kind of executive based bonus

665
00:31:59,800 --> 00:32:03,600
Speaker 3: place at his employer where where he's he has simply

666
00:32:03,680 --> 00:32:06,360
Speaker 3: chosen in the past to defer some of his compensation

667
00:32:06,920 --> 00:32:09,360
Speaker 3: and uh, at that time, he chose that it would

668
00:32:09,360 --> 00:32:11,200
Speaker 3: pay out over a five year time perio. It sounds

669
00:32:11,200 --> 00:32:13,800
Speaker 3: like that's coming up pretty soon, and so he's wondering about,

670
00:32:13,960 --> 00:32:15,800
Speaker 3: We've got this money coming in no matter what, on

671
00:32:15,840 --> 00:32:19,280
Speaker 3: top of our actual expenses that are happening anywhere. Actually

672
00:32:19,320 --> 00:32:21,080
Speaker 3: income that's happening anyway, So it might be a little

673
00:32:21,120 --> 00:32:24,120
Speaker 3: more a little more impactful. So uh, you know, and

674
00:32:24,240 --> 00:32:26,560
Speaker 3: and if this happens right as you retire, that tax

675
00:32:26,640 --> 00:32:28,640
Speaker 3: rate might not drop as much as you were thinking.

676
00:32:28,960 --> 00:32:30,400
Speaker 3: You know, a lot of people think I'm going to

677
00:32:30,440 --> 00:32:33,120
Speaker 3: retire here in whatever year and then my income is

678
00:32:33,120 --> 00:32:35,440
Speaker 3: gonna drop. Well, whoops, forgot about my deferred comp plan

679
00:32:35,480 --> 00:32:37,800
Speaker 3: that I signed up for a while ago. So in

680
00:32:37,840 --> 00:32:40,880
Speaker 3: any case, I would hold off on your your your

681
00:32:40,880 --> 00:32:43,240
Speaker 3: point about ROTH conversions. Hopefully you're gonna have a window

682
00:32:43,240 --> 00:32:45,840
Speaker 3: of time where your where your your income will drop.

683
00:32:46,280 --> 00:32:46,480
Speaker 4: Uh.

684
00:32:46,520 --> 00:32:49,200
Speaker 3: You You'll want to find that time period and you

685
00:32:49,280 --> 00:32:52,160
Speaker 3: might take when that comp comes out and he gets taxed.

686
00:32:52,200 --> 00:32:54,840
Speaker 3: I would carve it out and then consciously spend it

687
00:32:54,920 --> 00:32:55,920
Speaker 3: down over time.

688
00:32:56,480 --> 00:32:56,840
Speaker 5: Uh.

689
00:32:56,880 --> 00:32:59,680
Speaker 3: And then then then you'll have a window there where

690
00:32:59,680 --> 00:33:01,800
Speaker 3: you can use that income to live and pay your

691
00:33:01,840 --> 00:33:04,360
Speaker 3: bills and not turn on your so security or or

692
00:33:04,400 --> 00:33:06,560
Speaker 3: any other income streams if you can avoid those. And

693
00:33:06,600 --> 00:33:09,240
Speaker 3: then it's those years, however many years you get before

694
00:33:09,320 --> 00:33:12,280
Speaker 3: required minimum distributions kick in at seventy three or seventy

695
00:33:12,280 --> 00:33:14,880
Speaker 3: five for you, that's the window I would look for

696
00:33:15,200 --> 00:33:17,760
Speaker 3: to do those ROTH conversions. So again I would start

697
00:33:17,800 --> 00:33:19,680
Speaker 3: carving out some of that deferred compa as it comes in,

698
00:33:19,720 --> 00:33:22,480
Speaker 3: put it in relatively conservative type things, with the conscious

699
00:33:22,480 --> 00:33:24,680
Speaker 3: decision that yes, we are going to spend these dollars

700
00:33:24,800 --> 00:33:26,560
Speaker 3: to pay our bills during those years.

701
00:33:26,680 --> 00:33:27,760
Speaker 5: Do the ROTH conversions.

702
00:33:28,440 --> 00:33:31,920
Speaker 3: Michael and Madeira they've got a family LLC limited liability

703
00:33:31,920 --> 00:33:35,160
Speaker 3: corporation used for investment purposes, and he's wondering what the

704
00:33:35,200 --> 00:33:37,560
Speaker 3: pros and cons are of being elected to be taxed

705
00:33:37,600 --> 00:33:40,400
Speaker 3: as an escort versus keeping it as a partnership. Now,

706
00:33:40,400 --> 00:33:44,120
Speaker 3: Bob and I are not tax prepare people over financial planners.

707
00:33:44,160 --> 00:33:45,760
Speaker 5: We can do the high level here.

708
00:33:46,840 --> 00:33:49,240
Speaker 1: All right, Well, here's how I want to answer this question, Michael.

709
00:33:49,280 --> 00:33:51,720
Speaker 1: First of all, ento Bryan's point, I think you should

710
00:33:51,760 --> 00:33:55,120
Speaker 1: first seek the advice of a really good CPA, someone

711
00:33:55,160 --> 00:33:59,000
Speaker 1: that specializes in working with business owners, not just someone

712
00:33:59,480 --> 00:34:02,920
Speaker 1: that prepare you know, regular old plane vanilla tax returns,

713
00:34:02,960 --> 00:34:06,640
Speaker 1: because you really, especially if you're gonna change your tax structure,

714
00:34:06,720 --> 00:34:10,200
Speaker 1: you want to get proactive advice in advance, uh, to

715
00:34:10,280 --> 00:34:13,640
Speaker 1: make sure that you don't set off some you know,

716
00:34:13,760 --> 00:34:18,000
Speaker 1: unintentional land mines. Here by switching from an LLC to

717
00:34:18,080 --> 00:34:21,400
Speaker 1: an S corporation. Now that being said, the key difference

718
00:34:21,440 --> 00:34:25,480
Speaker 1: between the two is in an S corporation you do

719
00:34:25,719 --> 00:34:29,480
Speaker 1: avoid self employment taxes on one hundred percent of the income,

720
00:34:29,560 --> 00:34:32,520
Speaker 1: where in an LLC one hundred percent of any income

721
00:34:32,600 --> 00:34:35,719
Speaker 1: generated as a pass through you're gonna pay both fighter taxes,

722
00:34:35,840 --> 00:34:39,920
Speaker 1: self employment taxes and regular income taxes. In an S corporation,

723
00:34:40,160 --> 00:34:44,359
Speaker 1: you can set a reasonable salary and as long as

724
00:34:44,400 --> 00:34:47,960
Speaker 1: it's reasonable, uh, and can pass muster with the irs

725
00:34:47,960 --> 00:34:51,520
Speaker 1: and only pay self employment taxes on that income. So

726
00:34:51,760 --> 00:34:55,000
Speaker 1: an S corporation in the right situation can be a

727
00:34:55,040 --> 00:34:58,839
Speaker 1: bit more tax efficient. But again, seek the council of

728
00:34:58,880 --> 00:35:02,360
Speaker 1: a good CPA and look at the pros and cons

729
00:35:02,400 --> 00:35:05,800
Speaker 1: as they relate to your individual situation. All right, Brian,

730
00:35:05,880 --> 00:35:08,839
Speaker 1: real quick here, Mark and Fort Mitchell. He says we've

731
00:35:08,880 --> 00:35:12,479
Speaker 1: got municipal bonds in our taxable account, but he's heard

732
00:35:12,520 --> 00:35:17,839
Speaker 1: their income can still trigger the Medicare IRMA surcharge. Is

733
00:35:17,880 --> 00:35:19,960
Speaker 1: that true? And how do you plan around it?

734
00:35:20,800 --> 00:35:20,880
Speaker 3: So?

735
00:35:21,080 --> 00:35:22,320
Speaker 5: Yeah, this is a great point.

736
00:35:22,400 --> 00:35:25,759
Speaker 3: And IRMA, by the way, stands for basically looking at

737
00:35:25,800 --> 00:35:29,319
Speaker 3: your income and determining your your Medicare premiums that can

738
00:35:29,440 --> 00:35:31,920
Speaker 3: rise a little bit kind of stuff. So, but ERMA

739
00:35:31,960 --> 00:35:35,319
Speaker 3: stands for income related monthly adjustment amount. By the way, yes,

740
00:35:35,480 --> 00:35:38,759
Speaker 3: tax exempt municipal bond interest can drive those premiums up.

741
00:35:39,480 --> 00:35:41,719
Speaker 3: The thing to remember that starts at one hundred and

742
00:35:41,719 --> 00:35:43,839
Speaker 3: three thousand for a single person, two hundred and six

743
00:35:43,880 --> 00:35:47,840
Speaker 3: thousand for a married a couple, and if you go

744
00:35:47,880 --> 00:35:49,760
Speaker 3: over that, you might pay eight hundred to one thousand

745
00:35:49,800 --> 00:35:52,359
Speaker 3: dollars more per year. That's a two year reset, though

746
00:35:52,400 --> 00:35:56,080
Speaker 3: the IRS will look backwards two years to determine what

747
00:35:56,160 --> 00:35:58,560
Speaker 3: your IRMA situation is for the next couple of years

748
00:35:58,640 --> 00:36:00,680
Speaker 3: after that, So that is definitely some pay attention to

749
00:36:00,760 --> 00:36:02,840
Speaker 3: tax free doesn't always mean permanently tax free.

750
00:36:03,360 --> 00:36:03,680
Speaker 2: All right.

751
00:36:03,680 --> 00:36:06,440
Speaker 1: One of the most unlikely stocks you've ever heard of

752
00:36:06,680 --> 00:36:09,920
Speaker 1: just surged, and it's not because of earnings or demand

753
00:36:10,480 --> 00:36:13,319
Speaker 1: or even common sense. We'll talk about that coming up next.

754
00:36:13,360 --> 00:36:15,920
Speaker 1: You're listening to Simply Money presented about all Worth Financial

755
00:36:15,960 --> 00:36:27,080
Speaker 1: on fifty five KRC, the talk station. You're listening to

756
00:36:27,120 --> 00:36:30,400
Speaker 1: Simply Money presented by Allworth Financial on Bob Sponseller along

757
00:36:30,400 --> 00:36:34,520
Speaker 1: with Brian James. Brian, I love that Ghostbusters. We must

758
00:36:34,600 --> 00:36:36,319
Speaker 1: be getting close to Halloween.

759
00:36:37,000 --> 00:36:37,839
Speaker 5: I think we are.

760
00:36:38,040 --> 00:36:40,480
Speaker 3: That is a very appropriate tune. We appreciate Tony for

761
00:36:40,520 --> 00:36:41,359
Speaker 3: throwing that out there.

762
00:36:41,440 --> 00:36:41,839
Speaker 1: Very cool.

763
00:36:41,960 --> 00:36:43,160
Speaker 5: Looking forward to trick or treating?

764
00:36:44,200 --> 00:36:47,960
Speaker 1: All right, Speaking of tricks and treats, it's happening again.

765
00:36:48,160 --> 00:36:50,719
Speaker 1: Just when you thought the meme stock era had gone

766
00:36:50,760 --> 00:36:55,120
Speaker 1: the way of let's say, Tiger King, or sour dough starters.

767
00:36:55,480 --> 00:36:58,640
Speaker 1: It rears its greasy little head again. In this time

768
00:36:58,719 --> 00:37:02,080
Speaker 1: the star of the show is beyond meat.

769
00:37:02,320 --> 00:37:05,520
Speaker 5: Beyond meat plant never.

770
00:37:05,840 --> 00:37:08,360
Speaker 1: I have never touched this stuff. I never planned to.

771
00:37:08,960 --> 00:37:11,480
Speaker 1: But talk about what's going on with this stock.

772
00:37:12,040 --> 00:37:14,640
Speaker 5: More of a meat adjacent person than a beyond meat.

773
00:37:14,760 --> 00:37:18,480
Speaker 5: I like real I like real food very near his meat.

774
00:37:18,640 --> 00:37:21,480
Speaker 3: So it's a plant based burger that does if you

775
00:37:21,640 --> 00:37:23,839
Speaker 3: have described as what a tire my taste like I've

776
00:37:23,840 --> 00:37:26,799
Speaker 3: had gym membership. The stock went up big, but not

777
00:37:26,840 --> 00:37:29,440
Speaker 3: because Americans are suddenly ditching beef for peat protein.

778
00:37:29,480 --> 00:37:30,960
Speaker 5: Now I have had this stuff, and I'm gonna say

779
00:37:30,960 --> 00:37:33,400
Speaker 5: it's not far off. It's not the same. But but

780
00:37:33,440 --> 00:37:34,960
Speaker 5: if you if you, if you really want.

781
00:37:34,760 --> 00:37:38,520
Speaker 1: To make they mix a punch of herbs and spices

782
00:37:38,640 --> 00:37:42,200
Speaker 1: in there, and they could make you know, grass clippings,

783
00:37:42,320 --> 00:37:44,520
Speaker 1: you know, taste good, right if you throw enough stuff.

784
00:37:44,800 --> 00:37:46,319
Speaker 5: There's enough science behind it.

785
00:37:46,400 --> 00:37:48,600
Speaker 3: Yes, and you don't pay the price for having a

786
00:37:48,640 --> 00:37:51,280
Speaker 3: slider like you like you might have done in the past.

787
00:37:51,320 --> 00:37:53,520
Speaker 5: So it's got it. Let's stick with the stocks. Let's stick.

788
00:37:54,080 --> 00:37:55,319
Speaker 5: So where does rally come from?

789
00:37:55,360 --> 00:37:58,160
Speaker 3: So they had they expanded their distribution deal with Walmart,

790
00:37:58,160 --> 00:37:59,840
Speaker 3: so it's gonna be more available. Just a good business

791
00:37:59,880 --> 00:38:02,680
Speaker 3: to And more importantly, what happened, well, it became a

792
00:38:03,080 --> 00:38:04,760
Speaker 3: got added to the mean ETF.

793
00:38:04,800 --> 00:38:05,759
Speaker 5: That's a real thing, folks.

794
00:38:05,800 --> 00:38:08,160
Speaker 3: There is an ETF out there that tracks the social

795
00:38:08,200 --> 00:38:11,359
Speaker 3: media buzz and speculative trading trends. I'm pretty sure Andy

796
00:38:11,400 --> 00:38:14,400
Speaker 3: Stout is not going to be adding this noefolios anytime soon.

797
00:38:14,239 --> 00:38:15,160
Speaker 5: But it does exist.

798
00:38:15,520 --> 00:38:18,040
Speaker 3: Companies still not profitable, you know, it's the old Internet story.

799
00:38:18,040 --> 00:38:19,880
Speaker 3: You don't actually need that to make a profit. You

800
00:38:19,920 --> 00:38:21,840
Speaker 3: just need to have a cool story. And so the

801
00:38:21,880 --> 00:38:24,760
Speaker 3: stock rockets even higher because a group of Reddit traders

802
00:38:24,800 --> 00:38:25,920
Speaker 3: and social media.

803
00:38:25,680 --> 00:38:27,320
Speaker 5: People decided that it should.

804
00:38:27,320 --> 00:38:29,440
Speaker 3: This is the same thing that happened with Game Stop

805
00:38:29,520 --> 00:38:32,319
Speaker 3: and AMC and bed Bath and Beyond and now it's

806
00:38:32,360 --> 00:38:35,640
Speaker 3: beyond meats term in that same blender. But let's be

807
00:38:35,680 --> 00:38:38,480
Speaker 3: clear again, this is not investing. This is just entertainment

808
00:38:39,080 --> 00:38:41,040
Speaker 3: on social media dressed up as finance.

809
00:38:42,040 --> 00:38:45,000
Speaker 1: This is not unlike what we talked about earlier in

810
00:38:45,000 --> 00:38:47,560
Speaker 1: the show with some of these ETFs that are you know,

811
00:38:47,719 --> 00:38:52,240
Speaker 1: triple five times leverage. These are swing trading at best

812
00:38:52,360 --> 00:38:55,920
Speaker 1: and borderline day trading vehicles. These are not things that

813
00:38:55,960 --> 00:38:58,840
Speaker 1: should be in a long term buy and hold acid

814
00:38:58,840 --> 00:39:02,520
Speaker 1: allocation portfolio. But we throw it out there, just you know,

815
00:39:02,680 --> 00:39:05,800
Speaker 1: letting you know this stuff's out there, but giving you caution.

816
00:39:05,960 --> 00:39:09,160
Speaker 1: Here's the all Worth advice. Beyond Meat might be sizzling

817
00:39:09,200 --> 00:39:11,560
Speaker 1: again on Wall Street, but that doesn't mean it belongs

818
00:39:11,600 --> 00:39:15,800
Speaker 1: anywhere near your long term investment plan. Thanks for listening tonight.

819
00:39:15,800 --> 00:39:18,120
Speaker 1: Tune in tomorrow we'll talk about why you might get

820
00:39:18,160 --> 00:39:22,000
Speaker 1: a larger tax refund this coming April. You've been listening

821
00:39:22,000 --> 00:39:25,160
Speaker 1: to Simply Money, presented by Allworth Financial on fifty five KRC,

822
00:39:25,600 --> 00:39:26,520
Speaker 1: the talk station