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Speaker 1: Tonight what the latest economic data means for your portfolio,

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Speaker 1: and whether the Fed's next move could or maybe should,

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Speaker 1: reshape your thinking and your financial plan. You're listening to

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

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Speaker 1: along with Brian James. Well, it's hard to believe, but

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Speaker 1: welcome to December. Hope. Everyone had a great Thanksgiving holiday weekend,

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Speaker 1: and while many are winding down and prepping for holiday parties,

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Speaker 1: there's still plenty of activity in the financial world that

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Speaker 1: we're keeping our eyes on. And to that point, we

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Speaker 1: want to welcome in tonight all Worse Chief investment Officer

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Speaker 1: Andy Stout, who joins us. Andy, thanks again as always

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Speaker 1: for being with us, and I'll just kick it off

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Speaker 1: on a broad basis here. I mean, for a while

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Speaker 1: we weren't getting any data. Now the data is starting

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Speaker 1: to trickle in. You've got data to work with. They're

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Speaker 1: in your little laboratory that you work on all day

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Speaker 1: every day. Tell us what's going on here with the economy.

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Speaker 1: Is the economy softening? You know? I know we got

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Speaker 1: Beige Book numbers. Give us an update on what the

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Speaker 1: data is suggesting as far as where we stand in

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Speaker 1: the economy heading into the last month of the year.

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Speaker 2: Well hiding into the last month of the year. In

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Speaker 2: all honesty, we still don't have actually a good grasp

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Speaker 2: on the economic data because even though the government's been reopened,

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Speaker 2: the data that is coming out is still relatively stale,

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Speaker 2: least the official data you know, from the government. So

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Speaker 2: when you're thinking about, you know, the labor market data

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Speaker 2: or consumer inflation or retail sales, which you got last week,

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Speaker 2: we're still talking September data. So we're not don't even

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Speaker 2: think like, oh, November decided, what's going on in November.

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Speaker 2: We don't know because we don't even know what's been

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Speaker 2: going on in October because the data has not been

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Speaker 2: available and a lot of the October data is just

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Speaker 2: not coming back because that's usually or some of it's

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Speaker 2: collected in real time.

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Speaker 1: So with you know, the.

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Speaker 2: Government shut down during that, they weren't able to collect

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Speaker 2: the data. Looking off of the data that we do have,

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Speaker 2: you know what I would say, the picture is one

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Speaker 2: that's steady growth.

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Speaker 1: But moderating momentum.

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Speaker 2: And so when you look at some of the data

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Speaker 2: we got last week, again relatively stale. We did get

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Speaker 2: September's retail sales data, and it increased sort of spending

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Speaker 2: was up point two percent in September. So keep in

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Speaker 2: mind September was the last month of the third quarter,

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Speaker 2: and we're obviously at the last month of the fourth

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Speaker 2: quarter right now, so we're still kind of working through

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Speaker 2: this data backlog and it's going to catch up, but

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Speaker 2: unfortunately it's not there yet. So you know, just to

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Speaker 2: give you an example, BOP the consumer inflation and the

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Speaker 2: for November and the November Labor market report, they're not

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Speaker 2: going to come out until December sixteenth and eighteenth, and

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Speaker 2: then there's also the third quarter GDP. We would usually

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Speaker 2: have that by now, that's not being released until December

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Speaker 2: twenty third, So you know, if you want to ask

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Speaker 2: me how things are, i'd be much more well informed

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Speaker 2: answer that in a few weeks. But based on the

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Speaker 2: data that we've gotten, we did get some basebook information

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Speaker 2: which you just noted a little bit ago. What's interesting

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Speaker 2: about that it shows anecdotal evidence from like the fed's

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Speaker 2: twelve major districts. Overall, it really makes a case for

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Speaker 2: a rate reduction. In December. What it showed was relatively

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Speaker 2: steady growth but a weakening labor market with a lot

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Speaker 2: of or more districts noting i'll call it a sluggishness

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Speaker 2: and hiring and some and also pointed to consumers who

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Speaker 2: are strained.

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Speaker 1: All right, Andy, I know, Brian. I don't want to

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Speaker 1: keep Brian from jumping into this conversation, but I do

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Speaker 1: want to go back to this data because when I

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Speaker 1: watch you know, various people interviewed, including FED governors in

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Speaker 1: various economies, I get when I sit there and watch

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Speaker 1: this stuff, I get conflicting ideas about how much real

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Speaker 1: usable day is coming in. And I want you to

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Speaker 1: just weigh in on this because one of the among

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Speaker 1: the many things I admire about you is you you

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Speaker 1: managed to stay very apolitical, very non biased, and very

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Speaker 1: right down the middle in looking at facts. And again

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Speaker 1: we'll use that four letter word data. Here's my question.

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Speaker 1: A lot of these folks are saying that the private

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Speaker 1: sector and their contacts and they're able to go out

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Speaker 1: and look at how the economy is actually doing and

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Speaker 1: talk to people and get you know, non government data

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Speaker 1: with which to base their opinions and decisions. Other people say, man,

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Speaker 1: we really need this government data and without it we're

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Speaker 1: flying blind. Here, tell will you just you know, for

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Speaker 1: my benefit and hopefully the others out there listening. What's

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Speaker 1: reality here? What kind of data are actually people have

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Speaker 1: been actually getting over the last three, four or five weeks.

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Speaker 1: And is it useful? I mean it is useful.

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Speaker 2: I wantn't say we're flying completely blind or I mean

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Speaker 2: we're in the dark a little bit. If you want

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Speaker 2: to use an analogy, maybe you might be able to say,

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Speaker 2: it's like, it's like me, when I take my glasses off,

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Speaker 2: I can get a general sense of what's going on,

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Speaker 2: But do I have a really crisp idea of what's

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Speaker 2: going on? Not really until I put the glasses on.

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Speaker 2: And that's what the official government data actually provides.

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Speaker 3: That sounds like, that sounds very very scary. A federal

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Speaker 3: government is running, but it forgot its glasses at home.

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Speaker 3: Basically is where weed.

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Speaker 2: Yeah, and you don't want me driving without my glasses,

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Speaker 2: and that's.

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Speaker 3: Where you're not helping.

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Speaker 2: That's what we're asking the FED to do, right, We're

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Speaker 2: asking the Fed to drive the car when it comes

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Speaker 2: to monetary policy without its glasses so they can get

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Speaker 2: a decent idea. Because there is some private market data

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Speaker 2: out there. There's like ADP, which is the largest for

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Speaker 2: one of the largest private payroll companies, and they're telling

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Speaker 2: us what they see with their data. And we do

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Speaker 2: have some decent data coming out this week from the

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Speaker 2: ISM or the Institute of Supply Advantage that they're showing

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Speaker 2: us what from a survey perspective, what they see the

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Speaker 2: purchasing manager see on the manufacturing sector and the services

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Speaker 2: SACKER likely to show the manufacturing contracting again for the

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Speaker 2: November services probably expand services are roughly eighty five percent

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Speaker 2: of the economy, so that it is more important than

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Speaker 2: a manufacturing side, at least from a broad economic perspective.

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Speaker 2: So we do have some data, and some of that

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Speaker 2: data is good data like the ADP, while it is

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Speaker 2: a bit sporadic.

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Speaker 1: You know, some of the government data, to be honest,

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Speaker 1: is also sporadic.

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Speaker 2: Let's just be real about it. But you know, we

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Speaker 2: also get that ISM data which is coming out this week,

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Speaker 2: and that is a powerful tool that the FED will

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Speaker 2: look like look at when it's setting monetary policy. But yes,

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Speaker 2: I would absolutely presfer if they were wearing their glasses.

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Speaker 3: So let's let's shift if we could, to interest rates. Andy.

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Speaker 3: There's been a lot of back and forth over the

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Speaker 3: past several months. You know, months ago it was a

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Speaker 3: foregone conclusion that we were going to cut again in December,

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Speaker 3: and you know, have a bunch of rate cuts through

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Speaker 3: their balance of twenty twenty five. And then when we

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Speaker 3: went we started flying blind with the data, as we've

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Speaker 3: already discussed. Then we had a brief period where it

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Speaker 3: looks like things were slowing down a little bit and

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Speaker 3: maybe we're not going to get a rate cut at all,

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Speaker 3: but it seems like the pendulum may have swung back

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Speaker 3: in the other direction. Can you give us an update

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Speaker 3: on interest rates?

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Speaker 2: Yeah. I mean, if you have been to King's Island

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Speaker 2: before and got nauseous riding and roller coaster, don't pay

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Speaker 2: attention to the FED rate environment because you're going to

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Speaker 2: get that same nausea. So when you think about or

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Speaker 2: when you see what's been going on there, I mean

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Speaker 2: described it very well, because you know, heading into the

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Speaker 2: end of October, right before the FED last meeting, which

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Speaker 2: is like October thirtieth, twenty nine thirty, they the market

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Speaker 2: was pricing in one hundred percent chance of a cut

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Speaker 2: in December. You know when it next meets, which is

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Speaker 2: December tenth, by the way, So next Wednesday. Now, following

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Speaker 2: that October meeting, what we saw was that Jera Palell

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Speaker 2: came out and said, hey, there's no no foe gone

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Speaker 2: conclusions that we're going to have a rate cut in December.

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Speaker 2: So Wall Street you just need to you need to

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Speaker 2: back up a little bit here and just kind of

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Speaker 2: take it all in. And then you saw some other

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Speaker 2: data coming out from the or some other FED governors

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Speaker 2: coming out a little bit hawkish this, which means they

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Speaker 2: kind of are more worried about infhilation. And then you

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Speaker 2: saw the BLS come out and say, hey, there's not

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Speaker 2: going to be an October Jaws report at all, and

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Speaker 2: the November one isn't coming out until uh, you know,

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Speaker 2: mid December, after the Fed meets. All of that together

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Speaker 2: made Wall Street say, whoa, there really might not be

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Speaker 2: a rate cut. Then on November twentieth, there was just

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Speaker 2: a twenty five percent chance there would be a rate

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Speaker 2: cut on December tenth, so ten days ago, roughly, there

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Speaker 2: was a twenty five percent chance. Well guess what's happened

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Speaker 2: over the past ten days. Not too much, except we've

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Speaker 2: seen a little bit of all tilting in the market,

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Speaker 2: and we saw the Fed's Beige Book come out, which

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Speaker 2: showed some labor Marho weakness and guess what, now we're

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Speaker 2: at one hundred percent chance of a cut again on

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Speaker 2: December tenth. It's just, I mean, it's just it's a

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Speaker 2: it's a roller coaster ride, is what it is.

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Speaker 3: All right.

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Speaker 1: So with the market pricing in one hundred percent probability

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Speaker 1: of a rate cut, you know, this month, obviously the markets,

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Speaker 1: I think a lot of people weren't even paying attention.

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Speaker 1: Last week. We had a pretty good week, you know,

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Speaker 1: in the stock market. Uh. That being said, the Nasdaq

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Speaker 1: smp of both posted very strong year to date numbers.

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Speaker 1: International emerging market stocks have out performed even better. But

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Speaker 1: you know, in some cases by a long shot. When

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Speaker 1: you and your team look at rebalancing a portfolio going

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Speaker 1: into the end of the year, is there anything in

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Speaker 1: particular that folks should be thinking about right now or

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Speaker 1: should we just stick with the basic you know, blocking

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Speaker 1: and tackling, as we like to say, don't try to

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Speaker 1: pick tops and bottoms, just do your responsible rebalancing. And

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Speaker 1: what does that look like in terms of maybe taking

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Speaker 1: something something off the top in these tech stocks and

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Speaker 1: big growth you know, us growth companies and positioning it

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Speaker 1: into some international stocks.

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Speaker 2: Well, what I would say is, probably you want to

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Speaker 2: start with whatever your target investment mixes based on you

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Speaker 2: know what rate of return you need to meet your

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Speaker 2: financial goals, whether it be four percent, six percent, eight percent,

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Speaker 2: whatever it is, and then that backs into what that

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Speaker 2: you know investment mixes that you need, and then you

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Speaker 2: hear about rebalancing, right, and that's you want to avoid

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Speaker 2: making an emotional decision. This kind of keeps you on target.

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Speaker 2: One thing that is usually not a good idea is

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Speaker 2: to do calendar rebalancing, like, oh, it's a new year,

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Speaker 2: we might as well rebounce back to that. Let's just

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Speaker 2: say you have a sixty forty sixty forty percent on target,

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Speaker 2: new calendar year, let's rebalance back. You know, I've done

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Speaker 2: some studies and there's been lots of other people who

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Speaker 2: have done these studies, and calendar rebalancing is not really

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Speaker 2: beneficial for you or whatsoever. If anything, it might actually

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Speaker 2: hurt you a little bit. Instead, you know, what makes

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Speaker 2: more sense is to just look at the drift in

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Speaker 2: your portfolio relative target, and if it drifts too far

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Speaker 2: low in terms of your stock allocation, you might want

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Speaker 2: to add risk if it drips too far high, say

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Speaker 2: you're sixty forty as an example, gets to like sixty

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Speaker 2: five thirty five, you might want to de risk. What

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Speaker 2: this actually allows you to do, Bob is instead of

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Speaker 2: making some sort of emotional decision where you end up

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Speaker 2: selling at lows and buying at highs. By doing a

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Speaker 2: discipline rebalancing process, you're instead buying low and selling high.

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Speaker 2: So your after there's been a sale. So I mean,

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Speaker 2: think about it. The stock market's really the only market,

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Speaker 2: if you will, where if things go on sale, people

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Speaker 2: don't want to buy things. I mean, we're at the

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Speaker 2: time where like we're looking for sales, we're looking for

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Speaker 2: things cheaper. H And you know, right now, I understand

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Speaker 2: the stock market may not be cheap, but there will

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Speaker 2: come in time when it is. And I would urge

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Speaker 2: you to make sure that you focus on the overall

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Speaker 2: investment mix and instead of making an emotional decision, you know,

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Speaker 2: think about what would you do if it's all you

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Speaker 2: Black Friday or Cyber Monday. You know, if it's on sale,

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Speaker 2: that's what you might want to buy. So that's uh,

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Speaker 2: you know what what you might want to consider, all.

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Speaker 1: Right, Andy, to that point, a lot of folks that

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Speaker 1: we talk to and work with have these target date

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Speaker 1: retirement funds in their four to one K plans. How

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Speaker 1: do those funds tend to rebalance? Are a lot of

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Speaker 1: them calendar based? Or do some of them rebalance the

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Speaker 1: way you just talked about.

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Speaker 2: You'd have to look at the actual plan documents and

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Speaker 2: the perspectives of those funds, But a lot of them

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Speaker 2: are calendar based, just because it's kind of like the

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Speaker 2: check in the box and keeping itself. And I understand

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Speaker 2: if you don't really have much of a choice, and

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Speaker 2: you know, in all honesty, at least having some sort

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Speaker 2: of ass allocated solution like that is better than nothing,

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Speaker 2: So it's not terrible from that perspective. So if you're

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Speaker 2: able to do that and that's all you have, that's fine.

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Speaker 2: But if you're able to maybe be a little bit

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Speaker 2: more nuanced and looking for other opportunities, there are ways

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Speaker 2: which you know might be more beneficial.

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Speaker 1: Sounds good, Andy, Thanks as always for joining us tonight.

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Speaker 1: Coming up next, we shine a light on the hidden

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Speaker 1: risk of using AI to pilot or take over the

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Speaker 1: management of your portfolio. You're listening to simply money presented

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

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Speaker 1: station you're listening to Simply Money, presented by all Worth

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Speaker 1: Financial and Bob Sponseller along with Brian James. If you

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Speaker 1: can't listen to Simply Money every night, subscribe and get

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Speaker 1: our daily podcast. Just search Simply Money on the iHeart

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

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Speaker 1: six forty three, we'll talk about overly complex portfolios and

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Speaker 1: flashy sales pitches from so called advisors that might not

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Speaker 1: be or turn out to be what they seem like.

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Speaker 1: All right, Speaking of that topic, AI tools are popping

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Speaker 1: up everywhere, from chatbots to portfolio quizzes, but can you

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Speaker 1: actually trust them with your investments to just turn on

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Speaker 1: a machine and let it run. A lot of people

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Speaker 1: are starting to do that, Brian, But new research shows

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Speaker 1: that leaning exclusively on AI the same way you would

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Speaker 1: a trusted human advisor could end up costing you, especially

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Speaker 1: the more money you know that you have in your portfolio.

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Speaker 3: This is a study Bob by King's College out of

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Speaker 3: London and and a local school of business there that

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Speaker 3: compared the asset allocation recommendations from over from almost two

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Speaker 3: hundred human financial advisors to those generated by artificial intelligence tools,

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Speaker 3: so think Chat, GPT, Google, Gemini, et cetera. And they

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Speaker 3: found out that those AI tools were significantly more conserved,

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Speaker 3: which means lower allocations to stocks, higher to cash and

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Speaker 3: bonds than the human advisors were. So, for example, one

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Speaker 3: of them said that if you invested one hundred thousand

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Speaker 3: dollars this was Google Gemini, by the way, you might

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Speaker 3: lose about seventeen thousand dollars an opportunity cost over ten years,

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Speaker 3: in nearly forty nine thousand over twenty years, versus a

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Speaker 3: human advice portfolio. So I don't think we're yet at

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Speaker 3: the point where an artificial intelligence bob can truly understand

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Speaker 3: how a person will react when they panic, you know,

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Speaker 3: because we all say certain things in surveys, and then

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Speaker 3: we react completely different when the market behaves certain ways

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Speaker 3: and life happens to us. So I think what's happening

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Speaker 3: here is artificial intelligence is focusing much more on the

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Speaker 3: urge to panic that human beings sometimes have, rather than

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Speaker 3: the realization that if I just don't panic, then every

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Speaker 3: single time, every crazy thing that happened in history has

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Speaker 3: been kind of irrelevant. If I just kind of buy

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Speaker 3: and hold so I don't think AI is quite ready

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Speaker 3: for that.

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Speaker 1: Yeah, I think it's interesting just to study the nuance

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Speaker 1: is of how these AI tools work. And you know,

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Speaker 1: I don't claim to be an expert in AI, but

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Speaker 1: I know enough at this point to know that it's

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Speaker 1: all based on what kind of information is fed into it,

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Speaker 1: and repetitions matter. And I think to your point, Uh,

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Speaker 1: the one thing that AI cannot do at this point

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Speaker 1: is it really can't interpret massage, you know, human emotion,

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Speaker 1: and that's one of the big parts of investing. I'm curious.

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Speaker 1: I mean, you you study this stuff all the time,

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Speaker 1: you use AI a lot, and uh, why why do

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Speaker 1: you think the conservative bias I would have I would

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Speaker 1: have almost assumed the opposite. Why do you think the

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Speaker 1: AI tools are are spitting out almost a two conservative portfolio?

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Speaker 1: Is it just because of the way the questions are

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Speaker 1: being asked by the user?

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Speaker 3: Yeah, I think that's got a lot to do with it.

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Speaker 3: And when when I use it, I'm basically just using

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Speaker 3: it as Google on steroids find me the exact answer,

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Speaker 3: as opposed to articles about the answer, so I can

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Speaker 3: dig it up. So uh, but I don't think we're

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Speaker 3: anywhere near where I would run a full financial plan

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Speaker 3: through AI or something like that. It's just not there

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Speaker 3: yet and it doesn't think enough like a human being.

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Speaker 3: But it's fantastic for figuring out what the latest ar

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Speaker 3: ars regulations are on things. But anyway, this study that

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Speaker 3: was done, the researcher suggested several reasons. So the data

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Speaker 3: sets and the training of these tools, again, like we

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Speaker 3: were talking about, emphasizes downside avoidance. So in other words,

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Speaker 3: it feels like the downside is more impactful than the

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Speaker 3: potential upside and kind of relying on worst case scenarios.

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Speaker 3: We have clients like this. Clients tend to think this way.

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Speaker 3: This is kind of funny, and this is what we

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Speaker 3: have to talk people out of. Clients tend to think

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Speaker 3: like artificial intelligence, where my job is protect protect protect

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Speaker 3: that therefore, every last dollar must be in a safe place,

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Speaker 3: which is not the case. Something that that's a guaranteed

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Speaker 3: way to lose out to inflation. So we can't think

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Speaker 3: that way. But yet, our computers and our new fake

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Speaker 3: brains that we've been building over these last couple decades

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Speaker 3: apparently are little skittish with market swings. So again I

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Speaker 3: don't think we're quite ready to turn over our human

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Speaker 3: reactions and human emotions over to be parsed by AA

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Speaker 3: and tell us what to do. You need another human

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Speaker 3: being to look you in the eyes, tell you to

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Speaker 3: breathe before you decide, and walk you through some history

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Speaker 3: and the fact that we don't protect our assets by

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Speaker 3: not putting them at risk. You have to put some

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Speaker 3: risk in the system or will will lose to inflation.

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Speaker 3: The way to way around that is by making sure,

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Speaker 3: as Bob and I say all the time, making sure

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Speaker 3: that anything that's coming up in the next twelve to

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Speaker 3: twenty four months that's covered. Put that in something safe.

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Speaker 3: You know, find a nice CD or something like that.

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Speaker 3: If that bills come and do on a predictable date,

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Speaker 3: then nail that down and take that out of the

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Speaker 3: risk scenario. But that means the rest of your portfolio

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Speaker 3: should be in something that might swing a little bit

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Speaker 3: according to whatever your preferences are, but it needs to

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Speaker 3: be able to grow. Computers aren't going to do that

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Speaker 3: for us anytime soon.

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Speaker 1: No excellent point. Hey, talk about how we should be

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Speaker 1: using AI. I mean I use it. It sounds like

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Speaker 1: in a very similar fashion at this point to how

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Speaker 1: you use it. You said, Google on steroids, And I

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Speaker 1: think that's a great analogy. I mean the positive thing

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Speaker 1: of AI. You can look up you can get the

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Speaker 1: answers to questions in seconds that used to take hours

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Speaker 1: to research, and I think that's a beautiful thing, especially

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Speaker 1: you know when you're looking up things about tax law

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Speaker 1: or you know, just things like that, you can get

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Speaker 1: a lot of information really quickly. Talk about how to

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Speaker 1: marry excellent tools like that with still using a human advisor,

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Speaker 1: in factoring in some of the nuances of human behavior,

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Speaker 1: human on human with an advisor into actually managing your portfolio.

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Speaker 3: So I'm going to give you a precise example from

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Speaker 3: last week. So we are heading into we got the

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Speaker 3: last month of the year. Here, it's required minimum distribution season.

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Speaker 3: For those of you who haven't done it yet and

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Speaker 3: probably thinking about it, this is where if you have

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Speaker 3: an IRA or you inherited somebody else's IRA, you may

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Speaker 3: have to take a distribution out of it by the

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Speaker 3: end of the year. Well, one of the rule changes

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Speaker 3: for twenty twenty five updated something that changed in twenty twenty,

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Speaker 3: which is now there's this ten year limit that you

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Speaker 3: have to liquidate and inherited IRA completely and the assumption

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Speaker 3: for years has been that, well that means I can

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Speaker 3: wait until the year ten and do it all. Then

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Speaker 3: well that's not the case. If your loved one passed

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Speaker 3: away when they themselves were of required menum distribution age,

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Speaker 3: then they themselves were taking those distributions. That means you

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Speaker 3: have to take an annual distribution. You still have to

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Speaker 3: liquidate it by ten years. But that doesn't mean you

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Speaker 3: can do nothing. So I use chat GPT for this,

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Speaker 3: quite honestly, to lay out where are the IRS codes

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Speaker 3: that explain this, so that I can be very crystal

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Speaker 3: clear with the client who was questioning that whole process.

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Speaker 3: It is wonderful, a huge time saver for those kinds

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Speaker 3: of things. Beats the heck out of digging through all

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Speaker 3: the stuff on the IRS site.

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Speaker 1: Myself excellent. Here's the all Worth advice. Treat AI as

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Speaker 1: a smart assistant, not your portfolio's autopilot. Keep some human

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Speaker 1: hands on the controls of that plane as you steer

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Speaker 1: it through the skies towards your financial future. All right,

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Speaker 1: baby boomers control eighty five trillion dollars. Now how they

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Speaker 1: built it and what you must learn if you want

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Speaker 1: to grow and keep your wealth you're listening to Simply Money,

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Speaker 1: presented by Allworth Finani 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: I'm Bob sponsorer along with Brian James. Well, Brian, I'm

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Speaker 1: anxious to kick this one around with you a little bit.

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Speaker 1: We came across a very interesting article in the Washington

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Speaker 1: Post just talking about the massive amount of wealth that

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Speaker 1: the Baby Boom generation is holding on to right now,

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Speaker 1: and what the prospects are in terms of building a

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Speaker 1: similar amount of wealth for the generations coming after that.

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Speaker 1: Some interesting data, some interesting points. Let's get into it.

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Speaker 1: Eager to hear your thoughts on it.

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Speaker 3: Yeah, so this can be a bit of a hot button,

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Speaker 3: especially you know, I'll bet there were some conversations just

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Speaker 3: a few days ago around around the Thanksgiving tables about

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Speaker 3: what generation is to blame for what and who's doing

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Speaker 3: what wrong and all that kind of stuff. Unfortunately, that's nowadays,

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Speaker 3: that's how we spend our holidays, and this article, Bob,

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Speaker 3: isn't really going to help a whole lot because it

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Speaker 3: kind of leans toward its one generation's fault. So we

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Speaker 3: wanted to kind of balance things out a little bit.

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Speaker 3: It's not as simple as anybody what anybody thinks. Really,

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Speaker 3: So the article kind of it's going through, you know,

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Speaker 3: what is the situation with the current situation for the

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Speaker 3: baby boom generation. I really hope they're going to follow

434
00:21:14,119 --> 00:21:18,560
Speaker 3: up with something similar for you know, the younger generations too,

435
00:21:18,640 --> 00:21:20,879
Speaker 3: just kind of an overall, but the whole point of

436
00:21:20,920 --> 00:21:23,240
Speaker 3: it is that baby boomers hold about eighty five trillion

437
00:21:23,280 --> 00:21:26,000
Speaker 3: dollars in assets. That's the richest generation we've ever had.

438
00:21:26,280 --> 00:21:28,680
Speaker 3: And that's not too surprising, right, money goes up, not down,

439
00:21:28,720 --> 00:21:33,280
Speaker 3: so generally ensuing generations should be wealthier. But so where

440
00:21:33,320 --> 00:21:36,320
Speaker 3: that came from. The article assesses that that a lot

441
00:21:36,359 --> 00:21:38,880
Speaker 3: of this wealth came from entering the workforce during decades

442
00:21:38,880 --> 00:21:43,639
Speaker 3: of strong economic growth, rising productivity, favorable wages, long bull markets,

443
00:21:43,640 --> 00:21:45,040
Speaker 3: and I say all the time, you know, I think

444
00:21:45,080 --> 00:21:46,520
Speaker 3: this one. There's a lot of truth to that. The

445
00:21:46,520 --> 00:21:49,080
Speaker 3: eighties and the nineties were thenominally because really we had

446
00:21:49,119 --> 00:21:53,320
Speaker 3: twenty years of nothing but up essentially, and that is

447
00:21:53,359 --> 00:21:55,800
Speaker 3: not the way that history works. We've not been that

448
00:21:55,840 --> 00:21:58,040
Speaker 3: way since, and we weren't that way before. But there

449
00:21:58,040 --> 00:21:59,800
Speaker 3: is an awful lot of truth of that when I

450
00:21:59,800 --> 00:22:03,760
Speaker 3: think long bull markets during these times post recession recoveries,

451
00:22:03,960 --> 00:22:06,280
Speaker 3: tuition was lower, health care costs, all this stuff was

452
00:22:06,320 --> 00:22:09,119
Speaker 3: in favor. Equity holdings dominate, right, So this is the

453
00:22:09,200 --> 00:22:11,800
Speaker 3: generation that had its pensions taken away from them and

454
00:22:11,800 --> 00:22:13,760
Speaker 3: we're told you're on your own for retirement. So they

455
00:22:13,800 --> 00:22:16,840
Speaker 3: invested in the stock market. What did that do? Along

456
00:22:16,840 --> 00:22:18,560
Speaker 3: with a lot of other factors. Will all that money

457
00:22:18,600 --> 00:22:20,480
Speaker 3: flowing into the stock market started to push it up

458
00:22:20,520 --> 00:22:23,120
Speaker 3: as opposed to to pension type funds from the fifties

459
00:22:23,119 --> 00:22:26,840
Speaker 3: and sixties, which primarily invested mostly in treasury bonds to

460
00:22:26,920 --> 00:22:29,240
Speaker 3: keep them safe. So tons of you know, a lot

461
00:22:29,240 --> 00:22:33,720
Speaker 3: of factors came together to allow the baby boomers to

462
00:22:34,000 --> 00:22:36,840
Speaker 3: become one of the wealthiest generations the world has ever seen.

463
00:22:37,280 --> 00:22:39,879
Speaker 3: So on the other hand, we always have this, you know,

464
00:22:39,920 --> 00:22:42,840
Speaker 3: the the younger generations looking at that saying that's not

465
00:22:42,880 --> 00:22:45,040
Speaker 3: what I have. Tuition costs this much more for me.

466
00:22:45,400 --> 00:22:47,800
Speaker 3: My first house costs four times what your house did

467
00:22:47,840 --> 00:22:50,720
Speaker 3: in terms of how much of my income it requires

468
00:22:50,760 --> 00:22:52,359
Speaker 3: to get me to help me pay that mention, that

469
00:22:52,520 --> 00:22:55,119
Speaker 3: that pension and so forth. So you know, I don't know,

470
00:22:55,280 --> 00:22:57,160
Speaker 3: there's a lot of moving parts to this, and it's

471
00:22:57,200 --> 00:22:59,679
Speaker 3: not all about that. It's not. It wasn't all easy

472
00:22:59,720 --> 00:23:02,080
Speaker 3: for generation and hard for the other. Right, Let's not

473
00:23:02,119 --> 00:23:05,200
Speaker 3: forget in the early eighties we had eighteen percent mortgage rates.

474
00:23:05,240 --> 00:23:07,720
Speaker 3: There were multiple recessions through the seventies in the eighties.

475
00:23:07,720 --> 00:23:10,920
Speaker 3: That's where the term stagflation was invented. It wasn't invented

476
00:23:11,240 --> 00:23:14,160
Speaker 3: by the generations who were in their early working careers now,

477
00:23:14,160 --> 00:23:17,359
Speaker 3: because we have something similar going on or could. And

478
00:23:17,640 --> 00:23:19,560
Speaker 3: there was a lot of d industrialization at this time,

479
00:23:19,640 --> 00:23:21,440
Speaker 3: especially in the Midwest. This is when the Roust Belt

480
00:23:21,520 --> 00:23:23,800
Speaker 3: started to become the rust belt, when the factories were

481
00:23:23,800 --> 00:23:26,840
Speaker 3: closing down, the pensions, as we mentioned, were going away,

482
00:23:27,040 --> 00:23:30,919
Speaker 3: career instability, asset prices were lower back then, but at

483
00:23:30,920 --> 00:23:33,359
Speaker 3: the same time, paychecks weren't quite as reliable either. So

484
00:23:34,000 --> 00:23:35,159
Speaker 3: I don't let me come up for air for a

485
00:23:35,160 --> 00:23:36,480
Speaker 3: second there, and let me see what you think of

486
00:23:36,520 --> 00:23:38,200
Speaker 3: all that, Bob, this.

487
00:23:38,200 --> 00:23:42,000
Speaker 1: Is going I have a lot of thought. You mentioned, thanks,

488
00:23:42,960 --> 00:23:47,520
Speaker 1: you mentioned Thanksgiving. I'm sitting around over at my let's see,

489
00:23:47,600 --> 00:23:51,720
Speaker 1: my sister's sister in law's family, all right, and all

490
00:23:51,760 --> 00:23:54,240
Speaker 1: our family went to my sister in law's house for Thanksgiving.

491
00:23:54,320 --> 00:23:56,480
Speaker 1: Let me rephrase that had a great time. We're sitting

492
00:23:56,480 --> 00:24:00,040
Speaker 1: around watching football, and between my kids and all my

493
00:24:00,119 --> 00:24:03,879
Speaker 1: nieces and nephews, I mean there's probably twenty to twenty

494
00:24:03,920 --> 00:24:06,720
Speaker 1: five kids, you know, if you add in their boyfriends

495
00:24:06,720 --> 00:24:10,080
Speaker 1: and girlfriends between the ages of say twenty one and thirty.

496
00:24:10,640 --> 00:24:13,119
Speaker 1: And as the evening went on, and you know, a

497
00:24:13,160 --> 00:24:17,600
Speaker 1: couple of adult beverages were consumed. As usually what happens,

498
00:24:17,680 --> 00:24:23,280
Speaker 1: the financial questions start getting popped at meat and I

499
00:24:23,359 --> 00:24:26,560
Speaker 1: won't identify who this person was, but they're asking. They're like, hey,

500
00:24:27,200 --> 00:24:29,600
Speaker 1: what should I be doing right now to you know,

501
00:24:29,800 --> 00:24:32,639
Speaker 1: grow a big port. And I looked at this happened

502
00:24:32,640 --> 00:24:34,560
Speaker 1: to be one of my nieces, and I said, look,

503
00:24:34,680 --> 00:24:39,720
Speaker 1: here's my advice. Spend less money than you make. Invest

504
00:24:39,760 --> 00:24:42,960
Speaker 1: the difference in a stock index fund and do that

505
00:24:43,000 --> 00:24:46,800
Speaker 1: for about thirty five years and you'll be rich. And

506
00:24:46,840 --> 00:24:49,719
Speaker 1: these kids just looked at me like I had four heads.

507
00:24:49,920 --> 00:24:53,080
Speaker 1: That was a concept that, you know, it was foreign

508
00:24:53,160 --> 00:24:56,240
Speaker 1: to them. I asked my son the next day, I said,

509
00:24:56,440 --> 00:25:00,200
Speaker 1: did I say something wrong? And my my own son said, Dad,

510
00:25:00,000 --> 00:25:04,960
Speaker 1: and most of my peers spend you know, on average,

511
00:25:05,000 --> 00:25:09,000
Speaker 1: almost around two hundred dollars per weekend in bars, you know,

512
00:25:09,200 --> 00:25:13,080
Speaker 1: and I watch it. They have these gourmet, gourmet cocktails

513
00:25:13,119 --> 00:25:17,800
Speaker 1: and they eat out, and life's all about experiences. I think.

514
00:25:17,920 --> 00:25:21,160
Speaker 1: I think there's nuances to this. And you know, by

515
00:25:21,200 --> 00:25:24,240
Speaker 1: the by the same token, I blame the baby boom

516
00:25:24,359 --> 00:25:28,480
Speaker 1: generation for telling all these kids everyone must go to

517
00:25:28,560 --> 00:25:31,600
Speaker 1: college or else you're a worthless human being. And by

518
00:25:31,640 --> 00:25:34,280
Speaker 1: the way, we'll loan you the money with no caps

519
00:25:34,320 --> 00:25:37,840
Speaker 1: to go to college, no idea whatsoever on what the

520
00:25:37,920 --> 00:25:41,400
Speaker 1: return on investment of that college degree would be. These

521
00:25:41,480 --> 00:25:44,520
Speaker 1: kids just follow the advice that they were getting. And

522
00:25:44,520 --> 00:25:46,480
Speaker 1: to your point, they are saddled with a lot of

523
00:25:46,520 --> 00:25:50,200
Speaker 1: debt right now. Meanwhile, asset prices have spiked and it's

524
00:25:50,200 --> 00:25:52,520
Speaker 1: hard to get started for people in the early twenties.

525
00:25:52,560 --> 00:25:55,359
Speaker 1: So that's my take. I think it's hard, you know,

526
00:25:55,520 --> 00:25:59,320
Speaker 1: to if you're just trying to look at outcomes and

527
00:25:59,359 --> 00:26:02,439
Speaker 1: not look at the inputs that create the outcomes. I

528
00:26:02,440 --> 00:26:05,600
Speaker 1: think we're missing, you know, a lot of the picture here. Yeah,

529
00:26:05,880 --> 00:26:08,040
Speaker 1: I'll go back to what my dad always told me.

530
00:26:08,119 --> 00:26:12,720
Speaker 1: He said, Bob, the harder you work, the luckier you

531
00:26:13,000 --> 00:26:13,480
Speaker 1: tend to be.

532
00:26:14,560 --> 00:26:16,080
Speaker 3: I think there's I think there's a lot to be

533
00:26:16,119 --> 00:26:18,760
Speaker 3: said for that. It's good, good, good old school advice.

534
00:26:18,800 --> 00:26:20,960
Speaker 3: But yeah, I mean it's not shocking. I use the

535
00:26:20,960 --> 00:26:22,680
Speaker 3: phrase all the time. We are the United States of

536
00:26:22,720 --> 00:26:25,399
Speaker 3: profit margin. We are the country that has done the

537
00:26:25,400 --> 00:26:27,880
Speaker 3: best job in the history of the universe finding creative

538
00:26:27,880 --> 00:26:31,760
Speaker 3: ways to find profit margin under absolutely every cushion. And

539
00:26:31,800 --> 00:26:33,679
Speaker 3: that is good if you if you are somebody who

540
00:26:33,760 --> 00:26:36,080
Speaker 3: has the wherewithal to invest in stocks, like you just said,

541
00:26:36,080 --> 00:26:37,679
Speaker 3: do it. Do this for thirty years and ignore it,

542
00:26:37,720 --> 00:26:40,000
Speaker 3: and then you will have problems and concerns to answer.

543
00:26:40,440 --> 00:26:42,760
Speaker 3: You'll have a lot of opportunities that'll make a little

544
00:26:42,800 --> 00:26:43,200
Speaker 3: bit tougher.

545
00:26:43,400 --> 00:26:45,760
Speaker 1: But you have to find a way to own some

546
00:26:45,880 --> 00:26:48,920
Speaker 1: appreciating assets if you want to grow wealth here.

547
00:26:48,920 --> 00:26:50,719
Speaker 3: That's right. And we've done a lot in this country

548
00:26:50,760 --> 00:26:53,040
Speaker 3: to make the laws friendly toward taking risk. Right, it's

549
00:26:53,040 --> 00:26:55,199
Speaker 3: a lot easier to declare bankruptcy in this country. There

550
00:26:55,240 --> 00:26:58,320
Speaker 3: are a lot more you know, if you want, you're

551
00:26:58,320 --> 00:27:02,600
Speaker 3: gonna have or flexibility in terms of you know how

552
00:27:02,640 --> 00:27:04,720
Speaker 3: deductions work, how tax planning works. If you own a

553
00:27:04,720 --> 00:27:06,600
Speaker 3: small business, guess what you get. The right type of

554
00:27:06,600 --> 00:27:10,080
Speaker 3: small business you get, you get to take a twenty

555
00:27:10,080 --> 00:27:13,560
Speaker 3: percent discount on your income taxes through through recent rules

556
00:27:13,560 --> 00:27:15,639
Speaker 3: that didn't exist before. So the point of all this

557
00:27:15,800 --> 00:27:17,640
Speaker 3: is to say, we are a country that cares about

558
00:27:17,680 --> 00:27:20,960
Speaker 3: the ability to guess, pull yourself up by your own bootstraps.

559
00:27:21,040 --> 00:27:23,199
Speaker 3: That's what we've built. Sometimes that that means starts your

560
00:27:23,240 --> 00:27:25,480
Speaker 3: own business. Other times it means take advantage of other

561
00:27:25,520 --> 00:27:28,840
Speaker 3: people starting their own businesses. So find ways to invest

562
00:27:28,880 --> 00:27:31,280
Speaker 3: in assets that can grow. But that means you've got

563
00:27:31,320 --> 00:27:34,000
Speaker 3: to keep your budget below what it costs you what

564
00:27:34,080 --> 00:27:36,200
Speaker 3: you actually bring in so that there's something left over

565
00:27:36,280 --> 00:27:36,800
Speaker 3: to invest.

566
00:27:37,440 --> 00:27:40,120
Speaker 1: Yep, all right. Coming up next, what to do when

567
00:27:40,160 --> 00:27:44,920
Speaker 1: your spouse wants to gamble on individual stocks and you don't. Plus,

568
00:27:44,960 --> 00:27:48,399
Speaker 1: how to tell if your portfolio is too complicated, and

569
00:27:48,440 --> 00:27:52,080
Speaker 1: what to make of those custom portfolio pitches. You know

570
00:27:52,119 --> 00:27:55,240
Speaker 1: that advisors are throwing around all the time these days.

571
00:27:55,240 --> 00:27:57,760
Speaker 1: You're listening to Simply Money presented by all Worth Financial

572
00:27:57,800 --> 00:28:05,919
Speaker 1: on fifty five KRC, the talk station. You're listening to

573
00:28:05,920 --> 00:28:08,800
Speaker 1: Simply Money said about all Worth Financial on Bob Sponsor

574
00:28:08,880 --> 00:28:11,720
Speaker 1: along with Brian James. Do you have a financial question

575
00:28:11,800 --> 00:28:13,880
Speaker 1: you'd like for us to answer? There is a red

576
00:28:13,920 --> 00:28:16,040
Speaker 1: button you can click while you're listening to the show.

577
00:28:16,160 --> 00:28:19,479
Speaker 1: If you're listening on the iHeart app, simply hit that button,

578
00:28:19,520 --> 00:28:22,520
Speaker 1: record your question and it will come straight to us.

579
00:28:23,240 --> 00:28:26,440
Speaker 1: All right, get Brian, get ready for Tony and fort Wright.

580
00:28:26,560 --> 00:28:29,560
Speaker 1: He says, We've built a comfortable portfolio, but I'm worried

581
00:28:29,600 --> 00:28:33,800
Speaker 1: we're too reliant on the same companies for dividends. How

582
00:28:33,800 --> 00:28:38,720
Speaker 1: do you tell when income is diversified versus concentrated? Great question,

583
00:28:38,880 --> 00:28:41,120
Speaker 1: not one we get very off. Yeah, this good one.

584
00:28:41,200 --> 00:28:42,720
Speaker 3: This is a little different because what a lot of

585
00:28:42,720 --> 00:28:46,040
Speaker 3: people just heard is the age old idea of a

586
00:28:46,080 --> 00:28:48,520
Speaker 3: diversified portfolio. A lot of has, but that's not what

587
00:28:48,640 --> 00:28:50,000
Speaker 3: was asked here. What was asked is how do I

588
00:28:50,040 --> 00:28:53,600
Speaker 3: diversify my income? Because different sources of income can have

589
00:28:53,640 --> 00:28:56,600
Speaker 3: different outcomes. So, yeah, a lot of investors think they're diversified, Bob,

590
00:28:56,640 --> 00:28:58,920
Speaker 3: simply because they own a bunch of stocks. But income

591
00:28:58,960 --> 00:29:01,880
Speaker 3: concentrations different. It's about where these dollars are coming from,

592
00:29:02,120 --> 00:29:04,440
Speaker 3: not how many ticker symbols are in there. So here's

593
00:29:04,440 --> 00:29:07,040
Speaker 3: a good question. What percentage of your total dividends come

594
00:29:07,080 --> 00:29:10,040
Speaker 3: from your top five holdings If those five companies make

595
00:29:10,120 --> 00:29:12,000
Speaker 3: up you know, forty to fifty percent of your income,

596
00:29:12,280 --> 00:29:15,080
Speaker 3: that's concentration. So one of those companies hits the skids,

597
00:29:15,080 --> 00:29:16,200
Speaker 3: then all of a sudden, you're going to lose a

598
00:29:16,240 --> 00:29:18,760
Speaker 3: large chunk of it. If those top holdings are maybe

599
00:29:18,800 --> 00:29:20,720
Speaker 3: more like twenty to twenty five percent, that's a lot

600
00:29:20,760 --> 00:29:23,640
Speaker 3: healthier diversification. So I would look at the total income

601
00:29:23,720 --> 00:29:26,760
Speaker 3: stream and just break it down proportionally where's it coming from.

602
00:29:27,640 --> 00:29:29,880
Speaker 3: Then the next thing to look at would be sector concentration.

603
00:29:30,000 --> 00:29:31,600
Speaker 3: Once you have a handle on where the income is

604
00:29:31,600 --> 00:29:34,840
Speaker 3: coming from which individual companies, look at those sectors. Because

605
00:29:34,880 --> 00:29:39,240
Speaker 3: those dividends tend to cluster in just a few industries utilities, energy, financials,

606
00:29:39,280 --> 00:29:40,959
Speaker 3: consumer staples. You're not going to see a lot out

607
00:29:40,960 --> 00:29:43,680
Speaker 3: of the technology side, for example, But if more than

608
00:29:43,720 --> 00:29:45,840
Speaker 3: a third of your income's coming out of a single sector,

609
00:29:46,000 --> 00:29:48,720
Speaker 3: you are now exposed to that sector's business cycle. So

610
00:29:48,840 --> 00:29:51,120
Speaker 3: history kind of shows this clearly. In eight oh nine,

611
00:29:51,200 --> 00:29:54,240
Speaker 3: let's think the banking industry, bank dividends absolutely collapse because

612
00:29:54,280 --> 00:29:57,800
Speaker 3: the banks themselves were collapsing. Twenty fourteen to sixteen, we

613
00:29:57,880 --> 00:30:01,000
Speaker 3: had oil price shocks and that draw that pulled down

614
00:30:01,080 --> 00:30:03,880
Speaker 3: energy dividends as well, And so these are just things

615
00:30:03,880 --> 00:30:06,120
Speaker 3: to pay to pay attention to, because if if you've

616
00:30:06,160 --> 00:30:08,920
Speaker 3: got it overly exposed in any one area, you're gonna

617
00:30:08,920 --> 00:30:10,840
Speaker 3: get hurt by that. So I would make sure, just

618
00:30:10,760 --> 00:30:13,560
Speaker 3: just as always, understand which where your portfolio sits and

619
00:30:14,040 --> 00:30:17,120
Speaker 3: how it might react in different environments. All right, we're

620
00:30:17,120 --> 00:30:19,560
Speaker 3: gonna move on then. So now we've got Chris and Milford,

621
00:30:19,560 --> 00:30:22,640
Speaker 3: who he's got a question about tax efficiency. He's he

622
00:30:22,720 --> 00:30:26,440
Speaker 3: understands that their portfolio might be overly tax inefficient, which

623
00:30:26,480 --> 00:30:27,880
Speaker 3: that's I got to get my head around that. I

624
00:30:27,920 --> 00:30:30,800
Speaker 3: think we're just saying that we've got a tax inefficient portfolio,

625
00:30:31,400 --> 00:30:33,400
Speaker 3: but not quite sure what that means. So he's asking, Bob,

626
00:30:33,440 --> 00:30:35,840
Speaker 3: how can you tell if taxes are pulling down returns?

627
00:30:35,840 --> 00:30:36,560
Speaker 3: How do you spot that?

628
00:30:37,400 --> 00:30:40,920
Speaker 1: Well, I obviously don't you know, have your entire portfolio

629
00:30:41,000 --> 00:30:42,840
Speaker 1: in front of me, crisp. So I'm just gonna throw

630
00:30:42,880 --> 00:30:45,880
Speaker 1: out three examples that we see quite often. Brian, feel

631
00:30:45,920 --> 00:30:48,760
Speaker 1: free to weigh in here as well. But one thing

632
00:30:48,880 --> 00:30:51,800
Speaker 1: is in your taxable account, you know, meaning non IRA

633
00:30:52,040 --> 00:30:56,360
Speaker 1: taxable accounts. This is where if you've built wealth using

634
00:30:56,480 --> 00:31:00,440
Speaker 1: mutual funds and things that just declare capital gains whether

635
00:31:00,520 --> 00:31:03,720
Speaker 1: you sell anything or not, you want to find a

636
00:31:03,760 --> 00:31:09,200
Speaker 1: way to systematically and over time transition that portfolio into ets,

637
00:31:09,480 --> 00:31:13,720
Speaker 1: direct indexing strategies, things that have some tax loss harvesting

638
00:31:13,880 --> 00:31:16,760
Speaker 1: working in the background. I'll just go out and say it.

639
00:31:16,800 --> 00:31:19,080
Speaker 1: I mean that if you're in a situation like that,

640
00:31:19,320 --> 00:31:22,040
Speaker 1: you've got to move your portfolios from you know, from

641
00:31:22,040 --> 00:31:25,720
Speaker 1: the nineteen eighties into twenty twenty five, because there are

642
00:31:25,720 --> 00:31:30,640
Speaker 1: a lot of ways to manage a non IRA taxable

643
00:31:30,720 --> 00:31:34,760
Speaker 1: quote unquote taxable portfolio now to be very tax efficient,

644
00:31:35,120 --> 00:31:36,880
Speaker 1: and you've got to find a way to get that done.

645
00:31:36,960 --> 00:31:40,080
Speaker 1: Another thing might have to do with the composition of

646
00:31:40,120 --> 00:31:44,880
Speaker 1: your asset allocation. Meaning if, depending on how your income

647
00:31:44,920 --> 00:31:48,160
Speaker 1: strategy is set up, if you're going to own some

648
00:31:48,280 --> 00:31:50,920
Speaker 1: bonds in your portfolio, well it might make sense to

649
00:31:50,920 --> 00:31:54,000
Speaker 1: own the majority of your bonds in iras and qualified

650
00:31:54,000 --> 00:31:57,240
Speaker 1: plans because those are tax deferred accounts. You're not paying

651
00:31:57,280 --> 00:31:59,880
Speaker 1: taxes every year, you know whether or not you take

652
00:32:00,040 --> 00:32:04,440
Speaker 1: anything out, and you want higher growth components of your

653
00:32:04,440 --> 00:32:07,360
Speaker 1: portfolio that could take advantage of the lower long term

654
00:32:07,440 --> 00:32:11,360
Speaker 1: capital gain rates, you want those in taxable accounts. And

655
00:32:11,400 --> 00:32:14,080
Speaker 1: then a third thing is taking a look at what

656
00:32:14,240 --> 00:32:20,280
Speaker 1: that dreaded required minimum distribution situation might be down the road,

657
00:32:20,360 --> 00:32:23,960
Speaker 1: And if it makes sense, do some wroth conversions now

658
00:32:25,040 --> 00:32:27,120
Speaker 1: and pay be willing to pay a little taxes to

659
00:32:27,160 --> 00:32:30,280
Speaker 1: save a lot of taxes later. Those are three things

660
00:32:30,360 --> 00:32:32,720
Speaker 1: right off the top of my head that probably should

661
00:32:32,760 --> 00:32:37,320
Speaker 1: be looked at to make your portfolio more tax efficient. Brian,

662
00:32:37,400 --> 00:32:38,360
Speaker 1: anything to add there?

663
00:32:39,480 --> 00:32:41,080
Speaker 3: I think you just need to pay attention and make

664
00:32:41,120 --> 00:32:44,040
Speaker 3: sure you understand. You know how your different accounts are taxed.

665
00:32:44,080 --> 00:32:47,080
Speaker 3: There are three flavors of taxation taxed every year. That's

666
00:32:47,080 --> 00:32:48,680
Speaker 3: where you get a ten ninety nine B or a

667
00:32:48,720 --> 00:32:51,760
Speaker 3: ten ninety nine DIIV. And then you've got pre tax,

668
00:32:51,760 --> 00:32:53,800
Speaker 3: which is the money you've never paid taxes on you

669
00:32:53,840 --> 00:32:55,920
Speaker 3: deducted it when you shoved it into a retirement plan.

670
00:32:56,120 --> 00:32:58,240
Speaker 3: And then you have the wroth stuff, which is completely

671
00:32:58,280 --> 00:33:01,520
Speaker 3: tax free. Make sure you know how much of each

672
00:33:01,560 --> 00:33:03,800
Speaker 3: pile that you have, because everybody probably has a little

673
00:33:03,800 --> 00:33:06,000
Speaker 3: bit in each of these and there's not usually not

674
00:33:06,080 --> 00:33:07,560
Speaker 3: a lot of rhyme or reason. So just get an

675
00:33:07,560 --> 00:33:10,200
Speaker 3: idea start there, get an idea for what pile is

676
00:33:10,240 --> 00:33:11,640
Speaker 3: going to be taxed and how.

677
00:33:12,440 --> 00:33:14,160
Speaker 1: All right, we talked about you know, we're going to

678
00:33:14,240 --> 00:33:17,520
Speaker 1: cover this topic, you know, hit this question in this segment,

679
00:33:17,560 --> 00:33:19,480
Speaker 1: So I'm gonna toss this one to you. Aaron in

680
00:33:19,680 --> 00:33:24,880
Speaker 1: Kenwood says, my husband and I disagree about holding individual

681
00:33:24,920 --> 00:33:28,600
Speaker 1: stocks versus funds. How do you blend the desire for

682
00:33:28,720 --> 00:33:32,560
Speaker 1: control with the need for simplicity and I'll add the

683
00:33:32,560 --> 00:33:33,520
Speaker 1: word diversification.

684
00:33:34,520 --> 00:33:36,560
Speaker 3: Well, so I think first of all, you need to

685
00:33:36,600 --> 00:33:40,280
Speaker 3: decide there's nothing that says that married couples have to

686
00:33:40,520 --> 00:33:42,560
Speaker 3: agree on everything, right. If that were the rules, then

687
00:33:42,560 --> 00:33:45,160
Speaker 3: there wouldn't be any married couples. So there's nothing wrong

688
00:33:45,200 --> 00:33:47,360
Speaker 3: with the individual stocks. There's nothing wrong with funds. And

689
00:33:47,400 --> 00:33:49,160
Speaker 3: we don't really know who prefers what, but it doesn't

690
00:33:49,160 --> 00:33:52,160
Speaker 3: make any difference. Just make sure the whole pile makes sense. Now,

691
00:33:52,240 --> 00:33:55,240
Speaker 3: if the one who prefers individual stocks, if we're talking

692
00:33:55,240 --> 00:33:57,520
Speaker 3: and taking flyers on penny stocks and putting a huge

693
00:33:57,560 --> 00:34:00,200
Speaker 3: chunk of the portfolio in, you have bad idea to

694
00:34:00,240 --> 00:34:01,680
Speaker 3: be a fan of that. But on the other hand,

695
00:34:01,680 --> 00:34:04,640
Speaker 3: if this is if it's a good portfolio of stocks

696
00:34:04,640 --> 00:34:07,400
Speaker 3: that you know that have good earnings, track records and

697
00:34:07,480 --> 00:34:09,560
Speaker 3: have a good story and good products and so forth,

698
00:34:09,640 --> 00:34:12,480
Speaker 3: there's nothing wrong with that. Some the funds tend to

699
00:34:12,520 --> 00:34:14,520
Speaker 3: be preferred by people who just go you know what.

700
00:34:14,520 --> 00:34:16,239
Speaker 3: I'm okay with risk stuff going up and down, but

701
00:34:16,280 --> 00:34:18,000
Speaker 3: I really don't want to make the sausage. I don't

702
00:34:18,000 --> 00:34:20,040
Speaker 3: really care how we get there. I just want to

703
00:34:20,120 --> 00:34:22,120
Speaker 3: understand that I have something that can grow and can

704
00:34:22,200 --> 00:34:24,239
Speaker 3: keep up with inflation. But I want somebody else to

705
00:34:24,239 --> 00:34:26,719
Speaker 3: worry about it. All those things can work together, but

706
00:34:26,760 --> 00:34:29,799
Speaker 3: it starts with communication. Understand here's what I want, here's

707
00:34:29,800 --> 00:34:32,520
Speaker 3: what you want. How do we combine this together into

708
00:34:32,520 --> 00:34:35,920
Speaker 3: a full financial plan that benefits us both? All right?

709
00:34:35,960 --> 00:34:38,080
Speaker 1: Coming up next, we've got steps to take to keep

710
00:34:38,160 --> 00:34:43,280
Speaker 1: your retirement on track while still helping those dreaded adult kids.

711
00:34:43,640 --> 00:34:46,160
Speaker 1: You're listening to Simply Money presented by all Worth Financial

712
00:34:46,200 --> 00:34:56,840
Speaker 1: on fifty five KRC the talk station. We're listening to

713
00:34:57,000 --> 00:35:01,080
Speaker 1: Simply Money presented by all Worth Financial spun Seller along

714
00:35:01,120 --> 00:35:05,320
Speaker 1: with Brian James. Brian Hat's off to Jet I needed

715
00:35:05,320 --> 00:35:08,800
Speaker 1: that bumper music. Joe Strecker coming out of a long weekend.

716
00:35:08,840 --> 00:35:12,160
Speaker 1: That's just outstanding, Thank you sir. All Right, some new

717
00:35:12,239 --> 00:35:16,520
Speaker 1: non numbers reveal a growing trend more adult children are

718
00:35:16,520 --> 00:35:19,560
Speaker 1: moving back in with their parents and the fallout is

719
00:35:19,680 --> 00:35:23,000
Speaker 1: more than just crowded kitchens. Brian walk us through it.

720
00:35:23,200 --> 00:35:25,359
Speaker 3: So yeah, at first, I want to expose the little

721
00:35:25,360 --> 00:35:28,279
Speaker 3: inside joke there. So executive producer Joe Strecker knows what

722
00:35:28,320 --> 00:35:30,399
Speaker 3: we're going to be talking about, and sometimes he's able

723
00:35:30,400 --> 00:35:32,839
Speaker 3: to find some very appropriate music. So baby come back.

724
00:35:33,040 --> 00:35:35,960
Speaker 3: Literally that that's what we're talking about today. So, according

725
00:35:36,000 --> 00:35:39,000
Speaker 3: to a twenty twenty five survey from Thrive In, nearly

726
00:35:39,040 --> 00:35:41,560
Speaker 3: half of parents report that at least one child between

727
00:35:41,560 --> 00:35:44,040
Speaker 3: the ages of eighteen and thirty five has returned home

728
00:35:44,080 --> 00:35:46,920
Speaker 3: for a period of time. Even more alarmingly, for those

729
00:35:46,960 --> 00:35:48,840
Speaker 3: who may not be a fan of such things, about

730
00:35:48,920 --> 00:35:51,359
Speaker 3: four and ten of these boomerang parents say this has

731
00:35:51,440 --> 00:35:53,920
Speaker 3: hurt their own long term savings for retirement. Now that

732
00:35:53,920 --> 00:35:55,960
Speaker 3: that to me, that's not right, because one more person

733
00:35:56,000 --> 00:35:59,080
Speaker 3: living in your household should probably be helping, you know,

734
00:35:59,160 --> 00:36:01,640
Speaker 3: at least contribute something. Maybe they're not in a situation

735
00:36:01,680 --> 00:36:03,440
Speaker 3: where they can pay their own full rent and their

736
00:36:03,440 --> 00:36:04,840
Speaker 3: own full bills and all that, but there got to

737
00:36:04,880 --> 00:36:08,200
Speaker 3: be something contributing, contributed to a shared household. But anyway,

738
00:36:08,200 --> 00:36:10,160
Speaker 3: this makes a big difference spot because we're not talking

739
00:36:10,200 --> 00:36:12,759
Speaker 3: about you know, brand new college age or little kids

740
00:36:12,920 --> 00:36:17,120
Speaker 3: where you're talking about preserving these multimillion dollar portfolios, retirement timing,

741
00:36:17,239 --> 00:36:19,839
Speaker 3: legacy planning, and all these tax dynamics, things that take

742
00:36:19,920 --> 00:36:22,960
Speaker 3: decades to build but don't take all that long to destroy.

743
00:36:23,239 --> 00:36:25,640
Speaker 3: When an adult child moves back, it's not an extra

744
00:36:25,719 --> 00:36:28,320
Speaker 3: mouth to feed alone. It can also shift the cash flow,

745
00:36:28,480 --> 00:36:31,120
Speaker 3: change the housing support, can mess up your estate planning.

746
00:36:31,200 --> 00:36:33,400
Speaker 3: You know, it might affect your investment allocation because you're

747
00:36:33,400 --> 00:36:35,080
Speaker 3: trying to plan for different goals and so on and

748
00:36:35,120 --> 00:36:35,600
Speaker 3: so forth.

749
00:36:36,239 --> 00:36:38,080
Speaker 1: All right, I'm going to do a little role playing

750
00:36:38,080 --> 00:36:40,040
Speaker 1: here because this will be fun for my the bo

751
00:36:40,680 --> 00:36:43,160
Speaker 1: who can follow. I'm going to pretend that I'm a

752
00:36:43,200 --> 00:36:45,360
Speaker 1: twenty one year old kid and I move back in

753
00:36:45,480 --> 00:36:49,439
Speaker 1: with my parents, and you use the word multimillion dollar portfolio.

754
00:36:49,640 --> 00:36:52,839
Speaker 1: So here's my little role play, Brian. I say, hey,

755
00:36:52,880 --> 00:36:56,000
Speaker 1: mom and dad, you got plenty of money. Keep the

756
00:36:56,080 --> 00:36:58,839
Speaker 1: refrigerator full. I want to sit in the basement and

757
00:36:58,920 --> 00:37:02,160
Speaker 1: play mL I'll be the show and watch Netflix while

758
00:37:02,200 --> 00:37:04,560
Speaker 1: I figure out my life. And you can afford it.

759
00:37:04,640 --> 00:37:07,080
Speaker 1: What's the big deal? Give me a little time to

760
00:37:07,120 --> 00:37:09,760
Speaker 1: get my legs under me here and get off my back.

761
00:37:10,280 --> 00:37:12,239
Speaker 3: Yeah, Dad, I think I've decided on my career. I

762
00:37:12,320 --> 00:37:14,719
Speaker 3: want to be a stay at home son, So you know,

763
00:37:14,800 --> 00:37:17,440
Speaker 3: I really need you to kind of keep those things

764
00:37:17,480 --> 00:37:19,719
Speaker 3: going for me. I'm gonna need a place to keep

765
00:37:19,760 --> 00:37:21,560
Speaker 3: the rain off my stuff and a car. Gonna need

766
00:37:21,560 --> 00:37:24,520
Speaker 3: a car too, And you know, I'll find a job eventually,

767
00:37:24,560 --> 00:37:27,040
Speaker 3: you know, someday. But I really want to find myself first.

768
00:37:27,120 --> 00:37:30,560
Speaker 3: I need to get to know me, Dad, Bob, before

769
00:37:30,719 --> 00:37:32,640
Speaker 3: I can really commit this to the world. I don't

770
00:37:32,640 --> 00:37:34,560
Speaker 3: think the world is ready for this yet.

771
00:37:36,040 --> 00:37:38,279
Speaker 1: So what do we do about it? What do we

772
00:37:38,320 --> 00:37:40,000
Speaker 1: do about it? I'm trying to be the kid here.

773
00:37:40,040 --> 00:37:41,200
Speaker 1: I need you to be the adult.

774
00:37:41,280 --> 00:37:43,799
Speaker 3: Oh I'm the dad this time? Oh I told you that? Yeah,

775
00:37:43,800 --> 00:37:45,880
Speaker 3: all right, well I really wanted to be the kid. Fine,

776
00:37:46,080 --> 00:37:48,040
Speaker 3: I'll be a stay at home dead. Well then it

777
00:37:48,160 --> 00:37:51,080
Speaker 3: was so great. Okay, that's fine. Take some time figure

778
00:37:51,080 --> 00:37:52,360
Speaker 3: out what it is that you need. But this is

779
00:37:52,400 --> 00:37:54,839
Speaker 3: in a permanent situation. Someday I'm gonna be dead. What's

780
00:37:54,840 --> 00:37:57,160
Speaker 3: your plan? Then? I may or may not leave all

781
00:37:57,200 --> 00:37:59,000
Speaker 3: this stuff to you. We work very hard to build it.

782
00:37:59,200 --> 00:38:01,319
Speaker 3: You've got siblings. There are charities out there we want

783
00:38:01,320 --> 00:38:03,840
Speaker 3: to support, and you know your mother and I built

784
00:38:03,840 --> 00:38:05,880
Speaker 3: this the way we built it, and I'd like to

785
00:38:05,920 --> 00:38:08,200
Speaker 3: see you guys have learned something and do the same.

786
00:38:08,280 --> 00:38:10,240
Speaker 3: How do you think you would be able to react

787
00:38:10,280 --> 00:38:11,000
Speaker 3: to something like that?

788
00:38:13,560 --> 00:38:15,960
Speaker 1: I don't know. Let me think about that. And Dad,

789
00:38:16,000 --> 00:38:18,400
Speaker 1: please go upstairs because I'm about I'm in the seventh

790
00:38:18,400 --> 00:38:21,040
Speaker 1: inning of my MLB the show game, so please get

791
00:38:21,040 --> 00:38:23,160
Speaker 1: out of the basement. All right, here's the all Worth advice.

792
00:38:23,239 --> 00:38:29,799
Speaker 1: Don't don't let today's generosity derail tomorrow's independence. Thanks for

793
00:38:29,880 --> 00:38:32,839
Speaker 1: listening tonight. You've been listening to Simply Money, presented by

794
00:38:32,840 --> 00:38:36,240
Speaker 1: all Worth Financial on fifty five KRC, the talk station