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Speaker 1: Just how panicked are investors right now over this ongoing

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Speaker 1: war in Iran? The answer conserved as an important lesson

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Speaker 1: for you. You're listening to Simply Money, presented by all

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Speaker 1: Worth Financial. I'm Bob Spondseller along with Brian James. All Right,

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Speaker 1: let's talk about something we are starting to see now

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Speaker 1: beneath the surface of the market. There are some signs

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Speaker 1: out there that investors are getting a little more cautious,

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Speaker 1: not panicked.

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Speaker 2: Not running for the exits, not moving their.

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Speaker 1: Entire portfolios to cash, but definitely adjusting here as the

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Speaker 1: uncertainty in the Middle East drags on. Brian, let's look

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Speaker 1: at some updated data from JP Morgan, who obviously sees

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Speaker 1: what a lot of folks are doing with their money.

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Speaker 3: Well, there's a team over there, Bob, that's tracking how

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Speaker 3: much money investors are keeping in cash versus putting to work,

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Speaker 3: and they're looking at all the money floating around the

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Speaker 3: system and comparing that to the overall value the financial assets.

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Speaker 3: Pretty clear takeaways here, investors are starting to increase their

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Speaker 3: cash positions. This isn't too shocking given the headlines that

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Speaker 3: everybody that has everybody on edge a little bit. But

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Speaker 3: here's the key thing. They're not doing it super aggressively.

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Speaker 3: So let's put a little perspective behind this. Go back

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Speaker 3: to twenty twenty two, when Russia first invaded Ukraine.

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Speaker 2: That was a very different story.

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Speaker 3: Investors kind of quickly moved into cash, thinking that this

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Speaker 3: was going to turn into a much bigger conflict. We

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Speaker 3: don't know what's coming, so we're just going to get

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Speaker 3: defensive right now. So now the United States itself is

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Speaker 3: directly involved in a conflict involving I ran about twenty

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Speaker 3: percent of the global oil supply is impacted. And this

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Speaker 3: move into cash, though has been pretty modest. We're kind

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Speaker 3: of already on a war footing, and I kind of

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Speaker 3: can't help but think that maybe the Russian invasion of

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Speaker 3: Ukraine kind of put everybody in the mindset of, Okay,

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Speaker 3: I guess we're in a new bit of a new

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Speaker 3: era now, so maybe these things aren't going to be

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Speaker 3: as surprising as we've thought. And if you think back

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Speaker 3: to all of the major conflicts and things, are the

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Speaker 3: things that spook the market, there tends to usually be

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Speaker 3: an initial, pretty visceral reaction. And I think back to

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Speaker 3: tariffs about a year ago now, when tariffs were first announced,

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Speaker 3: we had a pretty panicky reaction to it.

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Speaker 2: The market came down pretty quickly, about twenty percent.

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Speaker 3: But then we realized that, Okay, this is just the

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Speaker 3: way this administration is going to operate, and uh, maybe

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Speaker 3: we don't need to panic about every last little bit

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Speaker 3: of news that comes out of it. So I think

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Speaker 3: now we're just kind of used to the idea that,

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Speaker 3: you know, maybe maybe we're not in Kansas anymore. We

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Speaker 3: just need to be ready and be nimble and be

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Speaker 3: a little flexible. So people are sensitive moving little bits

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Speaker 3: to cash, but not I would definitely say we're pretty

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Speaker 3: far from panic mode.

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Speaker 1: Yeah, And just to add to that, you know, you

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Speaker 1: mentioned twenty twenty two, and I just want to go

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Speaker 1: back and add you know, there are a few things

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Speaker 1: that are different today in terms of the fundamental economics

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Speaker 1: of the economy. And by by that, I mean inflation

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Speaker 1: is much lower than it was in twenty twenty two.

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Speaker 2: So I think in twenty twenty.

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Speaker 1: Two, investors were already a little bit nervous about you know, inflation,

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Speaker 1: the inflation rate coming out of the COVID crisis and

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Speaker 1: all that. And you know, we can look at this

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Speaker 1: now in the rear view mirror. I mean the FED

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Speaker 1: started to raise interest rates. They raise rates seven times

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Speaker 1: during twenty twenty two, So I don't care what's going on.

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Speaker 1: You know, the economy hate hates three things. They hate

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Speaker 1: uncertain It hates uncertainty, it hates rising interest rates, and

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Speaker 1: it hates inflation. And sometimes if you get all three

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Speaker 1: of those simultaneously, that's what's going to really, you know,

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Speaker 1: move this market down precipitously and probably cause a recession.

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Speaker 1: I think the two things today, you know, that are

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Speaker 1: different than twenty twenty two, as I always as I

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Speaker 1: already pointed out, inflation. You know, there is a threat

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Speaker 1: of a little bit of inflation here with this oil shop,

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Speaker 1: but inflation today is nowhere near where it was in

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Speaker 1: twenty twenty two. We are not we don't have a

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Speaker 1: high risk of the FED raising interest rates right now.

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Speaker 1: That could happen if inflation really starts to tick up

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Speaker 1: as a result of an extended oil shop. But things

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Speaker 1: are different, you know, you take war out of it,

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Speaker 1: things are different in terms of the fundamentals of the

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Speaker 1: economy right now. Looking at this JP Morgan, you know,

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Speaker 1: study of what investors are actually doing. I think this

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Speaker 1: is actually showing that people are being pretty rational. Back

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Speaker 1: in January, according to their study, investors were pretty aggressively

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Speaker 1: allocated more invested in equities than about eighty percent of

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Speaker 1: all the times they had measured historically. And I think

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Speaker 1: that comes down to the fact we've had, you know,

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Speaker 1: a few pretty good years in the market. People have

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Speaker 1: been rewarded for investing heavily in stocks, and you know

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Speaker 1: how this game works, Brian, people tend to be biased

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Speaker 1: toward recent returns. You know, they're running into twenty twenty

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Speaker 1: six heavily invested in stocks. Today, Now that we get

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Speaker 1: a little volatility, people are saying, all right, maybe the uh,

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Speaker 1: maybe the it's time to step away here. Things are

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Speaker 1: not going to be hunky door one hundred percent of

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Speaker 1: the time. So moving from eighty percent allocation down to

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Speaker 1: sixty two for moderate moderate risk investors, I think that's

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Speaker 1: rational and makes a whole lot of sense. So I'm

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Speaker 1: I'm quite pleased to see what investors are actually doing

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Speaker 1: right now. I think, you know a lot of them

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Speaker 1: are just doing healthy financial planning, refilling their cash balances,

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Speaker 1: putting some money away that they might need to spend.

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Speaker 1: Here if we have some ongoing volatility. I think this

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Speaker 1: is I think this is a good study.

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Speaker 3: Yeah, you know, I agree, And I think it's the

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Speaker 3: lack of panic though is what does it mean makes

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Speaker 3: me feel like it's not. I definitely wouldn't look at

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Speaker 3: this and say everybody should be getting more conservative. The

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Speaker 3: market's down only when it is six seven percent or

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Speaker 3: whatever it is right about now. And I don't if

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Speaker 3: you were okay with your allocation two months ago before

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Speaker 3: any of this happened, then you should be okay now,

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Speaker 3: because that would assume that you understand the kind of

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Speaker 3: volatility you should expect, which is where we are right now.

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Speaker 3: So you know, I'm glad that people aren't headed for

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Speaker 3: the exits on a broad scale basis. But at the

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Speaker 3: same time, again, we don't believe at all in market timing.

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Speaker 3: You can be right nine times in a row and

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Speaker 3: be wrong the tenth time and you go.

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Speaker 2: Right back to where you started. So that's not at

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Speaker 2: all what we're saying.

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Speaker 3: But it is a sign that, yes, investors are aware

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Speaker 3: of the headlines, they are making moves that they deemed

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Speaker 3: to be right for their own situations, and like Bob said,

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Speaker 3: a lot of people are simply of filling up the

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Speaker 3: cash bucket again with the concern for just maybe making

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Speaker 3: sure they've got enough liquidity to prevent them from having

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Speaker 3: to hit their longer term investments wholesale.

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Speaker 1: Yeah, I'll give you an actual example of a meeting,

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Speaker 1: you know, a zoom meeting I had with a long

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Speaker 1: time client yesterday, and he just wanted to, you know,

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Speaker 1: in his words, get calibrated. You know, where are we at.

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Speaker 1: What are you guys doing over there at all worth?

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Speaker 1: How's my plan? Look all that? And he just wanted

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Speaker 1: to touch base and see, you know, hey, in light

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Speaker 1: of some of this uncertainty, how is my portfolio doing?

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Speaker 1: How is it positioned, you know, to have a little

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Speaker 1: bit of protection against volatility? And the good news is

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Speaker 1: we had worked together going back, you know, a year

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Speaker 1: two years with in your reviews. We already had some

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Speaker 1: you know, buffer ETF strategies in place for his IRA

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Speaker 1: to mitigate some volatility. We had already intentionally put away

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Speaker 1: some cash, you know, in a short term high yield

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Speaker 1: you know money market account to you know, maintain some

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Speaker 1: liquidity in the portfolio. And this particular client was only

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Speaker 1: down about one point eight percent year to date, you know,

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Speaker 1: after having very nice returns in twenty five and twenty four.

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Speaker 1: But it was a great time to just touch base,

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Speaker 1: make sure everything is working, get a little bit of

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Speaker 1: update on what could happen and what we're going to

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Speaker 1: do about it over here. It was a very healthy

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Speaker 1: phone call. And I think that's kind of what this

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Speaker 1: JP Morgan study is revealing. A lot of people are

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Speaker 1: starting to you know, in a good way just and

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Speaker 1: this is a great time to sit down with your

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Speaker 1: advisor if you have one, and have that same kind

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Speaker 1: of the same kind of what i'll call libration meeting

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Speaker 1: with your advisor.

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Speaker 3: Yeah, and I agree, and that that's that even even

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Speaker 3: when that's headlines aren't scary, that's a good time to

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Speaker 3: do that, right, And I think, uh, that's the important

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Speaker 3: part is staying on some kind of a routine where

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Speaker 3: you're checking the uh checking the health of your overall

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Speaker 3: financial situation. Really no different than going to see your

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Speaker 3: your doctor and making sure that you know, just kind

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Speaker 3: of check under the hood, check the vital signs and

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Speaker 3: see what's going on, what are the things that I

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Speaker 3: should be paying to paying attention to now that I'm

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Speaker 3: whatever age I am, and so forth, Because without that,

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Speaker 3: that's how we get surprised, and that's what causes the panic.

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Speaker 3: When I didn't know what to anticipate and then something

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Speaker 3: happened that that that caused my beliefs to kind of

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Speaker 3: pivot a little bit. Uh, then I feel like it's

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Speaker 3: a mistake. And I think people convince themselves that a

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Speaker 3: lot of times these headlines are some kind of aberration

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Speaker 3: or a mistake or something we've never seen before, and

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Speaker 3: that's really just never the case. It's just it's just

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Speaker 3: a pivot from whatever path we were on before new information.

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Speaker 3: Now we've got a slightly different outcome here, and it's

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Speaker 3: just it's just something to make sure that you're that

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Speaker 3: you have understood. You know, how are you situated now?

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Speaker 3: You know when the portfolio is stable and things are

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Speaker 3: going okay, and then what should I anticipate, you know,

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Speaker 3: when things don't go that way, and if it does something.

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Speaker 3: There are plenty of software tools out there and websites

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Speaker 3: and all this kind of thing, or your financial advisor

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Speaker 3: should be able to stress test these things for you,

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Speaker 3: but there should be ways that you can look at

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Speaker 3: how has my portfolio behaved in past similar situations. Because

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Speaker 3: we've the eighties and the nineties to me, and I

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Speaker 3: say this all the time, we're a really calm period.

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Speaker 3: But ever since then, it's been a lot more looking

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Speaker 3: like history. The last twenty five years have been a

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Speaker 3: good amount of chaos. But if you think about it,

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Speaker 3: the overall world has been through far more chaos than

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Speaker 3: it has stability. The eighties and the nineties were an anomaly,

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Speaker 3: but I think people think that that was a mistake,

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Speaker 3: and we've been through a lot of more negative things

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Speaker 3: than we actually have right now.

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Speaker 2: Now.

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Speaker 1: You bring up a great point, Brian, and that's you

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Speaker 1: use the term stress testing, and that's exactly what this

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Speaker 1: client brought up to me yesterday.

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Speaker 2: He said, Hey, if we do get a.

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Speaker 1: Nineteen seventies you know style oil shock, can we can

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Speaker 1: we sit down and stress test this portfolio and see not.

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Speaker 2: He wasn't predicting that it's going to happen. He just

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Speaker 2: would like.

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Speaker 1: To know in advance a little bit here, you know,

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Speaker 1: on how how wide those guardrails are going to expand

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Speaker 1: in terms of downside risk if this.

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Speaker 2: Oil shock gets a little bit out of control.

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Speaker 1: And to your point, yeah, we have those tools where

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Speaker 1: we can reasonably simulate these historical periods of time, and

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Speaker 1: I think that's what gives people peace of mind when

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Speaker 1: they've sat down, they've stress test or overall planned, they

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Speaker 1: stress test their investment portfolio, and that helps them give

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Speaker 1: some peace of mind with actual useful data information as

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Speaker 1: opposed to some of these talking head you know, headline

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Speaker 1: people on cable news that just try to inflame everybody

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Speaker 1: and get everybody upset. So and you made an excellent

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Speaker 1: point too, Hey, the time to do this is when

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Speaker 1: the markets are up twenty percent, not wait until they're

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Speaker 1: down ten percent. You know, it's funny how that works.

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Speaker 1: People's risk tolerance tends to expand greatly when everything's going great.

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Speaker 1: You know, we never get the phone calls saying, hey,

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Speaker 1: how and why did I get outsized games last year

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Speaker 1: in my portfolio relative to what my chosen risk tolerance

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Speaker 1: should give me. Those phone calls and meetings only happen

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Speaker 1: when the market goes down.

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Speaker 2: I guess that's just human nature. Yeah, I would agree

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Speaker 2: with that completely.

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Speaker 3: That said, I don't know about you. My phones have

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Speaker 3: been relatively quiet. I don't think anybody is really calling in.

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Speaker 3: It does come up, of course, when we're doing our

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Speaker 3: annual reviews for meetings. That We're going to be scheduled

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Speaker 3: around now anyway, because that's part of the routine. People

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Speaker 3: do want to know. But nobody's really in panic mode.

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Speaker 3: And I think that's what that JP Morgan data is

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Speaker 3: telling us too.

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Speaker 2: There are some.

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Speaker 3: People out there making moves, and we do that as

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Speaker 3: well when somebody's plan dictates it. But I don't have

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Speaker 3: anybody right now calling in an absolute panic, just ready

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Speaker 3: to ready to head for the hills.

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Speaker 2: SA same on this end. Here's the all Worth advice.

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Speaker 1: Make sure your plan is built to handle uncertainty before

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Speaker 1: it shows up in your portfolio.

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Speaker 2: And that leads us to this. It's your portfolio recession proof.

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Speaker 2: We'll talk about that next.

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

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Speaker 1: on fifty five KRC.

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Speaker 2: The talk station.

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

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Speaker 1: on Bob spond Seller along with Brian James. If you

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Speaker 1: cannot listen to Simply Money alive every night, subscribe and

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Speaker 1: get our daily podcasts. Just search Simply Money on the

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Speaker 1: iHeart app or wherever you find your podcasts. Are you

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Speaker 1: thinking about selling your business but not sure how to

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Speaker 1: handle the offers that might be coming in. Plus, smart

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Speaker 1: strategies for managing IRA heavy retirement income and how real

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Speaker 1: estate wealth truly fits into an overall financial plan help

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Speaker 1: us on the way straight ahead. Anytime we start talking

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Speaker 1: about slowing growth, potential for recession, all of that, that

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Speaker 1: kind of stuff, the natural question becomes, how do you

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Speaker 1: actually protect your portfolio from these kinds of evil, bad

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Speaker 1: things that can happen. And when people hear the words

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Speaker 1: quote unquote recession proof, some immediately think, Okay, that means

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Speaker 1: I should just move everything to cash. Uh, let's get

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Speaker 1: into some of the options people have to make slight

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Speaker 1: adjustments in their portfolio rather than just heading for the

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Speaker 1: hills and burying bearing it all in a coffee can

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Speaker 1: in the backyard.

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Speaker 3: Brian, we'll stop me if you've heard this before, But

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Speaker 3: here's the problem. If you don't know when to get out,

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Speaker 3: then you definitely don't know when.

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Speaker 2: To get back in.

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Speaker 3: That's because remember, this is a this is a two

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Speaker 3: sided decision. If you're going to try to protect things,

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Speaker 3: and actually saw an online discussion about this very thing.

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Speaker 3: There's a recession coming, what should I do about it?

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Speaker 4: You know?

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Speaker 2: How do I move? How do I move my money?

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Speaker 3: To something safe so that I can sidestep this, and

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Speaker 3: I think the most dangerous thing anybody can do, although

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Speaker 3: I've also concluded that everybody needs to try it so

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Speaker 3: they can understand exactly how bad of an idea it is.

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Speaker 3: Is to put a high water mark under your portfolio

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Speaker 3: and whatever your value is and declare that anything below

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Speaker 3: that is some kind of mistake or some kind of aberration,

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Speaker 3: and you should have done something. That is an extremely

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Speaker 3: dangerous pattern to get yourselves into. And because you'll you'll

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Speaker 3: the worst case that can happen is that you'll actually

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Speaker 3: maybe get lucky and be right, and then you'll try

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Speaker 3: it three four more times before before you realize that

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Speaker 3: this is not a way that real investors make money

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Speaker 3: and it's not going to help you in the long run.

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Speaker 3: So let's say you's use the example. Let's see you

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Speaker 3: get five million dollars. So instead of being overly aggressive,

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Speaker 3: you're realizing, maybe I've got enough to kind of make it.

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Speaker 3: So I still want growth to keep up with inflation,

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Speaker 3: but I don't want to be super aggressive. So maybe

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Speaker 3: this is sixty percent stocks, thirty percent fixed income, and

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Speaker 3: ten percent in alternatives or cash something like that.

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Speaker 2: So now we have a recession, stocks drop about twenty percent.

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Speaker 2: That's not unheard of, that's fairly common when the market.

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Speaker 2: The market will react to that type of news. Your portfolio, though,

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Speaker 2: is not all stocks.

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Speaker 3: Therefore it's not down twenty percent. Maybe you're only down

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Speaker 3: ten to twelve percent, which isn't a fun thing. Nobody's

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Speaker 3: happy about this, but that's much more manageable.

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Speaker 2: And so here's the key. You've still got that still

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Speaker 2: stability in the portfolio.

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Speaker 3: The headlines are scarier than your portfolio returns are looking

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Speaker 3: at the moment, your assets didn't fall as much, and

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Speaker 3: that's gonna give you that flexibility.

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Speaker 1: Yeah, Brian, A couple of things, A couple thoughts come

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Speaker 1: to mind. You know, I forget who said this, you

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Speaker 1: might know, but you know, the saying goes volatility is

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Speaker 1: the price you have to pay to get long time,

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Speaker 1: long term outsized returns that outpace taxes and inflation. I mean,

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Speaker 1: that's the cost. That's the price of admission. You're gonna

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Speaker 1: have to weather some volatility. And to the point that

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Speaker 1: you brought up, the question becomes, how much does my

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Speaker 1: plan need to take on in order to achieve my

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Speaker 1: long term financial goals? And then there's always an emotional

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Speaker 1: quotion to this too. How much can my stomach take?

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Speaker 1: How much volatility can happen before I start, you know,

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Speaker 1: losing sleep at night and my quality of life goes

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Speaker 1: down and all that. And that's the purpose of stress

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Speaker 1: testing a financial plan and stress testing a portfolio in

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Speaker 1: advance during regular annual financial planning reviews. You know, you

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Speaker 1: get out in front of this stuff in advance, and

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Speaker 1: you let people kind of define what their own guardrails

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Speaker 1: are going to be based on what their personal financial

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Speaker 1: goals are, and then what their emotional quotients or tolerance

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Speaker 1: for risk is. That's what financial planning, among other things,

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Speaker 1: that's a big part of what needs to be done here,

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Speaker 1: you know, when setting an asset allocation strategy and investment

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Speaker 1: management strategy.

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Speaker 2: So let's look at that.

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Speaker 3: Let's look at this in reality here and look at

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Speaker 3: another example. So liquidity, call, of course, creates opportunity. As

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Speaker 3: Bob was just saying, So let's take these two investors again,

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Speaker 3: same five million dollar networth. The first one is fully invested,

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Speaker 3: no excess cash, second one's got maybe ten to fifteen

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Speaker 3: percent liquid reserves. And then we go through that same

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Speaker 3: recession period that we talked about before, maybe the market

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Speaker 3: drops another twenty percent. Investor he is stuck knowing that, well,

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Speaker 3: if I need money, I'm just gonna have to take

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Speaker 3: the losses on these investments because I've got bills to pay.

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Speaker 3: I can't do anything about it. Investor b has given

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Speaker 3: themselves options in the short run. They can use that

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Speaker 3: parachute that they built in for themselves and spend that

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Speaker 3: cash down consciously to pay the bills, and or if

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Speaker 3: it's if there's some left over, then they can buy

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Speaker 3: assets when they're cheaper. They can go ahead and get

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Speaker 3: that invested if they've decided that they don't need all

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Speaker 3: of that cash out there. But that's again the whole

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Speaker 3: point of having a financial plan, just to make sure

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Speaker 3: that all the puzzle pieces fit together. That is how

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Speaker 3: wealthy people stay wealthy. That's how people who are a

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Speaker 3: little lesser in assets grow themselves to a position where

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Speaker 3: they've got more flexibility by taking advantage of those moments.

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Speaker 3: And the most important part about it, Bob, is the anticipation,

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Speaker 3: not being surprised by it, knowing that it's coming, and

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Speaker 3: knowing how you will react to it.

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Speaker 2: Yeah, in other.

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Speaker 1: Words, you want to be in a position where you

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Speaker 1: could say, yep, we had a plan for that, and

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Speaker 1: more importantly, in an unemotional way, we executed on the plan.

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Speaker 1: And you mentioned, you know, taking advantage of downside volatility

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Speaker 1: in these non tax non IRA accounts, taxable investment accounts.

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Speaker 1: Just as a reminder, this is a beautiful time and

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Speaker 1: reason to have some tax loss harvesting strategies embedded in

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Speaker 1: your taxable accounts. This is where those things shine. Volatility

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Speaker 1: is your friend in these environments because you can really

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Speaker 1: harvest those losses and use them long, you know, down

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Speaker 1: the road, to offset future gains and make these non

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Speaker 1: IRA taxable portfolios extremely tax efficient, all while staying fully

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Speaker 1: invested and taking advantage of market dips at the same time.

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Speaker 1: So you know, like we always say, most of the time,

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Speaker 1: you know, the biggest risk here is not the market itself.

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Speaker 1: It's investor behavior making irrational emotional decisions when we start

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Speaker 1: to get a little bit of volatility, like what's going

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Speaker 1: on right now.

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Speaker 2: Yeah, I couldn't agree more.

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Speaker 3: And I think at this point we've beaten the horse

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Speaker 3: dead enough to make sure that you understand how you react.

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Speaker 3: It doesn't matter what you think the next the XYZ

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Speaker 3: fund is going to do or whatever. Trying to guess

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Speaker 3: this fund versus that fund. What's important is the biggest

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Speaker 3: variable in all of this, and that is the human

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Speaker 3: being behind the decision making. Make sure you understand how

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Speaker 3: you will react in these various environments, both good and bad.

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Speaker 1: Here's the all Worth advice. You can't avoid recessions, but

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Speaker 1: you can build a portfolio strong enough to handle them

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Speaker 1: and discipline enough to take advantage of them. Are your

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Speaker 1: life insurance policies still serving your bigger overall long term

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Speaker 1: financial picture. Our insurance expert is in next with some

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Speaker 1: actual real life solutions. 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: on Bob'spond Seller along with Brian James, joined tonight by

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Speaker 1: all Worth Director of Insurance Jody. Det's Jody, thanks as

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Speaker 1: always for making some time for us tonight. We want

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Speaker 1: to get into the topic of existing life insurance policies

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Speaker 1: and Brian and I always come across people that have

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Speaker 1: had these permanent cash value life insurance policies. You know,

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Speaker 1: oftentimes for twenty thirty, forty, even fifty years, and a

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Speaker 1: lot of times these policies don't get reviewed within the

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Speaker 1: context their overall financial plan and goals today in twenty

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Speaker 1: twenty six, and you know, when we get into these

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Speaker 1: kind of discussions, oftentimes some different examples of deploying those

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Speaker 1: assets and that cash value perhaps more efficiently come up.

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Speaker 1: And you want to walk through a couple of actual

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Speaker 1: examples that you've helped people with so far in twenty

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Speaker 1: twenty six, I'm looking forward to the discussion.

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Speaker 5: Awesome, Thank you so much. I spend a lot of

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Speaker 5: my time reviewing clients policies and like you said, looking

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Speaker 5: at it in the context of their overall plan. These

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Speaker 5: two scenarios were really focused on helping clients figure out

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Speaker 5: what their options were. So the first couple that I

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Speaker 5: worked with, he was seventy five and she was seventy two.

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Speaker 5: They both had permanent life insurance policies that they bought

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Speaker 5: way back when to protect their families. They didn't have

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Speaker 5: a life insurance need anymore, but they had this emotional

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Speaker 5: connection to wanting to have some life insurance for the

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Speaker 5: beneficiary when someone passed away, and we discussed all the options,

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Speaker 5: keeping what they had, making changes, surrendering the policies, etc.

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Speaker 5: And initially they said, we're just going to keep things

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Speaker 5: as is, because if they didn't pay any more premium,

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Speaker 5: the policies were going to last to pay out when

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Speaker 5: each of them passed away. Two weeks after we met

437
00:21:50,520 --> 00:21:52,960
Speaker 5: the initial time, they called me and said, you know

438
00:21:53,040 --> 00:21:56,840
Speaker 5: what you told us that if we surrendered these policies

439
00:21:56,880 --> 00:21:59,800
Speaker 5: and took the cash value, that there was no taxable event.

440
00:22:00,640 --> 00:22:04,560
Speaker 5: And there's thirty two thousand dollars in these policies, and

441
00:22:04,600 --> 00:22:07,320
Speaker 5: we've decided to make a life change and move closer

442
00:22:07,359 --> 00:22:10,199
Speaker 5: to our son and daughter in law and grandkids. We

443
00:22:10,240 --> 00:22:13,560
Speaker 5: want to build a new patio home, and we were thinking,

444
00:22:13,600 --> 00:22:16,200
Speaker 5: where are we going to get the funds to put

445
00:22:16,280 --> 00:22:18,360
Speaker 5: down as a down payment. We don't want to take

446
00:22:18,359 --> 00:22:22,560
Speaker 5: them out of our investment accounts, and we don't want

447
00:22:22,600 --> 00:22:24,800
Speaker 5: to take them from a home equity loan, and we

448
00:22:24,840 --> 00:22:26,919
Speaker 5: want to wait to put our house on the market

449
00:22:27,000 --> 00:22:29,600
Speaker 5: until we know the timeline we're going to use the

450
00:22:29,640 --> 00:22:33,720
Speaker 5: cash value in these policies. They were thrilled they surrendered them,

451
00:22:33,960 --> 00:22:38,159
Speaker 5: got checks and they were able to really make a

452
00:22:38,240 --> 00:22:41,280
Speaker 5: difference in what they did in their lives from a

453
00:22:41,359 --> 00:22:46,119
Speaker 5: legacy perspective by using the cash now, and didn't have

454
00:22:46,200 --> 00:22:48,560
Speaker 5: to impact their investments, so it was a win win

455
00:22:48,640 --> 00:22:49,159
Speaker 5: all around.

456
00:22:49,800 --> 00:22:52,120
Speaker 1: Yeah, it sounds like a great situation, a win win

457
00:22:52,160 --> 00:22:54,240
Speaker 1: for everybody for all the reasons you've already mentioned. It

458
00:22:54,240 --> 00:22:56,879
Speaker 1: brings up one question that I have though, Jody, is

459
00:22:57,440 --> 00:23:00,080
Speaker 1: you know you can you literally can't turn on the

460
00:23:00,119 --> 00:23:03,399
Speaker 1: news every night without seeing three or four commercials for

461
00:23:03,480 --> 00:23:07,400
Speaker 1: these firms you know, offering to buy your life insurance

462
00:23:07,440 --> 00:23:10,320
Speaker 1: policies from you. You know, for all the reasons you

463
00:23:10,440 --> 00:23:13,840
Speaker 1: just stated, are you running into those kind of scenarios

464
00:23:13,880 --> 00:23:16,520
Speaker 1: and what do you generally find, you know, the pros

465
00:23:16,560 --> 00:23:18,880
Speaker 1: and cons, if any, to working with one of those

466
00:23:18,920 --> 00:23:22,680
Speaker 1: firms to actually sell your policy versus doing what you

467
00:23:22,760 --> 00:23:25,760
Speaker 1: did in this scenario is just take the cash value,

468
00:23:25,840 --> 00:23:27,280
Speaker 1: move on by the patio home.

469
00:23:27,400 --> 00:23:28,320
Speaker 2: Any thoughts on that.

470
00:23:29,960 --> 00:23:32,080
Speaker 5: Yes, I get a lot of questions about it, Like,

471
00:23:32,119 --> 00:23:34,359
Speaker 5: I just want to sell this policy. Number one, it

472
00:23:34,400 --> 00:23:37,800
Speaker 5: has to be a permanent insurance policy with value. Number

473
00:23:37,840 --> 00:23:43,720
Speaker 5: two for the numbers to really make sense, the ensured

474
00:23:44,400 --> 00:23:51,000
Speaker 5: needs to not be healthy, meaning likely terminally ill diagnosed

475
00:23:51,000 --> 00:23:56,359
Speaker 5: with cancer. Interesting for healthier older people the numbers of

476
00:23:56,400 --> 00:23:58,720
Speaker 5: what they were going what these companies would pay for

477
00:23:58,760 --> 00:24:01,600
Speaker 5: them just aren't an enough to sell the policy.

478
00:24:01,680 --> 00:24:03,199
Speaker 2: It's a little morbid, isn't it.

479
00:24:03,240 --> 00:24:05,280
Speaker 3: Because But but I guess the only reason they're buying

480
00:24:05,359 --> 00:24:06,920
Speaker 3: is because they're looking for a payoff and they want

481
00:24:06,920 --> 00:24:07,080
Speaker 3: to know.

482
00:24:07,119 --> 00:24:08,760
Speaker 2: They want to have an idea that this payoff is

483
00:24:08,760 --> 00:24:11,480
Speaker 2: going to be interesting. Exactly one of these companies doesn't

484
00:24:11,520 --> 00:24:12,440
Speaker 2: want somebody to live to be one.

485
00:24:12,359 --> 00:24:16,080
Speaker 5: Hundred and twenty out of every twenty five requests I've received,

486
00:24:16,359 --> 00:24:19,160
Speaker 5: one may actually make sense, and maybe half of those

487
00:24:19,200 --> 00:24:23,040
Speaker 5: people actually move forward with doing the transaction to get

488
00:24:23,080 --> 00:24:26,439
Speaker 5: the cash. So it's one of those it sounds sounds

489
00:24:26,480 --> 00:24:28,240
Speaker 5: better than it is meant many times.

490
00:24:28,600 --> 00:24:29,040
Speaker 2: Good to know.

491
00:24:29,119 --> 00:24:31,600
Speaker 1: Hey, move us into scenario number two, because this is

492
00:24:31,640 --> 00:24:34,719
Speaker 1: an all too common scenario that a lot of people

493
00:24:34,760 --> 00:24:38,639
Speaker 1: I think don't realize they have the option to take advantage.

494
00:24:38,080 --> 00:24:43,200
Speaker 5: Of absolutely So couple age fifty five, their kids were

495
00:24:43,200 --> 00:24:46,000
Speaker 5: out of the house. They each had a whole life

496
00:24:46,040 --> 00:24:49,520
Speaker 5: policy with a total of about three hundred and sixty

497
00:24:49,520 --> 00:24:52,560
Speaker 5: five thousand dollars of death benefit, and they were spending

498
00:24:52,560 --> 00:24:56,920
Speaker 5: almost seven thousand dollars a year year in premium they

499
00:24:56,960 --> 00:24:59,639
Speaker 5: didn't need the life insurance, but they wanted to keep

500
00:24:59,640 --> 00:25:03,840
Speaker 5: a little bit of it just from a legacy perspective,

501
00:25:04,040 --> 00:25:06,480
Speaker 5: and because they were still ten years or so away

502
00:25:06,480 --> 00:25:10,560
Speaker 5: from retirement. I worked with them to get.

503
00:25:10,280 --> 00:25:14,000
Speaker 4: In force quotes if they did a reduced paid up policy,

504
00:25:14,160 --> 00:25:18,280
Speaker 4: which basically means reducing the death benefit assuming you pay

505
00:25:18,359 --> 00:25:21,560
Speaker 4: no additional premium, and then it's really a set it

506
00:25:21,640 --> 00:25:22,280
Speaker 4: and forget it.

507
00:25:23,000 --> 00:25:25,800
Speaker 5: In this scenario, they chose to take that option. They

508
00:25:25,840 --> 00:25:28,880
Speaker 5: saved their seven grand a year in premium, so they're

509
00:25:28,920 --> 00:25:32,520
Speaker 5: not taking it out of their investment accounts, and the

510
00:25:32,600 --> 00:25:35,280
Speaker 5: death benefit was dropped from the three hundred and sixty

511
00:25:35,320 --> 00:25:38,359
Speaker 5: five thousand dollars total to about two hundred and seventy

512
00:25:38,400 --> 00:25:41,800
Speaker 5: three thousand dollars, So they still each got to keep

513
00:25:42,040 --> 00:25:45,360
Speaker 5: a decent sized policy but save all of those funds

514
00:25:45,440 --> 00:25:48,680
Speaker 5: and be able to deploy those in other ways.

515
00:25:49,240 --> 00:25:52,160
Speaker 3: Yeah, Jordy, I think that's a great conversation for people

516
00:25:52,160 --> 00:25:54,240
Speaker 3: to have with their advisors. And in other words, I've

517
00:25:54,280 --> 00:25:56,680
Speaker 3: got this old thing that I don't really need any more,

518
00:25:57,119 --> 00:25:59,080
Speaker 3: but I also don't need the cash out of it,

519
00:25:59,119 --> 00:26:00,560
Speaker 3: and I don't want to pay the time, So what

520
00:26:00,600 --> 00:26:01,680
Speaker 3: else can I do Am I stuck?

521
00:26:01,720 --> 00:26:03,280
Speaker 2: Am I stuck at you know, just dead in the

522
00:26:03,320 --> 00:26:03,960
Speaker 2: water with this thing?

523
00:26:04,000 --> 00:26:06,720
Speaker 3: No, the answer is no. But do you just have

524
00:26:06,760 --> 00:26:08,760
Speaker 3: to be willing to have the death benefit come down?

525
00:26:08,760 --> 00:26:10,240
Speaker 3: In other words, if I'm not going to pump any

526
00:26:10,240 --> 00:26:13,719
Speaker 3: more money into this, then what's the maximum death benefit

527
00:26:13,720 --> 00:26:15,280
Speaker 3: I can get? So let me ask you about that.

528
00:26:15,600 --> 00:26:17,879
Speaker 3: So in this case, when when they stopped putting new

529
00:26:17,920 --> 00:26:20,119
Speaker 3: money in, the death benefit dropped from three sixty five

530
00:26:20,200 --> 00:26:22,879
Speaker 3: to two seventy three. But am I correct? They didn't

531
00:26:22,880 --> 00:26:24,960
Speaker 3: have to go through any underwriting. There was nothing new,

532
00:26:25,119 --> 00:26:27,160
Speaker 3: just a rejiggering of the math behind the policy.

533
00:26:27,200 --> 00:26:27,600
Speaker 2: Is that right?

534
00:26:27,720 --> 00:26:30,679
Speaker 5: Yes, just a calculation by the insurance company and to

535
00:26:30,720 --> 00:26:33,560
Speaker 5: say we will guarantee you this death benefit with no

536
00:26:33,640 --> 00:26:36,320
Speaker 5: additional premium for the rest of your life. It was

537
00:26:36,400 --> 00:26:40,679
Speaker 5: literally one form for each of them to complete. No underwriting, no, nothing,

538
00:26:41,160 --> 00:26:41,600
Speaker 5: got it?

539
00:26:41,720 --> 00:26:43,080
Speaker 2: Okay? So is there a way to know?

540
00:26:43,160 --> 00:26:45,400
Speaker 3: I mean, can somebody ballpark what they're I mean, is

541
00:26:45,400 --> 00:26:47,879
Speaker 3: is it based off of age or is there a

542
00:26:47,880 --> 00:26:49,879
Speaker 3: way to ballpark what's a death benefit might drop to?

543
00:26:50,640 --> 00:26:52,600
Speaker 3: You know, if they waited another five years, what would

544
00:26:52,640 --> 00:26:53,000
Speaker 3: it have been?

545
00:26:53,119 --> 00:26:53,800
Speaker 2: Yeah?

546
00:26:53,840 --> 00:26:56,000
Speaker 5: So the best way to review A policy is to

547
00:26:56,040 --> 00:26:59,520
Speaker 5: have a current policy statement. Do you get Every client

548
00:26:59,560 --> 00:27:02,360
Speaker 5: should get one every year. We look at an annual statement.

549
00:27:02,440 --> 00:27:04,600
Speaker 5: It's going to depend on the product type, how long

550
00:27:04,640 --> 00:27:08,080
Speaker 5: they've had it, what their goals are, and we can

551
00:27:08,119 --> 00:27:10,720
Speaker 5: review those to tell them should they keep it, should

552
00:27:10,720 --> 00:27:13,800
Speaker 5: they make changes, should they consider walking away, or could

553
00:27:13,840 --> 00:27:17,240
Speaker 5: we reposition that cash in a different type of policy.

554
00:27:18,440 --> 00:27:20,040
Speaker 2: Got it? That's great, that's super helpful.

555
00:27:20,040 --> 00:27:21,880
Speaker 3: I'm glad that glad you're on the team to help

556
00:27:21,920 --> 00:27:23,400
Speaker 3: us deal with this stuff for our clients.

557
00:27:23,800 --> 00:27:25,359
Speaker 2: And Jody, correct me if I'm wrong.

558
00:27:25,400 --> 00:27:28,000
Speaker 1: But in this scenario number two you just walk through,

559
00:27:28,040 --> 00:27:30,040
Speaker 1: there was a zero tax impact.

560
00:27:30,119 --> 00:27:30,280
Speaker 2: Right.

561
00:27:30,359 --> 00:27:34,880
Speaker 1: This was a completely tax free situation because we did

562
00:27:34,920 --> 00:27:37,320
Speaker 1: not take any cash value out. We just lowered the

563
00:27:37,320 --> 00:27:40,640
Speaker 1: death benefit, lowered the premium. Everybody walks away scott free.

564
00:27:40,720 --> 00:27:40,880
Speaker 2: Right.

565
00:27:41,440 --> 00:27:44,960
Speaker 5: Absolutely, Yep, no tax impact. The biggest thing was the

566
00:27:45,000 --> 00:27:49,400
Speaker 5: premium savings. They repositioned that seven grand to do other things.

567
00:27:50,080 --> 00:27:52,280
Speaker 2: Great stuff, Jody, thanks for joining us tonight.

568
00:27:52,320 --> 00:27:54,920
Speaker 1: You're listening to Simply Money presented by all Worth Financial

569
00:27:54,960 --> 00:28:01,919
Speaker 1: on fifty five KRC the talk station. You're listening to

570
00:28:01,920 --> 00:28:05,040
Speaker 1: Simply Money presented by all Worth Financial Lumbob spun Seller

571
00:28:05,080 --> 00:28:07,879
Speaker 1: along with Brian James. Do you have a financial question

572
00:28:08,000 --> 00:28:10,399
Speaker 1: you'd like for us to cover. There's a red button

573
00:28:10,440 --> 00:28:12,680
Speaker 1: you can click while you're listening to the show. If

574
00:28:13,000 --> 00:28:16,280
Speaker 1: you're listening on the iHeart app, simply record your question

575
00:28:16,640 --> 00:28:19,639
Speaker 1: and it will come straight to us. All right, Brian

576
00:28:19,920 --> 00:28:22,639
Speaker 1: Michael and Milford says, we've got a little over a

577
00:28:22,760 --> 00:28:26,320
Speaker 1: million dollars in a single tech stock with a very

578
00:28:26,359 --> 00:28:30,399
Speaker 1: low cost basis, what are the smartest ways to diversify

579
00:28:30,560 --> 00:28:34,520
Speaker 1: out of that big concentrated position without triggering a huge

580
00:28:34,600 --> 00:28:35,200
Speaker 1: tax bill.

581
00:28:36,200 --> 00:28:37,160
Speaker 2: Well, that's a great question.

582
00:28:37,359 --> 00:28:39,320
Speaker 3: So when you've got that much in a low tech stock,

583
00:28:39,360 --> 00:28:42,840
Speaker 3: there's really two things happening here. You're talking about concentration

584
00:28:43,040 --> 00:28:45,920
Speaker 3: risk and tax risk. The goal is to reduce the

585
00:28:45,960 --> 00:28:48,920
Speaker 3: one without letting the other dominate the decision. So but

586
00:28:49,040 --> 00:28:51,000
Speaker 3: let let's let's let's call a spat a spad here

587
00:28:51,040 --> 00:28:52,360
Speaker 3: doing nothing is a decision.

588
00:28:52,360 --> 00:28:54,480
Speaker 2: That's probably how this occurred, to.

589
00:28:54,440 --> 00:28:58,120
Speaker 3: Begin with letting a stock run and to the point

590
00:28:58,120 --> 00:28:59,200
Speaker 3: where it dominates the portfolio.

591
00:28:59,240 --> 00:28:59,800
Speaker 2: It's not a bad thing.

592
00:28:59,800 --> 00:29:01,840
Speaker 3: More money is good, But at the same time, now

593
00:29:01,880 --> 00:29:04,560
Speaker 3: all of a sudden, your financial success has a lot

594
00:29:04,600 --> 00:29:06,720
Speaker 3: to do with conference calls and earnings reports a lot

595
00:29:06,720 --> 00:29:09,400
Speaker 3: more than you might have wanted it to. So here's

596
00:29:09,400 --> 00:29:10,880
Speaker 3: one way to think about it you might use, just

597
00:29:10,880 --> 00:29:14,080
Speaker 3: to keep it simple, use a gradual selling strategy. Don't

598
00:29:14,160 --> 00:29:16,680
Speaker 3: dump the whole position at once, spread it over multiple

599
00:29:16,720 --> 00:29:18,880
Speaker 3: tax years. For example, we're about a quarter of the

600
00:29:18,880 --> 00:29:20,920
Speaker 3: way through this tax here. That means in nine months

601
00:29:20,920 --> 00:29:23,040
Speaker 3: we're going to be in another tax hear. My favorite

602
00:29:23,040 --> 00:29:25,800
Speaker 3: thing to do within this type of situation is if

603
00:29:25,800 --> 00:29:28,040
Speaker 3: we happen to be in the fourth quarter talking about it, well,

604
00:29:28,080 --> 00:29:30,240
Speaker 3: if it's December, then that means you can get into

605
00:29:30,280 --> 00:29:33,160
Speaker 3: three tax years over the course of about fourteen months.

606
00:29:33,440 --> 00:29:36,640
Speaker 3: So just think about what your income situation is going

607
00:29:36,640 --> 00:29:39,280
Speaker 3: to be in those various tax years, and then maybe

608
00:29:39,440 --> 00:29:42,560
Speaker 3: spread those sales over time. And we've already mentioned this

609
00:29:42,600 --> 00:29:45,160
Speaker 3: a couple times today, but you can also pair sales

610
00:29:45,160 --> 00:29:48,680
Speaker 3: with tax loss harvesting. If you have some other unrelated

611
00:29:48,720 --> 00:29:51,280
Speaker 3: positions that may be sitting at a loss, and maybe

612
00:29:51,280 --> 00:29:53,320
Speaker 3: not the entire position, but if you look underneath the

613
00:29:53,400 --> 00:29:56,400
Speaker 3: individual tax lots of that position could be sitting at

614
00:29:56,400 --> 00:29:59,120
Speaker 3: a loss. Then you liquidate those and be very careful

615
00:29:59,160 --> 00:30:02,000
Speaker 3: you're liquidating the the tax lots that are actually showing

616
00:30:02,040 --> 00:30:06,040
Speaker 3: a loss, and you can offset that capital gain. And Third,

617
00:30:06,080 --> 00:30:08,640
Speaker 3: and this is probably one of the bigger ones, think

618
00:30:08,640 --> 00:30:11,680
Speaker 3: about charity. If philanthropy is already on your mind, if

619
00:30:11,680 --> 00:30:16,960
Speaker 3: you are already charitably inclined and giving writing checks to organizations,

620
00:30:17,400 --> 00:30:19,560
Speaker 3: then what you might do is donate.

621
00:30:19,200 --> 00:30:21,560
Speaker 2: These appreciated shares some portion of them.

622
00:30:21,720 --> 00:30:24,160
Speaker 3: That's one of the most tax efficient moves available, because

623
00:30:24,200 --> 00:30:25,920
Speaker 3: if it's again, if it's something that you would have

624
00:30:25,960 --> 00:30:29,440
Speaker 3: done anyway, because you are charitably inclined already giving to charity,

625
00:30:29,680 --> 00:30:32,560
Speaker 3: then you can donate these shares. You will of course

626
00:30:32,600 --> 00:30:34,120
Speaker 3: get a bit of a deduction if it's over and

627
00:30:34,160 --> 00:30:36,760
Speaker 3: above your standard deduction. That's a different conversation. But the

628
00:30:36,760 --> 00:30:40,000
Speaker 3: more important thing is you did not sell anything, so

629
00:30:40,040 --> 00:30:43,040
Speaker 3: therefore you did not eat any of the capital gains taxes.

630
00:30:43,080 --> 00:30:45,480
Speaker 3: The charity will turn around, they'll sell it, but if

631
00:30:45,520 --> 00:30:47,600
Speaker 3: they're a five H one C three legit charity, they're

632
00:30:47,600 --> 00:30:48,720
Speaker 3: not going to pay taxes either.

633
00:30:48,960 --> 00:30:50,400
Speaker 2: So you'll still get credit.

634
00:30:50,160 --> 00:30:52,680
Speaker 3: For having donated that that dollar amount, you're not going

635
00:30:52,760 --> 00:30:54,680
Speaker 3: to pay capital gains on it, and you're also not

636
00:30:54,760 --> 00:30:56,640
Speaker 3: writing checks using your liquid cash.

637
00:30:56,400 --> 00:30:56,760
Speaker 2: To do it.

638
00:30:57,240 --> 00:30:58,960
Speaker 3: Matter of fact, I would say if anybody is out

639
00:30:58,960 --> 00:31:02,520
Speaker 3: there sitting on appreciation shares of something and writing checks

640
00:31:02,560 --> 00:31:05,440
Speaker 3: to their church or their favorite charities, you're doing it wrong.

641
00:31:05,800 --> 00:31:08,200
Speaker 3: If you really want to hold on that position, then

642
00:31:08,240 --> 00:31:10,920
Speaker 3: donate the appreciated shares and use your cash to buy

643
00:31:10,920 --> 00:31:13,120
Speaker 3: them more and reset your cost basis for the low

644
00:31:13,160 --> 00:31:16,320
Speaker 3: low price of nothing. Hope that helps, all right, So

645
00:31:16,560 --> 00:31:20,080
Speaker 3: let's move on to Brad and Madisonville. Brad is saying

646
00:31:20,160 --> 00:31:21,840
Speaker 3: he's a he's a business owner, and he's saying he's

647
00:31:21,880 --> 00:31:24,200
Speaker 3: getting some informal offers for it, but he hasn't done

648
00:31:24,240 --> 00:31:26,040
Speaker 3: any planning around it yet.

649
00:31:26,200 --> 00:31:28,440
Speaker 2: So how do you start this process, Bob?

650
00:31:28,440 --> 00:31:30,920
Speaker 3: What should be in place financially before he even considers

651
00:31:30,920 --> 00:31:32,040
Speaker 3: accepting one of these offers.

652
00:31:33,080 --> 00:31:36,080
Speaker 1: Well, Brian, as I listened to you answer Michael's question about,

653
00:31:36,120 --> 00:31:38,320
Speaker 1: you know, selling a single stop, you know, a lot

654
00:31:38,320 --> 00:31:42,160
Speaker 1: of times these same situations arise when selling a business

655
00:31:42,200 --> 00:31:45,200
Speaker 1: because for a lot of people, they're closely held business

656
00:31:45,440 --> 00:31:49,200
Speaker 1: is by far and away their largest financial asset. It's

657
00:31:49,240 --> 00:31:52,760
Speaker 1: a huge concentrated position in terms of their overall net worth.

658
00:31:53,160 --> 00:31:55,600
Speaker 1: So you know, my answer to Brad is, first of all,

659
00:31:56,200 --> 00:31:58,760
Speaker 1: you know I'm assuming. I'm just assuming because I don't

660
00:31:58,800 --> 00:32:01,560
Speaker 1: have your whole financial picture in front of me. But

661
00:32:01,640 --> 00:32:05,320
Speaker 1: you're thinking about selling this business, hoping to retire and

662
00:32:05,360 --> 00:32:06,640
Speaker 1: maybe not work anymore.

663
00:32:07,040 --> 00:32:08,880
Speaker 2: So I think the first planning.

664
00:32:08,520 --> 00:32:10,080
Speaker 1: You need to do is you need to factor in

665
00:32:10,120 --> 00:32:13,840
Speaker 1: your cost basis in the business, what capital gains, exposure

666
00:32:13,920 --> 00:32:16,040
Speaker 1: you're going to have if you sell it and sell

667
00:32:16,080 --> 00:32:18,840
Speaker 1: it for a certain price, and then run a financial

668
00:32:18,880 --> 00:32:21,800
Speaker 1: plan to say, hey, if is the net amount going

669
00:32:21,840 --> 00:32:24,440
Speaker 1: to be enough to meet you and your wife and

670
00:32:24,520 --> 00:32:28,040
Speaker 1: your family's income needs over the balance of your life.

671
00:32:28,080 --> 00:32:31,000
Speaker 1: That's kind of financial planning. One oh one count the

672
00:32:31,080 --> 00:32:35,040
Speaker 1: cost of selling the business, removing yourself from the business,

673
00:32:35,120 --> 00:32:37,480
Speaker 1: and do I have enough money to be able to

674
00:32:37,480 --> 00:32:40,560
Speaker 1: retire now if your net worth happens to be higher.

675
00:32:40,800 --> 00:32:43,640
Speaker 1: And Brian got into this with his prior answer to

676
00:32:43,760 --> 00:32:47,920
Speaker 1: Michael's question. Now, if you're charitably inclined, if we're if

677
00:32:47,920 --> 00:32:51,400
Speaker 1: we have a need to save federal estate taxes, now

678
00:32:51,520 --> 00:32:54,840
Speaker 1: you can get into some more complex things like charitable trusts,

679
00:32:55,680 --> 00:32:58,960
Speaker 1: getting some minority discounts, perhaps for giving some of those

680
00:32:59,000 --> 00:33:02,000
Speaker 1: shares in the business to your kids or other family

681
00:33:02,040 --> 00:33:05,840
Speaker 1: members prior to selling. Those are all things that get

682
00:33:05,880 --> 00:33:08,719
Speaker 1: a lot more nuanced, a lot more detailed, and we

683
00:33:08,800 --> 00:33:11,000
Speaker 1: would want to have, you know, the involvement of a

684
00:33:11,000 --> 00:33:14,200
Speaker 1: good CPA, an attorney and all that, so you know,

685
00:33:14,880 --> 00:33:18,320
Speaker 1: sitting down and developing a financial plan on just what

686
00:33:18,400 --> 00:33:21,800
Speaker 1: you need to accomplish before you really start to entertain

687
00:33:22,200 --> 00:33:25,320
Speaker 1: serious options. I would say now's the time to start

688
00:33:25,360 --> 00:33:28,280
Speaker 1: that process. Hope that helps, Brad, and good luck to you.

689
00:33:29,160 --> 00:33:32,200
Speaker 1: Julian Anderson says, we're both sixty two and most of

690
00:33:32,240 --> 00:33:35,400
Speaker 1: our assets are in ir race. Should we be aggressively

691
00:33:35,520 --> 00:33:40,080
Speaker 1: doing roth conversions now, even if that means paying higher

692
00:33:40,160 --> 00:33:41,000
Speaker 1: taxes today?

693
00:33:41,080 --> 00:33:45,440
Speaker 3: Brian, So, I think there you're hitting the right window

694
00:33:45,440 --> 00:33:47,320
Speaker 3: to be considering it. But I'm glad you're asking the

695
00:33:47,400 --> 00:33:50,640
Speaker 3: question as opposed to just doing it blindly. So there

696
00:33:50,720 --> 00:33:52,840
Speaker 3: is no black and white answer to this, right if

697
00:33:52,880 --> 00:33:54,880
Speaker 3: there were. If there were. If that was the case,

698
00:33:54,920 --> 00:33:57,200
Speaker 3: then we would all retire. Based off of advice from

699
00:33:57,200 --> 00:34:01,040
Speaker 3: TikTok videos, one size does not fit all with regard

700
00:34:01,080 --> 00:34:02,680
Speaker 3: to this stuff, and so I think we really need

701
00:34:02,720 --> 00:34:04,200
Speaker 3: to kind of step back and look at the question.

702
00:34:04,280 --> 00:34:06,240
Speaker 2: So Roth conversions often make sense.

703
00:34:06,280 --> 00:34:08,640
Speaker 3: Here at this age and with your situation as you're

704
00:34:08,680 --> 00:34:10,360
Speaker 3: describing it, which we don't have a lot of detail,

705
00:34:10,719 --> 00:34:12,799
Speaker 3: but we need to define what you mean by aggressively.

706
00:34:12,880 --> 00:34:15,480
Speaker 2: So here's the good part. Here's the thing that provides

707
00:34:15,520 --> 00:34:16,120
Speaker 2: the opportunity.

708
00:34:16,160 --> 00:34:20,280
Speaker 3: You're probably in a temporary tax valley, meaning if you're retired,

709
00:34:20,760 --> 00:34:23,120
Speaker 3: that means you've obviously left your jobs. Your income is

710
00:34:23,120 --> 00:34:25,239
Speaker 3: probably lower than it's been in a very long time.

711
00:34:25,239 --> 00:34:27,160
Speaker 3: That means you so are your tax bracket. You have

712
00:34:27,239 --> 00:34:30,719
Speaker 3: a long time until our required minimum distributions are rmds.

713
00:34:30,760 --> 00:34:32,880
Speaker 3: That could be seventy three or seventy five, depending on

714
00:34:32,880 --> 00:34:35,000
Speaker 3: when you were born. Maybe you haven't turned on so

715
00:34:35,080 --> 00:34:38,040
Speaker 3: security yet. Income might be lower currently than all it's

716
00:34:38,040 --> 00:34:40,279
Speaker 3: going to be fast forward ten years, that's going to

717
00:34:40,280 --> 00:34:40,880
Speaker 3: be the opposite.

718
00:34:40,920 --> 00:34:44,000
Speaker 2: You'll be back in that higher bracket. So the idea now.

719
00:34:43,880 --> 00:34:47,040
Speaker 3: Is to yes, don't think of this low tax period,

720
00:34:47,160 --> 00:34:50,640
Speaker 3: tax bracket period as a wonderful opportunity to not pay taxes.

721
00:34:51,040 --> 00:34:53,880
Speaker 3: Think of it as an opportunity to pay less taxes

722
00:34:53,920 --> 00:34:55,200
Speaker 3: on future assets than.

723
00:34:55,120 --> 00:34:56,560
Speaker 2: You will if you do absolutely nothing.

724
00:34:56,840 --> 00:34:59,279
Speaker 3: But again, look figure out what your marginal bracket is,

725
00:34:59,280 --> 00:35:01,880
Speaker 3: what your actual blended bracket is, in what you're comfortable

726
00:35:01,920 --> 00:35:04,120
Speaker 3: paying that's going to be twenty two maybe twenty four percent.

727
00:35:04,400 --> 00:35:06,160
Speaker 3: That literally gets you into one hundreds of thousands of

728
00:35:06,200 --> 00:35:07,040
Speaker 3: dollars worth of income.

729
00:35:07,080 --> 00:35:08,600
Speaker 2: By the way, it might be more than your thinking.

730
00:35:09,239 --> 00:35:12,160
Speaker 3: But then also make sure you understand the impact to IRMA,

731
00:35:12,840 --> 00:35:16,800
Speaker 3: which again I think this can be overcooked in terms

732
00:35:16,840 --> 00:35:18,960
Speaker 3: of if somebody is really worried about IRMA and they

733
00:35:18,960 --> 00:35:21,360
Speaker 3: want to do Roth conversions. My response to that is,

734
00:35:21,400 --> 00:35:23,319
Speaker 3: I don't really worry about IRMA so much. Yet might

735
00:35:23,400 --> 00:35:25,359
Speaker 3: drive up your Medicare premiums for a year or two,

736
00:35:25,680 --> 00:35:28,040
Speaker 3: but eventually that will reset versus the benefits of the

737
00:35:28,120 --> 00:35:30,720
Speaker 3: Roth conversion, which you'll have for the rest of your life.

738
00:35:30,840 --> 00:35:32,319
Speaker 3: So I think we're out of time, so I'll throw

739
00:35:32,360 --> 00:35:33,160
Speaker 3: it back to you, Bob.

740
00:35:33,840 --> 00:35:35,759
Speaker 1: All right, Coming up next, I'm going to take a

741
00:35:35,760 --> 00:35:39,240
Speaker 1: few minutes to expand upon a discussion, an important discussion

742
00:35:39,239 --> 00:35:44,160
Speaker 1: we had yesterday involving the critical nature of planning ahead

743
00:35:44,280 --> 00:35:46,560
Speaker 1: and communicating with family.

744
00:35:47,000 --> 00:35:49,000
Speaker 2: To get out in front of a potential long term

745
00:35:49,040 --> 00:35:49,520
Speaker 2: care event.

746
00:35:49,600 --> 00:35:52,320
Speaker 1: You're listening to Simply Money, presented by all Worth Financial

747
00:35:52,320 --> 00:35:57,640
Speaker 1: on fifty five KRC, the talk station. You're listening to

748
00:35:57,640 --> 00:35:59,719
Speaker 1: Simply Money to that of my all worth financial on

749
00:35:59,719 --> 00:36:03,719
Speaker 1: bomb sponseller along with Brian James. Brian, we spent more

750
00:36:03,760 --> 00:36:06,799
Speaker 1: than a few minutes yesterday just talking about the importance

751
00:36:06,880 --> 00:36:12,360
Speaker 1: of planning ahead and proactively communicating with family members around

752
00:36:12,360 --> 00:36:15,440
Speaker 1: a potential long term care event. And the context we

753
00:36:15,520 --> 00:36:19,720
Speaker 1: covered yesterday is just how many Americans across the country,

754
00:36:20,000 --> 00:36:23,280
Speaker 1: how many hours people are spending time away from work,

755
00:36:23,680 --> 00:36:26,920
Speaker 1: time and energy expended just to take care of aging

756
00:36:27,280 --> 00:36:30,439
Speaker 1: loved ones and family members. And I believe I said

757
00:36:30,480 --> 00:36:32,680
Speaker 1: on the show yesterday, I'm going to test drive this,

758
00:36:32,960 --> 00:36:35,160
Speaker 1: you know, with with my own wife, which I did

759
00:36:35,239 --> 00:36:35,719
Speaker 1: last night.

760
00:36:35,960 --> 00:36:36,879
Speaker 2: It was a nice night.

761
00:36:36,960 --> 00:36:39,080
Speaker 1: We sat out on the back porch and had dinner

762
00:36:39,560 --> 00:36:42,960
Speaker 1: and I said to my wife, I said, hey, let's

763
00:36:43,040 --> 00:36:46,719
Speaker 1: just say that I had a stroke tomorrow and I

764
00:36:46,760 --> 00:36:50,160
Speaker 1: couldn't do anything and I needed some care, and you know,

765
00:36:50,360 --> 00:36:51,920
Speaker 1: our whole life is upbended.

766
00:36:52,480 --> 00:36:54,640
Speaker 2: What would you and the kids likely do?

767
00:36:56,040 --> 00:37:00,040
Speaker 3: And hod of like the answer that you got. It

768
00:37:00,080 --> 00:37:02,800
Speaker 3: seems like dangerous territory, Bob, it wasn't.

769
00:37:03,160 --> 00:37:05,360
Speaker 1: I don't think this is what she really wanted to

770
00:37:05,400 --> 00:37:08,359
Speaker 1: cover during dinner last night, But I wanted to test

771
00:37:08,440 --> 00:37:10,520
Speaker 1: drive it because I said I would do that on

772
00:37:10,560 --> 00:37:12,440
Speaker 1: the show yesterday and.

773
00:37:12,160 --> 00:37:15,040
Speaker 2: And my I said, cager for the neighborhood.

774
00:37:15,280 --> 00:37:19,000
Speaker 1: She said, I'm gonna throw a massive party, dump your

775
00:37:19,040 --> 00:37:21,279
Speaker 1: rear rand off at the nearest nursing home, and live

776
00:37:21,320 --> 00:37:24,879
Speaker 1: happily ever after, which is exactly what I expect her

777
00:37:24,800 --> 00:37:26,680
Speaker 1: to say. No, she I got this deer in the

778
00:37:26,719 --> 00:37:31,120
Speaker 1: headlights look, and it was it was mainly you know,

779
00:37:31,480 --> 00:37:34,520
Speaker 1: why are you asking me this? And my point, you know,

780
00:37:34,640 --> 00:37:37,720
Speaker 1: she's in a mindset, and she's a very emotionally stable,

781
00:37:37,920 --> 00:37:41,680
Speaker 1: very smart lady, but her mindset right now is, Hey,

782
00:37:41,880 --> 00:37:44,279
Speaker 1: we just had a grandson about a year ago. All

783
00:37:44,320 --> 00:37:46,200
Speaker 1: I'm thinking about is when I'm going to see my

784
00:37:46,280 --> 00:37:49,000
Speaker 1: grandson in a week. And now you're springing this on me.

785
00:37:49,560 --> 00:37:53,120
Speaker 1: And the point being I said, what if we sit

786
00:37:53,160 --> 00:37:56,359
Speaker 1: down with the kids and just asked that question. It

787
00:37:56,520 --> 00:37:59,520
Speaker 1: wasn't a conversation she was ready to have. And that's

788
00:37:59,600 --> 00:38:04,239
Speaker 1: my point. I'm probably gonna have to force that conversation,

789
00:38:04,600 --> 00:38:07,920
Speaker 1: which is what I suggested everybody did on the show yesterday,

790
00:38:08,200 --> 00:38:11,920
Speaker 1: to just get some initial reactions from family members, and

791
00:38:11,960 --> 00:38:14,239
Speaker 1: that at least gives us, you know, kind of what

792
00:38:14,320 --> 00:38:17,600
Speaker 1: i'd call a baseline or ground zero from which to

793
00:38:17,680 --> 00:38:21,400
Speaker 1: maybe have some future discussions because as we said yesterday

794
00:38:21,400 --> 00:38:23,680
Speaker 1: and i'll repeat today, what you don't want to do

795
00:38:24,360 --> 00:38:29,200
Speaker 1: is just ignore the whole topic until something happens. And

796
00:38:29,239 --> 00:38:32,520
Speaker 1: then you know different kids that live in town, out

797
00:38:32,560 --> 00:38:35,680
Speaker 1: of town, working full time, not working full time. A

798
00:38:35,719 --> 00:38:40,239
Speaker 1: lot of times these responsibilities get distributed unevenly, and that's

799
00:38:40,280 --> 00:38:43,440
Speaker 1: where some family discord and stress can come in. And

800
00:38:43,480 --> 00:38:46,400
Speaker 1: that's again I will repeat what I said yesterday. The

801
00:38:46,480 --> 00:38:48,400
Speaker 1: sooner we can get out in front of that topic

802
00:38:48,520 --> 00:38:49,760
Speaker 1: with our family.

803
00:38:49,640 --> 00:38:52,800
Speaker 2: Full fledged conversation, the better. Thanks for listening tonight.

804
00:38:52,880 --> 00:38:54,920
Speaker 1: You've been listening to Simply Money for said about all

805
00:38:54,920 --> 00:38:58,160
Speaker 1: Worth Financial on fifty five KRC, the talk station