1 00:00:05,880 --> 00:00:06,280 Speaker 1: Tonight. 2 00:00:06,480 --> 00:00:09,320 Speaker 2: What wealthy folks tend to do in December that a 3 00:00:09,360 --> 00:00:12,000 Speaker 2: lot of people don't even think about. This is simply 4 00:00:12,039 --> 00:00:14,880 Speaker 2: money presented by all Worth Financial on bop sponseller along 5 00:00:14,920 --> 00:00:18,319 Speaker 2: with Brian James. For a lot of folks, December is 6 00:00:18,520 --> 00:00:21,799 Speaker 2: just put it in coast mode month, finish the year, 7 00:00:21,960 --> 00:00:25,720 Speaker 2: take a breath, and deal with finances in January. But 8 00:00:25,800 --> 00:00:29,080 Speaker 2: here's a little secret. December is when the wealthy lean in. 9 00:00:29,520 --> 00:00:33,200 Speaker 2: They make money moves now that quietly protect their wealth, 10 00:00:33,320 --> 00:00:37,080 Speaker 2: reduce their taxes and set up for twenty twenty six 11 00:00:37,240 --> 00:00:40,280 Speaker 2: and beyond. Brian, let's get into what some of the 12 00:00:40,360 --> 00:00:42,080 Speaker 2: smart rich people are doing. 13 00:00:42,600 --> 00:00:42,840 Speaker 1: Well. 14 00:00:42,880 --> 00:00:45,680 Speaker 3: One thing that happens this time of year is rebalancing. 15 00:00:45,720 --> 00:00:48,320 Speaker 3: Everybody else is coasting and just enjoying the third year 16 00:00:48,320 --> 00:00:51,240 Speaker 3: in a row of double digit gains. Fingers cross. Hopefully 17 00:00:51,240 --> 00:00:53,479 Speaker 3: we'll stick with this. But if you haven't looked at 18 00:00:53,479 --> 00:00:56,640 Speaker 3: that allocation since January, odds are portfolio is probably drifted 19 00:00:56,640 --> 00:00:59,120 Speaker 3: a little bit because some things just run faster than others. 20 00:00:59,320 --> 00:01:01,800 Speaker 3: Maybe take mylogy has blown past what you wanted it 21 00:01:01,840 --> 00:01:03,840 Speaker 3: to be. That's a very really good chance of that. 22 00:01:04,080 --> 00:01:06,720 Speaker 3: Maybe bonds have bounced back somewhat. December is a great 23 00:01:06,720 --> 00:01:08,920 Speaker 3: time to kind of trim those over performers and then 24 00:01:09,319 --> 00:01:11,240 Speaker 3: sell it the high and then add to the low 25 00:01:11,280 --> 00:01:13,199 Speaker 3: of the other positions that maybe haven't done so well. 26 00:01:13,440 --> 00:01:16,240 Speaker 3: Get everything back in terms with your your longer term plan. 27 00:01:16,560 --> 00:01:19,280 Speaker 3: And here's a kicker though, you're not really just maintaining discipline. 28 00:01:19,560 --> 00:01:21,440 Speaker 3: You're selling gains at the end of the year. When 29 00:01:21,480 --> 00:01:23,840 Speaker 3: you know your tax picture right, you're not waiting for 30 00:01:23,880 --> 00:01:26,520 Speaker 3: surprises in April because you've already will have looked at. 31 00:01:26,440 --> 00:01:30,039 Speaker 2: This telling your money what to do in advance. That's 32 00:01:30,080 --> 00:01:32,680 Speaker 2: the key, and that's the key to planning. All right, 33 00:01:32,720 --> 00:01:36,240 Speaker 2: let's talk about tax loss harvesting and maybe tax gain 34 00:01:36,400 --> 00:01:40,000 Speaker 2: harvesting too. And we've been banging the drum on this 35 00:01:40,080 --> 00:01:42,720 Speaker 2: topic for months and months now, but you know, if 36 00:01:42,760 --> 00:01:46,800 Speaker 2: you've got taxable accounts, it really is time to take 37 00:01:46,840 --> 00:01:50,680 Speaker 2: a look at updating things to twenty twenty five. And 38 00:01:50,760 --> 00:01:54,040 Speaker 2: what I'm talking about here is having a tax loss 39 00:01:54,040 --> 00:01:58,280 Speaker 2: harvesting strategy going on in the background with your portfolio 40 00:01:58,800 --> 00:02:02,400 Speaker 2: to take advantage of this. And for a couple of reasons, One, 41 00:02:03,120 --> 00:02:07,600 Speaker 2: you can really make your portfolio more tax efficient even 42 00:02:07,680 --> 00:02:10,240 Speaker 2: if you don't pull any money out at all, but 43 00:02:10,840 --> 00:02:15,200 Speaker 2: most importantly, offsetting some gains with losses helps do that 44 00:02:15,280 --> 00:02:18,120 Speaker 2: rebalancing that you just talked about, but do it in 45 00:02:18,160 --> 00:02:22,280 Speaker 2: a much more tax responsible way and keep Uncle Sam 46 00:02:22,360 --> 00:02:23,919 Speaker 2: out of your wallet at the same time. 47 00:02:24,880 --> 00:02:27,440 Speaker 3: And then we move on to charitable giving. Obviously, it 48 00:02:27,600 --> 00:02:30,320 Speaker 3: is the season to think of others, and so charitable 49 00:02:30,320 --> 00:02:32,399 Speaker 3: giving is a big topic right now. So let's say, 50 00:02:32,440 --> 00:02:34,160 Speaker 3: you know, if you do the math, you might be 51 00:02:34,200 --> 00:02:36,480 Speaker 3: donating ten thousand bucks a year to your church, your 52 00:02:36,520 --> 00:02:39,200 Speaker 3: alma mater, whatever you're doing, you know, on a monthly basis. 53 00:02:39,639 --> 00:02:42,519 Speaker 3: Maybe instead of spreading that out over four years, give 54 00:02:42,600 --> 00:02:45,760 Speaker 3: forty thousand dollars in one year and itemize those deductions. 55 00:02:45,760 --> 00:02:48,480 Speaker 3: Don't forget. Yeah, it's harder to get to an actual 56 00:02:48,560 --> 00:02:51,560 Speaker 3: tax benefit nowadays. If you're simply doing a monthly contribution, 57 00:02:51,880 --> 00:02:53,840 Speaker 3: probably not gonna you know, not too strong of a 58 00:02:53,880 --> 00:02:55,840 Speaker 3: chance you're gonna beat that standard deduction. So you're not 59 00:02:55,880 --> 00:02:58,040 Speaker 3: really getting it. You're not losing the deduction, you just 60 00:02:58,040 --> 00:03:00,360 Speaker 3: don't have to do the charity to get it. But 61 00:03:00,400 --> 00:03:02,080 Speaker 3: on the other hand, if you use something called a 62 00:03:02,120 --> 00:03:05,760 Speaker 3: donor advised fund, you can bunch all of those contributions 63 00:03:05,800 --> 00:03:08,600 Speaker 3: into one year and get a tax deduction. What that 64 00:03:08,639 --> 00:03:10,840 Speaker 3: means now, is you con pair that right, if I 65 00:03:10,880 --> 00:03:12,760 Speaker 3: want a big fat tax deduction, well, the best time 66 00:03:12,760 --> 00:03:13,960 Speaker 3: to do that is when I might have a big 67 00:03:14,000 --> 00:03:17,120 Speaker 3: fat tax bill. Maybe I have a retirement plan like 68 00:03:17,160 --> 00:03:19,080 Speaker 3: a four to fifty seven or something that unwound and 69 00:03:19,120 --> 00:03:21,560 Speaker 3: created a bunch of taxation or some other kind of 70 00:03:21,600 --> 00:03:24,480 Speaker 3: windfall inherited money something like that. Well, if I want 71 00:03:24,480 --> 00:03:27,600 Speaker 3: to offset those income taxes and very important, and I 72 00:03:27,680 --> 00:03:31,080 Speaker 3: was going to do these charitable contributions anyway, then pull 73 00:03:31,120 --> 00:03:33,560 Speaker 3: them all, pull them forward in time, do them all now, 74 00:03:34,000 --> 00:03:36,240 Speaker 3: donate them to a donor advised fund, and that means 75 00:03:36,280 --> 00:03:38,200 Speaker 3: you'll get a deduction this year. But then you will 76 00:03:38,240 --> 00:03:42,119 Speaker 3: not be making those those contributions in the in years two, three, four, 77 00:03:42,200 --> 00:03:46,200 Speaker 3: five and on, because you'll simply be actually granting those 78 00:03:46,240 --> 00:03:49,960 Speaker 3: dollars during those years. So you're your benefactors, the places 79 00:03:49,960 --> 00:03:53,200 Speaker 3: that you are benefiting will not know any difference. They're 80 00:03:53,200 --> 00:03:56,000 Speaker 3: still seeing dollars flowing in from you, so they don't 81 00:03:56,040 --> 00:03:58,440 Speaker 3: know that there's a difference that you made that contribution, 82 00:03:58,600 --> 00:04:00,000 Speaker 3: you know, all in one year, but you will get 83 00:04:00,080 --> 00:04:02,560 Speaker 3: the tax benefit for that year well, and. 84 00:04:02,960 --> 00:04:06,080 Speaker 2: In terms of a double whammy tax benefit, if you 85 00:04:06,160 --> 00:04:08,320 Speaker 2: are able to do what Brian has said, bunch some 86 00:04:08,400 --> 00:04:11,520 Speaker 2: of these contributions, you know, four years worth into one year, 87 00:04:11,640 --> 00:04:14,920 Speaker 2: use the donor advice fund, get the itemized deduction. If 88 00:04:14,960 --> 00:04:18,520 Speaker 2: you use appreciated stock or mutual fund or ETF shares 89 00:04:18,560 --> 00:04:21,799 Speaker 2: to do this, you also avoid all the capital income 90 00:04:22,000 --> 00:04:25,119 Speaker 2: or capital gains on those holdings if they've been held 91 00:04:25,120 --> 00:04:28,119 Speaker 2: by over one year. That can be a wonderful way 92 00:04:28,520 --> 00:04:33,599 Speaker 2: to accomplish your tax and charitable goals and be very 93 00:04:33,640 --> 00:04:36,920 Speaker 2: tax efficient, super tax efficient at the same time. Brian, 94 00:04:36,960 --> 00:04:39,880 Speaker 2: we also have to mention for our listeners over EGE 95 00:04:39,920 --> 00:04:44,000 Speaker 2: seventy and a half, please don't forget about qualified charitable 96 00:04:44,080 --> 00:04:47,640 Speaker 2: distributions directly from your IRA. This is a big one 97 00:04:47,680 --> 00:04:50,640 Speaker 2: that a lot of people miss. They are never made 98 00:04:50,640 --> 00:04:55,160 Speaker 2: aware of it. And these qualified charitable distributions, they do 99 00:04:55,320 --> 00:04:59,480 Speaker 2: count toward your required minimum distributions. And anything that goes 100 00:04:59,480 --> 00:05:02,440 Speaker 2: directly to a charity is not taxable at all. It 101 00:05:02,440 --> 00:05:06,159 Speaker 2: doesn't hit your tax return. That's a huge win if 102 00:05:06,200 --> 00:05:08,280 Speaker 2: you don't need the money to live off of and 103 00:05:08,360 --> 00:05:11,480 Speaker 2: you're gonna be giving money to charity or your church anyway. 104 00:05:11,800 --> 00:05:14,520 Speaker 3: Yeah, and I think the hidden part of these qualified 105 00:05:14,600 --> 00:05:17,560 Speaker 3: charitable distributions whether there's a couple. Bob said the age 106 00:05:17,560 --> 00:05:19,440 Speaker 3: seventy and a half, and some people will go, well, 107 00:05:19,480 --> 00:05:21,760 Speaker 3: wait a minute, that's not r MD age anymore. RMD 108 00:05:21,839 --> 00:05:24,400 Speaker 3: age is seventy three. That is correct. They did not 109 00:05:24,600 --> 00:05:29,200 Speaker 3: update the qualified charitable distribution age to seventy three. It was. 110 00:05:29,200 --> 00:05:32,880 Speaker 3: It was never locked directly to the RMD age. It's 111 00:05:32,920 --> 00:05:34,480 Speaker 3: just been set at seventy and a half since that 112 00:05:34,680 --> 00:05:36,840 Speaker 3: was the rmd A. So, yes, that is a kind 113 00:05:36,880 --> 00:05:39,080 Speaker 3: of a funky thing. You don't have to have a 114 00:05:39,080 --> 00:05:42,039 Speaker 3: requirement ofum distribution in your situation to take advantage of it, 115 00:05:42,080 --> 00:05:43,800 Speaker 3: as long as you're seventy and a half. But the 116 00:05:43,839 --> 00:05:45,960 Speaker 3: other thing I wanted to say Bob is not only 117 00:05:46,080 --> 00:05:48,400 Speaker 3: obviously yes, you're getting a tax benefit from this, you're 118 00:05:48,440 --> 00:05:50,240 Speaker 3: gonna give the money away and you're basically not paying 119 00:05:50,279 --> 00:05:53,280 Speaker 3: taxes on it, but more importantly, it doesn't even push 120 00:05:53,320 --> 00:05:56,200 Speaker 3: you up in the bracket. Right, So the income itself 121 00:05:56,279 --> 00:05:58,640 Speaker 3: is not taxable, most people get that, but it doesn't 122 00:05:58,680 --> 00:06:01,720 Speaker 3: even count in terms of pushing you upwards in the bracket. 123 00:06:01,839 --> 00:06:04,800 Speaker 3: So therefore your other taxable income streams are going to 124 00:06:04,800 --> 00:06:07,520 Speaker 3: get taxed at a lower rate. That's kind of crazy 125 00:06:07,520 --> 00:06:09,120 Speaker 3: for people to get their heads around, because we all 126 00:06:09,120 --> 00:06:10,520 Speaker 3: want to say, well, here's my income, I add it 127 00:06:10,520 --> 00:06:12,680 Speaker 3: all up and then here's the bracket. Well, yeah, that'll 128 00:06:12,720 --> 00:06:15,160 Speaker 3: put you in the bracket. But it doesn't necessarily mean 129 00:06:15,200 --> 00:06:18,160 Speaker 3: that every last little piece of your income counts. This 130 00:06:18,200 --> 00:06:21,599 Speaker 3: is why we have modified adjusted gross income, adjusted gross income, 131 00:06:21,640 --> 00:06:24,160 Speaker 3: we have provisional income. There's all kinds of different flavors 132 00:06:24,160 --> 00:06:27,480 Speaker 3: of income. And this is why tax preparers have careers. 133 00:06:27,480 --> 00:06:28,960 Speaker 3: And this is why we will never be doing our 134 00:06:29,000 --> 00:06:31,960 Speaker 3: taxes on a postcard as we were promised several years ago. 135 00:06:33,120 --> 00:06:35,640 Speaker 2: All right, and then another one that we want to 136 00:06:35,680 --> 00:06:38,400 Speaker 2: talk about here. For some families that can afford to 137 00:06:38,440 --> 00:06:40,440 Speaker 2: do this, and it just makes sense to do this, 138 00:06:40,680 --> 00:06:44,039 Speaker 2: Start giving some money to your kids or grandkids now 139 00:06:44,160 --> 00:06:47,039 Speaker 2: while you're alive, you know, rather than waiting until you 140 00:06:47,120 --> 00:06:51,279 Speaker 2: pass away. Just a reminder, you are allowed without any 141 00:06:51,560 --> 00:06:55,279 Speaker 2: tax consequences, you know whatsoever, in terms of gift taxes. 142 00:06:55,480 --> 00:06:58,200 Speaker 2: You can give up the nineteen thousand dollars per year 143 00:06:58,560 --> 00:07:02,039 Speaker 2: to any human being on the planet. So if you're 144 00:07:02,040 --> 00:07:04,880 Speaker 2: giving money to let's say your son and his wife, 145 00:07:04,920 --> 00:07:07,840 Speaker 2: you know, eighteen or nineteen times too. Last time I 146 00:07:07,960 --> 00:07:10,880 Speaker 2: checked is thirty eight thousand dollars. You can start to 147 00:07:10,920 --> 00:07:13,440 Speaker 2: shift some money, help them with down payments for a house, 148 00:07:13,800 --> 00:07:15,360 Speaker 2: college tuition, help. 149 00:07:15,240 --> 00:07:16,120 Speaker 1: Them out now. 150 00:07:16,480 --> 00:07:19,840 Speaker 2: As long as they are handling their money responsibly, it 151 00:07:19,840 --> 00:07:22,880 Speaker 2: could make a big difference in some of those young kids' 152 00:07:23,000 --> 00:07:27,400 Speaker 2: life now, especially folks starting out starting a family, rather 153 00:07:27,520 --> 00:07:29,840 Speaker 2: than just waiting for them to inherit. You know, a 154 00:07:29,840 --> 00:07:32,680 Speaker 2: few million dollars when you die and they're in their 155 00:07:32,720 --> 00:07:36,680 Speaker 2: sixties something to think about. And some people think about 156 00:07:36,720 --> 00:07:39,000 Speaker 2: actually doing this, but you got to do it before 157 00:07:39,000 --> 00:07:41,520 Speaker 2: the end of the year. You can't wait until April 158 00:07:41,520 --> 00:07:42,480 Speaker 2: fifteenth for this one. 159 00:07:42,640 --> 00:07:45,600 Speaker 3: Yeah, and I think let's dispel some some things too. 160 00:07:45,680 --> 00:07:49,720 Speaker 3: So yeah, you can give people more than the nineteen 161 00:07:49,760 --> 00:07:52,360 Speaker 3: thousand dollars. That's the annual, no harm, no foul, don't 162 00:07:52,360 --> 00:07:54,120 Speaker 3: even have to report it. You can write anybody a 163 00:07:54,200 --> 00:07:56,760 Speaker 3: check for anap to nineteen thousand dollars, anybody walking down 164 00:07:56,760 --> 00:08:00,160 Speaker 3: the street. So that so that's the easy part. That 165 00:08:00,200 --> 00:08:02,600 Speaker 3: doesn't mean you can't give somebody fifty thousand if you 166 00:08:02,680 --> 00:08:05,000 Speaker 3: really wanted to. Played by the rules. That simply means 167 00:08:05,000 --> 00:08:07,360 Speaker 3: you have to file a gift tax return, which doesn't 168 00:08:07,400 --> 00:08:09,720 Speaker 3: even mean you're going to pay taxes. There's something else 169 00:08:09,760 --> 00:08:14,200 Speaker 3: out there called a lifetime your lifetime gift maximum that's 170 00:08:14,240 --> 00:08:16,520 Speaker 3: a million dollars. And if you were to give in 171 00:08:16,600 --> 00:08:18,600 Speaker 3: that example, if you were to give fifty thousand, well, 172 00:08:18,640 --> 00:08:21,360 Speaker 3: the nineteen goes free as part of your annual. The 173 00:08:21,440 --> 00:08:24,880 Speaker 3: remaining thirty one thousand, well that counts down from your million. 174 00:08:25,080 --> 00:08:27,600 Speaker 3: Again still not taxable, but you do have to start 175 00:08:27,600 --> 00:08:30,000 Speaker 3: tracking that on a lifetime basis. But as Bob was 176 00:08:30,040 --> 00:08:32,920 Speaker 3: talking about, there are very easy ways to avoid this. 177 00:08:33,320 --> 00:08:36,200 Speaker 3: If you are married, then each is Bob mentioned, then 178 00:08:36,200 --> 00:08:38,720 Speaker 3: each you and your spouse can give nineteen thousand to 179 00:08:38,800 --> 00:08:41,760 Speaker 3: one individual. If that individual maybe it's your son or daughter. 180 00:08:41,800 --> 00:08:44,800 Speaker 3: If that person is married and important, and and you 181 00:08:44,880 --> 00:08:47,400 Speaker 3: trust the spouse, well then you can give the spouse. 182 00:08:47,480 --> 00:08:50,600 Speaker 3: You can each give that spouse your son or daughter 183 00:08:50,640 --> 00:08:53,079 Speaker 3: in law a nineteen thousand as well. So we can 184 00:08:53,120 --> 00:08:55,959 Speaker 3: get four gifts of nineteen thousand from a married couple 185 00:08:56,000 --> 00:08:58,560 Speaker 3: to a married couple without running a foul of any 186 00:08:58,600 --> 00:08:59,840 Speaker 3: of the annual gifting rules. 187 00:09:01,000 --> 00:09:03,800 Speaker 2: Here's another thing to think about, and again, most people 188 00:09:03,880 --> 00:09:06,320 Speaker 2: don't even want to think about this or talk about this. 189 00:09:06,520 --> 00:09:09,920 Speaker 2: But you know, let's face it, the holidays are times 190 00:09:09,960 --> 00:09:14,240 Speaker 2: when families are together, and that happens, you know, less 191 00:09:14,280 --> 00:09:18,640 Speaker 2: frequently than before. Actually getting everybody together in the same room. 192 00:09:18,720 --> 00:09:21,280 Speaker 2: I think this is the perfect time if you want 193 00:09:21,280 --> 00:09:22,880 Speaker 2: to get out in front of some of this stuff, 194 00:09:22,880 --> 00:09:26,840 Speaker 2: to sit down and actually talk to your kids about 195 00:09:26,880 --> 00:09:30,079 Speaker 2: your estate plan. Talk to them in advance about what's 196 00:09:30,120 --> 00:09:32,760 Speaker 2: going to happen. You don't, you can't. You can either 197 00:09:32,840 --> 00:09:36,120 Speaker 2: share or not share the exact dollar amounts, but get 198 00:09:36,120 --> 00:09:39,640 Speaker 2: the family together. Talk about powers of attorney for health care, 199 00:09:40,000 --> 00:09:43,800 Speaker 2: power powers of attorney for you know, financial matters. Talk 200 00:09:43,840 --> 00:09:46,400 Speaker 2: to them, you know, in generalities, about how the whole 201 00:09:46,480 --> 00:09:48,720 Speaker 2: estate plan is going to work. If you own a 202 00:09:48,760 --> 00:09:51,559 Speaker 2: family business or you own real estate where maybe one 203 00:09:51,640 --> 00:09:53,960 Speaker 2: kid's gonna get one asset and the other kids are 204 00:09:53,960 --> 00:09:56,880 Speaker 2: gonna get other assets, this is a great time to 205 00:09:57,400 --> 00:10:01,040 Speaker 2: kick those conversations around in advance and just get a 206 00:10:01,080 --> 00:10:03,959 Speaker 2: reaction and see if this is going to create family 207 00:10:04,040 --> 00:10:08,120 Speaker 2: discord or misunderstanding, or if you've got to smooth some 208 00:10:08,240 --> 00:10:11,120 Speaker 2: things out with family members based on how your whole 209 00:10:11,200 --> 00:10:13,320 Speaker 2: estate plan is going to go down. You know, when 210 00:10:13,320 --> 00:10:17,320 Speaker 2: that time comes against people, most families don't do this. 211 00:10:17,920 --> 00:10:20,520 Speaker 2: I always urge people to do it. It's better to 212 00:10:20,600 --> 00:10:25,000 Speaker 2: have those conversations now, then wait until something happens and 213 00:10:25,080 --> 00:10:31,199 Speaker 2: then possibly have some family discord down the road. That strategy, Brian. 214 00:10:31,400 --> 00:10:33,840 Speaker 2: I know this doesn't involve watching football. 215 00:10:33,400 --> 00:10:35,560 Speaker 3: Games, right, Well, you can have the football game on 216 00:10:35,640 --> 00:10:38,280 Speaker 3: in the background with this, but I wanted to kind 217 00:10:38,280 --> 00:10:39,520 Speaker 3: of tap into. 218 00:10:39,320 --> 00:10:42,480 Speaker 2: A football and generation skipping taxes. That's how I want 219 00:10:42,480 --> 00:10:43,680 Speaker 2: to spend my Christmas Eve. 220 00:10:43,920 --> 00:10:46,320 Speaker 3: That's a party, Bob. I look forward to not attending 221 00:10:46,360 --> 00:10:50,120 Speaker 3: the spond Seller holiday celebration, but no, I want to 222 00:10:50,160 --> 00:10:52,520 Speaker 3: link a couple of things together. So end of year reviews, 223 00:10:53,160 --> 00:10:55,520 Speaker 3: you know, and that's always good for at least a 224 00:10:55,559 --> 00:10:58,200 Speaker 3: married couple to go through just kind of just test 225 00:10:58,240 --> 00:11:00,240 Speaker 3: the water and see what's going on and to make 226 00:11:00,240 --> 00:11:02,200 Speaker 3: sure everybody's on the same page. But for if you 227 00:11:02,280 --> 00:11:04,959 Speaker 3: are charitably inclined and that's something you're thinking about you'd 228 00:11:05,040 --> 00:11:06,920 Speaker 3: like to pass on to your children. Well, we already 229 00:11:06,920 --> 00:11:09,160 Speaker 3: talked about the Donor Advice Fund, right, that's an annual 230 00:11:09,240 --> 00:11:11,680 Speaker 3: review thing. Anyway, maybe you're putting money into it for 231 00:11:11,760 --> 00:11:14,320 Speaker 3: tax planning purposes this year, or maybe it's time to 232 00:11:14,320 --> 00:11:16,960 Speaker 3: decide what grants you're going to give you. If you 233 00:11:17,000 --> 00:11:19,160 Speaker 3: are somebody who wants to involve the family, you want 234 00:11:19,160 --> 00:11:22,160 Speaker 3: to kind of pass on that legacy of charitable giving, 235 00:11:22,440 --> 00:11:24,440 Speaker 3: then you might bring the family in. Somebody at some 236 00:11:24,480 --> 00:11:26,559 Speaker 3: point is going to have to decide where those donor 237 00:11:26,559 --> 00:11:29,000 Speaker 3: advice funds are going and the benefit of that. By 238 00:11:29,000 --> 00:11:31,040 Speaker 3: the way, a donor advice fund, you are not naming 239 00:11:31,080 --> 00:11:33,880 Speaker 3: the beneficiary the charity upfront. You're just parking it and 240 00:11:33,920 --> 00:11:36,719 Speaker 3: basically an escrow until you have decided. It can be 241 00:11:36,760 --> 00:11:38,480 Speaker 3: any five oh one c three, and it can change 242 00:11:38,480 --> 00:11:40,760 Speaker 3: from year to year, very much a game time decision. 243 00:11:40,960 --> 00:11:44,240 Speaker 3: Bring the family in. I have clients who will they'll 244 00:11:44,240 --> 00:11:46,160 Speaker 3: have a nice, nice dinner at a nice restaurant or 245 00:11:46,200 --> 00:11:48,960 Speaker 3: at somebody's house or whatever, and other than the normal 246 00:11:49,000 --> 00:11:51,760 Speaker 3: holiday togetherness. Everybody knows that on the agenda is going 247 00:11:51,800 --> 00:11:53,920 Speaker 3: to be let's talk about what charities we want to 248 00:11:53,960 --> 00:11:56,600 Speaker 3: benefit with this donor advice fund, and then you will 249 00:11:56,600 --> 00:11:59,960 Speaker 3: be instilling your goals and your values into your own show, 250 00:12:00,120 --> 00:12:02,760 Speaker 3: in your own family and the way that you would 251 00:12:02,800 --> 00:12:04,439 Speaker 3: will want wanted to and they will have a clear 252 00:12:04,480 --> 00:12:06,800 Speaker 3: picture of how you wanted your assets treated, not only 253 00:12:06,840 --> 00:12:09,080 Speaker 3: to benefit them, but to benefit others as well. So 254 00:12:09,200 --> 00:12:11,040 Speaker 3: make that part of the holiday tradition if you are 255 00:12:11,080 --> 00:12:11,720 Speaker 3: so inclined. 256 00:12:12,800 --> 00:12:16,400 Speaker 2: Wonderful idea, Brian. If you host your family dinner at 257 00:12:16,400 --> 00:12:18,439 Speaker 2: the precinct, can I come and just be a part 258 00:12:18,480 --> 00:12:20,319 Speaker 2: of it and eat steak and watch you talk to 259 00:12:20,360 --> 00:12:20,880 Speaker 2: your family? 260 00:12:21,320 --> 00:12:24,319 Speaker 3: Absolutely, Bob, and we'll let you well. I'll even throw 261 00:12:24,360 --> 00:12:25,760 Speaker 3: a steak on the floor for you and you can 262 00:12:26,040 --> 00:12:27,240 Speaker 3: you can have no on the bone. 263 00:12:27,840 --> 00:12:28,160 Speaker 1: Thank you. 264 00:12:28,480 --> 00:12:31,160 Speaker 2: Here's the all Worth advice. December isn't just the end 265 00:12:31,160 --> 00:12:33,880 Speaker 2: of the year. It's your final chance to make strategic 266 00:12:34,040 --> 00:12:37,640 Speaker 2: moves that protect your wealth and set the tone for 267 00:12:37,760 --> 00:12:42,240 Speaker 2: everything coming ahead. Some of you have money that will 268 00:12:42,240 --> 00:12:44,960 Speaker 2: literally disappear if you don't use it in the next 269 00:12:44,960 --> 00:12:47,560 Speaker 2: few weeks. We'll talk about that next and why Elon 270 00:12:47,679 --> 00:12:52,000 Speaker 2: Musks thinks people won't have to work anymore. You're listening 271 00:12:52,040 --> 00:12:54,520 Speaker 2: to Simply Money presented by all Worth Financial on fifty 272 00:12:54,520 --> 00:13:05,400 Speaker 2: five KRC the talk station. You're listening to Simply Money 273 00:13:05,440 --> 00:13:08,240 Speaker 2: presented by all Worth Financial on Bob Sponsorer along with 274 00:13:08,280 --> 00:13:09,160 Speaker 2: Brian James. 275 00:13:09,880 --> 00:13:12,160 Speaker 1: Pay off the house or let that low. 276 00:13:12,000 --> 00:13:16,480 Speaker 2: Interest rate ride. What if your spouse totally disagrees and 277 00:13:16,520 --> 00:13:19,680 Speaker 2: does paying off debt always make you feel richer or 278 00:13:19,720 --> 00:13:22,040 Speaker 2: could it cost you in the long run. We'll sort 279 00:13:22,120 --> 00:13:25,880 Speaker 2: all of that stuff out straight ahead. At six forty three. 280 00:13:25,920 --> 00:13:28,320 Speaker 2: We do have a very important reminder for those of 281 00:13:28,360 --> 00:13:31,920 Speaker 2: you with a flexible spending account. Spend the money before 282 00:13:31,960 --> 00:13:35,280 Speaker 2: the end of the year, or you are literally throwing 283 00:13:35,320 --> 00:13:38,080 Speaker 2: it in the trash can Brian. There's a couple of 284 00:13:38,160 --> 00:13:41,040 Speaker 2: nuances to this rule, but this is one of the 285 00:13:41,040 --> 00:13:43,440 Speaker 2: things that I like because it's kind of black and white. 286 00:13:43,559 --> 00:13:46,400 Speaker 2: Do this or that happens, but walk us through it. 287 00:13:46,760 --> 00:13:50,960 Speaker 3: Flexible spending accounts, this is fsa flexible use it or 288 00:13:51,000 --> 00:13:52,800 Speaker 3: lose it. If you don't spend the money you contributed 289 00:13:52,840 --> 00:13:54,200 Speaker 3: this year and you've got a few weeks left to 290 00:13:54,200 --> 00:13:56,960 Speaker 3: do it, it may just vanish right back to your employer. 291 00:13:57,400 --> 00:13:58,880 Speaker 3: Some companies they are going to give you a grace 292 00:13:58,920 --> 00:14:01,439 Speaker 3: period into early twenty or maybe let you roll over 293 00:14:01,480 --> 00:14:03,240 Speaker 3: a small amount, but you need to check your plan 294 00:14:03,320 --> 00:14:05,400 Speaker 3: rules to know for sure. The one thing that is 295 00:14:05,480 --> 00:14:07,200 Speaker 3: for sure is that you cannot treat it like a 296 00:14:07,200 --> 00:14:09,760 Speaker 3: health savings account. You can't just keep it forever, so 297 00:14:09,840 --> 00:14:11,160 Speaker 3: this is the time of year, you know, go out 298 00:14:11,200 --> 00:14:13,960 Speaker 3: and buy four pairs of glasses or get your prescription 299 00:14:14,080 --> 00:14:17,400 Speaker 3: sunglasses or whatever. Those dollars are going to disappear. These 300 00:14:17,400 --> 00:14:18,720 Speaker 3: are the kind of things you can you can You 301 00:14:18,760 --> 00:14:22,600 Speaker 3: can also cover copays. You can cover prescription glasses, contact lenses, 302 00:14:22,680 --> 00:14:25,400 Speaker 3: dental cleanings, over the counter meds. If you've got receipts 303 00:14:25,400 --> 00:14:27,360 Speaker 3: for stuff that you've paid for, then go ahead and 304 00:14:27,360 --> 00:14:29,960 Speaker 3: take a distribution, right because you can pull these dollar 305 00:14:30,000 --> 00:14:31,600 Speaker 3: amounts out and then you do whatever you want with them. 306 00:14:31,640 --> 00:14:33,840 Speaker 3: You already spent the money, You're just reimbursing yourself. 307 00:14:34,720 --> 00:14:38,160 Speaker 2: Well, Brian, I know you were asking me about this yesterday. 308 00:14:38,280 --> 00:14:40,400 Speaker 2: I know you you want to squeeze in one more 309 00:14:40,400 --> 00:14:42,640 Speaker 2: pedicure before the end of the year, and we're trying 310 00:14:42,640 --> 00:14:45,760 Speaker 2: to use your flexible spending account for to pay for that. 311 00:14:45,840 --> 00:14:48,400 Speaker 2: And I did check with the IRS and they did say, hey, 312 00:14:48,480 --> 00:14:53,600 Speaker 2: if your primary care physician prescribes that pedicure, you can 313 00:14:53,640 --> 00:14:56,040 Speaker 2: go ahead and use your flexible spending account. Just wanted 314 00:14:56,080 --> 00:14:57,920 Speaker 2: to let you know before you book the appointment. 315 00:14:57,960 --> 00:15:01,040 Speaker 3: I'm way too pretty for just one pet, Bob. I 316 00:15:01,080 --> 00:15:02,080 Speaker 3: am high maintenance. 317 00:15:03,080 --> 00:15:05,640 Speaker 2: I knew that, all right, let's talk about something new 318 00:15:05,760 --> 00:15:09,160 Speaker 2: on the policy books that just might matter and matter 319 00:15:09,240 --> 00:15:13,040 Speaker 2: greatly if you have young kids or grandkids. Something called 320 00:15:13,080 --> 00:15:17,480 Speaker 2: Trump accounts. I actually like this. I think there's some 321 00:15:17,600 --> 00:15:19,880 Speaker 2: nuances to it that are yet to be worked out. 322 00:15:19,920 --> 00:15:22,600 Speaker 2: It was part of the you know, one big beautiful bill. 323 00:15:22,680 --> 00:15:24,680 Speaker 2: But believe it or not, a child that was born 324 00:15:24,760 --> 00:15:28,840 Speaker 2: between January first of this year and December thirty first 325 00:15:28,880 --> 00:15:31,920 Speaker 2: of twenty twenty eight another reason to run out and 326 00:15:31,960 --> 00:15:35,480 Speaker 2: have kids. The federal government is going to seed a 327 00:15:35,680 --> 00:15:38,960 Speaker 2: something called a Trump account with the first one thousand 328 00:15:39,040 --> 00:15:43,640 Speaker 2: dollars from their parents, guardians, even employers or other family 329 00:15:43,680 --> 00:15:46,440 Speaker 2: members can contribute to that account each year up to 330 00:15:46,480 --> 00:15:50,400 Speaker 2: a total of five thousand dollars per year. The employer 331 00:15:50,480 --> 00:15:54,120 Speaker 2: contributions are capped at twenty five hundred toward that cap. 332 00:15:54,800 --> 00:15:57,000 Speaker 1: Brian, I think, I think this is good. 333 00:15:57,040 --> 00:15:59,680 Speaker 2: I think what the administration is trying to do here 334 00:15:59,840 --> 00:16:04,240 Speaker 2: is is promote financial literacy. And I think nothing promotes 335 00:16:04,280 --> 00:16:07,960 Speaker 2: financial literacy, you know, better than having some actual skin 336 00:16:08,040 --> 00:16:11,080 Speaker 2: in the game. I think if these accounts are handled responsibly, 337 00:16:11,920 --> 00:16:14,560 Speaker 2: getting people started with you know, owning a piece of 338 00:16:14,560 --> 00:16:17,040 Speaker 2: the action, so to speak. I think if again, if 339 00:16:17,080 --> 00:16:21,240 Speaker 2: handled properly, it could be a wonderful educational opportunity for 340 00:16:21,360 --> 00:16:25,240 Speaker 2: families and get them you know, started financially off on 341 00:16:25,280 --> 00:16:26,200 Speaker 2: the right foot as well. 342 00:16:26,920 --> 00:16:30,040 Speaker 3: Yeah, and this this does create a receptacle into which 343 00:16:30,080 --> 00:16:31,960 Speaker 3: you know, you can put more money in. This is 344 00:16:32,080 --> 00:16:33,800 Speaker 3: the federal government, I think is just trying to to 345 00:16:34,080 --> 00:16:36,600 Speaker 3: to to goose the system here and just get people 346 00:16:36,880 --> 00:16:39,120 Speaker 3: get it going and seeding the account I think is 347 00:16:39,120 --> 00:16:41,080 Speaker 3: a great you know, you're not having to do the 348 00:16:41,120 --> 00:16:43,360 Speaker 3: farming here. It's gonna just it's gonna exist, and you'll 349 00:16:43,400 --> 00:16:45,080 Speaker 3: have to sign up for jump through some hoops, of course, 350 00:16:45,400 --> 00:16:47,400 Speaker 3: but you don't have to find your own dollars, uh, 351 00:16:47,440 --> 00:16:50,120 Speaker 3: to to get it going. But from there anybody can 352 00:16:50,120 --> 00:16:53,200 Speaker 3: throw money into it. It's an invested in a somewhat 353 00:16:53,200 --> 00:16:56,400 Speaker 3: conservative way, a low cost US stock index funds, exchange 354 00:16:56,440 --> 00:16:57,680 Speaker 3: traded funds, those kinds of things. 355 00:16:58,040 --> 00:16:58,240 Speaker 2: Uh. 356 00:16:58,280 --> 00:17:00,720 Speaker 3: They're locked up until till the child turns eighteen, and 357 00:17:00,760 --> 00:17:02,280 Speaker 3: then at that point it starts to behave a little 358 00:17:02,280 --> 00:17:05,000 Speaker 3: bit like an IRA. Obviously, you know, this is the 359 00:17:05,000 --> 00:17:07,120 Speaker 3: first year of it, so we will we will talk 360 00:17:07,160 --> 00:17:09,640 Speaker 3: about that in eighteen years about exactly what these things 361 00:17:09,640 --> 00:17:12,000 Speaker 3: are looking like. But at that point, withdrawals can be 362 00:17:12,040 --> 00:17:15,000 Speaker 3: used for just about anything education, first home, maybe starting 363 00:17:15,040 --> 00:17:18,080 Speaker 3: a business, or whatever that person decides as a young adult. 364 00:17:18,600 --> 00:17:20,960 Speaker 3: You know, there are downsides to this too, just like 365 00:17:21,000 --> 00:17:23,760 Speaker 3: anything else, because the account is structured a little bit 366 00:17:23,760 --> 00:17:25,800 Speaker 3: like an investment, kind of somewhere between an investment and 367 00:17:25,840 --> 00:17:28,240 Speaker 3: an IRA. Money's not guaranteed. It's going to go up 368 00:17:28,280 --> 00:17:30,639 Speaker 3: and down, just like anything else. But the sooner people 369 00:17:30,680 --> 00:17:33,160 Speaker 3: get used to that happening, the better. That's just reality. 370 00:17:33,880 --> 00:17:37,440 Speaker 3: Withdraws after eighteen are taxed as ordinary income. There could 371 00:17:37,520 --> 00:17:40,080 Speaker 3: be early withdraw rules if you pull those dollars out 372 00:17:40,119 --> 00:17:42,080 Speaker 3: too early, or you don't use them for you know, 373 00:17:42,160 --> 00:17:44,320 Speaker 3: approved reasons, which again there's a lot of approved reasons. 374 00:17:44,320 --> 00:17:47,040 Speaker 3: But then let's worry about this again in eighteen years 375 00:17:47,040 --> 00:17:48,480 Speaker 3: when this has grown to a point where you want 376 00:17:48,480 --> 00:17:48,919 Speaker 3: to pull it out. 377 00:17:49,359 --> 00:17:52,960 Speaker 2: Yeah, they're scheduling these accounts to happen on Independence Day 378 00:17:53,000 --> 00:17:56,120 Speaker 2: of twenty twenty six America is two hundred and fiftieth birthday, 379 00:17:56,240 --> 00:17:57,959 Speaker 2: So more to come on that. I want to make 380 00:17:57,960 --> 00:18:00,680 Speaker 2: sure we talk about this one Brian billionaire where Elon 381 00:18:00,800 --> 00:18:06,359 Speaker 2: Musk is signaling that artificial intelligence and robotics could eliminate 382 00:18:06,440 --> 00:18:10,000 Speaker 2: totally the need to even work within the next few decades. 383 00:18:10,920 --> 00:18:15,040 Speaker 3: Well, that sounds intriguing and also can somewhat concerning. Obviously, 384 00:18:15,119 --> 00:18:17,119 Speaker 3: that's going to have an impact here and there. So 385 00:18:17,160 --> 00:18:19,840 Speaker 3: this is coming from the US Saudi Investment Forum that 386 00:18:19,880 --> 00:18:22,480 Speaker 3: he had attended. He participated in a panel and was 387 00:18:22,520 --> 00:18:24,920 Speaker 3: asked about the long term impacts of robotics and AI 388 00:18:25,000 --> 00:18:27,640 Speaker 3: on the workforce, and he gave us a pretty bold prediction. 389 00:18:27,920 --> 00:18:30,080 Speaker 3: He basically said, I don't know what long term is. 390 00:18:30,119 --> 00:18:32,399 Speaker 3: Maybe it's ten twenty ars something like that, but my 391 00:18:32,480 --> 00:18:35,000 Speaker 3: prediction is that work will be optional. And then he 392 00:18:35,080 --> 00:18:37,240 Speaker 3: went on to say that money could eventually stop being 393 00:18:37,280 --> 00:18:41,080 Speaker 3: relevant if the future is dominated by AI and robotics 394 00:18:41,080 --> 00:18:44,720 Speaker 3: and all that. And he had said that positive AI 395 00:18:44,840 --> 00:18:48,040 Speaker 3: future money no often no longer exists in books out there. 396 00:18:48,080 --> 00:18:49,760 Speaker 3: So this is a lot of this stuff. It's kind 397 00:18:49,760 --> 00:18:52,720 Speaker 3: of up in the clouds. We'll see what comes of this. Obviously, 398 00:18:52,880 --> 00:18:56,600 Speaker 3: power electricity, the kind of things that they're going to run. 399 00:18:56,640 --> 00:18:58,639 Speaker 3: All these brains, all these fake brains out there that 400 00:18:58,680 --> 00:19:00,760 Speaker 3: are going to think for us. There's a lot to 401 00:19:00,800 --> 00:19:04,040 Speaker 3: think about here, and I don't know. I'm still in 402 00:19:04,080 --> 00:19:07,120 Speaker 3: the phase of let's wait and see what actually happens 403 00:19:07,160 --> 00:19:09,080 Speaker 3: before we really commit to the results that are going 404 00:19:09,119 --> 00:19:09,440 Speaker 3: to occur. 405 00:19:09,960 --> 00:19:12,600 Speaker 2: Brian, if money no longer exists, what happens to the 406 00:19:12,640 --> 00:19:15,760 Speaker 2: Simply Money radio show? I mean I would really miss too, 407 00:19:15,800 --> 00:19:20,600 Speaker 2: we'll just call it simply I would miss what about 408 00:19:20,680 --> 00:19:23,760 Speaker 2: Joe Strecker and that wonderful bumper music he plays? So 409 00:19:23,880 --> 00:19:25,720 Speaker 2: that would all go away too? I think it would. 410 00:19:25,760 --> 00:19:26,080 Speaker 1: I would. 411 00:19:26,080 --> 00:19:28,240 Speaker 2: I think it would be horrible. I still want to 412 00:19:28,280 --> 00:19:29,800 Speaker 2: work and I still want to have a reason to 413 00:19:29,840 --> 00:19:30,679 Speaker 2: talk about money. 414 00:19:30,960 --> 00:19:31,680 Speaker 1: What do you call it? 415 00:19:31,720 --> 00:19:34,160 Speaker 3: Simply Joe? And he's gonna have a microphone and he's 416 00:19:34,160 --> 00:19:36,320 Speaker 3: gonna give us his sage like wisdom. 417 00:19:36,800 --> 00:19:39,160 Speaker 2: He'll just become a DJ and play music for us. 418 00:19:39,440 --> 00:19:42,120 Speaker 2: Maybe that's even better, all right? Coming up next, why 419 00:19:42,240 --> 00:19:45,320 Speaker 2: sudden money can actually make you broke and how to 420 00:19:45,359 --> 00:19:48,800 Speaker 2: make sure your windfall doesn't just blow away. You're listening 421 00:19:48,880 --> 00:19:52,000 Speaker 2: to Simply presented by all Worth Financial on fifty five KRC, 422 00:19:52,440 --> 00:19:59,600 Speaker 2: the talk station. You're listening to Simply Money presented by 423 00:19:59,640 --> 00:20:03,760 Speaker 2: all Words Financial on Bob Sponseller along with Brian James. Well, 424 00:20:03,840 --> 00:20:07,679 Speaker 2: everyone dreams of a big financial windfall, a sudden inheritance 425 00:20:08,000 --> 00:20:11,239 Speaker 2: a business sale, maybe that stock you've been sitting on 426 00:20:11,280 --> 00:20:14,680 Speaker 2: that finally goes through the roof. But new research shows 427 00:20:14,720 --> 00:20:18,920 Speaker 2: that suddenly sudden money, you know, money that you can 428 00:20:18,960 --> 00:20:23,439 Speaker 2: get your hands on quickly, can actually destroy wealth faster 429 00:20:23,560 --> 00:20:27,120 Speaker 2: than it creates it. Brian, there's some new research out there, 430 00:20:27,160 --> 00:20:28,480 Speaker 2: and walk us through it today. 431 00:20:29,280 --> 00:20:32,879 Speaker 3: Yep, newsflash, new research. One in five people who inherit 432 00:20:32,920 --> 00:20:35,320 Speaker 3: a million dollars or more lose half of it within 433 00:20:35,400 --> 00:20:37,560 Speaker 3: five years. Well, every now, we hear these stories every 434 00:20:37,560 --> 00:20:39,560 Speaker 3: now and then from people who you know, win the lottery, 435 00:20:39,560 --> 00:20:41,399 Speaker 3: those kinds of things, and you hear the horror stories 436 00:20:41,440 --> 00:20:44,359 Speaker 3: about how they just weren't prepared for it and just 437 00:20:44,400 --> 00:20:47,919 Speaker 3: couldn't their brains simply couldn't handle that situation. That's not 438 00:20:48,040 --> 00:20:51,360 Speaker 3: bad luck, it's normally bad behavior, bad decision making. This 439 00:20:51,400 --> 00:20:54,000 Speaker 3: isn't just lottery winners though, Bob. It's people who sell 440 00:20:54,040 --> 00:20:56,840 Speaker 3: a business, you know, really, anybody who has some kind 441 00:20:56,880 --> 00:20:59,280 Speaker 3: of a massive windfall where a bunch of cash falls 442 00:20:59,280 --> 00:21:02,399 Speaker 3: out of the sky with no strings attached at a 443 00:21:02,400 --> 00:21:04,640 Speaker 3: relatively short period of time. This can be cashing out 444 00:21:04,640 --> 00:21:07,440 Speaker 3: of a career, getting a large inheritance, those kinds of things. 445 00:21:07,800 --> 00:21:10,040 Speaker 3: The faster the money comes, Bob, and all the faster 446 00:21:10,160 --> 00:21:11,920 Speaker 3: it can leave. So we're gonna kind of jump into 447 00:21:11,960 --> 00:21:14,560 Speaker 3: the different effects here that can happen and how to 448 00:21:14,600 --> 00:21:17,080 Speaker 3: handle it. So if you're in the situation, we're gonna 449 00:21:17,240 --> 00:21:19,760 Speaker 3: we'll start off with the first one, the windfall effect. 450 00:21:19,840 --> 00:21:19,959 Speaker 1: Here. 451 00:21:20,160 --> 00:21:23,360 Speaker 3: What really happens when you get a windfall, Well, psychologists 452 00:21:23,359 --> 00:21:24,879 Speaker 3: have actually done some work on this. They call it 453 00:21:24,920 --> 00:21:27,480 Speaker 3: sudden wealth syndrome, which sounds completely fake, but this is 454 00:21:27,480 --> 00:21:30,000 Speaker 3: a real thing. You literally go from thinking in terms 455 00:21:30,040 --> 00:21:32,720 Speaker 3: of thousands of dollars to thinking in millions overnight, and 456 00:21:32,760 --> 00:21:35,160 Speaker 3: this will give your brain whiplash. Think of it this way. 457 00:21:35,200 --> 00:21:38,240 Speaker 3: You've been driving a nice, compact, reasonable car for twenty years, 458 00:21:38,280 --> 00:21:39,560 Speaker 3: and all of a sudden you have the keys to 459 00:21:39,640 --> 00:21:42,760 Speaker 3: a Formula one race car that you have all the 460 00:21:42,880 --> 00:21:44,879 Speaker 3: complete freedom to go do whatever you want to do with. 461 00:21:45,280 --> 00:21:47,520 Speaker 3: Obviously it's pretty powerful and fast, but if you don't 462 00:21:47,520 --> 00:21:49,399 Speaker 3: know how to drive that kind of car, you're gonna 463 00:21:49,800 --> 00:21:52,600 Speaker 3: you're gonna have some kind of accident. So it happens financially, 464 00:21:52,640 --> 00:21:55,040 Speaker 3: the rains come off, and all of a sudden you 465 00:21:55,040 --> 00:21:57,600 Speaker 3: don't have the same sets of habits and the guardrails 466 00:21:58,080 --> 00:22:00,760 Speaker 3: because everything just drops. You think I can afford it, 467 00:22:00,840 --> 00:22:03,000 Speaker 3: and you can. We see this all the time with 468 00:22:03,359 --> 00:22:05,640 Speaker 3: this kind of a windfall. It's very easy to throw 469 00:22:05,680 --> 00:22:08,400 Speaker 3: money at problems when there is money around with which 470 00:22:08,440 --> 00:22:10,720 Speaker 3: to do so. But then if that gets baked into 471 00:22:10,760 --> 00:22:14,400 Speaker 3: the ongoing spending, you know, that can come alongside the investment, 472 00:22:14,440 --> 00:22:16,399 Speaker 3: start to get riskier because I feel like I've got 473 00:22:16,400 --> 00:22:19,439 Speaker 3: a bigger cushion, I can afford some riskier stuff, and 474 00:22:19,480 --> 00:22:21,160 Speaker 3: a lot of the discipline that you had that got 475 00:22:21,160 --> 00:22:23,760 Speaker 3: you to this pace starts to go away. So eventually 476 00:22:23,840 --> 00:22:26,040 Speaker 3: you get to a point where that money is controlling 477 00:22:26,080 --> 00:22:27,040 Speaker 3: you instead. 478 00:22:26,720 --> 00:22:27,400 Speaker 1: Of vice versa. 479 00:22:28,119 --> 00:22:30,640 Speaker 2: It's funny you brought up that Formula one race car 480 00:22:30,760 --> 00:22:34,080 Speaker 2: analogy because that reminds me of an actual client situation. 481 00:22:34,320 --> 00:22:37,560 Speaker 2: You know, business sale, millions of dollars coming in the door, 482 00:22:38,280 --> 00:22:41,960 Speaker 2: and this client went from buying one kind of exotic 483 00:22:42,040 --> 00:22:45,720 Speaker 2: collector car to now they own like eight to ten. 484 00:22:46,200 --> 00:22:47,400 Speaker 1: Well, what happened after that? 485 00:22:47,480 --> 00:22:50,840 Speaker 2: They needed to build a big barn or garage to 486 00:22:51,080 --> 00:22:54,200 Speaker 2: hold all the cars, and then you've got the trips 487 00:22:54,280 --> 00:22:58,240 Speaker 2: going to custom car shows transporting these cars. You know, 488 00:22:58,320 --> 00:23:01,720 Speaker 2: it becomes a lifestyle out with people that can afford 489 00:23:02,160 --> 00:23:04,720 Speaker 2: you know, eight ten different cars and shipping them all 490 00:23:04,720 --> 00:23:07,840 Speaker 2: over the country, and it leads to our less our 491 00:23:07,960 --> 00:23:12,720 Speaker 2: our next example, which is just lifestyle creep or lifestyle inflation. 492 00:23:14,040 --> 00:23:16,480 Speaker 2: You treat yourself a little bit and then all of 493 00:23:16,520 --> 00:23:20,359 Speaker 2: a sudden you've really ramped up into an overall lifestyle 494 00:23:20,400 --> 00:23:24,679 Speaker 2: that costs thousands and thousands more dollars per year, and 495 00:23:25,000 --> 00:23:27,520 Speaker 2: some people forget to just check and say, can we 496 00:23:27,600 --> 00:23:29,720 Speaker 2: really afford this? Is this sustainable? 497 00:23:29,760 --> 00:23:30,080 Speaker 1: Brian? 498 00:23:30,560 --> 00:23:33,120 Speaker 3: Yeah, that that that big house comes along a lot 499 00:23:33,119 --> 00:23:35,720 Speaker 3: of times with maybe it's a it's a homeowners association 500 00:23:35,880 --> 00:23:39,280 Speaker 3: fee that you didn't really account for. Definitely, property taxes 501 00:23:39,320 --> 00:23:41,560 Speaker 3: can sneak up. And I'll throw another one out there. 502 00:23:41,640 --> 00:23:44,080 Speaker 3: I ever spent fifteen thousand dollars on a tractor to 503 00:23:44,080 --> 00:23:46,640 Speaker 3: mow your your new acreage. You know, there are lots 504 00:23:46,640 --> 00:23:48,640 Speaker 3: of things out there that can you don't You don't 505 00:23:48,640 --> 00:23:52,400 Speaker 3: really see coming and until you're actually living in this situation. 506 00:23:52,560 --> 00:23:54,800 Speaker 3: So we've seen people spend like that when the lottery, 507 00:23:54,840 --> 00:23:57,080 Speaker 3: except they really didn't. They inherited a million or more 508 00:23:57,119 --> 00:23:59,920 Speaker 3: and it became ten million in their minds. And then 509 00:24:00,200 --> 00:24:01,720 Speaker 3: not to mention when you have to pay taxes on 510 00:24:01,720 --> 00:24:03,840 Speaker 3: all these things, so it's not nearly you know, is 511 00:24:04,200 --> 00:24:07,320 Speaker 3: a bottomless supply of money, as it seems like. It's 512 00:24:07,359 --> 00:24:09,480 Speaker 3: kind of like eating your Thanksgiving dinner every night. It 513 00:24:09,520 --> 00:24:11,439 Speaker 3: sounds great at first, but eventually it's gonna make you 514 00:24:11,480 --> 00:24:15,080 Speaker 3: throw up. So indulging ourselves too much can kind of 515 00:24:15,160 --> 00:24:16,399 Speaker 3: ruin the fund that comes along with it. 516 00:24:17,080 --> 00:24:20,800 Speaker 2: All right, here's another big behavioral area to look out for. It. 517 00:24:20,800 --> 00:24:22,680 Speaker 1: It's just the area of overconfidence. 518 00:24:22,720 --> 00:24:25,200 Speaker 2: People that make a lot of money or have sold 519 00:24:25,240 --> 00:24:27,600 Speaker 2: a business for a big chunk of money, you know, 520 00:24:27,680 --> 00:24:31,119 Speaker 2: their mind says, hey, I made a fortune, I'm really 521 00:24:31,160 --> 00:24:33,840 Speaker 2: good with money. But Brian, you and I know this 522 00:24:34,040 --> 00:24:37,080 Speaker 2: all too well. There is a big difference between the 523 00:24:37,160 --> 00:24:42,040 Speaker 2: ability to make money in some other industry versus actually 524 00:24:42,440 --> 00:24:45,960 Speaker 2: managing money once you've got it in your account, and 525 00:24:46,080 --> 00:24:48,280 Speaker 2: a lot of people have to learn that lesson the 526 00:24:48,320 --> 00:24:51,480 Speaker 2: hard way. They jump into a bunch of private investment deals, 527 00:24:51,920 --> 00:24:55,920 Speaker 2: you know, get over allocated to crypto or high risk startups. 528 00:24:56,200 --> 00:25:01,160 Speaker 2: They forget that wealth preservation is a completely different skill set. 529 00:25:01,600 --> 00:25:05,040 Speaker 2: And I think sometimes Brian, these people are bored by 530 00:25:05,160 --> 00:25:09,359 Speaker 2: just you know, traditional a set allocation stuff they're addicted 531 00:25:09,440 --> 00:25:13,119 Speaker 2: to the adrenaline rush, and they always constantly need to 532 00:25:13,160 --> 00:25:15,800 Speaker 2: be going out and taking risk, and you just got 533 00:25:15,840 --> 00:25:18,920 Speaker 2: to put the governor switch on that sometimes to keep 534 00:25:18,920 --> 00:25:22,000 Speaker 2: from losing something that you've spent a lifetime building. 535 00:25:22,520 --> 00:25:25,320 Speaker 3: Making money is not the same as keeping money. It's 536 00:25:25,359 --> 00:25:28,600 Speaker 3: two different, very two different mindsets, two different approaches. So 537 00:25:28,640 --> 00:25:32,520 Speaker 3: people who build wealth over decades, these might be entrepreneurs, savers, 538 00:25:32,720 --> 00:25:34,840 Speaker 3: or just disciplined investors pumping money into their four O, 539 00:25:34,920 --> 00:25:37,040 Speaker 3: one k's, four or three b's for years. They tend 540 00:25:37,040 --> 00:25:39,199 Speaker 3: to respect money more because they know how hard it 541 00:25:39,280 --> 00:25:42,120 Speaker 3: was to earn. Then we see, you know that sometimes 542 00:25:42,119 --> 00:25:44,960 Speaker 3: it's generation too that doesn't have that same benefit of 543 00:25:45,000 --> 00:25:47,600 Speaker 3: having built it from nothing and so doesn't value it 544 00:25:47,640 --> 00:25:49,639 Speaker 3: as much. It appears to them to have been easy 545 00:25:49,680 --> 00:25:52,119 Speaker 3: to acquire, therefore they treat it as such. So what 546 00:25:52,160 --> 00:25:52,800 Speaker 3: should we do? 547 00:25:53,080 --> 00:25:53,320 Speaker 1: First? 548 00:25:53,320 --> 00:25:55,600 Speaker 3: Step up, Build a team, make sure you've got people 549 00:25:55,600 --> 00:25:58,840 Speaker 3: around you, a financial planner to quarterback everything, a CPA 550 00:25:59,000 --> 00:26:01,240 Speaker 3: or a some kind of accounting outlet to help you 551 00:26:01,280 --> 00:26:03,679 Speaker 3: with the taxes, and an estate planning attorney. If this 552 00:26:03,720 --> 00:26:06,359 Speaker 3: is truly a significant pile of money, not the people 553 00:26:06,440 --> 00:26:09,040 Speaker 3: selling you something. These are people who behave in fiduciary 554 00:26:09,080 --> 00:26:11,560 Speaker 3: manners on what will help you with their future. So 555 00:26:11,800 --> 00:26:13,680 Speaker 3: the next step is figure out what you want. Once 556 00:26:13,680 --> 00:26:15,760 Speaker 3: you've got your team in place, now think about what 557 00:26:15,840 --> 00:26:18,000 Speaker 3: it is that you want. And this also assumes that 558 00:26:18,040 --> 00:26:20,359 Speaker 3: we didn't go out and do a bunch of things immediately. Really, 559 00:26:20,440 --> 00:26:23,080 Speaker 3: I'm gonna call it Step zero is don't do anything, 560 00:26:23,359 --> 00:26:25,640 Speaker 3: just stop and think before you build that team. Then 561 00:26:25,680 --> 00:26:28,040 Speaker 3: you need to have that discussion about what is it 562 00:26:28,080 --> 00:26:29,439 Speaker 3: that I want. Do I want to use this to 563 00:26:29,480 --> 00:26:32,160 Speaker 3: retire earlier? Do I want to benefit myself my family? 564 00:26:32,720 --> 00:26:35,639 Speaker 3: You know, maybe charities or something like that. Generational wealth 565 00:26:36,560 --> 00:26:39,119 Speaker 3: without some kind of purpose, money tends to get spent 566 00:26:39,400 --> 00:26:40,520 Speaker 3: just because it's sitting there. 567 00:26:41,040 --> 00:26:43,920 Speaker 2: Here's the all Worth advice. Wealth is not a finish line. 568 00:26:43,960 --> 00:26:47,639 Speaker 2: It's a responsibility. The more you have, the more discipline 569 00:26:47,680 --> 00:26:51,399 Speaker 2: it takes to keep it. You've built up two million dollars, 570 00:26:51,400 --> 00:26:54,720 Speaker 2: how do you protect it without missing growth? We'll cover risk, 571 00:26:54,920 --> 00:26:57,600 Speaker 2: income and a little peace of mind coming up next. 572 00:26:57,880 --> 00:27:00,440 Speaker 2: You're listening to Simply Money presented by all Worth Financial 573 00:27:00,480 --> 00:27:09,119 Speaker 2: on fifty five KRC the talk station. You're listening to 574 00:27:09,119 --> 00:27:11,440 Speaker 2: Simply Money present I buy all worth Financial on Bob 575 00:27:11,480 --> 00:27:14,440 Speaker 2: Sponseller along with Brian James. Do you have a financial 576 00:27:14,520 --> 00:27:16,680 Speaker 2: question you'd like for us to answer. There's a red 577 00:27:16,720 --> 00:27:18,919 Speaker 2: button you can click while you're listening to the show 578 00:27:19,160 --> 00:27:22,199 Speaker 2: right on the iHeart app. Simply record your question and 579 00:27:22,240 --> 00:27:25,520 Speaker 2: it will come straight to us, all right, Brian Derek 580 00:27:25,600 --> 00:27:28,359 Speaker 2: in Oakley leads us off tonight. He says, our advisor 581 00:27:28,480 --> 00:27:32,199 Speaker 2: keeps suggesting private equity and private credit. How do we 582 00:27:32,240 --> 00:27:36,760 Speaker 2: tell if these alternatives are true diversification or just higher 583 00:27:36,920 --> 00:27:40,000 Speaker 2: risk along with a sales pitch yep. 584 00:27:40,160 --> 00:27:42,400 Speaker 3: So we want to make sure that whenever these things 585 00:27:42,440 --> 00:27:44,240 Speaker 3: are coming up more and more often lately, and we 586 00:27:44,280 --> 00:27:46,199 Speaker 3: want to make sure we understand the moving parts that 587 00:27:46,240 --> 00:27:48,679 Speaker 3: are involved when these types of questions come up. So 588 00:27:48,720 --> 00:27:50,720 Speaker 3: private equity, what are we talking about? While we're talking 589 00:27:50,720 --> 00:27:53,800 Speaker 3: about investing in small businesses that are not publicly traded 590 00:27:53,920 --> 00:27:56,400 Speaker 3: kind of sort of the same thing as buying stocks, 591 00:27:57,119 --> 00:27:59,040 Speaker 3: but these are not out there on markets. You're just 592 00:27:59,080 --> 00:28:02,280 Speaker 3: literally connecting with somebody who has run a business. There 593 00:28:02,320 --> 00:28:04,239 Speaker 3: are funds and things that will do this for you, 594 00:28:04,880 --> 00:28:07,840 Speaker 3: and that's presumably what Derek is referring to here. So 595 00:28:08,000 --> 00:28:11,000 Speaker 3: private equity fundraising hit over one point two trillion dollars 596 00:28:11,040 --> 00:28:13,560 Speaker 3: globally in twenty four, slowing down a little bit, but 597 00:28:13,920 --> 00:28:15,960 Speaker 3: still probably going to be out there. So the kind 598 00:28:15,960 --> 00:28:18,080 Speaker 3: of questions you want to ask, you want to make 599 00:28:18,119 --> 00:28:20,320 Speaker 3: sure you understand what the lock up period is? Can 600 00:28:20,359 --> 00:28:22,679 Speaker 3: you get your money back out? Liquidity is always going 601 00:28:22,720 --> 00:28:26,119 Speaker 3: to be going to be a factor for these things. 602 00:28:26,440 --> 00:28:28,840 Speaker 3: What is the fee structure? These are going to be expensive. 603 00:28:28,840 --> 00:28:31,280 Speaker 3: Don't look for the no load version of private equity 604 00:28:31,359 --> 00:28:33,760 Speaker 3: doesn't exist. These things are expensive because there's a lot 605 00:28:33,800 --> 00:28:35,480 Speaker 3: going into them and there's a lot of people wanting 606 00:28:35,520 --> 00:28:37,840 Speaker 3: to make money off of them. And so how do 607 00:28:37,880 --> 00:28:41,600 Speaker 3: you verify the returns? Are these audited self reported valuations? 608 00:28:41,840 --> 00:28:44,960 Speaker 3: Are there default rates, recovery rates on the private credit side? 609 00:28:45,240 --> 00:28:47,360 Speaker 3: What information can you get so that you can understand 610 00:28:47,400 --> 00:28:49,840 Speaker 3: what you're looking at. These can be very valuable tools, 611 00:28:50,240 --> 00:28:52,040 Speaker 3: but you can also hurt yourself with them, So just 612 00:28:52,280 --> 00:28:55,239 Speaker 3: do your research, be careful what you're getting into. All right, 613 00:28:55,240 --> 00:28:57,920 Speaker 3: We're going to move south to Marty down in Florence, 614 00:28:58,040 --> 00:29:01,720 Speaker 3: who says they have a big unrealized game in their 615 00:29:01,720 --> 00:29:04,960 Speaker 3: brokerage account. First off, congratulations, that's a common problem these days, 616 00:29:05,320 --> 00:29:06,880 Speaker 3: and Marty wants to know if there's anything they can 617 00:29:06,960 --> 00:29:09,680 Speaker 3: do to trim those positions without taking that huge hit 618 00:29:09,760 --> 00:29:10,760 Speaker 3: tax hit all at once. 619 00:29:10,800 --> 00:29:13,920 Speaker 2: What do you think, Bob, Well, Marty, there's definitely ways 620 00:29:13,960 --> 00:29:16,640 Speaker 2: to trim the positions without taking a huge tax hit. 621 00:29:16,720 --> 00:29:19,080 Speaker 2: So good of you to ask the question before you 622 00:29:19,200 --> 00:29:22,200 Speaker 2: just took the tax hit. So you know, I don't 623 00:29:22,200 --> 00:29:24,840 Speaker 2: know from your question whether this big gain is in 624 00:29:25,040 --> 00:29:29,000 Speaker 2: one heavily concentrated position or whether you've just been sitting 625 00:29:29,000 --> 00:29:31,360 Speaker 2: on a bunch of you know, mutual funds and ETFs 626 00:29:31,400 --> 00:29:33,480 Speaker 2: over years that you know, you got a bunch of 627 00:29:33,520 --> 00:29:37,000 Speaker 2: positions with a lot of unrealized capital gains. So depending 628 00:29:37,000 --> 00:29:39,200 Speaker 2: on what your situation is, the first thing, get that 629 00:29:39,320 --> 00:29:43,160 Speaker 2: stuff into a tax managed to count where you've got 630 00:29:43,200 --> 00:29:48,040 Speaker 2: some tax loss harvesting going on in the background. Direct 631 00:29:48,040 --> 00:29:52,239 Speaker 2: indexing strategies are out there, and indexed exchange programs are 632 00:29:52,280 --> 00:29:55,160 Speaker 2: out there. And what this really means is you can 633 00:29:55,200 --> 00:29:58,920 Speaker 2: go slow. You can harvest some short term losses in 634 00:29:58,960 --> 00:30:03,440 Speaker 2: a diversified port and use that to gradually trim those 635 00:30:03,480 --> 00:30:06,920 Speaker 2: gains in your positions. If you are sitting on one 636 00:30:07,000 --> 00:30:12,360 Speaker 2: big concentrated stock positions, that's where things like collars selling 637 00:30:12,400 --> 00:30:15,640 Speaker 2: a covered call and buying a protective put on the 638 00:30:15,680 --> 00:30:18,560 Speaker 2: downside might come into play, and that way you could 639 00:30:18,680 --> 00:30:22,920 Speaker 2: protect your gains in that position and kind of have 640 00:30:23,000 --> 00:30:25,600 Speaker 2: the options market pay to do that for you. So 641 00:30:25,960 --> 00:30:28,120 Speaker 2: a lot of different options out there. The best thing 642 00:30:28,160 --> 00:30:30,959 Speaker 2: to do is probably sit down with a good fiduciary 643 00:30:31,000 --> 00:30:34,320 Speaker 2: advisor and walk through some of those options and get 644 00:30:34,320 --> 00:30:36,840 Speaker 2: you set up. Hope that helps all right. Eric in 645 00:30:36,880 --> 00:30:40,400 Speaker 2: Westchester says, our kids are in their thirties and they're successful, 646 00:30:41,000 --> 00:30:43,560 Speaker 2: but they don't know much about money. What's the best 647 00:30:43,600 --> 00:30:47,800 Speaker 2: way to start involving them in family financial discussions? 648 00:30:47,840 --> 00:30:49,560 Speaker 1: Brian, this is a great question. 649 00:30:49,360 --> 00:30:52,080 Speaker 3: More and more common question these days as wealth is 650 00:30:52,120 --> 00:30:55,080 Speaker 3: reaching new heights, and you know a lot of people 651 00:30:55,080 --> 00:30:56,880 Speaker 3: who are in their fifties and sixties and that have 652 00:30:57,040 --> 00:31:00,520 Speaker 3: been themselves successful now have kids who are doing okay 653 00:31:00,600 --> 00:31:03,080 Speaker 3: and successful as well. But they're starting to worry that 654 00:31:03,080 --> 00:31:05,680 Speaker 3: that these kids are not have not quite been through 655 00:31:06,200 --> 00:31:09,800 Speaker 3: the wealth management you know, and training and you know, 656 00:31:09,880 --> 00:31:12,600 Speaker 3: financial planning those kinds of things that they themselves have. 657 00:31:12,720 --> 00:31:15,480 Speaker 3: So why this is important, Well, there's trillions of dollars 658 00:31:15,520 --> 00:31:17,320 Speaker 3: are going to change hands the next twenty years about 659 00:31:17,360 --> 00:31:19,880 Speaker 3: eighty four trillion is going to move from Baby boomers 660 00:31:19,880 --> 00:31:22,920 Speaker 3: to Gen X and millennials by twenty forty five, and 661 00:31:23,440 --> 00:31:27,200 Speaker 3: so that this often comes along with people change. Either 662 00:31:27,280 --> 00:31:29,160 Speaker 3: the kids will change who they want to talk to 663 00:31:29,240 --> 00:31:31,479 Speaker 3: in terms of working with a financial advisor or if 664 00:31:31,520 --> 00:31:34,320 Speaker 3: they want to at all, because those conversations haven't simply 665 00:31:34,320 --> 00:31:37,280 Speaker 3: haven't occurred. So here's here's a couple steps to start 666 00:31:37,280 --> 00:31:39,680 Speaker 3: bringing them in. Start with values and not the numbers. 667 00:31:39,720 --> 00:31:42,320 Speaker 3: Talk about how you built, what you built, why it's 668 00:31:42,360 --> 00:31:45,760 Speaker 3: important to you, and it connect them to their history. 669 00:31:45,760 --> 00:31:47,160 Speaker 3: They're going to remember some of the stories you told 670 00:31:47,160 --> 00:31:48,840 Speaker 3: them because it would have affected them along the way. 671 00:31:49,120 --> 00:31:51,400 Speaker 3: Sometimes it's good to have a family State of the 672 00:31:51,480 --> 00:31:53,920 Speaker 3: Union meeting. A lot of families do this around the holidays, 673 00:31:54,560 --> 00:31:56,680 Speaker 3: just to talk about here's what we've built, here's here's 674 00:31:56,680 --> 00:31:59,400 Speaker 3: the goals that mom and I have or dad and 675 00:31:59,440 --> 00:32:02,000 Speaker 3: I have. Here's what we're thinking about, and here's why 676 00:32:02,040 --> 00:32:04,320 Speaker 3: we're thinking it. And let them share in the in 677 00:32:04,360 --> 00:32:06,640 Speaker 3: the feedback of that, and they'll they'll start to hear 678 00:32:06,680 --> 00:32:09,000 Speaker 3: how you've gotten to that point, and you know, eventually 679 00:32:09,000 --> 00:32:10,560 Speaker 3: get to the point where you do show them open 680 00:32:10,600 --> 00:32:12,320 Speaker 3: the vault, show them what's in there. If you trust 681 00:32:12,320 --> 00:32:14,520 Speaker 3: that they can handle it, then I think it's really 682 00:32:14,600 --> 00:32:17,480 Speaker 3: valuable to understand why it is that you are able 683 00:32:17,520 --> 00:32:19,320 Speaker 3: to live the way that you do, what is behind 684 00:32:19,360 --> 00:32:22,240 Speaker 3: all that, rather than having them assume it's just plain easy. 685 00:32:22,840 --> 00:32:26,120 Speaker 3: So in any case, I hope that helps. And big 686 00:32:26,120 --> 00:32:29,480 Speaker 3: discussions here coming up during the holidays. One more here 687 00:32:29,720 --> 00:32:32,720 Speaker 3: from from Janet down in Fort Thomas. Thank you for 688 00:32:32,760 --> 00:32:35,640 Speaker 3: defending our forts. Down there, Janet and her husband are 689 00:32:35,640 --> 00:32:38,840 Speaker 3: having a discussion about their mortgage. He apparently want wants 690 00:32:38,880 --> 00:32:40,960 Speaker 3: to just offload the debt, not think about it anymore, 691 00:32:40,960 --> 00:32:43,120 Speaker 3: and she wants to keep those dollars free to invest. 692 00:32:43,400 --> 00:32:45,480 Speaker 3: So how do we think about that in terms of 693 00:32:45,520 --> 00:32:47,720 Speaker 3: financial planning? How do you evaluate that trade off? 694 00:32:47,760 --> 00:32:51,560 Speaker 2: Bob Well, Janet used the word how do we evaluate 695 00:32:51,640 --> 00:32:52,320 Speaker 2: the trade off? 696 00:32:52,560 --> 00:32:53,200 Speaker 1: Logically? 697 00:32:53,840 --> 00:32:57,760 Speaker 2: And that's always that's always an interesting topic logically, because listen, 698 00:32:57,800 --> 00:33:00,280 Speaker 2: there's a logical way to handle this stuff, and there's 699 00:33:00,400 --> 00:33:04,600 Speaker 2: always an emotional reason why people make any kind of decisions. 700 00:33:04,600 --> 00:33:07,520 Speaker 2: So I tend to look at this two ways. One, 701 00:33:07,600 --> 00:33:09,640 Speaker 2: if you do want to look at it logically, look 702 00:33:09,680 --> 00:33:12,800 Speaker 2: at the after tax rate of return that you can 703 00:33:12,880 --> 00:33:15,959 Speaker 2: expect based on your personal risk tolerance you're in your 704 00:33:16,040 --> 00:33:20,680 Speaker 2: husband on how you invest money, and then compare that 705 00:33:20,720 --> 00:33:23,200 Speaker 2: to your mortgage rate. So you know, if you're a 706 00:33:23,240 --> 00:33:27,040 Speaker 2: growth investor, and even if you're netting on average, you know, 707 00:33:27,240 --> 00:33:31,280 Speaker 2: say seven eight percent a year, and you're sitting on 708 00:33:31,320 --> 00:33:33,360 Speaker 2: a two and a half two point seventy five two 709 00:33:33,400 --> 00:33:37,080 Speaker 2: point eight percent mortgage, you know, it doesn't logically makes 710 00:33:37,120 --> 00:33:39,440 Speaker 2: sense to pay that off because you're earning more money 711 00:33:39,480 --> 00:33:44,560 Speaker 2: keeping your money invested. However, if the psychological part of 712 00:33:44,560 --> 00:33:48,280 Speaker 2: this is just causing one spouse to lose sleep at night, 713 00:33:49,360 --> 00:33:52,200 Speaker 2: it it, you know, to keep marital harmony and keep 714 00:33:52,240 --> 00:33:54,320 Speaker 2: peace in the family, it might make sense to just 715 00:33:54,400 --> 00:33:56,920 Speaker 2: knock this thing out. So I think it's important to 716 00:33:56,960 --> 00:34:00,760 Speaker 2: look at it logically from a net rate of return standpoint, 717 00:34:01,120 --> 00:34:03,840 Speaker 2: and then also discuss risk tolerance and hopefully you can 718 00:34:03,880 --> 00:34:07,080 Speaker 2: come up with a good decision together. All Right, Wall 719 00:34:07,080 --> 00:34:10,800 Speaker 2: Street's newest game lets you bet on real world events. 720 00:34:10,960 --> 00:34:13,760 Speaker 2: Is it investing or just high stakes fun? We'll sort 721 00:34:13,800 --> 00:34:16,320 Speaker 2: all that out next. You're listening to Simply Money, presented 722 00:34:16,320 --> 00:34:20,480 Speaker 2: by Allworth Financial on fifty five KRC the talk station. 723 00:34:24,560 --> 00:34:27,279 Speaker 2: You're listening to Simply Money presented by Allworth Financial on 724 00:34:27,400 --> 00:34:31,520 Speaker 2: Bob Sponseller along with Brian James. Well, for decades, if 725 00:34:31,560 --> 00:34:33,319 Speaker 2: you wanted to place a bet, you had to go 726 00:34:33,360 --> 00:34:36,640 Speaker 2: to Las Vegas, flashing lights, free drinks in a weekend 727 00:34:36,680 --> 00:34:40,600 Speaker 2: you probably don't tell your accounting about. But now you 728 00:34:40,640 --> 00:34:43,440 Speaker 2: don't even have to leave the couch. Vegas might still 729 00:34:43,520 --> 00:34:46,880 Speaker 2: have the shows and the buffets, but the action, the 730 00:34:46,920 --> 00:34:51,000 Speaker 2: real betting action, it's all moving online, and not just 731 00:34:51,160 --> 00:34:55,239 Speaker 2: to sports betting sites like DraftKings or fan duels. It's 732 00:34:55,280 --> 00:34:59,399 Speaker 2: actually moving right into Wall Street's neighborhood. Brian, Hey, I've 733 00:34:59,440 --> 00:35:03,319 Speaker 2: seen Khmer on this often in recent days. I think 734 00:35:03,360 --> 00:35:06,279 Speaker 2: on Interactive Brokerage is running these commercials. 735 00:35:06,360 --> 00:35:07,840 Speaker 1: Tell uh, tell us about. 736 00:35:07,600 --> 00:35:11,360 Speaker 2: What's going on, about the opportunity to make bets on what's. 737 00:35:11,200 --> 00:35:12,840 Speaker 1: Going to happen next in the economy. 738 00:35:13,080 --> 00:35:15,319 Speaker 3: Well, first off, we're not calling them bets, Bob, that's 739 00:35:15,360 --> 00:35:18,279 Speaker 3: a dirty world. We're calling these prediction markets. Come on, 740 00:35:18,400 --> 00:35:20,959 Speaker 3: get with the times, all right. This is a whole 741 00:35:20,960 --> 00:35:22,840 Speaker 3: new word. I mean, it's it's betting. It's gambling, just 742 00:35:22,840 --> 00:35:24,880 Speaker 3: like anything else. You're you're betting on a certain outcome. 743 00:35:24,880 --> 00:35:26,920 Speaker 3: I think it's going to be a not b and 744 00:35:26,920 --> 00:35:28,400 Speaker 3: I'm going to bet twenty bucks on it. This is 745 00:35:28,400 --> 00:35:31,080 Speaker 3: a whole new world where people are trading contracts on 746 00:35:31,200 --> 00:35:34,600 Speaker 3: just these real world events. Who wins an election, when 747 00:35:34,760 --> 00:35:36,480 Speaker 3: or if the Fed is going to cut rates, how 748 00:35:36,480 --> 00:35:38,279 Speaker 3: far they're going to cut rates, or even who takes 749 00:35:38,280 --> 00:35:41,279 Speaker 3: home the super Bowl. That last one's pretty common. But these, these, 750 00:35:41,400 --> 00:35:44,160 Speaker 3: these next, these other ones come from just playing the headlines. 751 00:35:44,600 --> 00:35:47,280 Speaker 2: Could this be while why Jerome Powell is not cutting 752 00:35:47,320 --> 00:35:50,200 Speaker 2: interest rates because he's got some futures bets? 753 00:35:50,239 --> 00:35:52,440 Speaker 1: I'd already placed that happening. 754 00:35:52,520 --> 00:35:55,279 Speaker 3: That could very well be Bob. And maybe that's something 755 00:35:55,280 --> 00:35:57,000 Speaker 3: that we should have a We should have an election 756 00:35:57,120 --> 00:36:00,560 Speaker 3: or an elected committee investigation to make sure. 757 00:36:00,560 --> 00:36:03,800 Speaker 2: All right, well I digress. Please walk us through what. 758 00:36:03,560 --> 00:36:06,719 Speaker 3: The actual top these These aren't technically bets, right, this 759 00:36:06,760 --> 00:36:10,480 Speaker 3: is the the the regulatory bodies don't don't consider this gambling. 760 00:36:10,480 --> 00:36:13,680 Speaker 3: These are financial instruments called event contracts. They sound like 761 00:36:13,719 --> 00:36:17,040 Speaker 3: bets to me anyway. Regularly these aren't regulated by the 762 00:36:17,040 --> 00:36:20,040 Speaker 3: gaming boards, but rather by the Commodity Futures Trading Commission, 763 00:36:20,160 --> 00:36:24,000 Speaker 3: which is really the closest government body to UH since 764 00:36:24,040 --> 00:36:26,919 Speaker 3: since things like oil, corn, and currency futures are really 765 00:36:26,920 --> 00:36:29,400 Speaker 3: only worth what people think they're worth. There aren't. They 766 00:36:29,400 --> 00:36:31,480 Speaker 3: don't have their own profits, they don't spit out dividends, 767 00:36:31,480 --> 00:36:33,800 Speaker 3: they don't create their own products. This is as close 768 00:36:33,880 --> 00:36:37,320 Speaker 3: to these these types of events as we can possibly get. Therefore, 769 00:36:37,440 --> 00:36:39,880 Speaker 3: that's why it's the same folks who oversee oil, corn, 770 00:36:39,920 --> 00:36:42,400 Speaker 3: and currency futures are the ones who are looking at this. 771 00:36:42,760 --> 00:36:45,319 Speaker 3: So for example, there's there's just how big this is 772 00:36:45,360 --> 00:36:48,400 Speaker 3: the Intercontinental Exchange, which is which happens you probably never 773 00:36:48,440 --> 00:36:51,080 Speaker 3: heard of, same company that owns the New York Stock Exchange, 774 00:36:51,080 --> 00:36:53,520 Speaker 3: which probably have heard of. They're investing up to two 775 00:36:53,640 --> 00:36:57,600 Speaker 3: billion dollars in a platform called Polymarket. And one you 776 00:36:57,680 --> 00:36:59,640 Speaker 3: may have heard of. Another one out there is Robinhood. 777 00:36:59,719 --> 00:37:03,240 Speaker 3: Robin is already pretty popular with the with the smaller 778 00:37:03,280 --> 00:37:06,920 Speaker 3: investors already trading more than four billion of these event contracts. 779 00:37:07,120 --> 00:37:08,759 Speaker 3: So so think of this way. The reason that they're 780 00:37:08,760 --> 00:37:11,040 Speaker 3: doing this, Well, you can open your Robinhood app, buy 781 00:37:11,040 --> 00:37:13,080 Speaker 3: some stock and Apple or whatever other company in the 782 00:37:13,120 --> 00:37:16,080 Speaker 3: exact same session, invest in whether the FED is going 783 00:37:16,160 --> 00:37:19,160 Speaker 3: to cut rates next quarter via these these event type vets. 784 00:37:20,520 --> 00:37:24,319 Speaker 2: Well, look, while the horses seemingly already left the barn here. 785 00:37:24,400 --> 00:37:28,680 Speaker 2: The Commodities, Futures and Trading Commission is still trying to 786 00:37:28,680 --> 00:37:31,600 Speaker 2: figure out how to regulate these things. So imagine that 787 00:37:31,680 --> 00:37:34,400 Speaker 2: let's let's let let's get everybody involved in this and 788 00:37:34,440 --> 00:37:38,280 Speaker 2: then add the regulation later. What could possibly go wrong? 789 00:37:38,800 --> 00:37:41,719 Speaker 2: I'm thinking back to the housing crisis, but again one 790 00:37:41,800 --> 00:37:45,640 Speaker 2: company Calshe tried to launch a political event market and 791 00:37:45,680 --> 00:37:50,279 Speaker 2: got stopped cold by regulators. But in terms of the 792 00:37:50,400 --> 00:37:52,319 Speaker 2: risk here, the thing we got to call out is 793 00:37:52,360 --> 00:37:56,480 Speaker 2: liquidity and pricing. These aren't like stocks with billions of 794 00:37:56,520 --> 00:38:01,280 Speaker 2: dollars in daily volume. These are pretty low volume trades 795 00:38:01,320 --> 00:38:05,279 Speaker 2: and positions you can get in and out at bad prices. 796 00:38:05,680 --> 00:38:08,160 Speaker 2: In other words, there's big spreads between the bid and 797 00:38:08,239 --> 00:38:10,759 Speaker 2: ass on these things, and you might not realize that, 798 00:38:10,880 --> 00:38:12,000 Speaker 2: you know, when you get into it. 799 00:38:12,600 --> 00:38:15,839 Speaker 3: Yeah, and remember the taxation is also a question. It's 800 00:38:15,920 --> 00:38:17,799 Speaker 3: unclear how this is gonna be tax These are short 801 00:38:17,880 --> 00:38:19,640 Speaker 3: term types of things. I'm gonna bet that the Fed's 802 00:38:19,640 --> 00:38:21,719 Speaker 3: gonna do something this or that next week, and that 803 00:38:21,760 --> 00:38:23,880 Speaker 3: may or may not happen. Well, that's a short term hold. 804 00:38:24,160 --> 00:38:26,360 Speaker 3: And there are plenty of examples where the IRS taxes 805 00:38:26,400 --> 00:38:28,320 Speaker 3: obscure things a little differently than what you expect. 806 00:38:28,880 --> 00:38:31,319 Speaker 2: Here's the Allworth advice when Wall Street starts to look 807 00:38:31,360 --> 00:38:35,480 Speaker 2: like Vegas, remember the house usually always wins. Don't make 808 00:38:35,560 --> 00:38:38,880 Speaker 2: your retirement part of the show. Thanks for listening tonight. 809 00:38:38,920 --> 00:38:41,080 Speaker 2: You've been listening to Simply Money, presented by all Worth 810 00:38:41,120 --> 00:38:44,160 Speaker 2: Financial on fifty five KRC, the talk station