February 22, 2023 • 38 mins
Have you ever wondered whether your retirement nest egg is mired in Tax Drag? If not, it’ll definitely be on your radar after this episode of The Retirement Equals Freedom Podcast.
Host Josh Bretl, founder of FSR Wealth Strategies, is breaking down the intent behind portfolio rebalancing and the difference between sheltered and unsheltered investment vehicles.
We don’t have to live in fear of capital gains or let tax liability on non-qualified investments scare us out of cashing in and enjoying the fruits of the assets we’ve accrued! All we need to do is get our heads out of the sand and create a solid strategy, which is where the professionals come in!
Cohost Dave Schmidt’s portfolio may be heavily tilted towards socks and “Naughty Dip “ingredients, but he still needs to know about mutual funds and why they can upend tax planning.
Tune in and it will all become clear – both how different types of investments have variable tax impacts and why it matters. And even if you don’t wind up following Dave’s recipe, you’ll definitely come away with a better understanding of all the ingredients that go into proactive, tax-savvy investment management. And very likely an undeniable craving for Girl Scout cookies!
Wondering what kept Dave awake through Josh’s rambling? It was a big cup of iced Cometeer's "Counter Culture" roaster. Get $25 off your first order by using this link!
Don’t miss out! You can stay in the loop on all things R = F by signing up for the show’s weekly email at this link!
Click here to learn more about or listen to previous episodes of The Retirement Equals Freedom Podcast. Or join the conversation over at our private Facebook group, which you can find here.
Click here to explore the services that FSR Wealth Strategies offers and schedule a discovery call with one of the team’s CPAs. When it comes to living your best life, it’s never too early to get started!
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Josh Bretl (00:01):
I'm talking about problems here, and sometimes the
first thing you need to do is beaware of problems, and sometimes
people like to bury their headin the sand and pretend the
problems don't exist, but thismoney is there for a reason.
You've saved it for a purpose.
If once you save it and youthink, I have no way out, or
if I get out of it, I'm goingto have a giant tax or whatever
it might be, you just leave itthere and you're like, "Well,
(00:24):
that's my kid's problem,"or whoever it might be.
Well, why'd you do it in thefirst place, and why not use
this money for your benefit?
Why not have a plan in place tomake it beneficial to you and
to your family and to your kids,and things along those lines?
Dave Schmidt (00:37):
You don't have to live in fear of capital gains,
and don't let tax liabilityon non-qualified investments
scare you out of cashing inand enjoying the fruits of the
assets that you have accrued.
You just need to pick your headup, get it out of the sand,
and create a solid strategy.
Which is where today'sepisode picks up.
We are going to learn aboutportfolio rebalancing and the
(01:00):
difference between sheltered andunsheltered investment vehicles.
And tax drag?
Yeah, it's a thing andit will definitely be on
your radar after hearingJosh's thoughts on it.
And while I personally may betilted towards socks and naughty
dip ingredients, I still needto know about mutual funds and
(01:22):
how they can upend tax planning.
This is The RetirementEquals Freedom Podcast.
Your host of the show,Josh Bretl, is the owner
of FSR Wealth Strategies.
For the last few decades, hehas been helping fine folks
like you make retirementthe best part of your life.
(01:43):
And me.
Well, hey there, I'm Dave.
Josh's longtime friend,co-host of the podcast, and
huge fan of Tom Servo, CrowT Robot, and the rest of the
crew on the Satellite of Love.
All right, enough about me.
Let me let you let meend my introduction so
we can start the show.
(02:03):
FSR Wealth Management is a registered investment advisor
located in Elmhurst, Illinois.
Information and opinionscontained in this audio
have been arrived atby FSR Wealth advisors.
All information herein isfor informational purposes
and should not be construedas investment advice.
It does not constitute an offer,a solicitation or recommendation
to purchase any security.
FSR is not providing legal,tax, accounting, or financial
planning advice in this audio.
These views are as of thedate of this publication
and are subject to change.
Josh Bretl (02:43):
David, it's an exciting week.
Dave Schmidt (02:46):
Why?
Tell me why.
Josh Bretl (02:48):
This table that we've been waiting for since
Thanksgiving is finally here.
Dave Schmidt (02:55):
Thanksgiving or much earlier than that?
Josh Bretl (02:58):
Yeah, I think it was earlier than that, but do
you think this table's goingto make the podcast better?
Dave Schmidt (03:03):
Well, it's hard to improve something
that's already perfect.
Josh Bretl (03:07):
Now, we have no more excuses.
We better make somedarn good podcast.
Dave Schmidt (03:11):
Yeah.
Josh, we got thisbeautiful table.
I'm a little warm.
We got a light behind ushere, and I got this warm FSR
thing that you made me wear.
Josh Bretl (03:18):
You look good though.
Dave Schmidt (03:19):
Oh, I appreciate that.
So do you, Josh.
Josh Bretl (03:21):
Thanks.
Dave Schmidt (03:21):
That gallbladder removal was the best thing
that happened to you.
Josh Bretl (03:24):
I had a 20-pound gallbladder.
I'm 20 pounds lighter.
Dave Schmidt (03:27):
How about that?
Josh Bretl (03:28):
Dave, in the last episode, we talked about
something, and I meant tohave it here for you today.
I don't, but hopefully,on our next episode, which
I think we're recordingtomorrow, actually.
The Girl Scout Cookies are in.
Dave Schmidt (03:40):
That's going to be a huge hit.
You did promise a pictureof this alleged 1,900
boxes of cookies inyour front room though.
Josh Bretl (03:49):
I was off by 200.
It was only 1,700boxes of cookies.
Dave Schmidt (03:53):
Oh, my gosh.
Josh Bretl (03:55):
I didn't get a picture because we had
it spread out throughoutthe entire first floor due
to construction issues.
Missy, my wife, is thecookie coordinator for
her Girl Scout troop.
Now, let me putthis in perspective.
By Girl Scout troop,these are Daisies.
These are first-grade girls.
There's 20 of them.
(04:16):
They started sellingGirl Scout Cookies two
weeks before Christmasand finished mid-January.
They sold for a month,the worst month possible
because from two weeks beforeChristmas, no one wants to
buy more Girl Scout Cookies.
Dave Schmidt (04:29):
No.
Josh Bretl (04:29):
Not at all.
I don't know why theydo it that time of year.
Kids and girls soldsome, but some girls
sold a ton of cookies.
Now, my wife is reallyorganized and she doesn't
like people who aren't.
I'm amazed she likes me at all.
But on Saturday morningwas cookie pickup for the
entire city of Elmhurst.
So, every Girl Scout troopin Elmhurst went to Sandburg
(04:54):
Junior High to the parking lotin the back of the school to
pick up Girl Scout Cookies.
We had the 8:45 pickup time.
It started at 8:30 with the8:45 pickup time, and they give
you a sheet of how many boxesany type of car will hold.
Dave Schmidt (05:11):
Okay, interesting.
Josh Bretl (05:11):
We have a minivan.
We emptied out the seats in theminivan so that it's wide open.
We have another friendwith a giant SUV, and then
we had my smaller SUV.
Three of us go to pickup these cookies and
these cars are packed.
Now, I pull in theSandburg parking lot.
There were three semi-trucksfull of Girl Scout Cookies
for the city of Elmhurst.
Dave Schmidt (05:32):
My gosh.
Josh Bretl (05:33):
Elmhurst is not a big town.
I mean, we have a lot ofactive kids, but 18-wheelers.
We're talking-
Dave Schmidt (05:40):
Three 18-wheelers.
Dear Lord, it's a racket.
Josh Bretl (05:42):
Now, I didn't get to see how full they were, but
I couldn't imagine you'd bringmore than one if the other
two of them were almost full.
Dave Schmidt (05:47):
You're not going to pay for a semi
unless it's stuffed full.
Josh Bretl (05:50):
I was thinking that's just one city.
Imagine Chicago and therest of the country.
That's a lot ofGirl Scout Cookies.
Dave Schmidt (05:56):
I thought Maggie alone sold 1,900
boxes, so that's why-
Josh Bretl (06:01):
No, no, no.
... Dave Schmidt (06:02):
I was a little more like, "What?"
Josh Bretl (06:03):
No.
No.
Between 20 girls,1700 boxes of cookies.
Dave Schmidt (06:08):
Ooh, that's still not a small number.
Josh Bretl (06:10):
You will probably have yours tomorrow.
Missy's been organizing themand getting them out, so-
Dave Schmidt (06:15):
Awesome.
... Josh Bretl (06:15):
if you don't, you can yell at her.
The construction at our houseis actually done, right?
Remember, I've beenshowing you pictures today.
They've clean it up today, butwe've had construction stuff
everywhere, and then piles ofGirl Scout Cookies for other
Girl Scouts to come pick up,so it's been kind of funny.
Dave Schmidt (06:30):
That's what you need in your house that's been a
disaster zone for the last fourmonths, just boxes of cookies.
Josh Bretl (06:35):
You know what's gotten us through it, Dave?
Dave Schmidt (06:36):
Yeah.
Josh Bretl (06:37):
Coffee.
Dave Schmidt: Speaking of coffee- (06:38):
undefined
Josh Bretl (06:38):
I noticed you had a pod in your hands.
Dave Schmidt (06:40):
Yeah, it's Cometeer Counter Culture.
It's the roaster forthis particular blend.
I forgot which blendI'm drinking, Josh.
It's delicious, but it'spurply, and I made it ice today
because I love me some Cometeer.
Josh Bretl (06:54):
I feel like you're really loud today.
My ears have youreally loud in them.
Dave Schmidt (06:58):
All right.
Let's just be fair though.
I'm a little not sure howto talk in this new setup.
I'll turn your headphonesdown a little bit.
Josh Bretl (07:06):
I don't feel like I'm too loud in my ears.
I feel like you'retoo loud in my ears.
Dave Schmidt (07:10):
Yeah., That's why I'm turning
down your headphones here.
Josh Bretl (07:12):
Oh, all right.
Do I have time forone more cute story?
Dave Schmidt (07:15):
Yeah, of course you do.
Josh Bretl (07:15):
Or should I wait for tomorrow's podcast?
Dave Schmidt (07:17):
Josh, we don't even have to talk about
anything financially related.
If you just wants it to be cutestories, that's fine with me.
Josh Bretl (07:21):
I had cute stories today.
I'm in a really good mood today.
Dave Schmidt (07:24):
I know.
I can tell.
Josh Bretl (07:24):
So-
Dave Schmidt (07:25):
Thanks for sushi, by the way.
That's how good ofa mood you were in.
Josh Bretl (07:28):
Yeah.
Normally I'd worry that mywife would hear that because
sushi with Dave at lunch,sometimes she gets jealous,
but she doesn't listen to thepodcast, so we're good there.
No one tell my wife Daveand I had sushi today.
You know I'm talentedin some areas.
I'm not talented musically.
I have zero musical talent.
Missy has about the same.
Alex, my son, who loves andwe won't let him listen to
(07:49):
the Retirement Equals FreedomPodcast anymore, has become
obsessed with the guitar.
Dave Schmidt (07:54):
Right.
He was taking lessons.
Josh Bretl (07:56):
Taking lessons.
He now owns the guitar we got.
He wanted to practiceat home, and how are you
to say no to a boy whowants to practice at home?
I didn't think he'd actuallytake it seriously, but
in their lessons, theyare learning a song and
it's one of my favorites.
You ready?
Dave Schmidt (08:10):
Yep.
Josh Bretl (08:24):
So, that is The White Stripes,
Seven Nation Army.
It's one of my favorite songs.
Dave Schmidt (08:29):
I've known you a long time.
I never knew you likedThe White Stripes.
Josh Bretl (08:31):
Well, that's because I didn't know what that song
was actually called until Alexcame home, and he goes, "Dad,
I'm learning Seven Nation Army."
I go, "Cool, what's that?"
He goes, "You know..."
I was like, "Oh, that one."
So, now, I looked it upand I wanted to play it,
but I thought, "How areyou learning that already?
You've had threeweeks of lessons.
(08:52):
How is that possible?"
I thought maybe he just hadan amazing teacher or he
had some sort of weird sickability to learn the guitar.
No, no, they tell him he'splaying that, and I don't
know what noise is actuallycoming out of the guitar, but
he's really into it and heloves it, and it's kind of
cool to see him going with it.
He gets the fingers goingand it's kind of cool.
(09:15):
It's better than when I playedthe trombone in fourth grade.
Dave Schmidt (09:18):
Right.
I played to clarinet.
Now, how is Zachy andhis harmonica doing?
Josh Bretl (09:25):
Zachy and Maggie said they're going
to be part of Alex's band.
He can play the guitar.
Maggie's going to sing,so she can scream into the
microphone, and Zach's goingto be the harmonica player.
Dave Schmidt (09:33):
I mean-
Josh Bretl (09:33):
I can't wait for that podcast when
we bring those three on.
Dave-
Dave Schmidt (09:40):
Yeah, Josh.
Yes.
Josh Bretl (09:41):
We were discussing what we want to talk about
today, and over the last fewepisodes the last couple months,
we've spent some time on socialsecurity and 401[k], Roth
conversions, Secure Act 2.0.
We've gotten really taxheavy and taxes are super
important, but I want totalk about something we
have not talked about, butit's still tax related.
Alex (10:04):
Hashtag tax nerd.
Josh Bretl (10:07):
I can't get away from it.
This has to do withpeople's investments.
When we pick investmentsfor people, when you're
picking investments insideof an IRA or 401[k] or Roth
IRA, it's actually a loteasier than when you're not.
Yeah.
The dumbfounded look iswell deserved on that one.
So, imagine you have thisIRA, or you have this
401[k], or even this Roth.
Dave Schmidt (10:26):
Sure.
Josh Bretl (10:26):
Yeah.
Now, your picture, it's likea box, and inside of this
box, you can pick whateverinvestments you want.
Dave Schmidt (10:30):
I dreamed of this moment.
Josh Bretl (10:31):
You do and one of the things or variables
you don't have to take inconsideration or at least not
very heavily is the tax impactinternally because you know
in a Roth, all the growth istax-free, or inside of an IRA,
the transactions inside ofthe investments aren't taxed.
Okay?
But there's a large numberof people that have some
(10:52):
significant assets that aren'tinside of an IRA or 401[k] or a
Roth IRA or anything like that.
So, they're in whatwe call non-qualified
or brokerage accounts.
Dave Schmidt (11:01):
I was hoping you would take a longer break, so
I could answer that because Iactually knew the name of those.
Josh Bretl (11:05):
If you wanted me to breathe, you just say breathe.
So, you can say that.
Should we do it again?
Yeah.
Those accounts thataren't inside IRAs.
Dave Schmidt (11:12):
Would those be called like...
Well, cool kids call themNQAs, but non-qualified
accounts, Josh?
Josh Bretl (11:22):
Non-qualified.
Actually, we just callthem NQ, non-qualified.
Dave Schmidt (11:26):
Oh, you just dropped the A's.
Okay.
Josh Bretl (11:29):
But you're right, Dave.
That is what thecool kids call them.
When we have money insideof non-qualified accounts,
we're not just looking atthe diversification, the
tax, the investment holding.
we have to take intoconsideration the tax
impact that we have there.
Dave Schmidt (11:45):
Don't we always though, Josh?
I feel like it alwaysis about taxes.
Josh Bretl (11:48):
It always is about taxes, but this is
something people forget.
Advisors forget about this.
So, let me put somethingin perspective here.
There's a theory outthere called tax drag.
Doesn't that sound sexy?
Dave Schmidt (12:00):
I mean, if taxes weren't depressing enough, you
add the word drag after it.
Josh Bretl (12:05):
This is tax drag.
Tax drag is the impact,the negative impact
on an investment.
If you didn't have thattax drag, that's how much
better your investmentswould perform with everything
else being the same.
So, the same investments insideof an IRA versus not an IRA, you
could be losing 1% to 2% a yearin tax drag, and that's just an
(12:27):
estimate based from Morningstarthat comes out to play.
So, sometimes I actuallythink it could be higher.
Dave Schmidt (12:31):
MorningStar, they make breakfast sausages.
Josh Bretl (12:33):
Oh, do they?
Dave Schmidt (12:34):
Yeah.
Josh Bretl (12:34):
I thought that was Jimmy Dean.
Dave Schmidt (12:35):
But there's also a MorningStar brand.
They also do tax stuff like-
Josh Bretl (12:39):
no, Morningstar is probably the preeminent
investment research company.
Preeminent is the wrong word.
It's one of the largestinvestment research
companies in the world.
If you haven't heard of theirbreakfast sausage though,
it's delicious For example,if you have an investment
that pays you dividends...
Dave, do you want a dividend is?
We talked about thisbefore the show.
Dave Schmidt (12:59):
We did, but I got to be honest with
you, I was shoving my facefull of sushi, so I kind of
was half paying attention.
Josh Bretl (13:06):
A dividend is profit that a company earns.
So, if Apple earns a profitor any company, any stock
you own earns a profit, theway a shareholder gets their
part of the profit is fromdividends that come out.
So, if an investmentpays dividends, those
dividends are taxable towhoever receives them.
So, receiving dividendsis a good thing because
(13:27):
hey, you got income, butB, that income is taxable.
So, there's a negative to that.
Not all investmentspay dividends.
There's two ways thatinvestments grow.
They grow viadividends or income.
Some of them will payinterest or things like
that, but they also growvia capital appreciation.
Amazon is a greatexample of that.
Amazon doesn't pay dividends,but their stock price
(13:47):
keeps going up and up.
Amazon is not going tohave as much tax drag as a
blue chip company that payslarge dividends like an
AT&T, something like that.
Dave Schmidt (13:58):
Blue chip?
Josh Bretl (13:59):
Blue chip means some of the larger old-school large
companies out there that havebeen around for a long time.
They call them blue chip.
Sometimes those dividendscan become negative.
Now, I really want to focusthough on mutual funds.
(14:19):
We've talked a littleabout mutual funds in the
past, in prior episodes.
Mutual funds are an excellentway to diversify your assets.
It allows you to hold multipleinvestments with just one in
holding, but mutual funds canbe extremely tax inefficient
as well as expensive.
So, mutual funds cost money,and the different kinds of
internal causes, the overheadcost to own mutual funds
(14:42):
can be anywhere from 0.25%all the way up to 1.5%.
So, on top of what your advisorcharges you, they might also
be charging mutual fund cost.
That's money that you don'thave to pay, and that's not
tax drag, that's a fee issue.
But then, inside of themutual fund, you have no
control over what happens.
So, companies that paydividends that are held
(15:02):
inside of a mutual fund, thosemutual funds distribute the
dividends to whoever owns it.
So, if you own a mutualfund and that mutual
fund receives dividends,you're going to get it.
That shows up in your taxreturn and you know that.
That's okay.
So, there's incomeproducing dividends.
There's mutual fundsthat focus on dividends.
There's mutual funds that don't,so things along those lines.
But then something elsethat's actually more tragic
(15:22):
that occurs is that mutualfunds will have what we call
capital gain distributions.
All right?
Give me a second onthis one because I'm
going to set it up here.
Capital gain is when youbuy something for one price.
Let's say you bought itfor a hundred and it's
sold for a higher price.
You sold it for $150.
(15:43):
The capital gain isthe difference between
what you bought it forand what you sold it.
So, that case would be $50.
That amount is taxable to you.
And people understand that.
The people are okay with that.
But mutual funds are weirdbecause you can buy a mutual
fund, hold onto it foreverand have to pay capital
gains every single year onit, which is weird because
what happens is insidethat mutual fund, they are
(16:05):
constantly buying and sellingtheir internal investments.
So, when they buy and sell,those capital gains like
dividends get pushed out to thepeople who own the mutual funds.
Last year, 2022, I thinkpeople are in for a really
rude awakening when they dotheir taxes this year, and that
is because last year, 2022,the stock market was down.
(16:27):
Almost every single person,if you're invested in
stocks, lost money last year.
But that in theory, weyou would think, "Hey, one
benefit, no capital gains."
But another thing that occurswhen stocks are down the way
they were, a lot of investorswill flee mutual funds.
They'll sell their mutual fund,and when they do that, the money
manager of the mutual fund hasto sell their investments inside
(16:50):
that mutual fund in order to paythe people money who want out.
Well, that's going to triggerinternal capital gains.
So, they'll have capital gainsinside those mutual funds
that they have to distribute.
So, you may have lostmoney on your mutual fund.
Your mutual fund could havegone down 10%, 15%, 20%, but
you're still going to pay acapital gain distribution,
and it could be huge.
I think it's going tobe a really rough year
for people in those.
(17:10):
So, that's a tax dragthat occurs inside
those mutual funds.
Dave Schmidt (17:15):
I think I made the right decision not investing in
traditional stocks, but insteadinvesting in Bombas socks.
Josh Bretl (17:24):
Do you mean the Bombas socks stock
or the socks themselves?
Dave Schmidt (17:27):
No.
I mean, you say stocks.
I'm just thinking of socksand how comfy my Bombas.
Some people say Bombas.
I say Bombas.
Josh Bretl (17:34):
Bombas?
Dave Schmidt (17:34):
Yeah, Bombas socks are right now.
So, I'm kind of dozingoff as you're talking
about these mutual funds.
I'm like, "Stocks equals socks."
Josh Bretl (17:41):
Well, I don't think there's a sock mutual
fund, but if there is, it's-
Dave Schmidt (17:45):
well, find it.
... Josh Bretl (17:46):
all yours.
Dave Schmidt (17:47):
Thank you.
Josh Bretl (17:49):
But a lot of this can be very inefficient,
and a lot of thesedistributions are paid out
towards the end of the year.
So, all of a sudden, youdo your tax planning in
October, November, and-
Dave Schmidt (17:58):
it sneaks up on you.
Josh Bretl (17:59):
It sneaks up on you in December.
In December, boom, you're hitwith this giant capital gain.
Dave Schmidt (18:04):
Is there any way to predict it?
Josh Bretl (18:06):
There is.
The mutual funds will startputting some predictions out,
come Octoberish and they'lltell you the dates are going
to be declared, all thatstuff, but until they actually
pay them, it's not final.
So, you have to reallythink about that because
there's some serious taximplications inside of those
accounts when that occurs.
It can be extremelyinefficient when that happens.
(18:27):
Let's just put thisinto perspective.
If you hold a mutual fundthat pays a $50,000 capital
gain, which is not unheardof, that could be very common.
$50,000, if you pay a15% federal tax, a 5%
state tax, that's 20%.
All of a sudden, heck, you justlost 10,000 bucks in taxes.
And yes, in theory, in thefuture, you don't pay that
(18:48):
money in the future, but allsaid and done, you'd rather
not have to pay that money.
Now, the one thing that yourfavorite breakfast sausage
company does not look at, theydon't look at the capital gains.
For that, you have to go directto the mutual fund itself.
Dave Schmidt (19:02):
Jimmy Dean?
Josh Bretl (19:03):
Jimmy Dean and the Jimmy Dean fund.
They have a much better sausage.
I like the Jimmy Dean.
Now-
Dave Schmidt (19:08):
By the way, not to go on a tangent, but I'm going
to go on a tangent, have youtried my naughty dip before?
Josh Bretl (19:14):
Dave, this is a clean podcast.
Dave Schmidt (19:16):
Oh, I know, but it's a naughty
dip I serve at parties.
Josh Bretl (19:19):
No, I am not sure.
Maybe I have.
Well-
Dave Schmidt (19:21):
it's real simple.
Josh Bretl (19:22):
What's that?
Dave Schmidt (19:23):
A log of Jimmy Dean sausage.
Josh Bretl (19:25):
A log.
Dave Schmidt (19:25):
A log.
Josh Bretl (19:26):
Do you cook it?
Dave Schmidt (19:27):
A brick of cream cheese, a can
of RO-TEL tomatoes, cookthem all up in a pot.
Dip big Fritos into it.
You'll thank me later.
Josh Bretl (19:37):
Dave, this could be a cooking episode
for our email subscribers.
Dave Schmidt (19:40):
You think so?
Dave's naughty dip?
Josh Bretl (19:41):
Dave's naughty dip.
I think that'd be a lot of fun.
Dave Schmidt (19:45):
Yeah.
You're doing all thesesophisticated cocktails.
I'm like, "Let's do somesausage and cream cheese."
It's on brand.
Josh Bretl (19:56):
Now, let's get a little bit more in depth here.
Dave Schmidt (20:00):
Please do.
Why are we talking aboutall these things, Josh?
Josh Bretl (20:03):
Why are we talking about this?
Dave Schmidt (20:05):
Yeah.
Why are we talkingabout this because it
seems pretty negative?
Josh Bretl (20:09):
I'm talking about problems here, and sometimes the
first thing you need to do is beaware of problems, and sometimes
people like to bury their headin the sand and pretend the
problems don't exist, but thismoney is there for a reason.
You've saved it for a purpose.
If once you save it and youthink, I have no way out, or
if I get out of it, I'm goingto have a giant tax or whatever
(20:29):
it might be, you just leave itthere and you're like, "Well,
that's my kid's problem,"or whoever it might be.
Well, why'd you do it in thefirst place, and why not use
this money for your benefit?
Why not have a plan in place tomake it beneficial to you and
to your family and to your kids,and things along those lines?
One thing people worry aboutis they look at the mutual
funds, get out of mutual funds.
They'll say, "We'regetting into stocks,"
(20:50):
or they'll say, "Hey..."
Especially what we've seenin the last 10, 15 years,
the last year was down, butif you've held stocks for
a long period of time, thenyou've seen large gains.
So, let's say you boughtAmazon 10 years ago and you
put 50,000 bucks into it.
That's a lot.
Maybe you put 20,000 bucks intoit and it's now worth $200.
Well, the difference onthat is taxable to you.
(21:11):
So, people's thoughtprocess is, "Well, I'm
just not going to sell it.
I'll just hold onto it.
If I hold onto it, I don'thave to pay the taxes."
Which is true, you don'thave to pay the taxes, but
you just lost use of allthat money, and that to me
is really counterintuitive.
You're cutting off yourarm to save your finger.
Dave Schmidt (21:29):
Yeah.
Why'd you do it inthe first place?
You invested thatmoney for a reason.
Josh Bretl (21:31):
That's a good problem to have.
Let's celebrate this.
Let's do something cool with it.
I like to tell people, here'sthe issues that we have.
Here's the issues we want toaddress, and quite often people
aren't thinking about them.
The reason we talk aboutthis is because I want
you to use your money.
I want you to use it inits best purpose and for
whatever you want to achieve.
We call it the RetirementEquals Freedom Podcast.
(21:53):
We don't call it theRetirement Equals Don't
Use Your Money Podcast.
I mean, you want that...
That was really kind of cheesy.
But you want that tobe for your own good.
I don't know why I feellike I have to look at
you as I talk, but I do.
But that money'sthere for a purpose.
I told this beforehand, this isgoing to be a two-part series
(22:13):
or two-part episode becauseI want people to understand
that they can use and theyshould use their money.
So, in the next episode,we're going to talk about how
we fix all these problems.
What can you do if youwant access to that money?
You don't want tohave to die with it.
You want to have itfor your life, or maybe
you don't realize thatpossibilities are out there.
ALF (22:33):
Why must you needlessly complicate everything?
Dave Schmidt (22:37):
I simply ask, why are we talking about
all these negative things?
And 18 minutes laterwe get the answer.
Josh Bretl (22:44):
That was an important answer.
Dave Schmidt (22:45):
I know.
I'm just messing with you, Josh.
I'm just messing with you.
Cool.
All right.
What else we got here?
Josh Bretl (22:50):
Oh, we are going to talk about
one more problem here.
Dave Schmidt (22:52):
Mo' money, mo' problems.
Josh Bretl (22:54):
More money, more problems.
Now, let's talk about thetheory of rebalancing.
Dave Schmidt (23:02):
Do you want to hear my theory of rebalancing?
Josh Bretl (23:04):
Yeah, you got a theory on rebalancing?
Dave Schmidt (23:06):
It's not appropriate for this
podcast, but I do.
Josh Bretl (23:08):
Well, you already talked about your naughty dip.
Dave Schmidt (23:09):
Yeah, I did.
Josh Bretl (23:10):
Now, here's what a rebalancing is.
Okay?
A rebalancing is somethingthat's technical in an
investment nature, meaning,"Hey, I'm going to have
5% of this, 25% percentof this, 13% of this."
And you're planning yourdiversification, and when you
plan out a diversification,you also plan out a tolerance.
Because investments go upand down, so you're going
(23:32):
to say, "Hey, I want between5% and 8% of this, and I
want between 7% and 9% ofthis," whatever it might be.
And if it gets out of thosetolerances, quite often,
a rebalancing will occur.
Dave Schmidt (23:45):
Does this have to do with risk?
Josh Bretl (23:48):
It helps limit risk.
Actually, there's some reallygreat studies to prove the
benefits of rebalancing,and sometimes rebalancing
occurs just on time.
They say, "Hey, we're goingto rebalance every quarter,
every month, every year."
And they're going to say, "Everymonth, we're going to rebalance
to this threshold, 25%, 25%,25%," whatever it might be.
You can come up with that.
But those rebalancingtriggers buys and sells.
(24:10):
We already talked about thecapital gain distributions.
Sometimes those capital gaindistributions occur when
you're buying and selling.
So, what we look at is wesay, "Hey, inside of a mutual
fund, you can't control whenthey're going to rebalance.
You can't control."
Hey, this got out of whackand we're going to rebalance
this way or because of timethey're going to rebalance.
All of a sudden thosewill trigger capital
(24:30):
gain distribution.
So, when we have highly volatileyears, those capital gain
distributions can occur as well.
Does that make sense?
Dave Schmidt (24:36):
Yeah.
Whenever you say control, Ithink of, just own it baby.
Josh Bretl (24:39):
You ready for a sneak peek of
next week's episode?
Dave Schmidt (24:41):
Always.
Josh Bretl (24:42):
With technology, nowadays, mutual funds
have become less important.
You can own theseassets yourself.
The S&P 500, we canown it for cheaper than
buying a mutual fund.
And then, you have more control.
You've got more controlover the rebalancing.
You can set the limits.
You can set the thresholds.
There's some really neatstudies that show if you change
the tolerance from a 5% toa 10% rebalancing, you don't
(25:05):
actually negatively impactthe performance long term,
but you can have a huge impacton decreasing the tax track.
And when you're part of themutual fund, guess what?
You don't own that.
You don't control that.
But when you own itindividually, boom.
That boom really sounded stupid.
Dave Schmidt (25:21):
I'm actually happy.
I have a note here.
I'm glad you brought the S&P500 because I do have a note
about the S&P 500 because-
Josh Bretl (25:28):
you wrote a note about the S&P 500?
Dave Schmidt (25:29):
I did and you'll find out why because I'm
reading through these things.
I'm getting nervous that we mayhave too much invested in our
Arby's Beef and Cheddar fund-
Josh Bretl (25:38):
what?
... Dave Schmidt (25:38):
to where we'll be taxed so much.
See?
Josh Bretl (25:42):
Well, even with the increasing prices of
the beef and cheddar, it'sno longer five for five.
Dave Schmidt (25:45):
I know.
It's like five forsix or five for seven.
But the beef and cheddar fundwas trending on the S&P 500.
I don't know if you saw that.
I was reading that yesterday.
Josh Bretl (25:53):
Wow.
Dave Schmidt (25:54):
Mm-hmm.
On the Twitter.
Yeah.
Josh Bretl (25:56):
Arby's beef and cheddar.
Dave Schmidt (25:58):
It's a fund.
Yeah.
I didn't know if you knew that.
Josh Bretl (26:02):
Compliance is going to love this episode.
Hi, Debbie.
Dave, we've talked alot about the problems.
I gave you one little solutionthat's kind of a tidbit for
next week in how we implementthat, but I think next week...
Not next week.
I think on the next episode,we're going to really shine
some light on some thingsthat you can do to take
advantage of the tax situationto minimize the tax drag.
(26:26):
Everyone's looking fora bigger rate of return.
People are looking forthe next investment.
Should I be in Amazon or Apple?
Should I be in Searsor Montgomery Awards?
Should I be inwhatever and whatever?
Dave Schmidt (26:36):
Should I be in the Retirement
Equals Freedom Podcast?
Right.
Josh Bretl (26:38):
Yeah.
I mean, our stock is huge,but they're looking for that
extra 1% to 2% in performanceon their investments when
just get rid of the tax dragcan make a huge difference
inside those investments.
Dave Schmidt (26:50):
All this tax drag has got me dragged down.
Yeah.
What?
What?
Okay.
[singing].
To the escalator.
[singing]
Oh, yeah.
(27:20):
We got more roomback here to dance.
Well-
Josh Bretl (27:22):
we do.
... Dave Schmidt (27:22):
we will.
Josh Bretl (27:23):
We're standing.
We're getting there.
We're really getting there.
It doesn't matter becausewe haven't put anything
up on YouTube yet.
Dave Schmidt (27:29):
That is true.
My big question is, are youprepared with a question?
Josh Bretl (27:32):
I am.
Dave Schmidt (27:34):
I thought I caught you off guard.
Josh Bretl (27:35):
Nope.
Dave Schmidt (27:36):
Okay.
Josh Bretl (27:36):
I'm prepared.
Dave Schmidt (27:37):
By the way, were you done talking about
all these more problems?
Because I just kind ofcut you off at the knees.
Josh Bretl (27:42):
Yeah.
Well, I don't think if hewants to hear anymore about
the problems of owning assetssince I have a taxable account
without thinking about it.
Dave Schmidt (27:49):
I'm watching her ticker.
I'm like, "Yeah, if theyhaven't tuned out by now..."
Josh Bretl (27:54):
All right, Dave.
Yeah.
This is a really deep,really important Get
to Know Josh & Dave.
Dave Schmidt (27:58):
Deep thoughts by Josh.
Josh Bretl (28:01):
What's your favorite flavor of Girl Scout Cookies?
Dave Schmidt (28:04):
Really?
Josh Bretl (28:04):
Yeah.
Dave Schmidt (28:05):
Oh, man.
I'm excited.
Let's try these two newones that we were talking
about the other day.
Other than a freshlymade piña colada I loathe
coconut, but Samoas, there'ssomething about Samoas.
Josh Bretl (28:20):
Caramel, chocolate, coconut.
Oh, yeah.
Now, we're talking.
Dave Schmidt (28:24):
Yeah.
I love them all.
Don't get me wrong, but Samoasfeel like a guilty pleasure
that once a year I'll have them.
Josh Bretl (28:32):
Oh, yeah.
Dave Schmidt (28:33):
Now you did the other episode
say frozen Thin Mints.
Josh Bretl (28:38):
Yeah, but I'm going to make a surprise.
I love frozen Thin Mints, andI didn't realize this, and
you guys got to discover this.
There was a s'more flavor thatgot introduced a few years ago.
I love s'mores.
I love all things s'mores.
I didn't realize that there aremultiple Girl Scout bakeries in
the country, and in differentregions of the country, there's
(29:00):
different s'more cookies.
Dave Schmidt (29:01):
Wow.
Josh Bretl (29:02):
Mm-hmm.
We were actually up in Michigan.
You and I, with our friendsa couple years ago, and
we no longer invite Chrisup to Michigan anymore.
Just don't tell them about it.
But we were out for breakfastand there was a little girl
selling Girl Scout cookiesat the breakfast restaurant,
and we bought a box of thes'mores, and they were the
non-Chicago s'mores, andthey are out of this world.
So, I like the s'morecookie not made in Chicago.
(29:24):
If you are somewhere in thecountry and you want to send me
some of the non-Chicago s'morecookies, I would love that.
They're covered in chocolateand they have a graham cracker
inside and a marshmallow middle.
Oh, my god, they'reout of this world.
Dave Schmidt (29:36):
The Chicago ones are not terrible-
Josh Bretl (29:38):
they're not bad.
... Dave Schmidt (29:39):
but they taste-
Josh Bretl (29:39):
they're good.
... Dave Schmidt (29:40):
more like a duplex, and
they do a true s'more.
Josh Bretl (29:43):
Yeah.
The Chicago ones are good.
I'm not saying Idon't like them.
I'm just saying my favoriteare the non-Chicago
made s'more cookies.
Dave Schmidt (29:49):
If non-Chicago made s'more cookies were sold
in Chicago, we'd be sayingthings like, "Ain't nobody
got cash for that," becauseall of our spare cash would
be going to s'more cookies.
All right.
Yeah, that's good.
What?
There was something else.
Oh, yeah, DaveRelates to Retirees.
Josh Bretl (30:11):
Yeah, DR2R.
Dave Schmidt (30:13):
It's time for DR2R.
Josh, are you ready?
Josh Bretl (30:18):
As ready as I'm going to be.
Dave Schmidt (30:20):
I'm going to have to admit something to you.
Today's DR2R was somewhatinspired by our good friend
who emailed us a few days ago.
Josh Bretl (30:29):
Huh?
Dave Schmidt (30:29):
Do you remember who that was?
Josh Bretl (30:31):
I do.
Mr.
Mark Thomas-
Dave Schmidt (30:33):
Señor-.
... Josh Bretl (30:34):
the rebounding king of York High School.
Dave Schmidt (30:37):
He was called?
Josh Bretl (30:37):
The dirtiest player I've ever met.
Dave Schmidt (30:39):
He was called the rubber band of our team
by the Daily Herald, rubberBand or the Glue because
he held us all together.
I can't remember.
But he wrote it in a pretty-
Josh Bretl (30:49):
it's not because he's tall and
lanky and stretches real-
Dave Schmidt (30:51):
and awesome.
Josh Bretl (30:52):
Yeah.
Dave Schmidt (30:52):
He wrote in a pretty feisty email asking for
more credit for me when I talkabout the different ways that
I was able to score points.
He just wants more credit.
So, Mark, here's yourshout-out if you will, but
Dave relates to retirees.
Here's how I relate it.
Mystery Science Theater 3000.
(31:13):
Yeah?
Josh Bretl (31:13):
Okay.
Dave Schmidt (31:15):
MST3K.
For those of you thataren't aware of MST3K-
Josh Bretl (31:20):
right here.
Dave Schmidt (31:21):
Yep.
All right.
This story goes like this.
Joel is trapped on the satelliteof love and shot out into outer
space as part of an experimentrun by the Mads, M-A-D-S.
The experiment is to see ifthey could drive one person
insane by forcing them to watcha bunch of really bad movies.
(31:42):
That's the plot of the show.
Joel watches these badmovies by himself and
decides, this is boring.
I'm going to build some robots.
So, he builds Crow T.
Robot and Tom Servo.
And together they watchreally bad movies on
the satellite of love.
Joel and his robotshave no choice.
They are trapped onthe satellite of love.
(32:02):
See where I'm going with this?
Josh Bretl (32:04):
I hope so.
Dave Schmidt (32:06):
Joel is unable to fix his situation.
He's in outer space.
He cannot get outof this predicament.
What I'm tryingto elude is this.
Elude, did I use that correctly?
Josh Bretl (32:17):
Mm-hmm.
Mm-hmm.
Dave Schmidt (32:17):
Okay.
Josh Bretl (32:19):
As much as any MST3K listener or watcher
can elude to anything.
Dave Schmidt (32:23):
You had a frog in your throat right there.
Josh Bretl (32:24):
I did.
Yeah.
Dave Schmidt (32:32):
So, dear listener, retiree, soon to
be retiree, what I'm tryingto say to you is this.
Do not be like Joeland his robots.
You do not have to be stuckon the satellite of love, or
you don't have to be stuckwith all these taxes for NQAs.
Seek out help from somebody thatcan help you with these NQAs.
(32:54):
So, that dear friend, ishow I relate to retirees.
For those of you who arefamiliar, secret agent, the
super dragon, Josh, you canhave your full house moment
now because I know you'regoing to go home tonight.
Pump up Netflix and watch MST3K.
Josh Bretl (33:15):
I'm really glad you tied that together at
the end because for 99.9%of that, I was going,
"What is he talking about?"
I have never been so lost.
Dave Schmidt (33:26):
Yeah.
It's pretty simple, Josh.
It comes down to choice.
Joel had no choice.
Retirees, you have choices.
You need to own yourretirement and find
someone that can help you.
Josh Bretl (33:37):
You know, Dave, you said it for me, but let me
back up a step and needlesslycomplicate everything.
Growing up with you, Iwatched you play video games.
I wasn't bored.
We've sat there.
We've talked.
We had friends.
When Mystery Science Theatercame on, I would leave.
I would leave.
I don't care about it.
I don't watch it.
(33:57):
It has no interestto me whatsoever.
So, when you were talking aboutthat, I didn't even know the
concept to the plot behind it.
So, I didn't follow most ofwhat you said, but the ending I
did, and you are exactly right.
Just because I don't understandit, just because I quite
frankly don't enjoy it,doesn't mean it doesn't exist,
(34:19):
and it doesn't mean thatyou're stuck sitting there.
So, like you said before,Joel, get yourself together.
You're not stuck there.
You don't have to watchthese horrible movies over
and over and over again.
Do what I do andleave Dave's house.
You don't have to do that.
But also, as Erin likes to say,just because you're in a place
(34:42):
now, it doesn't mean you'regoing to be there forever.
There are ways to fix it.
You just may not know it yet.
How you got there doesn'tneed to be your future.
A lot of people have gotten towhere they are in retirement
and they're quite successful,or at this point in life and
they're quite successful,and they think that how they
got there is how they'regoing to get into the future.
So, if you did it yourself,if you have an advisor who put
(35:03):
you in that spot, it's okayto ask for a second opinion.
There's just things that havebecome more complicated, and
unfortunately, as life goeson, life needlessly complicates
it for us kind of like...
ALF (35:15):
Why must you needlessly complicate everything?
Josh Bretl (35:19):
Kind of like MSTK3000.
Dave Schmidt (35:21):
Mm-hmm.
MST3K.
Josh Bretl (35:24):
Yeah, whatever.
That's fine.
It all works.
Dave Schmidt (35:26):
I give you props for trying.
Josh Bretl (35:27):
And NQA.
All right.
Dave Schmidt (35:29):
Do you remember the names of the robots?
Josh Bretl (35:31):
No.
Dave Schmidt (35:31):
No.
Josh Bretl (35:31):
Not at all.
Dave Schmidt (35:32):
You're going to see a picture of them
in next week's email.
Josh Bretl (35:35):
I look forward to it.
Dave Schmidt (35:36):
Crow T.
Robot who is inspiredby a bowling pin.
Josh Bretl (35:38):
I mean, we are recording on the longest episode
ever, and we're going backrenaming robots right now?
Dave Schmidt (35:44):
Yeah.
And then, Tom Servo, who'sinspired by a gumball machine.
So, it'll all makeperfect sense.
Josh Bretl (35:48):
Oh, I mean, this is better than slip job, and
who was the video game peopleyou talked about last time?
Dave Schmidt (35:53):
Oh, my gosh, ToeJam & Earl.
Josh Bretl (35:54):
Oh, yeah, that's right.
Dave Schmidt (35:56):
Which by the way, just wait until you hear the
end of ToeJam & Earl, or I'msorry, the end of the episode.
It's going to be fantastic.
Josh Bretl (36:05):
Dave, that was a long episode.
We went through a lot of reallyminute stuff and was fun.
Next week or next episode, Ishould say, we're going to have
some solutions for people, notjust problems because I hate
when people tell me problemsand don't give me solutions.
So, like your Dave Relatesto Retirees, we're going to
teach people how that theycan actually just get up
(36:26):
and walk out of your house.
Dave Schmidt (36:27):
Oh, snap.
Josh Bretl (36:28):
Ooh, man.
Although, if there'sPuddin' Cakes there,
we're really in trouble.
But with that, if you do seethis and you feel stuck, you
have money that you can't usebecause there's a possible
taxation on it, let's talk.
Talk to someone whoknows what they're doing.
The person who got you here maynot be the one that needs to
take you to the finish line.
Dave Schmidt (36:48):
That's deep, man.
Josh Bretl (36:48):
Yeah.
Dave Schmidt (36:49):
Like Joel leaving Earth's orbit,
Josh and I, will say bye.
Josh Bretl (36:55):
Bye.
Tom Servo (36:58):
It ain't supposed to be commercial, man.
It's jazz.
Joel (37:01):
Well, how would you describe jazz anyway, Tom?
Tom Servo (37:03):
Oh man.
If you have to ask,you'll never know.
Crow T Robot (37:07):
Yeah, whatever.
Let's go.
Let's win.
Tom Servo (37:11):
Right Daddy.
One A two, A 1, 2,3, 4 Secret Agent.
Super Dragon, takeit Crow Daddy.
Crow T Robot (37:26):
Secret Agent Super Dragon.
Tom Servo (37:31):
Yeah, grab an 8, Joel.
Joel (37:34):
Secret Agent Super Dragon.
Tom Servo (37:42):
Now Secret Agent-
Joel (37:45):
Oh, wait, wait a second.
Uh, I mean, it justgoes on like that, huh?
Tom Servo (37:49):
Uh oh.
Crow takes a trumpet solo now.
Crow T Robot (37:52):
I, I, I only picked up the
trumpet a few minutes ago.
I only know two notes.
Tom Servo (37:56):
Yeah, that's not my fault if you
chops ain't together.
Crow T Robot (37:58):
Hey, chop on this pal-
Joel (38:00):
like red, wait to say Cut it out.
Guys.
Listen, I've-
Alex (38:04):
Hashtag tax nerd.
I'm talking about problems here, and sometimes the
first thing you need to do is beaware of problems, and sometimes
people like to bury their headin the sand and pretend the
problems don't exist, but thismoney is there for a reason.
You've saved it for a purpose.
If once you save it and youthink, I have no way out, or
if I get out of it, I'm goingto have a giant tax or whatever
it might be, you just leave itthere and you're like, "Well,
(00:24):
that's my kid's problem,"or whoever it might be.
Well, why'd you do it in thefirst place, and why not use
this money for your benefit?
Why not have a plan in place tomake it beneficial to you and
to your family and to your kids,and things along those lines?
Dave Schmidt (00:37):
You don't have to live in fear of capital gains,
and don't let tax liabilityon non-qualified investments
scare you out of cashing inand enjoying the fruits of the
assets that you have accrued.
You just need to pick your headup, get it out of the sand,
and create a solid strategy.
Which is where today'sepisode picks up.
We are going to learn aboutportfolio rebalancing and the
(01:00):
difference between sheltered andunsheltered investment vehicles.
And tax drag?
Yeah, it's a thing andit will definitely be on
your radar after hearingJosh's thoughts on it.
And while I personally may betilted towards socks and naughty
dip ingredients, I still needto know about mutual funds and
(01:22):
how they can upend tax planning.
This is The RetirementEquals Freedom Podcast.
Your host of the show,Josh Bretl, is the owner
of FSR Wealth Strategies.
For the last few decades, hehas been helping fine folks
like you make retirementthe best part of your life.
(01:43):
And me.
Well, hey there, I'm Dave.
Josh's longtime friend,co-host of the podcast, and
huge fan of Tom Servo, CrowT Robot, and the rest of the
crew on the Satellite of Love.
All right, enough about me.
Let me let you let meend my introduction so
we can start the show.
(02:03):
FSR Wealth Management is a registered investment advisor
located in Elmhurst, Illinois.
Information and opinionscontained in this audio
have been arrived atby FSR Wealth advisors.
All information herein isfor informational purposes
and should not be construedas investment advice.
It does not constitute an offer,a solicitation or recommendation
to purchase any security.
FSR is not providing legal,tax, accounting, or financial
planning advice in this audio.
These views are as of thedate of this publication
and are subject to change.
Josh Bretl (02:43):
David, it's an exciting week.
Dave Schmidt (02:46):
Why?
Tell me why.
Josh Bretl (02:48):
This table that we've been waiting for since
Thanksgiving is finally here.
Dave Schmidt (02:55):
Thanksgiving or much earlier than that?
Josh Bretl (02:58):
Yeah, I think it was earlier than that, but do
you think this table's goingto make the podcast better?
Dave Schmidt (03:03):
Well, it's hard to improve something
that's already perfect.
Josh Bretl (03:07):
Now, we have no more excuses.
We better make somedarn good podcast.
Dave Schmidt (03:11):
Yeah.
Josh, we got thisbeautiful table.
I'm a little warm.
We got a light behind ushere, and I got this warm FSR
thing that you made me wear.
Josh Bretl (03:18):
You look good though.
Dave Schmidt (03:19):
Oh, I appreciate that.
So do you, Josh.
Josh Bretl (03:21):
Thanks.
Dave Schmidt (03:21):
That gallbladder removal was the best thing
that happened to you.
Josh Bretl (03:24):
I had a 20-pound gallbladder.
I'm 20 pounds lighter.
Dave Schmidt (03:27):
How about that?
Josh Bretl (03:28):
Dave, in the last episode, we talked about
something, and I meant tohave it here for you today.
I don't, but hopefully,on our next episode, which
I think we're recordingtomorrow, actually.
The Girl Scout Cookies are in.
Dave Schmidt (03:40):
That's going to be a huge hit.
You did promise a pictureof this alleged 1,900
boxes of cookies inyour front room though.
Josh Bretl (03:49):
I was off by 200.
It was only 1,700boxes of cookies.
Dave Schmidt (03:53):
Oh, my gosh.
Josh Bretl (03:55):
I didn't get a picture because we had
it spread out throughoutthe entire first floor due
to construction issues.
Missy, my wife, is thecookie coordinator for
her Girl Scout troop.
Now, let me putthis in perspective.
By Girl Scout troop,these are Daisies.
These are first-grade girls.
There's 20 of them.
(04:16):
They started sellingGirl Scout Cookies two
weeks before Christmasand finished mid-January.
They sold for a month,the worst month possible
because from two weeks beforeChristmas, no one wants to
buy more Girl Scout Cookies.
Dave Schmidt (04:29):
No.
Josh Bretl (04:29):
Not at all.
I don't know why theydo it that time of year.
Kids and girls soldsome, but some girls
sold a ton of cookies.
Now, my wife is reallyorganized and she doesn't
like people who aren't.
I'm amazed she likes me at all.
But on Saturday morningwas cookie pickup for the
entire city of Elmhurst.
So, every Girl Scout troopin Elmhurst went to Sandburg
(04:54):
Junior High to the parking lotin the back of the school to
pick up Girl Scout Cookies.
We had the 8:45 pickup time.
It started at 8:30 with the8:45 pickup time, and they give
you a sheet of how many boxesany type of car will hold.
Dave Schmidt (05:11):
Okay, interesting.
Josh Bretl (05:11):
We have a minivan.
We emptied out the seats in theminivan so that it's wide open.
We have another friendwith a giant SUV, and then
we had my smaller SUV.
Three of us go to pickup these cookies and
these cars are packed.
Now, I pull in theSandburg parking lot.
There were three semi-trucksfull of Girl Scout Cookies
for the city of Elmhurst.
Dave Schmidt (05:32):
My gosh.
Josh Bretl (05:33):
Elmhurst is not a big town.
I mean, we have a lot ofactive kids, but 18-wheelers.
We're talking-
Dave Schmidt (05:40):
Three 18-wheelers.
Dear Lord, it's a racket.
Josh Bretl (05:42):
Now, I didn't get to see how full they were, but
I couldn't imagine you'd bringmore than one if the other
two of them were almost full.
Dave Schmidt (05:47):
You're not going to pay for a semi
unless it's stuffed full.
Josh Bretl (05:50):
I was thinking that's just one city.
Imagine Chicago and therest of the country.
That's a lot ofGirl Scout Cookies.
Dave Schmidt (05:56):
I thought Maggie alone sold 1,900
boxes, so that's why-
Josh Bretl (06:01):
No, no, no.
... Dave Schmidt (06:02):
I was a little more like, "What?"
Josh Bretl (06:03):
No.
No.
Between 20 girls,1700 boxes of cookies.
Dave Schmidt (06:08):
Ooh, that's still not a small number.
Josh Bretl (06:10):
You will probably have yours tomorrow.
Missy's been organizing themand getting them out, so-
Dave Schmidt (06:15):
Awesome.
... Josh Bretl (06:15):
if you don't, you can yell at her.
The construction at our houseis actually done, right?
Remember, I've beenshowing you pictures today.
They've clean it up today, butwe've had construction stuff
everywhere, and then piles ofGirl Scout Cookies for other
Girl Scouts to come pick up,so it's been kind of funny.
Dave Schmidt (06:30):
That's what you need in your house that's been a
disaster zone for the last fourmonths, just boxes of cookies.
Josh Bretl (06:35):
You know what's gotten us through it, Dave?
Dave Schmidt (06:36):
Yeah.
Josh Bretl (06:37):
Coffee.
Dave Schmidt: Speaking of coffee- (06:38):
undefined
Josh Bretl (06:38):
I noticed you had a pod in your hands.
Dave Schmidt (06:40):
Yeah, it's Cometeer Counter Culture.
It's the roaster forthis particular blend.
I forgot which blendI'm drinking, Josh.
It's delicious, but it'spurply, and I made it ice today
because I love me some Cometeer.
Josh Bretl (06:54):
I feel like you're really loud today.
My ears have youreally loud in them.
Dave Schmidt (06:58):
All right.
Let's just be fair though.
I'm a little not sure howto talk in this new setup.
I'll turn your headphonesdown a little bit.
Josh Bretl (07:06):
I don't feel like I'm too loud in my ears.
I feel like you'retoo loud in my ears.
Dave Schmidt (07:10):
Yeah., That's why I'm turning
down your headphones here.
Josh Bretl (07:12):
Oh, all right.
Do I have time forone more cute story?
Dave Schmidt (07:15):
Yeah, of course you do.
Josh Bretl (07:15):
Or should I wait for tomorrow's podcast?
Dave Schmidt (07:17):
Josh, we don't even have to talk about
anything financially related.
If you just wants it to be cutestories, that's fine with me.
Josh Bretl (07:21):
I had cute stories today.
I'm in a really good mood today.
Dave Schmidt (07:24):
I know.
I can tell.
Josh Bretl (07:24):
So-
Dave Schmidt (07:25):
Thanks for sushi, by the way.
That's how good ofa mood you were in.
Josh Bretl (07:28):
Yeah.
Normally I'd worry that mywife would hear that because
sushi with Dave at lunch,sometimes she gets jealous,
but she doesn't listen to thepodcast, so we're good there.
No one tell my wife Daveand I had sushi today.
You know I'm talentedin some areas.
I'm not talented musically.
I have zero musical talent.
Missy has about the same.
Alex, my son, who loves andwe won't let him listen to
(07:49):
the Retirement Equals FreedomPodcast anymore, has become
obsessed with the guitar.
Dave Schmidt (07:54):
Right.
He was taking lessons.
Josh Bretl (07:56):
Taking lessons.
He now owns the guitar we got.
He wanted to practiceat home, and how are you
to say no to a boy whowants to practice at home?
I didn't think he'd actuallytake it seriously, but
in their lessons, theyare learning a song and
it's one of my favorites.
You ready?
Dave Schmidt (08:10):
Yep.
Josh Bretl (08:24):
So, that is The White Stripes,
Seven Nation Army.
It's one of my favorite songs.
Dave Schmidt (08:29):
I've known you a long time.
I never knew you likedThe White Stripes.
Josh Bretl (08:31):
Well, that's because I didn't know what that song
was actually called until Alexcame home, and he goes, "Dad,
I'm learning Seven Nation Army."
I go, "Cool, what's that?"
He goes, "You know..."
I was like, "Oh, that one."
So, now, I looked it upand I wanted to play it,
but I thought, "How areyou learning that already?
You've had threeweeks of lessons.
(08:52):
How is that possible?"
I thought maybe he just hadan amazing teacher or he
had some sort of weird sickability to learn the guitar.
No, no, they tell him he'splaying that, and I don't
know what noise is actuallycoming out of the guitar, but
he's really into it and heloves it, and it's kind of
cool to see him going with it.
He gets the fingers goingand it's kind of cool.
(09:15):
It's better than when I playedthe trombone in fourth grade.
Dave Schmidt (09:18):
Right.
I played to clarinet.
Now, how is Zachy andhis harmonica doing?
Josh Bretl (09:25):
Zachy and Maggie said they're going
to be part of Alex's band.
He can play the guitar.
Maggie's going to sing,so she can scream into the
microphone, and Zach's goingto be the harmonica player.
Dave Schmidt (09:33):
I mean-
Josh Bretl (09:33):
I can't wait for that podcast when
we bring those three on.
Dave-
Dave Schmidt (09:40):
Yeah, Josh.
Yes.
Josh Bretl (09:41):
We were discussing what we want to talk about
today, and over the last fewepisodes the last couple months,
we've spent some time on socialsecurity and 401[k], Roth
conversions, Secure Act 2.0.
We've gotten really taxheavy and taxes are super
important, but I want totalk about something we
have not talked about, butit's still tax related.
Alex (10:04):
Hashtag tax nerd.
Josh Bretl (10:07):
I can't get away from it.
This has to do withpeople's investments.
When we pick investmentsfor people, when you're
picking investments insideof an IRA or 401[k] or Roth
IRA, it's actually a loteasier than when you're not.
Yeah.
The dumbfounded look iswell deserved on that one.
So, imagine you have thisIRA, or you have this
401[k], or even this Roth.
Dave Schmidt (10:26):
Sure.
Josh Bretl (10:26):
Yeah.
Now, your picture, it's likea box, and inside of this
box, you can pick whateverinvestments you want.
Dave Schmidt (10:30):
I dreamed of this moment.
Josh Bretl (10:31):
You do and one of the things or variables
you don't have to take inconsideration or at least not
very heavily is the tax impactinternally because you know
in a Roth, all the growth istax-free, or inside of an IRA,
the transactions inside ofthe investments aren't taxed.
Okay?
But there's a large numberof people that have some
(10:52):
significant assets that aren'tinside of an IRA or 401[k] or a
Roth IRA or anything like that.
So, they're in whatwe call non-qualified
or brokerage accounts.
Dave Schmidt (11:01):
I was hoping you would take a longer break, so
I could answer that because Iactually knew the name of those.
Josh Bretl (11:05):
If you wanted me to breathe, you just say breathe.
So, you can say that.
Should we do it again?
Yeah.
Those accounts thataren't inside IRAs.
Dave Schmidt (11:12):
Would those be called like...
Well, cool kids call themNQAs, but non-qualified
accounts, Josh?
Josh Bretl (11:22):
Non-qualified.
Actually, we just callthem NQ, non-qualified.
Dave Schmidt (11:26):
Oh, you just dropped the A's.
Okay.
Josh Bretl (11:29):
But you're right, Dave.
That is what thecool kids call them.
When we have money insideof non-qualified accounts,
we're not just looking atthe diversification, the
tax, the investment holding.
we have to take intoconsideration the tax
impact that we have there.
Dave Schmidt (11:45):
Don't we always though, Josh?
I feel like it alwaysis about taxes.
Josh Bretl (11:48):
It always is about taxes, but this is
something people forget.
Advisors forget about this.
So, let me put somethingin perspective here.
There's a theory outthere called tax drag.
Doesn't that sound sexy?
Dave Schmidt (12:00):
I mean, if taxes weren't depressing enough, you
add the word drag after it.
Josh Bretl (12:05):
This is tax drag.
Tax drag is the impact,the negative impact
on an investment.
If you didn't have thattax drag, that's how much
better your investmentswould perform with everything
else being the same.
So, the same investments insideof an IRA versus not an IRA, you
could be losing 1% to 2% a yearin tax drag, and that's just an
(12:27):
estimate based from Morningstarthat comes out to play.
So, sometimes I actuallythink it could be higher.
Dave Schmidt (12:31):
MorningStar, they make breakfast sausages.
Josh Bretl (12:33):
Oh, do they?
Dave Schmidt (12:34):
Yeah.
Josh Bretl (12:34):
I thought that was Jimmy Dean.
Dave Schmidt (12:35):
But there's also a MorningStar brand.
They also do tax stuff like-
Josh Bretl (12:39):
no, Morningstar is probably the preeminent
investment research company.
Preeminent is the wrong word.
It's one of the largestinvestment research
companies in the world.
If you haven't heard of theirbreakfast sausage though,
it's delicious For example,if you have an investment
that pays you dividends...
Dave, do you want a dividend is?
We talked about thisbefore the show.
Dave Schmidt (12:59):
We did, but I got to be honest with
you, I was shoving my facefull of sushi, so I kind of
was half paying attention.
Josh Bretl (13:06):
A dividend is profit that a company earns.
So, if Apple earns a profitor any company, any stock
you own earns a profit, theway a shareholder gets their
part of the profit is fromdividends that come out.
So, if an investmentpays dividends, those
dividends are taxable towhoever receives them.
So, receiving dividendsis a good thing because
(13:27):
hey, you got income, butB, that income is taxable.
So, there's a negative to that.
Not all investmentspay dividends.
There's two ways thatinvestments grow.
They grow viadividends or income.
Some of them will payinterest or things like
that, but they also growvia capital appreciation.
Amazon is a greatexample of that.
Amazon doesn't pay dividends,but their stock price
(13:47):
keeps going up and up.
Amazon is not going tohave as much tax drag as a
blue chip company that payslarge dividends like an
AT&T, something like that.
Dave Schmidt (13:58):
Blue chip?
Josh Bretl (13:59):
Blue chip means some of the larger old-school large
companies out there that havebeen around for a long time.
They call them blue chip.
Sometimes those dividendscan become negative.
Now, I really want to focusthough on mutual funds.
(14:19):
We've talked a littleabout mutual funds in the
past, in prior episodes.
Mutual funds are an excellentway to diversify your assets.
It allows you to hold multipleinvestments with just one in
holding, but mutual funds canbe extremely tax inefficient
as well as expensive.
So, mutual funds cost money,and the different kinds of
internal causes, the overheadcost to own mutual funds
(14:42):
can be anywhere from 0.25%all the way up to 1.5%.
So, on top of what your advisorcharges you, they might also
be charging mutual fund cost.
That's money that you don'thave to pay, and that's not
tax drag, that's a fee issue.
But then, inside of themutual fund, you have no
control over what happens.
So, companies that paydividends that are held
(15:02):
inside of a mutual fund, thosemutual funds distribute the
dividends to whoever owns it.
So, if you own a mutualfund and that mutual
fund receives dividends,you're going to get it.
That shows up in your taxreturn and you know that.
That's okay.
So, there's incomeproducing dividends.
There's mutual fundsthat focus on dividends.
There's mutual funds that don't,so things along those lines.
But then something elsethat's actually more tragic
(15:22):
that occurs is that mutualfunds will have what we call
capital gain distributions.
All right?
Give me a second onthis one because I'm
going to set it up here.
Capital gain is when youbuy something for one price.
Let's say you bought itfor a hundred and it's
sold for a higher price.
You sold it for $150.
(15:43):
The capital gain isthe difference between
what you bought it forand what you sold it.
So, that case would be $50.
That amount is taxable to you.
And people understand that.
The people are okay with that.
But mutual funds are weirdbecause you can buy a mutual
fund, hold onto it foreverand have to pay capital
gains every single year onit, which is weird because
what happens is insidethat mutual fund, they are
(16:05):
constantly buying and sellingtheir internal investments.
So, when they buy and sell,those capital gains like
dividends get pushed out to thepeople who own the mutual funds.
Last year, 2022, I thinkpeople are in for a really
rude awakening when they dotheir taxes this year, and that
is because last year, 2022,the stock market was down.
(16:27):
Almost every single person,if you're invested in
stocks, lost money last year.
But that in theory, weyou would think, "Hey, one
benefit, no capital gains."
But another thing that occurswhen stocks are down the way
they were, a lot of investorswill flee mutual funds.
They'll sell their mutual fund,and when they do that, the money
manager of the mutual fund hasto sell their investments inside
(16:50):
that mutual fund in order to paythe people money who want out.
Well, that's going to triggerinternal capital gains.
So, they'll have capital gainsinside those mutual funds
that they have to distribute.
So, you may have lostmoney on your mutual fund.
Your mutual fund could havegone down 10%, 15%, 20%, but
you're still going to pay acapital gain distribution,
and it could be huge.
I think it's going tobe a really rough year
for people in those.
(17:10):
So, that's a tax dragthat occurs inside
those mutual funds.
Dave Schmidt (17:15):
I think I made the right decision not investing in
traditional stocks, but insteadinvesting in Bombas socks.
Josh Bretl (17:24):
Do you mean the Bombas socks stock
or the socks themselves?
Dave Schmidt (17:27):
No.
I mean, you say stocks.
I'm just thinking of socksand how comfy my Bombas.
Some people say Bombas.
I say Bombas.
Josh Bretl (17:34):
Bombas?
Dave Schmidt (17:34):
Yeah, Bombas socks are right now.
So, I'm kind of dozingoff as you're talking
about these mutual funds.
I'm like, "Stocks equals socks."
Josh Bretl (17:41):
Well, I don't think there's a sock mutual
fund, but if there is, it's-
Dave Schmidt (17:45):
well, find it.
... Josh Bretl (17:46):
all yours.
Dave Schmidt (17:47):
Thank you.
Josh Bretl (17:49):
But a lot of this can be very inefficient,
and a lot of thesedistributions are paid out
towards the end of the year.
So, all of a sudden, youdo your tax planning in
October, November, and-
Dave Schmidt (17:58):
it sneaks up on you.
Josh Bretl (17:59):
It sneaks up on you in December.
In December, boom, you're hitwith this giant capital gain.
Dave Schmidt (18:04):
Is there any way to predict it?
Josh Bretl (18:06):
There is.
The mutual funds will startputting some predictions out,
come Octoberish and they'lltell you the dates are going
to be declared, all thatstuff, but until they actually
pay them, it's not final.
So, you have to reallythink about that because
there's some serious taximplications inside of those
accounts when that occurs.
It can be extremelyinefficient when that happens.
(18:27):
Let's just put thisinto perspective.
If you hold a mutual fundthat pays a $50,000 capital
gain, which is not unheardof, that could be very common.
$50,000, if you pay a15% federal tax, a 5%
state tax, that's 20%.
All of a sudden, heck, you justlost 10,000 bucks in taxes.
And yes, in theory, in thefuture, you don't pay that
(18:48):
money in the future, but allsaid and done, you'd rather
not have to pay that money.
Now, the one thing that yourfavorite breakfast sausage
company does not look at, theydon't look at the capital gains.
For that, you have to go directto the mutual fund itself.
Dave Schmidt (19:02):
Jimmy Dean?
Josh Bretl (19:03):
Jimmy Dean and the Jimmy Dean fund.
They have a much better sausage.
I like the Jimmy Dean.
Now-
Dave Schmidt (19:08):
By the way, not to go on a tangent, but I'm going
to go on a tangent, have youtried my naughty dip before?
Josh Bretl (19:14):
Dave, this is a clean podcast.
Dave Schmidt (19:16):
Oh, I know, but it's a naughty
dip I serve at parties.
Josh Bretl (19:19):
No, I am not sure.
Maybe I have.
Well-
Dave Schmidt (19:21):
it's real simple.
Josh Bretl (19:22):
What's that?
Dave Schmidt (19:23):
A log of Jimmy Dean sausage.
Josh Bretl (19:25):
A log.
Dave Schmidt (19:25):
A log.
Josh Bretl (19:26):
Do you cook it?
Dave Schmidt (19:27):
A brick of cream cheese, a can
of RO-TEL tomatoes, cookthem all up in a pot.
Dip big Fritos into it.
You'll thank me later.
Josh Bretl (19:37):
Dave, this could be a cooking episode
for our email subscribers.
Dave Schmidt (19:40):
You think so?
Dave's naughty dip?
Josh Bretl (19:41):
Dave's naughty dip.
I think that'd be a lot of fun.
Dave Schmidt (19:45):
Yeah.
You're doing all thesesophisticated cocktails.
I'm like, "Let's do somesausage and cream cheese."
It's on brand.
Josh Bretl (19:56):
Now, let's get a little bit more in depth here.
Dave Schmidt (20:00):
Please do.
Why are we talking aboutall these things, Josh?
Josh Bretl (20:03):
Why are we talking about this?
Dave Schmidt (20:05):
Yeah.
Why are we talkingabout this because it
seems pretty negative?
Josh Bretl (20:09):
I'm talking about problems here, and sometimes the
first thing you need to do is beaware of problems, and sometimes
people like to bury their headin the sand and pretend the
problems don't exist, but thismoney is there for a reason.
You've saved it for a purpose.
If once you save it and youthink, I have no way out, or
if I get out of it, I'm goingto have a giant tax or whatever
(20:29):
it might be, you just leave itthere and you're like, "Well,
that's my kid's problem,"or whoever it might be.
Well, why'd you do it in thefirst place, and why not use
this money for your benefit?
Why not have a plan in place tomake it beneficial to you and
to your family and to your kids,and things along those lines?
One thing people worry aboutis they look at the mutual
funds, get out of mutual funds.
They'll say, "We'regetting into stocks,"
(20:50):
or they'll say, "Hey..."
Especially what we've seenin the last 10, 15 years,
the last year was down, butif you've held stocks for
a long period of time, thenyou've seen large gains.
So, let's say you boughtAmazon 10 years ago and you
put 50,000 bucks into it.
That's a lot.
Maybe you put 20,000 bucks intoit and it's now worth $200.
Well, the difference onthat is taxable to you.
(21:11):
So, people's thoughtprocess is, "Well, I'm
just not going to sell it.
I'll just hold onto it.
If I hold onto it, I don'thave to pay the taxes."
Which is true, you don'thave to pay the taxes, but
you just lost use of allthat money, and that to me
is really counterintuitive.
You're cutting off yourarm to save your finger.
Dave Schmidt (21:29):
Yeah.
Why'd you do it inthe first place?
You invested thatmoney for a reason.
Josh Bretl (21:31):
That's a good problem to have.
Let's celebrate this.
Let's do something cool with it.
I like to tell people, here'sthe issues that we have.
Here's the issues we want toaddress, and quite often people
aren't thinking about them.
The reason we talk aboutthis is because I want
you to use your money.
I want you to use it inits best purpose and for
whatever you want to achieve.
We call it the RetirementEquals Freedom Podcast.
(21:53):
We don't call it theRetirement Equals Don't
Use Your Money Podcast.
I mean, you want that...
That was really kind of cheesy.
But you want that tobe for your own good.
I don't know why I feellike I have to look at
you as I talk, but I do.
But that money'sthere for a purpose.
I told this beforehand, this isgoing to be a two-part series
(22:13):
or two-part episode becauseI want people to understand
that they can use and theyshould use their money.
So, in the next episode,we're going to talk about how
we fix all these problems.
What can you do if youwant access to that money?
You don't want tohave to die with it.
You want to have itfor your life, or maybe
you don't realize thatpossibilities are out there.
ALF (22:33):
Why must you needlessly complicate everything?
Dave Schmidt (22:37):
I simply ask, why are we talking about
all these negative things?
And 18 minutes laterwe get the answer.
Josh Bretl (22:44):
That was an important answer.
Dave Schmidt (22:45):
I know.
I'm just messing with you, Josh.
I'm just messing with you.
Cool.
All right.
What else we got here?
Josh Bretl (22:50):
Oh, we are going to talk about
one more problem here.
Dave Schmidt (22:52):
Mo' money, mo' problems.
Josh Bretl (22:54):
More money, more problems.
Now, let's talk about thetheory of rebalancing.
Dave Schmidt (23:02):
Do you want to hear my theory of rebalancing?
Josh Bretl (23:04):
Yeah, you got a theory on rebalancing?
Dave Schmidt (23:06):
It's not appropriate for this
podcast, but I do.
Josh Bretl (23:08):
Well, you already talked about your naughty dip.
Dave Schmidt (23:09):
Yeah, I did.
Josh Bretl (23:10):
Now, here's what a rebalancing is.
Okay?
A rebalancing is somethingthat's technical in an
investment nature, meaning,"Hey, I'm going to have
5% of this, 25% percentof this, 13% of this."
And you're planning yourdiversification, and when you
plan out a diversification,you also plan out a tolerance.
Because investments go upand down, so you're going
(23:32):
to say, "Hey, I want between5% and 8% of this, and I
want between 7% and 9% ofthis," whatever it might be.
And if it gets out of thosetolerances, quite often,
a rebalancing will occur.
Dave Schmidt (23:45):
Does this have to do with risk?
Josh Bretl (23:48):
It helps limit risk.
Actually, there's some reallygreat studies to prove the
benefits of rebalancing,and sometimes rebalancing
occurs just on time.
They say, "Hey, we're goingto rebalance every quarter,
every month, every year."
And they're going to say, "Everymonth, we're going to rebalance
to this threshold, 25%, 25%,25%," whatever it might be.
You can come up with that.
But those rebalancingtriggers buys and sells.
(24:10):
We already talked about thecapital gain distributions.
Sometimes those capital gaindistributions occur when
you're buying and selling.
So, what we look at is wesay, "Hey, inside of a mutual
fund, you can't control whenthey're going to rebalance.
You can't control."
Hey, this got out of whackand we're going to rebalance
this way or because of timethey're going to rebalance.
All of a sudden thosewill trigger capital
(24:30):
gain distribution.
So, when we have highly volatileyears, those capital gain
distributions can occur as well.
Does that make sense?
Dave Schmidt (24:36):
Yeah.
Whenever you say control, Ithink of, just own it baby.
Josh Bretl (24:39):
You ready for a sneak peek of
next week's episode?
Dave Schmidt (24:41):
Always.
Josh Bretl (24:42):
With technology, nowadays, mutual funds
have become less important.
You can own theseassets yourself.
The S&P 500, we canown it for cheaper than
buying a mutual fund.
And then, you have more control.
You've got more controlover the rebalancing.
You can set the limits.
You can set the thresholds.
There's some really neatstudies that show if you change
the tolerance from a 5% toa 10% rebalancing, you don't
(25:05):
actually negatively impactthe performance long term,
but you can have a huge impacton decreasing the tax track.
And when you're part of themutual fund, guess what?
You don't own that.
You don't control that.
But when you own itindividually, boom.
That boom really sounded stupid.
Dave Schmidt (25:21):
I'm actually happy.
I have a note here.
I'm glad you brought the S&P500 because I do have a note
about the S&P 500 because-
Josh Bretl (25:28):
you wrote a note about the S&P 500?
Dave Schmidt (25:29):
I did and you'll find out why because I'm
reading through these things.
I'm getting nervous that we mayhave too much invested in our
Arby's Beef and Cheddar fund-
Josh Bretl (25:38):
what?
... Dave Schmidt (25:38):
to where we'll be taxed so much.
See?
Josh Bretl (25:42):
Well, even with the increasing prices of
the beef and cheddar, it'sno longer five for five.
Dave Schmidt (25:45):
I know.
It's like five forsix or five for seven.
But the beef and cheddar fundwas trending on the S&P 500.
I don't know if you saw that.
I was reading that yesterday.
Josh Bretl (25:53):
Wow.
Dave Schmidt (25:54):
Mm-hmm.
On the Twitter.
Yeah.
Josh Bretl (25:56):
Arby's beef and cheddar.
Dave Schmidt (25:58):
It's a fund.
Yeah.
I didn't know if you knew that.
Josh Bretl (26:02):
Compliance is going to love this episode.
Hi, Debbie.
Dave, we've talked alot about the problems.
I gave you one little solutionthat's kind of a tidbit for
next week in how we implementthat, but I think next week...
Not next week.
I think on the next episode,we're going to really shine
some light on some thingsthat you can do to take
advantage of the tax situationto minimize the tax drag.
(26:26):
Everyone's looking fora bigger rate of return.
People are looking forthe next investment.
Should I be in Amazon or Apple?
Should I be in Searsor Montgomery Awards?
Should I be inwhatever and whatever?
Dave Schmidt (26:36):
Should I be in the Retirement
Equals Freedom Podcast?
Right.
Josh Bretl (26:38):
Yeah.
I mean, our stock is huge,but they're looking for that
extra 1% to 2% in performanceon their investments when
just get rid of the tax dragcan make a huge difference
inside those investments.
Dave Schmidt (26:50):
All this tax drag has got me dragged down.
Yeah.
What?
What?
Okay.
[singing].
To the escalator.
[singing]
Oh, yeah.
(27:20):
We got more roomback here to dance.
Well-
Josh Bretl (27:22):
we do.
... Dave Schmidt (27:22):
we will.
Josh Bretl (27:23):
We're standing.
We're getting there.
We're really getting there.
It doesn't matter becausewe haven't put anything
up on YouTube yet.
Dave Schmidt (27:29):
That is true.
My big question is, are youprepared with a question?
Josh Bretl (27:32):
I am.
Dave Schmidt (27:34):
I thought I caught you off guard.
Josh Bretl (27:35):
Nope.
Dave Schmidt (27:36):
Okay.
Josh Bretl (27:36):
I'm prepared.
Dave Schmidt (27:37):
By the way, were you done talking about
all these more problems?
Because I just kind ofcut you off at the knees.
Josh Bretl (27:42):
Yeah.
Well, I don't think if hewants to hear anymore about
the problems of owning assetssince I have a taxable account
without thinking about it.
Dave Schmidt (27:49):
I'm watching her ticker.
I'm like, "Yeah, if theyhaven't tuned out by now..."
Josh Bretl (27:54):
All right, Dave.
Yeah.
This is a really deep,really important Get
to Know Josh & Dave.
Dave Schmidt (27:58):
Deep thoughts by Josh.
Josh Bretl (28:01):
What's your favorite flavor of Girl Scout Cookies?
Dave Schmidt (28:04):
Really?
Josh Bretl (28:04):
Yeah.
Dave Schmidt (28:05):
Oh, man.
I'm excited.
Let's try these two newones that we were talking
about the other day.
Other than a freshlymade piña colada I loathe
coconut, but Samoas, there'ssomething about Samoas.
Josh Bretl (28:20):
Caramel, chocolate, coconut.
Oh, yeah.
Now, we're talking.
Dave Schmidt (28:24):
Yeah.
I love them all.
Don't get me wrong, but Samoasfeel like a guilty pleasure
that once a year I'll have them.
Josh Bretl (28:32):
Oh, yeah.
Dave Schmidt (28:33):
Now you did the other episode
say frozen Thin Mints.
Josh Bretl (28:38):
Yeah, but I'm going to make a surprise.
I love frozen Thin Mints, andI didn't realize this, and
you guys got to discover this.
There was a s'more flavor thatgot introduced a few years ago.
I love s'mores.
I love all things s'mores.
I didn't realize that there aremultiple Girl Scout bakeries in
the country, and in differentregions of the country, there's
(29:00):
different s'more cookies.
Dave Schmidt (29:01):
Wow.
Josh Bretl (29:02):
Mm-hmm.
We were actually up in Michigan.
You and I, with our friendsa couple years ago, and
we no longer invite Chrisup to Michigan anymore.
Just don't tell them about it.
But we were out for breakfastand there was a little girl
selling Girl Scout cookiesat the breakfast restaurant,
and we bought a box of thes'mores, and they were the
non-Chicago s'mores, andthey are out of this world.
So, I like the s'morecookie not made in Chicago.
(29:24):
If you are somewhere in thecountry and you want to send me
some of the non-Chicago s'morecookies, I would love that.
They're covered in chocolateand they have a graham cracker
inside and a marshmallow middle.
Oh, my god, they'reout of this world.
Dave Schmidt (29:36):
The Chicago ones are not terrible-
Josh Bretl (29:38):
they're not bad.
... Dave Schmidt (29:39):
but they taste-
Josh Bretl (29:39):
they're good.
... Dave Schmidt (29:40):
more like a duplex, and
they do a true s'more.
Josh Bretl (29:43):
Yeah.
The Chicago ones are good.
I'm not saying Idon't like them.
I'm just saying my favoriteare the non-Chicago
made s'more cookies.
Dave Schmidt (29:49):
If non-Chicago made s'more cookies were sold
in Chicago, we'd be sayingthings like, "Ain't nobody
got cash for that," becauseall of our spare cash would
be going to s'more cookies.
All right.
Yeah, that's good.
What?
There was something else.
Oh, yeah, DaveRelates to Retirees.
Josh Bretl (30:11):
Yeah, DR2R.
Dave Schmidt (30:13):
It's time for DR2R.
Josh, are you ready?
Josh Bretl (30:18):
As ready as I'm going to be.
Dave Schmidt (30:20):
I'm going to have to admit something to you.
Today's DR2R was somewhatinspired by our good friend
who emailed us a few days ago.
Josh Bretl (30:29):
Huh?
Dave Schmidt (30:29):
Do you remember who that was?
Josh Bretl (30:31):
I do.
Mr.
Mark Thomas-
Dave Schmidt (30:33):
Señor-.
... Josh Bretl (30:34):
the rebounding king of York High School.
Dave Schmidt (30:37):
He was called?
Josh Bretl (30:37):
The dirtiest player I've ever met.
Dave Schmidt (30:39):
He was called the rubber band of our team
by the Daily Herald, rubberBand or the Glue because
he held us all together.
I can't remember.
But he wrote it in a pretty-
Josh Bretl (30:49):
it's not because he's tall and
lanky and stretches real-
Dave Schmidt (30:51):
and awesome.
Josh Bretl (30:52):
Yeah.
Dave Schmidt (30:52):
He wrote in a pretty feisty email asking for
more credit for me when I talkabout the different ways that
I was able to score points.
He just wants more credit.
So, Mark, here's yourshout-out if you will, but
Dave relates to retirees.
Here's how I relate it.
Mystery Science Theater 3000.
(31:13):
Yeah?
Josh Bretl (31:13):
Okay.
Dave Schmidt (31:15):
MST3K.
For those of you thataren't aware of MST3K-
Josh Bretl (31:20):
right here.
Dave Schmidt (31:21):
Yep.
All right.
This story goes like this.
Joel is trapped on the satelliteof love and shot out into outer
space as part of an experimentrun by the Mads, M-A-D-S.
The experiment is to see ifthey could drive one person
insane by forcing them to watcha bunch of really bad movies.
(31:42):
That's the plot of the show.
Joel watches these badmovies by himself and
decides, this is boring.
I'm going to build some robots.
So, he builds Crow T.
Robot and Tom Servo.
And together they watchreally bad movies on
the satellite of love.
Joel and his robotshave no choice.
They are trapped onthe satellite of love.
(32:02):
See where I'm going with this?
Josh Bretl (32:04):
I hope so.
Dave Schmidt (32:06):
Joel is unable to fix his situation.
He's in outer space.
He cannot get outof this predicament.
What I'm tryingto elude is this.
Elude, did I use that correctly?
Josh Bretl (32:17):
Mm-hmm.
Mm-hmm.
Dave Schmidt (32:17):
Okay.
Josh Bretl (32:19):
As much as any MST3K listener or watcher
can elude to anything.
Dave Schmidt (32:23):
You had a frog in your throat right there.
Josh Bretl (32:24):
I did.
Yeah.
Dave Schmidt (32:32):
So, dear listener, retiree, soon to
be retiree, what I'm tryingto say to you is this.
Do not be like Joeland his robots.
You do not have to be stuckon the satellite of love, or
you don't have to be stuckwith all these taxes for NQAs.
Seek out help from somebody thatcan help you with these NQAs.
(32:54):
So, that dear friend, ishow I relate to retirees.
For those of you who arefamiliar, secret agent, the
super dragon, Josh, you canhave your full house moment
now because I know you'regoing to go home tonight.
Pump up Netflix and watch MST3K.
Josh Bretl (33:15):
I'm really glad you tied that together at
the end because for 99.9%of that, I was going,
"What is he talking about?"
I have never been so lost.
Dave Schmidt (33:26):
Yeah.
It's pretty simple, Josh.
It comes down to choice.
Joel had no choice.
Retirees, you have choices.
You need to own yourretirement and find
someone that can help you.
Josh Bretl (33:37):
You know, Dave, you said it for me, but let me
back up a step and needlesslycomplicate everything.
Growing up with you, Iwatched you play video games.
I wasn't bored.
We've sat there.
We've talked.
We had friends.
When Mystery Science Theatercame on, I would leave.
I would leave.
I don't care about it.
I don't watch it.
(33:57):
It has no interestto me whatsoever.
So, when you were talking aboutthat, I didn't even know the
concept to the plot behind it.
So, I didn't follow most ofwhat you said, but the ending I
did, and you are exactly right.
Just because I don't understandit, just because I quite
frankly don't enjoy it,doesn't mean it doesn't exist,
(34:19):
and it doesn't mean thatyou're stuck sitting there.
So, like you said before,Joel, get yourself together.
You're not stuck there.
You don't have to watchthese horrible movies over
and over and over again.
Do what I do andleave Dave's house.
You don't have to do that.
But also, as Erin likes to say,just because you're in a place
(34:42):
now, it doesn't mean you'regoing to be there forever.
There are ways to fix it.
You just may not know it yet.
How you got there doesn'tneed to be your future.
A lot of people have gotten towhere they are in retirement
and they're quite successful,or at this point in life and
they're quite successful,and they think that how they
got there is how they'regoing to get into the future.
So, if you did it yourself,if you have an advisor who put
(35:03):
you in that spot, it's okayto ask for a second opinion.
There's just things that havebecome more complicated, and
unfortunately, as life goeson, life needlessly complicates
it for us kind of like...
ALF (35:15):
Why must you needlessly complicate everything?
Josh Bretl (35:19):
Kind of like MSTK3000.
Dave Schmidt (35:21):
Mm-hmm.
MST3K.
Josh Bretl (35:24):
Yeah, whatever.
That's fine.
It all works.
Dave Schmidt (35:26):
I give you props for trying.
Josh Bretl (35:27):
And NQA.
All right.
Dave Schmidt (35:29):
Do you remember the names of the robots?
Josh Bretl (35:31):
No.
Dave Schmidt (35:31):
No.
Josh Bretl (35:31):
Not at all.
Dave Schmidt (35:32):
You're going to see a picture of them
in next week's email.
Josh Bretl (35:35):
I look forward to it.
Dave Schmidt (35:36):
Crow T.
Robot who is inspiredby a bowling pin.
Josh Bretl (35:38):
I mean, we are recording on the longest episode
ever, and we're going backrenaming robots right now?
Dave Schmidt (35:44):
Yeah.
And then, Tom Servo, who'sinspired by a gumball machine.
So, it'll all makeperfect sense.
Josh Bretl (35:48):
Oh, I mean, this is better than slip job, and
who was the video game peopleyou talked about last time?
Dave Schmidt (35:53):
Oh, my gosh, ToeJam & Earl.
Josh Bretl (35:54):
Oh, yeah, that's right.
Dave Schmidt (35:56):
Which by the way, just wait until you hear the
end of ToeJam & Earl, or I'msorry, the end of the episode.
It's going to be fantastic.
Josh Bretl (36:05):
Dave, that was a long episode.
We went through a lot of reallyminute stuff and was fun.
Next week or next episode, Ishould say, we're going to have
some solutions for people, notjust problems because I hate
when people tell me problemsand don't give me solutions.
So, like your Dave Relatesto Retirees, we're going to
teach people how that theycan actually just get up
(36:26):
and walk out of your house.
Dave Schmidt (36:27):
Oh, snap.
Josh Bretl (36:28):
Ooh, man.
Although, if there'sPuddin' Cakes there,
we're really in trouble.
But with that, if you do seethis and you feel stuck, you
have money that you can't usebecause there's a possible
taxation on it, let's talk.
Talk to someone whoknows what they're doing.
The person who got you here maynot be the one that needs to
take you to the finish line.
Dave Schmidt (36:48):
That's deep, man.
Josh Bretl (36:48):
Yeah.
Dave Schmidt (36:49):
Like Joel leaving Earth's orbit,
Josh and I, will say bye.
Josh Bretl (36:55):
Bye.
Tom Servo (36:58):
It ain't supposed to be commercial, man.
It's jazz.
Joel (37:01):
Well, how would you describe jazz anyway, Tom?
Tom Servo (37:03):
Oh man.
If you have to ask,you'll never know.
Crow T Robot (37:07):
Yeah, whatever.
Let's go.
Let's win.
Tom Servo (37:11):
Right Daddy.
One A two, A 1, 2,3, 4 Secret Agent.
Super Dragon, takeit Crow Daddy.
Crow T Robot (37:26):
Secret Agent Super Dragon.
Tom Servo (37:31):
Yeah, grab an 8, Joel.
Joel (37:34):
Secret Agent Super Dragon.
Tom Servo (37:42):
Now Secret Agent-
Joel (37:45):
Oh, wait, wait a second.
Uh, I mean, it justgoes on like that, huh?
Tom Servo (37:49):
Uh oh.
Crow takes a trumpet solo now.
Crow T Robot (37:52):
I, I, I only picked up the
trumpet a few minutes ago.
I only know two notes.
Tom Servo (37:56):
Yeah, that's not my fault if you
chops ain't together.
Crow T Robot (37:58):
Hey, chop on this pal-
Joel (38:00):
like red, wait to say Cut it out.
Guys.
Listen, I've-
Alex (38:04):
Hashtag tax nerd.
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
The Nikki Glaser Podcast
Every week comedian and infamous roaster Nikki Glaser provides a fun, fast-paced, and brutally honest look into current pop-culture and her own personal life.