Simply Money

Episode Transcript

Speaker 1 (00:06):
Tonight, President Trump ramps up tariff talk. Are you paying
attention to fees? And what does the winner of the
Super Bowl tell us about the stock market? You're listening
to Simply Money, presented by all Worth Financial Imani Wagner
along with Bob sponseller Man. Since President Trump has taken office,
it feels like every day is about a week when
it comes to major headlines coming out of Washington and

(00:29):
the potential impact that could have on you. Of course,
last week we had the threat to go after Mexico
and Canada with tariffs, and both presidents came to the table,
did some negotiating.

Speaker 2 (00:41):
And for now those tariffs are on hold.

Speaker 1 (00:43):
But now the President says he is not finished with
tariff threats, joining us tonight. Allworth Chief Investment Officer Andy Stout. Andy,
I had the conversation several times last week after you
came on the show explaining why President Trump is.

Speaker 2 (00:57):
Bringing tariffs to the table. Number one you said as
the newgating tool.

Speaker 1 (01:00):
We saw that be incredibly effective at least so far
with Mexico and Canada.

Speaker 2 (01:04):
But the second one you said was to counter unfair
trade practices.

Speaker 1 (01:10):
And that seems to be kind of where he's focusing
his efforts right now.

Speaker 3 (01:15):
Yeah, so let's just reset this, I mean, talk about
the three reasons that President Trump is using tariff. So,
from a strategic standpoint, the first one is, as we
just discussed, to serve as a negotiating tool with foreign powers.
So President Trump believes that the economic sanctions that the

(01:36):
US has been imposing on other countries for maybe doing
things out of ill will have those sanctions have not
been as effective as they could be, and certainly have
they've lost effectiveness over time. He believes that tariffs will
be a better motivator for bad actors if you want
to use those terms to act in good face. Now,

(01:59):
the other reason is to generate revenue. So tariffs, do
you want to think about it? It's a tax coming
in now. The people who pay this tax are technically
the importers, so that would be the country that the
companies within the United States. However, uh, typically they may
charge more to the companies that are selling to them,
or they may pass those costs on to the in buyers.

(02:23):
So they do want to generate revenue, and President Trump
likes this idea because he can use that revenue to
pay for tax cuts.

Speaker 4 (02:30):
Later on.

Speaker 3 (02:31):
Now, the third reason, which is just brought up here,
is to counter unfair trade practices. So this means that
the US trade deficit could improve if he feels other
countries are taking advantage of the US. Also, it does
encourage onshoring of manufacturing facilities. So a lot of you,

(02:53):
a lot of manufacturing for products that makes its way
into the United States is done from outside of the
United States, and this could courage the on shoring or
bringing that back within the United States. Now, also on
the unfair trade practices, there are certain companies, some in
China Sheen and Timu as an example, that essentially get

(03:17):
through what's called a denominimous exemption, which means the exports,
if they're under eight hundred dollars, they avoid tariffs completely.
So if those packages are under eight hundred dollars, that's
an easy way for some of these foreign companies to
undercut US companies like eBay or Amazon or whatever. So

(03:38):
he's looking at all of these different things. So this
is a really important way that President Trump is looking
to help reduce the trade deficit.

Speaker 1 (03:49):
You know, any this is I mean, this talk of
tariffs has become so prevalent, like even my fifteen year
old kind of came to me and was like, oh,
my teachers are talking about this. It's on the top
of my and I think for a lot of people,
and certainly investors. We know that the American economy three
quarters of it is made up of consumers.

Speaker 2 (04:08):
Right our spending.

Speaker 1 (04:10):
Is this tariff talk weighing on not only just investors
but consumers at this point?

Speaker 3 (04:16):
Oh yeah, absolutely, And when you think about the tariff talk,
just you know, from a big picture perspective. And I'll
get to that the consumer thing in just a second,
but I do want to point out some news that
came out over the weekend was that President Trump has
said that reciprocal tariffs, which means those countries that put
tariffs on the US are going to be seeing similar

(04:40):
terriffs put on them this week. So we're going to
see how this plays out. So your son, who's talking
to your and kudos to your fifteen year old son
for paying attention to the teachers.

Speaker 4 (04:50):
Paying attention because he wants a new car. Andy, I've
known about that. He wants the new car now before
the prices go up.

Speaker 3 (05:00):
But well, yeah, if you look at the possible tariff
rate on autos coming in from potentially Canada Mexico. Because
remember those arffs are just delayed for a month, they're
not off the table completely. There's going to be some
reworking on those trade agreements. So you know, first of all,
I guess then let me change that. Kudos to your

(05:20):
son for thinking ahead to try to position himself in
the best manner possible to get a new car.

Speaker 1 (05:28):
How can you take advantage of this situation? Is what
we're what we're talking about now.

Speaker 4 (05:32):
But you continue sounds a lot like his mother exactly.

Speaker 3 (05:39):
So in terms of how consumers are thinking about, you know,
those future purchases, they're thinking inflation at least as a whole,
is going to be a lot higher than what it
had been. Specifically, we had the University of Michigan's Consumer
Sentiment come out last week, and what it showed was
that on average, the people in that survey think that

(06:02):
prices will be four point three percent higher over the
next twelve months. And if you just go back one
month ago to see what they thought, it was three
point three percent. So that's a let me just sell it,
tell you, that's a that's a humongous jump in just
one month and what's changed in that last month. Well,
it's been tariffs, right, And when you break it down further,

(06:22):
deconstruct that data, look at it by political party, there
is a big difference there. So I would take these
numbers with a grain of salt because if you look
at what Republicans think inflation will do over the next year,
it's zero. They think prices will be unchanged between now
and a year from now. So if your son leans right,

(06:46):
you know I he can make the argument, well, probably
should just delay a little bit if prices aren't going
anywhere now. For those who identify as Democrats, they think
that prices will be about five percent higher over the
next year, right, So that's a big difference. So it
really just depends on your political ideology and whether or
not you think the tariffs will have an inflation airy impact.

(07:12):
Now we're it'll probably end up as somewhere in the middle.
I mean, I seriously doubt you see inflation above five percent.
Seriously doubt you even get close to that four zero
point three percent number. I think it's probably going to
be somewhere around three percent, give or take in that
general area. So answer is likely somewhere in the middle.

Speaker 4 (07:33):
All right, Andy, we talk about all the time how
inflation definitely has an impact on what the FED does,
what they do and when they do it. I mean,
another big mover is unemployment. That's another one of their
big mandates. And we got a big unemployment report, you know,
the January unemployment report came out on Friday. As you
parts through all that data and news, how are you

(07:56):
seeing things?

Speaker 3 (07:58):
Well, when I look at the jobs report came out
last week, I'll call it a little bit underwhelming, but
good enough because the underwhelming side of it came out
of what's called the Establishment Survey. This is where the
government or the Bureau of Labor Statistics specifically, they ask
employers about adding new jobs. And what it showed was
that employers added just one hundred and forty three thousand

(08:21):
new jobs. What economists we're looking for was one hundred
and seventy five thousand. Now that's not ideal. However, the
prior two months of data was actually revised up by
one hundred thousand and that easily offset that miss. Now
I'll call this an okay report because when you look

(08:41):
under the hood, the job gains were really concentrated in
three areas. Two of them are relatively recession proof for
the most part. I'll talk about that in a second.
Healthcare added sixty six thousand jobs and government added thirty
two thousand jobs. Now, I'd say healthcare is really dependent
more on just the underlying demos graphics here within the
United States, and you know that would suggest that we'll

(09:04):
continue to see healthcare jobs being added.

Speaker 4 (09:06):
Now.

Speaker 3 (09:06):
The other is the government thirty two thousand jobs that
has typically been recession proof. With that being said, we
don't know how everything is going to fully transpire transpire
with the with DOGE and what changes you might see
in terms of government people not having jobs that they

(09:28):
had before because it's viewed as some efficiencies that could
be made out there. So I don't know how recession
proof the government sector is now compared to what it was,
you know, a year ago or so. Now, when you
look at the other part of the jobs report, that's
the unemployment rate, that's the household service, so the government
that talks to businesses, that's where you get new jobs.

(09:51):
The government also talks individuals, that's where you get the
unemployment rate. And what we saw there was that the
unemployment rate actually fell from four point one percent to
four percent. Now you put this all together, Bob, because
you're asking you frame this with a federal reserve in mind.
What does this mean for the Federal Reserve. Well, the
Federal Reserve looks at the job market and it looks

(10:13):
pretty good. In all honesty. You get four percent unemployment rate.
Jobs are still being added regardless of the sector, and
it suggests that we're pretty close to full employment.

Speaker 4 (10:23):
Now.

Speaker 3 (10:24):
On the inflationary side, yes, there are some risks associated
with terrafts and can't discount that. However, the broader inflationary
view tariffs society is that it's still higher than where
anybody wants it. I mean, the fest preferred inflation measure
is what's called core PCE. Core excludes food and energy prices,
and that sets at two point eight percent. The Fed

(10:46):
targets a two percent core pce E rate, so we're
not really even close to that. What that means is
that the Federal Reserve, it's our nascent social bank. They
can keep rates higher for longer in order to bring
down inflation because they're not worried about the job market.

Speaker 5 (11:02):
And I asked you this a few times.

Speaker 1 (11:05):
When we look at the job that the Federal Reserve
is doing right now. Right, you've been keeping a close
eye on this since the beginning of They've tried to
bring inflation down.

Speaker 2 (11:13):
What kind of grade do you give them at this point?
Because this is a tough ee.

Speaker 1 (11:16):
They're trying to keep an eye on what President Trump's
doing with tariffs here at the same time looking at
all the data that's coming in.

Speaker 5 (11:22):
Not an easy job.

Speaker 3 (11:24):
Yeah, and I would say the grade I've given the
Fed over time, it's been fluid, right, They're not always
going to be getting an ab CD or F. I
would give them B minus.

Speaker 1 (11:35):
Okay, it's been worse, it's been better, it's been Why
do you say be minus right now?

Speaker 3 (11:42):
Because we're probably not going to see much progress on
inflation over the next few months unless we fall in
into a recession, and some of that's obviously beyond the
control of the Federal Reserve. I mean, it's just the
natural state of economy goes in cycles. It's not necessarily
always the same. Cause. For that said, you know, we're
still not where we need to be with inflation, so

(12:06):
it's above a sea because you know, we're at full employment,
so that's decent. However, the FED has not done as
good of a job at bringing down inflation as you
know most people would like to see.

Speaker 2 (12:18):
You're you're a tough grader, Andy, Thank you. Here's the
all Worth advice.

Speaker 1 (12:22):
Don't be surprised if interest rates remain right where they
are at least for some time.

Speaker 2 (12:26):
Come give next.

Speaker 1 (12:26):
We're talking about a four letter word that starts with F.
I hope we don't get fired. We'll explain. You're listening
to Simply Money, presented by all Worth Financially. You're in
fifty five KR see the talk station. You're listening to
Simply Money persented by all Worth Financial. I mean, wagn're
along with Bob sponsor or. You can't listen to our

(12:47):
show every night. You don't have to miss a thing
we talk about. We've got a daily podcast for you.
Just search Simply Money. It's right there on the iHeart
app or wherever you get your podcasts coming up fact
or fiction. You're gonna want to stay tuned from that
because there's a lot I think we can all learn.

Speaker 2 (13:02):
Oh right, did you enjoy the Super Bowl?

Speaker 4 (13:05):
I enjoyed it, Amy, I did.

Speaker 2 (13:08):
I feel bad for the people who were at the
party with me.

Speaker 1 (13:10):
There's maybe I don't know, twenty people at a party,
who's some friends of ours in a couple showed up
and they were so sweet, but they were Kansas City
Chiefs fans, and I'm just was so over all of
all of Kansas City winning all the time that I
was a little I don't know, loud every time something bad.

Speaker 4 (13:29):
You lost a couple of friends.

Speaker 1 (13:30):
Last night, we here there are two less listeners to
the Simply Money radio show tonight. I'm telling you apologies
to those Kansas City Chiefs fans.

Speaker 2 (13:38):
But anyway, from a larger.

Speaker 1 (13:41):
Perspective for the show there of course, you know, we
sort of laugh about this, but there's lots of people
who like to make predictions on everything from the weather
to the holiday, to who wins the super Bowl as
to what we can expect the stock market to do well.

Speaker 4 (13:57):
This is very similar to Groundhog Day and Punk satani Phil.
There's something called the Super Bowl Indicator that is a
non scientific barometer of the stock market. It was actually
introduced by sportswriter Leonard Koppett back in nineteen seventy eight,
and the indicator suggests that a Super Bowl win for
an AFC team predicts a bear market for the rest

(14:19):
of the year, while a win for an NFC team
like what we got last night means the stock market
will be in a full bowl market in the coming year.
And obviously, the Eagles won, and you know, Patrick Mahomes
spent a lot of time on the ground last night
without a bunch of inadvertent, unnecessary flags flying on the ground.

(14:41):
So Amy, I think the stock market's going to be
up fifty percent this year.

Speaker 5 (14:45):
I'm feeling good about life today.

Speaker 1 (14:46):
I'm feeling good about how that Super Bowl game went down,
feeling good about the economy. Here's the deal, bro, This
Super Bowl indicator has been right three and ten times
from two two thousand and one until now. Not a
great predictor of what's going to happen. You know, we
like to talk about these things and just on the show.

(15:08):
Don't make any changes now. You're invested based on who
won or lost the game tonight, what color the gatorade
was that they threw over The Eagles coaches had none
of those things. Get your long term plan and stick with.

Speaker 4 (15:23):
It, Amy, I do have to ask, though, you mentioned
last week that you really enjoy watching these commercials, do
you have a favorite commercial from last night.

Speaker 5 (15:34):
I have a couple of favorites. The Nike one for
the women.

Speaker 1 (15:39):
Loved love that and also the Pfizer one with a
little boy with the boxing gloves.

Speaker 5 (15:45):
Loved both of those.

Speaker 4 (15:46):
What about you, I'd agree? You know, I watched my
wife's reaction to both of those, and you know, anyway, Yeah,
it was good. I think it just proves that there's
a bra and my son's reminded me all night, like Dad,
over fifty percent of the people that watch this game
care nothing about football. It's just a cultural event to

(16:06):
bring people together. So I thought some of those commercials
were good, and I agree with you those two that
you mentioned were great.

Speaker 5 (16:12):
Yeah, there were some good ones.

Speaker 1 (16:14):
As an investor, I want to ask you this question.
Are you paying attention to fees and expenses. There's something
that we do for clients when we're bringing them on
board or bringing money into all Worth called a rollover analyzer,
and it's so interesting because we fill it out and
we say, Okay, here's the fees that you're paying before
and the internal expenses, and here's what you're paying now.

Speaker 2 (16:35):
And it brings up the best.

Speaker 1 (16:37):
Conversations because I am really amazed at how many people
don't know that there are internal expenses in the current
investments that they have, or how any of these fees
or expenses impact them, or even that they're paying them
in the first place.

Speaker 4 (16:52):
I find the same thing. I mean, when we talk
to a perspective new client. I mean, obviously, the conversation
is going to come up about fees and compensation, and
the question always comes up, how do you get paid
and what is your fee? And we're always happy to
quote that fee and it's an advisory fee. But to
your point, Amy, what most people never look look at
or even consider, is what are the fees you know

(17:15):
that I would call are under the hood, so to speak,
And that's the internal operating expenses of the mutual funds
that you own, or some of these really hidden mortality
and expense fees embedded in these variable annuities, where you know,
people are under the impression that these are free investments
and nobody's getting paid and when in fact they're just

(17:38):
loaded with fees or you know, loaded with cap rates
on how much you can earn, you know, in new
So it's a very important conversation to have. And yeah,
there's a lot more than just the advisory fee. And
then I would add one other thing. What's really important
to talk about with your current advisor or perspective advisor

(18:00):
you're talking to is what are you going to be
doing to justify these fees? What amount of services are
you providing? And are those in fact value added services
that are going to improve your situation in things that
you're interested in.

Speaker 5 (18:15):
Yeah, looking at those internal expenses. You know.

Speaker 1 (18:18):
Vanguard, right, a big name, big player in our space,
is going to try to make it even cheaper for
investors to invest in exchange traded funds.

Speaker 2 (18:27):
There slashing the cost of investing in its funds.

Speaker 1 (18:31):
This is expected to save investors about three hundred and fifty.

Speaker 2 (18:35):
Million dollars this year alone.

Speaker 1 (18:38):
It's funny about my husband started a new job within
the past year or so, within the past few weeks,
he's finally able to put money into his flour one
K and so he came to me and was like,
what should I invest in? And half hour later he
comes back to me and he's like, Babe, I'm not
asking you to write a dissertation here, you know, but
I was looking up not only you know what the
options were, I know those, but I was looking at

(18:59):
the internal expenses of each one of them. Because if
there's two different ETFs or two different funds that essentially
do the same thing, but one of them has lower fees,
I'm going to choose that one all day every day.
So when I'm choosing what to invest in, I'm looking at,
you know, how diversified is it, but also what are
the expenses associated with it. I want to be as

(19:20):
efficient as I can. And if you've never invested with
an eye on these internal expenses before, I think it's
something you should start paying attention to definitely.

Speaker 4 (19:31):
And the good news is the trend is that these
internal operating expenses are coming down, not up. So you
know we talk about inflation all the time. This is
one trend you know in our industry that's working in
favor of investors. And you know, in a lot of
the model portfolios that Andy Stout and his team use
here at all Worth, we we have a lot of

(19:52):
Vanguard funds in there, so our clients are taking advantage
of this reduction in fees every day.

Speaker 1 (19:57):
Here's the all Worth advice. The lower the fees, the better.
Just keep thees in mind when you are investing. Coming
up next, all Or Chief investment Officer Andy Stout back
with some strategies. If you want to be more tax efficient,
you're listening to Simply Money presented by all Worth Financial
here on fifty five KRC the talk station. You're listening

(20:22):
to your Simply Money presented by all Worth Financial Enemy Wagner.

Speaker 2 (20:25):
Along with Bobs Bond Seller.

Speaker 1 (20:27):
Many times we'll get someone coming into our office and
maybe they've worked with other advisors in the past, or
they are di wires and they really understand investment philosophies.
You know, they're trying to figure out how they can
get the highest possible return, and off in the conversation
I have with them is what about taxes?

Speaker 2 (20:46):
Have you been keeping an eye on taxes when.

Speaker 1 (20:49):
You're investing in the look at the late strangest look
on their face, and then I bring up this term
called tax alpha and they're like, what exactly are you
talking about? Well, joining us tonight with I think some
great perspective on why all investors need to be focusing
on tax alpha. As our chief investment officer, Andy Stout, Andy,
let's just start with what tax alpha is for investors

(21:11):
who've maybe never thought about it before.

Speaker 3 (21:13):
When you think about the words tax and alpha. One
is good, one is bad. Right, tax is bad, Alpha
is good? What alpha is? Think of alpha as just
excess return above some level. So tax alpha that is
really just the extra return investors can get from being
tax conscious or tax aware investing. So think of it

(21:35):
as that extra return by minimizing tax liabilities rather than
just by thinking about returns in isolation. You want to
take into consideration ways that you can lower your taxes.

Speaker 4 (21:48):
Andy, I'm curious just as an advisor in our office,
and I know you have the unenviable task of having
all of us come to you with all of our
client problems and say, Andy, help us fix it. So,
you know, when you think of some of the more
complex situations you see it come across your desk that
advisors bring to you. You know, for folks that maybe

(22:10):
have a little bit higher net worth and higher complex situation.
What are some of the more common things that you're
asking you're being asked to solve for or fix.

Speaker 3 (22:22):
Well, a lot of it might be related to concentrated stock.
They have so much and you know Procter and Gamble
in the in they but they have a large tax
or you know small tax basis, meaning they would have
to pay a lot of taxes to sell out of it.
They're also concerned about, you know, I have this need
for income. I don't want to pay taxes. How can

(22:44):
we get some you know, some tax free income. Uh,
there's also just the idea of when you take that
money out. So you have clients who want to start
withdrawing money, that's where you want to start thinking about
the sequencing of those returns. And then you also have
people who might be charitably inclined, So how can you

(23:05):
how can you line up the idea to actually donate
the charity, but doing it in such a way that
you know, it's almost like a double win. So rather
than just donating money out of your bank account, right,
you have other gifting strategies that could also reduce your
tax taxical incomes. So those are the things that I
see a lot.

Speaker 4 (23:25):
So when you talk about dovetailing a good investment strategy
with generating some tax alpha and tax efficiency. What have
been a couple of the key strategies that you've seen
come into our industry within the last say five to
ten years, and even specifically to some of the strategies
we have here at all worth that you're excited about.

(23:45):
You know, things were able to bring to the table
to help people with these situations.

Speaker 3 (23:49):
Right, So, I mean there's a lot of things, and
some of these have been around longer than five or
ten years, but just at a high level, I'll start
with asset location, and this is where you take advantage
of putting some invest certain investments in tax bile accounts
and certain investments in non tax bile accounts. So, for instance,
what you might want to do is put your fixed

(24:13):
income or your bonds in a non taxbile a count
because that way you're not paying in your income tax
rate on the income that comes in from bonds. So
depending on what your tax rate is, you know, you
can look at what's called asset location, so locating your
investments and certain types of accounts to minimize your tax liability. Now,

(24:35):
also one thing to keep in mind if you do
have some large positions in your you've held it for
maybe ten months or eleven months, and you're kind of
on the fence, it might be worth considering waiting another
month or two so you've held it for at least
a year, and now instead of paying a short term
capital gain, you're paying a longer term capital gain tax

(24:57):
rate which is much much lower, and that's going to
save you a lot of money. You could I mentioned
gifting a little bit ago abob so using like a
donor advised fund or donating your most highly appreciated stocks
to whatever charity you have in mind. That way, you
lower your overall basis and you're essentially making a very

(25:18):
conscious decision that you know aligns with your values. And
we can get more complex things. I mean, there's some
complex tax loss harvesting that you could do with things
investments called direct indexes, which is a way to really
just get a lot of tax alpha. So a direct
index is really a passive investment, means it tries to

(25:40):
match an index return. However it does this through aggressive
tax loss harvesting. For example, maybe the fund owns both
home depot and lows. It might buy one and sell
another just to generate losses, but you still have that
similar type of exposure. There's lots of other things we
can get into, I mean, alternative assets, like a ten

(26:00):
thirty one DST Delaware Statutory Trust fund that's great for
tax deferral. There's keboz funds, qualified, qualified opportunity zone funds.
You can also get into things like a long short
strategy where you look to generate a lot of tax
offhas on if the market's going up or down, and

(26:21):
then those tax losses can be used offset gains in
other areas. So there's lots of ways that you can do.
Just make sure that it's right for your situation.

Speaker 1 (26:29):
Oh, we're Chief Investment Officer Andy Stout joining us tonight
with an I on being really tax efficient, going through
some great strategies that investors can think through. Andy, I've
gotten many many people in my office who are you know,
coming on board as a client of mine, who have
maybe not you know, some significant assets built up in

(26:50):
taxable accounts, and I will bring up the concept of
tax loss harvesting and they don't know what.

Speaker 2 (26:56):
I'm talking about right there?

Speaker 1 (26:58):
What you what are you speaking of? Say explinch to them.
They're like, yes, yes, sign me up for that. That
makes a lot of sense. Let's walk through that from
an investor's perspective and talk about how that can really help,
especially when you're getting to the point of maybe taking
distributions from those accounts, maybe in retirement or whenever you
need those.

Speaker 3 (27:18):
Yeah, So what tax loss harvesting is, and if you're
not familiar with it might sound like it's not a
great thing, like, oh, I have a loss. That's bad, right, Well,
markets and investments, they go up and down over time.
Over the long run, markets tend to move higher.

Speaker 4 (27:36):
We know that.

Speaker 3 (27:36):
But what we can do is we can take advantage
of those pullbacks. So let's just say, hypothetically, you have
an investment in a large cap index fund. Let's just
say it's the S and P five hundred index fund
for my shares, and let's just say it drops in
value because the market pulls back, which is normal. What
you can do is you could sell that at that

(27:59):
time after dirt drops and essentially lock in the losses
and you can use those losses to offset gains in
other areas. But you still want to have that broad
exposure to large cap socks. So then you could look
at maybe something that's similar but not the same. You
don't want to buy the same fund, but maybe instead
you buy instead of the I shares S and P
five hundred fun you would buy a Vanguard as an example,

(28:22):
or State Street Total US Market or a Russell one
thousand fund. So it's also kind of in a large
cap space, but different fund family, different underlying index, and
you're getting a similar exposure, and that would allow you
to get that same large cap exposure, but you've banked
those losses and you can use those losses to offset

(28:43):
gains in other areas. You can also use up to
three thousand dollars of losses in a given counter year
to lower your taxable income.

Speaker 1 (28:50):
These are just important strategies for investors to think through,
and you know, not just only focus on what kind
of returns am I getting, but also how am I
being asa sufficient as possible, especially for those who are
getting closer to retirement, because I've seen a huge difference
in how much you can keep in your pocket versus
how much you're paying out to Uncle Sam. Great perspective,

(29:10):
of course, from our chief investment officer, Andy Stout. You're
listening to Simply Money presented by all Worth Financial here
on fifty.

Speaker 2 (29:16):
Five krs the talk station.

Speaker 1 (29:21):
You're listening to Simply Money presented by all Worth Financial.
I mean you Wagner along with Bob spons Allar. Do
you have a financial question you need a little help with.
There's a red button you can click them while you're
listening to the show. It's right there on the iHeart
oppacord your question. It's coming straight to us, and it
is time to play fact or fiction, Bob.

Speaker 2 (29:37):
Let's get right to it, fact or fiction.

Speaker 1 (29:40):
Once you reach kind of a certain point, right, your
money has gotten to a certain point, it becomes real
money to you. Active management is always better than passive investing.

Speaker 4 (29:51):
That is fiction. And that's something that has always surprised me.
You know, over the decades I've been doing this as
people fall under the mistaken no that now that they
have more money, their investments need to get more complicated
and therefore more expensive, and that's just not true. Oftentimes,
all of the great things people did to save and

(30:14):
invest and get themselves to the point where they had
have enough money and have a nice net worth saved
up or exactly the things that we should continue to
do in retirement. So, in other words, if it ain't broke,
don't fix it.

Speaker 1 (30:28):
Yeah, I think there's a lot of smoke and mirrors
kind of involved in this. And I'll get some people
into my office who've talked to maybe some other advisors,
and they talk about all these complex strategies that they
think need to be applied, and I haven't doing the
show for a long time.

Speaker 5 (30:42):
I've looked at so.

Speaker 1 (30:42):
Much research and time after time after time again, passive investing, right,
just tracking the markets and the indexes tend to land
you better than someone who's paid a lot of money
on Wall Street to keep their fingers in the.

Speaker 2 (30:58):
Pod and buy and sell things all day every day.

Speaker 1 (31:01):
I think you like the idea of having someone in
there buying and selling things, but often it just the
research points this out.

Speaker 2 (31:09):
It does not end up you.

Speaker 1 (31:10):
Don't get a higher return, you know, by by investing
that way than just having passive investing. Here's another one
for you, fact or fiction. Hedge funds, right, this is
a big buzzword. Do not guarantee better returns than passive investments.
In fact, many underperform if you're looking taking fees into account.

Speaker 4 (31:30):
That's a fact, and that feeds right into the point
that you were just making. You know, amy the more
complex these investments get, you know, they can have lock
up provisions, they almost always have higher fees. So again
it's important to understand what these things do, why you
want to even consider having them in your portfolio. And

(31:50):
that's another good reason to sit down with a fiduciary
advisor that actually knows how these investments work. They can
explain the pros and cons and you know, sometimes keep
you out of harm's way, so to speak.

Speaker 1 (32:03):
Well, and going back to what we just talked about
with our Chief investment officer, Andy Stout, when you have
more money saved and you've seen your net worth grow,
more than focusing on getting more complex in your strategies,
I think the focus also needs to be on how
to be more tax efficient in how you've invested, in
how you're taking these distributions out. So, yes, there are

(32:25):
things need to be thinking about, but it's not getting
like fancier or sexier or more complex in how you're investing.
Here's another one for you, Bob, fact or fiction. A
trust completely will shield your assets from any estate taxes.

Speaker 4 (32:41):
That's fiction, and estate taxes are becoming less and less
of an issue these days. For example, the state of
Ohio does not have an inheritance tax anymore, and the
federal estate tax. You know, for a married filing joint couple,
you know that's done basic wills and trust. You know
you can shelter up to almost twenty eight million dollars

(33:02):
from federal estate taxes. Now, so what a trust really
does is it shields your assets from probate and then
as importantly, it allows you to get much more specific
about the timing over which you want to have your
errors inherit your assets. So that's a reason to consider
a trust. Probate and just more customization of your estate

(33:27):
distribution strategy, not estate taxes factor fiction.

Speaker 1 (33:31):
Real estate always a better investment than stocks or equities
if you have maybe saved.

Speaker 4 (33:37):
More money another fiction, and you know, without getting into
the nitty gritty details here, I mean, you have to
evaluate everything that you buy and invest in for a
net rate of return. And what I find is a
lot of times when you get into real estate, whether
it be your primary residence or a second home or
vacation home, emotion starts to creep into it and we

(34:00):
try to justify or rationalize the reason why we own
real estate and aren't really honest with ourselves about the
true net rate of return after expenses and you know,
management fees and everything else that goes into owning property.

Speaker 2 (34:18):
If you look.

Speaker 1 (34:18):
At how the S and P. Five hundred has done
over the past hundred years versus real estate. Right, just
on a chart, you will see that the stock market
has outperformed the real estate market. Now, in this post
pandemic world, rite post COVID, things are a little bit
all over the place.

Speaker 5 (34:37):
I mean anecdotally.

Speaker 1 (34:38):
The stories are you know, the house down the street
from me just sold for you know, fifty thousand dollars
more than what it was worth, you know, a year ago.
I think those kinds of stories might, you know, over time,
not necessarily be true anymore.

Speaker 4 (34:53):
So.

Speaker 1 (34:53):
I think what you have to figure out is what
do you need your investment to do for you? Right,
and look at it from that perspective instead. Coming up next, we're.

Speaker 2 (35:01):
Going to take you inside Bob's world of wealth. You're
going to want to stick around for that.

Speaker 1 (35:06):
You're listening to Simply Money presented by all Worth Financial
here in fifty five KRZ the talk station. You're listening
to Simply Money presented by all Worth Financial. I mean
you Wagner along with Bob Sponsaler. That music means one thing.
It is time to walk into Bob's world of wealth,

(35:27):
where we are.

Speaker 2 (35:27):
All going to learn something.

Speaker 5 (35:29):
What have you got for us?

Speaker 4 (35:30):
Bob? Well Amy, you and I both talked about this
topic in recent days and weeks. And that's the fact
that we are often surprised when clients come into our
office preparing for retirement and they actually have no idea
what they're planning to spend in retirement.

Speaker 5 (35:46):
Happens in no time.

Speaker 4 (35:48):
You know, we could talk about tax alfa, you know,
internal management expenses, all that kind of sexy stuff to
talk about, but at the end of the day, the
biggest number that's going to really move the needle and
determine the viability of retirement of your retirement plan is
how much are you going to spend? So you know
I've made comments on this, so I wanted to dig

(36:08):
into this for just a couple of minutes. This is
what I mean in terms of what we all need
to be talking about in preparation for retirement and talking
about this with your spouse or signific significant other. We
all know the basic, you know, operating costs of operating
a household, but the things that change and evolve over time,

(36:28):
especially in those retirement years, are are things like, hey,
are the kids still living with you? Are you still
paying for college costs? And are those costs going to
disappear at some point? How's that going to impact your
overall budget. The other thing is travel. When people stop working,
they have more time, and you know, people have been

(36:48):
dreaming for years about having the opportunity to go travel
and do some things. You need to You need to
figure out what that travel budget looks like and have
that be part of your plan. The other thing is grandkids.
You know, when grandkids show up, grandma and grandpa like
to spend money on them. And I've had a couple

(37:09):
of clients say, you know, Bob, no matter what our
retirement plan looks like, we are going to pay for
our grandkids private high school or college education. And I'm like, well,
have we talked about what that costs and is that
going to make you cash poor and retirement? Another thing
is aging parents. You know, and this is just real life.

(37:30):
About the time we get our kids raised, our parents
are starting to get to the age where they're having
health problems, and depending on their financial situation and their
need for care, that can involve some expenses as well.
You've got to factor that into your retirement planning budget.
And then the last thing I wanted to bring up
is just long term care costs. Amy. We talked about

(37:51):
this on the show last week. It's a very important
topic that very few people ever talk about and bring
up with their advisor, and that could be a real
game changer in terms of how much money flies out
of your bank account and investment accounts in your latter years.

Speaker 1 (38:09):
I was standing in the lobby with one of my
clients last week and he said, you know, a few
years ago, I had the assumption that when I retired,
my expenses were going to be lower. And he said,
now that I'm getting closer to retirement, I realized they're
not going to be And I said.

Speaker 2 (38:21):
Yes, that's exactly right.

Speaker 1 (38:23):
I spend more money on the weekends because I have
more free time. What is retirement? It is more free time.
It is more time to travel, to spoil the grandkids,
to do the.

Speaker 2 (38:32):
Things that you like.

Speaker 1 (38:33):
And that's going to be likely more expensive than the
cost of your commute or your dry cleaning or whatever
it was that everyone thought was so much more expensive
when they're working. Important to understand these things. Thanks for listening,
even listening to Simply Money presented by all Worth Financial
here in fifty five krs.

Speaker 2 (38:50):
The talk station