Episode Transcript
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Speaker 1 (00:05):
Tonight an example of tax planning that can serve as
a lesson for all investors. Plus how do you pay
for healthcare if you retire before sixty five? You're listening
to Simply Money, presented by all Worth Financial a Meani
Wagner along with Bob Sponseller. You know, Bob, I think
we see this all the time. There's almost two different
(00:25):
eras for investors. There is the accumulation phase where you're
just putting money into those four one ks hopefully health
savings accounts, taxable accounts, iras, wherever you're saving. But then
when you get closer to retirements, you kind of enter
a new era. You kind of move a little bit
out of that accumulation phase into the like distribution phase.
(00:50):
And the reason why I'm bringing those up is because
if you're really intentional in both of those phases, you
can also save yourself a lot of money in taxes.
It's a concept called tax alpha, and I don't think
a lot of people think through it.
Speaker 2 (01:08):
You're right, Amy, and you know, I don't like all
these industry jargon term you know, like tax alpha.
Speaker 3 (01:15):
People are probably wondering what is that.
Speaker 2 (01:17):
Well, let's just boil this down and talk about what
it means and then.
Speaker 3 (01:20):
How to apply it.
Speaker 2 (01:22):
Tax alpha is just a fancy industry jargon term that says, hey,
it describes the additional return or value that an investor
can achieve by simply managing their taxes effectively. Yes, and
as you've already stated, there tends to be two complete,
sometimes completely different phases of life accumulation stage and distribution stage,
(01:46):
and you have to have a good tax strategy in
place for both of those.
Speaker 1 (01:51):
So let's talk about what this means in practicality. Right,
for someone who has always focused on only your investments,
maybe you really well versed. You know what your four
to one K is invested in, you know that it's
the right asset allocation, you're making sure that it's rebalanced
every year or two, but you've never really thought about
the whole tax planning part of this puzzle. And this
(02:13):
is a huge, huge piece. I mean, I've seen for
someone who and we'll get to this in a few minutes,
but for someone who has taken tax planning into account,
the difference can be not even just tens of thousands
of dollars, hundreds of thousands of dollars. If you get
this right. One of the main places I like to
start having this conversation is you have to be saving
(02:34):
in different buckets, different kinds of accounts, and in those buckets,
we'll have different tax treatments to them, and it's going
to give you a lot more flexibility and retirement. But
also for someone in your thirties, right, if you're saving
into something called a taxable brokerage account, right, that word
taxable does not sound fun to anyone, but it's actually
(02:55):
not a bad thing. Uh, it's just taxed differently. Well,
it gives you some flexibility, first of all, to tap
those dollars before you're fifty nine and a half. And second,
most of the time, the money that goes into that account,
when you take it out, it's taxed at a long
term capital gains rate if the money's been in there
for at least a year, and for most of us,
(03:16):
that's going to be in some cases maybe half or
at least significantly lower than your regular income tax rate.
Speaker 2 (03:26):
Yeah, and I like to look at this kind of chronologically.
I don't have a lot of clients anymore that are
in their thirties, but my wife and I have three
grown sons that are in their late twenties, early thirties
and are getting started in life, you know, just getting married,
buying their first home.
Speaker 3 (03:42):
Thankfully, they have jobs and for one k's.
Speaker 2 (03:46):
So when I'm able to, you know, wrangle my sons
down and have them sit down at the table and
look at this, I mean, it's amazing the differences, and
it's fun to illustrate for them the differences to your
point of what the result is going to be twenty five,
thirty forty years down the road, based on what.
Speaker 3 (04:08):
Bucket you put this money into starting now.
Speaker 2 (04:11):
And you know, a key point and we talk about
this a lot, Roth, Roth, Roth and Roth. Yeah, particularly
for folks that are in a lower income strata right now,
you've got to maximize that Roth opportunity both through Roth
iras and WROTH four on one ks.
Speaker 3 (04:30):
The differences are monumental.
Speaker 1 (04:33):
I just had a client in my office past couple
of weeks and he was getting ready to retire and
had a pretty good savings in his four to one K.
He was doing well. Problem is, one hundred percent of
what he had was in that traditional four to one
k traditional IRA, so totally tax deferd bucket. And so
(04:56):
we talked about the fact that while his accounts have
done great through the years, have grown really well, he's
also going to have to pay taxes on every single
dollar that he pulls from that account. And he said,
you know, I wish someone would have told me years
ago about WROTH because I would have put money in there.
The difference being at the point that you pay taxes, right,
(05:16):
you're putting money into a WROTH account, you're paying taxes
at that point, but as it's invested and it grows
and it compounds, you don't ever have to pay taxes
on that money.
Speaker 3 (05:26):
Uh.
Speaker 1 (05:27):
And that can be a huge gift to yourself later
in life. So to your point, you know, I've got
a nephew who's getting married this year. He lives in Denver,
and I say to my sister all the time, when
he gets back in town, we're sitting down because this
is one of the things I want to make sure
that he's doing. I want to make sure that they're
taking advantage of putting dollars into those WROTH accounts so
(05:48):
that it can just grow and grow and grow.
Speaker 2 (05:50):
So he thought you were going to take him to
a ballgame or a concert or something.
Speaker 3 (05:54):
No, this is coot or school with Amy. He may
not decide I had to show up.
Speaker 1 (06:00):
Any I'll buy him a beer. But we're going to
talk about this stuff too, because it's important, right.
Speaker 2 (06:07):
All right, Well, at the other end of the spectrum,
and I'm thinking of three or four meetings that I've
had with prospective clients over the last year, where these
are folks with several million dollars and you know, I
have literally said to them, because they've saved well, they
have enough money. Their their concern is not running out
(06:29):
of money. They're concern could be or should be tax
efficiency of how to withdraw the money. And I've literally
looked these people in the eye and said, hey, mister
missus client, you don't need us. You know you're gonna
be fine. You may want us to be involved. And
(06:49):
here's why. And the evolution of our industry again for
those fiduciary advisors who have really grasped this and are
able to implement strategies with their clients. The software, the technology,
the ability to illustrate different tax scenarios has grown just
exponentially in the last five or ten years. And it's
(07:13):
fun and it's extremely impactful from a financial standpoint when
you can show somebody how to take their money during
retirement and save a boatload in taxes.
Speaker 1 (07:25):
You're listening to simply money presented by all Worth Financial.
I mean you Wagner along with Bob sponseller. For those
who have saved well invested right, watched your money grow
through the years? Are you missing out? Because have you
fully ticket advantage of all the tax planning strategies available
to you. We see people I would say ninety percent
(07:48):
of the time, someone comes into my office and they've
done maybe a great job on their own, they've been
a di wire for years. They are really well versed
on how they're invested. But this is the piece that
they're missing. Don't fully understand distribution strategies, the different kinds
of buckets of accounts that they should be saving it
in how to take full advantage of them. You know,
(08:10):
I actually have several clients who are in their thirties,
and I've had this conversation a lot recently about again
these taxable accounts, because the benefits are first of all,
your tax at a lower rate, but second those dollars
don't have to be tied up until you're fifty nine
and a half. So for anyone who's interested in retiring early.
This is kind of an aside from this tax planning conversation,
(08:31):
but these are the dollars that you would use to
kind of bridge the time between now whenever you're retiring,
and when you get to fifty nine and a half.
So there's lots of reasons why even from an early
age as an investor, you should be saving in different
kinds of accounts that have different tax treatments. Yes, you
(08:51):
can be more tax efficient, but also you're going to
give yourself more flexibility later on exactly.
Speaker 2 (08:57):
And when we think about taxible accounts historically usually people
you know, that term comes with a negative connotation. Act
you know, I've got to pay taxes on my gains
every year. That's not necessarily the case anymore with some
of these tax efficient strategies, and you know, we have
one at all Worth where you know, and I won't
(09:20):
get into the all the deal, but there's with the
software and the algorithms and everything that we're able to
utilize with our investment management team, and they do a
wonderful job of this. You can you can have some
things running in the background to harvest short term losses
and use them later to offset gains. And I'll tell you,
(09:41):
over the last two years, for example, you know, in
balanced moderate risk portfolios taxable portfolios, we've seen clients earn
fourteen fifteen, sixteen percent over the last couple of years.
And when I look at what their tax bill has
been and is going to it's darn near zero. So
(10:03):
you know, you with some good planning and a good
strategy in place, you can really make a quote unquote
taxable account feel like a non taxable account.
Speaker 3 (10:14):
It's wonderful.
Speaker 1 (10:15):
Yeah, And you know, and I've even known some people
who've tried to, and this is called tax loss harvesting
what we're talking about here, try to do it on
their own, and it was maddening, right, I mean, because
you're constantly having to check it. To your point, we
have software in programs that we run over these accounts
that and this is just a very simple kind of
example of this. But say you have a position in
(10:36):
lows and loads tends to be down. You got to
catch it on the day that it's down or whatever.
You know, it's a down position, you can sell it,
hold on to that money that you've sold, wait thirty days,
and then buy home depot, so you are just as
well diversified in the same kind of asset that you
were in before, but now you've harvested that loss so
(10:56):
that when you're taking a distribution, when you're selling a
position in that you can then harvest that loss against
that gain and be super tax efficient when you're taking
money out of these accounts. So these are strategies that
I'm not even going to say sophisticated investors. I think
all investors have to be thinking through.
Speaker 2 (11:17):
It's just moving from the nineteen nineties to twenty twenty
five and taking advantage of what's out there. And again,
we're not the only people on the planet that do this.
There are many good fiduciary advisors that can employ these strategies.
But the point is have the conversation with your advisor
(11:39):
and make sure these things are being talked about as
part of your comprehensive financial plan.
Speaker 1 (11:44):
Well, and I think I'm going to turn it around
and say, if your advisor isn't talking to you about this,
figure out why bring it up. Yeah. I mean, I've
had several people come into my office lately who've come
on board from other firms because and one of them
made them. I think a Roth conversion makes sense to me.
I brought it up to my advisor. He said, yeah,
(12:05):
we've got a guy that can talk to you about that.
He said, that was three years ago. I've never met
that guy. You know, these are conversations that need to
be have. And you know, here's an example, right, two
identical investors, both with a million dollars in assets at
an eight percent rate of return, and they've got twenty
years until they need that money. Right, they are invested
(12:25):
exactly the same so at the end, right, they're going
to have the same amounts in those accounts. But Investor
A was taking advantage of all the tax planning strategies.
Investor B was not. In the difference, and we've run
this scenario, right, we've kind of done this case study
here at all worth the difference between the investor that
(12:46):
was employing every text planning strategy available to them and
the one who was just oblivious to all of them,
six hundred thousand dollars that they were able to keep
in their pocket versus the other one that had to
hand it over to Uncle Sam because they just didn't
know any better.
Speaker 2 (13:00):
And in the example you cited, Amy, the gross investment
return was identical.
Speaker 1 (13:07):
Of course.
Speaker 3 (13:08):
Yeah, it wasn't like.
Speaker 2 (13:09):
You know, we had some ace stockpicker over here beating
the market. Inside it, it was doing the planning and
taking advantage of tax alpha planning strategies.
Speaker 1 (13:20):
Here's the all Worth advice when it comes to wealth management,
it's really not just about how much you earn, it's
how much you keep in your pocket. Come give next
strategies to consider. If you decide to stop working before
you're sixty five, how do you pay for healthcare? You're
listening to Simply Money presented by all Worth Financial here
on fifty five KRC, the talk station. You're listening to
(13:44):
Simply Money presented by all Worth Financial. I mean you
Wagner along with Bob sponseller straight ahead at six forty three.
We're helping you maximize the benefits of maybe owning and
living in multiple homes. How do you keep track of
that in? What strategies can you employ to get yourself
in the best shape possible if that's your situation? Okay,
you know, Bob, I talk to a lot of people
(14:06):
who weird, love love love to retire Early in the
hurdle for many is healthcare. I think we take advantage.
We just take for granted how much our employers pay
of that health insurance. Right, and once you're looking at okay,
I'm going to have to cover this bill fully on
(14:27):
my own for three years if I'm going to retire
at sixty two before I get to medicare age. For
some people it's like, well, that's not going to work.
I have to keep working. But for those who can
pull it off, let's talk through just what they need
to be thinking through.
Speaker 2 (14:41):
Yeah, people do underestimate the value of an employer contribution
to their health insurance until they, to your point, have
to get that check book out and write the check themselves.
So it is part of your compensation and should be
part of any compensation discussion when you're looking.
Speaker 3 (14:58):
For a job. But that's a whole other topic.
Speaker 2 (15:00):
Let's talk about, to your point, how do we transition,
you know, into retirement. The way I like to look
at this is there's there's three options. Three main options
cobra coverage, spousal coverage, and then going out and buying
you know, individual coverage either on the exchange or through
you know, buying buying insurance directly from a from an
(15:22):
insurance company. Obviously the best choice is to see if
you can get on your spouse's plan, and a lot
of times you can, sometimes you can't. What I find
people overlook is just Cobra coverage if you're going to leave,
especially if you've got a short runway between when you
(15:42):
retire and when you go on.
Speaker 1 (15:44):
Medicare eighteen months or less, right.
Speaker 2 (15:47):
Eighteen months or less. In almost all cases, you can
stay on your current plan. Now you've got to pay
for it, yeah, but you can stay. You know, it's
back to the if you like your plan, you could
keep your plan as long as you're will to write
the check. That ends up being a pretty good option
for a lot of people. And then thirdly, if you've
got to go out and shop under the Affordable Care Act,
(16:08):
there are the exchanges out there, and I'll cite one
example amy where I saw a client do this at
the end of last year. And these are not These
are high net worth people. Where we were we were
just able to structure their income to bring it way
down over that two year period between when the spouse
(16:29):
wants to go on.
Speaker 3 (16:30):
Medicare or can go on Medicare. And there are you.
Speaker 2 (16:35):
Know, supplements that come from the government for these exchange
ACA plans, and we were able to, you know, get
some subsidies and get the wife on one of these
plans and save them a boat load and health insurance
premiums just by being smart about how we took their
retirement income over the next you know, twelve to twenty
(16:57):
four months and back to our prior segment. They had
some savings, they had some non taxable money they could
get at, so we could generate the income that we
need without generating taxable income, and that kept things low
enough where they could get on the exchange and get
some very nice subsidies.
Speaker 1 (17:16):
It's another strategy, right, And this is something that might
be available to you that you've never thought through. And
for listen, anyone who is younger in wanting to retire early.
You know, I'm going to throw this into the conversation,
but a health savings account, right, if a high deductible
health care plan makes sense for you and you think
you might want to retire early, or even if you don't,
(17:38):
this is money you'll never pay taxes on if you
use this account correctly. It's a gift from the government
like nothing else. You put the money in, right, tax deferred,
then it grows tax free, and if you take it
out for qualified health care expenses later in life, you
never pay taxes. Many people put that money into the
health savings account and then they take it right back
(17:59):
out two weeks when they have a copay. I'm going
to suggest, and as I always do, you build up
your emergency fund to pay for your medical expenses as
you go, put the money into the health savings account.
Make sure it's invested. It's going to grow and compound.
Then maybe you get to fifty nine or sixty two
or whatever it is. In whichever plan you're paying for,
(18:22):
you can help cover the cost with a health savings
account because you've got lots of money in it, and
if it's going toward healthcare expenses, you're not going to
pay taxes on that money. Not ever.
Speaker 2 (18:33):
Yeah, I've never run into a person who has regretted
maximizing their health savings account. I mean, it's a gift
from above, so you know.
Speaker 3 (18:44):
Think of it.
Speaker 2 (18:44):
We need to think of it as another form of
a retirement plan. I mean, people get very excited about
their four toh one K plan and all the investment
options and blah blah blah. Most people forget about the
fact that you got to your point. This triple tax
advantage vehicle that we can all use. If we're in
a high deductible health plan, we got to use it
and maximize it and leverage it and invest that money
(19:07):
for the long term. There's huge benefits at the end
when you need to take the money out.
Speaker 1 (19:11):
I'm going to also say, if you are on your
spouse's plan and you're retiring early, maybe have a backup plan.
I had someone who's retiring last week. He's retiring several
years before her, and she said, you know, this is fine,
but I don't know that I want to work this long.
I don't know if I want to carry that healthcare
for both of us for a few years. So he said, okay,
let's do it for as long as we can, and
(19:31):
then we've got a backup plan in place so where
we can bridge that gap.
Speaker 2 (19:34):
So the wrong answer would be, honey, you need to
stay at work and by the way, up, I'll see
you later.
Speaker 3 (19:41):
Time on the golf, go play golf today.
Speaker 1 (19:43):
Exactly. Here's the all Worth advice. Retirement is really your
time to enjoy life. So let's en sure healthcare is
a part of your plan and it's not a stressor.
Coming up next, we're going to help you wipe your
personal information off your computer if you ever feel the
need to do so. You're listening to some money presented
by all Worth Financial here in fifty five KRC the
talk station. You're listening to simply money presented by all
(20:08):
Worth Financial. I me, me, Wagner, what do you do
with those old devices laptops, phones? If you're with me
or if you're me, I don't know the answer to
that question normally, so we just stockpile them in my basement,
which I have a feeling is not the right answer.
Sore joining us is our tech expert day matter, the
stockpiling of old devices, just collecting dust in the basement
(20:30):
probably not the best answer. What should we be doing, Dave.
Speaker 4 (20:34):
Well, I mean, this is a really important question that
I think is often overlooked. And whether it's your old PC,
your Mac, your phone, or some other type of device
that could collect data, even a printer, for example. A
lot of modern printers, especially more enterprise grade printers, have
memory and the ability to store data in them, and
hackers will often go after these printers because they know
there might be sensitive data stored in the memory of
(20:56):
the printer. So and sadly, you know how I feel
about so called devices. Any are Internet of things privacy
and security dumpster fire. Even some of those devices are
potentially a security and privacy concern for you. For example,
if you have a car and it's got an enfertainment
center all the new ones do, and you float your
phone into it, it's entirely possible that entertainment center has
(21:17):
sensitive data on it. So while most people, if they
think about this at all, and I think many don't,
and I fully understand that. That's why I'm glad you
wanted to talk about this today. It's more than just
your PC. If you are going to decommission and expunde
a device that could contain sensitive data, you really need
to think about how to do that in a way
(21:38):
that's going to ensure sensitive data passwords, bank account numbers,
anything like that aren't still on that device, because you know,
unless you physically destroy it, who knows where we'll end up.
Speaker 1 (21:49):
So the thought of this overwhelms me, you know, I mean,
I just it's like I don't even know. You know,
you've got pictures, you've got passwords, you've got on files,
You've got all of that stuff. So let's start with
a PC with the laptop. What do we do? How
do we do it? I know some places will have
certain days where you can bring like old technology, but
I don't even know if that's a good answer.
Speaker 4 (22:12):
Well, it kind of depends on what what's your ultimate
goal for that old PC is? If you have a
PC that's still got some life in it, and you know,
there are plenty of charitable organizations that would love to
get their hands on that stuff because they can repurpose
it and get it to less forward to the people.
So you know, maybe you want to give it to
a family member or a kid. My first answer is
what do you want to do with it? You know,
(22:34):
if you truly have no use for it, and it's
okay to physically destroy it, and I'll come back to
that in a second, that's different than if you want
to be able to repurpose it to someone else. In
either case, though, you know, don't just go throw it
in the garbage, don't set it out and then recycling,
because again someone driving down the street that knows the
value of the data. You know, a lot of times
any when devices are stolen, they're not stealing the device
(22:55):
because of its intrinsic hardware value. They're stealing the device
because of the data on it. Right, this is the
same thing. So you know, if you have a Windows
based PC, one of the things you could do is
get into the settings and basically reset it back to
the factory defaults. Now, I want to be clear, and
this is something that will generally apply to almost any
sort of device, because one of the problems, of course,
(23:16):
is how you would do this on a Mac versus
a Windows based computer versus an Android phone or whatever
is going to be a little bit different. But you know,
most modern devices have the capability to reset the device
to the factory default okay, and you know that will
quote delete the data on it. Now, I want to
be clear. When you delete data, in almost every case,
you're not actually physically removing the data. You're telling the
(23:38):
device that space is available, and it will originally be overwritten.
This is how people find themselves in trouble because they
think they have quote deleted something but it's still there.
And when the right tools and the right skills aren't
much by the way, it's easily retrievable. But you know,
doing a factory default reset is going to be way
better than nothing, and that's going to prevent you know,
casual hackers, interlopers, et cetera from access to that data.
(24:00):
If you really want to clean this system, you really
have three choices. You have to physically destroy it somehow
you have to, and this would be the best advice,
I believe for most people. Take it to like an
e cycling center. There are many in town. You can
look this up and say, you know, I don't need
this device anymore. They'll give you a certificate that says
they know how to use the right processes and that
(24:21):
they you know, attest to the fact that they have
clean sanitized in the business is the term that device,
so that your data is no longer on it, and
then you know they'll resell it or whatever. You can
download software that will wipe the device, that'll just overwrite
the memory and the device X number of times to
make it very very difficult to recover. But for most people,
(24:42):
my advice would be, you know, unless you want to
physically destroy it, and even then, if you don't know
what you're doing, that's question. Your best advice would be
defined at a local company that specializes in e cycling
thrice recycling use electronic devices, take it to them and
get that certificate from the the confirms they have securely
white slash sanitize that device.
Speaker 1 (25:05):
I like the fact, David earlier you brought up you're
you know, you're not a fan of these Internet of
things anything that's you know, attached to the Internet, but
most of us have smart TVs, smart appliances, whatever it is. Now,
I wouldn't even think twice about it if this TV
wasn't working anymore whatever, donating in or get rid of
it without even wiping anything. So is that something too
(25:26):
that should just go back to the default settings or
what do we need to be doing those kinds of devices?
Speaker 4 (25:33):
Yeah, Amy, you know, I just thoroughly despise the Internet
of Things because most of this stuff is a privacy
and security dumpster fire to have, you know, a perverse
business model of trying to be first to market, market
share and ease of use versus your privacy and security.
And while I'm not inherently against the idea of smart
devices that make your life more convenient, we're in a
(25:53):
place now where again, these companies' objectives do not really
align with your objectives as a consumer that cares about
privacy and security. So all of that said, you know,
any device that has a camera, any device that has
a Microsoft any device to connect to the Internet and
can potentially collect and share data is a potential risk
for having data that's still on it when you get
(26:14):
rid of it, you know, assuming the thing isn't just
completely dead and you can't interface with it all. My
advice would be set the thing back to the factory defaults,
which would be more likely than not to reset all
the data in there, and then you know, destroy this thing,
take it to a recycling center something like that. You know,
the data that your smart TV would potentially have is
(26:34):
going to be a lot less risky than the data
your work PC that you also use to access your
bank accounts and so forth. But in any electronic device
that can capture, store, and send data is a potential risk,
and it is important for people to consider these sorts
of things, not only as they're purchasing them, but especially
when they decide to get rid of it.
Speaker 1 (26:54):
You brought up a car before, and it's funny that
you say that I was recently having a conversation with them,
one who had bought a used vehicle, a really nice one,
and they casually mentioned that it had been kind of
a local celebrity's wife or something like that before, and
I was like, well, how do you know that, Like
do they tell you that when you bought it? They
were like, oh no, But when we got into the
(27:16):
car and started driving it, all of like the pin
place or at home on the computer system was their house,
so we knew it was it was theirs. And I
was like, oh, that's that's creepy. I wouldn't want to
turn in an old car and then have someone be
showing up in my driveway because they bought that car.
Would have never thought about that before.
Speaker 4 (27:38):
Yeah, two things to think about. First off, I strongly
encouraged anyone that's running a car do not connect your
phone to the infotainment in any way that it transfers information.
I mean, I get hands free calling in that sort
of thing. Some cars will support like a call only
mode where it doesn't transfer any data. But if you
rent a car and you connect your phone to it,
all your stuff gets thinking that that entertainment center you
(28:01):
turn that car back in. Who knows who has access
to that or what happens to it. There's a well
documented report where a researcher went out went the junkyards,
bought entertainment centers from junk cars and was able to
recover all kinds of it, you know, sensitive intimate texts
between people and all kinds of stuff. But as far
as your own car, my suggestion to you would be,
(28:21):
when it's time to get rid of the car for
whatever reason, you go back to the dealer and you say,
I want to ensure that any of my personal information
stored in this entertainment center is white. And I would
encourage people to take even a further step. Check out
the Mozilla Privacy Not Included report on recent cars. Mozilla
they make web browser software and other software. I have
(28:44):
a site called Privacy Not Included that takes a look
at the so called smart device Internet of things world,
and they did a gigantic deep dive into modern cars.
And I think most people will be shocked when they
under fully understand the amount of sensitive data that's being
collected about them only through the phones, but through the cameras,
the microphones, the censors, and the cars. What they're doing
(29:05):
with that data, which will just further incentivize you to
understand that that infotainment center is a potential significant risk
to you when you get rid of a car if
you don't have it sanitized, slash wipe.
Speaker 1 (29:17):
It's always eye opening. Dave had our tech expert from
Interest id right what you need to do old cars,
the old devices, phones, laptops, make sure you're taking the
proper steps to protect your information and yourself. You're listening
to Simply Money presented by all Worth Financial here on
fifty five KRC, the talk station. You're listening to Simply
(29:41):
Money presented my all Worth Financial. Immi Wagner along with
Bob Spon's already have a financial question that's keeping you
up at night. There's a red button you can click
them while you're listening to the show. It's right there
on the iHeart operacord. Your question is coming straight to us.
We can help you figure it out. Okay, Are you
like me and just every winter your dream of becoming
a snowbird? Lots of people around here right have places
(30:04):
in Florida. I know some who have a place in
Arizona and then they come back here for the summer.
So I think there's a lot of great things about
this way of living, and there's also some challenges. So
we kind of want to talk you through some of
the things you need to think through if this might
be something you're considering.
Speaker 2 (30:21):
Yeah, and a big consideration is taxes and then the
ongoing expenses of owning and trying to operate a second home.
Speaker 3 (30:31):
And I've had some experience doing that.
Speaker 2 (30:35):
My wife would tell you, Bob, you got way ahead
of yourself here. You know, back in two thousand and eight,
when our kids were still in middle school, you know,
I got the great idea of buying a condo in
cs to Key, Florida.
Speaker 3 (30:49):
You know, I had always loved the place.
Speaker 2 (30:51):
It was wonderful, it had a boat slip, you know,
all that I was all ready to roll and come
to find out, you know, your kids are busy, you
don't have you got to work, you don't have time
to get down there. And then I start trying to
rent the place, and so just to land the plane here,
you're paying property taxes, you're paying maintenance, you're paying HOA fees.
(31:15):
And then oh, by the way, when you try to
go rent the place, you know, if you're using somebody
to help you with all that they're taking a pretty
hefty cut. These things rarely, if ever, cash flow themselves. Yeah,
and so you got to go in with your eyes
wide open and make sure you've accounted for all the
(31:36):
costs before you just get enamored with the sunshine in
the beach.
Speaker 1 (31:40):
Yeah, you took the words right out of my mouth.
The concepts right. It's Nathan Backgrach, one of our founders,
used to always say the perfection of theory versus the
mess of reality, right, sounds great, and then the reality
of things may not be so great. We're not going
to try to talk you out of this. We do
want to talk you through so maybe logistical considerations here.
One of them is, I've clients so I talked to
(32:02):
yesterday who live in Florida also have a home in Indiana,
and they are in Florida six months and one day
to establish residency there. Of course, they're taking advantage of
the fact no income tax in the state of Florida,
which is great. They have to take very careful records
of living there so that they can prove that predominantly
(32:25):
they're living in that state versus the tri state.
Speaker 2 (32:29):
Yeah, most states require you to spend more than one
hundred and eighty three days a year, in other words,
over half the year physically in that location in order
to claim residency. And I know my CPA is a
stickler for that. So you've got to save receipts. Even
at something as simple as you know, I bought gas
(32:50):
at this gas station in Sarasota on this day, or
I had a meal here, you've got to be able
to demonstrate that you've actually been there.
Speaker 3 (32:59):
The other thing you've.
Speaker 2 (33:00):
Got to do is establish your driver's license, voter registration,
you know, and other financial accounts to prove your residency.
So if you don't do all of those things and
then try to claim your resident of Florida to save taxes,
you might you might have a negative surprise.
Speaker 1 (33:17):
Yeah, good luck with that.
Speaker 2 (33:19):
You know.
Speaker 1 (33:19):
Another thing to think through if you've got a place
down there and you're traveling back and forth often is
just to set up a credit card, open a credit
card that has travel benefits so that maybe you're getting
free flights on Delta or whatever your airline of choices,
so that you can take advantage because it's not cheap
to get back and forth, right, And so that's something
you know, Hey, I need to go check on the condo.
(33:41):
I'm going to fly down there for this weekend. Well,
at least you've got the points to do that, and
you're not shelling out four five hundred dollars for that flight.
Even that can be a small consideration, but it can
save you over the long run.
Speaker 2 (33:53):
One other big thing I want to mention, you know,
because I've experienced this with more than a few clients
just within the past two years, is.
Speaker 3 (34:01):
How that property is titled. You know.
Speaker 2 (34:04):
And I've got clients where we've done all the right
of state planning, we've got a trust in place. We
titled their home in Ohio in their trust, and then
they get all excited about buying that.
Speaker 3 (34:16):
Home down in Florida. They run to the closing table
and what do they do. They title the property.
Speaker 2 (34:22):
In their name or jointly, and you subject that property
to probate, and then we've got.
Speaker 3 (34:28):
To go back and get with the trust.
Speaker 4 (34:32):
Yeah.
Speaker 3 (34:32):
Yeah, And there's costs and expense and time.
Speaker 2 (34:34):
So you know, just make sure you title whatever you're
going to buy in whatever location in your trust if
you have one, in order to avoid probate, which was
the whole point of one of the main points of
doing all of your state planning work in the first place.
Speaker 1 (34:52):
Yeah, to be clear, we are not anti snowbird. I
will be someday flying self with the rest of you
who are who are flying self in January. Just go
into it with eyes wide open and understand all the
logistics before you jump in. Here's the all Worth advice.
Living in multiple places can give you some great flexibility, opportunities,
great lifestyle. You just have to put some thoughtful planning
(35:14):
in to make sure you're making the most of it.
Coming up next, a little Wagner wisdom for you. You're
listening to Simply Money presented by all Worth Financial here
in fifty five krs the talk station. You're listening to
simply Money presented by all Worth Financial. I mean you
(35:35):
Wagner along with Bob sponseller. That's huge open must mean
only one thing. It is time for some Wagner wisdom.
I hope I can live up to that opening listen.
I often think about and maybe it's because I'm in
this money business and I talk about this all day
every day, But what would I have told my younger
(35:55):
self right if I could go back and do it
all over again when it comes to money. I'm not
going to pretend that I've always done it all right,
I haven't. You know, there were times when there was
a time when we bought a home when we were
younger that we could hardly afford, and we prioritize that
home oversaving for retirement. And I think if I could
go back and tell my younger self, it would be like, yeah,
(36:17):
the home is great. But man, if you're taking advantage
of the power of compounding when you're in your twenties
and thirties, if you're putting as much as you can
ten fifteen, twenty percent of what you're bringing home into
a retirement account, oh, I mean, you're going to be
set for life later.
Speaker 2 (36:35):
Amy, I have a feeling if tiny homes existed when
you were twenty two to twenty three years old, you'd
probably still be living in one so you could maximize
your HSA account.
Speaker 3 (36:45):
Tell me I'm wrong.
Speaker 1 (36:46):
Not a lie, not a lie at all. I mentioned
earlier in the show. I've got a nephew who's getting married,
and I've had several younger clients who've come on board lately,
and it's funny because they look at me with eyeswiight
open and they're like, you are really passionate about this,
and I'm like, it's because it's like I get to
talk to my younger self and say, hey, these three
(37:07):
or four things right. If you were doing these three
or four things right now, you're gonna be set. We
mentioned health savings account right, prioritizing saving in those, making
sure it's invested, not spending them as you go. Dollars
in a roth account, you're paying taxes on it now,
and then it's going to grow until you get to retirement,
till you need to tap those funds and you're not
(37:27):
gonna have to pay taxes on it. I mean, Bob, anything,
you know, if you could talk to your younger self anything,
you would say, ha, you should probably do this.
Speaker 2 (37:36):
I wouldn't have bought a condo in Florida when my
kids were in middle school. It was a great place,
but we we bought it in two thousand and eight
and ended up selling it in twenty fourteen.
Speaker 3 (37:49):
And again, I should have listened to my wife. That's
that's what that's the message. Listen to your wife. Yo.
What did I do?
Speaker 2 (37:56):
I flew down there, looked at this place, and my
wife never even saw it, and I called her on
the phone and said, honey, do I have permission to
buy this?
Speaker 1 (38:07):
Oh?
Speaker 2 (38:08):
It was a total emotional thing. My dad had just
passed away.
Speaker 4 (38:13):
You would.
Speaker 2 (38:16):
Yes, Yeah, So that's I should have had Nathan Bacharack
whispering in my ear in two thousand and eight.
Speaker 1 (38:23):
Exactly. Thanks for listening. You've listening to Simply Money, presented
by all Worth Financial here in fifty five KRC, the
talk station
Tonight an example of tax planning that can serve as
a lesson for all investors. Plus how do you pay
for healthcare if you retire before sixty five? You're listening
to Simply Money, presented by all Worth Financial a Meani
Wagner along with Bob Sponseller. You know, Bob, I think
we see this all the time. There's almost two different
(00:25):
eras for investors. There is the accumulation phase where you're
just putting money into those four one ks hopefully health
savings accounts, taxable accounts, iras, wherever you're saving. But then
when you get closer to retirements, you kind of enter
a new era. You kind of move a little bit
out of that accumulation phase into the like distribution phase.
(00:50):
And the reason why I'm bringing those up is because
if you're really intentional in both of those phases, you
can also save yourself a lot of money in taxes.
It's a concept called tax alpha, and I don't think
a lot of people think through it.
Speaker 2 (01:08):
You're right, Amy, and you know, I don't like all
these industry jargon term you know, like tax alpha.
Speaker 3 (01:15):
People are probably wondering what is that.
Speaker 2 (01:17):
Well, let's just boil this down and talk about what
it means and then.
Speaker 3 (01:20):
How to apply it.
Speaker 2 (01:22):
Tax alpha is just a fancy industry jargon term that says, hey,
it describes the additional return or value that an investor
can achieve by simply managing their taxes effectively. Yes, and
as you've already stated, there tends to be two complete,
sometimes completely different phases of life accumulation stage and distribution stage,
(01:46):
and you have to have a good tax strategy in
place for both of those.
Speaker 1 (01:51):
So let's talk about what this means in practicality. Right,
for someone who has always focused on only your investments,
maybe you really well versed. You know what your four
to one K is invested in, you know that it's
the right asset allocation, you're making sure that it's rebalanced
every year or two, but you've never really thought about
the whole tax planning part of this puzzle. And this
(02:13):
is a huge, huge piece. I mean, I've seen for
someone who and we'll get to this in a few minutes,
but for someone who has taken tax planning into account,
the difference can be not even just tens of thousands
of dollars, hundreds of thousands of dollars. If you get
this right. One of the main places I like to
start having this conversation is you have to be saving
(02:34):
in different buckets, different kinds of accounts, and in those buckets,
we'll have different tax treatments to them, and it's going
to give you a lot more flexibility and retirement. But
also for someone in your thirties, right, if you're saving
into something called a taxable brokerage account, right, that word
taxable does not sound fun to anyone, but it's actually
(02:55):
not a bad thing. Uh, it's just taxed differently. Well,
it gives you some flexibility, first of all, to tap
those dollars before you're fifty nine and a half. And second,
most of the time, the money that goes into that account,
when you take it out, it's taxed at a long
term capital gains rate if the money's been in there
for at least a year, and for most of us,
(03:16):
that's going to be in some cases maybe half or
at least significantly lower than your regular income tax rate.
Speaker 2 (03:26):
Yeah, and I like to look at this kind of chronologically.
I don't have a lot of clients anymore that are
in their thirties, but my wife and I have three
grown sons that are in their late twenties, early thirties
and are getting started in life, you know, just getting married,
buying their first home.
Speaker 3 (03:42):
Thankfully, they have jobs and for one k's.
Speaker 2 (03:46):
So when I'm able to, you know, wrangle my sons
down and have them sit down at the table and
look at this, I mean, it's amazing the differences, and
it's fun to illustrate for them the differences to your
point of what the result is going to be twenty five,
thirty forty years down the road, based on what.
Speaker 3 (04:08):
Bucket you put this money into starting now.
Speaker 2 (04:11):
And you know, a key point and we talk about
this a lot, Roth, Roth, Roth and Roth. Yeah, particularly
for folks that are in a lower income strata right now,
you've got to maximize that Roth opportunity both through Roth
iras and WROTH four on one ks.
Speaker 3 (04:30):
The differences are monumental.
Speaker 1 (04:33):
I just had a client in my office past couple
of weeks and he was getting ready to retire and
had a pretty good savings in his four to one K.
He was doing well. Problem is, one hundred percent of
what he had was in that traditional four to one
k traditional IRA, so totally tax deferd bucket. And so
(04:56):
we talked about the fact that while his accounts have
done great through the years, have grown really well, he's
also going to have to pay taxes on every single
dollar that he pulls from that account. And he said,
you know, I wish someone would have told me years
ago about WROTH because I would have put money in there.
The difference being at the point that you pay taxes, right,
(05:16):
you're putting money into a WROTH account, you're paying taxes
at that point, but as it's invested and it grows
and it compounds, you don't ever have to pay taxes
on that money.
Speaker 3 (05:26):
Uh.
Speaker 1 (05:27):
And that can be a huge gift to yourself later
in life. So to your point, you know, I've got
a nephew who's getting married this year. He lives in Denver,
and I say to my sister all the time, when
he gets back in town, we're sitting down because this
is one of the things I want to make sure
that he's doing. I want to make sure that they're
taking advantage of putting dollars into those WROTH accounts so
(05:48):
that it can just grow and grow and grow.
Speaker 2 (05:50):
So he thought you were going to take him to
a ballgame or a concert or something.
Speaker 3 (05:54):
No, this is coot or school with Amy. He may
not decide I had to show up.
Speaker 1 (06:00):
Any I'll buy him a beer. But we're going to
talk about this stuff too, because it's important, right.
Speaker 2 (06:07):
All right, Well, at the other end of the spectrum,
and I'm thinking of three or four meetings that I've
had with prospective clients over the last year, where these
are folks with several million dollars and you know, I
have literally said to them, because they've saved well, they
have enough money. Their their concern is not running out
(06:29):
of money. They're concern could be or should be tax
efficiency of how to withdraw the money. And I've literally
looked these people in the eye and said, hey, mister
missus client, you don't need us. You know you're gonna
be fine. You may want us to be involved. And
(06:49):
here's why. And the evolution of our industry again for
those fiduciary advisors who have really grasped this and are
able to implement strategies with their clients. The software, the technology,
the ability to illustrate different tax scenarios has grown just
exponentially in the last five or ten years. And it's
(07:13):
fun and it's extremely impactful from a financial standpoint when
you can show somebody how to take their money during
retirement and save a boatload in taxes.
Speaker 1 (07:25):
You're listening to simply money presented by all Worth Financial.
I mean you Wagner along with Bob sponseller. For those
who have saved well invested right, watched your money grow
through the years? Are you missing out? Because have you
fully ticket advantage of all the tax planning strategies available
to you. We see people I would say ninety percent
(07:48):
of the time, someone comes into my office and they've
done maybe a great job on their own, they've been
a di wire for years. They are really well versed
on how they're invested. But this is the piece that
they're missing. Don't fully understand distribution strategies, the different kinds
of buckets of accounts that they should be saving it
in how to take full advantage of them. You know,
(08:10):
I actually have several clients who are in their thirties,
and I've had this conversation a lot recently about again
these taxable accounts, because the benefits are first of all,
your tax at a lower rate, but second those dollars
don't have to be tied up until you're fifty nine
and a half. So for anyone who's interested in retiring early.
This is kind of an aside from this tax planning conversation,
(08:31):
but these are the dollars that you would use to
kind of bridge the time between now whenever you're retiring,
and when you get to fifty nine and a half.
So there's lots of reasons why even from an early
age as an investor, you should be saving in different
kinds of accounts that have different tax treatments. Yes, you
(08:51):
can be more tax efficient, but also you're going to
give yourself more flexibility later on exactly.
Speaker 2 (08:57):
And when we think about taxible accounts historically usually people
you know, that term comes with a negative connotation. Act
you know, I've got to pay taxes on my gains
every year. That's not necessarily the case anymore with some
of these tax efficient strategies, and you know, we have
one at all Worth where you know, and I won't
(09:20):
get into the all the deal, but there's with the
software and the algorithms and everything that we're able to
utilize with our investment management team, and they do a
wonderful job of this. You can you can have some
things running in the background to harvest short term losses
and use them later to offset gains. And I'll tell you,
(09:41):
over the last two years, for example, you know, in
balanced moderate risk portfolios taxable portfolios, we've seen clients earn
fourteen fifteen, sixteen percent over the last couple of years.
And when I look at what their tax bill has
been and is going to it's darn near zero. So
(10:03):
you know, you with some good planning and a good
strategy in place, you can really make a quote unquote
taxable account feel like a non taxable account.
Speaker 3 (10:14):
It's wonderful.
Speaker 1 (10:15):
Yeah, And you know, and I've even known some people
who've tried to, and this is called tax loss harvesting
what we're talking about here, try to do it on
their own, and it was maddening, right, I mean, because
you're constantly having to check it. To your point, we
have software in programs that we run over these accounts
that and this is just a very simple kind of
example of this. But say you have a position in
(10:36):
lows and loads tends to be down. You got to
catch it on the day that it's down or whatever.
You know, it's a down position, you can sell it,
hold on to that money that you've sold, wait thirty days,
and then buy home depot, so you are just as
well diversified in the same kind of asset that you
were in before, but now you've harvested that loss so
(10:56):
that when you're taking a distribution, when you're selling a
position in that you can then harvest that loss against
that gain and be super tax efficient when you're taking
money out of these accounts. So these are strategies that
I'm not even going to say sophisticated investors. I think
all investors have to be thinking through.
Speaker 2 (11:17):
It's just moving from the nineteen nineties to twenty twenty
five and taking advantage of what's out there. And again,
we're not the only people on the planet that do this.
There are many good fiduciary advisors that can employ these strategies.
But the point is have the conversation with your advisor
(11:39):
and make sure these things are being talked about as
part of your comprehensive financial plan.
Speaker 1 (11:44):
Well, and I think I'm going to turn it around
and say, if your advisor isn't talking to you about this,
figure out why bring it up. Yeah. I mean, I've
had several people come into my office lately who've come
on board from other firms because and one of them
made them. I think a Roth conversion makes sense to me.
I brought it up to my advisor. He said, yeah,
(12:05):
we've got a guy that can talk to you about that.
He said, that was three years ago. I've never met
that guy. You know, these are conversations that need to
be have. And you know, here's an example, right, two
identical investors, both with a million dollars in assets at
an eight percent rate of return, and they've got twenty
years until they need that money. Right, they are invested
(12:25):
exactly the same so at the end, right, they're going
to have the same amounts in those accounts. But Investor
A was taking advantage of all the tax planning strategies.
Investor B was not. In the difference, and we've run
this scenario, right, we've kind of done this case study
here at all worth the difference between the investor that
(12:46):
was employing every text planning strategy available to them and
the one who was just oblivious to all of them,
six hundred thousand dollars that they were able to keep
in their pocket versus the other one that had to
hand it over to Uncle Sam because they just didn't
know any better.
Speaker 2 (13:00):
And in the example you cited, Amy, the gross investment
return was identical.
Speaker 1 (13:07):
Of course.
Speaker 3 (13:08):
Yeah, it wasn't like.
Speaker 2 (13:09):
You know, we had some ace stockpicker over here beating
the market. Inside it, it was doing the planning and
taking advantage of tax alpha planning strategies.
Speaker 1 (13:20):
Here's the all Worth advice when it comes to wealth management,
it's really not just about how much you earn, it's
how much you keep in your pocket. Come give next
strategies to consider. If you decide to stop working before
you're sixty five, how do you pay for healthcare? You're
listening to Simply Money presented by all Worth Financial here
on fifty five KRC, the talk station. You're listening to
(13:44):
Simply Money presented by all Worth Financial. I mean you
Wagner along with Bob sponseller straight ahead at six forty three.
We're helping you maximize the benefits of maybe owning and
living in multiple homes. How do you keep track of
that in? What strategies can you employ to get yourself
in the best shape possible if that's your situation? Okay,
you know, Bob, I talk to a lot of people
(14:06):
who weird, love love love to retire Early in the
hurdle for many is healthcare. I think we take advantage.
We just take for granted how much our employers pay
of that health insurance. Right, and once you're looking at okay,
I'm going to have to cover this bill fully on
(14:27):
my own for three years if I'm going to retire
at sixty two before I get to medicare age. For
some people it's like, well, that's not going to work.
I have to keep working. But for those who can
pull it off, let's talk through just what they need
to be thinking through.
Speaker 2 (14:41):
Yeah, people do underestimate the value of an employer contribution
to their health insurance until they, to your point, have
to get that check book out and write the check themselves.
So it is part of your compensation and should be
part of any compensation discussion when you're looking.
Speaker 3 (14:58):
For a job. But that's a whole other topic.
Speaker 2 (15:00):
Let's talk about, to your point, how do we transition,
you know, into retirement. The way I like to look
at this is there's there's three options. Three main options
cobra coverage, spousal coverage, and then going out and buying
you know, individual coverage either on the exchange or through
you know, buying buying insurance directly from a from an
(15:22):
insurance company. Obviously the best choice is to see if
you can get on your spouse's plan, and a lot
of times you can, sometimes you can't. What I find
people overlook is just Cobra coverage if you're going to leave,
especially if you've got a short runway between when you
(15:42):
retire and when you go on.
Speaker 1 (15:44):
Medicare eighteen months or less, right.
Speaker 2 (15:47):
Eighteen months or less. In almost all cases, you can
stay on your current plan. Now you've got to pay
for it, yeah, but you can stay. You know, it's
back to the if you like your plan, you could
keep your plan as long as you're will to write
the check. That ends up being a pretty good option
for a lot of people. And then thirdly, if you've
got to go out and shop under the Affordable Care Act,
(16:08):
there are the exchanges out there, and I'll cite one
example amy where I saw a client do this at
the end of last year. And these are not These
are high net worth people. Where we were we were
just able to structure their income to bring it way
down over that two year period between when the spouse
(16:29):
wants to go on.
Speaker 3 (16:30):
Medicare or can go on Medicare. And there are you.
Speaker 2 (16:35):
Know, supplements that come from the government for these exchange
ACA plans, and we were able to, you know, get
some subsidies and get the wife on one of these
plans and save them a boat load and health insurance
premiums just by being smart about how we took their
retirement income over the next you know, twelve to twenty
(16:57):
four months and back to our prior segment. They had
some savings, they had some non taxable money they could
get at, so we could generate the income that we
need without generating taxable income, and that kept things low
enough where they could get on the exchange and get
some very nice subsidies.
Speaker 1 (17:16):
It's another strategy, right, And this is something that might
be available to you that you've never thought through. And
for listen, anyone who is younger in wanting to retire early.
You know, I'm going to throw this into the conversation,
but a health savings account, right, if a high deductible
health care plan makes sense for you and you think
you might want to retire early, or even if you don't,
(17:38):
this is money you'll never pay taxes on if you
use this account correctly. It's a gift from the government
like nothing else. You put the money in, right, tax deferred,
then it grows tax free, and if you take it
out for qualified health care expenses later in life, you
never pay taxes. Many people put that money into the
health savings account and then they take it right back
(17:59):
out two weeks when they have a copay. I'm going
to suggest, and as I always do, you build up
your emergency fund to pay for your medical expenses as
you go, put the money into the health savings account.
Make sure it's invested. It's going to grow and compound.
Then maybe you get to fifty nine or sixty two
or whatever it is. In whichever plan you're paying for,
(18:22):
you can help cover the cost with a health savings
account because you've got lots of money in it, and
if it's going toward healthcare expenses, you're not going to
pay taxes on that money. Not ever.
Speaker 2 (18:33):
Yeah, I've never run into a person who has regretted
maximizing their health savings account. I mean, it's a gift
from above, so you know.
Speaker 3 (18:44):
Think of it.
Speaker 2 (18:44):
We need to think of it as another form of
a retirement plan. I mean, people get very excited about
their four toh one K plan and all the investment
options and blah blah blah. Most people forget about the
fact that you got to your point. This triple tax
advantage vehicle that we can all use. If we're in
a high deductible health plan, we got to use it
and maximize it and leverage it and invest that money
(19:07):
for the long term. There's huge benefits at the end
when you need to take the money out.
Speaker 1 (19:11):
I'm going to also say, if you are on your
spouse's plan and you're retiring early, maybe have a backup plan.
I had someone who's retiring last week. He's retiring several
years before her, and she said, you know, this is fine,
but I don't know that I want to work this long.
I don't know if I want to carry that healthcare
for both of us for a few years. So he said, okay,
let's do it for as long as we can, and
(19:31):
then we've got a backup plan in place so where
we can bridge that gap.
Speaker 2 (19:34):
So the wrong answer would be, honey, you need to
stay at work and by the way, up, I'll see
you later.
Speaker 3 (19:41):
Time on the golf, go play golf today.
Speaker 1 (19:43):
Exactly. Here's the all Worth advice. Retirement is really your
time to enjoy life. So let's en sure healthcare is
a part of your plan and it's not a stressor.
Coming up next, we're going to help you wipe your
personal information off your computer if you ever feel the
need to do so. You're listening to some money presented
by all Worth Financial here in fifty five KRC the
talk station. You're listening to simply money presented by all
(20:08):
Worth Financial. I me, me, Wagner, what do you do
with those old devices laptops, phones? If you're with me
or if you're me, I don't know the answer to
that question normally, so we just stockpile them in my basement,
which I have a feeling is not the right answer.
Sore joining us is our tech expert day matter, the
stockpiling of old devices, just collecting dust in the basement
(20:30):
probably not the best answer. What should we be doing, Dave.
Speaker 4 (20:34):
Well, I mean, this is a really important question that
I think is often overlooked. And whether it's your old PC,
your Mac, your phone, or some other type of device
that could collect data, even a printer, for example. A
lot of modern printers, especially more enterprise grade printers, have
memory and the ability to store data in them, and
hackers will often go after these printers because they know
there might be sensitive data stored in the memory of
(20:56):
the printer. So and sadly, you know how I feel
about so called devices. Any are Internet of things privacy
and security dumpster fire. Even some of those devices are
potentially a security and privacy concern for you. For example,
if you have a car and it's got an enfertainment
center all the new ones do, and you float your
phone into it, it's entirely possible that entertainment center has
(21:17):
sensitive data on it. So while most people, if they
think about this at all, and I think many don't,
and I fully understand that. That's why I'm glad you
wanted to talk about this today. It's more than just
your PC. If you are going to decommission and expunde
a device that could contain sensitive data, you really need
to think about how to do that in a way
(21:38):
that's going to ensure sensitive data passwords, bank account numbers,
anything like that aren't still on that device, because you know,
unless you physically destroy it, who knows where we'll end up.
Speaker 1 (21:49):
So the thought of this overwhelms me, you know, I mean,
I just it's like I don't even know. You know,
you've got pictures, you've got passwords, you've got on files,
You've got all of that stuff. So let's start with
a PC with the laptop. What do we do? How
do we do it? I know some places will have
certain days where you can bring like old technology, but
I don't even know if that's a good answer.
Speaker 4 (22:12):
Well, it kind of depends on what what's your ultimate
goal for that old PC is? If you have a
PC that's still got some life in it, and you know,
there are plenty of charitable organizations that would love to
get their hands on that stuff because they can repurpose
it and get it to less forward to the people.
So you know, maybe you want to give it to
a family member or a kid. My first answer is
what do you want to do with it? You know,
(22:34):
if you truly have no use for it, and it's
okay to physically destroy it, and I'll come back to
that in a second, that's different than if you want
to be able to repurpose it to someone else. In
either case, though, you know, don't just go throw it
in the garbage, don't set it out and then recycling,
because again someone driving down the street that knows the
value of the data. You know, a lot of times
any when devices are stolen, they're not stealing the device
(22:55):
because of its intrinsic hardware value. They're stealing the device
because of the data on it. Right, this is the
same thing. So you know, if you have a Windows
based PC, one of the things you could do is
get into the settings and basically reset it back to
the factory defaults. Now, I want to be clear, and
this is something that will generally apply to almost any
sort of device, because one of the problems, of course,
(23:16):
is how you would do this on a Mac versus
a Windows based computer versus an Android phone or whatever
is going to be a little bit different. But you know,
most modern devices have the capability to reset the device
to the factory default okay, and you know that will
quote delete the data on it. Now, I want to
be clear. When you delete data, in almost every case,
you're not actually physically removing the data. You're telling the
(23:38):
device that space is available, and it will originally be overwritten.
This is how people find themselves in trouble because they
think they have quote deleted something but it's still there.
And when the right tools and the right skills aren't
much by the way, it's easily retrievable. But you know,
doing a factory default reset is going to be way
better than nothing, and that's going to prevent you know,
casual hackers, interlopers, et cetera from access to that data.
(24:00):
If you really want to clean this system, you really
have three choices. You have to physically destroy it somehow
you have to, and this would be the best advice,
I believe for most people. Take it to like an
e cycling center. There are many in town. You can
look this up and say, you know, I don't need
this device anymore. They'll give you a certificate that says
they know how to use the right processes and that
(24:21):
they you know, attest to the fact that they have
clean sanitized in the business is the term that device,
so that your data is no longer on it, and
then you know they'll resell it or whatever. You can
download software that will wipe the device, that'll just overwrite
the memory and the device X number of times to
make it very very difficult to recover. But for most people,
(24:42):
my advice would be, you know, unless you want to
physically destroy it, and even then, if you don't know
what you're doing, that's question. Your best advice would be
defined at a local company that specializes in e cycling
thrice recycling use electronic devices, take it to them and
get that certificate from the the confirms they have securely
white slash sanitize that device.
Speaker 1 (25:05):
I like the fact, David earlier you brought up you're
you know, you're not a fan of these Internet of
things anything that's you know, attached to the Internet, but
most of us have smart TVs, smart appliances, whatever it is. Now,
I wouldn't even think twice about it if this TV
wasn't working anymore whatever, donating in or get rid of
it without even wiping anything. So is that something too
(25:26):
that should just go back to the default settings or
what do we need to be doing those kinds of devices?
Speaker 4 (25:33):
Yeah, Amy, you know, I just thoroughly despise the Internet
of Things because most of this stuff is a privacy
and security dumpster fire to have, you know, a perverse
business model of trying to be first to market, market
share and ease of use versus your privacy and security.
And while I'm not inherently against the idea of smart
devices that make your life more convenient, we're in a
(25:53):
place now where again, these companies' objectives do not really
align with your objectives as a consumer that cares about
privacy and security. So all of that said, you know,
any device that has a camera, any device that has
a Microsoft any device to connect to the Internet and
can potentially collect and share data is a potential risk
for having data that's still on it when you get
(26:14):
rid of it, you know, assuming the thing isn't just
completely dead and you can't interface with it all. My
advice would be set the thing back to the factory defaults,
which would be more likely than not to reset all
the data in there, and then you know, destroy this thing,
take it to a recycling center something like that. You know,
the data that your smart TV would potentially have is
(26:34):
going to be a lot less risky than the data
your work PC that you also use to access your
bank accounts and so forth. But in any electronic device
that can capture, store, and send data is a potential risk,
and it is important for people to consider these sorts
of things, not only as they're purchasing them, but especially
when they decide to get rid of it.
Speaker 1 (26:54):
You brought up a car before, and it's funny that
you say that I was recently having a conversation with them,
one who had bought a used vehicle, a really nice one,
and they casually mentioned that it had been kind of
a local celebrity's wife or something like that before, and
I was like, well, how do you know that, Like
do they tell you that when you bought it? They
were like, oh no, But when we got into the
(27:16):
car and started driving it, all of like the pin
place or at home on the computer system was their house,
so we knew it was it was theirs. And I
was like, oh, that's that's creepy. I wouldn't want to
turn in an old car and then have someone be
showing up in my driveway because they bought that car.
Would have never thought about that before.
Speaker 4 (27:38):
Yeah, two things to think about. First off, I strongly
encouraged anyone that's running a car do not connect your
phone to the infotainment in any way that it transfers information.
I mean, I get hands free calling in that sort
of thing. Some cars will support like a call only
mode where it doesn't transfer any data. But if you
rent a car and you connect your phone to it,
all your stuff gets thinking that that entertainment center you
(28:01):
turn that car back in. Who knows who has access
to that or what happens to it. There's a well
documented report where a researcher went out went the junkyards,
bought entertainment centers from junk cars and was able to
recover all kinds of it, you know, sensitive intimate texts
between people and all kinds of stuff. But as far
as your own car, my suggestion to you would be,
(28:21):
when it's time to get rid of the car for
whatever reason, you go back to the dealer and you say,
I want to ensure that any of my personal information
stored in this entertainment center is white. And I would
encourage people to take even a further step. Check out
the Mozilla Privacy Not Included report on recent cars. Mozilla
they make web browser software and other software. I have
(28:44):
a site called Privacy Not Included that takes a look
at the so called smart device Internet of things world,
and they did a gigantic deep dive into modern cars.
And I think most people will be shocked when they
under fully understand the amount of sensitive data that's being
collected about them only through the phones, but through the cameras,
the microphones, the censors, and the cars. What they're doing
(29:05):
with that data, which will just further incentivize you to
understand that that infotainment center is a potential significant risk
to you when you get rid of a car if
you don't have it sanitized, slash wipe.
Speaker 1 (29:17):
It's always eye opening. Dave had our tech expert from
Interest id right what you need to do old cars,
the old devices, phones, laptops, make sure you're taking the
proper steps to protect your information and yourself. You're listening
to Simply Money presented by all Worth Financial here on
fifty five KRC, the talk station. You're listening to Simply
(29:41):
Money presented my all Worth Financial. Immi Wagner along with
Bob Spon's already have a financial question that's keeping you
up at night. There's a red button you can click
them while you're listening to the show. It's right there
on the iHeart operacord. Your question is coming straight to us.
We can help you figure it out. Okay, Are you
like me and just every winter your dream of becoming
a snowbird? Lots of people around here right have places
(30:04):
in Florida. I know some who have a place in
Arizona and then they come back here for the summer.
So I think there's a lot of great things about
this way of living, and there's also some challenges. So
we kind of want to talk you through some of
the things you need to think through if this might
be something you're considering.
Speaker 2 (30:21):
Yeah, and a big consideration is taxes and then the
ongoing expenses of owning and trying to operate a second home.
Speaker 3 (30:31):
And I've had some experience doing that.
Speaker 2 (30:35):
My wife would tell you, Bob, you got way ahead
of yourself here. You know, back in two thousand and eight,
when our kids were still in middle school, you know,
I got the great idea of buying a condo in
cs to Key, Florida.
Speaker 3 (30:49):
You know, I had always loved the place.
Speaker 2 (30:51):
It was wonderful, it had a boat slip, you know,
all that I was all ready to roll and come
to find out, you know, your kids are busy, you
don't have you got to work, you don't have time
to get down there. And then I start trying to
rent the place, and so just to land the plane here,
you're paying property taxes, you're paying maintenance, you're paying HOA fees.
(31:15):
And then oh, by the way, when you try to
go rent the place, you know, if you're using somebody
to help you with all that they're taking a pretty
hefty cut. These things rarely, if ever, cash flow themselves. Yeah,
and so you got to go in with your eyes
wide open and make sure you've accounted for all the
(31:36):
costs before you just get enamored with the sunshine in
the beach.
Speaker 1 (31:40):
Yeah, you took the words right out of my mouth.
The concepts right. It's Nathan Backgrach, one of our founders,
used to always say the perfection of theory versus the
mess of reality, right, sounds great, and then the reality
of things may not be so great. We're not going
to try to talk you out of this. We do
want to talk you through so maybe logistical considerations here.
One of them is, I've clients so I talked to
(32:02):
yesterday who live in Florida also have a home in Indiana,
and they are in Florida six months and one day
to establish residency there. Of course, they're taking advantage of
the fact no income tax in the state of Florida,
which is great. They have to take very careful records
of living there so that they can prove that predominantly
(32:25):
they're living in that state versus the tri state.
Speaker 2 (32:29):
Yeah, most states require you to spend more than one
hundred and eighty three days a year, in other words,
over half the year physically in that location in order
to claim residency. And I know my CPA is a
stickler for that. So you've got to save receipts. Even
at something as simple as you know, I bought gas
(32:50):
at this gas station in Sarasota on this day, or
I had a meal here, you've got to be able
to demonstrate that you've actually been there.
Speaker 3 (32:59):
The other thing you've.
Speaker 2 (33:00):
Got to do is establish your driver's license, voter registration,
you know, and other financial accounts to prove your residency.
So if you don't do all of those things and
then try to claim your resident of Florida to save taxes,
you might you might have a negative surprise.
Speaker 1 (33:17):
Yeah, good luck with that.
Speaker 2 (33:19):
You know.
Speaker 1 (33:19):
Another thing to think through if you've got a place
down there and you're traveling back and forth often is
just to set up a credit card, open a credit
card that has travel benefits so that maybe you're getting
free flights on Delta or whatever your airline of choices,
so that you can take advantage because it's not cheap
to get back and forth, right, And so that's something
you know, Hey, I need to go check on the condo.
(33:41):
I'm going to fly down there for this weekend. Well,
at least you've got the points to do that, and
you're not shelling out four five hundred dollars for that flight.
Even that can be a small consideration, but it can
save you over the long run.
Speaker 2 (33:53):
One other big thing I want to mention, you know,
because I've experienced this with more than a few clients
just within the past two years, is.
Speaker 3 (34:01):
How that property is titled. You know.
Speaker 2 (34:04):
And I've got clients where we've done all the right
of state planning, we've got a trust in place. We
titled their home in Ohio in their trust, and then
they get all excited about buying that.
Speaker 3 (34:16):
Home down in Florida. They run to the closing table
and what do they do. They title the property.
Speaker 2 (34:22):
In their name or jointly, and you subject that property
to probate, and then we've got.
Speaker 3 (34:28):
To go back and get with the trust.
Speaker 4 (34:32):
Yeah.
Speaker 3 (34:32):
Yeah, And there's costs and expense and time.
Speaker 2 (34:34):
So you know, just make sure you title whatever you're
going to buy in whatever location in your trust if
you have one, in order to avoid probate, which was
the whole point of one of the main points of
doing all of your state planning work in the first place.
Speaker 1 (34:52):
Yeah, to be clear, we are not anti snowbird. I
will be someday flying self with the rest of you
who are who are flying self in January. Just go
into it with eyes wide open and understand all the
logistics before you jump in. Here's the all Worth advice.
Living in multiple places can give you some great flexibility, opportunities,
great lifestyle. You just have to put some thoughtful planning
(35:14):
in to make sure you're making the most of it.
Coming up next, a little Wagner wisdom for you. You're
listening to Simply Money presented by all Worth Financial here
in fifty five krs the talk station. You're listening to
simply Money presented by all Worth Financial. I mean you
(35:35):
Wagner along with Bob sponseller. That's huge open must mean
only one thing. It is time for some Wagner wisdom.
I hope I can live up to that opening listen.
I often think about and maybe it's because I'm in
this money business and I talk about this all day
every day, But what would I have told my younger
(35:55):
self right if I could go back and do it
all over again when it comes to money. I'm not
going to pretend that I've always done it all right,
I haven't. You know, there were times when there was
a time when we bought a home when we were
younger that we could hardly afford, and we prioritize that
home oversaving for retirement. And I think if I could
go back and tell my younger self, it would be like, yeah,
(36:17):
the home is great. But man, if you're taking advantage
of the power of compounding when you're in your twenties
and thirties, if you're putting as much as you can
ten fifteen, twenty percent of what you're bringing home into
a retirement account, oh, I mean, you're going to be
set for life later.
Speaker 2 (36:35):
Amy, I have a feeling if tiny homes existed when
you were twenty two to twenty three years old, you'd
probably still be living in one so you could maximize
your HSA account.
Speaker 3 (36:45):
Tell me I'm wrong.
Speaker 1 (36:46):
Not a lie, not a lie at all. I mentioned
earlier in the show. I've got a nephew who's getting married,
and I've had several younger clients who've come on board lately,
and it's funny because they look at me with eyeswiight
open and they're like, you are really passionate about this,
and I'm like, it's because it's like I get to
talk to my younger self and say, hey, these three
(37:07):
or four things right. If you were doing these three
or four things right now, you're gonna be set. We
mentioned health savings account right, prioritizing saving in those, making
sure it's invested, not spending them as you go. Dollars
in a roth account, you're paying taxes on it now,
and then it's going to grow until you get to retirement,
till you need to tap those funds and you're not
(37:27):
gonna have to pay taxes on it. I mean, Bob, anything,
you know, if you could talk to your younger self anything,
you would say, ha, you should probably do this.
Speaker 2 (37:36):
I wouldn't have bought a condo in Florida when my
kids were in middle school. It was a great place,
but we we bought it in two thousand and eight
and ended up selling it in twenty fourteen.
Speaker 3 (37:49):
And again, I should have listened to my wife. That's
that's what that's the message. Listen to your wife. Yo.
What did I do?
Speaker 2 (37:56):
I flew down there, looked at this place, and my
wife never even saw it, and I called her on
the phone and said, honey, do I have permission to
buy this?
Speaker 1 (38:07):
Oh?
Speaker 2 (38:08):
It was a total emotional thing. My dad had just
passed away.
Speaker 4 (38:13):
You would.
Speaker 2 (38:16):
Yes, Yeah, So that's I should have had Nathan Bacharack
whispering in my ear in two thousand and eight.
Speaker 1 (38:23):
Exactly. Thanks for listening. You've listening to Simply Money, presented
by all Worth Financial here in fifty five KRC, the
talk station
Simply Money News
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