Simply Money

Episode Transcript

Speaker 1 (00:06):
Tonight latest headlines President Trump wants to fire the head
of the FED, our nation central bank, plus a blind
spot in your portfolio you may not even know you have.
You're listening to Simply Money, presented by all Worth Financial
Imami Wagner along with Bob spawdseller Man. It's like, I
feel like we get like one thing a little bit
behind us, and then we're smacked in the face with

(00:28):
the next thing. And you know, just a reminder, everyone
markets like certainty, and we have lots of uncertainty. The
latest dose of uncertainty coming in the form of our
president having some very pointed remarks about the chair of
our nation Central Bank to room while.

Speaker 2 (00:49):
The rest of us were just out doing Easter egg hunt?

Speaker 1 (00:52):
Can we just stick with the Easter egg hunting please?

Speaker 2 (00:57):
All right? Well, you know, obviously the markets were down,
you know, big yesterday, and everybody always likes to guess
on why that happened. I think there's a couple of
things that happened, and one of which is to your point, Amy,
the President you know, went on truth social called chair
uh FED chairman pale a loser and all that. I

(01:18):
think that that stuff is can be very unsettling, you know,
to the markets, and it was yesterday. I think the
other thing is folks were hoping for uh, some resolution
somewhere somehow on some of these trade deals and we
got nothing on that over a long three day weekend
as well. So you combine that and again Amy just

(01:39):
an opinion, I think President Trump it just looked like
he was trying to find somebody to blame other than
himself for not getting some of these trade tariff deals done.
And the target this this week or this weekend was
FED chair. Pal markets didn't like it, and for good reason.

Speaker 1 (02:00):
Well, and I gotta I have to point out too,
this is nothing new a president going after a FED chair,
And I think it's important to then step back and
say what's happening here and make sure that you understand
what the whole point of the Federal Reserve is, right,
And so, first of all, it's supposed to be a

(02:20):
political I mean, even the paychecks for the people in
the FED come from outside the congressional budget, like this
is supposed to be set up in a way where
there's a bit of a political wall around the Federal
Reserve and they're supposed to keep there.

Speaker 2 (02:36):
I mean it's called down, it's called checks and balances. Yes,
in government, that's served us well for well over two
hundred years.

Speaker 1 (02:42):
Absolutely, and in the dual mandate of the Federal Reserve
is two things. Two things. It is to make sure
that we keep inflation in check and that people are working, right,
that's what their their nose is supposed to be down
looking at reams of data, and there's only a few
that they can kind of pull in order to keep

(03:03):
those things in check. One of those, of course, is
interest rates. And historically the issue with presidents is if
you are going to lower interest rates, it tends to
rejuice the economy, right, it's cheaper for people to borrow money.
It tends to kind of loosen up the economy. So
when you have maybe an incumbent president running for reelection,

(03:26):
they might go to the FED chair and say, hey,
would be great, right if you could lower interest rates.
And there's evidence of that in our country's history. I mean,
you go back to President Nixon, and he was doing
this at the FED chair at the time, and in
the FED chair under Nixon. In his diary going back
he talks about lots of pressure from the president who's

(03:51):
seeking reelection and kind of wanting me to help him
with that. But again, this is an office, this is
an entity that is supposed to be a political So
when you have President Trump making these decisions about things
like tariffs that could potentially be inflationary, you know, I
think his sort of inexplicit message is, hey, can you

(04:16):
help me a little bit here? If we lower interest rates,
things might go a little more smoothly on my agenda
point being that's not necessarily the job of the Fed.

Speaker 2 (04:27):
No it's not, And just trying to stay politically neutral here,
which is what we need to do, and just look
at facts. I mean, you know, under the last administration,
people were pulling their hair out over that term weaponization
of government. We didn't like it when we felt like
one side of the aisle or one administration was using

(04:48):
parts of the government inappropriately. Well, if you don't like it,
then you shouldn't like it now either. And I think
historically a lot of time, I mean, I think we're
naive if we don't think presidents sat down and had
a cup of coffee with the FED chairman or absolutely
laid around a golf.

Speaker 1 (05:05):
But you passed a note there. We was one of
the Bush passed a note to the FED chair and
was like, kind of, hey, can you help me out here.
There is a history of this going back decades.

Speaker 2 (05:14):
But you you do that in a collegial manner behind
closed doors, don't. You don't go on social media and
basically call the guy an idiot and a fool and
that you're going to fire him. And we've talked about
this umpteen different times. I mean, that's the way our
current president likes to communicate. It is unsettling to a
lot of people, and it was unsettling to the markets yesterday.

(05:38):
On top of the fact we got no progress on
trade talks, and we're in a pretty busy corporate earning
season right now, getting very little guidance from a lot
of companies because of the uncertainty around trade policy.

Speaker 1 (05:52):
You're listening to simply money presented by all Worth Financial,
I mean me Wagner along with Bob Sponseller. Every time
I think we hope we can take a collective breath
and maybe check our four one case and not have
bad news. There is a fresh round of news, and
this week I think volatility that we're seeing is because
President Trump is now saying Hey, I want to fire

(06:14):
the chair of the Federal Reserve. Keep in mind, too,
this is the president who appointed him during his first term.

Speaker 2 (06:21):
Yep. President Trump appointed chair Pal in twenty seventeen. He
took office in twenty eighteen, and then President Biden reappointed
chair Pal to an additional four year term in twenty
twenty two. So you know he is supposed to be
in there until May of twenty twenty six. And yeah,

(06:43):
so you know, this is the guy you appointed. And
I know he said even back in twenty twenty two
that you know, they were too late to raise rates
and then had to raise him seven times. We can
all have our opinions on how to run the economy,
it's how you communicate that publicly and keeping in mind

(07:04):
that you are the leader of the free world. That's
what can get people unsettling.

Speaker 1 (07:12):
It is the latest round of uncertainty. And so you know,
I think if you step back and say, okay, lots
going on in the US right now, maybe one thing
that you can do as an investor. Right we cannot
certainly control what's going on in Washington. Maybe we would
not even want to try. But the point of being
truly diversified is that right now, some US companies are

(07:35):
taking a bit of a bating, And so I think
the question you have to ask yourself is if I'm
truly well diversified, I'm actually also invested in global markets
outside of the US. I think we love kind of
home grown and you know, we work for these companies,
We believe in these companies. Our neighbors, our relatives all
work for these companies. But I think to be truly diversified,

(07:58):
you have to also look side of the US.

Speaker 2 (08:02):
Yeah, and Amy, you and I have discussed the importance
of bonds in a portfolio and how well those have
done to kind of cushion volatility and diversified portfolios so
far in twenty twenty five. The same can be said
of international stocks. And if we just look at the
largest most common international stock index, it's called the IFA

(08:22):
Index Europe Australian Far East. That index is up seven
percent year to date as a Friday, it's up ten
percent over the last year, and interestingly enough, now over
the last three year period three year average annual return
the EFA index is up seven point nine percent per

(08:43):
year over the last three years, exactly equal to the
S and P five hundred. Yeah, And like we talked
about with bonds, when tech stocks are going gangbusters and
you can just set it and forget it. With big
cap you know, US stocks, people tend to forget the
importance of or something. Kudos to our chief investment officer,
Andy Stout. He's got this stuff in our portfolios here

(09:06):
at all Worth, all the time, and it's doing its job.

Speaker 1 (09:09):
Yeah. The average American investor has close to eighty percent
of their stockholdings in US companies, but the US actually
only makes up about sixty percent of the global stock market,
So you could be missing out on something here. And
I think here's an exercise for you. Pay attention during
the course of one day to the products that you

(09:29):
use all the time that you love. Is your car
made here in the US? Is your phone made here
in the US? The coffee machine that you're getting your
coffee out of? Where is that made? You're probably interacting
pretty regularly with companies well by.

Speaker 2 (09:46):
You buy a lot of expensive shoes and purses, Amy,
I highly doubt those come from the United States.

Speaker 1 (09:51):
I think most of mine are actually from Target. But
I'm glad I fooled you there, and I think it's
just important though, to look at. You know, in we
talk about behavioral finance a lot. Behavioral economists call this
home country bias. Right, we know our companies here, but
if you do have that bias, and we've said this

(10:11):
many times, you check your political bias at the door
when you're investing, and I think you've got to check
that bias here as well. Do you know if you
own other countries' portfolios, other countries companies in your portfolio,
I think it's time to do a check on that well.

Speaker 2 (10:29):
And I think it just comes down to valuation. You
want to look at valuation for any asset that you're
looking at buying, whether that's a US stock, a global stock,
a bond, a piece of real estate, you're trying to
buy it on sale when it's oftentimes out of favor.
And that's what we're talking about here. There are different

(10:50):
asset classes at any given time where on a price
earnings basis, you know, based on historical performance, it can
be a little undervalued. And international stocks are an example
of an asset class that was pretty much ignored for
you know the last few years and low behold. Now
money's starting to go into it and it's it's helping

(11:11):
us make money.

Speaker 1 (11:12):
Are we saying go all in on the globe? Nope,
absolutely not. But do you own a portion of the
global economy and do you even know? You know, we
talk about kind of building the boat for times like
this where we're seeing volatility in the markets. I think
a lot of building the boat is educating yourself on
exactly how you are invested. You should know what's making

(11:35):
up your portfolio. You should know how you're a four
to one case investment well.

Speaker 2 (11:38):
And ideally you build the boat before the storm comes,
not after. So we are not saying bail out on
all your yes stocks now and pile into international. We're
just saying, you know, this is a good reminder, yes,
to have a good diversified portfolio at all times, and
it helps you find that sweet spot ideally to get

(11:59):
the highest rate of return per unit of risk. And
that's what good responsible asset allocation is all about.

Speaker 1 (12:06):
Yep, here's the all Worth advice. The world is actually
bigger than the S and P five hundred and smart
investors know that sometimes the best opportunities aren't always located
in your own backyard. Coming up next, a strategy that
is all the rage right now? Is it a strategy
that makes sense for you? You're listening to Simply Money
presented by all Worth Financial here on fifty five KRC,

(12:26):
the talk station. You're listening to Simply Money presented by
all Worth Financial. I mean you Wagner along with Bob
Spawnseller straight ahead at six forty three. Tax season is over,
but maybe you should just be getting started on your taxes.
We'll explain to you what we mean by that. There

(12:48):
is a strategy that I'm having conversations with a lot
more often now in my office. It's called buffer ets.
And in fact, you know, yesterday Bob, I had someone
in my office who we put it to the strategy
about a year ago, and they were really really glad
that we had because you know, when the overall markets
are down pretty bad so far this year, they have

(13:09):
truly been buffered from a large part of that downside.
If you are someone who this volatility is making really
nervous right now, I would say, lean in, listen up.
This might be a good strategy for you.

Speaker 2 (13:26):
Well, about seven billion dollars of capital has flowed into
these buffered ETFs as of early April of this year,
so this is a popular, you know strategy that's being used.
We have a buffered ETF built out strategy and portfolio
here at all words, so we're using multiple buffered ETFs

(13:48):
in one single portfolio, which is a real nice strategy.
But yeah, at the end of the day, you've got
clients and we all have them that they they intellectually
know that they've got to have a piece of their
portfolio in the game, so to speak, where they have
the opportunity to earn the type of investment returns that
come with being in the stock market, but they just

(14:11):
can't handle the potential downside volatility. So a BUFFERDTF strategy
just puts brackets around those potential returns, both on the
upside and the downside, and they come in all shapes, sizes,
and colors, and you can dial up the level of
buffers on the upside and downside, and it helps to

(14:31):
put some parameters around what your worst case scenario can
be in a down market. And people are finding that attractive.

Speaker 1 (14:38):
Yeah, So let's give an example. So say you have
a buffer ETF set up to buffer you from the
first ten percent right of any kind of market downturn.
So if the S and P five hundred drops eight percent,
your TF has that ten percent buffer. You're good, right, Well.

Speaker 2 (14:54):
You're good meaning you don't take on any of the.

Speaker 1 (14:56):
Downside, don't feel any of that downside. Yes, If the
S and P five hundred state drops twenty percent, okay,
you are going to be down. Everyone else is down
twenty percent, You're only down ten percent because you've got
that first ten percent.

Speaker 2 (15:09):
First ten the first ten percent was on the house.

Speaker 1 (15:11):
Absolutely absolutely on the flip side, right on the upswing.

Speaker 3 (15:16):
Here.

Speaker 1 (15:16):
If the S and P five hundred games eighteen percent
and in your cap is at fifteen percent, okay, well,
then you're only going to participate in the first fifteen
percent of that upside, right, So kind of the downside
protection comes from that upside cap. But for nervous investors
who lose sleep during times of market downturn, what a

(15:39):
nice option as an investor to know that the first
ten percent, the first fifteen percent of the market downturn,
you may not even be exposed to, You may not
even have to participate in.

Speaker 2 (15:51):
Yeah, because we talk about all the time, Amy, the
average intra year drop of the S and P five
hundred on average going back over fifty years is around
fourteen percent. Well, you put somebody in there with a
fifteen percent buffer, you know, with a good buffer detf strategy,
they don't take on any of that downside. So the
odds are in your favor. And people like the fact that, hey,

(16:14):
the average is fourteen point three. Shelter me from the
first fifteen. I'm good. I don't have to watch cable
news eight hours a day to figure out what's going
on because I know some of my downside it's protected,
and I have to bring up amy. You know, this
is in comparison to some of these annuity strategies that

(16:35):
are being sold out there with huge commissions, huge surrender
charge periods, and.

Speaker 1 (16:43):
They're talking about protection, protection, protection, right, that's how they
sell those annuities.

Speaker 2 (16:47):
And by the time you look at what your actual
return could possibly be, even in a good scenario, when
you net it out for fees and expenses and all that,
you might as well just bought a bond. Yeah, you know.
So these are much more they're they're more fee attractive
to people. You can get out of them.

Speaker 3 (17:07):
You're not.

Speaker 2 (17:09):
In it. There's no commissions. It's a much what it's
a much better way to play the buffering your downside
in your portfolio and people are people love it.

Speaker 1 (17:18):
I do want to get your take on this, Okay,
So say someone's listening and they're like, yes, yes this
for me, put all my money in a buffer ETF
right now because I hate downside. Do you think it's
a good strategy to go all in on these?

Speaker 2 (17:33):
Absolutely not. And for without getting too far into the weeds,
here our strategy that you know, Andy Stout, our chief
investment officer, and his team runs here at all Worth.
It's comprised of a bunch of different buffer ETFs, but
we tell clients up front the only the best way
to take advantage of this strategy is to commit to

(17:55):
it for at least one year.

Speaker 1 (17:56):
YEP.

Speaker 2 (17:57):
That allows it to work because during periods of volatility,
they will sell one of these bufferdtfs that protect it downside,
reset your downside, buy something else. You got to let
the strategy work for about a year to see the
benefits of it. So we still go back to amy
to what you and I talk about all the time,

(18:17):
that one to three year cash flow position being completely
out of the market, being in less volatile asset classes
like short term bonds, treasury bills, CDs cash that allows
you to weather from a cash flow standpoint, volatility like
what we're going on. These buffers bufferdtfs are more I

(18:37):
think for the emotional threshold. Hey, I know I need
to be in for the long term. I'm willing to
put it away and not think about it, but boy,
I don't want to see my portfolio balance flying all
over the place. Yeah, and that's where people like having
a portion, you know, these are risk averse people. Having
a portion of their long term capital invested in strategies.

Speaker 1 (19:00):
Like this, it helps you kind of stomach the volatiley
a little bit better. And if this is something you've
never heard about before, it's actually a relatively new strategy.
Twenty eighteen twenty nineteen is really when it first came
on the market, and we've been kind of using them
more and more often here over the past few years.
So if this sounds like maybe something you're interested, I
would say, hey, do your research, but it could be

(19:22):
an option for you.

Speaker 2 (19:23):
Yeah, And by do your research, I would put this
in the category of you know, don't try this at
home is home? Yeah, because these the contractual fine print
on these things varies, you know, amongst different buffer ETFs,
So you really need to have a good fiduciary sit
down with you and explain how this works, so you

(19:44):
know what you're buying before you're put before you put
your money on the table.

Speaker 1 (19:49):
Here's the all Worth advice. Bufferdtfs can be a useful
tool if maybe you are a conservative investor, especially if
you are near or in retirement and you still know, hey,
I need exposure to the stock market, but I have
a bit of a safety net here coming up next,
how to deal with an unexpected emergency that you likely
never thought might be one. You're listening to Simply Money

(20:10):
presented by all Worth Financial here on fifty five krs
the talk station. You're listening to Simply Money presented by
all Worth Financial. I mean me Wagner along with Bob Sponseller.
Our diamonds really a girl's best friend. I would say
they're probably up there, but honestly, we've got al Riddick

(20:32):
from Game Time Budgeting coming on today. And one of
the things about Alice, I never know where these segments
are going to go. He just says, here's what I
want to talk about, and then he takes it. So
I'm just gonna say all right, now we're listening. Our
diamond's really a girl's best friend.

Speaker 3 (20:47):
So they answer to that question might be it remains
to be seen. However, you know I have a story
for you, so I know you do. I'm sitting in
my office and then my cell phone buzzes because I
get a text from my wife. So when I turned
my phone over to read the text, it reads, I
lost a diamond from my reen for our ten year anniversary, Amy.

(21:13):
Just to give you a little bit of backstory, I
upgraded my wife's wedding band. So keep in mind we've
been married for over twenty two years. But when I
heard about her losing the diamond, naturally, a guy that
thinks the way I do about money, I started thinking
about the length of time that she's had the upgrade
and the cost per use for that potential lost diamond.

(21:38):
That's just the way my mind works, ad and assuming.

Speaker 1 (21:41):
She wears it every day. All you got your money's words, right,
of course I.

Speaker 3 (21:45):
Did, But I have to tell you one of the
initial thoughts that I had on a serious tip, so
to speak. First, I was like, man, I wonder how
traumatized my wife might be about this ring situation? And
then it hit me. I was like, man, I need
some clarity. Is she talking about what I referred to
as the mother diamond or is she talking about what

(22:07):
I call one of the baby diamonds? Because we're talking
two totally different ends of the cost spectrum, you know.
So another thing as well, Amy, with the big diamond
that she has, of course that's insured. But when I
purchased the upgrade for the smaller wedding band with the

(22:27):
baby diamonds, I was like, man, what's the chances of
a diamond falling out and inspired little diamonds? So I
was like, you know, it's about twenty percent, you know,
one out of five. So I didn't ensure the wedding
the band, so to speak. But of course I had
insurance on the big diamond. So I guess I'm just
gonna have to eat that cost.

Speaker 1 (22:48):
Amy, When is that the answer? It was one of
the baby diamonds.

Speaker 3 (22:53):
It was one of the baby diamonds. Sorry, sorry for
my lack of clarity there. So that is what the
the situation has presented to us. And I'm kind of
tossing back and forth in my mind, Amy, like this
type of expense, you know, is it coming out of
the emergency fund. Should I just consider it another gift

(23:15):
from my wife? But honestly, I'm leaning more towards the
emergency for what do you think, Amy?

Speaker 2 (23:22):
Hey, well, I got a question for you. Putting my
financial advisor hat on here for just a second. You
talked about insurance. What was the difference in premium between
ensuring the entire ring versus trying to save a few
pennies on the dollar and just ensuring the mother load
diamond only? Did you ever run.

Speaker 3 (23:44):
Those Actually it's been so long ago. I don't remember
what those numbers were. I just know that I was
willing to take that risk sor because the upgrade it
was just for the one with the five diamonds, the
mother diamond. I was already insured from day one, you know, yeah, you.

Speaker 1 (24:04):
Know, Although you make a great point, I do want
to go back to the question that you had about
where the money should come from, because one of the
things I very much admire about you and your wife
is you give every dollar that comes into your household
a job. You know exactly where it's going to go,
so when something unexpected happened, like you're planning for every vacation,

(24:26):
every vehicle purchase. But when something unexpected happens, like you
lose a high dollar item like a diamond, where do
you go for that? Do you go to your emergency fund?
I mean, I think that probably makes sense.

Speaker 3 (24:39):
We are definitely going to go to our emergency fund,
I believe, to cover this expense. And one of the
funny things about this my wife she's now wearing like
her old wedding band and she hasn't brought it up
the fact that she needs a new diamond for the
old one. So so I'm like, is she really ever
going to replace it? Where you are correct, Amy, this

(25:01):
expense is going to come out of our emergency fund.
And when you think about it, although this is a
although this is a very unique situation so far as
losing a diamond, you could almost look at it as
how is this a reflection about most people's average everyday life?
You know? Do you have the money set aside for

(25:21):
like when the oven goes out, when you need a
new refrigerator? So I think it's always wise to have
that pot of cash that you can tap into for
some of those unexpected events. And obviously, in this case,
I think we're just going to call that an emergency
expense and just roll with it from there.

Speaker 2 (25:42):
Amy, All right, hey, well, speaking of roll with it,
and I'm trying to put myself in your shoes as
the mail in this equation. You got your wife rolling
around here in her old wedding band. When are you
gonna just when are you gonna just cut the ripcord
here and replace the diamond and get it done?

Speaker 3 (26:03):
So listen that we're doing so so to me, I'm like,
I'm using her as my thermometer, so to speak, right
when she really wants to execute the next action as
it relates, Are you trying.

Speaker 2 (26:16):
To extract as many favors from her as you can
before we're playing here.

Speaker 3 (26:24):
At Actually, I already have the process to fix this situation,
so I know where the money's coming from. But can
you believe I did a little research online. You can
actually purchase a lab made diamond. Believe it or not.
It is grown in a lab under the same conditions
as a diamond that comes out of the earth. But

(26:45):
you can get it for a lot less expense. All
you have to do they just need the millimeter dimensions
of the diamond and you can actually order one. So
I'm just waiting on my wife to say, honey, it's
time to go ahead and get that diamond.

Speaker 2 (27:00):
I'll make a movie, you know.

Speaker 3 (27:02):
Yeah.

Speaker 2 (27:02):
Hey.

Speaker 1 (27:03):
One of the things I love about you is you
take your real life experiences we all have them, and
you bring it back to money. And you know, for listeners,
I want to I want to be really clear about
what it is that you do because they can work
with you. And I've even sent people to you who
maybe need help figuring out how to budget, people who

(27:25):
are convicted about making money changes in their lives, but
they do not know where to start. Can you briefly
walk us through what it looks like to work with.

Speaker 3 (27:34):
You so when you engage with al ready, First of all,
I have to tell everybody the reason that I wake
up in the morning is to help people develop the
proper mindset, behaviors and systems with money so they can
save more, reduce debt, and improve their quality of life.
Right So, throughout our coaching sessions, my goal is to

(27:57):
help you tap into what I call some of that
reserve discipline that we have not exerted towards money. We've
been doing it in a lot of other places, but
not towards money. To help you come up with a
simple and easy to duplicate system that you can follow
over and over and over again to make the gap
between income and spending as wide as possible, to increase

(28:19):
the number of options that you have with money. That's
all it is at the end of the day. I
could try to use some thirteen letter words to make
it sell fancy, but all I'm trying to do is
help people learn to make.

Speaker 1 (28:31):
Budget out exactly exactly well. And I love that you
use the word coaching right. We all have it in us,
but some of it needs to be coached out a
little bit more so. If you are someone who does
feel like, Okay, you know what, I'm tired of living
paycheck to paycheck and I'm tired of feeling like my
money controls me, that might be a good time to
reach out to our rite Game Time Budgeting and say, Okay,

(28:54):
I'm going to get serious about this. Let's partner together,
help me figure this out. This is a gain same
changing decision potentially in your financial journey. Alritick, we are
super grateful for you. We always love your stories, we
always learn from you, and we're grateful for the work
you are doing with so many investors. You're listening to
Simply Money presented by all Worth Financial here on fifty

(29:16):
five KRC, the talk station. You're listening to Simply Money
presented by all Worth Financial. I'm Me Wagner along with
Bob Sponsor already have a financial question. You just gotta
get it figured out. Maybe it's keeping you up at night.
There's a red button you can click on while you're
listening to the show. It's right there on your iHeart app.

(29:37):
Record your question. It's coming straight to us and straight ahead.
We would say seven reasons it's important to have a
fiduciary financial advisor in your corner or the appropriate education.
We'll get into what that looks like. Okay, many of
you have collectively kind of breathed a sigh of relief
over the past couple of years. Why because your file

(30:00):
your taxes and then you're like, Okay, I'm done with that.
I'm not going to think about it until next spring.
And we would say, if that's how you think about
your taxes, you're missing out.

Speaker 2 (30:12):
Amy tax proactive tax planning and I underline planning as
opposed to simply tax preparation. Big difference is a huge
part of what we do for our clients here at
all worth. So now is a great time to dust
off that tax return because it's fresh in people's mind.
They see what they did or didn't do in twenty

(30:33):
twenty four, and I know in the meetings I'm having,
I know in the meetings you're having with your clients, Amy,
it's like, hey, give us that twenty twenty four tax return.
You know, let us put that thing up on the
rack and let's start planning ahead for twenty twenty five
in order to help our clients keep more money in
their pocket. Because after all, it's not what you make,

(30:54):
it's what you keep at the end of the day
that really matters.

Speaker 1 (30:56):
Yeah, I mean, maybe I can create more work for
my clients, but I'm like, Okay, as soon as you
get that tax return, I want to see it. You
get it to me, and we're already planning lots of
conversations over the course of the next few weeks about
whether roth conversions make sense. You know, looking at your
tax return is also a great way to plan income
strategies in retirement. You know, how do you how do

(31:18):
you take money out of your investments and be as
tax efficient as possible. All of this is part of
tax planning. I had someone in my office yesterday who together,
this couple has built a substantial amount of wealth and
but now there's concentrated positions and a few companies, and uh,

(31:41):
they feel a little bit backed into the corner from
a tax standpoint, because if they were going to sell
out of those, it would be you know, high taxes.
So we talked about different strategies and he looked at
me and he said, why does no one talk to
me about this before? You just use this term tax alpha,
and I don't even know what you're talking about. And
I said, okay, let's talk about tax alpha. You could
have Investor A and Investor B. And Investor A is

(32:05):
just going along doing all the right things, socking money
into their four to one k's investing everything, they've got
taxable accounts open. They're seriously saving for their future. Other
investor Investor B doing the same thing, but they're thinking
through it from a tax standpoint. How do we keep
as much of this money in my pocket and out
of Uncle Sam's hands as possible? And that the difference

(32:29):
between those two ways of thinking is tax alpha. How
do you keep more money in your own pockets.

Speaker 2 (32:35):
Yeah, and I've seen data that suggests as many as
high as eighty five percent of CPAs and tax preparation
folks don't do any advanced planning. And it's not their fault.
They don't have time to do it. They're getting inundated
with this pile of stuff to just generate the returns
at the last minute, and they're busy. So you spend

(32:56):
the other nine to eleven months of the year doing
the of stuff that you just talked about. And that's
what we do to help our clients plan ahead. So
you already talked about managing where you take your cash
flow from. You know. The other thing is rmds, which
you mentioned too, and again conceptually, at age seventy three
is when you have to start taking require minimum distributions

(33:19):
from your iras and four to one k's well, a
lot of times people retire before age seventy three, and
they've got that period of time where they're in a
lower tax bracket than they were when they were working,
and a lower tax bracket then they will be in
if they do nothing and just allow these require minimum
distributions to really at their ugly heads. So that's where

(33:42):
we can get in and proactively plan you know, take
it a little bit out now, paying a lower tax rate,
converting that to a ROTH, or using some of that
money to support their monthly income. There's lots of things
we can do there, So managing withdraws rmds. Let's talk Amy,
talk about charitable planning.

Speaker 1 (34:01):
Yeah, so this is and I had someone in my
office just yesterday in this situation. They had worked with
another advisor before. They had been doing charitable donations out
of their checking account. You know, they have big hearts,
they love these organizations, they want to make an impact.
But they're also seventy one seventy two years old, and
they have the ability to pull those donations directly out

(34:23):
of their iras give them straight to those charities. So
same impact. But here's the deal. If it's coming directly
out of that tax deferred IRA and going directly to
the charity, you actually don't have to pay taxes on
that money. So they were missing a step and they
were getting taxed on the money. You know, they were
putting the money into the charity that they had already

(34:45):
been taxed on. So it was just a miss there.
When it comes to taxes.

Speaker 2 (34:48):
Well, and now with the standard deduction being thirty thousand
dollars a year for married filing joint couples, Unfortunately, there's
a lot of people that don't get the tax benefit
of just dropping that money in the offering played at
church anymore. Yeah, and Amy, I'm continue to be shocked
at how many people don't know how to do this.
You can start doing this when you're seventy and a half. Yes,

(35:11):
up to one hundred thousand dollars a year. You don't
have to wait until you're seventy three and get into
a require minimum distribution situation. It's a wonderful planning opportunity
that far too few people are taking advantage of.

Speaker 1 (35:25):
I get lots of people in my office who have
recently retired, and you got the memo you have to
save for your own retirement, right, So they have shoved
and shoved and shoved money into their four to one case.
And the problem is it's all tax deferred, and so
then that becomes a huge tax burden. There are strategies

(35:45):
here where you can diversify out of that. I think
the question for you is are you looking into them?
Do you understand them? Here's the all Worth Advice Tax
planning isn't just this kind of smart add on to
your retirement strategy. It's really kind of a foundational piece
that can significantly impact your financial future. Next, a sobering
look at the state of financial literacy. You're listening to

(36:07):
Simply Money, presented by all Worth Financial here on fifty
five KRC, the talk station. You're listening to Simply Money
presented by all Worth Financial. I'm Amy Wagner along with
Bob sponsor Or. One of the reasons that I love
my job so much is because I am so passionate
about helping people make smart money decisions. And so when

(36:32):
there is evidence that is working, I get excited. And
when there's evidence that people are still missing out, that
there are major gaps in what we know about money,
it does make me a little bit sad.

Speaker 2 (36:42):
And you even cover things in the produce at isle
at Kroger. That's how passionate find me.

Speaker 1 (36:48):
And Kroger and I will talk to you about social
security or whatever you want to talk to me about.

Speaker 2 (36:52):
All right, well, let's get into this financial literacy topic. FINRA,
which is a large financial regulatory organization you know, did
a seven question kit quiz to twenty five thousand, five
hundred adults in recent months, and some of these test
results were pretty remarkable. Three and ten test takers missed

(37:14):
a simple question about interest rates. Two and five flubbed
a question about how inflation works. So let's get into this, Amy,
we got some educating to do.

Speaker 1 (37:24):
Yeah, I mean we're asking you right now. Do you
know the answers to this question? Okay? So imagine that
the interest rate on your savings account last year was
one percent and inflation then was two percent. So after
one year, how much would you be able to buy
with the money in this account? The answers more than today,

(37:45):
exactly the same or less than today? Don't know. So
you've got inflation at two percent interested one percent? Guys,
The answer is your purchasing power has gone down, right,
Inflation is eating up the interest that your get. On
this and the fact that twenty five thousand people are
taking this test and many of them are not getting

(38:06):
it right, right, this is a simple well.

Speaker 2 (38:08):
Four and ten got that question wrong, Amy.

Speaker 1 (38:10):
Yeah, yeah, So that's a big gap and knowledge that
we have to make sure people understand. Here's another one
true or false buying a single company's stock usually provides
a safer return than a stock mutual fund.

Speaker 2 (38:26):
Only forty percent of people got that answer correct. You
know that it's generally riskier to invest in a single
stock rather than spread risk among many stocks in a
diversified mutual fund. So yeah, now here's I guess some
good news. And it all depends on what these youngsters
are being taught in school. In Ohio. In twenty twenty six,

(38:50):
it'll be the first graduating high school class to be
required to take a personal finance course. In Kentucky, that
year is twenty thirty, that'll be the first year that
high school graduates have been required to take a personal
finance course. I think that's good.

Speaker 1 (39:07):
I think it's great.

Speaker 2 (39:08):
It all depends on what these youngsters are being taught,
But I have to think a basic financial literacy course
will help more than four of ten people answer those
two questions we just reviewed correctly.

Speaker 1 (39:21):
And guys, it has to start at home too. By
the way, you totally just dated yourself by using the
word youngsters. Thanks for listening to tune and tomorrow we're
talking about our take on acclaim. You should be a
one hundred percent invested in stocks you've been listening to
Simply Money, presented by all Worth Financial here on fifty
five KRC, the talk station