Kersten Wealth Management Group - Money Sense 9-09-23

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Episode Transcript

(00:00):
Good morning, and welcome to Moneycenter're listening to the advisors of Kurston Wealth
Manager Group, Kevin Kurston and DennisKurston here with you this morning. Happy
to be with this morning. We'rekind of hitting September, which we talked
about in the last week's show Dennyas being historically the worst month, and
September is basically going on repeat forOctober. If we looked at the market

(00:23):
finishing at a relative high point atthe end of July, did I say
October I met August August on repeat? From August relative high point at the
end of July, sold off forthe first two to three weeks, and
then rallied into the end of themonth. Well, here we are in
September, selling off in the firstweek so far, still maintaining those levels

(00:44):
from August. We're not below thoseAugust lows at the moment, but we're
creeping back down there. So that'sgonna be Those are going to be some
important levels to pay attention to.Markets still up nicely on the year.
One thing that really changed the lastcouple of days. We've seen big tech
sort of roll over Apples down sixor seven percent in the last two days.
Not a recommendation to buy or sellApple, but we've sort of been

(01:07):
lukewarm on those areas and we've beenlooking at more equal weighted portfolios as a
result. Doesn't mean you're going toeliminate Apple from your portfolio, but you're
gonna take that allocation down. Youknow, in the NAZAC one hundred it's
twelve or fourteen percent. You're gonnatake that allocation down on an equal weight
to three or four percent. Thenumber one stock in the SMP about seven
percent, And so you know,it's really kind of a market that is

(01:36):
a handful of industries are doing welland a lot of them are not doing
well. Even when you impair theimpair, the NAS obviously way up because
of technology. You look at SMPfive hundred top ten names, there one
about thirty percent of the index.That's market camp wait, and that's a
lot of the names. And onthe other hand, that now which does

(02:00):
not have as much technology, isnot up nearly as much. I did
a printed out and this is onThursday afternoon, but as of yesterday,
as in a close on Wednesday,about half of the dousknocks are negative for
the year. At the moment.The worst one is walt Rings down.

(02:23):
There's not a recommendation ad buy orsell any of these uh Walter rings down
almost forty percent. The bottom namesare names like Nineteenth Travelers, Honeywell,
Verizon, three M, Johnson andJohnson, United Health, Roop, Hold
of Chevron, Disney Disney No Surprise, Nolman Socks, AMBTIONMRK, Procter,

(02:43):
and Ammo. And that covers halfof them. And they're all flat to
negative for the year. So andif you if you plug in certain areas
of the market, Denny, youdon't see the rally of the S and
P from the lows last October isimpressive, right, There's there's no question
about that. And there's there's basicallyno track record. If you look at

(03:07):
two different things. A market thathas rallied more than ten months, which
we have, and more than twentypercent, there's never been a time where
we've gone on to make new lowsever in that period. And with those
two metrics in hand, however,you know, I'm looking at a couple
of different things. Let's take alook at the small cap index, the
Russell two thousand, the Russell twothousands low point last October was right on.

(03:36):
Let's see here, one hundred andsixty four, one hundred and sixty
four and change. It's a onehundred and eighty five. That's not a
huge rally from one hundred. Imean that is twenty one on one hundred
and sixty a little more than alittle more than compared to the SMP still
at twenty plus percent. And ifyou break it down by sector, like

(04:00):
you were talking about some of thoseindividual names in the doo, uh,
let's look at financials as a sector. Some of those names in the Dow
that aren't doing so well year todate, we're in the financials sector as
a whole. Correct, Yeah,there's there's some names in there yet,
I mean the financial sector on thewhole. It's low for the for the
index. Here's what's interesting about thefinancials. In March, when Silicon Valley

(04:21):
Bank went under, financials actually wentlower than October, and that low point
just slightly. But that low pointfor the Financial's index UH was thirty It's
currently at thirty four, so justbarely above ten percent from the lows.
Some of those other areas that we'relooking at year today. Financial by the

(04:43):
way, compou through yesterday one pointtwo percent. But there's a lot of
names. We know a lot ofRemindal banks that are underwater for the year.
And look at boy, look atdefensive, Look at defensive this year.
Utilities down eleven percent year to dateand consumer state down two. Defensive
did very well last year. Sothat's still to me an encouraging sign because

(05:05):
when defense is losing that that showsthere's there's some underlying buying and going on
in the market. Well, allrelative less bad. Yeah, well,
it did hold up quite well.Energy did the best last year, and
it was positive in the last month. We've seen some of this volatility.
So I always like to take alook when we're seeing volatility, Denny,

(05:27):
and see what's performing better. Uh, and you you've seen positive returns on
communication services led by Facebook and Google, positive returns on energy, and positive
returns on technology at two point threepercent. Worst performing sectors in the last
month. And here's why it's two. It's very difficult in my mind,
okay, to get too negative onthe market when you see the worst performing

(05:54):
sectors in the last month Utilities andstaples yea, the two historically defensive areas.
Most defensive areas of the market performingthe worst. People are not flocking
to defense. People are not flockingto defense at the moment. So the
other part that has happened at thebeginning of this year, and one of
the things Brad and I put downas consensus for the year, consensus for

(06:16):
the year, what was going tobe consensus for the year, and how
are they how are the pundits goingto get it all wrong? It was
going to be the year of bonds. It was going to be the year
of bonds. Forget the stock market. Why would you bother put you can
get five plus percent on treasuries.In fact, at the time I have
the two year treasury here had ayield of four and a quarter. It's

(06:39):
now over five, which means yearto day now you're gonna get your principle
back if you hold it to maturity. But year to date you've barely made
any money in the two year treasurybecause you've lost principle. But you've made
a coupon given that it started atfour point two five. And look at
bonds year to date, the aggregateBond INDEXX is only up two tenths of

(07:00):
a percent. Now keep in mindit has a six percent yield. So
when the aggregate bond in next isonly up two tenths of a percent,
that's another bad year for fixed income. When everyone told us this is the
year of bond, so you stillwanted to be allocated towards stocks this year.
And we're going into what is seasonallythe most difficult period of the year

(07:20):
almost always, and we talk aboutthe third year of the presidential cycle being
the best. Still makes Augustin saidSeptember a pretty poor month. You realize
September is only up forty percent ofthe time. Yeah, it's only up
forty percent of the time. Soand it averages a negative return since nineteen
fifty, so not surprising. Sowhere we'll be looking looking at areas of

(07:45):
support. Certainly would look at thoseAugust lows on the SMP five hundred denny
as a area that you'd want todial into. Now we're talking about the
SMP. You mentioned the DOO.You know, we've had some strange days
in the last month, and Ieven got some call on this where the
SMP and the DOW we're not performingin lockstep. But SMP is the broadest

(08:05):
index, and we'd be looking atthose August lows that occurred on August twenty,
August eighteenth, excuse me, fourthousand, three hundred sixty nine.
Okay, four thousand, three hundredsixty nine was the August low, and
so we're looking at We're at fourthousand, four hundred and thirty six,
so that's still sixty plus points apercent and a half from those August lows.

(08:28):
So we're sort of churning around hereat a little bit higher level compared
to the August lows. The otherpart that I always like to look at
is the moving averages. We breachedthem, the two hundred day moving average,
just sort of the one year averageof the stock market, the two
hundred day We breached that in April. That typically is a sign that you're
in a new uptrend, you're ina new expansionary period. We're still well

(08:50):
above that two hundred day, thattwo hundred day moving average. Then he
sits all the way down at fourthousand, one hundred and sixty seven.
That's almost ten percent lower from here. So it's not a bad thing to
consolidate a little bit. We werewere above those moving averages, which still
tells us that maybe in the UHin the in the short term, because

(09:13):
we've sold off in last week,we might be oversold, but in the
inner more intermediate term, we mightbe still overbought. And so that's something
to pay attention to. Worst monthof the year, but guess what happens
in September two almost always one ofthe best buying opportunities of the year.
So we'll pay attention today, Kevin, Oh, I haven't looked at that
lately. Here the ten year,and that's that's a recent high. That's

(09:37):
a recent high. So a tenyear treasury four twenty eight, so it
must have got to four three fiveyesterday. So so you know, talking
about interest rates, there's a lotof short term and long term issues with
with interest rates. When interest ratesup in the short term for stocks,
Uh, that's so negative, isthat right? When you would say in

(10:01):
the short term, you know,yeah, I'd say, I'd say day
to day, if you see,well, it effects uh you know what
I you know what I would say. More more importantly, big moves in
either direction is bad for the stockmarket. Yeah, big moves. I
don't want to see. These arebig moves that we're seeing. I mean
when you see the ten year treasurymove point two in a day. Yeah,

(10:22):
that market doesn't like that in eitheror that affects tech stocks more than
anything because they tend to borrow moneyand hash flow and things like that.
But I'm reading an artic hole here, and that would subggest that rising interest
rates long term is a positive thingbecause what causes interest generally. While we're

(10:45):
finding inflation right now, but whenyou look at the a forty or fifty
year chart of interest rates, andwe're talking about this thirty year well Martin
and bonds from the eighties when inflationwas high and have a CD rate we're
fifteen percent or whatever. But ne'scome to an end. We've had the
very low rates for a long time. Now we're coming back. You know

(11:07):
where we are right now in athree to five percent range. That's more.
We haven't been about eighty or ninetypercent of the time for the last
sixty years. Yeah, And I'vebeen talking with a lot of clients about
this, Denny, is that theanomaly. There was two big anomalies in
history for interest rates, and therewas approximately a five was about five to

(11:28):
eight year period in the seventies andeighties where interest rates spiked into the double
digits and then there was a tenor twelve year period here recently where interest
rates were zero. Yeah, okay, now that obviously that's combined, that's
about twenty years. But if youlook at the last seventy or eighty years,
the ten year treasury was between threeand five percent for almost that entire
time. That's in our market commentary, by the way, titled what is

(11:52):
normal? If you check it outon our website kurstenwealth dot com. What
is normal? The norm is thisthree to five, And so when the
Fed is done raising rates, we'llget back to what I believe is normal,
which is that three to five.And there's that spike I'm looking at
it on the chart right here,roughly started in nineteen seventy two, went

(12:16):
to about nineteen eighty, and thenstarted coming down, and then of course
the zero percent interest rate environment we'vehad here recently. But well, that
chart goes out back to eighteen eightyand I don't know if you can make
a comparison then, but the pointis treasury rates were between three and five
percent for that entire period of time, wow, from eighteen eighty to nineteen

(12:37):
sixty. Even so, once theFED is done raising rates and they may
end up pulling back maybe one ortwo of those rate cuts, similar to
what Greenspan did in the nineteen nineties. We'll hopefully get back to normal correlations
for stocks and bonds two, whichmeans stocks have a correction, bond prices

(13:00):
hold up well and give you thatbuffer on the downside. Right. And
the other thing we've said many timesis the performance on bonds. About ninety
percent of your performance comes from thestarting yield on those bonds. That's right.
And yields are higher now, soyou can expect those types of returns.
If you're buying any type of aninvestment where the average maturity is a

(13:22):
number five years, ten years,the starting yield on that and that will
tell you what your average performance won'tbe within ten percent or so over that
period of time, that's right.And so what you would look at is
even if you're looking at a basketof bonds, you can you can do
a very similar exercise to what youwould do when you buy a single bond,

(13:43):
whether you're buying a single treasury andyou say, okay, the to
your treasury has a yield of fiveright, and I mentioned that you're to
date if you bought it four ina quarter, you'd be underwater, right,
Yeah. But the person who boughton January first, what are they
getting at the end of two years, Well, they're gonna get four and
a quarter yeah per year. Yeah, people want to sell it now,

(14:05):
that's right. Yeah. So theother component of that is you're starting yield,
but also what's called the duration thetime. So you buy it two
year treasury today, it's five percent. Guess what you wake up on September
of twenty twenty five, you're gonnamake five percent, okay. One of
the things that we follow is theaggregate bond Index. The aggregate bond index

(14:30):
has a yield of five point oneone right now, five point one one,
okay. The duration meaning the averageamount of time it's taking all the
aggregate bond index is a measure ofall bonds in the whole world, seventy
percent treasuries, corporates, everything.So it's a good benchmark to follow.
Five point one one with the durationof six point six and a quarter.

(14:54):
So what does that tell you insix years and three months you buy that
today, you're gonna make five pointone one. Now in between it's gonna
go up it's gonna go down,but that's where you're talking about. You
can do all the analysis in theworld, and obviously you can hire a
good manager to manage the fixed incomeas well and hopefully add some performance,

(15:18):
but really that starting yield is whatyou're looking at. And so what we've
mentioned the clients too, is theexciting thing about fixed income moving forward as
opposed to being a drag on yourportfolio performance. It's finally starting to add
something, right. And I evendid that a little exercise where you talk
about an eighty twenty stock to bondportfolio, and if you did it in

(15:39):
a zero percent interest rate world likewhat we had for the better part of
ten years, and assuming a reasonablereturn on equities over a five year period,
that eighty twenty portfolio has the sameexpected return the eighty twenty portfolio of
five years ago as a fifty fiftyportfolio today with less risk. You could

(16:00):
do it with a whole lot lessrisk and get the same return. So
that's what we're talking about in ourcommentary this week, where we're talking about
what is normal, we're talking aboutwhat is normal, and fixed income stocks
are gonna do what stocks do updown every five or six years. You
know, a twenty plus percent setback. Every year you're gonna have a five
to ten percent setback. That's thatfixed income that really was the problem for

(16:23):
a lot of retirees in the lastdecade, which is now finally going to
start contributing. But what does thatmean. That doesn't mean get excited and
enamored with your money market rate oryour CD rate and say, wow,
look at this, I'm gonna loadup on that and put all my eggs
in that basket. That doesn't meanthat, yep, it means finally a

(16:44):
sixty forty or a fifty fifty portfolio. We'll do maybe what a his historically
done and get back to that normal. We're gonna take our first pause.
You're listening to Money Sense Kevin andDennis Kurston. We'll be right back.
Welcome back to the show. You'relistening to the advisors of Kursten Wealth Manager
Group, Kevin Kurston and Dennis Kurston. Happy to be with you this morning.
As a reminder, we are professionalfinancial advisors and our offices are in

(17:06):
Perrysburg. Give us a call throughoutthe week if you want to set up
a consultation. To review your financialplan four one nine eight seven two zero
zero six seven. Doesn't matter ifyou're already retired or just getting into retirement
or just getting started. We canhelp you out. Give us a call
four one nine eight seven two zerozero six seven or check us out online
at Kurstonwealth dot com. Danny.The last two years provided a fair amount

(17:30):
of volatility in the markets. Wecame out of a midterm election year which
pretty much was textbook midterm election years, the most volatile year of the presidential
cycle, and the typically find abottom in the presidential the midterm election year,
and in the third year the presidentialcycle typically have a rally off of
that low, and so the whipsaws can cause I think investors to be

(17:56):
staring at statements or staring at onlinelogins and wondering how volatile this market is
and wondering if you should be doingsomething as opposed to is this just a
normal course of events that happens ina market cycle, and you have some
information about how often? What isnormal? I think when you prepare yourself

(18:19):
based on history, when you prepareyourself for how often the market is up
per day, per month, peryear, per five years per ten years.
Then you can understand and know whatto expect going into it. I
think the worst thing you can dowith an investment portfolios go into it and

(18:41):
say something like, Okay, Ilooked at the historical returns, it's whatever
percent per year and in the firstmonth that goes down, and say,
well, that's not what I signedup for. But actually it was what
you signed up for and you justdidn't realize it. Well, I'm always
reminder coming a number of years witha new client came in and we have

(19:03):
tools where you and you know,set it up to look at it every
day if you want them, ora monthly statement or quarterliest statement. And
the question to Brad was, wellhow often should I look at it?
And I thought he had it wouldanswer, well how often he wanted to
be disappointed? Because if you lookat all that we're happy. Yeah,
we're happy. Yeah, that's agood point. Optimism. It's a pessimism,

(19:26):
but on average, on all thedays in the year, if you
look at all the days in theyears, it's something about fifty five percent
of the time down atbout forty fivepercent of I don't even think it's that
good. Yeah, I think it'sfifty two forty eight. I'd have to
check the day to day numbers,but I don't think it's that good.
That was maybe a positive year,yeah, but obviously the longer you stretch
that out of frequency of let's say, looking at your statement, the more

(19:49):
you increase the odds of success sortbeing happy with what happens. If you
look at it once a month,it's up about sixty three percent of the
time. If you look at it, say every six months, you're up
to seventy percent of the time.Once a year seventy five percent of the

(20:10):
time, every five years ninety percentof the time, ten years ninety five
percent of the time, a fewmore years, it's one hundred percent of
the time. So you know,people have a tendency to want to do
something. And that's the old adageI've used many times. Don't always do

(20:32):
something. Stand there and people justwant to do stuff all the time.
Tweet portfolios a little bit to takeadvantage of things that get ahead of themselves
and behind themselves. You use theterm I think, you know, turning
the dimmer switch up and down alittle bit. Growth it's ahead of value
or small caps or and so forth, But don't make major moves trying to

(20:56):
chase you know, something called fommoe and the fear of missing out,
you know, the snot or thatsnot I'm going to jump on that man
wagon. That's not a good thingto do well, And I think the
number one thing to get right.Everyone spends all of their time worried about

(21:18):
what fund, what index, whatstock, what bond to buy? Right?
And I would argue, if you'regoing to pick between two things,
I'm going to spend all my time, energy and research on picking what stock,
what index, what fund, whatbond to buy? Or I'm really

(21:40):
going to sit down with myself anddecide my time horizon for this money.
Yeah, I said that is themost important thing. Let me explain why
this can really mess somebody up.Okay, let's say you decide. Let's

(22:00):
let's let's say the person picks thegreatest stock in the world. Let's say
you picked You picked Apple, nota recommendation to buy or sell, but
it's done well over the last thirtyyears, but your time horizon was six
months. Well, would you beenaround for the good performance of Apple whenever
that started in the early two thousandsof course not. So you might have

(22:22):
gotten the stock right, but yougot the time horizon wrong. And in
fact, if you had only boughtit for six months, you could have
very easily been underwater. Now,now imagine you buy. You don't worry
about what you're gonna buy. You'rejust gonna buy the market. You're gonna
buy the broad index. But youget your time horizon right. You say,
I have a ten year horizon forthis money. I don't need it
for ten years. I've looked atI've looked at my retirement, I've looked

(22:44):
at my numbers. Ten years,well you have a ninety what ninety eight
percent chance of success and in fifteenyears, and in fifteen years the market
has never been down one hundred percentbased on history. If you look at
one day and that's your time horizon, well it's a coin flip. So

(23:07):
if you get that time horizon rightwhen you need the money, when you
need the money, you get thatright. And in many cases it means
you can allocate more to stocks thanmaybe you thought. Okay, because some
of this money, even when you'reretired, I need a little bit this
year, I need a little bitnext year. But if i'm sixty two
years old today and retired. Someof this money's earmarked for when I'm eighty
two. That's twenty years. Andif you get that time horizon right,

(23:33):
and that's what those those those chartsthat you're showing based on how often the
market goes up per day, permonth, per year, per five years,
that's the that's the secret. That'sthe secret that no one understands.
Because if you, if you,if you put together a portfolio, and
I say this to everybody, becauseI'll often show people three four different risk

(23:56):
tolerances based on the portfolio that Ithink is appropriate for them, and everyone
will always say the same thing,Well in ten years, In ten years,
what do you think will do thebest? Is that? Well,
that doesn't matter. The best portfoliofor you is the one that you can

(24:17):
stick with. That's right. Whereif we say it's a ten year time
client, if we say it's aten year time rise, and you truly
do hold it for ten years,because the worst thing I can do is
put you in something that I justthink is going to do the best,
but it's too volatile for your stomach, and then you bail out in six
months. Well, all of asudden. We took something that had a
ten year horizon and made it six. So I have I have a lot
of clients or you know, prospects. Then we'll say, well, how

(24:41):
do you invest your money? Isaid, well, that is not important
how I invest my money. Uh, you know what really matters is your
temperament and what you can handle asfar as staying the horse with your portfolio.
Everybody has a plan. According tomy client, I'm in the face.
Well, that's right, And andthe degrees of how hard that punch

(25:02):
is gonna come is determined by therisk that you take. So you know,
it's it's always something that people areconstantly adjusting, and you're the tolerance
you have when you were twenty twomight not be the same as when you're
sixty two for varying reasons, justbecause you've been through a lot of bear
markets and you've seen what can happen, or you're closer just to the timeframe

(25:23):
that you need the money. Sothere's a lot of different variables that go
into it. But I've also seenseventy five year olds Denny who live on
a pension don't really need the moneyand are perfectly comfortable being one hundred percent
stocks because they say, over time, it's going to do the best for
my kids. This is for mykids, and I don't really need this
money, so it's different for everybody. But if you get that time horizon

(25:45):
correct, regardless of your risk tolerance, I would argue that that's the second
thing that has to come into theequation, then you can create a portfolio
that's right for almost any stock marketenvironment. Take our next pause. You're
listening to Money since Kevin and DenisKursten will be right back and welcome back
to the show. You're listening tothe advisors of Kursten Wealth Manager Group,
Kevin Kurston and Dennis Kurston. Annyquestion that often comes up to me for

(26:11):
people in their four oh one Kplans. There's been a lot of change
here lately. In fact, governmentjust came in here recently on they were
saying that if you were over fiftyand you're gonna do the catchup, that
they were going to mandate that itwent into a ROTH into a ROTH four
oh one K, and they justpushed that out to twenty twenty six.

(26:32):
I think they probably got a bunchof calls from lobbyists for four oh one
ks and third party administration and saidthis is a logistical nightmare. You're gonna
mandate this. And so that's beenpushed out, but the decision still sticks.
What do I do? I gotthis pre tax traditional four oh one
K, got this after tax roth. You know, we've talked about this

(26:53):
decision often on roth ira versus traditionalIRA in general, but on the after
tax versus pre tax I don't thinkpeople really know. Sometimes you just get
signed up for something that you didn'teven know was the proper thing. And
so when you look at the rathfar ol one k, it's enticing because

(27:14):
you say, I can build upthis nest egg, right, I can
build up this nest egg and thenit'll be tax free when I take it
out. You don't you get zerotax benefit today if you do that?
Okay, So what should a persondo? What sort of numbers should they
crunch to decide where the money isgoing to go? And if you look

(27:34):
at the numbers themselves, there's twobig things. Your tax bracket and your
time. Okay, that's the biggestthing. I mentioned time horizon. Well,
deciding on a rath orral one kversus traditional your time is a very
very important thing to look at.So article in the Wall Street Journal RATH
versus Traditional Where to put your money? To decide whether to contribute to our

(27:57):
traditional ROTH or both. Compare yourtax rate and the right rate you expect
to pay in retirement. Okay,that's the first thing they say. I
guess you're you're guessing the rate youexpect to pay. Really, well,
what if I'm thirty years old todayand I'm retiring in thirty years what we're
tax rates thirty years ago a lotdifferent? Yeah, So I don't know

(28:19):
if that's maybe the most important thing. And you know what if you have
a good financial and may not godown, you just that to me,
that's oversimplifying it. I mean,you can assume today's brackets, the Trump
tax cuts to expire in twenty twentyfive, you could maybe go back to
those levels as well, So thatmay be favoring doing the ROTH. Right

(28:42):
now, there's a person here that'sthirty two years old. He and his
wife are contributing to ROTH four ohone case. They're paying twenty two percent
tax on the money before it goesinto the ROTH account. So let's look
at that example. Do you likethat? I think that that at that
age, in that bracket, okay, the person expects to make more money

(29:03):
over time. I think it's important. But but one thing that I think
that people miss. I think beingthirty two years old, certainly there's enough
time to get enough tax deferred growthand then tax free growth that you can
do that. But here's one thingthat I think people miss, and this
is where you can go to theextreme. Let's say hypothetically you get all

(29:23):
your money in a wrath for onek a rath I rate, it's all
tax free coming out. Well,isn't that great? But the problem is,
at today's brackets, you can makeupwards of eighty thousand marrying filing jointly.
Actually it's ninety thousand now and payalmost no taxes. You pay very

(29:44):
little, okay, with the standarddeduction and the right offs you get,
you're only in the twelve percent bracket. Certain amount of the income's tax free,
certain amount of the incomes only taxat ten, the rest is taxed
at twelve. Well, why wouldn'tyou create a fun financial plan that you
had enough income that you were youstayed in that lowest bracket wherever it may

(30:04):
be down the road, Okay,Well, if it's all tax free,
then what you've essentially done in thisperson's example is you've paid twenty two percent
tax, and let's assume tax ratesstay the same. You've paid twenty two
percent tax on all your money,but you could have paid twelve percent tax
on some of your money. Sowhen you create this plan, which everybody

(30:29):
thinks is so great, I'm gonnahave everything in a roth, you actually
left some money on the table.Rights, yeah, you left. This
is why sometimes it even makes senseto do roth conversions in retirement, because
you may be planning for increase inincome as a result of soul security or
required distribution. Well, the sameis true when you're younger. You should

(30:52):
create enough of a nest egg ina pre tax account so that you have
a little bit of income that's taxedat those lowest brackets. So even if
the person's thirty two years old ortwenty two years old, I still think
that you could probably crunch the numbersand make an argument for at least a
portion. And by the way,no employer will make you do all or
nothing. No employer will make youdo all or nothing. To split that

(31:15):
up a little bit, Okay,professor, they have a They quote a
professor at the University of Arizona says, once a person moves out of the
twelve percent bracket, the research indicateit is best to start dividing between ROTH
and traditional. So there you go. If you're younger and you're in the
twelve bracket, which married filing jointlygoes up to ninety, which with the

(31:38):
standard deduction, that's actually one hundredand fifteen. Okay, you should be
probably doing one hundred percent ROTH,but you start jumping up from twelve to
twenty two, you should either splitit or start start doing the pre tax
so you get the tax savings.And so try to create rules of thumb.

(31:59):
I think his dangerous business. Buthere in the Wall Street Journal they
said, uh, and this wasfrom this University of Arizona professor. From
his research, he and his coauthors recommend add twenty to your age and
put that percentage of money you aresaving for retirement into a traditional four oh
one k with the rest in arothm Okay, so if I'm thirty,

(32:20):
I had twenty, So that's afifty fifty split. Is that what they're
talking about? Okay, I couldlive with that I can live with that
when to stick with the traditional fouroh one k uh. Jeff Levine,
chief planning officer at Buckingham Wealth Partners, So he gets quoted here does the
same job as we do, butsaid he recently met with an advisor who's
clients in the thirty seven percent bracketand was considering roth contribution. So talk

(32:43):
a little bit about why that wouldbe crazy. Well, you're you're leaving
a lot of savings, you know, off the table you put you you
put one hundred dollars in a preditionalfour old one, Hey, thirty seven
percent, Bryan, it's awesome,six three dollars, right, And this
particular gentleman in this example makes sevenhundred thousand dollars a year and plans on

(33:06):
his retirement income being four hundred.Well yeah, yeah, that's pretty good.
But the point is along the wayand what people knowing always talking about
they lost the opportunity hostily with themoney that went out in taxes. Well,
what I'm saying is that this gentleman'sactually planning on a reduction of income
in retirement, so all the morereason to contribute on a pre tax basis.

(33:30):
So if someone retires as an example, here, someone retires at sixty
and the taxable income falls, thatpresents an opportunity to move or convert.
So you can always take some ofthat money, and if you plan this
right based on the brackets, youcould put it in a pre tax account
and then if your income falls,you could later on convert that to a

(33:50):
ROTH at a lower rate. Sothe answer is not just as simple.
I've just I've seen a lot ofarticles talking about the ROTH. And what
I find the most exciting as anadvisor, Denny, when we get to
retirement and and we're doing income planningstrategies for people, I think it's great
when we have everything okay, becauseit's not just about the monthly income that

(34:15):
someone needs through retirement. Don't forgetabout the unexpected okay. And so if
you have a decent amount of savingsin a joint account or a trust account,
okay, this is an after taxyou know, non retirement account that's
taxed dividend rates and capital gains.If you have a decent amount of money
saved there, If you have adecent amount of money in an after tax

(34:37):
ROTH, and you have a decentamount of money in a pre tax I
RA and you have a decent amountof money, maybe you even have an
annuity, which is a completely differenttax structure. Okay, but what's great
is not only planning for your monthlyincome. You have options. You have
an unexpected bill at the house andyou have to pay twenty five thousand dollars

(34:59):
for repair or a roof, fora furnace, or whatever it might be.
You you don't come to your advisorwhen you have all your money in
a pre tax IRA and say,well, this is my only option.
Well, at that point, maybeyour income's already one hundred thousand. Now
you're going to take another twenty five, which jumps you into the next bracket.
When you say another twenty five,that's not what you're hang out for

(35:22):
sure. You'd have to take outforty, you know, right, So
retirement is not this linear thing.What's I'm gonna have this fixed income for
life and it's never going to change. The unexpected does happen, as we've
experienced. And so when you havethese different sources that you can pull from,
whether it be a ROTH, whetherit be an IRA or a non

(35:43):
retirement account, and someone would probablysay, well, what if it was
just all in ROTH, then itbe a piece of cake. Well,
as we mentioned before, you maybe leaving low rate income on the table
if you have it all in theROTH. So what were you saying to
this somebody came to you with thisrequest, Kevin. Here's a person or

(36:04):
a family that has virtually all theirmoney and an IRA, no non retirement
money at all. Uh, andthey want to buy a new Corvette one
hundred thousand dollars Corvette. They've alwayswanted to have one, and that's their
dream Hower and they want to takethe money out of the IRA one hundred
thousand dollars Corvette. What's that,Horvett. I don't want I don't want

(36:24):
to take out a loan. Idon't want to paying the interest. Well,
that corvette, and that's that's thatbrings up a second point, at
least one hundred and fifty thousand.And that brings up a second point,
which which you and I were touchingon in the break, which with interest
rates as high as they are,okay, people are starting to second guess
things like home equity line of creditloans on cars which are much higher rates.

(36:50):
And you say, I'd like topay cash, Well, if the
only type of account you have isthe pre tax IRA. Even if interest
rate start to rise, sometimes itstill doesn't make sense to pull the money
out of the IRA to pay forit. But if you have these other
accounts, and if you made acommitment to save into a joint account,
you made a commitment to save intoa roth, an interest rate spike on

(37:14):
you and you need to pay offa home equity line of credit. Now
you have places you can pull themoney from. That makes a lot of
sense. One other point in thisarticle that I think is very interesting as
it pertains to the roth, soit'd be something to think about. You
want to protect your spouse, Okay. We often note that if someone passes
away, a lot of times peoplejump into a new bracket, a higher

(37:36):
bracket. You're not married filing jointly, so all of a sudden, that
twelve percent bracket, I think it'slike forty little over forty thousand, okay,
where it's ninety thousand, married filingjointly. So it is nice to
have some money in a roth orroth for one K or a traditional roth
IRA so that if something happens toyou or your spouse and you lose that

(38:02):
married filing jointly status, you cansupplement your income without jumping your tax bracket
much higher. So that's a that'sa point in this Wall Street Journal article
they think is very important to lookat and point out twelve percent and a
single forty four thousand and up.So there you go. So you yeah,

(38:23):
so you you you could have nochange to your income if your spouse
passes away, and let's say youmade ninety thousand, you just took half
your money and increased the tax rateby ten percent. So having options,
having options, So I would say, you know, to sum up this
article, when you're choosing between Ilike, in all of the above strategy,

(38:46):
you don't know where you're going tobe in twenty or thirty years,
right, And there's no perfect answerbecause certainly you don't know where your life's
going to be, where your incomeis going to be. But I think
that having in all of the abovestrategy and in multiple different types of account
registrations, which each one of thosehas a different tax status when you get

(39:07):
to retirement, is an important thingto do. Take our next break,
you're listening to money Sense Kevin andDennis Kurston. We'll be right back and
welcome back to the show. You'relistening to the advisors of Kursten Wealth Manager
of Kevin Kurston and Dennis Kurston.We only have up six or seven minutes
left in the show here, andI want to just we're going into the
presidential season. Presidential year, presidentialelection year. Easy for me to say.

(39:30):
And I saw a headline in thejournal and I couldn't agree with it
more. You know, you knowwhat it says, the stupid party versus
the evil Party. Okay, Iknow, yeah, that's right. One
of the two parties has no intentionof losing with these two front runners,

(39:52):
guess which one. And this iswhat I've always said about Republicans from the
beginning, is they plan the party, they plan all the things they're gonna
do, and they forgot about thefirst step winning. Yea, right,
we're gonna do We're gonna do taxcuts. We're gonna do soul security reform,
We're gonna do healthcare reform. We'regonna do all these things. Here

(40:14):
the order, we're gonna secure it. We're gonna ban abortion, We're gonna
do all this stuff. Oh,whoops, we forgot to look at the
polls and see what we need tosay. And I've often said this too,
Lie, I don't care because themost important campaign promise and they don't
follow through on well, Democrats arereally good at it. What a Biden

(40:36):
promise on student loans? How manyvotes did that get him? And that
was Everyone knew that that was completegarbage. But guess what not the several
million young people that voted for him. Okay, an overwhelming majority of the
public, more than sixty percent,does not want either Joe Biden or Trump.
The polls say that over sixty percentdon't want either one. Okay,

(40:57):
Yet the two major political parties aretumbling toward that unwanted choice. The late
Washington economist Herbstein articulated what came tobe known as Stein's law. If something
cannot go on forever, it willstop. That is It's Dan Henninger.
That is my belief about this election. Biden versus Trump is unthinkable, Therefore
it won't happen. I don't knowabout that. Former Wyoming GOP Senator Alan

(41:21):
Simpson, one of the most serviantcharacters in our politics, used to call
Republicans the stupid party. But Simpsonwasn't done Democrats. He said were the
evil party, Which would you ratherbe right now, stupid or evil?
My money says the evil party willfind a way out of the Biden Trump
dilemma. Put it this way,the party that nominates someone other than these
two will win the decisive vote ofthe independence. I agree with that.

(41:43):
Some don't. What do you think, uh boy word will start? Trump
me our nominee from the Republican Party. In my opinion, you know and
have a lot of reasons why youdon't want to have that happen. I
think my number one reason is Idon't think he can win. I don't
care about the what his policies are, I understand that, but I think

(42:06):
with these four indictments that he hasthat are completely frivolous, He's done nothing
different than other people. You know, election interference, what an out or
do in ten thousand, when didHillary Clinton do and when she lost Trump
the first time? I don't careabout all that. Here's what we need.
Here's what you need for Trump towin. You need someone who was

(42:29):
lukewarm on Trump to now vote forTrump. And I would argue no one
is lukewarm on Trump. They eitherlove him or they despise him. So
who was lukewarm? That's going tochange? Uh me, you're already voted
for him, you weren't lukewarm.I'm would vote for him, yes,
But who was a lukewarm Biden voter? Who was a lukewarm Biden voter?

(42:52):
That's going to change? Who wasa warm Biden voter? That well?
I think Biden's policies and the thingsthat he is on inflation, the immigration
and the border, oil prices,drilling after Anna stand, none of it
matters. None of it matters.People, Put somebody in that can win

(43:14):
who I don't know. I don'teven know if I have the rights hand.
I just know it's not Trump.Trump cannot win. There's no money
close my closest. Put somebody inthat can a win a swing state most
importantly, Yeah, okay, pickpick a vice president that will win a
swing set. Why don't we keeppicking vice presidents from states that we already

(43:36):
have in the bag, like Wyoming, Indiana, Alaska? What are we
doing here? People? Every vicepresident should be from about five states and
it should never change. They shouldbe from I don't even know if you
need Ohio, Virginia, Arizona,Georgia, Wisconsin, Pennsylvania, if you're

(43:58):
not from that state, won't applyfor the job. Well, you're talking
about the stupid party, the Republicans. Here's what they need to do.
Clean up your election laws, andyou're not gonna happen. Not gonna happen.
They won't do it. They won'tdo it. I mean they allowed
in all those swing states, thestate legislators were buying large republic and allowed

(44:21):
the local election officials to change therules and do whatever they wanted to do
with all the mail in ballots andwatch out for COVID and masks because they
want mind us stay in the basement. If he continues to run, a
lot of people think he won't.But Trump's don't mean the nominee. Uh,
those election things are going to endup in the Supreme Court. I

(44:43):
don't think anything will come of it. And Trump can end up in jail,
who knows, and he'll pardon himselfand being the next president and everybody
can talk, you know, AndI like how everyone sits here and talks
about Biden policies. If that's asif that's how p people vote. You
know, too many political people thinkthat we're voting like George will when the

(45:10):
vast majority of the populace votes likeit's Kim Kardashian. It is. People
don't sit around and read the articlesfrom the Heritage Foundation. People don't sit
around like you, Denny and dothis. So we have to realize that
when a twenty four year old collegestudent goes to the polls, they don't

(45:32):
pick based on policy. It wouldbe nice if people did, but they
don't. So they're they vote athorning in my student loan exactly. Okay,
So that policy theoretically, the Republicansaren't even in the game because that
isn't policy. Republicans aren't in thegame because they think they're in the they

(45:53):
think they're in the honesty game.Pence. Pence is guilty of it.
Run Swanny went after him recently becausePence is talking about how people hate Mike
Pence. They do, they do. Mike Pence is a perfect example of
someone who could never win, neverwin because he is the caricature of the

(46:17):
old fuddy duddy guy that young peopledon't want. So once again, these
policies they might move the needle fora fifty year old, a sixty year
old, or a seventy year oldBut what Democrats have realized is if they
just make stuff up, they getall the votes of the twenty and thirty
year olds, because the twenty andthirty year olds haven't been around long enough

(46:37):
to know that it's a lie.And whether it's whether it's giving you money
for education, whether it's scaring peopleabout abortion. They know how to push
the buttons. Republicans don't know howto push the buttons because they think everybody
is spending hours on end researching taxpolicy and they're not. So you have
to win the beauty contest. That'swhat you have to win. And I

(47:00):
don't think Trump can win the beautycontest. Who besides him? You this
all sounds wonderful, but there's nomoney. There isn't even close. There
isn't anybody even close. Yeah,I mean the Sciantists, I mean quite
frankly. Uh, if Robert F. Kennedy Jr. Would probably win a
lot of votes, but the Democratshate him too well, they won't allow

(47:21):
that to happen. So, andI don't know if there's an easy answer,
it's it's it's like a lot ofthings. Uh. In investings the
same way, it's a lot easierto pick what you don't like as opposed
to what you do like. Butbut I think that I boil it down
to who is the lukewarm Biden voterthat is switching to Trump and I and

(47:42):
I don't know who that is,all right, I'm telling you who.
I think it is a lot ofpeople are fed up with everything in their
lives. They vote on hitchen tableissues, and the hitching table is a
lot more expensive it is it is. Now that's a lie. Maybe the
Republicans can go with because the kitchentables much more sensive and Trump had a
lot to do with it. ButI don't think people pay attention that closely.

(48:05):
You know, when Trump spends thefirst six trillion and Biden spends the
last two. Uh, somehow Biden'sresponsible for the inflation. But I don't
think people pay attention. I thinkthey still blame the numbers. No,
they're not what you say. Twoyes, yeah, I don't think so
everything. If you look at theat the deficit, it went up six
trillion under Trump, and it wentup now it's more like three under Biden

(48:29):
because and he passed the Inflation ReductionAct. The first three or four stimulus
checks came from Trump. That wassix trillion dollars plus the PPP program.
Well the numbers, Okay, let'slook at it for next week. I
don't, I don't. I hopeeveryone sort of whistles past the graveyard that
and doesn't doesn't blame Trump, butand I don't think they do, because

(48:51):
you always want to blame the presidentcurrently in office. So well, we'll
cover this and a lot more infuture shows. Thanks for listening, everyone,
we'll talk next week. You've beenlistening to Money since brought to you
each week by Kursten Wealth Management Group. To contact Dennis brad or Kevin professionally
called four one nine eight seven twozero zero six seven or eight hundred eight

(49:14):
seven five seventeen eighty six. Theiremail address is Kurstonwealth at LPL dot com
and their website is Kurstenwealth dot com. Opinions voiced in this show are for
general information only and are not intendedto provide specific advice or recommendations for any
individual. To determine which investments maybe appropriate for you, consult with your
financial advisor prior to investing. Securitiesare offered through LPL Financial member FINRA SIPC