Kersten Wealth Management Group - Money Sense 11-15-25

Episode Transcript

Speaker 1 (00:00):
Hello, and welcome to Money Center. You're listening to the
advisors of Kirsten Wealth Management Group, Kevin Kirsten and Brad Kirsten.
Happy to be with you today. Brad, we're working our
way through the month of November, and it's been a
pretty quiet month overall. Now, some of it's been because
of the government shutdown and the lack of information, lack
of data, especially on the jobs front. But I kind

(00:21):
of like the way this month is trending because we're
working off a little bit of the overbought conditions. We
keep talking about looking for a correction. I don't if
it happens now, it could happen in the first quarter,
it could happen next year. We haven't made any major
moves yet, but we're just trying to prepare investors for
more volatility after what has been an historic lack of

(00:44):
volatility in the last six months. But when you get
to the last couple of weeks of November in particular,
you actually there's two periods of time that have not
only low volatility, but also low volume and historic level
of gain, and that is that Thanksgiving week and then,
of course we've often talked about the Santa claus rally

(01:04):
after Christmas, so really early in mid part of December
historically has some precedent for some downturn, and we'll pull
it up next week.

Speaker 2 (01:13):
That Friday after Thanksgiving is I think we're probably at
a ninety ninety five clip on positive days, and that
particular day it's a shortened day. But yeah, we're think
I want to get back to just We did have
a little bit of a sell off, not quite three
percent of the overall market, but like you mentioned, it
was healthy because there were things revolving around earnings mostly

(01:35):
that sold off pretty rapidly. I mean we had ten
and fifteen percent sell us in individual stocks. We had
sectors that gave us a five percent sell off, even
though the overall market was only about two point eight
from high to low. But mainly because you just had
this ebb and flow where some sectors were off five
on days where other sectors were up, so the overall

(01:57):
market didn't feel like it went down. But under the hood,
a little disruption last week, and I do think that
it was the government shut down weighing on things, especially
when it came to some things that we know are
going to give us a slowdown. I want to touch
on one of them, and that is that's the flight cancelations.
On Monday of this week we had two four hundred
total canceled flights. Tuesday was about half of that, and

(02:20):
on Wednesday it looks like it's going to be just
shy of nine hundred. That is significantly higher than normal.
You do have to give a little baseline. We do
this with the market all the time. What's normal for
flight cancelations. So last year there were ninety six three
hundred flight cancelations, which works out to about two hundred
and sixty per day, and the year before it was
eighty seven nine hundred, which works out to about two

(02:43):
hundred and forty flight cancelations per day. That's about a
normal trend from year to year, even though it's more
per day because there's more flights, and so you're always
going to have a few more cancelations per year on
average because there's more flights. But you're talking about on
Monday and likely over the weekend too. I didn't pull
up those number a ten x more cancelations, and so

(03:04):
you think about the dollar amount there. If there's two
thousand extra flights over the course of a week, that
are canceled, and it's on average two hundred seats on
average four hundred dollars. Just doing the math, you're talking
about one hundred and sixty million per day of lost
flight revenue. That either it can't they're gonna either have

(03:25):
to credit somebody and the flight won't get taken, or
that flight just doesn't that you don't end up with
extra flights the next day. There's only so many pilots
and so many slots that you can that you can have.
So when you have flight cancelations because you don't have
the employees to run the place, you know, pretty soon,
if you're talking about a week of this many cancelations,
it turns into real money. It turns into a billion

(03:46):
of lost pretty quickly. And so I think that's why
the market did give up a little bit of ground,
kind of foreseeing that there's gonna be a few things
that have some weaker earnings because of it, and just
an overall slowdown that's gonna a hit if it went
on any longer. But then here we are midweek, have
a little bit of an agreement, and finally towards the
end of the week getting back to fully open and

(04:09):
people getting paid and the cancelations slowing down, and I
think by the time we get to the weekend, maybe
we'll get back to normal as far as the flights.

Speaker 1 (04:17):
Yeah, the seasonality I mentioned in November starts pretty much
the last week of the year, if you know, just
looking at the numbers on days, and we have some
days that average negative returns, and obviously days are a
coin flip if you look at days by themselves, well
we have some days that average negative returns. But really
the positive seasonality with the Thanksgiving holiday. The low volume

(04:38):
starts right around November twenty third, with actually November twenty
fourth being one of the top out of all three
well not three hundred and sixty five trading days, but
roughly two hundred trading days in a year, November twenty
fourth being one of the best. Now this doesn't really mean.

Speaker 2 (04:53):
A whole lot, but there because Thanksgiving moves around, but
that's probably one of the more common times.

Speaker 1 (04:57):
That it would be Thanksgiving week, and there's there is
there is some thought behind it. It's not just completely random. Okay,
the low volume, the market can get pushed one way
or another, but typically you're seeing it being pushed higher,
just like with the Santa Claus rally. But then you
get into early December. Plus we're gonna get a little
bit more news, both inflation related news and news on

(05:20):
the job front starting in early December, now that the
government has back opened up. So it's interesting to see
if I think if we get through where we work
off some of this overbought conditions, it could bow well
between now and the end of the year. What the
Dow just hit forty eight thousand. I remember, Brad, when
I first started working in nineteen ninety nine, there was

(05:40):
a gentleman who had a license plate that said Dow
fifty k. And by the way, that ended up being
in the short term. And this is not the way
this person did it was it was one of the
salespeople for one of the fun companies. He wasn't saying,
you know, Dow fifty k tomorrow. But the way the
market had been going in the late nineties, everyone was saying, Wow.

Speaker 2 (06:02):
Within five years, you'll be there. Yeah.

Speaker 1 (06:04):
Now, obviously that didn't happen, but we are now approaching it.
So the point being, and I think at that time
the Dow was around eleven or twelve thousand at the
peak in the year two thousand had to be cut
in half a couple of times. But now we're approaching
that Dow fifty k and you just look at the
power of compounding. It has actually been a below average
twenty five years since March of two thousand, but investors

(06:27):
have still made some pretty decent money in the Dow's
turn from twelve thousand to almost fifty thousand dows. So,
but that'll be a I think it doesn't really mean anything,
but it'll be a big day if and when you know,
they'll be popping shall they'll have hats on the on
the on the this floor of the New York Stock Exchange.

Speaker 2 (06:45):
But the last ten have not really been surprising. When
you go the ten prior and they're underperforming, you look
at the decades. If you have ten years of underperformance,
the next ten are typically a bounce back. Periods of
time usually goes a little long. Actually, usually it's more
like fifteen or twenty years of outperformance and then eight
to ten years of underperformance. And so no one should

(07:07):
have been surprised, and yet everyone is all the time,
and things that shouldn't be surprising are somehow surprising to
people over and over again. So yeah, I think the
market at the end of the year here will give
us a typical unless anything could happen. But even if
the market gives us a typical November and December, we'll
get to the end of the year and everyone will

(07:28):
be shocked.

Speaker 1 (07:29):
Right, you were mentioning a little bit about some areas
breaking down a little bit, and underneath the hood of
the overall market we are seeing a little bit more
weakness than what the indexes are saying. The S and
P is now up six months in a row right
now and not completely unprecedented, has happened before, But only
twenty six stocks out of the five hundred S and

(07:51):
P five hundred stocks brand also have six month winning streaks,
So only twenty six out of five hundred, So I
thought that was interesting. So yeah, yes, we in order
to see more broad based buying in order to see
confirmation signals that it's not just the magnificsent seven, we
need to see a broad based rally to confirm that

(08:12):
this thing's gonna go a lot longer. But I will say,
I mean, it really depends on the levels. We will
often say, what do People will ask us what's the
market gonna do next?

Speaker 2 (08:22):
Year.

Speaker 1 (08:22):
Well, I love in the next couple of weeks, we're
gonna get everybody's prediction for twenty twenty six, and we
still are gonna have even six weeks left. We have
six weeks left.

Speaker 2 (08:32):
If the market is down ten percent in those six weeks,
it changes versus up ten percent in the next six weeks.
You know, I don't want I'm not gonna make a
twenty twenty six prediction, but you got to tell me
where we are. Am I starting on the fifty yard
line or the goal line? Do I have ninety nine
to go or do I have fifty to go to
get a touchdown?

Speaker 1 (08:50):
And I will say, if you have some sort of
blowoff top, obviously we've talked about it on this show,
it's the time to be reducing risk, not loading up,
and we'll see what happens. Yeah, I mean, there are
things that are.

Speaker 2 (09:02):
Not at an all time high. There are sectors, there
are individual stocks. There are a lot of negative stocks
this year in the S and P five hundred and
so if we get a low off top and it
continues to be the sectors that lead, we're going to
be talking about not having to reduce risk stocks to bonds,
just yet, but just shift where you're taking your risk.
Take your risk and things that still have a good

(09:24):
risk profile, they have earnings, but they haven't participated in
the rally. Last year, we were talking about that with
international because international did not participate, and now we're going
to be talking about it with some of these other
sectors that still have earnings growth but are either negative
since the election, negative in twenty twenty five, or under
the hood have a lot of pieces of the portfolio,

(09:46):
maybe just one or two things that have moved, but
the rest of those sectors still sits negative.

Speaker 1 (09:52):
The one year return on healthcare as an example, the
healthcare index is up two point eight is all in
the last year, with the S and P up fifteen
point five, and the three year average on healthcare is
only six and the S and P three year average
is twenty one.

Speaker 2 (10:05):
Yeah, when you look at a lot of portfolios that
are building a portfolio based on AI, a lot of
them have a big waiting in healthcare because it continues
to be an area that on conference calls mentions how
they're adapting AI technologies to either build new drugs or
just to be more efficient in all of these areas
of healthcare.

Speaker 1 (10:25):
Yeah, I think that that's I mean, I look at
some of the other ones that have you want to
be a little bit contrarian, and look at the last
one year and three year that would have you in energy,
which is flat over the last year. I'm not so sure.
I mean that that was a big area that many
investors Brad were discussing after Trump won. Trump's going to
open the spicket. We're gonna have so much oil, all true,

(10:47):
But the problem is that lowers the price.

Speaker 2 (10:49):
Yeah, well, anyone wants to go back and listen to
our shows before and after the election, we talked about
that being the playbook. We had dry powder after the election,
and the one thing we were going to make sure
of is if Trump won, we were underweight energy. Because
of that, I actually thought that the oil price would
go down a little bit more rapidly and do it
right away. It actually didn't. It trended up and then
finally move down, and that's what's what had energy having

(11:12):
a kind of a not such a great summer and
not participating in this rally. But going forward, I think
it's a good place to be, especially if it's clean energy,
alternative energies that are getting a lot of business from
all this AI build out. Let's take our first pause
we come back. I want to touch on a couple
things that are just questions that clients have been asking

(11:32):
us and things that we've talked about in the past,
but I want to expand on a little bit. One
of them is we come up to the end of
the year and people are doing all these dinner seminars
and still a hot button is taxes and should you
be doing a Roth conversion? What does this just touch
on a few things because things are set at these
seminars that just aren't true, and most of it revolves
around what we know about tax policy.

Speaker 1 (11:54):
Maybe review a little bit about the current.

Speaker 2 (11:56):
Tax policy and take a look back at the historical
tax rates. Everybody always likes to talk about the high
end rate, but most people don't pay the high end rate,
and if they do, it's the last few years of
their working years. Let's talk about the other rates and
what they have done over the years, so you can
make a logical decision, educated educated decision on what you

(12:16):
need to do with maybe topping out a bracket for
Roth conversions.

Speaker 1 (12:19):
You're listening to the advisors of Kirsten Wealth Management Group.
We'll be right back. Welcome back to the show. You're
listening to the advisors of Kirsten Wealth Management Group, Kevin
Kristen and Brad Kurston. Happy to be with you today. Brad,
we're going to segue to talk about Roth conversions, and
only because it's a hot button with so many you know,
if I look at the list of things that we
discuss with clients on a financial for financial planning topics

(12:42):
that aren't what area of the market we're going to overweight, underweight,
how much stock, how much bond. It's up there, but
I feel like it gets more waiting than it should
in terms of its importance. It is an extreme hot
button for dinner seminars and extreme hot button for a
lot of folks like us who are on the radio.

(13:03):
And to me, it's like a good restaurant or a
good TV show where someone comes up to you and said,
this is the greatest thing, this is the greatest restaurant,
this is the greatest TV show, and you watch it
and you're like, well, it's good, but I feel like
it was a little bit over over sold and the
restaurant it was great, but it did cost me two
hundred dollars and I could have just ate at home.

(13:25):
And that's the same thing with the roth Ira is
it's okay, but it did cost me a lot in
taxes to do it well. And I think in general
it's I don't want to dismiss it because it is
part of what we plan for. But every person who
is new, who we haven't talked about this with, comes
in with this excitement and I have to temper it

(13:48):
and be like, Okay, it's a strategy, it's one of
the tools, but it's not everything. And that's the way
these dinner seminars go for everyone.

Speaker 2 (13:56):
Okay, So I want to just touch on one part
of that, because we can just in general say if
we haven't brought it up to a client, it's because
it doesn't apply to you. It does not apply to everyone,
it doesn't, right, Okay. So one of these things that
they'll say is we know this is in the seminar.
We know taxes are going up in the future. We

(14:16):
know that, so why wouldn't you want to pay taxes
now at these low rates? And one of the things
they're always looking at is the high or you go
that can I go one sort of this is a tangent.

Speaker 1 (14:27):
I'm sure, yes, No, it's not that long of a tangent.
But one of the things that kind of stops people
in their tracks right away when we talk ROTH conversion
is well, I was talking to somebody. It's like, well,
WROTH is tax free, my IRA is taxable. Yeah, so
why wouldn't I want to have it all in my WROTH.

Speaker 2 (14:43):
Yeah that's great. Just move it over to the WROTH. Yeah,
just flip the button, flip this way. You want tax
free or you want taxable, I'll give you tax free. No,
it's tax free after you pay all the taxes on
your entire IRA.

Speaker 1 (14:54):
And after I say that, the response is usually oh,
oh I don't want that.

Speaker 2 (14:58):
Yeah, but sorry, Well, well let's say you have a
million dollars. Okay, Well, it's all going to be taxable
at the highest bracket. You have forty thousand I'm sorry,
four hundred thousand out of your pocket. Well, that means
we're gonna have to take it out of your IRA
and withhold the tax and now your IRA, your off
IRA bound's gonna be six hundred thousand. Do we want that? Okay? Okay,
let's okay. So the other argument, the other argument is

(15:19):
that taxes, we know they're going down, well guarantee. It's
weird that something that never in most people's investment lifetimes
has gone one direction, has this guarantee that we know
what it's going to do in the future. Taxes have
gone down for almost every every every tax plan except

(15:40):
for one over the last twenty five and all but
one little blip for the last forty has gone George
hw with his whole no new taxes, Well, this is
what I want to talk about on the highest bracket,
which is all everyone's looking at now. How many people
are going to these dinner seminars are at the highest
tax bracket? And if they are, how many are going

(16:00):
to be in the highest tax bracket when they retire? Okay,
So the thing that we talked about months ago when
we talked about this is are taxes going up? Maybe?
Are they going up for you? Okay? Are you going
from three hundred and fifty thousand of income to when
you're retire you're at one hundred thousand of income? So
why would we do a roth conversion When you're in
the highest bracket that you'll ever be in, and when
you're retired, you're going to be in a low bracket.

(16:23):
Why would we do it now and to pay all
the taxes at a high bracket when we know in
the future you are going to be in a lower bracket.
So what they should be saying is, well, taxes go up,
not for you, So let's talk about it in a
rational way, rational way, But that's not what they do
for most people. We need to be looking at the
bottom two brackets. What have those done over time? And

(16:44):
with almost every tax plan, including the ones under Bush,
where the high brackets went up, the low brackets did not.
They changed a little bit, but they they went down,
and they have gone down almost consistently since the seventies.
So let's look at a couple different periods from two
thousand and two to today. The low bracket is ten okay,

(17:04):
I want to just touch on this period. Okay, ten
percent is the low bracket. And most people would say, well,
even the low bracket, it's gone up because in twenty
twenty and two it was taxed all the way up
to twelve thousand was at ten and the taxable income
today at that ten bracket is twenty three eight point fifty. Well,
that's true, it's it's almost a double. But you know what,

(17:26):
it's not the standard deduction in two thousand.

Speaker 1 (17:30):
Hold on, they're expanding the income that pays ten percent.
That's a tax cut.

Speaker 2 (17:37):
Yeah, that's less people paying ten Well the other thing
that is a tax cut. So this is making the
point that your taxes are actually going down, not up.
Even though we say in the.

Speaker 1 (17:46):
Year two thousand, right now you can make with the
standard deduction and you're over age sixty five. Let's let's
take that out. Just the stand reduction, approximately one hundred
and thirty thousand dollars. You can pay twelve percent taxes. Yep,
if you made one hundred and thirty thousand dollars, you
have that in the year two thousand.

Speaker 2 (18:02):
I don't have that. But my point is you can
have in the year two thousand. So let's do this.
Two thousand and two, the standard deduction Mary finally joint
was seven eight hundred and fifty today, not counting over
sixty five, it's thirty two two in twenty twenty six. Okay,
but the brackets also, that's essentially your zero bracket. So
the zero bracket in a twenty year period has gone

(18:24):
from seven thy eight hundred to thirty two to two
is not taxed. So here we have these dinner semin
are saying, we know taxes are going up, but they
haven't for twenty three years. And prior to that, you
can look at a lot of periods where these lowest
two brackets were. We're much higher than they are today.
The lowest bracket was fifteen percent from twenty twenty one

(18:45):
through twenty nineteen eighty eight, and at higher income levels,
by the way, so higher than today. Higher bracket it
was fifteen, not ten, and at higher income And so
go back to the fifties on a low bracket.

Speaker 1 (19:01):
Let me go back here really quick. So in the
year two thousand, the fifteen percent bracket went up to
married filing jointly went up to forty five thy two hundred. Okay,
the point I was trying to make is what they say, Oh,
obviously we have a thirty six trillion dollar debt, taxes

(19:21):
have to go up. Tax cuts are actually built into
the code because.

Speaker 2 (19:26):
More of your income on a standard deduction is not
tax and the bracket goes up based on inflation. Fifteen
percent bracket, we didn't have a twelve In the year
two thousand went up to forty five thousand. Now the
twelve bracket goes up to one hundred and thirty if
you include the standard deduction because of how the income
level for each bracket goes up. You're right, tax cuts
are built in, and yet at these seminars are telling

(19:47):
you we know taxes are going up. Well, not only
do we not know that it's built in to go down.
More of your income tax at a lower rate is
built in unless we have deflation. We're we're going to
have more of your income at a lower bracket in
the future. So when you're retired, you're probably going to
be making less. You're gonna be down a bracket, and

(20:08):
more of your income will not be taxed because the
standroduction is going up, and more of your income will
be at ten and more of your income will be
at twelve because those brackets and the amount you can
make will be lower. So the whole theory is false
that we know that taxes are going up in the future.
So that's the one that always bugs me is is
that they are convincing people they need to do these

(20:29):
roth conversions under the premise that.

Speaker 1 (20:31):
We know taxes are going up when they haven't.

Speaker 2 (20:34):
Not only have they not, but you're right, it's built
into not go up, it's built into actually go down.

Speaker 1 (20:40):
And with the fifteen percent bracket was forty five twenty
five years ago, and that bracket is now and I'm
not including the standard deduction this time is ninety five
thousand married filing jointly, so it's double than twenty five.
That means twenty five years from now, the lowest bracket
will be almost two hundred thousand.

Speaker 2 (20:56):
Yeah, but let's include the state.

Speaker 1 (20:58):
I say, well, wait a minute, but people's incomes go up,
and they do. But we're talking about retirees.

Speaker 2 (21:04):
And you're talking about doing everything right now, even part
of it right now, and banking even a twenty two
bracket I think is silly.

Speaker 1 (21:11):
It should not.

Speaker 2 (21:12):
You should not be thinking about it.

Speaker 1 (21:13):
It depends on the person. It depends on the person,
and so have we sufficiently ripped on it?

Speaker 2 (21:18):
Yeah? I think I think everybody gets the point. Okay,
the only person would be this, there's multiple people. I
think we have a four or five six million dollar IRA,
and here here comes a required distribution that is going
to kick you up to a bracket that we know
will be higher than if we top out twenty two.
And if you're only sixty five years old, we got

(21:39):
time to do it. We can do a little bit
at a time.

Speaker 1 (21:40):
Yes, And that's exactly what I've done for a lot
of people. So what I will say is this, first off,
let's just answer the easy ones. You're already in.

Speaker 2 (21:49):
The top bracket, zero roth conversion. What's the point No, right, Well,
the point would be they would tell you. The point is,
we think taxes are going now, it's going to go
from forty to fifty to sixty seven. They would They
would probably tell a Mundami, Oh, you know what, if
Mundami becomes president, then your tax are going to be seventy. Yeah,
and nobody will pay it, just like what it was
ninety two, nobody paid.

Speaker 1 (22:10):
Well, you cross that bridge when you come to if
you're already in the top bracket, there's not much planning
you can do with the wroth conversions. Unfortunately, your wroth
conversion will be taxed at the top rate, but so
was your and your rm D.

Speaker 2 (22:22):
Yeah.

Speaker 1 (22:23):
And by the way, if you're in the top bracket,
here's the decision process, and this is why you shouldn't
do it. My guess is one or more of your
kids is not in the top bracket, and so they
will inherit your IRA at some point and they could
potentially pay a lower rate if they're not as wealthy

(22:43):
as you. So yeah, So if your thought is I'm
gonna do the ros so they don't pay the tax
but they're in a lower bracket than you, then it
also doesn't make sense. So if your if your goal
for your retirement account is to pass it along to
your errge, you need to know their bracket. Okay, So
that's that's part of the equation I would say on
ROTH conversions in general, and we've mentioned it multiple times

(23:06):
in the show, but we'll mention it again. If you
have room, especially in the twelve percent bracket where your
income is pick a number eighty thousand, but you could
make one hundred and thirty and only pay twelve percent
taxes convert fifty thousand a year.

Speaker 2 (23:24):
Yeah. Absolutely, Yeah, Now we're talking about topping out that
twelve bracket. I think that's the sweet spot and where
we can do some planning the twelve percent bracket. Historically,
you mentioned that historically taxes have come down, but if
you look at that twelve percent bracket, that is historically favorable.

Speaker 1 (23:41):
It is. And so if you can pay twelve percent
on some probably not all unless you have a really
tiny IRA on some of the money in your IRA
and convert it. Now, the next question people will say
is okay, so then when do I get that big
tax savings? Is that is that next April brand? If
I convert right now, when do we get that big

(24:03):
tax savings? You get no tax savings. Yes, it is
a tax bill that you are willingly doing yourself. A
wroth conversion is a pull forward of taxes today so
that hopefully you pay less later. So when will I
be happy with my wroth conversions in a decade?

Speaker 2 (24:19):
Yeah, because it'll take that long to make up for it,
even if it's at the twelve bra So that's the
other conversation I've had with people is I said, you
will be happy with this in ten years? Yeah, It's like, well,
I'd say a little bit less if it's only the
twelve bracket. You know, say it comes out and now
for one hundred thousand, you got eighty eight invested, but
it's tax free. It doesn't take too long for that growth.
It's never going to catch it, but that growth, even

(24:42):
if you took it all out, it doesn't have to.

Speaker 1 (24:43):
Catch it because it won't be taxed at the same rate.
So to me, if you're in one of the top
three brackets, okay, unless you have some windfall coming that
everybody's situation is different here, But unless you have some
windfall coming, don't bother. If you're in the thirty two,
what is it right, thirty two, thirty five, thirty seven,
where are we right now?

Speaker 2 (25:01):
Yeah? No, I think it's higher than that.

Speaker 1 (25:04):
But if you're in one of the top three, okay,
don't bother. If you're in the twelve, have a conversation
with your advisor. At no point should any advisor recommend
you convert the entire ira unless you have a small balance,
like a fifty thousand dollars ira, okay. If you have
a large IRA, at no point should you do it
all once? Okay. The other one I would say is

(25:25):
there's a little bit of a jump when you're in
the twenty four percent marginal tax bracket up to the
thirty two. So and again that's for the wealthier people
with the larger iras. If you're the wealthier people with
the larger iras and you have wiggle room to convert
and only pay twenty four and maybe you're gonna have
one hundred and fifty or two hundred thousand dollars required

(25:47):
minimum distribution when you get to age seventy three, think
about trying to put a dent in that IRA.

Speaker 2 (25:51):
Yeah, but unless you're gonna stop working here soon and
you're gonna go from that, you know, twenty four bracket
to down to twelve. Yeah, almost every case.

Speaker 1 (26:01):
That we recommend it, Brad, we're really looking at a
situation where it's converting after you've retired. I mean, most
people are making the most amount of money in their
final whatever years that are working. Doing it while you're working.
I don't know when that ever makes sense, but after
you retire, and then the other thing I would say too, Brad,
and I had this conversation with someone who is doing

(26:23):
the Roth conversion strategy. You got to take the new
tax code, in the new Trump tax bill that was
extended in July, because there's some provisions for some extra
deductions for people over sixty five, in particular, that extra
sixty five hundred dollars right off. So if you were
doing it like a set schedule, you might you probably

(26:44):
probably can do a little bit more. You probably can
do a little bit more this year.

Speaker 2 (26:46):
Yeah.

Speaker 1 (26:46):
In fact, I just I had somebody who had converted
a little bit at the beginning of the year, trying
to put a dent in his IRA before he gets
to require distribution age. And we had a conversation right
after the Trump tax bill was extended. He said, well,
let's do that extra sixty five hundred and so that's
another thing. But it's just it's sold to get people

(27:09):
into the dinner seminars. Yeah, as this like life changing thing.
It is not.

Speaker 2 (27:13):
Yeah, yeah, it almost sold as I'm going to save
you taxes and or if your advisor isn't recommending this,
he doesn't know what he's talking about. Well that's not
true either, probably being more thoughtful than these dinner seminar people.
But the other thing, as we close this out, that
rule of thumb you just gave that, you know, the
twelve bracket and maybe one more bracket also saves you

(27:35):
from something else that I think people don't even realize
if their lower income once they start medicare, So once
you're over sixty five, there's some income limits to where
if you go over it and these roth conversions are
taking over it that you'll have Medicare premiums sor taxes
on it, or extra additional premiums whatever they call it
for Medicare Americare supplements, and so just blindly doing it

(27:56):
and doing what they recommend at the dinner seminar might
have you paying even more tax than the form.

Speaker 1 (28:02):
Of a higher Medicare premium. Yeah, so you have to
be careful of all these things. I look at it
like this, Brad. Many people will come in and ask
us about long term care insurance because once again I
think that's a hot dinner seminar topic, and the idea is, well,
you want to protect your assets, so you need to
have this long term care insurance. But as we've seen
over the years, these long term care policies have turned
into basically prepaid long term care because you basically give

(28:25):
the insurance company so much money. Non the older policies
from ten to twenty thirty years ago, a little bit better,
way better, Yeah, okay, but anything recent. All you're doing
first is the first eighteen months is your own premium back,
and then well even before that, there's a ninety day elimination,
so you almost go two years where you're not even

(28:46):
in the insurance company's pocket yet, and then years two
through three or four, however long you're doing it. Okay,
we're finally in the insurance company's pocket. They've got how
we're threading the needle to I don't want to get
into a long term care discussion. But the reason I
brought it up is because we do show people long
term care. We do show people wroth conversions. But in
both situations, Brad, I would say for every ten we

(29:07):
talk about to do it, and.

Speaker 2 (29:10):
Not because they want to do it, it's because we
get to the end and they say, what do you think?
And I say, I'm showing it to you so I
can show you why I don't think it's a good idea.
Just the reality of the cost, whether it's the reality
of the cost of the raw sticker shock of the
long term care the stick or the reality of the wroth. Yeah, well,
the sticker shock of the wroth too, in terms of
how much tax you have to pay. But if you're

(29:30):
managing it right and you're looking at those brackets and
you're maximizing some brackets on the lower end, or if
you're in a situation where you're uh, you have a
lower rate.

Speaker 1 (29:45):
Than your children. I mentioned the situation where your children
have a lower rate. Well, obviously you don't want to convert.
Give it to them and then maybe, you know, maybe
they can have some strategies after they inherit it from you,
but vice versa. I've had some people later in life,
later in retirement, who say, you know, my kids make
way more money than I ever did, right, and if
they inherit this, they're going to be taxed higher. That's

(30:07):
another example. So there's all these examples where it makes
some sense, but it's not one hundred percent for everybody.
And just like the long term care, there are some
examples where it makes some sense, but it's not one
hundred percent for everybody. And I think that's where we
kind of push back against some of those dinner seminar
type crowds.

Speaker 2 (30:25):
Let's take our next pau as we come back at
shift gears a little bit, maybe touch on a few
other things that you might hear in a dinner seminar
to watch out for, but also some planning ideas and
investment ideas for everyone you're listening to the advisors of
Cherson Wealth Management Group. We'll be right back and welcome back.
You're listening to the advisors of Christon Wealth Management Group
BRED and Kevin here with you. Kevin, I give you
a little example here and kind of juxtapose it with

(30:47):
probably a conversation you and I probably have with several
people a year. Let's do it. I'm gonna do it
with a dentist. I go to the dentists and I
ask do I need braces? And they say, no, you're
in your teeth, you're straight, you're fine, you do not
need But then, even with that recommendation from the dentist,
I go to an orthodonist and I asked them if
I needed braces, and they're in the business of doing braces,

(31:10):
and they say, yeah, you, let's do braces. Put braces on.
Go back to the dentist with these braces on, and
the dentists would say, what are you doing. I told
you didn't need them, and I would say, well, I
went to the artist honists and they said I do
need them, and they put them on. This is what
happens to us sometimes when somebody says do I need
a trust? Do I need an estate plan? And I
tell them you already have an estate plan and you

(31:32):
have no need for a trust. What are you thinking
that the trust would do for you? And when they
tell me what they wanted to do, I try to explain,
we're already doing all of that. And then years go
by and they forget. Then they go to somebody that
does trust and they say, sure, I'll give you a trust.
Here's your trust. Then they bring it to us and
I say, well, you only have high raise. There's nothing

(31:54):
I can do with this trust. There was no point
in it. Yeah, but I got the trust, and I
need to use the trust. And there's few things we
could retitle, but you don't need it. So I think
the word of state planning is something that the dinner
seminar crowd will say, you need an estate plan. And
I think people think I need a book that is
titled state plan with all these things in it. And
even if I already have all these things taken care of,

(32:16):
I still need that book. And the estate plan is
kind of a broad term, but in general it is
just it could be legal documents, but it is just
a plan for how your assets will flow to the
next generation.

Speaker 1 (32:30):
Well, there's different kinds of estate plans, I mean, and
many people do need trusts. They want to be very
specific with their assets, but there's a large group that
doesn't need it, and it's not one size fits all,
just like the Roth conversion. And that's where we get
a little bit annoyed because it's not one size fits all.
So let's start with number one at its most basic level.
Let's say the only accounts you have is an IRA

(32:54):
and a checking account. Yeah, if you have beneficiaries on
your IRA and transfer on town, they're payable on debth
on your checking account. You have an estate, you have
an estate plan. Now, someone with a most basic portfolio
of assets, okay, might come to me and say, I
would say, what's your goal? What's your goal with the
estate plan? If you're thinking about doing a trust, and

(33:15):
I would say eighty ninety percent of the time, the
first thing they say is, well, I don't want to
pay a state tax or no.

Speaker 2 (33:22):
No.

Speaker 1 (33:23):
The first one I would.

Speaker 2 (33:23):
Say is they want to avoid probate. That's the first thing.
That's the that's one in two.

Speaker 1 (33:27):
But these are one and two. But I was going
to get to that these are one and two. Okay,
I don't want to pay a state tax. So let's
start with that the number is astronomical.

Speaker 2 (33:35):
Okay, a fourteen million, fourteen point two I think this
year per per person.

Speaker 1 (33:39):
So it's transferable to your spouse twenty eight million dollars
of total assets.

Speaker 2 (33:45):
So check you're not going to pay a state taxes.

Speaker 1 (33:47):
Okay, your kids to liquidate your IRA will pay some
income taxes. They will not pay any taxes on your house.
They will not pay any taxes on your non retirement
account if you have one like a joint account. But
they'll pay some taxes on your IRA, and they will
not pay a state taxes. Everyone's afraid of that forty
five percent of state taxes. And often I will hear

(34:08):
brad well, yeah, but twenty five years ago and so
and so died twenty five years ago, the estate tax
limit was much less. But the second thing we always
hear is well, I need that trust. I need that
estate plan because I want to avoid probate. Same thing.
If you have payable on death on your non retirement
accounts or transfer on death. If you have IRA beneficiaries named,

(34:30):
you will avoid probate. You avoid probate when you name
a beneficiary. So those are the two. Naming a beneficiary
is in a small sense and a state plan. Yes, okay,
we've often said it on this show. You might want
to trust if you have a complicated family situation. If
you have step children and children from a you know

(34:53):
well that it is children from previous marriage. If you
have step children, if you have charities you want to involve.
If you have a disabled child that is going to
need assistance through.

Speaker 2 (35:03):
Or they can't have assets go into their name because
they're getting assistance from the government.

Speaker 1 (35:08):
If you have one child who's a spendthrift child and
one child who's responsible, and you want to limit if
your money gets spent very very quickly, you would want
to do a trust. You might have a child who
I mean, I hate to say it, but we've had
these conversations. You trust the spouse, and you might have
a child that you don't trust their spouse, and the.

Speaker 2 (35:28):
Only way to control from the grave is the trust.

Speaker 1 (35:31):
Is the trust. So there are examples. Very rarely is
it to avoid state taxes, because someone has to have
an extremely large estate to do that. But if you
want to be specific with how your money's spent, or
if there's charities involved, by all means, do the trust.
It makes sense in that scenario. But I feel like
too many times we will have someone with a modest

(35:52):
amount of money, Brad pick a number, five hundred thousand
dollars even, yep, and they'll come in and they'll hand
us the trust and they said, well, wish me to talk.
I don't really think that you need needed.

Speaker 2 (36:03):
This or needed right for it right. And I think,
but if it's a if it's a seminar where there's
an advisor and a trust h officer of some sort,
that's that's going to be the recommendation. Is everyone has
to have it again, a blanket recommendation when it's not
a it's not a situation that should warrant a blanket recommendation.

Speaker 1 (36:22):
Well, and I think this is maybe you know, this
is an example where you want to have a financial
advisor in the loop to Brad because you know it's
strangely enough, we were talking about this topic and I
looked at this article on the Wall Street Journal and
they said, you know, one of the things people look
at with their trust and their wills is you know,
they sign their wills, they do their trusts, and then
they always oh, I got to update this or I

(36:43):
gotta update that, and they're often thinking of doing that,
but with beneficiary forms on their four O one k's
or their I rays, they don't even think about did
I confirm that did so and so pass away? Do
I need to update that? Did somebody get divorced and
I need to update that? And so there's a lot
of things that I think get lost in the shuffle,
especially on accounts where you don't have an advisor, whether

(37:04):
it's a deferred complan or a four to oh three
B or a four to oh one K. And this
is really a mistake. So they gave some examples talking
about once an owner dies, beneficiary forms are almost impossible
to fix, compared with trust, which a lot of times
will have language in there that accounted for these various deaths.

Speaker 2 (37:21):
There was a famous one a couple of years ago
where somebody opened a four to one K put his
girlfriend on.

Speaker 1 (37:27):
Thirty years later, he had never changed it, and he
was the girlfriend was a girlfriend for a few months
and she got the whole four to one K. And
many times a trust if it's named so this would
be an example where the trust makes sense. It has
contingencies for if this person dies or if this person
isn't whatever not in my life, whatever it might be,

(37:48):
it goes to other people, whereas on the four oh
one K if you name one person, there's no contingency,
there's no contingency, even sometimes when you had a contingency.
So talked about. They gave an example of a major
US bank who who had a client's IRA beneficiary form.
The company refused to honor it because they didn't have

(38:08):
it on file. They never scanned it in, even though
the person had signed it and kept a copy themselves.
One person here said they made their sister the heir
of their retirement account and at the time it was
a really small account. Well, he died years later after
having added millions of dollars to the account. But when
he set it up, initially it was just his sister
because it was a small account, and he forgot about it,

(38:29):
and so it ended up being his largest asset at
the time, and the sister inherited it and it cut
out his wife and children. So the original goal was
I'll include my wife and children, but I'll just give
my sister a little bit.

Speaker 2 (38:40):
Hm.

Speaker 1 (38:41):
Well, this particular person forgot about that and it ended
up being his large as assets. So you have to
be very, very careful. So first of all, on an IRA,
never name your estate as an heir because that is probate.
He named your estate the air, and you'll lose not
only the spousal benefit of deferring over their lifetime, but
for kids, you'll lose that ten your pay. Okay, always

(39:01):
designate more than one layer. And by the way, this
is an estate plan. Yeah, without a trust, you're designating
another layer by doing it contient.

Speaker 2 (39:09):
Something that we're doing every time we're opening in an IRA,
and I guess maybe we should be reminding people this
is the estate plan level. Contingent beneficiaries is a version
of estate plan, or it's part of an estate plan
that's just getting done for you a lot of times
when you're opening an account and you don't even know it.

Speaker 1 (39:26):
Yep. So what's interesting too is, and you know this
happens pretty rarely, but if someone if if one of
the errors is in is an adult child who's in
an extremely high tax bracket, they actually also have the
ability to disinherit the money if they want, and then
they can give it. You know, I've seen very few examples,
because you know, people don't walk away from money, but

(39:49):
if someone's really wealthy and they have a sibling and
they're like, listen, mom and dad set this up. I
don't need this money, and my sibling is really not
doing as well. I've seen that examples and that that
is possible. Yeah, as another layer of that's something that
a child could do, especially if they're extremely wealthy. So
a couple other recommendations here. Number one, make sure you

(40:11):
complete new forms every time you transfer the account. The
beneficiaries don't transfer, so whatever you had on file before
does not go with it, so beneficiary errors can arise
when an over owner moves their accounts switch from one
company to another. Understand the four to one waiver for spouses.
I didn't really know this. Under federal law, spouses must
be the heirs of a four to oh one K
unless they have signed the waiver. Right, So, saying an

(40:34):
employee remarries after her first husband dies, she wants her
children to inherit her four oh one K and names
them on the beneficiary form, but neglects to get a
waiver from her current spouse. So we have a new marriage, okay,
on a lot of four on one case, and if
not all four oh one k's if she dies with
the four oh one K, the new spouse will get

(40:54):
it and so and.

Speaker 2 (40:57):
I would say, yeah, I would say that the one
that gets missed is just changing it because of a
divorce or a death, especially on four to one case.
I think advisors probably on top of this a little
bit more. But the four to one case, especially on divorce,
I do see this where it goes to the ex spouse.

Speaker 1 (41:13):
And be aware of the defaults. I didn't know this too.
There's a lot of well, all IRA custodians and four
to one K sponsors will have a list of heirs
called defaults. In the case the owner didn't name anyone,
so this is interesting. Usually the spouse comes first, followed
by children, parents, siblings, and then lastly the estate. So
if they didn't name anybody, many many companies have these defaults.

(41:35):
This cuts two ways. If Mary wants her husband Jack
to have her IRA but didn't name a beneficiary, the
sponsor's first default is to the spouse, then Jack can
inherit without a problem. However, there was a twenty twelve
decision in US appeals Court that ruled against the estate
of an employee who wanted his step sons to inherit

(41:55):
his four oh one K plan. The employee didn't list
contingent beneficiaries or change the jet beneficiaries after his wife died,
and the company's list of eligible heirs if no beneficiary
was named, didn't include step sons, so the funds went
to the other family members down the line and the
step sons were completely cut out. So be specific if
we talk about that estate plan, be specific. If you're

(42:18):
not going to do the trust, still be just as
specific with your beneficiaries and who you're naming, and then
have contingents contingent beneficiaries as well.

Speaker 2 (42:26):
Yeah, and if you don't know, ask, I would say
all the time, even if it's not in a review meeting.
I'll have older people call and say, I just can't remember.
Have I changed it? What is it? Maybe it's an
account that we set up back in the nineties. Let's
see if it's still current and accurate. And many times
it is, but it's worth a double check and is
just a quick call.

Speaker 1 (42:46):
Yeah. And then lastly, if you do the trust, you're
not done. You have to change the ownership on your
non retirement accounts to the trust you if you want
to have the trust, be the beneficiary of your retirement account.
You have to do that walking out of the attorney's
office and with a document. With a document, your work
is not done. You need to name that trust as

(43:08):
the owner of your house, as the owner of your
second house if you have one, as the owner of
your checking and savings account, as the owner of your
non retirement brokerage account, of your IRA's beneficiaries, of your
IRA's four one ks, etc. So that's the second part
of that. Just like the Roth discussion, not for every
single person. There are times when you need the trust

(43:30):
when you don't, and that is the concept of a
state planning. A trust is not a state planning trust.
It's part of it, but estate planning is a bigger
umbrella that includes a lot of other things, not just
the trust. Let's take our last pause. You're listening to
Money Sinse, Brad and Kevin Kirsten. We'll be right back.
Welcome back to the show. You're listening to the advisors
of Kriston Wealth Manage with group Kevin Kirston and Brad Kirsten.

(43:53):
As a reminder, we are professional financial advisors and our
offices are in Perrysburg. Give us a call throughout the week.
If you want to set up a consultation review your
financial plan, whether you're just getting started, well on your way,
or already in retirement, we'd be happy to sit down
and review your plan four one nine eight seven two
zero zero sixty seven or check us out online at
kirstenwealth dot com. Brad Trump, along with Bill Poulty, who

(44:16):
used to be a big homebiller Pulty Holmes who's in
the Trump administration now, is floating the idea of a
fifty year mortgage. And I don't want to say it
it's a bad idea. I mean, you could look at
the numbers. I think it's a useless idea. And a
lot of times with financial planning, one of the things
that we will talk to people about is what mortgage

(44:37):
to get what makes the most sense, which which at
any given point in time. Sometimes you might want the
adjustable rate, the fixed rate, the fifteen year, the thirty year,
whatever you might want to do. But I'm looking at
this fifty year mortgage, and who knows what the rate
would be. But one thing I know for sure if
we just look at fixed rate mortgages is the fifteen

(44:59):
year has a lower rate than the thirty year correct, correct, Okay,
So it stands to reason that the fifty year mortgage
that Trump is proposing would be higher than the thirty year.
It would make sense. I mean, it's a longer amount
of time. And by the way, we wouldn't have any
of this, and we were discussing this before the show
Fanny and Freddie, and there's a huge government subsidy. No

(45:22):
bank would ever give you a thirty year mortgage.

Speaker 2 (45:24):
It would all be like commercial loans.

Speaker 1 (45:26):
And you look at commercial loans five, ten, fifteen, maybe
twenty at the most if you'd have to be a
really special company to get that. And your rate changes
every three to five years, so there's no fixed rate
anything other than it's a fixed rate for three years
or five years. And nobody gets to admortize over thirty years,
especially not fifty years. But I just ran some numbers

(45:47):
on a five hundred thousand dollars house with twenty percent down,
So four hundred thousand dollars mortgage current fifteen years five
and a half roughly, that's thirty two to sixty eight
a month. The current thirty year is roughly six and
anl half, maybe a little bit less, but I'm using
round numbers here. That's twenty five twenty eight a month. So, okay,
you save it when you when you divide it from

(46:08):
fifteen to thirty years, you're going down significantly, almost seven
hundred dollars a month, significant savings there. You're gonna pay
more interest, but your monthly payment is lower. So the
logical thing that Trump's putting forward is, if it's seven
hundred dollars a month cheaper to go from fifteen to thirty,
why not go to fifty? Why not go to one
hundred two hundred?

Speaker 2 (46:27):
What?

Speaker 1 (46:27):
It's ridiculous. So the fifteen years one percent higher than
the thirty year, Is it fair to say the fifty
year would be one percent higher than the thirty year.

Speaker 2 (46:35):
In a normal environment? Yeah?

Speaker 1 (46:37):
Okay, So I did a fifty year mortgage on a
four hundred thousand dollars loan. Keep in mind, the thirty
year mortgage right now on a four hundred thousand dollars
loan would be twenty five twenty eight excluding taxes and insurance.
The fifty year would be twenty five sixty more money
because when you look at how amortization works, when you
spread it out over that many more years, not only

(47:00):
the lifetime interest that you pay, which will be astronomically higher,
but your monthly payment. You'd have to have a rate.
So really this is very close. Twenty five twenty eight
a month, yeah, versus twenty five sixty a month. It
has to be less than one percent for it to
be a lower payment. And even then is it worth it, Yeah,
because you'd have to have a significantly lower payment to

(47:21):
make it make sense. Otherwise you're just paying more interest
for no reason.

Speaker 2 (47:24):
Yeah.

Speaker 1 (47:24):
I mean, right now, if it's a one percent spread
on the thirty year and the fifty year, it's effectively
the same payment. Well, people aren't going to do it
unless they save three hundred, four hundred dollars a month.

Speaker 2 (47:35):
We're going to go through this whole exercise to end
up with something that nobody uses. And the only way
they would use it is if the government is throwing
money at it to lower it and kind of artificially
keep it at the same as the thirty year.

Speaker 1 (47:47):
I think it's a terrible idea. We're going to get
housing prices down. Look at the vek Ramaswan, who's running
for Ohio Governor's page right now, and he talks about it.
You know, how do we get energy prices down? We
need more of it. How do we get house prices down?
We need more houses, and we need to incentivize the
builders who are doing it so that they build more,
so they build more houses. And he also talked about

(48:09):
getting rid of property tax and that burden and funding
the areas that come from property tax other ways. But
you need to deregulate, you need to incentivize building, and
that's how you bring houses down. This fifty year mortgage idea,
it won't make a dent, if anything. It's and by
the way, no one's gonna do it.

Speaker 2 (48:27):
No, no one's gonna do it, and and so it's
it's it's not worth talking about and not worth getting
excited about.

Speaker 1 (48:32):
Absolutely not. Thanks for listening everyone, we'll talk to you
next week.

Speaker 2 (48:39):
You've been listening to Money since brought to you each
week by Kristen Wealth Management Group.

Speaker 1 (48:43):
To contact Dennis brad or Kevin professionally called four one
nine eight seven to two zero zero six seven or
eight hundred eight seven five seventeen eighty six.

Speaker 2 (48:53):
Their email address is Kristenwealth at LPO dot com and
their website is Kristenwealth dot com opinions voiced in this
show are for general information only and are not intended
to provide specific advice or recommendations for any individual. To
determine which investments may be appropriate for you, consult with
your financial advisor prior to investing.

Speaker 1 (49:12):
Securities are offered through LPL Financial member FINRA SIPC