Let's Talk Money

November 10th, 2024

Episode Transcript

Speaker 1 (00:09):
Good morning. My name is Martin Shields. I'm the chief
Wealth Advisor at Bruchet Finance Group, and I'm going to
be your host today for Let's Talk Money. It's great
to be here with you on this gorgeous, sunny, but
very cold Sunday morning. You know, we got so used
to the warm weather this fall that I went out

(00:30):
to get my car and I said, boy, this feels
more like winter. And I checked the temperature twenty four degrees.
Twenty four degrees today, so I guess this is actually
probably more in the range it should be in. But
it takes a little bit of getting used to when
we've had such warm, balmy weather. But it's great to
be here with you to answer any questions you may

(00:51):
have regarding your financial planning or investment managic concerns, and
I encourage you to calling those questions. You can read
me on a hotline at eight hundred Talk Wy. That's
eight hundred eight two five five nine four nine. Again
it's eight hundred eight two five five nine four nine.

(01:13):
Or as we've talked about, we now have an email
for any of our shy listeners who don't want to
get on the radio. I hope I'd rather talk to you,
but if you want to email me, you can, and
that email address is ask Bouche at bouche dot com.
Uh again, it's ask Bouche at Bouche dot com and

(01:35):
Bouche is b O U C h E Y dot com.
So you can email me or give me a call.
And as I always say, there's no dumber silly question
except for the one you don't asking. You may be
doing your fellow listener favored by asking that question that
they have. So boy, a good week in the market, folks,

(01:57):
hitting all time highs we with desp five hundred. We
briefly passed over the six thousand level mark. It kind
of came down from there, but for the week, the
markets were up. He was up four point seven percent
for Russell two thousand, which is more in the small
cap bigcap space, up by eight point five percent for

(02:20):
the week. So certainly, you know a number of factors
come into play here. One is the market doesn't like uncertainty.
It does not like uncertainty, and with the election coming,
there was a lot of discussion of volatility and uncertainty
of how the election was going to play out. And

(02:42):
you know, half the country is happy with the results.
Half the country's not happy, or maybe it's a little
bit more were happy because the popular vote and a
little more towards Trump. But as we've always said, at
the end of the day, it does not matter to
the broader economy, to the broader markets on who into loses.
We've got fifty years of data that shows you can

(03:04):
have good years under Republicans, you can have bad years
on the Republicans. You have good years under Democrats, you
get bad years under Democrats. So don't get too caught
up in your own political views as to what you're
going to do with your portfolio. And again, I think
now having some certainty on Trump being president, and again

(03:25):
there's going to be certain industries or areas that win
or lose. But you know, it's interesting, and I think
I talked about this last week. Even having those industries
that you think, oh, they're going to do really well
under a certain president and maybe some of the regulations
help them, whether it's enunder the Bidy administration with clean
energy or energy oil and gas under Trump, it doesn't

(03:50):
always play out that in that period of time that
those sectors from an investment perspective, do well, now they
may be better off because of regulatory environment, but it
doesn't necessarily mean that in that period of time it's
good to be invested in that sector. And it's really
interesting to see how, in particular with the energy industry,

(04:12):
it really had done better from an investment perspective under
Biden versus under Trump. And there's a number of different
factors that came into play in that, but that can
be true with a lot of different areas. So the
big thing is, you know, when we're looking at portfolios,
we're looking at the economic data, we're looking at the
corporate data. We're not worried about, you know, who's in

(04:35):
office or whatnot. The other thing that drove market hire
is that the set of Reserve cut interest rates this
week by twenty five basis points, so one quarter of
a percent. Now, that was somewhat expected that they were
going to do that, but there was maybe some concern
that because the economy continues to do so well, that

(04:57):
maybe they were going to hold off, but they in now,
we're going to get some inflation data out this week,
and again the Fed did come out and say pretty
clearly that it is going to be data dependent as
to what they do as they go forward. And we've
talked about this. You know, you could be in a

(05:18):
situation where this economy continues to remain very strong, and
if inflation doesn't continue to move to that two percent
target that they have, then you may have the Fed
reserve pause. They may not cut rates another quarter basis
point in December, which is what the market was expecting.

(05:38):
So you have to appreciate that. But you know, certainly,
this has been a great year in the markets, and
I think it's a perfect example of you know, you
had all these talking heads it was two years ago
talking about a recession, and then you know, this year
even concerns over that happening, and you know, here we

(05:58):
are with the sp up twenty five plus percent, and
you know, all I would tell you is this is
a good time to rebalance if your asset classes like
stocks or large cap growth have just gotten so strong,
to rebalance back so that you're properly weighted. It's still

(06:18):
a good time to be getting money invested, even though
we're at all time highs. But you know, it's not
a bad time as well to have some allocation to bonds.
And you know, what we're seeing we've talked about this
a little bit, is that with the Federal Reserve cutting
interest rates, that you know, your money in your money

(06:39):
market accounts, in your CDs, it's not going to earn
as much. And that's why over the last you know,
year or so, we've really been recommending the people to
really get back into bonds, get back into some longer
dated bonds. With a ten yu US treasury up right
now about four point three percent, and it's still below

(07:02):
where it was a year ago, which was at five percent,
but it's well above where it was this summer at
three point six percent. So it's not a bad time
to be moving back into bonds in some capacity. Depend
on your risk tolerance, and it's always good. You know,
there's a lot of pretty optimistic sentiment right now, which

(07:24):
could be warranted, but it's always good not to get
overly caught up in that, depending on what your risk
tolerance is and where you stand as far as in
your life and what you can be doing. Right So,
if you're getting closer to retirement, this is not a
bad time to make that adjustment to become a little
more conservative. It's just always you've got to be aware

(07:46):
of what's going on in your life versus getting caught
up in what's going on from a broader market perspective.
But there's a number of things that I want to
discuss today, both with from a funded planning perspective but
also with the markets. But before we jump into that,
if you have any questions again, feel free to give
me a call. You could reach me at eight hundred

(08:08):
eight two five five nine four nine. That's eight hundred
eight two five five nine four nine, or email me
at ask Bouche at Bouchet dot com. Uh and that
is b O U C h e Y dot com.
One of the questions I get caught offen is you know,

(08:31):
why should I take my SOLI security? And you know,
there used to be a lot of strategies about when
was the right time, and you could do what's called
filence suspend where you take it and your spouse takes
it and then you suspend it and then you flip
back it to your own because you were doing spouse
self benefits and all those strategies went away, so decisions

(08:52):
are much clearer as to when you should take it.
And my general recommendation for a couple who has good
health is that one of you should wait either until
your age seventy or certainly a little bit later sixty seven,
sixty eight, sixty nine, especially the higher income earner, because

(09:13):
by doing that, every year you delay taking it, you
get an eight percent increase in the amount that you're
going to receive. So it can be very beneficial. I
think I talked about this on the show. Right now,
if you're going to be one of the higher income
earners and you haven't taken your Security and you're gonna
be age seventy next year, when you take it, you're

(09:33):
gonna kind of get around seventy sixty one thousand dollars.
Sixty one thousand dollars is what you're going to get
if you're going to be age seventy next year and
you haven't taken Social Security and you've been more on
the higher income spectrum, So you think about that, that's
a nice add on, especially you know, if you're married
and now your spouse can say gets twenty or thirty

(09:55):
thousand dollars. Even for people or high income owners, to
be able to have that kind of basically fixed income
in place is important. But what I hear people ask
is they say, well, what if I take it early
and then I go ahead and invest the money that
you know, if you look at that, that could be
beneficial depending on how you invest it. But what I

(10:18):
often see is that if people do that, they tend
to spend the money right and you know, they maybe
are successful for a little bit in investing, but I
quote often will check back in them with them and say, hey,
how's it going to You know, you're gonna be able
to move that money over that we can invest and
they're like, well, Marty, I'm actually spending that money. I'm like,

(10:40):
that is fine, But I think it's important to remember
that as you have that income coming in, there's a
good chance you're going to spend it. And that's one
of the guides I always give clients, which is, you know, hey,
if you're young and you want to do things, and
you know you want to get that se security benefit
so you can spend it and live your life, or
certainly if you have help concerns. Right. So the break

(11:02):
even age is between age seventy eight and eighty one.
All that means is that if you live past that age,
then you're better off by delaying your benefits for as
long as you can, but if you have concerns over
your health, then certainly taking it early now whether or
not so security benefits are going to be here in
the future, I would necessary. I wouldn't necessarily have that

(11:27):
dictate your decision, because you know, I think there's going
to be some changes that are going to have to
occur to the system in order for it to be
successful long term. But you know, I do feel very
strongly that it is going to be intact in one
way or another. And I always joke with our younger

(11:48):
advisors when they're in the meeting with me that it's
probably more their generation or my kids generation that are
going to be seeing their benefits change or having to
pay more into it. But I do feel pretty strongly
that it is going to be there in some capacity.
So I won't necessarily take it now because you don't
think it's going to be there in the future. I mean,

(12:09):
you can do that, but I don't think that's necessarily
a wise decision. But these are things that you need
to consider. And again with our clients, we walk them through,
you know, what does this look like and why do
you need to consider this? But what we always say
to our clients is that decision on take your social security.

(12:29):
Don't overthink it. It does not and will never make
or break your plan. It just doesn't. I mean, even
whether you take it at eighty sixty two versus eight seventy,
I can kind of show you that it can move
the need all a little bit. And moving the needle,
frankly is more so if you live longer. Obviously by
delaying to age seventy it is better. And we do

(12:52):
when we do a plan for our clients, we usually
assume that they're going to be living to age ninety five.
But again, don't overthink this. Make your life easier. Just
to kind of think about this will always tell people
as they're making decisions, whether it's financial or not, you know,
make a list of just the one, two or three
main things that are the most important to you as

(13:14):
you go about that. And that's the same thing with
deciding when to take your security is what are the
top two or three things that are most important to
you as you make that decision, and that will help
you guide you as you make that decision. And that
principle right there is something that you utilize in any
decision making that you're going through I'm a big believer

(13:35):
in the Kiss principle to just keep it simple. And
you know, I think so often in our life we
make things more complicated they need to be. If you
can really simplify your life and decisions in your life,
you really it's kind of amazing. You can kind of
come to those conclusions a little bit easier than you
might expect. Let's go on to some questions. One question

(13:59):
that I've got here from and is the Federal Reserve
is cutting rates, but the thirty year mortgage keeps going higher.
Why is that? That's a great question. So it was
we talked about the Federal Reserve cut rates by fifty
basis points are a half percentage point in September, and
then they just in the meeting this week they cut

(14:21):
it by another twenty five basis points. So you might
be like saying, well, okay, this should mean that all
interst rates are going down. But we have to remember
is the said the Federal Reserve only has control over
the Federal Reserve Funds rate, and that rate is the
rate that the Federal Reserve charges banks, So it's an
overnight lending rate. So it is very very short term.

(14:45):
So as they cut that rates. As I mentioned earlier,
what that's going to mean is that infrast rates for
CDs or money market funds, which are very short term
in nature, they're going to go. They're going to refer
let that change very quickly, and you're going to see
that in your money market fund, You're going to see
that in your CD rates that they're going to drop

(15:08):
very quickly. But now the rest of the rates, they
exist in the debt market. I don't care if you're
talking about treasury rates or you're talking about corporate rates
or mortgage rates. The rest of those rates are controlled
by the bond market. The FED can impact them in
different ways, but really only it only has real control

(15:30):
over the Federal fund rate. So the rest of those
rates are step on the market. And really what the
market saying is, HM, we see inflation moving to two percent.
But given how strong the economy is, and you know,
now even a little bit more with with Trump having
won the election, there may be a little bit more

(15:52):
concerns over inflation. We'll have to see what happens with
the tariffs, but you know, it's pretty clear if you
start putting tear on things that can be problematic for inflation.
So that's the bond market, which can also usually have
some better insight to the broader economy than the stock market.

(16:13):
That's the bond market saying hmmm, I don't think inflation
is going to be really running to that two percent
target real soon, and I don't think the economy is
actually that week. I think it's pretty strong. So they
are keeping rates higher. And actually, over the last six weeks,

(16:33):
the thirty year mortgage has continued to increase. Right now,
that's six point seventy nine percent, So it is certainly
below where it was a year ago, but it's well
above where it was this past summer. And you know,
this goes to this whole concept, which is, you know,
I think you know, if you're out there in buying

(16:56):
a home, I think you're still going to see prices
remain pready, stubborn. You know, we see this with clients
who are either selling or buying. If they're selling, those
houses are going pretty quickly. If they're buying, uh, they're
seeing a lot of competition for the houses they're buying,
and in many cases they're getting outbid. In many cases

(17:17):
they're getting outbid with a cash offer, and so they
could even be putting in a higher price than the
other bidder, But because they're not putting in a cash offer, uh,
that's that you know, becomes a problem. You know, I
always suggest to people to the extent that they have
the assets, they put in that cash offer, it doesn't

(17:37):
preclude them from getting financing on the loan. And you know,
we help clients a lot with this, which is, if
you're successful to be able to build up a taxable account,
we can we help our clients facilitate a margin loan
on that taxable account that can be used either in
the short term funding for real estate or even from

(18:00):
a long term perspective. So for example, let me give
you an idea on this. We have a client that's
buying a second home, not sure if they want to
sell their primary home, and just from a mortgage perspective,
right now, they're not working, so sometimes that can be
problematic with a bank lending. But they've been very successful.

(18:21):
They have a sizeable taxbile account and they can borrow
up to about seventy percent of the value of that
taxile account, and this is a fairly large purchase. So
that through our finance custodian Charles Schwab were able to
negotiate a very good margin loan for them, and so

(18:42):
relatively speaking, it's much better than they're able to get
through a bank on a fixed loan. And the upside
with the marginal loan too is you don't necessarily have
to pay it down at all. You don't have to
pay interest on it, you don't have to pay any
the debt on it. Now, the thing you have to appreciate,
which is not so rising, is that if you don't
do that well, the interest is going to accumulate and

(19:04):
your deat amount is going to increase. But all things considered,
it gives you a lot of flexibility if you want
to go down that route. So this is one of
the options that you can consider, especially if fixed mortgage
rates remain so high, and that that is a real possibility.
I mean, I think you have to appreciate that if

(19:26):
this economy remains strong, the Thuner Reserve is probably going
to pause in December and not raise rates. And you know,
at the end of the day, that's that's okay. I've
said this all along. You know, if I'd rather have
a much stronger economy with inflation, you know, kind of
in the two percent range then certainly moving higher, and

(19:48):
I think that's better from an investment perspective as well.
Allows it's going to allow corporations to grow profits in
a better way. Let's go on to a couple of
other ideas I want to share with you, But again,
if you have any questions, you can give me a
call at eight hundred talk w g Y. That's eight
hundred eight two five five nine four nine. That's eight

(20:12):
hundred eight two five five nine four nine. Or as
I've mentioned before, you can reach me at ask Bouchet
at Bouchet dot com. That's asked Bouche at Bouche dot com.
You can email me and I can give you some thoughts.
Another question we have that's come in is that said

(20:34):
that there's new changes coming to four and K catch
up amounts for twenty twenty five. Can you talk about that?
And that is somewhat true. There is new amounts that
you're going to be able to contribute to your four
and K in twenty twenty five. It's gonna go up
from twenty three thousand dollars to twenty three thousand, five
hundred in twenty twenty five. So that's the base amount

(20:57):
that you can contribute. Simple art raiser are also going up.
This is another type of retirement account for small businesses
that's going to go up from sixteen thousand in twenty
twenty four to sixteen thousand, five hundred and twenty twenty five.
But now the standard catchup amount, which is seventy five

(21:17):
hundred for a falling K plan, is staying the same.
But what's in place for twenty twenty five, and there's
another element like this for simple arrays, is that for
falling ks four to three b's and four fifty seven plans,
if you're between aged sixty to sixty three, the catchup
amount is not seventy five hundred dollars, but instead it's

(21:40):
eleven thousand, two hundred and fifty dollars. Again, I'm gonna
say that again. So if you're between, if you're sixty
to sixty three, the catchup amount is not seventy five
hundred but eleven thousand, two hundred and fifty dollars. So
the IRIS put this in place to allow people who
are maybe behind where they think they need to be

(22:01):
from a retired perspective, to put more dollars away. Now
I think that's great, and that's fantastic. Any opportunity to
be able to save more is good. They certainly make
it more complicated. I do feel like with all these
new legislation that's come out, let's say, over the last
five years, one of the things they've done is just
make it a lot more complicated for people to understand

(22:23):
and for the possibility of an error to go up.
But that's what we're here for, right to give you
a guidance. In a simple I rate plan, the same
idea is true, which is, if you're between age sixty
to sixty three, the standard amount catch up is three
eight hundred and fifty dollars. But under these new rules,

(22:45):
the catch up amount is five thousand, two hundred and
fifty dollars. So a way to be able to contribute
some additional dollars there, and you know, I would really
encourage you to take advantage of it as you can. Now.
One of the things that people ask is the raw
form and K does that you have to start contributing

(23:05):
after your catchup amount and that doesn't start into twenty
twenty six. If you're a high income earner, you got
until twenty twenty six until you have to put your
catchup amount into a raw form and k. It was
supposed to start in twenty twenty four, but it was delayed. Well, folks,
orre to go with a commercial break, but come back
as we get team to take your questions. You'll listen

(23:28):
to Let's Talk Money, brought to you by Bruchet Financial Group,
where we help our clients prioritize their health well we
manage their wealth for life. Come back, folks as we
take your questions. Welcome back, folks. For those of you

(23:54):
just joining us, my name is Martin Shields. I'm the
chief Wealth Advisor at Blouche Financial Group and I'm your
home today for Let's Talk Money. It's great to be
here with you. And I want to also, as we
got Veterans Day on Monday, just thank all of our veterans.
You know, we appreciate anybody who's in the military, the

(24:15):
sacrifices they make for our country. I just really want
to thank you personally, my family and you know, many
people paid a huge price for serving in the military
in a lot of different ways. So if you know
somebody who's a veteran, is currently serving in the military
or serve, go out of your way over the next

(24:38):
few days and thank them for the service because what
they do is just fantastic for us. So that's great.
And the rocksack event, I like that. I came across
a friend who was doing rucksacking, so it's like a
thing now, and this gentleman was out walking four or
five six miles a day with weights in a backpack

(25:02):
and he lost a lot of weight. I was like, wow,
you look really good, and he was telling me about it,
and I guess this is a new thing now that
you know, kind of come over from the military, where
you know, you go out, you do exercises, and you
do with your backpack, so it gets you stronger. And
so I went out and I went went walking with

(25:22):
my wife and I was had the backpack on. We're
pitty metals, but I decided to put some weight in there.
But I put him fifty pounds. So it's we did
about two miles and that was I was. I was
done after that. I said, that's uh, would not put
on that much weight. So my recommendation Tia is go low,

(25:45):
try low first, which is be a smart thing to do,
and it's going to be a little more challenging that
you expect. But again, thank you to all of our
veterans for the all you do and have done for us.
We're going to go the phone lines. We have Luri
Laurier there, I'm here, Good morning, Good morning. What can
I help you with?

Speaker 2 (26:07):
I have a question about Social Security. I turned sixty
this year and I've always been a teacher at a
small school, so my Social Security payment will always be
less than half of my husband's. My husband started his
he's seventy. He started receiving his Social Security payment at

(26:28):
sixty five. So my question is would it be an
advantage for me to wait until I'm at sixty seven
and a half to start taking half of his? Or
should I do it now? And you know, considering our
age difference for the future.

Speaker 1 (26:49):
Your great question. So what you have to understand is
that your amount that you've received, your half amount, is
what his not what he's receiving now, but what his
forward time ronment amount was at age sixty seven. Now,
what you have to appreciate is you would get half
of that if you wait to your full retirement age.
If you take it early at age sixty two, now

(27:12):
you're going to get a reduced amount of what that
half amount is. So it's a little bit of a
function of your cash flow in where you stand. You know,
it goes to what I said earlier. Though this will
never make or break or plan. But some people are like,
you know what this is like in these situations from
a spouse perspective. You know, if you're going to retire,

(27:32):
you want your money, you want some cash flown, then
take it earlier and you can use that kind of
as your kind of spending dollars on your side. But
if you're looking to maximize your benefit, you should wait
until your full retirement age. Now, the one thing I
will tell you is that you don't benefit by waiting
past hs your full retirement age. So whatever that is

(27:53):
of at sixty six in a few months. That's the
one difference is you know, unlike other folks, if you
wait into age seventy, you get a higher amount. No,
for you either take it now it's et two, or
don't definitely take it by age your full time and age,
which is like close to sixty seven. There's no benefit
to wage age seventy for you. Oh that's good to know.

Speaker 2 (28:14):
Great, Okay, thank you so much.

Speaker 1 (28:17):
All right, take care now, we're gonna phone lines. We
have a jim from Hadley. Jimmy there.

Speaker 3 (28:28):
Hello, did you hear me?

Speaker 1 (28:30):
Hi? I can? What can I help you with?

Speaker 3 (28:34):
Well, first, I want to thank you for your great advice.
Last week I called about SIPC insurance versus about consolidating
accounts and losing half of that, and you give me
a great answer. So I appreciate it.

Speaker 1 (28:48):
Good, good, But I'm glad to hear that.

Speaker 3 (28:50):
What I'd like to know this week I was talking
to my account manager at one of the big one
of the big three companies, and of the things he suggested,
I told him that I was accumulating quite a bit
in my iras and cash, and he said, what I
really ought to consider is something called a single premium

(29:14):
deferred annuity. And I've listened to Steve for a long
time and I know that you know, he doesn't like
the A word annuity. And I just wanted to see
if you knew about that and if you had any
thoughts on it.

Speaker 1 (29:32):
Yeah, yes I do, so my thoughts are going to
probably be mirror Steves. Let me ask you a coole question.

Speaker 3 (29:39):
Are you married yes?

Speaker 1 (29:42):
And do you have kids? No? Okay, how do you
feel with market risks the market being invested in the market.

Speaker 3 (29:52):
Well, I'm pretty I'm about sixty three percent in the market.

Speaker 1 (29:59):
Okay, I'm going to put that as reasonably comfortable being
invested in the market. So, you know, here's a couple
of things. One is, you know, not in general, you're
going to be paying higher fees to go down the
route of buying an annuity. And you know, my guess
is this individual is not a fiduciary, and it's you know,

(30:20):
it's just the fact of the matter, and that he
gets compensated at a certain level for recommending to put
you in. That is, if I get a commission charge
or something, and you know what I would recommend is
that you simply just put that cash. Will either do
one or two things. You either uh, set up your
investments to automatically invest reinvest dividends so as cash accumulates,

(30:43):
it just goes back in and buys the security where
it came out. And you know the power of compounding
with dividends. I was just reading something. If you looked
at the S and P. Five hundred over the past
fifty years, and he looked at the price performance, it's
at let's say you know, up three hundred percent, but

(31:04):
if you look at the power of compounding and reinvesting
those dividends, it's up like five hundred and fifty percent
over that time period. So you know, in general, if
you don't need that cash, my first recommendation is to
automatically reinvest it back into the investments. But if you
want to have a little extra cash surplus there, I
would simply put it into a money market fund, which

(31:26):
they have gotten down from where they were, but they're
still above you know, where it was, let's say four
years ago, So you're not earning the five and a
half percent, but you're earning four and a half percent,
and you have complete liquidity and complete transparency for that. Again,
this is the challenge of working with somebody who's not
a fiduciary, because it's it's almost a no brainer that

(31:50):
unless you were. The only time I would ever recommend
an annuity to somebody is if you said, Marty, I
am deathly afraid of the markets, I really don't want
to be in there, and I want to have something
like a pension, And in that case, what I would
recommend is an immediate fixed annuity that you'd say you
could put in one hundred thousand dollars or two hundred
thousand dollars and then you would annuitize it, turn it

(32:13):
into a pension basically, and that money is basically is gone,
meaning that you're not going to pretty much going to
be able to access the lump sum amount, but you're
going to have that pension guaranteed for the rest of
your life in that circumstance, and somebody explained it to
you very clearly like that, and you're like, yes, that's
what I want, then that is the right approach. But
because you have cash accumulating to put it in annuity,

(32:34):
no way. I would definitely not recommend that. And again,
that sounds like somebody who's selling you something because it's
they're going to earn a pretty good commission on it.

Speaker 3 (32:43):
Okay, well, I appreciate the advisor.

Speaker 1 (32:46):
Again, you got it, Jim. I hope that works out
well for your party. Yep. Yeah, I mean that's just
it's just I mean, the problem I have with annuities
is just how they're sold. And I just see it
all the time with people coming in and they have
annuities and I start talking to them like I don't
know why I have this, they can't explain it to me,

(33:08):
and I show them their investment performance. Let's say if
it's a variable annuity and they could be inequities. I
showed their investment performance versus what would otherwise be and
it's not very good. Usually it's I mean, it could
be usually quite ugly. So I've said this, I will
say this NonStop. Before you buy an annuity, you really

(33:29):
should absolutely be talking to somebody, another advisor or somebody
who is a fiduciary who has no skin in the
game and can give you advice on whether it's to
do that. I talked about a colleague friend of mine
that came and talked to me about it, and very
successful individual, lots of assets, and he was getting sold
in annuity and I just told him to get away

(33:50):
from that as quickly as you can, because the problem is,
like anything in business, you know, if you're going to
lock up your money and you don't have transparency, you
bet it paid a lot more money for that. And
that's the problem. The newity is not only they're expensive,
but they lock you up with the penalty phase for
ten to twelve years. We're gonna stay with the phone

(34:11):
lines we have ed from Schenectady. Eddie there, good morning.

Speaker 4 (34:17):
I have a question I always had for a long time.
Those tax free New York muni like one is like Pimco,
the symbols p n Y. What are your thoughts on
them in today's market with interest rates? I know they
fluctuate sometimes you go with bonds or up interests down,

(34:38):
interests up, bonds down. What's your current on on those?
Keep buying them or sell or keep the same?

Speaker 1 (34:47):
Yeah? Great question ed. So really the answer is going
to be a function of what your income is. So
if you're a high income earner and you're earning over
say three three hundred and fifty thousand dollars in your
New York state and you have a taxable account, right,
so definitely never put munis in an IRA. There's no

(35:08):
advantage to them in there. But in a taxable account,
you don't pay taxes if it's in New York State
MUNI or Puerto Rican COMMUNI some a bond. You don't
pay federal taxes on that income, and you don't pay
state taxes on that income. So you think about it
as you move up to higher, higher tax brackets because
your income goes higher and you have you want to
have some element of bonds or fixed income in your portfolio.

(35:31):
It becomes very advantageous to have bonds where you don't
have to pay any taxes on it. So for you
to make that decision, what you need to do is say, okay,
what if I got this corporate bond and if it's Pimco,
there's Pimco has many corporate bond funds, and say what
is my yield on that? And compare it to the
pimp community bond fund. And then but with the corporate

(35:55):
bond fund, you have to take off your taxes off that, right,
so federal taxes, in state taxes, So what is your
after tax yield and compare that to the meuni tax yield.
And if you're a higher income earner, there's a good
chance that the beauty after tax yield is going to
be better than the corporate bond yield after taxes. So

(36:19):
you've got to do that analysis to make that decision.
And right now, MENI bond yield are actually very good.
There was a few years ago they were just horrible.
We actually moved our clients out of beauty bonds because
they were so low. But they've come back up quite
a bit. So, but again, the one thing I caveat
with that is you want to it has to be

(36:40):
getting New York State beauny bonds. So let's say you
got a Pennsylvanianmuni bond and there are funds out that
they have meaty bonds from around the country. But if
it's not in New York State, then it's only UH
tax free for federal taxes, not for state taxes, which
you know, again New York State we're a little bit
higher income tax state. So you want to if you're

(37:02):
a high income earner, you want to be getting that
benefit for both UH federal and state taxes. So but
it can still be a good part of your portfolio.
Thank you here, welcome all right, folks again, if you
have any questions, you can reach me at eight hundred

(37:23):
eight two five five nine four nine. That's eight hundred
eight two five five nine four nine, or you can
email me and ask Bouchet at Bouchet dot com. That's
ask Bouchet at Bouchet dot com and Bouchet is spelled
b O U c h e y dot com. Jo

(37:45):
any questions you may have either give me a call
or send me an email. Let's move on to another topic,
and I want to talk about credit scores. You know
it is. They're so important if you're going to be
going to get a mortgage, a car alone, you know,
a loan for a student loan, whatever the case might be.

(38:06):
If you're gonna be borrowing money or trying to access credit,
having a good credit score is so important. And you
know I will tell you, Even as the financial advisor,
trying to understand what drives those credit scores can be
very confusing. And at times I look at my OAD
and it doesn't seem to always make sense. There's a

(38:27):
rhyme or reasons to it. It seems to fluctuate. Sometimes
you're like, what is going on here? There's nothing different
that I'm doing, but just a few things that I
think it's very important. One you should go there's the
three credit bureaus you should be going and checking, let's
say once a year, to make sure there's no errors.
I have reviewed mine and I did find errors with it.

(38:49):
So you want to make sure that there are no
errors with your credit score, in particular, if you're getting
dinged one something where you shouldn't be to make sure
that's changed. One of the most important things is that
you make on time and consistent payments for any debt.
Late payments really hit you hard on that. So really
try to be paying off your debt, you know, very

(39:13):
consistently and on time. You know, you think about it
these days. I was talking to somebody, I almost never
write a check, you know. I pay all my bills
automatically online, you know, so that just as soon as
it comes in, it gets paid, and it makes my
life a lot easier. I don't have to be thinking about, Okay,
I got to make sure I get that check out
to pay for, you know, a car payment or mortgage

(39:36):
or whatever. It just happens automatically. Plus, you know, the
upside is that it's done and that that consistent payment
is so valuable. The other thing is not having debt
levels to the too high relative to what your available
credit or balance could be. So, for example, if your

(39:57):
line of credit could be up to ten thousand dollars,
you want to try to keep it below thirty percent.
So you want to try to keep it below three
thousand dollars. In this example that I'm using, with a
credit line of ten thousand dollars, if it starts going
to above that, then it becomes a negative to your
credit score. And then the other thing that really it

(40:18):
can be problematic is anytime you open up or BAF
even ask for a new loan or line of credit,
that that's called a hard inquiry and just that asking
that you might not even have to open it, but
just that inquiry is a negative to your credit score.

(40:39):
I'm not sure why, you know, you think about it.
You're like, if I paid out my debt consistently and
if I keep debt limits below what the line of
credit is. And also the big element is what do
you do what do you make right? I mean, you know,
if you have a high income and you're very consistent
with that, then it would seem that be very positive.

(41:01):
But the hard inquiry can be really a problem. So
just to be aware of that, and you know that's important.
You know, certainly for any debt that you're taking out,
it's going to impact what the interest rate is that
you get, so you have to be very much aware
of that and just try to make sure that if
you if you make a mistake, that you get back

(41:21):
on track as quick as quickly as you can. Let's
move on to a couple of the questions that I
get pretty consistently. But again, if you have any questions,
you can give me a call at eight hundred eight
two five five nine four nine, or you can email
me at ask Bouchet at Bouchet dot com. One of
the questions I get quite frequently is why where does

(41:44):
that two percent target come from for inflation? And the
fact the matter is it's arbitrary, right, that there's nothing
necessarily that's overly important about two percent for the inflation target.
But the question I have, well, why not make it zero?
Why have any inflation? And the main reason for that

(42:05):
is that the concern is that if you make it zero,
it was just no different than when you make it
at two percent, that you can undershoot it. Right, So
for many years our target was two percent, but the
actual inflation rate was a half a percentage point or
one percent or one and a half, so well below
that two percent target. And that was the case for

(42:26):
boy ten fifteen plus years. And I always, you know,
I really say that, I think you know. The challenge
that so many people are facing over the last four
years is not that this economy is not good or
not that they're not getting pay raises. But that impact
of inflation is so dramatic. I mean, we haven't had
inflation for forty five years since the mid seventies, so

(42:50):
you know, when it came back, and it really came
back high at nine percent or even five or six percent,
it really impacted people in a real negative way. And
I even saw that with people who've got big promotions,
so got big raises, that just even having to go
pay to the grocery store and pay that much more
for things they weren't paying that much before a few

(43:12):
years ago, really impacted their psyche in a real negative way.
And so the concern though, is if you make it
at zero, that we're going to undershoot that. And now
that's called deflation. That's where prices are actually declining. Now
that may sound good to you, but the problem is
no different than as bad as inflation is, deflation is

(43:34):
even worse because you think about it, If prices are
going down, what that does is it incentivizes consumers to wait.
So you think about this, if somebody said to you, hey,
you can buy that pair of shoes now, or if
you wait a month, they're going to be cheaper. Well,
many times people may wait on that. They may hold

(43:54):
off on purchases, especially larger purchases. If they thought they
could buy a car and they knew that was going
to consistently go down in price, well they may wait
on that. And then what happens is that that becomes
a self falcilling prophecy, which is that actually, now there's
less demand, so that price goes down even more. Right,
so the company selling that has to incentivize people, so

(44:18):
they lower the price even more, which now you've got
this rapidly declining price circle. So that's the reason that
it's at two percent. So that is that as inflation is,
deflation would be even worse. Now, we really have not
experienced deflation. I'm not sure when's the last time we
experienced deflation, Probably since a Great Depression where there was

(44:42):
real deflation. And you know, it's one of those things
where you know, price stability no different than the markets
like certainty. As consumers, we like some element of certainty
and stability as well, So that's why that is the case.
The other question I get quite often is is it

(45:03):
possible that we could have a situation like Japan did
where they had a booming stock market for the seventies
and eighties. And you know, certainly if you were in
business are around in the eighties, you knew, I mean,
Japan was going to take over the world, right They
were buying US assets, properties, and companies. Their companies were

(45:23):
doing incredibly well here in the US. It was a
role model for how all business should operate. And then
after it hit around eighty nine to ninety, the Kniek average,
which is the top two hundred fifty companies in Japan,
started going down, and it was called it's called the
last decade, but it's actually really a longer period of
time than that that the market just kept going down.

(45:47):
And this is what many people don't know is that
the NK just hit back to close to where it
was back thirty years ago. So it was thirty years
that it took that declient. Now, there are a number
of reasons that drove that, one of which, and the
most important item, is that the NIK, the price the PE,

(46:08):
the price or earnings ratio of NIK at that time
was seventy. Right, So to give you an idea, our
average price or earnings ratio for how expensive stocks are
is around nineteen. Right. Now we're at like twenty three
twenty two, so we're a little bit expensive relatively speaking.
They were at seventy, right, So that gives you an

(46:31):
ideas of how expensive those stocks were. The other thing
is that Japan is a very homogeneous society that has
a demographics issue that the population is declining, And so
when you put all that together, then you had just
a situation where their economy was not growing that much,

(46:54):
their companies were not doing that well, and oh, by
the way, that those very expensive companies came down dramatically.
So you know, could it happen here in the US? Sure,
I mean, anything is possible, But is it likely to happen?
Certainly not anytime soon with our economy how vibrant and
dynamic it is, and also with our demographics the way

(47:15):
they if they continue the way they do, but also
under the current evaluation structure, it's just not something that
it's anything likely. But now you certainly could have a
situation like you did in nineteen ninety nine where a
certain asset class like an astec is overly priced and
the other ones do well. Later well, folks, we spend
an hour together, I hope you'll learn something. As always,
it's been great to be here with you. You'll listen

(47:37):
to Let's Talk Money, brought to you by bouchet and
a screw. While we helped our clients prioritize their health,
while we manage their wealth for life. Folks, Happy Veterans
Day tomorrow. Take care of yourself and take care of
each other.