Let's Talk Money

January 19th, 2025

Episode Transcript

Speaker 1 (00:09):
Good morning, folks. My name is Martin Shields, and I'm
gonna be your host today, but let's talk money. It's
great to be here with you on this Sunday morning,
a little jurys. I look out the window, fairly mild,
but I think we're getting for some really cold temperatures
but this week. But when you look down south, I
mean way south, I saw Houston, Texas three to five

(00:32):
inches of snow. You know, just you know, they're not
prepared for it, whether they have in the rate gear
or infrastructure. So hopefully they'll get through it okay. But
it's great to be here with you to answer any
questions you may have regarding your financial planning or investment
manager concerns, and I encourage you calling with those questions.

(00:54):
You can reach me at eight hundred eight two five
five nine four nine. Again that's eight hundred eight two
five five nine four nine. Or as you know now,
we have an email you can email me if you're
too shy to calling out the radio, and that email
address is ask Bouche at bouchet dot com. Again, it's

(01:18):
ask Bouche at bouche dot com and Bouche spelled b
O U C h e y. So if you have
a question you want to email me, go ahead and
I can get you an answer. But as I always say,
there's no dumb or silly question except for the one
you don't ask, and you may be doing your fellow
listener a favor by asking the question that they have.

(01:42):
We have a lot to discuss today where now I'm
on LinkedIn, So if you want to follow me on LinkedIn,
please do and put a lot of posts out there
on different topics and also post out what we're gonna
be talking about on the show every week. So me
highlights for this week is a discussion on all the

(02:05):
global risks that are out there, and it certainly are
the risks that we are somewhat aware of, but certainly,
any given years we start the year, the actual risks
that come through may be completely different than the ones
we have identified as a risk. But how do you
construct your portfolio and have that set up a way

(02:26):
to manage that risk? Right? We recently had an initial
meeting with a client very concerned about global risk and
this and that, and you know, she was talking about
tailing her portfolio on investments and whatever, and we had
a great discussion that really kind of set her mind
at ease. So talk about that. We're going to talk

(02:47):
about distributions from a ross. When you make row of contributions,
your ability to access something is really much different than
a traditional ray. So we're going to highlight those options.
And then finally we'll talk about small business owners and
what that process looks like to sell your small business.
You know, many of our clients, we have a wide

(03:10):
range of clients from executives to family wealth, to divorces
to you know, people that just save a lot during
working years are now retiring, but we have a lot
of small business owners. As a small business owner, there's
different nuances that you have that other clients of ours
don't have. And in particular, when if you're looking to

(03:33):
go and sell your business, that's a major process that
you have to be aware of, starting much sooner than
most people do, getting it all lined up, and there's
certain things you need to be aware of as you
go through that. So talk about that and certainly talk
about the markets. It was a good week for the markets,

(03:54):
starting off the year well. The S and P is
up one point five percent, and this week has some
inflation data that came out that was a little bit
cooler than what the expectation was, and that is certainly
a good thing. Right, So we've talked all along about
where do we stand with this soft landing, and that
soft landing is simply the building for the economy continue

(04:17):
to grow by you have inflation moved to the FEDS
two percent target. Now, I think it's going to be
challenging to continue to have that move to the two
percent target. But one of the things you definitely don't
want to see is inflation start to rise higher. That's
really where you get to be in a problematic situation.

(04:37):
And you know, we had a good labor report last
week where the unemployment rate actually dropped to four point
one percent. We added over two hundred thousand jobs, which
is a great number, and this week we had lower
than expected inflation. So really, you know, it's one of
those things where it is a never it's continuous, so

(04:58):
there is never officially a off landing announcement because the
next month, the next week, whatever, it continues. But I
would say that all teams considered, this is about as
soft landing as you're going to get, meaning that you know,
you've got a situation where the Fed has started to

(05:18):
reduce rates or you know, we'll see if they could
team or reduce rates in twenty twenty five, but maybe
pause them and not raise them. And you have inflation
much lower than where we were, and then you have
the economy still remaining strong. As we've talked about before.
Historically speaking, that is very rare for that to happen.

(05:40):
That you have the Federal Reserve raised interest rates by
five hundred basis points, that's five percent in a year
and a half and not had the economy really weak
and much at all, a little bit here and there,
but not much, and or certainly not go into a recession.
That that was very unusual for this to happen. So,

(06:02):
you know, again to declare a soft landing is funny
because I think you know, this concept of declaring, everybody's
concerned about doing that because as soon as you do that,
maybe something could happen and things go awry, which is
certainly uh. You know, what happens from an economic perspective
is dynamic, right, it's not static. It's always changing. So

(06:26):
you know where we are right now is just one
snapshot in time. You know where it will be next
week or next month. Is that evolution. So but this
is about as close as you get to be able
to say, you know, thumbs up that there has been
a soft landing, and you know, really things continue. When
we look at what we see for twenty twenty five,

(06:48):
things continue to be very strong. Now I want to
see with the Trump administration, you know, in general from
a business environment perspective, people are pretty happy with maybe
perhaps less regulation, but there's going to be some unknowns,
in particular with his immigration stance and also with tariffs,
just to the extent that what does this mean for inflation? Right,

(07:11):
because certainly tariffs can be inflationary, So we'll have to
see exactly how that plays out. Uh, you know, I
think it's important not to jump to conclusions. Do we
see what the actual plans are. Uh, you know, I
think all along there's been a view that some of
the tariff discussion is certainly a negotiating tool from a

(07:32):
trade perspective, But we'll have to see what the reality
is and how that what that means for inflation. So
we'll talk about that as well. But again, if you
have any questions, you could give me a call. You
can reach me at eight hundred eight two five five
nine four nine. Again, that's eight hundred eight two five

(07:54):
five nine four nine and uh again. I hope you
get out to enjoy this long Martin Luther King weekend.
I think most people have Monday off and today my
wife and I are daughter tests are gonna go skat it.
Or we haven't been up there yet. I've heard it
has been great, so hopefully today the conditions are good.

(08:15):
And then begin if you follow me on LinkedIn, I
put some pictures of our ice rink. It's been a
great year for you know, cold enough to have our
ice break out front of the yard, put it up
in faithgiving, that's how early we put it up. And
lots of great skating. And this week it's gonna be phenomenal.
Now it's gonna be cold. I think a high a

(08:37):
couple of these days is in the single digits. That's
the high. So it is gonna be cold, but that's
perfect weather for good for them to blow snow at
the mountains to go out skating. And you know, as
I always say, if you got the right gear this stuff,
you know you can stay nice and warm. It's all
about the gear. And also with a lot of these activities,

(08:58):
whether it's walking or skating or cross country skiing. Once
you get out and get doing it, if you have
the right gear, you're actually pretty warm. Now downhill skiing
could be a different thing, right, if you're skiing downhill
and you're on the lift, and if it's as cold
as is going to be, you can still get cold.
I think the main element with that is you want

(09:21):
to have that heated vest. Maybe not. You get heated
gloveacy days, get heated boots, heated everything, right, so I
think all those things will keep you warm. But yeah,
today maybe the data to get out and do it.
Let's first dive into the discussion on small business owners.
So this kind of came to light. We had a

(09:43):
prospective client that came in, a great, very successful individual.
It's done a great job of growing in his business
and now he's got an offer perhaps to sell the
business and a very good opportunity for him. But it
brought to light some ideas that you need to be
aware of if you're a small business owner and either

(10:06):
if you've got an off on the table or you
think that at some point down the road you might
want to sell it. And you know, all I would
tell you is the earlier you could start planning for it,
the better. So you know, just try to be you know,
seeking out ahead multiple years. You know what you don't
want to do is you know, you you know, want

(10:26):
to sell the business this year and you start the
process that at that point you could do it, but
you are going to be behind the eight ball and
you may not get the maximum value of the business.
But before I continue, let's go to the throone lines.
I have Bob Castleton, Bobby.

Speaker 2 (10:41):
There, Yes, Hi, Hi Martin, good morning, Hi, Bob, good morning, Hi,
good morning. The incoming administration. I happened to be listening
to one of his rallies, President Trump, and he goes,
harkens back to the McKinley administration, and back then we

(11:04):
had a tariffs and we didn't have you know, this
is you know, eighteen ninety eight something like that, and
we didn't have any income taxes at that pot at
that time. But he said we had plenty of money.
In fact, we had so much money we didn't know
what to do with it. I guess this is how

(11:24):
he describes it. But as I look at what he
wants to do, tell me if this is I think
probably an equalizer. He wants to you know, they want
to continue with the tax cuts that they put in
place in seventeen but then additionally reduced taxes, so that's
stimulative to the economy. And then you can say, okay,

(11:46):
maybe he's going to put in a tariff of ten
percent or something to that effect, so that could you know,
obviously have a challenge with inflation and maybe be be
stimulative in the economy. So I think that it's kind
of a maybe a wash or maybe a positive. I mean,
what do you think about that?

Speaker 1 (12:08):
Yeah, so great question. I think the most important thing
to remember is we have a very he has a
very slight margin of the majority in the House, only
three representatives, that's it. And that's that's very tight, because
it could even be less than that. That know, what's
going on. And the thing to appreciate too is you

(12:29):
know you have the Freedom Caucus that you saw a
little bit where they they voted in Mike Johnson is speaker.
You know, there's a number of these folks there are
their budget hawks. I mean, you know, they really really
really do not want to be increasing the deficit. So
you know, for them to both keep in the tax

(12:52):
cuts that was in past twenty seventeen plus any concept
of do you think taxes more? You know, I don't know,
Like you never never know how this plays out. But
my guess is they're not gonna be able to do that.
You know, that would be very difficult to do it
because you know, it is problematic where we are with

(13:14):
our current deficit, and even individuals in his administration that
are coming in, you know, have talked about trying to
get that lower. So this year we're going to be
at one point eight trillion dougl theres one point eight
trillion dollars and if you don't change things either reduced
to spending or increase the revenue, that's going to continue. So,
you know, my my only observation is, I do think

(13:36):
this is probably going to be some sort of agreement
that exists that gets this passed. I do not think
if I had to put any money on it. If
they keep twenty seventeen task cuts, that might be one thing,
even that might be difficult, But I just do not
see how they're able to pass additional task cuts. So
to your point, that would be a stimulus if they

(13:58):
if they did that, I don't I don't see it happening,
I think, you know, and and you know, I do
think they're gonna be able to cut some spending. But
even that is difficult too, right, which is you know,
you got the doze, which is you know, Elon Musk
and but you know, but we hit this before go ahead. Yeah.

Speaker 2 (14:17):
The thing, the thing I'm thinking in terms of is
that you we've raised we've raised our spending because of
the pandemic, but we haven't cut it back. The pandemic ended,
and we're still spending an extra what trillion dollars? Yeah,
that has to they have to put the brakes on that,
I would think, you know, that's my thinking, you know,

(14:38):
and I think they've spent a lot of that money
on bringing in newcomers into the country. Uh, you know,
there's current administration and that that's going to end. So
I think there's there's room to reduce the budget and
that'll make that'll placate the Freedom Caucus, I believe. But anyway,
that's yeah, I think. So anyway, I think I'm positive

(15:01):
on the market and the stocks going.

Speaker 1 (15:05):
Forward, So I guess I'm agree.

Speaker 2 (15:07):
Yeah, but I can.

Speaker 1 (15:08):
Say that, yeah, well, I think we can also agree
there's so many different movie variables that how it plays
I said, as we began to show, I could sit
here and tell you how I think it's going to
play out. Chances are is going to help completely differently.
But from a broad economic perspective, things continue to be
very good, right. Inflation's trending in the right direction, the economy,

(15:30):
strong housing market, strong labor markets, strong corporate profits are good.
So from an investor perspective, that's all positive. What plays
out from a political perspective, you know, any bets are off,
and some of them are going to be good, some
of them are going to be bad, but you know
it's it's I think as an investor, the bigger question is, well,

(15:50):
two things. What is your time horizon right, and what
is your risk tolerant, so make sure you have that correct.
And then two in general, what is the economics set
up looking like? And you know, for as we start
this year twenty twenty five, there's nothing out there to
be overly pessimistic by any means, and so to me,
that's a good reason to be an investor. Yes, very good, Well,

(16:13):
thank you, Yeah, all right, you take care of Bob.

Speaker 2 (16:18):
Yeah, I listen.

Speaker 1 (16:19):
I'm a big believer in the concept of kiss keep
it simple, right, and so often in our lives, whether
it's personal or business or investing, we make it more complicated,
and you know, you tend to kind of trip up
yourself in doing that. There's not much value that you
get in doing that. So just keep things simple and

(16:41):
you're going to be successful. If you do that, you
try to make it too complicated, or you start to
think you're too smart and that you know what's going
to happen. You're probably going to make a mistake and
you're going to regret that. So a great question from Bob.
Let's continue the discussion on the small business so again,

(17:02):
so here's some real key things to think about. Uh,
if you're a small business owner, one again, start earlier,
you know, four or five, six, seven, eight, ten years out.
If you start thinking about, hey, at some point I
want to sell this business and it could be an
internal sale. Uh, you know, maybe you have family that
works in the business, or it could be an external sale,

(17:23):
whatever that process is. The earlier you start and you
and you you engage the right group of experts. So
you know, with our firm, we work with our clients
to the personal CFO, so we're giving them guidance. We
bring in people from evaluation perspective, you know CPAs and
their accountants that really know uh, the tax elements and

(17:45):
kind of how that should be set up. From a
books perspective, they're bookkeeping, and then you know the right
attorney and legal guidance. But if you can kind of
get this in place and kind of have the right
vision as to how you're going to do this, going
to be able to maximize your the value and the
dollars you get. But also the deal structure is going

(18:06):
to be what you're going to be most happy with,
and that's important. Most people don't think about that, but
that's that's important. So one, you've got to have a
good valuation. What is your company worth? And there's really
there's a number of different factors on this, but one
of them, you know, one of them is cash flow.
How much cash flow is your business generating? Two, what

(18:28):
is the growth that you're going to see? So you
think about this. If you had a company that had
good cash flow, but you have no future growth prospects
or limited then that's going to limit what somebody's going
to value your company. But if you've got good current
cash flow, I mean the company's profitable. If you have
limited debt and your growth uh has been and the

(18:49):
future growth is going to be good, well, people are
going to want to pay up for that. So that's
you can you know, that's going to really determine the
valuation of your company. It can vary from industry to industry,
but that's very important. The other thing too, is that
you've got to make your business more than just yourself, right.
So we see this a little bit with these entrepreneurs

(19:10):
that they just carry the way of running the business.
But the problem is if somebody's going to buy the business,
they're going to, you know, at some point have it
run without you. So you've got to make sure that
that business entity is an ncy that runs on its own.
We have the right team in place, the right technology
in place. You think about it. If you of a
business where somebody else can step in and from day

(19:33):
one start operating and running it and be successful, and
again that's because you have all the right processes in
place and people, then that is a very valuable business.
So you have to be thinking about your business along
those lines. The other thing is your deal structure, right,
so when you actually go ahead and you have this
acquisition occur, there's a lot of different ways for the

(19:56):
payout to occur. You know that many times this was
called an earnout where you get a certain amount up front,
but then you get a certain amount over the next
you know, three to five years, depending on how the
business does. And also there could be an employment contract.
UH maybe you know you want or they probably want
you to stay on for three to five years afterwards

(20:16):
to help continue to run the business. Uh, and make
sure that that transition process goes smoothly. The other thing
is you know what's going to happen with your team,
your people, your company. Uh, that is extremely important. You
want to make sure that the most people want to
make sure that the team is well taken care of,
and so that's a big part of what that deal

(20:37):
structure looks like, what is going to happen with them? Uh.
And you know you've got to make sure that if
you're getting acquired, that the culture of that acquiring firm
lines up with your business. I mean I talk about
it all the time with our firm, our culture is
so important. The way we interact with each other, the
way we interact with our clients. Our culture is so important.

(20:58):
You've got to make sure that the culture of your
organization lines up with that acquiring organization because otherwise it
gets to be really problematic. And that's what you hear
very quickly. If these deals go south, it's quite often
because the cultures don't line up. The other thing to
appreciate is when you have that acquiring company, there's going
to be some element of financing, whether they have their

(21:20):
own cash or they're getting a loan to buy your company.
But that financing part of that equation is very important,
especially as these deals get bigger. You know, the bigger
the price tag on these acquisitions, the more important you've
got to know how is this acquired funding this because

(21:42):
you know, if they've got to go out and get
a loan or they're getting other backing for it, that's
going to come through. And that's where we see sometimes
these issues come up, is that they don't have the
proper financing and that's where it becomes problematic. And the
other element, too is having the right team and advisors
in place to move you through this emotionally right, so

(22:06):
you know it is these transactions are about the numbers
that's a very important part of this. But it's going
to be an emotional process. Right, this is your baby.
You built the business. H you know, you're you're invested
in it, uh in so much. You know you you
started in many cases from it being nothing. You've grown
it to be the successful thing. That transition process to now.

(22:29):
You know, again, whether it's an internal sale or external sale,
it's going to be emotional. You have to appreciate that.
And so if you have the right team of advisors
in place, they're going to help you not get caught
up on the little things that just don't matter and
be more aware of the big things that do matter.
And that's where again, having the right set of advisors

(22:49):
to walk you through that is going to be very important.
And you know, we always talk about from an investment
perspective the value of uh you know, I mean the
right team from an emotional perspective, which is what we
do for our advisors our clients. We help remove the
emotion from investing. Well, the same thing holds true when

(23:10):
selling your business. You've got to really make sure you
have that right group to walk you through from the
quantitative perspective but also emotional well, folks, we're going to
go to commercial break. Well, come back and join us
as we continue to take your questions. You'll listen to
Let's Talk Money, brought to you by Bouchet Financial Group,
where we help our clients prioritize their health while we

(23:33):
manage their wealth for life. Come back and join us,
folks as we take your questions. Good morning, folks. My
name is Martin Shields and I'm your host today for
Let's Talk Money. It's great to be here with you
and answer any questions you may have regarding your financial
planning or investment manager concerns, and I encourage you to

(23:56):
call in with those questions. You can reach me at
eight hundre eight two five five nine four nine. That
is eight hundred eight two five five nine four nine,
or if you're too shy to call in with your question,
email me. You can reach me at ask Bouche at
Brusche dot com. That's ask Bouche at Bouche dot com

(24:21):
and it's b O U c h E Y is
the way to spell Bouche. I hope that you're doing well.
A couple of things we want to mention in the
beginning show that I want to talk about one of
which is let's talk about your how to handle global
risk in your portfolio. And as I mentioned, I had it.
We had a situation where an individual came in. It

(24:43):
was an initial meeting perspective client and very concerned about
just the economy and what's going on globally and all
these different concerns from a risk perspective, and uh, you
know she was already working with an advisor and you know,
trying to figure out where to invest in how to
mitigate these risks. And we had a great conversation with

(25:05):
her just thinking a little broadly about the really the
main way to basically look at those global risks and
then to basically look at your portfolio and make the
adjustments is thinking as I've talked about before, keeping it
simple and thinking much more high level. Right, you start

(25:25):
to talk about different sectors and countries and all these
different things, you're overthinking. You're definitely overthinking when it looks
at when it comes down to managing risk within a portfolio.
You could do any research out of this. It's pretty
well well documented. It primarily comes down to asset classes, right,
And this makes sense if you move from an all

(25:48):
equity portfolio that you're going to have if you're in
a diversified all equity portfolio. So I'm not talking about
just highly concentrated positions, but a diversified all equity portfolio,
whether that's an internetational one or a US focus one.
Like our portfolios, as you move from all equity to
something that has bonds, cash or alternative investments, you're going

(26:11):
to start to reduce the risk. And all that means
is we talk about this in general. Again, if you're
talking about well diversityed portfolio, you're not talking about capital
risks that you could lose your investment. Now, there are certainly,
you know, if you're all in, you know, risky stock
positions and individual positions, or there are other investments you
can have that you can lose all your money, right,

(26:33):
it can go to zero. But in a diversified portfolio
and the portfolios that we have for our clients, you
have what's called market risk. And what that means is
when the market goes down, you're going to experience some
of that downdraft that is being a long term investor.
But you know, over time, as the market recovers, which
they do, you're going to see that recovery. So if

(26:57):
you move to more conservative investments like bonds that can't
be volatile, we saw that in twenty twenty two, and
we have alternatives in that sleeve as well, which frankly
did much better than bonds did in twenty twenty two,
but can have some volatility. And then certainly cash that
really has no volatility if you're in a money market

(27:18):
or whatnot. I mean, there are rare, rare exceptions, but
in general it's pretty much a SETI eddy but with
those they're going to protect better on a downdraft and
a downturn in the market or the economy. And really, again,
I could we could sit here and talk about the
risk that exists for twenty twenty five. What I think

(27:40):
is really amazing is that almost any giving year, the
ashole risk, the things that actually come up and are
actually problematic, are something we're not even discussing, right. You know.
The perfect example of that was COVID when it was
you know, when if twenty twenties first started, you know,
there was just that few cases that were occurring in
twenty twenty four, nobody really knew about it, if there

(28:03):
was much discussion about it, it was that they would be
handled just like any of the other kind of beginning
issues that were occurring from a global perspective with any
diseases or viruses. But yet it turned out to be
a real problem. And that's true with many times in
any given year, is that the risk that we talk
about are not even the ones that actually have to

(28:23):
be concerned about. But if you want to mitigate those risks,
and you said, hey, I think these are real risk
out there, I want to make sure I'm not going
to be impacted in a real negative fashion, then really
what it's about is moving your portfolio to a more
conservative allocation. And for our clients, we have what we
called our risk tolerance statement, and it's very simple. It

(28:45):
basically breaks out our six portfolios from our most aggressive
being all equity to our most conservative being thirty percent
in bonds, cash and alternative sorry set thirty percent being
in stocks and seventy percent being bonds castional alternatives. That's
our most conservative, and it basically breaks out those six
portfolios with what the allocation is the stocks and what

(29:08):
it is to bonds castional alternatives, and then you basically
just initial next to that allocation, and that's how we
manage your portfolio. So what was great for this individual
came in. It just helped her appreciate, oh, this is
how simple it is that I can mitigate risk. So

(29:28):
you know, we found the appropriate allocation from her. We
talked about what her expective return would be in that allocation,
what type of expective volatility, and we talk about expected
is based on historical figures, right, and you know it
could change. You know, what history was over the last
fifty years certainly doesn't mean what's going to be next year. Now.

(29:51):
It might mean it might be a good indicator was
going to be longer term in nature, but it doesn't
mean anything about what's going to happen next year as
far as those allocations. But it really helped her understand, Okay,
so this is how I handle global risk. I just
dial back my allocation to stocks and that's really going
to do the trick. The thing to appreciate too, And

(30:13):
this is one of the things we talked about with her,
which is, you know, right now, for many of our clients,
we have individual bond portfolios where it's a bond ladder
that we have bonds, primarily treasuries, but it could be
investment grade corporate bonds that go out from a one
year bond that the matures in a year, one, that
matures in three years, five years, seven, and ten. In general,

(30:38):
that's the makeup of these bond ladders. And right now
the US Treasury ten your US Treasury hit four point
eight percent this week. Now it's back down with that
lower inflation print is back down to four point six
four percent something in that neighborhood. But that's a pretty

(30:58):
good yield about for historically speaking, you think about this,
if you could build out a bond portfolio ladder that
you could lock in for ten years and get four
point six percent, and that's the conservative part of your portfolio,
that's pretty good that that is, that is a pretty
good yield to be able to lock into it. And

(31:19):
so in some respects, if if you're concerned about global risk,
or you're moving into retirement or something's happening, it's not
a bad time to become more conservative. Uh, you know,
we're not I would ever encourage people to become overly
conservative because they're to give up on long term growth.
But you know, if you let's say you're you know,

(31:40):
you're sixty years old, you're maybe going to retire in
the next uh, you know, a few years. Let's say
you're in the all equity or let's say you're even
the growth and you know, you want to kind of
dial back that a little bit. You know, our growth
and income is sixty forty. You know, that's a nice
mix for somebody that is in retirement. Many of our
retire diaries are in that growth and income. They could

(32:03):
be in the growth. And one of the things we've
talked about before is what we do is if you're
retired and you're taking distributions, we put up to two
years worth of distributions in a more conservative allocation, so
that even if there's market volatility, that you could get
through that downturn and not sell equities when they're down.

(32:24):
And that's really what it comes down to. It is
the most important thing is either not panicking when the
market's down and selling or not having liquidity needs, not
having cash flow needs they have to sell stocks when
they're down. If you can do that even in the
you know, really long down terms like two thousand to
two thousand and two, or like two thousand and eight,

(32:46):
two thousand and nine, if you could get through those downturns,
you could be very successful from a folio perspective. And
what that allows our clients as well is to maybe
be a little more aggressive than they might otherwise be.
So we do have some clients that are in the
growth Allocation eighty twenty who are retired, but we put
their distributions up to two years worth in that market

(33:08):
serve of allocation and it really puts them in a
good spot to be able to sustain through and have
those distributions occur in down markets. And again, what it's
about is peace of mind. Right, if you're not up
at night concerned as to how this is going to happen,
that changes everything. That changes the equation. And I talked

(33:30):
about the emotion and the psychology of selling a business,
well the emotion in psychology of retiring, it's the same
thing just about right. There's a lot of quantitative elements
of being prepared for retirement, but there's also we do
a lot of handholding for individuals from an emotional and

(33:50):
psychological perspective. I just met with the clients on Friday
who are talking about retiring. We went through the plan
for the first time with them, and you know, I
could just feel the difference in kind of what the
stress and the tension is before we have those meetings
and after we have those meetings. If and here's the

(34:12):
if they've done all the right things financially to get
them in the right spot. And you know it, really
it goes from lots of concerns and unknowns to an
element of excitement, right because usually what we're doing is
pushing our clients to spend money, and it's hard for
them to kind of fathom that, right. There have been

(34:34):
so many years of saving, saving, saving, saving, and you know,
and they're saving while they have a paycheck, and now
we're flipping that script and now we're asking them to
take a distribution and not and this is going to
be doing this without a paycheck. That's just very concerning
for most folks. But that's where we come in with

(34:54):
a handholding, making sure they understand that this is okay,
and then we're going to manage that risk. And you know, again,
that's where them delegating that responsibility to us can be
so valuable. And another new client situation where uh, you know,
great couple, uh, you know much older, you know, almost
in the nineties, literally almost in their nineties, amazing couple

(35:18):
and they're just like, you know what, the husband really
wants to make sure that the whites protected if something
would happen. He handles all the finances he used to
manage his own portfolios all the way up to then.
But you gotta where that challenge with that is is
feeling comfortable to delegate. You know that that is that's
a mind shift change. And many of our clients they

(35:40):
have managed their portfolios in the past and even when
they you know, turn over the range to us to
manage their portfolio. Though quite often we call it a
sandbox account. It's an account that you can make your
own trades. Uh. You know, we can see it if
you want us to, but we won't bill on it.
But allows you to have that out that you've got

(36:02):
an idea, you know, you want to go ahead and investigate.
You don't have to call us to be putting in
your portfolio, which would rather not do because we have
our own allocation that we're going to be using. And
having that sandbox account is for many people the out
that allows them to delegate the vast majority of the
portfolio to us, uh, while at the same time allowing

(36:25):
them to have, uh, you know, the ability to put
some trades in a in a smaller account that they
can handle all that themselves. And and so that that
ability to delegate that also is very emotional, right, This
is you know, in this case I describe, uh, you know,
this person has been doing this for decades and frankly
it's done a nice job with it. So you know,

(36:48):
but even in that situation, just as time's gone on
and they've got more comfortable with working with our firm
and our communication as a firm, uh, it's really helped
put them at ease that that was the right decision, right.
And I always say, listen, when a client comes on
and starts working with us, that's a big decision. We

(37:09):
do not take that lightly. We appreciate that, you know,
you're putting your wealth with us, whether it's you know,
half a million dollars or ten million dollars, that's a
lot of money. In most cases, you know, we work
with our clients in their full well from a wealth perspective,
their full portfolio, and so we don't take that lightly.
But what I always say is within that first year,

(37:32):
if there's any concerns, they usually get mitigated. Within that
first year we go through the planning process. They understand
how we manage the portfolio and how we communicate. And
then after that first year they're like, I get it.
I understand how this works. Now, you know there's an
element where they've kind of mentally come to terms with
that delegation and it just gets to be a much

(37:53):
easier process for them at that point. Let's move on.
I want to talk about raw THI rays and when
you can act has those. But before I do, if
you have any questions, you can give me a call.
You can reach me at eight hundred eight two five
five nine four nine. Again that's eight hundred eight two

(38:13):
five five nine four nine, or you can email me
at ask Bouche at bouchet dot com. Again that is
ask Bouche at Bouchet dot com and Bouchet is spelled
b O U c h e y dot com. But
before I jump in the row, I just want to
highlight coming up in about this over a week and

(38:37):
a half, we have our Stateday economy presentations and uh,
this is this would be the tenth year that we
will have done these. Uh. We have one in Troy
at Frankoplaza, one in Saratoga at the eighteen sixty three Club,
And I'm telling you these are are one of our
hallmark events. You know, what we really really focus on

(38:58):
as a firm is community caating well with our clients.
If we can communicate well, they know what's going on,
if there's any concerns they have with the markets, the economy,
whatever that is. We want to be able to communicate,
whether it's via email, phone calls, zoom calls, in person,
but our State of the Economy presentations one, it just

(39:19):
gives us an opportunity to meet with a large number
of our clients in person and that's always a great
thing that we always enjoy doing. And then you know,
have a dinner for the presentation and then really outline
for the year what they need to be aware of
from an economic perspective, from a portfolio perspective, and we
also talk and highlight about from a tax and financial

(39:43):
planning perspective, and even what's going on with our firm.
You know, you think about our firm has been around
for thirty five years. We're celebrating thirty five years now.
We manage close to one point five billion for our
clients and you know, the future of this firm is important.
As Steve would say, we're set up for the next
thirty five years. Uh, and that's important because our clients

(40:06):
hire us from a long term perspective, so that having that,
you know, understanding what we're doing as a firm to grow.
And as I've always said, you know, as we've grown,
it's really only only added value to our clients. It's
you know, you're always concerned as you grow, do you
lose that culture and how you work with our clients.

(40:27):
And I'll say from my perspective, and I think most
of our clients would agree that it's only gotten better.
Our communications, improved, our internal processes, the people we've brought
on or just add so much value, you know. And
really what's great too is that now we as we grow,
we've had people that kind of specialize in certain areas,
so it would be tax planning, a state planning, what's

(40:49):
more on the investment side, charitable giving, all these different areas.
We've got advisors now that have expertise in those areas.
And it's just really added a tremendous amount of value
with our relationship with our clients and uh, and how
we work with them. So to me, it's been more
all about the good of us growing and getting bigger, uh,

(41:12):
versus really any of the downsides that can occur. And
I will tell you that that's that's intentional. It doesn't
happen by chance. We've made sure that as we grow,
both the people we hire, what our culture is internally,
that that that becomes just a real important part of
how we design the firm and really where the future

(41:33):
is with the firm, because that has to stay intact.
Let's talk about the law THI rays and those distributions.
But again, if you have any questions, you can reach
me at eight hundred eight two five five nine four nine.
That's eight hundred eight two five five nine four nine,
or you can email me at ask Bouchet at Bouchet

(41:56):
dot com. I actually I have an email that came
in here, he says from at Clifton Park. Hi, Joe,
I am seventy one. I am in a high tax
bracket with a portfolio of fifty percent stocks and fifty
percent cash. I soon have to take my rm D
on multiple counts, which will drive me into an even
higher bracket. What are my options to reduce taxes? Should

(42:18):
I move cash? To non dividend e t FS ETFs,
any device would be appreciated. So so great question here.
So a couple of things just to clarify. So if
you're seventy one now, then you'll when you turn seventy three,
that's the new age that you have your rm D.
And you know, this is something we talk about with

(42:41):
our clients quite a bit, right, which is you know,
many times they're not taking distributions from their IRA because
they don't need to. Uh. And then you know, you
get you know, we have the requirement of distribution and
when you first start taking it, it's going to be
about three point six percent of your portfolio. That's the
actual equation and number to calculate that. But it comes

(43:04):
down to about a three point six percent distribution. So
you know, if you've got a million dollar portfolio or
two million dollar portfolio, it's in your IRA. You know,
you're talking about another thirty five thousand dollars, you're talking
about another seventy thousand dollars. So Joe to your point
your question, you know, what are your options to reduce taxes?

(43:25):
Not a lot unfortunately, you know, because you probably have
Social Security, maybe have a pension, I don't know what
other retirement income you have, but you know, really if
you have now I'm assuming you're talking about a taxable
account where you have dividend paying ETFs. That is correct,
So in your taxable account you can make adjustments. So

(43:49):
now a couple of things you can do is if
you have bonds, you can move them to muni bonds,
So municipal bonds you don't pay federal taxes on it.
And if they're in New York State or Puerto Rican
UNI bonds, you don't pay state taxes as well. So
again for your tax will account for your bond allocation.

(44:09):
You could do that. Now, the thing to appreciate is
you have to really look at what's your after tax
yield to see if that's worth it, right, because for
most of our clients we don't put them in a
UNI bond allocation unless they have are making you know,
four hundred thousand dollars five hundred thousand dollars plus maybe
three point fifty, because you've got to be in that
high tax bracket to make it work a worthwhile because

(44:31):
you're what you're looking at is what is your after
tax yield? But you know, for people who are making
that much, they're in those very high tax brackets, both
federal and state. It does become worth it. The after
tax yield is higher on those media bonds, but that's
something you can consider. And then yes, moving from non
dividend ETFs, you know, now chances are you're going to

(44:54):
be in a qualified many of those dividends maybe what's
called qualified dividends, so they're only going get taxed from
about fifteen percent. So it's now you're going to be
as ordinary income. They could be taxed at fifteen percent,
So in that regard, it is going to add to
your overall income having those dividend ETFs. So you could

(45:16):
move to more of a growth ETF like QQQ that
has you know, a yield that's you know, around one percent,
or even the S and P five hundred that has
a yield of about one point five percent versus h
an ETF that's more focused on dividends and could have
a yield of three or four percent. So that's a

(45:38):
possibility as well. Beyond that, you know, the only other
thing is that I'm assuming you don't have any earned income.
You know, if you have earned income, there's things you
can do. You know you can if you're still working,
you know, you can obviously save some of that into
a traditional IRA that would work. It would be good.

(45:58):
But you know that's you know, in general we have
to think about is you know, we're talking about going
from one hundred thousand dollars to you know, one hundred
and fifty or if you're in the more in the
three to four five hundred thousand dollars range. That's really
you know, kind of the question is what range are
you in? And that's the determination as to what you

(46:18):
should be doing. Let's go on. So with the raw
Thier raise, what you need to be aware of is
that and the most important thing is your contributions into
the raws. If you make them, you can access them
at any point. The contribution, now, the growth, you can
only access if you've held them for five years, and

(46:39):
it is important you're fifty nine and a half. The
only exception of that is if you are building or
a home there you can access ten thousand dollars for
a first time home buyer, so that's always a nice thing,
but otherwise you have to wait into your five years
and a half. Now, the other thing I want to
highlight before the show up here is that if you

(47:01):
do a wroth conversion, you have to you can't access
that money even though you paid taxes on it. You've
got to wait for five years to go by before
you can access that those dollares you're converted without paying
that ten percent penalty, So that's very important. That's different
than if you've made those contributions yourself directly into the Wroth. Well, folks,

(47:24):
we spend another hour together. I hope you learned a
little bit. As always, I've enjoyed being here with you.
You'll listen to Let's Talk Money, brought to you by
a Bouchet finance group, where we help our clients prioritize
their health while we manage their wealth for life. Take
care of yourself, take care of each other.