Let's Talk Money

April 26th, 2025

Episode Transcript

Speaker 1 (00:00):
Good morning. Thank you so much for joining me and
this rainy Saturday. Mine is Harmony Wagner. I'm a wealth
advisor up Shade Financial Group. I'm a Certified Financial Planner
or CFP and also a Certified Private Wealth Advisor a CPWA.
I've been staving the team for coming up on nine
years at the end of the summer, and really, you know,

(00:20):
enjoy of course working with clients, but it's also a
privilege as well to join a radio audience on the weekends,
So thank you for joining me. At least where I
am today, it's a rainy morning, rady spring morning. So
if if it's raining where you are, you're taking a
break from the spring yard work. I'm getting some spring
cleaning indoors. Either way, I'm very glad you decided to

(00:41):
join me. Like I said, it's always a privilege to
get to join you live on the air and talk
about things that I'm passionate about, things I talk about
with clients and friends and family all day, every week,
every month, every year. One thing that you might not
know is that April is Financial Literacy Month, so it's
a time of really thinking more about how to we
educate our clients appreciated, something we're very passionate about. You know,

(01:04):
we act as a fiduciary for our clients, as you heard,
and a little intro, and part of acting in our
clients' best interest for us means informing and educating people
so they can make the best financial decisions for themselves,
making sure that they understand what's going on that they're
thinking about, all the different angles, all the risks, all
the things to consider. Whenever you're making a financial decision.

(01:26):
There are so many elements that go into it, you know,
calculations and also the psychological elements to it. And so
a big part of what we do is is that
education and trying to increase our clients' financial literacy something
so important to us. And of course, you know coming
to our listening audience on the radio is a big
part of that too. So thank you again for tuning

(01:48):
in and spending the next hour with me. I have
some interesting topics lined up, so I'm looking forward to
sharing with you about some things that happen on our
mind or you know, often things that come up in
client cop verstations throughout the week kind of helps us
develop the topics for the show. So we'll get into
an in just a moment. There's lots to discuss in
the markets as bent, as has been the theme of

(02:10):
the year so far. But before I start off on that,
I just want to remind everybody that the phone lines
are open, so you can call in with your questions
or topics you'd like to discuss at one eight hundred
Talk wd Y. That's one eight hundred eight two five
five nine four nine. If you can't call, or maybe
you're not comfortable you would rather write something out, you
can also use our email address. We have a dedicated

(02:33):
email for radio questions that is ask Bouche at Bouchet
dot com. Ask ask b o U, C h eu
y at Bouchet dot com. So if you're more comfortable
with that, or you just think that maybe you'll be
able to write your question out better in a written format,
please utilize that and I'll do my best or field
whatever questions you may have or whatever you might like

(02:54):
to talk about today. So I'll get started by doing
a market recap looking back the week we just had.
All the major indexes were positive for the week, so
welcome reprieve from some of the downward volatility we've been
experiencing year today, as I'm sure it doesn't come to
us as a surprise to any of our listeners, but
for the past week, the SMP five hundred was up

(03:14):
four point six percent of the week, the nastack up
over six percent, and the DAD zones up two and
a half percent. So Marcus started out the week under
some pressure. We've had, you know, a lot of volaility
this year with tariffs and political risks and this kind
of against the backdrop of people being afraid of our
recession or you know, at least an economic slowdown as

(03:36):
a result of you know, some of these headlines, some
of the political moves, things that are going on in
the world and in our country. However, this week we
had four consecutive positive treaties and so I ended up
seeing a nice rally for the week. I think a
main driver behind that being hopes for the de escalation
of the tariff battle between the US and China. That
seems to be one of the elements of the the

(03:58):
tariff that is most right. It's trying to being a
big trading partner of the US, and a lot of
just the aggressive talk from both sides and people worrying
about how that's going to affect the market, to affect
our relationship with them long term. Also on Friday, we
had some news from the White House that the US
and Japan are very close to a trade deal, so

(04:19):
some positivity for the markets and contributing to a nice
rally for the week. And after the end of this week,
we're actually now only three percent below the levels that
we were at before April coming into you know, Liberation
Day and some more of the tariff concerns really coming
to the forefront. So only three percent below where we
were at that point where a lot of the significant

(04:40):
downar volatility started. And I think if we continue to
see some maybe actual progress for a trade deal, some
tangible actions, the outlook is hopeful for the markets, at
least when it comes to that tariff concern So that's
something to keep an eye on as we go forward.
You know, the past month or so in the marketing,
even this whole year has been a great reminder of
what it means to be a market invent Right, There's
been a lot of volatility. I'll can't talk about that

(05:02):
in just a few minutes, but you know, it reminds
us that The risks are always there, and it's something
I think we know when we invest that there is
always risk to being invested in the markets, but we
don't always feel it. There are certainly years where it
doesn't seem that the risks are are present, it doesn't
seem that they're at the forefront of anybody's mind, but
they really are always there. There's always the possibility that

(05:23):
something could come up, whether foreseen or unforeseen, that would
really shake the markets and contribute to some volatility. It's
the reason why when someone needs money in the next
one to two years, we don't advise them to invest
it under almost every circumstance, because that's a relatively short
time and it's very easy for something to pop up
that affects the markets in that kind of short time frame. However, well,

(05:46):
the risks are always there. The rewards are always there too,
and that's something to remember. And sometimes when we're focusing
on only one side of the equation, we forget the other. Right,
in a great year, you think about twenty twenty three
or twenty twenty four, people weren't thinking about the risks
so much. Right, people were maybe more aggressive than they
actually are in their heart of hearts people seeing all
the markets going up and feeling like, oh, there's nothing
to do but gain here, but the rewards are not

(06:09):
the risks. And then you have a year like this
one where you know, folks are thinking a lot about
the risks and they are focused on the rewards and
maybe don't don't see those in the short term. But
we have seen some great days in the market recently,
including the best days in two thousand and eight just
a few short weeks ago, and oftentimes, as this is
historically accurate and we're seeing it this year as well
in the present, some of the best days in the

(06:31):
market occur often very a very close proximity to some
of the very the most painful daily declines. So it
is something to be aware of on the bottom side
of things, you know, to go over that briefly, we
have seen some ups and downs. Treasury yields had increased
a few weeks ago, but had actually takes a little
bit downward since then. The dollar strengthened this past week,

(06:51):
while began actually weakened slightly, and golds hit a record
high earlier this week as well. Overseas stocks are mostly
up for the week also, so generally to the week
in the investment world, you know, and as we think
about markets and of course the volatility, which is on
a lot of people's mind these days. You know, I
will say a quick word on that, because we are
seeing an elevated volatility environment. So on average, over the

(07:13):
long term, the S and B five hundred often swings
one percent up or down on a daily basis. So
you know, if you're tecting the markets day to day,
which I know many of our listeners probably do, if
you see the markets up up one percent down one
percent for the day, either one of those would be
considered very much within the normal range. And of course,
you know, volatility doesn't just mean downs, it includes the
ups as well, though we usually focus on the negative

(07:33):
when we hear that word. However, for the last month
of twenty twenty five, so you know, a marchin and
mostly April, the average intra day swing has been three
point two percent every day, So that's almost three that's
three times are a little more than three times the
long term average for daily swings. And so I think,
while I'm seeing with a lot of clients that I'm

(07:54):
speaking to, this is creating an environment where the volatility
has a higher volume than than normal. You know, it's
much more common in the past few weeks or months
to see one market day move the needle, you know,
two three five percent, either up or down. I think
this is creating an environment where a lot of people

(08:14):
are feeling that investing in the market is feeling a
little bit unstable or you know, more erratic, more nerve
wracking than the normal. And from my experience, people that
seeing most affected by these kind of feelings are either
those who may be more aggressive aggressively invested than they
were comfortable to begin with, maybe those who are newer
to investing, or you know, coming off of a two

(08:36):
year wall market run, they were more aggressive than perhaps
they truly are, and so nothing provides a gut check
like some extreme volatility and some fear in the market,
So that could be a contribute to it. I'm also
seeing a lot of clients who are approaching a transition
point in their life feeling higher levels of concern than
some others, and I think that is also completely normal.

(08:58):
If you are near retirement, if you're about to sell
a business, if you are about to maybe make some
withdrawals to send some kids to college or something like that.
Those are transition points in life. There, those are transition
points in life that are making it more more nerverecking
to be invested. And you know, so as as advisors,

(09:21):
we certainly appreciate that when we're working with clients over
a long term and we have the opportunity to plan
for these things ahead of time, we certainly do so
to protect. But it just thought, it's it's worth noting
that if you're in one of those categories, or you're
just someone who saying I feel more nervous right now
than I normally do, then it's understandable. You know, sometimes
working with a trusted advisor can help, can be a

(09:44):
good sounding board to hear your concerns, talk about, you know,
what's our potential path, what actions are we going to take?
Or is the best action no action? And having a
trusted partner in the advisory side can it can really
be a big help during times like this. More than ever,
We're gonna go to the film lines and chat with
the caller from Glenville.

Speaker 2 (10:04):
Good morning, good morning, can you hear me?

Speaker 1 (10:08):
Okay, yes, I Dan, how are you today?

Speaker 2 (10:13):
Okay? Good? Just a quick thought, do you feel we're
going to see inflation similar to what we thought four
or five years ago during the pandemic, with the upcoming
shortage of products in tariffs, and to that point, usually

(10:36):
gold is a good indicator of what the future holds
twelve to eighteen months into the future. I'm of the
belief that gold is not priced presently because of the
political issues, but it's looking further down the road that
we're gonna have some type of I hate to use

(10:56):
the term hyperinflation in the stagagnation type environment. I'd just
like to get your thoughts.

Speaker 1 (11:04):
Kind Yes, thank you for that question, and I think
you're asking a question a lot of people are thinking of,
so I do appreciate you raising it. I think you know,
one thing that people are concerned about is this potential
for a stagflationary environment where you know, we have slowing
growth and high inflation. It's a big fear of a
lot of people. It hasn't happened many times in history,

(11:26):
but it is a big fear because there's just not
a lot that can be done about it. Right and
you think, even right now, if we were to see
the economy start to slow down, in inflation spike and
at the same time, with tariffs contributing to that, that
could be a difficult situation. We're also in a point
where rates, the Fed funds rate is relatively high, right,
So a few years ago we went into a high

(11:48):
inflationary environment, but rates were very low going into that,
they were able to raise them quickly and they brought
it down by doing so. Now with rates higher, you know,
it's it's a much more difficult policy environments to kind
of address that. I think that people are very concerned
about inflation, and it's definitely a possibility, right A lot
of it depends on what the tariffs are that actually

(12:11):
stay in place long term, you know, how that all
plays out over the long run, you know. Right now,
it feels to me, you know, my personal opinion that
we're seeing tarifts is a lot of you know, political
bargaining and those negotiations and a lot of them have
already been walked back as we've seen, so they may
not be in place for long and sometimes they get
threatened and they never actually even take effect. So I

(12:32):
think that as we go on here and we see
what's going to really be in place over the long term,
how do these negotiations play out how quickly that will
impact a lot about the inflation going forward. But I
think you know, what you're saying is something a lot
of people are feeling. You know, we're seeing consumer sentiment
data on Friday hit one of its lowest levels ever
and it was down eight percent just from March. So

(12:54):
Americans in general are expecting inflation to increase a lot
over the next year to eighteen months. I think the
analysts are saying that they're pricing at about a six
point five percent inflation expectation. That doesn't mean that will happen,
but that's what you know, the country is kind of
bracing for, and so people are perceiving a lot of
risks of the overall economy as a result. So you know,
it certainly could happen. I'm with the mindset that, you know,

(13:16):
we'll kind of learn more as we see how these
tariffs play out, but it's definitely a possibility that we
see certainly an economic slowdown, possibly even a recession in
the future. You know, it's it's impossible to predict at
this time, but you know, high inflation, given where we're
at now as an economy, would be certainly a challenge.
So I appreciate your question. Thanks so much. We're gonna

(13:38):
go to a quick break here, but we'll be right
back with more. Let's talk money on WGY. Don't go away.

(14:25):
Thank you, Thank you so much for hanging with me
through that brief break. This is Harmony Wagner coming to
this rainy Saturday morning. I'm a Welth adviser at Bluchet
Financial Group and it's my pleasure today to join you
for this hour talking about the markets, the economy, financial planning,
and portfolio questions that you might have. If you would
like to talk about something or you have a question

(14:47):
to ask, please feel free to call in. That number
is one eight hundred talk w g Y one eight
hundred eight two five five nine four nine, And if
you're not able to call, or you prefer to send
a written question, you can send to our dedicated email
address that is ask ask Bouche b O U C
h E Y app Bouchet dot com and I'll keep

(15:08):
an eye on that inbox if you have a question
that you want to send in that way. We've been
talking a lot about the markets and what's going on
with some of the volatility, some of the drivers behind
that you know, as we look forward to the week ahead,
there's a lot of economic data to keep an eye on.
The first estimate of the Q one GDP for the
United States comes out this Wednesday, and that's expected to

(15:29):
give signals about how the trade tariffs haven't impacted the
economy for the first three months of the year. Obviously
we haven't been necessarily in place for that time, but
you know, the anticipation of that and how that may
have affected GDP. Some analysts are saying these might indicate
signs of an economic contraction. Others think that demand is
held up enough to prevent that so far. So that'll

(15:50):
be something that markets and investors are watching closely on Wednesday.
And also on Wednesday, that April PCE comes out, and
that's bets Preferred Inflation Index, may give us an additional
perspective about their likelihood of, you know, how they're gonna
behave regarding rates in the future. Next Friday, we've got
the April jobs report coming out. That's gonna draw a

(16:10):
lot of attention seeing whether the very strong March jobs
report is a trend that can continue or whether it
will be cooling and as icing on the cake. Four
out of the magnificent seven stocks, you've got Amazon, Apple, Meta,
and Microsoft all lined up to report earnings next week,
so needless to say, there will be a lot going
on before the break forth. The question we talked about
how volatility has been elevated this year compared to the

(16:34):
average by by a decent margin, So you know, it
is something to just be be thinking about for those
who do follow markets every day, right and we have
a lot of clients who actually don't who I actually
met with two people this past week who said, you know,
I was about to present their portfolio to them, talk
about what's going on and some of the moves that
we've made for them, and they admit that they actually

(16:54):
haven't looked at their portfolio all year. So you know,
whether it's a sign of just them kind of protecting
the peace of mind their mental health saying, hey, I know,
I'm going to stay the course. I'm not going to
take any action right now, so I'm not going to
look at it, or maybe something else. But there are
a lot of folks who don't look at it all
the time either. But if you do, those are some
of the things that to be aware of that it's
going to be coming out on the economic front this

(17:16):
next week. As I wrap up the section on the
market and the economy, you know, I always like to
boil it down into you know, what do we do
with our individual portfolios? Right? Because we think about the
macroeconomics that the big themes of what's going on in
the market at large or the economy at large is
it and it's you know, interesting to research those and

(17:36):
it can be helpful as you do some planning. But
what does it all boil down to for you and me? Right,
the normal Americans that are just trying to do the
right thing with their portfolios and with their personal finances.
One thing I think I always talk about but is
is that risk tolerance review and thinking about how are
you allocated? Is it appropriate for you? Does it feel
good when times are good in the markets, and does

(17:58):
it feel right to you times are more difficult when
there's more volatility, more concerns at the forefront. I think
having that long term risk tolerance is really important because
if you don't, if you're invested too aggressively or too conservatively,
you may end up putting yourself in a situation where
you make the wrong move at the wrong time, and

(18:19):
it can it be to your detriment. So whenever we
guide clients into their allocation selections, that's what we're talking about,
is we're saying we want something where you're gonna feel
good when markets are up, you're gonna feel like you're
participating in it on a risk adjusted basis, but also
when markets are down that you're not gonna really have
a strong inclination or a strong urge to become more
conservative at the wrong time. So this can be a

(18:40):
great time, and maybe it's not the time to actually
make the move, right. That's something we talk to clients
a lot about. Right if someone calls me when markets
are down and says, I'm realizing that I aggressed it,
invested too aggressively. I'm not comfortable with this, I want
to make a move. In that case, I would hear
them out and I would say, I appreciate it. We
want to value your peace of mind. I would advise
you to make that move when markets recover, and it

(19:02):
can be very hard to do. It can be very
hard to ride out the storm, especially when you're already uncomfortable.
But history shows us that the market does always go
on to make new all time highs, it does recover
from any number of different challenges that it has faced
in its history. So it is something to be aware
of that if you want to become more conservative, it

(19:22):
might not be the right move at that time, and
you may have to have the nerve and the stomach
to hold the course and then become more conservative when
when markets recover, which which is a hard thing to do,
but it is financially and logically the right one. Often.
Another thing that can be helpful at a time when
having that dial and investment strategy is paramount is consolidation. Right,

(19:44):
having accounts that are spread all over the place can
really work against you when you're trying to determine what
your overall allocation is. When you're trying to manage your portfolio,
especially if you're doing it on your own, it can
become really difficult, and so oftentimes it can be a
good time to say, Okay, I feel like I want
to take some action, right I'm nervous, or I just

(20:04):
have this desire to make a move and feel like
I'm doing something about how I'm feeling. Consolidation could be
a good thing to do, right if you have a
couple accounts like if you have two iras at different
locations and an old four oh one k right, consolidate
those to one IRA at you know, wherever, whatever institution
you're comfortable with, and have it all managed in one bucket.
Same with taxable accounts. If you've got a lot of

(20:25):
brokerage accounts here and there and everywhere, it could be
a good time to bring them together into one. You
could typically transfer everything in time, so it's not going
to be a taxable event. Same with iras, you can
just roll them over, but you know, having everything in
the correct accounts all in one spot so you can
see it. You can pull it up and you can say, okay,
I can see that I'm in a sixty forty allocation

(20:46):
here and then you can you know, make adjustments if
you need to from there. But it really is a
good time to kind of consolidate so you can really
get a good view of what is your overall portfolio doing,
how is it invested. It gets a lot harder to
do that when you've got you know, a lot of
money in a money market fund over here, and then
you've got one account that's one hundred percent equity over there,
another account that's diversified maybe sixty forty somewhere else. It

(21:07):
becomes a lot harder to manage that. So consolidation could
be a good action to take at this time when
you know you want to say, I want to focus
on my investment strategy and make sure it's right at
this point. Another thing you can do, and I've seen
so many articles about people doing this. I'm talking to clients,
they're talking about this. Even friends family that I speak
to are have this on their mind, is to really

(21:28):
hone in on your budget right now. Right if we're
worried about inflation increasing in the future, having your budget
set up where you know exactly what you're spending, exactly
where all your money is going can help you. Now.
You don't have to necessarily make reductions or budget cuts
right now, but it's something where you can say, all right,
if I'm worried about inflation, worried about the future of
the economy, you know, what's what's my plan? What are

(21:52):
the discretionary spending that I can cud if I need to,
What would be the first to go right? That that
can give people a lot of peace of mind if
they're worried about in As just a broad overarching theme
that's going to affect their life, saying, Okay, if I
if we see inslation creep up, you know, these three
subscriptions are gonna be the first thing that I cut
out to give myself a little extra cash for my budget.

(22:14):
So that's really helpful. That could be a great way
to take some action to really manage your personal financial
life in a in a great way. And speaking of budgets,
you know, this brings me to another thing, which is
focusing on on the things that you can control, right markets.
You can't control the markets, the economy, not so much politics,
certainly not. But what can we control, right our allocation.

(22:38):
We can make sure that our allocation is dialed in
and onomen that we're comfortable with. Again, over the long
term savings plan, are you are you meeting the savings
goals that you've hit into Whebe it's your four oh
one K or maybe you have you know, some money
each month going into your a brokerage account or even
just your bank account. Right you're building up an emergency
reserve fund. Making sure that you're hitting those goals will

(22:59):
go along way towards protecting your peace of mind your
budget as they talked about before. That's something that you
can control to a large extent, Right, what is the
discretionary things that you can cut out? What are the
things that you can't cut out? And you know, focusing
on that and making sure that it's really dial theant
at this point it is a great thing to be doing.
And finally, you know, consumption, not just the things you're spending,

(23:22):
but the things that you're allowing into your into your mind.
You know, sometimes it's best to just turn off the news,
right if it's really impacting you in a negative way,
to turn off the news, turn off, stop reading the
articles for a little bit, give yourself a day or
weekend to unplug and and just focus on things that
are really important that you can control, the things in
your in your life that are valuable to you. So

(23:44):
we are coming up to the end of the half
hour here, so we're gonna be going to a news break,
but don't go away. We have more to discuss when
we come back. And again i'd love to hear more
questions from the listening audience when we come back. So
don't go away. You're listening to Let's Talk Money, brought
to you by Bouchet financial group where we help our
clients prioritize their health while we manage their wealth for life.
Be back in a few Good morning, and thank you

(24:06):
for hanging with me through the break. For anybody who's
just joining us, my name is Harmony Wegger, Wealth Advisor
at Bouchet, a certified financial planner and certified private wealth advisor,
and it's my pleasure to be joining you light in
the air this morning talking about the market's economy, financial
planning topics, portfolio management, personal finance, and any other financial

(24:26):
topic that you can think of. I have a couple
of things I'd like to discuss now fifth years, from
the markets and the economy to some more of the
financial planning and strategic side. But if you do have
any questions on any of those areas, please call in.
I'd love to hear from you, and I'm sure our
listening audience would love to hear as well. Whenever someone
asked a question, I always think that there is probably

(24:47):
so many others who were thinking the same thing, So
don't be sy call in and ask away. The phone
number is one eight hundred talked WGY one nine four nine,
and if you are too shut of, you can also
send it via our email, so that email is ask
A s K luch b O U C h E

(25:08):
Y at say dot com if you'd like to send
an email question instead. Oh, let's go to the phone
lines now and talk to a call. Good morning and
Harry and yes again, good morning. What's your name? And
I'm a from Amsterdam. Hi, Tom, this is Harmony. Thanks

(25:29):
so much for calling in. What can I do for
you this morning?

Speaker 2 (25:32):
When do your when's your workshop with?

Speaker 1 (25:37):
What's that you have a workshop? I think you're doing?
Uh nothing scheduled as it right now? No? Okay, okay,
thanks all right. So, as we said fears here, I
figured it might be a nice time to talk about

(25:58):
some tax planning. So we just had taxes an ending,
and so many people might be thinking about it, right
maybe in the last few weeks you have God's share
return back and maybe you're you have some thoughts on it, right,
So a lot of times you think about tax planning
forwards the end of the year. But right now, we
just got our tax returns back. Maybe some of you

(26:19):
ow maybe something you had a refund, and so I
thought it might be a nice time to talk about
some of those items. So one thing for anybody who
did end up owing taxes, and especially if you owe penalties. Right,
So we see penalties, it could be in two categories. Right.
You can sometimes have a penalty on your taxes for
not paying it enough and also for mistiming your payments. Right.

(26:42):
So let's say, for example, if you sold the property
in March of last year, you didn't pay any estimated
payments until December. Right, Well, you're gonna get a timing
penalty because the IRS is saying, you see the paid
us in Q one, you didn't pay us to Q four.
There's interest lost on that. So there's two times when
you can can get penalized, or two different ways from
a tax perspective. So if that happened to you last

(27:05):
year and you're learning about it now and you're thinking,
how can I avoid doing that in the future, there's
some things you can be aware of, right, So number one,
making sure that you have a sense of what you're
going to owe this year is a good idea, right
if you're especially if your income is changing. Some folks
they just have their taxes with held from their paycheck.
It's pretty simple and they don't worry about it too much.

(27:27):
But for others, maybe those who are self employed, those
whose income is variable throughout the year, if you're selling
a property or realizing some significant gain in an investment
account in one quarter or another. Rough conversions are a
time where you'd have a larger amount of income at
one time. Typically if you're converting a large amount, being
aware of what's going on in your taxes so that

(27:48):
if you're on trap or you should be making estimated payments,
you're you're aware of that. If you're working with a
tax prepair, that's usually the best place to go and say, hey,
do I need to make estimated payments? Oftentimes they can
even you know, print out the vouchers, will give you
the instructions to do so if because that's something you
do every year, so that's a great, great way to
start right. Also, making sure that you're you're penalty proofing yourself,

(28:10):
which is either by paying ninety percent of the tax
you owe in the current year. That can be a
little harder to predict, especially if you have you know,
investment games, capital gain, distribution, portfolio income, those can be
harder to predict as opposed to know your paycheck, which
you typically know what that's going to be so you
have they either paid ninety percent of your tax for
this year or one hundred percent of the tax you

(28:33):
owed last year. And with one important note there, if
your adjusted growth sycom last year was greater than one
hundred and fifty thousand dollars, then you must pay actually
one hundred and ten percent of last year's taxes to
be penalty proofed, or to meet the safe harbor requirements,
you're gonna pay it enough and not get penalized even
if you do end up owing a little bit. So
those are kind of the two ways the penalty proof

(28:54):
either guarantee that you're paying ninety percent of this year's
taxes as you know, according to the right great timing,
or one hundred to one hundred and ten percent, again
depending on your income, whether or not you're over under
that one hundred and fifty thousand dollars threshold. One hundred
percent or one hundred and ten percent of last year's taxes.
That's a little bit easier to guarantee because you know
what last year's taxes were, so you can calculate the

(29:16):
percentage there. Whereas if this year's are unpredictable for you,
that could be a little more difficult. So just something
to be aware of, you know, as you're thinking, especially
if you ended up owning especially penalties and you're saying,
I don't want to do that again. You could penalty
proof by my MIDI most safe harbor requirements and making
estimated payments if necessary. One other thing I'll mentionally about
estimated payments. You know, of course, as you know, they

(29:37):
have to be in the right time, according to when
the income was realized by the quarter, and there's different
dates on that which you could lokate pretty usely online.
But there are two types of withholdings that are assumed
to be without throughout the year, and those are IRA
or inherited IRA withholdings and payroll deductions. So one thing
you can do is you realize, oh, man, I made

(29:58):
a rough conversion back in Q one, here we are
inc two. I didn't make an estimated payment. You're worried
about penalties, but maybe you have an IRA. Maybe you're
taking a required minimum distribution from an IRA or here
at an IRA, you can increase the withholdings on that
distribution to cover it, and that is an IRA withholding
is assumed to have occurred throughout the year, so you're

(30:20):
not going to run into that timing issue by doing
an IRA withholding and stay with payroll deductions. So if
you at some point in the year say I'd like
to increase my payroll deductions that are go to taxes
and have the next year with health, you can do that.
And again it's gonna assume that it happened throughout the year,
so you're gonna protect yourself from a timing issue in
that case. So there's a few tax planning items there. Again,

(30:42):
I thought m'd be in front of top of mind
for a lot of people just coming off of your
tax season just a week or two ago. So some
thoughts there. Another question shifting gears a little bit here
that someone was talking to me about this week client,
and it's something that we hear a lot, so I
thought I want to talk about on the radio. I'm
sure there are some folks out there who are thinking
about it. It. But this angel question right, if you

(31:03):
have a mortgage or a home equity line, or even
a student loan or a car payment, do you pay
it off early? And typically the question is, you know,
maybe someone has investments that are enough to pay off
the debt. And they're wondering if they should do that.
And so that's been a lot of clients come to
us about. And it's especially you know now where they

(31:26):
spin more volatile in the market and people are seeing
oftentimes their portfolio down if they're invested in equities on
you know, significant level patulis are probably down for here,
and so thinking about, okay, why am I paying three,
four or five six percent of my debt and I'm
moving money in my investment. Should I just take it
out and you know, knock off this debt? Would that
be a better use of it. So it's a question

(31:47):
we get a lot and so, you know, while it
is customized to each person, I thought, you know, why
don't I just walk through a little bit of how
we kind of have that discussion and maybe it would
help somebody out there. So of course, the first question
we asked no surprise to anyone, I'm sure, but it is,
you know, what's the insist rate on the loan that
that you have or the debt that you have? You know,
and years ago, you know, just a few years ago

(32:08):
when rates were very low, most people had very little
rate debt on a lot of different things, whether there's
a car or even their more if they had gotten
it recently or refinanced, it could be you know, two
and a half three four percent. And at that level,
we're saying, you know, if not really prudent typically to
take money out of a diversified portfolio, if it's invested
at least sixty forty or more aggressively, you would expect

(32:31):
to earn more than five percent over the long term. Right,
if we look at a ten to fifteen year average,
you're gonna expect to earn more than that in a
sixty forty portfolio typically. So at that point, it doesn't
necessarily behoove you to pay off the debt, you know,
because you're you're paying us an interest and you're making
in the market, so you need to give up more
by taking a big withdrawal out of your investment accounts

(32:54):
to pay it off. So that's kind of the first
thing we look at. Now there is kind of that
gray area right where we say number one, we don't
know what the future holds for the markets. We can
only look at historical returns, so we look at how
you're invested. You might make an estimation based off of
historic or what you earn going forward, but especially if
the interest rate on the debt is close to do
five or six percent, well, it becomes a lot harder
to say how you're going to do in the long term,

(33:18):
especially depending on the way the portfolio is investedive it's
something more moderate. So there is an element that where
it's not a perfect science, right. Sometimes it's very obvious
someone has an aggressive portfolio and they have three percent debt,
I'm not advising them to pay that off nine times
out of ten. But then there are times where you
know it's a more moderate portfolio and they're paying five
percent on the debt, and it becomes a little bit

(33:39):
more difficult to give them the exact right, you know, answer,
it's don's cut and dry. There's also an element of
tax deductions, right, and I think that's something we don't
often think about when we think about paying off mortgage debt.
But you know, for someone who's paying morkeag interest, you
may be itemizing and getting some benefit from the tax deduction.
So it's worth looking at your situation and saying, am

(33:59):
I getting a time benefit and what exactly would be
going away if I were to pay this off and
not having that expense anymore. So that's something to think
about as well. That kind of factors into the calculation
for some books. Others don't itemize where you know, it's
not above the threshold where that were allows them to.
So it may not be a decision making variable for
those folks, but something to be thinking of. Then there's

(34:20):
this element of, you know, the psychological right or the
peace of mind factor. And I do talk to clients
who say, hey, I'm approaching retirement, I still have my mortgage,
you know how much left? And I don't like the
idea of having debt and retirement, right, some folks are
just really debt averse. And you know, whether that's right

(34:41):
or wrong, it's it's just how it is for some people.
And so I think that if that is your situation,
and you're saying, you know, like it kind of go
either way, it's not really a no brainer based on
the interest rate and my portfolio and so on, then
that piece of mind factor really might become the decision
making element for you. And so I think it worth saying,
you know, even though it's not something that we can

(35:03):
quantify necessarily, it is a really valuable and tangible thing.
And so it's worth thinking about when you're considering the
do I pay off my debt or do I, you know,
keep paying the monthly payments and keep my portfolio invest in.
The other important caveat that I'll say is just, uh,
you know, if you're thinking about paying it from cash,
Let's say you have a lot of cash on the side,

(35:25):
then it becomes a much more attractive proposition to pay
off the debt because that cash, unless it's in a
high Yeald savings account. And even then, you know, the
indust rate is not going to be as high as
it typically would at an investment you you don't have
as much of that interest rate spread to think about.
So just some thoughts there. We're gonna take a quick
break here, but we'll be right back with more. Let's

(35:45):
talk money on w g Y that for colleagues. Hey, everybody,

(36:16):
thanks for staying with me for that brief break. This
is Harmony Wagner joining you this rainy Saturday morning, and
thanks for staying with me. We've got a few minutes
left till the bottom of the hour, and I do
have an email question that I thought was very interesting.
This emailer asked that he decided to take his social
Security at age sixty two and reinvested in the stock market,
and his intention is to buy as many shares of Voo.

(36:40):
That's a Vanguard SAD five hundred ets. For anyone who's
wondering a very low cost way to buy a broad
market index, just buy as many shares as the cannings
month with the Social Security and he's wondering what we
think of this strategy put in to let it grow
for at least ten years. So it's an interesting proposition.
So for anyone who may not be aware of the

(37:01):
social security rules, you can take it as early as
age sixty two. You can delay until either your full
retirement age, which is somewhere between sixty six and sixty seven.
Most people probably now at sixty seven. They've you know,
incrementally increased the what they determine their full retirement age
over time, and now it's it's probably closer to sixty

(37:21):
seven for most people. And you can also delay even
further up until age seventy if you'd like. Now you
might be answering, why would I delay? If I can
start getting money, why would I will? They incentimize you
to delay by giving you about an eight percent increase
it's actually it's a little more complicated than that. It's
about seven percent increase each year between age sixty two

(37:43):
and full retirement age. So we'll say sixty two and
sixty seven. For most people, you get a seven percent
increase each year. That's on top of the cost of living.
So let's say Social Security had a three percent cost
of living, you're getting actually a ten percent increase. That's
seven plus the three. Once you at full retirement age,
you get another. You get eight percent increase between those
years until age seventy. At age seventy, there's no more

(38:04):
increase that you would not want to let delay beyond that.
So this person who's who's emailing said that he's going
to take it as early as possible at sixty two.
So it's a reduced benefit because he's taking it before
full time and age, but he's going to start investing
that benefit into the S and P five hundred and
the very low cost ETF. Now, you know, I just
looked down the break and saw what the average of

(38:26):
that fund is, and over the last I think it
was thirty years, the average compound return is ten point
three three percent for for that So in that case,
now let's assume that that ten point carries forward. Right,
We cannot guarantee that, but we'll assume for conversation's sake
that it does. In that case, then this caller in

(38:48):
my my guests would probably break slightly more than even.
The reason being the average security cost of living adjustment
is two point five percent, so we're going to add
that to the seven or eight percent, and you're right
around that ten percent threshold when you do it, So,
you know, it's certainly an interesting option to do. So.
I think there's, of course there's risk by being invested

(39:10):
in the stock market, where you can also argue that
it be risk by leaving it in the social security
program as well. Right, some folks are worried about the
longevity of that, and they're definitely are some concerns. So
if it's not addressed, it could become an issue down
the road. So, you know, I think it is an
interesting thing. I think in this case, you're just deciding
what risk is more agreeable to you. Right, I do
think that it would probably end up washing out pretty

(39:31):
even based on the cost of living and the increase
that you get for delaying being you know, right around
the same. But it's that risk of whether you want
to take the risk of leaving dollars in the social
security and a government trust or in the broad stock
market at large. So it's a very interesting proposition. I
don't see a lot of people doing it, so I

(39:53):
do think it's interesting, and the math is there that it's,
you know, possibly going to work out quite well. It
could be a little better, it could be a little bit,
but that's that's kind of my general thoughts. And thank
you for emailing, and I appreciate your question very much.
All right, switching gears a little bit. It might be
a good time to discuss r and ds, right, something
that we don't always think about in the middle of

(40:15):
the year, but it can be a good time to
be thinking about it. So, requiremental distributions, or r and
ds as they're often shortened to, are when you're required
to take a certain percentage out of an ira or
an inherited ira. For traditional iras, this is four to
one case pre tax money that you save throughout your career.

(40:36):
You're required to take a when you reach age seventy three,
or for folks born after the year nineteen fifty nine,
it's actually seventy five, So when I first started in
the industry, it was seventy and a half. So it
has gone up by a few years here and there
when they passed new legislation, and now it's seventy three
or seventy five again depending on your birth year, whether
it's before or after nineteen fifty nine. But essentially at

(40:57):
that point, the IRS is saying, hey, you you got
tax deduction for putting it in. This money's been growings,
tax defer it all these years. It's time to depay
the taxes on it. So they require you to take
out a percentage. It's a small percentage at first, but
as you get older, that percentage does go up that
you're required to take out each year, so IRA owners
are required to take one again at age seventy three

(41:18):
or seventy five. Inherited IRA owners, it becomes more complicated,
especially if you've inherited it from someone who was not
your spouse, if you inherited it from a parent or
a sibling. That is where the inherent diarray rules have
become actually quite complex in the last few years with
the Secure Act and the Secure Acts two point zero,
so there is a lot of nuance to it. But

(41:40):
generally speaking, if you inherited an IRA from someone who
wasn't your spouse, you're gonna have to distribute that IRA
within ten years after the person's passing. So you have
a clock that begins that you're gonna have to take
out that whole account. Now, if it's a small account,
not as big of a deal, but for large accounts, right,
it's not uncommon for us with our client to see

(42:00):
a million dollar IRA. Right, that's a very large amount
to have to take out in a ten year time
and every dollar that comes out is going to be
ordinary income to that beneficiary, so it can create some
you know, some tax considerations when that happens. The other
item is that if the person who passed away was
taking rm ds annually, so right, they were the original

(42:23):
IRA owner, they were of the age that they were
taking out their arm D annually, you have to take
an annual amount as well. And that annual amount is
pretty small, right, It's based off of life expectancy, so
it's a smaller percentage. And so for a lot of
people who inherit iras, they have a ten year clock.
If the original owner was taking rm ds, they also
have to take at least a small annual amount or

(42:44):
face a penalty. And they get faced with this choice, right,
do I take the amount I'm required to take annually,
which is a small amount, maybe it's five percent of
the account for example, or do I take a larger
amount to spread out these distributions over the ten years.
So in that case, you probably want to take a
tenth each year until it's drawn down. And that is

(43:06):
again a decision that is different for each person. You
have to kind of look not only at what's your
tax situation this year, but what do you expect for
the next ten years. Right, So you may say, okay,
I'm still working right now, but in two years, I'm
going to retire and at that point my income from
a tax perspective, it's really going to go down. So
in that case, maybe you just take the annual amount

(43:26):
that you're required to, that small amount from the inherited DIRA,
and then you wait and you start just stripping on
a large and larger sections once you're retired, because then
your tax bracket is lower. You're gonna pay ordinary income
on those larger chunks in at a lower rates, which
is to your benefit. Over overall, it could also be
the flip side, right, So you know, I work with
a client who is going to have really high income

(43:47):
in a few years, and so he's actually taking out
inher to diray sooner. He's saying, I'm gonna actually take
it out in the next five years before my income
shoots up, so that I can use up lower brackets now,
and I know I'm gonna be in a higher bracket
then it's it's unavoidable. So I'm gonna distribute this inherited
diarray now and try to really use up lower tax
brackets as much as I can. So there are a

(44:08):
lot of things to think about, and you know, a
lot of decisions to be made when you inherit an
IRA from you know, someone who's not your spouse, but
even as you know it's your maybe it's your first
year either with it inherited diarray or maybe you just
turned seventy three and you have to start taking distributions
from your IRA or four O one K. It's you know,
good to be thinking about it now and being strategic
about it, and you know, thinking about you know, what

(44:31):
are you gonna do with that money? Do you need
it to live off? Of are you just gonna reinvest it?
Are you gonna make you make charitable donations with it?
That's actually the way that you can take the money
out tax free. If you write it directly to a
charity out of the IRA, right through a check or
just a direct distribution to a charity as a donation,
you can actually take money out of your IRA totally
tax free. Right, So you put it in, you got

(44:52):
tax production, then it grew tax deferred. If you're making
a charitable donation, you might as well make it from
your IRA because you're gonna pay no tax on that.
You kind of turn the IRA into a triple tax
advantaged vehicle for you for your charitable donations. So there
are a lot of ways you can approach it. You know,
our philosophy is to be proactive as much as possible
for our clients by preparing for future rmds. Right, So

(45:13):
maybe you know you're sixty five right now and you're
not worried about it, Well, you might be able to
do some things in the next you know, ten years
before your rm D start that could really benefit you
down the road and in your airs as well. Right,
maybe something like roth conversions or maybe just prioritizing distributing
from your IRA as opposed to a taxable account or
a ROTH IRA. Right, those would be better tax for

(45:36):
you this year, but they might not optimize your tax
situation overall. Right, And that's really what we look at.
Our tag line is health, wealth for life, and so
when we talk to clients, we're not just thinking about
the year and now, right, we're thinking about their whole
life and actually even beyond that, to their heirs, the
people they care about, and trying to make it the
best situation possible for everybody. So that's something that we

(45:58):
think about when we're doing rm D planning. And oftentimes
it does look like taking some money out of the
IRA before you're forced to, right, because at that point
a lot of your flexibility is taken away. You're not
able anymore to take only what you want or to
do it strategically. And even ROTH conversions actually are limited.
Once you're of rm D age. Your RMD can't go

(46:18):
towards the ROTH conversion, So if you want to convert,
it has to be on top of your RMD, and
that does become a little bit more difficult to control
from a tax perspective, Right, Your income is going to
naturally be higher at that point, so being proactive is
usually the best approach. Oftentimes, some of the biggest strategic
planning years for clients in my experience, is after they
retire and before they're of rmd AH when it comes

(46:40):
to IRA management. There's just a lot that we can
do in that timeframe where we're very, very flexible. So
that's a good thing to do. So just wanted to
put on everybody's radar, right, if you're turning seventy three
this year and you have an IRA, you have to
start thinking about it sooner rather than later, so it's
a good time to make a plan, so you don't
miss that. By Bandy, Well, thank you so much for

(47:01):
tuning in for today's show. I really enjoyed speaking with
you and I hope you got something valuable or at
least interesting out of the conversation today. We'll be back
right here on WGY tomorrow at eight am with more
livestock money brought to you by Bouchet Financial Group, where
we help our clients prioritize their health, where we manage
their wealth for life. Stay safe and have a great weekend.