Let's Talk Money

June 08th, 2025. 

Episode Transcript

Speaker 1 (00:09):
Good morning, folks. My name is Martin Shields. I'm the
chief Wealth Advisor at Bouchet Financial Group, and I'm going
to be your host today for Let's Talk Money. I
like that nice, slow, easy going jazz to start a
program here. As always, it's great to be here with
you to answer any questions you may have regarding your

(00:30):
financial planning or investment management concerns, and I encourage you
to call in with those questions. 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 we also have an email that if you're too

(00:50):
shy to call in, you can email me a question
at ask Bouchet at Bouchet dot com that has asked
Bouchet at Buche dot com and Bouchet is spelled b
O U c h e y dot com. But I
hope you're not too shy to call in. As always,
always enjoyed talking to our listeners, and I always say,

(01:13):
if you have a question, you know you may have
a fellow listener that has that same question and you're
doing them a favor by asking them that question. So
you know, take this some sometime and give me a
call and we can chat. It's great to be here
with you. I'm looking out the window. We've got i
think more or less a sunny morning, a little fog.
We've had some that smoke from the Canadian wildfires coming

(01:36):
down to us this past week, which is amazing when
you see how far away those fires are. But hopefully
we will not have that this week. But it's great
to be here with you. It was great day yesterday
for the Belmont. I was went there with my family
and it was it was great. I think it seemed
like there was fewer people there this year than last year.

(01:57):
I think maybe the rain in the morning has scared
some folks. But great race and finished between journalism and sovereignty,
and sovereignty was able to pull it off just like
you did in the Kentucky Derby. But really well organized race.
Just a lot of fun. And you know, we'll have

(02:17):
it back here again next year as well, I guess,
and so looking forward to that. But as we look
into the markets, it was a good week this week,
back up over six thousand on the S and P
five hundred, which is always great to see. And we
had some labor numbers that came out on Friday as

(02:38):
well and continues to show that the labor markets and
the broad economy really in a good spot. So he
had one hundred and thirty nine thousand jobs that were
added versus the expectations of one hundred and twenty five thousand.
And what happens when these labor numbers come out two
days before, ADYP which is the payroll processing company, also

(03:03):
puts out their kind of forecast of what they're seeing,
and their numbers were not good. They acted like they
were seeing some real impact in lower labor numbers, but
that was not reflected in the numbers that came out Friday.
You have an unemployment rate that still at four point
two percent, So he's been in that range bound since

(03:26):
really May of last year. It was around four percent,
and we've been between four and four point two percent
for more than a year now, and that that's a
very healthy unemployment rate. So the economy continues to be
very strong. Now we'll see if any of the uncertainty
with the tariffs will start to come into play over

(03:47):
the next few months here. You know, really they just
kicked in over the last month, so that's that's what
we're going to see is if it starts to get
reflected at all in any of the consumer price index numbers,
the inflation numbers, and if it starts to impact the
labor numbers at all. But right now, the economy remains
very strong, and as an investor, that's a good thing.

(04:10):
You know, we've talked about this. There's a difference between
the markets and the economy. But in general, from a
long term perspective, if you can keep the economic data
in this range and keep inflation also in the range
where it is, it'd be nice to move it down
to the two percent target. Right now, inflation's more in

(04:31):
the mid two percent range, and we're going to get
mazed numbers for the consumer price index out this week,
and so hopefully they will continued to trend down to
that two percent number. But that might allow the Fed
to be able to reduce rates. You know, if we
get rates just even fifty basis points lower, that's a
half a percentage point lower. I think that would be

(04:54):
very beneficial for the markets and from an investment perspective.
So we'll wait and see what happens, but there is
the potential of that. But let's move on to uh
some financial planning topics. And you know, I always like
bringing up ideas and questions that we see from clients

(05:15):
or potential clients, just so that you're educated as to, uh,
you know, what you should be doing in your own
personal financial situation. 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

(05:35):
ask Bouchet at Bouchet dot com. And Bouche is felled
b O U C H E Y and it's dot com.
So one of the things I want to talk about
is if you're a listener out there right now, and
you're married, and you're moving into your seventies and hopefully
you're enjoying life and you know, really going out there

(05:57):
and spending some money. Now, those are you know, your
sixties and seventies, those are years to really spend some money.
But what we quite often find with our clients or
perspective clients is that there's usually one individual that kind
of is the lead, the main person in managing the
financials for the household. And it could be the wife,
it could be the husband, can vary. We do see

(06:20):
situations where you know, maybe split up a little bit.
Just excuse me. At a new client came on that
the wife, she calls herself, accounts payable because she pays
all the bill, and he accounts receivable because he makes
sure that all the money comes in, whether it's social
security or the pension or from the portfolio, is there
to fund accounts payable. But quite often, you know, these

(06:44):
tasks are divvied up between the husband and the wife.
And you know, the one thing I would tell you is,
as you're getting older, and you have to be aware
that what what are you going to do if something
happens to the person that manages the finances. And the
reason I bring this up is we just see this

(07:05):
where quite often there's a perspective client coming in where
it's the individual who hasn't been managing the finances is
now trying to take this on and it's very difficult
to be doing that just after you've lost the spouse.
Uh So, you know, if you're older, you're your seventies
or eighties or even late sixties, and this happens. You know,

(07:27):
quite often you could be married for you know, thirty
forty fifty years and to when when that happens you
lose that spouse, you know, you're just going to have
that emotional hole that you have to deal with, and
it's can be overwhelming from many people. And then you
have so many other duties even just anything within the
household that that other person used to handle, right and

(07:50):
now you're responsible for handling all those elements, including if
this is the case for the spouse that was not
the finan financial person, they have to now handle all
the financial decisions as well, any situations with the portfolios
or the accounts or taxes or anything like that, and
it can be really overwhelming. So I would really recommend

(08:13):
to any of our listeners out there that you know,
as you're getting older, you really start to consider what
is the game plan if this were to happen, And
you know, frankly, you know to the extent that if
you're starting to get to a point where you're okay
delegating that to an outside advisor, that you do that

(08:34):
sooner rather than later. Again, it's just very difficult for
that remaining spouse to have to, you know, build that
relationship make these decisions on their own when they're dealing
with the grief of losing the spouse. And even if
it's just to start that relationship. You know, for most
of our clients, we manage all their portfolio, we handle

(08:56):
you know, we want to know everything that's going on
in their financial situationuation so that we can make sure
we take care of them properly. But if you're not
ready for that, even if you just start building that relationship,
you know, start you know, having those discussions so you
know what firm or advisor you want to work with. UH.
And then the other element, too, is from a tax perspective.

(09:19):
You know, our firm has started to do more tax work,
and you know that that's also another big element. If
you're doing your own taxes and now your remaining spouse
has to make the decision as to what to do
with taxes, it can be overwhelming. So really just start
to go down the path, have that conversation with your spouse,

(09:39):
start to UH, you know, look out there and have
these discussions. You know. The other thing we do with
our clients is that you know, many of our clients
when they come on UH, they have been managing their
own portfolios for quite some time, and so there's a
number of different reasons why they may engage our services.
But you know, sometimes they still have that h to

(10:00):
invest and so what we do in those circumstances is
we manage the bulk of their money, is the bulk
of their portfolio for them, but we keep what we
call a sandbox account to the side, and all that
is is just a brokerage account. You know, we usually
recommend not keeping any more than five percent of their
total investable assets in that account. But it's just an

(10:21):
account where they can trade, they can buy securities. We
can even keep it on our platform so that we
can help them if they have an issue with it,
but we don't bill on that account, we don't trade
on that account, and that way they can you know,
kind of still you know, keep involved in the markets,
buy securities that they think are going to do well,

(10:42):
and then allow us to manage the bulk of that wealth.
And the other thing is, you know, it's from our perspective,
this is why when we meet with clients, we really
always want to meet with both spouses, even if there's
one spouse that is the lead. From a financial perspective
of having that connection with both spouses is so important

(11:04):
and I think in general, we do a very good
job of trying to meet both these individuals as where
they are right. So you may have one who's more
knowledgeable and wants to have a more in depth discussion,
and you may have one who's not in this. You know,
the financials and the investments are not really their interest
or forte, but we want to make sure they understand

(11:26):
it right. We're big believers in education. We always say
our best client is an educated client. If you're an
educated client, you know what's going on with the markets,
and when there's volatility, you know that that's part and
parcel being an investor in the markets. So we can
take a different approach for each spouse, and I think

(11:48):
we do a very good job in general of talking
in layman's terms so that you can understand it. And
no different than the radio program. When we meet with
our clients, there's no are silly question, There really is not.
I'm a big believer in that I personally am an
individual that I'm naturally curious. I ask a lot of questions.

(12:09):
I'm always interested in individuals and situations and that's how
you learn. You got to ask those questions, so you know,
really I'm a big also believer that you meet people
where they are right. You don't try to push them
to you. You go to where they are to get
them the knowledge they need to have. Let's go on

(12:30):
to a different topic. But again, if you have any questions,
you can give me a call at eight hundred eight
two five five nine four nine. Again that's eight hundred
eight two five five nine four nine, or email me
and ask Bouchet at Bouchet dot com. One of the
other things I want to talk about too when we
talk about these life changes is divorce. And you know

(12:53):
right now, unfortunately, I have a couple of situations where
clients are going through the divorce and again it's in
a it's an emotional roller coaster ride and it's just
you know something where you know, I think we are
firm does a great job of not only providing guidance
from a financial perspective, but just from an emotional perspective.

(13:14):
And what I'll tell you is two things that usually
come up in these situations. One is you're also going
to have usually one of these spouses who now is
responsible for their own financial situation, who wasn't the financial
lead before. So that can be overwhelming for that person,
and that's what we always make sure that we really

(13:35):
try to get make sure both spouses are reasonably knowledgeable
about the investments in the portfolio and kind of the
long term financial plan. But the other element is it's
a really good chance that your financial situation is going
to be different and frankly, it's probably going to be
a little tighter from a financial perspective, right because you know,
it makes sense you now used to have one household

(13:58):
that with you know, expenses for one household. Now you
have two households, and you know you've got to cover
those expenses with the same amount of assets and the
same amount of income. So you know, what I see
is many times a household never had a budget. They
just were able to make enough money, bring it in,
kind of spend money however they wanted, and still be

(14:21):
able to do a good job saving which which is great,
but after a divorce, uh, that is quite often not
the case. Situations are a little bit tighter financially and
really having the idea that you need to put a
budget in place to know where you're spending your dollars
to make sure that you're in a good spot as
you move forward. From a financial perspective, that you're not overspending,

(14:44):
that you're saving enough. It becomes really important. So I
would highly encourage you a couple of things. One, if
you're going through a divorce, if you don't have an advisor,
to go out and reach out to a feel only
financial advisor. It really makes that transition a lot easier
to you know, to appreciate that. You know things are

(15:04):
going to change in a lot of ways, but financially
they are and they could be a little bit tighter.
But if you have a budget, it really helps you
get an element of control over your life. And you
know that's what happens when you go through these life transitions.
You kind of lose that feeling of control and so
to be able to put it back in place by

(15:25):
having a budget can be very freeing. So I would
encourage you to do that. Let's move on to a
different topic again. If you have any questions, you can
reach me at eight hundred eight two five five nine
four nine or ask Bouchet at Bouchet dot com and
you can email me your question. One of the questions

(15:48):
that I've got recently is a very wealthy family they
are looking long term at a lot of different ways
what to do with their dollars. They're very philanthropic, and
they asked about different approaches to being able to put
moneys away for themselves but also future generations, to be

(16:09):
able to give to charities. And so the question became,
what is the difference between contributing to a donor advised fund,
which is basically a fund or an account that exists.
But when Charles Schwab or Fidelity or Vanguard, where you
make donations into that fund. It could be cash or
it could be highly appreciated securities, and then you make

(16:29):
donations to qualify five oh one c three charities. So
it's a great approach to be able to make contributions.
Maybe you don't want to make it to a specific
charity right now, you make it to the donor advice fund.
You get the charitable deduction, and the best way to
do that is with highly appreciated stock, and then you

(16:50):
can make distributions from there. You can have those dollars invested,
they can grow, there's no requirement for taking any distributions,
and they can grow over time and they can get
passed on to future generations and there's no tax impact
by that transfer to future generation. So our family has
one that we utilize. You know, I think it's a

(17:12):
great way. We have three teenagers. It's a great way
to kind of build this idea of helping others, whether
it's both through your time and your dollars and your resources,
and get them involved, get your kids involved with that
discussion or grandkids. And again, these dollars can go on
for generations to come if you have them invested properly

(17:32):
and you're giving at a level that is sustainable. So
you have that approach, which it can be a great one,
and this is the approach that most people take. Right
there's no administrative cost, there's no tax filings that need
to be done. Again, most you can do with Vanguard
Fidelity Charles Schwab very straightforward and easy to use. Now,

(17:55):
a foundation is a little more complicated. You're basically setting
up a nonprofit yourself. There's different requirements for the foundation
versus a nonprofit, but you're really setting that up that
in general you're gonna want to put probably more dollars
and have a larger plan in place. There's some pros

(18:16):
and cons of a foundation versus a donor advice fund.
High level. With a foundation, you're gonna have limitations on
what you can write off. So those contributions to a
private foundation are limited at thirty percent of your justice
gross income, whereas for a donor advice fund that's up

(18:36):
the sixty percent of your adjusted gross income. So again,
you still can use this in a way that you
get the full tax deduction for a foundation, especially if
you give over multiple years, but you have to be
aware of that. Now, with a foundation, you can you
have to contribute. I'm sorry, I have to donate at
least five percent of the funds every year, right, and

(18:57):
I just said to you. On a donor advice fund,
there's no requirement that you contribute in any given year.
So you know, that's great. If you want to grow
those funds in that don't advise fund, not make any
distributions or donations for any given years, that's that's fine.
You can do that. But with a foundation, you have
to give at least five percent out every year. And

(19:18):
now the upside with the foundation is you don't have
to make those donations to five oh one c three
qualified charities. If you see a family that is struggling
and you want to help them out, you can make
a donation to them, so you basically in that respect
running your own nonprofit. And the other element with a

(19:39):
foundation is that there's going to be tax filings, there's
certain requirements you're going to need to operate within, so
it's more complicated in that regard. But you can pay people, know,
your kids, your grandkids to run the foundation. Now there's
restrictions exactly how much that can be, but that can

(19:59):
be so again, the way to view it is if
you really want to be able to have more flexibility
as to where you give those dollars in general, if
you're going to be looking to give larger dollars, the
foundation can be a better approach. But for many people,
the donor advised fund approach it really works. It's very

(20:21):
simple and there's less administrative headaches that exist with that.
So if you have a question, you can always reach
out to our firm and we can chat. But you know,
just something we see more often as people's wealth grows.
I mean we talk about this all the time, you know,
as you're accumulating wealth these days. You know, before thirty

(20:43):
years ago, forty years ago, it was all about pensions, right,
you know, you basically work for a company and either
you know, you had a pension and that's what we're
covering it, or frankly, you just worked and you put
off your Social Security or just working and you live
with your family. I mean, that's what used to happen,
but now it's you know, this environment where you have

(21:05):
to take care of yourself. You have to be saving
those dollars. You have to be doing all the right
things to prepare yourself for retirement. But as you do that,
you're you know, saving those dollars, you're creating family wealth,
generational wealth that is going to live on past you,
and you really need to be thinking and making sure
that next generation is prepared to handle that wealth. If

(21:28):
they're not, I've talked about this before, it can be
very problematic to see that next generation get sizeable doubts
amounts of dollars and if they're not ready for it,
it's not pretty. They'll spend those dollars real quickly. And
again that's why when we meet with our clients, we're
always open to having conversations for that next generation. In

(21:51):
some cases they're middle schoolers, they're high schoolers, where we
just talk to them about investments. You know, we maybe
help them set up a rough account if they're starting
to work. We have a you know, maybe a five
to twenty nine plan that we're talking about. What the
purpose is. You know, having that knowledge and getting them
to save is invaluable. You know, I'll talk about with

(22:12):
my teenagers. Uh, they all have wroth accounts, and what
we do is we have them basically take their dollars.
They can spend a certain amount, they're going to save
another amount that maybe they use for you know, college
or down the road. And then there's also a particular
amount that we haven't put into the wroth. And you know,
you can put up to seven thousand dollars into a

(22:34):
wroth where it's going to grow tax free. So you
know they have to whatever they earn for that summer
job or your job, Uh, they can put that into
that wroth. So again, it's about generational wealth, making sure
that you're that next generation is in a good spot
to receive it. Now, I always tell clients that, you

(22:54):
know a couple of things. One is, you know, if
you're in your sixties and you're in your seventies, you know,
spend that month. Yeah, I see them still struggling to
not spend that money. And all I'm going to tell
them is, if you don't spend it, you know somebody
else will. And even if you know you have kids
or grandkids that are in a good spot financially, they
will still spend that money. So you might as well

(23:15):
enjoy it yourself. But it takes the right planning and
mindset to do that. You know, I see clients struggle
with wanting to spend money. They're so used to not
spending it that it takes that mindset change to get
them feeling okay that they can spend it. And you know,
you can't feel guilty about it. And you've got to
make sure that when you're preparing for retirement that you

(23:37):
put yourself out first. Well, folks, we're going to go
to a commercial break, but come back and join us
as we continue to take your questions. You're listening to
Let's Talk Money, brought to you by Bruchet Financial Group. Well,
we help our clients prioritize their health while we manage
their wealth for life. Come back and join us, folks.

(24:07):
Welcome back, folks. For those of you just joining us,
my name is Martin Shields. I'm the chief wealth Advisor
here at Bruchet Financial Group, and I'm your host today
for Let's Talk Money. I hope you're doing well on this.
I'm gonna say, sunny and warm summer morning. We're passing,
are they summer morning? And it's great to be here

(24:30):
with you as always, and I hope you have some
nice plans to get out and enjoy this day. I
think I'm gonna get out for a bike ride, you know,
I definitely. To me, biking, whether it's mountain biking or
road biking, is one of my good ways to clear
out my mind and stay in shape. And I don't
know if you have listened to the show. A few

(24:51):
years ago, I got a bicycling accident. Actually a Saratoga
County sheriff took a left hand turn and hit me.
And I'm laughing at it, but I wasn't a laughing
matter of what had happened. So I say this just
to make sure that whether you're on a motorcycle or
whether you're a bicycling that you're that you stay safe

(25:11):
out there. These days, when I do ride, I ride
on bike pass. I don't ride on the road anymore.
To me, that was a week of call to not
to do that, and I want to make sure that
I'm safe. So I'll be riding on the Zim Smith Trail,
which goes out of Boston, SPA great trail. Lots of
great trails around here, and you know, to me, that's

(25:32):
where you want to stay, to be nice and safe
and protect yourself. And lots of great mountain biking around here,
you know, up around Saratoga in the Glens Falls area,
some of the best trails in the country. Really. I mean,
it's just some great riding and you know there you
can still get hurt, but you can take a little
bit slower. And that's what I do when you're out riding.

(25:54):
I'm all about when I do any activity, I don't
care what it is. My only two requirements models are
don't get hurt and don't hurt anybody else. And if
that happens, then it's a success. Uh that's that's a success.
And if if I feel like I'm just not the
right mindset to go out and do something, you know,

(26:15):
maybe I'm feeling a little tired that day, I just
don't do it. And you know, as you get older,
you're you're okay with that. And you just don't want
to get injured because then it slows you up. So
let's go back to some of the topics that we
were discussing before. But if you have any questions, you
can reach me at eight hundred eight two five five

(26:37):
nine four nine. That's eight hundred eight two five five
nine four nine, or you can send me an email
at ask Bouche at bouche dot com. Uh, that's ask
Bouche at bouchet dot com. And you may be doing
your fellow listener a favor by asking that question. So
don't be afraid give me a call or shoot me

(26:57):
an email and we can chat or I can respond
onto your email. Let's talk about a topic. We have
a lot of the individuals that come on as clients
and they have iras, but they're not fifty nine and
a half, and you have to be fifty nine and
a half to take a distribution from an IRA without
paying a ten percent penalty, And so the question becomes,

(27:20):
how can they retire when they're not fifty nine and
a half. In particular, if they have a lot of
their dollars tied up into an IRA and there is
a distribution approach, it's called the seventy two T that's
based on where it comes out of IRS regulations, and
what it allows you to do is take a distribution

(27:41):
from an IRA and not pay that ten percent penalty. Now,
the requirement is you have to take substantially equal payments
for either five years or until you turn fifty nine
and a half, whichever is longer. So let's say you're
fifty one and fifty two and you are going to retire,
you're going to take distribution. You have to take it
until fifty nine and a half. So if you're fifty one,

(28:03):
that's another eight and a half years you have to
take that distribution. There's different calculators and approaches that are established. Basically,
you're going to be using an interest rate that is
out there. It's called the mid term financial rate, and
you've right now it's around four point two percent. You
utilize that rate, and there's many different calculators that you

(28:27):
can use. There's really three different approaches that depend on
you know, a few factors that will determine the amount
you distribute, but you can they're usually going to be
about the same. But it's a great way that if
you're not fifty nine and a half that if you

(28:48):
have sizeable enough assets that you can retire and take distributions,
now you're going to pay ordinary income tax on that distribution.
And the thing to remember is in New York State,
if you're fifty nine and a half half you take a
distribution from an IRA, you have up to twenty thousand
dollars deduction that you don't pay taxes on for that distribution.

(29:09):
But now if you're not fifty nine and a half,
you're going to pay taxes on that twenty thousand dollars.
You don't get that deduction amount. So it's just important
to remember. The other thing that is important to remember
is that if you're going to retire that young, and
if you're in good health, that you have a long
time that you have to make those dollars fast. Right,

(29:30):
So I mean, if you're fifty one, if you're married,
there's a good chance that one or both of you
are going to live into your nineties. So you're talking
about forty years that you're going to be retired. I mean,
you think about that, you're going to be retired longer
than your working career. It's just something to be aware,
and I always tell individuals that retire early that you know,

(29:52):
you really have to have a plan in place of
what you're going to do right. Life to have to
has to have meaning and value and just sitting around
watching TV it's not going to cut it. Whether you
go and you do some part time work, whether you volunteer,
you're out traveling a lot, or whatever that may be,

(30:12):
you've got to have a plan as to what those
next forty years are going to look like and how
you're going to engage yourself right, what's going to provide
meaning and value to your life. And it's interesting we
see this quite often with clients where they're an executive
or they have a business, and you know, when you're
in the middle of that, you're maybe enjoying it, but

(30:33):
you're working hard and you have this end goal in sight,
and you think when you get to that end goal,
which is you know, that liquidation event. So if it's
a small business owner, you sell that small business, that
now you have this pile of money and life's going
to be great, and you know it can't be very
good to the extent that you can go out and
do a lot of things now that you maybe didn't
have the time for or maybe even the dollars for

(30:56):
now that you've sold that business, or if any executive,
if you've had stock options or different things where you
can now spend time with a family or friends. But
we have to appreciate is what people don't always understand
is that that work. That that actually for many people,
you know, it's part of their self identity, and it

(31:17):
really you know, it may cause stress, but it also
provides meaning in life. And so when you don't have
that anymore, it's a change. It is it is an
absolute change. And you know, retire I've always said, I've
really never met anybody that says, boy, I don't like retirement.
Usually the comment I get it get is more frequently,
boy I wish I had done this sooner. I wish

(31:39):
I had a retired sooner. But with that said, there
is there are some changes. I always say this. You know,
when you're not working, you don't have that sense of
identity that you've been building over forty plus years. When
you're not working, you don't have that paycheck anymore. It
could be a little scary. Instead of accumulating assets and saving,
you are now utilizing your portfolio and drawing down on

(32:02):
it and that can be a real adjustment for many folks.
You know, you actually many people won't realize this, but
there's a social connections that you have through work. You know,
maybe these people aren't your best friends, maybe you're not
going out and doing things with them on the weekend,
but there's still a social connection that you have day
to day with many of your work colleagues, and that's

(32:24):
an adjustment to lose that. And then also if you're married,
you know, it's an adjustment for you know, maybe you
and or your spouse to be home together. You know,
that's you hear that quite often where one spouse has
maybe been staying at home and now the other one
retires in his home. It's an adjustment. You have to
at least appreciate that it's an adjustment. And I think

(32:46):
a lot of times in life, if you I always
talk about this expectations management. If you manage your expectations,
that usually leads to good outcomes. And that's where I
think people get themselves in trouble is maybe they have
expectations that are too high and they're disappointed about an outcome.

(33:07):
But if you manage those expectations and you're aware of
what in this case, retirement holds. Then when you go
into that, you're like, oh, okay, Marty talked about this.
You know, you talked about some of these changes with
retirement that they're not necessarily bad, but they're adjustments, right,
And I think a lot of times in life we
struggle with change. We we you know, we we we

(33:31):
really we think we were okay with change that were
you know, have the mindset that we're all embrace change.
But change can be difficult. And then you've got to
be aware that when you go into that change, you
know it can be there's an adjustment period and you've
got to take your time as you move through that.
Let's move on to a different topic. But again, if

(33:51):
you have any questions, feel free to give me a call.
You can reach me at eight hundred talk w GUI
that's eight hundred eight two five five nine four nine,
or you can email me at ask Bouche at bouche
dot com. And the other thing I would encourage you
to do is to go to our website, which is
Bouche dot com b O U C h EUI dot com.

(34:16):
Every week we put out a new blog and we
have all of our old webinars on that we have
our what we call our State of the Economy presentation.
We're basically it's a video of the full presentation that
we do for our clients. We have it in the
beginning of the year two dinners, one in Troy and
one in Saratoga, and then we did a lunch this
year in Saratoga at the Both the events were eighteen

(34:38):
sixty three Club at the Track at Saratoga and Franklin
Plaza down at Troy. And you know, this is where
we outline our thoughts on the markets in the economy
for the upcoming year. But there's always a lot of
great information on that on the blog and in the webinars,
and we'd usually do a webinar every month. But one

(35:00):
of the most recent blogs was by my colleague Paala
La Pietro. He is a wealth advisor here of the
firm and he's also a portfolio of strategist. He's on
our investment team, and he wrote about hedge equity and
it's also these investments are called defined outcome ETFs, so
it's an ETF it's trades on daily and in this

(35:25):
case it's usually we can have different holdings in there.
In this case, it's SP five hundred that attracts, but
it uses options to hedge on the downside to put
a floor on the downside, and that can vary anywhere.
That floor can be anywhere from protection at ten percent
down fifteen, twenty twenty five, so there's different levels of protection.

(35:46):
But the way it pays for that protection, because that
costs money through those options, is that puts a cap
on the upside. So usually the ones that we utilize
for our clients has a ten to fifteen percent floor.
What that means is that if the market starts going
down in general, you can feel a little bit of
a downdraft, but not much downdraft until the market gets

(36:07):
below that hedged amount. So let's say it's at ten percent,
that you're not going to feel much downdraft for the
market moves down until the market is down by more
than ten percent, so it's got to be down by
twelve or thirteen percent, and then it gets capped up
in the upside in this situation usually around eight or
nine percent, So you're going to participate in the market
upside up until it goes more than eight or nine

(36:31):
percent up. So we use this as an alternative investment.
So what that means is it's really it's definitely not
a bond. Now there are stocks in there, stocks, but
it's not going to have the same risk characteristics they
return characteristics as a straight stock ETF. So it's in
our alternative category and you know, quite often we use

(36:52):
it as a bond substitute, and it works really well
to the extent that you know it provides. Like the
last couple of years, where you know, the bomb market
was up maybe two or three percent, these positions were
up eight or nine percent. And on the flip side,
you know, when we hit the volatility like we did
in the spring, these are hedged on the downside, so

(37:15):
they have better protection than let's say stocks do. So
really this has been that we've been using these for
a number of years now and the fact that they
are completely liquid, we can trade them at any point,
and we actually have a strategy where as the market
goes up, we will sell these positions to buy into
a new one. They're issued every month to buy into

(37:35):
a new one that has a higher floor and a
higher ceiling. So it really works well for our clients.
The flip side is if the market goes down, we
can sell it and buy straight into the SP five hundred.
So you know, the defined outcome ETF might be only
down let's say five percent, where the market could be
down fifteen and we could sell that position and buy

(37:57):
into the market. So either way it works. Well, we're
gonna go the phone lines. We have Bill from Saratoga. Bill,
you there, Good morning, money, How are you good? How
are you doing good? Sir?

Speaker 2 (38:09):
Changing gears a little bit. I have a question if
you could explain the mechanics of a irrevocable medicare trust.

Speaker 1 (38:21):
Sure, I think I'm working with that, okay, and I
think you need medicaid, so it's the irrevocable Medicaid trust. Yeah, yeah, yeah,
you're right, Yeah, no, absolutely, yeah, that's okay. So yeah,
so where you use this bill is, uh, let's say
you're doing to stay planning and you want to protect

(38:41):
your assets to be able to go in a long
term care facility, uh and not have to spend down
your assets. So what you do is you're gonna move.
You can't move ir rays in there, ross or traditional arrays,
they got to stay separate. But you can put any
other asset like a house. You can put broken accounts
into that irrevocal trust. Now it's irrevolcal, but that means

(39:05):
is you've moved it into the trust, you no longer
own it. In most cases, you know, when individuals do this,
they have their kids or someone that they trust be
the trustee of that account, because it's important to realize
now they as trustees, it's their asset, so you really
have to have confidence that they're going to do the

(39:25):
right thing for you. And in most cases, you know
a child will do the right thing for their parents,
so they become the trustee and from the state's perspective,
after five years, there's a five year look back. But
after five years those those account, those assets are no
longer under your control, so they cannot be included in

(39:48):
the equation to cover long term care cost. Now you
can also set it up that you get income from
that account, so it's not like, you know, you can't
get anything f fit from that account, but it can
be very difficult to access those assets again, and if
you do, you can disrupt the trust. That five year

(40:08):
look back gets taken away. So you have to be
very okay that as you do this that those assets
are you know you're you're you're okay giving up control,
and that the person you're giving control if you feel
comfortable with now the one thing, there's two things other
things with these trust One is if they're written properly,

(40:29):
those assets can get pulled back into your state to
get a step up in cost bases. So let's just
say hypothetically you're putting in, you know, a million or
two million dollars of tax full of dollars into that
it's growing quite a bit, so you have these big gains.
You would rather not have your errors pay taxes on
those gains. If the document's written properly, it can get

(40:50):
pulled back in so they get a step up in
cost bass on those. And then also the thing to
remember that it's a little that you know, these launcher
care ifaces are businesses, so sometimes there can be limitations
of them taking you if you're going to cover those
costs with medicaid, So you have to least be a
little bit aware of that that sometimes I can be

(41:11):
a little problematic with this approach. Interesting, thank you so
much for your time. You got it, Bill, You take care.
Now we're going to continue with the phone lines. We
have jim from Henley. Jimmy, you're there, I'm here. How
you doing? What can I help you with?

Speaker 2 (41:29):
Well, what I've been doing is I've been looking and
been listening to Steve and your other colleagues, and they've
been talking about ETFs versus mutual funds. Now, my wife
and I are longtime investors, and we have many mutual
funds that are no lowed, low cost that we bought

(41:50):
maybe in the late seventies and through the eighties, Okay,
And what I'm wondering is if I can, if there's
one in the ordinary accounts, is there a magic way
that I can just convert a mutual fund to an
ETF without any tax consequences. And in my my iras,

(42:14):
what I'd like to be able to do is sell
them and then buy an ETF. And I'm wondering if
it's really worth it.

Speaker 1 (42:24):
Well, so let's see here. You know, let's talk about
the iras first. So in general, the irays usually less
of an issue, right to the extent that there's no
tax impact from selling it, so you can certainly sell
it and not be concerned about it. And you know,
it depends on you know, mutual funds are not bad

(42:45):
just in of themselves. It's just a rapper that is used.
From an investment perspective, the problem tends to be many
times they're actually managed, meaning that you're paying for a manager,
and quite often if you look, that manager is now
not outperforming the that you're paying them to outperform. That
you can get for a lot less. Right, So you
could buy the S and P five one hundred index

(43:07):
for you know, three basis points, or you can pay
an actively managed fund mutual fund something like, you know,
fifty basis points or seventy five basis points. But if
they're now performing it, then why pay them? Why do
not I just take the ETF for three basis points
and get that performance. So again, but you can have

(43:27):
you can have a mutual fund that has the S
and P five hundred in it. So it depends on
you know, the performance of these funds, what the cost,
and kind of what is your launcher goal with the portfolio.
Now with a tax account, this is where mutual funds
are more problematic because a mutual fund will distribute gains
to you usually in November and December, and you know

(43:48):
the crazy thing is that fund could be down for
the year. You could have just bought it in September
and have a loss in it, and they're going to
distribute against you. It's just the way that they're set up.
They're not very tax efficient. So you can sometimes these
fun families, if they have a identical fund it's an ETF,
they will allow you to convert it from a mutual

(44:09):
fund to an ETF. So what I would suggest to
you is that you see with each one of these funds,
if the fun family, if they have an ETF that
you can convert it to, and if you can, it's
going to be beneficial from a tax perspective. Then you're
not going to get those distributions sent to you every year,
which you know is really a negative from a tax perspective.

(44:30):
So I would give them a call and see if
that can be done. But otherwise, you know, you'd have
to sell us positions and create gains, so you have
to evaluate it could still be worth it, but you know,
and again also depends on performance. You know, if the
fund's doing well, you're like, I might keep it, but
you may look at it and go, you know what,
I'm paying three quarters of percent annually, I'm getting these

(44:52):
distributions sent out to me, and oh, by the way,
it's underperforming and in which case it might make sense
to sell it even if there's a tax impact.

Speaker 2 (45:00):
Okay, so there is a possibility of doing a just
a conversion that is not a taxable event, that's right.

Speaker 1 (45:08):
Depends on yeah, depends on the fun family and the
fund that you have.

Speaker 2 (45:13):
Okay, well, I think you made my day.

Speaker 1 (45:15):
Okay, good. I hope it works out for you.

Speaker 2 (45:18):
Thanks Marty, all.

Speaker 1 (45:19):
Right, take care, Jim. Yeah, great questions there. And just
to fall up on Jim's question, I mean that's why
we use ETFs really our portfolios. We have a few
individual stocks, but they're primarily ETFs, and you know, it's cost.
In general, ETFs are much lower cost. Our average portfolio
cost weighted average all in is around it's less than

(45:41):
twenty basis points, so that's one fifth one percent. And
many times actually manage mutual funds or you know, half
percent to one percent or more. And then performance you
look at, you know, the index fund or the index
for a particular aid class, it can quite often outperform
the active manager over the long term. And then certainly

(46:03):
from a tax efficiency efficiency perspective, you know it really
mutual funds are not tax efficient at all in taxble accounts.
I mean, it really is kind of mind boggling when
somebody has one and they're like, wait a second, I
just bought this in August and it's down for the year,
but yet I am getting a capital gains distribution. And

(46:26):
so it can be problematic because the other thing, you know,
it just got to be aware of it. It really
can throw you off from a tax perspective. You know,
many people are not aware of that, and then you
know they get these they get the tax documents and
see those games, and it throws them off from what
they are planning for their taxes. So you got to
be aware of it. But you can convert them and

(46:48):
we've seen that happen. And you know, if you look
at it, you know ets were started back in the
early nineties. The first one is Spy by State Street.
It is I don't think it's the largest one anymore.
It used to be the largest one, but now there's
something the neighborhood of four to five trillion dollars in
ETFs and it's just grown tremendously and for the right reasons. Again,

(47:12):
what we can all the different approaches I talk to
you about the defined outcome ETFs. There's so many different
approaches that you can have in the ETF that it
really is it's hard to argue that you shouldn't take
that approach because it really is so efficient from a
cost perspective, from an investment UH investment performance perspective, and

(47:32):
from our perspective, allows us to be very tactical UH
with a portfolio where we can buy and sell positions
very quickly and adjust the portfolios very quickly and easily. Well, folks,
it's been an hour being with you. As always, I've
appreciated hopefully you did too. You listen, you're listening to
Let's Talk Money, brought to you by a Bouchet financial group.

(47:55):
While we help our clients prioritize their health while we
manage their wealth for life. Folks, enjoy your day and
as I always say, take care of yourself and take
care of each other