Episode Transcript
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Speaker 1 (00:00):
Good morning, folks. My name is Martin Shields. I'm the
chief wealth Advisor at Bruschet Financial Group and not gonna
be your host stay for let's talk money. It's great
to be here with you on this gorgeous summer morning.
And boy, we this is what we live for right
in upstate New York. We live for these days. Yesterday
it was another gorgeous day, just absolutely perfect to be outside.
(00:23):
And you know I always say, everywhere in life they
can live in. It has its trade offs. It's some
things are good or bad, but Upstate New York summer
days it's just the best. So it's great to be
here with you to answer any questions you may have
regarding your financial planning or investment managing concerns. And I
encourage you to call in with those questions. You can
(00:44):
reach me at eight hundred Talk WI. That is eight
hundred eight two five five nine four nine. Once again
it is eight hundred eight two five five nine four nine.
And as I always say, there's no dumb, silly question
except for the one you don't ask. And you may
be doing your fellow listener a favor by asking the
(01:06):
question that they have, but maybe they're just too shy
to call in, so go ahead and give me a
call again. Finally, it is eight hundred eight two five
five nine four nine. So a lot to discuss today,
both with the markets. They just keep chugging higher, folks.
Hopefully you're you're fully invested. You didn't go to cash
when we had that market volatility in April. As we
(01:30):
always tell our clients, you know, volatility is short term.
Whether it's one day, one month, or even one year,
the market will move higher, and you don't want to
panic when those situations occur. And it's great to see
the market hitting all time highs again this week. And
you know, as we look at the data, it continues
(01:52):
to be good, both with the economic data and with
corporate earnings. And we always talk about it, corporate earnings
are what determine.
Speaker 2 (02:02):
The stock market, folks.
Speaker 1 (02:04):
That is both the current earnings and expectations on forward
earnings for the next six to twelve months. And as
companies are reporting, it continues to be very solid across
most areas and certainly technology. You know, like anything in life,
it's not an absolute statement, but in general, technology continues
(02:25):
to be very strong, and as you know, if you're
a listener. We're well overweight in our technology holdings. The
Nasdaq QQQ is up ten percent year to date after
a stellar year last year and the year prior. Just
this past five days it's up one point three percent,
and the S and P five hundred is up seven
point three percent year to date and in the past
(02:47):
five days is up about zero point sixty seven percent,
so just under three corners of percent. That's both those
are great returns in a five day period. So you know,
if you're an equity investor, you're very happy with things,
and you know right now we're in an environment it's
called a melt up. And what all that means is,
(03:10):
you know, after April, there was a lot of concerns
that were out there with the market. You know, how
are these tariffs going.
Speaker 2 (03:17):
To impact the economy and earnings?
Speaker 1 (03:21):
Basically we were in a bear market meeting the market
was down by more than twenty percent, and from then
the market has steadily moved higher to the point that
again that we're at all time highs. And what that
melt up is. You know what happens is many investors
who went to cash or holding cash in the sidelines,
they start kind of panicking that they have fomo fear
(03:43):
of missing out, so they start putting it back into
the market and in doing so, they drive the market higher.
And that's really what we're seeing a little bit right now,
is this foma or fear of missing out. But at
the end of the day, it does have to be
supported by earnings and earnings with them in general, that's
what we're seeing now. As always, there are some areas
(04:04):
that we're looking at it. I don't know to say
it with concerns, but just kind of watching certainly the
labor markets. You know, unemployment rates continues to be very strong.
You have decent wage growth, but nothing that is too excessive.
Inflation moved up a little bit for the past month,
and again one month doesn't really concern us too much.
(04:27):
It's really more about the trend and that's what we'll
be watching as we move forward. Here is what happens
as these tariffs really take hold. And you know, that's
where the challenges whether you're a small business that does
that buys anything internationally or sells it internationally, or for
a multinational corporation as we've talked about with some of
(04:49):
the uncertainties with the tariff market. Then you've got to
make decisions, and you know, it's hard to make those
decisions if you don't know exactly what the future holds.
And you know, many companies went out and they bought
a lot of supplies overseas the first quarter.
Speaker 2 (05:06):
Because they saw that these tariffs were going to come.
Speaker 1 (05:08):
In place, so that delayed any inflation impact by the tariffs.
And that was the case really, you know for April
and for May and for much of June. But you
know you're going to start seeing some of those tariffs
really come into place in July and August and September,
and again there's a big what if is to at
(05:31):
what level they're going to be at, and that's I
don't think anybody knows particular, maybe even Donald Trump, who's
driving the decisions on this, and it part of it
depends on what the negotiation holds with these countries.
Speaker 2 (05:44):
But if those tariffs.
Speaker 1 (05:46):
Do remain high, they can spark inflation. Now I've talked
about this before on a blog that I've put out there,
and you can read all my blogs through my LinkedIn page.
But you know, when it comes to there's really four
different approaches that can happen with prices. One is they
get passed on the consumer. That's certainly a distinct possibility
(06:08):
that all those increases and prices get passed on to
the consumer, so you'll see that in the inflation data.
The other is the importing firm or company can basically
take on those costs and that would impact their bottom line,
and where that would come into play is going to
impact corporate profits as we move forward. And then the
(06:29):
third option is that the supplier from those foreign countries
could reduce their price by the tear fromount. And then
the fourth option is some combination of any of those three. Right,
it could be a little bit that the producer in
those foreign countries reduces their price, that the importer in
(06:50):
the US basically takes a little bit of a hit
on their profit margin, and that finally they pass some
of that on to the consumer. And so that's what
we're going to be looking at to see how much
does this come into play with inflation for consumers.
Speaker 2 (07:06):
And you know, this.
Speaker 1 (07:07):
Is really where the Federal Reserve is just waiting as well,
because the thing to appreciate is, and this is what
we saw before back three years ago with inflation. It
is kind of a one time thing where the prices
go up because of the tariffs, but it can build
off of that from there, meaning that as companies import
goods and prices go up, that price increase can flow
(07:31):
to other areas both you know, workers requesting more in pay,
so you know, it can have a kind of a
secondary and tertiary effect on prices as well. So that's
why you see this kind of battle argument breaking out
between Donald Trump and Jerome Powell, who is the chair
of the Federal Reserve, is that you know, from Trump's perspective,
(07:54):
you know, rate should be lower, and so we can
make an argument in that regard. You have a good economy,
but there are some areas of weakness, and you have
inflation that in general has been trending lower. But again,
you know, you just saw that last month pop up
a little bit, and if you have that trend continuing,
that's where Jerome Powell is going to be taking his
(08:15):
time and making decisions. So with the Federal Reserve, they
have what's called a dual mandate, and that dual mandate
is to maximize employment and also to stabilize prices, which
means to limit inflation. So that's what they're looking at
is both those items. As I mentioned, employment continued to
(08:36):
be very good, so there's nothing really concerning on that
end right now, and inflation is good. But he wants
to make sure. Jay Paul wants to make sure before
he makes a decision that he feels very comfortable that
inflation is not going to spike. And I've talked about
this gentleman's name before, Art Burns. Most people will not
(08:57):
know who Art Burns is, but he was the Federal
Reserve Chair under President Nixon in the seventies. And you
know what happened in the seventies is that you had
higher inflation. And the part of the problem was that
Art Burns was impacted. He was influenced by Nixon, who
(09:17):
was also pushing for the Federal Reserve to lower rates,
and art Burns capitulated and actually lower rates under Nixon.
And what happened with that is it kept causing inflation
to spike. So they would start to get inflation under control,
and then Art Burns, the Federal Reserve Chair back in
the seventies, really kind of again capitulated to what Nixon
(09:39):
wanted and started to lower rates, and then it would
spike again. And so then they had to raise rates again,
and then as inflation came down, he got pressure to
actually lower rates and he did, and then it would
spike again. So it was all through the seventies they
had this kind of a situation, kind of stagflation, where
you have limited growth and higher inflation. And Jerome Poull,
(10:04):
you know, I think the important thing to remember is
the independence of the Federal Reserve is very important. In
any country that is a developed country that has a
developed economy, like the US, they have that separation between
their central bank and whoever is the prime minister or
(10:24):
president of that country. The countries that don't, like Turkey,
like Venezuela, that they basically have that combined in some respect,
that's where you have inflationary environments and it's not good.
So it is important they have the Federal Reserve as
a separate entity where they can make decisions that are
(10:45):
not based on politics. Now, you know what I would
say is from my perspective, I think it's safe that
they're not based on politics. Maybe the decisions aren't always
the right decisions, right, So just because they're independent have
access to a lot of data, doesn't mean that Drome
Powell and this team are going to make the right decisions.
They certainly did not get it right when they called
(11:08):
inflation transitory back in three or four years ago. It
wasn't transitory, and that's what we saw and they had
a race, race dramatically. But that independence is very important,
and it's important from a global perspective. You know, the
US dollar and the strength of the US economy is
based on trust, you know, and if you take a
(11:29):
step back in any given day and think about all
the things you do and all the transactions that occur,
and it is it's all based on trust. Right you
move money to venmo to you know, you basically put
things on it your charge card. All these transactions that
are all done electronically. Now, the reason everybody's able to
(11:51):
do them is because you trust in the systems that
allow it to happen. If for whatever reason, that trust
starts to get eroded, you got a real problem. And
that's where it's you know you're seeing that right now,
is that trust does exist. So if you can continue
to have that trust, then things are good. But you've
got to have that separation of you know, where we
(12:14):
stand with the separation of the Federal Reserve and with
the President and those decisions, and that trust is just
very important as to how we operate.
Speaker 2 (12:26):
So we'll see exactly what he does.
Speaker 1 (12:29):
You know, I think I was listening to one commentator
talk and I actually like this idea. They would say
either all or nothing when it comes to rate changes.
And all that means is, if there's gonna be rate changes,
it's going to occur because things are very poor and
weak in the economy, so there could be multiple rate changes.
If things continue reasonably strong and if there's any element
(12:53):
of inflation, the Federal Reserve is not going to cut rates,
and that's the right thing to do. I mean, as
much as I would like to have rates lower for
and I think anybody would you know right now where
rates are, you're seeing kind of an equilibrium in the economy.
You know, certainly in the Caper region. We know with
our clients houses are selling. If you're going out buying
(13:14):
a house, it's competitive.
Speaker 2 (13:16):
Now.
Speaker 1 (13:16):
Some real estate markets around the country can vary a
little bit, but in general they're holding up pretty well
with the higher interest rates. I think the other thing
that's important to remember, which is the Federal Reserve only
controls what's called the federal funds rate. That's the short
term rate. It's the overnight rate that banks lend money
to one another.
Speaker 2 (13:35):
Right, they don't.
Speaker 1 (13:36):
Control the rest of the yield curve. And the rest
of the yield curve is you know, a six month
T bill, one year T bill, a ten year treasury bill,
you know the thirty year mortgage market. The feder Reserve
does not control those rates. That's controlled by the market. Well,
you know, again, they can influence it based on what
they do with the federal funds rate. But if there
(13:59):
was a situation where the Federal Reserve and its separation
from politics was not clear, then you know, you see
this even as there's threat of power being fired, that
what happens is those rates based on the market, not
based on the Federal Reserve. But it could actually be
a situation if the Fed start cutting rates that the
(14:22):
long term rates could actually increase. And that could happen
if there's either concerns over inflation long term or there's
concerns over that separation between the Federal Reserve and politics.
So again, to me, these are amazing things to watch out.
We'll see how they play out. But that separation is
extremely important. And again from my perspective, I do feel
(14:45):
like rates although they're high versus what we're used to,
but from a historical perspective, they're really not too high
by any means. And you know, in general, I think
there's an equilibrium that exists out there with rates and
the economy. So we'll see how that goes. Let's move
on to a different topic. If you have any questions, though,
(15:06):
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. Let's move on to a
different discussion. And you know what I want to talk
about is, uh, you know, individuals as they get older. Uh,
(15:28):
you know, whether it's your parents or spouses or whoever.
Maybe you're taking care of somebody, a few things that
you need to be aware of as that's you're moving
down that path. And you know, we talk to our
clients about this all the time. You know, one of
the first things you can do is, you know, as
you get older, Let's say you're married and you're the
one who manages the finances the portfolio for your spouse
(15:52):
and they're not really that much into managing the portfolios
or any of the finance elements. And we see this
with clients. It could be the husband, it could be
the wife.
Speaker 2 (16:01):
It varies.
Speaker 1 (16:03):
But what I really would suggest is, as you get older,
really start to consider, okay, what happens if you're not
in the picture. And you know, we see this so
often with either you know, current clients of ours or
with clients that are new clients that are coming in.
It is so important to have that lined up, that
you have a plan that says, okay, if I'm not
(16:23):
in the picture, and you know, that could happen over
a year period, six month period at overnight, right. You
don't know as you get older when that could happen.
But you've got to make sure that your remaining spouse
is in a good spot because you know, we've seen
it where a prospective client comes in and they they
are you know, the spouse that was managing everything, had
(16:45):
accounts everywhere, and so now only is that remaining spouse
trying to make financial decisions, but they're also mourning the
death of that spouse. And you think about it too.
With a household. You may not realize it, but there's
a vision of labor that exists, meaning that you know
you're as a husband and wife, you each cover a
(17:05):
lot of things that go on in a household. And
so now that remaining spouse is responsible for everything all
at once, and I just see it as being overwhelming.
When a spouse is trying to understand what's going out
from a financial perspective, and the spouse that died handled
all those things, it could be really challenging for that spouse.
(17:27):
So I would really suggest that one sooner rather later,
you work with a fiduciary investment fiduciary. It doesn't mean
you can't manage some of the money still. You know,
we have situations where we keep what up called sandbox
account available for that individual that was managing the money.
That they want to buy something, they can go ahead
(17:48):
and do that. And so it's not as though you
prevent you from making those investments at some point. But
in general, the bulk of your investments you turn over
to a fiducial, you a wealth manager that now, if
something were to happen, you know your spouse knows exactly
who they're dealing with. They get to know that team,
(18:09):
and frankly, there's an element I see this with clients too,
where you know, there's an emotional and psychological stress of
managing a portfolio, managing all the decisions with that that
exists as you get older. It's not great, and it
doesn't mean again that you can't have your fun by
buying some stocks, but just the overall stress of managing
(18:31):
a multimillion dollar portfolio can't be problematic. The other element
is consolidating with one financial custodium. That is really important,
you know. I hear people talk about this idea of
diversifying with financial custodians, and the reality is, if you're
dealing with one of the big guys, whether it's Vanguard
or Schwab or Fidelity, any of these big financial custodians,
(18:56):
you don't really get value by diversifying between them, right,
you know, always make the example. State Street is a
financial custodium for banks, and they've been around since seventeen sixty.
I think these other financial custodians will be around long
after we're not here. They basically make fractions of fractions
(19:18):
of pennies on the dollar. They're going to do all
the right things to make sure they're in a good
financial strait. And oh, by the way, if whatever unforeseen reasons,
something would happen to them. Your investments are not at risk, right,
It's not like a bank that's using your dollars to
lend out to people to buy things. That's not the
(19:40):
case with a financial custodium like Schwab or Fidelity.
Speaker 2 (19:45):
So I would really encourage you to.
Speaker 1 (19:47):
Consolidate all your accounts under one financial custodian. It's going
to make your life a lot easier. It's going to
make your spouse's life a lot easier if something were
to happen to you. The other thing to go through
is on any of your bank accounts, not only should
you be joint with your spouse, I mean you can
(20:07):
have still have your own accounts if that's important many
for many spouses, that is, you can still have your
own accounts. But I would always put a TOD, a
transfer on death which is basically a beneficiary on those
accounts that if something were to happen, it doesn't go
to have to go through probate, which is the court system.
It can go right to that whoever's listed as the
(20:28):
beneficiary as TOD, So that makes life that much easier.
The other thing is, if let's say one spouse is passed.
I would recommend if there's a child that you trust
and the child probably in their twenties, thirties, forties, or fifties,
that you put them on is joint with you with
that bank account. That way, again, if something were to happen,
(20:52):
that person could come in and write checks, access cash.
It just makes life a lot easier. Now, there's important
thing to highlight here when we're talking about putting it
on this joint, there's really two different ways.
Speaker 2 (21:06):
In New York State, it's what's.
Speaker 1 (21:07):
Called joint with rights of survivorship or joints with tendency
in common. In general, I would recommend joints with rights
and survivorship because it's just going to make that transfer
a lot easier to the other joint owner if something
would happen. And the other thing is you can't put
a TOD transfer on death or beneficiaries on a joint
(21:30):
with tennanc in common. It has to be a rights
with a survivorship, So again to help remove things from
going through probate, if you're going to put it in
a joint account, make sure it's a joint with rights
of survivorship. You can put a TOD on it transfer
on death, and it's just going to make your life
a lot easier. The other thing is with when it
(21:53):
comes to investment accounts in general. You know, with your
spouse you can put it as joint, but not to
put it as joint with a son or daughter or
a grandchild, because that's going to remove the step up
and cost basis at your day of death. So it's
important again to have those with TOD transfer on death,
(22:13):
on those with iras life insurance policies, make sure that
they're updated to reflect the correct beneficiaries. But on an
investment account, and we're not talking about a spouse, but
we're talking about a child, not to put them as
joint with that. But the other things to make sure
you have in place are power of attorney both financial
(22:36):
and power of attorney for healthcare. Those two are extremely
important that you have in place. It's going to make
situations a lot easier when decisions need to be made.
And I would encourage you to have those discussions with
your spouse and with your kids or grandkids or whoever
else is going to be making these decisions is to
(22:57):
what you want to be doing if something were to happen.
The more you have these conversations with people, the better
off you are. You're just in a much better spot
and your life's going to be a lot easier with
At some point you're going to have to make a decision,
and it just it's good to start having these conversations now.
You know, where I see problems is again to put
(23:20):
your head in the sand, to not be aware of it.
That's where it gets to be problematic. And you know,
you're just not doing yourself your spouse any favor by
doing that.
Speaker 2 (23:30):
So just things to be aware.
Speaker 1 (23:31):
Of and then you know, finally with that, you know,
I always encourage spouses to have real conversations with This
is also with the kids about where do you want
what charities do you want taken care of if you're
not there, if you have charitable interest, you know, what
does your funeral look like? All these things can be
difficult to have these conversations, but you're really much better
(23:54):
off by having them now while you're in good health
versus waiting too long, because that's where things get more problematic.
And here's the thing is, if you want things done
a certain way, you might as well speak up now
and have those conversations.
Speaker 2 (24:08):
Well, folks, we're gonna.
Speaker 1 (24:09):
Go to commercial break, but come back and join us
as we take your questions. You'll listen to Let's Talk Money,
brought to you by Bouchet Finance Group. Well, we help
our clients prioritize their health while we manage their wealth
for life. Well, welcome back, folks. My name is Martin Shields.
(24:31):
I'm the chief Wealth Advisor at Bouchet Finance Group, and
I'm your host today for Let's Talk Money. If you
have any questions regarding your financial planning or investment management concerns,
I encourage you to call in with those questions. You
can reach me at eight hundred eight two five five
nine four nine. That's eight hundred eight two five five
(24:53):
nine four nine. And as I always say, there's no
domer silly question except for the way you don't ask.
Speaker 2 (24:59):
But if you have any questions, call in.
Speaker 1 (25:01):
But before you do, let's talk about some of the
topics that I think are important for you to be
aware of. One thing, I want to talk about wroth
conversions and contributions, and I just want to highlight something
you need to be aware of for either of those.
Speaker 2 (25:16):
So with a wroth contribution.
Speaker 1 (25:19):
I really always encourage individuals that are in lower income
brackets kind of starting their careers to be able to
contribute to rows. In particular, if you have any teenagers
who are starting to work and have W two income,
they really should be opening up a WROTH. They can
contribute up to seven thousand dollars or whatever the amount
(25:39):
they earned that year, whichever is higher and I'm sorry
whichever is lower. So if they earn eight thousand, they
can only contribute seven thousand. If they only earn four thousand,
that they can contribute four thousand dollars. So that's a
great way to put dollars in. And the thing is too,
which is they can access the principal amount at any point.
(26:03):
So when you put those dollars in, let's say somewhere
down the road they need to access that money, they
can access the principle at any point, and with the earnings,
they can access tax free ten thousand dollars for a
home purchase. So it's actually a great way to save
for a home as well. You get that ten thousand
dollars for a first time home purchase with a WROTH.
(26:26):
The one thing I want to highlight though is with
a wroth conversion, you cannot access that converted part for
at least five years, which makes sense, right, So you
think about it. You do a wroth conversion, that means
you're taking traditional and taking a traditional array, you're paying
taxes on those dollars as you convert it, and now
(26:48):
it's in a wroth, it's going to grow tax free.
It would not make sense that you could immediately access
those dollars without a ten percent penalty. Otherwise people would
be doing that all the time. So you have to
weigh at least five years after the wroth conversion to
be accessed to be able to access the principle. Now
to access the growth, you need to be fifty nine
(27:09):
and a half to access the growth on that without
the ten percent penalty. But again, to access the principle
on a wroth conversion, you've got to wait five years
after the conversion, unlike a wroth contribution that you can
access at any point. So just want to highlight that
to our listeners. Again, in general, I would really encourage
(27:30):
any of you younger individuals, lower earning individuals to be
contributing to your wroth, whether it's an individual wroth or
whether it's a wroth form, and K that's most form,
and K plans have a wroth option. By twenty twenty six,
they will pretty much all have a wroth option. And
(27:51):
it's just a great way to put those dollars in.
You put them in and they grow tax free, and
then as you start earning more then in those years
let's say your mid forties, mid fifties, where you have
much higher income coming in maybe between you and your spouse,
then you really want to load up on putting in
the pre tax dollars at that point. So that's the
(28:14):
strategies to take to be beneficial in that regard. The
other thing I want to highlight is something we just
saw with a client and actually was one of their
children in this situation. Four fifty seven plans. They're a
great option. They're kind of like a for those who
don't know, they're kind of like a four to one
K four to three B that'll allow you to contribute
(28:36):
dollars through your employer, and you can actually do that
in conjunction with contributing to a four to three B. Now,
in general, a four to three I'm sorry, forty seventh
plan is only available through state entities or through nonprofit
organizations like hospitals. So most places don't have a four
(28:57):
to fifty seven plan. But there's a things I want
to highlight. One is, if you have a fourfty seven
planned with the state, you can move that account to
an IRA whenever you leave that organization, right so it
rolls right into IRA, no tax impact.
Speaker 2 (29:14):
It's all good.
Speaker 1 (29:16):
If you're with a nonprofit organization, in particular to say
or the hospital that's where we mostly see them. With
that nonprofit organization, you cannot roll that four fifty seven
account into an IRA. It has to stay with that
organization until you start taking distributions. Now, the important thing
(29:36):
to remember is you need to make a declaration within
either sixty to ninety days of you leaving that organization
is to what you want to do with that account.
And in general, what you want to do is to
say I want to start taking distributions. You have to
start taking it by RMDH, which is seventy three, so
you can't delay past then. But in general, what I
(29:59):
recommend is to delay until you're seventy or seventy three
when you're retired and you want to start taking distributions
from that account to fund your retirement. Now, there's a
couple important things to know. One is, with a four
to fifty seventh plan, it is at risk that if
that entity, that hospital were to go to bankruptcy, that
(30:22):
it is there's a possibility that those dollars could be
at risk through that bankruptcy proceedings. Now, I think it's
pretty rare under more circumstances that those dollars could actually
get forfeited, but you have to at least be aware
of that that it's not an impossibility. That's unlike a
four one K plan where those dollars are never at
(30:42):
risk for bankruptcy. With an organization a four fifty seventh plan,
they are, so you have to be aware of that.
And then the other thing is if you do not
make a declaration of what you want to have done
with those dollars coming out of a four to fifty
seven plan with a nonprofit it they're going to get
distributed to you and it's going to be a taxable event.
Speaker 2 (31:04):
So that's extremely important.
Speaker 1 (31:06):
Right with a state, you can roll it right to
an IRA, So not a problem with a state four
fifty seven plan, but with a nonprofit four to fifty
seven plan. If you leave and you don't make a
declaration within sixty to ninety days of you leaving, it
will be a taxable event. And so you think about that,
you have let's say one hundred and fifty two hundred
thousand and three hundree thousand dollars in a four forty
(31:27):
seventh plan, you've been doing really well with it, and
you screw up and you don't make that declaration within
sixty to ninety days, you're going to have a distribution
of two to three hundred thousand dollars tax ordinary income,
not long term capital gains, ordinary income.
Speaker 2 (31:43):
So extremely important.
Speaker 1 (31:45):
That you are aware that if you leave a nonprofit
organization where it has we have a four forty seven plan.
And again, really what you're gonna want to do is
you're gonna want to delay until you are what you
think is going to be a retirement age. Now, with
ana those plans, you have the opportunity to change it once,
meaning that if you let's say, you say I'm going
to take it at age seventy two, and as time
(32:06):
goes on you realize, hey, you know what, I want
to take it earlier.
Speaker 2 (32:08):
I want to take it at sixty.
Speaker 1 (32:09):
Seven you can change it one time and only one time,
and you could either take it in a lumpsum distribution
or take it out over a ten year period. So
there are different ways you can take it. But you know, again,
this is where there's so much complexity in today's financial
situations for individuals, where it's so important to have the
right tax advisor and the right financial advisor. And that's
(32:34):
moves on to the next topic, which is the OH
BBA see oh B B B A uh. That's the
Beautiful Bill Act, which is the tax bill that was passed.
So I want to talk about that in a few
highlights of that, but if you have any questions, you
can reach me at eight hundred eight two five five
(32:57):
nine four nine. That's eight hundred eight two five five
nine four nine. So the O B B B A
you know that came out and was passed a lot
with that, so I'm not going to unpack it all
right here, but two things. One is when you're meeting
with your tax advisor and for our clients, because we
(33:19):
have that expertise in house in general, they're talking to
us as their investment and wealth fiduciary.
Speaker 2 (33:26):
We're talking to.
Speaker 1 (33:27):
Us about this as well, but you know, you really
should be having a conversation to see where does this
apply to you.
Speaker 2 (33:34):
Now, the thing to remember is a couple things.
Speaker 1 (33:36):
A lot of these elements that are past are temporary,
meaning that they expire at the end of twenty eight,
so you have to kind of be aware of that.
Now exactly what happens in twenty nine, we will see
a bulk of Really what was passed was the extension
of the twenty seventeen tax cuts. That was the primary
(33:58):
thing that was passed, but there are a lot of
other nuances that were passed. So I would be having
a conversation with your tax advisor on any one of
these to see how they apply. Because the other thing
is there's a lot of areas where there's income phase outs, right,
so you know, whether you're in retirement or not, you know,
(34:19):
a lot of these deductions are phased out as your
income goes higher. Now a few that I want to highlight.
One I want to highlight is I actually don't think
it's something that most people want to take advantage of,
and that's called the Trump Well, it's a new investment
accounts for dependents, the Trump accounts. The thing you have
to appreciate with these accounts, Basically what they are set
(34:40):
up is that for children that you would basically put
money in there for you know, basically home purchases or
something down the road, even retirement for kids or grandkids.
And from December or twenty five onto December twenty eight,
(35:01):
for every child born in that period, if you open
an account how one of these accounts, you'll get one
thousand dollars that will get put in there for free
by the federal government. So in that regard, it's only
one per child, So it's almost a no brainer to
open up if you're having a kid during that time period,
to open it up and get your thousand dollars, that's
kind of a no brainer. But you're able to put
(35:24):
it up to five thousand dollars annually into these accounts.
But really the fact of matter is it's not a
great investment. And so if you were to ask me, hey,
should I put five thousand dollars into a five to
twenty nine plan I think my kid or grandkid might
be going to college? Or should I put five to
twenty Should I put five thousand into one of these accounts,
or even five thousand dollars into what's called the UTMA account,
(35:45):
which is just a taxable brokeure account for you know,
a child, a grandchild. In general, I'm going to say
either a five to twenty nine plan or an up
my account. The up my account, it's going to vary
a little bit. But you know the problem with these
new accounts, Trump accounts it has.
Speaker 3 (36:04):
If you want to learn more about Bouchet Financial Group,
visit their website Bouche dot com. That's b O U
c h e y dot com. Sign up for their blog,
which is updated every week Stephenbouche dot com. Follow them
on Twitter at Bouchet Group, Like them on Facebook. The
phone lines are open eight hundred talk WGY. That's eight
(36:24):
hundred eight two five five nine four nine. Here is
Stephen Bouche.
Speaker 1 (36:32):
Hello, folks. Sure about that. A little bit of a
technical difficulties, but we're back again, folks. 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. As we have about
ten minutes left, I want to go into a few
more topics, but again, if you have any more questions,
(36:54):
feel free to give me a call. One of the
things I want to talk about is just that right
now we're actually hiring as a firm. Uh. You know,
we've talked about us. We've grown a lot over the
number of years, and you know we do that. We
grow in part because we just always do the right
thing for our clients and that just feeds on itself. Right,
that's a good way to do business.
Speaker 2 (37:15):
Uh.
Speaker 1 (37:16):
You know, you know yourself that if you've got a business,
you deal with whatever area that is, and if they
do a great job, well, you know, you tend to
talk about them and whether it's a restaurant or a
hotel or whatever. And you know, fortunately that's been the
way with us with our firm. We've grown tremendously over
the years. And that's in part because our clients refer
(37:37):
us to other colleagues or to relatives. And you know,
from my perspective, you know, it just requires us to
do the right thing, make sure we take care of
our clients, whether it's from an investment perspective, financial planning perspective,
whatever we need to do. And then you know, a
big element of that is worth fiduciary. And we've talked
(37:59):
about this in gen role. All that means is we're
going to put our clients interests first. And when we
hire people, we want them to put our clients interest first,
and we also want them to put our team members first.
And you know what happens we have an environment like
that where you put others first, whether it's your our
(38:19):
clients and or your team members. You've got to have
people who are smart, who are hard working, and who
are humble to take on that role. And you know,
that's what we have, and you know, we make sure
we take care of our team members when they do that.
It's just this great environment that kind of feeds on itself.
And you know, I think as we grow, I've been
(38:40):
with the firm now for thirteen years, it only continues
to get better with the people we have. They're they're smarter,
they're hardworking, all these things that add more value to
our clients. But we're in the process now of bringing
on a new advisor, junior advisor. We're in the process
of looking for a client service person as well as
we continue to grow that team. And you know what's
(39:01):
interesting is you go through this process, you're talking with
a lot of people, you're just even doing research as
to what is out there with other positions, and it's
always enlightening to me, a little bit sometimes disheartening perhaps,
but enlightening to me as to how other organizations operate.
And what I mean by that is, you know, as
we get some of the younger folks, they're coming from
(39:23):
some of the bigger firms, whether you know some of
the bigger financial custodians, you know Chuave Fidelity, whoever that
may be, from some of the bigger UH insurance companies, acts,
the Northwestern Equitable and just even bigger companies, these publicly
traded companies. And when you understand what how they these
(39:45):
firms operate in particularly from a compensation perspective, it really
it kind of is mind boggling as to why they
would operate this way and not take this a fiduciary approach.
And I'm not gonna necessarily name names, but there was
one insurance company that has sixty advisors, that is six
zero advisors in the Campal region and they're all out selling.
(40:09):
And this is where the young guy was out selling
for them, and he describes the environment as a cutthroatn
environment where you know, he had some good folks and
colleagues and mentors, but in general, the environment in the
firm was a sales organization where he had to literally
negotiate his commissions with a senior advisor because he couldn't
(40:30):
bring the clients on himself. And it's just amazing that
that still exists. I don't even think it does, but
it does still exist. Again, this firm has sixty advisors
in the Canperal region out there selling in this way
where they're literally it almost talks about them squabbling over
commissions and how to split them, and you know, it
(40:52):
just drives the wrong behavior. And also, you know, as
I'm looking at these different positions there out there in
our industry, you know, I came across one where the
compensation for an advisor. The description was about six pages,
and it was six pages breaking down all the different
ways you get compensated. And really what that meant was
(41:13):
if you you know push product ABC, or you know
this other product and put this add on to that
that that's in general, how you get compensated. And I'm
a big believer. I talk about the show all the time,
which is keeping life simple. Well, I don't care it's
your personal life or professional life or whatever. Keeping things simple,
(41:33):
that's where the value is. The more you can keep
things simple, you can actually be more effective when you
make things extra complicated, and that's what was happening with
this big financial firm. You drive the wrong behavior because
compensation does drive behavior. It is is clear as clear
(41:53):
it can be. If you're in business, you know this,
and you know for us, our goal with our team
members is to make sure that that they are taking
care of our clients and that they're taking care of
each other. And when we have team members that do that,
and I'll tell you to a t that that's what
all of our team members do that. It is just
it's pure success for our clients, for team members, for
(42:14):
everybody involved. And when you make all these kind of
things complicated and six pages of different ways to get
complicated or get compensated depending on what you sell and
how you sell it, it doesn't drive the right behavior. Certainly,
it doesn't drive behavior that takes care of the client first.
And again, it's interesting because I kind of live in
(42:35):
our own bubble of investments fiduciaries. We're in an organization
of National Association of Personal Financial Advisors NATHA, where only
firms in this is that group are all the only advisors.
So in general, that's the type of firms we interact with.
And you know, these are great folks. And I'm not
(42:56):
saying that there can't be an advisor that is under
these other position models that can't be a good advisor,
but boy, it does drive a lot of the bad
behavior that exist in our industry. And I think you know,
you as a consumer need to be aware of that.
It's just uh, you know, myself being the industry, as
I see this, I can tell you it doesn't drive
(43:18):
the right behavior. So I just want to highlight that
to you as we look at them. But let's move
on to a different topic again. If you have any
last questions before we wrap up, 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.
One of the things I want to talk about are
(43:40):
HSA accounts health savings accounts, And you know, these are
great accounts. They're really one of the best ways not
only to cover healthcare expenses, but really a great way
to save for retirement and cover healthcare expenses in retirement.
And I want to make a differentiate an HSA, a
(44:01):
health savings account plummet from an FSA reflexible spending account.
An FSA is also an account where you put dollars in
pre tax that come out pre tax if they're for
qualified healthcare expenses, just like an HSA, but with an FSA,
you have to spend those dollars within account of a year,
(44:21):
So whatever dollars you put in in twenty twenty five,
you need to spend them by the end of twenty
twenty five, whereas with an HSA, you can roll those
dollars over indefinitely, and you can actually get them invested
into investments so you know, a broad stock index, and
grow them over time and use them for qualified healthcare
(44:45):
expenses in retirement. So it really is a great way
to save for retirement where it's pre tax dollars in
grows tax free, and then you use it for qualified
healthcare expenses in retirement. So now, the one element is
(45:06):
that exists with HSA is you have to connect them
with a high deductible plan, which can work really well
for individuals that don't have a lot of healthcare expenses,
and even sometimes when you have a healthcare expense, it
can still be valuable to have an HSA and have
a high deductible plan, but that is the requirement. You
(45:27):
cannot contribute to an HSA unless you have a high
deductible plan. Very important to remember it as you go
through with that. But these are things again. If you
have a investment produciary wealth manager, you know a good
tax advisor, hopefully they're giving guidance on these things to
make sure that you're properly set up for retirement. Well, folks,
(45:50):
it's been great to be here with you for an hour.
Once again. Hopefully you learned a lot. I always enjoy
sharing my thoughts on the markets in the economy. Go
out there and enjoyed this day and this weekend. You're
listening to Let's Talk Money, brought to you by a
Bouchet financial group. While we help our clients prioritize their
health while we manage their wealth for life. Folks, take
(46:12):
care of yourself and take care of each other.
Good morning, folks. My name is Martin Shields. I'm the
chief wealth Advisor at Bruschet Financial Group and not gonna
be your host stay for let's talk money. It's great
to be here with you on this gorgeous summer morning.
And boy, we this is what we live for right
in upstate New York. We live for these days. Yesterday
it was another gorgeous day, just absolutely perfect to be outside.
(00:23):
And you know I always say, everywhere in life they
can live in. It has its trade offs. It's some
things are good or bad, but Upstate New York summer
days it's just the best. So it's great to be
here with you to answer any questions you may have
regarding your financial planning or investment managing concerns. And I
encourage you to call in with those questions. You can
(00:44):
reach me at eight hundred Talk WI. That is eight
hundred eight two five five nine four nine. Once again
it is eight hundred eight two five five nine four nine.
And as I always say, there's no dumb, silly question
except for the one you don't ask. And you may
be doing your fellow listener a favor by asking the
(01:06):
question that they have, but maybe they're just too shy
to call in, so go ahead and give me a
call again. Finally, it is eight hundred eight two five
five nine four nine. So a lot to discuss today,
both with the markets. They just keep chugging higher, folks.
Hopefully you're you're fully invested. You didn't go to cash
when we had that market volatility in April. As we
(01:30):
always tell our clients, you know, volatility is short term.
Whether it's one day, one month, or even one year,
the market will move higher, and you don't want to
panic when those situations occur. And it's great to see
the market hitting all time highs again this week. And
you know, as we look at the data, it continues
(01:52):
to be good, both with the economic data and with
corporate earnings. And we always talk about it, corporate earnings
are what determine.
Speaker 2 (02:02):
The stock market, folks.
Speaker 1 (02:04):
That is both the current earnings and expectations on forward
earnings for the next six to twelve months. And as
companies are reporting, it continues to be very solid across
most areas and certainly technology. You know, like anything in life,
it's not an absolute statement, but in general, technology continues
(02:25):
to be very strong, and as you know, if you're
a listener. We're well overweight in our technology holdings. The
Nasdaq QQQ is up ten percent year to date after
a stellar year last year and the year prior. Just
this past five days it's up one point three percent,
and the S and P five hundred is up seven
point three percent year to date and in the past
(02:47):
five days is up about zero point sixty seven percent,
so just under three corners of percent. That's both those
are great returns in a five day period. So you know,
if you're an equity investor, you're very happy with things,
and you know right now we're in an environment it's
called a melt up. And what all that means is,
(03:10):
you know, after April, there was a lot of concerns
that were out there with the market. You know, how
are these tariffs going.
Speaker 2 (03:17):
To impact the economy and earnings?
Speaker 1 (03:21):
Basically we were in a bear market meeting the market
was down by more than twenty percent, and from then
the market has steadily moved higher to the point that
again that we're at all time highs. And what that
melt up is. You know what happens is many investors
who went to cash or holding cash in the sidelines,
they start kind of panicking that they have fomo fear
(03:43):
of missing out, so they start putting it back into
the market and in doing so, they drive the market higher.
And that's really what we're seeing a little bit right now,
is this foma or fear of missing out. But at
the end of the day, it does have to be
supported by earnings and earnings with them in general, that's
what we're seeing now. As always, there are some areas
(04:04):
that we're looking at it. I don't know to say
it with concerns, but just kind of watching certainly the
labor markets. You know, unemployment rates continues to be very strong.
You have decent wage growth, but nothing that is too excessive.
Inflation moved up a little bit for the past month,
and again one month doesn't really concern us too much.
(04:27):
It's really more about the trend and that's what we'll
be watching as we move forward. Here is what happens
as these tariffs really take hold. And you know, that's
where the challenges whether you're a small business that does
that buys anything internationally or sells it internationally, or for
a multinational corporation as we've talked about with some of
(04:49):
the uncertainties with the tariff market. Then you've got to
make decisions, and you know, it's hard to make those
decisions if you don't know exactly what the future holds.
And you know, many companies went out and they bought
a lot of supplies overseas the first quarter.
Speaker 2 (05:06):
Because they saw that these tariffs were going to come.
Speaker 1 (05:08):
In place, so that delayed any inflation impact by the tariffs.
And that was the case really, you know for April
and for May and for much of June. But you
know you're going to start seeing some of those tariffs
really come into place in July and August and September,
and again there's a big what if is to at
(05:31):
what level they're going to be at, and that's I
don't think anybody knows particular, maybe even Donald Trump, who's
driving the decisions on this, and it part of it
depends on what the negotiation holds with these countries.
Speaker 2 (05:44):
But if those tariffs.
Speaker 1 (05:46):
Do remain high, they can spark inflation. Now I've talked
about this before on a blog that I've put out there,
and you can read all my blogs through my LinkedIn page.
But you know, when it comes to there's really four
different approaches that can happen with prices. One is they
get passed on the consumer. That's certainly a distinct possibility
(06:08):
that all those increases and prices get passed on to
the consumer, so you'll see that in the inflation data.
The other is the importing firm or company can basically
take on those costs and that would impact their bottom line,
and where that would come into play is going to
impact corporate profits as we move forward. And then the
(06:29):
third option is that the supplier from those foreign countries
could reduce their price by the tear fromount. And then
the fourth option is some combination of any of those three. Right,
it could be a little bit that the producer in
those foreign countries reduces their price, that the importer in
(06:50):
the US basically takes a little bit of a hit
on their profit margin, and that finally they pass some
of that on to the consumer. And so that's what
we're going to be looking at to see how much
does this come into play with inflation for consumers.
Speaker 2 (07:06):
And you know, this.
Speaker 1 (07:07):
Is really where the Federal Reserve is just waiting as well,
because the thing to appreciate is, and this is what
we saw before back three years ago with inflation. It
is kind of a one time thing where the prices
go up because of the tariffs, but it can build
off of that from there, meaning that as companies import
goods and prices go up, that price increase can flow
(07:31):
to other areas both you know, workers requesting more in pay,
so you know, it can have a kind of a
secondary and tertiary effect on prices as well. So that's
why you see this kind of battle argument breaking out
between Donald Trump and Jerome Powell, who is the chair
of the Federal Reserve, is that you know, from Trump's perspective,
(07:54):
you know, rate should be lower, and so we can
make an argument in that regard. You have a good economy,
but there are some areas of weakness, and you have
inflation that in general has been trending lower. But again,
you know, you just saw that last month pop up
a little bit, and if you have that trend continuing,
that's where Jerome Powell is going to be taking his
(08:15):
time and making decisions. So with the Federal Reserve, they
have what's called a dual mandate, and that dual mandate
is to maximize employment and also to stabilize prices, which
means to limit inflation. So that's what they're looking at
is both those items. As I mentioned, employment continued to
(08:36):
be very good, so there's nothing really concerning on that
end right now, and inflation is good. But he wants
to make sure. Jay Paul wants to make sure before
he makes a decision that he feels very comfortable that
inflation is not going to spike. And I've talked about
this gentleman's name before, Art Burns. Most people will not
(08:57):
know who Art Burns is, but he was the Federal
Reserve Chair under President Nixon in the seventies. And you
know what happened in the seventies is that you had
higher inflation. And the part of the problem was that
Art Burns was impacted. He was influenced by Nixon, who
(09:17):
was also pushing for the Federal Reserve to lower rates,
and art Burns capitulated and actually lower rates under Nixon.
And what happened with that is it kept causing inflation
to spike. So they would start to get inflation under control,
and then Art Burns, the Federal Reserve Chair back in
the seventies, really kind of again capitulated to what Nixon
(09:39):
wanted and started to lower rates, and then it would
spike again. And so then they had to raise rates again,
and then as inflation came down, he got pressure to
actually lower rates and he did, and then it would
spike again. So it was all through the seventies they
had this kind of a situation, kind of stagflation, where
you have limited growth and higher inflation. And Jerome Poull,
(10:04):
you know, I think the important thing to remember is
the independence of the Federal Reserve is very important. In
any country that is a developed country that has a
developed economy, like the US, they have that separation between
their central bank and whoever is the prime minister or
(10:24):
president of that country. The countries that don't, like Turkey,
like Venezuela, that they basically have that combined in some respect,
that's where you have inflationary environments and it's not good.
So it is important they have the Federal Reserve as
a separate entity where they can make decisions that are
(10:45):
not based on politics. Now, you know what I would
say is from my perspective, I think it's safe that
they're not based on politics. Maybe the decisions aren't always
the right decisions, right, So just because they're independent have
access to a lot of data, doesn't mean that Drome
Powell and this team are going to make the right decisions.
They certainly did not get it right when they called
(11:08):
inflation transitory back in three or four years ago. It
wasn't transitory, and that's what we saw and they had
a race, race dramatically. But that independence is very important,
and it's important from a global perspective. You know, the
US dollar and the strength of the US economy is
based on trust, you know, and if you take a
(11:29):
step back in any given day and think about all
the things you do and all the transactions that occur,
and it is it's all based on trust. Right you
move money to venmo to you know, you basically put
things on it your charge card. All these transactions that
are all done electronically. Now, the reason everybody's able to
(11:51):
do them is because you trust in the systems that
allow it to happen. If for whatever reason, that trust
starts to get eroded, you got a real problem. And
that's where it's you know you're seeing that right now,
is that trust does exist. So if you can continue
to have that trust, then things are good. But you've
got to have that separation of you know, where we
(12:14):
stand with the separation of the Federal Reserve and with
the President and those decisions, and that trust is just
very important as to how we operate.
Speaker 2 (12:26):
So we'll see exactly what he does.
Speaker 1 (12:29):
You know, I think I was listening to one commentator
talk and I actually like this idea. They would say
either all or nothing when it comes to rate changes.
And all that means is, if there's gonna be rate changes,
it's going to occur because things are very poor and
weak in the economy, so there could be multiple rate changes.
If things continue reasonably strong and if there's any element
(12:53):
of inflation, the Federal Reserve is not going to cut rates,
and that's the right thing to do. I mean, as
much as I would like to have rates lower for
and I think anybody would you know right now where
rates are, you're seeing kind of an equilibrium in the economy.
You know, certainly in the Caper region. We know with
our clients houses are selling. If you're going out buying
(13:14):
a house, it's competitive.
Speaker 2 (13:16):
Now.
Speaker 1 (13:16):
Some real estate markets around the country can vary a
little bit, but in general they're holding up pretty well
with the higher interest rates. I think the other thing
that's important to remember, which is the Federal Reserve only
controls what's called the federal funds rate. That's the short
term rate. It's the overnight rate that banks lend money
to one another.
Speaker 2 (13:35):
Right, they don't.
Speaker 1 (13:36):
Control the rest of the yield curve. And the rest
of the yield curve is you know, a six month
T bill, one year T bill, a ten year treasury bill,
you know the thirty year mortgage market. The feder Reserve
does not control those rates. That's controlled by the market. Well,
you know, again, they can influence it based on what
they do with the federal funds rate. But if there
(13:59):
was a situation where the Federal Reserve and its separation
from politics was not clear, then you know, you see
this even as there's threat of power being fired, that
what happens is those rates based on the market, not
based on the Federal Reserve. But it could actually be
a situation if the Fed start cutting rates that the
(14:22):
long term rates could actually increase. And that could happen
if there's either concerns over inflation long term or there's
concerns over that separation between the Federal Reserve and politics.
So again, to me, these are amazing things to watch out.
We'll see how they play out. But that separation is
extremely important. And again from my perspective, I do feel
(14:45):
like rates although they're high versus what we're used to,
but from a historical perspective, they're really not too high
by any means. And you know, in general, I think
there's an equilibrium that exists out there with rates and
the economy. So we'll see how that goes. Let's move
on to a different topic. If you have any questions, though,
(15:06):
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. Let's move on to a
different discussion. And you know what I want to talk
about is, uh, you know, individuals as they get older. Uh,
(15:28):
you know, whether it's your parents or spouses or whoever.
Maybe you're taking care of somebody, a few things that
you need to be aware of as that's you're moving
down that path. And you know, we talk to our
clients about this all the time. You know, one of
the first things you can do is, you know, as
you get older, Let's say you're married and you're the
one who manages the finances the portfolio for your spouse
(15:52):
and they're not really that much into managing the portfolios
or any of the finance elements. And we see this
with clients. It could be the husband, it could be
the wife.
Speaker 2 (16:01):
It varies.
Speaker 1 (16:03):
But what I really would suggest is, as you get older,
really start to consider, okay, what happens if you're not
in the picture. And you know, we see this so
often with either you know, current clients of ours or
with clients that are new clients that are coming in.
It is so important to have that lined up, that
you have a plan that says, okay, if I'm not
(16:23):
in the picture, and you know, that could happen over
a year period, six month period at overnight, right. You
don't know as you get older when that could happen.
But you've got to make sure that your remaining spouse
is in a good spot because you know, we've seen
it where a prospective client comes in and they they
are you know, the spouse that was managing everything, had
(16:45):
accounts everywhere, and so now only is that remaining spouse
trying to make financial decisions, but they're also mourning the
death of that spouse. And you think about it too.
With a household. You may not realize it, but there's
a vision of labor that exists, meaning that you know
you're as a husband and wife, you each cover a
(17:05):
lot of things that go on in a household. And
so now that remaining spouse is responsible for everything all
at once, and I just see it as being overwhelming.
When a spouse is trying to understand what's going out
from a financial perspective, and the spouse that died handled
all those things, it could be really challenging for that spouse.
(17:27):
So I would really suggest that one sooner rather later,
you work with a fiduciary investment fiduciary. It doesn't mean
you can't manage some of the money still. You know,
we have situations where we keep what up called sandbox
account available for that individual that was managing the money.
That they want to buy something, they can go ahead
(17:48):
and do that. And so it's not as though you
prevent you from making those investments at some point. But
in general, the bulk of your investments you turn over
to a fiducial, you a wealth manager that now, if
something were to happen, you know your spouse knows exactly
who they're dealing with. They get to know that team,
(18:09):
and frankly, there's an element I see this with clients too,
where you know, there's an emotional and psychological stress of
managing a portfolio, managing all the decisions with that that
exists as you get older. It's not great, and it
doesn't mean again that you can't have your fun by
buying some stocks, but just the overall stress of managing
(18:31):
a multimillion dollar portfolio can't be problematic. The other element
is consolidating with one financial custodium. That is really important,
you know. I hear people talk about this idea of
diversifying with financial custodians, and the reality is, if you're
dealing with one of the big guys, whether it's Vanguard
or Schwab or Fidelity, any of these big financial custodians,
(18:56):
you don't really get value by diversifying between them, right,
you know, always make the example. State Street is a
financial custodium for banks, and they've been around since seventeen sixty.
I think these other financial custodians will be around long
after we're not here. They basically make fractions of fractions
(19:18):
of pennies on the dollar. They're going to do all
the right things to make sure they're in a good
financial strait. And oh, by the way, if whatever unforeseen reasons,
something would happen to them. Your investments are not at risk, right,
It's not like a bank that's using your dollars to
lend out to people to buy things. That's not the
(19:40):
case with a financial custodium like Schwab or Fidelity.
Speaker 2 (19:45):
So I would really encourage you to.
Speaker 1 (19:47):
Consolidate all your accounts under one financial custodian. It's going
to make your life a lot easier. It's going to
make your spouse's life a lot easier if something were
to happen to you. The other thing to go through
is on any of your bank accounts, not only should
you be joint with your spouse, I mean you can
(20:07):
have still have your own accounts if that's important many
for many spouses, that is, you can still have your
own accounts. But I would always put a TOD, a
transfer on death which is basically a beneficiary on those
accounts that if something were to happen, it doesn't go
to have to go through probate, which is the court system.
It can go right to that whoever's listed as the
(20:28):
beneficiary as TOD, So that makes life that much easier.
The other thing is, if let's say one spouse is passed.
I would recommend if there's a child that you trust
and the child probably in their twenties, thirties, forties, or fifties,
that you put them on is joint with you with
that bank account. That way, again, if something were to happen,
(20:52):
that person could come in and write checks, access cash.
It just makes life a lot easier. Now, there's important
thing to highlight here when we're talking about putting it
on this joint, there's really two different ways.
Speaker 2 (21:06):
In New York State, it's what's.
Speaker 1 (21:07):
Called joint with rights of survivorship or joints with tendency
in common. In general, I would recommend joints with rights
and survivorship because it's just going to make that transfer
a lot easier to the other joint owner if something
would happen. And the other thing is you can't put
a TOD transfer on death or beneficiaries on a joint
(21:30):
with tennanc in common. It has to be a rights
with a survivorship, So again to help remove things from
going through probate, if you're going to put it in
a joint account, make sure it's a joint with rights
of survivorship. You can put a TOD on it transfer
on death, and it's just going to make your life
a lot easier. The other thing is with when it
(21:53):
comes to investment accounts in general. You know, with your
spouse you can put it as joint, but not to
put it as joint with a son or daughter or
a grandchild, because that's going to remove the step up
and cost basis at your day of death. So it's
important again to have those with TOD transfer on death,
(22:13):
on those with iras life insurance policies, make sure that
they're updated to reflect the correct beneficiaries. But on an
investment account, and we're not talking about a spouse, but
we're talking about a child, not to put them as
joint with that. But the other things to make sure
you have in place are power of attorney both financial
(22:36):
and power of attorney for healthcare. Those two are extremely
important that you have in place. It's going to make
situations a lot easier when decisions need to be made.
And I would encourage you to have those discussions with
your spouse and with your kids or grandkids or whoever
else is going to be making these decisions is to
(22:57):
what you want to be doing if something were to happen.
The more you have these conversations with people, the better
off you are. You're just in a much better spot
and your life's going to be a lot easier with
At some point you're going to have to make a decision,
and it just it's good to start having these conversations now.
You know, where I see problems is again to put
(23:20):
your head in the sand, to not be aware of it.
That's where it gets to be problematic. And you know,
you're just not doing yourself your spouse any favor by
doing that.
Speaker 2 (23:30):
So just things to be aware.
Speaker 1 (23:31):
Of and then you know, finally with that, you know,
I always encourage spouses to have real conversations with This
is also with the kids about where do you want
what charities do you want taken care of if you're
not there, if you have charitable interest, you know, what
does your funeral look like? All these things can be
difficult to have these conversations, but you're really much better
(23:54):
off by having them now while you're in good health
versus waiting too long, because that's where things get more problematic.
And here's the thing is, if you want things done
a certain way, you might as well speak up now
and have those conversations.
Speaker 2 (24:08):
Well, folks, we're gonna.
Speaker 1 (24:09):
Go to commercial break, but come back and join us
as we take your questions. You'll listen to Let's Talk Money,
brought to you by Bouchet Finance Group. Well, we help
our clients prioritize their health while we manage their wealth
for life. Well, welcome back, folks. My name is Martin Shields.
(24:31):
I'm the chief Wealth Advisor at Bouchet Finance Group, and
I'm your host today for Let's Talk Money. If you
have any questions regarding your financial planning or investment management concerns,
I encourage you to call in with those questions. You
can reach me at eight hundred eight two five five
nine four nine. That's eight hundred eight two five five
(24:53):
nine four nine. And as I always say, there's no
domer silly question except for the way you don't ask.
Speaker 2 (24:59):
But if you have any questions, call in.
Speaker 1 (25:01):
But before you do, let's talk about some of the
topics that I think are important for you to be
aware of. One thing, I want to talk about wroth
conversions and contributions, and I just want to highlight something
you need to be aware of for either of those.
Speaker 2 (25:16):
So with a wroth contribution.
Speaker 1 (25:19):
I really always encourage individuals that are in lower income
brackets kind of starting their careers to be able to
contribute to rows. In particular, if you have any teenagers
who are starting to work and have W two income,
they really should be opening up a WROTH. They can
contribute up to seven thousand dollars or whatever the amount
(25:39):
they earned that year, whichever is higher and I'm sorry
whichever is lower. So if they earn eight thousand, they
can only contribute seven thousand. If they only earn four thousand,
that they can contribute four thousand dollars. So that's a
great way to put dollars in. And the thing is too,
which is they can access the principal amount at any point.
(26:03):
So when you put those dollars in, let's say somewhere
down the road they need to access that money, they
can access the principle at any point, and with the earnings,
they can access tax free ten thousand dollars for a
home purchase. So it's actually a great way to save
for a home as well. You get that ten thousand
dollars for a first time home purchase with a WROTH.
(26:26):
The one thing I want to highlight though is with
a wroth conversion, you cannot access that converted part for
at least five years, which makes sense, right, So you
think about it. You do a wroth conversion, that means
you're taking traditional and taking a traditional array, you're paying
taxes on those dollars as you convert it, and now
(26:48):
it's in a wroth, it's going to grow tax free.
It would not make sense that you could immediately access
those dollars without a ten percent penalty. Otherwise people would
be doing that all the time. So you have to
weigh at least five years after the wroth conversion to
be accessed to be able to access the principle. Now
to access the growth, you need to be fifty nine
(27:09):
and a half to access the growth on that without
the ten percent penalty. But again, to access the principle
on a wroth conversion, you've got to wait five years
after the conversion, unlike a wroth contribution that you can
access at any point. So just want to highlight that
to our listeners. Again, in general, I would really encourage
(27:30):
any of you younger individuals, lower earning individuals to be
contributing to your wroth, whether it's an individual wroth or
whether it's a wroth form, and K that's most form,
and K plans have a wroth option. By twenty twenty six,
they will pretty much all have a wroth option. And
(27:51):
it's just a great way to put those dollars in.
You put them in and they grow tax free, and
then as you start earning more then in those years
let's say your mid forties, mid fifties, where you have
much higher income coming in maybe between you and your spouse,
then you really want to load up on putting in
the pre tax dollars at that point. So that's the
(28:14):
strategies to take to be beneficial in that regard. The
other thing I want to highlight is something we just
saw with a client and actually was one of their
children in this situation. Four fifty seven plans. They're a
great option. They're kind of like a for those who
don't know, they're kind of like a four to one
K four to three B that'll allow you to contribute
(28:36):
dollars through your employer, and you can actually do that
in conjunction with contributing to a four to three B. Now,
in general, a four to three I'm sorry, forty seventh
plan is only available through state entities or through nonprofit
organizations like hospitals. So most places don't have a four
(28:57):
to fifty seven plan. But there's a things I want
to highlight. One is, if you have a fourfty seven
planned with the state, you can move that account to
an IRA whenever you leave that organization, right so it
rolls right into IRA, no tax impact.
Speaker 2 (29:14):
It's all good.
Speaker 1 (29:16):
If you're with a nonprofit organization, in particular to say
or the hospital that's where we mostly see them. With
that nonprofit organization, you cannot roll that four fifty seven
account into an IRA. It has to stay with that
organization until you start taking distributions. Now, the important thing
(29:36):
to remember is you need to make a declaration within
either sixty to ninety days of you leaving that organization
is to what you want to do with that account.
And in general, what you want to do is to
say I want to start taking distributions. You have to
start taking it by RMDH, which is seventy three, so
you can't delay past then. But in general, what I
(29:59):
recommend is to delay until you're seventy or seventy three
when you're retired and you want to start taking distributions
from that account to fund your retirement. Now, there's a
couple important things to know. One is, with a four
to fifty seventh plan, it is at risk that if
that entity, that hospital were to go to bankruptcy, that
(30:22):
it is there's a possibility that those dollars could be
at risk through that bankruptcy proceedings. Now, I think it's
pretty rare under more circumstances that those dollars could actually
get forfeited, but you have to at least be aware
of that that it's not an impossibility. That's unlike a
four one K plan where those dollars are never at
(30:42):
risk for bankruptcy. With an organization a four fifty seventh plan,
they are, so you have to be aware of that.
And then the other thing is if you do not
make a declaration of what you want to have done
with those dollars coming out of a four to fifty
seven plan with a nonprofit it they're going to get
distributed to you and it's going to be a taxable event.
Speaker 2 (31:04):
So that's extremely important.
Speaker 1 (31:06):
Right with a state, you can roll it right to
an IRA, So not a problem with a state four
fifty seven plan, but with a nonprofit four to fifty
seven plan. If you leave and you don't make a
declaration within sixty to ninety days of you leaving, it
will be a taxable event. And so you think about that,
you have let's say one hundred and fifty two hundred
thousand and three hundree thousand dollars in a four forty
(31:27):
seventh plan, you've been doing really well with it, and
you screw up and you don't make that declaration within
sixty to ninety days, you're going to have a distribution
of two to three hundred thousand dollars tax ordinary income,
not long term capital gains, ordinary income.
Speaker 2 (31:43):
So extremely important.
Speaker 1 (31:45):
That you are aware that if you leave a nonprofit
organization where it has we have a four forty seven plan.
And again, really what you're gonna want to do is
you're gonna want to delay until you are what you
think is going to be a retirement age. Now, with
ana those plans, you have the opportunity to change it once,
meaning that if you let's say, you say I'm going
to take it at age seventy two, and as time
(32:06):
goes on you realize, hey, you know what, I want
to take it earlier.
Speaker 2 (32:08):
I want to take it at sixty.
Speaker 1 (32:09):
Seven you can change it one time and only one time,
and you could either take it in a lumpsum distribution
or take it out over a ten year period. So
there are different ways you can take it. But you know, again,
this is where there's so much complexity in today's financial
situations for individuals, where it's so important to have the
right tax advisor and the right financial advisor. And that's
(32:34):
moves on to the next topic, which is the OH
BBA see oh B B B A uh. That's the
Beautiful Bill Act, which is the tax bill that was passed.
So I want to talk about that in a few
highlights of that, but if you have any questions, you
can reach me at eight hundred eight two five five
(32:57):
nine four nine. That's eight hundred eight two five five
nine four nine. So the O B B B A
you know that came out and was passed a lot
with that, so I'm not going to unpack it all
right here, but two things. One is when you're meeting
with your tax advisor and for our clients, because we
(33:19):
have that expertise in house in general, they're talking to
us as their investment and wealth fiduciary.
Speaker 2 (33:26):
We're talking to.
Speaker 1 (33:27):
Us about this as well, but you know, you really
should be having a conversation to see where does this
apply to you.
Speaker 2 (33:34):
Now, the thing to remember is a couple things.
Speaker 1 (33:36):
A lot of these elements that are past are temporary,
meaning that they expire at the end of twenty eight,
so you have to kind of be aware of that.
Now exactly what happens in twenty nine, we will see
a bulk of Really what was passed was the extension
of the twenty seventeen tax cuts. That was the primary
(33:58):
thing that was passed, but there are a lot of
other nuances that were passed. So I would be having
a conversation with your tax advisor on any one of
these to see how they apply. Because the other thing
is there's a lot of areas where there's income phase outs, right,
so you know, whether you're in retirement or not, you know,
(34:19):
a lot of these deductions are phased out as your
income goes higher. Now a few that I want to highlight.
One I want to highlight is I actually don't think
it's something that most people want to take advantage of,
and that's called the Trump Well, it's a new investment
accounts for dependents, the Trump accounts. The thing you have
to appreciate with these accounts, Basically what they are set
(34:40):
up is that for children that you would basically put
money in there for you know, basically home purchases or
something down the road, even retirement for kids or grandkids.
And from December or twenty five onto December twenty eight,
(35:01):
for every child born in that period, if you open
an account how one of these accounts, you'll get one
thousand dollars that will get put in there for free
by the federal government. So in that regard, it's only
one per child, So it's almost a no brainer to
open up if you're having a kid during that time period,
to open it up and get your thousand dollars, that's
kind of a no brainer. But you're able to put
(35:24):
it up to five thousand dollars annually into these accounts.
But really the fact of matter is it's not a
great investment. And so if you were to ask me, hey,
should I put five thousand dollars into a five to
twenty nine plan I think my kid or grandkid might
be going to college? Or should I put five to
twenty Should I put five thousand into one of these accounts,
or even five thousand dollars into what's called the UTMA account,
(35:45):
which is just a taxable brokeure account for you know,
a child, a grandchild. In general, I'm going to say
either a five to twenty nine plan or an up
my account. The up my account, it's going to vary
a little bit. But you know the problem with these
new accounts, Trump accounts it has.
Speaker 3 (36:04):
If you want to learn more about Bouchet Financial Group,
visit their website Bouche dot com. That's b O U
c h e y dot com. Sign up for their blog,
which is updated every week Stephenbouche dot com. Follow them
on Twitter at Bouchet Group, Like them on Facebook. The
phone lines are open eight hundred talk WGY. That's eight
(36:24):
hundred eight two five five nine four nine. Here is
Stephen Bouche.
Speaker 1 (36:32):
Hello, folks. Sure about that. A little bit of a
technical difficulties, but we're back again, folks. 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. As we have about
ten minutes left, I want to go into a few
more topics, but again, if you have any more questions,
(36:54):
feel free to give me a call. One of the
things I want to talk about is just that right
now we're actually hiring as a firm. Uh. You know,
we've talked about us. We've grown a lot over the
number of years, and you know we do that. We
grow in part because we just always do the right
thing for our clients and that just feeds on itself. Right,
that's a good way to do business.
Speaker 2 (37:15):
Uh.
Speaker 1 (37:16):
You know, you know yourself that if you've got a business,
you deal with whatever area that is, and if they
do a great job, well, you know, you tend to
talk about them and whether it's a restaurant or a
hotel or whatever. And you know, fortunately that's been the
way with us with our firm. We've grown tremendously over
the years. And that's in part because our clients refer
(37:37):
us to other colleagues or to relatives. And you know,
from my perspective, you know, it just requires us to
do the right thing, make sure we take care of
our clients, whether it's from an investment perspective, financial planning perspective,
whatever we need to do. And then you know, a
big element of that is worth fiduciary. And we've talked
(37:59):
about this in gen role. All that means is we're
going to put our clients interests first. And when we
hire people, we want them to put our clients interest first,
and we also want them to put our team members first.
And you know what happens we have an environment like
that where you put others first, whether it's your our
(38:19):
clients and or your team members. You've got to have
people who are smart, who are hard working, and who
are humble to take on that role. And you know,
that's what we have, and you know, we make sure
we take care of our team members when they do that.
It's just this great environment that kind of feeds on itself.
And you know, I think as we grow, I've been
(38:40):
with the firm now for thirteen years, it only continues
to get better with the people we have. They're they're smarter,
they're hardworking, all these things that add more value to
our clients. But we're in the process now of bringing
on a new advisor, junior advisor. We're in the process
of looking for a client service person as well as
we continue to grow that team. And you know what's
(39:01):
interesting is you go through this process, you're talking with
a lot of people, you're just even doing research as
to what is out there with other positions, and it's
always enlightening to me, a little bit sometimes disheartening perhaps,
but enlightening to me as to how other organizations operate.
And what I mean by that is, you know, as
we get some of the younger folks, they're coming from
(39:23):
some of the bigger firms, whether you know some of
the bigger financial custodians, you know Chuave Fidelity, whoever that
may be, from some of the bigger UH insurance companies, acts,
the Northwestern Equitable and just even bigger companies, these publicly
traded companies. And when you understand what how they these
(39:45):
firms operate in particularly from a compensation perspective, it really
it kind of is mind boggling as to why they
would operate this way and not take this a fiduciary approach.
And I'm not gonna necessarily name names, but there was
one insurance company that has sixty advisors, that is six
zero advisors in the Campal region and they're all out selling.
(40:09):
And this is where the young guy was out selling
for them, and he describes the environment as a cutthroatn
environment where you know, he had some good folks and
colleagues and mentors, but in general, the environment in the
firm was a sales organization where he had to literally
negotiate his commissions with a senior advisor because he couldn't
(40:30):
bring the clients on himself. And it's just amazing that
that still exists. I don't even think it does, but
it does still exist. Again, this firm has sixty advisors
in the Canperal region out there selling in this way
where they're literally it almost talks about them squabbling over
commissions and how to split them, and you know, it
(40:52):
just drives the wrong behavior. And also, you know, as
I'm looking at these different positions there out there in
our industry, you know, I came across one where the
compensation for an advisor. The description was about six pages,
and it was six pages breaking down all the different
ways you get compensated. And really what that meant was
(41:13):
if you you know push product ABC, or you know
this other product and put this add on to that
that that's in general, how you get compensated. And I'm
a big believer. I talk about the show all the time,
which is keeping life simple. Well, I don't care it's
your personal life or professional life or whatever. Keeping things simple,
(41:33):
that's where the value is. The more you can keep
things simple, you can actually be more effective when you
make things extra complicated, and that's what was happening with
this big financial firm. You drive the wrong behavior because
compensation does drive behavior. It is is clear as clear
(41:53):
it can be. If you're in business, you know this,
and you know for us, our goal with our team
members is to make sure that that they are taking
care of our clients and that they're taking care of
each other. And when we have team members that do that,
and I'll tell you to a t that that's what
all of our team members do that. It is just
it's pure success for our clients, for team members, for
(42:14):
everybody involved. And when you make all these kind of
things complicated and six pages of different ways to get
complicated or get compensated depending on what you sell and
how you sell it, it doesn't drive the right behavior. Certainly,
it doesn't drive behavior that takes care of the client first.
And again, it's interesting because I kind of live in
(42:35):
our own bubble of investments fiduciaries. We're in an organization
of National Association of Personal Financial Advisors NATHA, where only
firms in this is that group are all the only advisors.
So in general, that's the type of firms we interact with.
And you know, these are great folks. And I'm not
(42:56):
saying that there can't be an advisor that is under
these other position models that can't be a good advisor,
but boy, it does drive a lot of the bad
behavior that exist in our industry. And I think you know,
you as a consumer need to be aware of that.
It's just uh, you know, myself being the industry, as
I see this, I can tell you it doesn't drive
(43:18):
the right behavior. So I just want to highlight that
to you as we look at them. But let's move
on to a different topic again. If you have any
last questions before we wrap up, 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.
One of the things I want to talk about are
(43:40):
HSA accounts health savings accounts, And you know, these are
great accounts. They're really one of the best ways not
only to cover healthcare expenses, but really a great way
to save for retirement and cover healthcare expenses in retirement.
And I want to make a differentiate an HSA, a
(44:01):
health savings account plummet from an FSA reflexible spending account.
An FSA is also an account where you put dollars in
pre tax that come out pre tax if they're for
qualified healthcare expenses, just like an HSA, but with an FSA,
you have to spend those dollars within account of a year,
(44:21):
So whatever dollars you put in in twenty twenty five,
you need to spend them by the end of twenty
twenty five, whereas with an HSA, you can roll those
dollars over indefinitely, and you can actually get them invested
into investments so you know, a broad stock index, and
grow them over time and use them for qualified healthcare
(44:45):
expenses in retirement. So it really is a great way
to save for retirement where it's pre tax dollars in
grows tax free, and then you use it for qualified
healthcare expenses in retirement. So now, the one element is
(45:06):
that exists with HSA is you have to connect them
with a high deductible plan, which can work really well
for individuals that don't have a lot of healthcare expenses,
and even sometimes when you have a healthcare expense, it
can still be valuable to have an HSA and have
a high deductible plan, but that is the requirement. You
(45:27):
cannot contribute to an HSA unless you have a high
deductible plan. Very important to remember it as you go
through with that. But these are things again. If you
have a investment produciary wealth manager, you know a good
tax advisor, hopefully they're giving guidance on these things to
make sure that you're properly set up for retirement. Well, folks,
(45:50):
it's been great to be here with you for an hour.
Once again. Hopefully you learned a lot. I always enjoy
sharing my thoughts on the markets in the economy. Go
out there and enjoyed this day and this weekend. You're
listening to Let's Talk Money, brought to you by a
Bouchet financial group. While we help our clients prioritize their
health while we manage their wealth for life. Folks, take
(46:12):
care of yourself and take care of each other.
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