Episode Transcript
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Speaker 1 (00:01):
Good morning everyone. My name is Martin Shields. I'm the
chief Wealth Advisor at Bruchet Financi Group and it's great
to be here with you on this Sunday morning to
answer any questions you may have regarding your financial planning
or investment management concerns, and I encourage you to call
in with those questions. You can reach me at eight
(00:21):
hundred Talk WI. That's eight hundred eight two five five
nine four nine again eight hundred eight two five five
nine four nine, or you can email me at ask
Bouche at Bouchet dot com. That's ask Bouche at Bouche
dot com and Bouchet is spelled b o u h
(00:44):
e y, So if you're too shy to call in
and chat, you can email me. But whatever works best
for you. Again, it's great to be here with you.
It's a little bit cloudy out there, but I think
we may avoid some of the rain showers. But boy,
was yesterday an amazing day. I mean, it is just
one of those days where it doesn't get any better.
(01:05):
I mean, no humidity, great warm temperatures, nice breeze. If
you were you had to be outside, you could not
be inside in a day like yesterday, and I certainly
had travers and sovereignty winning that pretty impressive with his
win at the Kentucky Dirty, the Belmont Steaks, the Jim
Dandy Steaks, and Travers, I mean that's never been done before,
(01:27):
so very impressive. And if you listened to the show yesterday,
you know that yesterday was my birthday. So we had
a great birthday celebration and in particularly I highlighted having
that family dinner is always something I enjoy. Standard steak
and scalps, which were fantastic. My wife is an amazing cook,
and we made a little deviation. We had corn on
(01:50):
the cob as well, which was great that you can't
really beat it this time of year to have corn
on the cob and do it with a little olive oil,
some sage salt and pepper wrapping and Timfoyle put on
the grill. I'm telling you, it doesn't get any better.
And deviated with the dessert instead of the Boston cream
(02:11):
pie because the peaches have been so amazing, we had
peach and blueberry cobbler, which I'm a chocolate guy. I
like to have chocolate just as a dessert. That's my favorite.
But I will tell you that was it was amazing
with a little vanilla ice cream. So great birthday celebration.
But I hope that you're doing well. A lot to
(02:33):
discuss today, both with the markets. You know, Friday was
a big day up with J. Paul being out in
Jackson Hole and basically made the statement that there was
a high likelihood of the Fed lowering rates in September,
probably by a quarter percentage point, and that allowed the
(02:54):
markets to rally real close to all time highs. Maybe
just off of that, but the S and P five
hundred is up just about ten percent for the year.
The Nasdaq one hundred, which is a big holding that
we have in our portfolio, is up almost twelve percent
for the year. And you know, we're continued to be
in this environment where the economy remains very strong, maybe
(03:17):
some weakness in the labor markets, and I talked about
this yesterday. I mean, the Federal Reserve has a dual mandate,
which is full employment, and we're really kind of in
that space right now. And also price stabilization, which just
simply means they want inflation closer to the two percent target,
(03:40):
and it's not there right now, but they're at this point,
They're still okay with where inflation is given what maybe
some of the one time impacts from the tariffs that
are going in place. But the question is, you know,
does that if we're at two point seven and the
three point one for inflation, does that continue a rise
(04:03):
with some of these teriffs. And if the tariffs are
in place, is that just a one time increase in
prices or does it become something that builds on itself? Right,
which is yes, the tariffs themselves are only to increase
one time, but because of those increases, do other prices
subsequently increase? Which can happen? And as I talked about yesterday,
(04:28):
you know, J. Powell had made a mistake back three
or four years ago when he called inflation transitory. He
doesn't want to make that mistake again. So you know, again,
I do think he'll probably reduce rates by a quarter
percentage point, assuming all the data stays in this kind
of realm right now. You know, one of the things
(04:50):
that he mentioned in his meeting in out in Jackson
Hole was concerns over the labor market. So I think
that this is where you know, the scale you're going
to be weighing, where do we stand with inflation versus
concerns with the labor markets and the overall economy to
make sure that the current interest rates are not too restrictive, right,
(05:13):
And that's that balancing act that he'll be going for.
But the big element, and this is always the most
important thing. We talk about this all the time, is
corporate profits, both where they are now and where they're
looking in as we kind of forecast out over the
next six to nine months to twelve months. And we
(05:34):
talk about this all the time. The stock market is
always forward looking, right, what's happening today does not matter
as much is what's happening in the future. So again,
as of right now, I think there was a lot
of concerns when the discussions of terrorists were coming into
place in April, but companies have been able to maneuver
(05:56):
through those at least for right now, and we'll see
what happens. You know, we see this a lot with
our client meetings. We have a lot of executives, a
lot of small business owners in general. Uh, they're pretty
much across the board. They continue to see strength in
their industries, in their business businesses. They still struggle to
(06:18):
hire good people and retain good people. So you know,
that's a little more anecdotal because we're just one area
right here. But there's nothing that we're seeing in our
conversations with folks that would indicate that the economy is
in real jeopardy by any means. So that's that's a
real positive. So that's what we'll be looking at as
(06:40):
we go forward. And you know, we talk about this,
We have an investment team that meets every week constantly
looking at all these economic factors and corporate earnings to
make determinations as to where we're going. And you know,
as we've talked about, we've been always overweight for technology
long before even I was here, which is thirteen years ago.
(07:03):
And you do see that without a doubt. I mean,
it's it's going to be interesting to see how it
plays out as we move forward here. But that technology
sleeve of the top ten companies with the really the
exception of Berkshire, all of them are really the big
tech space. NA Video right now makes up around eight
(07:26):
percent of the S and P five hundred. So the
S and P five hundred index is the biggest five
hundred companies in the US, and it's what's called the
market cap weighted Index. So the bigger the company, the
larger percentage share it makes up of the S and
P five hundred and so tho those top eight holdings
(07:46):
make up over thirty five percent of the SP five
hundred and NA VideA is you know, really the now
it's the biggest out there. It's over four trillion dollars.
But you know, as we look at technology and AI, uh,
it's going to be a huge driver across all industries.
And you know, even in our industry, we're starting to
(08:08):
see it come into place and and we're going to
be utilizing it in different ways as a firm. Uh.
And what it does is increases productivity and profitability. Now
there are concerns over how it will impact different industries
and those jobs. And you know that's the thing you
have to appreciate. Whenever you have new introduction of technology.
Speaker 2 (08:31):
Uh.
Speaker 1 (08:32):
I mean, starting back when the car came instead of
the horse and buggy, or the railroad came, or electricity.
Every time you have introduction of new technology, there's going
to be job losses. And it's you know, if you're
in that field, it's it's painful. It is. That is
just the reality of living in a capitalist society that
(08:54):
as those jobs I'm sorry, as those technologies are introduced,
you know, if you're in that field, you're going to
have to pivot. And you know, I think the interesting
thing is I see this because I have three kids
who are teenagers in their twenties, is that in education
in general, you know, the they really don't want kids
(09:17):
using AI. But when it comes to the actual working field,
you know, really you have to embrace AI. If you
don't embrace AI, you're going to be left behind. And
I think that's important, right which is you know, either
your field is protected from AI right now. Let's say
you're in a blue collar field where you're a plumber
(09:40):
or electrician. I think right now you're you're safe from AI.
But if you're in you know, more of a white
collar space, depending on the situation, you know, your field
could be impacted by AI, and what you need to
do is embrace it. You've got to find ways to
utilize AI to be effective, uh and be more productive
(10:02):
because it's those individuals that fight it that we're really
going to find themselves having problems. Well, let's move on
to some different topics, more funtion planning, but if you
have any questions, again, 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
(10:26):
email me at ask Bouchet at bouchet dot com. One
of the things I want to talk about is the
Wroth Ira, Wroth four and K, and I was just
talking to a set of clients this week about this.
They have so many dollars in a traditional ira. Uh.
You know, they're in their mid sixties, and you know,
(10:49):
the wroth Ira did not even come into existence until
nineteen ninety seven, and the Wroth for when K did
come into existence into the early two thousands, around two
thousand and three. So you know, these clients for the
most part didn't have access to that because even when
the Wrath four and K came into an existence, uh,
(11:11):
most plans didn't really adapt adopt it until let's say
twenty ten or so, so it really wasn't available for
many people who are older, maybe in their mid sixties
or older, to be able to contribute. But now that
it's in place, you know, my suggestions to individuals where
they're you know, one, if they're teenagers and they're working
(11:33):
and they should absolutely be putting any of their savings
that they want to grow into a wrath. You're really
better off doing that than even putting into a brokerage account.
And the reason for that is you can always access
your principle that you put into a raw fire ray.
So if they ever, you know, put that money in
there and they needed to access the principle, they could
(11:56):
without it not with no problem, no penalty. And also,
if you're buying a home, which is quite often what
these dollars will be used for for young savers, you
can access up to ten thousand dollars for a first
time home buyer tax free, tax free by doing that,
So really it is one of the best tools for
(12:19):
a young saver. And in particular, let's say you don't
need to access those dollars, well, now they're going to
grow tax free all the way until you retire, so
through the power of compounding, those will become very big accounts.
And then when they start working, you start working in
your in your twenties, you really all your savings at
(12:40):
that point, especially through a four and K, should be
at the row level, right, you know, what you want
to do is just really maximize the amount of dollars
that you can put into a WROTH four and k
let it grow tax free. And then as you start
to earn more and more dollars as you, let's say,
approach your late thirties or four, and you start moving
(13:01):
up into that income tax bracket. Maybe you know, you
get married and so your overall income goes up, then
you want to start moving into the pre tax contributions
in order to get that tax deduction. That's the way
you want to do it. So you know, the goal
is just like you do with your investments. From a
(13:21):
tax perspective, you want to diversify as well. Right, you
want to while you're in lower tax brackets, put contributions
into a roth. Now you'll have those dollars when you retire,
and I will tell you it is very powerful. We
see this with clients that have larger ross. When you
have those large ross when you retire, to be able
(13:43):
to take those dollars out and not have to pay
any taxes on it from a retirement perspective, that's that's
a really powerful thing versus having to take dollars out
of an IRA and not only pay taxes, but pay
ordinary income on those dollars right, So it's not long
term capital gains, it's ordinary income on those distributions, and
(14:05):
that can throw off things like ERMA, which is what
you pay for your premiums for medicare. So it's just
very important to kind of look at this from a
holistic perspective and make sure that you're contributing to these
buckets in a smart way and in the right way,
(14:25):
depending on what tax bracking you're in. Now. One of
the questions I get quite often is should I contribute?
Let's say I am. You have clients that have a
form and K. They maximize that out, but they have
too many dollars to be able to contribute to a
wroth or pre tax to an IRA, but they want
(14:45):
to save more and they can't do a backdoor wroth
because they have a pre tax IRA, so they're kind
of limited to what they can do. And they've gotten
guidance should they put money post tax into an IRA.
So regardless of what you earn and whether you have
a four and K available to you or not, you
(15:06):
can always put dollars up to the limit seven thousand
dollars annually or eight thousand if you're fifteen over into
an IRA, but not get the tax deduction right, so
you can put it in there, it grows tax deferred,
you don't pay any taxes on it while it's in
that IRA, but then when it comes out, you pay
(15:27):
taxes ordinary income for any gains in that account. So
I get that question, should I make that contribution? And
my answer is pretty firmly no, you should not. You
really shouldn't be making post tax contributions to an IRA,
and I'll explain why one is. Think about this. You
have two options. You can either do that put post
(15:49):
tax contributions into an IRA, or you can put contributions
into a taxi account and let it grow now with
the taxible count. If you want to take those dollars
out twenty years from now, you have gains, you're going
to pay pay long term capital gains, which in general
is about fifteen percent. But now with the IRA, when
(16:13):
you take those gains out, you're going to pay ordinary income,
which could be as high as thirty five percent or
certainly probably more likely in the twenty percent range. So
really not a very tax efficient way to do that.
The other reasons are, when you make post tax contributions
into an IRA, you have to track those, and you've
(16:36):
got to make sure every year that you track and
you know how much of your IRA contributions are post
tax versus pre tax. And oh, by the way, here's
the real kicker. When you do start taking distributions, every
dollar is going to be a weighted average of your
post tax versus pre tax contributions. So you think about that,
(16:57):
you've got to not only track how much you've made
as post tax contributions, but for the rest of your life,
when you take out distributions out of any IRA you've got,
it's going to be a weighted average of posts and pretex.
So talk about complicated to do that. It's just much
more complicated. And here's the other reason. Let's say down
(17:19):
the road, you and when you pass away those iras,
traditional irays are going to have to be distributed by
your heirs, your non spousal heirs, and they're going to
pay they got to take about within ten years, over
a ten year period, and they're going to pay ordinary
income on any gains. Right, so the gains in those
(17:40):
iras continue to exist. Whereas if you took those dollars
and you put them in a taxbile account and you
let them grow all those gains, guess what they get
wiped away at your day to death, your rors get
a step up in cost basis. So again pretty strongly
recommend again making post tax contributions. UH to an IRA.
(18:04):
It's just really not what you want to do. Let's
move on to a different topic. But before I do again,
if you want to call in 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
(18:25):
ask Bouchet at bouchet dot com and Bouchet is spelled
b O U c h e y dot com. One
of the things that just came out in the last
couple of weeks is President Trump basically gave guidance to
the Department of Labor to start allowing to have cryptocurrency
(18:47):
and private investments like private real estate, credit, private equity
in four and K plans and UH. I've got a
lot of questions as to whether or not that's a
good thing or not, And what I would say is,
in general, probably not. I'm not saying it's that's not
an absolute statement. There could be situations where there could
(19:08):
be some value in that. But what you have to
appreciate is, you know, with your full and K dollars,
you really want to keep cost incredibly low and you
want consistent, long term, good returns. And the thing with
certainly you know crypto is it's a speculative investment, right.
It is absolutely an investment with a lot of volatility,
(19:31):
and you know you could potentially see huge returns, but
you can also see huge losses. And if you have
individuals that really just go all in on those investments
and it doesn't work out, this is not you know,
your your kind of what we call sandbox account that
you want to trade on. This is your retirement, right.
If it doesn't work out for you, you have a major problem.
(19:54):
The other thing, too, is appreciate when you just start
talking about private investments like private equity and private credit,
it requires an awful lot of due diligence and it's
very easy. We've seen this before with prospective clients coming
in where they have some of these investments and they
can be very illiquid, you can't sell them. They're not
always very transparent as to what the performance is, and
(20:18):
also the fees in general can be quite high. So
what you have to appreciate is this, the more money
that goes into these fields, and in particular, if there's
four and K money, it's very attractive for Wall Street
because they make great fees on those types of funds.
So the concept of being able to put those funds
in a four and K is very appealing to them.
(20:41):
But the more and more money that goes into those areas,
you're going to have more funds that really underperform. And
I was just talking with a colleague or college buddy
of mind. He did really well with a company that
was bought by a private equity firm, and you know,
he just talked about how in that space back in
(21:01):
the late eighties and nineties, in two thousands, if you
were in that space, you were making money handover fist,
just making a ton of money. Now there's so much
more money in private equity that the competition and the
evaluations on those acquisitions are so much higher that it's
not the same returns that you saw ten, twenty, or
(21:23):
thirty years ago. And that's not surprising, right. This is
what happens from an investment perspective, is when there are
those oversized returns in a particular area that's where a
lot of capital flows, and so it's one of those
things where you have to just be very aware of
the fees, the overall performance, the consistent performance of those
(21:45):
asset classes. And here's the other thing that's important. This
is more so for people who are fiduciaries with those plans.
This is meaning that if you're a small business owner,
you have fiduciary responsibility, which includes personal liveability to manage
those plans accordingly, both from an administrative perspective as well
(22:05):
from an investment perspective. And guess what, the more fees
you have in a plan, the poorer performance you have
in funds, you potentially are setting yourself up for a lawsuit.
And this is what happened, you know, certainly back in
the nineties with the tech bubble, where a lot of
companies had their own individual stocks in their former ke
(22:28):
plans and they were putting their plan participant money in there.
That's where a lot of these lawyers are looking at saying, hey,
this is going to be very attracted to them for
lawsuits because of those higher fees and potentially underperformance in
those funds. So you have to be aware from a
fiduciary perspective. If you're a trustee on those plans, you
(22:51):
know what does that mean to put in those type
of asset classes that can be more speculative in nature
and have higher fees. So really very important to be
aware of that and do your due diligence, and it'll
be interesting to see what happens. I think it's you know,
very early. The Department Labor has not come out with
any real guidance yet and that's where it's going to
(23:12):
come into play. And we talk about this all the time.
You know, again, making sure that your full and K
plan has very low fees. And in general, you want
to be as aggressive as you can from an equity perspective,
but you also want to have broad diversification across a
lot of asset classes because this is your retirement account.
(23:32):
You don't want to mess around with that. Well, folks,
we're gonna go to commercial break, but come back and
join us as we take your questions. You're listening to
let's talk money brought to you by a bruchet financial group. Well,
we help our clients prioritize their health while we manage
their wealth for life. Come back and join us. Folks,
as we take your questions. Welcome back everybody. For those
(23:54):
of you just joining us, my name is Martin Shields.
I'm the chief Wealth Advisor at Bruchet Financial Group, and
i'm your host today for Let's Talk Money. It's great
to be here with you. Now. It's raining out, folks.
It was just cloudy before, but I think it's just
gonna be a quick showers. But it's great to be
here with you on this summer morning. And you know,
we can't have just all gorgeous days like yesterday. We
(24:16):
have to have some rain. Matter of factor. Our yards
look a little brown. So I think this is probably
a good thing. But it's great to be here with
you to answer any questions you may have regarding your
financial planning or investment management concerns, and I encourage you
to call in with those questions. You can reach me
at one eight hundred Talk WI. That's eight hundred eight
(24:38):
two five five nine four nine. That's eight hundred eight
two five five nine four nine, or you can email
me at ask Bouchet at Bouchet dot com. So I
think I talked about this before. I I do occasionally
run some traathlines, and before I used to do what's
(24:59):
called the Aqua bike, which is just the bike and
the swim, and last two years ago I did what
was called an International distance, which is it includes it's
about a almost a mile swim, twenty six mile bike ride,
and then a tank k run, which I did. And
(25:19):
I haven't been running too much because of all the
surgeries and bad knees and joints and everything. But now
I've been able to move a little bit more into
that realm and so next Saturday, I'm doing a half
iron Man, So that is a one point two mile swim,
it's a fifty six mile bike ride, and it's a
(25:41):
half marathon. So I've been training for it. We'll see
how it goes. You just never know until it's actually
game day. And it's up in Lake Georgia, and it
is a great venue. It's right out of a million
dollar beach right there. That's where the swim is. The
bike ride goes up around Brandt Lake and just gorgeous areas.
(26:04):
So hopefully the weather will be good. Times i've done
it in a past it's been great weather, which makes
all the difference in the world, so hopefully that'd be good.
It definitely all this training keeps you in shape, that's all.
I would say, I've been able to eat whatever I want,
and I find that I have I'm just really hungry
all the time. So it definitely helps just kind of
(26:28):
keep me in shape and keep me a discipline. So
let's have a conversation on a few items that I
think it's important. You know, as I bring these items up,
usually these are things that clients are asking me about
in meetings, and so I think it's important to you
as listeners to also be aware and then maybe you
can implement them in your own personal situation. One of
(26:49):
the questions I get is with outside form and k's.
Let's say you leave a job or you have an
old form and K what's the best thing to do
with that? And you know, certainly what you don't want
to be doing is leaving that four and K where
it is, because what's going to happen is most people
these days, you know, you have multiple jobs. You're not
(27:10):
just saying at one company, You're moving on to different
companies and you end up collecting four one k's. And
I've seen this with prospective clients coming in where they
have you know, three or four four one ks or
maybe they have a couple iras, and that gets to
be problematic. There there is let's just be clear, there
is no value in diversifying in financial custodians. And all
(27:35):
I might mean by that is, you know, I hear
this sometime, Well, I don't want all my money at
Schwab or Fidelity or Vanguard. And you know I've said
this before. There is those three custodians. There's no risk
of them going out of business. I mean, I'm not
saying it's zero, but it's ninety nine point nine nine
percent that they're going to be around here longer than
we are. And you know, this concept of having accounts
(27:59):
in more latile custodians not does not make sense. And
you know the other thing too is you know with
the form and K, even at the biggest and best,
you still pay for some fees, even if it's just small,
but some fees that if you can avoid pay for them,
you'd rather do that. And you know, these days, whether
you know you open a Fidelity or Swab or Vanguard,
(28:21):
you can have an IRA with really minimum fees and
very low cost investments. So I would always recommend if
you have a bit of a plan, right, You can't
just roll that money into an IRA and start buying stocks,
you know, kind of on a whim. But if you
have a fairly well thought out plan, which really is
(28:41):
just about broad diversification in those iras, you're definitely better
off rolling it into an IRA and consolidating your accounts
in that regard. You know, I always say, you know,
relatively speaking, if I had to look at and say
at my kids, probably everybody's going to have three accounts.
They're going to have a roth iray, they're going to
(29:02):
have a traditional array, and they're going to have a
trust or a broken account or something like that. I mean,
that's at the minimum. You know. That's one of the
reasons why when I look at what we do for
our clients and the challenges that they face, it's because
not only will they have those three accounts that I mentioned,
but their spouse will have those three accounts, their kids
(29:25):
may have those some of those accounts, and then they're
going to receive probably similar accounts from their parents on
both sides of that relationship, could even be from grandparents
as well. So you think about the complexity that exists
with all those and I talked about you know how
important tax planning is when making those decisions. And you know,
(29:50):
we've added really a tax practice to our firm about
three or four years ago where we start doing some
individual tax returns for our larger clients and also we
do a lot more tax planning than we have before.
And it's just invaluable. You know, that is one thing
that you can't control is trying to minimize your taxes.
(30:12):
You know, you can't control what the market's going to do,
but you can't control you know, how you handle your
taxes and your tax planning. And you know, we always
say this that tax prep. I mean, I do think
tax prep is going to be one of those things
that AI will be very effective at because really what
tax prep is is give me the rules and I'm
(30:32):
going to tell you based on your situation, you know
what needs to happen. Now. Tax planning is where that's
will always be something I think individuals will be able
to add a lot of value to because that's where
you take everything together and you make adjustments before those
taxes occur how to minimize your taxes. And you know,
(30:54):
we just had a meeting on Friday with a great
set of clients been on for a long time and
I had been. Cenzo Testa is one of our CPAs,
one of our tax experts on in that meeting with us,
and we were there for two hours plus, uh, talking
about their situation. And it's very complex. They have a
lot of moving pieces and but the tax planning that
(31:16):
we you know, we're gonna say Vincenzo was able to
do for them is phenomenal. I mean, it really is
amazing what we've been able to do for these clients.
And they have, you know, different interests. They like to travel,
they have a number of different pieces of real estate,
both from a rental perspective but also the second homes.
And they're charitable as well. They're very charitable individuals. And
(31:40):
so combining all that together that you know, in corporating
that charitable giving with wrath conversions with the real estate
to try to minimize their taxes, that is where the
real value is. And whether it's working with your CPA
or your wealth manager, uh, it's you've got to be
getting that advice. If you're not, you're missing out. And
(32:01):
I see this, you know a number of times where
you know, somebody works with their accountant or CPA to
do their tax prep, but they're not getting any tax
planning advice and they're missing out. If you're not getting
tax planning advice, especially as your net worth grows and
as your complexities grow, you're not that's where the real
(32:24):
value is. So you've got to make sure that you're
you're getting that. And you know, this goes into a
question that we get as well, which is do we
have minimums to come on as clients and why is that?
And we do have a minimum, our minimums half million
dollars of investamble assets, and we listen, we would like
to not to have miniums. Our goal is really to
(32:45):
help as many people as we can. That really is
the ethos of our firm, and everybody that works there
has that mindset, and really it's kind of part of
what the radio program is is to give guidance just
to the general public, because you know, we're fiduciary. Our
goal really is to do what's in our client's best interest.
But unfortunately in our industry that's not always the case.
(33:07):
And I see this with people being sold things where
you just scratch your head wondering, you know, about the
ethics of somebody that would sell individuals certain investments that
it just does not make sense for them, it's not appropriate.
And so you know, from our perspective, educating people is
so important, but when it comes to working with our clients,
(33:29):
we really dive in. And you know, from a planning perspective,
I talked about the tax element, but the fundane planning
is as complex and as valuable. And we've talked about
this before. We're really our client's personal CFO, and that
takes a lot of man hours to provide that level
(33:49):
of service. And what we've found is really, you know,
we have to have at least a certain size from
an economics perspective to make that investment with our clients worthwhile.
And you know that is just so important. What we'll
always say, though, is if you need help and guidance,
will help you one way or the other. Meaning and
(34:10):
what I mean by that is, you know, whether it's
just some pro bono advice to get you moving in
the right direction, or we'll connect you with another fiduciary
that does not have those minimums. You know, some smaller
firms don't have minimums, so you know, you might be
we might be able to connect you with them. So
if you need guidance in your below our minimum, we'll
(34:33):
find a way to help you one way or the other.
And that's just important because we want to make sure
that you know, as many people as possible are getting
the right advice because these days, you know, you're really
on your own. You are and I've said this before,
which is, you know, it's not what you make, it's
what you save. And it's so important that you're doing
(34:55):
all the right things from an early age. And I've
seen it before where you know that millionaire next door,
they don't make a lot of money, but they're great savers.
And boy, when we get to talk to them about
retiring early at age fifty five or sixty because they've
been doing such a great job and they let us
do our job and manage the portfolios, it's a it's
(35:15):
a great conversation. It is. That's why we love our job,
because to be able to give people that good news
and you help them, you know, kind of plan on
what the retirement looks like and how they want to
spend those dollars they've been so diligent in saving. That's fantastic,
but what can be also very difficult is you know,
when it's usually not a client because we will have
(35:37):
given guidance, But when a perspective client comes to us
and they make a substantial amount of money and they're
not prepared for retirement, it's a it's a difficult conversation.
It's a very difficult conversation, and you know it's one
that we are always we don't want to have that conversation,
but we're always willing to have to make sure that
(35:57):
we can kind of try to get them turned around proper,
believe and start saving because you think about this, really,
what retirement is you're just taking your income and you're
replacing it with dollars coming from someplace, whether it's social Security,
atension or your portfolio. Now, you can also limit some
of your spending when you retire, but you know, we
(36:19):
say this, most people don't want to do that, and
I want record. I don't want to have to be
telling a client they have to limit their spending. You know,
I always say, when you're in retirement, if you have
your health, you have everything, and you know, if you're
in a decent financial position, don't be afraid to spend
those dollars and that's the guidance we're usually giving our clients.
(36:43):
And you know, usually you're going to spend more money
in retirement, right, So you think about this. If you're working,
you're working thirty forty fifty hours a week. Well, now
if you're retired those hours, you're going to be spending
dollars or doing something where you might spend dollars and
you might want to travel more or you know, you're
going to home depot more or whatever the case may be.
(37:05):
It's just the reality. So when you think about your
retirement and your spending, you've got to actually think at
a higher level than you are when you're working. And
that's that's very important from a budgeting perspective. And you know,
there's some of these financial experts that I kind of
roll my eyes at that some of their advice is
(37:25):
less than stellar, and you know they kind of pooh,
who budgeting? And you know I have to laugh as well,
because you know, these people don't need a budget. They
make a lot of money. But ninety nine percent of
folks really need to be aware of budgeting even when
they're working. And it doesn't have to be you know,
(37:45):
to the nth degree, even at a very level of
budgeting that can be very valuable. So you know, just
being aware of that, having that budget in place, and
when you move into retirement it becomes that much more important.
They have the budget to know where you stand on
what your long term findag plan looks like. We're going
(38:06):
to go to the phone lines. We have Carrie from
Niski Yuna carry you there.
Speaker 2 (38:11):
Yes, Hi, thank you so much Martin for taking my call.
Speaker 1 (38:14):
Yes, what can I help you with?
Speaker 2 (38:17):
Well, I have the best financial people in the world.
It's your group, and I unfortunately gave some misinformation that
I had to correct over this weekend, so I didn't
get a chance to call my great advisors Scott and Katie.
But here's my dilemma. So I am retiring on Friday,
(38:39):
that is my last day at my job. I do
have a pension. I am not taking Social Security for
a while. I am sixty three. I have the option
through my job to take half my days and they
will keep it in an account and pay just my
premiums for my medical for the next year and for
(39:00):
my dental for the year and a half, and then
after that you know, of course, in a year and
a half ish I'll be sixty five, so they will
if I opt to do the Medicare advantage, they will
pay whatever that is, and that I believe is about
five or six hundred dollars going forward taken from that account.
(39:20):
Is it better then to just keep that in that
medical account as that half of my day's amount or
take a quarter of my days in cash?
Speaker 1 (39:31):
Will you say in the medical account? What is that
like an HSA HRA? Do you know what that is?
Speaker 2 (39:36):
I thought it would be an HSA because if it
was an HSA or an HRA, they would be paying
anything like copays and things like that. Nope, it's not
for my premiums. So my premium for the next year
and a half is probably going to be roughly about
twenty five hundred dollars and maybe another eight hundred, so
maybe I'm going to say another thousand for the dental
(40:00):
and then going forward after that once I'm sixty five,
it'll be between five and six hundred dollars a year
for just the premium amount of the medical advantage.
Speaker 1 (40:11):
Okay, well, I'll take this a two part here. One
is I'm going to give you some thoughts here over
the radio, but obviously let's have a conversation in more
detail this week, and also congratulations on your upcoming retirement.
But to the extent if this is at all a
tax advantaged account, so that would be the case, if
(40:32):
it's an HR or an HSA, you want to keep
those dollars in there, and if they're able to put
dollars in there for you to use for any sort
of medical expenses, whether it's premiums or other expenses, absolutely
that's great. And to the extent they're willing to cover
any of your medical expenses in two especially as you
(40:53):
until you get to be sixty five, that's fantastic because
that's where most people really struggle, as you know, when
they leave their job and their job's been covering some
element of their health insurance and now they got to
cover it on their own. It could be cost prohibitive.
So again, without knowing all the details, my general recomdation
is to keep those dollars in those accounts and use
(41:16):
those to cover any of your premiums or medical expenses.
Speaker 2 (41:20):
And the amount I have a lot of days, I
don't take six days or days just you know, to
take them. So the amount of that half of the
days will be about seventeen thousand dollars. If I took
that in cash, of course, that would be half of that.
I am told that seventeen thousand dollars ish is not
(41:40):
going to be taxed. And of course I'll pay the
Medicare advantage when I'm sixty five and they'll reinburse me
for that. But I'm assuming again that's tax free, because
this is money that belongs to me that they are
just holding. And again, if I die, that dies with me.
Speaker 1 (41:58):
So that's right. But I think you could use it
any other time during your retirement as well for medical expenses.
Speaker 2 (42:05):
So no, not for medical expenses, that's if it was
that would be a no brainer.
Speaker 1 (42:11):
But oh, just the premium yeeah. Well, again, I'm gonna
say this is something that might be I don't like
to give you a wrong answer for the radio, I
think giving we'll have to sit down with you and
go through the exact numbers to kind of map it
out to see which one is going to be best,
because if it's gonna be only used for premiums, just
to make sure that the you're going to use those
(42:32):
dollars fully versus not so.
Speaker 2 (42:37):
Right, right, And my other thing is insurance always goes up,
so yeah, I mean it covered.
Speaker 1 (42:43):
Yeah, my general gut feel is that you're gonna want
to keep it in that account and cover those expenses.
That's what I've you know, that's what I'm thinking right now.
But again, in these situations, I'm really gonna want to
look at the exact numbers and Katie and Scott or
two of our best advisors, so they'll be able to
run those exact number for you to give you that guidance.
But that's that's what my gut is thinking.
Speaker 2 (43:04):
I got to tell you, mister Shields, I've been listening
to Steve Bouchet for thirty years and at six o'clock
PM on a Sunday when he used to start the show,
and it's because of that, thank you, my husband and
I are able to retire.
Speaker 1 (43:18):
So well.
Speaker 2 (43:19):
I want to thank you guys. And we had no
qualms when we came to meet you guy, you know
and have our meeting. My husband will Dad saying all
these people are our people, so.
Speaker 1 (43:29):
Well, I can't thank you so much. That's very kind
of you say.
Speaker 2 (43:34):
And we do love Scott and Katie and Andrea and
Lauren all of you, so thank you so much.
Speaker 1 (43:42):
Again, Well, thank you, and again congratulations on retirement that
you're moving into another great state stage of your life.
Speaker 2 (43:49):
Yes, thank you. And now I have to make sure
I'm healthy. I won't be doing what you're doing, but
people out there walking more so good.
Speaker 1 (43:57):
Good the lungs, you're moving reasonly healthy and keep moving
and keep mentally healthy. You're you're good.
Speaker 2 (44:03):
That's right. I have to make sure that I get
every penny of that seventeen.
Speaker 1 (44:08):
That's great.
Speaker 2 (44:11):
Well, thanks, have a great day.
Speaker 1 (44:14):
Yeah, take care, thanks bye bye. Well, that's that's great.
Uh that kind of words from Carrie, and that's she's right, Steve.
He's been doing the radio show for thirty years. He
used to do it Sundays at six, and uh yeah,
it's then when I joined, we're doing it Sundays at
I'm sorry, Saturdays at noon, and now we do the
(44:38):
show Saturdays at ten and Sundays at eight. But no,
it's it's great to talk to listeners like Carrie who
now became clients, and we have many individuals like that,
and I'm excited for her for retirement. That's fantastic. Oh right, really, folks,
we only have about five more minutes left the show.
So if you have any other questions, again, you can
(44:59):
call in at eight hundred eight two five five nine
four nine, or you can email me at Askbouchet at
Bouchet dot com and any questions you may have. One
of the other things I just wanted to talk about
real quickly is this idea of having a network statement.
(45:19):
I can't stress that importance, the importance to you, just
to the extent that as you add more complexity. A
network statement is real simple. All you're doing is you
take it's a snapshot in time. You're taking the value
of your assets, your house, your cars, anything that has
you know, real significant value. And then below that you're
(45:42):
taking your liabilities, any monies that you owe. I wouldn't
necessarily include credit card debt to the extent that you
pay it off. Now, if you don't pay it off
on a monthly basis, which I really hope that you
don't do this, But if you paid off on a
monthly basis, which hopefully is what you do, then you
don't want to you don't need to include that as
(46:04):
one of your liabilities. So you're including any long term
debt UH that you have UH. And then what's remaining
uh is uh your uh that's your net worth. And
he's just a great way. You have a lot of complexities,
a lot of moving pieces to be able to take
a snapshot of where you stand with your net worth
(46:24):
over time. And you know, with many of our clients, UH,
they have a number of assets that are not overly liquid. UH.
So what's good with you in your net worth is
you get to see, you know, what which assets are
liquid versus not uh, how they are titled under different spouses.
And we talked about this yesterday in the show of
(46:44):
making sure that things are titled properly uh in order
to minimize any estate taxes or taxes in general. UH.
And then also you get to see what the tax
uh ramification is if you want to sell those or
utilize them for your cash flow. And so I really
(47:04):
would encourage you if you don't have it already. We
do this for our clients as part of their retirement planning.
But that you put together that network statement, it's gonna
make it's gonna really give you a good picture of
where you stand. And what we do is, you know,
every year when we get together with them, we update
that network statement so they understand where everything kind of
(47:25):
all comes together, and it really does say, you know,
what is your overall financial picture look like? And it's
just so important. So two takeaways today, Get that network
statement in place and get the budget in place with
that tax planning. All right, folks, Well we spend another
hour together. As always, it's been fantastic. Always enjoy this
(47:47):
time with you. You're listening to Let's Talk Money, brought
to you by a Bruchet financial group where we help
our clients prioritize their health while we manage their wealth
for life. Folks, enjoy your sun and remember take care
of yourself and take care of each other
Good morning everyone. My name is Martin Shields. I'm the
chief Wealth Advisor at Bruchet Financi Group and it's great
to be here with you on this Sunday morning to
answer any questions you may have regarding your financial planning
or investment management concerns, and I encourage you to call
in with those questions. You can reach me at eight
(00:21):
hundred Talk WI. That's eight hundred eight two five five
nine four nine again eight hundred eight two five five
nine four nine, or you can email me at ask
Bouche at Bouchet dot com. That's ask Bouche at Bouche
dot com and Bouchet is spelled b o u h
(00:44):
e y, So if you're too shy to call in
and chat, you can email me. But whatever works best
for you. Again, it's great to be here with you.
It's a little bit cloudy out there, but I think
we may avoid some of the rain showers. But boy,
was yesterday an amazing day. I mean, it is just
one of those days where it doesn't get any better.
(01:05):
I mean, no humidity, great warm temperatures, nice breeze. If
you were you had to be outside, you could not
be inside in a day like yesterday, and I certainly
had travers and sovereignty winning that pretty impressive with his
win at the Kentucky Dirty, the Belmont Steaks, the Jim
Dandy Steaks, and Travers, I mean that's never been done before,
(01:27):
so very impressive. And if you listened to the show yesterday,
you know that yesterday was my birthday. So we had
a great birthday celebration and in particularly I highlighted having
that family dinner is always something I enjoy. Standard steak
and scalps, which were fantastic. My wife is an amazing cook,
and we made a little deviation. We had corn on
(01:50):
the cob as well, which was great that you can't
really beat it this time of year to have corn
on the cob and do it with a little olive oil,
some sage salt and pepper wrapping and Timfoyle put on
the grill. I'm telling you, it doesn't get any better.
And deviated with the dessert instead of the Boston cream
(02:11):
pie because the peaches have been so amazing, we had
peach and blueberry cobbler, which I'm a chocolate guy. I
like to have chocolate just as a dessert. That's my favorite.
But I will tell you that was it was amazing
with a little vanilla ice cream. So great birthday celebration.
But I hope that you're doing well. A lot to
(02:33):
discuss today, both with the markets. You know, Friday was
a big day up with J. Paul being out in
Jackson Hole and basically made the statement that there was
a high likelihood of the Fed lowering rates in September,
probably by a quarter percentage point, and that allowed the
(02:54):
markets to rally real close to all time highs. Maybe
just off of that, but the S and P five
hundred is up just about ten percent for the year.
The Nasdaq one hundred, which is a big holding that
we have in our portfolio, is up almost twelve percent
for the year. And you know, we're continued to be
in this environment where the economy remains very strong, maybe
(03:17):
some weakness in the labor markets, and I talked about
this yesterday. I mean, the Federal Reserve has a dual mandate,
which is full employment, and we're really kind of in
that space right now. And also price stabilization, which just
simply means they want inflation closer to the two percent target,
(03:40):
and it's not there right now, but they're at this point,
They're still okay with where inflation is given what maybe
some of the one time impacts from the tariffs that
are going in place. But the question is, you know,
does that if we're at two point seven and the
three point one for inflation, does that continue a rise
(04:03):
with some of these teriffs. And if the tariffs are
in place, is that just a one time increase in
prices or does it become something that builds on itself? Right,
which is yes, the tariffs themselves are only to increase
one time, but because of those increases, do other prices
subsequently increase? Which can happen? And as I talked about yesterday,
(04:28):
you know, J. Powell had made a mistake back three
or four years ago when he called inflation transitory. He
doesn't want to make that mistake again. So you know, again,
I do think he'll probably reduce rates by a quarter
percentage point, assuming all the data stays in this kind
of realm right now. You know, one of the things
(04:50):
that he mentioned in his meeting in out in Jackson
Hole was concerns over the labor market. So I think
that this is where you know, the scale you're going
to be weighing, where do we stand with inflation versus
concerns with the labor markets and the overall economy to
make sure that the current interest rates are not too restrictive, right,
(05:13):
And that's that balancing act that he'll be going for.
But the big element, and this is always the most
important thing. We talk about this all the time, is
corporate profits, both where they are now and where they're
looking in as we kind of forecast out over the
next six to nine months to twelve months. And we
(05:34):
talk about this all the time. The stock market is
always forward looking, right, what's happening today does not matter
as much is what's happening in the future. So again,
as of right now, I think there was a lot
of concerns when the discussions of terrorists were coming into
place in April, but companies have been able to maneuver
(05:56):
through those at least for right now, and we'll see
what happens. You know, we see this a lot with
our client meetings. We have a lot of executives, a
lot of small business owners in general. Uh, they're pretty
much across the board. They continue to see strength in
their industries, in their business businesses. They still struggle to
(06:18):
hire good people and retain good people. So you know,
that's a little more anecdotal because we're just one area
right here. But there's nothing that we're seeing in our
conversations with folks that would indicate that the economy is
in real jeopardy by any means. So that's that's a
real positive. So that's what we'll be looking at as
(06:40):
we go forward. And you know, we talk about this,
We have an investment team that meets every week constantly
looking at all these economic factors and corporate earnings to
make determinations as to where we're going. And you know,
as we've talked about, we've been always overweight for technology
long before even I was here, which is thirteen years ago.
(07:03):
And you do see that without a doubt. I mean,
it's it's going to be interesting to see how it
plays out as we move forward here. But that technology
sleeve of the top ten companies with the really the
exception of Berkshire, all of them are really the big
tech space. NA Video right now makes up around eight
(07:26):
percent of the S and P five hundred. So the
S and P five hundred index is the biggest five
hundred companies in the US, and it's what's called the
market cap weighted Index. So the bigger the company, the
larger percentage share it makes up of the S and
P five hundred and so tho those top eight holdings
(07:46):
make up over thirty five percent of the SP five
hundred and NA VideA is you know, really the now
it's the biggest out there. It's over four trillion dollars.
But you know, as we look at technology and AI, uh,
it's going to be a huge driver across all industries.
And you know, even in our industry, we're starting to
(08:08):
see it come into place and and we're going to
be utilizing it in different ways as a firm. Uh.
And what it does is increases productivity and profitability. Now
there are concerns over how it will impact different industries
and those jobs. And you know that's the thing you
have to appreciate. Whenever you have new introduction of technology.
Speaker 2 (08:31):
Uh.
Speaker 1 (08:32):
I mean, starting back when the car came instead of
the horse and buggy, or the railroad came, or electricity.
Every time you have introduction of new technology, there's going
to be job losses. And it's you know, if you're
in that field, it's it's painful. It is. That is
just the reality of living in a capitalist society that
(08:54):
as those jobs I'm sorry, as those technologies are introduced,
you know, if you're in that field, you're going to
have to pivot. And you know, I think the interesting
thing is I see this because I have three kids
who are teenagers in their twenties, is that in education
in general, you know, the they really don't want kids
(09:17):
using AI. But when it comes to the actual working field,
you know, really you have to embrace AI. If you
don't embrace AI, you're going to be left behind. And
I think that's important, right which is you know, either
your field is protected from AI right now. Let's say
you're in a blue collar field where you're a plumber
(09:40):
or electrician. I think right now you're you're safe from AI.
But if you're in you know, more of a white
collar space, depending on the situation, you know, your field
could be impacted by AI, and what you need to
do is embrace it. You've got to find ways to
utilize AI to be effective, uh and be more productive
(10:02):
because it's those individuals that fight it that we're really
going to find themselves having problems. Well, let's move on
to some different topics, more funtion planning, but if you
have any questions, again, 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
(10:26):
email me at ask Bouchet at bouchet dot com. One
of the things I want to talk about is the
Wroth Ira, Wroth four and K, and I was just
talking to a set of clients this week about this.
They have so many dollars in a traditional ira. Uh.
You know, they're in their mid sixties, and you know,
(10:49):
the wroth Ira did not even come into existence until
nineteen ninety seven, and the Wroth for when K did
come into existence into the early two thousands, around two
thousand and three. So you know, these clients for the
most part didn't have access to that because even when
the Wrath four and K came into an existence, uh,
(11:11):
most plans didn't really adapt adopt it until let's say
twenty ten or so, so it really wasn't available for
many people who are older, maybe in their mid sixties
or older, to be able to contribute. But now that
it's in place, you know, my suggestions to individuals where
they're you know, one, if they're teenagers and they're working
(11:33):
and they should absolutely be putting any of their savings
that they want to grow into a wrath. You're really
better off doing that than even putting into a brokerage account.
And the reason for that is you can always access
your principle that you put into a raw fire ray.
So if they ever, you know, put that money in
there and they needed to access the principle, they could
(11:56):
without it not with no problem, no penalty. And also,
if you're buying a home, which is quite often what
these dollars will be used for for young savers, you
can access up to ten thousand dollars for a first
time home buyer tax free, tax free by doing that,
So really it is one of the best tools for
(12:19):
a young saver. And in particular, let's say you don't
need to access those dollars, well, now they're going to
grow tax free all the way until you retire, so
through the power of compounding, those will become very big accounts.
And then when they start working, you start working in
your in your twenties, you really all your savings at
(12:40):
that point, especially through a four and K, should be
at the row level, right, you know, what you want
to do is just really maximize the amount of dollars
that you can put into a WROTH four and k
let it grow tax free. And then as you start
to earn more and more dollars as you, let's say,
approach your late thirties or four, and you start moving
(13:01):
up into that income tax bracket. Maybe you know, you
get married and so your overall income goes up, then
you want to start moving into the pre tax contributions
in order to get that tax deduction. That's the way
you want to do it. So you know, the goal
is just like you do with your investments. From a
(13:21):
tax perspective, you want to diversify as well. Right, you
want to while you're in lower tax brackets, put contributions
into a roth. Now you'll have those dollars when you retire,
and I will tell you it is very powerful. We
see this with clients that have larger ross. When you
have those large ross when you retire, to be able
(13:43):
to take those dollars out and not have to pay
any taxes on it from a retirement perspective, that's that's
a really powerful thing versus having to take dollars out
of an IRA and not only pay taxes, but pay
ordinary income on those dollars right, So it's not long
term capital gains, it's ordinary income on those distributions, and
(14:05):
that can throw off things like ERMA, which is what
you pay for your premiums for medicare. So it's just
very important to kind of look at this from a
holistic perspective and make sure that you're contributing to these
buckets in a smart way and in the right way,
(14:25):
depending on what tax bracking you're in. Now. One of
the questions I get quite often is should I contribute?
Let's say I am. You have clients that have a
form and K. They maximize that out, but they have
too many dollars to be able to contribute to a
wroth or pre tax to an IRA, but they want
(14:45):
to save more and they can't do a backdoor wroth
because they have a pre tax IRA, so they're kind
of limited to what they can do. And they've gotten
guidance should they put money post tax into an IRA.
So regardless of what you earn and whether you have
a four and K available to you or not, you
(15:06):
can always put dollars up to the limit seven thousand
dollars annually or eight thousand if you're fifteen over into
an IRA, but not get the tax deduction right, so
you can put it in there, it grows tax deferred,
you don't pay any taxes on it while it's in
that IRA, but then when it comes out, you pay
(15:27):
taxes ordinary income for any gains in that account. So
I get that question, should I make that contribution? And
my answer is pretty firmly no, you should not. You
really shouldn't be making post tax contributions to an IRA,
and I'll explain why one is. Think about this. You
have two options. You can either do that put post
(15:49):
tax contributions into an IRA, or you can put contributions
into a taxi account and let it grow now with
the taxible count. If you want to take those dollars
out twenty years from now, you have gains, you're going
to pay pay long term capital gains, which in general
is about fifteen percent. But now with the IRA, when
(16:13):
you take those gains out, you're going to pay ordinary income,
which could be as high as thirty five percent or
certainly probably more likely in the twenty percent range. So
really not a very tax efficient way to do that.
The other reasons are, when you make post tax contributions
into an IRA, you have to track those, and you've
(16:36):
got to make sure every year that you track and
you know how much of your IRA contributions are post
tax versus pre tax. And oh, by the way, here's
the real kicker. When you do start taking distributions, every
dollar is going to be a weighted average of your
post tax versus pre tax contributions. So you think about that,
(16:57):
you've got to not only track how much you've made
as post tax contributions, but for the rest of your life,
when you take out distributions out of any IRA you've got,
it's going to be a weighted average of posts and pretex.
So talk about complicated to do that. It's just much
more complicated. And here's the other reason. Let's say down
(17:19):
the road, you and when you pass away those iras,
traditional irays are going to have to be distributed by
your heirs, your non spousal heirs, and they're going to
pay they got to take about within ten years, over
a ten year period, and they're going to pay ordinary
income on any gains. Right, so the gains in those
(17:40):
iras continue to exist. Whereas if you took those dollars
and you put them in a taxbile account and you
let them grow all those gains, guess what they get
wiped away at your day to death, your rors get
a step up in cost basis. So again pretty strongly
recommend again making post tax contributions. UH to an IRA.
(18:04):
It's just really not what you want to do. Let's
move on to a different topic. But before I do again,
if you want to call in 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
(18:25):
ask Bouchet at bouchet dot com and Bouchet is spelled
b O U c h e y dot com. One
of the things that just came out in the last
couple of weeks is President Trump basically gave guidance to
the Department of Labor to start allowing to have cryptocurrency
(18:47):
and private investments like private real estate, credit, private equity
in four and K plans and UH. I've got a
lot of questions as to whether or not that's a
good thing or not, And what I would say is,
in general, probably not. I'm not saying it's that's not
an absolute statement. There could be situations where there could
(19:08):
be some value in that. But what you have to
appreciate is, you know, with your full and K dollars,
you really want to keep cost incredibly low and you
want consistent, long term, good returns. And the thing with
certainly you know crypto is it's a speculative investment, right.
It is absolutely an investment with a lot of volatility,
(19:31):
and you know you could potentially see huge returns, but
you can also see huge losses. And if you have
individuals that really just go all in on those investments
and it doesn't work out, this is not you know,
your your kind of what we call sandbox account that
you want to trade on. This is your retirement, right.
If it doesn't work out for you, you have a major problem.
(19:54):
The other thing, too, is appreciate when you just start
talking about private investments like private equity and private credit,
it requires an awful lot of due diligence and it's
very easy. We've seen this before with prospective clients coming
in where they have some of these investments and they
can be very illiquid, you can't sell them. They're not
always very transparent as to what the performance is, and
(20:18):
also the fees in general can be quite high. So
what you have to appreciate is this, the more money
that goes into these fields, and in particular, if there's
four and K money, it's very attractive for Wall Street
because they make great fees on those types of funds.
So the concept of being able to put those funds
in a four and K is very appealing to them.
(20:41):
But the more and more money that goes into those areas,
you're going to have more funds that really underperform. And
I was just talking with a colleague or college buddy
of mind. He did really well with a company that
was bought by a private equity firm, and you know,
he just talked about how in that space back in
(21:01):
the late eighties and nineties, in two thousands, if you
were in that space, you were making money handover fist,
just making a ton of money. Now there's so much
more money in private equity that the competition and the
evaluations on those acquisitions are so much higher that it's
not the same returns that you saw ten, twenty, or
(21:23):
thirty years ago. And that's not surprising, right. This is
what happens from an investment perspective, is when there are
those oversized returns in a particular area that's where a
lot of capital flows, and so it's one of those
things where you have to just be very aware of
the fees, the overall performance, the consistent performance of those
(21:45):
asset classes. And here's the other thing that's important. This
is more so for people who are fiduciaries with those plans.
This is meaning that if you're a small business owner,
you have fiduciary responsibility, which includes personal liveability to manage
those plans accordingly, both from an administrative perspective as well
(22:05):
from an investment perspective. And guess what, the more fees
you have in a plan, the poorer performance you have
in funds, you potentially are setting yourself up for a lawsuit.
And this is what happened, you know, certainly back in
the nineties with the tech bubble, where a lot of
companies had their own individual stocks in their former ke
(22:28):
plans and they were putting their plan participant money in there.
That's where a lot of these lawyers are looking at saying, hey,
this is going to be very attracted to them for
lawsuits because of those higher fees and potentially underperformance in
those funds. So you have to be aware from a
fiduciary perspective. If you're a trustee on those plans, you
(22:51):
know what does that mean to put in those type
of asset classes that can be more speculative in nature
and have higher fees. So really very important to be
aware of that and do your due diligence, and it'll
be interesting to see what happens. I think it's you know,
very early. The Department Labor has not come out with
any real guidance yet and that's where it's going to
(23:12):
come into play. And we talk about this all the time.
You know, again, making sure that your full and K
plan has very low fees. And in general, you want
to be as aggressive as you can from an equity perspective,
but you also want to have broad diversification across a
lot of asset classes because this is your retirement account.
(23:32):
You don't want to mess around with that. Well, folks,
we're gonna go to commercial break, but come back and
join us as we take your questions. You're listening to
let's talk money brought to you by a bruchet financial group. Well,
we help our clients prioritize their health while we manage
their wealth for life. Come back and join us. Folks,
as we take your questions. Welcome back everybody. For those
(23:54):
of you just joining us, my name is Martin Shields.
I'm the chief Wealth Advisor at Bruchet Financial Group, and
i'm your host today for Let's Talk Money. It's great
to be here with you. Now. It's raining out, folks.
It was just cloudy before, but I think it's just
gonna be a quick showers. But it's great to be
here with you on this summer morning. And you know,
we can't have just all gorgeous days like yesterday. We
(24:16):
have to have some rain. Matter of factor. Our yards
look a little brown. So I think this is probably
a good thing. But it's great to be here with
you to answer any questions you may have regarding your
financial planning or investment management concerns, and I encourage you
to call in with those questions. You can reach me
at one eight hundred Talk WI. That's eight hundred eight
(24:38):
two five five nine four nine. That's eight hundred eight
two five five nine four nine, or you can email
me at ask Bouchet at Bouchet dot com. So I
think I talked about this before. I I do occasionally
run some traathlines, and before I used to do what's
(24:59):
called the Aqua bike, which is just the bike and
the swim, and last two years ago I did what
was called an International distance, which is it includes it's
about a almost a mile swim, twenty six mile bike ride,
and then a tank k run, which I did. And
(25:19):
I haven't been running too much because of all the
surgeries and bad knees and joints and everything. But now
I've been able to move a little bit more into
that realm and so next Saturday, I'm doing a half
iron Man, So that is a one point two mile swim,
it's a fifty six mile bike ride, and it's a
(25:41):
half marathon. So I've been training for it. We'll see
how it goes. You just never know until it's actually
game day. And it's up in Lake Georgia, and it
is a great venue. It's right out of a million
dollar beach right there. That's where the swim is. The
bike ride goes up around Brandt Lake and just gorgeous areas.
(26:04):
So hopefully the weather will be good. Times i've done
it in a past it's been great weather, which makes
all the difference in the world, so hopefully that'd be good.
It definitely all this training keeps you in shape, that's all.
I would say, I've been able to eat whatever I want,
and I find that I have I'm just really hungry
all the time. So it definitely helps just kind of
(26:28):
keep me in shape and keep me a discipline. So
let's have a conversation on a few items that I
think it's important. You know, as I bring these items up,
usually these are things that clients are asking me about
in meetings, and so I think it's important to you
as listeners to also be aware and then maybe you
can implement them in your own personal situation. One of
(26:49):
the questions I get is with outside form and k's.
Let's say you leave a job or you have an
old form and K what's the best thing to do
with that? And you know, certainly what you don't want
to be doing is leaving that four and K where
it is, because what's going to happen is most people
these days, you know, you have multiple jobs. You're not
(27:10):
just saying at one company, You're moving on to different
companies and you end up collecting four one k's. And
I've seen this with prospective clients coming in where they
have you know, three or four four one ks or
maybe they have a couple iras, and that gets to
be problematic. There there is let's just be clear, there
is no value in diversifying in financial custodians. And all
(27:35):
I might mean by that is, you know, I hear
this sometime, Well, I don't want all my money at
Schwab or Fidelity or Vanguard. And you know I've said
this before. There is those three custodians. There's no risk
of them going out of business. I mean, I'm not
saying it's zero, but it's ninety nine point nine nine
percent that they're going to be around here longer than
we are. And you know, this concept of having accounts
(27:59):
in more latile custodians not does not make sense. And
you know the other thing too is you know with
the form and K, even at the biggest and best,
you still pay for some fees, even if it's just small,
but some fees that if you can avoid pay for them,
you'd rather do that. And you know, these days, whether
you know you open a Fidelity or Swab or Vanguard,
(28:21):
you can have an IRA with really minimum fees and
very low cost investments. So I would always recommend if
you have a bit of a plan, right, You can't
just roll that money into an IRA and start buying stocks,
you know, kind of on a whim. But if you
have a fairly well thought out plan, which really is
(28:41):
just about broad diversification in those iras, you're definitely better
off rolling it into an IRA and consolidating your accounts
in that regard. You know, I always say, you know,
relatively speaking, if I had to look at and say
at my kids, probably everybody's going to have three accounts.
They're going to have a roth iray, they're going to
(29:02):
have a traditional array, and they're going to have a
trust or a broken account or something like that. I mean,
that's at the minimum. You know. That's one of the
reasons why when I look at what we do for
our clients and the challenges that they face, it's because
not only will they have those three accounts that I mentioned,
but their spouse will have those three accounts, their kids
(29:25):
may have those some of those accounts, and then they're
going to receive probably similar accounts from their parents on
both sides of that relationship, could even be from grandparents
as well. So you think about the complexity that exists
with all those and I talked about you know how
important tax planning is when making those decisions. And you know,
(29:50):
we've added really a tax practice to our firm about
three or four years ago where we start doing some
individual tax returns for our larger clients and also we
do a lot more tax planning than we have before.
And it's just invaluable. You know, that is one thing
that you can't control is trying to minimize your taxes.
(30:12):
You know, you can't control what the market's going to do,
but you can't control you know, how you handle your
taxes and your tax planning. And you know, we always
say this that tax prep. I mean, I do think
tax prep is going to be one of those things
that AI will be very effective at because really what
tax prep is is give me the rules and I'm
(30:32):
going to tell you based on your situation, you know
what needs to happen. Now. Tax planning is where that's
will always be something I think individuals will be able
to add a lot of value to because that's where
you take everything together and you make adjustments before those
taxes occur how to minimize your taxes. And you know,
(30:54):
we just had a meeting on Friday with a great
set of clients been on for a long time and
I had been. Cenzo Testa is one of our CPAs,
one of our tax experts on in that meeting with us,
and we were there for two hours plus, uh, talking
about their situation. And it's very complex. They have a
lot of moving pieces and but the tax planning that
(31:16):
we you know, we're gonna say Vincenzo was able to
do for them is phenomenal. I mean, it really is
amazing what we've been able to do for these clients.
And they have, you know, different interests. They like to travel,
they have a number of different pieces of real estate,
both from a rental perspective but also the second homes.
And they're charitable as well. They're very charitable individuals. And
(31:40):
so combining all that together that you know, in corporating
that charitable giving with wrath conversions with the real estate
to try to minimize their taxes, that is where the
real value is. And whether it's working with your CPA
or your wealth manager, uh, it's you've got to be
getting that advice. If you're not, you're missing out. And
(32:01):
I see this, you know a number of times where
you know, somebody works with their accountant or CPA to
do their tax prep, but they're not getting any tax
planning advice and they're missing out. If you're not getting
tax planning advice, especially as your net worth grows and
as your complexities grow, you're not that's where the real
(32:24):
value is. So you've got to make sure that you're
you're getting that. And you know, this goes into a
question that we get as well, which is do we
have minimums to come on as clients and why is that?
And we do have a minimum, our minimums half million
dollars of investamble assets, and we listen, we would like
to not to have miniums. Our goal is really to
(32:45):
help as many people as we can. That really is
the ethos of our firm, and everybody that works there
has that mindset, and really it's kind of part of
what the radio program is is to give guidance just
to the general public, because you know, we're fiduciary. Our
goal really is to do what's in our client's best interest.
But unfortunately in our industry that's not always the case.
(33:07):
And I see this with people being sold things where
you just scratch your head wondering, you know, about the
ethics of somebody that would sell individuals certain investments that
it just does not make sense for them, it's not appropriate.
And so you know, from our perspective, educating people is
so important, but when it comes to working with our clients,
(33:29):
we really dive in. And you know, from a planning perspective,
I talked about the tax element, but the fundane planning
is as complex and as valuable. And we've talked about
this before. We're really our client's personal CFO, and that
takes a lot of man hours to provide that level
(33:49):
of service. And what we've found is really, you know,
we have to have at least a certain size from
an economics perspective to make that investment with our clients worthwhile.
And you know that is just so important. What we'll
always say, though, is if you need help and guidance,
will help you one way or the other. Meaning and
(34:10):
what I mean by that is, you know, whether it's
just some pro bono advice to get you moving in
the right direction, or we'll connect you with another fiduciary
that does not have those minimums. You know, some smaller
firms don't have minimums, so you know, you might be
we might be able to connect you with them. So
if you need guidance in your below our minimum, we'll
(34:33):
find a way to help you one way or the other.
And that's just important because we want to make sure
that you know, as many people as possible are getting
the right advice because these days, you know, you're really
on your own. You are and I've said this before,
which is, you know, it's not what you make, it's
what you save. And it's so important that you're doing
(34:55):
all the right things from an early age. And I've
seen it before where you know that millionaire next door,
they don't make a lot of money, but they're great savers.
And boy, when we get to talk to them about
retiring early at age fifty five or sixty because they've
been doing such a great job and they let us
do our job and manage the portfolios, it's a it's
(35:15):
a great conversation. It is. That's why we love our job,
because to be able to give people that good news
and you help them, you know, kind of plan on
what the retirement looks like and how they want to
spend those dollars they've been so diligent in saving. That's fantastic,
but what can be also very difficult is you know,
when it's usually not a client because we will have
(35:37):
given guidance, But when a perspective client comes to us
and they make a substantial amount of money and they're
not prepared for retirement, it's a it's a difficult conversation.
It's a very difficult conversation, and you know it's one
that we are always we don't want to have that conversation,
but we're always willing to have to make sure that
(35:57):
we can kind of try to get them turned around proper,
believe and start saving because you think about this, really,
what retirement is you're just taking your income and you're
replacing it with dollars coming from someplace, whether it's social Security,
atension or your portfolio. Now, you can also limit some
of your spending when you retire, but you know, we
(36:19):
say this, most people don't want to do that, and
I want record. I don't want to have to be
telling a client they have to limit their spending. You know,
I always say, when you're in retirement, if you have
your health, you have everything, and you know, if you're
in a decent financial position, don't be afraid to spend
those dollars and that's the guidance we're usually giving our clients.
(36:43):
And you know, usually you're going to spend more money
in retirement, right, So you think about this. If you're working,
you're working thirty forty fifty hours a week. Well, now
if you're retired those hours, you're going to be spending
dollars or doing something where you might spend dollars and
you might want to travel more or you know, you're
going to home depot more or whatever the case may be.
(37:05):
It's just the reality. So when you think about your
retirement and your spending, you've got to actually think at
a higher level than you are when you're working. And
that's that's very important from a budgeting perspective. And you know,
there's some of these financial experts that I kind of
roll my eyes at that some of their advice is
(37:25):
less than stellar, and you know they kind of pooh,
who budgeting? And you know I have to laugh as well,
because you know, these people don't need a budget. They
make a lot of money. But ninety nine percent of
folks really need to be aware of budgeting even when
they're working. And it doesn't have to be you know,
(37:45):
to the nth degree, even at a very level of
budgeting that can be very valuable. So you know, just
being aware of that, having that budget in place, and
when you move into retirement it becomes that much more important.
They have the budget to know where you stand on
what your long term findag plan looks like. We're going
(38:06):
to go to the phone lines. We have Carrie from
Niski Yuna carry you there.
Speaker 2 (38:11):
Yes, Hi, thank you so much Martin for taking my call.
Speaker 1 (38:14):
Yes, what can I help you with?
Speaker 2 (38:17):
Well, I have the best financial people in the world.
It's your group, and I unfortunately gave some misinformation that
I had to correct over this weekend, so I didn't
get a chance to call my great advisors Scott and Katie.
But here's my dilemma. So I am retiring on Friday,
(38:39):
that is my last day at my job. I do
have a pension. I am not taking Social Security for
a while. I am sixty three. I have the option
through my job to take half my days and they
will keep it in an account and pay just my
premiums for my medical for the next year and for
(39:00):
my dental for the year and a half, and then
after that you know, of course, in a year and
a half ish I'll be sixty five, so they will
if I opt to do the Medicare advantage, they will
pay whatever that is, and that I believe is about
five or six hundred dollars going forward taken from that account.
(39:20):
Is it better then to just keep that in that
medical account as that half of my day's amount or
take a quarter of my days in cash?
Speaker 1 (39:31):
Will you say in the medical account? What is that
like an HSA HRA? Do you know what that is?
Speaker 2 (39:36):
I thought it would be an HSA because if it
was an HSA or an HRA, they would be paying
anything like copays and things like that. Nope, it's not
for my premiums. So my premium for the next year
and a half is probably going to be roughly about
twenty five hundred dollars and maybe another eight hundred, so
maybe I'm going to say another thousand for the dental
(40:00):
and then going forward after that once I'm sixty five,
it'll be between five and six hundred dollars a year
for just the premium amount of the medical advantage.
Speaker 1 (40:11):
Okay, well, I'll take this a two part here. One
is I'm going to give you some thoughts here over
the radio, but obviously let's have a conversation in more
detail this week, and also congratulations on your upcoming retirement.
But to the extent if this is at all a
tax advantaged account, so that would be the case, if
(40:32):
it's an HR or an HSA, you want to keep
those dollars in there, and if they're able to put
dollars in there for you to use for any sort
of medical expenses, whether it's premiums or other expenses, absolutely
that's great. And to the extent they're willing to cover
any of your medical expenses in two especially as you
(40:53):
until you get to be sixty five, that's fantastic because
that's where most people really struggle, as you know, when
they leave their job and their job's been covering some
element of their health insurance and now they got to
cover it on their own. It could be cost prohibitive.
So again, without knowing all the details, my general recomdation
is to keep those dollars in those accounts and use
(41:16):
those to cover any of your premiums or medical expenses.
Speaker 2 (41:20):
And the amount I have a lot of days, I
don't take six days or days just you know, to
take them. So the amount of that half of the
days will be about seventeen thousand dollars. If I took
that in cash, of course, that would be half of that.
I am told that seventeen thousand dollars ish is not
(41:40):
going to be taxed. And of course I'll pay the
Medicare advantage when I'm sixty five and they'll reinburse me
for that. But I'm assuming again that's tax free, because
this is money that belongs to me that they are
just holding. And again, if I die, that dies with me.
Speaker 1 (41:58):
So that's right. But I think you could use it
any other time during your retirement as well for medical expenses.
Speaker 2 (42:05):
So no, not for medical expenses, that's if it was
that would be a no brainer.
Speaker 1 (42:11):
But oh, just the premium yeeah. Well, again, I'm gonna
say this is something that might be I don't like
to give you a wrong answer for the radio, I
think giving we'll have to sit down with you and
go through the exact numbers to kind of map it
out to see which one is going to be best,
because if it's gonna be only used for premiums, just
to make sure that the you're going to use those
(42:32):
dollars fully versus not so.
Speaker 2 (42:37):
Right, right, And my other thing is insurance always goes up,
so yeah, I mean it covered.
Speaker 1 (42:43):
Yeah, my general gut feel is that you're gonna want
to keep it in that account and cover those expenses.
That's what I've you know, that's what I'm thinking right now.
But again, in these situations, I'm really gonna want to
look at the exact numbers and Katie and Scott or
two of our best advisors, so they'll be able to
run those exact number for you to give you that guidance.
But that's that's what my gut is thinking.
Speaker 2 (43:04):
I got to tell you, mister Shields, I've been listening
to Steve Bouchet for thirty years and at six o'clock
PM on a Sunday when he used to start the show,
and it's because of that, thank you, my husband and
I are able to retire.
Speaker 1 (43:18):
So well.
Speaker 2 (43:19):
I want to thank you guys. And we had no
qualms when we came to meet you guy, you know
and have our meeting. My husband will Dad saying all
these people are our people, so.
Speaker 1 (43:29):
Well, I can't thank you so much. That's very kind
of you say.
Speaker 2 (43:34):
And we do love Scott and Katie and Andrea and
Lauren all of you, so thank you so much.
Speaker 1 (43:42):
Again, Well, thank you, and again congratulations on retirement that
you're moving into another great state stage of your life.
Speaker 2 (43:49):
Yes, thank you. And now I have to make sure
I'm healthy. I won't be doing what you're doing, but
people out there walking more so good.
Speaker 1 (43:57):
Good the lungs, you're moving reasonly healthy and keep moving
and keep mentally healthy. You're you're good.
Speaker 2 (44:03):
That's right. I have to make sure that I get
every penny of that seventeen.
Speaker 1 (44:08):
That's great.
Speaker 2 (44:11):
Well, thanks, have a great day.
Speaker 1 (44:14):
Yeah, take care, thanks bye bye. Well, that's that's great.
Uh that kind of words from Carrie, and that's she's right, Steve.
He's been doing the radio show for thirty years. He
used to do it Sundays at six, and uh yeah,
it's then when I joined, we're doing it Sundays at
I'm sorry, Saturdays at noon, and now we do the
(44:38):
show Saturdays at ten and Sundays at eight. But no,
it's it's great to talk to listeners like Carrie who
now became clients, and we have many individuals like that,
and I'm excited for her for retirement. That's fantastic. Oh right, really, folks,
we only have about five more minutes left the show.
So if you have any other questions, again, you can
(44:59):
call in at eight hundred eight two five five nine
four nine, or you can email me at Askbouchet at
Bouchet dot com and any questions you may have. One
of the other things I just wanted to talk about
real quickly is this idea of having a network statement.
(45:19):
I can't stress that importance, the importance to you, just
to the extent that as you add more complexity. A
network statement is real simple. All you're doing is you
take it's a snapshot in time. You're taking the value
of your assets, your house, your cars, anything that has
you know, real significant value. And then below that you're
(45:42):
taking your liabilities, any monies that you owe. I wouldn't
necessarily include credit card debt to the extent that you
pay it off. Now, if you don't pay it off
on a monthly basis, which I really hope that you
don't do this, But if you paid off on a
monthly basis, which hopefully is what you do, then you
don't want to you don't need to include that as
(46:04):
one of your liabilities. So you're including any long term
debt UH that you have UH. And then what's remaining
uh is uh your uh that's your net worth. And
he's just a great way. You have a lot of complexities,
a lot of moving pieces to be able to take
a snapshot of where you stand with your net worth
(46:24):
over time. And you know, with many of our clients, UH,
they have a number of assets that are not overly liquid. UH.
So what's good with you in your net worth is
you get to see, you know, what which assets are
liquid versus not uh, how they are titled under different spouses.
And we talked about this yesterday in the show of
(46:44):
making sure that things are titled properly uh in order
to minimize any estate taxes or taxes in general. UH.
And then also you get to see what the tax
uh ramification is if you want to sell those or
utilize them for your cash flow. And so I really
(47:04):
would encourage you if you don't have it already. We
do this for our clients as part of their retirement planning.
But that you put together that network statement, it's gonna
make it's gonna really give you a good picture of
where you stand. And what we do is, you know,
every year when we get together with them, we update
that network statement so they understand where everything kind of
(47:25):
all comes together, and it really does say, you know,
what is your overall financial picture look like? And it's
just so important. So two takeaways today, Get that network
statement in place and get the budget in place with
that tax planning. All right, folks, Well we spend another
hour together. As always, it's been fantastic. Always enjoy this
(47:47):
time with you. You're listening to Let's Talk Money, brought
to you by a Bruchet financial group where we help
our clients prioritize their health while we manage their wealth
for life. Folks, enjoy your sun and remember take care
of yourself and take care of each other
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