Episode Transcript
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Speaker 1 (00:00):
Good morning, Hello everyone, and welcome to Let's Talk Money.
My name is Samantha Macy and I will be your
host today. I am a wealth advisor Bouchet Financial Group.
I'm a certified financial planner and a Certified Exit Planning Advisor.
Here at Bouchet, I'm joined by my colleague Vincenzo Testa,
who's a CFP and a CPA. He's also a wealth
(00:20):
advisor and tax planner who heads up for tax practice
at the firm. Vinnie, Hello, thank you for joining us.
Speaker 2 (00:27):
I say, have no problem.
Speaker 1 (00:30):
So I work closely with our investment infants playing needs
with their clients. I make sure their investment decisions go
hand in hand with their financial goals. But as a SIPA,
I have a little bit more specific expertise here where
I work with business owners to identify and build the
value of their business with the ultimate goal of getting
(00:50):
them to the finish line. And that finish line is
really helping them exit the business today and maximizing their
profit and also at the same time prioritizing their legacy goals.
A lot of owners have most of their net worth
tied up in the business itself, and that's a different
planning problem than the typical retirement conversation, so I will
(01:10):
specifically work with these clients on navigating this. So Bennie
and I are giving Steven Bouchet a well deserved break
this morning, and I think we have a great show
planned for you. And it seems to be shaping up
to be another beautiful weekend here in up state New York.
The sun is starting to peek out after a terribly
rainy week. I think we're due for some nicer weather,
(01:33):
and some might say the same sentiment about the markets,
but we'll discuss that in a bit, and hopefully everyone
can get outside today and enjoy the nice weather while
we have it after so many rainy days in a row.
And I was actually able to get out last night
and go to the John mulaney comedy show It's Back.
And first off, he was hilarious. It was a great show.
(01:54):
He did a great job. It was a fun evening,
but it was humid, and it was funny because he
kept cracking jokes about how moist the air was and
how just standing on stage he felt like he was
getting rained on. And you know, it's back, it's open air.
So it was a valid point and it was. It
(02:15):
was just so funny but great time. I was actually
there with Lauren Bouchet, Steve's daughter, and my my colleague,
and it was a really fun great tickets. Highly recommend
you catch him at some point if you can. And
just going to Spack in general is such a treat
mean to have that in our community accessible to us,
you know, all the great shows, artists, medias that come through.
(02:38):
It really is such a joyd dealle to go to
that in our own community. Well, today, I encourage anyone
if you're listening to call in with questions. You can
reach me at one eight hundred talk WGY. That's one
eight hundred eight two five five nine four nine. We
love callers. You can also email questions and to ask
(03:00):
at Bouchet dot com and Vinnie and I will try
to address them during today's show. So thank you again
for tuning in. Of course, we're going to kick off
today's show by talking about what's going on in the market,
and then we'll dive into some great tax and planning
topics that I think will be interesting to you. So
(03:20):
stay tuned throughout the show and hopefully you'll be able
to have some great takeaways for your week. So let's
talk about the market. It was, you know, a little tumultuous.
This week was genuinely a wild ride, but it still
landed in positive territory, with the Dow and SMP each
(03:41):
gaining roughly one percent and the NASA climbed about one
point six percent. There there was a lot of factors
that played into that. This week. We saw the Fed
hold interest rates, saw an AI sell that we've been
experiencing for the past few weeks, and then Thursday rebound,
So it was not a boring week whatsoever year to
(04:04):
date that SMP closed Friday up point seven percent, the
NANSAC rose one percent, and the Dow game point five
to three percent, with Amazon jumping after a strong cloud
earnings beat. Long term yields kept climbing into Friday, with
the thirty year hitting its highest level since two thousand
(04:25):
and seven and the ten year topping four point seven
percent for the first time since January twenty twenty five.
When it comes to big tech Amazon, Microsoft, Alphabet, they
added close to one point five trillion dollars in combined
market value this week after recording strong cloud growth. But
on the flip side, Apple, Meta and Tesla fell this week,
(04:48):
So let's talk about this week and the variables that
we saw play out. So Monday and Tuesday, it was
quiet on the surface but shaky underneath. Chip stocks got
hit hard both days as investors debated whether AI spending
is getting ahead of itself. Nvidia alone dropped five percent
on Monday, and Wednesday was a big day. The Fed
(05:09):
held its benchmark rate steady at three and a half
to three point seventy five percent, the fifth straight meeting
without a change. What was notable was that three committee
members dissented, and not in the direction I think most
listeners would believe. They actually wanted a rate hike, not
a cut. Over lingering inflation concerns, and that hawkish undertone
(05:32):
spook the market. The SMP and Dow both fell rough
lee one point five to one point six percent that day,
and longer term treasure yields jumped, with a tenure moving
up to about four point sixty five percent in the
thirty year, pushing above five point one percent. Thursday was
(05:52):
the turnaround. We saw a sharp rebound. The SMP jumped
one point seven percent, the Dow rose one point two percent,
the NAZDEKXERG two point eight percent, snapping a six day
losing streak. The catalyst was Microsoft, whose cloud business grew
around forty three percent, easing fears that AI spending isn't
(06:12):
paying off. It was the largest ever single day jump
in a company's market value after impressing investors with latest
earnings reports. Now, not everyone got the memo about this, though.
I Meta fell roughly ten percent on weaker guidance, a
reminder that not all stocks trade the same anywhere, specifically
(06:34):
in the AI space. And finally, on Friday, markets closed
out the month on a firmer note. Despite a choppy session,
Amazon jumped fifteen percent after beating expectations on its cloud business,
echoing Microsoft strength two days earlier. We saw modest gains
across US and Pe down Nasdaq. All this happened even
(06:55):
as long term treasure yields kept climbing. The thirty year
hit its hight level since seven, like we talked about,
and you know, it's it's a single signal worth watching, right,
and that's something that as advisors that we do for
our clients. July as a whole was more mixed. The
dows squeezed out a point three percent month again it's
(07:17):
fourth straight well. The SMP slipped about point one percent
and the Nasdaq fell three point two percent, dragged down
by the sell off earlier this month. Year to date,
the SMP are both up in high single digits to
around nine percent, and the nasduck is in similar range
after a rocky stretch earlier this year. So all this
to say, I mean, we're still hovering around those all
(07:39):
time highs that we've hit and still a great time
to be an investor. Right, It's still very positive year
to date, but we have experienced some volatility this year,
and you know, I do not believe that it's over
at this point when it comes to some of the factors.
Of course, we have geopolitical tension and affecting the markets,
(08:01):
right so the Iran roarer. We've seen a ceasefire break
down in the Middle East, We've seen escalating tension over
the past few days, and additional conflicts seem to be
on the horizon. We'll see how this continues to evolve
over the coming days and weeks. Of course, it could
completely reverse course, you know, we can we can only
(08:24):
hope for the best in that situation. And when it
comes to bonds and other assets. Treasury yields kept climbing
all week and hit fresh multi high year multi year
highs for Friday, the ten year again top four point
seven percent, and gold has remained elevated, sitting above forty
one hundred ounce, a sign some of users are still
(08:46):
reaching for that hedge even though stocks are near highs,
and this speaks to just the uncertainty that some people
are feeling about their investments. But it's always good to
have a diverse by portfolio, and that's why diversify, right,
so that if there is volatility, you have a more
conservative part of your portfolio, such as bonds such as gold,
(09:06):
that are providing that hedge against the volatility. But if
you're really looking for that growth over the long term,
you want to be an equity investor and you understand
that you have to have a long term perspective when
it comes to inflation. The most recent CPI report for
June actually came in cooler than expected. Headline inflation ease
(09:29):
to three point five percent year rear, down from four
point two percent in May. That was worrying some experts
as they were projecting out what might be occurring for
the rest of the year. Core inflation fell to two
point six percent, and this strips out food and energy
in that estimation. The improvement was mostly an energy story
(09:52):
when gas prices dropped nearly ten percent in June as
the ceasefire took cold and this is a big reason
headline fleetion cooled so sharply. What is horisome is the
headly number is still well above the fed's two percent target,
and a lot of economists see that June reading is
encouraging but not conclusive. So with the price of oil
(10:14):
spiked back towards the one hundred dollars a barrel earlier
this month, it's something that surely the FED will be
watching in terms of FED commentary. Despite the cooler June
CPI figure that we have seen, Wednesday's meetings showed a
FED that isn't ready to declare victory, and FED Chair
Kevin worsh his own words after the Jun report or
(10:37):
that the mission is not accomplished at the moment, and
then with the three dissenting votes on Wednesday in favor
of a rate hike instead, there seems to be you know,
some some members of that team that believe that there
might be rat hikes on the horizon, So the Fed
(10:58):
seems to be in a wait and see mode. No
move is expected before the September meeting, but you know,
we'll be watching the FED communications between now and then,
and if anything does come out, it would likely impact
the markets with some movement either way as investors tried
to decipher what the next move would be by the Fed. Overall,
(11:20):
the US economy is growing at slower pace, but it's
still growing and it's not letting anything knock it down
at the moment. GDP growth sank to one and a
half percent last quarter. The government estimated down two point
one percent in the previous quarter, in below the one
point eight percent that economists expected, But after stripping out
(11:41):
volatile government spending and trade numbers, the economy grew at
a relatively healthy rate at three point nine percent despite
the war and you know other variables that are going on.
Growth in consumer spending has accelerated quite a bit, accelerated
to three point two percent from point five percent in
Q one, and analysts say that household budgets were aided
(12:03):
by the bigger than usual tax refunds this spring, you know,
with senior deductions and other tax refund deductions. That were
available to people this year. So that coupled with gas
price declines in June stemming from the seafire seasfire at
that time, you know, that has allowed people to have
more padding in their pocket. So we've seen spending still
(12:26):
strong for consumers thanks to watch moving forward. I mean,
obviously we're going to be watching in the market. So
how is the volatility going to play out in the
near term? What is the FED going to be saying
at the next FED meeting? Will we see great hikes?
Will the FED still be in that weight and see
mode for you know, another period of time this year,
(12:48):
All that is to be seen. We'll be keeping an
eye and upcoming jobs data as well, and you know,
just overall just looking at how the stock market is
moving in. Both Apple and Amazon reported on Thursday their
earnings after the clothes and the market treated them very different.
Tim Cook, the CEO of Apple, just gave his last
(13:12):
earnings call and he'll be passing the baton to John
turned Us on September first, and the results of that
call were mixed. Back Revenue beat expectations on surging iPhone
and Max sales, but supply constraints and weakness in China
and its services business dampened the going away party for Cook.
(13:32):
So ultimately, investors didn't love what they heard and stock
fell in the after hours of trading and put a
dent in the major hot streak for what we've seen
from Apple. But you know, the Apple has achieved a
record high earlier this week, apart from investors appreciating that
(13:54):
it wasn't spending as much on AI as rivals were.
Amazon had a very big week, and like Apple, investors
were deeply pleased with Amazon, showing the company stock jump
nine percent in the after hours of trading after it
said that sales of its cloud computing unit, Amazon Web
Services grew the fastest since Q four of twenty twenty one.
(14:17):
This growth was so impressive that investors didn't seem to
mind that they also hiked their AI spending projection from
two hundred billion to two hundred and twenty billion, which
is a figure that recently spooped investors, but seemed to
you know, not be a cause for worry as they
see that they actually are growing the Web services in
that cloud competing unit. So that was the week in
(14:40):
a nutshell again. If you are someone that wants to
call in. You can reach us and you can call
in at one eight hundred talk WGY. The number is
one eight hundred eight two five five ninety four nine.
We would love to hear from you. So, you know,
as we think about the markets and the week that
(15:03):
we've experienced, you know, let's talk about what this week
actually could mean for you in your financial picture. I mean,
volatility is a part of being an equity investor, right,
and that's not going to be something that goes away
in the short term, midterm, or long term. But we
want to have a long term perspective when we think
(15:26):
about being an investor and getting through volatility. I mean,
the Wednesday to Thursday swing is a great real time
example of why reacting to a single bad day is
usually a mistake when it comes to being an investor.
I mean, people who panicked on Wednesday, and let's say
(15:47):
they sold out on Wednesday totally missed the rebound on Thursday.
And that is probably the worst thing that you can
do as an equity investor. I mean, you are investing
for a reason, right that long term growth. We know
that if you're invested in stocks over the long term,
as long as you're in a diversified portfolio. That is
(16:07):
the best way to maximize your wealth in terms of investing.
If you compare their turns to bonds, you're going to
be out performing over the long run. And that's just
something that we know historically. So selling out at the
wrong time is a way to really, you know, flip
the tables on this. You sell out, you miss the rebound,
(16:29):
and then you reinvest that cash when the market's already
at that rebounded price and you know you're not going
to get that appreciation. You've already missed the voat. So
really you don't want to do that. You want to
stay the course. You don't want to make any kne
r reactions to the market like that. And just think
about it like this. If you are someone that doesn't
(16:50):
look at your accounts very often, maybe you looked at
the accounts that you have this morning, you would see
that your account is actually positive for the week, right,
But if you looked at it every day this week,
you would have seen the markets playings that were happening.
It might have felt that anxiety and that urge to sell,
to make a change, to become more conservative, whatever it is.
(17:12):
And if you had just stayed the course. Like the
person that checks their account less frequently, you know, you'd
be in a positive situation for the week, and hopefully
that person also didn't make that change right and they
let it ride even though it caused them some stress.
But ultimately you would end up in the same place
as someone that didn't check and some that did check,
as long as both of you didn't make any changes.
(17:34):
So just something to think about. You know, as you
think about your your investments in long term, make sure
you're in the right risk tolerance for yourself. If you
can't handle being one hundred percent in stock because it
is keeping op at night and it's causing you stress,
maybe you shouldn't be. There's other variables that play into that.
I mean, what kind of growth do you need over
the long term to sustain your spending. How old are
(17:57):
you Should you be maximizing taking on as much risk
as possible because of the long term you have that
ability or are you retired? But if if that is
something that is just it's not for you. Being a
little bit more conservative, maybe be in an eighty twenty
blend or sixty forty blend in terms of stock devans,
(18:17):
but just make sure that you do have enough in
the stock market to make sure that you're getting that
that growth for the long term. Well, we are coming
to the bottom of the hour, but before we we
go to our break, I'm gonna let Vincenzo jump into
his first topic that he has for you today, and
(18:39):
he's going to be reviewing and sharing some information about
Trump accounts. Then you go ahead.
Speaker 2 (18:45):
Thanks Sam. Again, we encourage all listeners to call in
at eight hundred talk WGY. That's eight hundred and eight
two five five nine four nine. So with legislation that
was passed last year, these new retirement accounts per se
are put into place on July fourth this year, so
just us than a month ago. And what they're really
(19:05):
geared to do is allow parents, grandparents, aunts, uncles, whatever
we have, you get money into a retirement account for
children as early as possible, and if you know anything
about investing, the earlier you get it in, the more
what they call compound interest is going to occur on
that money. And compound interest is gains on top of
(19:29):
gains on top of gains, or interest on interest on interest.
So give you an example. Let's say you put one
hundred dollars in and you make ten percent every year.
The first year, that one hundred dollars turns into one
hundred and ten, and the gain in the following year
instead of ten dollars, it's actually eleven because that extra
(19:49):
gain that was in the first year, there's another ten
percent on top of that. So let's book compound interests
and over time returns become exponential. So if you were
able to get money into a investment account a retirement
account for your child at the age of one, two, three, four, five,
except these early ages, that compound interest is gonna benefit
(20:12):
that child in a major way. So that's what these
Trump accounts are really aimed to do. So what they
are are non deductible iras. Essentially, so a parent or
grandparents starts on for a child. The annual maximum contributions
are five thousand dollars per child combined between all sources
of contributions, and the age eighteen, a child takes ownership
(20:35):
of the account. It's a non deductible IRA, meaning that if
money is pulled out down the road at age fifty
nine and a half, that's when there would be no penalties.
If you pull out money before then, there would be
a penalty. There is ordinary income tax on the gain
and not the original contribution. So that's what a non
(20:56):
inductible IRA is. The regular IRA is all the funds
that you pull out are taxable as ordinary income, but
the non deductible allows you to not have tax on
the original contributions. But the original contribution is after tax.
So with the regular IRA, your contributions are tax deductible.
With the non inductible IRA, they're not deductible. So really
(21:21):
the strategy to employ with this one is children born
between January one, twenty twenty five and December thirty one,
twenty twenty eight are eligible for a free thousand dollars
from the IRS, So you had a child born during
that time, you get a free thousand dollars. And then
otherwise you make contributions annually, weekly, whatever what have you.
And the ad you download is the Trump account I
(21:43):
think it's called Trump Accounts. It's on the app store
on the iPhone. And we are coming to a commercial break,
so I will get into this more deeper when we
get back, but these are really a great tool. I
open up one for my son. But the strategy to
employee is really, you know, execute a ross conversion at
age eighteen. That way you get these funds into a
(22:05):
roth IRA and they wrote tax for you for forty
fifty years up until you child's retirement. You are listening
to Let's Talk Money, brought to you by Bouchet Financial Group,
where we help our clients prioritize their health and we
manage their wealth for life. Thank you. You're listening to
Let's Talk Money, brought to you by Bouchet Financial Group.
My name is Vincenzo test I'm one of the wealth
advisors here. I'm joining Sam Macy who's hosting the show,
(22:28):
and we have a caller already coming back. In the
commercial break, we have Steve from Colon.
Speaker 3 (22:35):
Yeah, Kanes, we called the scale book. I'm questioned for
you on Can you hear me?
Speaker 2 (22:40):
Okay, I can hear you? Okay, Hello, Okay.
Speaker 3 (22:45):
So I'm about forty years old and I work for
the state, and I got I question it for you.
Though with the way my fear system is set up,
I can't either. I can retire, I'll have thirty few
years and fifty five, but I don't want to go
to sixty two. And if I started pulling requirement at
(23:07):
fifty five. They dig me pretty good. My question is
to you, I definitely do I have enough time to
create a short fund of seven years, just expand that
gap so that way I can retire at fifty five
in the state and just put it on hold.
Speaker 2 (23:25):
Yeah, I mean, I want to give you advice on me, see,
but I don't know your whole financial picture. I don't
know the numbers. So this is a situation where it
sounds like you need a financial planner to get involved
and potentially there a financial plan for you to determine
if you are able to do that. But I can't
give you any advice on that without knowing the entire situation, of.
Speaker 3 (23:47):
Course, so I kind of get that too. I mean
as far as like financially money and being able to
put stuff away, that's not an issue. It's just you know,
making sure I'm in the right account to do for
this fifteen years, to make sure that uh you know,
is where it needs to be at the end of
the fifteen years, in my fifth moore and fifty five
(24:08):
and when I leave the day, so that way, you know,
I don't have to work another job or something like that.
Speaker 2 (24:15):
Now, Yeah, I definitely advise you to engage a financial
planner to because you want to put yourself in a
situation where you know it's too little, too late.
Speaker 3 (24:25):
Absolutely, all right, well thanks for the time, and uh
maybe I'll be looking you guys up and see what
you can offer me as far as science wouldvice day.
Speaker 2 (24:35):
Yeah. Absolutely, if you're interested in engaging us, just give
us a call at five point eight seven two zero
three three three three and uh we can talk a
little bit further. All right, thank you, thanks Steve. We
encourage all listeners to call in at eight hundred talk WGY.
That's eight hundred and eighty two five five nine four nine.
(24:58):
Before the break, I was talking about Trump accounts, which
are new retirement accounts for children that were put in
the place in July fourth, And you have a really
great tool to get money into a retirement account for
your child, your grandchild, a niece or nephew. That way,
it has decades to grow and you know, a retirement
they could have this boatload of money that they didn't
(25:21):
really have to do much for, right, didn't have to
work contribute to a four to one k for ten
twenty thirty four years. And it's really a great tool.
But using the ross conversion strategy is really the the
major benefit of these accounts. But again, you know it
is complicated. It is it takes some attention to details,
(25:42):
so work with a professional before executing that strategy. I'm
going to push it back to Sam to let her
talk about what she wants to talk about next.
Speaker 1 (25:53):
Well, thank you, Benny, appreciate the insight on Trump accounts
and if anyone does have a specific question about them,
please call in eight two five five nine four nine
or email us at Askbouche at bouche dot com. We
actually did get an email from Hector in Troy and
he says thank you for them for informative radio show.
(26:14):
I want to keep my AGI low enough to avoid
IRMA thresholds. If I need extra cash, is it possible
to take a loan from my pre tax retirement account
instead of taking a distribution which would increase my AGI.
So when he's talking about ERMA thresholds, so that everyone knows,
he is referring to what's called the income related Monthly
(26:38):
Adjustment amount, and this is a surcharge added to Medicare
Part B and Part DEEP premiums for individuals whose income
exceeds certain thresholds, and this is calculated based on modifying
adjustic gross income from two years prior. So if you're
twenty twenty six modified ad justic gross income is high,
(27:00):
it's above that threshold, you would then trigger surcharge in
twenty twenty eight on Part B and Part D premiums
that you pay. And it's a sliding scale, so there
are tiers to how much of a surcharge based on
how high you're modified ad justin gross income is. And
for Hector, I mean, we don't know his entire situation,
(27:23):
why he's asking this question and what's the reason why
he really needs these funds. But when it comes to
taking a loan out of pre tax retirement account, the
loan option is available, typically through an employer plan like
a four to one K or four or three B.
(27:44):
But traditional iras and roth iras do not allow you
to take a loan out, so this would not be
a possibility if his money is already in an IRA
in his name. Not every employer offers a loan for
even a four to one K plan though, so you
would have to look into a planned document or speak
(28:04):
with HR and four one K loan works differently than
you're a traditional loan. Since you're borrowing from yourself and
paying yourself back with interest, it's not treated as a
distribution from that account, and it doesn't touch that agi
amount that we're talking about. And that's the appeal for
someone watching IRMA thresholds closely. And typically you have to
(28:30):
take out or you're only allowed to take out the
lesser of fifty thousand or half of your vested balance,
and so he might yelled a's fifty thousand, but it
might be less, and repayment usually happens through payroll deduction
over a certain period of time. But here's the catch.
If you if you leave your job or you lose it,
(28:52):
while that loan is outstanding, the clock speeds up. You
generally have until that tax filing deadline. Extension is typically
included to pay off that remaining balance, and if you
miss that window and the unpaid amount converts to it
converts to a taxbal distribution, which could then cause you
to have a ten percent penalty if you're under fifty
(29:13):
nine and a half. So it really could cause some
major problems for this individual if he decides to go
that route and something happens like losing his job, and
without knowing your total picture, again, I can't say yes
or you know that makes sense for you, But typically
we do not advise people take loans out against their
(29:34):
four ROH and K. What happens is you lose the
growth on the money that you borrow. So whatever you
pull out stops compounding in the market. So if it
is that fifty thousand, that fifty thousand stops having market growth,
and that could be a significant amount of the account
or maybe it's not. But at the same time, it's
not something that we typically like to see people doing
(29:57):
when it comes to their retirement funds. Penny, from a
tax perspective, do you have anything to add for Hector
in his situation.
Speaker 2 (30:08):
Yeah, it's hard to say without knowing the full picture,
but yeah, definitely managing ERMA bracts is important on a
year to year basis, not in just one year. But yeah,
I mean, Hector, if you want to talk further, definitely
give the office a call and we could talk further
about that.
Speaker 1 (30:30):
All right, Well, thank you Hector for emailing us a question.
If anyone else would like to call in or email us,
we are available. I am going to now transition to
talking about business owners specifically what's called the wealth gap.
So I was sharing earlier that I'm a certified EXCEP
Planning Advisor and as a SIPA, I am focused on
(30:52):
aligning business, personal and financial goals ahead of a business
owner's transition, and that's typically X the business and as
a SIPA, I will quarterback the team that this client
would put together, which can include their CPA, their attorney,
other specialists to make sure we help them get to
(31:12):
their end goal, which is maximizing the value of their
business and exiting at the right time for them. But
that doesn't always happen in terms of exiting exactly when
they want to. But we'll talk about that in a minute,
But generally speaking, we're going to talk about the wealth
gap and why so many business owners seem to be
richer on paper than actually in the bank. A statistic
(31:36):
that's pretty powerful is that seventy five percent of business
owners would like to exit their business within ten years,
and the majority of owners selling in the next five
are baby boomers, which isn't too shocking, as you know,
baby boomers are retiring and looking to take that next
step into whatever life holds next. But of all business owners,
(32:00):
Only twenty seven percent have formal exit plans. And that's
where we come in as advisors and as a SIBA
to make sure that someone has a plan in place
to exit in the most profitable way as they get
to that next step. And what's commonly seen is that
owners are not liquid when they when they're talking about
(32:24):
their net worth. It may surprise listeners to hear this,
but the typical business owner has eighty percent of their
net worth tied up in their business. And we're not
talking in the stock market or real estate or divers
by portfolio. We're talking about one asset that they can't
just go and sell tomorrow, and someone else has to
be willing to buy it. Right. The business has to
(32:45):
have attractiveness and the owner needs to be ready as well.
So it's an area that does take real planning. And
if you think about the eighty percent for a second,
I mean, as a financial advisor, if I looked at
you accounts and said eighty cents of every dollar you
own sits in a single illiquid holding, I would use
(33:07):
the words concentrated and risk when we talked about it, right,
But when you're speaking with a business owner, it is
more of a natural thing to that, because you know,
business owners have built this business with their own hands.
They've poured their their finances, their time, they're sweat and
tears into it, and so for them this just means success. Right.
(33:31):
If eighty percent then net worth is in the business,
it can mean hey, I've succeeded. It's done so well,
look at what it's worth. And ultimately that is a
great goal for them, right, But how do we capture it?
And for some owners, you know, this could simply mean
their business has thrived and it has grown so much,
it's valued so highly that represents eighty percent. But for
(33:54):
others that could mean maybe they didn't save enough into
their retirement and just put all the dollars back to
the business. For others, it could mean maybe they had
a lifestyle creep. Whereas they made more and more money,
they also grew accustomed to more affluent lifestyle and may
need to understand their budget for pulling the trigger on,
(34:14):
you know, retiring, or what their future would look like. Ultimately,
the issue really does lie with the inherent risk of
tying yourself to one asset, and so that's what we
help them navigate. Unfortunately, though, half of business transitions in
our country happened involuntarily through death, disability, divorce, partner disputes,
(34:38):
not on the owner's timeline, which can unfortunately mean a
business owner does not receive what they were hoping for
or the value isn't what could have been, what it
could have been if they prepared properly, if they had
a plan in place. And you know, that's what we're
talking about with this wealth gap. A wealth gap is
when you're it is the difference between your personal wealth goal,
(35:03):
so your retirement goals you're spending, and the net worth
outside of your business. So as the business owner plans
for their future retirement, and how do we get to
that ultimate goal, we have to able to close that gap, right,
what is the wealth We identify the wealth gap, and
then we help them close it by building value in
the business, exiting in the right way, and also you know,
(35:25):
taking into account, you know, whatever their legacy goals are,
to make sure that we're capturing what their goals are
over the long term and building profit and value within that.
And as you focus on profit and value, that wealth
gap does begin to close for owners over the long
term and even the short term. As you start making
(35:45):
slight changes and having this focus. All Right, we are
at a commercial break and we hope that you stay tuned.
We will be right back with you. Well, welcome back everyone.
You are listening to Let's Talk Money, brought to you
by Bouchet Financial Group, where we help our clients prioritize
their health while we manage their wealth for life. This
is Smith Macy and I'm joined by my colleague Vincenzo Testa,
(36:08):
who earlier was sharing about Trump accounts and now he's
going to be talking about how advisors add value. Vinny,
I will hand it over to you.
Speaker 2 (36:18):
Thanks. Sim Yeah, advisors add value in a lot of ways,
and I think some of them go under the radar.
And I mean one of the main things is clarity.
And that's when advisors are able to kind of explain
to a client and lame his term specific topics regarding
financial planning, tax planning, investment markets and just providing clarity
(36:39):
to the client in a way that they could understand.
I mean, everyone is in a different profession, right, I'm
not a doctor, I'm not a lawyer, but you know,
I know financial planning, tax planning, and finance. So when
you're in a different industry, you know, and finance is
such an interesting industry in my opinion, it's it's something
(37:00):
you don't know and for someone to be able to
be there to explain these complex topics to you in
a way that anybody could understand, I think that provides
a ton of value. So it's really clarity is one
of the major things that I think advisors provide to
clients and help clients understand the real situation at hand.
(37:20):
And again again we encourage all listeners to call in
eight hundred talk WGY that's eight hundred and eighty two
five five nine, four nine. And then behavioral coaching is
another way that advisors add value. And I always say this,
I think one of the most important things that we
do that it's not really out on the forefront, is
we're there when things go south in the markets, because
(37:42):
they always do eventually, but history shows that they always
go on to make all time highs again when they
do go south. But we're there when markets an equities drop,
and we're there to say to the client and be
there to make sure they don't panic sel or chase
any trends or try to time the market taking an
emotion out of decision making is one of the main
(38:04):
most important things that we do as advisors that I
think goes under the radar. But selling equities when they
take a dip is one of the worst things you
could do as far as affecting your investment returns. So
standing the course, making sure you don't panic if something
happens in the markets, going to cash is the worst
(38:25):
thing you could do at a time like that. We're
there to shake our clients and yell at them the
lack of a better term, to make sure they don't
do things of that nature. And then proactive planning. You know,
I'm a CPA. I do a lot of tax planning
for clients at the firm. Being proactive when it comes
to planning rather than reactive is very important. So executing
(38:48):
strategies like raw conversions, tax loss harvesting, charitable strategies, asset location,
all of these strategies our best you when you're proactive
about it versus reactive. I think everything in life works
well that way. But just being a proactive planner for
our clients and knowing the laws and the rules and
(39:10):
making sure our clients do what they're supposed to do
in a timely fashion. But advisors add value in a
lot of ways, more than most clients know. But I think,
you know, after clients work with us for a year
or two and so on and so forth, they start
to see how important it is to work with an
(39:32):
advisor and financial planner. And you know, obviously there's a
fee to working with an advisor, and I think that
for almost all of our clients at least, we're earning
that fee, and we're doing a lot of things for
our clients that can help them financially. You know, investment
management is obviously the backbone of it, but the supplemental
(39:54):
services we provide as advisors are really great as well.
Speaker 1 (40:00):
One hundred percent, thanks Benny. Yeah, when we talk about
we're offering our clients, we like to think we're one
stop shop. We're Yes, we're offering investment management and that's
why our relationship starts. But we're also offering comprehensive holistic
financial planning, which includes state planning and tax planning and
just making sure that all the little pieces insurance planning
(40:22):
fall into place for your particular situation and everything is
particular just to your needs, right, your long term financial
health and you know, that's what our clients value, and
that's why they choose to come to us, so that
not only will we help them with their investments and
take that stress and that burden off of them, but
we also will know their particular situation and advise and
(40:46):
help them plan for, you know, what's important to them
over the long term, whether that's retirement, legacy planning, or
even just you know, saving for retirement and you're not
at retirement yet, but maybe how do we get there?
And how do I plan for college for my kids?
It's whatever it is that's important to them. You know,
we're there every step of the way. Well, we're getting
close to the end of our show, and I just
(41:08):
had one more topic I wanted to briefly touch upon
because I've been thinking about a lot about it recently
in my own life, and it's wasted spending. So, you know,
I think as inflation has been a little bit elevated
and we've all felt the price at the gas pump
and grocery bills. I've got two little ones at home
(41:30):
and they're little stellar one's a toddler, one's a baby,
But my grocery bill feels incredibly inflated compared to what
it used to be, and it's probably just them eating
more right, but also just things are more expensive. So
I've been just taking a look at my own budget
and looking for ways that I can trim and trying
to think through, you know, what are my needs that
(41:53):
they can't change? Right, food, shelter, transportation, those things aren't
going to change, But what are other areas I could target.
One area that has come to mind for me specifically
and probably for a lot of you, would be subscriptions.
We've all got them. I mean, if you don't have them,
I'm very impressed. I don't know how you could live
in today's world without some sort of subscription. And you know,
(42:15):
when you sign up for them, I mean they're basically
set on autopay, right, So you sign up for them
one time, and they're just going to continue until you
either stop, you know, whatever the contract length is, and
maybe it's a year, or you actually manually go in
and you say, younger, I'm done with this month to
month payment. But I think a lot of these services
(42:37):
are hoping that you almost forget about them, or you're
just using them just enough to keep them as part
of your life, and you're willing to keep paying for
them even though you may or may not use it
every single month. I'm talking about streaming, that's probably the
biggest one, right, but gym memberships. I mean, I just
bought a printer and the printer wanted me to get
on a subscription model for a monthly ink and I
(43:00):
found that shocking. So I think everything is changing to
this model because they're realizing they can get more money
from being on this model. So, I mean, I was
looking into it and the average person is underestimating what
they spent on subscriptions by two and a half percent.
The average tracked person in a study that I was reading,
(43:23):
spends two hundred and nineteen dollars per month on subscriptions,
which is a lot, but they estimated their bill was
on the eighty six dollars. So I mean, I think
that applies to myself when I think about even just
my streaming. I pay for almost all of them, right.
I have certain things I love to watch, Like I
love to watch Survivor, which right now there's not a
(43:44):
new season airing, but I was watching the last season
and that's on Paramount, so I was paying for Paramount.
I really should cancel it at this point, but I'm
still paying for it. But I've got the Netflix, a
Disney Hulu bundle, my husband has ESPN, So you know,
we're paying for all of them, right, and maybe we
should be a little bit more tactical about what we're
(44:06):
paying for and what we're not. But there are ways
to keep track of this. There are apps out there
now that you can download that will tell you, hey,
you have this month to month expense. We think it's this,
and it's usually a streaming service or some sort of
other service, and you can see, oh, wow, I didn't
realize I was paying for this, Maybe I should cancel that.
(44:26):
My credit card even offers that service now where I
have some of my bills going onto my credit card
that I pay off each month, but it does say
here are your recurring expenses, and they list them out
so I can see, oh, yeah, I'm still paying for Netflix.
I see it right there. Oh there's my phone bill.
But if I saw something that I didn't want to
pay for anymore, I can actually through my credit card
(44:48):
hit cancel and they would cancel it for me. So
a lot of these services are getting more intelligent. They're
helping you with this problem. But it's something that I
think you know, probably a lot of us bruggle with
with signing up and that auto renewal of that membership
or whatever it is. Even think about Amazon, it's a
(45:09):
once a year expense and most people probably want to
keep it right now. But if you wanted to end
that membership, you would have to really be thinking about it.
You're only going to see it hit your hit your card,
your account once a year, So I just recommend keep
that in mind. Remote review your accounts, your your credit cards,
(45:29):
try to find some of these apps. I saw that
Rocket Money has one. It's one called pocket Guard, this
one called Subby, and these can be great ways to
try to just keep track of those growing expenses. And
we were talking about lifestyle creep earlier, and I think
this is one of the ways my lifestyle has creep.
Just subscriptions that I love to have. I have Spotify
(45:51):
right so it really does add up. But that that's
just something I wanted to touch upon. I think it's
just a really interesting way that we can keeping track
of our expenses, making sure we're not getting that lifestyle creep.
We really appreciate you tuning in today listening to Let's
Talk Money with Us, I hope that there was some
information that you can carry forward into your week and
(46:13):
better your financial life. This is brought to you by
a Bouchet financial group where we help our clients prioritize
their health, we manage their wealth for life
Good morning, Hello everyone, and welcome to Let's Talk Money.
My name is Samantha Macy and I will be your
host today. I am a wealth advisor Bouchet Financial Group.
I'm a certified financial planner and a Certified Exit Planning Advisor.
Here at Bouchet, I'm joined by my colleague Vincenzo Testa,
who's a CFP and a CPA. He's also a wealth
(00:20):
advisor and tax planner who heads up for tax practice
at the firm. Vinnie, Hello, thank you for joining us.
Speaker 2 (00:27):
I say, have no problem.
Speaker 1 (00:30):
So I work closely with our investment infants playing needs
with their clients. I make sure their investment decisions go
hand in hand with their financial goals. But as a SIPA,
I have a little bit more specific expertise here where
I work with business owners to identify and build the
value of their business with the ultimate goal of getting
(00:50):
them to the finish line. And that finish line is
really helping them exit the business today and maximizing their
profit and also at the same time prioritizing their legacy goals.
A lot of owners have most of their net worth
tied up in the business itself, and that's a different
planning problem than the typical retirement conversation, so I will
(01:10):
specifically work with these clients on navigating this. So Bennie
and I are giving Steven Bouchet a well deserved break
this morning, and I think we have a great show
planned for you. And it seems to be shaping up
to be another beautiful weekend here in up state New York.
The sun is starting to peek out after a terribly
rainy week. I think we're due for some nicer weather,
(01:33):
and some might say the same sentiment about the markets,
but we'll discuss that in a bit, and hopefully everyone
can get outside today and enjoy the nice weather while
we have it after so many rainy days in a row.
And I was actually able to get out last night
and go to the John mulaney comedy show It's Back.
And first off, he was hilarious. It was a great show.
(01:54):
He did a great job. It was a fun evening,
but it was humid, and it was funny because he
kept cracking jokes about how moist the air was and
how just standing on stage he felt like he was
getting rained on. And you know, it's back, it's open air.
So it was a valid point and it was. It
(02:15):
was just so funny but great time. I was actually
there with Lauren Bouchet, Steve's daughter, and my my colleague,
and it was a really fun great tickets. Highly recommend
you catch him at some point if you can. And
just going to Spack in general is such a treat
mean to have that in our community accessible to us,
you know, all the great shows, artists, medias that come through.
(02:38):
It really is such a joyd dealle to go to
that in our own community. Well, today, I encourage anyone
if you're listening to call in with questions. You can
reach me at one eight hundred talk WGY. That's one
eight hundred eight two five five nine four nine. We
love callers. You can also email questions and to ask
(03:00):
at Bouchet dot com and Vinnie and I will try
to address them during today's show. So thank you again
for tuning in. Of course, we're going to kick off
today's show by talking about what's going on in the market,
and then we'll dive into some great tax and planning
topics that I think will be interesting to you. So
(03:20):
stay tuned throughout the show and hopefully you'll be able
to have some great takeaways for your week. So let's
talk about the market. It was, you know, a little tumultuous.
This week was genuinely a wild ride, but it still
landed in positive territory, with the Dow and SMP each
(03:41):
gaining roughly one percent and the NASA climbed about one
point six percent. There there was a lot of factors
that played into that. This week. We saw the Fed
hold interest rates, saw an AI sell that we've been
experiencing for the past few weeks, and then Thursday rebound,
So it was not a boring week whatsoever year to
(04:04):
date that SMP closed Friday up point seven percent, the
NANSAC rose one percent, and the Dow game point five
to three percent, with Amazon jumping after a strong cloud
earnings beat. Long term yields kept climbing into Friday, with
the thirty year hitting its highest level since two thousand
(04:25):
and seven and the ten year topping four point seven
percent for the first time since January twenty twenty five.
When it comes to big tech Amazon, Microsoft, Alphabet, they
added close to one point five trillion dollars in combined
market value this week after recording strong cloud growth. But
on the flip side, Apple, Meta and Tesla fell this week,
(04:48):
So let's talk about this week and the variables that
we saw play out. So Monday and Tuesday, it was
quiet on the surface but shaky underneath. Chip stocks got
hit hard both days as investors debated whether AI spending
is getting ahead of itself. Nvidia alone dropped five percent
on Monday, and Wednesday was a big day. The Fed
(05:09):
held its benchmark rate steady at three and a half
to three point seventy five percent, the fifth straight meeting
without a change. What was notable was that three committee
members dissented, and not in the direction I think most
listeners would believe. They actually wanted a rate hike, not
a cut. Over lingering inflation concerns, and that hawkish undertone
(05:32):
spook the market. The SMP and Dow both fell rough
lee one point five to one point six percent that day,
and longer term treasure yields jumped, with a tenure moving
up to about four point sixty five percent in the
thirty year, pushing above five point one percent. Thursday was
(05:52):
the turnaround. We saw a sharp rebound. The SMP jumped
one point seven percent, the Dow rose one point two percent,
the NAZDEKXERG two point eight percent, snapping a six day
losing streak. The catalyst was Microsoft, whose cloud business grew
around forty three percent, easing fears that AI spending isn't
(06:12):
paying off. It was the largest ever single day jump
in a company's market value after impressing investors with latest
earnings reports. Now, not everyone got the memo about this, though.
I Meta fell roughly ten percent on weaker guidance, a
reminder that not all stocks trade the same anywhere, specifically
(06:34):
in the AI space. And finally, on Friday, markets closed
out the month on a firmer note. Despite a choppy session,
Amazon jumped fifteen percent after beating expectations on its cloud business,
echoing Microsoft strength two days earlier. We saw modest gains
across US and Pe down Nasdaq. All this happened even
(06:55):
as long term treasure yields kept climbing. The thirty year
hit its hight level since seven, like we talked about,
and you know, it's it's a single signal worth watching, right,
and that's something that as advisors that we do for
our clients. July as a whole was more mixed. The
dows squeezed out a point three percent month again it's
(07:17):
fourth straight well. The SMP slipped about point one percent
and the Nasdaq fell three point two percent, dragged down
by the sell off earlier this month. Year to date,
the SMP are both up in high single digits to
around nine percent, and the nasduck is in similar range
after a rocky stretch earlier this year. So all this
to say, I mean, we're still hovering around those all
(07:39):
time highs that we've hit and still a great time
to be an investor. Right, It's still very positive year
to date, but we have experienced some volatility this year,
and you know, I do not believe that it's over
at this point when it comes to some of the factors.
Of course, we have geopolitical tension and affecting the markets,
(08:01):
right so the Iran roarer. We've seen a ceasefire break
down in the Middle East, We've seen escalating tension over
the past few days, and additional conflicts seem to be
on the horizon. We'll see how this continues to evolve
over the coming days and weeks. Of course, it could
completely reverse course, you know, we can we can only
(08:24):
hope for the best in that situation. And when it
comes to bonds and other assets. Treasury yields kept climbing
all week and hit fresh multi high year multi year
highs for Friday, the ten year again top four point
seven percent, and gold has remained elevated, sitting above forty
one hundred ounce, a sign some of users are still
(08:46):
reaching for that hedge even though stocks are near highs,
and this speaks to just the uncertainty that some people
are feeling about their investments. But it's always good to
have a diverse by portfolio, and that's why diversify, right,
so that if there is volatility, you have a more
conservative part of your portfolio, such as bonds such as gold,
(09:06):
that are providing that hedge against the volatility. But if
you're really looking for that growth over the long term,
you want to be an equity investor and you understand
that you have to have a long term perspective when
it comes to inflation. The most recent CPI report for
June actually came in cooler than expected. Headline inflation ease
(09:29):
to three point five percent year rear, down from four
point two percent in May. That was worrying some experts
as they were projecting out what might be occurring for
the rest of the year. Core inflation fell to two
point six percent, and this strips out food and energy
in that estimation. The improvement was mostly an energy story
(09:52):
when gas prices dropped nearly ten percent in June as
the ceasefire took cold and this is a big reason
headline fleetion cooled so sharply. What is horisome is the
headly number is still well above the fed's two percent target,
and a lot of economists see that June reading is
encouraging but not conclusive. So with the price of oil
(10:14):
spiked back towards the one hundred dollars a barrel earlier
this month, it's something that surely the FED will be
watching in terms of FED commentary. Despite the cooler June
CPI figure that we have seen, Wednesday's meetings showed a
FED that isn't ready to declare victory, and FED Chair
Kevin worsh his own words after the Jun report or
(10:37):
that the mission is not accomplished at the moment, and
then with the three dissenting votes on Wednesday in favor
of a rate hike instead, there seems to be you know,
some some members of that team that believe that there
might be rat hikes on the horizon, So the Fed
(10:58):
seems to be in a wait and see mode. No
move is expected before the September meeting, but you know,
we'll be watching the FED communications between now and then,
and if anything does come out, it would likely impact
the markets with some movement either way as investors tried
to decipher what the next move would be by the Fed. Overall,
(11:20):
the US economy is growing at slower pace, but it's
still growing and it's not letting anything knock it down
at the moment. GDP growth sank to one and a
half percent last quarter. The government estimated down two point
one percent in the previous quarter, in below the one
point eight percent that economists expected, But after stripping out
(11:41):
volatile government spending and trade numbers, the economy grew at
a relatively healthy rate at three point nine percent despite
the war and you know other variables that are going on.
Growth in consumer spending has accelerated quite a bit, accelerated
to three point two percent from point five percent in
Q one, and analysts say that household budgets were aided
(12:03):
by the bigger than usual tax refunds this spring, you know,
with senior deductions and other tax refund deductions. That were
available to people this year. So that coupled with gas
price declines in June stemming from the seafire seasfire at
that time, you know, that has allowed people to have
more padding in their pocket. So we've seen spending still
(12:26):
strong for consumers thanks to watch moving forward. I mean,
obviously we're going to be watching in the market. So
how is the volatility going to play out in the
near term? What is the FED going to be saying
at the next FED meeting? Will we see great hikes?
Will the FED still be in that weight and see
mode for you know, another period of time this year,
(12:48):
All that is to be seen. We'll be keeping an
eye and upcoming jobs data as well, and you know,
just overall just looking at how the stock market is
moving in. Both Apple and Amazon reported on Thursday their
earnings after the clothes and the market treated them very different.
Tim Cook, the CEO of Apple, just gave his last
(13:12):
earnings call and he'll be passing the baton to John
turned Us on September first, and the results of that
call were mixed. Back Revenue beat expectations on surging iPhone
and Max sales, but supply constraints and weakness in China
and its services business dampened the going away party for Cook.
(13:32):
So ultimately, investors didn't love what they heard and stock
fell in the after hours of trading and put a
dent in the major hot streak for what we've seen
from Apple. But you know, the Apple has achieved a
record high earlier this week, apart from investors appreciating that
(13:54):
it wasn't spending as much on AI as rivals were.
Amazon had a very big week, and like Apple, investors
were deeply pleased with Amazon, showing the company stock jump
nine percent in the after hours of trading after it
said that sales of its cloud computing unit, Amazon Web
Services grew the fastest since Q four of twenty twenty one.
(14:17):
This growth was so impressive that investors didn't seem to
mind that they also hiked their AI spending projection from
two hundred billion to two hundred and twenty billion, which
is a figure that recently spooped investors, but seemed to
you know, not be a cause for worry as they
see that they actually are growing the Web services in
that cloud competing unit. So that was the week in
(14:40):
a nutshell again. If you are someone that wants to
call in. You can reach us and you can call
in at one eight hundred talk WGY. The number is
one eight hundred eight two five five ninety four nine.
We would love to hear from you. So, you know,
as we think about the markets and the week that
(15:03):
we've experienced, you know, let's talk about what this week
actually could mean for you in your financial picture. I mean,
volatility is a part of being an equity investor, right,
and that's not going to be something that goes away
in the short term, midterm, or long term. But we
want to have a long term perspective when we think
(15:26):
about being an investor and getting through volatility. I mean,
the Wednesday to Thursday swing is a great real time
example of why reacting to a single bad day is
usually a mistake when it comes to being an investor.
I mean, people who panicked on Wednesday, and let's say
(15:47):
they sold out on Wednesday totally missed the rebound on Thursday.
And that is probably the worst thing that you can
do as an equity investor. I mean, you are investing
for a reason, right that long term growth. We know
that if you're invested in stocks over the long term,
as long as you're in a diversified portfolio. That is
(16:07):
the best way to maximize your wealth in terms of investing.
If you compare their turns to bonds, you're going to
be out performing over the long run. And that's just
something that we know historically. So selling out at the
wrong time is a way to really, you know, flip
the tables on this. You sell out, you miss the rebound,
(16:29):
and then you reinvest that cash when the market's already
at that rebounded price and you know you're not going
to get that appreciation. You've already missed the voat. So
really you don't want to do that. You want to
stay the course. You don't want to make any kne
r reactions to the market like that. And just think
about it like this. If you are someone that doesn't
(16:50):
look at your accounts very often, maybe you looked at
the accounts that you have this morning, you would see
that your account is actually positive for the week, right,
But if you looked at it every day this week,
you would have seen the markets playings that were happening.
It might have felt that anxiety and that urge to sell,
to make a change, to become more conservative, whatever it is.
(17:12):
And if you had just stayed the course. Like the
person that checks their account less frequently, you know, you'd
be in a positive situation for the week, and hopefully
that person also didn't make that change right and they
let it ride even though it caused them some stress.
But ultimately you would end up in the same place
as someone that didn't check and some that did check,
as long as both of you didn't make any changes.
(17:34):
So just something to think about. You know, as you
think about your your investments in long term, make sure
you're in the right risk tolerance for yourself. If you
can't handle being one hundred percent in stock because it
is keeping op at night and it's causing you stress,
maybe you shouldn't be. There's other variables that play into that.
I mean, what kind of growth do you need over
the long term to sustain your spending. How old are
(17:57):
you Should you be maximizing taking on as much risk
as possible because of the long term you have that
ability or are you retired? But if if that is
something that is just it's not for you. Being a
little bit more conservative, maybe be in an eighty twenty
blend or sixty forty blend in terms of stock devans,
(18:17):
but just make sure that you do have enough in
the stock market to make sure that you're getting that
that growth for the long term. Well, we are coming
to the bottom of the hour, but before we we
go to our break, I'm gonna let Vincenzo jump into
his first topic that he has for you today, and
(18:39):
he's going to be reviewing and sharing some information about
Trump accounts. Then you go ahead.
Speaker 2 (18:45):
Thanks Sam. Again, we encourage all listeners to call in
at eight hundred talk WGY. That's eight hundred and eight
two five five nine four nine. So with legislation that
was passed last year, these new retirement accounts per se
are put into place on July fourth this year, so
just us than a month ago. And what they're really
(19:05):
geared to do is allow parents, grandparents, aunts, uncles, whatever
we have, you get money into a retirement account for
children as early as possible, and if you know anything
about investing, the earlier you get it in, the more
what they call compound interest is going to occur on
that money. And compound interest is gains on top of
(19:29):
gains on top of gains, or interest on interest on interest.
So give you an example. Let's say you put one
hundred dollars in and you make ten percent every year.
The first year, that one hundred dollars turns into one
hundred and ten, and the gain in the following year
instead of ten dollars, it's actually eleven because that extra
(19:49):
gain that was in the first year, there's another ten
percent on top of that. So let's book compound interests
and over time returns become exponential. So if you were
able to get money into a investment account a retirement
account for your child at the age of one, two, three, four, five,
except these early ages, that compound interest is gonna benefit
(20:12):
that child in a major way. So that's what these
Trump accounts are really aimed to do. So what they
are are non deductible iras. Essentially, so a parent or
grandparents starts on for a child. The annual maximum contributions
are five thousand dollars per child combined between all sources
of contributions, and the age eighteen, a child takes ownership
(20:35):
of the account. It's a non deductible IRA, meaning that if
money is pulled out down the road at age fifty
nine and a half, that's when there would be no penalties.
If you pull out money before then, there would be
a penalty. There is ordinary income tax on the gain
and not the original contribution. So that's what a non
(20:56):
inductible IRA is. The regular IRA is all the funds
that you pull out are taxable as ordinary income, but
the non deductible allows you to not have tax on
the original contributions. But the original contribution is after tax.
So with the regular IRA, your contributions are tax deductible.
With the non inductible IRA, they're not deductible. So really
(21:21):
the strategy to employ with this one is children born
between January one, twenty twenty five and December thirty one,
twenty twenty eight are eligible for a free thousand dollars
from the IRS, So you had a child born during
that time, you get a free thousand dollars. And then
otherwise you make contributions annually, weekly, whatever what have you.
And the ad you download is the Trump account I
(21:43):
think it's called Trump Accounts. It's on the app store
on the iPhone. And we are coming to a commercial break,
so I will get into this more deeper when we
get back, but these are really a great tool. I
open up one for my son. But the strategy to
employee is really, you know, execute a ross conversion at
age eighteen. That way you get these funds into a
(22:05):
roth IRA and they wrote tax for you for forty
fifty years up until you child's retirement. You are listening
to Let's Talk Money, brought to you by Bouchet Financial Group,
where we help our clients prioritize their health and we
manage their wealth for life. Thank you. You're listening to
Let's Talk Money, brought to you by Bouchet Financial Group.
My name is Vincenzo test I'm one of the wealth
advisors here. I'm joining Sam Macy who's hosting the show,
(22:28):
and we have a caller already coming back. In the
commercial break, we have Steve from Colon.
Speaker 3 (22:35):
Yeah, Kanes, we called the scale book. I'm questioned for
you on Can you hear me?
Speaker 2 (22:40):
Okay, I can hear you? Okay, Hello, Okay.
Speaker 3 (22:45):
So I'm about forty years old and I work for
the state, and I got I question it for you.
Though with the way my fear system is set up,
I can't either. I can retire, I'll have thirty few
years and fifty five, but I don't want to go
to sixty two. And if I started pulling requirement at
(23:07):
fifty five. They dig me pretty good. My question is
to you, I definitely do I have enough time to
create a short fund of seven years, just expand that
gap so that way I can retire at fifty five
in the state and just put it on hold.
Speaker 2 (23:25):
Yeah, I mean, I want to give you advice on me, see,
but I don't know your whole financial picture. I don't
know the numbers. So this is a situation where it
sounds like you need a financial planner to get involved
and potentially there a financial plan for you to determine
if you are able to do that. But I can't
give you any advice on that without knowing the entire situation, of.
Speaker 3 (23:47):
Course, so I kind of get that too. I mean
as far as like financially money and being able to
put stuff away, that's not an issue. It's just you know,
making sure I'm in the right account to do for
this fifteen years, to make sure that uh you know,
is where it needs to be at the end of
the fifteen years, in my fifth moore and fifty five
(24:08):
and when I leave the day, so that way, you know,
I don't have to work another job or something like that.
Speaker 2 (24:15):
Now, Yeah, I definitely advise you to engage a financial
planner to because you want to put yourself in a
situation where you know it's too little, too late.
Speaker 3 (24:25):
Absolutely, all right, well thanks for the time, and uh
maybe I'll be looking you guys up and see what
you can offer me as far as science wouldvice day.
Speaker 2 (24:35):
Yeah. Absolutely, if you're interested in engaging us, just give
us a call at five point eight seven two zero
three three three three and uh we can talk a
little bit further. All right, thank you, thanks Steve. We
encourage all listeners to call in at eight hundred talk WGY.
That's eight hundred and eighty two five five nine four nine.
(24:58):
Before the break, I was talking about Trump accounts, which
are new retirement accounts for children that were put in
the place in July fourth, And you have a really
great tool to get money into a retirement account for
your child, your grandchild, a niece or nephew. That way,
it has decades to grow and you know, a retirement
they could have this boatload of money that they didn't
(25:21):
really have to do much for, right, didn't have to
work contribute to a four to one k for ten
twenty thirty four years. And it's really a great tool.
But using the ross conversion strategy is really the the
major benefit of these accounts. But again, you know it
is complicated. It is it takes some attention to details,
(25:42):
so work with a professional before executing that strategy. I'm
going to push it back to Sam to let her
talk about what she wants to talk about next.
Speaker 1 (25:53):
Well, thank you, Benny, appreciate the insight on Trump accounts
and if anyone does have a specific question about them,
please call in eight two five five nine four nine
or email us at Askbouche at bouche dot com. We
actually did get an email from Hector in Troy and
he says thank you for them for informative radio show.
(26:14):
I want to keep my AGI low enough to avoid
IRMA thresholds. If I need extra cash, is it possible
to take a loan from my pre tax retirement account
instead of taking a distribution which would increase my AGI.
So when he's talking about ERMA thresholds, so that everyone knows,
he is referring to what's called the income related Monthly
(26:38):
Adjustment amount, and this is a surcharge added to Medicare
Part B and Part DEEP premiums for individuals whose income
exceeds certain thresholds, and this is calculated based on modifying
adjustic gross income from two years prior. So if you're
twenty twenty six modified ad justic gross income is high,
(27:00):
it's above that threshold, you would then trigger surcharge in
twenty twenty eight on Part B and Part D premiums
that you pay. And it's a sliding scale, so there
are tiers to how much of a surcharge based on
how high you're modified ad justin gross income is. And
for Hector, I mean, we don't know his entire situation,
(27:23):
why he's asking this question and what's the reason why
he really needs these funds. But when it comes to
taking a loan out of pre tax retirement account, the
loan option is available, typically through an employer plan like
a four to one K or four or three B.
(27:44):
But traditional iras and roth iras do not allow you
to take a loan out, so this would not be
a possibility if his money is already in an IRA
in his name. Not every employer offers a loan for
even a four to one K plan though, so you
would have to look into a planned document or speak
(28:04):
with HR and four one K loan works differently than
you're a traditional loan. Since you're borrowing from yourself and
paying yourself back with interest, it's not treated as a
distribution from that account, and it doesn't touch that agi
amount that we're talking about. And that's the appeal for
someone watching IRMA thresholds closely. And typically you have to
(28:30):
take out or you're only allowed to take out the
lesser of fifty thousand or half of your vested balance,
and so he might yelled a's fifty thousand, but it
might be less, and repayment usually happens through payroll deduction
over a certain period of time. But here's the catch.
If you if you leave your job or you lose it,
(28:52):
while that loan is outstanding, the clock speeds up. You
generally have until that tax filing deadline. Extension is typically
included to pay off that remaining balance, and if you
miss that window and the unpaid amount converts to it
converts to a taxbal distribution, which could then cause you
to have a ten percent penalty if you're under fifty
(29:13):
nine and a half. So it really could cause some
major problems for this individual if he decides to go
that route and something happens like losing his job, and
without knowing your total picture, again, I can't say yes
or you know that makes sense for you, But typically
we do not advise people take loans out against their
(29:34):
four ROH and K. What happens is you lose the
growth on the money that you borrow. So whatever you
pull out stops compounding in the market. So if it
is that fifty thousand, that fifty thousand stops having market growth,
and that could be a significant amount of the account
or maybe it's not. But at the same time, it's
not something that we typically like to see people doing
(29:57):
when it comes to their retirement funds. Penny, from a
tax perspective, do you have anything to add for Hector
in his situation.
Speaker 2 (30:08):
Yeah, it's hard to say without knowing the full picture,
but yeah, definitely managing ERMA bracts is important on a
year to year basis, not in just one year. But yeah,
I mean, Hector, if you want to talk further, definitely
give the office a call and we could talk further
about that.
Speaker 1 (30:30):
All right, Well, thank you Hector for emailing us a question.
If anyone else would like to call in or email us,
we are available. I am going to now transition to
talking about business owners specifically what's called the wealth gap.
So I was sharing earlier that I'm a certified EXCEP
Planning Advisor and as a SIPA, I am focused on
(30:52):
aligning business, personal and financial goals ahead of a business
owner's transition, and that's typically X the business and as
a SIPA, I will quarterback the team that this client
would put together, which can include their CPA, their attorney,
other specialists to make sure we help them get to
(31:12):
their end goal, which is maximizing the value of their
business and exiting at the right time for them. But
that doesn't always happen in terms of exiting exactly when
they want to. But we'll talk about that in a minute,
But generally speaking, we're going to talk about the wealth
gap and why so many business owners seem to be
richer on paper than actually in the bank. A statistic
(31:36):
that's pretty powerful is that seventy five percent of business
owners would like to exit their business within ten years,
and the majority of owners selling in the next five
are baby boomers, which isn't too shocking, as you know,
baby boomers are retiring and looking to take that next
step into whatever life holds next. But of all business owners,
(32:00):
Only twenty seven percent have formal exit plans. And that's
where we come in as advisors and as a SIBA
to make sure that someone has a plan in place
to exit in the most profitable way as they get
to that next step. And what's commonly seen is that
owners are not liquid when they when they're talking about
(32:24):
their net worth. It may surprise listeners to hear this,
but the typical business owner has eighty percent of their
net worth tied up in their business. And we're not
talking in the stock market or real estate or divers
by portfolio. We're talking about one asset that they can't
just go and sell tomorrow, and someone else has to
be willing to buy it. Right. The business has to
(32:45):
have attractiveness and the owner needs to be ready as well.
So it's an area that does take real planning. And
if you think about the eighty percent for a second,
I mean, as a financial advisor, if I looked at
you accounts and said eighty cents of every dollar you
own sits in a single illiquid holding, I would use
(33:07):
the words concentrated and risk when we talked about it, right,
But when you're speaking with a business owner, it is
more of a natural thing to that, because you know,
business owners have built this business with their own hands.
They've poured their their finances, their time, they're sweat and
tears into it, and so for them this just means success. Right.
(33:31):
If eighty percent then net worth is in the business,
it can mean hey, I've succeeded. It's done so well,
look at what it's worth. And ultimately that is a
great goal for them, right, But how do we capture it?
And for some owners, you know, this could simply mean
their business has thrived and it has grown so much,
it's valued so highly that represents eighty percent. But for
(33:54):
others that could mean maybe they didn't save enough into
their retirement and just put all the dollars back to
the business. For others, it could mean maybe they had
a lifestyle creep. Whereas they made more and more money,
they also grew accustomed to more affluent lifestyle and may
need to understand their budget for pulling the trigger on,
(34:14):
you know, retiring, or what their future would look like. Ultimately,
the issue really does lie with the inherent risk of
tying yourself to one asset, and so that's what we
help them navigate. Unfortunately, though, half of business transitions in
our country happened involuntarily through death, disability, divorce, partner disputes,
(34:38):
not on the owner's timeline, which can unfortunately mean a
business owner does not receive what they were hoping for
or the value isn't what could have been, what it
could have been if they prepared properly, if they had
a plan in place. And you know, that's what we're
talking about with this wealth gap. A wealth gap is
when you're it is the difference between your personal wealth goal,
(35:03):
so your retirement goals you're spending, and the net worth
outside of your business. So as the business owner plans
for their future retirement, and how do we get to
that ultimate goal, we have to able to close that gap, right,
what is the wealth We identify the wealth gap, and
then we help them close it by building value in
the business, exiting in the right way, and also you know,
(35:25):
taking into account, you know, whatever their legacy goals are,
to make sure that we're capturing what their goals are
over the long term and building profit and value within that.
And as you focus on profit and value, that wealth
gap does begin to close for owners over the long
term and even the short term. As you start making
(35:45):
slight changes and having this focus. All Right, we are
at a commercial break and we hope that you stay tuned.
We will be right back with you. Well, welcome back everyone.
You are listening to Let's Talk Money, brought to you
by Bouchet Financial Group, where we help our clients prioritize
their health while we manage their wealth for life. This
is Smith Macy and I'm joined by my colleague Vincenzo Testa,
(36:08):
who earlier was sharing about Trump accounts and now he's
going to be talking about how advisors add value. Vinny,
I will hand it over to you.
Speaker 2 (36:18):
Thanks. Sim Yeah, advisors add value in a lot of ways,
and I think some of them go under the radar.
And I mean one of the main things is clarity.
And that's when advisors are able to kind of explain
to a client and lame his term specific topics regarding
financial planning, tax planning, investment markets and just providing clarity
(36:39):
to the client in a way that they could understand.
I mean, everyone is in a different profession, right, I'm
not a doctor, I'm not a lawyer, but you know,
I know financial planning, tax planning, and finance. So when
you're in a different industry, you know, and finance is
such an interesting industry in my opinion, it's it's something
(37:00):
you don't know and for someone to be able to
be there to explain these complex topics to you in
a way that anybody could understand, I think that provides
a ton of value. So it's really clarity is one
of the major things that I think advisors provide to
clients and help clients understand the real situation at hand.
(37:20):
And again again we encourage all listeners to call in
eight hundred talk WGY that's eight hundred and eighty two
five five nine, four nine. And then behavioral coaching is
another way that advisors add value. And I always say this,
I think one of the most important things that we
do that it's not really out on the forefront, is
we're there when things go south in the markets, because
(37:42):
they always do eventually, but history shows that they always
go on to make all time highs again when they
do go south. But we're there when markets an equities drop,
and we're there to say to the client and be
there to make sure they don't panic sel or chase
any trends or try to time the market taking an
emotion out of decision making is one of the main
(38:04):
most important things that we do as advisors that I
think goes under the radar. But selling equities when they
take a dip is one of the worst things you
could do as far as affecting your investment returns. So
standing the course, making sure you don't panic if something
happens in the markets, going to cash is the worst
(38:25):
thing you could do at a time like that. We're
there to shake our clients and yell at them the
lack of a better term, to make sure they don't
do things of that nature. And then proactive planning. You know,
I'm a CPA. I do a lot of tax planning
for clients at the firm. Being proactive when it comes
to planning rather than reactive is very important. So executing
(38:48):
strategies like raw conversions, tax loss harvesting, charitable strategies, asset location,
all of these strategies our best you when you're proactive
about it versus reactive. I think everything in life works
well that way. But just being a proactive planner for
our clients and knowing the laws and the rules and
(39:10):
making sure our clients do what they're supposed to do
in a timely fashion. But advisors add value in a
lot of ways, more than most clients know. But I think,
you know, after clients work with us for a year
or two and so on and so forth, they start
to see how important it is to work with an
(39:32):
advisor and financial planner. And you know, obviously there's a
fee to working with an advisor, and I think that
for almost all of our clients at least, we're earning
that fee, and we're doing a lot of things for
our clients that can help them financially. You know, investment
management is obviously the backbone of it, but the supplemental
(39:54):
services we provide as advisors are really great as well.
Speaker 1 (40:00):
One hundred percent, thanks Benny. Yeah, when we talk about
we're offering our clients, we like to think we're one
stop shop. We're Yes, we're offering investment management and that's
why our relationship starts. But we're also offering comprehensive holistic
financial planning, which includes state planning and tax planning and
just making sure that all the little pieces insurance planning
(40:22):
fall into place for your particular situation and everything is
particular just to your needs, right, your long term financial
health and you know, that's what our clients value, and
that's why they choose to come to us, so that
not only will we help them with their investments and
take that stress and that burden off of them, but
we also will know their particular situation and advise and
(40:46):
help them plan for, you know, what's important to them
over the long term, whether that's retirement, legacy planning, or
even just you know, saving for retirement and you're not
at retirement yet, but maybe how do we get there?
And how do I plan for college for my kids?
It's whatever it is that's important to them. You know,
we're there every step of the way. Well, we're getting
close to the end of our show, and I just
(41:08):
had one more topic I wanted to briefly touch upon
because I've been thinking about a lot about it recently
in my own life, and it's wasted spending. So, you know,
I think as inflation has been a little bit elevated
and we've all felt the price at the gas pump
and grocery bills. I've got two little ones at home
(41:30):
and they're little stellar one's a toddler, one's a baby,
But my grocery bill feels incredibly inflated compared to what
it used to be, and it's probably just them eating
more right, but also just things are more expensive. So
I've been just taking a look at my own budget
and looking for ways that I can trim and trying
to think through, you know, what are my needs that
(41:53):
they can't change? Right, food, shelter, transportation, those things aren't
going to change, But what are other areas I could target.
One area that has come to mind for me specifically
and probably for a lot of you, would be subscriptions.
We've all got them. I mean, if you don't have them,
I'm very impressed. I don't know how you could live
in today's world without some sort of subscription. And you know,
(42:15):
when you sign up for them, I mean they're basically
set on autopay, right, So you sign up for them
one time, and they're just going to continue until you
either stop, you know, whatever the contract length is, and
maybe it's a year, or you actually manually go in
and you say, younger, I'm done with this month to
month payment. But I think a lot of these services
(42:37):
are hoping that you almost forget about them, or you're
just using them just enough to keep them as part
of your life, and you're willing to keep paying for
them even though you may or may not use it
every single month. I'm talking about streaming, that's probably the
biggest one, right, but gym memberships. I mean, I just
bought a printer and the printer wanted me to get
on a subscription model for a monthly ink and I
(43:00):
found that shocking. So I think everything is changing to
this model because they're realizing they can get more money
from being on this model. So, I mean, I was
looking into it and the average person is underestimating what
they spent on subscriptions by two and a half percent.
The average tracked person in a study that I was reading,
(43:23):
spends two hundred and nineteen dollars per month on subscriptions,
which is a lot, but they estimated their bill was
on the eighty six dollars. So I mean, I think
that applies to myself when I think about even just
my streaming. I pay for almost all of them, right.
I have certain things I love to watch, Like I
love to watch Survivor, which right now there's not a
(43:44):
new season airing, but I was watching the last season
and that's on Paramount, so I was paying for Paramount.
I really should cancel it at this point, but I'm
still paying for it. But I've got the Netflix, a
Disney Hulu bundle, my husband has ESPN, So you know,
we're paying for all of them, right, and maybe we
should be a little bit more tactical about what we're
(44:06):
paying for and what we're not. But there are ways
to keep track of this. There are apps out there
now that you can download that will tell you, hey,
you have this month to month expense. We think it's this,
and it's usually a streaming service or some sort of
other service, and you can see, oh, wow, I didn't
realize I was paying for this, Maybe I should cancel that.
(44:26):
My credit card even offers that service now where I
have some of my bills going onto my credit card
that I pay off each month, but it does say
here are your recurring expenses, and they list them out
so I can see, oh, yeah, I'm still paying for Netflix.
I see it right there. Oh there's my phone bill.
But if I saw something that I didn't want to
pay for anymore, I can actually through my credit card
(44:48):
hit cancel and they would cancel it for me. So
a lot of these services are getting more intelligent. They're
helping you with this problem. But it's something that I
think you know, probably a lot of us bruggle with
with signing up and that auto renewal of that membership
or whatever it is. Even think about Amazon, it's a
(45:09):
once a year expense and most people probably want to
keep it right now. But if you wanted to end
that membership, you would have to really be thinking about it.
You're only going to see it hit your hit your card,
your account once a year, So I just recommend keep
that in mind. Remote review your accounts, your your credit cards,
(45:29):
try to find some of these apps. I saw that
Rocket Money has one. It's one called pocket Guard, this
one called Subby, and these can be great ways to
try to just keep track of those growing expenses. And
we were talking about lifestyle creep earlier, and I think
this is one of the ways my lifestyle has creep.
Just subscriptions that I love to have. I have Spotify
(45:51):
right so it really does add up. But that that's
just something I wanted to touch upon. I think it's
just a really interesting way that we can keeping track
of our expenses, making sure we're not getting that lifestyle creep.
We really appreciate you tuning in today listening to Let's
Talk Money with Us, I hope that there was some
information that you can carry forward into your week and
(46:13):
better your financial life. This is brought to you by
a Bouchet financial group where we help our clients prioritize
their health, we manage their wealth for life
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