Mobile Bay Financial Solutions 12.17.2024

Episode Transcript

Speaker 1 (00:07):
This is News Radio seven to ten WNTM. Uncle Henry
here with John McNeil and Virginia O'Brien of Mobile Bay
Financial Solutions. You can find Mobile Bay Financial Solutions online
at MB financial Solutions dot com. That's MB financial Solutions
dot com. Telephone number two five to one sixty six

(00:30):
six five thousand if you'd like to call and make
an appointment or just call and ask a question. Two
five to one six sixty six five thousand. That is
the number for Mobile Bay Financial Solutions. The commentary presented
herein contains the opinions of Mobile Bay Wealth Management LLC,
a registered investment advisor. This information should not be relied

(00:50):
upon for tax purposes. Is based on sources believed to
be reliable. No guarantee is made to the completeness or
accuracy of this information. Mobile Bay Wealth Management LC shall
not be responsible for any trading decisions, damages, or other
losses resulting from or related to the information, data analysis,
or opinions contained herein or their use which do not

(01:14):
constitute investment advice. Are provided as of the date written,
are provided solely for informational purposes, and therefore are not
an offer to buy or sell a security. Investments and
securities are subject to investment risk, including possible loss of principle.
Prices of securities may fluctuate from time to time and
may even become valueless. This information has not been tailored

(01:36):
to suit any individual. John McNeil, Virginia O'Brien, how are
things going at Mobile Bay Financial Solutions.

Speaker 2 (01:42):
It's great, Uncle Henry. We always enjoy you having adorning
us with your presence here in the office.

Speaker 1 (01:51):
You know, now I feel even more special about myself
the idea that I'm adorning you. I don't know that
I've adorned another, but here I am adorning.

Speaker 3 (02:01):
Well.

Speaker 1 (02:02):
Thank you for having me, and I know you get.
We talked last time we were here about how even
this time of year you're busy, and that once we're
through a holiday, even more people are going to want
to see you.

Speaker 2 (02:13):
Yeah. It This time of year is the year end
wrap ups, meeting with clients, making sure we've taken advantages
of all the tax benefits that expire, you know, at
the end of each year, and what we can do
if we miss those and that type thing and the
required minimum distributions, big, big part of what we do

(02:33):
on a daily basis this time of year, making sure
people have taken their rm ds, see if they want
to send some of their R and D s directly
to charity from their IRA, those type things. It's it's
it's back to back to back meetings, and we really
appreciate you scheduling us in between those meetings.

Speaker 1 (02:51):
Fantastic. If you want to get in touch with John
mc neilla, Virginia O'Brien Mobile Bay Financial Solutions, the number
is two five to one six six six five thousand.
That's five one sixty sixty sixty five thousand. So let's
talk about some financial half truths. We hear a lot
of half truths in the financial world, not necessarily because
people try to make misleading statements, but because sometimes a

(03:14):
simple statement just doesn't quite tell the whole story. So
let's discuss a few examples. One of them is, don't
worry about those losses because the market always goes up
in the long run.

Speaker 3 (03:27):
Yeah, you know, historically does the market come back, Yes,
it does, so, of course, you know, you can't historical
performances can't guarantee future performances. But when we look at
what that's saying, it's you know, the really it's about timing,
you know, do you have time to wait for the

(03:48):
market to come back up. That's one of the things
where it's so important to know your risk number, know
how risk averse you are, or how you know comfortable
with the risk you are, and then make sure that
your investments actually reflect that. So many times you've heard
a talk about when people come in they might be
they might after taking a risk assessment and us talking

(04:10):
to them about sort of their dreams, goals, how they
feel about money, how they feel about the market, they'll
actually be a much more conservative than how they're invested.
They might be really aggressively invested, or vice versa. They
might really have be pretty comfortable with risk or comfortable
taking a lot of risk with a little bit of money,
so to speak. But that's not how they're invested. And

(04:32):
so it's really important to make sure those mirror each other,
to make sure that your what your risk tolerance is
is actually how you're invested. And so when it's talking
about those losses, will they come back? Yet? Historically they have,
But it's just all about if you are not invested
properly an opportune time and you have to you know,
liquidate things that are down, that's when you lose money.

(04:54):
So just making sure you have that plan set out,
which is why it's so important we talk about this
all the time to have.

Speaker 1 (04:59):
A here is your next financial half truth. The fees
in your portfolio are less than one percent?

Speaker 3 (05:07):
Yeah, you know, this is something fees. We are very
transparent about fees, and it really just kind of depends
on the situation. They very our personally, our fees vary
from what you're invested in to you know, how big
of the size the portfolio is. But and what kind
of feed is Is it a flat fee or is
it a you know, is it a commission or is
it a percentage fee. But you know a lot of

(05:30):
times people say, oh, well, I'm only being charged you know,
like this one less one percent. So mays, let's say
there may be being they think they're being charged eighty
five basis points a point eighty five percent. But then
there's the the hidden fees inside of the portfolio of
like the mutual fund expense ratios or when people use
variable annuities the fees inside of those, or hidden commissions

(05:54):
and trading costs. A lot of times that will pop up.
So it's really important to make sure you understand the
fees when you see that on there and question that
if you don't understand it with your advisor.

Speaker 1 (06:05):
Here is another financial half truth. If you have a
low interest rate on your mortgage, you're better off to
invest that money instead of paying off your house early.

Speaker 2 (06:15):
We get this question probably one of our most frequent
questions we get from clients when we come in. When
they come in for their first meeting, we talked about
their mortgage. If they have one, we talk about and
we analyze their investments in that type thing. A lot
of people have come to us in the past and
they retire before they come see us. They retire and

(06:35):
they take a big chunk of money out of their
four oh one K when they roll it to an
IRA and pay off their mortgage. That's usually not a
good idea because if you, let's say you retire in
November and you've had eight or nine months of your
paycheck coming in and then you take out another eighty
thousand dollars to pay off your mortgage, that adds up
to a lot of taxable income in that year. With

(06:59):
what we've gone through until just recently, what we went
through with interest rates, being so low. We have a
lot of people who come in and have an under
three percent mortgage rate, you know, two point seventy five
percent mortgage rate. Well, like this, this person or this
the factors built into this. If you've got money that

(07:22):
you can pay off your mortgage, but you're earning let's
say five percent in a money market account, why would
you take money out of your money market earning five
percent when your mortgage is two and a half percent
doesn't make sense. Just pay the monthly payment and make
more money on your money and keep going. You can
always pay it off if you want to. It is

(07:43):
a psychological thing there. People say, well, I want to
go into retirement without any debt. Well, there's different types
of debt. Mortgage debt that has a low interest rate,
you might not want to pay it off, whereas credit
card debt that has you know, high interest rate. Yeah,
we talked to people about how we should look at
paying off debt and win and with what money? That's

(08:05):
a key part. Do we want to use qualified money
meaning four oh three B four oh one k ira
all the money that would be taxable if you take
it out and pay off a low tax deductible interest rate.
The mathematics don't work out that way. Now, if you've
got a seven percent mortgage and you're only earning four
or five percent on your money, yeah, we might not

(08:27):
want to pay it off in one big chunk with
taxable dollars taking money out of an IRA. We may
want to just increase your cash flow and you double
your payment on your mortgage and wipe it out pretty quick.

Speaker 1 (08:39):
Here is another financial half truth. Diversification is the key.

Speaker 3 (08:45):
Yeah, you know, diversification is a big, is important as
important factor. But you know, it's not just about diversification.
It's making sure that you're allocated the correct way, that
you're incorporating the right kind of products if they're there's
an insurance product needed or something else. Just making sure
that or maybe it's just a bank price CD or

(09:06):
something like that, the right equities, fixed income, all of that,
and then also the right strategies too. You know, do
you have some hedge against the market for instance, you know,
some some bufferytfs and things of that nature. So there's
just a lot of different things. Diversification, yes, but making
sure that it is that that's one kind of small

(09:27):
component when people look at diversification. A lot of times
people think, oh, well, I'm in like ten different mutual funds,
and each of these mutual funds invests in like, you know,
five hundred different stocks, five hundred different holdings. Well, a
lot of times what people don't realize is there's overlap.
So if you're in you know, ten different mutual funds,
a lot of the times those the holdings will overlap

(09:48):
and they don't really realize that. They just see that
they're in, you know, ten different funds, and you know whatever.
So diversification is a big part of it, but there's
so much more to it, and there's it's not just
about making sure you have you know, you're investing in
different stocks. It's all the things. And I would say
making sure that that plan is put in place.

Speaker 1 (10:08):
Here's one more financial half truth. These bonds significantly reduce
the risk in your portfolio.

Speaker 3 (10:16):
Yeah, people weren't seeing that tune at the end of
twenty twenty two.

Speaker 2 (10:18):
You know, it weren't when.

Speaker 3 (10:20):
Bond aggregates were down double digits, so it's somewhere around
fourteen percent, and then equities were also down double digits.
So a lot of times historically those bonds and equities
were inversely correlated. That's just a fancy way of saying
when one was up, the other was down, and vice versa.
So historically a lot of the times, if equities were down,

(10:42):
bonds were up. Well, equities were down in twenty twenty two,
and so we're bonds, I believe it. Historically that's only
ever happened where they're both down in double digits three
times in history, so that was a pretty significant thing. Now,
there's a lot of other things that need to be
built into the that can be built into the plane
if it's pret apropriate to again hedge against that risk.

(11:03):
There's fixed indexed products that can be put in there
if they're appropriate. There's buffer ETFs that can be put
in there if they're appropriate. Lots of different strategies that
can be used again in building a plan to make
sure that that overall risk level is exactly what you
need it to be and that it's able to move
forward with you, you know, making sure that that you're

(11:25):
adjusting that risk tolerance.

Speaker 1 (11:27):
You're listening to John mcneiland Virginia O'Brien of Mobile Bay
Financial Solutions. The website is mb financial Solutions dot com.
The telephone number is two five to one six six
six five thousand. Let's talk about confidence in retirement, spending
with competence. Uh, some people have trouble spending money with

(11:48):
competence when they first retire. Now why is that the
case for some people?

Speaker 2 (11:52):
Well, they're moving. It's a big change in life, you know,
Retiring is a huge emotional factor. They've worked all their lives,
they've been saving money, and they're hesitant to spend because
they've been taught all through the working years to save safe,
save the men, put money in for one k, other investments,

(12:13):
savings accounts and that type thing. They get to retirement
and they're thinking, well, I no longer have a paycheck
coming in. I'm not sure what's gonna happen. That's pretty
common lately with the last four years, what we've had
with our inflation and economy and interest rates and everything else.
So when they first retire, we caution people, you're going

(12:34):
to spend more money in the first six to twelve
months of retirement than you think is comfortable. We have
to assure them and show them in our retirement dream
catcher where the income's gonna come from, how we're going
to replace their plate paycheck basically and show them that
they can spend with confidence within reason. That's one of

(12:56):
the things that we have to psychologically get across the people.
When we set up your cash flow where we're going
to be taking money from and depositing it in your
checking account at the beginning of each month. We want
to produce the amount of income that you're actually going
to spend, because in the past they've been getting a
paycheck after they put money in four one K, then

(13:18):
they put money in a savings account for travel, past
book savings account, Christmas club accounts. No, we don't want
to be taking money out of your retirement accounts in
retirement and you go, that's earning a good interest rate
or good return and go put it over into the
savings account for that you know, comfort or confidence level.
Because it's still there. The accounts we have are still there.

(13:39):
We can go get them to if we if we
have a you know, an emergency need for cash flow.
So we've got to help people get it, get the
confidence that when they first retire everything's going to be okay.
If it's not, we'll tell them.

Speaker 1 (13:54):
Well, have you have you had people that did not
want to retire because of this confidence iss. They just
weren't confident with the whole process.

Speaker 2 (14:02):
Yes, we uh, we had a great meeting today. This
is one week indo her retirement. We've been talking to
her for three or four years. You can retire, you
can retire, and she finally got it, you know, in
her head. Well, y'all, y'all are right. And we show
her where she was now compared to where she was
four years ago, and uh, we've got the income streams
turned on. You know, just a lot of different factors.

(14:25):
But a lot of people don't want to retire because
they don't have the confidence.

Speaker 1 (14:29):
Is that A key to helping people loosen up and
live their retirement more fully is by educating them the
way that you do.

Speaker 2 (14:37):
We're big on education, Uncle Lenry. You've you've you've heard
us talk to people. We educate, educate, educate. As a
matter of fact, when when when people want to come
see us, it's a three meeting process. Before we do anything.
We're going to educate them or where they are, where
the holes are in in the current situation, and how
we can fix those holes and give them the confidence

(14:59):
that that they're lacking when they first retire.

Speaker 1 (15:02):
Hey, before we go off the topic of confidence, have
you had anybody that was spending money with too much
confidence and you had to reel them in because they
were they were they were really out there thinking that
it was never gonna end.

Speaker 3 (15:15):
Yeah, we have those conversations too. Sometimes those are hard
conversations to have. Sometimes it's it's because of different things.
You know, maybe the kids still think, you know, mom
and dad, can you know, bail them out or just
give them love money all the time. But sometimes it's
because there's been you know, some medical hardships or something
like that. Sometimes it's you know, it's different things. Sometimes

(15:37):
it's people just thinking they can spend, spend, spend, and
it's just never gonna run out. But you know, we
that's why we have the plan to say, hey, look
this is what we this is what we talked about spending,
you know, on a monthly basis or an annual basis
or whatever, and we're spending this much. Actually we if
we keep down this path, it's not gonna you know,
be sustainable or you know whatever that is. So we

(15:59):
do talk to people and we tell people that you know,
if if it's your money, can do whatever you want
to with it, We're going to tell you if you
think it's, you know, going out an accelerated rate, that
might not be sustainable. So that's our job too, to
make sure that you understand that part of it, not
just that how once you can spend to keep spending,
but also okay, hey we're going to rain this in.
We might want to think about raining it in a little.

Speaker 1 (16:20):
All right, you're listening to John mcneilan Virginia O'Brian of
Mobile Bank Financial Solutions. You can call their office and
make an appointment at two five one six six six
five thousand. That's two five to one six six six
five thousand. Now we've got some emails from listeners. If
you'd like to email a question in to John mcneilan
Virginia brian. The email address is mobi fs mobif is

(16:44):
info info. I got the address backwards. No wonder if
sometimes I show up at the wrong place. Info at
mobaifs dot com. That's info at mobifs dot com. First
email is from Mary in Mobile, Alabama, and Mary writes,
now that the kids are gone, and by gone, I
mean they live seven states away. Now we're thinking about

(17:06):
downsizing to a much smaller house. After we sell our
current home and pay cash for the new one, we'll
still probably have about two hundred and fifty thousand dollars remaining.
Do you have any suggestions for how to handle this
large sum? We have about seven hundred thousand dollars in
various retirement savings already.

Speaker 2 (17:25):
Good question, And what we would do is look at
where they where there are seven hundred thousand dollars in
iras the four oh one ks are, and we would
talk to them about the income retirement income planning, because
if the majority of their money they're planning on living
own in retirement is retirement accounts, it's all going to
be fully taxable as we take it out. So if

(17:46):
they have this windfall of two hundred and fifty thousand dollars,
of that is not taxed when you sell your primary residence,
you've got some exemptions there. So they have two hundred
and fifty thousand dollars that they can invest into just
a brokeragy account. We can manage the tax ability of
that going forward. But if something happens down the road,

(18:07):
let's say, have to buy a new car and after
trade in, they got to come up with another thirty
five thousand. If they take thirty five thousand out of
their retirement accounts, they have to pay taxes on that
thirty five. But if we have this two hundred and
fifty thousand dollars account over here, we would we may
have to pay some taxes, but it would be at
a capital gains rate, and we can manage portfolios tax
officient portfolios that minimize the tax bite down the road.

(18:32):
So it would give them a bucket of money to
go to to put a roof on the house, buy
a new car, you know, do different things, spend some
money on the grandchildren, or whatever it may be. But
I would suggest not just blowing it or giving it away.
If the majority of your savings is in retirement accounts,
which is going to be taxable, and we no, I

(18:54):
don't care who's in the White House, We're going to
have to pay more taxes somewhere somehow to keep this
this United States moving.

Speaker 1 (19:03):
Next emails for Ernie in Daphne, Ernie Rights, do you
have any advice or words of caution for me before
I start a five twenty nine plan from my daughter's
college expenses?

Speaker 3 (19:15):
Well, this depends a lot on the situation. Of course,
each individual, you know, case is different, so this isn't
just like blanket advice for everybody, but I would encourage
people to look at alternative routes to a five twenty
nine plan. A five twenty nine plan, in our opinion,
is works best if it is front end loaded when

(19:37):
the kids are young young, meaning they at least have
you know, like ten years to grow. So but before
the child's you know, eighth birthday, then that gives them,
you know, ten years to hypothetically use it for college.
And that it's it's pretty heavily front end loaded that way.
When you do that, it does give the better It

(20:00):
gives a better planning With that strategy, I should say
it's it's better planning because then you have it has
a long time to grow, and that's the whole point
is that you can take it out tax free for
college expenses without you know, paying taxes on that growth. However,
a lot of times when people start five twenty nine
is what we find is it's not usually wanting to
max fund it in the front end. They're wanting to
put a little bit away each year, and so a

(20:23):
lot of times we think the better idea for that
would be to just putting in an investment investment account
that's in the parent's name and then you know, earmarked
for college expenses. When you look at some of the
benefits to that with a five twenty nine plan, what
if that child doesn't go to college, or what if
that child is a full ride scholarship to college and
all that kind of stuff. There's a lot of stipulations

(20:44):
on how it can be used and when it can
be used if it's not for college expenses, and so
that's one of the things you look at. Whereas if
it's just an investment account a brokerage account in the
parents' names or the grandparents' names, even if it's the
grandparents that want to do it, they can dole it
out as they see fits and then also use it

(21:04):
for anything if they, you know, don't go to college
or go or go on a full d scholarship, don't
don't really need the funds for college. That can be
you know, what they used to pay for a wedding
or give to the child for a down payment on
the first house or something like that. But it's just
something it's an interesting idea to look at to maybe
before you do a fiveteen nine and think, Okay, now

(21:25):
let's think about this in the timeline and the amount,
so I would really encourage you to think about that
for sure.

Speaker 1 (21:30):
All Right, we are out of time. John McNeil, Virginia O'Brien,
thank you, and.

Speaker 3 (21:34):
Roll tide, roll tied, Uncle Henry.

Speaker 1 (21:36):
To find out more about Mobile Bay Financial Solutions, visit
their website MB financial Solutions dot com. That's MB financial
Solutions dot com, or call their office at two five
one six six six five thousand. That's two five to
one six six six five thousand for Mobile Bay Financial

(21:58):
Solutions