Simply Money

Episode Transcript

Speaker 1 (00:06):
Can I how your behavior impacts not only your portfolio,
but millions of other portfolios as well. You're listening to
Simply Money, presented by all Worth Financial. I'm Bob Sponseller
along with Steve Ruby. We like to think of the
stock market as this giant, complex system with virtually no
connection to our day to day lives. But the truth

(00:27):
is we're all part of the equation. Our everyday behaviors,
what we spend money on, where we spend money, how
we save, and even our emotions play a huge role
in shaping the direction of the markets. So Steve, let's
get into some of the factors that influence how our
thoughts and behaviors influence the markets as a whole.

Speaker 2 (00:48):
Yeah, I think this is quite interesting because oftentimes as
investors we can feel victim to market swings, but believe
it or not, our behavior as a whole and the
choices we make can can certainly shape the direction of
the market. So consumer spending first and foremost. You know,
consumer spending makes up seventy percent of GDP obviously has

(01:10):
a huge effect on the overall economy, and you can
kind of call it the market's fuel almost when when
we spend money. It's not going into thin air. It
doesn't disappear. It flows into the businesses that we're buying
goods and services from, and it drives their revenues up,
and in turn there's stock prices. So companies like Apple, Amazon, McDonald's,

(01:31):
they're directly impacted by how much we are spending as consumers.
When the economy is doing well and people are spending,
those stock prices tend to go up. When people pull
back and tighten their spending, obviously things don't go in
the same direction. They pull back and stock prices can
go down.

Speaker 1 (01:51):
So, Steve, are you telling me the fact that Amy's
taking another day off today and spending the day at
the spa getting her manicure and petty that might actually
positively impact economic activity in the stock market today.

Speaker 2 (02:06):
Depends on how expensive that that manicure is. I guess
this is more of a on an individual basis. You're
not going to move the markets. But you know, all
of us, combines, all the Amazon packages that my wife gets,
I would argue could potentially move the markets. It feels
like it when I check the credit card statement. But
still it's a matter of sentiment. It's how much everyone

(02:26):
is spending not just one individual. But I like where
you're coming from there, Bob.

Speaker 1 (02:31):
All right, well, speaking of sentiment, we're talking about consumer
confidence or the emotional side of the market. When we
feel confident about the economy, confident about our jobs and
our financial futures, we just tend to spend more, borrow more,
and invest more, and that's generally good news for the market,
right Steve.

Speaker 3 (02:51):
Oh, yeah, for sure.

Speaker 2 (02:52):
You know that this is confidence in different aspects, not
just how we're spending, but how we feel about these
different aspects. And when when there's uncertainty in the air,
when people are maybe worried about job losses, they they
tend to pull back on their spending. And as far
as behaviors are concerned, when when people are worried about
what the markets are doing, sometimes they pull back and

(03:13):
how they're investing and sell to cash. When a lot
of people do that, it can have a ripple effect
in the stock market.

Speaker 1 (03:20):
And this is why we constantly hear about, and we
talk about on this show consumer confidence index or consumer
confidence surveys. It's it's tends to be meant as a
leading indicator or reflection on how positive or negative consumers
are feeling about the future, and oftentimes folks economists look

(03:42):
at that as an indicator of what might be happening
with the markets, you know, in the days and weeks
to come.

Speaker 2 (03:49):
Yeah, consumer spending and consumer confidence that these these are
not new, uh figures. But one that is kind of
interesting in this day and age anyways, is retail investor behavior.
So that's the individual using smartphones and computers to buy
their stocks. In the past, you know, this was mostly

(04:12):
large institutions. Ultra wealthy, high net worth investors were those
that could influence stock prices. But today the retail investors
is a major driving force. So look back to you know,
twenty twenty during during COVID shutdowns and living in a
day and age where there's you know, Reddit, Wall Street bets.

(04:33):
Have you ever looked down there, Bob? Have you ever
looked at Wall Street bets on Reddit?

Speaker 1 (04:38):
It is, I never have, But I look at stock charts.
So I mean, you you know, think of Game Stop
back in twenty twenty. I mean you look at how
stocks like that just rocketed higher and then just plummeted.
I mean, the daily movement of these what are called
meme stocks were just all over the all over the place.

(05:00):
To your point, it is because people sitting in their basements,
you know, reading these social media stories and then trading
on that quote unquote advice and in the short term
people could make a ton of money, but also lose
a ton of money if you weren't at the top
of the pyramids scheme, so to speak.

Speaker 2 (05:19):
Yeah, an old friend showed me this, this message board
a long time ago, and I would lurk on it
sometimes and just look for giggles, you know, because it
is a depraved place of the internet. These people are
really something else. And you know, back in twenty twenty
when what happened.

Speaker 3 (05:36):
Was is these groups of this group of.

Speaker 2 (05:39):
Retail investors, they saw the writing on the wall that
you know, stocks like GameStop and AMC made not a
lot of sense to invest in. So these big hedge
funds were shorting them. And what they did is they
identified what they called the short squeeze. So they banded
together kind of secretly behind the scenes, and they bought
these stocks, waiting for these these big hedge funds to

(06:03):
have to buy them back at a huge loss, and
it just shot the price up through the roof. But
then that's when you know the the everyday retail investor
was like, Okay, well that seems like a good buying opportunity,
and they would put some money into it before it
all came crashing back down because it wasn't a good investment.
Game stops a place where I guess you can buy
video games online now you don't need to go to

(06:23):
a store location AMC. Obviously movie theaters were closed during COVID,
So it's kind of interesting that you know that the
retail investor behavior can have that type of pull on
markets from time to time.

Speaker 1 (06:38):
Yeah, it's literally the financial version of musical chairs, remember
that game. You know, everybody's walking around and then the
last person to sit, the last man standing, so to speak,
can get it, really get the rug pulled out from
under them financially if they're left holding one of these
meme stocks. You're listening to Simply Money presented by all
Worth Financial. I'm Bob Sponseller along with Steve Ruby. Steve,

(07:00):
let's get into more from a macro standpoint investor fear
and greed. You know we've all been there. The market drops,
we get anxious, maybe even scared. There's headline news about
what might happen in Washington or geopolitically, and that fear
can lead some investors to sell all their holdings and say, well,

(07:22):
I'm going to get it. I'm going to get out
until things seem better. Talk about the impact of that
kind of behavior.

Speaker 2 (07:29):
Oh yeah, I when I started in this industry, it
was in a customer service role for four oh one
k's for a big brokerage firm that obviously has four
own k business and it was frustrating to me how
often people would call and say, hey, you know, I
saw something on the news, or I read an article,
or I saw something online, or I was talking about
blah blah blah bh so and so, and I want
to sell all my investments. And before I had any

(07:51):
kind of licenses or letters after my name, I would
just have to say, great, you reach the right place.
I'm happy to help you with that. And I saw
it every day that there was some kind of movement
down in the markets. It was painful. I obviously I
quickly became an advisor and I got to step back
and ask why, why would you want to do that.

Speaker 3 (08:12):
And kind of educate.

Speaker 2 (08:12):
But that's a good example of how fear can drive
our behaviors. I see it all the time. You know,
as advisors today, you know, many of us certified financial planners, fuduciaries.
We'll build financial plans for folks and show them, you know,
this money is eer marks for that goal, this timeframe.
You know, this is this is how it all ties together.

(08:33):
And there's going to be volatility and you'll be fine.
So when volatility hits, we can point back to the
financial plan and see say, see, it's not a big deal.
So people will obviously make that decision on their own
to sell when they don't have somebody in their corner
stopping them from making bad decisions. But I also see
it on the flip side, when greed kicks in when
the markets are going up, up, up up up. Sometimes

(08:55):
I'll have somebody call and be like, hey, maybe I
should move from sixty forty to one hundred percent stock.
What do you think, Steve? And the answer is usually no.
But it goes both ways when it comes to fear
and greed.

Speaker 1 (09:05):
Yeah. And then another another factor that impacts a lot
of behavior is interest rates and borrowing. Think about it.
When the Federal Reserve lowers interest rates, borrowing money becomes cheaper,
people take out more loans for homes, for cars, and
even take out money to buy stocks. On the flip side,
when rates are high, people borrow less. Their you know,

(09:28):
their animal links instincts tend to get tempered, and that
can tend to lead to a slower economy and potentially
lower stock prices.

Speaker 2 (09:37):
That's precisely why the Fed will move interest rates up
and down when inflation was spiking. They they made borrowing
more expensive to curb the flow of cash into the economy,
so it drove down prices and drove down inflation. So
that this is, you know, absolutely something that will impact
the markets and our behavior. And when we behave a
certain way, that's a self fulfilling, self fulfilling prophecy that

(09:59):
further in the economy the markets are doing it. It's
all interesting how it's tied together social media in this
day and age too. You know, it used to be
only that financial experts had the power to move the
market with you know what they were saying. But now
there's you know, Reddit, Wall Street, bets, we talked about Twitter,
even TikTok. There's there's videos online of people giving in

(10:23):
quotation advice, which really is not that these people don't
have any fiduciary responsibility to make sure that you are
making good decisions with your buddy. But the crowd behavior can,
and it can. These individuals can sometimes influence how the
crowd behaves, is what I should say.

Speaker 1 (10:41):
Definitely, Well, here's the all Worth advice. The next time
you're watching the market swaying, remember you're not just a
victim of it. You're actively involved by your behavior and
the behavior of others, and understanding that power gives you
the opportunity to make smarter decisions for your own financial fuel. Next,
the place investors think is the best spot to park

(11:04):
their money for the long term, and why some of
these answers are somewhat concerning to us. You're listening to
Simply Money presented by all Worth Financial on fifty five KRC,
the talk station. If you're listening to Simply Money presented
by Allworth Financial, I'm Bob Sponsller along with Steve Ruby,

(11:27):
who's in for Amy tonight. Remember if you can't listen
to Simply Money every night, that's okay, Just subscribe to
our daily podcast. Just search Simply Money on the iHeartRadio
app or wherever you find your podcast. Straight ahead at
six forty three, We've got a pop quiz for you,
and we're gonna play some retirement factor fiction. All right, Steve,

(11:50):
We preach all the time that the stock market is
the best place to invest for the long term, But
do most people agree with that?

Speaker 3 (12:00):
No, unfortunately not, which blows my mind.

Speaker 2 (12:03):
So what we're talking about here is a recent bank
Great survey. They released data that showed that just three
in ten prefer the stock market as the way to
invest money that they didn't need for a decade anymore.
That's three in ten people. The second most preferred way
real estate, followed by cash investments like savings accounts, CDs.

(12:25):
You know, all three over a great long period of
time had just a few percentage points in difference, But
over the long term that can make a major impact
on the value of your money.

Speaker 1 (12:36):
So this bank Rate survey bottom line showed that it
people are split into thirds as far as where they
think the best place to put long term money is
right about a third thig stocks, a third real estate,
third Cash's let's get into each category. Then why the
stock market? Why is the stock market the best place
to be long term?

Speaker 2 (12:56):
Well, the stock market over it overperforms bombs cash realists date.
I mean, that's that's the short answer. The S and
P five hundred. For example, it's average around nine to
ten percent annualized returns over the past hundred years, which
far exceeds inflation and and and provides the opportunity for
some real wealth growth. You know, I have a little

(13:17):
chart that I have in my back pocket that I
pull up on the screen that I show to folks
sometimes when they're sitting in my office. Usually this this
pertains to you know, why why they should or shouldn't
invest in gold, for example, with the majority of their
assets as opposed to just like a piece of it.
And it's it's it paints a really interesting picture of
what the dollar has done over the past two hundred

(13:38):
years versus gold, versus you know, bonds and treasuries versus
stock stock blows everything out side of the water over
the long term. And that is the best way to
keep up with inflation. It just sometimes doesn't feel like
it because they can be volatile in the short term.

Speaker 1 (13:54):
Yeah, and you've brought up what to me is the
key point here, keeping up with inflation, keeping up with
purchasing power. It's not about beating the market or always
having your market your your money go up in value.
It's about maintaining and growing your purchasing power over the
long term decades, and that's where stocks historically have just

(14:17):
there's been no comparison. Let's get into some of the
other benefits about you know, things like daily liquidity for
the stock you can access your money when you need it,
you know it. Not only the returns are great, but
the flexibility and the liquidity of being in stocks is
great as well as opposed to some other asset classes.

Speaker 2 (14:39):
Yeah, real state not particularly liquid. Obviously cash is, but
it doesn't keep up with inflation. When we're talking about stocks,
reinvesting dividends and allowing capital gains to compound that can
lead to exponential growth. You know, the longer you stay invested,
the more compounding works in your favor. When you have
those assets and tax efficient accounts either like a roth
iray growing tax free or a tax managed broke whid account.

(15:02):
When I say tax managed, that means that you are
actively making decisions about tax loss harvesting. For example, there
are some opportunities to fild tax out into the overall
return of what stocks will provide for you over the
long term. What about real estate, why that might be
the wrong answer in your opinion.

Speaker 1 (15:22):
Well, I think people love real estate because they can
touch it, look at it, feel it, you know, walk
around it, look at it, all those things. And typically
real estate is going to appreciate it three to five
percent per year, which is roughly equal to the long
term inflation rate or slightly higher than that. And obviously
you can add rental income to the equation, which can

(15:43):
enhance your returns. But with that rental income, and I've
learned that personally, you know, positively and negative with different
things over the years, the rental income can come with
the challenges of property management fees, vacancies, and maintenance fees.
So the rental income is nice, but you got to
look at the costs that come with that rental income

(16:05):
as well. None of that kind of stuff you know,
exists with owning stocks.

Speaker 2 (16:11):
Yeah, and you know, real estate it does offer some
potential tax advantages like depreciation ten thirty one exchanges when
you're moving from one one investment property to another. You know,
it comes with capital gain taxes and property tax increases
from time to time. I know that when when we
see property tax increases in our own homes. It can
be a little bit jarring. Imagine if you have a

(16:32):
portfolio of real estate and all of a sudden you
get property tax increases for every single one of them.
That type of surprise can eat away it returns that
that your real estate offers.

Speaker 1 (16:43):
Yeah, and you brought up the tax efficiency of real
estate and stocks, and I thought you brought up a
great point. There are just so many ways now that
you can make stock portfolios extremely tax efficient through some
of these tax you know, alpha strategies that we talk
about all the time that to me has become something

(17:05):
that has more and more differentiated the stock market from
real estate over the last five to ten years, wouldn't
you agree, Steve?

Speaker 2 (17:12):
Oh, Yeah, there's some fantastic opportunities for systems that tax
loss harvests from, you know, direct indexing. For example, the
Russell three thousand represents the overall US market, and you know,
you buy six hundred of those individual stocks in any
given week, probably half of them are going to be
down to some capacity. So you can swap in and

(17:33):
swap out and essentially tax loss harvest nearly daily in
some instances. And that's just not the same opportunity that
you would get for real estate tax alpha.

Speaker 1 (17:45):
Yeah. And lastly, we need to touch on cash, and
that's the asset class that makes everybody feel good, feel safe,
but it actually loses value and a lot of value
over time in the terms of purchasing power due to inflation.
For an example, if inflation averages three percent a year,

(18:06):
a one million dollar cash holding today would only have
the purchase purchasing power of about seven hundred and thirty
seven thousand dollars in ten years. So even a high
interest rate, you know safety account is going to lose
purchasing power after taxes and inflation. And while it might
feel real good to not have a volatile asset class

(18:29):
for your long term holdings, you're just eroding away the
value of your money.

Speaker 2 (18:34):
There's very few guarantees you can make when when you're
talking about investing, but when you're just sitting at a
pile of cash, I can guarantee that you're slowly going,
slowly going to lose. That's exactly what happens because as
purchasing power erodes due to inflation, if we kick that
out to twenty years, your million bucks turns into five
hundred thousand worth of purchasing power twenty years down down
the road. That's why we need to invest, whether it's

(18:56):
stock of real estate, but stock is typically what's going
to win, even though that's not necessarily what the everyday
investor feels based on this bank rate survey.

Speaker 1 (19:04):
Yeah, and don't get us wrong, it is important to
hold some cash, particularly for short term needs, liquidity needs,
maybe even living expenses of one to three years. You know,
cash is the best thing going. What we're talking about
here is where to position your long term holdings. Here's
the all Worth advice. The stock market is to one

(19:24):
place that has beaten the rate of inflation over the
long term. And beating inflation and maintaining and growing your
purchasing power is the name of the game. Are you
using the right approach when helping others financially? We're going
to explore that next. You're listening to Simply Money presented
by all Worth Financial on fifty five KRC the talk station.

(19:51):
You're listening to Simply Money presented by all Worth Financial.
I'm Bob's month seller along with Steve Ruby. Philanthropy can
be one of the most fulfill billing aspects of a
financial plan. It allows us to support causes that resonate
with our values while helping us manage our tax liabilities,
grow our charitable impact in the community, and ensure a

(20:13):
lasting legacy for future generations. But are we always using
the right approach to how we implement our philanthropic endeavors.

Speaker 3 (20:25):
Probably not, is a short answer. I mean not.

Speaker 2 (20:28):
A lot of folks openly communicate finances with their family,
and obviously they're philanthropic. Their charitable goals are part of
that financial conversation. You know, first is setting a mission,
you know, clearly defining what those goals are and what
you hope to achieve with your charitable causes. You know,

(20:50):
the clarity around that helps you decide which vehicle you
would use to be charitably inclined, which we're going to
get into talk about some of the differences between these vehicles.

Speaker 1 (21:03):
And yeah, I want to camp out on this setting
the mission and communication part real quick, because I find
that that's a a critical part that's often missed. You know,
in dealing with the clients I've dealt with for years,
they simply don't talk about it because sometimes especially as

(21:24):
it involves dealing with your children and grandchildren. It involves
talking about death or what happens when we're gone, and
that tends to be a topic people you know, like
to avoid. So what do you find works in terms
of talking and communicating with your clients to get them
to articulate how they really want to implement this.

Speaker 2 (21:47):
Better from a warm heart than a cold hand. Really,
it's as simple as that. You know, having these discussions
today enable you to ensure that your charitable giving goals
are met now and in the future when you're gone.
So having these conversations today is a positive choice for

(22:10):
not only you and your money, but for future generations
that will be stewards of your money as well. So
better from a warm heart than a cold hand. And
it's a little crass, but I think it opens people's
eyes and they're like, Okay, that's fair enough, Steve, let's chat.

Speaker 1 (22:27):
Yeah. And I would just add that it's also critical
to have both spouses involved because when you start asking
people about what's important to them beyond their own family,
you get a lot of interesting answers. You have two spouses,
Bob to say, you've got making sure everybody is on
the same page as Key and I appreciate that.

Speaker 2 (22:48):
So let let's talk about some of these vehicles. Donor
advise fun you know, I'm a huge fan of these.
It's a charitable giving account that's administered by a sponsoring organization,
like a financial firm. So you know, Fidelity has one,
Shalab has one, Vanguard has one. These are major companies
that were all very familiar with. You know, a donor
advice fund. It's it's easy. I mean, this is the

(23:10):
quick and dirty. It's easy to do. The investment initially
upfront can be more modest than some of the other
options we're going to discuss, like a foundation, for example,
record keeping, investment management, compliance. It's all handled by the
sponsoring organization, so it takes some of that off your plate.
But from a tax planning perspective, it's very easy because

(23:31):
let's say you have a high income here, you can
reduce your tax liabilities by lumping in some larger donations
to fund your donor advice fund in that year and
then capitalize on that by itemizing your taxes. Furthermore, if
we're funding that donor advice fund with appreciated securities, think

(23:51):
in this area, Procter and Gamble. You know a lot
of folks that that I've worked with over the years,
they they either worked at Proper, Procter and Gamble or
a family did so some of them, especially that have
inherited wealth, are sitting on large positions of PNG that
have grown significantly over the years. You can fund your
donor advice fund with highly appreciated shares and not have

(24:13):
to pay the taxes on that donation. Plus you can
do some itemizing with that. So it's an opportunity from
from a tax planning perspective to have quite an impact
on your charitable giving causes and keep that going for
you and your children and your spouses.

Speaker 1 (24:33):
Bob, Yeah, I love donor advice funds. My wife and
I have one personally, and I've recommended these to many
many clients over the years, and the folks that are
using them actually absolutely love them because to your point, Steve,
it literally literally is a warehouse where you can, with

(24:55):
a couple of mouse clicks, you know, distribute these funds
out to chosen charities and y very efficient way. And
I will say CPAs are liking these more and more
and as well because with the standard deduction now for
a married finding jointly couple up to thirty thousand dollars.
Now fewer and fewer people are able to itemize, so

(25:18):
you know, you raise the point, you know in your comments.
Sometimes we will lump two or three years worth of
charitable giving into one year and warehouse that giving in
a donor advice fund in order to be able to
get more tax benefit out of the actual gift. It's
a great strategy.

Speaker 2 (25:34):
I've done five years even and paired that with roth
conversion strategies for people that recently retired but aren't collecting
Social Security yet and have lower income that they've had
in a long time. So it's a great opportunity. And
then you said it yourself, You quick a button. You
can give that money right to your church or other
charitable causes and map that out over years.

Speaker 1 (25:54):
Let's touch briefly on a couple of other options, private foundations,
which I don't see used very much at all because
of the fees and complexities involved in setting those up,
but they do give you more control if you want
to go there and open up more of a permanent,
family controlled entity. Talk about that a little bit.

Speaker 2 (26:14):
Yeah, I think about a wider variety of causes, like
awarding scholarships, making international grants fewer restrictions last. These foundations,
if properly endowed, can last for generations. The structure can
bring family members together to serve on boards that review
grant requests and carry out, you know, a tradition of giving.

(26:36):
You know, there are potential tax seductions when you contribute
to them, but there are certain limitations compared to what
you would see in a donor advice fund. So I
think greater flexibility longer term, but a little bit more
expensive and challenging to administer.

Speaker 1 (26:52):
Yeah. The last strategy that we want to touch on
today is one that I know, Steve, you and I
use all the time with clients, and it's a wonderful
strategy that unfortunately most people don't use or maybe not
have not even heard of. And that's the qualified charitable distribution.
What a great way to use your required minimum distributions

(27:13):
from your iras or IRA assets once you reach age
seventy and a half. You talked about dovetailing a couple
strategy with Wroth conversions. Take us through maybe an example
or two of how you've used qualified charitable distributions with
your client, Steve.

Speaker 2 (27:30):
So, qcds are easy because you just send money directly
from your IRA to a charity of your choice, and
in doing so, you're not paying taxes on that distribution,
and since that charity is a tax exempt organization they're
not receiving there's no taxes lost on that. So let's
think about this. If you're giving cash every week to
your church, for example, and in that situation, you're typically

(27:54):
using after tax money dollars that you've already paid taxes on.
Or you could map out your giving to your church
over the course of the year and give them one
lump sum via your IRA distribution. As long as you're
processing as a qualified charitable distribution, you will not have
to pay taxes on that, so you're still helping your
charitable causes. Technically, you're saving money on taxes that you
could just give that away as well, and you're poking

(28:18):
Uncle Sam in the eye with a stick in the meantime.

Speaker 1 (28:22):
Yeah, the one caveat we do need to throw out
with this strategy is you cannot do a qualified charitable
distribution to a donor advice fund. That money has to
go directly to charities of your choice. That's one thing
to keep in mind. All Right, here's the all Worth Advice.
We recommend you work closely with a fiduciary financial advisor,
tax advisor, and a state attorney to design an actual

(28:45):
philanthropic strategy that reflects your values, supports the causes you
care about, and stands the test of time. Next, we
are separating fact from fiction. You're listening to Simply Money
and buy all Worth Financial and fifty five KRC the
talk station. You're listening to Simply Money presented by all

(29:12):
Worth Financial. I'm Bob sponseller along with Steve Ruby. Do
you have a financial question you'd like for us to answer.
There's a red button you could click while you're listening
to the show right on the iHeart app. Simply record
your question and it'll come straight to us. All Right, Steve,
Time to play retirement fact or Fiction. Are you ready? Steve?

Speaker 3 (29:32):
Oh, I'm always ready. I love this game.

Speaker 1 (29:35):
All right, Factor Fiction. The sequence of return risk is
one of the biggest threats to retirement portfolios.

Speaker 2 (29:43):
You know, if we if we say one of the
then yes, fact I would say it's up there with
inflation or purchasing power risk, which is the sinking value
of the dollar over time. Sequence of return risk means
that your investments, even in a diversified portfolio, they're not
going to get the same set rate of return every
single year. Sometimes we're going to get kicked in the teeth,

(30:05):
and during those periods of time, if we are taking
too much out, depending on our asset level and our
goals and our timing need for money, that can have
a major impact on the longevity of your portfolio, which
is why it's so important to have an emergency fund
when you are in retirement. It's not just about setting
enough to a side to cover you know, expenses, uh,

(30:26):
in case you lose your job. It's setting enough aside
to cover expenses in case the markets get kicked in
the teeth and you don't want to have to pull
from portfolio assets when they're down.

Speaker 1 (30:34):
All right, factor fiction. If the stock market crashes, you
should immediately move your portfolio to cash.

Speaker 3 (30:43):
Uh. You know, I was going to give this one
to you, but it's easy. We'll just say fiction. Move along.

Speaker 2 (30:47):
You know, we talk about this all the time. You
don't you don't sell it a loss. That is realizing
those losses and putting yourself in a position where you're
not going to be able to get back those gains. Unfortunately,
this happens from time to time. People that react emotionally
might make that mistake. And you know, I've seen this
plenty of times over the course of my career where

(31:08):
I'll sit down and meet with somebody and and they'll
show share a story of regret where they did that
at some point and and unfortunately it's it's just something
that can derail your financial plan if you're not careful.
I'm going to give you one, Bob, I want I
want you to play too, okay, fact fact or fiction.
High income does not necessarily mean high net worth.

Speaker 3 (31:29):
Fact.

Speaker 1 (31:31):
And unfortunately, we see this all the time. It's not
how much money you make or earn, it's how much
you keep, and it's how much you save, and it's
how much you plan for when the day is going
to come eventually where your accumulated savings and your income
sources have to replace that paycheck. So, you know, we

(31:54):
we run into this all the time. Folks that have
a very high income but unfortunately spend too much of
that income, and the closer and closer they get to retirement,
the more they are surprised that the party is not
going to be able to continue once they stop working.

Speaker 3 (32:11):
Yeah, this is lifestyle creep. That's what happens.

Speaker 2 (32:15):
Instead of increasing your contributions to retirement accounts or other
savings vehicles, you spend more as your income rises, and
you find yourself in a position where when it comes
time to retire, you're not able to create that same
cash flow with what you've accumulated. It's obviously one of
the big benefits of sitting down with a financial advisor
five even ten years out for retirement, especially if you're

(32:36):
a higher earner and have that capacity for savings, is
to identify any gaps that we might need to close
to continue living the life that we want to live
to and through retirement. All right, Bob, I'm hitting you
with another one fact or fiction. Diversification eliminates risk.

Speaker 1 (32:53):
That is fiction. It doesn't eliminate risk, but it certainly
does help risk. How about that? And by risk, we're
talking about volatility. Volatility meaning just the movement of the
balance of your portfolio. So again this comes down to,
especially if you're taking an income stream from your portfolio,
structuring your portfolio properly so you have an opportunity to

(33:16):
maybe take that monthly income or even a lump sum
amount of money out of your portfolio that is not
subject to being whip sawed by short term market volatility.
All right, Steve Factor, fiction, you don't need an estate
plan if you don't have kids.

Speaker 2 (33:33):
I feel like we get great questions sometimes where it's
just I don't know, maybe this way, maybe that way,
but these are easy today. This is fiction. You do
need an estate plan no matter who you are. It
doesn't matter if you don't have kids. Maybe it's even
more important if you don't have kids, because at the
end of the day, the estate plan isn't just setting
up a trust or will. It's making sure that you
have beneficiaries the way that you want to have them

(33:55):
on your accounts. It's also making sure that you have
financial powitty erny, medical power of attorney, health care directive,
living well. There's lots of moving parts to that estate plan.
The whole goal is to avoid probate at the end
of the day and make sure that your wishes are
met when you are gone, and without an estate plan,
those can be massacred and your money doesn't go to

(34:18):
who you want it to, goes to probate, and it's
expensive in public, it's just getting a state plan. You know,
it's cheap, it's easy. It's just you know, it's like
going to the dentist a little bit sometimes though, like you,
maybe you put it off and you shouldn't.

Speaker 3 (34:32):
There's just too much at stake to not.

Speaker 1 (34:35):
It's just like the Nike slogan, right, just do it, Steve,
just do it.

Speaker 2 (34:40):
I tell people I'm gonna bug them about it till
they do it, or they tell me to shut up,
which everyone comes first.

Speaker 1 (34:44):
I do the same, and that usually gets people to
do something. All right, Great, next time to get a
gem of advice from all wors very own mister Steve Ruby.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to

(35:07):
Simply Money presented by all Worth Financial. I'm Bob Sponsller
along with Steve Ruby, and that music can only mean
one thing. Ruby's gem of advice.

Speaker 3 (35:18):
I love that.

Speaker 2 (35:18):
Every time I'm here these days, I get my own soundtracked,
I get my own floor to cover whatever I want
to cover. And today I want to go back to
what we were talking about with charitable giving and kind
of tie that back to volunteering. Our time and how
we plan on using our time in retirement. You know
that there's a lot of folks out there that are
working towards retiring but don't know what it's actually going

(35:40):
to look like when they are done. Steve Sprovac great
example of this. This was a guy who had all
kinds of hobbies. His his his baseball, he's a he's
a pilot. He you know, got a place in in
Arizona near family and still lives in town and visits
family up in Michigan. So making sure that when when,
when you're volding a financial plan and working with an advisor,

(36:03):
we will break down your goals into things like your needs,
your housing, utilities, groceries, gas, your mortgage, your medical insurance,
your wants and your wishes. We want folks to lean
on us heavily to help map out what those wants
and wishes are to make sure that you're living a
meaningful retirement. So why I said bring that back to

(36:23):
the charitable giving strategies. What we shared was just ways
to give money. What about sweat equity? What about getting
involved with some of these charities? What about getting out
there and doing something to make sure that you stay busy.
I'm sure we've all heard heard stories over the course
of our life of somebody working all the way up
until retirement and then kicking the bucket right away. We

(36:43):
want to make sure that you are mapping out how
you want to spend your time in retirement or else.

Speaker 3 (36:48):
What's this all for exactly?

Speaker 1 (36:50):
You bring up some great points, and as you shared,
I thought of my one client who was a very
high end, you know, high level executive at a way
well known company here in Cincinnati that we all know about.
This guy made a ton of money, was leading a
lot of people retired and he just didn't have enough
to do. Steve, and he found great meaning and purpose

(37:13):
from just going it twice a week to read books
to special needs children, and he has shared how much
that has meant to him. And I would have never
thought he'd be somebody that would be doing that. But
I'll tell you, Steve, if he wasn't doing that right now,
there'd be a big hole in his life.

Speaker 3 (37:30):
Yeah, it's a great point. I love that story.

Speaker 2 (37:32):
That's fantastic, and that's one that I'm glad you've shared,
because you know, there's too many people out there. I
think of a handful of folks that I've helped retire
over the years, and you know, I call him, how
you doing what you've been up to? And a lot
of times it's just nothing. So we actually try to
coach and share ideas about how could you spend your
time to make things a little more meaningful. But that
doesn't mean that if your goal is to do nothing,
that's not what you shouldn't do. But you know, I

(37:55):
think about these charitable giving strategies and I think about
folks retiring, and I think it's important to make sure
that we have goals for how we spend our time
as well, not just our money.

Speaker 1 (38:04):
Yeah, the answer quote unquote nothing that tends not to
bode well for people's long term emotional health or their
physical health. You know, as many studies after studies show
with retired folks some great points. Tonight, Steve, thank you
for listening. You've been listening to Simply Money, presented by
all Worth Financial on fifty five KRC, the talk station