Simply Money

Episode Transcript

Speaker 1 (00:06):
Tonight the most misleading financial headlines of May and why
they provide no value whatsoever. You're listening to simply money,
presented by all Worth Financial. I'm Bob Sponseller along with
Brian James Brian. We come across so many headlines each
day throughout the day that those headlines can tend to
either make us laugh out loud literally or make us

(00:29):
furious or somewhere in between.

Speaker 2 (00:31):
I remember the purpose of a headline. It's to grab
your eyes and grab your attention so that you will
buy that newspaper or click on that article, and on
and on, and that's been That's that's a tale as
old as time. We need to grab people's attention and
hang on to it. So we're gonna go through some
of our favorites here that just just that just are
a little bit of head scratchers in terms of how
they drive people to react. And the moral of the

(00:52):
story behind all of this is read the article, not
the headline. It's okay to read this stuff, but don't
just make conclusions based off of the words in the
in the huge type on the on the top of
the front page. So the first one here, we're looking
at this is one of this is this one? This
will light your light, your hair on fire a little bit.
Global financial market armageddon looms as Japanese yield surge. You know, Bob,

(01:13):
I stay up at night worrying about Japanese yields and
how it's going to affect my diversified portfolio, don't you.

Speaker 1 (01:20):
I don't. And that's why we have Andy Stout because
he that guy never sleeps. He reads everything and he
does all that for us. So yeah, I don't lose
any sleep over this. And the funny thing is if
you look at how the markets have performed this month,
I mean, it's nowhere close to armageddon. So again, the
danger here is you read that headline and you're like, gosh,

(01:41):
I gotta go to cash or I gotta dump a
bunch of money. And it costs you money to just
react or make short term decisions based on.

Speaker 2 (01:48):
This and these it's the words in the headline getting attention.
Armageddon looms and surge. Those are attention grabbing head Now,
if we look under the article, let's do we said it,
Let's do it now. So where's this coming from? What's
this hard go about? Well, it's a strategist from Society General,
which is a big financial institution over in Europe. But
they're warning that Japanese government bond yields may trigger a
global financial crisis. Well, lots of things may trigger a

(02:11):
global financial crisis. This concern is coming from the yen
carry trade, and that could wind up in significant capital
outflows from US markets. Just because the market may react
to this this way, this is just what we're writing
about today, doesn't mean it's necessarily going to happen, is it.
Is it something that investment managers are worried about or
looking at. Yes, absolutely, because it's a piece of the

(02:32):
overall pie with which they make their decisions. But again,
those three words in that headline, armageddon, looms and surge
make us react, and that's what the headline writers are after.

Speaker 1 (02:42):
The next headline that jumped out at US quote US
fiscal position a ticking time bomb for global markets. An
analysts caution that the US worsening financial situation, exasperated by
persistent budget deficits and rising interest rates, a significant risk
to global financial stability. And obviously we did have a

(03:05):
credit downgrade by Moody's, but we got nowhere near a
time bomb or an armageddon or anything like that. Brian.
This kind of stuff that's happened over the last week
or so, it happens all the time.

Speaker 2 (03:17):
Yeah, and again here we are again with just a
handful of words in the headline, ticking time bomb grabs
your attention. There are people that have referred to the
US as a ticking time bomb since the US dollar
was named as a world's reserve currency at Breton Woods
in the nineteen forties. People have been looking for that
next legdown. I still have clients that'll come in now
and they're kind of still looking for that next leg

(03:38):
down from the twenty twenty two COVID related recession. And
that's not actually twenty twenty, I believe as when their
session was that maybe we don't know, but at some
point we're going to actually have this soft landing that
we've talked about. And again, soft landing to me, and
I've mentioned this before, but in my mind, soft landing
that simply means that we just stopped talking about it.
Nobody ever declares that we have landed softly. We just

(03:59):
quit talking about it. We start talking about something else.
That's where we are right now. We're focused on the
things the administration is doing. But again, ticking time bomb
is it's not ticking anymore than it has been in
the past.

Speaker 1 (04:10):
That's why I love that Wall of Worry chart that
Andy Stout has put together for us, because you could literally,
very quickly put that up on a whiteboard or a
video board and show everyone, including ourselves, because I got
to be reminded of this sometimes myself. You go back
to nineteen twenty nine, you can look for a reason
about every two to three years why it would make

(04:33):
sense to take all your money and put it in
a coffee can and bury it in the backyard, just
waiting for the world to come to an end, you know,
the Kennedy assassination, doctor Martin Luther King's assassination, Cuban missile crisis,
the tech bubble. Every two or three years, you can
plot these major events that have happened where if you're

(04:56):
sitting there in real time. And this is why the
benefit of history, you know, is good. You can sit
there now and think, well, what was I thinking and
how was I feeling when that happened? And it was unsettling,
it was fearful. But again, with the benefit of time,
you can go back and look well, this is what happened.
This is how markets reacted. The market goes through cycles,

(05:20):
interest rates ebb and flow, government spending ebbs and flows.
We get through it and we move on to all
time highs. It's always been that way.

Speaker 2 (05:28):
Here's our next scary headline, US on the precipice of recession.
Do you hear the tone in my voice pod? This
is a scary headline. It's in big font. Follow these
ten money rules because the US is on the precipice
of recession. If you follow the ten money rules, they
are all logical things that we if you read the
article here, there are all logical things we talk about
all day, every day on these very airwaves.

Speaker 1 (05:48):
They're not interesting.

Speaker 2 (05:49):
But the headline sure is, isn't it.

Speaker 1 (05:51):
It is? And I always kind of chuckle when I
see that recession word because usually Brian, historically, by the
time the markets and the economy have declared that we're
in a recession, it's the markets have already recovered, because
the markets are always anticipating what's going to happen in
the next six to twelve months, not what happened in

(06:15):
the rearview mirror. And these economists are brilliant for making
these predictions and then revising data in the rearview mirror
and the stories over. By then it's nonexistent. But the
financial media loves to throw around that word recession because
it scares that you know what out of pain, and
it keeps you watching because those here to stick with

(06:35):
us through this commercial break.

Speaker 2 (06:36):
So yeah, I always encourage people to look back at
if you're nervous about the headlines. So let's look back
at March ninth, two thousand and nine. I often encourage
clients to go list, go look at the headlines. If
we're worried about current headlines. Let's go back at March
ninth nine, look for any positive headlines. And I'm highlighting
that day because March ninth of nine was the absolute
bottom of the two thousand and eight market crash, and

(06:58):
there were no good headth Nobody came out and said
all the sharks are gone, everybody back in the pool,
everything's fine, all the lights are green. That didn't happen,
but the market definitely turned on that day.

Speaker 1 (07:07):
Well, Brian, at that point in time, the S and
P five hundred was down over fifty percent. I mean,
there was blood in the water. People are scared to death.
I mean there was nothing on the horizon to signal
the coast is clear right. The good headlines did not
surface until later that summer. In the fall.

Speaker 2 (07:22):
The market always anticipates, and it's frequently wrong. That's why
we get these bounces up and down. It's trying to
anticipate that things are going to improve and sometimes it doesn't.

Speaker 1 (07:30):
You're listening to Simply Money presented by all Worth Financial.
I'm Bob Sponseller along with Brian James. Let's get in
get into a more recent headline that just came across
our desk this week. The media is now talking about
Taco Tuesday market rallies and this has to do with
the President Trump putting tariffs on, taking them off, adjusting

(07:52):
them up, adjusting them down, and the market swings that
come and now they're declaring it Taco Tuesday.

Speaker 2 (07:59):
And honestly, I I've found these these are nerve wracking,
these surges we're getting when he's on again off again.
But at the same time, I also find comfort in
the fact that the market is still willing to bounce
when the good news comes. The market wants to go up,
it wants all this fogg to clear. And you know,
I'd be more nervous, Bob if we came out with
something positive and the market said and that would tell

(08:19):
me that investors have entirely moved on and have moved
on to something maybe more predictable.

Speaker 1 (08:23):
But we're nowhere right now.

Speaker 2 (08:24):
By the way, Taco Tuesday stands for Trump always chickens out.
So that is just somebody's opinion. And again it's a
way too. You know, you would read this headline and
you go Taco Tuesday. What in the world is that? Well,
it's just somebody's cutesy little phrase that they thought of
as they were driving into the office to write their article.

Speaker 1 (08:40):
That way, Yeah, and the point here, do these short
term spikes and decline have any bearing whatsoever on your
long term investment strategy? Probably not. But these kinds of
market movements, they're just often driven by headline news, temporary
political decisions, and really don't reflect the underlying fundamentals of

(09:00):
the economy or individual companies or corporate earnings. And that's
what we really need to stay focused on.

Speaker 2 (09:07):
Yeah, So this next one I can picture looking at it,
you know, some kind of news app or whatever, and
if you look at the fine print right unerneath the headline.
It'll clearly be an ad Investors should brace themselves for
another twenty percent market correction this summer. Veteran strategist warns, Okay, cool,
show me this veteran strategist track record? Have I ever
heard of him or her? And what is their track

(09:28):
record for predicting the market? If anybody was any good
at actually doing this, first of all, they'd do it
more than once in a row, and we would all
know who they are because they'd be managing all of
our money. This is one person, presumably intelligent person, right.
This actually came from a chief investment officer of DWS Group,
big financial institution. He's certainly not an idiot by any means,

(09:49):
but he doesn't know any more about the future than
anybody else. And I would venture to say he himself
may not even like this headline that someone attributed to him.

Speaker 1 (09:55):
Absolutely, And let's face it, all of these quote unquote
chief investment officers of the these various firms they want
to get on television. They want they want to be
seen on camera to help promote their firms, and oftentimes
the most the wildest claims they can get on and
talk about the more these media outlets are going to
lap it up and put them on television. And you know,

(10:17):
even a broken clock is right twice a day, Brian.
I mean, you can make any kind of prediction you
want to make. What I find is interesting is virtually
none of these predictions come with time horizons attached to it.
When is the twenty percent market decline going to come?
How long is it going to last? And then when
it's when is it going to rebound? They never talk

(10:38):
about that ever, And that's why you got to just
let this stuff pass you right on by and pretty
much ignore it. Here's another one, the stock market crash
of twenty twenty five. Genuine risk or overblown fear. This
isn't a prediction. This is just throwing it out there saying, well, gosh,
you should either be fearful or greedy pick one of them,

(10:59):
because we don't. I don't want you happy, yep.

Speaker 2 (11:01):
And the word I want to pick out of this
one is twenty twenty five. You could take this headline
and stick it in any year in the past or
in the future. We're always worried whether the market's going
to go over the cliff that is always a fear.

Speaker 1 (11:11):
Here's the all Worth advice. Reacting to headlines is not
a strategy planning is Should you withdraw more than four
percent of your next day each year after you retire?
What the man who invented that rule is now saying.
Coming up next, you're listening to Simply Money presented by
all Worth Financial on fifty five KRC the talk station.

(11:38):
You're listening to Simply Money presented by all Worth Financial.
I'm Bob Sponseller along with Brian James. How can you
prepare for a financial crisis without being too conservative? It's
one of the questions we'll answer coming up straight ahead
at six forty three. All right, there's a retirement rule
of thumb. I'm sure most of you've probably heard of
that you can safely withdraw about four percent of your

(12:01):
portfolio value each year in retirement and be fine. But
now the leader of that quote unquote four percent rule
says that might actually be too conservative.

Speaker 2 (12:13):
Yeah, but let's go over real quick for those who
may not those who may have only heard of this
in passing. The four percent rule comes from a study
that was done where they looked at thirty year periods.
So for example, nineteen thirty to nineteen sixty, thirty one
to sixty one, thirty two, sixty, all the way through
much more recent times. And the conclusion was, none of
those thirty year periods, which by the way, that thirty

(12:34):
years represents roughly the average amount of time somebody might
be retired, none of those thirty year periods ran out
of money, as long as we only took out four percent.
In other words, that was the most you could take
out to make sure all of those thirty year periods
were successful, the worst being in nineteen sixty eight. That's
the one that basically landed at four percent.

Speaker 1 (12:52):
So that's the rule. But Brian, did that rule factor
in asset allocation at all? What was the asset mix?
You know that that drove the four percent rule? Right?

Speaker 2 (13:01):
It was a balanced portfolio. So they're basically looking at
an average rate of return. That's the whole point of this.
If I if I spend a little bit of the growth,
a little bit of the dividends, what can I get
away with worst case scenario over history?

Speaker 1 (13:10):
All right? Well, what's Bill Benkon, who came up with
this original rule?

Speaker 2 (13:14):
What's he saying? So Bill's out there with an update.
Now he's saying, and this, by the way, this report
came out in the nineties. Now he's saying, retires can
safely take out closer to five percent, maybe even a
little more, depending on market conditions and inflation trends. I
don't like when people do this. I think he had
a great study and his name was attached to a
really good concept, because you can comfortably say, you know that,

(13:35):
historically speaking, I can do four percent, and here are
the numbers that have backed that up from history. We
don't know what's what's happening in the future, but at
least we're basing that on something that has happened in
the past. Future past never predicts the future. But at
the same time, it's better than a wild, blank guess.
And I don't know where his five percent is coming from.
He's not a dumb guy. But at the same time,
there's no history to this one. This just seems to

(13:56):
be like an update, sort of cherry picked out.

Speaker 1 (13:59):
Of the air well. And I don't like these well,
you know, sol strategies, And I really don't like this
story either. And I'll tell you why, Brian, and feel
free to disagree with me. By the way. But when
you go back and look at the last thirty years,
you look at the trend of interst rates over the
last thirty years, and they've largely been trending down. I mean,
we've had decades where we've had nice, good bull markets

(14:22):
and bonds. You know, when interstrates trend down, the price
of existing bonds goes up, and that, in my opinion,
has provided a lot of tailwinds behind that sixty forty
allocation strategy. There's no guarantee going forward that rates are
going to keep coming down. I mean, we saw them
go up in twenty twenty two. I just want to

(14:44):
be very careful in saying, hey, the coast is clear,
don't just withdraw four now you can withdraw five. The
point here, everybody's individual situation is different. Don't just make
your plans based on some guy's article and assumption. Run
the number, run the assumptions, and make sure your individual
plan is going to work with a certain withdrawal rate. Yeah.

Speaker 2 (15:06):
Absolutely, And again it's just making sure that you know
what you need and what your resources are and how
you match up those two things.

Speaker 1 (15:14):
All right. Another thing we want to cover college decisions.
They are tough enough as we all know. Now, a
new report breaks down which majors lead to the strongest
job markets and which ones tend to struggle. Brian, I
don't think this is going to come as too much
of a surprise to too many people out there.

Speaker 2 (15:31):
Yeah, so just confirming what a lot of people already suspect. So,
according to recent data, health professions and computer science majors
are leading the way in employment rates, meaning can I
get a job with this degree and earnings potential? Obviously,
computer science is probably always going to be in the
mix here, because that's probably the quickest evolving industry we've
ever had in the history of the world, because things
can change so quickly. Health we all got it, we

(15:53):
all got to deal with those kind of problems, and
society as a whole is aging rapidly. So on the
other hand, we've got degrees in psychology, performing arts, Liberal
arts are showing some of the highest unemployment rates unfortunately,
So I don't I don't think that's a major shock
to anybody, but that is still holding true.

Speaker 1 (16:09):
You know, the point we're trying to make here, you know,
we don't want to steer our kids away from their
lifelong passions and dreams. I mean, if you're not interested
in something and willing to put time and effort and
energy into it, you're probably not going to be very
good at it. But you know, when you talk about
the cost of these tuition bills and room and board
and the overall cost of college, it's a humongous number.

(16:31):
And I think the message we're trying to put out
there is before families make these kind of decisions, you
do kind of have to. You have to count the costs,
and you've got to look at the potential opportunities at
the other end and at least at least start to
factor in some type of rate of return decision on
your college decisions. Yeah, and at the end of the day,

(16:52):
we all need to we're pursuing these degrees so that
we can pay the bills and get to get the
job done. So we need to make.

Speaker 2 (16:59):
Sure that the the things all figure.

Speaker 1 (17:01):
Together all right. Every Sunday you'll find our all Worth
Advice in the Cincinnati Inquirer. And here's a preview. Brian.
We've got James and dry Ridge who asks my fifteen
year old daughter, baby sits a lot, so I'm wondering
if she can save in a roth ira with this
money or is she too young?

Speaker 2 (17:20):
So, James, that's a great question, and it's great that
you're leading your daughter down this path of Hey, let's
start thinking about this. And I'm going to say that
age ain't nothing but a number other than when it
comes to earned income.

Speaker 1 (17:32):
So that's really the hitch. It's not her age.

Speaker 2 (17:34):
You can open up a minor wroth ira, meaning that
you would be sort of the custodian for it as
her guardian, but it goes in her name, her so
scurity number, and it would function just like a roth ira.
The hitch there is that is whether she's reporting this income.
If somebody's given her you know, fifty seventy five bucks
or whatever in cash on the way out the door
or venmowing her, then then that's not getting reported.

Speaker 1 (17:55):
Therefore she will not have a W two.

Speaker 2 (17:58):
That would justify the cost or USI by the ability
of making that roth contribution. So that's the position she
needs to be in. So she needs to have earned
income from these sources where you know it actually works
like an actual job. So that really is the pivot
point there. But again it's a great thing to get started,
and I'll throw out there too that whenever this question

(18:20):
comes up, if you have young people who do have jobs,
or maybe they're actually not not just a teenage summer job,
but also you know they've gotten their first grown up job,
and now they get a four O one K or
a four or three B or whatever. When somebody is
just getting started. There are very few rules of thumb
that that we like as advisors, but I would say,
when you're just getting started and you are in a
low bracket, the answer is roth, roth, Roth all day long.

(18:42):
Whether you're funding an IRA or you're choosing that outlet
in your four O one K, four or three B,
do the wroth if you do nothing but contribute to
the wroth side of your four oh one K while
you're in a low bracket. Maybe you do that through
your twenties, and then by the time you're thirty, you've
got different things screaming for money. You're married, there's a mortgage,
there's kids, and so forth. If you never fund the
wroth again, that money you put in in your earliest years,

(19:04):
that very first dollar will be the most valuable valuable
dollar you've ever owned, and it will come out tax
free after thirty or forty years.

Speaker 1 (19:11):
Worth of growth.

Speaker 2 (19:11):
So good on you, James for talking to your daughter
about what a roth ira is. And for the rest
of you out there, encourage your kids to get that
wroth money working very very very early in their careers.

Speaker 1 (19:21):
And remember too, if you're not getting that W two
or ten ninety nine from your daughter's employment, make sure
you or she keep you know, good records. You know,
in case you got to you know, the irs comes
calling later on, make sure you've got good records all work.
Steve Ruby joins us next as we talk about the
newest scams out there. As May comes to an end,

(19:41):
you're listening to Simply Money, presented by Allworth Financial on
fifty five KRC the talk station. You're listening to Simple
Money presented by all Worth Financial. I'm Bob Sponseller along
with Steve Ruby, and we're by our good friend President

(20:02):
of the Cincinnati Better Business Bureau, Josil Erlik. Josil, thanks
for making time for us today.

Speaker 3 (20:09):
I always enjoy coming on your show.

Speaker 1 (20:12):
All Right, today, we want to talk about some scams
that are out there.

Speaker 3 (20:16):
Correct absolutely, and we've got some travel scams. I thought
that May would be a good month to try and
get ahead of this and warn people about what they
might be facing. Sounds to talk about, Okay, the first
one I'd like to talk about is the toll payment scam.
Scammers are using fake toll payment notices. They're trying to

(20:38):
steal your money and your personal information. These notices could
come in any form, from email, text, phone calls, even
actual letters. Now, if you get an email or a letter,
a lot of times you're going to see a very
official looking logo and it looks very legitimate. Phone calls,
they very likely are going to display the name of

(20:59):
a state agency on your caller ID. Personally, I am
getting a toll scam text about every week and I'm
just tired of it. Regardless of how the message is delivered,
there's going to be a threat if you don't pay,
maybe a license suspension, fines, lawsuits, even a hold on
your vehicle registration. The goal is to scare you into

(21:20):
paying quickly without ever verifying the claim. These notices also
could direct you to a bogus website that looks like
the official toll agency site, and if you click on
that link, it's going to prompt you to enter your
personal information and credit card details. Clicking on that link
could also install malware on your device, giving these guys

(21:42):
access to your personal data and possibly subjecting you to
a ransomware attack down the line. Some scammers are even
going to call you pretending to be a representative from
a toll authority, and they're going to try to pressure
you into making immediate payments over the phone. Do not
do it. In most cases, you're going to be able
to tell if it's a scam if you haven't been

(22:03):
to the state in question. But if you have and
you're unsure if you have an outstanding toll violation, contact
that state's toll authority before you pay anybody any money Anywhere.
You can contact them directly by phone. You would find
it on the toll authorities website or by typing in
the URL directly into your browser. Never ever, ever trust

(22:27):
the link provided in these unsolicited messages. They're going to
lead you to a phishing site that's trying to get
your personal information, your banking information, or both.

Speaker 4 (22:37):
These are terrifying, and I'm getting them too. I got
one for tolls in Arkansas or something. I was like,
I don't think i've ever driven through Arkansas before, but
I did get one for a New Jersey and I
lived there for a few years and actually had like
a one of those lane passes in my car, and
the first time I got it, it caught my attention.
I was like, wait a second, do I really and
then the alarm bells went off after I thought about

(22:58):
it for a second and did not end up clicking
on a link or paying anything. But these things that
I just hate that there's so much energy that goes
into the bad people out there that are trying to
scam us, steal our money, and stealer information. So I'm
glad you're talking about it. Another one that's timely as
travel season ramps up here vacation rental scams.

Speaker 3 (23:21):
Yeah. Now, these guys put fake listings on legitimate platforms
like Airbnb and verbo, very legitimate platforms, and they're using
pictures of properties that they've taken from other people's listings,
and to make it even more enticing, they're going to
low ball their price so they can attract even more
potential renters. So you call to get more information, and

(23:42):
the scammers who are posing as the owners paint this
fabulous picture of the property and the grand time you're
going to have in this unique location, and if you
show interest, they claim there's a high demand for the
property and they're pressuring you into booking right now. This
urgency is always a key that you're being scammed. They
require you to send money today to reserve the property,

(24:04):
but instead of using the rental platform's secure payment system
that Airbnb and Verbo and the like have, they want
you to pay with a wire transfer like Western Union
or money Gram, or a cash app like Venmo and
zell even cryptocurrency or gift cards. So of course when
you pay those ways, once the money's sent, it's nearly

(24:25):
impossible to recover. Then those once friendly owners, once they've
got your money, they disappear, cutting off all communication with you. Unfortunately,
that's not the worst of it. Your dream vacation is
going to be ruined when you get there and you
find out that either the property doesn't exist, it belongs
to somebody else who has no idea about the rental,

(24:47):
it's already booked by someone who booked it through a
legitimate listing agency, or it's not at all what was advertised.
It's old, it's run down, it doesn't have the proper
promised amenities. You name it. Just take your time in
think first. We also have fake airline ticket deals.

Speaker 1 (25:04):
Yeah, go ahead, Joe sil We also.

Speaker 3 (25:06):
Have fake airline ticket deals. These scammers set up fraudulent
travel agencies or fake websites they claim to offer deep
discounts on flights, and if you book a flight through
one of these sites, you'll eventually find out that either
you don't really have a ticket on the flight, or
you have a valid ticket but it got canceled because
the scammer used a stolen credit card to book it. Now,

(25:29):
along the same lines, you've got the hotel reservations. These
guys follow the same mo as the fake airline ticket scams.
They create a phony hotel booking website that looks just
like the real name brand websites. You think you're booking
through a reputable chain, but you're not, and after paying
for the reservation on this bogus site, you get to
your hotel only to find you do not have a reservation.

Speaker 1 (25:53):
Yeah, joseille Iya, I didn't mean to interrupt you before,
but when you were talking about that vacation rental ski,
I mean that one hit close to home for my
wife and I. We own a condo out in Colorado,
and this has happened three times already. Someone has been
scammed and actually paid to rent our condo, and obviously

(26:15):
we never have had it listed and never was intending
to rent it. We felt awful for those people, but
they contacted somehow contacted us thinking they were ready to
come in and rent the condo, and they were scammed.
So you definitely got to look out for this stuff.

Speaker 3 (26:30):
Absolutely. If you are dealing with a company that you
have never dealt with before, the best advice I can
give you is check that company out at BBB dot org.
See what BBB has to say about them, see what
the reviews are about them. Don't give your money. Don't
be forced into giving your money quickly without being able

(26:52):
to do your homework.

Speaker 1 (26:54):
Great stuff, as always from Josiel Erlik, the president of
our Greater Cincinnati Better Business Bureau. Thanks again for coming on.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to

(27:15):
Simply Money presented by all Worth Financial. I'm Bob sponsorer
along with Steve Ruby. Do you have a financial question
you'd like for us to answer? There's a red button
you can click while you're listening to the show right
there on the iHeart app. Simply record your question and
it'll come straight to us. All right, we've got a
segment here, ask the advisor. Let's roll with it. Steve.

Speaker 4 (27:37):
First, we have Lynn in Madeira almostly have another two
thousand and eight. How do we plan for that with
something too conservative? All right, so this question is good.
It's planning for a major financial crisis. I don't think
this question is unfair by any means, because at some
point in the future we will have some kind of
a recession paired with a bear market. I don't know

(27:59):
if it's going to be a two thousand and eight
level crisis, but we do need to make sure that
our money is working for us so that our dollars
keep up with inflation. Now, without knowing the specifics of
Lin's financial plan, you know, the exact feedback is a
little challenging to provide. But I will say that when
you have that financial plan in order, it will help

(28:20):
you understand what you need to do with your money
to not only keep up with inflation, but meet your
financial goals over the long term. That's why fiduciary financial
planning firms will create financial plans. It's to help people
understand that they need to stay the course in the
face of a financial crisis. Now that there are investment

(28:42):
strategies that exist out there that can set ceilings and
floors on investments, I'm talking about like a buffered etf strategy.
Something like this is potentially beneficial for somebody that needs
to have their money in the markets to meet their goals,
but they're terrified of the potential consequence is of a
downturn when it comes to better outcomes over a long

(29:03):
period of time, though, capping those gains can be a
risk for the longevity of your plan. So this is
something I deploy only when people really need it to
actually invest their money in the markets.

Speaker 1 (29:17):
Let's go to Alex in Oakley. How do I pass
assets to my kids without a huge tax hit? Well, Alex,
I think it depends on who you want to avoid
the tax hit on you or your kids. So there's
different strategies to do that. One thing to remind you
of and remind everybody of, there is a step up
in cost basis for non IRA, non retirement plan assets,

(29:39):
you know, stocks and bonds, things like that. So a
lot of people like to hold those long term and
make sure they pass those pieces of their portfolio onto
their kids because there will be no tax exposure once
you pass away. If you've got a portfolio largely concentrated
in retirement funds, you know, that's where a lot of

(30:00):
people will consider roth conversions for a multiple of reasons,
one of which is your tax rate during your lifetime.
But we've got some clients that want to take care
of that tax hit now during their lifetime so that
they don't leave iras and qualified plans to their kids
and have to have them pay the taxes down the road.

(30:20):
So it really depends on your own individual situation, and again,
whether we're trying to avoid taxes for you or your kids,
or a combination of both.

Speaker 4 (30:31):
And if you're fortunate enough to be rather wealthy in
this day and age, the death tax that we've all
heard of before is very high at this point. You
need to have a large estate before that even comes
into play. But then there's more unique strategies using life
insurance policies tied to irrevocable trusts. I'm talking about an
islet irrevocable life insurance trust that you can actually use

(30:54):
money to pay for that insurance policy within that trust
account that will then be used to pay estate taxes
on behalf of your state when you're gone. So that
this is for people that I'm talking you have, you know,
tens of millions of dollars. Strategies like that could certainly
be beneficial. John and Fort Thomas.

Speaker 1 (31:11):
What are the trade offs between Wroth conversions now versus
later in retirement? Well, John, the tradeoffs you got to
look at as your tax rate now, because when you
can do a Wroth conversion now, you got to pay
the taxes today at the current tax rate, you know,
based on what your other income is if you're still working,
or you know, the situations vary by clients. So you

(31:32):
got to look at your tax situation today, you got
to make some assumptions about what tax rates might be
in the future, and then you also got to take
make some assumptions about the rate of return in the future.
And then you know, that's where some of this great
financial planning and tax software comes in. We can model
different scenarios to weigh those trade offs. And none of

(31:53):
this stuff is perfect, but you know, it's it's kind
of the garbage in garbage out. If you're making good
sumptions going in with good data, you can make the
best possible decision you can make armed with the information
we have available. That's what I'd recommend, you know, sit
down and have a good fiduciary advisor model out different
scenarios for you, and they're definitely trade offs and oftentimes, Steve,

(32:19):
I don't know if you agree. And when we actually
sit down and run and model out these different scenarios,
people will come up with a with a with an
ending scenario that they feel comfortable with and feel comfortable
pulling the trigger on. And sometimes that is doing nothing.

Speaker 4 (32:35):
Oh yeah, it is. Sometimes a Roth conversion doesn't make
sense at a certain point in time. That's why they're
very popular when you make that transition into retirement, because
if you're somebody earning a lot of money currently, you
could be putting those dollars tax free, not tax free,
but tax deferred into your four O one K for example,
and then once your income falls off, there's more of

(32:56):
an opportunity to capitalize on larger Roth conversions when you
make that transition into retirement.

Speaker 1 (33:02):
All right, speaking of four oh one k's Sam and
Batavia has a question, Steve.

Speaker 4 (33:07):
I already max out my four oh one K.

Speaker 3 (33:09):
What else can I do to reduce my taxes?

Speaker 4 (33:12):
Well, nice job, that's wonderful. I'm glad to hear it.
If you're married or planning with a partner, whoever else
is in that household, perhaps they could be maxing a
workplace retirement plan. If they're not, then maybe they're eligible
for a traditional IRA contribution.

Speaker 1 (33:27):
Same thing with you.

Speaker 4 (33:28):
There are limits on how much you can earn and
actually get a deductible contribution on that IRA, but we
could be looking at things like a health savings account.
For example, if you have a high deductible health plan,
you could be putting money tax deferred into that vehicle.
Same thing with an FSA, but that's something that doesn't
roll over the same way that an HSA does every year.

(33:49):
There's also potential strategies for itemizing taxes. Let's say you
have significant positions in a taxable account and you're also
charitably in client Maybe we could be doing some tax
suce harvesting in the tax will account, or we could
be using some of those assets to fund a donor
advice fund. To itemize your taxes in a particular year,

(34:11):
the thought process there is that you're bunching your your
your tax filing strategy, so you can itemize in one
year and take standard deductions and alternating years. So there
are strategies you can deploy. Obviously, sit down and talk
to a CFP or a CPA or both.

Speaker 1 (34:26):
Coming up next, we're going to take a trip inside
my own warped brain, my world of wealth. You're listening
to Simply Money presented by all Worth Financial on fifty
five KRC the talk station. You're listening to Simply Money
presented by all Worth Financial. I'm Bob Sponseller along with

(34:48):
Steve Ruby. All Right, Steve, I want what I want
to talk about today, and in this I think this
is you know, it's always important, but in light of
a lot of the recent volatility we had, I want
to stress the importance and the critical importance of separating
your investment in financial decisions from your own personal politics.

(35:11):
It is critically important. And I'll give you a reason why.
I had a guy come into my office earlier today.
We've had three meetings together within the last ninety days,
and this guy has been and I've worked with this
gentleman for over thirty years he's a very bright, very
responsible guy, but he's been all over the map here

(35:33):
in the last ninety days, and I think it's because
of his political bias. He wanted to go to all cash.
Then he wanted me to recommend you the hottest tech
stocks so he doesn't miss the AI revolution. He moved
a lot of money to cash, and then he wants
to get back in and talk about a long term

(35:56):
investment strategy. All the things that we tell people not
to do. This guy has talked about it, thought about it,
and to some extent, done it all within the last
ninety days. It's been crazy.

Speaker 4 (36:11):
It's interesting because no matter what side of the aisle
you're on, you're on, you're still driven by fear and greed.
And a lot of people think that the other political
party is going to massacre the markets no matter what happens.
But at the end of the day, we're not investing
in politicians who can't actually move the markets as much
as people think they can. We're investing in businesses, which

(36:35):
drives the stock market, and businesses are driven by corporate
greed and that's that's a foundation of capitalism, and capitalism
isn't going anywhere, so letting political biases cloud your own judgment,
whether it's on the fear side thinking that everything is
going to go bad, or the greed side because your
guy got in and putting all of your money into

(36:56):
one hundred percent stock when you're eighty five years old,
that's not necessarily the best approach for your money.

Speaker 1 (37:01):
Well, and I find you know, when the emotions run hot,
you know, during times like this, oftentimes with highly technical,
highly intelligent people, you know, doctors, engineers, people that are
very very smart, well educated people. They like to think
when it comes to the world of investing, they can

(37:22):
figure out or they want to figure out how the
whole macro economy works, the global economy works in the
short term, and they think they have the absolute answer
on what the way the world should work or will work.
And they make some they come up with some really
I'm not they come up with some decisions that they

(37:44):
want to make which are completely irrational because you cannot
anticipate how investors, companies, governments are all going to adapt
and move and change depending on what's going on economically,
with interest rates, with geopolitical concerns, Trying to outthink the

(38:08):
management and behavior of a global economy is a really
dangerous place to go, and we've got to avoid getting
wrapped up in all that.

Speaker 4 (38:16):
I think remembering that at the end of the day,
the stock markets, like walking up the stairs, will plane
with yo yo. Things will trudge along forwards no matter
what happens with politics, so don't make big decisions based
on emotions from them.

Speaker 1 (38:29):
Thank you for listening. You've been listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
talk station