Episode Transcript
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Speaker 1 (00:07):
Tonight is all hell about to break loose in your
four to one K. You're listening to Simple Money, presented
by all Worth Financial. I'mbob sponsorer along with Brian James.
What I just said, Brian is not my words. That's
an actual headline that we saw yesterday and market Watch
and obviously it got us interested. Tell us what's really
(00:28):
going on here?
Speaker 2 (00:29):
Yeah, what's really going on is a publisher's selling advertisements. Really,
this is just like always when we find these crazy
scary headlines. The answer is really make sure you read
the article, not just the headline. And that's the case
here too. So what they're getting at is this headline
is definitely designed to grab your attention, and it sure
did because here we are talking about it on the radio.
(00:49):
But what's the substance behind it. Let's make sure we
understand what's going on. So what the article is about
is some new discussions that are happening about the potential
inclusion of some more high risk investments like cryptocurrency, private
equity and annuities and things like that into your four
to one case. Currently, the US Labor Department, which that's
that's the entity that governs four oh one CA's right.
It's a little different corner of the of the investment world.
(01:12):
There's a lot of different government agencies involved in our
in our space, to say the least, right Bob, But
in any case, the US Labor Department is over four
to one case. They have not yet had a real
strong opinion on crypto and these ideas, so it hasn't
officially been rubber stamped for approval. But and there's still
a lot of legal, logistical types of things. It's not
going to be a simple thing to add these to
(01:33):
four to one k's for participants.
Speaker 1 (01:35):
Well, Brian, I don't know if you and I have
had an opportunity to kick this topic around yet, but
we've talked about it on the show here a few
times now this year, and I'll give you my two
cents on it.
Speaker 3 (01:45):
I want to hear yours.
Speaker 1 (01:47):
In my opinion, I think some investors are asking to
put these kind of things into four one K plans,
But I think a lot of this is coming from
lobbying interest from actual vendors, the product sponsors product. They
want to get all this stuff on these four to
one K platforms because let's face it, that's where all
the money is that's where all the you know, retirees are,
(02:09):
so there's there's big revenue and fees involved. If you
can get these things on various four to one K
platforms and get people invested in it, that's my glasses
half empty.
Speaker 3 (02:21):
Look at this? What say you, Brian?
Speaker 2 (02:23):
Yeah, the cynicism has an appropriate place in this particular discussion,
and I think you're exactly right. This is the same
crowd that got all wound up when there were rumors
of a potential digital dollar US currency reserve, and that
may still come. It gets kicked around every now and then,
but it's not your average person sitting in a cubicle
looking at their four oh one K just super wishing
(02:43):
they could invest in all this crazy stuff out there.
And it's not simple, right, This is not you know
a lot of people might think this is hey, just
add it to the list.
Speaker 3 (02:51):
That's all there is to it.
Speaker 2 (02:52):
Absolutely not. Some of you people out there, some of
you folks are responsible for this and are involved in
the committees who decide what's available in four to one K,
and that is an important important job because, believe it
or not, your company that makes boxes or widgets or
whatever is also a fiduciary for its employees with regard
to investments. If you didn't know that, well now you do.
But that's why this is not an easy answer. Your
(03:14):
employer is responsible to make sure they don't give you
enough rope to hang yourself if something goes wrong. And
I guarantee this is gonna happen because somebody's gonna go
too wild west with the ability to do this, and
employees are gonna get hurt. People don't know what they're doing,
are gonna make a mess of their investments. And the
employ you're the company that makes boxes during its day job,
(03:34):
will be held responsible because it is a fiduciary. So
that's why these things do not happen very quickly at all.
It takes a very long time for the committee to
decide yes, this is worth it, and it does not
put the company at an inordinate amount of risk.
Speaker 3 (03:47):
Well, Brian, you bring up some great points.
Speaker 1 (03:48):
You actually took the words out of my mouth because
I've shared before on this show. I used to be
the advisor to four or five pretty large four oh
one K plans for businesses, you know, in the greater
Cincinnati areas, so I know how this process works. And
I used to be the guy that went in and
gave the annual update slash review for plan participants, and
it goes something like this. I mean, they these companies
(04:11):
give you about thirty minutes to talk about tax laws,
raw four one K, regular four to one K, investment options,
asset allocations. You cannot pack all this into a thirty minute,
you know, conversation with people. And even if you try to,
you know, you're getting a deer in a headlights look
from about one third of the people in the room.
The last thing these people need is to just look
(04:33):
at some of these exotic asset classes that might have
had a great six or twelve month run in terms
of return and say, yeah, I'm gonna pile all my
money into that option because it's outperforming everything else.
Speaker 3 (04:46):
And then you just you.
Speaker 1 (04:47):
Just cause this person to have a whole ton of
volatility into their retirement plan. And then if things go
the other way on them, there is no one there
to take responsibility. There's no one there to hold that
investment by the hand.
Speaker 3 (05:01):
It can be a mess if not handled correctly.
Speaker 2 (05:04):
Yeah, I've been in that position too. And the thing
to remember the most noticeable thing about that room full
of people. Is that you are the only one whose
day job is to worry about this four oh one K.
Everybody else who is employed by that company and on
that committee also has other meetings and other stuff to
do that day that minute, probably because the company is
responsible for making widgets, not providing a four to one
(05:26):
K for its employers. However, Department of Labor and a
big act called ERISA says differently. They say that employer
is responsible. That means they bear the responsibility to make
sure that as a fiduciary that the investments that they
have available are prudent for investors. They have to monitor
them ongoing. That's why these ongoing meetings happen. They have
to be super careful not to put too many things
leaning toward the volatives, volatile and speculative stuff. There's all
(05:49):
kinds of issues with ill liquidity and complexity with if
you're gonna throw private equity, not only talking about crypto,
those other things they're kicking around putting in here. Private
equity type investments seem all kinds of sexy, but then
they're not liquid. So what happens when somebody leaves and
wants to roll their four O one k over and
it's all tied up into some kind of private equity investment.
So again, none of these decisions are simple tread lightly.
If you're responsible for.
Speaker 1 (06:10):
Them, you're listening to some you're listening to simply money
presented by all Worth Financial. I'm Bob Sponseller along with
Brian James Brian here here's at least my take, and
just to get everybody calmed down here a little bit.
Speaker 3 (06:22):
I mean, the four to one case system is not broken.
Speaker 1 (06:25):
In fact, it's still one of the best, most tax efficient,
automatic dollar cost averaging, low cost.
Speaker 3 (06:32):
Way to build wealth.
Speaker 1 (06:34):
And all of these plans are still going to have
the plain old you know, index funds, target date funds,
responsible large cap you know, dividend paying stocks in them.
It's just we're we're just calling this out. Don't panic
with all this headline news. Just be aware that some
of that stuff might be coming down the pike in
(06:55):
your plan, and don't be caught off guard by it.
Be prepared and stay the course in terms of using good,
good old, long term responsible options in your four to
one K plan.
Speaker 2 (07:07):
Yeah, and let let's be clear, we're going to be
the last to tell anybody that you should never ever,
ever ever invest in these types of things. It's just
it's you have to understand what you're getting into and
not take too much risk. So if you're somebody who
does get that, you may be able to do it
right now. So there's a lot of four to one
ks nowadays offer something called a brokerage window, which is
where you can open inside your four oh one K
(07:29):
you can open an account with perhaps at Schwab or Fidelity,
or there's a lot of other custodians out there, and
it may be a different custodian who actually runs your plan.
You have to look into this, but it'll function like
a brokerage account where you can log in and buy
this and sell that and it's all happening within within
your four o one K. They're usually a little bit
of expenses to that, of course, but you may have
the ability to do these things without your your plan
(07:51):
committee that we're more worried about, without them having to approve.
That's the addition of that for everyone. So if you
understand it and you know the risks and you want
to get involved in it, then look around for a
brokerage window. There are different cut names for him. Schwab
calls it a pc R account, Fidelity.
Speaker 3 (08:07):
Costs directed brokerage account. Yeah, fingers link.
Speaker 2 (08:10):
Yeah, it'll have some kind of branded name, but yeah,
it could be possible already for you.
Speaker 3 (08:14):
Yeah.
Speaker 1 (08:15):
To me, that's the place where if you are a
seasoned experience investor and you know what you're doing, and
you have a responsible asset allocation set up, and you
do want to kind of go off the proverbial reservation
here a little bit and speculate with some of these
you know, one off investment options like crypto ETFs or
things like that. To me, that's the place to do it,
(08:37):
not just throw this into the general platform menu. And
again to your point, Brian, we're not trying to come
across as big brother here. We're just trying to be
responsible and helpful and tell people, you know, watch out
what's coming down the pike, and don't be enamored by
headline news.
Speaker 2 (08:55):
Yeah, and let's bring this full circle. So we started
this off by complaining about the second the headline that
grabs eyeballs.
Speaker 3 (09:01):
The article itself is not bad.
Speaker 2 (09:02):
It's giving you good information about what's coming in the
four oh one k world, Good, bad, or indifferent but
that headline needs to grab your eyeballs or that doesn't
or doesn't sell advertisements for the people who put it
out there. So the truth is, if you're if you're
somebody you're in your forties fifties, and you're looking at retirement,
you know, the question isn't will crypto ruin my four
oh one k? It's does it matter to me? Because
as Bob just mentioned, you're not going to lose the
(09:23):
ability to do the traditional things you're probably more accustomed to. Anyway,
that's not on the table. It's just new options available
to you. However, the more important question remains and always
has been, am I contributing enough? Is my investment mixed?
Still appropriate? And have have I rebalanced it lately? The
market's been on an absolute tear the last couple of years.
There's a good chance you're overweighted in stocks. That's not
a bad thing, that's what we want, but it does
(09:45):
have to be rebalanced out eventually, and so so remember also,
if you're a business owner, you're going to be asked,
probably by your employees about these so you'll want to
make sure that you you know, you kind of understand
what the situation is and you know make you're gonna
be making a decision as to whether you want to
incl these options in your four to one. Okay, don't
forget that fiduciary obligation. Lean on your partners oftentimes who
(10:06):
will take that responsibility for you.
Speaker 3 (10:08):
Here's the all Worth advice.
Speaker 1 (10:09):
Don't let sensational headlines shake your confidence. Four to oh
one k's are still one of the best tools for retirement.
Just make sure you're using yours wisely. Coming up next,
why many baby boomers are choosing to spend their money
now rather than leave it behind to airs and what
that means for your financial future. You're listening to Simply
(10:30):
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 Brian James.
If you can't listen to Simply Money every night live,
do what Brian James does. Subscribe to our daily podcast.
(10:53):
He listens to it all night long. And if you
think your friends could use some financial advice, tell them
about it as well. Search Simply Money on the iHeart
app or wherever you find your podcast. Straight Ahead at
six forty three, a look at an option that many
company retirement plans have that not many folks take advantage of.
(11:14):
All right, Cincinnati continues to make its mark on the
national business landscape, with several local companies securing spots on
this year's Fortune five hundred list. Brian, give us some
updated numbers. Yeah, so this is pretty exciting.
Speaker 2 (11:29):
So as we as we know, and you and I
know very well from sitting at the across the table
from a lot of these folks, Cincinnati is a city
full of large employers. That means we have a lot
of W two employees, you know, people out there who
go and support a bigger companies. It's a little bit
of a different environment that some of our partners across
the country at all Worth. You know, some are some
areas are more small business oriented that kind of thing.
(11:50):
But here we have a lot of major employers and
some of the big ones out here.
Speaker 3 (11:55):
With the new.
Speaker 2 (11:56):
Rankings of the Fortune five hundred, Kroger is that is
the top Spotthole are locally speaking at number twenty seven
out of all five hundred, one hundred and forty seven
billion dollars in revenue. So obviously that has a lot
of that comes home to the Tri State area.
Speaker 3 (12:10):
And they're selling a lot of eggs, Brian.
Speaker 2 (12:12):
There is an awful lot of groceries being sold out there,
and we certainly appreciate that as well as not to mention,
you know, it's just because your your badge or your
car business car doesn't say Kroger, doesn't mean you don't
support them. There's an enormous amount of companies, little businesses
who support the Krogers and the P and g's in
the in the General Electrics of the world here. So
speaking of P and G, they're not too far behind.
They're in fifty first place, eighty four billion in revenue.
(12:35):
And an interesting story is General Electric and people might go, well,
of course General Electric's been there, They've been on there
for a long time. No, don't forget. General Electrics split
into four pieces a few years ago. Ge Aerospace, one
of those four chunks is the company that we got
to keep locally based there and even Dale just down
the hill from us now as standalone company and they're
at forty billion in revenue. So that's been a very
(12:55):
cool story. And I'll throw out there too for you
those folks out there working for ge Aerospace or four
oh one K got modernized so that RSP used to
be didn't have all the bells and whistles.
Speaker 4 (13:04):
Now it does.
Speaker 2 (13:05):
So if you want to know what we're talking about,
give us a call, or give your advisor a call
and ask them to go over your summary plan description
to see what those new features are.
Speaker 3 (13:14):
Good stuff.
Speaker 1 (13:14):
All right, let's talk about the so called Great wealth Transfer.
For years, Brian, we've heard that baby boomers are set
to pass down trillions and trillions of dollars to their heirs.
But recent data suggests that this massive transfer might not
be as widespread as one thought.
Speaker 2 (13:34):
So what's happening here, Bob Well. Projections are estimating over
the next two decades with regard to the baby boomers,
about eighty four trillion dollars trillion. Remember when when billion
was a big number. Now that's like the little number
next to the big number. Eighty four trillion is going
to pass generations. About seventy two trillions going to go
directly to those airs. And so what's going on is
a significant number of boomers are kind of rethinking how
(13:56):
they're going to do this. Northwestern Mutual Big Insurance Company
twenty twenty four found that only about two out of
two and ten baby boomers actually intend to leave an
inheritance to those younger generations. That's a big, big change.
That's not really just changing attitudes. There's there's some very
practical concerns here. Healthcare costs are are a major factor.
And you know, as we talk to our our clients,
(14:17):
a lot of them are saying, hey, you know what
I earned this, I want to, you know, live my life.
They'll get what they'll get what's left, and I'm fine
with that, but they're probably going to get more than
me anyway, So it is not a major goal. And
I would say, in my experience, Bob, maybe you remember
this too, but before two thousand and eight, everybody had
a thought that, well, I want I want to leave
my kids, you know, I want to leave me each
a million dollars and I think I can do that
based on what the market has done. Then two thousand
(14:38):
and eight happened and everybody just said, you know, what,
the heck with it. They're going to get whatever's left
over and they're gonna be happy with it.
Speaker 1 (14:45):
Well, Brian, I want to go back to some of
these numbers, and I'm you know, I don't have data
to back up what I'm about to say other than
just anecdotal data, but two and ten seems pretty low
to me.
Speaker 3 (14:55):
So one of one of two things has to be
going on here.
Speaker 1 (14:58):
Either a lot a lot of baby boomers really are
going to run out of money during their lifetime they
have not saved enough to retire responsibly. Or these numbers
are just off because we don't come across many clients
in our office that are at risk of, you know,
dying with no money, or you know, don't walk in
(15:19):
walk in and say, well, the heck with my kids,
I'm going to spend it all down to zero and
leave them nothing. Something seems off here to me.
Speaker 3 (15:26):
What do you think?
Speaker 2 (15:28):
Yeah, I think I think what happens here is this
is just a survey and we don't know who they're asking.
All we know is that they sent somebody an online
form to click the answers to questions on. What I
will say, mister Sponzeller, is that you probably have seen
you have seen this so many times you had in
the past month. Have you had somebody sitting at your
table who is absolutely convinced they're going to run out
of money? When the opposite is true. That has come
(15:48):
in often all day, every day. Right, people have a
notion of scarcity. There's never enough, never enough, never enough.
And we talk about this all the time, that one
of the biggest risks is not knowing what position you've
put yourself in and working too long. And I would
say that these eight out of ten people who apparently
have ruled out the notion that there will be anything
left over are simply suffering from or at least a
good chunk of them suffering from the idea that they
(16:09):
have no idea how what position they're in now, let
alone what they're going to be in thirty years. That's
why we have a job.
Speaker 4 (16:14):
Yeah.
Speaker 1 (16:15):
Well, the only other thing I can come up with
is maybe there really is a wealth gap here.
Speaker 3 (16:19):
I mean, we hear about that all the time.
Speaker 1 (16:21):
Maybe we are living in a world of haves and
have nots. But we'll leave that discussion for another time.
You're listening to Simply Money presented by all Worth Financial.
I'm Bob Sponseller along with Brian James. I think in
light of that survey we just talked about, and you know,
I think it comes down to communication here between generations
(16:41):
because if only two and ten people have a will,
which even have a will in twenty twenty five, which
is a sharp decline in the last survey we saw
back at twenty sixteen that said four and ten people
have a will, people aren't even doing estate planning documents anymore.
And if you layer that on top of what we
(17:03):
just talked about a minute ago, folks planning to die broke,
that could be a real disconnect in terms of expectations
between the Baby Boom generation and the next generation.
Speaker 2 (17:15):
Brian, Yeah, I kind of wonder in this case if
this wasn't the second question in the survey. First, do
you plan on leaving an inheritance?
Speaker 3 (17:21):
No, do you have a will?
Speaker 2 (17:22):
Of course I don't have a will.
Speaker 1 (17:23):
I don't need a will because I'm not gonna have
any money left exactly two people.
Speaker 2 (17:27):
So yeah, so the whole point of this, And we
have lots of stories, of course, about about people who
you'll planned on getting an inheritance and it didn't happen
for one reason or another. You know, a lot of
times the thing that can sneak up sometimes is is
long term care. So parents may be perfectly healthy at
this point, but then something happens, and then some of
the scarier things out there are Huntington's or an Alzheimer's
(17:49):
type diagnosis. The average stay for that situation is seven
to eight years. For a normal, you know, kind of
end of life's stay, it's about two and a half
to three years. But if you've got one of those
debilitating cognitive issues that involve cognitive decline, then you can
be healthy. He's a horse, but still need around the
clock care because you could be putting yourself at risk.
That's expensive, and those are the kind of things that
(18:11):
can sneak up on somebody and eat up the entire
nest egg. And again, something to kind of budget for.
That doesn't mean we all rush out there and buy
long term care insurance. That might be the answer, but
I think this always comes back to and people get
tired of here and say it, But that's why we
need a financial plan. Let's figure out what position are
we in if nothing bad ever happens again, and then
(18:32):
let's simulate the cash outflow that would occur should one
or both of us in a marriage situation, should one
or both of us need some kind of long term
care solution for us, Let's understand what that impact would
be over and above whatever the baseline is.
Speaker 1 (18:44):
Yeah, on the flip side of that. And now I've
been doing this long enough, Brian. Now or I'm working
with the children, the adult children of some of my
clients I've worked with for over thirty years, and some
of those conversations are interesting in terms of this. These
these adult children will come in and say, well, I
know mom and dad have a boatload of money and
(19:05):
they're gonna leave me a large inheritance, so we don't
need to be as responsible, you know, as far as
saving and planning for our own retirement. And I'm sitting there,
I mean, I can't share actual information, but you know,
unless I have permission to do so. But folks, sometimes
that younger generation can be wildly off base in terms
(19:25):
of what they're actually going to inherit and they're using
that as an excuse to not do the proper planning
and responsibly spend money during their lifetime. It's really a
discussion that has to be had, and that goes back
to proper communication between generations here, so everybody is alended
on the same page.
Speaker 3 (19:45):
Here's the all Worth advice.
Speaker 1 (19:47):
Don't bank inheritance, build your own financial security through proactive
planning and open family conversations. Warmer weather is here, all right,
is it time to sell or a home? Our real
estate expert is in next with the answer to that question.
You're listening to Simply Money presented by all Worth Financial
(20:07):
on fifty five KRC, the talk station. You're listening to
Simply Money presented by Allworth Financial. I'm Bob Sponseller along
with Brian James, joined tonight by our real estate expert,
Michelle Sloan, owner of Remax Time. Michelle, I'm surprised you
(20:28):
even have time for us tonight because of how many
homes you're out there selling.
Speaker 3 (20:32):
Give us an update on what's going on in the market.
It's got to be ripping right now, correct, it really is.
Speaker 4 (20:39):
It's been a really busy season the last two months.
We've cranked up the heat and now the weather actually
feels like summer already. You know, we always go from
in Cincinnati it's all or nothing, so it's like either
really really cold or really really hot, and we barely
have anything in between. That's sort of like real estate
(21:00):
market as well. So right now, real estate in Cincinnati,
we are really doing well as far as the number
of listings coming on the market, the number of sales
that we're getting, the prices that we're getting on our
homes are increasing. So in Cincinnati it's still a seller's market.
But honestly, if you're reading the headlines or you're listening
(21:23):
to the news about the nationwide picture, it's not always
as rosy as I think it is here in Cincinnati.
Speaker 1 (21:32):
Yeah, it's funny you bring It's funny you bring that
up because I'm reading headlines. I've seen articles about, you know,
all this inventory in Colorado, in Florida, you know, people
can't sell condos and all that Isn't that just things
got a little bit ahead of themselves in terms of
some of this price appreciation, where that's not always the
case or rarely the case in Cincinnati.
Speaker 3 (21:55):
Is that remotely correct?
Speaker 4 (21:56):
You know, Michelle, we're definitely steady Eddie when it comes
to Cincinnati and the real estate market. That's that's why
I love it. We don't have huge swings usually in
the market. Florida, you know, it has its own issues
with pricing and hurricanes and insurance. Again, we don't have.
Speaker 3 (22:16):
A lot of those issues.
Speaker 4 (22:18):
We're just a nice place to live, great place to
raise a family. We have steady income with our businesses,
so we do tend in Cincinnati to stay fairly even
even keel, which is a good thing. But you know,
we definitely there's always that shade of doubt in our
minds because we are seeing if it's happening in California today,
(22:42):
is that going to migrate to our part of the country.
So we're always keeping an eye on things. But right now,
mortgage rates are definitely a huge factor for our buyers.
They're still hovering right around seven percent. I don't know
if that's for a thirty year fix. Again, you can
get a lower rate, you can buy down points. There's
(23:03):
a lot of programs available, but you really need to
understand that it's up to you. You are an individual,
your situation is different, and talk to your real estate
agent about how you can make it work. If you
want to sell, let's sell. Now's a great time. If
you want to buy, go ahead and buy, because guess what,
(23:25):
a year or two from now, most likely the home
that you buy today is going to be worth more
tomorrow and two years from now, in five years from now.
Speaker 3 (23:34):
Hey, Michelle.
Speaker 2 (23:34):
One of the things that we deal with frequently is
people kind of wanted to live out their dreams of
their financial plan, and a lot of times that involves
a second property somewhere. Used to always be a condo
in Florida, but now it seems more and more often
it's farmland down in Kentucky or Indiana or something like that.
Are you seeing First of all, you've seeing more of
that too than you've seen in the past. And second
of all, what is that market?
Speaker 3 (23:54):
Like?
Speaker 2 (23:54):
The reason I'm asking is because I have a lot
of clients, like I said, who we've determined through their
financial plan that yes, this is a doable thing, you
can do it. But then they're running into you know,
it's almost like those types of properties are even more inflated.
It seems like it really hasn't slowed down at all,
not only for the primary homes but also the secondary
Do you see you see the same thing?
Speaker 4 (24:13):
Absolutely. I think that there is a shift in the
location of the secondary homes. I have a lot of
my cellars right now. Over this past summer, a lot
of people are moving to North and South Carolina rather
than Florida because I don't know, they feel like that
is it's still more temperate than we have here, but
(24:35):
maybe it's a little bit more stable. So it's interesting
because there is definitely a shift on the location that
people who are retiring. If you're going to have a
second home, where do you want to go? Do you
want to you know, like you said, do you want
to move have some a second home in Kentucky on
one of the lakes Cumberland or something like that, And
(24:56):
those are always great options as well, maybe something a
little closer to home. I've got some people who are
getting that second home up in the Upper Peninsula of Michigan.
So it's it's a big wide world. I even have
one of my clients who they are retiring and moving
to Spain. They're moving to Spain. I mean, I think
(25:18):
that is just unbelievable, but it's they're doing it.
Speaker 3 (25:23):
Michelle.
Speaker 1 (25:24):
It sounds like things are pretty healthy here in the
Cincinnati market as you survey the global landscape, so to speak,
of the real estate market. If there was one thing
that you could change right now, if Michelle, if we
made Michelle Queen of the Earth for a day, if
you could change one thing in this whole market, economy,
or economic condition, what would it be?
Speaker 4 (25:46):
You know what that's that's an easy question, or that's yeah,
that is an easy question for me to answer. The
one thing would be mortgage rates. I would love to
see the rates. I don't want to see them at
three percent again because I think I think that was
just too much. But if the rates got to six percent,
I think we would see a little bit more of
(26:08):
a boom, we would see more comfortability, we would see
a lot. So really, the mortgage rates around seven and
I've always said seven is a threshold. Now, of course,
if you look historically, seven is pretty much the average
over the last thirty years. But at the same time,
in our mindset and if we look back just at
the last ten years, people have a problem with seven percent,
(26:33):
and with the cost and the value of properties going
up so dramatically, that mortgage interest rate really does play
a big factor in whether or not a buyer, especially
first time home buyers, can actually get into a home.
So in my world, if I could snap my magic
(26:54):
button or whatever, I was thinking of something fun, I'd
have the rate go to six percent and maybe stay
there rather than seven.
Speaker 1 (27:04):
I think the thought here, Michelle is I think you
should immediately open up a truth social account and just
start going off on fed chair Pal and get him
to lower rates. That would make things really hum for you.
It would make the stock market go up too. It'd
be a win win for everybody. What do you think
can we count on you to get it done?
Speaker 4 (27:24):
I'm pretty sure that someone on that level is not
going to listen to a little old me. But I
will say, you know what, the some statistics and I
know we're almost out of time, but real estate was
voted the best long term investment for the twelfth year
in a row. That's an annual report from Gallup real
(27:44):
Estate Best long Term Investment. So if you can, and
if you're in the market to buy, do it, don't wait.
That's my best advice.
Speaker 1 (27:54):
Good stuff, all right, thanks as always to Michelle Sloan,
owner of Remax Time. You've been 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
(28:14):
Worth Financial. I'm Bob Sponseller along with Brian James. 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 our show right there on the iHeart app. Simply
record your question and it'll come straight to us. When
it comes to retirement planning, the Wrath four oh one
K is often overshadowed by its traditional counterpart.
Speaker 3 (28:35):
You know that we all know the regular four one K.
Speaker 1 (28:39):
But for many Brian, especially high earners, it's definitely a
tool worth considering.
Speaker 2 (28:45):
Yeah, Bob, I want to get into that, but first
I have an important question. If I push that red
button in the app and I say, can Bob make
me a blowney sandwich?
Speaker 1 (28:51):
What happens?
Speaker 3 (28:52):
Have we tried that yet?
Speaker 1 (28:53):
I make it immediately, and I respond back and say
what kind of toppings would you like on that sandwich?
Speaker 3 (29:00):
And I deliver it to your home immediately.
Speaker 2 (29:02):
Now that's the kind of service that Bob Spondseller provides.
Speaker 3 (29:05):
That that's the related service.
Speaker 2 (29:07):
Okay, onto, enough sill Why we're Brian here for little
silliness and some financial advice as well. So Wroth for
oh one k. So the Wroth war oh one k
has not been around forever. Wroth war O one k
is similar to Roth versus traditional. Right, you're debating of
pre tax contributions, the money that I put in. Do
I want my tax benefit? Now in terms of a
deduction off my current this year income, or do I
(29:29):
want to go ahead and pay the taxes on it
now that I would have anyway, and let it grow
for the next ten twenty thirty years however long until
I retire and then pull it out capital gains and
income tax free ROTH versus traditional That is the question
no matter what type of account that you're talking about. However,
today we're talking about four oh one K WROTH flor
oh one K has not been available since the start
the pre tax four oh one K version that's been
(29:51):
around since late seventies, early eighties, very long time. Those
of you who have been in the working class for
a very long time, that you probably have them the
vast majority, if not all, of your dollars on the
pre tax side. ROTH came available in two thousand and
six in a four oh one K. This is different
than a roth ira. Roth iras became available two thousand,
not on the four oh one K side until two
thousand and six. That simply meant, though that the legalities
(30:14):
were in place for an employer to choose to offer it.
So from six to nine it actually was subject to
a sunset, meaning it was going to go away anyway,
So a lot of employers said, you know what, why
why bother going through something that setting up something we're
probably gonna take down. And then eventually, after the Pension
Protection Act, that made the roth war one K permanent.
But it really wasn't until twenty fourteen that all employers,
(30:38):
not certainly, not all, but most the majority of employers
began to offer it. So if you feel like you
it just snuck up on you, it has not been
available to you for thirty years. Your own employer's plan
may not have chosen to offer it until sometime in
the prior decade. So that's where we came from. The
benefits of roth war on and K. Of course, these
are tax free. You're paying your taxes upfront. That is
(30:58):
very much a choice that you would make, and it
is a sacrifice, right. This is not a black and
white decision. A lot of people get enamored with the
words tax free, don't they, Bob, And they decide, you
know what all I need is this is rough everything,
and there's no downside whatsoever, no, not at all. You
are working now, you are in a tax bracket. If
you're married, then there's to a working spouse, then there's
a second income there, and that's putting you into some
(31:20):
kind of a bracket. You are very much choosing to
pay taxes at that bracket in exchange for pulling them
out tax free at a time where you might be
in a lower bracket. That's not the only factor of
the decision, of course, but that's a big one to consider.
Speaker 1 (31:35):
Yeah, one of the things we talk with all the
client all the time with clients, Brian, and I'd love
your take on this as well. Something I've been starting
to take a look at more and more is for
those folks that have one hundred percent of their four
to one K dollars in that pre tax bucket. When
you start to run the numbers out five, ten, fifteen,
twenty years and you get into those required minimum distribution
(31:56):
years starting at seventy three age seventy three, that tax
income coming out. I don't care what the tax law
changes are or people think they're going to be, you're
going to be in a higher tax bracket than you
think you might be. And it might be counterintuitive, but
when you look at what that must withdraw number is,
you know, out at seventy three, seventy five eighty years old.
(32:19):
That's where it does often make sense to just bite
the bullet now, even if you're in a high income
you know, situation, and pay a little taxes now, build
up that second bucket of tax free money, because now
you've got a couple of different errors and arrows in
your quiver or buckets, so to speak, from which to
pull money out during retirement, and that can save you
(32:40):
some significant tax dollars down the road.
Speaker 2 (32:43):
I think that's a great point, mister sponseller. A lot
of people think that tax the taxes only matter right now.
What can I do right now to get a deduction?
All I care about is deductions. How can I pay
less taxes now? That's really not the way to think
about it. That's a piece of it, for sure. But
at the same time, tax planning nowadays means what should
I do now so that I get some kind of
a different outcome later, whether that be next year, five
(33:04):
or ten years from now. And I think what you're
referring to, you know, some of some of my grumpiest
people are the ones who are in high tax brackets now,
and that sure does make a man. My second grumpiest
group of people are the ones who are in RMD
stage and don't really need the money, but they're being
forced to pay the taxes on it. The downside there,
what they missed out on was was the ability to
do some tax planning in their in their pre retirement years,
(33:26):
perhaps doing some conversions, right, so you can convert existing
traditional pre tax dollars to WROTH. Yes, you're gonna pay taxes,
but of course that that flies right in the face
of the notion that taxing tax planning is only about
minimizing my taxes now. This would be a conscious choice.
I'm gonna pay some taxes now so that i can
pay less taxes later by having WROTH when in my
rm D years.
Speaker 1 (33:47):
You're listening to simply money presented by all Worth Financial.
I'm Bob Sponsler along with Brian James. All right, Brian,
we just shared a ton of information and it might
come across as a bunch of quick gobbly gook.
Speaker 3 (33:57):
Here, what's a little bit pleo, that's the whole school.
Speaker 1 (34:00):
What's some practical advice on how to actually sit down
and approach this for retirees, as you know, to weigh
the pros and cons of using either WROTH or regular
or a.
Speaker 3 (34:12):
Blend of both in the retirement plan. What process do
you suggest we go through.
Speaker 2 (34:17):
I think I think it's understanding where you are currently
in the first place. If you have put away a
good slug of cash in your investments inside your pre
tax account, it's gonna be who of you to find
a way to it to at least understand what would
the impact if I switch that to ROTH and that
comes in a financial plan. If you build a financial plan,
we can build one scenario where we say everything from
here on out is going to be pre tax, and
(34:37):
we'll put one right next to it where we're gonna
say we're gonna put less in because you've got to
pay taxes in the current year, but it'll be tax
free from here forward. Then you can look at what
is the impact when I'm seventy three or seventy five,
What does it look like when I've reached rmd AH
and is that an acceptable outcome for you?
Speaker 3 (34:52):
Here's the all Worth advice.
Speaker 1 (34:53):
Paying taxes now through a WROTH for one K can
lead to significant tax free growth and flexibility in retirement. Next,
you're going to get my two cents on a potential
land mine as you consider various social security claiming strategies.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to
(35:20):
Simple Money presented by all Worth Financial sponseller.
Speaker 3 (35:24):
Along with Brian James and Brian.
Speaker 1 (35:26):
It's time for my little two cents segment here and
I want to talk about a potential land mine that
most some people might not be aware of with regard
to social security claiming strategies. And it's actually a situation
that came up yesterday, so it's fresh in my mind
and I think it's worth mentioning here. I have a client,
you know, husband and wife. They're very responsible, great planners,
(35:50):
great savers. They ask all the right questions. We've put
together a fantastic plan for them, which they are following,
by the way. And this gentleman is getting right to
retire at some point, probably later on in the summer
of this year, but his full retirement age for social
security doesn't come about until December.
Speaker 3 (36:11):
And you know he's a math guy. He gets out
and runs the numbers.
Speaker 1 (36:14):
He's like, Bob, can I go ahead and take my
social security in August rather than December? You know, it's
only going to cost me about, I don't know, thirty
or forty bucks a month.
Speaker 3 (36:23):
What's the difference.
Speaker 1 (36:24):
I'd rather take the money now and not pull money
out of my investment account. And he wanted me to
check all his math, and I'm like, hey, your math
is great, and thankfully I remember this little obscure rule before.
Speaker 3 (36:38):
We pulled the trigger.
Speaker 1 (36:39):
And it's this in the year that you reach full
retirement age if you're still working like this gentleman is
in twenty twenty five, for example, once you have an
income above a little more than sixty two thousand dollars
this year, you're gonna get You're gonna get a one
for every three dollars deduction in your Social Security benefit,
(37:01):
you know, during that year. So when you factor that
into the equation, you know, a one third deduction from
that Social Security benefit. It becomes kind of a no brainer. Hey,
let's hold off, let's pump the brakes, let's wait till
December to take social Security. Thankfully, this client called me
and asked, and thankfully I knew to look up this
(37:23):
rule and give them a good answer. Brian, does this
ever come across your desk at all? Yeah?
Speaker 2 (37:28):
And when we do workshops, this comes up. I get
pulled aside after the workshops that we do here around Cincinnati,
and the question is always, ud, tell me, explain to
me again, how does it work when I, you know,
if I'm going to work and take soci security at
the same time. What you're referring to is something called
the earnings test. You can google that and learn all
about it. But basically, if you have not reached full
retirement age, which is either sixty six somewhere between sixty
(37:49):
six and sixty seven, depending on when you were born,
you will take a little bit of a haircut if
you're going to keep working and earn more than say,
twenty thousand dollars or so, and turn on your social
securities pigot. That's the earnings test, and there is a
true up at the end of all of it. You
will get some of it back, but it does kind
of lock you into a lower mount.
Speaker 3 (38:05):
It's very rare that.
Speaker 2 (38:06):
I think it's actually truly worth it for somebody to
pull the trigger. Let's solve the problem another way, It's
my opinion.
Speaker 3 (38:11):
Usually Yep, yep, thanks for listening.
Speaker 1 (38:14):
Tune in tomorrow and we're going to talk about how
something called the Vanderbilt Curse could impact you. You've been
listening to Simply Money, presented by all Worth Financial on
fifty five krc V talk station
Tonight is all hell about to break loose in your
four to one K. You're listening to Simple Money, presented
by all Worth Financial. I'mbob sponsorer along with Brian James.
What I just said, Brian is not my words. That's
an actual headline that we saw yesterday and market Watch
and obviously it got us interested. Tell us what's really
(00:28):
going on here?
Speaker 2 (00:29):
Yeah, what's really going on is a publisher's selling advertisements. Really,
this is just like always when we find these crazy
scary headlines. The answer is really make sure you read
the article, not just the headline. And that's the case
here too. So what they're getting at is this headline
is definitely designed to grab your attention, and it sure
did because here we are talking about it on the radio.
(00:49):
But what's the substance behind it. Let's make sure we
understand what's going on. So what the article is about
is some new discussions that are happening about the potential
inclusion of some more high risk investments like cryptocurrency, private
equity and annuities and things like that into your four
to one case. Currently, the US Labor Department, which that's
that's the entity that governs four oh one CA's right.
It's a little different corner of the of the investment world.
(01:12):
There's a lot of different government agencies involved in our
in our space, to say the least, right Bob, But
in any case, the US Labor Department is over four
to one case. They have not yet had a real
strong opinion on crypto and these ideas, so it hasn't
officially been rubber stamped for approval. But and there's still
a lot of legal, logistical types of things. It's not
going to be a simple thing to add these to
(01:33):
four to one k's for participants.
Speaker 1 (01:35):
Well, Brian, I don't know if you and I have
had an opportunity to kick this topic around yet, but
we've talked about it on the show here a few
times now this year, and I'll give you my two
cents on it.
Speaker 3 (01:45):
I want to hear yours.
Speaker 1 (01:47):
In my opinion, I think some investors are asking to
put these kind of things into four one K plans,
But I think a lot of this is coming from
lobbying interest from actual vendors, the product sponsors product. They
want to get all this stuff on these four to
one K platforms because let's face it, that's where all
the money is that's where all the you know, retirees are,
(02:09):
so there's there's big revenue and fees involved. If you
can get these things on various four to one K
platforms and get people invested in it, that's my glasses
half empty.
Speaker 3 (02:21):
Look at this? What say you, Brian?
Speaker 2 (02:23):
Yeah, the cynicism has an appropriate place in this particular discussion,
and I think you're exactly right. This is the same
crowd that got all wound up when there were rumors
of a potential digital dollar US currency reserve, and that
may still come. It gets kicked around every now and then,
but it's not your average person sitting in a cubicle
looking at their four oh one K just super wishing
(02:43):
they could invest in all this crazy stuff out there.
And it's not simple, right, This is not you know
a lot of people might think this is hey, just
add it to the list.
Speaker 3 (02:51):
That's all there is to it.
Speaker 2 (02:52):
Absolutely not. Some of you people out there, some of
you folks are responsible for this and are involved in
the committees who decide what's available in four to one K,
and that is an important important job because, believe it
or not, your company that makes boxes or widgets or
whatever is also a fiduciary for its employees with regard
to investments. If you didn't know that, well now you do.
But that's why this is not an easy answer. Your
(03:14):
employer is responsible to make sure they don't give you
enough rope to hang yourself if something goes wrong. And
I guarantee this is gonna happen because somebody's gonna go
too wild west with the ability to do this, and
employees are gonna get hurt. People don't know what they're doing,
are gonna make a mess of their investments. And the
employ you're the company that makes boxes during its day job,
(03:34):
will be held responsible because it is a fiduciary. So
that's why these things do not happen very quickly at all.
It takes a very long time for the committee to
decide yes, this is worth it, and it does not
put the company at an inordinate amount of risk.
Speaker 3 (03:47):
Well, Brian, you bring up some great points.
Speaker 1 (03:48):
You actually took the words out of my mouth because
I've shared before on this show. I used to be
the advisor to four or five pretty large four oh
one K plans for businesses, you know, in the greater
Cincinnati areas, so I know how this process works. And
I used to be the guy that went in and
gave the annual update slash review for plan participants, and
it goes something like this. I mean, they these companies
(04:11):
give you about thirty minutes to talk about tax laws,
raw four one K, regular four to one K, investment options,
asset allocations. You cannot pack all this into a thirty minute,
you know, conversation with people. And even if you try to,
you know, you're getting a deer in a headlights look
from about one third of the people in the room.
The last thing these people need is to just look
(04:33):
at some of these exotic asset classes that might have
had a great six or twelve month run in terms
of return and say, yeah, I'm gonna pile all my
money into that option because it's outperforming everything else.
Speaker 3 (04:46):
And then you just you.
Speaker 1 (04:47):
Just cause this person to have a whole ton of
volatility into their retirement plan. And then if things go
the other way on them, there is no one there
to take responsibility. There's no one there to hold that
investment by the hand.
Speaker 3 (05:01):
It can be a mess if not handled correctly.
Speaker 2 (05:04):
Yeah, I've been in that position too. And the thing
to remember the most noticeable thing about that room full
of people. Is that you are the only one whose
day job is to worry about this four oh one K.
Everybody else who is employed by that company and on
that committee also has other meetings and other stuff to
do that day that minute, probably because the company is
responsible for making widgets, not providing a four to one
(05:26):
K for its employers. However, Department of Labor and a
big act called ERISA says differently. They say that employer
is responsible. That means they bear the responsibility to make
sure that as a fiduciary that the investments that they
have available are prudent for investors. They have to monitor
them ongoing. That's why these ongoing meetings happen. They have
to be super careful not to put too many things
leaning toward the volatives, volatile and speculative stuff. There's all
(05:49):
kinds of issues with ill liquidity and complexity with if
you're gonna throw private equity, not only talking about crypto,
those other things they're kicking around putting in here. Private
equity type investments seem all kinds of sexy, but then
they're not liquid. So what happens when somebody leaves and
wants to roll their four O one k over and
it's all tied up into some kind of private equity investment.
So again, none of these decisions are simple tread lightly.
If you're responsible for.
Speaker 1 (06:10):
Them, you're listening to some you're listening to simply money
presented by all Worth Financial. I'm Bob Sponseller along with
Brian James Brian here here's at least my take, and
just to get everybody calmed down here a little bit.
Speaker 3 (06:22):
I mean, the four to one case system is not broken.
Speaker 1 (06:25):
In fact, it's still one of the best, most tax efficient,
automatic dollar cost averaging, low cost.
Speaker 3 (06:32):
Way to build wealth.
Speaker 1 (06:34):
And all of these plans are still going to have
the plain old you know, index funds, target date funds,
responsible large cap you know, dividend paying stocks in them.
It's just we're we're just calling this out. Don't panic
with all this headline news. Just be aware that some
of that stuff might be coming down the pike in
(06:55):
your plan, and don't be caught off guard by it.
Be prepared and stay the course in terms of using good,
good old, long term responsible options in your four to
one K plan.
Speaker 2 (07:07):
Yeah, and let let's be clear, we're going to be
the last to tell anybody that you should never ever,
ever ever invest in these types of things. It's just
it's you have to understand what you're getting into and
not take too much risk. So if you're somebody who
does get that, you may be able to do it
right now. So there's a lot of four to one
ks nowadays offer something called a brokerage window, which is
where you can open inside your four oh one K
(07:29):
you can open an account with perhaps at Schwab or Fidelity,
or there's a lot of other custodians out there, and
it may be a different custodian who actually runs your plan.
You have to look into this, but it'll function like
a brokerage account where you can log in and buy
this and sell that and it's all happening within within
your four o one K. They're usually a little bit
of expenses to that, of course, but you may have
the ability to do these things without your your plan
(07:51):
committee that we're more worried about, without them having to approve.
That's the addition of that for everyone. So if you
understand it and you know the risks and you want
to get involved in it, then look around for a
brokerage window. There are different cut names for him. Schwab
calls it a pc R account, Fidelity.
Speaker 3 (08:07):
Costs directed brokerage account. Yeah, fingers link.
Speaker 2 (08:10):
Yeah, it'll have some kind of branded name, but yeah,
it could be possible already for you.
Speaker 3 (08:14):
Yeah.
Speaker 1 (08:15):
To me, that's the place where if you are a
seasoned experience investor and you know what you're doing, and
you have a responsible asset allocation set up, and you
do want to kind of go off the proverbial reservation
here a little bit and speculate with some of these
you know, one off investment options like crypto ETFs or
things like that. To me, that's the place to do it,
(08:37):
not just throw this into the general platform menu. And
again to your point, Brian, we're not trying to come
across as big brother here. We're just trying to be
responsible and helpful and tell people, you know, watch out
what's coming down the pike, and don't be enamored by
headline news.
Speaker 2 (08:55):
Yeah, and let's bring this full circle. So we started
this off by complaining about the second the headline that
grabs eyeballs.
Speaker 3 (09:01):
The article itself is not bad.
Speaker 2 (09:02):
It's giving you good information about what's coming in the
four oh one k world, Good, bad, or indifferent but
that headline needs to grab your eyeballs or that doesn't
or doesn't sell advertisements for the people who put it
out there. So the truth is, if you're if you're
somebody you're in your forties fifties, and you're looking at retirement,
you know, the question isn't will crypto ruin my four
oh one k? It's does it matter to me? Because
as Bob just mentioned, you're not going to lose the
(09:23):
ability to do the traditional things you're probably more accustomed to. Anyway,
that's not on the table. It's just new options available
to you. However, the more important question remains and always
has been, am I contributing enough? Is my investment mixed?
Still appropriate? And have have I rebalanced it lately? The
market's been on an absolute tear the last couple of years.
There's a good chance you're overweighted in stocks. That's not
a bad thing, that's what we want, but it does
(09:45):
have to be rebalanced out eventually, and so so remember also,
if you're a business owner, you're going to be asked,
probably by your employees about these so you'll want to
make sure that you you know, you kind of understand
what the situation is and you know make you're gonna
be making a decision as to whether you want to
incl these options in your four to one. Okay, don't
forget that fiduciary obligation. Lean on your partners oftentimes who
(10:06):
will take that responsibility for you.
Speaker 3 (10:08):
Here's the all Worth advice.
Speaker 1 (10:09):
Don't let sensational headlines shake your confidence. Four to oh
one k's are still one of the best tools for retirement.
Just make sure you're using yours wisely. Coming up next,
why many baby boomers are choosing to spend their money
now rather than leave it behind to airs and what
that means for your financial future. You're listening to Simply
(10:30):
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 Brian James.
If you can't listen to Simply Money every night live,
do what Brian James does. Subscribe to our daily podcast.
(10:53):
He listens to it all night long. And if you
think your friends could use some financial advice, tell them
about it as well. Search Simply Money on the iHeart
app or wherever you find your podcast. Straight Ahead at
six forty three, a look at an option that many
company retirement plans have that not many folks take advantage of.
(11:14):
All right, Cincinnati continues to make its mark on the
national business landscape, with several local companies securing spots on
this year's Fortune five hundred list. Brian, give us some
updated numbers. Yeah, so this is pretty exciting.
Speaker 2 (11:29):
So as we as we know, and you and I
know very well from sitting at the across the table
from a lot of these folks, Cincinnati is a city
full of large employers. That means we have a lot
of W two employees, you know, people out there who
go and support a bigger companies. It's a little bit
of a different environment that some of our partners across
the country at all Worth. You know, some are some
areas are more small business oriented that kind of thing.
(11:50):
But here we have a lot of major employers and
some of the big ones out here.
Speaker 3 (11:55):
With the new.
Speaker 2 (11:56):
Rankings of the Fortune five hundred, Kroger is that is
the top Spotthole are locally speaking at number twenty seven
out of all five hundred, one hundred and forty seven
billion dollars in revenue. So obviously that has a lot
of that comes home to the Tri State area.
Speaker 3 (12:10):
And they're selling a lot of eggs, Brian.
Speaker 2 (12:12):
There is an awful lot of groceries being sold out there,
and we certainly appreciate that as well as not to mention,
you know, it's just because your your badge or your
car business car doesn't say Kroger, doesn't mean you don't
support them. There's an enormous amount of companies, little businesses
who support the Krogers and the P and g's in
the in the General Electrics of the world here. So
speaking of P and G, they're not too far behind.
They're in fifty first place, eighty four billion in revenue.
(12:35):
And an interesting story is General Electric and people might go, well,
of course General Electric's been there, They've been on there
for a long time. No, don't forget. General Electrics split
into four pieces a few years ago. Ge Aerospace, one
of those four chunks is the company that we got
to keep locally based there and even Dale just down
the hill from us now as standalone company and they're
at forty billion in revenue. So that's been a very
(12:55):
cool story. And I'll throw out there too for you
those folks out there working for ge Aerospace or four
oh one K got modernized so that RSP used to
be didn't have all the bells and whistles.
Speaker 4 (13:04):
Now it does.
Speaker 2 (13:05):
So if you want to know what we're talking about,
give us a call, or give your advisor a call
and ask them to go over your summary plan description
to see what those new features are.
Speaker 3 (13:14):
Good stuff.
Speaker 1 (13:14):
All right, let's talk about the so called Great wealth Transfer.
For years, Brian, we've heard that baby boomers are set
to pass down trillions and trillions of dollars to their heirs.
But recent data suggests that this massive transfer might not
be as widespread as one thought.
Speaker 2 (13:34):
So what's happening here, Bob Well. Projections are estimating over
the next two decades with regard to the baby boomers,
about eighty four trillion dollars trillion. Remember when when billion
was a big number. Now that's like the little number
next to the big number. Eighty four trillion is going
to pass generations. About seventy two trillions going to go
directly to those airs. And so what's going on is
a significant number of boomers are kind of rethinking how
(13:56):
they're going to do this. Northwestern Mutual Big Insurance Company
twenty twenty four found that only about two out of
two and ten baby boomers actually intend to leave an
inheritance to those younger generations. That's a big, big change.
That's not really just changing attitudes. There's there's some very
practical concerns here. Healthcare costs are are a major factor.
And you know, as we talk to our our clients,
(14:17):
a lot of them are saying, hey, you know what
I earned this, I want to, you know, live my life.
They'll get what they'll get what's left, and I'm fine
with that, but they're probably going to get more than
me anyway, So it is not a major goal. And
I would say, in my experience, Bob, maybe you remember
this too, but before two thousand and eight, everybody had
a thought that, well, I want I want to leave
my kids, you know, I want to leave me each
a million dollars and I think I can do that
based on what the market has done. Then two thousand
(14:38):
and eight happened and everybody just said, you know, what,
the heck with it. They're going to get whatever's left
over and they're gonna be happy with it.
Speaker 1 (14:45):
Well, Brian, I want to go back to some of
these numbers, and I'm you know, I don't have data
to back up what I'm about to say other than
just anecdotal data, but two and ten seems pretty low
to me.
Speaker 3 (14:55):
So one of one of two things has to be
going on here.
Speaker 1 (14:58):
Either a lot a lot of baby boomers really are
going to run out of money during their lifetime they
have not saved enough to retire responsibly. Or these numbers
are just off because we don't come across many clients
in our office that are at risk of, you know,
dying with no money, or you know, don't walk in
(15:19):
walk in and say, well, the heck with my kids,
I'm going to spend it all down to zero and
leave them nothing. Something seems off here to me.
Speaker 3 (15:26):
What do you think?
Speaker 2 (15:28):
Yeah, I think I think what happens here is this
is just a survey and we don't know who they're asking.
All we know is that they sent somebody an online
form to click the answers to questions on. What I
will say, mister Sponzeller, is that you probably have seen
you have seen this so many times you had in
the past month. Have you had somebody sitting at your
table who is absolutely convinced they're going to run out
of money? When the opposite is true. That has come
(15:48):
in often all day, every day. Right, people have a
notion of scarcity. There's never enough, never enough, never enough.
And we talk about this all the time, that one
of the biggest risks is not knowing what position you've
put yourself in and working too long. And I would
say that these eight out of ten people who apparently
have ruled out the notion that there will be anything
left over are simply suffering from or at least a
good chunk of them suffering from the idea that they
(16:09):
have no idea how what position they're in now, let
alone what they're going to be in thirty years. That's
why we have a job.
Speaker 4 (16:14):
Yeah.
Speaker 1 (16:15):
Well, the only other thing I can come up with
is maybe there really is a wealth gap here.
Speaker 3 (16:19):
I mean, we hear about that all the time.
Speaker 1 (16:21):
Maybe we are living in a world of haves and
have nots. But we'll leave that discussion for another time.
You're listening to Simply Money presented by all Worth Financial.
I'm Bob Sponseller along with Brian James. I think in
light of that survey we just talked about, and you know,
I think it comes down to communication here between generations
(16:41):
because if only two and ten people have a will,
which even have a will in twenty twenty five, which
is a sharp decline in the last survey we saw
back at twenty sixteen that said four and ten people
have a will, people aren't even doing estate planning documents anymore.
And if you layer that on top of what we
(17:03):
just talked about a minute ago, folks planning to die broke,
that could be a real disconnect in terms of expectations
between the Baby Boom generation and the next generation.
Speaker 2 (17:15):
Brian, Yeah, I kind of wonder in this case if
this wasn't the second question in the survey. First, do
you plan on leaving an inheritance?
Speaker 3 (17:21):
No, do you have a will?
Speaker 2 (17:22):
Of course I don't have a will.
Speaker 1 (17:23):
I don't need a will because I'm not gonna have
any money left exactly two people.
Speaker 2 (17:27):
So yeah, so the whole point of this, And we
have lots of stories, of course, about about people who
you'll planned on getting an inheritance and it didn't happen
for one reason or another. You know, a lot of
times the thing that can sneak up sometimes is is
long term care. So parents may be perfectly healthy at
this point, but then something happens, and then some of
the scarier things out there are Huntington's or an Alzheimer's
(17:49):
type diagnosis. The average stay for that situation is seven
to eight years. For a normal, you know, kind of
end of life's stay, it's about two and a half
to three years. But if you've got one of those
debilitating cognitive issues that involve cognitive decline, then you can
be healthy. He's a horse, but still need around the
clock care because you could be putting yourself at risk.
That's expensive, and those are the kind of things that
(18:11):
can sneak up on somebody and eat up the entire
nest egg. And again, something to kind of budget for.
That doesn't mean we all rush out there and buy
long term care insurance. That might be the answer, but
I think this always comes back to and people get
tired of here and say it, But that's why we
need a financial plan. Let's figure out what position are
we in if nothing bad ever happens again, and then
(18:32):
let's simulate the cash outflow that would occur should one
or both of us in a marriage situation, should one
or both of us need some kind of long term
care solution for us, Let's understand what that impact would
be over and above whatever the baseline is.
Speaker 1 (18:44):
Yeah, on the flip side of that. And now I've
been doing this long enough, Brian. Now or I'm working
with the children, the adult children of some of my
clients I've worked with for over thirty years, and some
of those conversations are interesting in terms of this. These
these adult children will come in and say, well, I
know mom and dad have a boatload of money and
(19:05):
they're gonna leave me a large inheritance, so we don't
need to be as responsible, you know, as far as
saving and planning for our own retirement. And I'm sitting there,
I mean, I can't share actual information, but you know,
unless I have permission to do so. But folks, sometimes
that younger generation can be wildly off base in terms
(19:25):
of what they're actually going to inherit and they're using
that as an excuse to not do the proper planning
and responsibly spend money during their lifetime. It's really a
discussion that has to be had, and that goes back
to proper communication between generations here, so everybody is alended
on the same page.
Speaker 3 (19:45):
Here's the all Worth advice.
Speaker 1 (19:47):
Don't bank inheritance, build your own financial security through proactive
planning and open family conversations. Warmer weather is here, all right,
is it time to sell or a home? Our real
estate expert is in next with the answer to that question.
You're listening to Simply Money presented by all Worth Financial
(20:07):
on fifty five KRC, the talk station. You're listening to
Simply Money presented by Allworth Financial. I'm Bob Sponseller along
with Brian James, joined tonight by our real estate expert,
Michelle Sloan, owner of Remax Time. Michelle, I'm surprised you
(20:28):
even have time for us tonight because of how many
homes you're out there selling.
Speaker 3 (20:32):
Give us an update on what's going on in the market.
It's got to be ripping right now, correct, it really is.
Speaker 4 (20:39):
It's been a really busy season the last two months.
We've cranked up the heat and now the weather actually
feels like summer already. You know, we always go from
in Cincinnati it's all or nothing, so it's like either
really really cold or really really hot, and we barely
have anything in between. That's sort of like real estate
(21:00):
market as well. So right now, real estate in Cincinnati,
we are really doing well as far as the number
of listings coming on the market, the number of sales
that we're getting, the prices that we're getting on our
homes are increasing. So in Cincinnati it's still a seller's market.
But honestly, if you're reading the headlines or you're listening
(21:23):
to the news about the nationwide picture, it's not always
as rosy as I think it is here in Cincinnati.
Speaker 1 (21:32):
Yeah, it's funny you bring It's funny you bring that
up because I'm reading headlines. I've seen articles about, you know,
all this inventory in Colorado, in Florida, you know, people
can't sell condos and all that Isn't that just things
got a little bit ahead of themselves in terms of
some of this price appreciation, where that's not always the
case or rarely the case in Cincinnati.
Speaker 3 (21:55):
Is that remotely correct?
Speaker 4 (21:56):
You know, Michelle, we're definitely steady Eddie when it comes
to Cincinnati and the real estate market. That's that's why
I love it. We don't have huge swings usually in
the market. Florida, you know, it has its own issues
with pricing and hurricanes and insurance. Again, we don't have.
Speaker 3 (22:16):
A lot of those issues.
Speaker 4 (22:18):
We're just a nice place to live, great place to
raise a family. We have steady income with our businesses,
so we do tend in Cincinnati to stay fairly even
even keel, which is a good thing. But you know,
we definitely there's always that shade of doubt in our
minds because we are seeing if it's happening in California today,
(22:42):
is that going to migrate to our part of the country.
So we're always keeping an eye on things. But right now,
mortgage rates are definitely a huge factor for our buyers.
They're still hovering right around seven percent. I don't know
if that's for a thirty year fix. Again, you can
get a lower rate, you can buy down points. There's
(23:03):
a lot of programs available, but you really need to
understand that it's up to you. You are an individual,
your situation is different, and talk to your real estate
agent about how you can make it work. If you
want to sell, let's sell. Now's a great time. If
you want to buy, go ahead and buy, because guess what,
(23:25):
a year or two from now, most likely the home
that you buy today is going to be worth more
tomorrow and two years from now, in five years from now.
Speaker 3 (23:34):
Hey, Michelle.
Speaker 2 (23:34):
One of the things that we deal with frequently is
people kind of wanted to live out their dreams of
their financial plan, and a lot of times that involves
a second property somewhere. Used to always be a condo
in Florida, but now it seems more and more often
it's farmland down in Kentucky or Indiana or something like that.
Are you seeing First of all, you've seeing more of
that too than you've seen in the past. And second
of all, what is that market?
Speaker 3 (23:54):
Like?
Speaker 2 (23:54):
The reason I'm asking is because I have a lot
of clients, like I said, who we've determined through their
financial plan that yes, this is a doable thing, you
can do it. But then they're running into you know,
it's almost like those types of properties are even more inflated.
It seems like it really hasn't slowed down at all,
not only for the primary homes but also the secondary
Do you see you see the same thing?
Speaker 4 (24:13):
Absolutely. I think that there is a shift in the
location of the secondary homes. I have a lot of
my cellars right now. Over this past summer, a lot
of people are moving to North and South Carolina rather
than Florida because I don't know, they feel like that
is it's still more temperate than we have here, but
(24:35):
maybe it's a little bit more stable. So it's interesting
because there is definitely a shift on the location that
people who are retiring. If you're going to have a
second home, where do you want to go? Do you
want to you know, like you said, do you want
to move have some a second home in Kentucky on
one of the lakes Cumberland or something like that, And
(24:56):
those are always great options as well, maybe something a
little closer to home. I've got some people who are
getting that second home up in the Upper Peninsula of Michigan.
So it's it's a big wide world. I even have
one of my clients who they are retiring and moving
to Spain. They're moving to Spain. I mean, I think
(25:18):
that is just unbelievable, but it's they're doing it.
Speaker 3 (25:23):
Michelle.
Speaker 1 (25:24):
It sounds like things are pretty healthy here in the
Cincinnati market as you survey the global landscape, so to speak,
of the real estate market. If there was one thing
that you could change right now, if Michelle, if we
made Michelle Queen of the Earth for a day, if
you could change one thing in this whole market, economy,
or economic condition, what would it be?
Speaker 4 (25:46):
You know what that's that's an easy question, or that's yeah,
that is an easy question for me to answer. The
one thing would be mortgage rates. I would love to
see the rates. I don't want to see them at
three percent again because I think I think that was
just too much. But if the rates got to six percent,
I think we would see a little bit more of
(26:08):
a boom, we would see more comfortability, we would see
a lot. So really, the mortgage rates around seven and
I've always said seven is a threshold. Now, of course,
if you look historically, seven is pretty much the average
over the last thirty years. But at the same time,
in our mindset and if we look back just at
the last ten years, people have a problem with seven percent,
(26:33):
and with the cost and the value of properties going
up so dramatically, that mortgage interest rate really does play
a big factor in whether or not a buyer, especially
first time home buyers, can actually get into a home.
So in my world, if I could snap my magic
(26:54):
button or whatever, I was thinking of something fun, I'd
have the rate go to six percent and maybe stay
there rather than seven.
Speaker 1 (27:04):
I think the thought here, Michelle is I think you
should immediately open up a truth social account and just
start going off on fed chair Pal and get him
to lower rates. That would make things really hum for you.
It would make the stock market go up too. It'd
be a win win for everybody. What do you think
can we count on you to get it done?
Speaker 4 (27:24):
I'm pretty sure that someone on that level is not
going to listen to a little old me. But I
will say, you know what, the some statistics and I
know we're almost out of time, but real estate was
voted the best long term investment for the twelfth year
in a row. That's an annual report from Gallup real
(27:44):
Estate Best long Term Investment. So if you can, and
if you're in the market to buy, do it, don't wait.
That's my best advice.
Speaker 1 (27:54):
Good stuff, all right, thanks as always to Michelle Sloan,
owner of Remax Time. You've been 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
(28:14):
Worth Financial. I'm Bob Sponseller along with Brian James. 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 our show right there on the iHeart app. Simply
record your question and it'll come straight to us. When
it comes to retirement planning, the Wrath four oh one
K is often overshadowed by its traditional counterpart.
Speaker 3 (28:35):
You know that we all know the regular four one K.
Speaker 1 (28:39):
But for many Brian, especially high earners, it's definitely a
tool worth considering.
Speaker 2 (28:45):
Yeah, Bob, I want to get into that, but first
I have an important question. If I push that red
button in the app and I say, can Bob make
me a blowney sandwich?
Speaker 1 (28:51):
What happens?
Speaker 3 (28:52):
Have we tried that yet?
Speaker 1 (28:53):
I make it immediately, and I respond back and say
what kind of toppings would you like on that sandwich?
Speaker 3 (29:00):
And I deliver it to your home immediately.
Speaker 2 (29:02):
Now that's the kind of service that Bob Spondseller provides.
Speaker 3 (29:05):
That that's the related service.
Speaker 2 (29:07):
Okay, onto, enough sill Why we're Brian here for little
silliness and some financial advice as well. So Wroth for
oh one k. So the Wroth war oh one k
has not been around forever. Wroth war O one k
is similar to Roth versus traditional. Right, you're debating of
pre tax contributions, the money that I put in. Do
I want my tax benefit? Now in terms of a
deduction off my current this year income, or do I
(29:29):
want to go ahead and pay the taxes on it
now that I would have anyway, and let it grow
for the next ten twenty thirty years however long until
I retire and then pull it out capital gains and
income tax free ROTH versus traditional That is the question
no matter what type of account that you're talking about. However,
today we're talking about four oh one K WROTH flor
oh one K has not been available since the start
the pre tax four oh one K version that's been
(29:51):
around since late seventies, early eighties, very long time. Those
of you who have been in the working class for
a very long time, that you probably have them the
vast majority, if not all, of your dollars on the
pre tax side. ROTH came available in two thousand and
six in a four oh one K. This is different
than a roth ira. Roth iras became available two thousand,
not on the four oh one K side until two
thousand and six. That simply meant, though that the legalities
(30:14):
were in place for an employer to choose to offer it.
So from six to nine it actually was subject to
a sunset, meaning it was going to go away anyway,
So a lot of employers said, you know what, why
why bother going through something that setting up something we're
probably gonna take down. And then eventually, after the Pension
Protection Act, that made the roth war one K permanent.
But it really wasn't until twenty fourteen that all employers,
(30:38):
not certainly, not all, but most the majority of employers
began to offer it. So if you feel like you
it just snuck up on you, it has not been
available to you for thirty years. Your own employer's plan
may not have chosen to offer it until sometime in
the prior decade. So that's where we came from. The
benefits of roth war on and K. Of course, these
are tax free. You're paying your taxes upfront. That is
(30:58):
very much a choice that you would make, and it
is a sacrifice, right. This is not a black and
white decision. A lot of people get enamored with the
words tax free, don't they, Bob, And they decide, you
know what all I need is this is rough everything,
and there's no downside whatsoever, no, not at all. You
are working now, you are in a tax bracket. If
you're married, then there's to a working spouse, then there's
a second income there, and that's putting you into some
(31:20):
kind of a bracket. You are very much choosing to
pay taxes at that bracket in exchange for pulling them
out tax free at a time where you might be
in a lower bracket. That's not the only factor of
the decision, of course, but that's a big one to consider.
Speaker 1 (31:35):
Yeah, one of the things we talk with all the
client all the time with clients, Brian, and I'd love
your take on this as well. Something I've been starting
to take a look at more and more is for
those folks that have one hundred percent of their four
to one K dollars in that pre tax bucket. When
you start to run the numbers out five, ten, fifteen,
twenty years and you get into those required minimum distribution
(31:56):
years starting at seventy three age seventy three, that tax
income coming out. I don't care what the tax law
changes are or people think they're going to be, you're
going to be in a higher tax bracket than you
think you might be. And it might be counterintuitive, but
when you look at what that must withdraw number is,
you know, out at seventy three, seventy five eighty years old.
(32:19):
That's where it does often make sense to just bite
the bullet now, even if you're in a high income
you know, situation, and pay a little taxes now, build
up that second bucket of tax free money, because now
you've got a couple of different errors and arrows in
your quiver or buckets, so to speak, from which to
pull money out during retirement, and that can save you
(32:40):
some significant tax dollars down the road.
Speaker 2 (32:43):
I think that's a great point, mister sponseller. A lot
of people think that tax the taxes only matter right now.
What can I do right now to get a deduction?
All I care about is deductions. How can I pay
less taxes now? That's really not the way to think
about it. That's a piece of it, for sure. But
at the same time, tax planning nowadays means what should
I do now so that I get some kind of
a different outcome later, whether that be next year, five
(33:04):
or ten years from now. And I think what you're
referring to, you know, some of some of my grumpiest
people are the ones who are in high tax brackets now,
and that sure does make a man. My second grumpiest
group of people are the ones who are in RMD
stage and don't really need the money, but they're being
forced to pay the taxes on it. The downside there,
what they missed out on was was the ability to
do some tax planning in their in their pre retirement years,
(33:26):
perhaps doing some conversions, right, so you can convert existing
traditional pre tax dollars to WROTH. Yes, you're gonna pay taxes,
but of course that that flies right in the face
of the notion that taxing tax planning is only about
minimizing my taxes now. This would be a conscious choice.
I'm gonna pay some taxes now so that i can
pay less taxes later by having WROTH when in my
rm D years.
Speaker 1 (33:47):
You're listening to simply money presented by all Worth Financial.
I'm Bob Sponsler along with Brian James. All right, Brian,
we just shared a ton of information and it might
come across as a bunch of quick gobbly gook.
Speaker 3 (33:57):
Here, what's a little bit pleo, that's the whole school.
Speaker 1 (34:00):
What's some practical advice on how to actually sit down
and approach this for retirees, as you know, to weigh
the pros and cons of using either WROTH or regular
or a.
Speaker 3 (34:12):
Blend of both in the retirement plan. What process do
you suggest we go through.
Speaker 2 (34:17):
I think I think it's understanding where you are currently
in the first place. If you have put away a
good slug of cash in your investments inside your pre
tax account, it's gonna be who of you to find
a way to it to at least understand what would
the impact if I switch that to ROTH and that
comes in a financial plan. If you build a financial plan,
we can build one scenario where we say everything from
here on out is going to be pre tax, and
(34:37):
we'll put one right next to it where we're gonna
say we're gonna put less in because you've got to
pay taxes in the current year, but it'll be tax
free from here forward. Then you can look at what
is the impact when I'm seventy three or seventy five,
What does it look like when I've reached rmd AH
and is that an acceptable outcome for you?
Speaker 3 (34:52):
Here's the all Worth advice.
Speaker 1 (34:53):
Paying taxes now through a WROTH for one K can
lead to significant tax free growth and flexibility in retirement. Next,
you're going to get my two cents on a potential
land mine as you consider various social security claiming strategies.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to
(35:20):
Simple Money presented by all Worth Financial sponseller.
Speaker 3 (35:24):
Along with Brian James and Brian.
Speaker 1 (35:26):
It's time for my little two cents segment here and
I want to talk about a potential land mine that
most some people might not be aware of with regard
to social security claiming strategies. And it's actually a situation
that came up yesterday, so it's fresh in my mind
and I think it's worth mentioning here. I have a client,
you know, husband and wife. They're very responsible, great planners,
(35:50):
great savers. They ask all the right questions. We've put
together a fantastic plan for them, which they are following,
by the way. And this gentleman is getting right to
retire at some point, probably later on in the summer
of this year, but his full retirement age for social
security doesn't come about until December.
Speaker 3 (36:11):
And you know he's a math guy. He gets out
and runs the numbers.
Speaker 1 (36:14):
He's like, Bob, can I go ahead and take my
social security in August rather than December? You know, it's
only going to cost me about, I don't know, thirty
or forty bucks a month.
Speaker 3 (36:23):
What's the difference.
Speaker 1 (36:24):
I'd rather take the money now and not pull money
out of my investment account. And he wanted me to
check all his math, and I'm like, hey, your math
is great, and thankfully I remember this little obscure rule before.
Speaker 3 (36:38):
We pulled the trigger.
Speaker 1 (36:39):
And it's this in the year that you reach full
retirement age if you're still working like this gentleman is
in twenty twenty five, for example, once you have an
income above a little more than sixty two thousand dollars
this year, you're gonna get You're gonna get a one
for every three dollars deduction in your Social Security benefit,
(37:01):
you know, during that year. So when you factor that
into the equation, you know, a one third deduction from
that Social Security benefit. It becomes kind of a no brainer. Hey,
let's hold off, let's pump the brakes, let's wait till
December to take social Security. Thankfully, this client called me
and asked, and thankfully I knew to look up this
(37:23):
rule and give them a good answer. Brian, does this
ever come across your desk at all? Yeah?
Speaker 2 (37:28):
And when we do workshops, this comes up. I get
pulled aside after the workshops that we do here around Cincinnati,
and the question is always, ud, tell me, explain to
me again, how does it work when I, you know,
if I'm going to work and take soci security at
the same time. What you're referring to is something called
the earnings test. You can google that and learn all
about it. But basically, if you have not reached full
retirement age, which is either sixty six somewhere between sixty
(37:49):
six and sixty seven, depending on when you were born,
you will take a little bit of a haircut if
you're going to keep working and earn more than say,
twenty thousand dollars or so, and turn on your social
securities pigot. That's the earnings test, and there is a
true up at the end of all of it. You
will get some of it back, but it does kind
of lock you into a lower mount.
Speaker 3 (38:05):
It's very rare that.
Speaker 2 (38:06):
I think it's actually truly worth it for somebody to
pull the trigger. Let's solve the problem another way, It's
my opinion.
Speaker 3 (38:11):
Usually Yep, yep, thanks for listening.
Speaker 1 (38:14):
Tune in tomorrow and we're going to talk about how
something called the Vanderbilt Curse could impact you. You've been
listening to Simply Money, presented by all Worth Financial on
fifty five krc V talk station
Simply Money News
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