Simply Money

Episode Transcript

Speaker 1 (00:06):
Tonight, it's some major news from one of Cincinnati's largest companies.
You're listening to Simply Money, presented by all Worth Financial.
I'm Bob Sponseller, along with Brian, James Procter, and Gamble,
announced it would cut thousands of jobs and shed some
of its existing brands in some markets. During a presentation
by executives at the twenty twenty five Deutsche Bank Consumer

(00:29):
Conference in Paris, Brian give us an update on what's
going on with good old P and G.

Speaker 2 (00:34):
Yeah, so a lot of folks around the Cincinnati area
woke up to a bit of a bit of an
attention getter for sure this morning. So P and G
obviously a huge contributor locally. You know that their employee
about ten thousand people directly here in the Cincinnati area.
And let's not forget multiples of that work for smaller
companies that support P and G. So anything that happens

(00:54):
the P and GP and G gets a cold, Cincinnati
gets the flu.

Speaker 3 (00:58):
So you know, this is a big head.

Speaker 2 (01:00):
So the announcement is that they're going to eliminate about
seven thousand non manufacturing jobs.

Speaker 3 (01:05):
This is outside this.

Speaker 2 (01:06):
Could include Cincinnati, but it includes PNG's entire global footprint.

Speaker 3 (01:09):
Of course, that's about.

Speaker 2 (01:10):
Fifteen percent of the current non manufacturing workforce over the
next two years. We don't have a lot of details yet.
This announcement just came out just this morning. We don't
have breakdowns by the region or which job sites at
here at this time, but obviously they're pivoting on what
they're going to want to do, and that also includes
divesting of some of the products and brands that they're

(01:30):
using starting in twenty twenty six. Now this is fiscal
twenty twenty six, This isn't a month. A P and
G works off of a fiscal year that starts in
July July one, So there's going to be some product
categories and brands and individual markets serving different products. And
again we don't know the details of this yet, but
obviously big change is coming.

Speaker 1 (01:50):
Well, we always have to ask ourselves why, you know,
why are these changes coming? And the announcements you know,
coming from P ANDNG come in the midst of reporting
it to line and quarterly sales in the recent quarter,
and that caused P ANDNG to lower its fiscal twenty
twenty five guidance for core earnings per share to two
percent growth to four somewhere in that range, and that

(02:13):
was down from a prior expectation of growth of five
to seven percent. The company at the time said it
expected the impact of President Trump's tariffs to cause about
a billion dollars in revenue impact to the company. P
and G says these layoffs are not a cost cutting measure,
but rather an attempt to just make rolls broader, make

(02:36):
their teams a little smaller, work a little bit more efficiently.
Efficiency in other words, do a little trimming here and
try to help the bottom line moving forward.

Speaker 2 (02:45):
Yeah, and this is the companies do to make these
types of decisions all the time, right whenever they have
to make negative moves.

Speaker 3 (02:51):
Sometimes it's just.

Speaker 2 (02:53):
The reality of the game, and it's easier when they
can do it undercover of some outside force. In this
particular case, P ANDNG is is kind of using the
tariffs as a little bit of a shield to make
decision that. I'm sure that has an impact. It's affecting everybody,
but at the same time, these are probably champions.

Speaker 3 (03:08):
He's pretty smart.

Speaker 2 (03:09):
There's some pretty smart people down there on Fifth Street
that making these decisions and elsewhere as well. And there's
a couple hundred year history of some pretty smart financial
decisions down there. So we want to give, of course,
some grace here. But at the same time, you know,
it is I think there's a little more going on
than just the tariffs.

Speaker 1 (03:26):
You're listening to simply money presented by all Worth Financial.
I'm Bob Sponseller along with Brian James. All Right, Brian,
how should investors react to this news? You know, investors
in Procter and Gamble.

Speaker 3 (03:37):
Yeah. So I think that's a great, great question.

Speaker 2 (03:39):
That's really why we have these conversations, isn't it, Bob,
at the end of the day, would do Does this
affect me at the end of the day?

Speaker 3 (03:44):
How am I impacted?

Speaker 2 (03:45):
Okay, so let's look at a little bit of a history. Obviously,
big companies tend to do this right. Sometimes they have
to make decisions and it can read the headline. We
first read that headline, it can feel like, oh my gosh,
they're laying off people. They must be in dire streets.
Things are just not going well. Well, let's go back
to history a little bit. So somewhat recently in twenty
two and twenty three, a lot of the big you
know the fang companies right, These are this is Facebook, Apple, Netflix, Amazon, Google,

(04:10):
and and you know a couple other companies like that.
Each of them laid off twenty thousand plus employees during
this period, and the reason wasn't because they were hitting
the skids. They were making adjustments based on what they
felt they needed going forward. So ever, since then, each
one of them is up anywhere from one hundred to
four hundred percent. So that's just kind of a because

(04:32):
I remember the day we talked about those headlines on
this very radio show when those layoffs happened. That was
the impression that the clients were giving us. Oh my god,
if this stalwart technology industry that has driven by portfolio
for twenty years, if they have to make layoffs, this
must be terrible. This must be the end of the
great technology bull run. Absolutely not. These are smart people
running smart, well well funded companies, just doing the things

(04:54):
they need to do to affect it, making sacrifices now
for a better short term future. And again, all those
companies are up at again at least one hundred percent
since then. So P and g's got a long track
record of smart moves, and we got to think that
over time, this will come out the same way.

Speaker 1 (05:08):
Yeah, And this is where we have to separate, as
hard as it may be, because when we're talking about
job cuts and we don't know where these cuts are
coming from, but I have to assume it's going to
impact some of our friends and neighbors here in the
greater Cincinnati area. I mean, that's not fun. It's not
fun to get downsized or lose your job, especially when
you've done nothing wrong and probably a lot of things right.

(05:29):
But to your point, Brian, every company goes through this
type these types of iterations and evolutions as they just
move and shake and position their company for greater and
greater revenue and profits in the future.

Speaker 3 (05:43):
This is normal. And again you've got to separate how.

Speaker 1 (05:45):
This feels to people that live and work right here
in Cincinnati for P and G, and understand this is
simultaneously happening all the time with every company in the
S and P five hundred or in a diversified portfolio,
where folks out there they really don't care about that
or even know about it because it's not impacting their

(06:06):
job or their neighbor or something like that.

Speaker 3 (06:08):
Right it, So that's the flip side of the coin.

Speaker 2 (06:10):
Right, So we just got done talking about the benefit
of the shareholder, which arguably is good. It's just a good,
solid company. If you're the employee, then you're having very
different thoughts about that what that stock is going to
be worth. So these these are the kind of things
where obviously it's going to be nerve wracking, but at
the same time, hopefully you've built up kind of an
emergency fund and you'll be able to kind of to
kind of weather those those months of you know what,

(06:32):
while you have to pivot if and when this comes
Remember this just came out today, so there will be
packages and those kinds of things they're going to This
is not the first time it's happened, so be prepared
to start thinking about especially those who were in the
window of retirement.

Speaker 3 (06:45):
This is usually what happens.

Speaker 2 (06:46):
Our phones will start ringing off the hook once people
start getting those those offers in the mail.

Speaker 3 (06:51):
Is this good for me?

Speaker 2 (06:52):
This is about two three, four years earlier than I
thought I was going to go. Can I get away
with it? Those kinds of things, and that all again
circles back to Okay, what was the plan? And to
begin with, now, let's run a different scenario to say,
here's the new information, have to retire a little earlier,
but there's a there's a bit of money dropping out
of the sky. So is it the right decision or
should you do something else? But again, it all comes

(07:13):
back to let's make sure in the very short term
we can pay the bills, and then let's run the
plan again to see what the new information indicates.

Speaker 1 (07:19):
Yeah, and as a reminder, these seven thousand job cuts
are non manufacturing jobs. I mean, these are white collar jobs.
And I think the other point we need to you know,
draw upon here is p and G. They're expected to
provide more details about this whole restructuring plan in its
next quarterly earnings report. That doesn't happen until July twenty ninth,

(07:40):
So I'm sure people that work in POG are going
to know about some of these changes way in advance
of that earnings report or announcement. We're just teeing it
up for conversation and advanced planning for folks that might
be impacted.

Speaker 3 (07:53):
You know.

Speaker 1 (07:53):
Obviously, monitoring all these updates will be crucial for making
good informed investment decisions.

Speaker 4 (07:59):
Yea.

Speaker 2 (08:00):
And again, those of you out here might be really
sweat in the headlines this morning, because that's your employer.
People who are older than you went through this. Perhaps
you remember some of those names. Contact them see how
they navigated. A lot of them will have landed on
their feet being consultants or working for some supporting company
because of that pedigree they have on the resume.

Speaker 3 (08:16):
Here's the all Worth advice.

Speaker 1 (08:17):
While P and G's restructuring reflects significant changes or potentially does,
it is essential to focus on long term objectives and
maintain a diversified portfolio. All right, people are saving more.
It sounds like today, but are you. We're going to
talk about that next. You're listening to Simply Money presented
by all Worth Financial on fifty five KRC, the talk station.

(08:45):
You're listening to Simply Money presented by all Worth Financial.
I'm Bob Sponseller along with Brian James. Are qualified dividends
taxed at lower rates than ordinary income. Brian, I know
you know the answer, but don't give it away yet.
We're going to be testing your knowledge on that and
a whole lot more in our fact or fiction segment
coming up at six forty three. All Right, for the

(09:07):
first time, American workers are saving at near optimal levels
in their retirement plans. According to a recent Fidelity Investment survey,
the average four to one case savings rate has increased
to a record fourteen point three percent of income in
the first quarter of twenty twenty five, just shy of
the fifteen percent annual rate most financial advisors often recommend. Brian,

(09:32):
that's good news. I want to add that that fourteen
point three percent includes company matching money, which is almost
in this survey, just under five percent. But these are
still very good numbers.

Speaker 2 (09:43):
Absolutely, so we really want to think of that minimum
when we recommend to people. If you're getting started, and
that's the question, how much should I put in my
four Okay, how much?

Speaker 3 (09:51):
How much?

Speaker 2 (09:51):
Well, that's a loaded question and it generates everyone's favorite
financial planner answer, which is it depends because we don't
like to make decisions either. No, I'm kidding, but there's
lots of moving parts to how much. You know, how
much you want to put in? You have to kind
of start at the end to make this decision because
what my answer to that is another question, well, what
is your goal? Do you want to retire early? You know,

(10:12):
what are we trying to layer in here and what
are your responsibilities now, and then we can decide exactly
what the right amount is. But obviously this particular headline,
this is a good one. We're getting up now. We're
at an average of fourteen percent of income. Again, that's
people that the average is the employee contributing about nine
and a half percent, and the average employer match which
can be a match or profit sharing, is about four

(10:34):
point eight percent. So this is We're seeing a generational
differences here too, a little bit, but everybody's moving up.
So the average baby boomer is putting away about seventeen percent. Obviously,
this is the this is the generation whose kids have
all kind of moved out and they have less responsibility,
less for need less need for take home pay, if
you will, so they can afford to put a little
more in and they're making more because they're at their

(10:54):
peak earning years. Gen X, which I am solidly in
the middle of word about fifteen percent and those behind
me a millennials and Gen Z a little over thirteen percent.
Average balances. This is good for people who want to
compare themselves. A lot of people like to know where
am I, how am I looking versus everybody else with
the average balance across all these generations. Again, this according
to Fideli one hundred and twenty seven thousand. That's down

(11:15):
about three percent from the prior quarter, but it's up
one percent year over year, and that medium is twenty
nine thousand, And you know, similar numbers for four or
three b's And I raise as well well.

Speaker 1 (11:27):
As I look at this this survey, and I'm not
discounting this at all. This is great news. People are
saving more for their retirement. But surveys like this, Brian
also paint with a very broad brush. And to your
point that you raised before, you know, it's important to
sit down and look at what are you doing for
your financial plan. For example, you mentioned gen Z folks

(11:48):
are only saving thirteen percent versus fourteen point something for
Gen X and baby boomers a little higher. The Gen
Z people are the ones that don't have kids, aren't
paying for travel baseball, aren't pay for college. They're the
people that should be putting twenty percent away instead of
going out and going to six concerts a month instead

(12:09):
of one and doing all that. So I think it's
important to just take these numbers with a grain of
salt and go back to what are you doing in
your financial plan in terms of saving for future goals
and retirement, and make sure you're on schedule, because the
sooner you start, the less painful this is gonna be
down the road.

Speaker 2 (12:28):
So Bob, if I'm gen z, I'm screaming. Have you
seen mortgage rates? Have you seen the purchase price of
a home? Have you seen the fact that Cincinnati rental
rates are the highest?

Speaker 3 (12:36):
I don't know.

Speaker 2 (12:37):
I got aside a little bit with it is a
lot more expensive to pay for that stuff now as
a percentage of wages than it was twenty thirty years
ago when you and I got to start benefiting from it.

Speaker 1 (12:47):
All right, well, what else do you have to say
about this whole saving thing anything?

Speaker 3 (12:51):
What do you draw from this study?

Speaker 2 (12:53):
The answer to that is, I think people are getting
the message that, hey, I'm going to be more reliant
on my own nesting, my own savings for my retirement
than my prior generations. My parents, my grandparents had social
security and pensions. Pensions are rare these days, especially for
a new job. Social Security is not going away, despite
the sexy headlines, but it could be reduced in the future. Therefore,

(13:15):
I need to take initiative myself, and I think it's
a good thing. We're seeing those numbers come out that way, all.

Speaker 1 (13:20):
Right, Switching gears here, thinking of a summer escape, be
prepared because some popular vacation destinations see short term rental
prices absolutely surge dramatically during peak season. And I experienced
that with my own family last November when we at
the last second said hey, let's take everybody down to
c s to Key, Florida and rent a house over Thanksgiving.

(13:42):
And I told my wife, Yeah, just go book it,
get it done, let's go. I had absolute sticker shock
when I saw what we were paying to rent a
house and cst Key in late November. A recent bank
rate survey study highlights where these spikes occur and offer
some tips to keep your travel budget in check.

Speaker 2 (14:02):
So where we're looking at here is what can you
do about this kind of thing? So make sure that
you're securing your accommodations well in advance. Try to do
this with we leave some lead time so that you're
not paying those last minute prices, and that can help
you kind of lock in better rates. Understand how credit
card rewards and things work. There are credit cards out
there and I'm a huge fan of this, Bob. If

(14:23):
you've got to pay your bills anyway, run every last
expense that will allow you to do so, run it
through a credit card that gets your rewards paid. You know,
don't use your debit card. Don't write checks for everything,
because you're getting absolutely no benefit. You're allowing the banks
and the financial institutions to benefit from the movement of money.
You can do so yourself if you simply understand how
credit cards work, and there's any number out there that
will provide you travel benefits. So learn how that works

(14:46):
and stack up those rewards and have somebody else pay
for that vacation. And yet where I see it that
the sticker shock for me comes in. I have in
my head that it used to be about two thousand
bucks to rent a nice house, maybe a block or
two in from the beach, and you could get away
with a week. Well, that vacation is now more like
four thousand and five thousand dollars. And so where I
have financial plans we built ten years ago for a

(15:06):
client who is now retired, that's one of the major
changes that we're making pretty regularly. Hey, if you still
want to go hit CS to Key. It now costs this.
Let's make me make sure we budget it.

Speaker 3 (15:14):
Yeah, I'm not even going to tell you what we
paid to rent that house. It's yes to Key.

Speaker 1 (15:18):
It was a five digit number and you'd probably smacked
me for not being financially responsible.

Speaker 2 (15:23):
No, I would, absolutely No, I'm going to push back
hard on you, Bob, because I am a huge, huge,
and I'm not exaggerated. I'm a huge, huge believer in
do the things that create the memories for your family.
No one is going to sit around you on your
deathbb Bob and say, hey, remember that time we didn't
spend that money and it sat in the account because
vacation was too expensive.

Speaker 3 (15:39):
Man, that was a great weekend.

Speaker 2 (15:41):
Looking at you, you know, sitting on the couch griping
about not being at the beach.

Speaker 3 (15:44):
Best weekend of my life, dad, Well that's what my
kids and their spouses all say. So I guess it
was all good. All right.

Speaker 1 (15:49):
Every Sunday you will find our all Worth Advice in
the Cincinnati Inquirer. And here's just a little snapshot preview
of what you'll see if you read the paper this weekend.

Speaker 2 (15:58):
Yeah, so this question came came from Lewis in the
heart of Cincinnati. So Lewis wants to retire early, which
in his in his world, that means before age sixty.

Speaker 1 (16:08):
All right, I want to retire. Here's what he says.
I want to retire early, before age sixty. But I
know you can't take money out of retirement accounts early
unless you want to pay a penalty. So how do
he wants to know? How do I fund my retirement
if I can't get to that money. Brian, I know
you've got an angle to all this.

Speaker 2 (16:25):
Now, there's always an angle. So we don't know exactly
what Lewis's age is. But what Lewis and everybody else
should take note of is something called the rule of
fifty five. Not a lot of people know this. We
have in our heads that if it's retirement money, then
fifty nine and a half is the magic age I
got to get to to get past penalties. If this,
if these dollars are sitting in a four to oh
one K or four h three B, then the age
is fifty five. You can pull money directly from a

(16:47):
four oh one K if without penalty, as long as
you're at least fifty five years old. So that's something
to keep in the back of your back of your mind.
So if you're going to retire fifty seven to fifty
eight or whatever prior to fifty nine and a half,
leave some chunk of money in that four oh and
k that you can draw and you'll avoid those penalties.
So next question comes Carrie from lovelent Bob all right.

Speaker 1 (17:10):
Carrie asked what credit score should someone have. I'm at
eight oh three, but I heard eight point fifty is best.
Am I missing out on anything because mine is lower? Carrie,
I would say eight aight oh three and is an
absolutely stellar score. I think you've got nothing to worry
about here. And this is where don't don't focus on
having to be perfect, because that's virtually unattainable. Aight o

(17:33):
three is a store great score. Anything under anything over
eight hundred is just pristine. You know, you might be wondering, well,
what moves that score around. It has to do with
what comprises your credit history and where you're borrowing money.
And these credit scoring bureaus they look at what fixed
payment you know, fixed payments are, and then revolving credit

(17:55):
payments are, and when that revolving balance say that credit
balance the few months. If you have a heavy month
in terms of spending, even if you pay it off
at the end of the month, fully, that can impact
your score a little bit. And that might be what's
going on with you here, Carrie. But hey, you're doing great, Okay.
I wouldn't change a thing.

Speaker 2 (18:15):
That's fantastic. You did hear that eight to fifty is best.
That's the highest score you can get. Acts of clients
who printed their thing out once when it said eight
to fifty and they framed it and hung on the wall. However,
they don't get a benefit over somebody who's got a
seven to fifty. There's not a whole lot of difference
to what you have access to.

Speaker 1 (18:29):
All right, this is the last place you want your
loved ones to be in after you pass away, and
we're going to talk about that next. You're listening to
Simply Money presented by all Worth Financial on fifty.

Speaker 3 (18:39):
Five KRC the talk station.

Speaker 1 (18:46):
You're listening to Simply Money presented by all Worth Financial.
I'm Bob Sponseller, joined tonight by our estate planning expert,
attorney Dan Perry with the law firm here locally of
Wood and Lamping.

Speaker 3 (18:58):
Dan, thanks for taking time with us today.

Speaker 1 (19:00):
We're going to talk about a very important topic that
I know a lot of people hear about and need
to deal with.

Speaker 3 (19:07):
And that's the whole topic of probate.

Speaker 4 (19:10):
When I talk with clients about probate, you know, the
question I always get is, you know what happens to
my property when I die? Well, after you pass away,
all the property that you own and the debts that
you have must be administered through a public core process
called probate. And the word probate is actually a Latin word.

(19:30):
And you know, us lawyers, we always have to use
Latin phrases for everything. It means to prove. And you see,
for title to your property, you know, whether that's your home,
your car, or bank accounts to change to your heirs
and other family members, a probate process must occur.

Speaker 1 (19:47):
And what is that process? Daan in practicality, what what happens?
You know, just in layman's terms, practically, when somebody has
to go through this whole process called probate, what happens.

Speaker 4 (19:59):
Well, probate is a public court proceeding and all of
your assets, property and other debts are listed in public
court documents. There are a number of court documents such
as an inventory of assets and accounting of all the transactions,
and those are filed with the courts. People go to

(20:21):
a number of court hearings in a probate case, and
at the end of that case, the assets which remain
are distributed to the family members, either according to a
will or according to state law, after all debts have
been paid. I use the example of let's imagine for
a minute, Jane, she passed away, owning a home and

(20:41):
bank accounts. In order for Jane's children to receive the
home in the bank account, Jane's children have to go
through a probate court process before those assets can even
be transferred.

Speaker 1 (20:54):
All right, sounds like something we want to try to avoid,
he'd if at all possible. And I know we talk
about avoiding probate with our clients all the time, Dan,
as you advise clients in your in your practice, what
are some of the things that you're advising your clients
to do to avoid this whole situation you know altogether?

Speaker 4 (21:13):
Well, there are a variety of ways to avoid probate.
One way is with what's called joint ownership. Now you
heard me mention at the beginning of the segment that
any assets you own in your individual name, for title
to change hands, it has to go through probate. Well,
that doesn't apply for jointly titled assets. So such as
joint owning property jointly with the right of survivorship, those

(21:37):
assets immediately go to the surviving joint owner. And a
perfect example of this would be, you know, your home
owned by a married couple with right of survivorship. The
surviving joint owner is going to take full ownership of
that house outside of probate. And the same is also
true for jointly held bank accounts as an example. Another

(21:57):
way is with what's called beneficiary does it nations, and
those would be people that you designate to receive certain
accounts such as investment accounts, retirement accounts, and life insurance.
It properly completed beneficiary designation on accounts well ensure that
those assets go directly to the beneficiary outside of probate.

(22:18):
And those are what we call non probate assets.

Speaker 1 (22:21):
All right, this is this is a good time to
bring up you know, excuse the interruption, Dan, but we
see this all the time in our office. People think,
you know, I've done my will, I've done my power
of attorney, I might even done a trust, but they
completely forget about the fact that their iras qualified plans.
Life insurance policies don't even go through probate. They pass
through beneficiary the beneficiary process, and a lot of people

(22:44):
haven't reviewed those beneficiary designations for years and things can
change and that people people are surprised, you know, to
learn that do you find the same thing. People are
just surprised about how this works and doesn't work with
respect to retirement plan assets in your practice.

Speaker 4 (23:02):
Absolutely, I see it all the time where we are
actually having to probate a retirement account because the beneficiary
listen was either blank or the person had passed away.
And if there's no beneficiary listed, then you have a
non traditionally a non probate asset that would go directly
to the designated benefishiary is now going to go through

(23:24):
probate and be stuck in that probate core process that
can take anywhere from six months to two years or
longer to get for a family to get through.

Speaker 3 (23:32):
Wow.

Speaker 1 (23:32):
So I mean again, this is an easy situation to
avoid if you've done the proper planning right. So what's
some of the best advice you could give folks out
there who may not have done this kind of work
and haven't thought about it for a while. What's your
advice to folks out there as you think about probate?
What do you need to be doing to kind of

(23:53):
get your proverbial ducts.

Speaker 3 (23:55):
In a row?

Speaker 4 (23:56):
So, you know, one question I always get is people
would say, you know, I have a will that avoids probate. Well,
that's not true. A will still has to be proven
legally valid in probate. When it comes to getting your
ducks in a row. I tell people that does see
which assets you own, Is there things that can be
held jointly? Fill out those beneficiary designations and make sure

(24:19):
that they're completed and up to dates. And also consider
establishing a living trust. I get ask questions about trusts
all the time. What are they? What do they do?
A living trust? Any assets title to a living trust?
Also avoid probate?

Speaker 1 (24:35):
Yeah, and this is not a do it one time
and forget it type of proposition, right Dan, I mean
we see clients all the time. They did their legal work.
You know, ten, fifteen, twenty years ago, they put it,
put it away in a file and never looked at
it again and things change.

Speaker 3 (24:50):
Talk about what you.

Speaker 1 (24:51):
See, you know, as you stay in contact with folks,
maybe every three to five years, like we should be doing.
What are some of the situation and did you see
crop up that can happen in a negative way if
you just let this stuff sit around for ten to fifteen,
twenty years and don't look at it.

Speaker 4 (25:09):
Yeah, so absolutely, estate planning is not a one time event.
You should review your state plan at least every five
years or after major life changes. Some of the things
that I see are going through an estate plan, I
would see a backup executor named under a will and
it's a former son in law, for example, or a

(25:30):
spouse is made who is predeceased, and I see that
in beneficiary designations as well. The primary beneficiary on a
retirement account is also deceased. Or we've got property that
has been identified inside of a trust and inside of
a will that was sold many years ago. And so
that's not just major life changes. Need to be looking

(25:52):
every five years of these things. Also, the laws are
always changing, you know, they're always looking to change the
tax laws, for example, so it's important to stay up
to date. Speak with your speak with your attorney review
these sayings. You know generally every five years or after
major life changes.

Speaker 1 (26:08):
Great stuff from our estate planning expert Dan Perry from
the law for firm of Wood and Lamping. 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 on Bob Sponseller along with

(26:29):
Brian James. Do you have a financial question you'd like
for us to answer. There's a red button you can
click right there on the iHeart app. Simply record your
question and it will come straight to us. All right, Brian,
time to play fact or fiction. Let's get rolling here,
factor fiction. If I move to a no income tax state,

(26:50):
I no longer have to pay state taxes on my
investment income.

Speaker 3 (26:53):
That's an easy one. Bob.

Speaker 2 (26:54):
Of course that's the case, right, That's the whole point
of a no income tax state.

Speaker 1 (26:57):
If I wanted to give you an easy one on
first day, is I want to build your confidence here, Brian?

Speaker 3 (27:03):
All right, you need to build little success stories. They
pile up. It's kind of like getting a base hit
in baseball. I'm gonna take the win Bob, I'm gonna
take that win.

Speaker 2 (27:10):
So, yes, if I move to a no incomes tax state,
hey I have no income, no income tax.

Speaker 3 (27:14):
That that's exactly how that works out.

Speaker 2 (27:15):
So that means that you know, if you have if
you're earning dividends on your stocks, again, this is stuff
that is outside of an IRA, earning dividends on your
stocks or interest on CDs and that kind of thing.
Or if you have a job you ever did income
you're not paying any state income tax. So that is
very much a fact. Federal tax is always going to
be a thing. So when you're drawing on your on
your iras, your four to one k, if you're taking

(27:36):
on any outs, taking your check account and spending it,
yes you're gonna pay federal taxes. But again in those
tax free states and those state tax All right, Bob,
my turn, let's see if you can do as well
as I did. Fact to fiction, qualified dividends are taxed
at lower rates than ordinary income.

Speaker 1 (27:50):
What you got that is a fact, and you know,
basically to boil it down, qualified dividends or tax exactly
at the same rates as capital gains taxes short and
long term think that way. So but the important point
here is this is where it's important to actually do
some tax planning versus just last minute tax preparation.

Speaker 3 (28:11):
And there's a key difference here.

Speaker 1 (28:13):
So what we sit down and do for our clients
all the time as we do review meetings, is we
look at the total income structure that a client has,
and we try to create an investment strategy and an
overall tax plan that keeps our clients in the lowest
marginal rate possible while still meeting their income goals.

Speaker 3 (28:32):
That's the goal, isn't it all?

Speaker 1 (28:34):
Right? Here you go, Brian factor fiction, capital gains taxes
are always lower than income taxes.

Speaker 2 (28:40):
This is fiction, Bob, because my income can be so gosh,
I don't pay any taxes.

Speaker 3 (28:45):
That's very possible.

Speaker 2 (28:46):
And again, like we were talking about a little bit earlier,
there can be situations where you don't have any income,
but you're still not destitute. Lots of people retire and
simply don't turn on any of the streams of income
because there's enough money in the checking account.

Speaker 3 (28:57):
How can this happen? Well, a lot of times.

Speaker 2 (28:59):
You know, if I'm somebody who sold a business, then
I'm going to generate a bunch of cash or when
we retire also happens to, ironically frequently be right around
the time that we inherit assets from our own parents.
So when that's a situation that I encounter for client,
we usually will say, you know what, you've had this windfall.
Let's just stick some of it in the bank and
then we can let social Security grow for another year
gain that eight percent return. We can leave our iras

(29:20):
alone to grow and just kind of spin the assets
down a little bit. But that means I'm literally in
a zero percent bracket on my income less than capital games.

Speaker 1 (29:27):
Well, it also means that you're sitting down with a
competent advisor like Brian and actually thinking through these things
and doing some planning.

Speaker 2 (29:35):
That's that's our role, man. How can we look at
the different puzzle pieces and fit them all together?

Speaker 3 (29:39):
All right?

Speaker 2 (29:39):
Might turn back to me Bob factor fiction. If you
have home insurance, you still need umbrella insurance.

Speaker 3 (29:45):
That is a fact.

Speaker 1 (29:46):
And how much you need, I think depends on your circumstances.
So think about the home that had you got three
or four little rug rats running around, you got a
trampoline in your back yard. You're the house where all
the kids collect to play whiffle ball in the backyard.
Think lawsuit, Think the potential of getting sued. So you
want to look at the value of your home. You

(30:08):
want to look at your car insurance and everything, and
then you want to think about what if I get sued?
Do I have enough coverage to handle this thing? You know,
in the event the worst case scenario happens. Same thing
as if you coach a youth sports team at all,
and you're throwing batting practice to a bunch of ten
year olds and you accidentally hit one in the head.

Speaker 3 (30:28):
Guess what you might get sued. Yeah, these are important things.

Speaker 2 (30:31):
And umbrella insurance is really relatively cheap, and so maybe
four or five hundred, six hundred bucks a year on
top of what you're already paying. It covers things that
are pretty rare, so therefore it's not very expensive. But
if they do occur to you, these are ship sinkers,
so it's.

Speaker 3 (30:43):
Very well worth well.

Speaker 1 (30:44):
And the pleasant surprise here is if you are combining
your homeowners, auto and umbrella with one carrier, a lot
of times you'll be amazed at how inexpensive this coverage
is relative to the other insurance costs you have you
in your life. It's definitely something to take care of,
and you can take care of it, usually very inexpensively,
all right, Brian Factor fiction donating appreciated stock instead of

(31:08):
cash can help you avoid capital gains taxes.

Speaker 2 (31:11):
That is a rock solid fact, Bob. So if I
have a stock that I bought for I'll make up numbers.
I bought it for ten thousand, it's now worth fifteen thousand,
and I want to donate that to my church or
whatever charity I have in mind. I can sell it
and then I'll pay income or capital gain taxes rather
on that five thousand dollars gain, and then I can
write them a check. That's what a lot of people
do because we think that's the only way. However, any
five OHO one C three charity will more be more

(31:32):
than happy to take that stock off your hands exactly
as is. I can give them all fifteen thousand dollars
of the stock. I get credit for heaven giving them
fifteen thousand. But I do not have to pay capital
gains because I didn't sell it. I gave it to
the charity. The charity sold it. The charity isn't liable
for taxes. Anyway, So nobody pays capital gains.

Speaker 3 (31:49):
That's a fact, and this is a great time to inject.

Speaker 1 (31:52):
I'm gonna get all my soapbox here a little bit
about donor advice funds, because devices to what I like
to say warehouse some charitable giving. If you sell a business,
you sell a home, or you have a situation where
you got appreciated stock that you've got to get rid
of and diversify, you can you can put that stock

(32:14):
and do get all the benefits that you just talked about,
the tax deduction and the capital gains tax avoidance without
having to actually give the money out to various charities.
You just put it in this little warehouse called a
donor advice fund. You get all the tax benefits now,
and then you can decide over time where to give
that money. It's a beautiful gifting, you know, opportunity. My

(32:37):
wife and I have one of these. I recommend them
to clients all the time. They're wonderful.

Speaker 2 (32:42):
Yeah, it's a way to still get a benefit off
of making a charitable donation because you can put a
fat pile in and get the credit for it, but
you don't have to give it all to the church.
Or the charity all at once, because that's going to
set some crazy expectations.

Speaker 1 (32:54):
All right, last one, Brian, quickly, here factor fiction. Charitable
contributions always lower my taxes.

Speaker 2 (33:00):
This one is fiction, believe it or not. Because remember
we have a standard deduction now to twelve thousand for
a single twenty five thousand four.

Speaker 3 (33:07):
Those are old numbers. I believe it's thirty for a
married couple, but we'll google that. Anyway.

Speaker 2 (33:11):
If you're under that, then you're not getting the deduction
for that charitable contribution. That's where those don advice funds
come in.

Speaker 3 (33:18):
All Right.

Speaker 1 (33:18):
Coming up next, a trip into my world of wealth,
and we're gonna kick around a couple of watchouts relative
to your life insurance policies. You're listening to Simply Money
presented by all Worth Financial on.

Speaker 3 (33:29):
Fifty five KRC the talk station.

Speaker 1 (33:37):
You're listening to Simply Money presented by all Worth Financial
Lumbob Sponsorler along with Brian James. All Right, Brian, here's
a topic that just has come up. I mean it's
only Tuesday, Brian, and this has already come up twice
this week. People calling it and these are not clients
of all Worth they're not my clients, but these situations
of situations have just kind of gotten dumped in my

(33:59):
lap and the last forty eight hours, and it's like, Bob,
help me figure this out. And that has to do
with term life insurance policies that are coming to the
end of their fixed premium term. And I've a couple
thoughts on this, and then I'm interested in what you think.
A lot of times people can buy these twenty year
thirty year level term policies, and they're wonderful because you

(34:22):
can buy a boat load of life insurance for a
relatively low premium. But you've got to constantly evaluate your
situation to see how long you need this life insurance.
And the right time to make some adjustments in your
portfolio is not three months before the premium is gonna
more than quadruple. You got to look at this stuff

(34:44):
and see, you know, do I need to extend the term?
Is maybe a permanent policy makes sense. You got to
look at why you have your insurance in the first place.
It's an often overlooked thing in people's financial lives that
I want to make sure we get out in front
of here today.

Speaker 2 (34:59):
So yeah, I have that conversation with my clients as well,
because everybody buys term insurance when when they're young, where
they have just had the kids. We're worried about make
sure and families. Okay, get the mortgage paid off, something
happened to me, so forth. All that makes sense. But eventually,
gosh darn it, you're gonna outlive that insurance. Most likely.
That's a good thing, by the way, we want that.
So what you'll start hearing is from the insurance company.
By the way, one of the misnumbers is that like

(35:20):
a twenty year term is gonna go away, it just
goes poof. That's not the case. It's the premium that
goes away. So you'll start hearing in year nineteen or
twenty or so that twenty year term. Here's your new premium.
If you want to keep it, you're gonna have to
write a check that's maybe two, three, four times higher.
So what you're referring to is the ability to convert it.
Do I need that insurance? And that's the question, do
you still need money to rain from this guy in
the event of your death. If there's still debt in

(35:41):
the mix, then yeah, maybe, or if one of the
kids is still in the nest, still fighting their way
through college, that kind of thing, then then that's possibility.
But if all those things have gone away, maybe not.

Speaker 3 (35:48):
Well.

Speaker 1 (35:48):
The important thing to remember here this is how life
insurance companies price life insurance. It's all underwritten based, meaning
you go in at age twenty five or thirty, and
you buy a thirty or two policy and yeah, you're
as healthy as a horse. You can oftentimes get preferred
Nonsmoker rates. You've locked in a great rate, but it's
only for a period of time. If you run to

(36:10):
the end of that term. And now you get this
you know Bill in the mail saying you're you know again,
you're using my example, your premium is gonna quadruple. To
your point, Brian, they're not taking the coverage away from you.
They're just saying, well, we under we medically underwrote you
for thirty years, you know, assuming you're healthy for thirty years. Now,
if you want to keep the policy, we're going to

(36:31):
charge you a standard rate based on what we charge
every other sixty two year old in America. And if
you're not as healthy as you were when you're thirty,
you want to you know, it all comes down to
evaluating this before you get to the end of that.

Speaker 3 (36:47):
Fixed term period.

Speaker 2 (36:48):
And the reason it goes up that high is because
the insurance company is virtually guaranteeing that they may have
to pay out a death benefit versus on that. You know,
if I'm twenty five years old and I buy a
twenty year policy, that is highly unlikely to pay out.
Most people of well pass forty five, So that term
policy is not going to pay out unless unless something
crazy and unpredictable happens.

Speaker 1 (37:05):
Yeah, So the key thing we want to point out
here is don't just buy these policies when you're twenty
five or thirty and throw them in the drawer and
forget about them. This is something you should be evaluating
with your advisor in a review meeting every single year
to make sure you have the coverage you need at
the price that makes sense based on your current underwriting situation.
Thank you for listening. You've been listening to Simply Money,

(37:27):
presented by all Worth Financial on fifty five KARC, the
talk station