Episode Transcript
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Speaker 1 (00:06):
Tonight some real life stories of outdated financial plans that
nearly derailed retirement dreams and family goals. You're listening to
Simply Money, presented by all Worth Financial. I'm Bob spon
Seller along with Brian James. A good financial plan isn't
written in stone. It's not like a cast iron skillet
you buy once and keep for life.
Speaker 2 (00:28):
It's more like a garden.
Speaker 1 (00:29):
You have to water it, prune it, and occasionally replant
when things outgrow your space. And yet some families with
a million dollars, two million dollars, even five or ten
million dollars in net worth, they haven't reviewed their plans
in years.
Speaker 2 (00:44):
Brian, Yeah, this is something that happens fairly frequently when
when people have enough assets right, they feel financially stable
and really nothing happens to cause any concern and they're
feeling okay about things. But we kind of tend to
ignore our situations and we lose track of things that
have changed that we can control, you know, maybe something
(01:05):
about our own personal situations. Maybe it's spending, or some
kind of family arrangement, maybe a new marriage or something
like that. Things that we can't control, such as economic policy,
tax policy, those kinds of things, So the needle does
move from time to time. We caught wind of a
story of a couple who came up with a plan
that told them they needed about a million dollars to retire.
Remember when a million dollars seemed like a lot of money, Bob.
Speaker 1 (01:26):
Well, And this plan was put together in the in
the nineteen nineties, right the mid to late nineteen nineties.
But yes, I remember when that was a lot of Yeah,
back when it was.
Speaker 2 (01:34):
And it's not that it's not I'm not saying that
it's not a lot of money today, but it doesn't
obviously it doesn't stretch as far as it's just not
a lot of money to you. Yeah, yeah, let's go
with that. Let's ride that pony for a little while.
But any case, this couple thought they were ahead of
the game because they had that seven digits. You know,
we get those two commas, we feel like all problems
are solved. But actually a fresh review that they hadn't
(01:55):
done in years revealed that they were about to run
out of money in their eighties, and they still had
some time to fix this problem. But really, to keep
up with their spending, they would have needed about two
point three million dollars simply because their spending has outpaced
their resources. That's kind of a big miss, and they
finally look for an update and that's how they got
to come up with their new number.
Speaker 1 (02:16):
Well, thankfully they became aware of the situation in their
sixties rather than in their eighties, because by the time
you get to your eighties, it's a little late to
have a major course correction. And I can only guess
here the thing that was overlooked in that plan was inflation. Inflation,
you know, people forget about that, especially with potential health
care costs, and you've got to have an investment portfolio
(02:39):
and a plan put together that's going to keep your
money growing to maintain, if not grow, your purchasing power
into those later years.
Speaker 2 (02:47):
Yeah, and I think it's inflation of my existing spending, right,
you can kind of do that, you can rough out
the math there. But there's also inflation of spending on
things I didn't know I was going to want to do.
So a lot of times people haven't spent enough time
thinking of about how they'll fill the vacuum of time
with spending. Right when we have time, we're not working,
you know, nine to five anymore, we've got more time.
(03:08):
We tend to fill that with spending, and we need
to budget for that appropriately or it will catch up
with us sometimes too late to do anything about it.
Speaker 1 (03:14):
Well, another thing that can rear its ugly head, and
we see this sometimes when we have to counsel people
off of this is those pesky kids always see. We
think they're going to grow up and go away and
be self sufficient, and yet that bank of mom and
dad never seems to fully close, right Brian.
Speaker 2 (03:32):
Yeah, we're going through a little bit of that now.
Is you know, helping young adults transition into adulthood here
trying to find their path, get their footing. But yeah,
you need to kind of prepare. And not only that,
but let's remember we talk about the Sandwich generation all
the time. You might have the generation above you needing
a little bit of help because they're in this situation
that we're describing. So that's something to pay attention to
make sure we don't lose sight of.
Speaker 1 (03:53):
Here's a second story we came across, and we'll call
this one the outdated estate plan. We heard of a
man who had an estate plan drawn up when his
kids were in elementary school. Well today those kids have
kids of their own, but the plans still named a
now estranged brother as guardian of the kids. It had
(04:13):
no provisions whatsoever for how to treat this gentleman's now
special needs grandchild. And thankfully they got a hold of
an advisor and a good estate planning attorney and got
that sorted out. Imagine having a special needs grandson that
means the world to you, and yet you didn't go
in and look at your state plan and even put
(04:34):
things in place to take care of the little guy.
That could create some unexpected, unintended, significant consequences.
Speaker 2 (04:42):
I think more often than not it happens where state
plans get out data right, because in terms of cash
flow and all the money in the spending and all
that kind of stuff, we're usually pretty highly focused on that,
so we tend to catch that stuff quicker. But estate
plans can change quickly after having done nothing for ten years.
And I'm thinking along the lines of I've seen cases
where somebody in their thirties and forties asked their attorney
(05:05):
uncle to be their trustee or their executor or whatever.
And this is now itself thirty or forty years ago.
So now the individual is seventy, uncle is eighty and
is the one who's going to be trying to settle
the estates. There comes a time where that no longer
makes sense, and that's going to be a problem down
the road. Another crazy store I had years ago in
my life was I had a grandfather who had three grandchildren.
(05:25):
He also happened to be on the board of three banks,
and he decided easiest date plan. Each kid gets one
of these piles of stock. But over thirty forty years, Bob,
those three banks went three separate directions. One of them
went bankrupt and disappeared off the face of the earth.
The other became some little community bank. The third one
became city bank. So those heirs were all sitting there
wondering why Grandpa had a favorite. It was really really
(05:46):
hard to unwind that one.
Speaker 1 (05:47):
Would have loved to been a fly on the wall
for that reading of the wills, so to speak. But hey,
in all seriousness, this is why we recommend to everyone
out there, and we always guide our clients this way.
At a minimum of every five years, make sure you know,
at a minimum you at least read your documents. You
pull them out, you read them, not just the will,
(06:10):
but the healthcare and financial powers of attorney, trust, family,
limited partnerships, any documents that at least sit down and
read them, and you don't have to be an attorney
in most cases to figure out, wow, this is what
I put in place fifteen twenty thirty years ago. Boy,
have things changed. I need to make some you know,
some adjustments every five years at a minimum.
Speaker 2 (06:31):
You got to do that.
Speaker 1 (06:33):
And then I think too, just have those documents reviewed
by a good estate planning attorney to look at have
have tax laws changed? Has anything changed in the legal
aspect of things that might cause you to need to
refine those documents to have them accomplish what you really
set out to accomplish when you originally drafted, had them
(06:55):
drafted for you, let's say twenty thirty years ago.
Speaker 2 (06:58):
Yeah.
Speaker 1 (06:58):
Absolutely, you're listening to simply money presented by all Worth Financial.
I'm Bob Sponseller along with Brian James. Let's get into
story number three and this is a big one. Missed
tax opportunities.
Speaker 2 (07:09):
Brian, So, yeah, a lot of times when we think
of tax planning, we really only focus on how am
I going to minimize my taxes? This year, Where can
I find some more deductions? Well, that ship sailed a
while ago. Really, really the final nail in that coffin
was the Tax Cuts and Jobs Act of twenty seventeen
that bumped everybody's standard deduction to twenty five thousand. So
now there really aren't there unless you own a business
(07:30):
or you have something legitimate going on, there really isn't
much to find in the way of reducing your taxes. Now,
now that's it. That doesn't mean they aren't planning opportunities.
So this is a story of a couple good, high
earning income, a couple in Cincinnati. They were still maxing
out their traditional meaning pre tax four O one k's
because fifteen twenty thirty years ago, that's what you did,
and then frankly, that was the only option that long ago.
(07:51):
But now they're in their peak earning years and they're
in their their lowest expense years. In a roundabout way,
because because the kids are out of the nest, their
future tax bracket and we're tirement's going to be lower,
so that kind of makes sense. But at the same time,
now all of a sudden, they've reached a point where
they are really doubling down on that pre tax pile,
and that's going to get smacked around a lot by
(08:11):
required minimum distributions when they reach age seventy three could
be seventy five for some of you out there, depending
on when you were born. So one of the strategies
for them is to look at either shifting some of
those contributions to the wroth side. And yes they're in
a high bracket, but at the same time, that's the
only way they're ever going to get a pile of
tax free money is by biting the bullet. This is
something this is something I'm personally doing right now because
(08:31):
all that was available when I was starting was was
the pre tax four oh one K, and I'm going
to have I've seen my clients go through this. I'm
going to have a big requirementium distribution problem if I
don't do something different. Another way to think about this
is perhaps if you're really in the you know, a
couple three four years away from retirement, you might consider this.
Couple might consider setting some money aside outside the four
oh one k, put it in just a taxable account,
(08:54):
invest it, grow it however you're comfortable, but target those
dollars for use in wroth conversions. Once you hit that
retirement age, you'll be able to hang it up. You
can hold off on turning on Social Security for a
few years, or even if you do take social Security,
you'll be in a lower bracket. That's the year to
take those conversions, and you will have a pile of
money with which to do it, to pay the taxes,
all while you're in a lower bracket year. But again,
(09:15):
the whole point of this is we need to start
shifting the focus from planning for my this year ten
forty and planning for my future ten forties.
Speaker 1 (09:23):
And that leads us into the fourth story when we
want to cover, and that just life changes, life happens,
life e alls. We came across a local family who
had bought a second home in Michigan, and their original
financial plan to assume, well, we'd have one house, one
set of expenses, and a snowbird kind of a lifestyle
starting at age seventy. Well, it turns out they ended
(09:43):
up loving that lake house so much they decided to
move their full time and rent out their Cincinnati home.
Speaker 2 (09:50):
But you have, the.
Speaker 1 (09:51):
Original plan did not account for rental income, property management fees,
the tax differences between Ohio and Michigan. The point here
is by reworking and refining their financial plan, they were
able to make all those up upgraded or revised dreams
come true and actually end up retiring three years earlier
(10:13):
than they had planned. So all benefits of having your
financial plan reviewed regularly, ideally with a good fiduciary advisor
to take a look at all the opportunities out there
that you might be missing if you just did a
one time financial plan and threw it in the drawer
and let it sit there for fifteen or twenty years.
Speaker 2 (10:33):
Yeah. And on the topic of buying houses and things
in different places, a lot of times were tempted to
go buy something near where our children have landed. Well,
now your children are adults and they're going to have
the same curveballs thrown at them by life. Don't forget
they could be uprooted by their own employers or the
other side of the family or something like that. So
just remember to be flexible. Nothing is written in stone.
Speaker 1 (10:52):
Here's the all Worth advice. Your financial plan is a
living document. If you haven't updated it in the last
few years, it may end up being more of a
liability than a safety net. Coming up next, the three
most expensive tax missteps that even high net worth investors
often make. You're listening to Simply Money, presented by all
Worth Financial on fifty five KRC, the talk station Blombob
(11:22):
sponsller along with Brian James. Is there a right time
to discuss the inheritance you plan to leave your children
or other family members. It's actually one of the questions
you asked us about. We'll answer all of that coming
up ahead at six forty three. All Right, when you've
built significant wealth, it's easy to assume you've got your
(11:43):
financial house in order, but we see it all the time.
Wealthy families, even those with excellent accountants and CPAs, still
making tax mistakes that cost them tens of thousands of dollars,
sometimes even more. Brian, and we've got three of those
mistake we want to walk through tonight.
Speaker 2 (12:01):
Yeah. These all come fresh off the presses of our
advisors here who have these stories, and ourselves because we
talked to our clients as well about these types of things.
So the first mistake people make miss deductions. So there
are a lot of people out there who maybe didn't
quite catch on that the tax cuts and Jobs Acts
of twenty seventeen eliminated the standard deduction, and they may
be making contributions in a way where they're missing out
(12:24):
on a tax benefit. For example, if you always gave
your church or some charity ten thousand dollars of cash,
that's no longer enough to outpace the standard deduction. You're
getting that deduction for free. You haven't really lost anything,
but you've been doing that for years because you just
just what you do at tax tim I right it, Jack,
I get a deduction. There you go, Brian.
Speaker 1 (12:42):
And not to interrupt, but I see this all the time.
And the other one that I see and is not
used at all is that qualified Charitable deduction. For folks
ages seventy and a half. In older talk about some
of the examples of how that should be used.
Speaker 2 (12:57):
Something called the QCD Qualified Charitable Deduction. That is something
that you can use your when you hit the age
of being of a required minimum distribution, when you were
required to take ira dollars out and begin to pay
taxes on them. You can have that sent directly to
a charity. You need to work with the custodian of
their wrath, which is the financial institution that holds your account,
and that they'll have you fill out the proper paperwork
(13:17):
to get that done. But that and you'll need things
like the tax ide of the charity and an address,
and they'll need to know you know where to send
the dollars and all that. The charity, believe me, will
be more than happy to help you with this information.
They know exactly how it works.
Speaker 1 (13:29):
Another miss deduction or missed tax planning opportunity we see
often Brian is underutilizing that health save these account A
lot of times people don't max out the contributions to
those accounts, and then other times, even when they do
max amount, they're spending that money on medical expenses as
soon as it comes in, you know, when they're in
(13:50):
their fifties, rather than letting that money grow and taking
full advantage of that triple tax benefit of pre tax contributions,
tax free growth both and tax free withdrawals for medical
expenses once you get into your late sixty Yeah.
Speaker 2 (14:05):
Well, one of the things that people need to remember,
but an HSA account, remember this is not an FSA.
HSA is not to use it or lose it. So
you can stack up these expenses now and pay them
off later. So meaning you can put that money in now,
get your deduction as Bob mentioned, and then invested in
something I've read the other day that only about ten
percent of hsas are actually invested in something beyond the
simple bank account. You can move that to a place
(14:26):
that will allow you to do mutual funds similar to
your four O one k. Let it grow for a decade,
decade and a half, and then you can come back
and you can pay for it with You can pay
for expenses that you had fifteen years ago, so you
can benefit from from that over a very very long
period of time. Make sure you understand how that works.
Speaker 1 (14:42):
All right, Let's get into mistake number two from a
tech standpoint, and that's poor timing, Brian. What we mean
there is, you know, for example, selling a big stock
position in December and having this huge capital gains hit.
You know, you might you triggered that big capital gains
hit in December when a little paid and a little
planning could have shifted that liability into the next year
(15:04):
or split it up between one, two or three years.
And that's where it's important to run those numbers in
advance of just making a big wholesale decision. You know,
off cuff or off the top of your head. So
I actually like when this comes up in the fourth
quarter of a year because it makes me look like
I have a really, really huge brain. But it's really
simple stuff.
Speaker 2 (15:24):
So let's say somebody comes up with an expense they
need to buy a car, or they're going to buy
that vacation home, or they're gonna help the kids or whatever.
They have a big expense, it's going to require them
to liquidate something and therefore incurse some taxes. Well, if
this is happening in the fourth quarter of a year,
then if you think about it, if we're really talking
about this in December, you can actually get into three
separate tax years over a thirteen month span, sell a
(15:44):
third of it now in this December, a third of
it anytime in the following year, and then a third
of it in the following January. Now you've spread that
income tax hit over three separate years, and it's okay
to do something like maybe you cover it with the
home equity line of credit. Even with rates up. Now
you're only paying eight percent or so at a maxim,
sometimes even lower than that, and so the math can
be very very favorable as long as you have a
(16:05):
plan and you can stomach the idea that, yes, you
do have debt for thirteen months, but it's not that painful.
Speaker 1 (16:09):
And you're really talking about Brian, just borrowing that money
for a month or two or three just to get
in that next tax year, gets you at a lower
tax rate, and then immediately pay it off.
Speaker 2 (16:19):
Just arranging the financial furniture a little bit.
Speaker 1 (16:21):
Speaking of timing, the same logic applies to Wroth conversions,
and that's where it's important to run those numbers because
a little timing and a little spacing out of the
amount and the timing of those Wroth conversions could mean
the difference between paying taxes at say a twenty two
percent you know, marginal rate or a thirty five percent
marginal tax rate. The differences can be often huge. Another
(16:44):
tax opportunity I want to make sure we really hit
on because we see this often, and I'll just say
it this way, for after tax non IRA, non four
oh one K accounts, if you don't have a plan
and an advisor that is taking advantage of regular I'm
talking about daily, monthly, quarterly automatic tax loss harvesting your
(17:06):
investment portfolio. I'll just say is out of date because
there's so many good opportunities now to have this kind
of on autopilot running in the background that a lot
of good fiduciary advisors have available to them. You've got
to be taking advantage of that tax saving opportunity, now,
that's true.
Speaker 2 (17:23):
And if it's a pile of mutual fund or something
like that, it can be a little more complicated, but
you might consider switching to something that's going to allow
you to invest in individual securities. And what Bob's referring
to there with tax loss harvesting is looking at a
position where perhaps a dividend reinvested last quarter and then
the market came down that those particularly purchased piles of
shares of that stock are now sitting in a lost position.
You could sell those and stack it up toward up
(17:45):
to a three thousand dollars deduction for the current tax here,
all right.
Speaker 1 (17:48):
And then tax planning mistake number three is just simply
outdated strategies. This one can sting because it often involves
things that used to be good advice. You were doing
all the right things that you were told to do,
but you were told to do them ten fifteen twenty
years ago and things have changed and you got to
adjust along with current tax law and current planning opportunities.
Speaker 2 (18:10):
Yeah, that always happens where you know the best of intentions,
but if we ignore things then it's not gonna I'm
not gonna have a good outcome there. So perhaps you
were told you know about some kind of estate planning
structure you should have, maybe a family limited partnership. Those
were popular a very long time ago and still serve
a good purpose. I'm not saying they don't. However, families change, right,
People don't get along anymore, Relationships change, financial needs change
(18:33):
in situations. Maybe somebody needs to exit that partnership because
it's causing more problems than it's solving at this point.
Sometimes you can have a tax structure of a trust
that is out of date. So you know there's a
sunset coming for the Tax Cuts and Jobs Act that's
coming at the end of this year, and that could
be affecting your estate plan.
Speaker 1 (18:51):
Here, you need to make sure that you're on top
of that. Here's the all Worth advice. Don't waste money
on taxes. Make sure your strategies evolve as fast as
your portfolio does. How old is your Internet router. It's
a question you should definitely answer soon we will explain
why next. You're listening to Simply Money presented by all
Worth Financial on fifty five KARC the talk station. You're
(19:21):
listening to Simply Money presented by Allworth Financial. I'm Bob
sponsorer along with Brian James, joined tonight by our tech.
Speaker 2 (19:28):
And cybersecurity guru, mister.
Speaker 1 (19:31):
Dave Hatter, and I know this topic is something everyone
out there. This applies to everyone. Dave, what are we
going to cover tonight to help keep our data and
our money secure?
Speaker 3 (19:42):
Guys is always thanks for having me on and this
is an important topic. It's a recent warning from the
FBI about small businesses and people's homes here. Generally, large
corporations have nerds like me running around. They have enterprise
grade security solutions, they have firewalls from folks like Palo
Alto and Cisco and Fortinet. But at home, many people
(20:03):
just have whatever came from the internet service provider. Same
with small businesses, or maybe they've gone out the best
buyer Walmart or somewhere and bought an off the shelf
Wi Fi router because they need more capabilities than what
you can get out of the thing that was delivered
by your Internet service provider. And the FBI is warning
that in many cases, like so much of the tech
that's out there, so much of our so called Internet
(20:26):
of things aka smart devices, you know, these things have
to be updated regularly, they have to be configured correctly,
and as they get older and go into life where
they're not getting software upgrades and more importantly, security patches
from the vendor, that creates a gigantic security hole. This
is the kind of thing TENFOI hat nuts like me
warn't about all the time. But I'm happy to see
(20:46):
that the FBI is now trying to get in front
of this and warning folks that if you have these
older end of life devices, you know, anything that's more
than five or six years old, you should question if
it's ten years old or older, that's going to be
a significant concern. You need to you need to seriously
take a hard look at replacing these things. And the
good news is they're relatively inexpensive.
Speaker 1 (21:05):
All Right, Dave is somebody who grew up here in Cincinnati,
you know, using that old Greenhills mindset where I'm going
to pinch every penny i can you know, a lot
of times I think to myself, and I know other
people think the same way. I do not want to
rent that router from Spectrum or you know, Ulti Fiber
or whatever. I'm just going to go buy my own
because it's going to save me a few bucks. Are
(21:27):
those the people you're really talking to right now, Those
people that went out and bought that router twenty years
ago and said, yep, I got my own router. I
feel great about not having to pay rental payments to
a cable company. Are those the people most at risk,
you know, in situations like the one you're talking about
right now.
Speaker 3 (21:44):
Most likely because if you're essentially renting it from your
internet service provider again think you know, Spectrum, Ultifiber, whomever.
And i'd also point out, you know, there are so
many different ways to get online now. You know, in
the old days, you typically have to work with some
sort of landline based internet service provider. Now you have
solutions like Starlink, ount there and so forth. But at
the end of the day, the Wi Fi router, And
(22:06):
this often gets confusing for people because a lot of
folks have two different devices. You have the cable modem,
if you have something like Spectrum, which is a physical
device that connects you to their network, and then sometimes
that will serve also as a Wi Fi router. Sometimes
you might have a separate device that is then throwing
up the Wi Fi signal in your facility, your home,
(22:29):
your small office or whatever. This is a constant battle
with my family, like the WiFi is down. I'm like, no,
the WiFi is not down. The internet connection is down.
These are two different things right now. Again, sometimes one
device can provide both. Most people have two. If you're
working with the internet service provider, you know they will
occasionally replace these things. Usually you're not going to have
(22:50):
a device that's a little but if you went out
and bought your own because you don't want to have
that rental fee or you wanted extra capabilities, yes, again,
if it's more than five or six years old, and
the FBI is specific says in their PSA anything produced
in twenty ten or earlier, so you're talking to fifteen
year old device. These things have notorious security flaws. They're
not getting updates from the vendors. They're also missing a
(23:12):
lot of more modern security features, and that's one of
the key things here. You can go out and buy
a high relatively high end powerful Wi Fi router for
three hundred bucks or less that will add an enormous
amount of additional functionality and security capabilities versus something that's
even a couple of years old. You know, there are
new encryption standards for your Wi Fi network. There are
(23:35):
new Wi Fi standards that provide better performance and better speeds.
So you know, by upgrading, despite the fact that people
don't want to spend money, and I get it, you
also have to remember every single thing you do online
through that device is you know, whether it's your banking,
accessing your work networks, whatever you're doing is going through
that device, so ensuring its security is very important for you,
(23:58):
your business, your money, et cetera. And you know, one
quick piece of advice before we aroun out of time again,
there's lots of new standards. You can get much better performance,
much better security, get software updates, things like WPA three.
That's that's the highest level of encryption most home Wi
Fi routers would support. You know, you need to be
turning on the highest level of protection you can, and
(24:22):
I would encourage folks. You know, if you don't have
an eardy friend like me, you can talk to check
out magazines online like c net, Charlie Net, or zd Net,
Ziff Davis Net, Tom's Guide, PC Magazine, Consumer Reports. They
have editors and experts that vet these things right, so
you can go out and say, well, what's the best
home Wi Fi router for twenty twenty five on one
(24:43):
of these sites and they'll give you recommendations. You know,
do I want the cheapest one? Do I want the
most powerful one? Do I want the most secure one?
Do I care about gaming? There's all kinds of great advice,
and I also encourage people sign up and go to
IC three dot gov Internet Crime Complaints Center. It's hosted
by the FBI. They put out these public service announcements.
(25:04):
There's all kinds of useful information there. So there's ample
resources to help you figure this out. But if you
have a really old device, take the FBI's advice and
replace this, because you're setting yourself up for disaster if
you don't.
Speaker 2 (25:16):
Hey, Dave, is there besides it being old? Are there
things that the thing that my router could do? Well?
I know that if it's behaving a certain way that
I maybe I should be paying more attention. You know,
obviously you know that there there are model numbers and
things we can look at too, but just in general,
should are there things I should watch for, just in
terms of his normal performance?
Speaker 3 (25:33):
Yeah, that's a good question.
Speaker 1 (25:35):
You know.
Speaker 3 (25:35):
One of the reasons why they've put out this PSA is,
you know, for these really old routers, it's not that
hard for hackers to find these. There's a search engine
called Showdan specifically designed to find Internet connected devices, so
bad guys can go look up routers that have known defects.
They can infiltrate your router, and then they'll use it
(25:56):
essentially as a proxy or for other nefarious purposes, So
they're they're routing their bad activities through your router, which
also means you could get a visit from the FBI someday.
If you look into that, you'll find that has happened before.
Speaker 2 (26:07):
But yeah, if it used.
Speaker 3 (26:09):
To work fine and now it suddenly starts to lose
its connectivity, your speed goes to near zero, it seems
to overheat, or just suddenly starts acting weird. I mean,
that could just be a sign that that's getting old
and tired, or could be a sign of some sort
of infestation from some hackers somewhere, and again, with these
newer devices, they're much harder to hack. They're getting the
(26:32):
security patches from their vendors, they're much easier to secure.
You know, all the reasons why you should really think
about replacing anything that Again, I would say if it's
five or six years old, you should take a hard
look at replacing it.
Speaker 2 (26:44):
Yeah, and I want to be clear too, this is
something I learned years ago about that We've hinted at
a couple times here, but just to say it a
third time, you do not have to rent devices from
your internet provider anymore than you have to rent a
lawn sprinkler from the water company. They can't control what
you're connecting to that connection, So you can be in
full control of this and save yourself a little money.
At the same time, Dave, I'm going to ask you
(27:05):
a little bit of a loaded question. Have we heard
from the Ulti Fibers and the spectrums of the world
is from there? Are they raising a flag on any
of this? And do you have any idea if they
would bear any liability. That's a lawyer question and none
of us is one. But I'm asking anyway.
Speaker 3 (27:20):
Yeah, I have not seen, like you know, I use
Spectrum at home. I have not seen any communication from
Spectrum in this regard. Now, again, you know, they will
occasionally replace their equipment and so forth, and you know,
I would encourage people to your point to not rent
their equipment and go for some of the higher end
and relatively inexpensive. You know, if you spend three hundred
dollars on a fairly high end Wi Fi router and
(27:42):
you advertize that over five or six years, that's not
very much money to get a lot more security and
a lot better capability and probably a lot better performance
to boom. You know. All of that said, so, I
haven't seen anything from the Internet service providers in this
region comment on this particular FBI warning. I think it
probably is really geared more towards the people like you
(28:03):
mentioned that have gone out and bought their own equipment,
perhaps a long time ago. And you know, as far
as the internet service provider bearing any responsibility, yeah, I'm
not an attorney, and I'm sure if you read through
their terms of service there's indimnification in there for anything
that goes wrong using their service. So I kind of
doubt it but you know, I'm not an attorney, and
you know, could you get a class action lawsuit together
(28:25):
for people that have somehow been hacked because they had
old equipment and they weren't warned and it wasn't replaced.
Speaker 2 (28:31):
Maybe? Yeah.
Speaker 1 (28:33):
So bottom line is spending that investing that three hundred dollars,
like you said, advertized over six, seven, eight, ten years
is way less expensive than going through a dramatic, you know,
identity theft or fraud situation that could cost you hundreds,
if not thousands of dollars. Great stuff, as always from
our tech expert Dave Hatter. You're listening to Simply Money
(28:55):
presented by all Worth Financial on fifty five KARC the
talk station. You're listening to Simply Money presented by all
Worth Financial. I'm Bob Sponsorer along with Brian James. Do
(29:18):
you have a financial question for us? There is a
red button you could click while you're listening to the
show right there on the iHeart app. Simply record your
question and it will come straight to us. All right,
let's roll here the Ask the Advisors segment. Well, first
we have Brian and Mason.
Speaker 2 (29:36):
What does this smart withdrawal strategy look like? For someone
with a three million dollars portfolio. Yeah, thanks for clicking
that red button there, Brian. So that's a great, great question,
and you know, I wish this is one of those
things honestly that is job security for me and Bob,
because that is that is a very very complicated question,
important question everyone will face it. It depends on the tax structure.
So Brian, I would ask you, is this money you
(29:57):
said three million dollars? Is this in a four oh
one k is that I or perhaps you inherited it,
maybe you sold a business and it's exposed to taxes,
which isn't a bad thing. Everything's exposed to taxes, but
there are differences between retirement taxes and capital gains taxes,
of course, So it depends on what you need and
when you need it. So the ideal part of this
is what I would suggest is come up with the
(30:17):
some semblance of what do you need in the next
twelve to eighteen months that ought to be placed in
something that's pretty accessible and not going to be affected
by the headlines, and then that then you'll be more
confident in leaving the rest of it invested over the
longer haul. But maybe come up with three buckets, a
short term, medium term, and a long term, and then
you can look at how those different things are taxed.
All right, how about Robert and Florence.
Speaker 1 (30:39):
Is there a right time or way to talk to
my airs about what inheritance they might receive? Well, Robert,
this is a loaded question, but a great one because
we talk about it all the time on this show.
Communicating with your family is of the utmost importance in
terms of timing. I'll just give my answer as someone
My wife and I we have three adult sons, and
(30:59):
we have shared any of this information you know, with them.
Yet we're a little bit young. They're a little bit young.
But I'd say the first thing to focus on before
you talk about inheritance, make sure your kids are equipped
to handle money well. Make sure that you're happy, not
that you micro manage their life, but make sure you're
(31:19):
at least comfortable that they have financial plans of their own.
They're following those plans, they're being responsible with money, they're
not racking up a lot of debt. And then when
you get down the road a little bit, you know,
I think then when you know they're going to be
responsible with anything, you might leave them I think you
could throw out some round numbers because I think if
they have some just broad numbers to work with as
(31:43):
they're growing their family, it helps them sit down with
their advisor and do the same kind of planning that
you are doing in terms of retirement. Hey, if I
know I got a little bit of money coming here, well,
that might make some differences in how I contribute to
ROTH versus regular four to one K, how I fund
kids college educations. So I again, I would say, first
(32:05):
thing is make sure they're handling money correctly or know
how to do so, and then broach the subject, not
with guarantees, but broadly speaking, give them a range of
dollars that they're likely going to inherit. That's how I
plan to go about it with my own family.
Speaker 2 (32:21):
And now we'll move on. We'll dig a little deeper
into the voicemail bag. We have Bill and blue Ash.
I've heard that people in my situation can be over
insured or under insured depending on their stage life. How
do I know if my insurance still makes sense? Yeah,
another great question. These are all things that we think
of at three o'clock in the morning when we're staring
at the ceiling. So so Bill. I think the right
(32:42):
way to approach this is to figure out if something
were to happen to you or your spouse, and or
your spouse you know, here in the short run, how
much money would need to rain from the sky so
that you're, you're whoever you're responsible for can can continue
the lifestyle. A lot of times people you know, we'll
buy a lot of insurance when the kids are young,
but then we hit a stage where where that's kind
of over with. So I always recommend term insurance for
(33:05):
term needs. You can calculate when the kids should be
out of college, assuming that's one of your goals, and
you you already have a piece of paper that shows
the exact date the mortgage goes away, so those are
finite dates. You can look at term insurance for those.
And then the rest of it is really, uh, what
kind of income replacement do my dependence need if I
am no longer out there able to earn a salary,
And again, you may have already built up a nest
(33:26):
egg that covers it. If that's the case, you don't
really need any more insurance. However, if there's a gap there,
that's where you might be looking at a more permanent
insurance type of a situation if there if there will
always be a need, or if perhaps there's a there's
a person in your life for whom you are somewhat
responsible who will always need some financial support. Perhaps there's
some disabilities or something like that that requires permanent insurance
(33:46):
because you'll need you will definitely need something to fall
from the sky after your death. But that's These are
all things that make a situation unique.
Speaker 1 (33:53):
All right, let's hear from Ed and Amberley Village.
Speaker 2 (33:55):
I'm re tired, but my spouse is still working. How
do you coordinate a financial plan on one person is
earning and the other one is it? Especially with taxes
and healthcare in themics.
Speaker 1 (34:05):
Well, Ed, you hit on the two big factors taxes
and healthcare, and those are obviously extremely important things to
cover and we want to, you know, take care of
the first things.
Speaker 2 (34:14):
First.
Speaker 1 (34:14):
You got to make sure that you've got health care
coverage for both of you, and hopefully you're in a
situation where your spouse is still working and you're retired.
Hopefully you can stay on her health care plan until
she retires, and hopefully get that bridge built between you
know now and being able to go on Medicare, So
that's number one. You want to look at that and
make sure there's not any gaps there, you know, being
(34:37):
in a situation where you are potentially without health care coverage.
And then you brought up taxes, and that's where you
can sit down and run through Social Security claiming strategies.
How that impacts your Medicare premiums. What type of assets
do you have that are going to be able to
replace one or both spouse's income. There's a lot of
(34:57):
moving parts there, and I think a good fiduciary can
help you, you know, kind of put the proverbial car
up on the rack, so to speak, and look at
what those potential income sources are, dovetail that with your
tax strategy and your healthcare needs, and then I think
you got a good plan heading into retirement.
Speaker 2 (35:15):
And quickly Diana and Milford has some questions about healthcare.
I've saved well, but Medicare still confuses me.
Speaker 3 (35:21):
How do you plan for those costs so they don't
sneak up on you.
Speaker 2 (35:25):
Yeah, So this is where a financial plan comes in.
And I'll throw out a quick quick tip here. When
we build financial plans, we use data from the Medicare
organization themselves. For a single person, we estimate somewhere around
five to six thousand dollars per year in current dollars.
That will account for the Medicare premium, a supplemental policy premium,
and then an estimate of office visits and copays and
(35:46):
all those kinds of things. So about five thousand bucks
maybe ten to eleven for a married couple. Coming up next, we're.
Speaker 1 (35:50):
Going to hear Brian's bottom line where he's going to
talk to talk to us about Hey, why you might
be working longer than you might need to?
Speaker 2 (35:59):
This will be great.
Speaker 1 (36:00):
You're listening to Simply Money, presented by all Worth Financial
on fifty five KRC, the talk station.
Speaker 3 (36:09):
In the Kickers Thing moment.
Speaker 1 (36:11):
You're listening to Simply Money presented by all Worth Financial.
I'm Bob sponsorer along with Brian James, and it's time
now for Brian's bottom line. Lay it on as.
Speaker 2 (36:20):
Brian Well, Bob, I had an attention get her. Recently
went to a funeral of a client and it was
kind of a sad situation of course, as it always is.
But these are some of my favorite people, just beyond
the financial plan being an interesting thing. To put together
fun puzzle to work on, you know, just professionally speaking,
just fun people to sit around the table with and
solve these problems. But the gentleman who passed on, he
(36:42):
had worked until he was in his mid seventies, loved
what he did, just was highly respected and super enjoyed
his job and really just kind of wanted to get
every last minute out of it. And so he just
finally decided to retire. And unfortunately his wife came down
with some health problems and she was gone in six months,
and very recently I went to his funeral too. So sadly,
these this wonderful couple who have, you know, their own
(37:05):
children and grandchildren in the neighborhood, didn't get to enjoy
all of that, with all the free time that they had.
And it just really really got me thinking about priorities.
And I have another meeting coming up somebody I haven't
met yet, but who I can tell right away they've
got way more money than they need from the basic
facts that they know about them, and they are still
so worried about running out of money.
Speaker 1 (37:27):
Well, Brian, let's go back to that first couple, because
I remember the day you were in the office. You know,
you had your suit on, ready to go to the funeral,
and I didn't know where you were headed, but I
knew you were headed someplace special. And I could tell
from talking to you that it was weighing heavy on
your heart and mind that day. What could that couple
maybe have done a little bit different? Sure, do the
plan earlier, figure out where you are, you know, And
(37:49):
here's another quick sort of a different couple, but the
same idea. One of the saddest stories in my entire
career was a couple that came in here with They
both had old school pensions with inflation built in, and
we did the whole plan and they realized they could
have retired five or six years earlier.
Speaker 2 (38:04):
And there were tears. And usually it's because, you know,
people cry over this stuff because it's a relief. Oh,
I finally made it. I get to run my life
the way I want. But it took me a few
seconds to realize that this lady was legit sad because
she was not thinking of all the freedom in the future.
She was thinking of what she had missed in the past,
because her grandkids were now getting older and kind of
doing their own thing, and She could have easily taken
(38:27):
the time to spend with them, but never took a
breath to see what position she had put herself in.
She simply hid behind the fact that I just don't
the position of scarcity. There's never enough, never enough, never enough. Well,
she had more than enough and missed out well.
Speaker 1 (38:39):
As I listened to you share those stories, and they're
real stories in your life with your clients. I mean,
I think a lot of times people when they think
of coming to see their financial advisor, they're thinking, all right,
what are these people are going to tell me that
I can't do because I don't have enough money, when
in reality, a lot of times were encouraging them about
all the things they can and should be doing to
(39:01):
really open up and give them that life of freedom
and joy in those latter years that they've worked so
hard to earn. Thanks for listening. You've been listening to
Simply Money, presented by all Worth Financial on fifty five KRC,
the talk station
Tonight some real life stories of outdated financial plans that
nearly derailed retirement dreams and family goals. You're listening to
Simply Money, presented by all Worth Financial. I'm Bob spon
Seller along with Brian James. A good financial plan isn't
written in stone. It's not like a cast iron skillet
you buy once and keep for life.
Speaker 2 (00:28):
It's more like a garden.
Speaker 1 (00:29):
You have to water it, prune it, and occasionally replant
when things outgrow your space. And yet some families with
a million dollars, two million dollars, even five or ten
million dollars in net worth, they haven't reviewed their plans
in years.
Speaker 2 (00:44):
Brian, Yeah, this is something that happens fairly frequently when
when people have enough assets right, they feel financially stable
and really nothing happens to cause any concern and they're
feeling okay about things. But we kind of tend to
ignore our situations and we lose track of things that
have changed that we can control, you know, maybe something
(01:05):
about our own personal situations. Maybe it's spending, or some
kind of family arrangement, maybe a new marriage or something
like that. Things that we can't control, such as economic policy,
tax policy, those kinds of things, So the needle does
move from time to time. We caught wind of a
story of a couple who came up with a plan
that told them they needed about a million dollars to retire.
Remember when a million dollars seemed like a lot of money, Bob.
Speaker 1 (01:26):
Well, And this plan was put together in the in
the nineteen nineties, right the mid to late nineteen nineties.
But yes, I remember when that was a lot of Yeah,
back when it was.
Speaker 2 (01:34):
And it's not that it's not I'm not saying that
it's not a lot of money today, but it doesn't
obviously it doesn't stretch as far as it's just not
a lot of money to you. Yeah, yeah, let's go
with that. Let's ride that pony for a little while.
But any case, this couple thought they were ahead of
the game because they had that seven digits. You know,
we get those two commas, we feel like all problems
are solved. But actually a fresh review that they hadn't
(01:55):
done in years revealed that they were about to run
out of money in their eighties, and they still had
some time to fix this problem. But really, to keep
up with their spending, they would have needed about two
point three million dollars simply because their spending has outpaced
their resources. That's kind of a big miss, and they
finally look for an update and that's how they got
to come up with their new number.
Speaker 1 (02:16):
Well, thankfully they became aware of the situation in their
sixties rather than in their eighties, because by the time
you get to your eighties, it's a little late to
have a major course correction. And I can only guess
here the thing that was overlooked in that plan was inflation. Inflation,
you know, people forget about that, especially with potential health
care costs, and you've got to have an investment portfolio
(02:39):
and a plan put together that's going to keep your
money growing to maintain, if not grow, your purchasing power
into those later years.
Speaker 2 (02:47):
Yeah, and I think it's inflation of my existing spending, right,
you can kind of do that, you can rough out
the math there. But there's also inflation of spending on
things I didn't know I was going to want to do.
So a lot of times people haven't spent enough time
thinking of about how they'll fill the vacuum of time
with spending. Right when we have time, we're not working,
you know, nine to five anymore, we've got more time.
(03:08):
We tend to fill that with spending, and we need
to budget for that appropriately or it will catch up
with us sometimes too late to do anything about it.
Speaker 1 (03:14):
Well, another thing that can rear its ugly head, and
we see this sometimes when we have to counsel people
off of this is those pesky kids always see. We
think they're going to grow up and go away and
be self sufficient, and yet that bank of mom and
dad never seems to fully close, right Brian.
Speaker 2 (03:32):
Yeah, we're going through a little bit of that now.
Is you know, helping young adults transition into adulthood here
trying to find their path, get their footing. But yeah,
you need to kind of prepare. And not only that,
but let's remember we talk about the Sandwich generation all
the time. You might have the generation above you needing
a little bit of help because they're in this situation
that we're describing. So that's something to pay attention to
make sure we don't lose sight of.
Speaker 1 (03:53):
Here's a second story we came across, and we'll call
this one the outdated estate plan. We heard of a
man who had an estate plan drawn up when his
kids were in elementary school. Well today those kids have
kids of their own, but the plans still named a
now estranged brother as guardian of the kids. It had
(04:13):
no provisions whatsoever for how to treat this gentleman's now
special needs grandchild. And thankfully they got a hold of
an advisor and a good estate planning attorney and got
that sorted out. Imagine having a special needs grandson that
means the world to you, and yet you didn't go
in and look at your state plan and even put
(04:34):
things in place to take care of the little guy.
That could create some unexpected, unintended, significant consequences.
Speaker 2 (04:42):
I think more often than not it happens where state
plans get out data right, because in terms of cash
flow and all the money in the spending and all
that kind of stuff, we're usually pretty highly focused on that,
so we tend to catch that stuff quicker. But estate
plans can change quickly after having done nothing for ten years.
And I'm thinking along the lines of I've seen cases
where somebody in their thirties and forties asked their attorney
(05:05):
uncle to be their trustee or their executor or whatever.
And this is now itself thirty or forty years ago.
So now the individual is seventy, uncle is eighty and
is the one who's going to be trying to settle
the estates. There comes a time where that no longer
makes sense, and that's going to be a problem down
the road. Another crazy store I had years ago in
my life was I had a grandfather who had three grandchildren.
(05:25):
He also happened to be on the board of three banks,
and he decided easiest date plan. Each kid gets one
of these piles of stock. But over thirty forty years, Bob,
those three banks went three separate directions. One of them
went bankrupt and disappeared off the face of the earth.
The other became some little community bank. The third one
became city bank. So those heirs were all sitting there
wondering why Grandpa had a favorite. It was really really
(05:46):
hard to unwind that one.
Speaker 1 (05:47):
Would have loved to been a fly on the wall
for that reading of the wills, so to speak. But hey,
in all seriousness, this is why we recommend to everyone
out there, and we always guide our clients this way.
At a minimum of every five years, make sure you know,
at a minimum you at least read your documents. You
pull them out, you read them, not just the will,
(06:10):
but the healthcare and financial powers of attorney, trust, family,
limited partnerships, any documents that at least sit down and
read them, and you don't have to be an attorney
in most cases to figure out, wow, this is what
I put in place fifteen twenty thirty years ago. Boy,
have things changed. I need to make some you know,
some adjustments every five years at a minimum.
Speaker 2 (06:31):
You got to do that.
Speaker 1 (06:33):
And then I think too, just have those documents reviewed
by a good estate planning attorney to look at have
have tax laws changed? Has anything changed in the legal
aspect of things that might cause you to need to
refine those documents to have them accomplish what you really
set out to accomplish when you originally drafted, had them
(06:55):
drafted for you, let's say twenty thirty years ago.
Speaker 2 (06:58):
Yeah.
Speaker 1 (06:58):
Absolutely, you're listening to simply money presented by all Worth Financial.
I'm Bob Sponseller along with Brian James. Let's get into
story number three and this is a big one. Missed
tax opportunities.
Speaker 2 (07:09):
Brian, So, yeah, a lot of times when we think
of tax planning, we really only focus on how am
I going to minimize my taxes? This year, Where can
I find some more deductions? Well, that ship sailed a
while ago. Really, really the final nail in that coffin
was the Tax Cuts and Jobs Act of twenty seventeen
that bumped everybody's standard deduction to twenty five thousand. So
now there really aren't there unless you own a business
(07:30):
or you have something legitimate going on, there really isn't
much to find in the way of reducing your taxes. Now,
now that's it. That doesn't mean they aren't planning opportunities.
So this is a story of a couple good, high
earning income, a couple in Cincinnati. They were still maxing
out their traditional meaning pre tax four O one k's
because fifteen twenty thirty years ago, that's what you did,
and then frankly, that was the only option that long ago.
(07:51):
But now they're in their peak earning years and they're
in their their lowest expense years. In a roundabout way,
because because the kids are out of the nest, their
future tax bracket and we're tirement's going to be lower,
so that kind of makes sense. But at the same time,
now all of a sudden, they've reached a point where
they are really doubling down on that pre tax pile,
and that's going to get smacked around a lot by
(08:11):
required minimum distributions when they reach age seventy three could
be seventy five for some of you out there, depending
on when you were born. So one of the strategies
for them is to look at either shifting some of
those contributions to the wroth side. And yes they're in
a high bracket, but at the same time, that's the
only way they're ever going to get a pile of
tax free money is by biting the bullet. This is
something this is something I'm personally doing right now because
(08:31):
all that was available when I was starting was was
the pre tax four oh one K, and I'm going
to have I've seen my clients go through this. I'm
going to have a big requirementium distribution problem if I
don't do something different. Another way to think about this
is perhaps if you're really in the you know, a
couple three four years away from retirement, you might consider this.
Couple might consider setting some money aside outside the four
oh one k, put it in just a taxable account,
(08:54):
invest it, grow it however you're comfortable, but target those
dollars for use in wroth conversions. Once you hit that
retirement age, you'll be able to hang it up. You
can hold off on turning on Social Security for a
few years, or even if you do take social Security,
you'll be in a lower bracket. That's the year to
take those conversions, and you will have a pile of
money with which to do it, to pay the taxes,
all while you're in a lower bracket year. But again,
(09:15):
the whole point of this is we need to start
shifting the focus from planning for my this year ten
forty and planning for my future ten forties.
Speaker 1 (09:23):
And that leads us into the fourth story when we
want to cover, and that just life changes, life happens,
life e alls. We came across a local family who
had bought a second home in Michigan, and their original
financial plan to assume, well, we'd have one house, one
set of expenses, and a snowbird kind of a lifestyle
starting at age seventy. Well, it turns out they ended
(09:43):
up loving that lake house so much they decided to
move their full time and rent out their Cincinnati home.
Speaker 2 (09:50):
But you have, the.
Speaker 1 (09:51):
Original plan did not account for rental income, property management fees,
the tax differences between Ohio and Michigan. The point here
is by reworking and refining their financial plan, they were
able to make all those up upgraded or revised dreams
come true and actually end up retiring three years earlier
(10:13):
than they had planned. So all benefits of having your
financial plan reviewed regularly, ideally with a good fiduciary advisor
to take a look at all the opportunities out there
that you might be missing if you just did a
one time financial plan and threw it in the drawer
and let it sit there for fifteen or twenty years.
Speaker 2 (10:33):
Yeah. And on the topic of buying houses and things
in different places, a lot of times were tempted to
go buy something near where our children have landed. Well,
now your children are adults and they're going to have
the same curveballs thrown at them by life. Don't forget
they could be uprooted by their own employers or the
other side of the family or something like that. So
just remember to be flexible. Nothing is written in stone.
Speaker 1 (10:52):
Here's the all Worth advice. Your financial plan is a
living document. If you haven't updated it in the last
few years, it may end up being more of a
liability than a safety net. Coming up next, the three
most expensive tax missteps that even high net worth investors
often make. You're listening to Simply Money, presented by all
Worth Financial on fifty five KRC, the talk station Blombob
(11:22):
sponsller along with Brian James. Is there a right time
to discuss the inheritance you plan to leave your children
or other family members. It's actually one of the questions
you asked us about. We'll answer all of that coming
up ahead at six forty three. All Right, when you've
built significant wealth, it's easy to assume you've got your
(11:43):
financial house in order, but we see it all the time.
Wealthy families, even those with excellent accountants and CPAs, still
making tax mistakes that cost them tens of thousands of dollars,
sometimes even more. Brian, and we've got three of those
mistake we want to walk through tonight.
Speaker 2 (12:01):
Yeah. These all come fresh off the presses of our
advisors here who have these stories, and ourselves because we
talked to our clients as well about these types of things.
So the first mistake people make miss deductions. So there
are a lot of people out there who maybe didn't
quite catch on that the tax cuts and Jobs Acts
of twenty seventeen eliminated the standard deduction, and they may
be making contributions in a way where they're missing out
(12:24):
on a tax benefit. For example, if you always gave
your church or some charity ten thousand dollars of cash,
that's no longer enough to outpace the standard deduction. You're
getting that deduction for free. You haven't really lost anything,
but you've been doing that for years because you just
just what you do at tax tim I right it, Jack,
I get a deduction. There you go, Brian.
Speaker 1 (12:42):
And not to interrupt, but I see this all the time.
And the other one that I see and is not
used at all is that qualified Charitable deduction. For folks
ages seventy and a half. In older talk about some
of the examples of how that should be used.
Speaker 2 (12:57):
Something called the QCD Qualified Charitable Deduction. That is something
that you can use your when you hit the age
of being of a required minimum distribution, when you were
required to take ira dollars out and begin to pay
taxes on them. You can have that sent directly to
a charity. You need to work with the custodian of
their wrath, which is the financial institution that holds your account,
and that they'll have you fill out the proper paperwork
(13:17):
to get that done. But that and you'll need things
like the tax ide of the charity and an address,
and they'll need to know you know where to send
the dollars and all that. The charity, believe me, will
be more than happy to help you with this information.
They know exactly how it works.
Speaker 1 (13:29):
Another miss deduction or missed tax planning opportunity we see
often Brian is underutilizing that health save these account A
lot of times people don't max out the contributions to
those accounts, and then other times, even when they do
max amount, they're spending that money on medical expenses as
soon as it comes in, you know, when they're in
(13:50):
their fifties, rather than letting that money grow and taking
full advantage of that triple tax benefit of pre tax contributions,
tax free growth both and tax free withdrawals for medical
expenses once you get into your late sixty Yeah.
Speaker 2 (14:05):
Well, one of the things that people need to remember,
but an HSA account, remember this is not an FSA.
HSA is not to use it or lose it. So
you can stack up these expenses now and pay them
off later. So meaning you can put that money in now,
get your deduction as Bob mentioned, and then invested in
something I've read the other day that only about ten
percent of hsas are actually invested in something beyond the
simple bank account. You can move that to a place
(14:26):
that will allow you to do mutual funds similar to
your four O one k. Let it grow for a decade,
decade and a half, and then you can come back
and you can pay for it with You can pay
for expenses that you had fifteen years ago, so you
can benefit from from that over a very very long
period of time. Make sure you understand how that works.
Speaker 1 (14:42):
All right, Let's get into mistake number two from a
tech standpoint, and that's poor timing, Brian. What we mean
there is, you know, for example, selling a big stock
position in December and having this huge capital gains hit.
You know, you might you triggered that big capital gains
hit in December when a little paid and a little
planning could have shifted that liability into the next year
(15:04):
or split it up between one, two or three years.
And that's where it's important to run those numbers in
advance of just making a big wholesale decision. You know,
off cuff or off the top of your head. So
I actually like when this comes up in the fourth
quarter of a year because it makes me look like
I have a really, really huge brain. But it's really
simple stuff.
Speaker 2 (15:24):
So let's say somebody comes up with an expense they
need to buy a car, or they're going to buy
that vacation home, or they're gonna help the kids or whatever.
They have a big expense, it's going to require them
to liquidate something and therefore incurse some taxes. Well, if
this is happening in the fourth quarter of a year,
then if you think about it, if we're really talking
about this in December, you can actually get into three
separate tax years over a thirteen month span, sell a
(15:44):
third of it now in this December, a third of
it anytime in the following year, and then a third
of it in the following January. Now you've spread that
income tax hit over three separate years, and it's okay
to do something like maybe you cover it with the
home equity line of credit. Even with rates up. Now
you're only paying eight percent or so at a maxim,
sometimes even lower than that, and so the math can
be very very favorable as long as you have a
(16:05):
plan and you can stomach the idea that, yes, you
do have debt for thirteen months, but it's not that painful.
Speaker 1 (16:09):
And you're really talking about Brian, just borrowing that money
for a month or two or three just to get
in that next tax year, gets you at a lower
tax rate, and then immediately pay it off.
Speaker 2 (16:19):
Just arranging the financial furniture a little bit.
Speaker 1 (16:21):
Speaking of timing, the same logic applies to Wroth conversions,
and that's where it's important to run those numbers because
a little timing and a little spacing out of the
amount and the timing of those Wroth conversions could mean
the difference between paying taxes at say a twenty two
percent you know, marginal rate or a thirty five percent
marginal tax rate. The differences can be often huge. Another
(16:44):
tax opportunity I want to make sure we really hit
on because we see this often, and I'll just say
it this way, for after tax non IRA, non four
oh one K accounts, if you don't have a plan
and an advisor that is taking advantage of regular I'm
talking about daily, monthly, quarterly automatic tax loss harvesting your
(17:06):
investment portfolio. I'll just say is out of date because
there's so many good opportunities now to have this kind
of on autopilot running in the background that a lot
of good fiduciary advisors have available to them. You've got
to be taking advantage of that tax saving opportunity, now,
that's true.
Speaker 2 (17:23):
And if it's a pile of mutual fund or something
like that, it can be a little more complicated, but
you might consider switching to something that's going to allow
you to invest in individual securities. And what Bob's referring
to there with tax loss harvesting is looking at a
position where perhaps a dividend reinvested last quarter and then
the market came down that those particularly purchased piles of
shares of that stock are now sitting in a lost position.
You could sell those and stack it up toward up
(17:45):
to a three thousand dollars deduction for the current tax here,
all right.
Speaker 1 (17:48):
And then tax planning mistake number three is just simply
outdated strategies. This one can sting because it often involves
things that used to be good advice. You were doing
all the right things that you were told to do,
but you were told to do them ten fifteen twenty
years ago and things have changed and you got to
adjust along with current tax law and current planning opportunities.
Speaker 2 (18:10):
Yeah, that always happens where you know the best of intentions,
but if we ignore things then it's not gonna I'm
not gonna have a good outcome there. So perhaps you
were told you know about some kind of estate planning
structure you should have, maybe a family limited partnership. Those
were popular a very long time ago and still serve
a good purpose. I'm not saying they don't. However, families change, right,
People don't get along anymore, Relationships change, financial needs change
(18:33):
in situations. Maybe somebody needs to exit that partnership because
it's causing more problems than it's solving at this point.
Sometimes you can have a tax structure of a trust
that is out of date. So you know there's a
sunset coming for the Tax Cuts and Jobs Act that's
coming at the end of this year, and that could
be affecting your estate plan.
Speaker 1 (18:51):
Here, you need to make sure that you're on top
of that. Here's the all Worth advice. Don't waste money
on taxes. Make sure your strategies evolve as fast as
your portfolio does. How old is your Internet router. It's
a question you should definitely answer soon we will explain
why next. You're listening to Simply Money presented by all
Worth Financial on fifty five KARC the talk station. You're
(19:21):
listening to Simply Money presented by Allworth Financial. I'm Bob
sponsorer along with Brian James, joined tonight by our tech.
Speaker 2 (19:28):
And cybersecurity guru, mister.
Speaker 1 (19:31):
Dave Hatter, and I know this topic is something everyone
out there. This applies to everyone. Dave, what are we
going to cover tonight to help keep our data and
our money secure?
Speaker 3 (19:42):
Guys is always thanks for having me on and this
is an important topic. It's a recent warning from the
FBI about small businesses and people's homes here. Generally, large
corporations have nerds like me running around. They have enterprise
grade security solutions, they have firewalls from folks like Palo
Alto and Cisco and Fortinet. But at home, many people
(20:03):
just have whatever came from the internet service provider. Same
with small businesses, or maybe they've gone out the best
buyer Walmart or somewhere and bought an off the shelf
Wi Fi router because they need more capabilities than what
you can get out of the thing that was delivered
by your Internet service provider. And the FBI is warning
that in many cases, like so much of the tech
that's out there, so much of our so called Internet
(20:26):
of things aka smart devices, you know, these things have
to be updated regularly, they have to be configured correctly,
and as they get older and go into life where
they're not getting software upgrades and more importantly, security patches
from the vendor, that creates a gigantic security hole. This
is the kind of thing TENFOI hat nuts like me
warn't about all the time. But I'm happy to see
(20:46):
that the FBI is now trying to get in front
of this and warning folks that if you have these
older end of life devices, you know, anything that's more
than five or six years old, you should question if
it's ten years old or older, that's going to be
a significant concern. You need to you need to seriously
take a hard look at replacing these things. And the
good news is they're relatively inexpensive.
Speaker 1 (21:05):
All Right, Dave is somebody who grew up here in Cincinnati,
you know, using that old Greenhills mindset where I'm going
to pinch every penny i can you know, a lot
of times I think to myself, and I know other
people think the same way. I do not want to
rent that router from Spectrum or you know, Ulti Fiber
or whatever. I'm just going to go buy my own
because it's going to save me a few bucks. Are
(21:27):
those the people you're really talking to right now, Those
people that went out and bought that router twenty years
ago and said, yep, I got my own router. I
feel great about not having to pay rental payments to
a cable company. Are those the people most at risk,
you know, in situations like the one you're talking about
right now.
Speaker 3 (21:44):
Most likely because if you're essentially renting it from your
internet service provider again think you know, Spectrum, Ultifiber, whomever.
And i'd also point out, you know, there are so
many different ways to get online now. You know, in
the old days, you typically have to work with some
sort of landline based internet service provider. Now you have
solutions like Starlink, ount there and so forth. But at
the end of the day, the Wi Fi router, And
(22:06):
this often gets confusing for people because a lot of
folks have two different devices. You have the cable modem,
if you have something like Spectrum, which is a physical
device that connects you to their network, and then sometimes
that will serve also as a Wi Fi router. Sometimes
you might have a separate device that is then throwing
up the Wi Fi signal in your facility, your home,
(22:29):
your small office or whatever. This is a constant battle
with my family, like the WiFi is down. I'm like, no,
the WiFi is not down. The internet connection is down.
These are two different things right now. Again, sometimes one
device can provide both. Most people have two. If you're
working with the internet service provider, you know they will
occasionally replace these things. Usually you're not going to have
(22:50):
a device that's a little but if you went out
and bought your own because you don't want to have
that rental fee or you wanted extra capabilities, yes, again,
if it's more than five or six years old, and
the FBI is specific says in their PSA anything produced
in twenty ten or earlier, so you're talking to fifteen
year old device. These things have notorious security flaws. They're
not getting updates from the vendors. They're also missing a
(23:12):
lot of more modern security features, and that's one of
the key things here. You can go out and buy
a high relatively high end powerful Wi Fi router for
three hundred bucks or less that will add an enormous
amount of additional functionality and security capabilities versus something that's
even a couple of years old. You know, there are
new encryption standards for your Wi Fi network. There are
(23:35):
new Wi Fi standards that provide better performance and better speeds.
So you know, by upgrading, despite the fact that people
don't want to spend money, and I get it, you
also have to remember every single thing you do online
through that device is you know, whether it's your banking,
accessing your work networks, whatever you're doing is going through
that device, so ensuring its security is very important for you,
(23:58):
your business, your money, et cetera. And you know, one
quick piece of advice before we aroun out of time again,
there's lots of new standards. You can get much better performance,
much better security, get software updates, things like WPA three.
That's that's the highest level of encryption most home Wi
Fi routers would support. You know, you need to be
turning on the highest level of protection you can, and
(24:22):
I would encourage folks. You know, if you don't have
an eardy friend like me, you can talk to check
out magazines online like c net, Charlie Net, or zd Net,
Ziff Davis Net, Tom's Guide, PC Magazine, Consumer Reports. They
have editors and experts that vet these things right, so
you can go out and say, well, what's the best
home Wi Fi router for twenty twenty five on one
(24:43):
of these sites and they'll give you recommendations. You know,
do I want the cheapest one? Do I want the
most powerful one? Do I want the most secure one?
Do I care about gaming? There's all kinds of great advice,
and I also encourage people sign up and go to
IC three dot gov Internet Crime Complaints Center. It's hosted
by the FBI. They put out these public service announcements.
(25:04):
There's all kinds of useful information there. So there's ample
resources to help you figure this out. But if you
have a really old device, take the FBI's advice and
replace this, because you're setting yourself up for disaster if
you don't.
Speaker 2 (25:16):
Hey, Dave, is there besides it being old? Are there
things that the thing that my router could do? Well?
I know that if it's behaving a certain way that
I maybe I should be paying more attention. You know,
obviously you know that there there are model numbers and
things we can look at too, but just in general,
should are there things I should watch for, just in
terms of his normal performance?
Speaker 3 (25:33):
Yeah, that's a good question.
Speaker 1 (25:35):
You know.
Speaker 3 (25:35):
One of the reasons why they've put out this PSA is,
you know, for these really old routers, it's not that
hard for hackers to find these. There's a search engine
called Showdan specifically designed to find Internet connected devices, so
bad guys can go look up routers that have known defects.
They can infiltrate your router, and then they'll use it
(25:56):
essentially as a proxy or for other nefarious purposes, So
they're they're routing their bad activities through your router, which
also means you could get a visit from the FBI someday.
If you look into that, you'll find that has happened before.
Speaker 2 (26:07):
But yeah, if it used.
Speaker 3 (26:09):
To work fine and now it suddenly starts to lose
its connectivity, your speed goes to near zero, it seems
to overheat, or just suddenly starts acting weird. I mean,
that could just be a sign that that's getting old
and tired, or could be a sign of some sort
of infestation from some hackers somewhere, and again, with these
newer devices, they're much harder to hack. They're getting the
(26:32):
security patches from their vendors, they're much easier to secure.
You know, all the reasons why you should really think
about replacing anything that Again, I would say if it's
five or six years old, you should take a hard
look at replacing it.
Speaker 2 (26:44):
Yeah, and I want to be clear too, this is
something I learned years ago about that We've hinted at
a couple times here, but just to say it a
third time, you do not have to rent devices from
your internet provider anymore than you have to rent a
lawn sprinkler from the water company. They can't control what
you're connecting to that connection, So you can be in
full control of this and save yourself a little money.
At the same time, Dave, I'm going to ask you
(27:05):
a little bit of a loaded question. Have we heard
from the Ulti Fibers and the spectrums of the world
is from there? Are they raising a flag on any
of this? And do you have any idea if they
would bear any liability. That's a lawyer question and none
of us is one. But I'm asking anyway.
Speaker 3 (27:20):
Yeah, I have not seen, like you know, I use
Spectrum at home. I have not seen any communication from
Spectrum in this regard. Now, again, you know, they will
occasionally replace their equipment and so forth, and you know,
I would encourage people to your point to not rent
their equipment and go for some of the higher end
and relatively inexpensive. You know, if you spend three hundred
dollars on a fairly high end Wi Fi router and
(27:42):
you advertize that over five or six years, that's not
very much money to get a lot more security and
a lot better capability and probably a lot better performance
to boom. You know. All of that said, so, I
haven't seen anything from the Internet service providers in this
region comment on this particular FBI warning. I think it
probably is really geared more towards the people like you
(28:03):
mentioned that have gone out and bought their own equipment,
perhaps a long time ago. And you know, as far
as the internet service provider bearing any responsibility, yeah, I'm
not an attorney, and I'm sure if you read through
their terms of service there's indimnification in there for anything
that goes wrong using their service. So I kind of
doubt it but you know, I'm not an attorney, and
you know, could you get a class action lawsuit together
(28:25):
for people that have somehow been hacked because they had
old equipment and they weren't warned and it wasn't replaced.
Speaker 2 (28:31):
Maybe? Yeah.
Speaker 1 (28:33):
So bottom line is spending that investing that three hundred dollars,
like you said, advertized over six, seven, eight, ten years
is way less expensive than going through a dramatic, you know,
identity theft or fraud situation that could cost you hundreds,
if not thousands of dollars. Great stuff, as always from
our tech expert Dave Hatter. You're listening to Simply Money
(28:55):
presented by all Worth Financial on fifty five KARC the
talk station. You're listening to Simply Money presented by all
Worth Financial. I'm Bob Sponsorer along with Brian James. Do
(29:18):
you have a financial question for us? There is a
red button you could click while you're listening to the
show right there on the iHeart app. Simply record your
question and it will come straight to us. All right,
let's roll here the Ask the Advisors segment. Well, first
we have Brian and Mason.
Speaker 2 (29:36):
What does this smart withdrawal strategy look like? For someone
with a three million dollars portfolio. Yeah, thanks for clicking
that red button there, Brian. So that's a great, great question,
and you know, I wish this is one of those
things honestly that is job security for me and Bob,
because that is that is a very very complicated question,
important question everyone will face it. It depends on the tax structure.
So Brian, I would ask you, is this money you
(29:57):
said three million dollars? Is this in a four oh
one k is that I or perhaps you inherited it,
maybe you sold a business and it's exposed to taxes,
which isn't a bad thing. Everything's exposed to taxes, but
there are differences between retirement taxes and capital gains taxes,
of course, So it depends on what you need and
when you need it. So the ideal part of this
is what I would suggest is come up with the
(30:17):
some semblance of what do you need in the next
twelve to eighteen months that ought to be placed in
something that's pretty accessible and not going to be affected
by the headlines, and then that then you'll be more
confident in leaving the rest of it invested over the
longer haul. But maybe come up with three buckets, a
short term, medium term, and a long term, and then
you can look at how those different things are taxed.
All right, how about Robert and Florence.
Speaker 1 (30:39):
Is there a right time or way to talk to
my airs about what inheritance they might receive? Well, Robert,
this is a loaded question, but a great one because
we talk about it all the time on this show.
Communicating with your family is of the utmost importance in
terms of timing. I'll just give my answer as someone
My wife and I we have three adult sons, and
(30:59):
we have shared any of this information you know, with them.
Yet we're a little bit young. They're a little bit young.
But I'd say the first thing to focus on before
you talk about inheritance, make sure your kids are equipped
to handle money well. Make sure that you're happy, not
that you micro manage their life, but make sure you're
(31:19):
at least comfortable that they have financial plans of their own.
They're following those plans, they're being responsible with money, they're
not racking up a lot of debt. And then when
you get down the road a little bit, you know,
I think then when you know they're going to be
responsible with anything, you might leave them I think you
could throw out some round numbers because I think if
they have some just broad numbers to work with as
(31:43):
they're growing their family, it helps them sit down with
their advisor and do the same kind of planning that
you are doing in terms of retirement. Hey, if I
know I got a little bit of money coming here, well,
that might make some differences in how I contribute to
ROTH versus regular four to one K, how I fund
kids college educations. So I again, I would say, first
(32:05):
thing is make sure they're handling money correctly or know
how to do so, and then broach the subject, not
with guarantees, but broadly speaking, give them a range of
dollars that they're likely going to inherit. That's how I
plan to go about it with my own family.
Speaker 2 (32:21):
And now we'll move on. We'll dig a little deeper
into the voicemail bag. We have Bill and blue Ash.
I've heard that people in my situation can be over
insured or under insured depending on their stage life. How
do I know if my insurance still makes sense? Yeah,
another great question. These are all things that we think
of at three o'clock in the morning when we're staring
at the ceiling. So so Bill. I think the right
(32:42):
way to approach this is to figure out if something
were to happen to you or your spouse, and or
your spouse you know, here in the short run, how
much money would need to rain from the sky so
that you're, you're whoever you're responsible for can can continue
the lifestyle. A lot of times people you know, we'll
buy a lot of insurance when the kids are young,
but then we hit a stage where where that's kind
of over with. So I always recommend term insurance for
(33:05):
term needs. You can calculate when the kids should be
out of college, assuming that's one of your goals, and
you you already have a piece of paper that shows
the exact date the mortgage goes away, so those are
finite dates. You can look at term insurance for those.
And then the rest of it is really, uh, what
kind of income replacement do my dependence need if I
am no longer out there able to earn a salary,
And again, you may have already built up a nest
(33:26):
egg that covers it. If that's the case, you don't
really need any more insurance. However, if there's a gap there,
that's where you might be looking at a more permanent
insurance type of a situation if there if there will
always be a need, or if perhaps there's a there's
a person in your life for whom you are somewhat
responsible who will always need some financial support. Perhaps there's
some disabilities or something like that that requires permanent insurance
(33:46):
because you'll need you will definitely need something to fall
from the sky after your death. But that's These are
all things that make a situation unique.
Speaker 1 (33:53):
All right, let's hear from Ed and Amberley Village.
Speaker 2 (33:55):
I'm re tired, but my spouse is still working. How
do you coordinate a financial plan on one person is
earning and the other one is it? Especially with taxes
and healthcare in themics.
Speaker 1 (34:05):
Well, Ed, you hit on the two big factors taxes
and healthcare, and those are obviously extremely important things to
cover and we want to, you know, take care of
the first things.
Speaker 2 (34:14):
First.
Speaker 1 (34:14):
You got to make sure that you've got health care
coverage for both of you, and hopefully you're in a
situation where your spouse is still working and you're retired.
Hopefully you can stay on her health care plan until
she retires, and hopefully get that bridge built between you
know now and being able to go on Medicare, So
that's number one. You want to look at that and
make sure there's not any gaps there, you know, being
(34:37):
in a situation where you are potentially without health care coverage.
And then you brought up taxes, and that's where you
can sit down and run through Social Security claiming strategies.
How that impacts your Medicare premiums. What type of assets
do you have that are going to be able to
replace one or both spouse's income. There's a lot of
(34:57):
moving parts there, and I think a good fiduciary can
help you, you know, kind of put the proverbial car
up on the rack, so to speak, and look at
what those potential income sources are, dovetail that with your
tax strategy and your healthcare needs, and then I think
you got a good plan heading into retirement.
Speaker 2 (35:15):
And quickly Diana and Milford has some questions about healthcare.
I've saved well, but Medicare still confuses me.
Speaker 3 (35:21):
How do you plan for those costs so they don't
sneak up on you.
Speaker 2 (35:25):
Yeah, So this is where a financial plan comes in.
And I'll throw out a quick quick tip here. When
we build financial plans, we use data from the Medicare
organization themselves. For a single person, we estimate somewhere around
five to six thousand dollars per year in current dollars.
That will account for the Medicare premium, a supplemental policy premium,
and then an estimate of office visits and copays and
(35:46):
all those kinds of things. So about five thousand bucks
maybe ten to eleven for a married couple. Coming up next, we're.
Speaker 1 (35:50):
Going to hear Brian's bottom line where he's going to
talk to talk to us about Hey, why you might
be working longer than you might need to?
Speaker 2 (35:59):
This will be great.
Speaker 1 (36:00):
You're listening to Simply Money, presented by all Worth Financial
on fifty five KRC, the talk station.
Speaker 3 (36:09):
In the Kickers Thing moment.
Speaker 1 (36:11):
You're listening to Simply Money presented by all Worth Financial.
I'm Bob sponsorer along with Brian James, and it's time
now for Brian's bottom line. Lay it on as.
Speaker 2 (36:20):
Brian Well, Bob, I had an attention get her. Recently
went to a funeral of a client and it was
kind of a sad situation of course, as it always is.
But these are some of my favorite people, just beyond
the financial plan being an interesting thing. To put together
fun puzzle to work on, you know, just professionally speaking,
just fun people to sit around the table with and
solve these problems. But the gentleman who passed on, he
(36:42):
had worked until he was in his mid seventies, loved
what he did, just was highly respected and super enjoyed
his job and really just kind of wanted to get
every last minute out of it. And so he just
finally decided to retire. And unfortunately his wife came down
with some health problems and she was gone in six months,
and very recently I went to his funeral too. So sadly,
these this wonderful couple who have, you know, their own
(37:05):
children and grandchildren in the neighborhood, didn't get to enjoy
all of that, with all the free time that they had.
And it just really really got me thinking about priorities.
And I have another meeting coming up somebody I haven't
met yet, but who I can tell right away they've
got way more money than they need from the basic
facts that they know about them, and they are still
so worried about running out of money.
Speaker 1 (37:27):
Well, Brian, let's go back to that first couple, because
I remember the day you were in the office. You know,
you had your suit on, ready to go to the funeral,
and I didn't know where you were headed, but I
knew you were headed someplace special. And I could tell
from talking to you that it was weighing heavy on
your heart and mind that day. What could that couple
maybe have done a little bit different? Sure, do the
plan earlier, figure out where you are, you know, And
(37:49):
here's another quick sort of a different couple, but the
same idea. One of the saddest stories in my entire
career was a couple that came in here with They
both had old school pensions with inflation built in, and
we did the whole plan and they realized they could
have retired five or six years earlier.
Speaker 2 (38:04):
And there were tears. And usually it's because, you know,
people cry over this stuff because it's a relief. Oh,
I finally made it. I get to run my life
the way I want. But it took me a few
seconds to realize that this lady was legit sad because
she was not thinking of all the freedom in the future.
She was thinking of what she had missed in the past,
because her grandkids were now getting older and kind of
doing their own thing, and She could have easily taken
(38:27):
the time to spend with them, but never took a
breath to see what position she had put herself in.
She simply hid behind the fact that I just don't
the position of scarcity. There's never enough, never enough, never enough. Well,
she had more than enough and missed out well.
Speaker 1 (38:39):
As I listened to you share those stories, and they're
real stories in your life with your clients. I mean,
I think a lot of times people when they think
of coming to see their financial advisor, they're thinking, all right,
what are these people are going to tell me that
I can't do because I don't have enough money, when
in reality, a lot of times were encouraging them about
all the things they can and should be doing to
(39:01):
really open up and give them that life of freedom
and joy in those latter years that they've worked so
hard to earn. Thanks for listening. You've been listening to
Simply Money, presented by all Worth Financial on fifty five KRC,
the talk station
Simply Money News
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