Episode Transcript
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Speaker 1 (00:06):
Tonight, are we supposed to ignore the headlines? Why less
news could mean more portfolio growth? You're listening to Simply Money,
presented by all Worth Financial. I'm Bob Sponseller along with
Brian James. If you have felt overwhelmed by the constant
flash of breaking news happening in the Middle East and
(00:27):
elsewhere this week, You're not alone. Tonight we're diving into
a booming investing mantra that you'd be better off just
ignoring the news and asking is that smart advice? Is
that smart advice? Brian? Just don't even watch the news,
don't listen to it.
Speaker 2 (00:43):
It's not the worst idea anymore. You know, we're all
at a point where there's no shortage of news. It
used to be that you had to you had to
you had a half hour right after dinner, right around dinner,
and you catch up on the news, and then you
had to wait till the next day, till the next
dinner to figure out what happened that day. Well, that
is certainly not the case.
Speaker 1 (00:59):
Now.
Speaker 2 (00:59):
We are surrounded by news. It is forced down our
throats and into our ears on a daily basis, so
can't get away from it. But most of today's news,
and when I'm not speaking of today today, I'm talking
about all of the today's doesn't meaningfully move the long
term market. So the data shows that major headlines trigger
usually only these temporary blips the market, you know, gets
happy about things, we get way too excited, or we
(01:20):
get way too panicky about things, and then they snap
back within weeks. And we have seen this, bob, haven't
we And just just in the past week. So over
the weekend last weekend, of course, we bombed the nuclear
facilities of another country. That seems like an important thing,
don't you think it even had a name, Operation Midnight Hammer.
And then Iran of course fired some missiles in response.
Everybody got into a bit of a snit over it.
(01:42):
Briefly spiked oil prices over five percent, and gold, as
it always does, people run to gold, as if the
world ends, it's going to matter that they have a
pile of gold. But stocks kind of went whatever. We
got meetings and we have things, we got products to sell,
and so forth. S and P five hundred stayed pretty stable.
The Nasdaq itself, which is mostly technology, that rallied a
little bit, and because they're looking at at this point
(02:04):
the FED has been pretty non impactful and kind of
being nice to everybody at the moment. That was an
immediate aftermath of this, so we know. The conclusion is
that apparently that did not as scary as that sounds,
bombing nuclear facilities. That did not move the markets. It
didn't scare investors all that much.
Speaker 1 (02:22):
Yeah, we talk about this often. I think, you know,
we can throw out the word news with kind of
a grain of salt here. I think a lot of
times it depends on where you get your news, and
by that I mean, and I'm going to mention the
dirty little word here, politics. Depending on what any of
our political biases are, and let's face it, we all
have them, whether we want to admit it or not.
(02:44):
We always gravitate toward new sources that fit our preconceived
ideas on how the world should work. And that's what
we got to be careful about. And we remind people
all the time about this. We did a whole segment
on it earlier this week where we got to remember,
our money is not blue, it's not red, it's green.
(03:05):
And the other thing to remember is the new the
news media is a business and it's meant to drive
two very powerful emotions, fear and greed. And if the
media can get us feeling strongly in any one of
those two areas, fear or greed, we're gonna keep watching,
We're gonna keep clicking, we're gonna keep listening. And then
(03:27):
we do that long enough and we think, well, gosh,
I better do something because because all hell's breaking loose
out there, and I got to stay in control of
my money. And that's what can get people making some
decisions they soon come to regret. Yeah, that's right.
Speaker 2 (03:42):
And the reason this is done, and this is with
the United States of profit margin here. We are all
about how to make money in successful business. That's what
we've been since the start, and that started with us
throwing tea into the end of the harbor of a
couple centuries ago.
Speaker 1 (03:54):
Uh.
Speaker 2 (03:54):
But we all they're trying to do is keep your attention,
because if they can keep your attention, then the politicians
get votes and the media companies get to make money
off of selling ads. It's, frankly, what this is really about.
We can't do that if everybody is, you know, content
and happy. I don't know that we'll ever see a
situation again where we're allowed to be content and happy.
Now that we can get you know that, now that
(04:16):
all these people folks can get into your brains on
a daily, twenty four to seven hour basis, that means
we're always going to be worried about something. So you know,
what is it about headlines? Why are we scared? What's
the psychological part behind this? Well, our brains are wired
to see to look for risk and spot it and
sniff it out and react to it. Right, this goes
back to when we were living in caves running away
(04:38):
from animals. So now it has translated to scary headlines,
you know, such as we see a headline that says
oil jumps ten percent on an Iran strike as we
saw over the weekend. Well that causes us to say,
oh my gosh, I should do something. I should fight
it off, or I should protect myself from it. The
urge is to do something. If I have to do something,
my next urge is is to learn what I should do,
which keeps my attention and at the end of the day,
(05:00):
that's truly what they're after here.
Speaker 1 (05:02):
Well, let's go back to early April, you know, quote
unquote Liberation Day, when the when the tariff stuff was announced.
I mean, the market went haywire here for a week
or two, you know, dropped ten twelve percent in a hurry,
and it was non stop media, you know, stories about
all of it. You know, we got a few phone
calls about it in our office from clients. And you
(05:26):
fast forward to you know, late June, you would have
never thought any of that stuff happened. The markets have
bounced back. They're actually up for the year. And if
you if you fall prey to those media headlines and
you do something crazy with a big portion of your
retirement money and then you leave it in cash, because
that's what people do. If they make a big mistake,
(05:46):
then they're spooked and they just sit there in cash,
maybe for months or years, and you've just wrecked, you know,
a good long term plan because you made short term
decisions based on fear and greed. We see it happen
all the time.
Speaker 2 (06:02):
Yeah, and you kind of hinted it's something that I
think is fascinating. And when I think about the headlines
and the stuff that we've read and the stories we've
seen online and on TV and so forth. In twenty
twenty five, I can't even think of a boring one.
It's been NonStop chaos since day one. But let's pretend
we'll rip Van Winkle for a second, and we fell
asleep on New Year's Day. If we wake up today
(06:22):
and do nothing but look at the markets, then we go, huh,
must be a pretty quiet year. Because the sps S
and P five hundreds up two three percent something like that.
Internationals are up the double digit sixteen percent. That's interesting, however,
just good things might be happening. That's the assumption we
would make not knowing the headlines. But if you ignore
the markets and you read the headlines only, you would
assume that the world has ended and we're all falling
(06:45):
through the floor. But that's simply not the case. So
we just need to make sure we step back and
look at the forest, not the trees, and react accordingly.
Speaker 1 (06:53):
You're listening to Simply Money presented by all Worth Financial
on Bob Sponseller along with Brian James and Brian I
want to make sure sure we make clear here what
we're not talking about is have all your money in
stocks all the time twenty four to seven. Because the
stock market will always be volatile in the short term,
it always will be so it is responsible. It's very
(07:15):
responsible to have again, different buckets of money with different
levels of risk tolerance depending on when you need that
money or need an income stream from that money. So
you know, we're not talking about being one hundred percent
in stocks all the time. We're just saying that your
long term money should not be moved in and out
and timed based on these jott and tittles and of
(07:38):
these headlines every every day, because it'll really throw that
long term return, you know, off track. And we talk
about this often as well. Missing the best ten days,
the best forty days or what have really rex the
long term return of your portfolio.
Speaker 2 (07:55):
Yeah, and I think this is that I'd like to
use some analogies here to kind of drive these point.
Speaker 1 (08:00):
It's home.
Speaker 2 (08:00):
You know, oftentimes when the market gets scary, people will
have the urge I want to do something about it.
I should react to what's happening right now. And to me,
this is a kin to saying, you know, what, it's
raining outside, I should brick up my windows. Think of
the fuel savings we'll have in the winter if we
simply don't have windows. Clearly we don't need them anymore
because it's raining right now. Well, obviously nobody's gonna do that,
(08:21):
because we all know that's not how it works. The
weather ebbs and flows, just like the markets. Things come
and go. So the answer to this is to understand
the market history, not try to prevent it from happening right,
Understand how things move around, Understand how you will react
to it, and make sure that you're in a position
to protect yourself. The way we do this is by
making sure that the money we're gonna need in the
(08:42):
shorter term is not exposed to it to begin with.
So if you know you're gonna be spending money on
some project or something, or downpayment on house or what
have you, then then that money should come out when
the market is at a peak, which is pretty much
now we're basically at the all time high. So if
that money's coming out in the short run of it
out now, that way, you will not have the question
of I should do something different when scary things happen.
Speaker 1 (09:05):
Well, another analogy, if we're going to go the analogy route,
I love the analogy of getting on an airplane. I mean,
we get on an airplane, we strap ourselves in the pilot,
walks in shuts, that door and locks it, and the
pilot is steering the aircraft and lo and behold. We
have a little turbulence. And it could feel scary when
we bump and drop and move around. But you know,
(09:27):
correct me if I'm wrong. We're on an airplane. We
get a little turbulence. We don't holler and say get
me off this plane because we've got a little bump
in the air.
Speaker 2 (09:35):
Well, some of us do, and then it shows up
on social media, but most people, you're.
Speaker 1 (09:39):
Right, don't. Well, but the good thing with an airline scenario,
you know, you don't get to talk to the pilot.
The pilot's behind a closed door, you don't talk to him.
What I'm talking about here is have a copilot at
least have a good fiduciary advisor where you can at
least have a conversation about the turbulence and have a
dialogue and a plane that you collaborate on to navigate
(10:03):
through that turbulence. And that's what having a good fiduciary
advisor can help you do. Copilot the plane so we
don't get off course. You know, the first shot of
any turbulence. Here's the all Worth advice. The headlines may
change every day, but your financial plan should not stick
to strategy, not emotion. Coming up next, an eye opening
(10:26):
number that could change how you say for college, plus
some financial predictions that are just out of this world.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC, the talk station. You're listening to
Simply Money presented by all Worth Financial on Bob Sponsorer
(10:48):
along with Brian James straight ahead of six forty three.
We separate financial planning fact from fiction, and we bust
some of the biggest myths investors still believe. Tonight, we've
got some news that parents and grandparents may not want
to hear. Brian t row Price just put out a
college savings roadmap. Let's dig into that for a few minutes.
Speaker 2 (11:12):
It was the last time these conversations weren't terrifying with
regard to college savings. It's just expensive as all get out.
So trow Price now saying you're gonna need about one
hundred and five thousand dollars per child by age eighteen
just to cover half of an in state of an
in state education. That's about thirty six thousand dollars in
place by age five sixty six thousand by age ten,
(11:33):
and then an eighty one thousand. If you can get
to eighty one thousand by thirteen, then you should be
okay by eighteen. So how in the world, Bob, what
can we be doing to save this much? And I'll
admit a little bit of frustration with all of the
efficiency discussions we've had here in twenty twenty five and
how we need to take care of the individual and
take care of inflation and all this kind of stuff.
The one place that doesn't seem to have hit is
(11:54):
the colleges, where costs are just out of control. For
a lot of reasons, I think colleges are in a
competition with each other to have the coolest place to go.
I remember thirty years ago when I was at a
high university and they were talking about somebody somewhere, some
college was building a hot tub for college for the
students to enjoy themselves in. And first my first thought
was gross, but my second thought was that what are
(12:18):
we spending money on? Why are we doing this in
this place? But anyway, since we can't fight that off,
the answer right now is to open that five twenty
nine as soon as you can even if it's only
fifteen bucks a month, a little amount, just get something
trickling in there, and you can always circle back and
put more money in the future. Make sure you're paying
for your own retirement first, though your kids. The best
thing you can do for your kids is probably not
to be sleeping on their couches when you're in your
(12:40):
later years.
Speaker 1 (12:41):
Yeah, and too often, Brian, and with the best of intentions,
we all want our kids to go into the go
to the best university they can get into based on
their you know, economic success in high school and all that,
and we cheer that on. But you know what I
run to run into far too often is people don't
start even thinking about these having these discussions with their
(13:05):
kids until they're juniors and seniors in high school. And
then you've allowed the expectations to set in. You know,
if I can get into this prestigious private university, You're
gonna let me go, right, mom and dad, because I'm
gonna get a great education and a great job. And
the parents, you know, with two years left to go
to plan, start to think about the fact that we
(13:27):
can't afford this. So you got to set those realistic
expectations all the way around, and to your point, don't
let this huge college bill, you know, completely wreck your
long term financial plan by trying to pay for an
education that you really can't afford. All right, Switching gears here,
Shaquille O'Neal just settled a lawsuit over promoting crypto and
(13:52):
shaq agreed to pay nearly two million dollars to settle
a class action lawsuit alleging he misled investors by endorsing
a firm that I think some of us remember, ft
X Ryan. What's going on here?
Speaker 2 (14:06):
Yeah, so this is the one you might remember. There
are a couple of names got dragged into this. Matt
Damon was involved, and I think a lot of these
famous people were simply thinking of Brady, right, Tom Brady
was involved as well. Yeah, and I have a feeling
not many of the I'm totally guessing. I don't know
what was in their brains, but I have a feeling
most of them were like, oh cool, another endorsement. Sometimes
I endorse shoes, sometimes I endorse beverages. Today I'm endorsing cryptocurrency.
(14:27):
Probably didn't think about it very much, but these are
you know, it's one thing to overprice for some to
convince somebody to pay two hundred and fifty dollars for shoes.
That's just the American way.
Speaker 1 (14:36):
It's what we do.
Speaker 2 (14:36):
However, what resulted here was people making investments. They're encouraging
people to invest in something that was a mirage. This
lawsuit settlement is going to resolve claims for anybody who
deposited funds or purchased tokens from FTX between May of
twenty nineteen and late twenty twenty two. He's going to
write a big fat check and in exchange he'll be
reduced from any future liability. So this is the first
(14:59):
of those selectlebrities to go through this. Tom Brady, Steph Curry.
There's still there could be billions at stake here for
the folks who profited based on convincing the people to
do these types of things that hurt them financially. So
the answer here is the same as it ever is,
don't rely on celebrity hype or frankly, anybody's hype. Crypto
is a speculative asset, it has been since the start.
(15:20):
It will hold a place in the future as part
of an investment portfolio, but right now it does not
at all behave like currency, and I'm getting I'm glad
we're getting away from calling it currency. It's purely something
that goes up and down in value, and people trade
off of it and make money and lose boatloads of money.
Speaker 1 (15:36):
All right, talk about crazy headlines? How about this when
Brian more Americans are turning to psychic tools for big
money decisions, from buying homes to investing in bitcoin. Astrology
and intuitive readings are now part of some people's financial playbooks.
According to the Pew Research Center, nearly one third of
(15:57):
all Americans consult astrology, tarot cards, or fortune tellers each year,
and about one in ten of these folks say they
find real guidance from these services, sometimes even for major
life choices like investing, how to pick a job, or
what come on home to buy?
Speaker 2 (16:14):
I mean, it's crazy, yeah, And so let's go let's
get into some details with some of these stories. So
we came across a story about a woman in South Carolina.
She had carved out fifty thousand dollars to buy a
rental property. That's a fairly common thing. Some people are,
you know, are interested in owning rental property making money
that way. Then she went through a tarot reading process
and decided at that point she needed to make a change.
The end result of that was she went out and
(16:36):
bought an RV and started a very lucrative travel writing business.
And that's generating an extra three thousand dollars a month.
That's a lot more than her rental income. And my
first thought is, wait a minute, this is all bologne.
The tarot had nothing to do with this. I think
it just if it was a really a real thing,
it simply pointed her in the direction of, Hey, you
are a talented writer, maybe you should go do that.
(16:57):
You're good at it, go do it. I'm not convinced
the tarost stuff had anything to do with it, just
makes for an interesting story that grabs our attention. Hence
we're talking about it on the radio today.
Speaker 1 (17:05):
So another story here.
Speaker 2 (17:06):
So tell us about Grace Morris, this astrologer with astro economics.
Speaker 1 (17:11):
Well, Grace has been using planetary cycle analysis to pick
stocks and has been advising investors for thirty years. Personal
consultation with good old Grace will set you back eight
hundred bucks eight hundred bucks an hour if you want
her to advise your company. Get ready to spend twenty
(17:32):
six hundred dollars an hour. Crazy. All right, let's get
back to planet Earth and reality here, Brian. Every Sunday
you will find our all Worth Advice in the Cincinnati
in Choir, and here's a preview. We got a question
from ds and rs from Marymont Brian. They say, we've
been on Medicare for a few months and we recently
realize we're paying more than the standard Medicare premium and
(17:55):
we don't think that's right. Can we get this amount reduced?
Speaker 2 (17:58):
So yeah, let's talk about why that might be happening.
My best guess is what we talked about a little
bit ago, which is IRMA. So you've probably run across
something where the Sois Carey administration looks at what your
income was two years ago, insides that you should be
paying a little bit more money, and so it is
possible to get that amount reduced. Just like with many
federal government decisions, there are appeals processes. So again irma's
(18:19):
determined based on what your modified adjusted gross income was
from two years prior, but you can make your case
if your financial situation has changed significantly from two years ago,
you can request a reconsideration of that determination. Of course,
it's the federal government. Guess what, there's a form, the
Medicare income Related Monthly Adjustment Amount Life changing Event form.
(18:39):
These types of things can be a marriage, divorce, annulment,
death of a spouse. Maybe you lost a job or
somebody lost a job, got laid off, you lost an
income producing property, pension went away. In other words, your
situation has changed substantially. Therefore, can I change this calculation?
So again you're gonna want to contact the Social Carey
Administration and ask about a life changing event. Let's move
(19:02):
on to Stephanie and Ed from Butler County. Bob, they
would like to hear your opinion on whether they should
renew the term life insurance now that they're about to retire.
Speaker 1 (19:10):
Well, you should always renew any kind of insurance you have,
but to you know, quickly get to the question. You know,
if you're about to retire. Most people bought term insurance
early on in their career to insure against, you know,
loss of income as somebody passes away. You always got
to look at how much insurance do I need and
for how long I do it? And we find with
a lot of folks by the time you retire you
(19:31):
really don't need that term insurance anymore, and in a
lot of cases, it's okay to let it go. Coming
up next, all Worth Chief Investment Officer Andy Stout is
back with investment solutions for those focused on having income streams.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC, the talk station. You're listening to
(19:57):
Simply Money presented by all Worth Financial. I'm Bob John
Teller along with Brian Jean, and we're back with all
Worth Chief Investment Officer Andy Stout. Andy. Tonight, we're going
to talk about an important topic for most investors out there.
A lot of people are thinking about, Hey, I got
this pile of money, I have these investment accounts. How
do I craft an overall strategy focused on income generation?
(20:22):
What do you tell investors, savers, retirees about that topic.
Speaker 3 (20:28):
Well, I would start by saying, tell me a lot more,
because there are so many ways that you can get
income and it really depends on you, know, what your
objectives are, what your besides income?
Speaker 1 (20:41):
Well, let me let me let me help you out
a little bit. I mean, obviously we've got we've got
clients that are you know, almost one hundred percent bond.
They just want a safe, income generating portfolio from a
mixture of bonds and cash. We have other folks, as
you well know, that are more balanced investors, you know,
more of that fifty to fifty six forty kind of investors.
(21:01):
And then we've got, you know, clients that want to
heavily skew toward growth in their portfolio seventy eighty ninety
percent in stocks, but still want some income you know,
coming from their portfolio for cash flow. With that as
a backdrop, talk about some things that we do in
the way of portfolio construction for all three of those
(21:22):
kind of folks.
Speaker 3 (21:24):
But if you're looking for the individual bond, so that
first type of persona, if you will that you described, yeah,
I would probably start to think about bond ladders, which
are a way to spread out your individual bond. So
think of like an example of being a one to
five year bond a ladder where you take your investment,
say it's a million dollars, just to keep it simple,
(21:49):
basically invest two hundred thousand dollars and bonds that mature
in one year from whenever you do it, two year,
three year, four year and five years, and then as
you get closer to those bonds and you take those
those one year bonds that are now matured and buy
a new five year group of bonds. And so that
allows you to stagger your investments over a period of
(22:10):
time and helping to smooth out the overall interst rate
risk that's out there. And it's not just quote unquote bonds.
I mean, there's different types of bonds that people should consider. Okay,
if you're in a high tax bracket, you might want
to be looking at municipal bonds because that will give
you a federal tax free income and possibly state tax
(22:30):
free income depending on the bond that you actually get. Now,
if you're not in a high tax bracket, or maybe
you already have a lot of exposure to me, you
needsily just want to diversify, you can also look at
corporates and treasury bonds. So there's a lot of options
for you from that perspective. So you know, when you
look at those bond ladders, that's one thing that I
(22:53):
think makes a lot of sense if you have individual bonds. Now,
another type of you know, person would be the person
who's investing in individual stocks so if you're investing in
individual stocks, you know, you want to make sure you
stay diversified from that perspective, and you can easily focus
on individual stocks to have a high you know, dividend
(23:16):
paying mentality if you will, and you used to look
at like what their yield has been or what they're
expected yield is going to be. And the key is
really just to make sure you stay diversified. You want
to not have it all in one sector. So it's
really critical that you pay attention and not just buy
high dividend yielding stocks. And you also probably want to
actually look at the names because some of those names
(23:39):
could be paying a high dividend for all the wrong reasons.
So you might see, oh, this has a ten percent dividend,
this is great, Well, maybe it only has a ten
percent dividend because the stock has been crashing and maybe
there's no prospects for any sort of real improvement and
that dividend could be at risk. So you really need
to pay attention to stable cash flows. And you know,
we definitely want to focus on stable companies. And the
(24:01):
other person ona that you know we talked about was
a diversified investor. Now you can certainly combine individual stocks
and individual bonds. You can also go to fundrout you
can use like exchange trade of funds or mutual funds
to achieve pretty much the same thing. So you can
get income in that four five percent range depending on
how much risk you're willing to take, by having a
(24:22):
diversified portfolio of stocks and bonds. So you can have
your typical you know, sixty forty mix as an example,
and get that roughly you know, four to five percent yield.
And the key here is to make sure you're diversified.
Don't just put it all into one ETF or one
mutual fund. You want to spread it over different types
(24:42):
of dividend payers and different types of bond investments that
pay out income. So there's lots of opportunities there.
Speaker 2 (24:51):
So Andy, one thing I feel like I've seen talking
to my clients, you know, over the past fifteen years,
it seems like, obviously we've had really really low interest
rates up until about three years ago. It seemed like
during that period when interest rates are so low, people
were much more attracted to the idea of, you know what,
I'll just invest in the diversified portfolio of you know, stocks, funds, bonds, whatever,
(25:11):
and just take distributions out of it, especially when it's
like an IRA where there's not much control over the taxation. Anyhow,
you're going to take your distributions to pay your bills
and you're going to pay your taxes, and you're going
to like it, by God. But in any case, have
you seen a shift over the last three years more
interest in individual bonds? It feels like we've maybe gone
back to where it was in late nineties early two thousands.
Are you seeing the same thing?
Speaker 3 (25:32):
Yeah, I'm seeing interest there for sure, for all the
reasons you just mentioned, But there's a few other things
that have been becoming more and more attractive for investors.
One thing that I'm saying is covered calls. So if
you have a big position in proper and Gamble as
an example, you're seeing some investors write call options on
(25:54):
them to generate their own income. And that's just another way.
Now you run the risk of that stop getting called away,
but there's rules you can put a place in minimize
is that. Another thing that I'm seeing out there is
some structured notes to generate yield. So it's not just
the individual bonds that have seen increased attractiveness. And I
(26:15):
don't call these exotic investments. I mean covered calls, structor
noteses are relatively mundane in today's day and the world.
I mean twenty years ago maybe you might have thought that,
but now not so much. But yeah, you were seeing
a shift in general to a broader offering overall good
stuff there, Andy, and I think the point we want
(26:37):
to drive home to all investors out there.
Speaker 1 (26:39):
There's a lot of options out there, a lot of
things to consider, and a lot of variables to factor
in when you construct a well designed income plan from
your portfolio. Thanks as always to our chief investment Officer,
Andy Stout for joining us today. You're listening to Simply
Money presented by all Worth Financial on fifty five KARC
(27:00):
the talk station. You're listening to Simple Money present up
by all with Financial on Bob Sponsorer along with Brian James.
Do you have a financial question for us to answer?
There's a red button you can click while you're listening
(27:22):
to our show right there on the iHeart app. Simply
record your question and it'll come straight to us. All right.
Time to play financial Planning Factor Fiction. Brian. I'm gonna
let you start off factor fiction. Direct investing can offer
better tax efficiency than traditional ETFs. Fact, this is a fact, Bob.
Speaker 2 (27:44):
So direct indexing basically means that instead of owning a
mutual fund that replicates a stock index or a bond
index or whatever you know. Most typically that's the S
and P five hundred, which is nothing more than the
five hundred largest American companies, you can own a fund
that does that kind of thing. However, nowadays you can
also own all five hundred stocks individually. That might seem overwhelming,
(28:05):
and maybe I don't want a thirty page statement and
all that kind of thing. But if I own all
five hundred stocks, that means any of those five hundred
stocks is doing anything good, bad, and different. Some are
up summer down. But if I've got the ability, I
can do some tax loss harvesting in a taxable account.
This doesn't help in an IRA roth IRA. It has
to be a you know, an account that's otherwise exposed
to taxes on an annual basis. But if I own
(28:26):
those five hundred individual stocks, I can sell some at
a loss. During the year. Stuff is going to go
up and down. We know how that works. If I
incur that loss, I can stack that up and deduct
up to three thousand dollars off of my short term
you know, against any short term gains and off of
my income. I can also use those losses to offset
any long term capital gains that I may have incurred,
(28:48):
and that it could be because I sold some stock
somewhere else and I ate a capital gain. Maybe I
sold a business and there's a capital gain you know
from that. But direct indexing is a great way for
the right investors to have the ability to do some
tax loss harvestings, so that one which is in fact,
it just.
Speaker 1 (29:04):
Puts more arrows in your quiver, right, Brian, A lot
more flexibility.
Speaker 2 (29:07):
Another weapon. All right, Bob, you're on the hot seat.
Here it comes fact or fiction, Bob. Social Security benefits
are always tax free.
Speaker 1 (29:16):
That is fiction, and I think most people understand this.
But you know, your income doesn't have to get much
over forty thousand dollars for a mery filey joint couple
before eighty five percent of your Social Security benefit is taxed.
So now there are situations if you're a lower income person,
or if we can make you into a lower income
(29:37):
person by using accumulated savings or taking advantage of some
of the low capital gains tax rates. There are ways
we can bring that taxable income number way down, but
in most cases most people need to plan for paying
taxes on their Social Security benefit.
Speaker 2 (29:57):
Yeah, you're right, being low income isn't necessarily a that
thing gives you some control over your taxes, all right.
Speaker 1 (30:02):
My term, Bob hit me structured notes Brian can be
designed with buffers against market losses while still offering equity
linked returns. Factor fiction. This is facts.
Speaker 2 (30:14):
That's what a structured note does. That's the whole point.
Structured note is basically something that is a calculation based
off of what the underlying index, again most commonly the
S and P five hundred, against what the underlying index
has done, meaning that we can put a floor under
it and also a ceiling. Right, So there's pros and
cons anything we do. But the purpose of a structured
note is for somebody who says, yeah, I believe in
the stock market. I believe it's going to be the
(30:36):
best source of growth going forward in the best you know,
for that chunk of my portfolio. But on the other hand,
I also don't like the headlines, and I really don't
like the whiplash you can get, you know, when when
somebody says something, you know, the wrong words are uttered
into a microphone from one of our political leaders or
something like that. So I would really rather not have
to go through that. So a structured note will put
(30:56):
a floor in so that you can't really lose beyond
a certain amount. But that also means you're sacrificing some
of the upside. So you'll decide that if you buy
a structured note, that's one of the decisions you make
is how much downside do you want to be protected from?
And that in turn requires you to sacrifice some of
the upside. So like another arrow in the quiver. As
we already discussed before, these aren't the end all bell.
(31:18):
No investment is the end all bell. But structured notes
can be a great way to offset some of the
risk of a portfolio. All right, come in your way again, Bob.
Fact or fiction. You don't need life insurance once you're retired.
Speaker 1 (31:29):
What say you, Well, this is one of those situations
where I'm gonna say it depends I think the opinion.
Speaker 2 (31:38):
That's a that's a chicken financial planner answer.
Speaker 1 (31:41):
It might be it might be chicken, but I'm doing
my job here, Brian. And the key point we want
to make is it depends on your financial situation. It
doesn't matter whether you're working or retired. What you want
to do is you want to look at your overall
plan and obviously look look at it through the lens
of if I die today, do my heirs have enough
(32:02):
money to accomplish all the goals that we've set out,
you know, with your spouse to accomplish. We ideally we
like to have people in a situation that by the
time they are ready to retire, they're in a position
to self insure they don't quote unquote need life insurance
to take care of things. Sometimes we find that people
are going to retire and they still need a little
(32:24):
bit of life insurance, maybe for five, ten, fifteen years.
Some people might want to keep their life insurance for
an estate planning tool, or to leave a legacy of
dollars to their heirs. So it's a it's an it's
a it depends answer based on every single family's individual
financial planning needs.
Speaker 2 (32:45):
Yeah, it depends. In such a common answer, I was
being mean to Bob just because I can, But that's
because there is no end all be all black and white.
Everybody should do this answer to any of these topics.
Everything is affected by other outside influences that may only
exist in your situation.
Speaker 1 (33:00):
It depends, all right, Let's go back to a very
an easier question to answer definitively Brian factor fiction. You
can carry forward unused capital losses indefinitely.
Speaker 2 (33:11):
On the other hand, there are some that are black
and white. This one is fact. So if you have
a loss, meaning you know, perhaps you bought a stock
sometime during the year and it went the wrong way
on you and you sold it. Therefore you've incurred a loss, Yes,
you can carry forward those capital losses indefinitely. What that
means is that you are able to deduct up to
three thousand dollars off of your income of short term losses.
(33:35):
That short term meaning you bought it within a year
or bought it and sold it within a year and
took a loss on it that short term and you
can offset an unlimited amount of gains with your losses.
So if you have a million dollar gain and you
have a million dollar loss, guess what, you're not paying
any taxes. The carry forward part of this means if
you had more losses than gains during the year after
(33:56):
you've taken the three thousand dollars deduction in addition to
the long term offset, then you can carry forward those
into the future. This is why you're asked when you
do your taxes, do you have any loss carry forwards?
And most go Most people go, I don't know to
know what that is, so I'm gonna guess I don't.
There is a form that you that you are filled out,
that you filled out as part of your ten forty
that will track that for you, So make sure that
you're on top of that so you don't lose that benefit.
Speaker 1 (34:18):
Coming up next, I'm going to give you my two
cents on proactive tax planning. You're listening to Simply Money
presented by all Worth Financial on fifty five krc V
talk station. You're listening to Simply Money presented by all
Worth Financial sponsorer along with Bryant Jams. All Right, Brian,
(34:40):
I feel so strongly about this topic. We're going to
spend a few minutes on and I'm anxious to hear
your perspective as well. And what we're talking about tonight
is proactive tax planning, actually taking the time in the
effort sitting down with a fiduciary advisor to actually dovetail
your investment strategy with your tax planning strategy. So few people, Brian,
(35:04):
we find are doing this, and it's one of the
biggest value ads I think that we add for our clients,
and it's something everyone should be taking advantage of.
Speaker 2 (35:14):
Yeah. I think that's a great point, and I think
there's an awful I'm glad to hear you're going to
be talking about this because there's an awful lot of
people who focus only on what's my ten to forty
going to look like this year? How do I reduce
my taxes this year? That's not the only thing to
focus on is about.
Speaker 1 (35:27):
Now, And I'm going to break this into two categories.
One is for an after tax account. You know, so
now we're not we're talking about your brokerage account, not
your IRA or your Wroth IRA, your taxable account. You
really do need to take a look at, if you're
not doing so already, these tax loss harvesting opportunities that
can and should go on in the background through a
(35:48):
well managed investment portfolio, and that allows you to harvest
these short term losses to be used you know in
the future to offset future gains. It's a wonderful plan
opportunity and one that we're not seeing enough people take
advantage of just in the overall management of their portfolio.
And then the second thing that I want to talk
(36:09):
about is just overall strategy. This is where you get
into Wroth contribution or Wroth conversion strategies, social security claiming strategies,
putting everything together in an overall income producing strategy with
an eye on tax management to keep your marginal tax
(36:29):
rate in the lowest possible bracket. It can be Brian,
it can pay huge dividends down the road. And this
is where you got to take advantage again, usually with
an advisor of some of the good software and planning
tools that are out there to actually walk people through
how to make this work. And then we can run
those projections on. Hey, if we do strategy A, B
(36:53):
or C or a combination of all three, here's how
it impacts to your point, Brian, your tax situation not
only this year, but five, ten, fifteen, twenty years down
the road. Yeah.
Speaker 2 (37:05):
I took a call last week, Bob that right on
this topic. One of the radio listeners called in wanting
to know how he can reduce taxes on his required
minimum distribution. So this gentleman's in his mid seventies, he's
required to take money out of his IRA, and I
have a choice about it, and he's wanting to reduce taxes. Unfortunately,
there's not a hike of a lot you can do
at that point unless you're own a business. You've got
(37:26):
some you know, different entities out there generating losses or whatever.
It's not like the old days where you can kind
of just you know, look for hidden deductions and so forth.
The right answer to this would have been, hey, ten
years ago, let's start reducing your IRA by converting to
a ROTH. That way, in the future you will have
fewer rmds. That's tax planning.
Speaker 1 (37:44):
Yeah, excellent point, Brian, And again we want to get
out in front of some of these tax planning opportunities
and what we find most often with clients, Brian, you know,
you feel free to weigh in here, but there's usually
this low income period of time, the intervening years between
when someone retires and when they have to start taking
(38:06):
those required minimum distributions. That's where a lot of this
magic can happen. Where you can put their entire plan.
You know, I like to use the automotive analogy. Put
the entire plan up on the rack and look for
that ten, twelve to fifteen year window where we can
keep people in a very low tax bracket and accomplish
some big things, you know, down the road.
Speaker 2 (38:27):
Yeah. Absolutely, that's a great donut hole to be able
to take advantage of some tax obligations.
Speaker 1 (38:32):
Thank you for listening. You've been listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
talk station
Tonight, are we supposed to ignore the headlines? Why less
news could mean more portfolio growth? You're listening to Simply Money,
presented by all Worth Financial. I'm Bob Sponseller along with
Brian James. If you have felt overwhelmed by the constant
flash of breaking news happening in the Middle East and
(00:27):
elsewhere this week, You're not alone. Tonight we're diving into
a booming investing mantra that you'd be better off just
ignoring the news and asking is that smart advice? Is
that smart advice? Brian? Just don't even watch the news,
don't listen to it.
Speaker 2 (00:43):
It's not the worst idea anymore. You know, we're all
at a point where there's no shortage of news. It
used to be that you had to you had to
you had a half hour right after dinner, right around dinner,
and you catch up on the news, and then you
had to wait till the next day, till the next
dinner to figure out what happened that day. Well, that
is certainly not the case.
Speaker 1 (00:59):
Now.
Speaker 2 (00:59):
We are surrounded by news. It is forced down our
throats and into our ears on a daily basis, so
can't get away from it. But most of today's news,
and when I'm not speaking of today today, I'm talking
about all of the today's doesn't meaningfully move the long
term market. So the data shows that major headlines trigger
usually only these temporary blips the market, you know, gets
happy about things, we get way too excited, or we
(01:20):
get way too panicky about things, and then they snap
back within weeks. And we have seen this, bob, haven't
we And just just in the past week. So over
the weekend last weekend, of course, we bombed the nuclear
facilities of another country. That seems like an important thing,
don't you think it even had a name, Operation Midnight Hammer.
And then Iran of course fired some missiles in response.
Everybody got into a bit of a snit over it.
(01:42):
Briefly spiked oil prices over five percent, and gold, as
it always does, people run to gold, as if the
world ends, it's going to matter that they have a
pile of gold. But stocks kind of went whatever. We
got meetings and we have things, we got products to sell,
and so forth. S and P five hundred stayed pretty stable.
The Nasdaq itself, which is mostly technology, that rallied a
little bit, and because they're looking at at this point
(02:04):
the FED has been pretty non impactful and kind of
being nice to everybody at the moment. That was an
immediate aftermath of this, so we know. The conclusion is
that apparently that did not as scary as that sounds,
bombing nuclear facilities. That did not move the markets. It
didn't scare investors all that much.
Speaker 1 (02:22):
Yeah, we talk about this often. I think, you know,
we can throw out the word news with kind of
a grain of salt here. I think a lot of
times it depends on where you get your news, and
by that I mean, and I'm going to mention the
dirty little word here, politics. Depending on what any of
our political biases are, and let's face it, we all
have them, whether we want to admit it or not.
(02:44):
We always gravitate toward new sources that fit our preconceived
ideas on how the world should work. And that's what
we got to be careful about. And we remind people
all the time about this. We did a whole segment
on it earlier this week where we got to remember,
our money is not blue, it's not red, it's green.
(03:05):
And the other thing to remember is the new the
news media is a business and it's meant to drive
two very powerful emotions, fear and greed. And if the
media can get us feeling strongly in any one of
those two areas, fear or greed, we're gonna keep watching,
We're gonna keep clicking, we're gonna keep listening. And then
(03:27):
we do that long enough and we think, well, gosh,
I better do something because because all hell's breaking loose
out there, and I got to stay in control of
my money. And that's what can get people making some
decisions they soon come to regret. Yeah, that's right.
Speaker 2 (03:42):
And the reason this is done, and this is with
the United States of profit margin here. We are all
about how to make money in successful business. That's what
we've been since the start, and that started with us
throwing tea into the end of the harbor of a
couple centuries ago.
Speaker 1 (03:54):
Uh.
Speaker 2 (03:54):
But we all they're trying to do is keep your attention,
because if they can keep your attention, then the politicians
get votes and the media companies get to make money
off of selling ads. It's, frankly, what this is really about.
We can't do that if everybody is, you know, content
and happy. I don't know that we'll ever see a
situation again where we're allowed to be content and happy.
Now that we can get you know that, now that
(04:16):
all these people folks can get into your brains on
a daily, twenty four to seven hour basis, that means
we're always going to be worried about something. So you know,
what is it about headlines? Why are we scared? What's
the psychological part behind this? Well, our brains are wired
to see to look for risk and spot it and
sniff it out and react to it. Right, this goes
back to when we were living in caves running away
(04:38):
from animals. So now it has translated to scary headlines,
you know, such as we see a headline that says
oil jumps ten percent on an Iran strike as we
saw over the weekend. Well that causes us to say,
oh my gosh, I should do something. I should fight
it off, or I should protect myself from it. The
urge is to do something. If I have to do something,
my next urge is is to learn what I should do,
which keeps my attention and at the end of the day,
(05:00):
that's truly what they're after here.
Speaker 1 (05:02):
Well, let's go back to early April, you know, quote
unquote Liberation Day, when the when the tariff stuff was announced.
I mean, the market went haywire here for a week
or two, you know, dropped ten twelve percent in a hurry,
and it was non stop media, you know, stories about
all of it. You know, we got a few phone
calls about it in our office from clients. And you
(05:26):
fast forward to you know, late June, you would have
never thought any of that stuff happened. The markets have
bounced back. They're actually up for the year. And if
you if you fall prey to those media headlines and
you do something crazy with a big portion of your
retirement money and then you leave it in cash, because
that's what people do. If they make a big mistake,
(05:46):
then they're spooked and they just sit there in cash,
maybe for months or years, and you've just wrecked, you know,
a good long term plan because you made short term
decisions based on fear and greed. We see it happen
all the time.
Speaker 2 (06:02):
Yeah, and you kind of hinted it's something that I
think is fascinating. And when I think about the headlines
and the stuff that we've read and the stories we've
seen online and on TV and so forth. In twenty
twenty five, I can't even think of a boring one.
It's been NonStop chaos since day one. But let's pretend
we'll rip Van Winkle for a second, and we fell
asleep on New Year's Day. If we wake up today
(06:22):
and do nothing but look at the markets, then we go, huh,
must be a pretty quiet year. Because the sps S
and P five hundreds up two three percent something like that.
Internationals are up the double digit sixteen percent. That's interesting, however,
just good things might be happening. That's the assumption we
would make not knowing the headlines. But if you ignore
the markets and you read the headlines only, you would
assume that the world has ended and we're all falling
(06:45):
through the floor. But that's simply not the case. So
we just need to make sure we step back and
look at the forest, not the trees, and react accordingly.
Speaker 1 (06:53):
You're listening to Simply Money presented by all Worth Financial
on Bob Sponseller along with Brian James and Brian I
want to make sure sure we make clear here what
we're not talking about is have all your money in
stocks all the time twenty four to seven. Because the
stock market will always be volatile in the short term,
it always will be so it is responsible. It's very
(07:15):
responsible to have again, different buckets of money with different
levels of risk tolerance depending on when you need that
money or need an income stream from that money. So
you know, we're not talking about being one hundred percent
in stocks all the time. We're just saying that your
long term money should not be moved in and out
and timed based on these jott and tittles and of
(07:38):
these headlines every every day, because it'll really throw that
long term return, you know, off track. And we talk
about this often as well. Missing the best ten days,
the best forty days or what have really rex the
long term return of your portfolio.
Speaker 2 (07:55):
Yeah, and I think this is that I'd like to
use some analogies here to kind of drive these point.
Speaker 1 (08:00):
It's home.
Speaker 2 (08:00):
You know, oftentimes when the market gets scary, people will
have the urge I want to do something about it.
I should react to what's happening right now. And to me,
this is a kin to saying, you know, what, it's
raining outside, I should brick up my windows. Think of
the fuel savings we'll have in the winter if we
simply don't have windows. Clearly we don't need them anymore
because it's raining right now. Well, obviously nobody's gonna do that,
(08:21):
because we all know that's not how it works. The
weather ebbs and flows, just like the markets. Things come
and go. So the answer to this is to understand
the market history, not try to prevent it from happening right,
Understand how things move around, Understand how you will react
to it, and make sure that you're in a position
to protect yourself. The way we do this is by
making sure that the money we're gonna need in the
(08:42):
shorter term is not exposed to it to begin with.
So if you know you're gonna be spending money on
some project or something, or downpayment on house or what
have you, then then that money should come out when
the market is at a peak, which is pretty much
now we're basically at the all time high. So if
that money's coming out in the short run of it
out now, that way, you will not have the question
of I should do something different when scary things happen.
Speaker 1 (09:05):
Well, another analogy, if we're going to go the analogy route,
I love the analogy of getting on an airplane. I mean,
we get on an airplane, we strap ourselves in the pilot,
walks in shuts, that door and locks it, and the
pilot is steering the aircraft and lo and behold. We
have a little turbulence. And it could feel scary when
we bump and drop and move around. But you know,
(09:27):
correct me if I'm wrong. We're on an airplane. We
get a little turbulence. We don't holler and say get
me off this plane because we've got a little bump
in the air.
Speaker 2 (09:35):
Well, some of us do, and then it shows up
on social media, but most people, you're.
Speaker 1 (09:39):
Right, don't. Well, but the good thing with an airline scenario,
you know, you don't get to talk to the pilot.
The pilot's behind a closed door, you don't talk to him.
What I'm talking about here is have a copilot at
least have a good fiduciary advisor where you can at
least have a conversation about the turbulence and have a
dialogue and a plane that you collaborate on to navigate
(10:03):
through that turbulence. And that's what having a good fiduciary
advisor can help you do. Copilot the plane so we
don't get off course. You know, the first shot of
any turbulence. Here's the all Worth advice. The headlines may
change every day, but your financial plan should not stick
to strategy, not emotion. Coming up next, an eye opening
(10:26):
number that could change how you say for college, plus
some financial predictions that are just out of this world.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC, the talk station. You're listening to
Simply Money presented by all Worth Financial on Bob Sponsorer
(10:48):
along with Brian James straight ahead of six forty three.
We separate financial planning fact from fiction, and we bust
some of the biggest myths investors still believe. Tonight, we've
got some news that parents and grandparents may not want
to hear. Brian t row Price just put out a
college savings roadmap. Let's dig into that for a few minutes.
Speaker 2 (11:12):
It was the last time these conversations weren't terrifying with
regard to college savings. It's just expensive as all get out.
So trow Price now saying you're gonna need about one
hundred and five thousand dollars per child by age eighteen
just to cover half of an in state of an
in state education. That's about thirty six thousand dollars in
place by age five sixty six thousand by age ten,
(11:33):
and then an eighty one thousand. If you can get
to eighty one thousand by thirteen, then you should be
okay by eighteen. So how in the world, Bob, what
can we be doing to save this much? And I'll
admit a little bit of frustration with all of the
efficiency discussions we've had here in twenty twenty five and
how we need to take care of the individual and
take care of inflation and all this kind of stuff.
The one place that doesn't seem to have hit is
(11:54):
the colleges, where costs are just out of control. For
a lot of reasons, I think colleges are in a
competition with each other to have the coolest place to go.
I remember thirty years ago when I was at a
high university and they were talking about somebody somewhere, some
college was building a hot tub for college for the
students to enjoy themselves in. And first my first thought
was gross, but my second thought was that what are
(12:18):
we spending money on? Why are we doing this in
this place? But anyway, since we can't fight that off,
the answer right now is to open that five twenty
nine as soon as you can even if it's only
fifteen bucks a month, a little amount, just get something
trickling in there, and you can always circle back and
put more money in the future. Make sure you're paying
for your own retirement first, though your kids. The best
thing you can do for your kids is probably not
to be sleeping on their couches when you're in your
(12:40):
later years.
Speaker 1 (12:41):
Yeah, and too often, Brian, and with the best of intentions,
we all want our kids to go into the go
to the best university they can get into based on
their you know, economic success in high school and all that,
and we cheer that on. But you know what I
run to run into far too often is people don't
start even thinking about these having these discussions with their
(13:05):
kids until they're juniors and seniors in high school. And
then you've allowed the expectations to set in. You know,
if I can get into this prestigious private university, You're
gonna let me go, right, mom and dad, because I'm
gonna get a great education and a great job. And
the parents, you know, with two years left to go
to plan, start to think about the fact that we
(13:27):
can't afford this. So you got to set those realistic
expectations all the way around, and to your point, don't
let this huge college bill, you know, completely wreck your
long term financial plan by trying to pay for an
education that you really can't afford. All right, Switching gears here,
Shaquille O'Neal just settled a lawsuit over promoting crypto and
(13:52):
shaq agreed to pay nearly two million dollars to settle
a class action lawsuit alleging he misled investors by endorsing
a firm that I think some of us remember, ft
X Ryan. What's going on here?
Speaker 2 (14:06):
Yeah, so this is the one you might remember. There
are a couple of names got dragged into this. Matt
Damon was involved, and I think a lot of these
famous people were simply thinking of Brady, right, Tom Brady
was involved as well. Yeah, and I have a feeling
not many of the I'm totally guessing. I don't know
what was in their brains, but I have a feeling
most of them were like, oh cool, another endorsement. Sometimes
I endorse shoes, sometimes I endorse beverages. Today I'm endorsing cryptocurrency.
(14:27):
Probably didn't think about it very much, but these are
you know, it's one thing to overprice for some to
convince somebody to pay two hundred and fifty dollars for shoes.
That's just the American way.
Speaker 1 (14:36):
It's what we do.
Speaker 2 (14:36):
However, what resulted here was people making investments. They're encouraging
people to invest in something that was a mirage. This
lawsuit settlement is going to resolve claims for anybody who
deposited funds or purchased tokens from FTX between May of
twenty nineteen and late twenty twenty two. He's going to
write a big fat check and in exchange he'll be
reduced from any future liability. So this is the first
(14:59):
of those selectlebrities to go through this. Tom Brady, Steph Curry.
There's still there could be billions at stake here for
the folks who profited based on convincing the people to
do these types of things that hurt them financially. So
the answer here is the same as it ever is,
don't rely on celebrity hype or frankly, anybody's hype. Crypto
is a speculative asset, it has been since the start.
(15:20):
It will hold a place in the future as part
of an investment portfolio, but right now it does not
at all behave like currency, and I'm getting I'm glad
we're getting away from calling it currency. It's purely something
that goes up and down in value, and people trade
off of it and make money and lose boatloads of money.
Speaker 1 (15:36):
All right, talk about crazy headlines? How about this when
Brian more Americans are turning to psychic tools for big
money decisions, from buying homes to investing in bitcoin. Astrology
and intuitive readings are now part of some people's financial playbooks.
According to the Pew Research Center, nearly one third of
(15:57):
all Americans consult astrology, tarot cards, or fortune tellers each year,
and about one in ten of these folks say they
find real guidance from these services, sometimes even for major
life choices like investing, how to pick a job, or
what come on home to buy?
Speaker 2 (16:14):
I mean, it's crazy, yeah, And so let's go let's
get into some details with some of these stories. So
we came across a story about a woman in South Carolina.
She had carved out fifty thousand dollars to buy a
rental property. That's a fairly common thing. Some people are,
you know, are interested in owning rental property making money
that way. Then she went through a tarot reading process
and decided at that point she needed to make a change.
The end result of that was she went out and
(16:36):
bought an RV and started a very lucrative travel writing business.
And that's generating an extra three thousand dollars a month.
That's a lot more than her rental income. And my
first thought is, wait a minute, this is all bologne.
The tarot had nothing to do with this. I think
it just if it was a really a real thing,
it simply pointed her in the direction of, Hey, you
are a talented writer, maybe you should go do that.
(16:57):
You're good at it, go do it. I'm not convinced
the tarost stuff had anything to do with it, just
makes for an interesting story that grabs our attention. Hence
we're talking about it on the radio today.
Speaker 1 (17:05):
So another story here.
Speaker 2 (17:06):
So tell us about Grace Morris, this astrologer with astro economics.
Speaker 1 (17:11):
Well, Grace has been using planetary cycle analysis to pick
stocks and has been advising investors for thirty years. Personal
consultation with good old Grace will set you back eight
hundred bucks eight hundred bucks an hour if you want
her to advise your company. Get ready to spend twenty
(17:32):
six hundred dollars an hour. Crazy. All right, let's get
back to planet Earth and reality here, Brian. Every Sunday
you will find our all Worth Advice in the Cincinnati
in Choir, and here's a preview. We got a question
from ds and rs from Marymont Brian. They say, we've
been on Medicare for a few months and we recently
realize we're paying more than the standard Medicare premium and
(17:55):
we don't think that's right. Can we get this amount reduced?
Speaker 2 (17:58):
So yeah, let's talk about why that might be happening.
My best guess is what we talked about a little
bit ago, which is IRMA. So you've probably run across
something where the Sois Carey administration looks at what your
income was two years ago, insides that you should be
paying a little bit more money, and so it is
possible to get that amount reduced. Just like with many
federal government decisions, there are appeals processes. So again irma's
(18:19):
determined based on what your modified adjusted gross income was
from two years prior, but you can make your case
if your financial situation has changed significantly from two years ago,
you can request a reconsideration of that determination. Of course,
it's the federal government. Guess what, there's a form, the
Medicare income Related Monthly Adjustment Amount Life changing Event form.
(18:39):
These types of things can be a marriage, divorce, annulment,
death of a spouse. Maybe you lost a job or
somebody lost a job, got laid off, you lost an
income producing property, pension went away. In other words, your
situation has changed substantially. Therefore, can I change this calculation?
So again you're gonna want to contact the Social Carey
Administration and ask about a life changing event. Let's move
(19:02):
on to Stephanie and Ed from Butler County. Bob, they
would like to hear your opinion on whether they should
renew the term life insurance now that they're about to retire.
Speaker 1 (19:10):
Well, you should always renew any kind of insurance you have,
but to you know, quickly get to the question. You know,
if you're about to retire. Most people bought term insurance
early on in their career to insure against, you know,
loss of income as somebody passes away. You always got
to look at how much insurance do I need and
for how long I do it? And we find with
a lot of folks by the time you retire you
(19:31):
really don't need that term insurance anymore, and in a
lot of cases, it's okay to let it go. Coming
up next, all Worth Chief Investment Officer Andy Stout is
back with investment solutions for those focused on having income streams.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC, the talk station. You're listening to
(19:57):
Simply Money presented by all Worth Financial. I'm Bob John
Teller along with Brian Jean, and we're back with all
Worth Chief Investment Officer Andy Stout. Andy. Tonight, we're going
to talk about an important topic for most investors out there.
A lot of people are thinking about, Hey, I got
this pile of money, I have these investment accounts. How
do I craft an overall strategy focused on income generation?
(20:22):
What do you tell investors, savers, retirees about that topic.
Speaker 3 (20:28):
Well, I would start by saying, tell me a lot more,
because there are so many ways that you can get
income and it really depends on you, know, what your
objectives are, what your besides income?
Speaker 1 (20:41):
Well, let me let me let me help you out
a little bit. I mean, obviously we've got we've got
clients that are you know, almost one hundred percent bond.
They just want a safe, income generating portfolio from a
mixture of bonds and cash. We have other folks, as
you well know, that are more balanced investors, you know,
more of that fifty to fifty six forty kind of investors.
(21:01):
And then we've got, you know, clients that want to
heavily skew toward growth in their portfolio seventy eighty ninety
percent in stocks, but still want some income you know,
coming from their portfolio for cash flow. With that as
a backdrop, talk about some things that we do in
the way of portfolio construction for all three of those
(21:22):
kind of folks.
Speaker 3 (21:24):
But if you're looking for the individual bond, so that
first type of persona, if you will that you described, yeah,
I would probably start to think about bond ladders, which
are a way to spread out your individual bond. So
think of like an example of being a one to
five year bond a ladder where you take your investment,
say it's a million dollars, just to keep it simple,
(21:49):
basically invest two hundred thousand dollars and bonds that mature
in one year from whenever you do it, two year,
three year, four year and five years, and then as
you get closer to those bonds and you take those
those one year bonds that are now matured and buy
a new five year group of bonds. And so that
allows you to stagger your investments over a period of
(22:10):
time and helping to smooth out the overall interst rate
risk that's out there. And it's not just quote unquote bonds.
I mean, there's different types of bonds that people should consider. Okay,
if you're in a high tax bracket, you might want
to be looking at municipal bonds because that will give
you a federal tax free income and possibly state tax
(22:30):
free income depending on the bond that you actually get. Now,
if you're not in a high tax bracket, or maybe
you already have a lot of exposure to me, you
needsily just want to diversify, you can also look at
corporates and treasury bonds. So there's a lot of options
for you from that perspective. So you know, when you
look at those bond ladders, that's one thing that I
(22:53):
think makes a lot of sense if you have individual bonds. Now,
another type of you know, person would be the person
who's investing in individual stocks so if you're investing in
individual stocks, you know, you want to make sure you
stay diversified from that perspective, and you can easily focus
on individual stocks to have a high you know, dividend
(23:16):
paying mentality if you will, and you used to look
at like what their yield has been or what they're
expected yield is going to be. And the key is
really just to make sure you stay diversified. You want
to not have it all in one sector. So it's
really critical that you pay attention and not just buy
high dividend yielding stocks. And you also probably want to
actually look at the names because some of those names
(23:39):
could be paying a high dividend for all the wrong reasons.
So you might see, oh, this has a ten percent dividend,
this is great, Well, maybe it only has a ten
percent dividend because the stock has been crashing and maybe
there's no prospects for any sort of real improvement and
that dividend could be at risk. So you really need
to pay attention to stable cash flows. And you know,
we definitely want to focus on stable companies. And the
(24:01):
other person ona that you know we talked about was
a diversified investor. Now you can certainly combine individual stocks
and individual bonds. You can also go to fundrout you
can use like exchange trade of funds or mutual funds
to achieve pretty much the same thing. So you can
get income in that four five percent range depending on
how much risk you're willing to take, by having a
(24:22):
diversified portfolio of stocks and bonds. So you can have
your typical you know, sixty forty mix as an example,
and get that roughly you know, four to five percent yield.
And the key here is to make sure you're diversified.
Don't just put it all into one ETF or one
mutual fund. You want to spread it over different types
(24:42):
of dividend payers and different types of bond investments that
pay out income. So there's lots of opportunities there.
Speaker 2 (24:51):
So Andy, one thing I feel like I've seen talking
to my clients, you know, over the past fifteen years,
it seems like, obviously we've had really really low interest
rates up until about three years ago. It seemed like
during that period when interest rates are so low, people
were much more attracted to the idea of, you know what,
I'll just invest in the diversified portfolio of you know, stocks, funds, bonds, whatever,
(25:11):
and just take distributions out of it, especially when it's
like an IRA where there's not much control over the taxation. Anyhow,
you're going to take your distributions to pay your bills
and you're going to pay your taxes, and you're going
to like it, by God. But in any case, have
you seen a shift over the last three years more
interest in individual bonds? It feels like we've maybe gone
back to where it was in late nineties early two thousands.
Are you seeing the same thing?
Speaker 3 (25:32):
Yeah, I'm seeing interest there for sure, for all the
reasons you just mentioned, But there's a few other things
that have been becoming more and more attractive for investors.
One thing that I'm saying is covered calls. So if
you have a big position in proper and Gamble as
an example, you're seeing some investors write call options on
(25:54):
them to generate their own income. And that's just another way.
Now you run the risk of that stop getting called away,
but there's rules you can put a place in minimize
is that. Another thing that I'm seeing out there is
some structured notes to generate yield. So it's not just
the individual bonds that have seen increased attractiveness. And I
(26:15):
don't call these exotic investments. I mean covered calls, structor
noteses are relatively mundane in today's day and the world.
I mean twenty years ago maybe you might have thought that,
but now not so much. But yeah, you were seeing
a shift in general to a broader offering overall good
stuff there, Andy, and I think the point we want
(26:37):
to drive home to all investors out there.
Speaker 1 (26:39):
There's a lot of options out there, a lot of
things to consider, and a lot of variables to factor
in when you construct a well designed income plan from
your portfolio. Thanks as always to our chief investment Officer,
Andy Stout for joining us today. You're listening to Simply
Money presented by all Worth Financial on fifty five KARC
(27:00):
the talk station. You're listening to Simple Money present up
by all with Financial on Bob Sponsorer along with Brian James.
Do you have a financial question for us to answer?
There's a red button you can click while you're listening
(27:22):
to our show right there on the iHeart app. Simply
record your question and it'll come straight to us. All right.
Time to play financial Planning Factor Fiction. Brian. I'm gonna
let you start off factor fiction. Direct investing can offer
better tax efficiency than traditional ETFs. Fact, this is a fact, Bob.
Speaker 2 (27:44):
So direct indexing basically means that instead of owning a
mutual fund that replicates a stock index or a bond
index or whatever you know. Most typically that's the S
and P five hundred, which is nothing more than the
five hundred largest American companies, you can own a fund
that does that kind of thing. However, nowadays you can
also own all five hundred stocks individually. That might seem overwhelming,
(28:05):
and maybe I don't want a thirty page statement and
all that kind of thing. But if I own all
five hundred stocks, that means any of those five hundred
stocks is doing anything good, bad, and different. Some are
up summer down. But if I've got the ability, I
can do some tax loss harvesting in a taxable account.
This doesn't help in an IRA roth IRA. It has
to be a you know, an account that's otherwise exposed
to taxes on an annual basis. But if I own
(28:26):
those five hundred individual stocks, I can sell some at
a loss. During the year. Stuff is going to go
up and down. We know how that works. If I
incur that loss, I can stack that up and deduct
up to three thousand dollars off of my short term
you know, against any short term gains and off of
my income. I can also use those losses to offset
any long term capital gains that I may have incurred,
(28:48):
and that it could be because I sold some stock
somewhere else and I ate a capital gain. Maybe I
sold a business and there's a capital gain you know
from that. But direct indexing is a great way for
the right investors to have the ability to do some
tax loss harvestings, so that one which is in fact,
it just.
Speaker 1 (29:04):
Puts more arrows in your quiver, right, Brian, A lot
more flexibility.
Speaker 2 (29:07):
Another weapon. All right, Bob, you're on the hot seat.
Here it comes fact or fiction, Bob. Social Security benefits
are always tax free.
Speaker 1 (29:16):
That is fiction, and I think most people understand this.
But you know, your income doesn't have to get much
over forty thousand dollars for a mery filey joint couple
before eighty five percent of your Social Security benefit is taxed.
So now there are situations if you're a lower income person,
or if we can make you into a lower income
(29:37):
person by using accumulated savings or taking advantage of some
of the low capital gains tax rates. There are ways
we can bring that taxable income number way down, but
in most cases most people need to plan for paying
taxes on their Social Security benefit.
Speaker 2 (29:57):
Yeah, you're right, being low income isn't necessarily a that
thing gives you some control over your taxes, all right.
Speaker 1 (30:02):
My term, Bob hit me structured notes Brian can be
designed with buffers against market losses while still offering equity
linked returns. Factor fiction. This is facts.
Speaker 2 (30:14):
That's what a structured note does. That's the whole point.
Structured note is basically something that is a calculation based
off of what the underlying index, again most commonly the
S and P five hundred, against what the underlying index
has done, meaning that we can put a floor under
it and also a ceiling. Right, So there's pros and
cons anything we do. But the purpose of a structured
note is for somebody who says, yeah, I believe in
the stock market. I believe it's going to be the
(30:36):
best source of growth going forward in the best you know,
for that chunk of my portfolio. But on the other hand,
I also don't like the headlines, and I really don't
like the whiplash you can get, you know, when when
somebody says something, you know, the wrong words are uttered
into a microphone from one of our political leaders or
something like that. So I would really rather not have
to go through that. So a structured note will put
(30:56):
a floor in so that you can't really lose beyond
a certain amount. But that also means you're sacrificing some
of the upside. So you'll decide that if you buy
a structured note, that's one of the decisions you make
is how much downside do you want to be protected from?
And that in turn requires you to sacrifice some of
the upside. So like another arrow in the quiver. As
we already discussed before, these aren't the end all bell.
(31:18):
No investment is the end all bell. But structured notes
can be a great way to offset some of the
risk of a portfolio. All right, come in your way again, Bob.
Fact or fiction. You don't need life insurance once you're retired.
Speaker 1 (31:29):
What say you, Well, this is one of those situations
where I'm gonna say it depends I think the opinion.
Speaker 2 (31:38):
That's a that's a chicken financial planner answer.
Speaker 1 (31:41):
It might be it might be chicken, but I'm doing
my job here, Brian. And the key point we want
to make is it depends on your financial situation. It
doesn't matter whether you're working or retired. What you want
to do is you want to look at your overall
plan and obviously look look at it through the lens
of if I die today, do my heirs have enough
(32:02):
money to accomplish all the goals that we've set out,
you know, with your spouse to accomplish. We ideally we
like to have people in a situation that by the
time they are ready to retire, they're in a position
to self insure they don't quote unquote need life insurance
to take care of things. Sometimes we find that people
are going to retire and they still need a little
(32:24):
bit of life insurance, maybe for five, ten, fifteen years.
Some people might want to keep their life insurance for
an estate planning tool, or to leave a legacy of
dollars to their heirs. So it's a it's an it's
a it depends answer based on every single family's individual
financial planning needs.
Speaker 2 (32:45):
Yeah, it depends. In such a common answer, I was
being mean to Bob just because I can, But that's
because there is no end all be all black and white.
Everybody should do this answer to any of these topics.
Everything is affected by other outside influences that may only
exist in your situation.
Speaker 1 (33:00):
It depends, all right, Let's go back to a very
an easier question to answer definitively Brian factor fiction. You
can carry forward unused capital losses indefinitely.
Speaker 2 (33:11):
On the other hand, there are some that are black
and white. This one is fact. So if you have
a loss, meaning you know, perhaps you bought a stock
sometime during the year and it went the wrong way
on you and you sold it. Therefore you've incurred a loss, Yes,
you can carry forward those capital losses indefinitely. What that
means is that you are able to deduct up to
three thousand dollars off of your income of short term losses.
(33:35):
That short term meaning you bought it within a year
or bought it and sold it within a year and
took a loss on it that short term and you
can offset an unlimited amount of gains with your losses.
So if you have a million dollar gain and you
have a million dollar loss, guess what, you're not paying
any taxes. The carry forward part of this means if
you had more losses than gains during the year after
(33:56):
you've taken the three thousand dollars deduction in addition to
the long term offset, then you can carry forward those
into the future. This is why you're asked when you
do your taxes, do you have any loss carry forwards?
And most go Most people go, I don't know to
know what that is, so I'm gonna guess I don't.
There is a form that you that you are filled out,
that you filled out as part of your ten forty
that will track that for you, So make sure that
you're on top of that so you don't lose that benefit.
Speaker 1 (34:18):
Coming up next, I'm going to give you my two
cents on proactive tax planning. You're listening to Simply Money
presented by all Worth Financial on fifty five krc V
talk station. You're listening to Simply Money presented by all
Worth Financial sponsorer along with Bryant Jams. All Right, Brian,
(34:40):
I feel so strongly about this topic. We're going to
spend a few minutes on and I'm anxious to hear
your perspective as well. And what we're talking about tonight
is proactive tax planning, actually taking the time in the
effort sitting down with a fiduciary advisor to actually dovetail
your investment strategy with your tax planning strategy. So few people, Brian,
(35:04):
we find are doing this, and it's one of the
biggest value ads I think that we add for our clients,
and it's something everyone should be taking advantage of.
Speaker 2 (35:14):
Yeah. I think that's a great point, and I think
there's an awful I'm glad to hear you're going to
be talking about this because there's an awful lot of
people who focus only on what's my ten to forty
going to look like this year? How do I reduce
my taxes this year? That's not the only thing to
focus on is about.
Speaker 1 (35:27):
Now, And I'm going to break this into two categories.
One is for an after tax account. You know, so
now we're not we're talking about your brokerage account, not
your IRA or your Wroth IRA, your taxable account. You
really do need to take a look at, if you're
not doing so already, these tax loss harvesting opportunities that
can and should go on in the background through a
(35:48):
well managed investment portfolio, and that allows you to harvest
these short term losses to be used you know in
the future to offset future gains. It's a wonderful plan
opportunity and one that we're not seeing enough people take
advantage of just in the overall management of their portfolio.
And then the second thing that I want to talk
(36:09):
about is just overall strategy. This is where you get
into Wroth contribution or Wroth conversion strategies, social security claiming strategies,
putting everything together in an overall income producing strategy with
an eye on tax management to keep your marginal tax
(36:29):
rate in the lowest possible bracket. It can be Brian,
it can pay huge dividends down the road. And this
is where you got to take advantage again, usually with
an advisor of some of the good software and planning
tools that are out there to actually walk people through
how to make this work. And then we can run
those projections on. Hey, if we do strategy A, B
(36:53):
or C or a combination of all three, here's how
it impacts to your point, Brian, your tax situation not
only this year, but five, ten, fifteen, twenty years down
the road. Yeah.
Speaker 2 (37:05):
I took a call last week, Bob that right on
this topic. One of the radio listeners called in wanting
to know how he can reduce taxes on his required
minimum distribution. So this gentleman's in his mid seventies, he's
required to take money out of his IRA, and I
have a choice about it, and he's wanting to reduce taxes. Unfortunately,
there's not a hike of a lot you can do
at that point unless you're own a business. You've got
(37:26):
some you know, different entities out there generating losses or whatever.
It's not like the old days where you can kind
of just you know, look for hidden deductions and so forth.
The right answer to this would have been, hey, ten
years ago, let's start reducing your IRA by converting to
a ROTH. That way, in the future you will have
fewer rmds. That's tax planning.
Speaker 1 (37:44):
Yeah, excellent point, Brian, And again we want to get
out in front of some of these tax planning opportunities
and what we find most often with clients, Brian, you know,
you feel free to weigh in here, but there's usually
this low income period of time, the intervening years between
when someone retires and when they have to start taking
(38:06):
those required minimum distributions. That's where a lot of this
magic can happen. Where you can put their entire plan.
You know, I like to use the automotive analogy. Put
the entire plan up on the rack and look for
that ten, twelve to fifteen year window where we can
keep people in a very low tax bracket and accomplish
some big things, you know, down the road.
Speaker 2 (38:27):
Yeah. Absolutely, that's a great donut hole to be able
to take advantage of some tax obligations.
Speaker 1 (38:32):
Thank you for listening. You've been listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
talk station
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