Simply Money presented by Allworth Financial

Episode Transcript

Speaker 1 (00:06):
Tonight we say a time of time again and once
to end it all rings true. The market continues to
hit record highs. You're listen listening to Simply Money presented
by All with Financial on Bob Sponseller along with Brian James,
we sure hope you kept your money in the market
after Liberation Day in April, because not only did we

(00:27):
gain back all the losses from that two weeks of
significant volatility, Brian, but the numbers are higher than they
have ever been before as of Friday afternoon. What happened
the S and P five hundred, the index we talk
about all the time, It crossed a record high at
what point? At least on Friday after President Trump said

(00:47):
that the US had made trade deals with quote probably
four or five different countries, so many we've lost track.
Nothing we've ever seen before, right, agreements with China and UK.
It was also interesting he said that he was just
giving up on negotiating with Canada. The market didn't move

(01:10):
on that, and then I saw as of eleven pm
last night, Canada came out and said, well, we're gonna
suspend the digital services taxes on a lot of US
tech tech companies. So not so fast. We still want
to negotiate, So I guess Canada and the US are
still going to talk, Brian, he goes on and on.

Speaker 2 (01:31):
And I think that's what the market has recognized, that
so much of this is bluster from all sides. Underneath,
this is still a relatively healthy economy there.

Speaker 1 (01:41):
Of course, there's always scary things going.

Speaker 2 (01:42):
You can always cherry pick scary headlines and little details,
little data points that make things look scary, but the
market doesn't recognize it that way. So we are once
again pretty much at an all time high. But I
want to talk a little bit about that, Bob, because
that's not that crazy, right. A lot of people get spooked.
We're at an all time high. The next step must
be down. No, it's not.

Speaker 1 (02:00):
That's not how it works. Look at a chart over
the last century.

Speaker 2 (02:03):
The market goes up, not down, So of course it
spends most of its time at an all time high.

Speaker 1 (02:07):
Yeah, we should be at all time highs all the
time every year. It means the economy is growing. That's
what should happen. Companies should make more money, the economy
should grow. This is how it's supposed to work in
a healthy economy.

Speaker 2 (02:20):
That's right, so I did a little research on this
that was curious about it because it does this whenever
we get like I said, whenever we get to all
time highs.

Speaker 1 (02:26):
That spooks somebody.

Speaker 2 (02:27):
So I was wondering over the weekend, Bob, how often
is the S and P five hundred really at an
all time high? And the answer to that is, since
inception in nineteen fifty seven, the S and P five hundred,
which is just the five hundred largest companies, it's basically
what we call the stock market in the United States, seventeen
times a year on average it makes an all time high.
That's about six point seven percent of trading days annually,

(02:50):
and sometimes it's even crazier that. In twenty twenty one,
and remember twenty twenty one, we were in chaos, that
was the middle of the of the COVID pandemic. But
the S and P five hundred hit an all time high,
closed at an all time high seventy different times. In
nineteen ninety five, it hit a record of seventy seven. So,
in other words, yes, the market usually spends time at
all time highs. We just focus an awful lot on

(03:10):
the negatives.

Speaker 1 (03:12):
Well, first of all, I'm pretty impressed, Brian, because while
you spent your weekend looking at all time highs on
the S and P and plotting data points on a chart,
I was hitting golf balls and watching reds baseball fin Party.
Kudos to you. Somebody is mining the store here at
all worth. Good for you. Hey, let's switch gears and
talk about consumer sentiment a little bit. Consumer sentiment rose

(03:34):
sharply in June to a four month high, and inflation
expectations in spite of what we hear about tariffs and
this ongoing feud between President Trump and Fedchair Pal, inflation
seems to be just treading water and pretty darn team here.
The pace was seen as consistent with tame price pressures

(03:56):
that will probably allow the Federal Reserve to resume its
rate cuts later this year. I'd say, right now in
the market's probably pricing in two rate cuts maybe in
the fourth quarter of this year. Is that how you're
saying it right now?

Speaker 2 (04:08):
That's about If any stout were here, he would tell
us the same thing, right So the we can often
figure out what the market thinks of interest rates by
watching what bond prices are doing and money markets are
out there moving in a way that does indicate two
more FED cuts by the end of this year. Now,
this has been higher than that, it's been lower than
that during this.

Speaker 1 (04:27):
You know, the first half of this year. So we
will see if that holds.

Speaker 2 (04:31):
But there's also a job support coming out this Thursday
that's going to give us a little bit of a
peek into what the Fed's thinking.

Speaker 1 (04:37):
Well, and most importantly, let's talk about what Fed Chair
Jerome Pal actually said. He told lawmakers that he expects
inflation still to pick up in June, July, and August
as tariffs become increasingly reflected in consumer prices. This is
because a lot of this stuff, Brian continues to move
these ninety day windows. You know, we roll it four forward,

(05:00):
we suspend trade talks with Canada, then we resume them. There's,
you know, the FEDS looking at this, I guess is uncertainty.
And if the FED Chair expects inflation to pick up
this summer late this summer, they're not going to be
in a hurry to lower rates. And I guess that's
a responsible way to look at this. I would say
things are not hunky dory right now. You know, between

(05:23):
President Trump and Fed Chair Pal, there's this social media
few that keeps going, which is a little unsettling. Yeah,
it is.

Speaker 2 (05:30):
And you know, the President Trump doesn't tend to feel
like the rules that we've followed in the past tend
to apply to him. So how whatever the reaction is
going to be, I would say, it's going to be unpredictable. However,
for whatever reason, he has not made a concerted effort
to somehow replace Chair Powell. Not that he can't. He
cannot directly do that legally the way the laws are written. However,
that hasn't stopped him in the past. But yes, there's

(05:52):
definitely a lot of animosity there. He definitely wants Chair
Palell behaving a little bit differently, but so far that
has not had an impact all.

Speaker 1 (05:58):
Right, Well, after we get through this fourth of July
Independence Day holiday weekend, I mean, I think everybody's pretty
much checking out here for the next several days. We
are coming up on second quarter earning season, and that's
really the report card, Brian, that's going to tell the
story our companies making more money than they did a
year ago, and if so, how much more. Wall Street

(06:20):
estimates right now show profit growth expectations of two point
eight percent year over year for the second quarter for
the benchmark S and P five hundred index. And that's
according to data compiled compiled by Bloomberg Intelligence, and that
would be the smallest jump in two years. I so far,

(06:42):
everything we've seen so far this year, Brian, earnings, actual
earnings number have pretty much blown away these estimates. And
I think that's why the market's staying at all time highs.
I think the market's pricing in higher than two point
eight percent year over year growth in the second quarter.
But we shall see the data.

Speaker 2 (07:01):
Is the data that's right when we will see when
they make that announcement whether the market.

Speaker 1 (07:05):
Holder if it pulls back a little bit. All right, well,
here's the point we're really trying to make here. If
you have a long term plan, don't worry about all
the negativity negativity in the headlines. Just stick with your
long term plan. You're listening to Simply Money presented by
all Worth Financial on Bob Sponseller along with Brian James. Brian,

(07:27):
let's get into some historical data again, peeling back more
of a long term perspective of the benefits of just
sticking with your long term plan, staying invested for the
long term, and oftentimes these numbers when we actually look
at them in the rear view mirror, they're pretty darn

(07:47):
powerful and make a quite a compelling case for staying
invested for the long term.

Speaker 2 (07:54):
That's right, So more perspective, more data points, and you know,
I love this stuff, Bob. So since nineteen fifty, the
S and P five has hit an all time high
more than twelve hundred times. This is another point of view,
and what I was talking about earlier. If you look
at how often that might happen, that's about every nineteen
days on average. But when it does happen, it tends
to create a little bit of panic, and it makes
headlines as if we've never seen this before and it's

(08:14):
a scary event. But that doesn't mean the market is
too hot or it's about to fall. It just means
the economy is healthy and corporate earnings are growing, which
again that's normally where we are. The publicly traded companies
that are based here in this country, and some of
the big ones are based right here in this city
of ours. There's a lot of smart people, some of
the smartest financial minds run these companies, and they find

(08:35):
ways to change and pivot whenever the scary headlines happen.
I think of a couple three years ago when the
big tech firms were all making massive layoffs of tens
of thousand people, and some were saying that was heralding
a huge contraction in the technology industry, and because if
they can't afford to pay all these people, then they
must be on hard times. That wasn't the case at all, Bob.
They were simply pivoting and trimming off some things that

(08:57):
weren't as profitable and finding ways to again and reach
new highs, which they've now done well.

Speaker 1 (09:03):
And if you go back to just twenty thirteen, not
that long ago, if you'd bought into the S and
P five hundred and twenty thirteen and just left your
money alone, you would have now more than tripled your money,
even with all the volatility along the way, the FED
raising rate seven times in twenty twenty two, COVID, you know,

(09:24):
all these trade wars, everything, Just put it in there
and let it go, tripling your money since just twenty thirteen.
I think that comes as a as a surprise to
a lot of folks, it really does.

Speaker 2 (09:36):
And then this brings up thoughts obviously, that's you know,
twelve years ago, so there's an awful lot of people
around there during that time who you know, would say
things like, Wow, I'm gonna wait for the dip and
I'm gonna buy the dip, you know. And my question is, well,
where is this money sitting if you're excited and you
want to buy now, where has this money been sitting
until then? And how much did you leave on the
table by waiting for this time? So it's not the
entry point that matters, it's what it does in the

(09:58):
meantime over the long term.

Speaker 1 (10:00):
And we are talking about long term capital here. It
doesn't mean we're advocating putting one hundred percent of all
your money in the stock market. You have to have
a financial plan. You have to have a cash flow plan,
so you have to have an emergency fund. So it
does sense to have some short term money out of
the market. What we're talking here is those folks that say, well,

(10:20):
I'm going to invest when the coast is clear or
everything looks comfortable. You're missing out on just more and
more growth and accumulation of wealth if you just stick
to the headlines and focus on that fear component and
not just invest for the long term. Here's the all
Worth advice. If you're investing properly, new highs should be

(10:43):
the norm, not the exception. All right, from cryptocurrency and
your retirement plan to private equity in your four to
one k, Wall Street is opening new doors for everyday investors.
But are these new tools right for you? We're going
to explore that coming up next listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the

(11:05):
talk station. If you can't listen to Simply Money every night,
subscribe and get our daily podcast. And if you think
your friends could use some financial advice, tell them about
us as well. Just search Simply Money on the iHeart
app or wherever you find your podcast. Are you falling

(11:27):
for costly money myths? We're going to play some financial
planning fact or fiction coming up at six forty three.
All right, we do have some big news from Capitol Hill.
Republican senators have introduced a new framework dub the quote
Crypto Rules of the Road unquote. This proposal aims to

(11:48):
establish more clear guidelines for digital assets, particularly stable coins,
which are cryptocurrencies pegged to traditional currencies like the US dollar.
Let's dig in to that for a few minutes. Brian, So,
I'm very glad this is happening.

Speaker 2 (12:03):
I kind of like the way it's the way it's phrased,
the rules of the Road, meaning there haven't been rules before,
so we should probably have some. So that's not one
hundred percent true, but it's not that. The crypto is
definitely a little bit of more. It's closer to the
Wild West than anything else going on right now. So
the story is June twenty fourth, twenty twenty five. Just
the other day this bill, crypto Rules of the Road
came out, and the goal here is to define when

(12:25):
a digital asset is considered a security versus a commodity.
And this sounds like super boring stuff, but there are
the real question here is who is responsible for governing this.
Is it the SEC in the case of if it's
a security, or are these commodities, in which case it's
the CFTC. Republicans prefer the CFTC because there's a little
more of flexibility, a lot more of open ability to

(12:48):
use these tools for financial purposes. Democrats tend to worry
that that will create systemic problems down the road, so
they prefer the oversight of the SEC. This has passed
one House of Congress, move needs to move to the
other House, but interestingly it has been there is some
bipartisan support for this, so heaven forbid, Bob, someone might
agree on something in DC paris well.

Speaker 1 (13:09):
And hopefully what they're trying to accomplish is avoiding some
type of major fraud situation. Let's say, like the FTX
situation where unsuspecting investors you know, lost hundreds of millions,
if not billions of dollars. I mean, I don't care
whether it's a Republican or Democrat. I think you have
to have enough regulation on this stuff to just make

(13:32):
sure people aren't getting defrauded out of their money. There's
there's disclosures in place as far as fees, transparency of
liquidity and different things so that people just know what
they're buying when they get into this stuff. And Brian,
you and I have been in this business for a
long time. I mean, yeah, you can get into situations

(13:53):
where things get overregulate, overregulated, but by and large, regulation
tends to be a good thing thing if it results
in transparency for everyday investors out there, because if people
don't have transparency and then a lot of money gets lost.
That's where distrust of the financial markets come in, and
that's no good for anybody.

Speaker 2 (14:14):
Yea, and a lot of this stuff came out of
the Great Depression, right, These rules we're talking about that
seem extremely boring. In other words, what's the security?

Speaker 1 (14:20):
What's not?

Speaker 2 (14:21):
These are literally the things where it Again, it might
not peauk your interest to hear the details of all
this stuff, but this is these are the types of
things that destroyed families during the Great Depression. That's why
the SEC came to be in the early thirties to
prevent these kinds of things from happening again. So, again,
boring stuff, but super important to make sure we know
exactly what we're getting ourselves into.

Speaker 1 (14:40):
Yeah, we'll just file that under one of these you know,
stay tuned stories. So, speaking of staying tuned, Blackrock, the
world's largest asset manager in terms of assets under management,
is introducing private equity and credit investments into their four
to one K platform. Brian, I've got some thoughts on this.
You know, a formula four to one K advisor. Why

(15:03):
do you think they're doing that? Why is Blackrock wanting
to put private equity and private credit into four to
one K plans.

Speaker 2 (15:10):
Let's just start with greed and then we'll also end
with greed. And it's all about profits and so forth.
And I'm not saying this is a bad thing, but
it's this is not the oh my gosh, this is
what we've all been waiting for. Now, We're all going
to be bazillionaires. It's just big financial institutions doing what
they do. So let's let's define some terms here a
little bit. So Normally, when we think of our four
to one K investments, we think of mutual funds, stocks, bonds,
and all that kind of stuff, publicly traded things. The

(15:33):
keyword here is this is private. These are arrangements where
you know there is no public exchange. You're not looking
up ticker symbols and quotes. You're basically waiting for an
accounting firm to tell you what this private entity is worth. Now,
I think this is the interesting moving part because where
Black Rock says they're going to do this initially is
in their target date funds. Their target date funds are
just mutual funds they've been in there forever. The more

(15:53):
aggressive ones with the longer targets may go up to
twenty percent of these types of holdings, but I don't
know how they're going to value. How am I going
to look at my four oh one K and see
what it was worth yesterday versus today, when you know
a lot of these private equity firms may only get
evaluation once a year. So that's gonna be really interesting
to see how they fit that in there and help
people react to it. Given the fact that we are
used to the public structure.

Speaker 1 (16:14):
Well historically a lot of these really well performing private
equity funds. The reason they've done so well is investors
do commit their money and not take it out for five, six,
seven years. I don't know how you pull off those
kind of returns in a completely liquid four oh one
case structure. That's what I'm interested to see, And the

(16:35):
skeptic in me says, hey, if you can load up
these target date funds with whatever you want to, and
depending on what asset class you're using in a professionally
managed fund, they these come with higher fees. And I
see this as a profit margin play on black Rock
and some others, because you can't select out these components

(16:57):
of these target date funds. It's either all in or
you're either all in or you're all out, and that's
where the skeptic in me comes in. Brian. I want
to see under the hood and see what the fees are,
what the lock up periods are, before I just pile
into these things.

Speaker 2 (17:12):
And the thing that occurs to me, Bob, what if
I leave my job and I want to roll over
my four roh and k are these things liquid? I mean,
the whole definition of private equity is illiquidity, so I'm
assuming and Blackrock, being one of the biggest financial institutions
out there, has figured out a way around this. But
at the same time, I don't know how that's going
to work or required minimum distributions. If I own one
of these in my IRA and I need to carve
out a chunk of it, am I running into lock

(17:33):
up periods?

Speaker 1 (17:33):
What happens? Then? Yeah? You're listening to Simply Money presented
by all Worth Financial on Bob Sponsorller along with Brian James.
I guess the thing we're calling out here. You know,
we're not all in on this, We're not all out
on this. It's just make sure you know what you're
investing in. That's the message here. Take a look at
the four to one K offerings in your plan as

(17:54):
some of these changes come down the pike. And if
you're somebody that doesn't want to look at it or
or even know what you're looking at, if you do
take time to look at it, get a good fiduciary
advisor to help you through this, just to make sure
that you're not inadvertently getting into some things that might
benefit the four to oh one K provider and not yourself.

Speaker 2 (18:15):
Yeah, that's right, and remember what you're getting into. These
are private transactions, so the private equity transaction. You probably
drive by a bunch of them on your way to
work every day. These are businesses that are not owned
by the public markets and not tradable.

Speaker 1 (18:28):
Every day.

Speaker 2 (18:29):
There's simply groups of people who have all pulled their
money together in some kind of partnership type of a structure.
That's literally what you're investing in. The technology and the
size of these financial institutions today has allowed them to
create structures where they can break these up into shares
that are somehow appropriate to fit inside.

Speaker 1 (18:44):
Of a mutual fund.

Speaker 2 (18:45):
But these are private equity investments. They go up and
down just like anything else, and a lot of times
it's a lot harder to see inside the black box
to know exactly where their dollars are coming from.

Speaker 1 (18:55):
Here's the all Worth advice. Private equity in your four
to one k could be a smart fire, just make
sure you understand all the trade offs. Wealth can open
many many doors, but it can also make it harder
to say no. We'll help you set clear, confident boundaries
without guilt. Coming up next, you're listening to Simply Money

(19:16):
presented by all Worth Financial on fifty five KARC the
talk station. You're listening to Simply Money presented by all
Worth Financial on Bob Sponseller along with Brian James. When
you've achieved financial success, it often comes with some unspoken expectations,

(19:37):
perhaps from friends, extended family, even distant acquaintances. Whether it's
a request a co sign alone for example, or invest
in a business idea or fund of family members emergency
saying no can feel awkward at best and guilt inducing
it worst. Brian, I've had situations like this come up

(19:59):
several times tis over the years and years I've been
doing this. What about you?

Speaker 2 (20:03):
Oh yeah, absolutely, it comes up all the time within
family dynamics so we all want to support our children
and our you know, our our siblings and our extended
families when we can. Stuff happens, life happens to everybody,
and it's good to have that family network around you
that can kind of step in. However, it can totally backfire.

Speaker 1 (20:20):
Of course.

Speaker 2 (20:20):
We all run into these horror stories every now and then.
I think, I think, really the one that jumps off
the page to me is co signing alone. I have, Bob,
I have just never heard of a situation where this ended. Well,
if you're asked to co sign alone, that means whoever
is asking you has been turned down by the banks
unless someone else's credit can back them up. That means
that the banks out there think that this person is
not going to be able to pay these bills. And

(20:41):
if you're co signing alone, then you are you are
on that loan as if you were borrowing the money yourself.
That you don't have any more protection than if you
were literally borrowing or signing for that mortgage your absolute self.

Speaker 1 (20:51):
So just know that if you.

Speaker 2 (20:52):
If you agree with the bank that maybe this person
isn't going to be good for it, then you are
probably gonna get stuck with that bill.

Speaker 1 (20:57):
Well, maybe without getting too off on a religious tangent,
maybe that maybe that's illustrative of why in the Bible
it warns us against co signing for other people's loans. Right,
maybe God, even Jesus pretty smart after all. All right, Hey,
but the point we're trying to make here is constantly
saying yes to other people when they know you've got

(21:19):
some money and they think, well, he's he or she's
got a lot of money. It doesn't matter they can
quote unquote afford it. It can set unsustainable expectations and
quietly erode your own autonomy over your own money. And
that emotional weight that you carry around could be exhausting,

(21:40):
leading to resentment or burnout or just fracture relationships if
it's not managed correctly.

Speaker 2 (21:46):
Yeah, and so I think, so get creative, right, It
doesn't have to be a hard no. It can first
of all, be not right now. Or let let's pretend
you I'll give an example of this from a real client,
so we're how we found the solution. So let's say
that you know, the client's kid wants to buy a
house else and the banks aren't willing to lend at
a at a reasonable rate. So the client says, well,
I'll step in, I'll co sign the mortgage and we'll
go from there. Well, then, obviously we've talked about what

(22:08):
exposure that lead. So what if the compromise point is Okay,
you're not happy in your apartment right now, it's not
big enough or whatever. What if I gave you an
extra few hundred dollars every month, actually making an investment
versus taking on a much more massive risk, buy you
some time, get you in a nicer place, and then
I will work with you, child of mind, to get
your finances looking better so that maybe the next two

(22:29):
or three years you can do it without my help.
So that's kind of a middle ground, and it's actually
an investment of dollars that you won't see again. But
at the same time, it might be a lot better
than putting yourself a risk for several hundred thousand dollars
should your kid not be able to make that payment.

Speaker 1 (22:41):
I like where you're going there, because there's a big
difference between just saying flat out no and never helping
a loved one or a child or what have you,
versus partnering with that loved one to help you know,
whether you say coach them or counsel them or assist
them in becoming financial responsible and you know, help them

(23:04):
bridge that gap between just learning about money and getting
them to where they can manage their own affairs. And
that's really what we're talking about here, coaching people to
be responsive, responsible versus just enabling them to have what
they feel they want or deserve. That that's what we're
really trying to get into here.

Speaker 2 (23:24):
Yeah, for sure, And again you're not rejecting the person
and you're not saying no, You're saying no butt and
then come up with a solution that could get them
across the finish line.

Speaker 1 (23:32):
You're listening to simply money presented by All with Financial
On Bob Sponseller along with Brian James. Let's get into
how to maybe prepare to say no in a in
a dignified way for everyone. And this comes down to
some communication and advanced planning. I like things like this.
Try some responses like hey, I care deeply about you,

(23:54):
but I've made a commitment to keep financial matters separate
from personal relationships. I think that's a good line to
use when we're dealing with maybe parties outside of our
family where we just get we get bombarded with requests
from charities and other people coming at us asking for money.

Speaker 2 (24:12):
And I think what you're really talking about there is
just just have a policy, sit down and think in advance.
If you think this is coming, then give yourself some
time to figure out what do I really believe here?
What is my policy as to whether I would do this?
And I'm not talking about something necessarily to write down
unless that works for you to kind of cement it
into your brain. But just give some forethought and then
then you'll know how to respond rather than stuttering and

(24:34):
stammering when the question arises.

Speaker 1 (24:36):
Here's another good response. You could say something like, Hey,
this isn't something I can support financially, but I'm happy
to help brainstorm other solutions with you. You're inviting that
person into more of a relationship to coach them through,
helping them solve some of their financial problems versus just
pulling out the checkbook and writing a check and hoping

(24:58):
it all works out.

Speaker 2 (25:00):
And you shouldn't feel pressure to answer right away, right
And I think of a quick yes or a quick
no tells this person one of two things. A quick
yes says, well, hey, this is easy. This, I guess,
is just how the world works, and it's just easy
to get money. A no will tell them this person
doesn't care about me, So tell them. Even if you
already know your answer, tell them. I need to think
about this. This is a huge decision and both of

(25:20):
us are going to be impacted by it one way
or another, and I really have got to put some
thought into this. Then you can come back with your
response even if you already knew what it was. Give
it some time to percolate.

Speaker 1 (25:29):
Yeah, and one other thing to point out here, you
don't owe anyone more than maybe a few second explanation.
If you get into a twenty minute explanation on why
you don't want to give them money. The longer you
just drivel on and talk and talk and talk, you
know it quickly comes across. As you're rationalizing, you feel
guilty and uncomfortable. And the way you're managing yourself through

(25:53):
this is just by talking and talking and talking about
all the reasons why you're going to say no. That
can make that other per feel very uncomfortable as well.

Speaker 2 (26:01):
And there's no need to go there, and we can
find out that there's a lot more to a relationship
like that, Suddenly it becomes not about money, it becomes
about interpersonal stuff.

Speaker 1 (26:08):
Yeah. And then lastly, and I tell clients this all
the time, Brian, blame me, Blame your financial advisor. For
those that work with a financial advisor, they can serve
as a helpful buffer in these conversations as well. You
heard it here, folks, it's Bob's fault. Well, but referring
financial request to your advisor, you know, puts that buffer

(26:31):
if it needs to be there between you and your money.
And yeah, you can blame somebody else, someone your fiduciary
advisor that's looking out for you, and let the financial
advisor come up with that quick twenty second response on
why we can't go there where we all know we're
being asked to make a decision that might not be
in the best interest of all parties. Here's the all

(26:53):
Worth advice. Protecting your wealth starts with setting boundaries that
align with your values, because say no is sometimes the
smartest financial decision you can make. Coming up next, see
if you can separate fact from fiction before it costs
you big time. You're listening to Simply Money, presented by
all Worth Financial on fifty five KRC. The talk station

(27:21):
you're listening to Simply Money, presented by all Worth Financial.
I'm Bob sponseller along with Brian James. You have a
financial question for us, There's a red button you can
click while you're listening to the show right there on
the iHeart app. Simply record your question and it will
come straight to us. All right, Brian, it's time to
play financial planning fact or fiction. I'll let you have

(27:44):
the easy one. First factor fiction, you don't need bonds
in your portfolio once you retire. Brian, I don't know
about easy.

Speaker 2 (27:52):
I'm gonna call that one faction, right, It's a little
of both. So bonds in your portfolio Normally, historically we
recognize that bonds can be kind of the rudder for
the portfolio to smooth out the tougher times. Over the
past couple decades, the behavior of bonds has kind of shifted.
Everything gets speculated on no matter what it is, bond moves.
Bonds move with interest rates, and we have absolutely had

(28:13):
very different interest rate environments over the prior couple decades
than we had for the century prior to that. So
the way I here's I don't know you tell me.
Here's how I talk to my clients about it. I
don't really want to necessarily make a portfolio conservative simply
because someone is now fits under the definition of retire.
That's not the trigger for me. The trigger for me
is when do we need these specific dollars. Some people

(28:34):
are in a situation where they don't. They've got income
coming in from I don't know, rental properties, or maybe
they still own a chunk of the business they used
to run, whatever, and maybe they don't need these investments.
So that means or they have a pension, yeah, you know, pension,
so scaredy. Maybe that pays the bills. That's fine to me.
That pushes out the need for these particular invested dollars
out you know, ten twenty. Sometimes there really isn't even

(28:54):
a horizon where it's needed. So in that case, sure,
let's stay aggressive and continue to grow. Why wouldn't we
otherwise we're taking out of our kids' mouths Ultimately, So
that situation itself means I don't necessarily need bonds because
it's just something different. And if I do want a rudder,
there are other options out there. I can do book GIFs,
I can do some I can arrange my investments in
another way and create that rudder.

Speaker 1 (29:16):
No, I think you hit the nail on the head there.
It comes down to a the individual client's financial plan
and retirement income plan, and then second they're emotional tolerance
for risk.

Speaker 2 (29:27):
It's not a one size fits all situation. Yep, all
right here coming at you. Now it's your turn for
what I think is an easy one. But let's see
what Bob says. Buying municipal bonds is a better move
when you're in.

Speaker 1 (29:37):
A high tax bracket. Factor fiction, Bob, I would say,
fact here, it certainly can be, but you got to
run the numbers. And I had a client where we
actually did that here recently, and they're sitting on a
boatload of cash and they feel great about the gross
marginal interest rate they're getting on that cash, and they've

(29:59):
got a bunch of me inscipal bonds elsewhere in their portfolio.
And I just had the conversation like, hey, do you
understand what you're actually netting here, net of taxes and
inflation by sitting on all this cash. And this was
a very smart person, very numbers oriented, and their answer
to me was, yes, I understand I just like holding

(30:22):
all that cash. It makes me feel better just knowing
I can get to it. So it's just you got
to look at the gross you know, the gross yield
versus the net yield, look at your tax situation, and
make sure you're going in with your eyes wide open
on what you actually own. And if you feel okay
with it, fine, but at least know what you've got.

Speaker 2 (30:43):
So I want to weigh in on this a little
bit because this is another thing I've been given some
thought to, and this could affect me personally and some
ti I'm starting to talk to my clients about if
I want better. You know, the whole point of municipal
is tax free, right, that's what we want. But you
can do that a couple of ways. One thing I'm
thinking about doing when I get to that point, have
we got another ten years or so? I'm thinking of
overstuffing my wroth Ira with megaback door four and K contributions,

(31:04):
backdoor contributions or whatever, and just knowing that that money
I'm carving out is my emergency fund and I'll stick
it in a you know, in a money market fund
that a bank might have. I could be getting four
or five percent on my wroth IRA if in my
brain I know that's my emergency fund and I could
quickly move money to my checking account. Now I got
the best of both worlds. I get high rates of
return but no taxes.

Speaker 1 (31:24):
The key there, and what you said is you're getting
out in front of it, you know, ten years in
advance and doing some you know, advanced planning. Not everybody
does that. And for folks that sell a business and
get a big whopping paycheck, they don't have that option
available to them. But no great discussion, all right, Brian Factor. Fiction,
having multiple financial advisors is a smart way to diversify

(31:47):
your advice. Yeah, this one again.

Speaker 2 (31:50):
I'm going to go with fiction on this one because
I just feel like, you know, whenever somebody has multiple advisors,
they're never happy because they're hearing from they have to
babysit two different people. They're hearing slightly differing points of view,
even if both advisors are really stronger. Sometimes there's three
or four, but it just seems to cloud all the
decision making and they can't commit, and it just really

(32:11):
drags everything out.

Speaker 1 (32:12):
That they want to do.

Speaker 2 (32:13):
So find one that you trust and move on. So
think of this way, you might get a second opinion
from a doctor, but you don't have both doctors perform
the actual You pick one to do the actual procedure.

Speaker 1 (32:23):
You're not going to get the procedure done twice.

Speaker 2 (32:24):
With financial planning, you can have everything done twice if
you really want to, but it's really going to throw
an anchor in your overall comfort. It makes you your
own financial advisor because you're responsible to decide who's right.

Speaker 1 (32:34):
I don't think that could be said any better. That
is spot on, all right, factor fiction Brian, A five
twenty nine plan can be converted into a raw ira.

Speaker 2 (32:44):
Fact fact fact fact fact. This is my favorite new
cool rule here. So with the new rule came out,
five to nine plans, as we know, are are tax
free if they're pulled out used for college tuition, books,
room board.

Speaker 1 (32:55):
That's the way it's been for decades. But the concern
in the past has.

Speaker 2 (32:59):
Been that I don't want to put money in my
five twenty nine because I don't know if this newborn baby,
or perhaps this child who doesn't even exist yet.

Speaker 1 (33:05):
That's another thing you can do.

Speaker 2 (33:07):
I don't know if this person's gonna be gonna go
to college maybe they're gonna got a full ride. I
won't need these dollars, So then aret I losing out?
The answer is now not at all, because there are
new rules in place as of twenty twenty four that
will allow you to As long as the account the
five throe nine has been in existence for fifteen years,
you can contribute over time up to thirty five thousand
dollars from the five twenty nine two year WROTH just

(33:28):
using that thirty five thousand dollars over three four years
as the annual contribution to the roth IRA. So if
you think about this, I love this thought, Bob. So
if I fund this, Let's say I find out my
adult child is pregnant, and now I know within the
next year something I'm gonna have a baby. I can
fund that account now, and that money could grow for
sixty five years until my grandchild actually retires. That is

(33:51):
an absolutely enormous amount of money. If you want to
think lump sums, you could put twelve in now, It'll
be worth thirty five by the time they're eighteen, and
now you have funded irate contributions for until they're in
their mid twenties and hopefully really really stable I love
that rule.

Speaker 1 (34:05):
Now, it's a great rule. And I think this just
the overall arching theme here is never give up those
wrath dollars until you absolutely have to, because that compounded
long term growth is a powerful, powerful thing. All right,
factor fiction, and I'll take this one. An inheritance plan
is more important than in a state plan, Brian, I don't.

(34:26):
I don't think I even understand the question here, but
I think what they're I let you take that. I
don't get that either, so go to Well, the only
way I can interpret this is an estate plan. I
think when when people think of an a state plan,
I think they're talking about the legal documents, you know,
and a lot of times people don't read them. There's
a lot of boiler plate legalese in them. The difference

(34:47):
in an inheritance plan is you're actually communicating and making
it very clear to your heirs and your beneficiaries what
you want this money to do for them and win.
And I think that comes down to actual communication rather
than just drafting and leaving to someone this complicated document

(35:08):
that just appears out of the desk drawer after you
pass away.

Speaker 2 (35:11):
Yeah, I think this might be referring to an unfunded trust,
which happens when you run across a lawyer who may
be perfectly well meaning and they want to they want
to have you write up a trust document. That could
be perfectly fine, but if you never put anything in
the trust, meaning you've literally gone to your investment firms
you've named the trust as beneficiary or even as the owner,
that trust doesn't do squat Bob until some til it
owns something.

Speaker 1 (35:32):
Coming up next, you'll get my two cents on some
additional estate planning considerations. You're listening to Simply Money presented
by all Worth Financial on fifty five KRC the talk station.
You're listening to Simple Money presented by all Worth Financial
Law Bob Sponsorer along with Brian James and Brian I

(35:54):
want to take a couple seconds here and just talk
about an actual store a client story across here recently,
and I think it illustrates something that a lot of
people should be doing and rarely do, and that's actually
review your estate planning documents every so often. And here's why, Brian.
I had a client and this is an elderly woman

(36:16):
that actually lived down in Alabama and she left her
nephew as her power of attorney. Okay, everything good so far. However,
the power of attorney document did not allow this nephew
to make any changes to beneficiaries in any of her accounts. Well,
what he did was he set up the account for

(36:38):
him to run, you know, the account, and he named
transfer on death beneficiaries and that's fun. Well, this lady
ended up passing away, and we're trying to get the
estate settled and get all the money moving around where
it needs to go. And the custodio firm, you know,
rejected moving this to that nephew's account, you know, per

(37:03):
the beneficiaries that were set up because the power of
attorney document did not allow this individual to name beneficiaries.
And this is something that should have and could have
been caught years and years ago and made you know,
provisions for that. Instead, we had to help the client
get an attorney down in Alabama, take the thing through

(37:25):
probate court, and it took about two months to get
all this sorted out. And it was just an unnecessary
delay in probating and settling this woman's estate that could
have been avoided if those documents had not been reviewed
periodically and make the necessary adjustments. I just call that

(37:45):
out as a reminder, review what you've got. Don't just
set it and forget it and pull these things out
down the road, because you could be in for a surprise.

Speaker 2 (37:54):
So I got a little war story from the trenches too,
from last week. So that's a client of mine that
passed away. Unfortunately, and at some point we had asked
multiple times to get a hold of the trust document.
They could never locate it. The trust in this case
was only the beneficiary. It didn't own anything. It was
named as the beneficiary, so we didn't really need it,
but obviously we like to have it on file for
this exact reason. No one knows where this trust document is,

(38:17):
so all we know is that the name of it
and the date of it, but we can't figure out
who we need to legally be talking to to retitle
these assets. So the moral of that story is make
sure that your financial advisors, your banks make sure that
they have something on file. They should have asked you
for the trust document itself, or what's called a trustee certification,
which basically pulls out the important details and you sign
a form saying yes, it was dated this date. Here

(38:38):
are the trustees, here's the success or trustee and here's
how to get a hold of us. So make sure
you've done that, otherwise you don't have much of a
plan at place.

Speaker 1 (38:45):
Well. I don't know about you, Brian, but sometimes when
I ask clients or prospective clients to review this stuff,
they look at me like, are you really gonna make
me dig this stuff out? And I'm like, yes, I am.
I mean that's our job, and some people don't initially
want to think of that as our job. But boy,
if you can get out in front of this stuff,

(39:06):
you know, people thank us after the fact because this
stuff really does need to be reviewed every two, three,
four years just to make sure this estate plan is
actually set up to do what you actually intended for
it to do when you had the documents drafted. It's
very very important in something that we stress with our
clients all the time. Thanks for listening. You've been listening

(39:29):
to Simply Money, presented by all Worth Financial on fifty
five KRC, the talk station