September 10, 2025 • 41 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian break down the growing role of alternative investments inside retirement plans — and why you should be cautious before diving in. They also tackle whether today’s AI excitement is the new dot-com bubble, the lessons behind a shocking $4 million hospital bill, and what nearly 600,000 new 401(k) millionaires can teach us about long-term discipline. Plus, you’ll hear a personal story about how being overconcentrated in one stock devastated a family financially. And in our listener Q&A, we cover farmland sales, retirement income strategies, umbrella insurance, global diversification, and whether direct indexing beats ETFs.
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Episode Transcript
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Speaker 1 (00:00):
When it happened. We are coming to you live.
Speaker 2 (00:02):
You're going to want to listen to this fifty five
KRC the talk station.
Speaker 1 (00:15):
Tonight.
Speaker 3 (00:15):
We're talking about alternative investments and retirement plans, a real
life example of what can happen if you aren't diversified
and more. You're listening to Simply Money, presented by all
Worth Financial on Bob Sponsller along with Brian James. Well,
we have some new information on the impact that alternative
investments could have on your portfolio. Brian, we've been talking
(00:37):
about this topic for a few months now as the
industry continues to evolve and update share the latest information
on alts or alternative investments.
Speaker 4 (00:48):
Yeah, we did say last time that I think we
made a joke about how often we were going to
talk about this. That might have been a week and
a half ago, and lo and behold, here we are again.
So the reason this is hitting the is hitting these again.
Of course it will all year long. So the rules
are being loosened on what you can invest in inside
of your four to oh one k's. There is twelve
trillion dollars inside retirement plans. Company based employer based retirement
(01:12):
plans like four to one k's, four or three v's
and so forth, and so the financial services industry would very,
very much like to get more products and services available
to that twelve trillion dollars because that is how we
roll as a country. So what we're talking about today
is alts, short for alternative. These are things outside of
traditional stocks, bonds, and cash that's normally what's in your
(01:32):
four to one k's in the form of usually mutual funds.
Those are mutual funds or one type of investment that
owns a bunch of different things underneath it.
Speaker 5 (01:39):
Stocksponds, cash.
Speaker 4 (01:40):
But now we're moving on to alts, which are private equity,
hedge funds, real estate, and private credit arrangements. These are
often used to diversify a traditional portfolio and can potentially
reduce risk and boost returns, but they're also less liquid
and a lot more complex. There's a lot more moving
parts here that people need to understand before we get
into them.
Speaker 3 (01:59):
All right, I'm not anti this stuff at all, as
I've shared before, but my I got to put my
skepticism had on here a little bit, and I'll explain
what I mean.
Speaker 1 (02:07):
Black Rocks said.
Speaker 3 (02:08):
One in four retirement plans are considering adding alternative investments
over the next year. And as you said, it's it's
it can impact trillions of dollars. And look, as somebody
who used to be an advisor to several large four
one K plans, I know how this game is played,
and I know how the costs of retirement plans and
(02:30):
plan administration works. And these companies, you know, to keep
the company from paying out of pocket for administration services,
what these plan sponsor companies will do is they'll just
put higher fee investment options into the plan. You know,
you the higher the expense ratio of some of these
(02:51):
funds are, that pays the cost of having these plans administered.
So who ends up paying that bill the plan participants.
And I just say buyer beware here, because this stuff
can work out great, better diversification, better returns in some cases,
but you're also paying higher fees to have these things.
(03:13):
And I'm noticing, you know, companies like t ro Price, Goldman, Sachs, Blackrock,
they're starting to bury these alternative investments into those.
Speaker 1 (03:21):
Target date funds.
Speaker 3 (03:22):
So if you just buy the target date fund and
you're getting fifteen or sixteen funds in that target date fund,
some of these things are going to be these alternative investments,
and yeah, it could work out great, but rest assured
the fee exposure is.
Speaker 1 (03:37):
Going up as well.
Speaker 5 (03:38):
Yeah am I am I off base here, Brian, No, No,
for sure.
Speaker 4 (03:42):
I mean that's really this is everybody's going to kind
of fixate on the idea that, hey, you know, diversify
my portfolio.
Speaker 5 (03:48):
Yeah, blah blah blah.
Speaker 4 (03:49):
But most people are going to see the possible chance
for higher returns and that's what's going to be attractive.
But there's also you know, remember where the returns are going.
Speaker 5 (03:57):
To be going.
Speaker 4 (03:58):
There are companies out there, as you just mentioned that
who create these things.
Speaker 5 (04:01):
They make money when you own them.
Speaker 4 (04:03):
It doesn't matter too much to them so much whether
we are successful with them. And I always use the
example of the gold Rush at eighteen forty nine. It
wasn't the gold diggers who made the money. It was
Levi's and Wells, Vargo and these other companies who went
to support the great demand that was happening in that environment.
Speaker 5 (04:18):
So just be buyer beware like anything else.
Speaker 3 (04:21):
Yeah, and I'm not picking on anybody here, but I'm
just throwing out a couple of facts here in this
recent survey. Black Rock itself just Blackrock, spent twenty five
billion dollars on two acquisitions over the past year to
grow their presence and exposure in private credit in infrastructure,
and in July, the firm said, lo and behold, we're
(04:42):
expecting to start offering you know, its own target date
funds with these private credit and infrastructure funds baked in.
Here's the interesting thing, Brian. BlackRock's own survey found that
smaller plans are actually more likely than larger ones to
consider adding private assets earlier this year. Their CFOs said
(05:05):
large plans typically rely on consultants and take considerable more
time before.
Speaker 1 (05:11):
Making any major changes.
Speaker 3 (05:13):
And this is again I'm not slamming any of this,
but the smaller plans are the ones where they got
to find ways to pay for the planned administration expenses.
Speaker 1 (05:24):
The larger your.
Speaker 3 (05:25):
Plans are, there's more scale, the fees tend to be lower.
And yeah, these companies are going to have an advisor
or a consultant helping them to make sure that their
investors are taken care of.
Speaker 5 (05:38):
Yeah, and I kind of liken it too.
Speaker 4 (05:40):
When the early two thousands, late nineteen hundreds and early
two thousands during the first Internet explosion. There when some
form and case began to allow funds that focus purely
on technology, and there was a huge rush into them.
Because this was before two thousand and two, is before
two thousand and eight. We all thought we were invincible
(06:01):
and stocks just went to the moon, and there was
a massive rush any fund that had the word technology,
and it didn't.
Speaker 5 (06:05):
Matter what was under the hood.
Speaker 4 (06:07):
By god, it's it's got technology in it. If it
says though right there in the title, then I'm gonna
own that fun So I have a feeling there's gonna
be a little bit of that. Again, these are not
necessarily bad ideas, but know what you're getting into.
Speaker 5 (06:16):
Nothing is a panacea. Nothing comes without risk.
Speaker 3 (06:20):
You're listening to Simply Money, presented by all Worth Financial.
I'm Bob Sponseller along with Brian James all Right, shifting
topics here a little bit. Brian is AI becoming thenew
dot com bubble. We're starting to see articles like that
cropping up. We've talked about this before and from time
to time it's worth just checking in to see if
anything has changed, you know, with regard to how we
(06:43):
want to answer that question and you've got some good
information to share on just where valuation stand, because you
got to look at valuations to make sure we're not
overpaying for this stuff. Give us some updated, you know,
fig facts and figures around valuation.
Speaker 5 (07:00):
What comparisons to two thousand are everywhere?
Speaker 1 (07:02):
Right?
Speaker 4 (07:02):
I just just kind of made one when we were
in a prior subject there, back when valuation didn't matter,
and you had all these companies that weren't making a dime,
but they had really cool marketing campaigns and really cool
visions and all that kind of stuff. So that that's
kind of where AI is right now. However, the leaders
of this one, these aren't startup firms, right. This is Nvidia, Microsoft, Apple,
and Google, huge cash flows, real.
Speaker 5 (07:23):
Demand for their products and services.
Speaker 4 (07:26):
AI of course is a major major focus for these
giant companies. However, they've got something to fall back on.
This isn't, you know, startup companies in garages. So let's
talk to Let's do some actual comparisons. Valuations are kind
of stretched things that are a little running a little
bit hot. We talk about valuations, by the way, what
we're talking about is that the price to earnings ratio,
which is basically how many dollars of earnings? Is that
(07:47):
the current price? What is the ratio between that price
too the actual earnings? And back then and then late
nineteen hundreds, I keep saying that sounds.
Speaker 5 (07:56):
Like the eighteen nineties when I say it like that,
but any case.
Speaker 1 (08:00):
But around we're getting we're giving old Brian.
Speaker 5 (08:03):
Dating myself, right.
Speaker 4 (08:04):
But back in nineteen ninety nine, the forward price to
earnings ratio of the S and P five hundred was
over twenty five. That was an eye popping figure for
that time. In other words, twenty five dollars of share
of share price for one.
Speaker 5 (08:15):
Dollar of earnings. That's big number.
Speaker 4 (08:17):
Lots of internet stocks had no earnings at all, and
you couldn't even use this metric because again they were
losing money hand over fist, So there is no PE ratio.
Speaker 5 (08:25):
So compare that to today.
Speaker 4 (08:26):
Today, the S and P five hundred forward PE ratio
is around twenty one. So that's up there. Our long
term average is fifteen to sixteen. But we're nowhere near
the dot com boom. And remember that dot com boom
came when we were all a little bit immature about
how the stock market actually worked. At that time, we
had had twenty years of basically nothing but up, and
we all thought that that we were invincible and nothing
(08:48):
bad could ever happen.
Speaker 5 (08:49):
And then two thousand and two taught us differently.
Speaker 4 (08:50):
But back at that time, pe ratio around twenty five,
currently around twenty one, so not quite as bad as
we were back then.
Speaker 5 (08:57):
It's not as much of a bubble as you might think.
Speaker 3 (09:00):
Yeah, I think another huge difference is these bit You know,
we talk about these Magnificent seven companies all the time.
I mean any of the anybody that listens to anything
financially oriented in the news media. I mean the whole
mag seven concept. It's ubiquitous, these seven companies, Apple, Microsoft, Alphabet, Amazon, Meta, Tesla, Navidia.
(09:20):
They make up more than thirty percent of the entire
S and P five hundred. But Brian, to your point,
they're also making money. They're growing, their earnings are growing.
They're real businesses. They're scaled up to really compete in
this new AI era. That is a completely different ballgame
than back in the late nineteen nineties and early two thousands,
(09:43):
where we were talking about companies like pets dot Com,
Webvan dot com, e toys, you know, companies like that
that didn't even have any positive earnings. So I think
it's always important to pay attention to these valuations, and
anytime they get a little ahead of themselves, you know,
the market does a great job of self correcting, and
that's why we talk about diversified, diversified, diversify. But I
(10:07):
think to compare what's going on today back to the
dot com bubble days is a bit of a stretch
because again we're talking about real, mature companies that have earnings,
and not only earnings, but growing earnings.
Speaker 4 (10:21):
Yeah, and don't let that FOMO get a hold of you, right,
because if you have a diversified portfolio, now you probably
have in your four ohwe ki raise your investments, you
probably have something representing the S and P five hundred,
which is just the five hundred largest companies in the
United States. Remember the way that those those types of
funds s and P five hundred index funds are constructed
is they're subject to a weighted average of those individual
(10:45):
funds or individual stocks underneath it, meaning it's not divided
across five hundred companies. Evenly, the bigger the company, the
more that index it makes up. So the Magnificent seven
Apple Microsoft alphabet, which is Google, Amazon, Facebook, Tesla, and Nvideo.
Those make up thirty percent of the entire s and
P five hundred. If you own a large cap fund,
you are exposed to these companies.
Speaker 5 (11:06):
Don't feel like you are missing out.
Speaker 4 (11:07):
You've got If your portfolio has probably run up a
good bit last couple of years and you are benefiting,
don't lose sight of that.
Speaker 3 (11:14):
Yeah, this is probably a good time to put a
plug in here on private equity too, because if you
do want a good diversified, professionally managed portfolio that gets
exposure to private equity. Again, private just means non publicly
traded companies. Let's face it, there are fewer and fewer
publicly traded companies out there right now. So if you
(11:35):
can get a good private equity manager where you are
broadly diversified, not buying a lottery ticket, it can make
sense to have some of that exposure in your portfolio.
Speaker 1 (11:46):
Here's the all Worth advice.
Speaker 3 (11:48):
Don't try to outguess the AI boom, Diversify your exposure
across sectors, and avoid going all in on just one
single trend. What does a four million hospital bill and
a record number of four to one k millionaires have
in common. They both reveal the power and risk of
(12:09):
long term financial planning. We'll explain what we're talking about next.
You're listening to Simply Money, presented by Allworth Financial on
fifty five KRC, the talk station.
Speaker 1 (12:18):
That's happening.
Speaker 6 (12:19):
Seven people killed over the weekend in Chicago.
Speaker 1 (12:21):
The mayor is telling us not to come in. It
is racist.
Speaker 7 (12:24):
Meanwhile, a judge rule that Trump acted unlawfully when Los Angeles.
Speaker 5 (12:27):
Deploying the National Guard is off.
Speaker 1 (12:30):
It's so ridiculous.
Speaker 5 (12:31):
Fifty five KRC, the talkstation.
Speaker 6 (12:34):
Allworth Financial a registered investment advisory firm. Any ideas presented
during this program are not intended to provide specific financial advice.
You should consult your own financial advisor, tax consultant, or
a state planning attorney to conduct your own due diligence.
Speaker 3 (12:53):
You're listening to Simply Money, presented by all Worth Financial
on Bob Sponsller along with Brian James Ether. It's taxes
on family land, planning a three million dollar portfolio, or
just protecting rental properties. We're tackling your real life money
challenges that are coming up straight ahead at six forty three.
All right, Brian, this this is a shocking story an
(13:16):
Ohio woman named Hannah Castle. Recently her story went viral
after posting her four million dollar hospital bill on TikTok.
The charges came after she gave birth to quadruplets prematurely,
with each baby needed an extended stay in a neonatal
intensive care facility. Wow, what a bill, What a surprise.
(13:40):
This woman's dealing with enough already.
Speaker 4 (13:42):
Yeah, so in order to deal with this, obviously, that's
a heart attack when you open that envelope. But she
actually quit her job during pregnancy so that she could
qualify for Medicaid because it was the only way to
get any kind of financial assistance, but still got a
four million dollar bill out of it. So yeah, kind
of breathtaking that this actually happen. And so basically the
(14:03):
way this ended up, Medicaid ultimately did cover most of
those costs. But this did trigger a whole debate and
it got a lot of people talking about how are
we our family, what are we exposed to with regard
to this, so kind of things you're going on, want
to make sure understand your coverage in the first place.
You know, we're sneaking up here, Bob, It's almost Q
four and we're sneaking up here on benefit season where
we all got to pick new plans. Take a little
(14:24):
extra time. Remember what happened to this woman, which, yah,
it's an extreme story, but.
Speaker 5 (14:27):
It does happen.
Speaker 4 (14:28):
Take a little time and read those details. Understand exactly
what you're exposed to, know what you're getting, more importantly,
what you're not getting, so that something sneaks up.
Speaker 5 (14:35):
On you, you'll you'll kind of know you know what
to deal with.
Speaker 4 (14:38):
And also remember up to up to eighty percent of
medical bills can contain errors, according to a couple of
different healthcare communication firms. So just make sure you are
on top of what you actually owe and don't just
write the check because they were because you were told.
Speaker 1 (14:50):
You owe it.
Speaker 3 (14:51):
Yeah, I think that's the big thing. Check check your coverage,
plan ahead if you can. I mean, I understand that
pregnancy is not always something you can plan ahead for
or but medical benefits are.
Speaker 1 (15:02):
So make sure before you just walk away.
Speaker 3 (15:05):
From company provided coverage, you know what you're getting into
as far as your next medical coverage, and do some
of that homework up front, and then to your point, Brian,
check that bill because there's so many errors out there
with medical bills. And my guess is Medicare probably went
in there and reviewed that thing. I hope they did,
at least because this tax payer money. Review that bill
(15:26):
with a fine tooth, come and get rid of some
of the fat in there.
Speaker 5 (15:30):
Yeah, and Medicaid is what's stepped in for her Medicaid.
Speaker 1 (15:34):
Medicaid.
Speaker 5 (15:34):
Sorry, that's okay. One of the other things too.
Speaker 4 (15:37):
If you're in a situation like this, remember the hospital,
the healthcare facility itself may offer some kind of charity
care or payment plans even if you do have insurance,
because they understand, you know, they understand how it works.
There's just red tape you have to get through. You
also might consider supplemental policies. You may have something right
So a lot of times people come up with these
insurance policies they've had for decades and don't know why.
Speaker 5 (15:58):
Make sure you know what you own.
Speaker 4 (16:00):
Sometimes there's a critical illness rid or a hospital indemnity
policy already in your household, so make sure you understand
what resources are.
Speaker 1 (16:07):
Yep. All right.
Speaker 3 (16:08):
We talk about the number of four to one k
millionaires quite often on this show. And here's a headline
that jumped out of US this week. According to Fidelity,
almost six hundred thousand people now in this country have
at least one million dollars in their four to one
K plan. That's the highest number ever recorded. And know
these aren't Silicon Valley founders or lottery winners. These are
(16:32):
most likely people just like you and me, long term
savers who were disciplined and just stuck to a plan
and it works.
Speaker 1 (16:41):
It works over time, yep.
Speaker 4 (16:43):
So this is a common question I'm acting clients when
when we're updating financial plans. Because I'm just sitting here
at this table every day talking to people and putting
their puzzle pieces together. I see this happen and we
have the big momentous where I get to ask them
the question, hey, do you feel like a millionaire? And
a husband and then a wife will look at each
other and they'll be like, nope, because it's a little
bit of a different world now.
Speaker 5 (17:04):
So in any case, real numbers behind this.
Speaker 4 (17:07):
So the average four and K balance was up over
eight percent in the second quarter this year. That's around
one hundred and thirty seven thousand. Remember this is the
average of everybody, and so that's largely thanks to the
market's performance so far, we're up about the S and
P five hunders, up about eleven percent. Most of that
came in the second quarter, but with the really important
point of that is that people, for the most part
stayed the course. We had a panic in April when
(17:29):
we were first getting used to the idea that tariffs
were going to be a thing, and the market dropped
as low as fifteen percent at that point, which was
a scary, scary event. But at the same time we
recovered and most people seem to have stayed put.
Speaker 1 (17:42):
I did.
Speaker 4 (17:42):
My phone didn't ring a whole lot during that time period.
So I think maybe people knock on wood. You tell
me what you think. Maybe people are getting used to
chaos is the order of the day. I don't know,
what do you think, Bob?
Speaker 3 (17:51):
I agree? I mean there's always going to be market volatility,
you know, wherever the source comes from or the reason
for it. Market volatility is the price of being in
and you've got to stay the course and have a
disciplined plan and those that do can ride these things out.
You're listening to Simply Money presented by all Worth Financial
on Bob Sponseller along with Brian James. Let's not forget
(18:13):
the savings rate matters here too.
Speaker 1 (18:15):
Back to this.
Speaker 3 (18:16):
Fidelities, you know, study the total savings rate that's employee
and employer contributions combined. They held steady at just over
fourteen percent. That's a little bit below Fidelity's recommended fifteen
percent target, but that's pretty darn good, Brian. And by
the way, gen x and boomers are increasing their contributions
(18:37):
to iras too, up twenty five and thirty seven percent
respectively over the last year. So even older savers are
taking advantage of every little bit of tax sheltered growth
they can get.
Speaker 5 (18:50):
Yeah, we want to be in a good place. There.
Speaker 4 (18:52):
Another interesting bullet from Fidelity. I was talking a minute
ago about that, about what happened in April when the
market took a dive. Fidelity said that only about five
percent of account holders made any changes during the second
quarter when we were in that tariff panic. So basically
what that says is that ninety five percent of them
of investors didn't really react to it. Might not have
been happy read the headlines, grumbled about it, then went
(19:12):
on about their merry way and just kept saving, which
puts them in the strong position that they're in right now.
Speaker 1 (19:16):
So that's great.
Speaker 4 (19:17):
But one thing we want to pay attention to as
well is loans. Right so, about nineteen percent of people,
according to Fidelity, have loans out against their four to
oh one ks. That's kind of a red flag barring
against your retirement plans. It can really create big problems
down the road. I really haven't seen a situation where
it was the best answer for somebody. Sometimes, yes there
is no other choice, but usually planning ahead and making
(19:41):
sure you have an emergency fund, all of that, having
done that work in advance can put you in a
better position where you'll never have to have that type
of a discussion. Scary thing about four to one K loan, Bob,
is if you quit your job or lose your job
unexpectedly with a loan in place, that loan will almost
always become a taxable and possibly penalizable distribution unless you
can pay it off in pretty short order. Most people
(20:01):
can't do that. That's why there's a loan in the
first place.
Speaker 3 (20:04):
Yeah, that's something you really really want to avoid. Here's
the allworth vice. Becoming a four to one K millionaire
isn't about luck. It's about discipline, consistency, patience and making
savings a long time habit. Do you think you're safe
because you own a stock, one particular stock in a
great company that might even have fantastic long term returns.
(20:27):
We're going to bring you a real life example of
how that mindset crushed a family financially. You're listening to
Simply Money presented by all Worth Financial on fifty five KRC,
the talk station.
Speaker 4 (20:39):
Fifty five KRC the talk station iHeartRadio station.
Speaker 3 (20:49):
You're listening to Simply Money presented by Allworth Financial. I'm
Bob Sponseller along with Brian James. Well, if you're someone
who loves big tech stocks, hopefully you know by now
that those big company he's often come with a lot
of government scrutiny and depending on the outcome or how
you know, judges and court cases you know pan out,
the result can really impact the stock price. Case in point, Brian,
(21:13):
you know Alphabet's Google does not have to sell its
Chrome web browser, but it must share some of its
search and other data with competitors, according to a federal
judge deciding in a landmark case against the search giant.
Speaker 1 (21:27):
Let's get into some of the details there.
Speaker 4 (21:29):
Yeah, so judge Ammett Meta ruled last year that Google
was taking advantage of its rather dominant position atop of
these search space and kind of set up an illegal
monopoly and making money advertising by paying companies like Apple
and Samscum literally billions of dollars a year to have
Google installed as the default search.
Speaker 5 (21:49):
Engines on your smartphones.
Speaker 4 (21:51):
This is where you do you type in a word
into your phone somewhere, and it magically now dumps you
on Google having done a Google search. So that's been
determined to be a no no that this vision might
have fundamentally reshaped how Google has to do business. That's
the big way they make money by driving traffic into
their search engine. So the Justice Department is proposing some
sweeping changes that would include selling off Chrome or even
(22:13):
the Android operating system, which is what runs Google phones.
Speaker 5 (22:17):
So on September second.
Speaker 4 (22:18):
Though, he said Google is not going to be required
to get rid of Chrome, but the court also won't
include a contingent divestiture of the Android operating system either,
So in other words, those two big things are apparently
not going to happen. This is not unlike what happened
in nineteen ninety eight when the Department of Justice went
after Microsoft, and at that time, the idea was that
Microsoft had built Internet Explorer originally when it blew Netscape
(22:41):
out of the water. This is ancient Internet history, and
it was determined to have set up a monopoly at
that time. So that had a big impact back then,
didn't a Bob.
Speaker 3 (22:51):
Yeah, this is back in April two thousand, So I
mean it's hard to tell how much of this stock
price moves was due to this court case and how
much of it was just tied to the whole tech
bubble where the NASDAC you know, went down almost eighty percent.
But Judge Thomas Penfield Jackson ruled that Microsoft had violated
(23:12):
antitrust laws and that stock just plummeted over a short
period of time back into the twenties. Now, obviously Microsoft
is doing more than fine today. But the point of
these stories is just anytime you are overly concentrated in
any one company, anyone sector, no matter how good it
(23:33):
all looks, things can and do happen. And we want
to just to illustrate that point today, we want to
give you a real life story on how over concentrated
in one stock can really impact a family negatively and
our own producer here at All Worth, Jason Scott, is
here to talk about how a situation like this really impacted.
Speaker 1 (23:55):
His family, and not in a good way.
Speaker 5 (23:58):
Jason, thanks for joining us.
Speaker 4 (23:59):
I'd love to hear you know what does the real
world stories are great, So yeah, please tell.
Speaker 5 (24:02):
Us what happened to your family.
Speaker 8 (24:04):
Yeah, you know, we do the show daily and we
always talk about don't be underdiversified. But I did, you know,
I felt it very important. You know, what is an example,
like what does that look like? So my mother's second husband,
back in like nineteen ninety eight or so, had a
(24:26):
lot of their portfolio directed in Microsoft. I don't know
how much, but it was way, you know, too much,
as we would like to say. And when that anti
trust case started and you guys talked about how the
stock had plummeted. Initially, you know, he didn't do anything
(24:49):
about it. He just figured it'll come back, it'll come back.
But what happened is it was kind of like a
slow burn with the stock, in which it kind of
slowly over almost like a deck gad. I believe it
just kept kind of staying where it was, and it
kept going lower and lower, and there were just he
would not get out of it. He was again, he
(25:11):
was not diversified, and he wouldn't get out. He wouldn't
get out. You wouldn't get out thinking it would come back. Well,
what ultimately happened is after about three years of this,
he got Parkinson's disease and dementia basically simultaneously, and they
wound up, my mother and him wound up in a
(25:32):
situation where they ultimately had to sell it. They needed
the money, but they sold it again. It was so
much of their portfolio that basically it killed them financially.
And to extrapolate forward to now, just that one thing
has impacted our family to the point of, you know,
(25:56):
like we're talking about medicaid now and nursing homes and
all these kinds of horrible things that you can only imagine.
Speaker 1 (26:04):
But a lot of it had to.
Speaker 8 (26:05):
Do with a simple portfolio that had too much of
too much money in one thing.
Speaker 4 (26:11):
Yeah, I'm looking at Microsoft right now, and I can
see I see the timeframe you're talking about. Microsoft basically
was dead in the water from a little after two
thousand to about twenty thirteen. It has since gone off
like a rocket to the moon. But yeah, that can
be And that wasn't the worst time period either. There
were there were ups and downs during that timeframe, but
a diversified portfolio would have would have helped a lot.
(26:31):
It's a it's a shame your mother had to go
through that. So that's so, So what what advice would
you give, you know, as a family member, if if
you you know, you don't even have to be a
financial advisor to recognize these types of situations. What what
advice would you give to some innocent bystander who sees
a loved one kind of going through this.
Speaker 5 (26:47):
Yeah, well, and that's the other part of this.
Speaker 1 (26:49):
It's funny.
Speaker 8 (26:49):
We talk about so many concepts and they were all
at play here.
Speaker 1 (26:53):
So when they got.
Speaker 8 (26:55):
Remarried, he wouldn't let my mom know much about what
was going on with them, and so she just wanted
to be taken care of, so she just kind of
turned a blind eye to it. So there's that component
of it, a lack of communication. Then again, you know,
when you own Indexes, you already own Microsoft, you already
own Navidia, you already and you ultimately may own the
(27:17):
next Navidia and the next Microsoft, and that sort of thing,
you know, as a family member. All my experience is
just you know, you have to ask questions. You know,
if you're going into a relationship, you really you know,
there have to be sort of you have to tell
(27:38):
me what's going on or this isn't going to happen.
Speaker 3 (27:41):
Jason, was your father, mother and father working with a
financial advisor in any way, shape or form with their
whole financial plan?
Speaker 1 (27:49):
Did they have a financial plan?
Speaker 8 (27:51):
So this was her second husband, this was not my father,
that's all right. I don't know what kind of a
financial plan they had. I am sure that they did
have some sort of a plan. Unfortunately I don't have
the answer to that because my mom didn't have the
answer to that. Yeah, and you know, at the time,
I mean this was twenty five years ago, I was,
(28:11):
you know, doing my own thing. I wasn't so worried
about what was happening because they seemed everything was fine.
They lived in a big, beautiful home and there was
no need at the time. I thought they have to,
you know, get involved.
Speaker 1 (28:24):
All right. Well, Jason, thank you for coming on tonight.
Speaker 3 (28:27):
And I know that's a difficult story to tell, and
really appreciate your transparency, especially sharing personal family information. And
hopefully that'll help a lot of folks out there. Here's
the all Worth advice. If one stock is carrying too
much of your future, you don't actually have a plan.
You have a gamble all right, from farmland sales to
(28:47):
retirement insurance gaps and even direct indexing. We answer your
biggest money questions coming up next. You're listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
Talk station. To be Rich, we call them every day
millionaires every day listen to Dave Ramsey.
Speaker 7 (29:05):
They typically say one of the things that turned their
life around was when they started looking at purchasing something rich.
People ask how much broke people and I've been both
brother okay broke. People ask how much down and how
much a month?
Speaker 1 (29:22):
Tonight at seven oh six started asking how much On.
Speaker 2 (29:26):
Fifty five RZ the talk station, get your hot cup
of coffee and Brian Thomas tomorrow from five till nine
am on fifty five KRC the Talk station.
Speaker 3 (29:44):
You're listening to Simply Money, presented by all Worth Financial
on Bob Sponseller along with Brian James.
Speaker 1 (29:49):
Do you have a financial question you'd like for us
to answer?
Speaker 3 (29:51):
There's a red button you can click while you're listening
to the show right on the iHeart app. Simply record
your question and it will come straight to us. All right, Brian,
Tom and Milford leads us off tonight. He says, we
just sold some farmland that's been in our family for decades.
Is there a way to use those proceeds for income
while also reducing the tax hit?
Speaker 1 (30:14):
Well?
Speaker 5 (30:14):
Yeah, let's so let's talk a little bit about that
tax hit to begin with. So, if you've been holding
on to.
Speaker 3 (30:18):
Why are these people always come to us after they've
done something?
Speaker 1 (30:22):
You notice a pattern here?
Speaker 3 (30:24):
I created this mess. I created this mess. Brian, please
clean it up for me after the fact.
Speaker 4 (30:30):
Yeah, So that the problem what Bob's referring to there
is the the past tense nature of Tom's question and time.
We're not making fun of you, but this is this
This could there could be.
Speaker 5 (30:38):
Some challenges because the farm land has already been sold.
Speaker 4 (30:41):
But so one of the things that happened to I
would ask, do you know what the cost basis is
in the first place, meaning what is the tax hit?
Did you inherit it from your your forebears or was
it given to you during their lives because if you
inherited it, and that should have come with a step
up in cost basis, so therefore there might be less
hopefully for you, there's less tax. You might be thinking
now if you had had maybe a chance to prepare
(31:02):
a little bit, depending on what you ultimately were going
to do with these dollars, you could have maybe used
what's called a ten thirty one exchange if you were
going to reinvest these dollars in other similar real estate.
But if the cash has are even received, that's not
a thing. If the sale is not completely finalized, then
maybe you can rearrange it to do an installment sale
and you'll allow the Of course, that's sort of like
seller financing. Basically you'll allow the seller or the buyer
(31:25):
rather to make payments to you over time. That means
you can spread them into different years. You can use
those the proceeds to fund a different portfolio and then
look for losses elsewhere to possibly set off some of
the gains if you've got If you are charitably inclined,
now this is something that could potentially help you. If
you've got a bit of a gain, if you are
charitably inclined, then you may be This may be a
(31:46):
good year to use like a donor advised fund or
maybe a charitable remainder trust to make a sizeable donation
to a charity that you were already supporting anyway, effectively
pulling a bunch of years worth of donations into one
tax year to gain that tax deduction.
Speaker 5 (31:59):
That could help you now.
Speaker 4 (32:01):
But the ten thirty one, that kind of stuff, Unfortunately,
that ship has sailed because you already sold the property.
Speaker 5 (32:05):
Okay, let's move on.
Speaker 4 (32:06):
Michael in Loveland is sixty years old and he's ready
to hang it up, and he's asking, with social security
pensions and investments, what's the best order to draw from?
Speaker 5 (32:15):
So I don't run into any taxi prizes.
Speaker 3 (32:16):
Bob, Well, Michael, you know when you say social security
pensions and investments, we don't know how those investments are structured.
Are they four or one k's? Are they iras? Are
they raw iras? Or are they after tax brokerage accounts?
So it's important to take a look at all your
sources of income and all your potential sources of income
(32:37):
meaning investments, and then run some numbers to say what
is the best way to construct in income strategy in
the most tax efficient way possible. So it doesn't mean
that you've got to start with one source and drain
all that down before you tap another one. Oftentimes, I
would say most times, you're going to end up with
(32:58):
a blend of all that stuff working together. And again,
sit down with a good fiduciary advisor, paired up with
a good CPA, and together you know you could put
together an income plan that gives you the income you
need and want every year, but do it in the
most tax efficient manner. That'd be my answer, all right.
Samantha and Florence Brian. She says she's got already has
(33:21):
umbrella insurance, but they also have a vacation home and
a boat, so they're living large out on the lake,
having a whole lot of fun. Maybe too much fun,
because she says, do we need a whole different level
of liability coverage?
Speaker 4 (33:35):
I don't know what you're out there doing on that boat,
but you're just thinking ahead and that's not a bad
thing at all. So umbrella liability is designed to protect
over and above the standard things that auto, home and
boat policies offer, but all underlying policies have to have
a required minimum that's usually a two D fifty thousand,
five hundred thousand dollars liability. That's what's built into what
(33:55):
you probably already own. Umbrella is on top of that.
So if you've got extra assets such as this vacation
property in a boat, the umbrella limits should should come
up yes to that to match that net worth exposure.
A lot of advisors suggest in the five million dollar
range if you've got a multimillion dollar household out there.
So don't know, we don't know how big of an
asset we're talking about here, but good numbers to work with.
(34:17):
That does sound like an awful lot, But remember umbrella
policies are geared to cover things that aren't very likely
to happen, but if they do happen, they can be
they can be life ruiners. So the the cost of
this coverage isn't that much. You're not talking tens of
thousands of dollars, so it's very well worth it. And
make sure that your umbrella covers watercraft liability. Sometimes they
(34:38):
need a whole separate boat liability rider in addition, so
lots of moving parts there, but you're right to be
thinking this far ahead.
Speaker 5 (34:44):
That's a good idea. Tom In Westchester. He's got he's
got a pile of money he's worried about.
Speaker 4 (34:49):
He's got about three million dollars, and then he realizes
that all of it is almost all of it is
in US stocks. Bob, should he have any global exposure
or can we just keep it simple and throw it
all in the S and P five hundred.
Speaker 3 (35:00):
Let's say you, well, Tom's worried about over complicating things.
So I mean, my off the cuff answer is, you know,
do you have a huge emergency here because you don't
own any global or international stocks by all means no?
Speaker 1 (35:14):
All right, that being.
Speaker 3 (35:15):
Said, over time, when you run the numbers on combining
risk and return, it does make sense, back to that
whole efficient frontier studies that we've seen over time, to
have a little bit of exposure to global and international
stocks somewhere between zero and twenty percent.
Speaker 1 (35:32):
Now do you have to do that today?
Speaker 2 (35:33):
No?
Speaker 3 (35:34):
But I think as you do your normal rebalancing, keeping
in mind that we don't want to have the you know,
tax tail wag the dog here, meaning don't don't expose
yourself to a bunch of tax liability just to move
some money into international stocks. It might make sense to
take a look at it over time as you just
do your normal rebalancing, get a little sliver into international stocks.
(35:58):
Just as a reminder, international stocks are doing wonderfully well
this year after three four years where people didn't.
Speaker 1 (36:05):
Want to invest in them at all, and hence the point.
Speaker 3 (36:07):
It makes sense to have a little slice of that
in a truly diversified portfolio. But you could do it
gradually over time and don't feel like you got to
go out and buy that stuff in bulk today.
Speaker 1 (36:18):
Hope that makes sense, all right?
Speaker 3 (36:20):
Chris and fort Thomas is evaluating direct indexing versus ETFs. Brian,
you got about twenty five seconds. At what level is
the complexity worth it to save on taxes?
Speaker 4 (36:30):
Yeah, so it can really be worth it to move
to a direct indexing plan, meaning you own individual stocks
as opposed to ets mutual funds. I'd say a million
dollars in up in taxable accounts. You've got high income,
maybe you're in a high marginal tax bracket. I think
that's when it's most efficient to start looking at more
specific strategies.
Speaker 1 (36:46):
That was well done, sir, all right.
Speaker 3 (36:48):
Coming up next, I've got my two cents on managing
short term debt. You're listening to Simply Money, presented by
all Worth Financial on fifty five KRCEE the talk station.
Speaker 8 (37:00):
It's not as if there are people sitting there reading
every piece of information the US government has writing.
Speaker 6 (37:06):
China is writing the rules while we're left behind.
Speaker 3 (37:10):
Math deploying fake mass and accounting gimmicks to hide the
true cost.
Speaker 1 (37:14):
Of their bill.
Speaker 6 (37:15):
Little do you know it, it keeps changing every day.
Speaker 2 (37:17):
We've been taking you back to school all summer.
Speaker 1 (37:21):
Sounds like a high school term paper. They got a little.
Speaker 2 (37:24):
Mark continued education on fifty five krs the talkstation at
the dot Com.
Speaker 1 (37:31):
I am so worried that next month I have to
choose between groceries for my kids or gas for my car.
Speaker 2 (37:36):
Talk about it here fifty five KRC the talk station.
Speaker 1 (37:43):
You're listening to Simply Money? Is that a buy?
Speaker 3 (37:45):
All Worth Financial? Lumbop sponseller along with Brian James. All right, Brian,
I want to talk a little bit. You know, I
sometimes am surprised when I have client review meetings the
number of people that walk in and they have a
great financial plan, and then all the sudden they tell me, hey,
we still have debt. Out here, We've got a car
loan at seven point nine percent, or I took a
(38:08):
home equity line of.
Speaker 1 (38:09):
Credit out to pay for a cruise.
Speaker 3 (38:12):
And my point here is when people are sitting on this,
these these small loans, sometimes bigger loans, but you know,
medium sized loans at above seven percent interest rates, I'd
like to know what you think, but I want these
things paid off. Sitting out there. I know the markets
have been doing great, you know, diversified even sixty forty
(38:35):
portfolios have done in the mid teens for the last
few years, and it's it's really easy to just go
to sleep and say, well, my investments are always going
to outperform the.
Speaker 1 (38:44):
Cost of my debt. But that is not guaranteed.
Speaker 3 (38:47):
And so when you get this, when you get this
debt on your balance sheet at over seven percent, I
want to make that stuff disappear. And I've been having
more conversations than I care to want to have about
that here in recent months.
Speaker 4 (39:03):
Yeah a thing, Yeah, because the mark, like I said,
the mark is at a peak, and people will people
will will kind of lean on the idea that I
should leave it all alone and all and I'll leave
I'll let these little credit cards go for a while
because they're not hurting anything, no big deal. And now
we've got, you know, four credit cards with three or
four thousand dollars on them that have all run up
to the twenty five and thirty percent bracket. And people
(39:24):
will say, but it's I never looked at it, didn't
know the interest rate was that high. Well, then that's
that's what they're hoping for. You're playing right into their
hands of these big banks and financial institutions. So a
common conversation I'm having right now, Bob is, look, you've
been looking at these little piles.
Speaker 5 (39:38):
Of debt for a while, uh, and just not doing
anything about them.
Speaker 4 (39:41):
And I'll ask the question, what if somebody dropped money
out of the sky, what if cash just appeared in
your checking account?
Speaker 5 (39:46):
What would you go do? And they all say, well,
I pay off those debts.
Speaker 4 (39:49):
Of course, Well great, because I'm gonna send money from
your investment account to your bank account, because we're gonna
pay these debts off with money you didn't have a
month ago. Because we're gonna take advantage of the market
where it is at an all time high. That's a
great time to blow up some of these little debts
and clean up some of the clutter on your balance sheet.
Speaker 3 (40:06):
No, that's good, and that highlights the two points I
really want to make here. Number one, don't go to
sleep here just because the market's been doing well and
it's at all time highs. And then second, where possible
plan ahead for some of these lump some expenditures, build
up some cash in advance so you don't have to
go out and borrow money to make those purchases. I
(40:27):
know sometimes it's easier said than done, but it's just
good sound financial planning.
Speaker 1 (40:32):
All right, thanks for listening tonight.
Speaker 3 (40:34):
Tune in tomorrow we'll talk about the smart way to
avoid a tax bomb. You've been listening to Simply Money,
presented by all Worth Financial one fifty five KR see
the talk station.
Speaker 2 (40:45):
It's the main event for the importance events of today.
Speaker 4 (40:49):
Every day we discover something new and in court.
Speaker 8 (40:52):
So it's control our capital, city, direct, federal control, check
in throughout today, something within there will be land swaps,
a deal.
Speaker 1 (41:00):
The everyday event, what is happening the most important things?
Speaker 3 (41:04):
Events in my day to day at tracking our next
weather event, events affecting my money, events in the Middle
East
Speaker 4 (41:09):
Happen, events happening now important at this moment, KRC, the
talk station you know, having a
When it happened. We are coming to you live.
Speaker 2 (00:02):
You're going to want to listen to this fifty five
KRC the talk station.
Speaker 1 (00:15):
Tonight.
Speaker 3 (00:15):
We're talking about alternative investments and retirement plans, a real
life example of what can happen if you aren't diversified
and more. You're listening to Simply Money, presented by all
Worth Financial on Bob Sponsller along with Brian James. Well,
we have some new information on the impact that alternative
investments could have on your portfolio. Brian, we've been talking
(00:37):
about this topic for a few months now as the
industry continues to evolve and update share the latest information
on alts or alternative investments.
Speaker 4 (00:48):
Yeah, we did say last time that I think we
made a joke about how often we were going to
talk about this. That might have been a week and
a half ago, and lo and behold, here we are again.
So the reason this is hitting the is hitting these again.
Of course it will all year long. So the rules
are being loosened on what you can invest in inside
of your four to oh one k's. There is twelve
trillion dollars inside retirement plans. Company based employer based retirement
(01:12):
plans like four to one k's, four or three v's
and so forth, and so the financial services industry would very,
very much like to get more products and services available
to that twelve trillion dollars because that is how we
roll as a country. So what we're talking about today
is alts, short for alternative. These are things outside of
traditional stocks, bonds, and cash that's normally what's in your
(01:32):
four to one k's in the form of usually mutual funds.
Those are mutual funds or one type of investment that
owns a bunch of different things underneath it.
Speaker 5 (01:39):
Stocksponds, cash.
Speaker 4 (01:40):
But now we're moving on to alts, which are private equity,
hedge funds, real estate, and private credit arrangements. These are
often used to diversify a traditional portfolio and can potentially
reduce risk and boost returns, but they're also less liquid
and a lot more complex. There's a lot more moving
parts here that people need to understand before we get
into them.
Speaker 3 (01:59):
All right, I'm not anti this stuff at all, as
I've shared before, but my I got to put my
skepticism had on here a little bit, and I'll explain
what I mean.
Speaker 1 (02:07):
Black Rocks said.
Speaker 3 (02:08):
One in four retirement plans are considering adding alternative investments
over the next year. And as you said, it's it's
it can impact trillions of dollars. And look, as somebody
who used to be an advisor to several large four
one K plans, I know how this game is played,
and I know how the costs of retirement plans and
(02:30):
plan administration works. And these companies, you know, to keep
the company from paying out of pocket for administration services,
what these plan sponsor companies will do is they'll just
put higher fee investment options into the plan. You know,
you the higher the expense ratio of some of these
(02:51):
funds are, that pays the cost of having these plans administered.
So who ends up paying that bill the plan participants.
And I just say buyer beware here, because this stuff
can work out great, better diversification, better returns in some cases,
but you're also paying higher fees to have these things.
(03:13):
And I'm noticing, you know, companies like t ro Price, Goldman, Sachs, Blackrock,
they're starting to bury these alternative investments into those.
Speaker 1 (03:21):
Target date funds.
Speaker 3 (03:22):
So if you just buy the target date fund and
you're getting fifteen or sixteen funds in that target date fund,
some of these things are going to be these alternative investments,
and yeah, it could work out great, but rest assured
the fee exposure is.
Speaker 1 (03:37):
Going up as well.
Speaker 5 (03:38):
Yeah am I am I off base here, Brian, No, No,
for sure.
Speaker 4 (03:42):
I mean that's really this is everybody's going to kind
of fixate on the idea that, hey, you know, diversify
my portfolio.
Speaker 5 (03:48):
Yeah, blah blah blah.
Speaker 4 (03:49):
But most people are going to see the possible chance
for higher returns and that's what's going to be attractive.
But there's also you know, remember where the returns are going.
Speaker 5 (03:57):
To be going.
Speaker 4 (03:58):
There are companies out there, as you just mentioned that
who create these things.
Speaker 5 (04:01):
They make money when you own them.
Speaker 4 (04:03):
It doesn't matter too much to them so much whether
we are successful with them. And I always use the
example of the gold Rush at eighteen forty nine. It
wasn't the gold diggers who made the money. It was
Levi's and Wells, Vargo and these other companies who went
to support the great demand that was happening in that environment.
Speaker 5 (04:18):
So just be buyer beware like anything else.
Speaker 3 (04:21):
Yeah, and I'm not picking on anybody here, but I'm
just throwing out a couple of facts here in this
recent survey. Black Rock itself just Blackrock, spent twenty five
billion dollars on two acquisitions over the past year to
grow their presence and exposure in private credit in infrastructure,
and in July, the firm said, lo and behold, we're
(04:42):
expecting to start offering you know, its own target date
funds with these private credit and infrastructure funds baked in.
Here's the interesting thing, Brian. BlackRock's own survey found that
smaller plans are actually more likely than larger ones to
consider adding private assets earlier this year. Their CFOs said
(05:05):
large plans typically rely on consultants and take considerable more
time before.
Speaker 1 (05:11):
Making any major changes.
Speaker 3 (05:13):
And this is again I'm not slamming any of this,
but the smaller plans are the ones where they got
to find ways to pay for the planned administration expenses.
Speaker 1 (05:24):
The larger your.
Speaker 3 (05:25):
Plans are, there's more scale, the fees tend to be lower.
And yeah, these companies are going to have an advisor
or a consultant helping them to make sure that their
investors are taken care of.
Speaker 5 (05:38):
Yeah, and I kind of liken it too.
Speaker 4 (05:40):
When the early two thousands, late nineteen hundreds and early
two thousands during the first Internet explosion. There when some
form and case began to allow funds that focus purely
on technology, and there was a huge rush into them.
Because this was before two thousand and two, is before
two thousand and eight. We all thought we were invincible
(06:01):
and stocks just went to the moon, and there was
a massive rush any fund that had the word technology,
and it didn't.
Speaker 5 (06:05):
Matter what was under the hood.
Speaker 4 (06:07):
By god, it's it's got technology in it. If it
says though right there in the title, then I'm gonna
own that fun So I have a feeling there's gonna
be a little bit of that. Again, these are not
necessarily bad ideas, but know what you're getting into.
Speaker 5 (06:16):
Nothing is a panacea. Nothing comes without risk.
Speaker 3 (06:20):
You're listening to Simply Money, presented by all Worth Financial.
I'm Bob Sponseller along with Brian James all Right, shifting
topics here a little bit. Brian is AI becoming thenew
dot com bubble. We're starting to see articles like that
cropping up. We've talked about this before and from time
to time it's worth just checking in to see if
anything has changed, you know, with regard to how we
(06:43):
want to answer that question and you've got some good
information to share on just where valuation stand, because you
got to look at valuations to make sure we're not
overpaying for this stuff. Give us some updated, you know,
fig facts and figures around valuation.
Speaker 5 (07:00):
What comparisons to two thousand are everywhere?
Speaker 1 (07:02):
Right?
Speaker 4 (07:02):
I just just kind of made one when we were
in a prior subject there, back when valuation didn't matter,
and you had all these companies that weren't making a dime,
but they had really cool marketing campaigns and really cool
visions and all that kind of stuff. So that that's
kind of where AI is right now. However, the leaders
of this one, these aren't startup firms, right. This is Nvidia, Microsoft, Apple,
and Google, huge cash flows, real.
Speaker 5 (07:23):
Demand for their products and services.
Speaker 4 (07:26):
AI of course is a major major focus for these
giant companies. However, they've got something to fall back on.
This isn't, you know, startup companies in garages. So let's
talk to Let's do some actual comparisons. Valuations are kind
of stretched things that are a little running a little
bit hot. We talk about valuations, by the way, what
we're talking about is that the price to earnings ratio,
which is basically how many dollars of earnings? Is that
(07:47):
the current price? What is the ratio between that price
too the actual earnings? And back then and then late
nineteen hundreds, I keep saying that sounds.
Speaker 5 (07:56):
Like the eighteen nineties when I say it like that,
but any case.
Speaker 1 (08:00):
But around we're getting we're giving old Brian.
Speaker 5 (08:03):
Dating myself, right.
Speaker 4 (08:04):
But back in nineteen ninety nine, the forward price to
earnings ratio of the S and P five hundred was
over twenty five. That was an eye popping figure for
that time. In other words, twenty five dollars of share
of share price for one.
Speaker 5 (08:15):
Dollar of earnings. That's big number.
Speaker 4 (08:17):
Lots of internet stocks had no earnings at all, and
you couldn't even use this metric because again they were
losing money hand over fist, So there is no PE ratio.
Speaker 5 (08:25):
So compare that to today.
Speaker 4 (08:26):
Today, the S and P five hundred forward PE ratio
is around twenty one. So that's up there. Our long
term average is fifteen to sixteen. But we're nowhere near
the dot com boom. And remember that dot com boom
came when we were all a little bit immature about
how the stock market actually worked. At that time, we
had had twenty years of basically nothing but up, and
we all thought that that we were invincible and nothing
(08:48):
bad could ever happen.
Speaker 5 (08:49):
And then two thousand and two taught us differently.
Speaker 4 (08:50):
But back at that time, pe ratio around twenty five,
currently around twenty one, so not quite as bad as
we were back then.
Speaker 5 (08:57):
It's not as much of a bubble as you might think.
Speaker 3 (09:00):
Yeah, I think another huge difference is these bit You know,
we talk about these Magnificent seven companies all the time.
I mean any of the anybody that listens to anything
financially oriented in the news media. I mean the whole
mag seven concept. It's ubiquitous, these seven companies, Apple, Microsoft, Alphabet, Amazon, Meta, Tesla, Navidia.
(09:20):
They make up more than thirty percent of the entire
S and P five hundred. But Brian, to your point,
they're also making money. They're growing, their earnings are growing.
They're real businesses. They're scaled up to really compete in
this new AI era. That is a completely different ballgame
than back in the late nineteen nineties and early two thousands,
(09:43):
where we were talking about companies like pets dot Com,
Webvan dot com, e toys, you know, companies like that
that didn't even have any positive earnings. So I think
it's always important to pay attention to these valuations, and
anytime they get a little ahead of themselves, you know,
the market does a great job of self correcting, and
that's why we talk about diversified, diversified, diversify. But I
(10:07):
think to compare what's going on today back to the
dot com bubble days is a bit of a stretch
because again we're talking about real, mature companies that have earnings,
and not only earnings, but growing earnings.
Speaker 4 (10:21):
Yeah, and don't let that FOMO get a hold of you, right,
because if you have a diversified portfolio, now you probably
have in your four ohwe ki raise your investments, you
probably have something representing the S and P five hundred,
which is just the five hundred largest companies in the
United States. Remember the way that those those types of
funds s and P five hundred index funds are constructed
is they're subject to a weighted average of those individual
(10:45):
funds or individual stocks underneath it, meaning it's not divided
across five hundred companies. Evenly, the bigger the company, the
more that index it makes up. So the Magnificent seven
Apple Microsoft alphabet, which is Google, Amazon, Facebook, Tesla, and Nvideo.
Those make up thirty percent of the entire s and
P five hundred. If you own a large cap fund,
you are exposed to these companies.
Speaker 5 (11:06):
Don't feel like you are missing out.
Speaker 4 (11:07):
You've got If your portfolio has probably run up a
good bit last couple of years and you are benefiting,
don't lose sight of that.
Speaker 3 (11:14):
Yeah, this is probably a good time to put a
plug in here on private equity too, because if you
do want a good diversified, professionally managed portfolio that gets
exposure to private equity. Again, private just means non publicly
traded companies. Let's face it, there are fewer and fewer
publicly traded companies out there right now. So if you
(11:35):
can get a good private equity manager where you are
broadly diversified, not buying a lottery ticket, it can make
sense to have some of that exposure in your portfolio.
Speaker 1 (11:46):
Here's the all Worth advice.
Speaker 3 (11:48):
Don't try to outguess the AI boom, Diversify your exposure
across sectors, and avoid going all in on just one
single trend. What does a four million hospital bill and
a record number of four to one k millionaires have
in common. They both reveal the power and risk of
(12:09):
long term financial planning. We'll explain what we're talking about next.
You're listening to Simply Money, presented by Allworth Financial on
fifty five KRC, the talk station.
Speaker 1 (12:18):
That's happening.
Speaker 6 (12:19):
Seven people killed over the weekend in Chicago.
Speaker 1 (12:21):
The mayor is telling us not to come in. It
is racist.
Speaker 7 (12:24):
Meanwhile, a judge rule that Trump acted unlawfully when Los Angeles.
Speaker 5 (12:27):
Deploying the National Guard is off.
Speaker 1 (12:30):
It's so ridiculous.
Speaker 5 (12:31):
Fifty five KRC, the talkstation.
Speaker 6 (12:34):
Allworth Financial a registered investment advisory firm. Any ideas presented
during this program are not intended to provide specific financial advice.
You should consult your own financial advisor, tax consultant, or
a state planning attorney to conduct your own due diligence.
Speaker 3 (12:53):
You're listening to Simply Money, presented by all Worth Financial
on Bob Sponsller along with Brian James Ether. It's taxes
on family land, planning a three million dollar portfolio, or
just protecting rental properties. We're tackling your real life money
challenges that are coming up straight ahead at six forty three.
All right, Brian, this this is a shocking story an
(13:16):
Ohio woman named Hannah Castle. Recently her story went viral
after posting her four million dollar hospital bill on TikTok.
The charges came after she gave birth to quadruplets prematurely,
with each baby needed an extended stay in a neonatal
intensive care facility. Wow, what a bill, What a surprise.
(13:40):
This woman's dealing with enough already.
Speaker 4 (13:42):
Yeah, so in order to deal with this, obviously, that's
a heart attack when you open that envelope. But she
actually quit her job during pregnancy so that she could
qualify for Medicaid because it was the only way to
get any kind of financial assistance, but still got a
four million dollar bill out of it. So yeah, kind
of breathtaking that this actually happen. And so basically the
(14:03):
way this ended up, Medicaid ultimately did cover most of
those costs. But this did trigger a whole debate and
it got a lot of people talking about how are
we our family, what are we exposed to with regard
to this, so kind of things you're going on, want
to make sure understand your coverage in the first place.
You know, we're sneaking up here, Bob, It's almost Q
four and we're sneaking up here on benefit season where
we all got to pick new plans. Take a little
(14:24):
extra time. Remember what happened to this woman, which, yah,
it's an extreme story, but.
Speaker 5 (14:27):
It does happen.
Speaker 4 (14:28):
Take a little time and read those details. Understand exactly
what you're exposed to, know what you're getting, more importantly,
what you're not getting, so that something sneaks up.
Speaker 5 (14:35):
On you, you'll you'll kind of know you know what
to deal with.
Speaker 4 (14:38):
And also remember up to up to eighty percent of
medical bills can contain errors, according to a couple of
different healthcare communication firms. So just make sure you are
on top of what you actually owe and don't just
write the check because they were because you were told.
Speaker 1 (14:50):
You owe it.
Speaker 3 (14:51):
Yeah, I think that's the big thing. Check check your coverage,
plan ahead if you can. I mean, I understand that
pregnancy is not always something you can plan ahead for
or but medical benefits are.
Speaker 1 (15:02):
So make sure before you just walk away.
Speaker 3 (15:05):
From company provided coverage, you know what you're getting into
as far as your next medical coverage, and do some
of that homework up front, and then to your point, Brian,
check that bill because there's so many errors out there
with medical bills. And my guess is Medicare probably went
in there and reviewed that thing. I hope they did,
at least because this tax payer money. Review that bill
(15:26):
with a fine tooth, come and get rid of some
of the fat in there.
Speaker 5 (15:30):
Yeah, and Medicaid is what's stepped in for her Medicaid.
Speaker 1 (15:34):
Medicaid.
Speaker 5 (15:34):
Sorry, that's okay. One of the other things too.
Speaker 4 (15:37):
If you're in a situation like this, remember the hospital,
the healthcare facility itself may offer some kind of charity
care or payment plans even if you do have insurance,
because they understand, you know, they understand how it works.
There's just red tape you have to get through. You
also might consider supplemental policies. You may have something right
So a lot of times people come up with these
insurance policies they've had for decades and don't know why.
Speaker 5 (15:58):
Make sure you know what you own.
Speaker 4 (16:00):
Sometimes there's a critical illness rid or a hospital indemnity
policy already in your household, so make sure you understand
what resources are.
Speaker 1 (16:07):
Yep. All right.
Speaker 3 (16:08):
We talk about the number of four to one k
millionaires quite often on this show. And here's a headline
that jumped out of US this week. According to Fidelity,
almost six hundred thousand people now in this country have
at least one million dollars in their four to one
K plan. That's the highest number ever recorded. And know
these aren't Silicon Valley founders or lottery winners. These are
(16:32):
most likely people just like you and me, long term
savers who were disciplined and just stuck to a plan
and it works.
Speaker 1 (16:41):
It works over time, yep.
Speaker 4 (16:43):
So this is a common question I'm acting clients when
when we're updating financial plans. Because I'm just sitting here
at this table every day talking to people and putting
their puzzle pieces together. I see this happen and we
have the big momentous where I get to ask them
the question, hey, do you feel like a millionaire? And
a husband and then a wife will look at each
other and they'll be like, nope, because it's a little
bit of a different world now.
Speaker 5 (17:04):
So in any case, real numbers behind this.
Speaker 4 (17:07):
So the average four and K balance was up over
eight percent in the second quarter this year. That's around
one hundred and thirty seven thousand. Remember this is the
average of everybody, and so that's largely thanks to the
market's performance so far, we're up about the S and
P five hunders, up about eleven percent. Most of that
came in the second quarter, but with the really important
point of that is that people, for the most part
stayed the course. We had a panic in April when
(17:29):
we were first getting used to the idea that tariffs
were going to be a thing, and the market dropped
as low as fifteen percent at that point, which was
a scary, scary event. But at the same time we
recovered and most people seem to have stayed put.
Speaker 1 (17:42):
I did.
Speaker 4 (17:42):
My phone didn't ring a whole lot during that time period.
So I think maybe people knock on wood. You tell
me what you think. Maybe people are getting used to
chaos is the order of the day. I don't know,
what do you think, Bob?
Speaker 3 (17:51):
I agree? I mean there's always going to be market volatility,
you know, wherever the source comes from or the reason
for it. Market volatility is the price of being in
and you've got to stay the course and have a
disciplined plan and those that do can ride these things out.
You're listening to Simply Money presented by all Worth Financial
on Bob Sponseller along with Brian James. Let's not forget
(18:13):
the savings rate matters here too.
Speaker 1 (18:15):
Back to this.
Speaker 3 (18:16):
Fidelities, you know, study the total savings rate that's employee
and employer contributions combined. They held steady at just over
fourteen percent. That's a little bit below Fidelity's recommended fifteen
percent target, but that's pretty darn good, Brian. And by
the way, gen x and boomers are increasing their contributions
(18:37):
to iras too, up twenty five and thirty seven percent
respectively over the last year. So even older savers are
taking advantage of every little bit of tax sheltered growth
they can get.
Speaker 5 (18:50):
Yeah, we want to be in a good place. There.
Speaker 4 (18:52):
Another interesting bullet from Fidelity. I was talking a minute
ago about that, about what happened in April when the
market took a dive. Fidelity said that only about five
percent of account holders made any changes during the second
quarter when we were in that tariff panic. So basically
what that says is that ninety five percent of them
of investors didn't really react to it. Might not have
been happy read the headlines, grumbled about it, then went
(19:12):
on about their merry way and just kept saving, which
puts them in the strong position that they're in right now.
Speaker 1 (19:16):
So that's great.
Speaker 4 (19:17):
But one thing we want to pay attention to as
well is loans. Right so, about nineteen percent of people,
according to Fidelity, have loans out against their four to
oh one ks. That's kind of a red flag barring
against your retirement plans. It can really create big problems
down the road. I really haven't seen a situation where
it was the best answer for somebody. Sometimes, yes there
is no other choice, but usually planning ahead and making
(19:41):
sure you have an emergency fund, all of that, having
done that work in advance can put you in a
better position where you'll never have to have that type
of a discussion. Scary thing about four to one K loan, Bob,
is if you quit your job or lose your job
unexpectedly with a loan in place, that loan will almost
always become a taxable and possibly penalizable distribution unless you
can pay it off in pretty short order. Most people
(20:01):
can't do that. That's why there's a loan in the
first place.
Speaker 3 (20:04):
Yeah, that's something you really really want to avoid. Here's
the allworth vice. Becoming a four to one K millionaire
isn't about luck. It's about discipline, consistency, patience and making
savings a long time habit. Do you think you're safe
because you own a stock, one particular stock in a
great company that might even have fantastic long term returns.
(20:27):
We're going to bring you a real life example of
how that mindset crushed a family financially. You're listening to
Simply Money presented by all Worth Financial on fifty five KRC,
the talk station.
Speaker 4 (20:39):
Fifty five KRC the talk station iHeartRadio station.
Speaker 3 (20:49):
You're listening to Simply Money presented by Allworth Financial. I'm
Bob Sponseller along with Brian James. Well, if you're someone
who loves big tech stocks, hopefully you know by now
that those big company he's often come with a lot
of government scrutiny and depending on the outcome or how
you know, judges and court cases you know pan out,
the result can really impact the stock price. Case in point, Brian,
(21:13):
you know Alphabet's Google does not have to sell its
Chrome web browser, but it must share some of its
search and other data with competitors, according to a federal
judge deciding in a landmark case against the search giant.
Speaker 1 (21:27):
Let's get into some of the details there.
Speaker 4 (21:29):
Yeah, so judge Ammett Meta ruled last year that Google
was taking advantage of its rather dominant position atop of
these search space and kind of set up an illegal
monopoly and making money advertising by paying companies like Apple
and Samscum literally billions of dollars a year to have
Google installed as the default search.
Speaker 5 (21:49):
Engines on your smartphones.
Speaker 4 (21:51):
This is where you do you type in a word
into your phone somewhere, and it magically now dumps you
on Google having done a Google search. So that's been
determined to be a no no that this vision might
have fundamentally reshaped how Google has to do business. That's
the big way they make money by driving traffic into
their search engine. So the Justice Department is proposing some
sweeping changes that would include selling off Chrome or even
(22:13):
the Android operating system, which is what runs Google phones.
Speaker 5 (22:17):
So on September second.
Speaker 4 (22:18):
Though, he said Google is not going to be required
to get rid of Chrome, but the court also won't
include a contingent divestiture of the Android operating system either,
So in other words, those two big things are apparently
not going to happen. This is not unlike what happened
in nineteen ninety eight when the Department of Justice went
after Microsoft, and at that time, the idea was that
Microsoft had built Internet Explorer originally when it blew Netscape
(22:41):
out of the water. This is ancient Internet history, and
it was determined to have set up a monopoly at
that time. So that had a big impact back then,
didn't a Bob.
Speaker 3 (22:51):
Yeah, this is back in April two thousand, So I
mean it's hard to tell how much of this stock
price moves was due to this court case and how
much of it was just tied to the whole tech
bubble where the NASDAC you know, went down almost eighty percent.
But Judge Thomas Penfield Jackson ruled that Microsoft had violated
(23:12):
antitrust laws and that stock just plummeted over a short
period of time back into the twenties. Now, obviously Microsoft
is doing more than fine today. But the point of
these stories is just anytime you are overly concentrated in
any one company, anyone sector, no matter how good it
(23:33):
all looks, things can and do happen. And we want
to just to illustrate that point today, we want to
give you a real life story on how over concentrated
in one stock can really impact a family negatively and
our own producer here at All Worth, Jason Scott, is
here to talk about how a situation like this really impacted.
Speaker 1 (23:55):
His family, and not in a good way.
Speaker 5 (23:58):
Jason, thanks for joining us.
Speaker 4 (23:59):
I'd love to hear you know what does the real
world stories are great, So yeah, please tell.
Speaker 5 (24:02):
Us what happened to your family.
Speaker 8 (24:04):
Yeah, you know, we do the show daily and we
always talk about don't be underdiversified. But I did, you know,
I felt it very important. You know, what is an example,
like what does that look like? So my mother's second husband,
back in like nineteen ninety eight or so, had a
(24:26):
lot of their portfolio directed in Microsoft. I don't know
how much, but it was way, you know, too much,
as we would like to say. And when that anti
trust case started and you guys talked about how the
stock had plummeted. Initially, you know, he didn't do anything
(24:49):
about it. He just figured it'll come back, it'll come back.
But what happened is it was kind of like a
slow burn with the stock, in which it kind of
slowly over almost like a deck gad. I believe it
just kept kind of staying where it was, and it
kept going lower and lower, and there were just he
would not get out of it. He was again, he
(25:11):
was not diversified, and he wouldn't get out. He wouldn't
get out. You wouldn't get out thinking it would come back. Well,
what ultimately happened is after about three years of this,
he got Parkinson's disease and dementia basically simultaneously, and they
wound up, my mother and him wound up in a
(25:32):
situation where they ultimately had to sell it. They needed
the money, but they sold it again. It was so
much of their portfolio that basically it killed them financially.
And to extrapolate forward to now, just that one thing
has impacted our family to the point of, you know,
(25:56):
like we're talking about medicaid now and nursing homes and
all these kinds of horrible things that you can only imagine.
Speaker 1 (26:04):
But a lot of it had to.
Speaker 8 (26:05):
Do with a simple portfolio that had too much of
too much money in one thing.
Speaker 4 (26:11):
Yeah, I'm looking at Microsoft right now, and I can
see I see the timeframe you're talking about. Microsoft basically
was dead in the water from a little after two
thousand to about twenty thirteen. It has since gone off
like a rocket to the moon. But yeah, that can
be And that wasn't the worst time period either. There
were there were ups and downs during that timeframe, but
a diversified portfolio would have would have helped a lot.
(26:31):
It's a it's a shame your mother had to go
through that. So that's so, So what what advice would
you give, you know, as a family member, if if
you you know, you don't even have to be a
financial advisor to recognize these types of situations. What what
advice would you give to some innocent bystander who sees
a loved one kind of going through this.
Speaker 5 (26:47):
Yeah, well, and that's the other part of this.
Speaker 1 (26:49):
It's funny.
Speaker 8 (26:49):
We talk about so many concepts and they were all
at play here.
Speaker 1 (26:53):
So when they got.
Speaker 8 (26:55):
Remarried, he wouldn't let my mom know much about what
was going on with them, and so she just wanted
to be taken care of, so she just kind of
turned a blind eye to it. So there's that component
of it, a lack of communication. Then again, you know,
when you own Indexes, you already own Microsoft, you already
own Navidia, you already and you ultimately may own the
(27:17):
next Navidia and the next Microsoft, and that sort of thing,
you know, as a family member. All my experience is
just you know, you have to ask questions. You know,
if you're going into a relationship, you really you know,
there have to be sort of you have to tell
(27:38):
me what's going on or this isn't going to happen.
Speaker 3 (27:41):
Jason, was your father, mother and father working with a
financial advisor in any way, shape or form with their
whole financial plan?
Speaker 1 (27:49):
Did they have a financial plan?
Speaker 8 (27:51):
So this was her second husband, this was not my father,
that's all right. I don't know what kind of a
financial plan they had. I am sure that they did
have some sort of a plan. Unfortunately I don't have
the answer to that because my mom didn't have the
answer to that. Yeah, and you know, at the time,
I mean this was twenty five years ago, I was,
(28:11):
you know, doing my own thing. I wasn't so worried
about what was happening because they seemed everything was fine.
They lived in a big, beautiful home and there was
no need at the time. I thought they have to,
you know, get involved.
Speaker 1 (28:24):
All right. Well, Jason, thank you for coming on tonight.
Speaker 3 (28:27):
And I know that's a difficult story to tell, and
really appreciate your transparency, especially sharing personal family information. And
hopefully that'll help a lot of folks out there. Here's
the all Worth advice. If one stock is carrying too
much of your future, you don't actually have a plan.
You have a gamble all right, from farmland sales to
(28:47):
retirement insurance gaps and even direct indexing. We answer your
biggest money questions coming up next. You're listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
Talk station. To be Rich, we call them every day
millionaires every day listen to Dave Ramsey.
Speaker 7 (29:05):
They typically say one of the things that turned their
life around was when they started looking at purchasing something rich.
People ask how much broke people and I've been both
brother okay broke. People ask how much down and how
much a month?
Speaker 1 (29:22):
Tonight at seven oh six started asking how much On.
Speaker 2 (29:26):
Fifty five RZ the talk station, get your hot cup
of coffee and Brian Thomas tomorrow from five till nine
am on fifty five KRC the Talk station.
Speaker 3 (29:44):
You're listening to Simply Money, presented by all Worth Financial
on Bob Sponseller along with Brian James.
Speaker 1 (29:49):
Do you have a financial question you'd like for us
to answer?
Speaker 3 (29:51):
There's a red button you can click while you're listening
to the show right on the iHeart app. Simply record
your question and it will come straight to us. All right, Brian,
Tom and Milford leads us off tonight. He says, we
just sold some farmland that's been in our family for decades.
Is there a way to use those proceeds for income
while also reducing the tax hit?
Speaker 1 (30:14):
Well?
Speaker 5 (30:14):
Yeah, let's so let's talk a little bit about that
tax hit to begin with. So, if you've been holding
on to.
Speaker 3 (30:18):
Why are these people always come to us after they've
done something?
Speaker 1 (30:22):
You notice a pattern here?
Speaker 3 (30:24):
I created this mess. I created this mess. Brian, please
clean it up for me after the fact.
Speaker 4 (30:30):
Yeah, So that the problem what Bob's referring to there
is the the past tense nature of Tom's question and time.
We're not making fun of you, but this is this
This could there could be.
Speaker 5 (30:38):
Some challenges because the farm land has already been sold.
Speaker 4 (30:41):
But so one of the things that happened to I
would ask, do you know what the cost basis is
in the first place, meaning what is the tax hit?
Did you inherit it from your your forebears or was
it given to you during their lives because if you
inherited it, and that should have come with a step
up in cost basis, so therefore there might be less
hopefully for you, there's less tax. You might be thinking
now if you had had maybe a chance to prepare
(31:02):
a little bit, depending on what you ultimately were going
to do with these dollars, you could have maybe used
what's called a ten thirty one exchange if you were
going to reinvest these dollars in other similar real estate.
But if the cash has are even received, that's not
a thing. If the sale is not completely finalized, then
maybe you can rearrange it to do an installment sale
and you'll allow the Of course, that's sort of like
seller financing. Basically you'll allow the seller or the buyer
(31:25):
rather to make payments to you over time. That means
you can spread them into different years. You can use
those the proceeds to fund a different portfolio and then
look for losses elsewhere to possibly set off some of
the gains if you've got If you are charitably inclined,
now this is something that could potentially help you. If
you've got a bit of a gain, if you are
charitably inclined, then you may be This may be a
(31:46):
good year to use like a donor advised fund or
maybe a charitable remainder trust to make a sizeable donation
to a charity that you were already supporting anyway, effectively
pulling a bunch of years worth of donations into one
tax year to gain that tax deduction.
Speaker 5 (31:59):
That could help you now.
Speaker 4 (32:01):
But the ten thirty one, that kind of stuff, Unfortunately,
that ship has sailed because you already sold the property.
Speaker 5 (32:05):
Okay, let's move on.
Speaker 4 (32:06):
Michael in Loveland is sixty years old and he's ready
to hang it up, and he's asking, with social security
pensions and investments, what's the best order to draw from?
Speaker 5 (32:15):
So I don't run into any taxi prizes.
Speaker 3 (32:16):
Bob, Well, Michael, you know when you say social security
pensions and investments, we don't know how those investments are structured.
Are they four or one k's? Are they iras? Are
they raw iras? Or are they after tax brokerage accounts?
So it's important to take a look at all your
sources of income and all your potential sources of income
(32:37):
meaning investments, and then run some numbers to say what
is the best way to construct in income strategy in
the most tax efficient way possible. So it doesn't mean
that you've got to start with one source and drain
all that down before you tap another one. Oftentimes, I
would say most times, you're going to end up with
(32:58):
a blend of all that stuff working together. And again,
sit down with a good fiduciary advisor, paired up with
a good CPA, and together you know you could put
together an income plan that gives you the income you
need and want every year, but do it in the
most tax efficient manner. That'd be my answer, all right.
Samantha and Florence Brian. She says she's got already has
(33:21):
umbrella insurance, but they also have a vacation home and
a boat, so they're living large out on the lake,
having a whole lot of fun. Maybe too much fun,
because she says, do we need a whole different level
of liability coverage?
Speaker 4 (33:35):
I don't know what you're out there doing on that boat,
but you're just thinking ahead and that's not a bad
thing at all. So umbrella liability is designed to protect
over and above the standard things that auto, home and
boat policies offer, but all underlying policies have to have
a required minimum that's usually a two D fifty thousand,
five hundred thousand dollars liability. That's what's built into what
(33:55):
you probably already own. Umbrella is on top of that.
So if you've got extra assets such as this vacation
property in a boat, the umbrella limits should should come
up yes to that to match that net worth exposure.
A lot of advisors suggest in the five million dollar
range if you've got a multimillion dollar household out there.
So don't know, we don't know how big of an
asset we're talking about here, but good numbers to work with.
(34:17):
That does sound like an awful lot, But remember umbrella
policies are geared to cover things that aren't very likely
to happen, but if they do happen, they can be
they can be life ruiners. So the the cost of
this coverage isn't that much. You're not talking tens of
thousands of dollars, so it's very well worth it. And
make sure that your umbrella covers watercraft liability. Sometimes they
(34:38):
need a whole separate boat liability rider in addition, so
lots of moving parts there, but you're right to be
thinking this far ahead.
Speaker 5 (34:44):
That's a good idea. Tom In Westchester. He's got he's
got a pile of money he's worried about.
Speaker 4 (34:49):
He's got about three million dollars, and then he realizes
that all of it is almost all of it is
in US stocks. Bob, should he have any global exposure
or can we just keep it simple and throw it
all in the S and P five hundred.
Speaker 3 (35:00):
Let's say you, well, Tom's worried about over complicating things.
So I mean, my off the cuff answer is, you know,
do you have a huge emergency here because you don't
own any global or international stocks by all means no?
Speaker 1 (35:14):
All right, that being.
Speaker 3 (35:15):
Said, over time, when you run the numbers on combining
risk and return, it does make sense, back to that
whole efficient frontier studies that we've seen over time, to
have a little bit of exposure to global and international
stocks somewhere between zero and twenty percent.
Speaker 1 (35:32):
Now do you have to do that today?
Speaker 2 (35:33):
No?
Speaker 3 (35:34):
But I think as you do your normal rebalancing, keeping
in mind that we don't want to have the you know,
tax tail wag the dog here, meaning don't don't expose
yourself to a bunch of tax liability just to move
some money into international stocks. It might make sense to
take a look at it over time as you just
do your normal rebalancing, get a little sliver into international stocks.
(35:58):
Just as a reminder, international stocks are doing wonderfully well
this year after three four years where people didn't.
Speaker 1 (36:05):
Want to invest in them at all, and hence the point.
Speaker 3 (36:07):
It makes sense to have a little slice of that
in a truly diversified portfolio. But you could do it
gradually over time and don't feel like you got to
go out and buy that stuff in bulk today.
Speaker 1 (36:18):
Hope that makes sense, all right?
Speaker 3 (36:20):
Chris and fort Thomas is evaluating direct indexing versus ETFs. Brian,
you got about twenty five seconds. At what level is
the complexity worth it to save on taxes?
Speaker 4 (36:30):
Yeah, so it can really be worth it to move
to a direct indexing plan, meaning you own individual stocks
as opposed to ets mutual funds. I'd say a million
dollars in up in taxable accounts. You've got high income,
maybe you're in a high marginal tax bracket. I think
that's when it's most efficient to start looking at more
specific strategies.
Speaker 1 (36:46):
That was well done, sir, all right.
Speaker 3 (36:48):
Coming up next, I've got my two cents on managing
short term debt. You're listening to Simply Money, presented by
all Worth Financial on fifty five KRCEE the talk station.
Speaker 8 (37:00):
It's not as if there are people sitting there reading
every piece of information the US government has writing.
Speaker 6 (37:06):
China is writing the rules while we're left behind.
Speaker 3 (37:10):
Math deploying fake mass and accounting gimmicks to hide the
true cost.
Speaker 1 (37:14):
Of their bill.
Speaker 6 (37:15):
Little do you know it, it keeps changing every day.
Speaker 2 (37:17):
We've been taking you back to school all summer.
Speaker 1 (37:21):
Sounds like a high school term paper. They got a little.
Speaker 2 (37:24):
Mark continued education on fifty five krs the talkstation at
the dot Com.
Speaker 1 (37:31):
I am so worried that next month I have to
choose between groceries for my kids or gas for my car.
Speaker 2 (37:36):
Talk about it here fifty five KRC the talk station.
Speaker 1 (37:43):
You're listening to Simply Money? Is that a buy?
Speaker 3 (37:45):
All Worth Financial? Lumbop sponseller along with Brian James. All right, Brian,
I want to talk a little bit. You know, I
sometimes am surprised when I have client review meetings the
number of people that walk in and they have a
great financial plan, and then all the sudden they tell me, hey,
we still have debt. Out here, We've got a car
loan at seven point nine percent, or I took a
(38:08):
home equity line of.
Speaker 1 (38:09):
Credit out to pay for a cruise.
Speaker 3 (38:12):
And my point here is when people are sitting on this,
these these small loans, sometimes bigger loans, but you know,
medium sized loans at above seven percent interest rates, I'd
like to know what you think, but I want these
things paid off. Sitting out there. I know the markets
have been doing great, you know, diversified even sixty forty
(38:35):
portfolios have done in the mid teens for the last
few years, and it's it's really easy to just go
to sleep and say, well, my investments are always going
to outperform the.
Speaker 1 (38:44):
Cost of my debt. But that is not guaranteed.
Speaker 3 (38:47):
And so when you get this, when you get this
debt on your balance sheet at over seven percent, I
want to make that stuff disappear. And I've been having
more conversations than I care to want to have about
that here in recent months.
Speaker 4 (39:03):
Yeah a thing, Yeah, because the mark, like I said,
the mark is at a peak, and people will people
will will kind of lean on the idea that I
should leave it all alone and all and I'll leave
I'll let these little credit cards go for a while
because they're not hurting anything, no big deal. And now
we've got, you know, four credit cards with three or
four thousand dollars on them that have all run up
to the twenty five and thirty percent bracket. And people
(39:24):
will say, but it's I never looked at it, didn't
know the interest rate was that high. Well, then that's
that's what they're hoping for. You're playing right into their
hands of these big banks and financial institutions. So a
common conversation I'm having right now, Bob is, look, you've
been looking at these little piles.
Speaker 5 (39:38):
Of debt for a while, uh, and just not doing
anything about them.
Speaker 4 (39:41):
And I'll ask the question, what if somebody dropped money
out of the sky, what if cash just appeared in
your checking account?
Speaker 5 (39:46):
What would you go do? And they all say, well,
I pay off those debts.
Speaker 4 (39:49):
Of course, Well great, because I'm gonna send money from
your investment account to your bank account, because we're gonna
pay these debts off with money you didn't have a
month ago. Because we're gonna take advantage of the market
where it is at an all time high. That's a
great time to blow up some of these little debts
and clean up some of the clutter on your balance sheet.
Speaker 3 (40:06):
No, that's good, and that highlights the two points I
really want to make here. Number one, don't go to
sleep here just because the market's been doing well and
it's at all time highs. And then second, where possible
plan ahead for some of these lump some expenditures, build
up some cash in advance so you don't have to
go out and borrow money to make those purchases. I
(40:27):
know sometimes it's easier said than done, but it's just
good sound financial planning.
Speaker 1 (40:32):
All right, thanks for listening tonight.
Speaker 3 (40:34):
Tune in tomorrow we'll talk about the smart way to
avoid a tax bomb. You've been listening to Simply Money,
presented by all Worth Financial one fifty five KR see
the talk station.
Speaker 2 (40:45):
It's the main event for the importance events of today.
Speaker 4 (40:49):
Every day we discover something new and in court.
Speaker 8 (40:52):
So it's control our capital, city, direct, federal control, check
in throughout today, something within there will be land swaps,
a deal.
Speaker 1 (41:00):
The everyday event, what is happening the most important things?
Speaker 3 (41:04):
Events in my day to day at tracking our next
weather event, events affecting my money, events in the Middle
East
Speaker 4 (41:09):
Happen, events happening now important at this moment, KRC, the
talk station you know, having a
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