September 24, 2025 • 39 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian break down the looming government shutdown and what it could mean for your investments in the short term. They also dive into why investors are holding a record $7.7 trillion in money market funds, and whether that’s a smart move in today’s market. Plus, they unpack the real cost of the American Dream—homes, kids, health care, and more—and how planning can keep those expenses from derailing your retirement goals. Later, the guys tackle “phantom income,” that frustrating tax bill on money you never actually see, and explain how to prepare for it. Finally, in Ask the Advisor, they answer your questions on long-term care planning, inherited property, consolidating old 401(k)s, and whether annuities make sense for million-dollar portfolios—before wrapping up with important advice on managing your 529 college savings plans.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:06):
Tonight, a potential government shutdown looms, the danger of something
called phantom income, and we answer your questions. You're listening
to Simply Money presented by all Worth Financial on Bob
Sponseller along with Brian James.
Speaker 2 (00:20):
Well, the clock is ticking.
Speaker 1 (00:21):
Toward another potential government shut down. Brian, this could impact
markets and your investments in the very very short term.
Update us on where things stand. You know, as of
Tuesday night.
Speaker 3 (00:35):
Us fnal government is approaching a deadline coming up September
thirtieth to pass a continuing resolution or full appropriations bills. However,
we're going to solve it this time around. This has
become routine. We do this, you know, every you know,
six months, twelve months, eighteen months, every now and then.
But if nothing passes, then of course, just like always
a lot of government operations are going to shut down.
(00:56):
So where we are with this the House, which is
of course that's the Republican side. The republic Republicans have
controlled the House. They've stopped a pass the stopgap funding
bill to extend government funding through November twenty twenty first.
So this is the phase where we just tack on
a few more weeks, a few more days and then
that's the real deadline. Wop's no weight, this is the
real deadline. No, we're serious about this deadline. That's the
(01:16):
phase we've entered. Now. The Senate, of course, as you
would expect, has rejected that bill along with a Democratic alternative.
So as that deadline is coming up, there is more
and more risk of a shutdown. But again, we've seen
this game before, haven't we, Bob.
Speaker 2 (01:29):
We see it all the time.
Speaker 1 (01:30):
And you know, I've monitored a couple of different news
shows today and I'm seeing maybe some olive branches being
extended here. House Minority Leader Jeffries and Senate Minority Leader
Schumer are going to meet with President Trump sometime I
think in the next couple of days and at least
talk about this. And I'm hearing whisperings Brian of kicking
(01:53):
the can down the road.
Speaker 2 (01:54):
I think, what's it.
Speaker 1 (01:56):
The big sticking point here is this thirty billion dollars
to extend medicare supplements that were instituted back during COVID,
and it was meant to be a temporary funding mechanism
that's set to expire, and the Democratic side of Congress
does not want that stuff to expire. They wanted to
(02:17):
continue and not just have these subsidies come to a
screeching halt. I'm hearing that that's the sticking point. It's
thirty billion dollars of medicaid funding. And Brian, I'll just
share an opinion. I mean, look, thirty billion dollars right
now is what this government has been taking in roughly
every month as tariff revenue so far during twenty twenty five.
(02:41):
If I had to guess, I think the President and
these two gentlemen will sit down and work something out
and invert a shutdown.
Speaker 2 (02:48):
But maybe that is wishful thinking on my part.
Speaker 3 (02:51):
Well, it's wishful think thinking. And this is always a
game of brinksmanship because and we're way early in the
brinksmanship game. We're in the chicken part of the of
the process here where the two trains are rushing at
each other, waiting for which one of them to swerve.
And now hopefully they're not actually trains and they're not
on rails and they'll be able to swerve. That usually
is what happens, is what has happened in the past.
(03:12):
But you know, this is going to take some time
for the arguments and the back and forth and all
that kind of stuff. But k so let's talk about
what should we be prepared for. Well, the potential short
term impact in terms of investments. Obviously, the volatility is
going to be up. That always happens. The market hates
the lack of clarity, It hates fog. We can be
fine with bad news. We're fine with good news. It's
(03:32):
the no news that causes an awful lot of uncertainty
because if there's bad news out there, well, we know
what it is and we know how to react to it,
and we can kind of we can draw parallels to
things that have happened in the past and the market
will react accordingly. But when we're just guessing at what happens,
then every new little headline will cause somebody, will cause
the market to swing a little bit. The way somebody
answers a question, if they pause, if they look away
(03:55):
before they respond. All that kind of stuff drives the
crazy that we have. You know, when we go through
these processes. So and the mathematically treasury yields may drop too.
And ironically, even though it's the government shutting down, US
treasuries often still see end up seeing a flow in
as people start to move out of riskier assets such
as the stock market, and so people will pursue safety
(04:16):
whenever they've got these types of concerns.
Speaker 1 (04:19):
Yeah, the markets historically they often look past all this stuff.
I mean, this has become as you as you said common. Now,
this is like every six months or so, we have
a thread of a government shut down. Both political parties
like to fundraise on this stuff. Let's not forget we're
heading into mid terms, you know, and that whole election
cycle will start in earnest here after the holidays. So
(04:42):
that's why I think the canill get kicked down the
road here. I think both political parties want a fundraise
on this issue. But we'll see it's dangerous to share
opinions about any of this stuff because no one really
knows what's gonna happen. But shutdowns usually have a you did,
market impact, and they seem to be the market just
(05:03):
seems to be yawning at all of this right now.
For example, during the twenty eighteen twenty nineteen shutdown, the
longest one in history, by the way, the S and
P five hundred actually rose nearly ten percent because it
coincided with a federal Reserve pivot where they started to
lower interest rates. So there's a lot of things that
move this market. I think my advice out there would be,
(05:26):
you know, with any kind of uncertainty, as you've already
called out, you know, if you need to get short
term money on the sidelines for buying a car or
home improvements or running a tuition bill, you know that
money should already be out of the market and in cash.
And if you haven't done so already, make sure you
have some dry powder here for those short term cash needs,
(05:48):
because you know, anything can happen here in the next
few days to a week as we try to avert
a government shutdown.
Speaker 2 (05:56):
Yeah, so I like what you.
Speaker 3 (05:57):
Were talking about there with with some examples from the past.
You know, I like looking at the looking at history
to understand what might come. So another example twenty thirteen,
we had a shut down then and that cost the
economy about twenty four billion in lost GDP, but a
lot of that was recaptured after the government reopened. So
the demand for stuff that we have right the things
that need to happen, that doesn't just go away. It's
(06:19):
definitely disruptive, but usually once things get settled, then we
will go back and capture whatever did and get done.
That's what happened in twenty thirteen. And you know, like
you said, twenty eighteen, twenty nineteen, we had a similar
type of a situation that was the longest one in history,
but it kind of came and went. I do remember
that being just a disperable It didn't feel like a
scary year like two thousand and eight, but it was
(06:40):
just a miserable, kind of a doldrums year. Just dragged
on and on and on. The market wouldn't move, we
couldn't get these questions answered, and just everybody waiting for
Congress to just decide what in the world it was
going to do so that we could just all move
on with our lives. But so unfortunately we've been through
this before, and I think, like you just said, Bob,
we've talked about this a lot late. The win the
market is at a peak when the news is good bad. Otherwise,
(07:03):
if the market is at a peak and you've been
sitting on not enough cash for the bills you've got
coming up, then fix the problem, deal with it, and
don't get drawn in by the fact that though hey,
the market's been on a heck of a run. It
might go a little bit more more likely, it's gonna turn,
it's gonna turn the wrong direction on you're gonna have
take those dollars out at a little bit of a loss.
Speaker 1 (07:20):
Yeah, don't treat your tech stock portfolio like an ATM.
In other words, you're listening to simply money, presented by
all Worth Financial lumbob Spon Seller along.
Speaker 2 (07:28):
With Brian James. All Right, another story we're following.
Speaker 1 (07:31):
According to some data from Crane Data and industry researcher,
US investors are now holding a record seven point seven
trillion dollars in money market funds Brian. So that's not
just institutions. That includes a lot of individual investors. And
if you think that's just leftover pandemic savings, it's not.
This trend is continuing now even in a rising market.
(07:55):
Seven point seven trillion dollars Brian.
Speaker 3 (07:59):
Yeah, and this is not just institutions, right. Institutions are
always sitting on giant piles of money. You know, some
of our largest tech companies usually set on huge piles
of cash so that they can have some DRIVEOWD or
to do whatever they want to do. This is individual
investors and I can speak to a lot of them.
I'm going to have meetings with some of them today
because this is just something that people are doing. We're
in a situation. We're in a part of the economy
(08:20):
right now through the economic cycle where where there has
been a lot of cash moving around and just a
lot of you know, put productive activity, and people are
starting to hoard cash a little bit. I have a
lot of clients again the same thing where we're trying
to figure out what should I do with this cash?
Should I continue to hoard it, or should I you know,
do I should I pay off the mortgage, or you know,
do to take care of some of these other things
(08:40):
that I want to But anyway, the reason has happened
that it's more and more focused this time is because
the Fed, of course, hiked interest rates a few years
ago and again and again and again, and all of
a sudden, we have high yield savings accounts that look
like they haven't looked in twenty five years, and it's
become more attractive and more rewarding to have cash. So
that there that is a good reason for that much
money sitting on the sitting on the sideline. But if
(09:02):
you do have emergency cash in that high yield savings account.
We would still argue you keep it right where it is.
The yields are higher than they've been in decades, and
you might even consider locking some of it in. Right,
We've already gotten one rate cut, and there's possibly another
one coming a couple more later this year, so it
wouldn't be the worst idea. If you know you've got
more than you need to go ahead and lock a
rate in for the next year or two. I'd say
even maybe three years. Beyond that the yield curve starts
(09:24):
to get in the way, but at least one, two,
maybe three years.
Speaker 1 (09:27):
Yeah, it all depends on the time horizon. And again,
tell your money what it should be doing in advance.
Don't just hope everything works out. You know, a lot
of people are happy, you know, locking in four percent
in a what can seem like an uncertain environment. An
interesting discussion I heard yesterday Brian among a couple of
respected economists. They pointed out that yep, seven point seven
(09:50):
trillion dollars is in fact a lot of money, But
when you factor in the total market cap of the
stock market now after the tremendous run up we've it's
it's really not that much money as a percentage of
total capital in people's investment accounts. I thought that was
an interesting story because we always talk about numbers, we
(10:12):
rarely talk about percentages. So again they were just pointing out, yep,
seven point seven trillion obviously a lot of money, but
as a percentage of the.
Speaker 2 (10:22):
Total value of all these.
Speaker 1 (10:24):
Brokerage and retirements and four to one k accounts sitting
out there, it's not really as big of a number.
Speaker 3 (10:30):
In percentage terms as people might think. Your thoughts, you
got my yeah, no, what you just got my brain rolling?
So I just pulled it up.
Speaker 1 (10:38):
You're already you're already pounding your computer pulling this out.
Speaker 2 (10:41):
Yeah.
Speaker 3 (10:42):
I thought that was like, that's an interesting point. Bob
doesn't know the number real time. This is why I
love the fact that you do this show with me.
All Right, what's your research telling you? One hundred and
twenty four trillion is the total market cap of all
the publicly traded and that's globally. So this is a
great point, Bob.
Speaker 2 (10:58):
So that means we're talking five percent allocation, right.
Speaker 3 (11:01):
Yeah, So in other words, this planet has a five
percent allocation to cash right now, that's not crazy. So
it's a big number. The fun part of this is
if it comes off the sidelines, that's gonna move things
pretty quickly.
Speaker 1 (11:11):
Sure, but five percent is healthy. I mean, I think
people are we human beings are rational. Most of them
are pretty intelligent and well informed. So this is just
rational behavior at a market at all time highs. And
let's face it, some people like to spend some of
their money. Some people do build responsible emergency funds, so
(11:34):
you know, we this is this is why you don't
want to just read the headlines. You want to dig
into the the details behind it. So you just did
Bryant that Brian, and a great perspective there. All right,
here's the all Worth advice. Whatever you do, don't go
chasing returns with that emergency cash. You need it to
be as liquid as possible. And as we've already pointed out,
(11:57):
have a plan and tell your money what it needs
and should do, needs to do and should do, and
have the money positioned accordingly. All right, coming up next,
what is the American dream actually costing you? We'll show
you how smart planning can ensure that that dream becomes
a reality. You're listening to Simply Money present up by
all Worth Financial on fifty five KRC, the talk station.
(12:23):
You're listening to Simply Money present up by all Worth
Financial on Bob's Fun Seller along with Brian James. If
you can't listen to Simply Money every night, subscribe and
get our daily podcasts. You can listen the following morning
during your commute or at the gym, or during your
walk around the neighborhood. Just search Simply Money on the
iHeart app or wherever you find your podcast. Straight ahead,
(12:44):
what do you do with a family inheritance? Is too
much cash really a bad thing? And is buying an
annuity ever worth it? We'll answer all of those questions
and more coming up at six forty three. You've probably
heard one of these before, a so called seasonal pattern
in the stock market. The one getting attention right now
(13:05):
says this, sell your stocks before Rashashana and then buy
back in after Yam Kapor Brian dispel yet another headline
rumor we need to just discard.
Speaker 3 (13:19):
Yeah, we love our black and white push button get
money type processes. We really want this stuff to be
more predictable than it is, so lots of people look
for these different patterns, and if you can identify anything
in history, then it must be worth talking about in
a tweet. So anyway, the idea is that the market
tends to dip slightly during the span, which this year
that's about a nine day window. It started yesterday and
(13:40):
it goes until October first, and historically, yeah, you can
point to that. Yeah, the market has dropped a little
bit during the stretch, something like a point three five
percent declined on average. Now let me be clear, I
did not say thirty five percent point three to five
as in a third of a percentage point. That's just noise.
It happens to be coincidental that market pulls back. I
would asked that maybe that's that's the shift from summer,
(14:02):
you know, freedom into back to back into business time,
you know, fall or whatever. But really that's not a
real thing. That's like saying the Bengals always lose after
a rainy Thursday. Sounds kind of fun that, Well, yeah,
I hate.
Speaker 1 (14:12):
Bryan, Brian, we just you're gonna get my blood pressure up.
Let's let's talk about anything other than the Bengals right now.
Speaker 3 (14:20):
The Reds always win after uh Monday, let's go with that.
You how about that?
Speaker 2 (14:25):
All right?
Speaker 3 (14:25):
Yeah, anyway, no meaningful edge to this stuff. Historical holiday
trading patterns. They sound clever, they're cute, and they're fun
to talk about, but there's nothing going on here. They're inconsistent, unreliable,
and always overwhelmed by bigger market forces. Don't don't use
these superstitions. Stick with a real, actual strategy driven by
a financial plan.
Speaker 1 (14:42):
You're listening to Simple Money, presented by all Worth Financial
on Bob spond Seller along with Brian James. All Right, Brian,
there's a new benchmark in America's financial conversation, and that's
the cost of the quote unquote American dream. According to
recent numbers from Investipedia, getting to those traditional milestones a home, family, college, retirement,
(15:03):
nice cars, vacations. You add all that up, it adds
up to roughly five million dollars. That's what it takes
as far as spending goes over a lifetime to accomplish
all of those things.
Speaker 3 (15:15):
That's a big number, Brian, it is. Where's this coming from, Bob? Well,
what's driving the price tag up? There's a bunch of things. Well,
let's hit a few bullets here, rising home ownership costs, right,
that's a big and in twenty twenty five, it's estimated
about nine hundred and fifty seven thousand dollars just for
the home purchase and financing for a standard home over
a thirty year mortgage. So that sounds like a big number.
(15:35):
And some people just heard principal and answering fifty.
Speaker 2 (15:38):
Correct.
Speaker 3 (15:39):
This is the sum total of the down payment and
the in the every interest in principal payment. You're gonna
make three hundred and sixty of them over a thirty
year mortgage. So obviously that's a lot of money just
to get a house going college raising kids. Hey guess
what those cost? Money? Two kids from birth to age
eighteen plus college for both obviously a much bigger burden
(15:59):
on families. That cost is about eight hundred and seventy
six thousand dollars, and that covers the cost of schooling,
living costs, tuition, board, and all that other fun stuff
tied onto there.
Speaker 1 (16:08):
That number seems low based on what I spent on
my little lovely boys.
Speaker 2 (16:12):
But yeah, let's talk about healthcare. This is a big one.
Speaker 1 (16:16):
Health Care costs over a lifetime are no longer a
nice to have light item. They are a major driver
of the total, The estimate for health care comes in
around four hundred and fourteen thousand dollars over.
Speaker 2 (16:29):
One's adult lifetime.
Speaker 1 (16:30):
That number includes typical insurance, medical care, you know, auto
pocket costs. That's a big number. So you multiply that
times too. If you're married, we're getting close to a
million dollars.
Speaker 3 (16:41):
Brian, Yeah, obviously this stuff stacks up, and that's why
we're talking about it too. So what we're looking at
in terms of just what we're talking about is what
are the things that have cost that have gone up
in the American dream? How do we find the American
dream financially now? Then of course we've got our lifestyle
elements too, weddings, vacations, car ownership, hats, all this stuff.
You know how many places are there now where you
(17:02):
can go get your dog groomed, where you're dropping them
off to be babysat for the day, and you know
you're dropping sixty seventy five bucks. You know where where
it used to be back in the day, the dog
never came inside the house and didn't even get a bath,
versus what we have to do now where they're basically
little children. But that's how we that's how we live nowadays.
And weddings, you want to have a you know, a
good mark the ceremony and the importance of that of
(17:24):
that day with you know, with a significant type of
a celebration for the family. These are things that have
always been part of the American dream, and we've kind
of become comfortable with the idea that this is just
part of what we do. But it's getting to the
point where they're where it's starting to force decisions that
that our forebears did not have to face.
Speaker 1 (17:42):
Well. And I think the point that we're trying to
drive home here, I think everybody knows that stuff's expensive.
Now the point is you got to have a financial plan.
You got to sit down and make some assumptions, especially
as you approach retirement or plan for retirement, what are
we actually gonna want to spend and what does it
all cost? How does in impact those costs? And then
(18:02):
sometimes some tough decisions need to be made. You know,
we might not be able to do everything we want
in our forties and fifties because we got to put
a little bit more money away in our savings accounts
and for one K plans to make sure that we
pay for our retirement. So the key is count the costs,
now run the numbers, have a financial plan, and make
(18:24):
sure you don't have sticker shock here when it comes
time to think about retiring and then you wake up
and realize, Wow, we just haven't put enough money away
to be able to do this, and we're in danger
of our lifestyle having to take a meaningful hit to
the downside.
Speaker 3 (18:40):
Yeah, these are things that everybody out there needs to
be really kind of paying attention to to make sure
that we're on top of where where we need to be.
And it has everything to do with understanding what are
your needs? Right. We talk about this all the time
in the planning process. Here's what I need to keep
the ship afloat. There's this many dollars that have to
go to the grocery store, the electric bill, the water bill,
the cable bill, allized streaming stuff that I do. And
(19:00):
then here's the things that I would like to do
that are maybe more flexible. Here's my resources that I'm
going to cover, which are my streams of income, social
security and investments. And then here's here's how long I
can get away with it. And if it works, awesome,
go have a good life and enjoy it. If it
doesn't work, we need to reprioritize what we're going to
be able to sacrifice in exchange for what we truly want.
Speaker 2 (19:20):
Here's the all Worth advice.
Speaker 1 (19:21):
The cost of the American dream isn't just about building
up assets anymore. It's about figuring out what your dream
really looks like, staying ahead of rising costs, and making
sure your goals don't turn into financial stress down the road. Ever,
paid taxes on money you'll never actually receive. It's called
phantom income. Next we'll uncover where it comes from, why,
(19:44):
at blind sides, specifically high income earners, and the strategies
to keep it from wrecking your cash flow. You're listening
to Simply Money presented by all Worth Financial on fifty
five KRC the talk station listening to Simply Money present
up by all Work Financial on Bob swun Seller.
Speaker 2 (20:03):
Along with Brian James Well.
Speaker 1 (20:05):
Few things frustrate high net worth investors more than ohing
taxes on money they never receive. And yet that's exactly
what happens when something called phantom income strikes. Because despite
its name, phantom income is very real and if you're
not prepared, it can quietly erode even the most carefully
(20:25):
crafted wealth plan and emergency fund. Brian tell us about
what phantom income is and how we need to plan
for it.
Speaker 3 (20:33):
Phantom income, Bob, is something that everybody seems to learn
the hard way one time in their lives, and then
they recognize they know exactly what it is. It's one
of these touched the hot stove types.
Speaker 2 (20:42):
And then they need to meet Brian.
Speaker 3 (20:43):
Right, yes, well, this kind of stuff does keep us
employed direight job security. As long as people are learning
as they go, then I'm always gonna have a job.
But anyway, phantom income refers to taxable income that never
arrives in the form of cash. Hen's the word phantom.
It appears on your tax You're expected to pay taxes
on it even though no funds ever landed in your account.
(21:04):
The reason is because the IRS has identified that you
received some kind of economic benefit, not just a pile
of cash.
Speaker 2 (21:10):
Right.
Speaker 3 (21:10):
There are more economic benefits than simply piles of money
being received. So what happens here is I mean certain
investments and compensation structures often can generate tax liabilities even
when they don't generate any liquidity right, we just said
no cash involved, but you still have a tax bill. Well,
where's that coming from? Phantom income often is the cost
of sophistication. So these are the types of vehicles that
(21:31):
offer diversification, tax efficiency, or enhance returns like extra bells
and whistles and more sophisticated types of investment structures. They
often come with rules that where the IRS says, yeah,
that's okay, you can do that, but there is an
identifiable economic, identifiable economic benefit involved that is not a
pile of cash.
Speaker 1 (21:47):
So therefore, here's how you have to calculate that. All right,
let's get into where some of this stuff comes from.
Speaker 2 (21:52):
You know.
Speaker 1 (21:53):
The first one we want to mention is any k
ones from partnership or private equity, private credit funds. And Brian,
I know a lot of my clients they've told me,
umpty in different times, you put me in anything you want,
but do not put me in anything that comes with
a K one because k ones delay the filing of
their tax returns. Typically you get these k ones I
(22:16):
don't know, late March, early April, and some of my
you know, senior citizen type advisors, they hate that because
they love getting their taxes filed, you know, by around
February tenth. So aside from the income that comes from
these things, it does delay your tax filings. It's it's
additional paperwork that you got to file with your CPA
(22:38):
or if you self prepare your taxes.
Speaker 2 (22:40):
And that's why.
Speaker 1 (22:41):
And we've talked about the preponderance of private equity private
credit funds coming into vogue here. That's one watch out
from those kind of things. Another is just and we
run into this a lot. Brian reinvest reinvested dividends and
capital gains, specifically within mutual funds, and it's a big
reason that we've tried to gravitate people where it makes
(23:04):
sense from a tax standpoint, away from mutual funds and
in the ets, because these declared capital gains happen in
the fourth quarter of every year, whether you've sold anything
or not, and you get hit with a tax bill
that can be a surprise, especially after a big run
up in the market like we've had, and sometimes people
(23:24):
are unprepared for that.
Speaker 3 (23:26):
Yep. And another place where we see this too is
in debt forgiveness, right, so when a portion of a
loan is forgiven, in other words, whoever with the bank
or the institute. Well of them, the bank would never
do this, but sometimes there are agreements between family members
or or you know, business agreements that when a portion
of a loan is forgiven, like if there's a real
estate type of a sale here in and a loan
is set up but eventually just wiped off the books
(23:47):
while the IRS if it comes into if it finds
out about that that amount is going to be treated
as taxable income even though no money actually changed hands.
We just said, hey, you don't know me that money anymore,
don't worry about it, just keep it. Irsays whatever the morning,
the remainder of that loan that was still out there
is now taxable income and which again comes back to
phantom income. Didn't get anything, but got to pay taxes
(24:08):
on it. Restricted stock units, exercising stock options through your employer.
This is a big one when equity compensation vests, meaning
now you've been there long enough and you have full
access to whatever the grant was, or you exercise those options,
then that value is treated as income and therefore taxable
as phantom income. Even if you don't sell shares or
generate liquidity liquidity, you will still face a sizeable tax bill.
(24:30):
In those types of things.
Speaker 1 (24:31):
This is a great topic to sit down and discuss
with your fiduciary advisor because you need to manage things
on a couple of fronts. Here we've already talked about
the tax impact, but also market impact of when these
stock options vest or available to exercise them. You want
to make sure you have a strategy from a return standpoint,
a diversification standpoint, and a tax planning standpoint to just
(24:54):
not sit and let these things happen and go unmanaged.
You're listening to Simply Money presented by all Worth Financial
Bob Sponsorller along with Brian James. Brian get into a
couple other things that we need to be doing to
plan for this fandom income.
Speaker 2 (25:08):
Get out in front of it so it doesn't surprise us. Well.
Speaker 3 (25:11):
First off, understand what you own right, what you're considering
investing before you get into private funds or or you know,
accepting equity compensation, which I'm not sure why you'd say
no to that, but just know what you're getting into.
If you hear the word K one, then you should
also hear the word extension on my taxes and it
is not a big deal. You ask for an extension,
you get one, You get an extension, you get an extension.
(25:33):
Everybody gets an extension. UH. And it's just part of
the deal. If you're gonna, if you're gonna be getting
into these types of things, you are no longer filing
by April. Just assume you're filing by October and it
doesn't hurt anything. Just means you're not gonna have to
You're not gonna deal with that until later in the year.
Be strategic too about your asset location. That means what
type of an account do I own these things in?
Speaker 2 (25:51):
UH.
Speaker 3 (25:51):
For example, if you are able, if it's something that's
gonna spit out fansom income, well, then a great place
for that to live might be an IRA or a
roth ira, because there is no sch thing is annual
income in those accounts. Those are only driven by what
comes out of the account crosses the line and lands
in your bank account. But stuff that happens within the
investment that's inside the IRA is not It does not
(26:12):
affect taxes at all. Now, it's never that simple, right.
You can't simply say, well, yeah, exotic investment. I'm going
to say there's something.
Speaker 1 (26:18):
Called ubu there's something called UBTI out there that we
don't have time to get into right now. But the
irs all they're always going to poke around and try
to get their money. So but anyway, didn't want to
take you off track there, Brian.
Speaker 3 (26:31):
Now that's all right yet. Yeah, just understand where you're
going with these things. Lots of moving parts.
Speaker 2 (26:35):
Here's the all Worth advice.
Speaker 1 (26:36):
Phantom income may be invisible, but its tax consequences are
very real. Plan ahead and you can turn that potential
tax burden into a tax opportunity. Coming up next week,
tackle your real world financial dilemmas and are asked the
advisor segment. You're listening to Simply Money, presented by all
Worth Financial on fifty five KRC, the talk station.
Speaker 2 (27:03):
You're listening to Simply Money.
Speaker 1 (27:04):
You said up at all Worth Financial on Bob spond
Seller along with Brian James.
Speaker 2 (27:08):
Do you have a financial question you'd like for us
to answer.
Speaker 1 (27:10):
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,
Karen and Hyde Park leads us off tonight. She says,
my mom is eighty two, still living at home, but
I'm worried one fall could change everything. How do we
(27:31):
prepare financially for sudden long term care needs?
Speaker 3 (27:35):
All right, and this is certainly something that that that
lots of people are gonna go through. You know, we
all we all have these types of situations, and unfortunately,
when it becomes time to step in and start taking
care of your parents, that usually means your your children
are also kind of getting to the part of life
where they're gonna need some support and getting themselves launched.
It can be pretty stressful and obviously, you know, we're
(27:55):
talking about some pretty scary things. One fall in the
house where there's nobody else in it, that can be
a very cary problem. So what we can do about that, Well,
you can look into there are of course options for
home care, meaning you'll just have somebody in the house.
Is This can range anywhere from truly skilled care to
somebody who's just there, you know, helping out around the
house and just being there in case something happens. That
(28:15):
can run twenty five thirty to thirty dollars an hour,
could be two thousand to twenty five hundred dollars a month.
You might look at assisted living, which, of course this
is an elevated care in an elevated level of care,
and that's about forty five hundred to five thousand dollars
per month at another facility. And then nursing home care.
Of course, this is the big, the big one, when
it's truly time for round the clock actual health care
(28:36):
and attention and so forth, and that can be over
eight thousand dollars a month, sometimes even more than that.
And that's for a semi private room.
Speaker 2 (28:42):
Right.
Speaker 3 (28:43):
You might be mom or dad might be in a
situation where they're gonna have to share room with somebody,
and that's not ideal either, but at the same time,
it's still better than trying to get all these this
complicated care taking care of it home. So I hope
that helps, and best of luck to you and your
mom hopefully get her in a safe situation. Let's move
on to Mark in Love Linda. Mark says his siblings
and he have inherited property from their parents, but they
(29:04):
can't decide what to do, whether to sell it or
keep it. They how are they going to resolve this,
you know, with while keeping the family together. Bob, I
know you, you and I have talked about situations you've
had like this.
Speaker 1 (29:14):
Yeah, ideally, this is why we advise clients to get
out in front of this in their estate planning before
you leave these properties to your kids. But we are
where we are here with with Mark and his situation.
So I mean, the best advice I can give without
knowing the entire situation is you got to sit down,
get your siblings all in a room, preferably in person
(29:35):
or at least on a zoom call if people are
spread out all over the place, and just find out,
you know, shoot straight, what does everybody need and want
from this situation. If somebody really wants this property, you
know they're going to have to you know, buy probably
buy out their siblings.
Speaker 2 (29:53):
I mean, there's no other way around it.
Speaker 1 (29:54):
You You either got to come to an agreement amongst
all of you in an equitable way that makes it
everybody happy, or no one's going to have any part
of this property and you got to put it up
for sale, liquidate it, and divide up the proceeds. But
I think the key here is proactive communication. Be sensitive
and actively listen to what every one of your siblings
(30:17):
needs and wants out of this situation, and then hopefully
you can all work together over a reasonable period of
time and come up with a solution that's not ideal,
but at least palatable, because there's no reason to let
some money permanently tear a family apart. So hopefully, Mark,
you're the adult in the room here that can step
up and lead your siblings down this path and get
(30:41):
this situation resolved.
Speaker 2 (30:42):
I wish you all the luck in the world, all.
Speaker 1 (30:44):
Right, Jim, And Montgoverery says, I've got two and a
half million dollars, but half of it, Brian is in
old four to one k's. Should I consolidate them or
just leave them where they are?
Speaker 3 (30:55):
Yeah? So, Jim, I'm a huge fan of simplification, and
I don't know how old Jim is. He doesn't say,
but at some point he is going to, like everyone,
run into required minimum distribution time, which means when you
are at either age seventy three or seventy five, depending
on when you were born, you're gonna have to start
taking money out of those four oh one k's there.
If they're pretext, I'm assuming at least some of it
(31:16):
is pretext, But in that case, this at this point
where you are now is when that time hits Jim,
you will be responsible to go chase down all those
four oh one k's and make sure that you understand
the dollar amounts that need to come out of each
one of them. You don't have to take it all
from each one, but you could take it all from one,
but you got to do the math based on all
of your four oh one case. So that's said to
(31:36):
answer your question, put it on in IRA, just be
done with it. There's not a whole lot of benefit
to you know, to having money scattered across four oh
one k's. It's not a form of diversification. Let's be
very clear. A bunch of index funds in five different
four to one case is still just a bunch of
index funds. You need a consolidated plan. Understand why you
own everything you own, not just that I used to
work there and there's still some pile of money there. Now.
(31:58):
You need some kind of structure around all this stuff.
So I would definitely strongly urge you to consolidate. Plus,
the way you say this sounds like there's taxable assets
out there. I would learn about roth conversions. Maybe you
do it, maybe you don't. But it sounds like you've
got a good amount of money on the taxable side.
You could reallocate some of that toward paying taxes to
buy the tax freedom of those pre tax dollars and
reduce the R and D problem we talked about in
(32:19):
the first place. So find a fiduciar advisor to help
you do the math and understand whether that's worthwhile. Sue
in Florence is talking to somebody about annuities. She's been Oh,
here's this word, the P word, Bob, it's always in here.
I've been pitched annuities as a way to lock in income.
Are they a smart move at the one to two
million dollar level or just expensive products?
Speaker 1 (32:37):
Go nuts, Bob. I'm not gonna go nuts. I think
you know what I'm gonna say, trigger word for you.
Speaker 2 (32:42):
I know, yeah, yeah, I get triggered quickly and often.
Speaker 1 (32:47):
Look, I'm going to assume that somebody is selling you
an annuity, and let's face it, most people that do
this make a large commission if you buy it.
Speaker 2 (32:56):
So I think you got to step back.
Speaker 1 (32:58):
And take a look at an overall comprehensive financial plan.
At a minimum, get a second opinion from a fiduciary
financial advisor that has no vested interest from an economic standpoint,
whether you buy an annuity or come up with some
other solution to solve your problem or create opportunities. That
(33:19):
being said, I can tell you in over ninety percent
of the situations that I run across, you can solve
somebody's needs and wants cheaper and with more flexibility by
using non annuity solutions. That's my bias because I've been
doing this for a long time and I've seen.
Speaker 2 (33:38):
It both ways.
Speaker 1 (33:39):
I started off with an insurance based broker dealer, where
you know, we were trained to sell annuities and life insurance.
And I'm not knocking the people that do it. I'm
just saying oftentimes that's the only options they have. Those
are the only tools they have in their toolbox, and
you're paid handsomely in the way of commissions to quote
(33:59):
unquote h's these things. So I'd say get a second
opinion from a good fiduciary advisor that could take a
comprehensive look at your situation and help answer your exact question.
Speaker 2 (34:11):
Is it a smart move or just an expensive product?
Speaker 3 (34:14):
Hey, I want to weigh in on that too. We'll
have to get to the branded blush. We'll get on
another time, but I think Sue's got an important question here,
and I would throw out that, like you said, annuities
aren't evil. They're tools. You either use them for good
or evil. But every for those who might be attracted
to those income guarantees, just remember that every time the
market makes a new high, which is usually an income guarantee,
(34:35):
was no good. It just cost you more than you
would have gotten any way had you just left alone
without the extra bells and wist.
Speaker 2 (34:40):
Excellent point.
Speaker 1 (34:41):
All right, coming up next, I've got my two cents
on managing your five twenty nine plans. You're listening to
Simply Money presented by all Worth Financial on fifty five
KRC the talk station. You're listening to Simply Money presented
by all Worth Financial on Bob spon Seller along with
Brian James. All Right, tonight, I want to talk about
(35:03):
five twenty nine's plans. And Brian, you know this doesn't
happen often, but it's happening more often than I'm comfortable with.
I've had people come into the office for review meetings
and they have these five twenty nine plans that they've
opened up, and we start to look under the hood
and see how they're invested, and oftentimes they're just sitting
in cash. And I can understand why this happens. I mean,
(35:27):
especially through the Ohio College Advantage Program, the Ohio is
five twenty nine program.
Speaker 2 (35:33):
It's a very good product.
Speaker 1 (35:34):
You can get into some low fee, you know, well
diversified options, and it's a great plan, a great way
to say for college. But if you're a do it
yourself investor and you just open these accounts up, you
got to make sure you at least know what you're
doing and take a look at how they're invested. And
that's a good reason to include this on your annual
(35:55):
checklist at a minimum of what you go through with
your do sharey financial advisor every year. Because Brian, I
occasionally run across someone and I did recently where you know,
money was put away after the grandchild was born and
lo and behold, they're eight or nine years old now
and the money was never invested. It's sitting in cash
(36:18):
earning an obscenely low rate of interest.
Speaker 2 (36:21):
Do you ever run into similar situations, you know, as
you work with your clients, Brian.
Speaker 3 (36:26):
Yeah, this is because I think those these are often
pitched kind of really set it and forget it type
invaily a bad thing that we need to need to
pay attention to what the mechanics are underneath the hood.
It is very, very very common to just assume that, Okay,
if I just put my name on this and I
got an account number, then poof, I have a five
twenty nine and that box has checked and I never
have to think about it again. This happens also with
(36:48):
health savings accounts and sometimes even four one case that
just get ignored forever because people haven't taken the time
to understand what they own. But yes, we are very
very fortunate to live in, you know, in an area
with one of the strongest plans. If you're in the
state of Ohio, the Ohio College Advantage Plan is wonderful,
and you can't do a whole lot even as an investor,
you can't do that much with any five twenty nine.
(37:08):
You're kind of limited in terms of moving things around
and all that kind of stuff. So don't go in
thinking this is an account you have to babysit a lot.
It really can be a pretty hands off type of approach,
but you still have to decide, and that plan does
include the ability to set an age based portfolio, which
will be it'll get more and more conservative the closer
you get to college and through college. I've got a
(37:29):
few of those myself.
Speaker 1 (37:30):
Yeah, you took the words right out of my mouth.
I mean, we're not trying to turn people into day
traders here on their five twenty nine plans, but you
do need to put this money to work. And to
your point, you know, the Vanguard age based strategy is
a wonderful one.
Speaker 2 (37:43):
It is.
Speaker 1 (37:44):
You know, if you want the closest thing to a
set it and forget it type of proposition out there,
this is a great one.
Speaker 2 (37:50):
You know. It's age base, meaning it's.
Speaker 1 (37:52):
More aggressively allocated the younger the account beneficiary is, and
then as they approach college, age gradually on its own
gets more conservative. So you take a little, in some
cases a lot of risk off the table once you
get within two, three, four, five years of the.
Speaker 2 (38:11):
Child actually going to college.
Speaker 1 (38:13):
I'm just pointing out, make sure you look at this
stuff at least once a year, and if you're not
comfortable doing that yourself, sit down with a good fiduciary
advisor that can do that. For you, because we want
to take full advantage of all the tremendous tax benefits
that these five twenty nine plans offer. But you at
least got to pay attention and know a little bit
(38:34):
about what you're doing.
Speaker 3 (38:35):
Brian, Yeah, now, listen, I'm going to throw out here
I kind of forgot to circle back to it. But
obviously we live in the tri state area, not the
one state area. So let's talk about Indiana Kentucky here
briefly too. So Kentucky does that the Kentucky as the
Kentucky Saves Ky Saves five twenty nine plan. They do
not offer though a state income tax benefit. There are
no treats on the front end for having put money
(38:55):
into it. Ohio does, but for Ohio residents only. Indiana
does as well. Indiana is about twenty percent of the
contribution amount maximum of fifteen hundred dollars per tax return.
Speaker 2 (39:06):
So if you're in.
Speaker 3 (39:06):
Indiana, you may as well, you know, and that's not
a bad plan either. You may use the Indiana plan.
But if you're in Kentucky, I'd be looking at the
Ohio plan to be quite honest, because again it's one
of the best rated out there in Kentucky's not offering
you any treats anyway.
Speaker 1 (39:18):
Yeah, you get, you get a lot of bang for
your buck in terms of investment fees and good sound management.
Great advice there, Brian, all right, thanks for listening tonight.
You've been listening to Simply Money, presented by all Worth
Financial on fifty five KRC, the talk station
Tonight, a potential government shutdown looms, the danger of something
called phantom income, and we answer your questions. You're listening
to Simply Money presented by all Worth Financial on Bob
Sponseller along with Brian James.
Speaker 2 (00:20):
Well, the clock is ticking.
Speaker 1 (00:21):
Toward another potential government shut down. Brian, this could impact
markets and your investments in the very very short term.
Update us on where things stand. You know, as of
Tuesday night.
Speaker 3 (00:35):
Us fnal government is approaching a deadline coming up September
thirtieth to pass a continuing resolution or full appropriations bills. However,
we're going to solve it this time around. This has
become routine. We do this, you know, every you know,
six months, twelve months, eighteen months, every now and then.
But if nothing passes, then of course, just like always
a lot of government operations are going to shut down.
(00:56):
So where we are with this the House, which is
of course that's the Republican side. The republic Republicans have
controlled the House. They've stopped a pass the stopgap funding
bill to extend government funding through November twenty twenty first.
So this is the phase where we just tack on
a few more weeks, a few more days and then
that's the real deadline. Wop's no weight, this is the
real deadline. No, we're serious about this deadline. That's the
(01:16):
phase we've entered. Now. The Senate, of course, as you
would expect, has rejected that bill along with a Democratic alternative.
So as that deadline is coming up, there is more
and more risk of a shutdown. But again, we've seen
this game before, haven't we, Bob.
Speaker 2 (01:29):
We see it all the time.
Speaker 1 (01:30):
And you know, I've monitored a couple of different news
shows today and I'm seeing maybe some olive branches being
extended here. House Minority Leader Jeffries and Senate Minority Leader
Schumer are going to meet with President Trump sometime I
think in the next couple of days and at least
talk about this. And I'm hearing whisperings Brian of kicking
(01:53):
the can down the road.
Speaker 2 (01:54):
I think, what's it.
Speaker 1 (01:56):
The big sticking point here is this thirty billion dollars
to extend medicare supplements that were instituted back during COVID,
and it was meant to be a temporary funding mechanism
that's set to expire, and the Democratic side of Congress
does not want that stuff to expire. They wanted to
(02:17):
continue and not just have these subsidies come to a
screeching halt. I'm hearing that that's the sticking point. It's
thirty billion dollars of medicaid funding. And Brian, I'll just
share an opinion. I mean, look, thirty billion dollars right
now is what this government has been taking in roughly
every month as tariff revenue so far during twenty twenty five.
(02:41):
If I had to guess, I think the President and
these two gentlemen will sit down and work something out
and invert a shutdown.
Speaker 2 (02:48):
But maybe that is wishful thinking on my part.
Speaker 3 (02:51):
Well, it's wishful think thinking. And this is always a
game of brinksmanship because and we're way early in the
brinksmanship game. We're in the chicken part of the of
the process here where the two trains are rushing at
each other, waiting for which one of them to swerve.
And now hopefully they're not actually trains and they're not
on rails and they'll be able to swerve. That usually
is what happens, is what has happened in the past.
(03:12):
But you know, this is going to take some time
for the arguments and the back and forth and all
that kind of stuff. But k so let's talk about
what should we be prepared for. Well, the potential short
term impact in terms of investments. Obviously, the volatility is
going to be up. That always happens. The market hates
the lack of clarity, It hates fog. We can be
fine with bad news. We're fine with good news. It's
(03:32):
the no news that causes an awful lot of uncertainty
because if there's bad news out there, well, we know
what it is and we know how to react to it,
and we can kind of we can draw parallels to
things that have happened in the past and the market
will react accordingly. But when we're just guessing at what happens,
then every new little headline will cause somebody, will cause
the market to swing a little bit. The way somebody
answers a question, if they pause, if they look away
(03:55):
before they respond. All that kind of stuff drives the
crazy that we have. You know, when we go through
these processes. So and the mathematically treasury yields may drop too.
And ironically, even though it's the government shutting down, US
treasuries often still see end up seeing a flow in
as people start to move out of riskier assets such
as the stock market, and so people will pursue safety
(04:16):
whenever they've got these types of concerns.
Speaker 1 (04:19):
Yeah, the markets historically they often look past all this stuff.
I mean, this has become as you as you said common. Now,
this is like every six months or so, we have
a thread of a government shut down. Both political parties
like to fundraise on this stuff. Let's not forget we're
heading into mid terms, you know, and that whole election
cycle will start in earnest here after the holidays. So
(04:42):
that's why I think the canill get kicked down the
road here. I think both political parties want a fundraise
on this issue. But we'll see it's dangerous to share
opinions about any of this stuff because no one really
knows what's gonna happen. But shutdowns usually have a you did,
market impact, and they seem to be the market just
(05:03):
seems to be yawning at all of this right now.
For example, during the twenty eighteen twenty nineteen shutdown, the
longest one in history, by the way, the S and
P five hundred actually rose nearly ten percent because it
coincided with a federal Reserve pivot where they started to
lower interest rates. So there's a lot of things that
move this market. I think my advice out there would be,
(05:26):
you know, with any kind of uncertainty, as you've already
called out, you know, if you need to get short
term money on the sidelines for buying a car or
home improvements or running a tuition bill, you know that
money should already be out of the market and in cash.
And if you haven't done so already, make sure you
have some dry powder here for those short term cash needs,
(05:48):
because you know, anything can happen here in the next
few days to a week as we try to avert
a government shutdown.
Speaker 2 (05:56):
Yeah, so I like what you.
Speaker 3 (05:57):
Were talking about there with with some examples from the past.
You know, I like looking at the looking at history
to understand what might come. So another example twenty thirteen,
we had a shut down then and that cost the
economy about twenty four billion in lost GDP, but a
lot of that was recaptured after the government reopened. So
the demand for stuff that we have right the things
that need to happen, that doesn't just go away. It's
(06:19):
definitely disruptive, but usually once things get settled, then we
will go back and capture whatever did and get done.
That's what happened in twenty thirteen. And you know, like
you said, twenty eighteen, twenty nineteen, we had a similar
type of a situation that was the longest one in history,
but it kind of came and went. I do remember
that being just a disperable It didn't feel like a
scary year like two thousand and eight, but it was
(06:40):
just a miserable, kind of a doldrums year. Just dragged
on and on and on. The market wouldn't move, we
couldn't get these questions answered, and just everybody waiting for
Congress to just decide what in the world it was
going to do so that we could just all move
on with our lives. But so unfortunately we've been through
this before, and I think, like you just said, Bob,
we've talked about this a lot late. The win the
market is at a peak when the news is good bad. Otherwise,
(07:03):
if the market is at a peak and you've been
sitting on not enough cash for the bills you've got
coming up, then fix the problem, deal with it, and
don't get drawn in by the fact that though hey,
the market's been on a heck of a run. It
might go a little bit more more likely, it's gonna turn,
it's gonna turn the wrong direction on you're gonna have
take those dollars out at a little bit of a loss.
Speaker 1 (07:20):
Yeah, don't treat your tech stock portfolio like an ATM.
In other words, you're listening to simply money, presented by
all Worth Financial lumbob Spon Seller along.
Speaker 2 (07:28):
With Brian James. All Right, another story we're following.
Speaker 1 (07:31):
According to some data from Crane Data and industry researcher,
US investors are now holding a record seven point seven
trillion dollars in money market funds Brian. So that's not
just institutions. That includes a lot of individual investors. And
if you think that's just leftover pandemic savings, it's not.
This trend is continuing now even in a rising market.
(07:55):
Seven point seven trillion dollars Brian.
Speaker 3 (07:59):
Yeah, and this is not just institutions, right. Institutions are
always sitting on giant piles of money. You know, some
of our largest tech companies usually set on huge piles
of cash so that they can have some DRIVEOWD or
to do whatever they want to do. This is individual
investors and I can speak to a lot of them.
I'm going to have meetings with some of them today
because this is just something that people are doing. We're
in a situation. We're in a part of the economy
(08:20):
right now through the economic cycle where where there has
been a lot of cash moving around and just a
lot of you know, put productive activity, and people are
starting to hoard cash a little bit. I have a
lot of clients again the same thing where we're trying
to figure out what should I do with this cash?
Should I continue to hoard it, or should I you know,
do I should I pay off the mortgage, or you know,
do to take care of some of these other things
(08:40):
that I want to But anyway, the reason has happened
that it's more and more focused this time is because
the Fed, of course, hiked interest rates a few years
ago and again and again and again, and all of
a sudden, we have high yield savings accounts that look
like they haven't looked in twenty five years, and it's
become more attractive and more rewarding to have cash. So
that there that is a good reason for that much
money sitting on the sitting on the sideline. But if
(09:02):
you do have emergency cash in that high yield savings account.
We would still argue you keep it right where it is.
The yields are higher than they've been in decades, and
you might even consider locking some of it in. Right,
We've already gotten one rate cut, and there's possibly another
one coming a couple more later this year, so it
wouldn't be the worst idea. If you know you've got
more than you need to go ahead and lock a
rate in for the next year or two. I'd say
even maybe three years. Beyond that the yield curve starts
(09:24):
to get in the way, but at least one, two,
maybe three years.
Speaker 1 (09:27):
Yeah, it all depends on the time horizon. And again,
tell your money what it should be doing in advance.
Don't just hope everything works out. You know, a lot
of people are happy, you know, locking in four percent
in a what can seem like an uncertain environment. An
interesting discussion I heard yesterday Brian among a couple of
respected economists. They pointed out that yep, seven point seven
(09:50):
trillion dollars is in fact a lot of money, But
when you factor in the total market cap of the
stock market now after the tremendous run up we've it's
it's really not that much money as a percentage of
total capital in people's investment accounts. I thought that was
an interesting story because we always talk about numbers, we
(10:12):
rarely talk about percentages. So again they were just pointing out, yep,
seven point seven trillion obviously a lot of money, but
as a percentage of the.
Speaker 2 (10:22):
Total value of all these.
Speaker 1 (10:24):
Brokerage and retirements and four to one k accounts sitting
out there, it's not really as big of a number.
Speaker 3 (10:30):
In percentage terms as people might think. Your thoughts, you
got my yeah, no, what you just got my brain rolling?
So I just pulled it up.
Speaker 1 (10:38):
You're already you're already pounding your computer pulling this out.
Speaker 2 (10:41):
Yeah.
Speaker 3 (10:42):
I thought that was like, that's an interesting point. Bob
doesn't know the number real time. This is why I
love the fact that you do this show with me.
All Right, what's your research telling you? One hundred and
twenty four trillion is the total market cap of all
the publicly traded and that's globally. So this is a
great point, Bob.
Speaker 2 (10:58):
So that means we're talking five percent allocation, right.
Speaker 3 (11:01):
Yeah, So in other words, this planet has a five
percent allocation to cash right now, that's not crazy. So
it's a big number. The fun part of this is
if it comes off the sidelines, that's gonna move things
pretty quickly.
Speaker 1 (11:11):
Sure, but five percent is healthy. I mean, I think
people are we human beings are rational. Most of them
are pretty intelligent and well informed. So this is just
rational behavior at a market at all time highs. And
let's face it, some people like to spend some of
their money. Some people do build responsible emergency funds, so
(11:34):
you know, we this is this is why you don't
want to just read the headlines. You want to dig
into the the details behind it. So you just did
Bryant that Brian, and a great perspective there. All right,
here's the all Worth advice. Whatever you do, don't go
chasing returns with that emergency cash. You need it to
be as liquid as possible. And as we've already pointed out,
(11:57):
have a plan and tell your money what it needs
and should do, needs to do and should do, and
have the money positioned accordingly. All right, coming up next,
what is the American dream actually costing you? We'll show
you how smart planning can ensure that that dream becomes
a reality. You're listening to Simply Money present up by
all Worth Financial on fifty five KRC, the talk station.
(12:23):
You're listening to Simply Money present up by all Worth
Financial on Bob's Fun Seller along with Brian James. If
you can't listen to Simply Money every night, subscribe and
get our daily podcasts. You can listen the following morning
during your commute or at the gym, or during your
walk around the neighborhood. Just search Simply Money on the
iHeart app or wherever you find your podcast. Straight ahead,
(12:44):
what do you do with a family inheritance? Is too
much cash really a bad thing? And is buying an
annuity ever worth it? We'll answer all of those questions
and more coming up at six forty three. You've probably
heard one of these before, a so called seasonal pattern
in the stock market. The one getting attention right now
(13:05):
says this, sell your stocks before Rashashana and then buy
back in after Yam Kapor Brian dispel yet another headline
rumor we need to just discard.
Speaker 3 (13:19):
Yeah, we love our black and white push button get
money type processes. We really want this stuff to be
more predictable than it is, so lots of people look
for these different patterns, and if you can identify anything
in history, then it must be worth talking about in
a tweet. So anyway, the idea is that the market
tends to dip slightly during the span, which this year
that's about a nine day window. It started yesterday and
(13:40):
it goes until October first, and historically, yeah, you can
point to that. Yeah, the market has dropped a little
bit during the stretch, something like a point three five
percent declined on average. Now let me be clear, I
did not say thirty five percent point three to five
as in a third of a percentage point. That's just noise.
It happens to be coincidental that market pulls back. I
would asked that maybe that's that's the shift from summer,
(14:02):
you know, freedom into back to back into business time,
you know, fall or whatever. But really that's not a
real thing. That's like saying the Bengals always lose after
a rainy Thursday. Sounds kind of fun that, Well, yeah,
I hate.
Speaker 1 (14:12):
Bryan, Brian, we just you're gonna get my blood pressure up.
Let's let's talk about anything other than the Bengals right now.
Speaker 3 (14:20):
The Reds always win after uh Monday, let's go with that.
You how about that?
Speaker 2 (14:25):
All right?
Speaker 3 (14:25):
Yeah, anyway, no meaningful edge to this stuff. Historical holiday
trading patterns. They sound clever, they're cute, and they're fun
to talk about, but there's nothing going on here. They're inconsistent, unreliable,
and always overwhelmed by bigger market forces. Don't don't use
these superstitions. Stick with a real, actual strategy driven by
a financial plan.
Speaker 1 (14:42):
You're listening to Simple Money, presented by all Worth Financial
on Bob spond Seller along with Brian James. All Right, Brian,
there's a new benchmark in America's financial conversation, and that's
the cost of the quote unquote American dream. According to
recent numbers from Investipedia, getting to those traditional milestones a home, family, college, retirement,
(15:03):
nice cars, vacations. You add all that up, it adds
up to roughly five million dollars. That's what it takes
as far as spending goes over a lifetime to accomplish
all of those things.
Speaker 3 (15:15):
That's a big number, Brian, it is. Where's this coming from, Bob? Well,
what's driving the price tag up? There's a bunch of things. Well,
let's hit a few bullets here, rising home ownership costs, right,
that's a big and in twenty twenty five, it's estimated
about nine hundred and fifty seven thousand dollars just for
the home purchase and financing for a standard home over
a thirty year mortgage. So that sounds like a big number.
(15:35):
And some people just heard principal and answering fifty.
Speaker 2 (15:38):
Correct.
Speaker 3 (15:39):
This is the sum total of the down payment and
the in the every interest in principal payment. You're gonna
make three hundred and sixty of them over a thirty
year mortgage. So obviously that's a lot of money just
to get a house going college raising kids. Hey guess
what those cost? Money? Two kids from birth to age
eighteen plus college for both obviously a much bigger burden
(15:59):
on families. That cost is about eight hundred and seventy
six thousand dollars, and that covers the cost of schooling,
living costs, tuition, board, and all that other fun stuff
tied onto there.
Speaker 1 (16:08):
That number seems low based on what I spent on
my little lovely boys.
Speaker 2 (16:12):
But yeah, let's talk about healthcare. This is a big one.
Speaker 1 (16:16):
Health Care costs over a lifetime are no longer a
nice to have light item. They are a major driver
of the total, The estimate for health care comes in
around four hundred and fourteen thousand dollars over.
Speaker 2 (16:29):
One's adult lifetime.
Speaker 1 (16:30):
That number includes typical insurance, medical care, you know, auto
pocket costs. That's a big number. So you multiply that
times too. If you're married, we're getting close to a
million dollars.
Speaker 3 (16:41):
Brian, Yeah, obviously this stuff stacks up, and that's why
we're talking about it too. So what we're looking at
in terms of just what we're talking about is what
are the things that have cost that have gone up
in the American dream? How do we find the American
dream financially now? Then of course we've got our lifestyle
elements too, weddings, vacations, car ownership, hats, all this stuff.
You know how many places are there now where you
(17:02):
can go get your dog groomed, where you're dropping them
off to be babysat for the day, and you know
you're dropping sixty seventy five bucks. You know where where
it used to be back in the day, the dog
never came inside the house and didn't even get a bath,
versus what we have to do now where they're basically
little children. But that's how we that's how we live nowadays.
And weddings, you want to have a you know, a
good mark the ceremony and the importance of that of
(17:24):
that day with you know, with a significant type of
a celebration for the family. These are things that have
always been part of the American dream, and we've kind
of become comfortable with the idea that this is just
part of what we do. But it's getting to the
point where they're where it's starting to force decisions that
that our forebears did not have to face.
Speaker 1 (17:42):
Well. And I think the point that we're trying to
drive home here, I think everybody knows that stuff's expensive.
Now the point is you got to have a financial plan.
You got to sit down and make some assumptions, especially
as you approach retirement or plan for retirement, what are
we actually gonna want to spend and what does it
all cost? How does in impact those costs? And then
(18:02):
sometimes some tough decisions need to be made. You know,
we might not be able to do everything we want
in our forties and fifties because we got to put
a little bit more money away in our savings accounts
and for one K plans to make sure that we
pay for our retirement. So the key is count the costs,
now run the numbers, have a financial plan, and make
(18:24):
sure you don't have sticker shock here when it comes
time to think about retiring and then you wake up
and realize, Wow, we just haven't put enough money away
to be able to do this, and we're in danger
of our lifestyle having to take a meaningful hit to
the downside.
Speaker 3 (18:40):
Yeah, these are things that everybody out there needs to
be really kind of paying attention to to make sure
that we're on top of where where we need to be.
And it has everything to do with understanding what are
your needs? Right. We talk about this all the time
in the planning process. Here's what I need to keep
the ship afloat. There's this many dollars that have to
go to the grocery store, the electric bill, the water bill,
the cable bill, allized streaming stuff that I do. And
(19:00):
then here's the things that I would like to do
that are maybe more flexible. Here's my resources that I'm
going to cover, which are my streams of income, social
security and investments. And then here's here's how long I
can get away with it. And if it works, awesome,
go have a good life and enjoy it. If it
doesn't work, we need to reprioritize what we're going to
be able to sacrifice in exchange for what we truly want.
Speaker 2 (19:20):
Here's the all Worth advice.
Speaker 1 (19:21):
The cost of the American dream isn't just about building
up assets anymore. It's about figuring out what your dream
really looks like, staying ahead of rising costs, and making
sure your goals don't turn into financial stress down the road. Ever,
paid taxes on money you'll never actually receive. It's called
phantom income. Next we'll uncover where it comes from, why,
(19:44):
at blind sides, specifically high income earners, and the strategies
to keep it from wrecking your cash flow. You're listening
to Simply Money presented by all Worth Financial on fifty
five KRC the talk station listening to Simply Money present
up by all Work Financial on Bob swun Seller.
Speaker 2 (20:03):
Along with Brian James Well.
Speaker 1 (20:05):
Few things frustrate high net worth investors more than ohing
taxes on money they never receive. And yet that's exactly
what happens when something called phantom income strikes. Because despite
its name, phantom income is very real and if you're
not prepared, it can quietly erode even the most carefully
(20:25):
crafted wealth plan and emergency fund. Brian tell us about
what phantom income is and how we need to plan
for it.
Speaker 3 (20:33):
Phantom income, Bob, is something that everybody seems to learn
the hard way one time in their lives, and then
they recognize they know exactly what it is. It's one
of these touched the hot stove types.
Speaker 2 (20:42):
And then they need to meet Brian.
Speaker 3 (20:43):
Right, yes, well, this kind of stuff does keep us
employed direight job security. As long as people are learning
as they go, then I'm always gonna have a job.
But anyway, phantom income refers to taxable income that never
arrives in the form of cash. Hen's the word phantom.
It appears on your tax You're expected to pay taxes
on it even though no funds ever landed in your account.
(21:04):
The reason is because the IRS has identified that you
received some kind of economic benefit, not just a pile
of cash.
Speaker 2 (21:10):
Right.
Speaker 3 (21:10):
There are more economic benefits than simply piles of money
being received. So what happens here is I mean certain
investments and compensation structures often can generate tax liabilities even
when they don't generate any liquidity right, we just said
no cash involved, but you still have a tax bill. Well,
where's that coming from? Phantom income often is the cost
of sophistication. So these are the types of vehicles that
(21:31):
offer diversification, tax efficiency, or enhance returns like extra bells
and whistles and more sophisticated types of investment structures. They
often come with rules that where the IRS says, yeah,
that's okay, you can do that, but there is an
identifiable economic, identifiable economic benefit involved that is not a
pile of cash.
Speaker 1 (21:47):
So therefore, here's how you have to calculate that. All right,
let's get into where some of this stuff comes from.
Speaker 2 (21:52):
You know.
Speaker 1 (21:53):
The first one we want to mention is any k
ones from partnership or private equity, private credit funds. And Brian,
I know a lot of my clients they've told me,
umpty in different times, you put me in anything you want,
but do not put me in anything that comes with
a K one because k ones delay the filing of
their tax returns. Typically you get these k ones I
(22:16):
don't know, late March, early April, and some of my
you know, senior citizen type advisors, they hate that because
they love getting their taxes filed, you know, by around
February tenth. So aside from the income that comes from
these things, it does delay your tax filings. It's it's
additional paperwork that you got to file with your CPA
(22:38):
or if you self prepare your taxes.
Speaker 2 (22:40):
And that's why.
Speaker 1 (22:41):
And we've talked about the preponderance of private equity private
credit funds coming into vogue here. That's one watch out
from those kind of things. Another is just and we
run into this a lot. Brian reinvest reinvested dividends and
capital gains, specifically within mutual funds, and it's a big
reason that we've tried to gravitate people where it makes
(23:04):
sense from a tax standpoint, away from mutual funds and
in the ets, because these declared capital gains happen in
the fourth quarter of every year, whether you've sold anything
or not, and you get hit with a tax bill
that can be a surprise, especially after a big run
up in the market like we've had, and sometimes people
(23:24):
are unprepared for that.
Speaker 3 (23:26):
Yep. And another place where we see this too is
in debt forgiveness, right, so when a portion of a
loan is forgiven, in other words, whoever with the bank
or the institute. Well of them, the bank would never
do this, but sometimes there are agreements between family members
or or you know, business agreements that when a portion
of a loan is forgiven, like if there's a real
estate type of a sale here in and a loan
is set up but eventually just wiped off the books
(23:47):
while the IRS if it comes into if it finds
out about that that amount is going to be treated
as taxable income even though no money actually changed hands.
We just said, hey, you don't know me that money anymore,
don't worry about it, just keep it. Irsays whatever the morning,
the remainder of that loan that was still out there
is now taxable income and which again comes back to
phantom income. Didn't get anything, but got to pay taxes
(24:08):
on it. Restricted stock units, exercising stock options through your employer.
This is a big one when equity compensation vests, meaning
now you've been there long enough and you have full
access to whatever the grant was, or you exercise those options,
then that value is treated as income and therefore taxable
as phantom income. Even if you don't sell shares or
generate liquidity liquidity, you will still face a sizeable tax bill.
(24:30):
In those types of things.
Speaker 1 (24:31):
This is a great topic to sit down and discuss
with your fiduciary advisor because you need to manage things
on a couple of fronts. Here we've already talked about
the tax impact, but also market impact of when these
stock options vest or available to exercise them. You want
to make sure you have a strategy from a return standpoint,
a diversification standpoint, and a tax planning standpoint to just
(24:54):
not sit and let these things happen and go unmanaged.
You're listening to Simply Money presented by all Worth Financial
Bob Sponsorller along with Brian James. Brian get into a
couple other things that we need to be doing to
plan for this fandom income.
Speaker 2 (25:08):
Get out in front of it so it doesn't surprise us. Well.
Speaker 3 (25:11):
First off, understand what you own right, what you're considering
investing before you get into private funds or or you know,
accepting equity compensation, which I'm not sure why you'd say
no to that, but just know what you're getting into.
If you hear the word K one, then you should
also hear the word extension on my taxes and it
is not a big deal. You ask for an extension,
you get one, You get an extension, you get an extension.
(25:33):
Everybody gets an extension. UH. And it's just part of
the deal. If you're gonna, if you're gonna be getting
into these types of things, you are no longer filing
by April. Just assume you're filing by October and it
doesn't hurt anything. Just means you're not gonna have to
You're not gonna deal with that until later in the year.
Be strategic too about your asset location. That means what
type of an account do I own these things in?
Speaker 2 (25:51):
UH.
Speaker 3 (25:51):
For example, if you are able, if it's something that's
gonna spit out fansom income, well, then a great place
for that to live might be an IRA or a
roth ira, because there is no sch thing is annual
income in those accounts. Those are only driven by what
comes out of the account crosses the line and lands
in your bank account. But stuff that happens within the
investment that's inside the IRA is not It does not
(26:12):
affect taxes at all. Now, it's never that simple, right.
You can't simply say, well, yeah, exotic investment. I'm going
to say there's something.
Speaker 1 (26:18):
Called ubu there's something called UBTI out there that we
don't have time to get into right now. But the
irs all they're always going to poke around and try
to get their money. So but anyway, didn't want to
take you off track there, Brian.
Speaker 3 (26:31):
Now that's all right yet. Yeah, just understand where you're
going with these things. Lots of moving parts.
Speaker 2 (26:35):
Here's the all Worth advice.
Speaker 1 (26:36):
Phantom income may be invisible, but its tax consequences are
very real. Plan ahead and you can turn that potential
tax burden into a tax opportunity. Coming up next week,
tackle your real world financial dilemmas and are asked the
advisor segment. You're listening to Simply Money, presented by all
Worth Financial on fifty five KRC, the talk station.
Speaker 2 (27:03):
You're listening to Simply Money.
Speaker 1 (27:04):
You said up at all Worth Financial on Bob spond
Seller along with Brian James.
Speaker 2 (27:08):
Do you have a financial question you'd like for us
to answer.
Speaker 1 (27:10):
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,
Karen and Hyde Park leads us off tonight. She says,
my mom is eighty two, still living at home, but
I'm worried one fall could change everything. How do we
(27:31):
prepare financially for sudden long term care needs?
Speaker 3 (27:35):
All right, and this is certainly something that that that
lots of people are gonna go through. You know, we
all we all have these types of situations, and unfortunately,
when it becomes time to step in and start taking
care of your parents, that usually means your your children
are also kind of getting to the part of life
where they're gonna need some support and getting themselves launched.
It can be pretty stressful and obviously, you know, we're
(27:55):
talking about some pretty scary things. One fall in the
house where there's nobody else in it, that can be
a very cary problem. So what we can do about that, Well,
you can look into there are of course options for
home care, meaning you'll just have somebody in the house.
Is This can range anywhere from truly skilled care to
somebody who's just there, you know, helping out around the
house and just being there in case something happens. That
(28:15):
can run twenty five thirty to thirty dollars an hour,
could be two thousand to twenty five hundred dollars a month.
You might look at assisted living, which, of course this
is an elevated care in an elevated level of care,
and that's about forty five hundred to five thousand dollars
per month at another facility. And then nursing home care.
Of course, this is the big, the big one, when
it's truly time for round the clock actual health care
(28:36):
and attention and so forth, and that can be over
eight thousand dollars a month, sometimes even more than that.
And that's for a semi private room.
Speaker 2 (28:42):
Right.
Speaker 3 (28:43):
You might be mom or dad might be in a
situation where they're gonna have to share room with somebody,
and that's not ideal either, but at the same time,
it's still better than trying to get all these this
complicated care taking care of it home. So I hope
that helps, and best of luck to you and your
mom hopefully get her in a safe situation. Let's move
on to Mark in Love Linda. Mark says his siblings
and he have inherited property from their parents, but they
(29:04):
can't decide what to do, whether to sell it or
keep it. They how are they going to resolve this,
you know, with while keeping the family together. Bob, I
know you, you and I have talked about situations you've
had like this.
Speaker 1 (29:14):
Yeah, ideally, this is why we advise clients to get
out in front of this in their estate planning before
you leave these properties to your kids. But we are
where we are here with with Mark and his situation.
So I mean, the best advice I can give without
knowing the entire situation is you got to sit down,
get your siblings all in a room, preferably in person
(29:35):
or at least on a zoom call if people are
spread out all over the place, and just find out,
you know, shoot straight, what does everybody need and want
from this situation. If somebody really wants this property, you
know they're going to have to you know, buy probably
buy out their siblings.
Speaker 2 (29:53):
I mean, there's no other way around it.
Speaker 1 (29:54):
You You either got to come to an agreement amongst
all of you in an equitable way that makes it
everybody happy, or no one's going to have any part
of this property and you got to put it up
for sale, liquidate it, and divide up the proceeds. But
I think the key here is proactive communication. Be sensitive
and actively listen to what every one of your siblings
(30:17):
needs and wants out of this situation, and then hopefully
you can all work together over a reasonable period of
time and come up with a solution that's not ideal,
but at least palatable, because there's no reason to let
some money permanently tear a family apart. So hopefully, Mark,
you're the adult in the room here that can step
up and lead your siblings down this path and get
(30:41):
this situation resolved.
Speaker 2 (30:42):
I wish you all the luck in the world, all.
Speaker 1 (30:44):
Right, Jim, And Montgoverery says, I've got two and a
half million dollars, but half of it, Brian is in
old four to one k's. Should I consolidate them or
just leave them where they are?
Speaker 3 (30:55):
Yeah? So, Jim, I'm a huge fan of simplification, and
I don't know how old Jim is. He doesn't say,
but at some point he is going to, like everyone,
run into required minimum distribution time, which means when you
are at either age seventy three or seventy five, depending
on when you were born, you're gonna have to start
taking money out of those four oh one k's there.
If they're pretext, I'm assuming at least some of it
(31:16):
is pretext, But in that case, this at this point
where you are now is when that time hits Jim,
you will be responsible to go chase down all those
four oh one k's and make sure that you understand
the dollar amounts that need to come out of each
one of them. You don't have to take it all
from each one, but you could take it all from one,
but you got to do the math based on all
of your four oh one case. So that's said to
(31:36):
answer your question, put it on in IRA, just be
done with it. There's not a whole lot of benefit
to you know, to having money scattered across four oh
one k's. It's not a form of diversification. Let's be
very clear. A bunch of index funds in five different
four to one case is still just a bunch of
index funds. You need a consolidated plan. Understand why you
own everything you own, not just that I used to
work there and there's still some pile of money there. Now.
(31:58):
You need some kind of structure around all this stuff.
So I would definitely strongly urge you to consolidate. Plus,
the way you say this sounds like there's taxable assets
out there. I would learn about roth conversions. Maybe you
do it, maybe you don't. But it sounds like you've
got a good amount of money on the taxable side.
You could reallocate some of that toward paying taxes to
buy the tax freedom of those pre tax dollars and
reduce the R and D problem we talked about in
(32:19):
the first place. So find a fiduciar advisor to help
you do the math and understand whether that's worthwhile. Sue
in Florence is talking to somebody about annuities. She's been Oh,
here's this word, the P word, Bob, it's always in here.
I've been pitched annuities as a way to lock in income.
Are they a smart move at the one to two
million dollar level or just expensive products?
Speaker 1 (32:37):
Go nuts, Bob. I'm not gonna go nuts. I think
you know what I'm gonna say, trigger word for you.
Speaker 2 (32:42):
I know, yeah, yeah, I get triggered quickly and often.
Speaker 1 (32:47):
Look, I'm going to assume that somebody is selling you
an annuity, and let's face it, most people that do
this make a large commission if you buy it.
Speaker 2 (32:56):
So I think you got to step back.
Speaker 1 (32:58):
And take a look at an overall comprehensive financial plan.
At a minimum, get a second opinion from a fiduciary
financial advisor that has no vested interest from an economic standpoint,
whether you buy an annuity or come up with some
other solution to solve your problem or create opportunities. That
(33:19):
being said, I can tell you in over ninety percent
of the situations that I run across, you can solve
somebody's needs and wants cheaper and with more flexibility by
using non annuity solutions. That's my bias because I've been
doing this for a long time and I've seen.
Speaker 2 (33:38):
It both ways.
Speaker 1 (33:39):
I started off with an insurance based broker dealer, where
you know, we were trained to sell annuities and life insurance.
And I'm not knocking the people that do it. I'm
just saying oftentimes that's the only options they have. Those
are the only tools they have in their toolbox, and
you're paid handsomely in the way of commissions to quote
(33:59):
unquote h's these things. So I'd say get a second
opinion from a good fiduciary advisor that could take a
comprehensive look at your situation and help answer your exact question.
Speaker 2 (34:11):
Is it a smart move or just an expensive product?
Speaker 3 (34:14):
Hey, I want to weigh in on that too. We'll
have to get to the branded blush. We'll get on
another time, but I think Sue's got an important question here,
and I would throw out that, like you said, annuities
aren't evil. They're tools. You either use them for good
or evil. But every for those who might be attracted
to those income guarantees, just remember that every time the
market makes a new high, which is usually an income guarantee,
(34:35):
was no good. It just cost you more than you
would have gotten any way had you just left alone
without the extra bells and wist.
Speaker 2 (34:40):
Excellent point.
Speaker 1 (34:41):
All right, coming up next, I've got my two cents
on managing your five twenty nine plans. You're listening to
Simply Money presented by all Worth Financial on fifty five
KRC the talk station. You're listening to Simply Money presented
by all Worth Financial on Bob spon Seller along with
Brian James. All Right, tonight, I want to talk about
(35:03):
five twenty nine's plans. And Brian, you know this doesn't
happen often, but it's happening more often than I'm comfortable with.
I've had people come into the office for review meetings
and they have these five twenty nine plans that they've
opened up, and we start to look under the hood
and see how they're invested, and oftentimes they're just sitting
in cash. And I can understand why this happens. I mean,
(35:27):
especially through the Ohio College Advantage Program, the Ohio is
five twenty nine program.
Speaker 2 (35:33):
It's a very good product.
Speaker 1 (35:34):
You can get into some low fee, you know, well
diversified options, and it's a great plan, a great way
to say for college. But if you're a do it
yourself investor and you just open these accounts up, you
got to make sure you at least know what you're
doing and take a look at how they're invested. And
that's a good reason to include this on your annual
(35:55):
checklist at a minimum of what you go through with
your do sharey financial advisor every year. Because Brian, I
occasionally run across someone and I did recently where you know,
money was put away after the grandchild was born and
lo and behold, they're eight or nine years old now
and the money was never invested. It's sitting in cash
(36:18):
earning an obscenely low rate of interest.
Speaker 2 (36:21):
Do you ever run into similar situations, you know, as
you work with your clients, Brian.
Speaker 3 (36:26):
Yeah, this is because I think those these are often
pitched kind of really set it and forget it type
invaily a bad thing that we need to need to
pay attention to what the mechanics are underneath the hood.
It is very, very very common to just assume that, Okay,
if I just put my name on this and I
got an account number, then poof, I have a five
twenty nine and that box has checked and I never
have to think about it again. This happens also with
(36:48):
health savings accounts and sometimes even four one case that
just get ignored forever because people haven't taken the time
to understand what they own. But yes, we are very
very fortunate to live in, you know, in an area
with one of the strongest plans. If you're in the
state of Ohio, the Ohio College Advantage Plan is wonderful,
and you can't do a whole lot even as an investor,
you can't do that much with any five twenty nine.
(37:08):
You're kind of limited in terms of moving things around
and all that kind of stuff. So don't go in
thinking this is an account you have to babysit a lot.
It really can be a pretty hands off type of approach,
but you still have to decide, and that plan does
include the ability to set an age based portfolio, which
will be it'll get more and more conservative the closer
you get to college and through college. I've got a
(37:29):
few of those myself.
Speaker 1 (37:30):
Yeah, you took the words right out of my mouth.
I mean, we're not trying to turn people into day
traders here on their five twenty nine plans, but you
do need to put this money to work. And to
your point, you know, the Vanguard age based strategy is
a wonderful one.
Speaker 2 (37:43):
It is.
Speaker 1 (37:44):
You know, if you want the closest thing to a
set it and forget it type of proposition out there,
this is a great one.
Speaker 2 (37:50):
You know. It's age base, meaning it's.
Speaker 1 (37:52):
More aggressively allocated the younger the account beneficiary is, and
then as they approach college, age gradually on its own
gets more conservative. So you take a little, in some
cases a lot of risk off the table once you
get within two, three, four, five years of the.
Speaker 2 (38:11):
Child actually going to college.
Speaker 1 (38:13):
I'm just pointing out, make sure you look at this
stuff at least once a year, and if you're not
comfortable doing that yourself, sit down with a good fiduciary
advisor that can do that. For you, because we want
to take full advantage of all the tremendous tax benefits
that these five twenty nine plans offer. But you at
least got to pay attention and know a little bit
(38:34):
about what you're doing.
Speaker 3 (38:35):
Brian, Yeah, now, listen, I'm going to throw out here
I kind of forgot to circle back to it. But
obviously we live in the tri state area, not the
one state area. So let's talk about Indiana Kentucky here
briefly too. So Kentucky does that the Kentucky as the
Kentucky Saves Ky Saves five twenty nine plan. They do
not offer though a state income tax benefit. There are
no treats on the front end for having put money
(38:55):
into it. Ohio does, but for Ohio residents only. Indiana
does as well. Indiana is about twenty percent of the
contribution amount maximum of fifteen hundred dollars per tax return.
Speaker 2 (39:06):
So if you're in.
Speaker 3 (39:06):
Indiana, you may as well, you know, and that's not
a bad plan either. You may use the Indiana plan.
But if you're in Kentucky, I'd be looking at the
Ohio plan to be quite honest, because again it's one
of the best rated out there in Kentucky's not offering
you any treats anyway.
Speaker 1 (39:18):
Yeah, you get, you get a lot of bang for
your buck in terms of investment fees and good sound management.
Great advice there, Brian, all right, thanks for listening tonight.
You've been listening to Simply Money, presented by all Worth
Financial on fifty five KRC, the talk station
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