September 26, 2025 • 38 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian unpack four hidden forces that quietly drive high-stakes money choices—even when the spreadsheet says “go.” They share real “financial confessions” from successful investors, outline costly divorce mistakes, and tackle a rapid-fire Ask the Advisor on wash sales, annuities, private credit, and the #1 mistake for households with a few million saved.
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Episode Transcript
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Speaker 1 (00:08):
Tonight. Four hidden forces that shape every financial decision. You're
listening to Simple Money because I'm about all words financial.
I'm Bob Sponseller along with Brian James. All Right, you've
done the modeling, the plan checks out, the spreadsheets say
you can retire early, make that gift, or finally buy
that vacation home. And yet you pause, you hesitate, you freeze.
(00:31):
This isn't because you're bad with money. It's because financial
decisions aren't made in a vacuum. Let's explore four hidden
forces that often guide high stakes, high dollar financial decisions,
especially for those with significant wealth, and how to bring
some of these decisions into alignment. Brian, let's get into
these four major and let's just call it what it is.
(00:53):
It's emotions.
Speaker 2 (00:54):
Yeah, these are obstacles, Bob. So the first one, first
big one here is emotional, right, the gut reaction. So
anytime we talk about money, you can't do that, You
really can't do that without some kind of emotion setting
in somewhere, usually between fear and greed. And even this
happens even for people who really manage these things. Well,
we're all human beings. If somebody has a lot of money,
then often we get really wound up about the fear
(01:15):
of loss. This is the kind of thing when our
clients will will tell us that you'll call us and sabe,
I really can't afford to lose any of this at all.
I can't handle a market downturn, and so therefore I
want to protect, protect, protect, And that's fine, except what
that brings into is the risk of inflation over time.
Will a market downturn fall apart? Will I live longer
than expected? What happens if, you know, if I give
a generous gift today or that I really want to do,
(01:37):
and that screws up my future independence? How do I
know when I'm going to be okay? And sometimes it's
not fear, but the emotion is guilt. So some investors
struggle with just that idea of I have way too much,
I'm too fortunate, others have too little, and that causes
them to freeze and not really make any decisions at all,
because they simply can't get over the notion that they
that they've been too blessed in Others, you know, are
suffering out there, and sometimes there's anxiety about whether they've
(02:00):
earned it or it was given it to them, and
how will those choices be perceived by family. All of
this stuff, Bob gets in the way of good, intelligent
decision making that we all have to do at some point.
Speaker 1 (02:11):
Yeah, I see this come into play, you know, this
fear part. You know when folks first retire, and I
think what happens is when people are building their wealth,
they're at work every day. They're working very hard, focused
on a business or a high end executive or what
have you. They're buried in their work for eight to twelve,
sometimes fourteen, sixteen hours a day, working at their job.
(02:33):
They don't have time to look at the markets, and
they don't have the emotional capacity to worry about the markets.
Yet when all that stops and all they have left
to do is think about and worry about their pile
of money, even a two to three percent pullback in
the market, you know, translated into into dollars and cents,
(02:53):
which could be big at times, that really freaks people out.
And that's something that we got to talk with folks about,
especially in those early stages of retirement. Yeah.
Speaker 2 (03:03):
I think of an example there that I'm sure you'll
relate to too. But for our Procter and Gamble friends
out there. Everybody remembers the Dirk Yager years twenty some
years ago, and we always talk about how that, you
know that the market basically did not like the CEO
that was put in place and his plan, and it
took about half the value of the company away in
approximately six weeks. That does happen to Procter and Gamble,
(03:23):
as wonderful as it is, it's a stock like any other.
But I always tell people, remember you you remember that,
but at the time you didn't. It wasn't a big
deal because you were working, you were raising kids, you
were building your career. Wasn't that scary and you knew, hey,
I got a long time frame ahead of me. It'll recover,
it'll move on, always has and that's you know, still
pretty much been the case. However, the next time that
kind of thing happens to any stock out there that
(03:44):
you might own, you'll be paying a lot more attention
to it because you've got the time and it's gonna
hurt a little more. So let's move on. Let's move
on here to the social side of things, Bob, You
know that keeping up with the Joneses.
Speaker 1 (03:55):
Yeah, the pro the quiet pressure to keep up, Brian.
Here's what I think about this one. I think we're all,
you know, in some way, shape or form. We all
start to make decisions based on the people we surround
ourselves with. That becomes our normal. And I can remember,
you know, just my college days, and this is a
good thing, you know, being in the business school at
(04:16):
Miami and being in a fraternity, the people that I
spent four years with and you know, process life with
and kind of set some initial career goals with. You know,
you you all kind of get in alignment and you
get a sense of what's normal. And I think sometimes
that translates later in life. You start to look at well,
(04:38):
how's this guy doing, how's that guy doing? Does he
have two homes? Or what kind of car does he drive?
Or what kind of vacations do they take? And the
quiet social pressure can creep in, like well, hey, I
work really hard too, I deserve to have this, I
deserve to have that, And it can lead to making
decisions based on that. So why pressure or that social
(05:02):
pressure rather than making decisions based on deeply held values
that you have.
Speaker 2 (05:08):
Yeah, fomo is a nasty thing. Fear of missing out,
and we all tend to focus on, you know, those
questions that you just ask, what are the visible things
that I can see about this this person, whether I know,
maybe I don't even know them, but maybe I'm just
vaguely aware of their existence or whatever. It's just something
to compare myself against. So I think one way to
deal with that is to whenever you find yourself going
down that path, always ask yourself, I wonder what the
conversations at their dinner table is like. Is everything going
(05:30):
okay in that household? Is it not? And it may
very well be. But my point is, somebody makes a
sacrifice somewhere. We all cannot have it all except in extreme,
extremely rare.
Speaker 1 (05:42):
Rare cases.
Speaker 2 (05:43):
But in a lot of cases where somebody appears to
be very very successful in the outside, that comes with
a massive, massive investment of time. So I can think
of clients who I know who have very successful businesses
and they rarely make it to their kids baseball games,
and you know, the family just isn't quite as tight
versus other people who wish they had a little bit more.
But sure enough, they're the ones out there, you know,
coaching the little league games and just being more involved
(06:05):
in their families. Both of them are. They're both just
different lifestyle choices. Nothing right or wrong with either one
of them. But neither one of those examples in what
I gave there, is truly happy. They all feel like
they're missing something. So just make sure if you feel
like you're missing out on something, that you understand what
that other person has sacrificed to get where they are,
because it may be something that you've taken for granted.
How about generational issues. You inherited some kind of mindset,
(06:27):
didn't you.
Speaker 1 (06:29):
Yeah, I think this is a big one, Brian. I mean,
we all have parents, we all grow up in families.
And then the challenging part is for those of us
that get married all of a sudden, now you inherit
a spouse and their upbringing and their values and the
way their families handle money, and that can just become
a big conundrum of values, you know, how families operate.
(06:53):
So you know, one way of thinking is you can
never have enough. You know, folks that are coming from
a holdover mindset from the depression where scarcity was the thing,
you know, just getting by, You know, you can never
have enough, And those kind of people tend to be
afraid to spend any money whatso whatsoever. Other families never
(07:13):
talked about money at all, ever, ever, ever, And the
lack of being willing to have conversations about money with
your kids and grandkids and spouses and other family members
that can shut down important planning conversations that really need
to happen. And then a third one that we run
into from time to time, Brian, is you know that
(07:35):
you know unspoken quote that you know we help family
no matter what, meaning if anybody needs anything at any time,
we must, must, must pull the check book out and
write a check for that. And sometimes that is warranted,
and sometimes it isn't because it can enable unhealthy behavior
(07:56):
and some habits that need to change, quite frankly for
family members.
Speaker 2 (08:00):
Yeah, and it's not only know, it's not only changing
how we think about supporting people too much. It can
also be supporting yourself not enough. So you mentioned a
few bullets ago, you mentioned that can never have enough
depression era thinking, I'll never forget this story from my youth.
So I used to work in Northgate Park retirement home
over in Colorin Township, and I worked in the kitchen.
(08:21):
I was a waiter and one of us always had
to be on duty to guard the salad bar because
these folks who grew up in the depression would go
get their salad. They'd sit down, you a little bit
of it, and you, by god, you weren't going to
throw any of that away, right if you didn't want it.
They weren't by their refrigerators, so they would go back
to the salad bar and put the lettuce back in
the lettuce thing and the cottage cheese back in the
cottage cheese thing. If that happened, the health department, of course,
would require that we break down the whole salad bar.
(08:42):
So one of us had to play goalie at the
salad bar to make sure it didn't happen, and God forbid,
if they got away with it, the whole place would
erupt watching us throw all this food away.
Speaker 1 (08:51):
But that's the rules we had to follow.
Speaker 2 (08:52):
That mindset is good in terms of not overspending, but
it can also work extremely against you in terms of
always work that the world is going to end and
I have to I have to be paranoid. I'ta always
be looking over my shoulder. That causes family conflicts too,
So you know't know what you can get away with.
And that's what financial planning does well.
Speaker 1 (09:10):
And I'll share mine. I mean, I can remember being
sat down at the dinner table at the age of
nine and they said, hey, my parents said, hey, Bobby,
the allowance is over. You want money, you want to
buy a candy bar, you want to go to a
movie or whatever. You need to go get a job.
And this is at age nine. So I mean I
went out and got two paper routes, and it was
(09:31):
just a mindset drilled into me. The only person that's
going to take care of you is you. And you know,
it led to a great work ethic obviously and all that,
but there there there are some things that that are
not so good that come from that as well. So
it's very interesting how those early, those early experiences kind
(09:52):
of hardwire our brain and cause us to make financial decisions.
Speaker 2 (09:59):
Bob, My paper was on Jessup Road. There were four
candy stores. I didn't make a dime, but I walked
a lot.
Speaker 1 (10:06):
All right, Well, let's get into the fourth hidden one here.
And that's just the logical the analysis paralysis. I know,
you're really good at this. The spreadsheets, the projections, the
tax model, they're all crucial, but they can often just
confirm rather than drive decisions, because, let's face it, at
the end of the day, decisions people want to make
(10:27):
decisions based on emotion. And we have this happen often.
Brian people come in and I can tell they've already
made the decision. They already know what they're going to do.
They want me to run the numbers, to rationalize how
this is all gonna work out in the spreadsheets. Say, see, honey,
Bob told us we can do this, and whether I
(10:47):
told them they can or can't, they're already gonna do it.
Do you have any meetings like that? Oh? Yeah.
Speaker 2 (10:52):
And this comes up for whatever reason. This comes up
with people who who are going to help their kids,
you know, become hell or high water. That the first
thing that they're gonna do. And there's of course nothing
wrong with that. It's just the reality today that that
needs to happen a little more than it used to.
But but there are a lot of times people will
come in with one goal. This is gonna happen no
matter what, and it will. It will dictate all the
(11:12):
other things. But here is my number one priority, and
and that's perfectly fine. I mean this at least it's
happening in the in the in the guise of a
planning conversation, where they're at least asking is this gonna work?
Ors are going to totally sink our ship, and that's
our job. So I don't mind that at all, and
I know and you don't. We enjoy it. That's really
that's kind of how we put the puzzle pieces together,
you know. So it doesn't mean that it's a bad
idea at all, but again it does mean step back
(11:33):
and look at all the trees. Don't stare at one
of them.
Speaker 1 (11:36):
Yeah, So there's just a few questions we'll run through
here quickly, you know, in terms of aligning your forces
before you make a decision, a large dollar decision. Number One,
What am I feeling? Is this decision rooted in fear, excitement, anxiety,
or relief? Get your get your arms around what you're feeling?
Number two? Who might I be trying to impress or
(11:56):
match by making this decision? Three?
Speaker 2 (12:00):
Well, you know what, I'll add one there, and does
this person think about me at all? In turn?
Speaker 1 (12:04):
Exactly because the answers usually know three what money stories
did I inherit? That's driving this decision. Four, what do
the numbers actually say? You know? Does the plan actually work? Five?
Have I discussed this with an objective third party? Oftentimes
an objective third party, whether it's us, other family members,
(12:26):
are trusted friends that can be worth its weight in gold?
Getting a non emotional second or third opinion? Six? Does
this align? This decision aligned with my broader goals and values?
And then seven? Am I rushing or am I giving
this the time and the thought that it deserves? Big
decisions benefit from a brief pause and deeper reflection. Here's
(12:49):
the all Worth advice. The most effective plans are built
not just on spreadsheets, but on self awareness, meaningful conversations,
and a clear understanding of what matters most to you.
Coming up next, what to learn from financial mistakes that
successful investors admit behind closed doors. You're listening to Simply
(13:11):
Money presented by Allworth Financial on fifty five KRC the
talk station. You're listening to Simply Money presented by Allworth
Financial on Bob Spunseller along with Brian James. If you
can't listen to Simply Money every night, subscribe to get
our daily podcast. You can listen the following morning during
(13:32):
your commute or at the gym, just search simply Money
on the iHeart app or wherever you find your podcast
straight ahead at six forty three, we're going to tackle
the real life questions and decision making that you're facing
in your real life the questions that you've submitted to
us in today's Ask the Advisor segment. Have you ever
(13:52):
set around the dinner table with friends people like you,
successful people who built something, professionals, entrepreneurs, maybe a partner
in your firm, and after that second or third drink,
the conversation shifts in opinion on the markets, a quick
comment about real estate prices, or maybe that new advisor
or attorney someone just hired. Then come the financial confessions. Brian,
(14:17):
let's get into some of these that often come up,
and it's just signals maybe we need to dust off
our financial plan and get some things updated. Yeah.
Speaker 2 (14:27):
I think these are great opportunities. If you find yourself
in this situation where that what the blank question comes
up from somebody else, jot it down because it's probably
gonna affect you at at some point too. So one
big one that happens all the time is somebody has
an estate plan that was put together when the kids
were in diapers, and now their kids have kids in diapers,
so you know, we did our state plan way back
when kids are little. I think it's fine, right, should
(14:48):
be fine, right, nothing changes, Well, of course things change.
You have documents, which is better. That means it's not
the state that's going to dictate what happens to your
kids and your assets after you're gone. But that structure,
you know, usually doesn't reflect the family's reality anymore. Or
or the stuff you own your balance sheet probably has changed.
Tax laws for sure have changed and always will, and
probably your priorities have changed. You may be thinking, you know,
(15:10):
maybe you only worried about I want to get my
stuff to my kids. Well maybe now you've always had
the or you've more recently had a thought of I
want to like this charity, this group, I want to
support somebody else. That's fine, you got to get it
on paper, or it doesn't really matter. So make sure
that you're thinking about all these kinds of things. And
there are structures out there. There's grant or retained annuity trust,
spousal lifetime access trust. There are a lot of more
(15:32):
complicated things that may not have been appropriate or applicable
when you were first discussing this, but might now this
is where lawyers bring a lot of value in terms
of putting structures in place that can accomplish the things
that you want. Now, how about this one, Bob, What
about too much in one basket?
Speaker 1 (15:48):
Yeah? Yeah, You'll hear people sit around and say, well,
I've always done really, really well with real estate, that's
where most of my net worth is. And I guess
I never thought about risk or you know what happen,
you know, or too much money in one single company
or maybe a business. And let's face it, most people
that build some real wealth do it because they've worked
(16:10):
extremely hard, they've taken some risk, and they like control, Brian.
They like to control the outcome, and they have the
ability and the resources and the intellect to control the outcome.
What I see happen is if when people get older
and they start to think about retirement, they might be
able to still be engaged, but they don't want to
(16:31):
have that much control. They want to be able to
do some other things with their time and energy. And
that's a good time to sit down and take a
look at the whole package here and say, what are
some things that we can do to diversify a little
bit and still have you know, still have my fingers
in it, but maybe not be have this whole world,
(16:52):
the whole orbit focused on what I get done every day,
because that wears people out when they get into their
life eight fifties or sixties.
Speaker 2 (17:02):
Yeah. Another topic that I think comes up all the
time every year. Of course it comes up every year
on accounter is taxes. So a lot of people tend
to only think of taxes as a thing I worry
about in the first quarter, and I really worry about
it in April, and then I forget about it until
the next year. That's not really the case, and this
is this. I think some of this comes from the
people that we use for tax prep. Tax prep firms
(17:23):
are extremely busy. They get more and more work every year.
I swear when we partner with a local firm and
we make referrals to them, eventually it almost feels like
sometimes we shut them down because we give them too
much business. So I kind of understand. But the point
of all this is to say that tax planning is
very different from tax prep. Tax planning means how do
I think about what I should be doing two, three, four,
five years from now? Maybe should I be doing roth conversions?
(17:44):
Should I plan on doing those over time? But my
tax preparer can really only focus on getting my tax
returned done by the tax deadline because he or she
has a bunch more to do right behind mind, So
the time doesn't get put in there, and we don't
come back after that tax return is filed. This could
be a some or early fall thing maybe to kind
of have that discussion. Tax preparers like to do tax
planning in the summer. But anyway, the point is do
(18:07):
it also. You know another another concern, Bob, I'm going
to ask you about this here. So what about what
about somebody who says, well, we've been fortunate, we got
plenty of money. You know, that's that's enough to fund retirement.
So we really haven't put anymuch else thought into things.
We think is that a good idea?
Speaker 1 (18:20):
Well, that that having plenty of money, thinking about just
the total dollar value of the pile, and you know,
using a simple formula like well, if I take four
percent out of this you know pile, I'm gonna have enough.
So I'm good, I'm ready to go. I'm not going
to think about it anymore. And it goes back to
your last point. There is a huge difference between tax
(18:41):
preparation and tax planning. And there are so many strategies
out there. You know, the saying holds it's not what
you make, it's what you keep, And there are so
many opportunities out there to craft an actual income strategy
that's very tax efficient. You know, think about things like
roth convert, how to handle your required minimum distributions, where
(19:03):
to take your monthly income from. There's a lot of
things you can factor in that really put dollars back
in your pocket and your family's pocket rather than the
IRS's pocket. And then the fifth one we want to
touch on, Brian, is insurance planning. That policy, that insurance
policy that might be sitting in the dress drawer that
hasn't been looked at for twenty thirty forty years.
Speaker 2 (19:26):
Yeah, so there's a lot of cases where we bought
a life insurance policy because the kids are little. We
need to make sure they have what they need. But
then all of a sudden we realize, you know what,
we've kind of made it. They're up on their own,
they don't really need the death benefit anymore. And then
we just ignore the policy, there are other things you
can do. You might be able to pivot that to
cover long term care, for example, So look into other opportunities.
Don't let it die on the vine.
Speaker 1 (19:45):
Here's the all Worth advice. So if you've ever left
a dinner party thinking maybe it's time we looked at that,
you've just uncovered the moment many people miss. That's where
real planning can start. Next, the costly mistakes divorcing couples
often make, and how you could protect your long term wealth,
especially if you built a healthy nest egg. You're listening
(20:06):
to Simply Money presented by all With Financial on fifty
five KRC the talk station. You're listening to Simply Money
presented by all Worth Financial on Bob Sponseller along with
Brian James. Divorce obviously is a legal proceeding, but it's
a highly emotional process as we all know. But it's
(20:28):
also at its core a massive financial transaction, and for
couples that have established a healthy nest egg, the stakes
can be very, very high. Brian, We're going to get
into some of the mistakes that people don't often or
sometimes don't think about in the midst of this high
stake highly emotional process. Uh, mistake number one not understanding
(20:52):
the full financial picture.
Speaker 2 (20:54):
Yeah, so I'm actually taking a client through this right now,
so jump on you and yeah, okay, well then I'll
be sure to leave you some time to it. So
even the happiest married couples don't often sit down and
have the same clear picture because it's usually one spouse
takes over the finances and provides an update and then
that usually morphs into the other spouse never knows anything
(21:14):
that's going on. That's even the happiest couples in that situation.
Somebody who has gotten divorced probably hasn't been talking about
anything in a long time. So if you are going
to or somebody who's on the path to divorce, rather
hasn't been talking to each other for a long time.
So when you actually get to the point where you're
doing the discovery of assets and all that, one spouse
usually just has no idea. So make sure you know
how and where to look for things. Get used to
(21:36):
the idea of pulling that tax return from a couple
of years ago. Look for fifty four to ninety eights
off of iras. These are the things that show up
in your mailbox that will confirm the existence of an account.
What have you seen out there.
Speaker 1 (21:46):
Bob, Well, the main thing in the situation I'm dealing with,
I'm acting kind of as the forensic accountant here. I
know what questions to ask, and therefore I'm asking them
of the attorney, and in this case, the attorney she
is going out and getting this information. So oftentimes for
that spouse that is not financially involved and has no
(22:07):
clue what's going on, it's knowing the questions to ask.
Mistake number two keeping the house for emotional reasons, Brian,
this has reared its head in a big way for
this situation. I'm dealing with one spouse just left. The
other spouse is home with three kids. Two of them
are out of high school and they're in college. There's
(22:28):
one still in high school and this is where all
the family memories are. And the one spouse still living
in the home deeply wants to stay there. There's huge
emotional ties. Wants that son to finish high school at
their current high school. But when you start to look
at the bills, you know, the mortgage, the property taxes,
the insurance, the upkeep, the maintenance, the numbers just don't
(22:51):
add up. It's just not going to work. And you know,
so the sad news here is eventually this house is
going to have to be sold in the equi, he's
gonna have to be divided up. You just got to
pick with all the other stuff going on here. You
gotta help guide people on when the right time to
pull the trigger on this is. And it can be
(23:12):
very difficult.
Speaker 2 (23:13):
Yeah, one of the thought I'd throw out there, if
you're gonna do it to do something with the house,
one of the factors that probably needs to play a
role is making sure or being aware that if they've
been in that house that long, that interest rate if
there is a mortgage, is probably really low and they're
not gonna get that treatment again. So that will offset
some of the negative numbers. All the outcomes are a
little bit scary, but but that can be a thing
that comes up as well. So taxes, right, so overlooking
(23:36):
tax implications, meaning a five hundred thousand dollars IRA or
roth IRA is not the same as a five hundred
thousand thousand dollars broker. It's regular taxable account. One is
tax sheltered, the other is post tax completely, meaning it
receives a ten nine to nine gets taxed, you know,
every single year. Both of these have both of these
pros and cons. There isn't one better than the other,
but they have different impacts. So a lot of times
(23:57):
clients will say, you know, we're gonna split things fifty
to fifty. This account, this IRA is roughly this size,
so I'll take that, and this taxble account is roughly
the same size, so you can have that, only to
realize that they've basically not spread the tax treatment out.
Maybe the dollars are spread equally, but not the tax treatment.
A five hundred thousand dollars IRA is more like a
three hundred and fifty four hundred thousand dollars assets. Once
(24:18):
you take taxes into account.
Speaker 1 (24:20):
You're listening to simply money presented by all Worth Financial
on Bob Spon Seller along with Brian James. Let's move
into mistake number four and Brian. Unfortunately, we see this
way too often, failing to update state planning documents and
beneficiaries on retirement accounts. After that divorce is done, your
ex could still inherit everything, you know, because let's face it,
(24:41):
most of the times the spouse is named as one
hundred percent primary beneficiary, and then the kids are contingent
beneficiaries if you've named them. You gotta get that stuff fixed. Otherwise,
this spouse that you no longer you know are going
to be married to could unintentionally inherit everything, and what
a ma that would be. So you gotta make sure
(25:02):
you update those beneficiary forms and estate planning documents where appropriate.
Speaker 2 (25:07):
Yeah, we log into people's four oh one ks we're
in that situation, and we look at that, and then
the new spouse will be sitting there looking at the
X spouse's name on the screen as the beneficiary. The
eyeballs get real big when that happens. Quick fix though,
So one last one here ignoring the long term impact
on your retirement. So divorce will really cut that nest
egg in half, right, there's lots of jokes about that,
(25:28):
but obviously serious situations. If you're in your fifties or sixties,
there's really not a lot of time to rebuild that.
So make sure if this is a step you have
got to take, and there's more to this than money,
for sure, but don't underestimate the impact of your assets
gonna that's gonna have And then therefore your retirement viability.
Speaker 1 (25:44):
Here's the all Worth advice. When love ends, your financial
life does not have to completely unravel. Slow down, get
good advice and be sure to protect your future self.
What's on your mind when it comes to investing, retirement
or passing wealth to the next generation. We're gonna dive
into your questions in our Ask the Advisors segment coming
(26:06):
up next. You're listening to Simply Money, presented by all
Worth Financial on fifty five KRC, the talk station. You're
listening to Simply Money's presented by all Worth Financial on
Bob's Fund Seller along with Brian James. Do you have
a financial question you'd like for us to answer. There's
a red button you can click while you're listening to
(26:26):
the show right there on the iHeart app. Simply record
your question and it will come straight to us. All right.
Mark from West Palm Beach, Florida leads us off tonight
and he says, Brian, I'm a Cincinnati and now living
in Florida. He loves listening to the show, but can
you please explain what a wash sale is and when
(26:46):
it makes sense to do one.
Speaker 2 (26:48):
God bless the internet is that is so cool? That
people all over the all over the world really now
can hear the show, which is which is great. So anyway, Yeah,
so a wash sale. Wash sale basically means that you
sold an asset and you you took a loss on it,
and then you buy it back right away.
Speaker 1 (27:07):
So the whole the.
Speaker 2 (27:07):
Reason this might come up is because somebody might want
to do what's called a loss harvest, meaning maybe you
bought a stock. You know, maybe you have put ten
thousand dollars into it, it is now worth eight thousand
and if you don't know this, you can actually take
a deductible loss off of that if you sold it
at eight thousand dollars. So when people get w into this,
sometimes what they'll do is they'll say, well, I still
want to own the stock. I want to, but I
want to take that tax benefit. So I'm going to
(27:28):
sell it today on Tuesday, and then I'll buy it
back on Wednesday. That's a wash sale because you were
not out of the position for longer than thirty days.
The IRS will disallow that that deduction, So you need
to if you're going to do that, you need to
stay out of the stock for thirty days. Then you
can buy it back in there isn't really when it
makes sense to do one. But really, I say, as
(27:49):
part of an overall tax loss harvesting plan. And you know,
if you're at absolutely in love with the stock and
you just don't want to be out of it for
any moment in time because it could go any day
now and that's why you bought it. Well hopefully that's
not a big party of portfolio anyway, But then you
might not want to do a Washdale because again you
got to stay out of that thirty days, and it
doesn't it makes no sense to do that within the
thirty day plan. So let's move on to a Jack
(28:11):
and Madeira. Jack was wondering about annuities in his portfolio.
Do I need annuities if I already have a big
pile of money?
Speaker 1 (28:16):
What do you think of that, Bob Well? Jack? In general,
I look at annuities. You know, they basically do two things,
two reasons to own one. One is people like it
in non qualified accounts for tax deferred growth. That's one
reason to own them. The other is when you want
some guaranteed income out of a piece of your portfolio.
(28:37):
I think with how this industry has evolved over the
years with tax loss harvesting and other tax strategies in
taxable non qualified accounts. Most of the time, my opinion
is these annuities can cause more harm than good because
once you've started to grow money in an annuity, when
you pull it out, it is all taxed at ordinary
(29:00):
income rates and that sticks. So there's there's usually always
a better way to skin the cat from a tax standpoint,
other than annuities it out.
Speaker 2 (29:11):
Please please, if I could share one one thought, so,
I'm you're right, But people do look at annuities and
they realize that, hey, this is a way. It's not
an IRA. You know, maybe I've got a pile of
money I inherited or I sold a business or some
asset or something, and I want to tax to fer
that so I can stick it in my IRA.
Speaker 1 (29:26):
Right.
Speaker 2 (29:26):
Well, no, of course, not that you can only put
a very limited amount every year. Can't do a couple
hundred thousand. So the next thing people discover is I
can use an annuity and invest in things that look
like stock market type growth, and I will, and it's
all tax sheltered. And that is kind of true. But
what you've done in that case, as Bob just mentioned
you have changed relatively favorable capital gains taxation to ordinary
(29:46):
income taxation on the on the back end, ordinary income
taxation is marginal. The more you have, the more you make,
the more you pay in taxes, and that can just
really set up a negative situation years down the road
when it's far too late to do any about it.
Annuities are wonderful during life, they're terrible to die with.
If your kids inherit it, they're really going to be
unhappy when they hear how much of a.
Speaker 1 (30:04):
Yeah, Because you don't get that stepped up cost basis
at death, you limit your charitable giving opportunities. You can
probably tell I'm not a big fan. All right, let's
move on here, Betsy and Indian Hill. Is there a
point where I should stop trying to grow my portfolio
and just protect it?
Speaker 2 (30:22):
Yeah? I think a great question, Betsy. A lot of
people get to this point where they realize, you know what,
I've grown, I've worked my rear end off, I have
a big pile of money, and I've gotten pretty stable.
Should I just not have to worry anymore? I always
tell people that that that is a personal decision. First
of all, this assumes that you've sat down with a
fiduciary advisor and done a full financial plan, which is
to say, here my resources, here's what I'm trying to
(30:43):
do with it, and then here's what comes out the
back end. Then you need to stress test it if
there is risk, you know, because you have some kind
of unexpected major expense or investment rub poor investment results,
something like that. If all of that looks good, then
then you're looking at a decision of Okay. On one
end of the spectrum, I don't have to take any risk.
Maybe I shouldn't, and I think this is what Betsy
is thinking. I could park all this stuff in super
(31:04):
safe investments. I know I've got enough to make it,
and therefore I wouldn't have to read the headlines anymore.
The flip side of that is, and I've seen people
do this, Eventually you'll conclude that, my gosh, most of
this money is going to sit here for the remaining
thirty years of my life. Am I taking it out
of my kid's mouths if I don't allow it to
grow since I'm not gonna need it. So that's where
people usually land somewhere in the middle. I don't need
(31:25):
the go go growth that I needed when I was
twenty and thirty years old, just trying to get the
thing off the ground. But at the same time, it's
a lost opportunity if I lock it all down and.
Speaker 1 (31:32):
Make it perfectly secure.
Speaker 2 (31:34):
So very personal decision your thought there is on is reasonable,
but at the same time there's a flip side. Let's
move on to Charles in Deerfield Township, who desperately wants
to know Bob's opinion on diversification. Bob says, Charles says,
I'm already diversiti I with stocks and bonds. When does
private credit actually make sense to kind of complement a portfolio?
Speaker 1 (31:55):
Well, i'd say, Charles, I mean private credit, private equity.
Those are sexy terms. Makes us all feel like we're
cutting edge and we're out there doing something exotic that
other people don't know about or don't have access to.
And sometimes that's true. But look, private credit, you're basically
loaning money to companies that want to go to the
(32:16):
private credit markets in most cases because they can't get
loans from traditional banks because the things that they're borrowing
money for and to do come with higher risk, higher
interest rates, higher yield for the investors. So that's the
reason why as an investor you like to get involved
with private credit. You could potentially earn earn a higher yield,
(32:39):
higher return on your money, but you've got to understand
that comes with more credit risk and more risk of default.
So I'd say, if you're going to venture into that space,
make sure that you're in a diversified, well managed portfolio
with some professionals that know how to do the actual
credit evaluation to make sure you're not putting all your
(32:59):
eggs in one basket here to chase yield and really
get burned in the process. That'd be by that'd be
my answer. All right, let's end here with Bill and
Fort Thomas. Brian. Bill ask what's the number one mistake
you see people with a few million dollars making today?
Speaker 2 (33:14):
You know when when I when I saw Bill's question,
my first reaction was, well, you know, obviously it's taking
your eye off the ball, just kind of checking the
box and and you know, going, I got enough and
I don't have to think anymore that that does happen.
But sometimes, especially in a case like this, it can
be keeping your eye on the ball too much. And
what I mean by that is. And I'm thinking of
a client who also lives in Fort Thomas who did
this to themselves, tagging some number out there. Let's say
(33:37):
you're worth one point eight million dollars and it's got
to get to two before you retire. And I had
I had a client that had some health problems and
lots of things going on, but by god, he was
going to get to that two million dollars before he
pulled the trigger and retired. He wound up listening to
me and his spouse and finally realized that it really
doesn't matter. It's just a number, and I've got bigger
things to worry about. So don't don't take your eye
(33:57):
off the ball, but don't have your eye on the
ball too much there.
Speaker 1 (34:01):
All right, Next, I've got my two cents just to
add to how we started the show tonight, how to
make some of these key decisions where emotion and feelings
come into play. Here, 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 Allworth Financial on
(34:23):
Bob Sponseller along with Brian James. All Right, I want
to go back and revisit something, Brian, we talk about
all the time. And that's all the factors, whether it's emotional, financial,
family dynamics, all that that come into making major decisions.
And I just want to share a story that I
had the privilege of being a part of here with
(34:44):
a family here recently. And you know, this is a couple, married,
couple in their mid fifties, and they're dealing with how
to handle in this case, the wife's mother who really
they needed to move her down to Cincinnati. She needed
to get into a long term care situation, and money
is tight, money is scarce. There's some emotional ties that
(35:06):
are keeping her from wanting to move down to Cincinnati,
but it needs to be done. This family didn't have
a lot of extra money to throw at it, and
the mother in this case was being a bit irrational,
and I just I guess it just comes down to,
you know, you can run spreadsheets to your blue in
the face, you can talk about all the emotional things,
(35:28):
and at some point in time you got to look
at your family's values. And I don't want to get
too inappropriate or off the rails here, but the nice
thing in this case is this family has a deeply
held Christian faith. I happen to be in the same boat,
and we were able to talk about that. And my
(35:48):
point in bringing this topic up is, you know, you
can run these spreadsheets all day long, but you've got
to look at the end of the day on what
are your core values, what's your true north, what's guy
these decisions? And believe it or not, some people might
not be aware of this, the Bible has more to
say about money than any other topic. And we were
(36:10):
able to talk about that as a family as a
team here and actually spend some time praying about the
situation because we didn't have a lot of easy answers.
And I'm happy to report that I got a text
from this client. I got a message about a week
ago because I had no idea how this whole situation
(36:30):
was going to work out, and he said, you know what, Bob,
I just wanted to let you know that mom decided
to come down and move five minutes from us in
this exact nursing home that you mentioned. We look at,
looked at She's happy about it. We're happy about it,
and thanks for talking through this with us. And it
was one of the best outcomes that I've had in
(36:53):
a meeting so far in twenty twenty five, and it
had nothing to do with buffert ETF's loss harvesting any
of these techniques we talked about. It was just getting
the family in a room and realigning decision making with
what I knew was the family's deeply health values. And
then sometime good old prayer asking God to intervene and
(37:17):
give us a little guidance. Here ended up winning the day,
and it was a good outcome.
Speaker 2 (37:22):
Those are those yeah, those are those outcomes. There are
those moments where you go, you know, I really am
still a little mad that Major League Baseball did not
recognize my talents at the age of ten, but I'm
kind of glad for where I landed and what we
get to do in this job. But yeah, you're right, Pa,
A lot of people tend to we tend to hide
behind the numbers. It's a lot easier to talk about
the numbers than it is to talk about the emotional
stuff and the making sure I'm on the same page
(37:43):
with my loved ones. So people will go down a
lot of rabbit holes over money and dollar amounts and
accounts and investments and all that kind of stuff. Meanwhile,
there's somebody staring them straight in the face that has
something else on their mind that they're not bringing up
because we can't take our eyeballs off the money. That
happens very very frequently, so I think the easiest thing
to do is get it out of the way. The
numbers are black and white. Here's some spreadsheets. Now, let's
quit talking about spreadsheets and talk about what's really in
(38:05):
your minds that you're not bringing up right now.
Speaker 1 (38:07):
Yeah, And that's where trusted friends and families and just
running these things by people, whether it's a professional advisor
or just trusted close friends. Oftentimes they can give you
the answers that you know deep down are the answers
in the course of action you need to take. Something's
(38:28):
just holding you back from pulling the trigger. And that's
the value of having close family, close friends, close advisors
to help you out here. And prayer comes in all
the time too. Thanks for listening. You've been listening to
Simply Money and presented by all Worth Financial on fifty
five KRC, the talk station
Tonight. Four hidden forces that shape every financial decision. You're
listening to Simple Money because I'm about all words financial.
I'm Bob Sponseller along with Brian James. All Right, you've
done the modeling, the plan checks out, the spreadsheets say
you can retire early, make that gift, or finally buy
that vacation home. And yet you pause, you hesitate, you freeze.
(00:31):
This isn't because you're bad with money. It's because financial
decisions aren't made in a vacuum. Let's explore four hidden
forces that often guide high stakes, high dollar financial decisions,
especially for those with significant wealth, and how to bring
some of these decisions into alignment. Brian, let's get into
these four major and let's just call it what it is.
(00:53):
It's emotions.
Speaker 2 (00:54):
Yeah, these are obstacles, Bob. So the first one, first
big one here is emotional, right, the gut reaction. So
anytime we talk about money, you can't do that, You
really can't do that without some kind of emotion setting
in somewhere, usually between fear and greed. And even this
happens even for people who really manage these things. Well,
we're all human beings. If somebody has a lot of money,
then often we get really wound up about the fear
(01:15):
of loss. This is the kind of thing when our
clients will will tell us that you'll call us and sabe,
I really can't afford to lose any of this at all.
I can't handle a market downturn, and so therefore I
want to protect, protect, protect, And that's fine, except what
that brings into is the risk of inflation over time.
Will a market downturn fall apart? Will I live longer
than expected? What happens if, you know, if I give
a generous gift today or that I really want to do,
(01:37):
and that screws up my future independence? How do I
know when I'm going to be okay? And sometimes it's
not fear, but the emotion is guilt. So some investors
struggle with just that idea of I have way too much,
I'm too fortunate, others have too little, and that causes
them to freeze and not really make any decisions at all,
because they simply can't get over the notion that they
that they've been too blessed in Others, you know, are
suffering out there, and sometimes there's anxiety about whether they've
(02:00):
earned it or it was given it to them, and
how will those choices be perceived by family. All of
this stuff, Bob gets in the way of good, intelligent
decision making that we all have to do at some point.
Speaker 1 (02:11):
Yeah, I see this come into play, you know, this
fear part. You know when folks first retire, and I
think what happens is when people are building their wealth,
they're at work every day. They're working very hard, focused
on a business or a high end executive or what
have you. They're buried in their work for eight to twelve,
sometimes fourteen, sixteen hours a day, working at their job.
(02:33):
They don't have time to look at the markets, and
they don't have the emotional capacity to worry about the markets.
Yet when all that stops and all they have left
to do is think about and worry about their pile
of money, even a two to three percent pullback in
the market, you know, translated into into dollars and cents,
(02:53):
which could be big at times, that really freaks people out.
And that's something that we got to talk with folks about,
especially in those early stages of retirement. Yeah.
Speaker 2 (03:03):
I think of an example there that I'm sure you'll
relate to too. But for our Procter and Gamble friends
out there. Everybody remembers the Dirk Yager years twenty some
years ago, and we always talk about how that, you
know that the market basically did not like the CEO
that was put in place and his plan, and it
took about half the value of the company away in
approximately six weeks. That does happen to Procter and Gamble,
(03:23):
as wonderful as it is, it's a stock like any other.
But I always tell people, remember you you remember that,
but at the time you didn't. It wasn't a big
deal because you were working, you were raising kids, you
were building your career. Wasn't that scary and you knew, hey,
I got a long time frame ahead of me. It'll recover,
it'll move on, always has and that's you know, still
pretty much been the case. However, the next time that
kind of thing happens to any stock out there that
(03:44):
you might own, you'll be paying a lot more attention
to it because you've got the time and it's gonna
hurt a little more. So let's move on. Let's move
on here to the social side of things, Bob, You
know that keeping up with the Joneses.
Speaker 1 (03:55):
Yeah, the pro the quiet pressure to keep up, Brian.
Here's what I think about this one. I think we're all,
you know, in some way, shape or form. We all
start to make decisions based on the people we surround
ourselves with. That becomes our normal. And I can remember,
you know, just my college days, and this is a
good thing, you know, being in the business school at
(04:16):
Miami and being in a fraternity, the people that I
spent four years with and you know, process life with
and kind of set some initial career goals with. You know,
you you all kind of get in alignment and you
get a sense of what's normal. And I think sometimes
that translates later in life. You start to look at well,
(04:38):
how's this guy doing, how's that guy doing? Does he
have two homes? Or what kind of car does he drive?
Or what kind of vacations do they take? And the
quiet social pressure can creep in, like well, hey, I
work really hard too, I deserve to have this, I
deserve to have that, And it can lead to making
decisions based on that. So why pressure or that social
(05:02):
pressure rather than making decisions based on deeply held values
that you have.
Speaker 2 (05:08):
Yeah, fomo is a nasty thing. Fear of missing out,
and we all tend to focus on, you know, those
questions that you just ask, what are the visible things
that I can see about this this person, whether I know,
maybe I don't even know them, but maybe I'm just
vaguely aware of their existence or whatever. It's just something
to compare myself against. So I think one way to
deal with that is to whenever you find yourself going
down that path, always ask yourself, I wonder what the
conversations at their dinner table is like. Is everything going
(05:30):
okay in that household? Is it not? And it may
very well be. But my point is, somebody makes a
sacrifice somewhere. We all cannot have it all except in extreme,
extremely rare.
Speaker 1 (05:42):
Rare cases.
Speaker 2 (05:43):
But in a lot of cases where somebody appears to
be very very successful in the outside, that comes with
a massive, massive investment of time. So I can think
of clients who I know who have very successful businesses
and they rarely make it to their kids baseball games,
and you know, the family just isn't quite as tight
versus other people who wish they had a little bit more.
But sure enough, they're the ones out there, you know,
coaching the little league games and just being more involved
(06:05):
in their families. Both of them are. They're both just
different lifestyle choices. Nothing right or wrong with either one
of them. But neither one of those examples in what
I gave there, is truly happy. They all feel like
they're missing something. So just make sure if you feel
like you're missing out on something, that you understand what
that other person has sacrificed to get where they are,
because it may be something that you've taken for granted.
How about generational issues. You inherited some kind of mindset,
(06:27):
didn't you.
Speaker 1 (06:29):
Yeah, I think this is a big one, Brian. I mean,
we all have parents, we all grow up in families.
And then the challenging part is for those of us
that get married all of a sudden, now you inherit
a spouse and their upbringing and their values and the
way their families handle money, and that can just become
a big conundrum of values, you know, how families operate.
(06:53):
So you know, one way of thinking is you can
never have enough. You know, folks that are coming from
a holdover mindset from the depression where scarcity was the thing,
you know, just getting by, You know, you can never
have enough, And those kind of people tend to be
afraid to spend any money whatso whatsoever. Other families never
(07:13):
talked about money at all, ever, ever, ever, And the
lack of being willing to have conversations about money with
your kids and grandkids and spouses and other family members
that can shut down important planning conversations that really need
to happen. And then a third one that we run
into from time to time, Brian, is you know that
(07:35):
you know unspoken quote that you know we help family
no matter what, meaning if anybody needs anything at any time,
we must, must, must pull the check book out and
write a check for that. And sometimes that is warranted,
and sometimes it isn't because it can enable unhealthy behavior
(07:56):
and some habits that need to change, quite frankly for
family members.
Speaker 2 (08:00):
Yeah, and it's not only know, it's not only changing
how we think about supporting people too much. It can
also be supporting yourself not enough. So you mentioned a
few bullets ago, you mentioned that can never have enough
depression era thinking, I'll never forget this story from my youth.
So I used to work in Northgate Park retirement home
over in Colorin Township, and I worked in the kitchen.
(08:21):
I was a waiter and one of us always had
to be on duty to guard the salad bar because
these folks who grew up in the depression would go
get their salad. They'd sit down, you a little bit
of it, and you, by god, you weren't going to
throw any of that away, right if you didn't want it.
They weren't by their refrigerators, so they would go back
to the salad bar and put the lettuce back in
the lettuce thing and the cottage cheese back in the
cottage cheese thing. If that happened, the health department, of course,
would require that we break down the whole salad bar.
(08:42):
So one of us had to play goalie at the
salad bar to make sure it didn't happen, and God forbid,
if they got away with it, the whole place would
erupt watching us throw all this food away.
Speaker 1 (08:51):
But that's the rules we had to follow.
Speaker 2 (08:52):
That mindset is good in terms of not overspending, but
it can also work extremely against you in terms of
always work that the world is going to end and
I have to I have to be paranoid. I'ta always
be looking over my shoulder. That causes family conflicts too,
So you know't know what you can get away with.
And that's what financial planning does well.
Speaker 1 (09:10):
And I'll share mine. I mean, I can remember being
sat down at the dinner table at the age of
nine and they said, hey, my parents said, hey, Bobby,
the allowance is over. You want money, you want to
buy a candy bar, you want to go to a
movie or whatever. You need to go get a job.
And this is at age nine. So I mean I
went out and got two paper routes, and it was
(09:31):
just a mindset drilled into me. The only person that's
going to take care of you is you. And you know,
it led to a great work ethic obviously and all that,
but there there there are some things that that are
not so good that come from that as well. So
it's very interesting how those early, those early experiences kind
(09:52):
of hardwire our brain and cause us to make financial decisions.
Speaker 2 (09:59):
Bob, My paper was on Jessup Road. There were four
candy stores. I didn't make a dime, but I walked
a lot.
Speaker 1 (10:06):
All right, Well, let's get into the fourth hidden one here.
And that's just the logical the analysis paralysis. I know,
you're really good at this. The spreadsheets, the projections, the
tax model, they're all crucial, but they can often just
confirm rather than drive decisions, because, let's face it, at
the end of the day, decisions people want to make
(10:27):
decisions based on emotion. And we have this happen often.
Brian people come in and I can tell they've already
made the decision. They already know what they're going to do.
They want me to run the numbers, to rationalize how
this is all gonna work out in the spreadsheets. Say, see, honey,
Bob told us we can do this, and whether I
(10:47):
told them they can or can't, they're already gonna do it.
Do you have any meetings like that? Oh? Yeah.
Speaker 2 (10:52):
And this comes up for whatever reason. This comes up
with people who who are going to help their kids,
you know, become hell or high water. That the first
thing that they're gonna do. And there's of course nothing
wrong with that. It's just the reality today that that
needs to happen a little more than it used to.
But but there are a lot of times people will
come in with one goal. This is gonna happen no
matter what, and it will. It will dictate all the
(11:12):
other things. But here is my number one priority, and
and that's perfectly fine. I mean this at least it's
happening in the in the in the guise of a
planning conversation, where they're at least asking is this gonna work?
Ors are going to totally sink our ship, and that's
our job. So I don't mind that at all, and
I know and you don't. We enjoy it. That's really
that's kind of how we put the puzzle pieces together,
you know. So it doesn't mean that it's a bad
idea at all, but again it does mean step back
(11:33):
and look at all the trees. Don't stare at one
of them.
Speaker 1 (11:36):
Yeah, So there's just a few questions we'll run through
here quickly, you know, in terms of aligning your forces
before you make a decision, a large dollar decision. Number One,
What am I feeling? Is this decision rooted in fear, excitement, anxiety,
or relief? Get your get your arms around what you're feeling?
Number two? Who might I be trying to impress or
(11:56):
match by making this decision? Three?
Speaker 2 (12:00):
Well, you know what, I'll add one there, and does
this person think about me at all? In turn?
Speaker 1 (12:04):
Exactly because the answers usually know three what money stories
did I inherit? That's driving this decision. Four, what do
the numbers actually say? You know? Does the plan actually work? Five?
Have I discussed this with an objective third party? Oftentimes
an objective third party, whether it's us, other family members,
(12:26):
are trusted friends that can be worth its weight in gold?
Getting a non emotional second or third opinion? Six? Does
this align? This decision aligned with my broader goals and values?
And then seven? Am I rushing or am I giving
this the time and the thought that it deserves? Big
decisions benefit from a brief pause and deeper reflection. Here's
(12:49):
the all Worth advice. The most effective plans are built
not just on spreadsheets, but on self awareness, meaningful conversations,
and a clear understanding of what matters most to you.
Coming up next, what to learn from financial mistakes that
successful investors admit behind closed doors. You're listening to Simply
(13:11):
Money presented by Allworth Financial on fifty five KRC the
talk station. You're listening to Simply Money presented by Allworth
Financial on Bob Spunseller along with Brian James. If you
can't listen to Simply Money every night, subscribe to get
our daily podcast. You can listen the following morning during
(13:32):
your commute or at the gym, just search simply Money
on the iHeart app or wherever you find your podcast
straight ahead at six forty three, we're going to tackle
the real life questions and decision making that you're facing
in your real life the questions that you've submitted to
us in today's Ask the Advisor segment. Have you ever
(13:52):
set around the dinner table with friends people like you,
successful people who built something, professionals, entrepreneurs, maybe a partner
in your firm, and after that second or third drink,
the conversation shifts in opinion on the markets, a quick
comment about real estate prices, or maybe that new advisor
or attorney someone just hired. Then come the financial confessions. Brian,
(14:17):
let's get into some of these that often come up,
and it's just signals maybe we need to dust off
our financial plan and get some things updated. Yeah.
Speaker 2 (14:27):
I think these are great opportunities. If you find yourself
in this situation where that what the blank question comes
up from somebody else, jot it down because it's probably
gonna affect you at at some point too. So one
big one that happens all the time is somebody has
an estate plan that was put together when the kids
were in diapers, and now their kids have kids in diapers,
so you know, we did our state plan way back
when kids are little. I think it's fine, right, should
(14:48):
be fine, right, nothing changes, Well, of course things change.
You have documents, which is better. That means it's not
the state that's going to dictate what happens to your
kids and your assets after you're gone. But that structure,
you know, usually doesn't reflect the family's reality anymore. Or
or the stuff you own your balance sheet probably has changed.
Tax laws for sure have changed and always will, and
probably your priorities have changed. You may be thinking, you know,
(15:10):
maybe you only worried about I want to get my
stuff to my kids. Well maybe now you've always had
the or you've more recently had a thought of I
want to like this charity, this group, I want to
support somebody else. That's fine, you got to get it
on paper, or it doesn't really matter. So make sure
that you're thinking about all these kinds of things. And
there are structures out there. There's grant or retained annuity trust,
spousal lifetime access trust. There are a lot of more
(15:32):
complicated things that may not have been appropriate or applicable
when you were first discussing this, but might now this
is where lawyers bring a lot of value in terms
of putting structures in place that can accomplish the things
that you want. Now, how about this one, Bob, What
about too much in one basket?
Speaker 1 (15:48):
Yeah? Yeah, You'll hear people sit around and say, well,
I've always done really, really well with real estate, that's
where most of my net worth is. And I guess
I never thought about risk or you know what happen,
you know, or too much money in one single company
or maybe a business. And let's face it, most people
that build some real wealth do it because they've worked
(16:10):
extremely hard, they've taken some risk, and they like control, Brian.
They like to control the outcome, and they have the
ability and the resources and the intellect to control the outcome.
What I see happen is if when people get older
and they start to think about retirement, they might be
able to still be engaged, but they don't want to
(16:31):
have that much control. They want to be able to
do some other things with their time and energy. And
that's a good time to sit down and take a
look at the whole package here and say, what are
some things that we can do to diversify a little
bit and still have you know, still have my fingers
in it, but maybe not be have this whole world,
(16:52):
the whole orbit focused on what I get done every day,
because that wears people out when they get into their
life eight fifties or sixties.
Speaker 2 (17:02):
Yeah. Another topic that I think comes up all the
time every year. Of course it comes up every year
on accounter is taxes. So a lot of people tend
to only think of taxes as a thing I worry
about in the first quarter, and I really worry about
it in April, and then I forget about it until
the next year. That's not really the case, and this
is this. I think some of this comes from the
people that we use for tax prep. Tax prep firms
(17:23):
are extremely busy. They get more and more work every year.
I swear when we partner with a local firm and
we make referrals to them, eventually it almost feels like
sometimes we shut them down because we give them too
much business. So I kind of understand. But the point
of all this is to say that tax planning is
very different from tax prep. Tax planning means how do
I think about what I should be doing two, three, four,
five years from now? Maybe should I be doing roth conversions?
(17:44):
Should I plan on doing those over time? But my
tax preparer can really only focus on getting my tax
returned done by the tax deadline because he or she
has a bunch more to do right behind mind, So
the time doesn't get put in there, and we don't
come back after that tax return is filed. This could
be a some or early fall thing maybe to kind
of have that discussion. Tax preparers like to do tax
planning in the summer. But anyway, the point is do
(18:07):
it also. You know another another concern, Bob, I'm going
to ask you about this here. So what about what
about somebody who says, well, we've been fortunate, we got
plenty of money. You know, that's that's enough to fund retirement.
So we really haven't put anymuch else thought into things.
We think is that a good idea?
Speaker 1 (18:20):
Well, that that having plenty of money, thinking about just
the total dollar value of the pile, and you know,
using a simple formula like well, if I take four
percent out of this you know pile, I'm gonna have enough.
So I'm good, I'm ready to go. I'm not going
to think about it anymore. And it goes back to
your last point. There is a huge difference between tax
(18:41):
preparation and tax planning. And there are so many strategies
out there. You know, the saying holds it's not what
you make, it's what you keep, And there are so
many opportunities out there to craft an actual income strategy
that's very tax efficient. You know, think about things like
roth convert, how to handle your required minimum distributions, where
(19:03):
to take your monthly income from. There's a lot of
things you can factor in that really put dollars back
in your pocket and your family's pocket rather than the
IRS's pocket. And then the fifth one we want to
touch on, Brian, is insurance planning. That policy, that insurance
policy that might be sitting in the dress drawer that
hasn't been looked at for twenty thirty forty years.
Speaker 2 (19:26):
Yeah, so there's a lot of cases where we bought
a life insurance policy because the kids are little. We
need to make sure they have what they need. But
then all of a sudden we realize, you know what,
we've kind of made it. They're up on their own,
they don't really need the death benefit anymore. And then
we just ignore the policy, there are other things you
can do. You might be able to pivot that to
cover long term care, for example, So look into other opportunities.
Don't let it die on the vine.
Speaker 1 (19:45):
Here's the all Worth advice. So if you've ever left
a dinner party thinking maybe it's time we looked at that,
you've just uncovered the moment many people miss. That's where
real planning can start. Next, the costly mistakes divorcing couples
often make, and how you could protect your long term wealth,
especially if you built a healthy nest egg. You're listening
(20:06):
to Simply Money presented by all With Financial on fifty
five KRC the talk station. You're listening to Simply Money
presented by all Worth Financial on Bob Sponseller along with
Brian James. Divorce obviously is a legal proceeding, but it's
a highly emotional process as we all know. But it's
(20:28):
also at its core a massive financial transaction, and for
couples that have established a healthy nest egg, the stakes
can be very, very high. Brian, We're going to get
into some of the mistakes that people don't often or
sometimes don't think about in the midst of this high
stake highly emotional process. Uh, mistake number one not understanding
(20:52):
the full financial picture.
Speaker 2 (20:54):
Yeah, so I'm actually taking a client through this right now,
so jump on you and yeah, okay, well then I'll
be sure to leave you some time to it. So
even the happiest married couples don't often sit down and
have the same clear picture because it's usually one spouse
takes over the finances and provides an update and then
that usually morphs into the other spouse never knows anything
(21:14):
that's going on. That's even the happiest couples in that situation.
Somebody who has gotten divorced probably hasn't been talking about
anything in a long time. So if you are going
to or somebody who's on the path to divorce, rather
hasn't been talking to each other for a long time.
So when you actually get to the point where you're
doing the discovery of assets and all that, one spouse
usually just has no idea. So make sure you know
how and where to look for things. Get used to
(21:36):
the idea of pulling that tax return from a couple
of years ago. Look for fifty four to ninety eights
off of iras. These are the things that show up
in your mailbox that will confirm the existence of an account.
What have you seen out there.
Speaker 1 (21:46):
Bob, Well, the main thing in the situation I'm dealing with,
I'm acting kind of as the forensic accountant here. I
know what questions to ask, and therefore I'm asking them
of the attorney, and in this case, the attorney she
is going out and getting this information. So oftentimes for
that spouse that is not financially involved and has no
(22:07):
clue what's going on, it's knowing the questions to ask.
Mistake number two keeping the house for emotional reasons, Brian,
this has reared its head in a big way for
this situation. I'm dealing with one spouse just left. The
other spouse is home with three kids. Two of them
are out of high school and they're in college. There's
(22:28):
one still in high school and this is where all
the family memories are. And the one spouse still living
in the home deeply wants to stay there. There's huge
emotional ties. Wants that son to finish high school at
their current high school. But when you start to look
at the bills, you know, the mortgage, the property taxes,
the insurance, the upkeep, the maintenance, the numbers just don't
(22:51):
add up. It's just not going to work. And you know,
so the sad news here is eventually this house is
going to have to be sold in the equi, he's
gonna have to be divided up. You just got to
pick with all the other stuff going on here. You
gotta help guide people on when the right time to
pull the trigger on this is. And it can be
(23:12):
very difficult.
Speaker 2 (23:13):
Yeah, one of the thought I'd throw out there, if
you're gonna do it to do something with the house,
one of the factors that probably needs to play a
role is making sure or being aware that if they've
been in that house that long, that interest rate if
there is a mortgage, is probably really low and they're
not gonna get that treatment again. So that will offset
some of the negative numbers. All the outcomes are a
little bit scary, but but that can be a thing
that comes up as well. So taxes, right, so overlooking
(23:36):
tax implications, meaning a five hundred thousand dollars IRA or
roth IRA is not the same as a five hundred
thousand thousand dollars broker. It's regular taxable account. One is
tax sheltered, the other is post tax completely, meaning it
receives a ten nine to nine gets taxed, you know,
every single year. Both of these have both of these
pros and cons. There isn't one better than the other,
but they have different impacts. So a lot of times
(23:57):
clients will say, you know, we're gonna split things fifty
to fifty. This account, this IRA is roughly this size,
so I'll take that, and this taxble account is roughly
the same size, so you can have that, only to
realize that they've basically not spread the tax treatment out.
Maybe the dollars are spread equally, but not the tax treatment.
A five hundred thousand dollars IRA is more like a
three hundred and fifty four hundred thousand dollars assets. Once
(24:18):
you take taxes into account.
Speaker 1 (24:20):
You're listening to simply money presented by all Worth Financial
on Bob Spon Seller along with Brian James. Let's move
into mistake number four and Brian. Unfortunately, we see this
way too often, failing to update state planning documents and
beneficiaries on retirement accounts. After that divorce is done, your
ex could still inherit everything, you know, because let's face it,
(24:41):
most of the times the spouse is named as one
hundred percent primary beneficiary, and then the kids are contingent
beneficiaries if you've named them. You gotta get that stuff fixed. Otherwise,
this spouse that you no longer you know are going
to be married to could unintentionally inherit everything, and what
a ma that would be. So you gotta make sure
(25:02):
you update those beneficiary forms and estate planning documents where appropriate.
Speaker 2 (25:07):
Yeah, we log into people's four oh one ks we're
in that situation, and we look at that, and then
the new spouse will be sitting there looking at the
X spouse's name on the screen as the beneficiary. The
eyeballs get real big when that happens. Quick fix though,
So one last one here ignoring the long term impact
on your retirement. So divorce will really cut that nest
egg in half, right, there's lots of jokes about that,
(25:28):
but obviously serious situations. If you're in your fifties or sixties,
there's really not a lot of time to rebuild that.
So make sure if this is a step you have
got to take, and there's more to this than money,
for sure, but don't underestimate the impact of your assets
gonna that's gonna have And then therefore your retirement viability.
Speaker 1 (25:44):
Here's the all Worth advice. When love ends, your financial
life does not have to completely unravel. Slow down, get
good advice and be sure to protect your future self.
What's on your mind when it comes to investing, retirement
or passing wealth to the next generation. We're gonna dive
into your questions in our Ask the Advisors segment coming
(26:06):
up next. You're listening to Simply Money, presented by all
Worth Financial on fifty five KRC, the talk station. You're
listening to Simply Money's presented by all Worth Financial on
Bob's Fund Seller along with Brian James. Do you have
a financial question you'd like for us to answer. There's
a red button you can click while you're listening to
(26:26):
the show right there on the iHeart app. Simply record
your question and it will come straight to us. All right.
Mark from West Palm Beach, Florida leads us off tonight
and he says, Brian, I'm a Cincinnati and now living
in Florida. He loves listening to the show, but can
you please explain what a wash sale is and when
(26:46):
it makes sense to do one.
Speaker 2 (26:48):
God bless the internet is that is so cool? That
people all over the all over the world really now
can hear the show, which is which is great. So anyway, Yeah,
so a wash sale. Wash sale basically means that you
sold an asset and you you took a loss on it,
and then you buy it back right away.
Speaker 1 (27:07):
So the whole the.
Speaker 2 (27:07):
Reason this might come up is because somebody might want
to do what's called a loss harvest, meaning maybe you
bought a stock. You know, maybe you have put ten
thousand dollars into it, it is now worth eight thousand
and if you don't know this, you can actually take
a deductible loss off of that if you sold it
at eight thousand dollars. So when people get w into this,
sometimes what they'll do is they'll say, well, I still
want to own the stock. I want to, but I
want to take that tax benefit. So I'm going to
(27:28):
sell it today on Tuesday, and then I'll buy it
back on Wednesday. That's a wash sale because you were
not out of the position for longer than thirty days.
The IRS will disallow that that deduction, So you need
to if you're going to do that, you need to
stay out of the stock for thirty days. Then you
can buy it back in there isn't really when it
makes sense to do one. But really, I say, as
(27:49):
part of an overall tax loss harvesting plan. And you know,
if you're at absolutely in love with the stock and
you just don't want to be out of it for
any moment in time because it could go any day
now and that's why you bought it. Well hopefully that's
not a big party of portfolio anyway, But then you
might not want to do a Washdale because again you
got to stay out of that thirty days, and it
doesn't it makes no sense to do that within the
thirty day plan. So let's move on to a Jack
(28:11):
and Madeira. Jack was wondering about annuities in his portfolio.
Do I need annuities if I already have a big
pile of money?
Speaker 1 (28:16):
What do you think of that, Bob Well? Jack? In general,
I look at annuities. You know, they basically do two things,
two reasons to own one. One is people like it
in non qualified accounts for tax deferred growth. That's one
reason to own them. The other is when you want
some guaranteed income out of a piece of your portfolio.
(28:37):
I think with how this industry has evolved over the
years with tax loss harvesting and other tax strategies in
taxable non qualified accounts. Most of the time, my opinion
is these annuities can cause more harm than good because
once you've started to grow money in an annuity, when
you pull it out, it is all taxed at ordinary
(29:00):
income rates and that sticks. So there's there's usually always
a better way to skin the cat from a tax standpoint,
other than annuities it out.
Speaker 2 (29:11):
Please please, if I could share one one thought, so,
I'm you're right, But people do look at annuities and
they realize that, hey, this is a way. It's not
an IRA. You know, maybe I've got a pile of
money I inherited or I sold a business or some
asset or something, and I want to tax to fer
that so I can stick it in my IRA.
Speaker 1 (29:26):
Right.
Speaker 2 (29:26):
Well, no, of course, not that you can only put
a very limited amount every year. Can't do a couple
hundred thousand. So the next thing people discover is I
can use an annuity and invest in things that look
like stock market type growth, and I will, and it's
all tax sheltered. And that is kind of true. But
what you've done in that case, as Bob just mentioned
you have changed relatively favorable capital gains taxation to ordinary
(29:46):
income taxation on the on the back end, ordinary income
taxation is marginal. The more you have, the more you make,
the more you pay in taxes, and that can just
really set up a negative situation years down the road
when it's far too late to do any about it.
Annuities are wonderful during life, they're terrible to die with.
If your kids inherit it, they're really going to be
unhappy when they hear how much of a.
Speaker 1 (30:04):
Yeah, Because you don't get that stepped up cost basis
at death, you limit your charitable giving opportunities. You can
probably tell I'm not a big fan. All right, let's
move on here, Betsy and Indian Hill. Is there a
point where I should stop trying to grow my portfolio
and just protect it?
Speaker 2 (30:22):
Yeah? I think a great question, Betsy. A lot of
people get to this point where they realize, you know what,
I've grown, I've worked my rear end off, I have
a big pile of money, and I've gotten pretty stable.
Should I just not have to worry anymore? I always
tell people that that that is a personal decision. First
of all, this assumes that you've sat down with a
fiduciary advisor and done a full financial plan, which is
to say, here my resources, here's what I'm trying to
(30:43):
do with it, and then here's what comes out the
back end. Then you need to stress test it if
there is risk, you know, because you have some kind
of unexpected major expense or investment rub poor investment results,
something like that. If all of that looks good, then
then you're looking at a decision of Okay. On one
end of the spectrum, I don't have to take any risk.
Maybe I shouldn't, and I think this is what Betsy
is thinking. I could park all this stuff in super
(31:04):
safe investments. I know I've got enough to make it,
and therefore I wouldn't have to read the headlines anymore.
The flip side of that is, and I've seen people
do this, Eventually you'll conclude that, my gosh, most of
this money is going to sit here for the remaining
thirty years of my life. Am I taking it out
of my kid's mouths if I don't allow it to
grow since I'm not gonna need it. So that's where
people usually land somewhere in the middle. I don't need
(31:25):
the go go growth that I needed when I was
twenty and thirty years old, just trying to get the
thing off the ground. But at the same time, it's
a lost opportunity if I lock it all down and.
Speaker 1 (31:32):
Make it perfectly secure.
Speaker 2 (31:34):
So very personal decision your thought there is on is reasonable,
but at the same time there's a flip side. Let's
move on to Charles in Deerfield Township, who desperately wants
to know Bob's opinion on diversification. Bob says, Charles says,
I'm already diversiti I with stocks and bonds. When does
private credit actually make sense to kind of complement a portfolio?
Speaker 1 (31:55):
Well, i'd say, Charles, I mean private credit, private equity.
Those are sexy terms. Makes us all feel like we're
cutting edge and we're out there doing something exotic that
other people don't know about or don't have access to.
And sometimes that's true. But look, private credit, you're basically
loaning money to companies that want to go to the
(32:16):
private credit markets in most cases because they can't get
loans from traditional banks because the things that they're borrowing
money for and to do come with higher risk, higher
interest rates, higher yield for the investors. So that's the
reason why as an investor you like to get involved
with private credit. You could potentially earn earn a higher yield,
(32:39):
higher return on your money, but you've got to understand
that comes with more credit risk and more risk of default.
So I'd say, if you're going to venture into that space,
make sure that you're in a diversified, well managed portfolio
with some professionals that know how to do the actual
credit evaluation to make sure you're not putting all your
(32:59):
eggs in one basket here to chase yield and really
get burned in the process. That'd be by that'd be
my answer. All right, let's end here with Bill and
Fort Thomas. Brian. Bill ask what's the number one mistake
you see people with a few million dollars making today?
Speaker 2 (33:14):
You know when when I when I saw Bill's question,
my first reaction was, well, you know, obviously it's taking
your eye off the ball, just kind of checking the
box and and you know, going, I got enough and
I don't have to think anymore that that does happen.
But sometimes, especially in a case like this, it can
be keeping your eye on the ball too much. And
what I mean by that is. And I'm thinking of
a client who also lives in Fort Thomas who did
this to themselves, tagging some number out there. Let's say
(33:37):
you're worth one point eight million dollars and it's got
to get to two before you retire. And I had
I had a client that had some health problems and
lots of things going on, but by god, he was
going to get to that two million dollars before he
pulled the trigger and retired. He wound up listening to
me and his spouse and finally realized that it really
doesn't matter. It's just a number, and I've got bigger
things to worry about. So don't don't take your eye
(33:57):
off the ball, but don't have your eye on the
ball too much there.
Speaker 1 (34:01):
All right, Next, I've got my two cents just to
add to how we started the show tonight, how to
make some of these key decisions where emotion and feelings
come into play. Here, 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 Allworth Financial on
(34:23):
Bob Sponseller along with Brian James. All Right, I want
to go back and revisit something, Brian, we talk about
all the time. And that's all the factors, whether it's emotional, financial,
family dynamics, all that that come into making major decisions.
And I just want to share a story that I
had the privilege of being a part of here with
(34:44):
a family here recently. And you know, this is a couple, married,
couple in their mid fifties, and they're dealing with how
to handle in this case, the wife's mother who really
they needed to move her down to Cincinnati. She needed
to get into a long term care situation, and money
is tight, money is scarce. There's some emotional ties that
(35:06):
are keeping her from wanting to move down to Cincinnati,
but it needs to be done. This family didn't have
a lot of extra money to throw at it, and
the mother in this case was being a bit irrational,
and I just I guess it just comes down to,
you know, you can run spreadsheets to your blue in
the face, you can talk about all the emotional things,
(35:28):
and at some point in time you got to look
at your family's values. And I don't want to get
too inappropriate or off the rails here, but the nice
thing in this case is this family has a deeply
held Christian faith. I happen to be in the same boat,
and we were able to talk about that. And my
(35:48):
point in bringing this topic up is, you know, you
can run these spreadsheets all day long, but you've got
to look at the end of the day on what
are your core values, what's your true north, what's guy
these decisions? And believe it or not, some people might
not be aware of this, the Bible has more to
say about money than any other topic. And we were
(36:10):
able to talk about that as a family as a
team here and actually spend some time praying about the
situation because we didn't have a lot of easy answers.
And I'm happy to report that I got a text
from this client. I got a message about a week
ago because I had no idea how this whole situation
(36:30):
was going to work out, and he said, you know what, Bob,
I just wanted to let you know that mom decided
to come down and move five minutes from us in
this exact nursing home that you mentioned. We look at,
looked at She's happy about it. We're happy about it,
and thanks for talking through this with us. And it
was one of the best outcomes that I've had in
(36:53):
a meeting so far in twenty twenty five, and it
had nothing to do with buffert ETF's loss harvesting any
of these techniques we talked about. It was just getting
the family in a room and realigning decision making with
what I knew was the family's deeply health values. And
then sometime good old prayer asking God to intervene and
(37:17):
give us a little guidance. Here ended up winning the day,
and it was a good outcome.
Speaker 2 (37:22):
Those are those yeah, those are those outcomes. There are
those moments where you go, you know, I really am
still a little mad that Major League Baseball did not
recognize my talents at the age of ten, but I'm
kind of glad for where I landed and what we
get to do in this job. But yeah, you're right, Pa,
A lot of people tend to we tend to hide
behind the numbers. It's a lot easier to talk about
the numbers than it is to talk about the emotional
stuff and the making sure I'm on the same page
(37:43):
with my loved ones. So people will go down a
lot of rabbit holes over money and dollar amounts and
accounts and investments and all that kind of stuff. Meanwhile,
there's somebody staring them straight in the face that has
something else on their mind that they're not bringing up
because we can't take our eyeballs off the money. That
happens very very frequently, so I think the easiest thing
to do is get it out of the way. The
numbers are black and white. Here's some spreadsheets. Now, let's
quit talking about spreadsheets and talk about what's really in
(38:05):
your minds that you're not bringing up right now.
Speaker 1 (38:07):
Yeah, And that's where trusted friends and families and just
running these things by people, whether it's a professional advisor
or just trusted close friends. Oftentimes they can give you
the answers that you know deep down are the answers
in the course of action you need to take. Something's
(38:28):
just holding you back from pulling the trigger. And that's
the value of having close family, close friends, close advisors
to help you out here. And prayer comes in all
the time too. Thanks for listening. You've been listening to
Simply Money and presented by all Worth Financial on fifty
five KRC, the talk station
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