Simply Money Presented by Allworth Financial

Episode Transcript

Speaker 1 (00:00):
Give you a piece of my mind.

Speaker 2 (00:01):
It's gross, gross incompetence of Talk Tilver.

Speaker 3 (00:04):
People are scared fifty five krs the talk station.

Speaker 1 (00:15):
Tonight, we're challenging the entire idea of retirement, why the
whole concept might be outdated, and what a better version
of the future really might look like. You're listening to
Simply Money, presented by all Worth Financial. I'm Bob Sponseller
along with Brian James. When you hear the word retirement,
what picture comes to mind? Sitting on a beach, golfing

(00:37):
five days a week, maybe that condo in Naples. But
here's the thing, and we see this all the time
with folks, we work with that model. Nowadays, it's kind
of outdated and for a lot of you listening, especially
those of you who've done the hard work, built businesses,
saved well and are sitting on a pile of assets,
that old idea of retirement might actually be limiting. Brian,

(01:01):
this is a wonderful topic. Let's get into this tonight.

Speaker 4 (01:03):
So, yeah, that traditional retirement plan make it to sixty five,
so Medicare kicks in, live off that pension, social Security,
maybe a little bit of savings that was built in
a totally different era generations ago.

Speaker 5 (01:14):
It doesn't work anymore. Back then, people lived into their
mid seventies, Bob.

Speaker 4 (01:18):
Healthcare costs were a lot lower, inflation wasn't that big
of a deal, and company pensions did a lot of
the heavy lifting. So we had a lot of people
who took careers with one company and never left because
that's the way that we did employment back then, was
to make sure we had people stick around for their
lifetimes and give them a benefit well into retirement. Nowadays
don't work that way, so we now kind of live

(01:39):
in a just in time employment world where when you
have reached a point where your role is no longer needed,
that will be it. It's discarded unused office supplies. At
this point, Well, I think the biggest change is what
you already hit on. I mean, it used to be retirement,
you know, lasted maybe five seven years, and now for
a lot of people that retire in their early to

(02:01):
mid sixties, you know, and we see this every day, Brian.
People are living into their late eighties, early nineties.

Speaker 1 (02:08):
We're talking about retirement periods that can last up to
thirty years or more. So when you leave that, you know,
longtime career and you're thinking about the next twenty five
to thirty five years instead of the next five to
seven years. That is a that's a huge paradigm shift
just mentally and how you look at the rest of

(02:28):
your life.

Speaker 5 (02:29):
And that's what we're really talking about tonight.

Speaker 4 (02:32):
Yeah, and that's true even for people with five to
ten million dollars, right, that's a lot of money. But
you still have to think about sequence of returns. And
what we mean by that is when do the bad
times come. We know there will be up markets and
down markets. It's when the down markets hit, which which
we cannot control. And I would hope everybody has by
now dispelled the notion that we can try to sidestep
that and you know, and miss out on the bad times.

(02:54):
It doesn't work that way. We're just going to end
up in the long run leaving a lot of money
on the table that we should be bearing, airing through
and gaining through growth. But then you've got long term
care costs keeping up with inflation over all that time.
And not to mention, the markets are just different now
and interest rates have been all over the place. You know,
it's not your grandparents or even your great grandparents' retirement anymore.

Speaker 5 (03:13):
We're in a global economy now.

Speaker 4 (03:15):
Is something that happens, you know, a butterfly flaps its
wings in China and the United States gets a cold.
That kind of thing happens. There's no such thing as
set it and forget it. Investing anymore, we've got to
be a little more nimble than we have been in
the past because things move so quickly. And then finally,
on the mentally side, people are just wired differently today.
It's not just about escape in retirement. It's about really

(03:36):
staying sharp and staying relevant. And this has everything to
do with the fact that we're not talking about a
ten year retirement anymore. You're talking about thirty, maybe even
forty years of not having a reason to get out
of bed necessarily unless you construct it for yourself.

Speaker 5 (03:49):
And that changes how people think and operate.

Speaker 1 (03:52):
So let's throw out a different term. And there's been
multiple books written on this topic. We're not we're not
mentioning anything tonight that you know isn't out there. People
are studying this and I think what's interesting for folks,
And Brian, let's face it, you and I have been
you know, in this industry for over thirty years, we
have really lived through the evolution of retirement by guiding

(04:14):
clients through this phase. So we're gonna throw out a
term that we'll just call rewirement instead of retirement. And
what do we mean kind of a phased retirement or
just you know, rethinking what the rest of your life
is going to look like. And and Brian to your point,
the money is one thing, but it comes down for
a lot of people that we work with. You know,

(04:36):
just what am I gonna do? How am I gonna
spend my time? How am I gonna stay mentally sharp
and engaged? And there's been a lot of healthcare studies
out there that say people that just fold up their
tent and just sit in a chair and watch HBO
all day, I mean, they they get unhealthy very quickly.
I've seen this happen a couple times, you know, in

(04:58):
my own practice.

Speaker 5 (04:59):
I'm sure you have as well well.

Speaker 1 (05:01):
Versus people that are proactive, you know, working on charitable boards,
doing some mentoring, even launching a second career.

Speaker 5 (05:09):
Let's let's get into what people are actually doing.

Speaker 1 (05:11):
I don't like talking about the doom and gloom stuff
all the time. Let's talk about what some people are
actually out there doing that you and I work with
every day.

Speaker 5 (05:20):
That are positive.

Speaker 4 (05:21):
Yeah, So the happy things that I've seen people do
is it seems to work the best when people get
to a baby step into retirement a little bit. And
sometimes that can mean I'm gonna work with my boss
and we'll figure out how I can only work two
days a week, or we'll give back some some duties.
That kind of thing that can work, But it can
also be a slippery slope because you're still the smartest

(05:42):
person in the room. If you're working with the exact
same team, everybody knows what's in your brain, and they're
gonna want it to complete their own jobs because the
rest of your team is not reducing their hours. So
you're likely gonna wind up getting sucked into the same
things you always did just because you're still around. And
that's not a bad thing, but you can lose years
feeling obligated to keep up on those kinds of things.

(06:02):
So it's definitely worth considering see what's out there. But
you also might might even just go look, and I
always tell people this all the time, go on indeed
dot com and just throw in any random keywords for
any hobby or anything you're truly interested in, and you
would be shocked what you might find. That can be
kind of as you mentioned, Bob, a second career. It
can be something you've never done before. Maybe it's something
you don't even have much experience with, but if you're

(06:23):
passionate about it, that can come through and carry you.

Speaker 5 (06:26):
And you don't need the salary.

Speaker 4 (06:28):
That an experienced person in that field would gain, you
don't need the benefits.

Speaker 5 (06:31):
That's the point of retirement.

Speaker 4 (06:33):
You can kind of find your own path and figure
out something you want to do versus something you have
to do. And let me let me drive this point home.
It's better to be the dumbest person in the room
than the smartest person in the room.

Speaker 5 (06:44):
If you're trying to reduce your hours.

Speaker 1 (06:48):
Well, you're making a point I was going to bring up,
you know, because we do see a lot of people
that go back to work for the company they retired
from and do it on a part time basis. What
I what I tend to see happen is people assume,
you know, they they have you pigeonholed and being the
go to person, the person that can get things done,

(07:08):
and you know, yeah, they're gonna pay you to get
things done.

Speaker 5 (07:11):
But before you know it, you.

Speaker 1 (07:12):
Get sucked into doing more than just that ten hour
a week part time gig that you were looking for.
And now you're suddenly having to miss time with the grandkids,
or miss your golf game with your buddies, or miss
that cruise that you wanted to take because you're back
in there mentally engaged and trying to quote unquote get
things done for the company. Yeah, they pay you to

(07:33):
do that, but if all you were in this for
was for money, you'd still be working and earning the
full time salary.

Speaker 5 (07:40):
So it's an excellent point.

Speaker 1 (07:41):
You know, sometimes it makes sense to do a complete
paradigm shift and be, to your point, the dumbest person
in the room rather than the guy or or that
they say yeah, yeah, yeah. Now. What I've seen work
really well is is folks that you know. Number one,
The point I want to drive home is stay connected.
Don't disconnect from your whole network just because you're retired.

(08:04):
Stay engaged, have the lunches, hang out with people. And
I've seen this work a lot of times. People get
into some nonprofit consulting works and on boards they say
mentally engaged.

Speaker 5 (08:16):
They stay socially.

Speaker 1 (08:17):
Connected with people that have met the world to them
for twenty thirty forty years and they're able to contribute
and have time to travel and play with the grandkids
and all that. So you got to be intentional about
this and that is a huge part of really doing
retirement planning.

Speaker 4 (08:35):
Yeah, and I think, Bob, if you if you're somebody
who works for a large company, oftentimes there are alumni
groups out there full of people just like you. And
they're not only full of people who are retired and
have moved on. A lot of times they pick up
people who are within maybe five to ten years of
retirement because those folks want to hear about life on
the other side, and they're going to want to ask
questions about how did you do this, How did you

(08:57):
answer this question? You know, when you made your retirement decision,
how did you ease out of your position? You know,
how did you talk to hr? All those kinds of things,
and it will keep you connected as well. You'll feel
the value of sharing your experience with younger people so
you can help them out and just kind of stand
in the mix and have any reason to leave the
house in February is really sometimes what it boils down to.

Speaker 1 (09:17):
You're listening to Simple Money, presented by All with Financial
on Bob Sponseller along with Brian James. Well, Brian, let's
pivot back to the money part of this, because this
is real again. If you're looking at a period of
retirement that's you know, instead of five to seven years,
it's twenty five to thirty five years. There are additional
financial considerations you really have to manage on an ongoing

(09:40):
basis for a longer term retirement period.

Speaker 5 (09:44):
Let's get into what some of those are.

Speaker 1 (09:45):
What are the things that we need to be doing
proactively from a financial standpoint once we're retired.

Speaker 5 (09:52):
Well, let's talk about income planning, right.

Speaker 4 (09:54):
Income is kind of important to all this that it
becomes different when you don't want to when you know,
if you don't stop working cold Turkey, you may still
have some income streams coming in that may trigger you
wanting to delay Social Security because there's only a certain
amount you can earn before you have to start giving
back some of your Social Security. Because you have W
two income that only affects your retirement from sixty two

(10:17):
to full retirement aid, so you only have to think
about that from sixty two to either sixty six or
sixty seven, depending on when you were born. But that
is an impact if you're gonna keep working. Speaking of taxes,
that's a huge piece of this too. If you're still
earning income, you have to coordinate that with your distributions.
If you are of RMD age require minimum distribution meaning
seventy three or so, then you're gonna have to work

(10:39):
that into ROTH. Conversions can play a role here. All
these things are good, except they do push us into
higher brackets, so they're definitely required. The required math right
math is required in retirement. So you're gonna want to
think about how to make these decisions. And it's not
about don't get hung up on the idea that retirement
is about avoiding taxation. That is almost never the answer.
The answer is how do I mitigate it? You're not

(11:00):
gonna avoid it. There's no such thing. Avoiding tax early
in retirement means you're backloading taxes for late in retirement
and you'll have at that point you'll have little to nothing
you can do except smile and write a check to
the irs. So be proactive and understand what the tax
implications are of the steps you take now, not only
what the benefits and sacrifices are now, but what are
those in the future. Their combination of those two timeframes

(11:23):
is really where the right answer is.

Speaker 5 (11:26):
Yeah.

Speaker 1 (11:26):
I don't know about you, Brian, but a lot of
times people say, you know, I'm talking about you know,
needing or using an accountant or a good CPA. A
lot of people will say, well, shoot, when I retire,
this is going to get really simple because all I'm
going to have is my pension and Social Security and
I don't need any complex planning or what.

Speaker 5 (11:44):
What I find is the opposite. When people are.

Speaker 1 (11:47):
Earning a huge, you know, W two pay check, there's
less things we can do to reduce taxes because, let's
face it, you're earning a high income income is always taxable.
Not a whole lot you can do. The planning, the
need for planning, and the opportunity for planning oftentimes comes
after retirement. So to me, that's a paradigm shift. You

(12:08):
should certainly have a good CPA on board, working together
with a good fiduciary financial advisor, because there is a
lot of moving parts that you have control over during retirement.
In terms of how you manage your income, your taxes,
where you take your income from, and it's critical to
have a team of planners in place to help you

(12:30):
maximize that opportunity. Here's the all Worth advice, the old
retirement playbook, It is outdated. Your second act should be
about purpose, passion, and staying engaged, not just escaping from
your current job. Coming up next, why some tax payers
will see bigger refunds and why that's not necessarily a

(12:51):
good thing, Plus why some are actually earning less in
return in their pocket that their investments are actually making
to Simply Money, presented by all Worth Financial on fifty
five KRC the talk station.

Speaker 6 (13:06):
Yeah, breaking news coming to you live right now on
the way home.

Speaker 5 (13:10):
We have an accident flowing things down there when you.

Speaker 3 (13:13):
Need us weird there, fifty five krc D talkstation.

Speaker 7 (13:18):
Allworth Financial a registered investment advisory firm. Any ideas presented
during this program are not intended to provide specific financial advice.
You should consult your own financial advisor, tax consultant, or
a state planning attorney to conduct your own due diligence.

Speaker 1 (13:37):
You're listening to Simply Money, presented by all Worth Financial
on Bob sponsller along with Brian James. If you can't
listen to Simply Money Live every night, subscribe and get
our daily podcast. You can listen the following morning during
your commute or at the gym. And if you think
your friends or family could use some financial advice, tell
them about us as well. Just search Simply Money on

(13:58):
the iHeart app up or wherever you find your podcast.
Straight Ahead, too many retirement accounts, new Secure Act rules,
and a long neglected health savings account. We're going to
break all that down and more what smart investors should
be doing in each of those cases. The IRS has

(14:19):
announced delays in how it's handling certain tax season tasks.
But here's the surprising part. Some people are going to
end up with bigger refunds because of it.

Speaker 5 (14:29):
What's going on here, Brian, Well, who's likely to see
a higher refund?

Speaker 4 (14:32):
Well, people with multiple deductions, credits, if you added a child,
paid for education, if there's maybe there's a big charitable donation,
or if you took advantages of some tax breaks like
the clean vehicle credit or energy efficient home upgrades. All
those things can boost your refund. So if you've considered
those projects, make sure you're taking that into account that
can help pay for help them pay for themselves. If
you over withheld from your paycheck. If you didn't, maybe

(14:54):
you didn't adjust that withholding after a job change or
after a raise, or you might want to be making
sure if you've switched from ROTH to traditional four to
one K contributions, make sure you're withholding it still in
line to keep you where you need to be. But
you could have sent too much to the irs this year,
so that overpayment, of course.

Speaker 5 (15:11):
Comes back to you as a refund.

Speaker 4 (15:13):
For business owners, real estate investors, maybe your income dropped
this year, you took some losses, your taxable income could
have dropped.

Speaker 5 (15:18):
That might result in a larger.

Speaker 4 (15:20):
Refund, especially if you continue to pay quarterly estimates estimates
assuming that your income was the same as last year.

Speaker 1 (15:27):
Yeah, it feels like this, This entire show might end
up being the importance of working with a good CPA
and a fiduciary financial advisor.

Speaker 5 (15:37):
Brian.

Speaker 1 (15:38):
To me, this comes down to proactive communication and a
lot of times people just don't take the time to communicate.

Speaker 5 (15:44):
With their tax professional. Here's what I mean.

Speaker 1 (15:47):
If you're somebody where you know to your point, some
of these credits happened last year and aren't gonna happen
this year, or vice versa. Or you do own a
business and your income fluctuates quite a bit. You got
to communicate that stuff to the person that does your taxes,
especially if you're filing quarterly estimates, because you don't run
a run into a situation where you got to write

(16:07):
a huge check at the end of the year or
next April, or you know what we're talking about tonight,
getting a huge check back next April. I mean, let's
face it, would you give a bank twenty thousand dollars
of your own money to hold for twelve months and
then give it back to you with no interest next April.
Probably not. I mean, we see people calling us, emailing

(16:28):
us all the time. You know, they're going and shopping
for different savings accounts rates. I mean they're quibbling over
you know, ten basis points on a savings account interest rate.
But yet they think nothing of having their money tied
up with the irs for an entire year earning nothing,
you know, zero.

Speaker 4 (16:46):
So people who get excited about that, hey, I got
a big refund coming in the coming in April. Well
that's great, except you're leaving some opportunity on the table.

Speaker 1 (16:54):
Here you're listening to simply money presented by all Worth
Financial on Bob Sponseller along with Brian and James.

Speaker 5 (17:01):
Here's something that might surprise you.

Speaker 1 (17:03):
Even if you're invested in a solid mutual fund or ETF,
a real well performing fund, there is a very good
chance you're not actually earning the returns that are reported
by that fund every year. It's called the behavior gap. Brian,
get into this. This, this is really important. We see

(17:23):
this often as well. So yeah, this stat is coming
from morning Star.

Speaker 4 (17:27):
New research shows that investors on average are earning less
than the funds that they invest in, Which that sounds
kind of strange, right, If I own a fund, I
get whatever returns, don't I? Well, over the past ten years,
here's the numbers behind it, the average investor earned about
six point three percent a year, But of the funds
that morning Star looked at in this study, those were
averaging about seven point three percent. So some people are going, well,

(17:47):
that's the must be fees. They're giving that back in fees.

Speaker 5 (17:49):
No they're not.

Speaker 4 (17:50):
That's not the point. Where did that missing one percent go?
It was lost in timing people tend to jump into
these funds after they've had a good run. I just
had a conversation yesterday with somebody who was looking at
their retirement plan and asked me to look at it.
And he said, yeah, you know what, don't worry about it.
I'm just going to take a look at what happened
last year, two years ago, and then I'll just pick
those funds. And they said, wait a minute, Bengals went
to the super Bowl in twenty twenty one.

Speaker 5 (18:11):
Does that mean they were going to win in twenty
two and twenty three. Please don't talk about the Bengals.

Speaker 1 (18:16):
I'm still I'm still trying to pull myself out of
the depression state.

Speaker 5 (18:20):
But no, you know, finish your point.

Speaker 4 (18:22):
Yeah, so again, morning star, I looked at both. This
isn't just you know, a handful of funds. He looked
at both mutual funds and exchange traded funds because ETFs
are even easier to jump in and out of index funds.
These low cost, passively managed funds did a little bit better.
But even then, the average investor still underperforms the fund.
And it has to do with behavior, you know, stalling
on making that decision.

Speaker 5 (18:42):
Maybe maybe if.

Speaker 4 (18:43):
Somebody thought about this earlier this year in April and
thought about how the market's kind of bumpy, I don't
want to invest, and decided to wait until June while
money was left on the table. So when we look
at the returns that mutual funds have had or any investment, frankly,
you were looking at an agnostic year over year your
type of return scenario. Not when did somebody out there
get the guts to go ahead and invest and not

(19:06):
read the headlines anymore. So, those numbers on that piece
of paper you're looking at have nothing to do with
the human element of all these different things.

Speaker 1 (19:13):
The flip side of this, Brian, and we talk about
this often on this show, is some people, not all,
but some people use their growth mutual funds like your
savings account.

Speaker 5 (19:23):
Here's what I mean.

Speaker 1 (19:24):
If people know they're gonna, you know, remodel their bathroom
or buy a car, or take a cruise or something
like that, or an expensive vacation, they just they want
to pull the money out of that high growth fund,
you know, whenever the bill is due for that particular
you know spending, you know event that's going to happen.
Talk to your advisor you know ahead of time, because

(19:46):
you know it it it makes sense to get that
money out of harm's way, get it out of the
market with enough time to prevent some type of uh,
you know, market correction or just a temporary drop due
to a news event something like that.

Speaker 5 (20:01):
Again, it comes down.

Speaker 1 (20:02):
To communication with your advisor to try to you know,
we're not trying to date day trade this stuff or
get into it in an extensive market timing. But there is
some common sense involved here. I mean, if you're the
market's at an all time high and you know you're
going to be doing something over the next two to
three months, it might make sense to take a little

(20:24):
money off the table. Here's the all worth advice. Even
great funds can't protect you from poor timing. The best
way to grow wealth isn't chasing returns. It's avoiding the
costly mistakes They can keep you from earning what your
investments are already providing to you. Coming up next, assisted living,

(20:44):
nursing homes or staying home. What's the right move for
your parents or for you? These are tough, costly decisions.
Will help you plan before the situation becomes urgent. Coming
up next, you're listening to Simply Money, presented by All
Words Financial on fifty five KR see.

Speaker 5 (21:02):
The talk station an iHeartRadio station.

Speaker 1 (21:09):
You're listening to Simply Money. It's not about all Worth Financial.
I'm Bob Sponsorer along with Brian James. It's one of
the hardest decisions a family has to make, and it
never feels like there's a perfect answer. Brian, I know
this is definitely more of an art than a science.
We're talking about senior living, whether to do assisted living,
nursing homes, in home care, or just trying to keep

(21:33):
mom and dad at home, And the truth is these
decisions are as emotional as they are financial. Let's start
by laying out what the options even are and what
the typical cost is for each of these options.

Speaker 4 (21:46):
Now, this can be a little bit of alphabet soup.
You're looking at a lot of different words that are
gonna sound familiar, but they're all gonna run together. So
we'll start with the different flavors of the types of
care you can have. So first off is independent living.
This is more like senior apartments. No re care is
provided there, but it's kind of ready at hand if
something is needed and you're in a community of people
kind of your own, your own age, and a lot.

Speaker 5 (22:08):
Of commonalities there.

Speaker 4 (22:09):
That runs about three thousand dollars a month for just
that kind of bare minimum with help nearby but not
necessarily right up in your face every day. That next
step up, though, Bob, is assisted living. This is going
to include help with meals, medication, and just daily tasks
of keeping the household in shape and taking care of
the things you need to. That'll run anywhere from forty
five hundred to seven thousand dollars monthly. And again you're

(22:32):
still kind of independent, but you've got somebody hanging around
that can help with those again, those daily routines. And
then where we get into the bigger ones is really
memory care. And a lot of people go through this.
It can be very challenging, of course, aside from the finances,
but so of course we're talking about Alzheimer's, dimension, dementia, Parkinson's,
those kinds of things. You're looking at six to ten

(22:53):
thousand dollars per month for that level of care. And
then one more step up from that when we've got
nursing home care. This is really really where we're getting to.
What We've got a lot of medical issues and kind
of a really end of life type care.

Speaker 5 (23:06):
Full medical care.

Speaker 4 (23:07):
Runs about nine to twelve thousand dollars a month for
a situation like that.

Speaker 5 (23:11):
But the thing I want to.

Speaker 4 (23:12):
Point out here, Bob, is a lot of people will
do a financial plan for people who are young and healthy,
maybe just retired sixties, maybe early seventies, and they'll start
to look at these numbers and they'll say, Okay, I
have got to be able to take this plan that
we just built and layer on an extra ten thousand
dollars a month for one of these days.

Speaker 5 (23:26):
That is not the case.

Speaker 4 (23:27):
Remember when you're in one of these more elaborate, more
expensive type homes, you're not traveling anymore, you're not running
to the grocery store anymore. There's a lot of bills
that are being covered for you in that ten thousand
a month. So it might be more than you're actually
spending currently to run your lives, but it's not a
complete extra expense added on to the top. Be careful
not to go too far down that rabbit hole of
how scary it will be to go through this type

(23:48):
of thing. It's expensive, for sure, but it's not as
terrifying as it might seem Yeah.

Speaker 1 (23:53):
The flip side of that, Brian, And I'm living through
this right now with an actual client. I mean, it
is a little bit terrible. And here's what I mean.
This person is recently widowed, she wants to stay in
her home, and she has multiple in home caregivers coming
in for a variety of reasons. So when you layer

(24:16):
on some of these in home care folks, depending on
what they provide, I mean, in this one case, and
I'm talking about one, this particular lady is spending upwards
of twenty thousand dollars a month to stay in her
home and have all these people come in and provide
all these you know services. So thankfully, you know, she's
in a situation where she can at least now afford

(24:39):
all that. But boy, that's a lot of money. And
I guess that leads to the point that really makes
this difficult is emotionally, everybody, Brian. Everybody wants to stay
in their home as long as they can. And you
got two things you got to look at here, and
I've done. I'm in the middle of dealing this all,

(24:59):
dealing with this also with multiple families, there's communication needs
that need you know, need to go on between the
siblings and the kids. Who's going to provide this kind
of care to enable mom or dad or both to
stay at home? And then financially what does this all mean?
Because again the default is I want to stay in
my home. I want to stay in my home. I

(25:19):
want to you know, be where I am. But it
costs money, time, effort, angst on the part of the
family that you're having come in to help you. And
these communications and discussions need to take place sooner rather
than later so that you don't disrupt multiple families on
top of all the money decisions to make all this work,

(25:40):
it could get very very difficult.

Speaker 4 (25:43):
So, yeah, we want to be paying attention to a
lot of these things and it's it can be very
very stressful. So what should you be doing? Well, think
about your own future here, what do you want? And
again this may help you think about what you're even
if you're doing this early and maybe you feel too early,
but you might be helping your parents and other relatives
simply by you thinking about it, you can have better
conversations with them. Is it important to you to age

(26:04):
at home? Could your house even handle that?

Speaker 5 (26:06):
Right?

Speaker 7 (26:06):
Is?

Speaker 4 (26:06):
Are there are a lot of steps are There are
a lot of things that are going to make it
tough for somebody who's a little bit limited with mobility.
Do you have long term care insurance or have you
looked into asset based policies that might give you some flexibility.
One of my all time favorite things to do for
people is if we've got a life insurance policy, for example,
that was purchased when the kids were new, or maybe
even before the kids were around, and now those kids
have kids, then sometimes those policies can have cash values

(26:29):
built up in them and we really no longer need
the death benefits. Well, one of the things that can
be done. You can, of course cash it out and
run away and pay taxes and all that. That's always
a choice, but a lot of times what you can
do is convert that into something that, yes, has a
minimal death benefit, which is kind of necessary to make
this work, but instead of focusing on that, it also
provides primarily a long term care benefit. So all you're

(26:51):
doing in that case is read a bunch of paperwork
and some testing and redeploying a pile of money from
a need you don't have, which is death benefit, to
a need that you do, which is now long term care.
That's called a ten thirty five exchange. It's a tax
free type of a thing. If you have that situation
and you don't need death benefit, you might consider that.

Speaker 1 (27:09):
Brian, another thing to consider, And I'd love to get
your perspective on this, even if you don't disagree.

Speaker 5 (27:14):
If you don't agree with me.

Speaker 1 (27:15):
A lot of times I've had people that have had
life insurance policies for years with this built up cash
value in it, and you know, when you run the
actual probability of dying, which is last time I checked
with one hundred percent versus needing long term care coverage,
which is, you know, around fifty percent. Sometimes you can afford,

(27:35):
if you build your plan properly, to just spend down
some of your assets knowing that the life insurance is
going to come in and backfill those assets that you
spent down. That can end up being a pretty good
scenario because at least you know you're going to get
some bang for your buck out of your insurance.

Speaker 5 (27:52):
What do you think about that idea?

Speaker 4 (27:55):
I think that's really something to look into and make
sure you've got all these moving parts covered. From a
standpoint of it, it's complicated, but if we think ahead,
then we can kind of get We can control the
future a little bit as long as we plan.

Speaker 5 (28:05):
Here's the all Worth advice.

Speaker 1 (28:07):
Planning for long term care isn't just smart, it is
a gift to your family. You're saving them from crisis, conflict,
and potentially years of stress. Coming up next from Tangled
iras to secure two point zero confusion and even some
hidden gems in your health savings account. We'll tackle the

(28:27):
questions you've been meaning to ask.

Speaker 5 (28:29):
Coming up next.

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Move up and invest in your future.

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Speaker 1 (29:41):
You're listening to Simply Money pre said up by all
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Speaker 5 (29:58):
All right. Karen in High Park leads us off tonight Brian.

Speaker 1 (30:01):
She says, we've heard about something called tax alpha, the
idea that good planning can add as much value as
investment performance. I don't know about that, but how do
you measure tax alpha? Talk about what that is and
help Karen, you know, understand the difference between that and
just plan on investment performance.

Speaker 4 (30:20):
I actually like the way she phrased that that makes
a lot of sense, and I think there's a lot
of there's a lot of benefits to this.

Speaker 5 (30:24):
So what is tax alpha?

Speaker 4 (30:26):
Tax alpha is the is the extra value you can
get by focusing on the tax efficiency of your investments
rather than simply looking at a pile of different investment
options and watching how they go up and down over
the years. So, really, what this means is what is
my portfolio done after taxes? So for example, if I'm
doing something and I'm somehow I've got some kind of

(30:46):
heavy trading strategy that is generating a lot of short
term gains, well those gains are going to be taxed
to me as income. If I'm in a thirty percent bracket,
well then I'm given away a third of my return
in my short term trading program. That's why a lot
of people don't do this kind of thing because or
at least if they're doing it, they're doing it in
an IRA.

Speaker 5 (31:03):
Maybe, So how should you? How should you?

Speaker 4 (31:05):
How do you measure it? Because the only way you
can really know you can't open a brochure and see
what some investment strategies after tax performances have been. Because
taxes are an individual thing. Everybody's in a different bracket
with a different situation, so the after tax performance is
going to be different for everybody. Best thing you can
do there is established some kind of a benchmark that
matches what it does, and then figure out what your

(31:26):
own pre tax returns have been. What did that portfolio
earn before taxes? This is usually pretty easy to get to.
What did the benchmark earn that's pre tax alpha, and
then figure out your after tax returns. This is where
you'll have to look at your You know, often you're
looking at your schedule B, your ten ninety nine B
and looking for the capital gains and losses that were
generated if you had a This isn't a perfect comparison

(31:47):
care but if you had this money and some kind
of a portfolio prior to moving to the tax alpha strategy,
then what you can do is look for more and
there should be more activity generating more losses in those
kinds of things, and so see if you can find
a way to compare those older returns with the newer ones.
With that strategy in place. Now, granted you'd be talking
about two different market periods. It is not perfect by

(32:09):
any stretch, but you should be seeing more activity trickling
through your tax return in the sense of realizing gains
that are offset therefore not being taxed, or giving you
up to three thousand dollars in a straight up deduction
if there's any losses over and above the gains that
are generated.

Speaker 5 (32:23):
So hope that helps.

Speaker 4 (32:24):
That's a slippery slope tax I'm a big believer in
tax alpha, but it does it does take some understanding,
all right. So we're gonna move on to Aaron and Kenwood.
Aaron says they've got they feel good about their net worth.
They look great on paper, but they feel like lots
of it is ill liquid. They've got a bunch of
stuff everywhere, real estate, retirement accounts, some stakes and businesses.
And he's wondering, how do you build up liquidity without
blowing up the plan?

Speaker 1 (32:43):
Bob Well, the words that's out to me and this
question is blowing up the plan. And here's what I mean, Aaron,
the plan needs to include a gradual transition of some
of these ill liquid you know, assets and accounts into
something that can create liquid income. So I think the
plan needs to be re examined. And the big thing

(33:04):
that I tell folks all the time is you don't
have to make wholesale decisions and movements in one fell swoop,
you know, in one year, because if.

Speaker 5 (33:14):
You do that, that will blow up your tax return
in the way of unnecessary taxation.

Speaker 1 (33:21):
So I think you got to sit down, especially as
it relates to illiquid assets such as real estate or
a business. You know, there's a process, there's a timeline
that you got to develop that matches your desire for
liquidity with your personal desires in retirement and craft a
gradual strategy to transition your net worth into something that's

(33:44):
going to meet your needs, you know, when you no
longer want to work.

Speaker 5 (33:48):
Hope that helps, all right?

Speaker 1 (33:50):
Ron and Mason says, we've got multiple iras and four
to one k's spread across different institutions. What's the cleanest
way to consolidate them without losing cost basis, data or protection. Fortunately,
this is a relatively easy one, Brian softball for me.

Speaker 4 (34:06):
So the way to handle the cost basis of an
IRA or a four oh one K is to it
ignore it entirely because it doesn't mean anything at all,
you know. So, I mean, unless you're in a situation
where maybe you work for Procter and Gamble. If you're
looking at something called a net unrealized appreciation type of
a transaction, yes, then then the cost basis will matter.
But most people simply have you know, mutual funds or

(34:27):
exchange traded funds in those types of retirement plans, and
so therefore the cost basis is irrelevant the tax treatment
of the account. If it's pre tax then that simply
means that are traditional IRA or four O one K.
That simply means that any nickel that comes out of
it is going to get taxed as income to you.
If it's WROTH, then it's not going to be taxed
at all, as long as you've met a couple simple
rules with regard to timing and some other things that

(34:48):
are relatively simple to get passed, so you can consolidate
all those into one account without really losing any information.
Not to mention, let's say you're not talking about an IRA.
Cost basis only is a relevant in a taxable account.
If the custodian has that information, it will transfer over
from one financial institution to another. Sometimes it takes a
week or two to get it all there, but they

(35:10):
do have to communicate that if they have it. If
you handed them a certificate thirty years ago that represented
some stock, then they don't know either what you paid
for it. So hope that helps one more question here,
and we're going to move on to Paul and Anderson.
This is not a softball, Paul says. His CPA mentioned
the secure two point zero rules for inherited iras Bob,

(35:30):
and he's asking, does the ten year rule mean equal
withdrawals or can you still manage the time? I guess
this one's not too bad, but could be a bit
of a rabbit hole, Bob.

Speaker 1 (35:38):
Yeah, there's a couple of different rules to consider here, Paul,
and I'm going to assume we're talking about a non
spouse beneficiary. So the first thing to know is when
does the proverbial clock start running. That ten year clock
starts running the year following the death of the original
IRA owner. That's the first thing to keep in mind.
After that, it comes down who was the person that

(36:02):
passed away already in there require minimum distribution stage where
they already taking annual rmds.

Speaker 5 (36:09):
If so, then you are required.

Speaker 1 (36:12):
To stay on that same schedule based on the decedents
you know, age and that whole formula and then in
addition to that, the whole thing needs to be paid
out completely in ten years. So what that situation can
end up looking like is you got to take a
little bit out every year and then if you do
not manage it, you know, in year ten, you might

(36:33):
get a bigger you know, lump sum coming out and
a bigger tax bill than you might want to see.
The other option is if the person that passed away
had not started annual rmds, well, then you got a
ton of flexibility as long as you meet that ten
year rule. You don't have to take anything out until
year ten if you don't want to. But then in
year ten you got to pull the whole thing out.

(36:55):
It's all taxable income. You owe all the taxes. So
depending on what you're sitting, situation is, you know, that's
where you want to sit down with your advisor and
your CPA and map out an income strategy to make
this withdrawal uh situation as tax efficient as possible. There
are a lot of moving parts there, but if you
if you understand what you're dealing with, you know from

(37:16):
the get go you can manage the situation. You know,
without a whole lot of complexity.

Speaker 5 (37:21):
Coming up next.

Speaker 1 (37:22):
I've got my two cents and some additional thoughts on
the whole long term care planning discussion we had a
little bit earlier. You're listening to Simply Money, presented by
all Worth Financial on fifty five KRC, the talk station,
Mark Levin.

Speaker 2 (37:36):
Let me tell you some The Internet is breeding evil,
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Speaker 5 (37:58):
On this stuff.

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Mark Levin tonight at ten oh six on fifty five
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Speaker 5 (38:04):
Hiks, Ryan Thomas.

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Next month, I have to choose between groceries for my
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Speaker 3 (38:09):
Talk about it here fifty five KRC, the talk station.

Speaker 1 (38:17):
You're listening to Simply Money, presented by all Worth Financial.
I'm Bob Spondseller along with Brian James. Brian, I want
to I want to talk a little bit more, you know,
just piggybacking on our prior discussion about this whole long
term care planning process. And what I want to talk
about here is, you know, assuming we get to the
point where it is time to start looking at a

(38:40):
long term care facility, you know, moving into a facility,
you know, there's some important considerations to factor in and
some important questions to ask. And a couple of those
questions I think these are good ones. What's the staff
to resident ratio at night? Because look, if you just
schedule a tour and go in there, it's like any other.

Speaker 5 (39:01):
Tour you go on.

Speaker 1 (39:02):
They're gonna put their best face on the whole situation.
The thing's fully staffed, it's been cleaned. It's all that
you want to talk about. You know, what are things
look like at night when when a lot of this
care is really needed, so staffed a resident ratio at night?
And then also what's the staff turnover rate? They should
be willing to share that kind of information with you,

(39:24):
because if the staff is moving in and out and
it's a constant turnover, I don't think that's good. I
think our loved one wants to know who they're dealing
with develop a relationship. They need to get to know
what the ins and outs of what the needs really
are for our loved one, so that if the staff's
turning over at a breakneck pace, that's not a really

(39:47):
good thing. And then I would also say, are they
doing background checks on all of their caregivers at the facility?

Speaker 5 (39:53):
I know you want to jump in here as well.

Speaker 4 (39:55):
Yeah, so I think this is probably one of the
most important places where we're of mouth feedback is the
most valuable. You know, the brochures are lovely, but they're
not gonna not be lovely, So look under every stone
for stories. I would be looking on social media and
just search for the you know, search for the for
the name of the facility, and bear in mind obviously
you're gonna see stories. You know, people don't tend people

(40:16):
who are super happy don't tend to talk about it
very much versus people who are raging over something. Then
it could come up there. But again, just look under
every stone, find people who live there. You might even
you know, catch somebody who perhaps looks younger walking out
of the facility. Perhaps this is the adult child of
someone who lives there. Stop them in the parking lot
and just ask how it's gone. You know, this is
an extremely important one. So I think you look under

(40:37):
every stone for every piece of information you can possibly get.

Speaker 1 (40:40):
Or just network around with your friends and folks. I mean,
everybody knows someone who has needed this kind of care.
Don't don't just rely on the internet and online reviews.
Get out there and talk to somebody, because the sad
truth is you can spend a fortune and still get
poor care if you have not vetted this sick situation carefully.

Speaker 5 (41:01):
Thanks for listening tonight.

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You've been listening to Simply Money, presented by all Worth
Financial on fifty five KRC the Talk Station.

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