November 21, 2025 • 38 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian break down the most common money mistakes they're still seeing in 2025 — and why even high-net-worth investors continue to fall into these traps. From chasing returns and emotional investing to poor tax planning, ill-advised Roth conversions, and overexposure to tech stocks, this conversation is packed with real-world examples and actionable takeaways. Whether it’s misunderstanding alternative investments or failing to build a retirement withdrawal strategy, these errors could cost you big. Learn how to avoid becoming a cautionary tale — and what it really means to have a financial plan versus just a portfolio.
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Speaker 1 (00:06):
Tonight. The biggest money mistakes that are still happening even
in twenty twenty five. This is simply money was out
of my all worth financial I'm Bob Sponseller along with
Brian James. You know, Brian. Every year we think to ourselves, maybe,
just maybe people will stop making the same money mistakes
year after year after year. But here we are, it's
(00:26):
November twenty twenty five. We are still seeing the same
issues crop up again and again. I know you like
to say that's what creates job securities for people like
you and I. It's like the financial equivalent of trying
to stop people from speeding on I seventy five. The
signs are everywhere, and yet people pick whatever speed they
(00:47):
want to drive. Let's get into some of the basic
mistakes that are we could cover quickly, and let's get
into some of the more nuanced advanced mistakes that are
still tripping people up.
Speaker 2 (01:00):
So one of the most basic mistakes that people can make,
and we're at this time period right now, whenever the
markets had a good run, well then a lot of
times we'll start with a classic of chasing returns. You know,
you'd think we'd have figured this out after two thousand
and eight and after twenty twenty two and all of
the crazy we've seen over.
Speaker 3 (01:14):
The last couple decades.
Speaker 2 (01:15):
But people still will chase whatever is doing well. And
the problem with that is it works for a little while,
because you know, things like artificial intelligence AI stocks are
still drawing people in like moss to a flame.
Speaker 3 (01:27):
But it wasn't that long ago we saw all this.
Speaker 2 (01:29):
Exact same situation with you know, for example, real estate
companies in two thousand and eight. You know, and whatever
whatever was doing really well, it must continue to be
doing well because people forget just because something doubled last
year doesn't mean it's going to do it again. If
you're buying last year's winners, that's like betting on the
World Series winner last year just because of that. That's
not investing, that's reacting. So if your financial plan relies
(01:50):
on hitting a home run every year, you really don't
have a plan. You just kind of have a wish
and you're and you're simply betting the farm on things
that don't really have a high likelihood of continuing.
Speaker 1 (01:59):
Let's talk about the next one, because this crops up
all the time too, and that's what we'll call emotional
investing or making emotional decisions. People are still reacting to headlines,
and let's face it, headlines are everywhere. People react to
headlines instead of their long term plan, inflation news, they
panic fed news, They chase risk political headlines. Some people
(02:22):
just freeze deer in the headlines. Emotional investing leads to
bad timing, and bad timing leads to bad returns and
oftentimes brian mistakes that people just can't recover from. It
takes a long time to recover from some of these
emotional mistakes.
Speaker 2 (02:39):
Yeah, and there's another one here is ignoring taxes right,
not paying attention to the steps that you're taking. We
still see investors putting tax inefficient investments into taxable accounts.
Speaker 3 (02:49):
This is the for.
Speaker 2 (02:50):
Those of you who are who are own mutual funds
and taxable accounts. This is that time of year where
sometimes they sneak up on you and send you a
gigantic capital gains distribution you're gonna have to pay for
come April. That's leaving money on the table if you've
got bonds or high turnover mutual funds, creating a lot
of taxable activity in that brokerage account while your wroth
is sitting in cash. That's the one that drives me
(03:12):
the most nuts when somebody comes in having converted a
WROTH and it's still sitting in cash. A ROTH conversion,
for example, that's great that you pay taxes and moves
it to tax free, but the whole point of it
was to get it to generate some kind of tax
free growth. And if you've got it invested conservatively, you're
really leaving money on the table because you already sacrificed
a bunch to get it there in the first place.
So lots of people out there with multimillion dollar portfolios
(03:33):
who had never had a real conversation about asset location,
meaning what type of assets should I own in what
type of tax tax account? That is a massive, massive
planning gap.
Speaker 1 (03:44):
Another big mistake is having no retirement withdrawal strategy, and Brian,
we see this people entering retirement with no real plan
on how they're going to pull money out of their accounts.
They're just winging it, for example, taking rmds when they're
forced to, instead of getting out in front of it,
maybe years in advance, you know, and in doing this strategically
(04:05):
when they can or want to in mitigating that tax
bill down the road, or just guessing what to sell
when the market dips. That is not a portfolio withdraw strategy.
Without a real distribution plan, you risk overspending or underliving,
meaning just accumulating all this money and never enjoying it.
(04:26):
Both can be dangerous things to undertake, and again we
find this with people that have no strategy, no advice,
no advisor helping them walk through these kind of you know,
retirement income with draw strategies. Brian talk about a state
planning because this is a big one as well.
Speaker 2 (04:44):
Well, if you haven't had a discussion about what's going
to happen to all this when I or WE is
no longer here, then you have no plan. In fact,
what you do have is a plan put together by
the county that you live in, because that means you've
died intestate with with no will, no nothing, and the
county will decide who gets everything. So lots of situations
out there where we've got clients that just haven't taken
(05:05):
the time to figure out how are we going to
get this correctly and efficiently to these individual people that
you know, most people have at least some vague idea
of who the individuals are that they want, but they've
never taken that step to actually put it all down
on paper and get the accounts set up appropriately to
route those assets the right direction. The counting may or
(05:25):
may not conclude the same thing that you have, and
so you know, you need to make sure you're talking
about trust, possibly gifting strategies, even legacy planning. Without that,
you don't have a plan. And some of these strategies
are really easy to put in place. Oftentimes the hardest
part is nailing down who the individuals you are, however
your family works, who are the people that you want
to benefit, and what percentages are you looking to do
(05:47):
that kind of thing. That can be a little bit
that's not necessarily the hard part, but then it's the
painful part of getting to retitle the assets, put the
trust in place.
Speaker 3 (05:55):
So on and so forth.
Speaker 2 (05:56):
But if these things go neglected, you could become a
cautionary tale that advisors like Bob and I will use
in the future to make sure that other people don't
make the same mistakes.
Speaker 1 (06:06):
You're listening to. Simply money presented by all Worth Financial
on bob'spondseller along with Brian James. Brian let's get into
some of the more complicated mistakes that we're seeing crop
up now here in twenty twenty five. The first one
we want to talk about is not understanding alternative investments.
This is somewhat of a newer mistake that we're seeing
people do, you know, they load up on private credit
(06:29):
or alternative investments that they don't fully understand. We talk
about this all the time. This can come with you know,
lock up periods, high fees and commissions, or higher risk
than people might have understood when they bought it, and
it can add volatility to the portfolio, ad fees, you know,
(06:50):
not being able to access your money, on and on
and on because that high yield if some of these
instruments sounds great when they're being pitched to you by
a product salesperson until you realize that it does come
with low liquidity, high fees, or no transparency. That can
become a real problem if and when you need to
access your money, or if markets, you know, suddenly tighten
(07:13):
up and we're looking for things to access. It's something
to really pay attention to and make sure you understand
what you're buying ahead of time.
Speaker 2 (07:23):
Yeah, and then another another situation that crops up regularly
is the idea that some things, some of these financial
planning solutions work against each other, and I need to
prioritize what I want to do. And I'm referring to
one example of asset location when there's a trust involved.
So you know a lot of people say, well, I'm
just going to get a trust and I'll just take
all these assets and throw them in there, and that
(07:43):
means that a lot of times you lose the ability.
Of course, a trust cannot own a roth ira, it
cannot own a traditional ira. So anything you're going to
put into a trust is going to be taxed. If
it's a revocable trust, that can be you know that
that is taxed at your bracket because it's revocable. But
if it's an errevocable trust, meaning something you've permanently given away,
(08:04):
is maybe some kind of a different family structure you're
trying to pursue there, those can get taxed at a
lot higher trust rates in that top federal bracket kicks
in at fifteen thousand dollars worth of income. Trusts are
often set up to avoid a state tax, but they're
inefficient before that happens because they can. If you have
a lot of bond funds or income generating assets that's
(08:25):
going to get taxed that are really really high rate.
Because irrevocable trusts do, you have a different set of
marginal brackets than the personal ones we're all kind of
accustomed to. So the way to fix this is, if
you're in this situation, get those tax and efficient assets
out of the trust. Right that might mean you need
to sell things and rebuy something else that's more appropriate,
or go ahead and distribute the income to the beneficiaries
(08:46):
if that's appropriate for the trust to lower the tax
bill that the trust itself pays.
Speaker 1 (08:50):
Let's talk next about Roth conversions, and Brian, this is
something that's coming up all the time in client meetings
we have in our office, and it's going to continue
to crop up, you know, year after year here and
what I'm talking about here is doing roth conversions and
just winging it without a multi year strategy. Here's why
that can be a problem. You might save on future taxes,
(09:12):
but you might blow up your current year tax return
or lose thousands to increase you know, IRMA or Medicare
taxes down the road. If you do this incorrectly. How
to fix it? Actually have a financial plan and sit
down with a good fiduciary advisor who can say, hey,
this is not only how twenty twenty five or twenty
(09:33):
twenty six is going to look if you do X,
Y and Z, but also have a good estimate of
what the next five to ten fifteen years look like
in terms of potential, require minimum distributions, and actually have
a multi year strategy that takes into account not only
income taxes but Social Security taxes we talk about, and
(09:54):
this is something that's going to come up, you know,
over the next three years here with this potential phase
out of this new senior you know what we'll call
Social Security credit or deduction. You really need to look
at this with a multi year strategy in view before
you just wing it and start converting iras to wroth,
(10:16):
because it could bite you down the road.
Speaker 2 (10:18):
Yeah, have an end goal, right, so understand what it
might look like. You want to look at the timing
of that whole thing and figuring out how many years
you've got to get away with making these roth conversions
without pushing yourself into a higher bracket, and just recognize
the fact that yes, you are purposely increasing your taxes
now in exchange for lower taxes in the future when
you're in those requirementum distribution years. So speaking of retirement,
(10:41):
So one other issue that pops up here is not
understanding the risk of sequence of returns if you're an
early retiree, So a few bad years early in retirement,
that's what sequence of returns risk means? When do I
get the bad years? If it's early in retirement, that
hurts a lot. If those crazy years like twenty two
or two thousand and eight, which are coming around again, right,
that's one of the few guarantees we get to give
(11:03):
is sometimes the market's going to fall apart and have
to recover, and we've been through that before. But if
that happens later in retirement, that's less impactful than it
happens right up front. This is the important This is
where stress testing is really important. Run your financial plan
and understand what it looks like if nothing bad ever
happens again, and then do the exact same thing, but
knock off twenty to twenty five percent of your financial assets,
(11:25):
which kind of represents here's what would happen. What happened
to anybody who retired in say twenty twenty one, and
then immediately went over the cliff a little bit in
twenty two or seven to eight where the same thing happened.
Speaker 3 (11:35):
So that's called stress testing.
Speaker 2 (11:36):
And if your plan works under both scenarios, then you're
gonna be okay and you know you don't have to
panic if and when that situation happens. Doesn't happen everybody,
but it does happen to some.
Speaker 1 (11:46):
All right. And then a last one we want to
touch on in Brian, it feels like you and I
talk about this often because it really needs to be discussed,
and that's overweighting a portfolio to these megacap tech stocks
in thinking you're in it diversified portfolio because you own
you know, sixteen different ETFs that if you really look
under the hood, they own the same tech stocks. I mean,
(12:08):
let's face it, the Magnificent seven stocks, they make up
between thirty and forty percent of the s and P
five hundred. Now, I mean as recently as this week,
I think Navidia Brian made up eight percent of the
SMP five hundred. So you might think you're diversified, but
if you actually look at the components of your portfolio.
You can unknowingly be overly weighted to these megacap tech
(12:31):
stocks that can and will decline, either in a general
market decline or if you know in the day will
come when the earnings growth starts to slow down. You
got to get out in front of this and make
sure your portfolio to your prior point, stress tests this
thing and make sure you're not setting yourself up for
a shock coming down the road that you had not
(12:53):
prepared for. Here's the r with advice, even in twenty
twenty five, the biggest money mistakes aren't about products. They're
about behavior. Build a plan, understand your accounts and what's
in them, and avoid the traps that are still tripping
people up. Did your spare change just get more valuable?
We got a penny for our thoughts. Next, plus, a
(13:16):
financial company actually wants to deliver cash right to your doorstep.
Is that innovation or absurdity? 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
(13:39):
Financial on Bob Sponseller along with Brian James straight ahead
of six forty three. How to handle a deferred compensation plan,
what to do in your rental properties of skyrocket in value,
and where to put your money once you've maxed out
your retirement accounts. Well, Brian, the end of an era
has officially arrived. The US mint struck its final penny
(14:02):
ever last week. That's it, no more Lincoln sense, And
now everyone has the same question. Are my old pennies
worth anything now?
Speaker 2 (14:12):
Well, Bob, I know you like to change the pennies
in your penny loafers about once a week, if not
more frequently than that, to keep that nice copper sheen
going there, So you're gonna have to stock up a
little bit.
Speaker 1 (14:21):
I like them looking shiny and new, Brian.
Speaker 3 (14:23):
Love those penny loafers.
Speaker 2 (14:25):
But to the question of my old penny's worth anything new,
it's in anything now. It's a great question to ask,
is supply and demand right? If we're not making anything
more any more of them, then the value should go up.
But the short answer, unfortunately, probably not. So let's walk
through what's actually happening here. This came directly from the
White House.
Speaker 3 (14:41):
A while back.
Speaker 2 (14:42):
President Trump ordered the Treasury to stop mint minting pennies
as a cost savings measure, because the reason for that
is costs about three point seven cents to produce just
one penny. We've been losing money on these for a
very long time, but that's it. Just because they're no
longer making them doesn't mean that jar that's been sitting
in your bedroom for thirty years suddenly he turned into gold.
Most old pennies are still worth exactly what it says
(15:03):
right on the label one cent, especially anything made in
the last fifty years.
Speaker 3 (15:08):
Now, not all of them.
Speaker 2 (15:09):
For coin collectors out there, you might know there's a
few out there that there still have value, but it's not.
It's got nothing to do with the fact that we're
not making anymore. The most famous one is the nineteen
forty three copper wheat penny because that year pennies were
supposed to be made a steel wet we were at war.
The copper needed to be sent for the war efforts,
but a few copper blanks did slip through.
Speaker 3 (15:29):
One of them sold for over.
Speaker 2 (15:30):
Two hundred thousand dollars a few years ago. Now that's
worth a little more than one cent. Another one floating
around out there has been estimated to be worth over
a million, but again, those are the ones that are
worth money. There's a story behind them, not simply all
pennies because we have quit making them.
Speaker 1 (15:43):
Brian, I'm curious, what do you do with the pennies
that are in your pocket or laying around your house?
What do you actually do with those?
Speaker 3 (15:51):
Well?
Speaker 2 (15:51):
I store them because I'm worried that Bob is going
to run out of pennies for his penny loafers. And
I don't want you to have a morning like that
where you can't get out the door because you have
dull pennies, your penny lovers.
Speaker 1 (16:01):
I can't remember the last time I even saw a penny,
And I think my dear wife finds a way to
just find all this spare change laying around, and she
does something with it that's probably very productive. But I'm
glad to see this stuff go away. I mean, if
it's costing us almost four cents to create a penny
that's worth one cent, I think it's way past time
(16:22):
that we get out of that.
Speaker 2 (16:24):
I am curious, though, on a serious note, I'm curious
there are some business out there that are gonna be
affected by this, because what do I do if I
owe some if I'm a cash business, and I owe
somebody a couple of pennies?
Speaker 3 (16:33):
Do I round up for me or do I round
down for them? You know, because that stuff does add
up over time.
Speaker 1 (16:38):
I think we already know the answer to that, right.
They'll be a round up or round down fee, and
they'll find a way to convert all that to a
nickel and put it in their pocket. That's what's gonna happen,
all right. Speaking of cash, Robinhood is rolling out a
service where they will actually deliver physical cash to your house. Yes,
they want to bring wads of bills and cash to
(16:59):
your doorstep, because apparently waiting for the ATM is too
much effort. Now, Brian, this is bizarre to me, crazy,
but walk us through it.
Speaker 3 (17:08):
This is stupid, Bob. Let's call it what it is.
I'm gonna blunt mood today. All right, here's the kicker.
Guess what.
Speaker 2 (17:14):
There's a delivery fee involved, even for your own money.
If you've got over one hundred thousand dollars in assets,
the fee drops, but still three bucks maybe seven bucks
to skip the ATM.
Speaker 3 (17:24):
This is just all This is just.
Speaker 2 (17:26):
An extra way to squeeze money out out of your wallet.
They've got a few more attachments here. You have to
be a robin Hood Gold member, which already has a
subscription fee you're already paying for this, have direct deposit
going in, etc. So this is just about convenience when
you already have met a package of the criteria, the
different rules and things that they require. But thinking through this, Bob,
I can't spend cash in my own house unless I'm
(17:48):
gonna give it to my family for some reason. But otherwise,
if I want cash in my wallet, aren't I going
to be out and about anyway? And haven't they spent
the last several decades putting ATMs on every street corner.
So I in the world, am I gonna go pay,
you know, pay three to seven dollars just to get
my own money to stick in my wallet and then.
Speaker 3 (18:05):
Walk right back out the door. This makes zero sense to.
Speaker 1 (18:08):
Me, Bob. I'm gonna give you the answer. If you're
sitting in your basement on your couch playing Call of
Duty with your headset on, and you're already willing to
pay a four dollars six six dollars delivery fee to
have a McDonald's you know, big mac value meal delivered
to your door, why would you ever take the time
to interrupt your video game and go to an ATM.
Speaker 2 (18:29):
That's why you sound a little grumpy this morning, Bob,
you're sounding a little old guy this morning.
Speaker 3 (18:34):
This is Hey.
Speaker 1 (18:35):
It's all about supply and demand. If people are dumb
enough to pay the fee, someone will come up with
a service to take your money.
Speaker 3 (18:41):
All right.
Speaker 1 (18:42):
Every Sunday you'll find our all Worth Advice in the
Cincinnati Inquire. Here's a preview. Here's an actual financial question
for you, Brian, Mike and Bracken County says. I've been
contributing to an HSA for a few years, and I'll
be enrolling in Medicare soon. But I've heard I can't
use my HSA I'm on Medicare. Is that right, Brian?
Speaker 3 (19:02):
Now that's well you might be thinking of.
Speaker 2 (19:04):
You can't contribute to your AHSA when you're on Medicare,
and in fact, you need to stop your contributions to
your HSA six months before Medicare kicks in, because Medicare
is retroactive for half a year.
Speaker 3 (19:17):
So it's not that you can't use the HSA.
Speaker 2 (19:18):
It's available to you, you know, to spend on whatever
you need.
Speaker 3 (19:22):
But you can't contribute. That's what you're running into.
Speaker 1 (19:25):
All right, good clarification there, All right, it's a question
many people will ask on the path to financial freedom.
Should I buy or should I rent? Will help you
answer that question. Next, you're listening to Simply Money presided
by all Worth Financial on fifty five KRC. The talk
station you're listening to Simply Money is that by all
(19:47):
Worth Financial. Un bomp spun Seller along with Brian James,
joined tonight by our real estate expert Michelle Sloan, owner
of Remax Time. Michelle, thanks again for spending time with
us tonight. And you want to talk about something that's
always a fascinating topic to me, and I know Brian
loves this as well, just the conversations that we all
(20:07):
get into nowadays on hey, does it make more sense
to rent a home or buy a home? And what
are the pros and cons from a financial standpoint and
a cost standpoint? And I know you've got a lot
to offer on this topic, walk us through it tonight.
Speaker 4 (20:23):
You know it would be smart of me as a
salesperson to always say you should buy a home, but
you know, after doing the twenty years, you know I
have to be so realistic when I sit down with
clients who are interested in buying a home, because there
(20:46):
is a lot to consider when it comes to buying
a home, and maybe, depending on your specific situation, renting
is the better move. So we'll break it down a
little bit with our pros of renting, our pro our
cons of renting, the pros of buying, et cetera.
Speaker 1 (21:06):
Are you ready, I'm ready?
Speaker 3 (21:08):
I want to learn.
Speaker 4 (21:09):
Okay, all right, Well, the first pro of renting is
there is a lower upfront cost, the barrier to entry. Basically,
you only need likely a security deposit, maybe first month's rent,
an application via fifty dollars, and you can live in
(21:29):
a property. That's a good thing. That's a pro for renting.
When it comes to buying, certainly you're going to need
a much larger down payment. You're going to pitch of
a couple hundred thousand dollars, so you might need twenty
thousand dollars. You may and a lot of people don't
have that in their bank account. So that's that's the
(21:50):
first barrier to buying a home is having some cash
on hand, and so saving is so important when I
can when I consult with buyers or want to be buyers.
Is you know what, it takes time to build up
the savings that you need to buy a home. So
(22:12):
number one, if if you don't have that, renting may
be your only option. And that's okay, as long as
you can try to find a way to start saving
because in the end, and this is the way sort
of the world goes around and around. As you're younger,
you don't have a lot of savings and you're not
making as much money. As you get a little bit
(22:34):
older and your job becomes more stable than you're thinking about. Okay,
I mean you start a family, now it's time to
start thinking about buying and having that nesteche is so
very important.
Speaker 2 (22:47):
Well, Michelle, what would you say that the average time
is if somebody knows they're going to be somewhere, you know,
for a certain amount of time, when when is that
that sort of break even point? If you're going to
if you know you're gonna stay put for this man years,
then it's safe to buy, versus if you may have
to move in two or three years, that's a little
bit dicey.
Speaker 3 (23:04):
You might want to consider renting. Do you have a
break even for that.
Speaker 4 (23:07):
Yeah, I do. Actually, that's a great question. Because mortgage
rates are high and home prices are high, it often
takes longer for the benefits of buying to actually catch
up with renting. So for that break even time, it's
anywhere between six and eight years. So if you're planning
(23:27):
on staying in your home for six to eight years,
that's when it's definitely time for you to consider buying.
If you're going to be bouncing around and you don't
know if your job is going to be stable, or
if you personally are just not sure you want to
live in a particular area and you're going to move
within a year or two, guess what you're likely to
(23:49):
lose money on that investment and buying a home. Although
it's very emotional and it's where you live, and it's
where you it's all of the things that go along
with buying a home, it is an investment and it's
one of the biggest and most important investments that you're
ever going to make. So when you make it with
(24:10):
the and you're very thoughtful about it, that's so important.
So if you're planning on staying a home for less
than six to eight years, you may consider renting. Now, no,
you're never going to build equity when you're renting. That's
the other con of renting. You're not paying yourself. You're
(24:30):
actually paying the person who owns that property, and you're
paying for them to build wealth. And so wealth building
is extremely important in the real estate industry, and it's
important in your industry too, right because you look at
those kinds of folks that have homes or multiple properties,
(24:51):
and we look at how the increase in value of
those properties will continue from year to year, and you
know that's part of your portfolio.
Speaker 2 (25:03):
Okay, So falling off the timing question again, do you
see people relying on arms on adjustable rate mortgages now
now that we're in a declining rate environment, or people
kind of taking that risk of needing to refinance in
three or five years, or do you see people locking
them in for longer term fixed.
Speaker 4 (25:18):
Most of my clients, you know, like the stability of
either a fifteen or a thirty year the arms in
my opinion, and again, I don't do the mortgage side
of things every single day. I think it's an option
and an opportunity. But there's a lot of people who don't.
They feel like if you do a five to one
(25:38):
arm or a seven to one arm or whatever that is,
knowing that we don't know what the future looks like
in five years. It could be worse than it is today.
And if you're doing an interest only loan and you're
only paying the interest, you're never really you're just again
sort of spinning your wheels. So you definitely want to
talk to an expert in the financing side of it,
(26:01):
the mortgage industry, and really see what is best suited
for your budget and your personal situation.
Speaker 1 (26:12):
Michelle, I want to go back to your example, and
first of all, I want to call out and just
say thank you for your transparency and your honesty and
be willing to well. I'm being sincere because I know
the way you operate. You're you truly operate like a
good fiduciary advisor, not just a real estate salesperson. And
that's why we think so highly of you and trust
(26:33):
you and love having you on the show. So I
mean that sincerely.
Speaker 4 (26:37):
Thank you.
Speaker 1 (26:37):
The point I want to add to your prior comment
is for those folks that maybe aren't in that six
to eight year window now, the key thing is to
not go through lifestyle creep and just because you're renting,
spend one hundred percent of your discretionary income, so you
don't build up that emergency fund earmarked for a home
down payment, right, And is that what you talk about
(26:58):
to your clients that maybe aren't ready yet, but you
know need to be ready in four or five years
one hundred percent.
Speaker 4 (27:06):
You always want to be planning for your future, So
finding ways to save, even if it's a couple of
bucks some months, or you know, one hundred dollars here,
fifty dollars there, definitely setting that money aside, not only
for buying a home, but you know, just life, you
never know what's going to happen along the way, and
(27:28):
if you are prepared for any you know, your car
breaks down, okay, if you have no emergency fund, you
you can't fix your car, you can't get around. So
it's the same thing with the house, and it definitely
is starting to put money away is so important. The
other thing that I'd like to tell buyers real quick,
(27:49):
and I know that we're up against the clock, is
checking your credit because having good credit will go a
long way for getting the best rates when it does
come time for you to buy a house.
Speaker 3 (28:02):
Great point and very important point.
Speaker 1 (28:05):
Thanks as always so much, Michelle. You're listening to Simply
Money presented by all Worth Financial on fifty five KRC
the talk station. You're listening to Simply Money presented by
all Worth Financial on Bob Sponseller 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
(28:26):
you're listening to the show right on the iHeart app.
Simply record your question and it will come straight to
us Brian, Jason or John excuse me, and Mason leads
us off tonight. He says, we've been building cash reserves
waiting for a market ball back, but it never seems
to come. How do we decide when to put that
(28:46):
money back to work without guessing wrong?
Speaker 2 (28:50):
Well, I hope you haven't set aside too much because
this is kind of the what we're living through right now,
the reason that we don't want to do those kinds
of things.
Speaker 3 (28:59):
At the end of the day, what you're trying to
do is time the market.
Speaker 2 (29:02):
And you know, whether that's done out of fear or greed,
it's still timing and it's not something we can control.
You can be right nine times in a row and
that tenth time comes back around to get you. So,
you know, even even with money paying four or five
percent on money market, it's inflation is still eating away.
You're purchasing power over time, So missing just the ten
best days in the market over twenty years can cut
(29:23):
that return in half.
Speaker 3 (29:24):
So really, what should you do now?
Speaker 2 (29:25):
I'd say stop paying attention to the market, you know,
maybe do maybe do a little quick math and figure
out exactly how much has been left on the table
over whatever this time period is you've been sitting in cash,
just so you can be reminded not not to you know,
not to try to pull the strategy too many times.
But if you're nervous about putting it all into once
because you feel like the train has left the station,
spread it out over time, you know, maybe divide it
by six a little bit over over the next six
(29:47):
months and then let it go. Let it do its job.
Don't be surprised when the market pulls back. That's a
guarantee I can give you it's gonna happen. But this
is you know, I hate to see people thinking they're
making responsible financial decisions. Then they wind up throwing the
money in, and the market does take a downturn, and
then those people tend to decide that the market has
targeted them for failure. The market could care less about you,
or your goals or your money. It's going to do
(30:09):
what it does. You have to learn to let it
do what it to, how to ride it and not
try to tap dance in and out of it.
Speaker 3 (30:15):
So let's move on to Greg in Westchester.
Speaker 2 (30:16):
So Greg's got a slug of company stock and his
retirement plan. He's concerned that it's become a pretty big
part of his portfolio, and he's asking Bob, are those
option strategies like Collers protective puts?
Speaker 3 (30:28):
Is that realistic for an individual investor?
Speaker 4 (30:30):
Or?
Speaker 3 (30:30):
Is that better left of the institutions.
Speaker 1 (30:33):
I think they're absolutely appropriate for individual investors, and I
wish more individual investors knew about them and actually use that.
That being said, they're awfully helpful if you're working with
a good fiduciary advisor that even knows what things these
things are and how to deploy them.
Speaker 3 (30:51):
So let's get into that a little bit. A protective put.
Speaker 1 (30:54):
I mean, sometimes our industry does a great job of
making this stuff. You know, seem way more common implicated
than it is. Think about if you've got a million
dollar home, Okay, you would not sit out there with
that home and have no insurance on the house. Right
if it burns down, you know, or a flood comes
through or whatever and wipes it out, you're you're eliminating
(31:15):
a big chunk of your net worth. Same thing with
the stock. All the protective put is is I am
buying an option to sell that stock at this price
by this set date, and you got to pay, you know,
a premium to do that. You know, just treat it
like an insurance premium. If the stock keeps going up
and you hold that put to expiration, it goes away
(31:39):
and that's a lost you know cost to ensure that stock,
just like you know, premiums you pay on your home.
If the stock starts to go down, you don't have
to hold the put to expiration.
Speaker 3 (31:50):
You can sell it.
Speaker 1 (31:51):
If you get that eight ten percent pullback, what have you.
You can always sell the put for a profit. But
you got the protection, and if you were right and
the stock went down, you were protected and made a
little money on the down on the you know, with
your downside protection. All a caller is is an attempt
to help get some of that insurance paid for. Meaning
(32:12):
you sell a call option, meaning you're you are willing
to sell your stock by a certain date at a
certain price, and you receive a premium in order, you know,
in return for selling that call option, and that helps
pay for the call op or the put protection. So
you know, in a caller strategy, you want to spread
these things apart a little bit and uh usually you
(32:35):
know that way, you have a little bit more upside left.
You know, things continue to go up, but you're helping
pay for some downside protection. It's a wonderful strategy. Unfortunately,
a lot of people have no idea what I'm talking about,
including advisors, and don't know how to put this into
a you know, responsible financial plan. Hope that helps Greg,
(32:56):
all right, Michael, and Hyde Park says, I'm being offered
a deferred compensation plan, but I'm worried about company solvency.
How do you evaluate that kind of risk before committing
to even get involved in the deferred comp plan?
Speaker 3 (33:10):
So yeah, Michael, congratulations.
Speaker 2 (33:12):
Obviously you're working for an employer that has put together
some great benefit plans for their for the employees. For
those who might not know, a deferred compensation plan. This
is not a four to oh one K. This is
something in addition to a four oh one K. Four
oh one K, of course, has its own limitations of
how much money can go into somewhere between twenty three
and thirty thousand dollars depending on your age. That is
available to everybody out there. A deferred comp plan is different.
(33:34):
It's not made available to everybody, to absolutely everybody. It's
usually an executive type of a plan, something for higher
income owners generally speaking, but also the big risk and
Michael's already included into this, these are assets of the company.
What that means is that a deferred comp plan is
it's a it could be a acclaimed by a creditor.
If that company ever gets sued by somebody, or or
(33:57):
goes bankrupt or whatever. That basically means that these assets
are exposed. Your four oh one K that is not
that is very clearly walled off. Nobody can touch it.
So what do you have to do? You have to
treat this like any other company. Forget the fact that
you work there. Make sure you understand your own company's
credit ratings. If it's publicly traded. What is their debt
load their what do their financial statements look like? Look
(34:17):
at trends and cash flow profit margins, have they made
layoffs recently?
Speaker 3 (34:21):
And you can even ask HR for planned documents.
Speaker 2 (34:24):
That they should be shoving them in your face anyway,
if you've got this as an option, but make sure
you understand exactly where that goes.
Speaker 3 (34:30):
So, yes, you're right to identify some risks.
Speaker 2 (34:32):
There could be a good opportunity here, but it could
also be risky as well, so just make sure you
understand what you're getting into. But otherwise those can be
really beneficial programs. So one more quick one. Alison and
Lovelin's got some rental properties. They've gone up, but the
maintenance is wearing them out.
Speaker 3 (34:46):
So what would she asks Bob? What are their best
exit strategies?
Speaker 2 (34:49):
How can they get out without triggering these massive capital
gains of real estate?
Speaker 1 (34:53):
Well, I got to move quick here, Alison. The most
popular option is to use if you don't want to,
you know, have maintenance headed and be a landlord anymore
at Delaware statutory trust better known as a passive ten
thirty one alternatives, So you basically put your property in
there it gets sold and you get diversified into a
professionally managed portfolio of real estate. You defer the capital
(35:18):
gains and you convert this to an income stream. The
only thing is they're typically a little bit illiquid. You
got to be willing to hold them for five or
ten years. But it can be a good strategy to
defer and spread out that capital gains headache, and also
get yourself out of the landlord and you know maintenance business,
which a lot of people want to do is they
(35:40):
head toward retirement. All right, coming up next, some advice
on keeping money from wrecking your relationships. 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 Bob's Hansel along with Brian James.
(36:02):
Did you know that more than one in three Americans
say they have lost a friendship because of money, according
to a new survey from lending Tree. They say financial stress,
disputes or mismatch spending expectations have driven a wedge between
people they once called friends. Brian, this is a shame.
Speaker 3 (36:22):
Walk us through it.
Speaker 2 (36:23):
Well, Bob, we've got a survey here showing four out
of ten admit having had disagreements with friends over money,
and about a third of them feel pressure to match
their friends spending, and about one in three bob have
lied about how well they're doing financially. Well, this shows
us that money can be a bit of a minefield.
This is one of the last domains where we actually
reveal our vulnerabilities because people can see what we spend
money on, income, debt, our fears, aspirations. When all of
(36:46):
our friends are at different stages or just have different
attitudes for how this is working for him, these differences
can really magnify between people, and it can drive a
wedge between between people who otherwise we're good family members
and friends.
Speaker 1 (36:58):
Well, Brian, what this comes down to me is just uh,
I'll just say it insecurity. You know, you've got people
that have a lot of money, where their whole identity
is tied up in their wealth or you know, their income,
and they like to, you know, lord it over people.
They talk about their country club membership or their expensive vacation.
You know, they they want to make everybody know that
(37:20):
they've made it and they're doing great. If you're around
people like that, you got to question whether they are
truly your friend, because if they're gonna if they're got
to hang that over your head and make you feel
like less of a person, I would say that's not
really a friend. On the flip side, if you've got
people that hang out with folks that have some money
and you've got less money, and you're expecting that person
(37:44):
to pay for your stuff, pay for your dinner, you know,
all that kind of stuff. You know, that's not good either.
So I think it comes down to not tying your
identity to money. True friendships, UH can put all that
kind of stuff aside, have a little bit of a
feel or where your friend really is financially, and treat
(38:04):
one another with you know, mutual respect and dignity and
keep from getting into, you know, all these kind of messes.
I hate to see relationships end because of money. Here's
the all Worth advice. Prevent money from becoming that silent wedge.
Define your terms, talk early, protect both your financial peace
and your friendships. Thanks for listening tonight. You've been listening
(38:26):
to Simply Money, presented by all Worth Financial on fifty
five KRC, the talk station
Tonight. The biggest money mistakes that are still happening even
in twenty twenty five. This is simply money was out
of my all worth financial I'm Bob Sponseller along with
Brian James. You know, Brian. Every year we think to ourselves, maybe,
just maybe people will stop making the same money mistakes
year after year after year. But here we are, it's
(00:26):
November twenty twenty five. We are still seeing the same
issues crop up again and again. I know you like
to say that's what creates job securities for people like
you and I. It's like the financial equivalent of trying
to stop people from speeding on I seventy five. The
signs are everywhere, and yet people pick whatever speed they
(00:47):
want to drive. Let's get into some of the basic
mistakes that are we could cover quickly, and let's get
into some of the more nuanced advanced mistakes that are
still tripping people up.
Speaker 2 (01:00):
So one of the most basic mistakes that people can make,
and we're at this time period right now, whenever the
markets had a good run, well then a lot of
times we'll start with a classic of chasing returns. You know,
you'd think we'd have figured this out after two thousand
and eight and after twenty twenty two and all of
the crazy we've seen over.
Speaker 3 (01:14):
The last couple decades.
Speaker 2 (01:15):
But people still will chase whatever is doing well. And
the problem with that is it works for a little while,
because you know, things like artificial intelligence AI stocks are
still drawing people in like moss to a flame.
Speaker 3 (01:27):
But it wasn't that long ago we saw all this.
Speaker 2 (01:29):
Exact same situation with you know, for example, real estate
companies in two thousand and eight. You know, and whatever
whatever was doing really well, it must continue to be
doing well because people forget just because something doubled last
year doesn't mean it's going to do it again. If
you're buying last year's winners, that's like betting on the
World Series winner last year just because of that. That's
not investing, that's reacting. So if your financial plan relies
(01:50):
on hitting a home run every year, you really don't
have a plan. You just kind of have a wish
and you're and you're simply betting the farm on things
that don't really have a high likelihood of continuing.
Speaker 1 (01:59):
Let's talk about the next one, because this crops up
all the time too, and that's what we'll call emotional
investing or making emotional decisions. People are still reacting to headlines,
and let's face it, headlines are everywhere. People react to
headlines instead of their long term plan, inflation news, they
panic fed news, They chase risk political headlines. Some people
(02:22):
just freeze deer in the headlines. Emotional investing leads to
bad timing, and bad timing leads to bad returns and
oftentimes brian mistakes that people just can't recover from. It
takes a long time to recover from some of these
emotional mistakes.
Speaker 2 (02:39):
Yeah, and there's another one here is ignoring taxes right,
not paying attention to the steps that you're taking. We
still see investors putting tax inefficient investments into taxable accounts.
Speaker 3 (02:49):
This is the for.
Speaker 2 (02:50):
Those of you who are who are own mutual funds
and taxable accounts. This is that time of year where
sometimes they sneak up on you and send you a
gigantic capital gains distribution you're gonna have to pay for
come April. That's leaving money on the table if you've
got bonds or high turnover mutual funds, creating a lot
of taxable activity in that brokerage account while your wroth
is sitting in cash. That's the one that drives me
(03:12):
the most nuts when somebody comes in having converted a
WROTH and it's still sitting in cash. A ROTH conversion,
for example, that's great that you pay taxes and moves
it to tax free, but the whole point of it
was to get it to generate some kind of tax
free growth. And if you've got it invested conservatively, you're
really leaving money on the table because you already sacrificed
a bunch to get it there in the first place.
So lots of people out there with multimillion dollar portfolios
(03:33):
who had never had a real conversation about asset location,
meaning what type of assets should I own in what
type of tax tax account? That is a massive, massive
planning gap.
Speaker 1 (03:44):
Another big mistake is having no retirement withdrawal strategy, and Brian,
we see this people entering retirement with no real plan
on how they're going to pull money out of their accounts.
They're just winging it, for example, taking rmds when they're
forced to, instead of getting out in front of it,
maybe years in advance, you know, and in doing this strategically
(04:05):
when they can or want to in mitigating that tax
bill down the road, or just guessing what to sell
when the market dips. That is not a portfolio withdraw strategy.
Without a real distribution plan, you risk overspending or underliving,
meaning just accumulating all this money and never enjoying it.
(04:26):
Both can be dangerous things to undertake, and again we
find this with people that have no strategy, no advice,
no advisor helping them walk through these kind of you know,
retirement income with draw strategies. Brian talk about a state
planning because this is a big one as well.
Speaker 2 (04:44):
Well, if you haven't had a discussion about what's going
to happen to all this when I or WE is
no longer here, then you have no plan. In fact,
what you do have is a plan put together by
the county that you live in, because that means you've
died intestate with with no will, no nothing, and the
county will decide who gets everything. So lots of situations
out there where we've got clients that just haven't taken
(05:05):
the time to figure out how are we going to
get this correctly and efficiently to these individual people that
you know, most people have at least some vague idea
of who the individuals are that they want, but they've
never taken that step to actually put it all down
on paper and get the accounts set up appropriately to
route those assets the right direction. The counting may or
(05:25):
may not conclude the same thing that you have, and
so you know, you need to make sure you're talking
about trust, possibly gifting strategies, even legacy planning. Without that,
you don't have a plan. And some of these strategies
are really easy to put in place. Oftentimes the hardest
part is nailing down who the individuals you are, however
your family works, who are the people that you want
to benefit, and what percentages are you looking to do
(05:47):
that kind of thing. That can be a little bit
that's not necessarily the hard part, but then it's the
painful part of getting to retitle the assets, put the
trust in place.
Speaker 3 (05:55):
So on and so forth.
Speaker 2 (05:56):
But if these things go neglected, you could become a
cautionary tale that advisors like Bob and I will use
in the future to make sure that other people don't
make the same mistakes.
Speaker 1 (06:06):
You're listening to. Simply money presented by all Worth Financial
on bob'spondseller along with Brian James. Brian let's get into
some of the more complicated mistakes that we're seeing crop
up now here in twenty twenty five. The first one
we want to talk about is not understanding alternative investments.
This is somewhat of a newer mistake that we're seeing
people do, you know, they load up on private credit
(06:29):
or alternative investments that they don't fully understand. We talk
about this all the time. This can come with you know,
lock up periods, high fees and commissions, or higher risk
than people might have understood when they bought it, and
it can add volatility to the portfolio, ad fees, you know,
(06:50):
not being able to access your money, on and on
and on because that high yield if some of these
instruments sounds great when they're being pitched to you by
a product salesperson until you realize that it does come
with low liquidity, high fees, or no transparency. That can
become a real problem if and when you need to
access your money, or if markets, you know, suddenly tighten
(07:13):
up and we're looking for things to access. It's something
to really pay attention to and make sure you understand
what you're buying ahead of time.
Speaker 2 (07:23):
Yeah, and then another another situation that crops up regularly
is the idea that some things, some of these financial
planning solutions work against each other, and I need to
prioritize what I want to do. And I'm referring to
one example of asset location when there's a trust involved.
So you know a lot of people say, well, I'm
just going to get a trust and I'll just take
all these assets and throw them in there, and that
(07:43):
means that a lot of times you lose the ability.
Of course, a trust cannot own a roth ira, it
cannot own a traditional ira. So anything you're going to
put into a trust is going to be taxed. If
it's a revocable trust, that can be you know that
that is taxed at your bracket because it's revocable. But
if it's an errevocable trust, meaning something you've permanently given away,
(08:04):
is maybe some kind of a different family structure you're
trying to pursue there, those can get taxed at a
lot higher trust rates in that top federal bracket kicks
in at fifteen thousand dollars worth of income. Trusts are
often set up to avoid a state tax, but they're
inefficient before that happens because they can. If you have
a lot of bond funds or income generating assets that's
(08:25):
going to get taxed that are really really high rate.
Because irrevocable trusts do, you have a different set of
marginal brackets than the personal ones we're all kind of
accustomed to. So the way to fix this is, if
you're in this situation, get those tax and efficient assets
out of the trust. Right that might mean you need
to sell things and rebuy something else that's more appropriate,
or go ahead and distribute the income to the beneficiaries
(08:46):
if that's appropriate for the trust to lower the tax
bill that the trust itself pays.
Speaker 1 (08:50):
Let's talk next about Roth conversions, and Brian, this is
something that's coming up all the time in client meetings
we have in our office, and it's going to continue
to crop up, you know, year after year here and
what I'm talking about here is doing roth conversions and
just winging it without a multi year strategy. Here's why
that can be a problem. You might save on future taxes,
(09:12):
but you might blow up your current year tax return
or lose thousands to increase you know, IRMA or Medicare
taxes down the road. If you do this incorrectly. How
to fix it? Actually have a financial plan and sit
down with a good fiduciary advisor who can say, hey,
this is not only how twenty twenty five or twenty
(09:33):
twenty six is going to look if you do X,
Y and Z, but also have a good estimate of
what the next five to ten fifteen years look like
in terms of potential, require minimum distributions, and actually have
a multi year strategy that takes into account not only
income taxes but Social Security taxes we talk about, and
(09:54):
this is something that's going to come up, you know,
over the next three years here with this potential phase
out of this new senior you know what we'll call
Social Security credit or deduction. You really need to look
at this with a multi year strategy in view before
you just wing it and start converting iras to wroth,
(10:16):
because it could bite you down the road.
Speaker 2 (10:18):
Yeah, have an end goal, right, so understand what it
might look like. You want to look at the timing
of that whole thing and figuring out how many years
you've got to get away with making these roth conversions
without pushing yourself into a higher bracket, and just recognize
the fact that yes, you are purposely increasing your taxes
now in exchange for lower taxes in the future when
you're in those requirementum distribution years. So speaking of retirement,
(10:41):
So one other issue that pops up here is not
understanding the risk of sequence of returns if you're an
early retiree, So a few bad years early in retirement,
that's what sequence of returns risk means? When do I
get the bad years? If it's early in retirement, that
hurts a lot. If those crazy years like twenty two
or two thousand and eight, which are coming around again, right,
that's one of the few guarantees we get to give
(11:03):
is sometimes the market's going to fall apart and have
to recover, and we've been through that before. But if
that happens later in retirement, that's less impactful than it
happens right up front. This is the important This is
where stress testing is really important. Run your financial plan
and understand what it looks like if nothing bad ever
happens again, and then do the exact same thing, but
knock off twenty to twenty five percent of your financial assets,
(11:25):
which kind of represents here's what would happen. What happened
to anybody who retired in say twenty twenty one, and
then immediately went over the cliff a little bit in
twenty two or seven to eight where the same thing happened.
Speaker 3 (11:35):
So that's called stress testing.
Speaker 2 (11:36):
And if your plan works under both scenarios, then you're
gonna be okay and you know you don't have to
panic if and when that situation happens. Doesn't happen everybody,
but it does happen to some.
Speaker 1 (11:46):
All right. And then a last one we want to
touch on in Brian, it feels like you and I
talk about this often because it really needs to be discussed,
and that's overweighting a portfolio to these megacap tech stocks
in thinking you're in it diversified portfolio because you own
you know, sixteen different ETFs that if you really look
under the hood, they own the same tech stocks. I mean,
(12:08):
let's face it, the Magnificent seven stocks, they make up
between thirty and forty percent of the s and P
five hundred. Now, I mean as recently as this week,
I think Navidia Brian made up eight percent of the
SMP five hundred. So you might think you're diversified, but
if you actually look at the components of your portfolio.
You can unknowingly be overly weighted to these megacap tech
(12:31):
stocks that can and will decline, either in a general
market decline or if you know in the day will
come when the earnings growth starts to slow down. You
got to get out in front of this and make
sure your portfolio to your prior point, stress tests this
thing and make sure you're not setting yourself up for
a shock coming down the road that you had not
(12:53):
prepared for. Here's the r with advice, even in twenty
twenty five, the biggest money mistakes aren't about products. They're
about behavior. Build a plan, understand your accounts and what's
in them, and avoid the traps that are still tripping
people up. Did your spare change just get more valuable?
We got a penny for our thoughts. Next, plus, a
(13:16):
financial company actually wants to deliver cash right to your doorstep.
Is that innovation or absurdity? 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
(13:39):
Financial on Bob Sponseller along with Brian James straight ahead
of six forty three. How to handle a deferred compensation plan,
what to do in your rental properties of skyrocket in value,
and where to put your money once you've maxed out
your retirement accounts. Well, Brian, the end of an era
has officially arrived. The US mint struck its final penny
(14:02):
ever last week. That's it, no more Lincoln sense, And
now everyone has the same question. Are my old pennies
worth anything now?
Speaker 2 (14:12):
Well, Bob, I know you like to change the pennies
in your penny loafers about once a week, if not
more frequently than that, to keep that nice copper sheen
going there, So you're gonna have to stock up a
little bit.
Speaker 1 (14:21):
I like them looking shiny and new, Brian.
Speaker 3 (14:23):
Love those penny loafers.
Speaker 2 (14:25):
But to the question of my old penny's worth anything new,
it's in anything now. It's a great question to ask,
is supply and demand right? If we're not making anything
more any more of them, then the value should go up.
But the short answer, unfortunately, probably not. So let's walk
through what's actually happening here. This came directly from the
White House.
Speaker 3 (14:41):
A while back.
Speaker 2 (14:42):
President Trump ordered the Treasury to stop mint minting pennies
as a cost savings measure, because the reason for that
is costs about three point seven cents to produce just
one penny. We've been losing money on these for a
very long time, but that's it. Just because they're no
longer making them doesn't mean that jar that's been sitting
in your bedroom for thirty years suddenly he turned into gold.
Most old pennies are still worth exactly what it says
(15:03):
right on the label one cent, especially anything made in
the last fifty years.
Speaker 3 (15:08):
Now, not all of them.
Speaker 2 (15:09):
For coin collectors out there, you might know there's a
few out there that there still have value, but it's not.
It's got nothing to do with the fact that we're
not making anymore. The most famous one is the nineteen
forty three copper wheat penny because that year pennies were
supposed to be made a steel wet we were at war.
The copper needed to be sent for the war efforts,
but a few copper blanks did slip through.
Speaker 3 (15:29):
One of them sold for over.
Speaker 2 (15:30):
Two hundred thousand dollars a few years ago. Now that's
worth a little more than one cent. Another one floating
around out there has been estimated to be worth over
a million, but again, those are the ones that are
worth money. There's a story behind them, not simply all
pennies because we have quit making them.
Speaker 1 (15:43):
Brian, I'm curious, what do you do with the pennies
that are in your pocket or laying around your house?
What do you actually do with those?
Speaker 3 (15:51):
Well?
Speaker 2 (15:51):
I store them because I'm worried that Bob is going
to run out of pennies for his penny loafers. And
I don't want you to have a morning like that
where you can't get out the door because you have
dull pennies, your penny lovers.
Speaker 1 (16:01):
I can't remember the last time I even saw a penny,
And I think my dear wife finds a way to
just find all this spare change laying around, and she
does something with it that's probably very productive. But I'm
glad to see this stuff go away. I mean, if
it's costing us almost four cents to create a penny
that's worth one cent, I think it's way past time
(16:22):
that we get out of that.
Speaker 2 (16:24):
I am curious, though, on a serious note, I'm curious
there are some business out there that are gonna be
affected by this, because what do I do if I
owe some if I'm a cash business, and I owe
somebody a couple of pennies?
Speaker 3 (16:33):
Do I round up for me or do I round
down for them? You know, because that stuff does add
up over time.
Speaker 1 (16:38):
I think we already know the answer to that, right.
They'll be a round up or round down fee, and
they'll find a way to convert all that to a
nickel and put it in their pocket. That's what's gonna happen,
all right. Speaking of cash, Robinhood is rolling out a
service where they will actually deliver physical cash to your house. Yes,
they want to bring wads of bills and cash to
(16:59):
your doorstep, because apparently waiting for the ATM is too
much effort. Now, Brian, this is bizarre to me, crazy,
but walk us through it.
Speaker 3 (17:08):
This is stupid, Bob. Let's call it what it is.
I'm gonna blunt mood today. All right, here's the kicker.
Guess what.
Speaker 2 (17:14):
There's a delivery fee involved, even for your own money.
If you've got over one hundred thousand dollars in assets,
the fee drops, but still three bucks maybe seven bucks
to skip the ATM.
Speaker 3 (17:24):
This is just all This is just.
Speaker 2 (17:26):
An extra way to squeeze money out out of your wallet.
They've got a few more attachments here. You have to
be a robin Hood Gold member, which already has a
subscription fee you're already paying for this, have direct deposit
going in, etc. So this is just about convenience when
you already have met a package of the criteria, the
different rules and things that they require. But thinking through this, Bob,
I can't spend cash in my own house unless I'm
(17:48):
gonna give it to my family for some reason. But otherwise,
if I want cash in my wallet, aren't I going
to be out and about anyway? And haven't they spent
the last several decades putting ATMs on every street corner.
So I in the world, am I gonna go pay,
you know, pay three to seven dollars just to get
my own money to stick in my wallet and then.
Speaker 3 (18:05):
Walk right back out the door. This makes zero sense to.
Speaker 1 (18:08):
Me, Bob. I'm gonna give you the answer. If you're
sitting in your basement on your couch playing Call of
Duty with your headset on, and you're already willing to
pay a four dollars six six dollars delivery fee to
have a McDonald's you know, big mac value meal delivered
to your door, why would you ever take the time
to interrupt your video game and go to an ATM.
Speaker 2 (18:29):
That's why you sound a little grumpy this morning, Bob,
you're sounding a little old guy this morning.
Speaker 3 (18:34):
This is Hey.
Speaker 1 (18:35):
It's all about supply and demand. If people are dumb
enough to pay the fee, someone will come up with
a service to take your money.
Speaker 3 (18:41):
All right.
Speaker 1 (18:42):
Every Sunday you'll find our all Worth Advice in the
Cincinnati Inquire. Here's a preview. Here's an actual financial question
for you, Brian, Mike and Bracken County says. I've been
contributing to an HSA for a few years, and I'll
be enrolling in Medicare soon. But I've heard I can't
use my HSA I'm on Medicare. Is that right, Brian?
Speaker 3 (19:02):
Now that's well you might be thinking of.
Speaker 2 (19:04):
You can't contribute to your AHSA when you're on Medicare,
and in fact, you need to stop your contributions to
your HSA six months before Medicare kicks in, because Medicare
is retroactive for half a year.
Speaker 3 (19:17):
So it's not that you can't use the HSA.
Speaker 2 (19:18):
It's available to you, you know, to spend on whatever
you need.
Speaker 3 (19:22):
But you can't contribute. That's what you're running into.
Speaker 1 (19:25):
All right, good clarification there, All right, it's a question
many people will ask on the path to financial freedom.
Should I buy or should I rent? Will help you
answer that question. Next, you're listening to Simply Money presided
by all Worth Financial on fifty five KRC. The talk
station you're listening to Simply Money is that by all
(19:47):
Worth Financial. Un bomp spun Seller along with Brian James,
joined tonight by our real estate expert Michelle Sloan, owner
of Remax Time. Michelle, thanks again for spending time with
us tonight. And you want to talk about something that's
always a fascinating topic to me, and I know Brian
loves this as well, just the conversations that we all
(20:07):
get into nowadays on hey, does it make more sense
to rent a home or buy a home? And what
are the pros and cons from a financial standpoint and
a cost standpoint? And I know you've got a lot
to offer on this topic, walk us through it tonight.
Speaker 4 (20:23):
You know it would be smart of me as a
salesperson to always say you should buy a home, but
you know, after doing the twenty years, you know I
have to be so realistic when I sit down with
clients who are interested in buying a home, because there
(20:46):
is a lot to consider when it comes to buying
a home, and maybe, depending on your specific situation, renting
is the better move. So we'll break it down a
little bit with our pros of renting, our pro our
cons of renting, the pros of buying, et cetera.
Speaker 1 (21:06):
Are you ready, I'm ready?
Speaker 3 (21:08):
I want to learn.
Speaker 4 (21:09):
Okay, all right, Well, the first pro of renting is
there is a lower upfront cost, the barrier to entry. Basically,
you only need likely a security deposit, maybe first month's rent,
an application via fifty dollars, and you can live in
(21:29):
a property. That's a good thing. That's a pro for renting.
When it comes to buying, certainly you're going to need
a much larger down payment. You're going to pitch of
a couple hundred thousand dollars, so you might need twenty
thousand dollars. You may and a lot of people don't
have that in their bank account. So that's that's the
(21:50):
first barrier to buying a home is having some cash
on hand, and so saving is so important when I
can when I consult with buyers or want to be buyers.
Is you know what, it takes time to build up
the savings that you need to buy a home. So
(22:12):
number one, if if you don't have that, renting may
be your only option. And that's okay, as long as
you can try to find a way to start saving
because in the end, and this is the way sort
of the world goes around and around. As you're younger,
you don't have a lot of savings and you're not
making as much money. As you get a little bit
(22:34):
older and your job becomes more stable than you're thinking about. Okay,
I mean you start a family, now it's time to
start thinking about buying and having that nesteche is so
very important.
Speaker 2 (22:47):
Well, Michelle, what would you say that the average time
is if somebody knows they're going to be somewhere, you know,
for a certain amount of time, when when is that
that sort of break even point? If you're going to
if you know you're gonna stay put for this man years,
then it's safe to buy, versus if you may have
to move in two or three years, that's a little
bit dicey.
Speaker 3 (23:04):
You might want to consider renting. Do you have a
break even for that.
Speaker 4 (23:07):
Yeah, I do. Actually, that's a great question. Because mortgage
rates are high and home prices are high, it often
takes longer for the benefits of buying to actually catch
up with renting. So for that break even time, it's
anywhere between six and eight years. So if you're planning
(23:27):
on staying in your home for six to eight years,
that's when it's definitely time for you to consider buying.
If you're going to be bouncing around and you don't
know if your job is going to be stable, or
if you personally are just not sure you want to
live in a particular area and you're going to move
within a year or two, guess what you're likely to
(23:49):
lose money on that investment and buying a home. Although
it's very emotional and it's where you live, and it's
where you it's all of the things that go along
with buying a home, it is an investment and it's
one of the biggest and most important investments that you're
ever going to make. So when you make it with
(24:10):
the and you're very thoughtful about it, that's so important.
So if you're planning on staying a home for less
than six to eight years, you may consider renting. Now, no,
you're never going to build equity when you're renting. That's
the other con of renting. You're not paying yourself. You're
(24:30):
actually paying the person who owns that property, and you're
paying for them to build wealth. And so wealth building
is extremely important in the real estate industry, and it's
important in your industry too, right because you look at
those kinds of folks that have homes or multiple properties,
(24:51):
and we look at how the increase in value of
those properties will continue from year to year, and you
know that's part of your portfolio.
Speaker 2 (25:03):
Okay, So falling off the timing question again, do you
see people relying on arms on adjustable rate mortgages now
now that we're in a declining rate environment, or people
kind of taking that risk of needing to refinance in
three or five years, or do you see people locking
them in for longer term fixed.
Speaker 4 (25:18):
Most of my clients, you know, like the stability of
either a fifteen or a thirty year the arms in
my opinion, and again, I don't do the mortgage side
of things every single day. I think it's an option
and an opportunity. But there's a lot of people who don't.
They feel like if you do a five to one
(25:38):
arm or a seven to one arm or whatever that is,
knowing that we don't know what the future looks like
in five years. It could be worse than it is today.
And if you're doing an interest only loan and you're
only paying the interest, you're never really you're just again
sort of spinning your wheels. So you definitely want to
talk to an expert in the financing side of it,
(26:01):
the mortgage industry, and really see what is best suited
for your budget and your personal situation.
Speaker 1 (26:12):
Michelle, I want to go back to your example, and
first of all, I want to call out and just
say thank you for your transparency and your honesty and
be willing to well. I'm being sincere because I know
the way you operate. You're you truly operate like a
good fiduciary advisor, not just a real estate salesperson. And
that's why we think so highly of you and trust
(26:33):
you and love having you on the show. So I
mean that sincerely.
Speaker 4 (26:37):
Thank you.
Speaker 1 (26:37):
The point I want to add to your prior comment
is for those folks that maybe aren't in that six
to eight year window now, the key thing is to
not go through lifestyle creep and just because you're renting,
spend one hundred percent of your discretionary income, so you
don't build up that emergency fund earmarked for a home
down payment, right, And is that what you talk about
(26:58):
to your clients that maybe aren't ready yet, but you
know need to be ready in four or five years
one hundred percent.
Speaker 4 (27:06):
You always want to be planning for your future, So
finding ways to save, even if it's a couple of
bucks some months, or you know, one hundred dollars here,
fifty dollars there, definitely setting that money aside, not only
for buying a home, but you know, just life, you
never know what's going to happen along the way, and
(27:28):
if you are prepared for any you know, your car
breaks down, okay, if you have no emergency fund, you
you can't fix your car, you can't get around. So
it's the same thing with the house, and it definitely
is starting to put money away is so important. The
other thing that I'd like to tell buyers real quick,
(27:49):
and I know that we're up against the clock, is
checking your credit because having good credit will go a
long way for getting the best rates when it does
come time for you to buy a house.
Speaker 3 (28:02):
Great point and very important point.
Speaker 1 (28:05):
Thanks as always so much, Michelle. You're listening to Simply
Money presented by all Worth Financial on fifty five KRC
the talk station. You're listening to Simply Money presented by
all Worth Financial on Bob Sponseller 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
(28:26):
you're listening to the show right on the iHeart app.
Simply record your question and it will come straight to
us Brian, Jason or John excuse me, and Mason leads
us off tonight. He says, we've been building cash reserves
waiting for a market ball back, but it never seems
to come. How do we decide when to put that
(28:46):
money back to work without guessing wrong?
Speaker 2 (28:50):
Well, I hope you haven't set aside too much because
this is kind of the what we're living through right now,
the reason that we don't want to do those kinds
of things.
Speaker 3 (28:59):
At the end of the day, what you're trying to
do is time the market.
Speaker 2 (29:02):
And you know, whether that's done out of fear or greed,
it's still timing and it's not something we can control.
You can be right nine times in a row and
that tenth time comes back around to get you. So,
you know, even even with money paying four or five
percent on money market, it's inflation is still eating away.
You're purchasing power over time, So missing just the ten
best days in the market over twenty years can cut
(29:23):
that return in half.
Speaker 3 (29:24):
So really, what should you do now?
Speaker 2 (29:25):
I'd say stop paying attention to the market, you know,
maybe do maybe do a little quick math and figure
out exactly how much has been left on the table
over whatever this time period is you've been sitting in cash,
just so you can be reminded not not to you know,
not to try to pull the strategy too many times.
But if you're nervous about putting it all into once
because you feel like the train has left the station,
spread it out over time, you know, maybe divide it
by six a little bit over over the next six
(29:47):
months and then let it go. Let it do its job.
Don't be surprised when the market pulls back. That's a
guarantee I can give you it's gonna happen. But this
is you know, I hate to see people thinking they're
making responsible financial decisions. Then they wind up throwing the
money in, and the market does take a downturn, and
then those people tend to decide that the market has
targeted them for failure. The market could care less about you,
or your goals or your money. It's going to do
(30:09):
what it does. You have to learn to let it
do what it to, how to ride it and not
try to tap dance in and out of it.
Speaker 3 (30:15):
So let's move on to Greg in Westchester.
Speaker 2 (30:16):
So Greg's got a slug of company stock and his
retirement plan. He's concerned that it's become a pretty big
part of his portfolio, and he's asking Bob, are those
option strategies like Collers protective puts?
Speaker 3 (30:28):
Is that realistic for an individual investor?
Speaker 4 (30:30):
Or?
Speaker 3 (30:30):
Is that better left of the institutions.
Speaker 1 (30:33):
I think they're absolutely appropriate for individual investors, and I
wish more individual investors knew about them and actually use that.
That being said, they're awfully helpful if you're working with
a good fiduciary advisor that even knows what things these
things are and how to deploy them.
Speaker 3 (30:51):
So let's get into that a little bit. A protective put.
Speaker 1 (30:54):
I mean, sometimes our industry does a great job of
making this stuff. You know, seem way more common implicated
than it is. Think about if you've got a million
dollar home, Okay, you would not sit out there with
that home and have no insurance on the house. Right
if it burns down, you know, or a flood comes
through or whatever and wipes it out, you're you're eliminating
(31:15):
a big chunk of your net worth. Same thing with
the stock. All the protective put is is I am
buying an option to sell that stock at this price
by this set date, and you got to pay, you know,
a premium to do that. You know, just treat it
like an insurance premium. If the stock keeps going up
and you hold that put to expiration, it goes away
(31:39):
and that's a lost you know cost to ensure that stock,
just like you know, premiums you pay on your home.
If the stock starts to go down, you don't have
to hold the put to expiration.
Speaker 3 (31:50):
You can sell it.
Speaker 1 (31:51):
If you get that eight ten percent pullback, what have you.
You can always sell the put for a profit. But
you got the protection, and if you were right and
the stock went down, you were protected and made a
little money on the down on the you know, with
your downside protection. All a caller is is an attempt
to help get some of that insurance paid for. Meaning
(32:12):
you sell a call option, meaning you're you are willing
to sell your stock by a certain date at a
certain price, and you receive a premium in order, you know,
in return for selling that call option, and that helps
pay for the call op or the put protection. So
you know, in a caller strategy, you want to spread
these things apart a little bit and uh usually you
(32:35):
know that way, you have a little bit more upside left.
You know, things continue to go up, but you're helping
pay for some downside protection. It's a wonderful strategy. Unfortunately,
a lot of people have no idea what I'm talking about,
including advisors, and don't know how to put this into
a you know, responsible financial plan. Hope that helps Greg,
(32:56):
all right, Michael, and Hyde Park says, I'm being offered
a deferred compensation plan, but I'm worried about company solvency.
How do you evaluate that kind of risk before committing
to even get involved in the deferred comp plan?
Speaker 3 (33:10):
So yeah, Michael, congratulations.
Speaker 2 (33:12):
Obviously you're working for an employer that has put together
some great benefit plans for their for the employees. For
those who might not know, a deferred compensation plan. This
is not a four to oh one K. This is
something in addition to a four oh one K. Four
oh one K, of course, has its own limitations of
how much money can go into somewhere between twenty three
and thirty thousand dollars depending on your age. That is
available to everybody out there. A deferred comp plan is different.
(33:34):
It's not made available to everybody, to absolutely everybody. It's
usually an executive type of a plan, something for higher
income owners generally speaking, but also the big risk and
Michael's already included into this, these are assets of the company.
What that means is that a deferred comp plan is
it's a it could be a acclaimed by a creditor.
If that company ever gets sued by somebody, or or
(33:57):
goes bankrupt or whatever. That basically means that these assets
are exposed. Your four oh one K that is not
that is very clearly walled off. Nobody can touch it.
So what do you have to do? You have to
treat this like any other company. Forget the fact that
you work there. Make sure you understand your own company's
credit ratings. If it's publicly traded. What is their debt
load their what do their financial statements look like? Look
(34:17):
at trends and cash flow profit margins, have they made
layoffs recently?
Speaker 3 (34:21):
And you can even ask HR for planned documents.
Speaker 2 (34:24):
That they should be shoving them in your face anyway,
if you've got this as an option, but make sure
you understand exactly where that goes.
Speaker 3 (34:30):
So, yes, you're right to identify some risks.
Speaker 2 (34:32):
There could be a good opportunity here, but it could
also be risky as well, so just make sure you
understand what you're getting into. But otherwise those can be
really beneficial programs. So one more quick one. Alison and
Lovelin's got some rental properties. They've gone up, but the
maintenance is wearing them out.
Speaker 3 (34:46):
So what would she asks Bob? What are their best
exit strategies?
Speaker 2 (34:49):
How can they get out without triggering these massive capital
gains of real estate?
Speaker 1 (34:53):
Well, I got to move quick here, Alison. The most
popular option is to use if you don't want to,
you know, have maintenance headed and be a landlord anymore
at Delaware statutory trust better known as a passive ten
thirty one alternatives, So you basically put your property in
there it gets sold and you get diversified into a
professionally managed portfolio of real estate. You defer the capital
(35:18):
gains and you convert this to an income stream. The
only thing is they're typically a little bit illiquid. You
got to be willing to hold them for five or
ten years. But it can be a good strategy to
defer and spread out that capital gains headache, and also
get yourself out of the landlord and you know maintenance business,
which a lot of people want to do is they
(35:40):
head toward retirement. All right, coming up next, some advice
on keeping money from wrecking your relationships. 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 Bob's Hansel along with Brian James.
(36:02):
Did you know that more than one in three Americans
say they have lost a friendship because of money, according
to a new survey from lending Tree. They say financial stress,
disputes or mismatch spending expectations have driven a wedge between
people they once called friends. Brian, this is a shame.
Speaker 3 (36:22):
Walk us through it.
Speaker 2 (36:23):
Well, Bob, we've got a survey here showing four out
of ten admit having had disagreements with friends over money,
and about a third of them feel pressure to match
their friends spending, and about one in three bob have
lied about how well they're doing financially. Well, this shows
us that money can be a bit of a minefield.
This is one of the last domains where we actually
reveal our vulnerabilities because people can see what we spend
money on, income, debt, our fears, aspirations. When all of
(36:46):
our friends are at different stages or just have different
attitudes for how this is working for him, these differences
can really magnify between people, and it can drive a
wedge between between people who otherwise we're good family members
and friends.
Speaker 1 (36:58):
Well, Brian, what this comes down to me is just uh,
I'll just say it insecurity. You know, you've got people
that have a lot of money, where their whole identity
is tied up in their wealth or you know, their income,
and they like to, you know, lord it over people.
They talk about their country club membership or their expensive vacation.
You know, they they want to make everybody know that
(37:20):
they've made it and they're doing great. If you're around
people like that, you got to question whether they are
truly your friend, because if they're gonna if they're got
to hang that over your head and make you feel
like less of a person, I would say that's not
really a friend. On the flip side, if you've got
people that hang out with folks that have some money
and you've got less money, and you're expecting that person
(37:44):
to pay for your stuff, pay for your dinner, you know,
all that kind of stuff. You know, that's not good either.
So I think it comes down to not tying your
identity to money. True friendships, UH can put all that
kind of stuff aside, have a little bit of a
feel or where your friend really is financially, and treat
(38:04):
one another with you know, mutual respect and dignity and
keep from getting into, you know, all these kind of messes.
I hate to see relationships end because of money. Here's
the all Worth advice. Prevent money from becoming that silent wedge.
Define your terms, talk early, protect both your financial peace
and your friendships. Thanks for listening tonight. You've been listening
(38:26):
to Simply Money, presented by all Worth Financial on fifty
five KRC, the talk station
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