November 27, 2025 • 37 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian break down what most investors misunderstand about “risk” — and how that confusion could cost you more than any market drop ever will. They explore the real definition of risk, why sitting in cash might be riskier than you think, and how to create a retirement plan that accounts for volatility without derailing your future. Plus, hear why stock market bubbles might not be all bad (if you’re prepared), and what the Vanderbilt family can teach you about preserving wealth for generations. Later, in Ask the Advisor, they answer your questions about Roth conversions, gifting to children, charitable giving, and what to do with a large cash windfall. And in Brian’s Bottom Line, the essential estate planning move everyone should double-check today.
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Episode Transcript
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Speaker 1 (00:06):
Tonight what investors safe risk is and what it actually
means for your money. You're listening to Simply Money, presented
by all Worth Financial. I'm Bob sponsorller along with Brian James.
Let's talk a little bit about that four letter word
in investing risk. The moment the market drops a few
percentage points, the headlines start to scream, emotions run high,
(00:28):
and some people start wondering if they should move to
cash by gold or bury their money in a coffee
can in the backyard. But here's the truth. What most
people think is risk isn't and that misunderstanding can cost
you more than a market downturn. Ever will what say you, Brian?
Speaker 2 (00:46):
So let's talk about the difference between volatility and risk.
Volatility is stuff going up and down in a day
to day basis, and I'm not even limiting that, limiting
that to the stock market. That's life, Bob. Sometimes we
have good days, we have bad days. We have good
mornings and good afternoons and vice versa and so forth.
Speaker 1 (01:01):
I like to have all good days, Brian.
Speaker 2 (01:03):
Okay, well, you keep hanging your hat on that and
tell me how that works out. As we know, we
all need to be flexible. Things don't go our way
one hundred percent of the time. Sometimes we fail seventy
eighty percent of the time, like a baseball player. But anyway,
the difference between volatility and risk volatility again, it's just
those ups and down. Risk is really the idea that
something permanent can happen. So you know what I mean
(01:26):
by that is, let's bring that to the market, right. So,
every now and then we'll run across as a client
who maybe they have kids, or somebody who's new to investing.
He hasn't really thought about it. And everybody has the
same story. Bob, I'm sure you've heard this too. Well,
SO and so invested in the market and they lost everything.
And my first in my mind, I go, okay, DS,
because I can show you a chart of the stock
(01:47):
the stock market, the S and P five hundred. It
has gone up, not down for you know, a many,
many many decades now. It has never gone to zero.
So if SO and so lost all their money quote
unquote in the stock market, that means so and so
is investing in things that to permanently go away. That
could be options, It could be you know, it could
be penny stocks, those kinds of things that really do
go poof in the middle of the night.
Speaker 1 (02:07):
That does happen out there.
Speaker 2 (02:08):
But if you're investing in the diversified portfolio, then you
were experiencing volatility, not risk.
Speaker 1 (02:14):
Yeah, I always say the same exact thing to clients, Brian,
I quickly like to differentiate between risk and volatility. And
you said it, risk is, hey, I'm gonna put money
in something and it's going to completely evaporate. I mean,
none of the stuff that we do for clients, and
I know all good fiduciary advisors do for their client,
they're not putting their retirement money into something that can
(02:35):
evaporate or go away. And that's completely different than the
person that says, hey, I tried out the market and
I lost it all. I mean maybe they went out
and put one hundred grand in game, stop thinking it
was going to go to three hundred bucks in two weeks.
That's a whole different ballgame than what we're doing. We're
talking about volatility, and that's the variation in the return,
not the risk of completely blowing the whole thing up.
Speaker 2 (02:57):
Exactly, And there are risks other than the ups and
downs of the market that happens every single day. Real
risk is somebody who you know retires with a three
million dollar portfolio and on paper you want to go, hey,
this person's in good shape. But then they're spending like
they have ten million dollars. That is real risk. So
needing one hundred thousand dollars a year but only planning
for seventy thousand, right, that's overspending.
Speaker 1 (03:17):
That is real, real risk.
Speaker 2 (03:19):
And that's the kind of stuff that doesn't surface until
it's way, way, way too late to do anything about it.
If you live that way for ten, fifteen, twenty years
of your retirement, you're going to have a problem in
the future. So that means we need to be thinking
about now about the risk of not knowing what our
budget is like and what are what it's going to
cost to maintain our lifestyle.
Speaker 1 (03:36):
Yeah, no matter what that top you know, that top
number is, that pile of money is, You've got to
temper that spending up front by understanding what that plan
will support. Because oftentimes that big number might seem like
a comfortable way to proceed, but when you look at
spending at a certain amount for five, ten, fifteen, thirty years,
(03:58):
it can go away quickly. If you're not careful. Yeah.
Speaker 2 (04:01):
Now, let's talk about a third topic of risk here,
and that's the idea of playing it too safe, you know,
as one of our old friends around here used to say,
going broke safely. So a lot of smart discipline savers
out there maybe can be a little too conservative and
perhaps a little, you know, a little too unaccepting of
how reality can be. So after two thousand and eight,
(04:23):
a lot of people out there did make the choice
to shift to CDs and annuities are sitting in cash
for a while, And the bottom of the two thousand
and eight market was March of two thousand and nine,
and a lot of people sat on the sidelines until
twelve thirteen, fourteen, fifteen.
Speaker 1 (04:37):
Sometimes.
Speaker 2 (04:38):
Matter of fact, I have clients who did not come
on back on board till twenty twenty one.
Speaker 1 (04:42):
That was when we got to know them.
Speaker 2 (04:43):
They sat in cash for literally fifteen years and missed
out on They probably should have had three times what
they had even invested conservatively, had they stayed invested over
that time period. And of course, the way the market,
the market thinks it's funny, so is somebody who reinvested
in twenty twenty one, what happened to them, Bob, immediately
over cliff in twenty two, right, so we took it again.
The stock market has a bad, bad, nasty habit of
(05:05):
punishing people twice for trying to time well.
Speaker 1 (05:08):
And we don't ignore the year twenty twenty. I mean,
you have people sitting out of the market, and then
we have a little thing called COVID come along the
way where the market fell what thirty eight to forty
percent about three weeks. That'll scare some people off as well.
Speaker 2 (05:21):
Absolutely, that's true the way I think of that, though,
that was over and done within within thirty days, which
was the up to the top to bottom of the market,
and then we had it all back by the summer.
Nobody remembers that though, Bob, because we were all hiding
in our basements thinking we were going to die. If
you remember what the attitude back then was, twenty two
was a little different.
Speaker 1 (05:37):
That's when we had the great unwinding of all that stuff. Yeah.
I think a lot of times the reason people go
to cash and stay there is perhaps they were over
allocated to two risky stocks or too heavy of a
concentrated position to begin with, going into that kind of situation,
and yeah, when everything tanks fifty to sixty percent because
(05:58):
you're not well diversified, that can't carry you off for
a few years. You're listening to Simply Money, presented by
all Worth Financial on Bob Sponseller along with Brian James.
All right, let's get into some real life examples here
using some real math. What can we and should we
be doing uh to understand and factor volatility into a
responsible retirement plan in portfolio? Okay, Bob, let's set the scene.
Speaker 2 (06:22):
You retired ten years ago and you had two million
dollars back then. He said, you know what, I really
can't stomach the the ups and downs on the roller
coaster ride of the stock market. So I'm just going
to stick to the stuff that's predictable CDs and treasuries.
I'm good to go. I'm never going to read a
headline again. At the time, it feels responsible, like a good, solid,
safe move. But let's do the math behind it. Well,
a sixty forty portfolio, right, and that means sixty percent
(06:42):
stocks forty percent bonds. That's kind of the dried and
true conservative ish goldilock zone portfolio that might have returned
about seven and eight seven to eight percent every year
over that decade, and that those are real numbers. That's
not that that's just the way things have come out
historically speaking. If you're focusing on that cash heavy approach
or the CDs, remember we said ten years ago, we
haven't had these high rates for all ten years, So
(07:03):
you'd be averaging closer to one to two percent in
exchange for not having had to worry about the headlines.
So on a two million dollar portfolio, that's a difference
of a million bucks, Bob. If you average seventy eight percent,
you're gonna wind up with somewhere over three million dollars
in that range. But if you're only getting that one
to too, it's not even gonna come anywhere close to that.
And you have to factor in two. We've got inflation
(07:24):
hiding in the background, right. If we're gonna keep up
with inflation, we can't, you know, we can't stick to
only the safe stuff and predictable. We've got to let
something grow that can keep up with inflation.
Speaker 1 (07:34):
Well, using my simple Green Hills High School math, Brian,
a million dollars profit on two million dollars, I mean,
that's fifty percent return over ten years. That's a game
changer in terms of a long term wealth plan.
Speaker 2 (07:46):
Yes, and it's not a huge amount. It's not a
huge amount of return. That's a conservative portfolio.
Speaker 1 (07:51):
And this isn't saying wor stock picking gurus and we
picked the right stocks at the right time. This is
just basic blocking and tackling, doing the right things, having
a good sound acid allocation strategy, and letting it work
over time. The difference is measurable huge.
Speaker 2 (08:07):
And let's circle back to the whole point of this
particular segment, which is the difference between risk and volatility.
Risk again, is the idea of not allowing your assets
to keep up with inflation so that you can maintain
your lifestyle. Volatility is just the idea of knowing that
if I want these seven eight percent returns so that
I can deal with inflation over the rest of my life,
then volatility is just knowing that sometimes it rains. It
(08:29):
is not the weather man's job to help you avoid
the rain. That's not the case. It's the weatherman's job
to help you navigate it. Make sure you know what
might be coming and what should you do.
Speaker 1 (08:38):
To prepare well. And here's the real point here. I
think it takes sitting down, running numbers, looking at what
amount of risk in return your plan needs to achieve
and tolerate in order to meet your long term objectives.
And if you don't do that and you leave it
all to chance, then everybody, I don't care who you are,
you leave it to emotion, and that's where fear and
(09:00):
greed run in. It could because you don't have a plan,
You don't look fifteen, twenty thirty years out. And that's
what we want to try to help people avoid. Tonight
is just that bury your head in the sand and
forget it kind of mentality.
Speaker 2 (09:12):
Yeah, and remember if you if your safe money is
growing by two percent and inflation is more like four,
you're actually losing money in terms of purchasing bout.
Speaker 1 (09:20):
Here's the all Worth advice. The riskiest thing you could
do with your money is not understand what risk really is.
Coming up next, our take on a headline that suggests
we should embrace stock market bubbles. 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
(09:50):
all Worth Financial. I'm Bob Sponseller, along with Brian James
trying not to laugh at that intro music from our
buddy jokes Trekker. Hey, if you can't listen to Simply
Money every night, subscribe to get our daily podcasts. And
if you think your friends could use some financial advice,
tell them about us as well. Search Simply Money on
(10:10):
the iHeart app or wherever you find your podcasts. Should
you be doing rawth conversions even though you don't need
the money yet. It's one of the questions you asked
us to tackle, and we're going to answer that one
straight ahead. At six forty three, there's a provocative headline
making its way around the financial media right now why
(10:31):
we should welcome stock market bubbles? Brian who is making
this claim? And what's going on here?
Speaker 2 (10:38):
Yet another provocative headlines And it seems like all the
headlines are provocative, But then again, I guess that's what
makes them headlines. We want to grab eyeballs and you know,
and sell advertisement. So anyway, this particular claim is coming
from Mark Hulbert, and he makes it.
Speaker 1 (10:50):
He does make a fair point.
Speaker 2 (10:52):
Some of these the transformative technologies that we've seen have
happened during stock market bubbles. There's something, there's a catalyst
that's causing you know, everybubble has something inside of it.
It's either the real estate bubble from you know, from
twenty years ago, that's when it began. We had the
tech bubble before that, when the internet first came on
the scene. We also had uh there was sort of
another bubble when when mobile phones and smartphones became a thing,
(11:14):
and nowadays we're talking about AI. There's always a catalyst
underneath these kinds of things. So on one hand, that
that's how we grow the market. A new some kind
of new environment, some kind of new tool out there
that can help people be more productive, be more efficient,
can help companies make more money. But at the same time,
just like anything, we overreact to it as investors. We
inflate it too much and then we panic too much
(11:35):
on the downside.
Speaker 1 (11:36):
Yeah, I think I think the word momentum trade comes,
you know, comes to mind. And we can talk a
little bit about AI stocks here over the last few years.
I mean, we've talked about this many times. The S
and P five hundred. If you look at the index,
thirty to thirty five percent of the market cap of
the S and P is weighted in just seven companies
the quote unquote magnificent seven. They've had a great ride,
(11:58):
and then you know, we go back to we go
back to you know, earlier and things the legs can
come out from under some of those stocks. You have
big market volatility in the short term. In other words,
people can ride a momentum trade longer than they need
to and not properly diversify, and that's where they can
get hurt by this, you know, quote unquote bubble and Brian,
(12:20):
I don't know about you. This is why I always
like to have a little dry powder. I like to
have a little cash on hand because I agree with
Mark Holbert, when things start to tank and go down,
that's usually a tremendous buying opportunity to buy things that
got oversold on the downside.
Speaker 2 (12:38):
Yeah, and I think I think these periods can be
extremely educational, not only for people who are just experienced
in the market for the first time, but also for
people who are sneaking up on retirement or who have
retired and then all of a sudden they're now having
to navigate the ups and downs of the market that
have always been there but they haven't paid attention because
they're too busy working, raising kids and so forth. Now
(12:58):
they've got the time to pay attention, and they feel
like they've got more to risk because the nest egg
is bigger, of course, and it's coming closer and closer
to the time where we need to tap into.
Speaker 1 (13:07):
It well and emotionally and financially, people don't care as
much about volatility when you're earning money and putting money
away because you got your paycheck supporting you every month,
and you know long term. People know long term, if
they buy and hold and let it go, it eventually
quote unquote comes back. But I think a lot of
(13:27):
people get over they get over comfortable with large stock
concentrations as well concentrated positions. And then when you do
retire and you've got to turn that portfolio into a paycheck,
that's where you can be left with more potential volatility
than you might think you have. And then if one
of these bubbles rear their ugly head and you're not
(13:48):
prepared for it, it can really derail a good long
term plan.
Speaker 2 (13:52):
Right exactly, And that's the bad side of the bubble.
But where the bad decision making comes in usually comes
during the inflation period. Of the bubble can encourage some
bad behavior. Just from a behavioral finance standpoint, bubbles can
be dangerous because they that means stuff is going up,
and sometimes we own that stuff and we're celebrating it,
or other other times we're watching people other people that
(14:13):
maybe we work with or family members, whatever, who are
talking about these kinds of things at the cocktail parties.
That creates the fear of missing out. So if you've
got one to five million dollars, you know that that's
a really really big deal, because that can if you
get sucked into those kind of things, that can be
a massive loss when that bubble pops.
Speaker 1 (14:29):
Well, one of my favorite sayings is you only need
to get rich once. Brian. You know you don't want
to do all this work, do all this saving, do
all this responsible investing and saving and discipline for twenty thirty,
forty fifty years and then fall into that fear of
missing out trap, you know, overweighting the magnificent seven stocks
or thinking you're going to get cute with cryptocurrency in
(14:52):
the short term and then you completely ruin what you've
spent thirty to fifty years building. It's something we've got
to help people watch out.
Speaker 2 (14:59):
For absolutely and an another way that can sneak in is, Hey,
my brother in law wants to open a restaurant.
Speaker 1 (15:04):
I've got a good chunk of money here staved.
Speaker 2 (15:05):
I'll throw a little thing something at this, you know,
because I can afford to do it. Those kinds of
things can really sneak up. Again, it's that that fear
of missing out that can really catch up to us.
Speaker 1 (15:13):
Well, we've all read stories about professional athletes that do
just that, right, they get these huge signing bonuses, or
people that win the lottery, people that have a bunch
of money, you know, on hand and have you know,
they want to look it away to double or triple
that bunch of money, and they go and make risky
decisions and then have it have it. Then they're surprised
(15:34):
and disappointed how quickly some of that money can disappear
on them. Yeah.
Speaker 2 (15:38):
So, now that we've beaten that horse to death, what
should we do about it?
Speaker 1 (15:42):
Right?
Speaker 2 (15:42):
So, how do we bubble proof our financial plans? Really
the first thing, and this isn't the most interesting of
advice necessarily, but stay diversified, don't wander away from you know,
the dance with the one that brung you, of course,
which is a diversified portfolio is going to keep you stable.
If you want to dabble in things that you think
that you're interested in or that you think might have
a you know, it might might have a nice pop here,
(16:03):
that's fine, go ahead and do that with a small
portion of your money.
Speaker 1 (16:05):
But think about it this way.
Speaker 2 (16:07):
If you already have a solid nest egg, then you
certainly wouldn't take it to the casino to gamble it.
But some of these more speculative things, that's literally what
you're doing. But it's okay to take a small portion.
And if you you know, take one percent of your
portfolio and you hit it right and it becomes three percent,
that's great, but it's not a life changing event. On
the other hand, if you put fifty percent of your
portfolio in and it drops fifty seventy five percent, that
(16:29):
is a life changing event. So so weigh the risk
of the way the risk versus the return. Is this
really going to move the needle for me and change
my life or am I just doing this for fun?
Speaker 1 (16:38):
What we're talking about here, Brian, in the midst of
doing a responsible and building a responsible retirement plan, is
putting some guard rails about your portfolio, around your portfolio.
What do I mean We talk about this all the time.
Stress test the thing, look at your goals, look at
your income sources, look at what you've got, and then
run various scenarios about what can and likely will happen
(17:00):
in the future. Interest rates will go up, interest rates
will go down, We'll have low growth periods in the market,
high growth periods of the market. Kind of simulate that,
kind of those all those situations in advance. And the
nice thing is a lot of this good software that
we use with clients. I mean it goes back and
looks at historical volatility going back seventy years. We're not
(17:21):
going to be one hundred percent accurate, but we could
at least put enough guardrails around a portfolio to keep
the plan from going off the rails and then really
putting someone in a dangerous spot.
Speaker 2 (17:32):
Yeah, and as advisors, we're subject to this stuff too.
We're human as well. So I'll share a quick personal story. So,
so my family decided recently to make a slightly off
the beaten path investment in a kind of a private
arrangement that is very different from the from the ninety
the other ninety eight percent of our portfolio, which is
diversified like we normally would do. And frankly, it's Andy
(17:54):
Stouts problem. He's the one who manages all just along
with the rest of all worths twenty six billion or so.
But in any case, this I had a conversation with
the CPA about how does this work?
Speaker 1 (18:03):
What am I?
Speaker 2 (18:03):
You know, I'm a financial advisor, I'm not a CPA,
so what are the things I'm not thinking of? And
I got the bright idea of, hey, we could do
a little more if we used our IRA dollars for
this and the ants. I'll never forget this one of
those things that stuck in my brain. It wasn't that
long ago, just a few months. His answer to that
was because that's not a simple thing to do. You
can do those kinds of things, but there's a lot
of moving parts to investing iras in things that are
(18:24):
not publicly traded. The quick thing he said to me
was why do you want a complicated life? And Bob,
that knocked me back on my heels and I thought,
my god, what what really?
Speaker 1 (18:32):
What I am I doing?
Speaker 2 (18:33):
Is it really worth jumping through all these hoops just
to get this done, you know, for a very small
portion of my portfolio, because it's something my family is
interested in. And that, yes, that made me take a
breath and go, Okay, let's think about what I'm really
trying to accomplish here and why do why do I
want a complicated life?
Speaker 1 (18:48):
Well, and the good the big point here is you
were willing to swallow your pride and your excitement a
little bit and get a second set of eyes on
the whole situation, get an objective viewpoint on something you
and your family are considering in advance of pulling the
trigger and making the decision. And that enabled you, you know,
through getting that good advice and a second set of eyes,
(19:10):
it enabled you to maybe avoid a huge mistake.
Speaker 2 (19:13):
We all need that financial Jiminy cricket. So find somebody
out there who thinks the same way as you do
and bounce your ideas off and see what they say.
They're in armslength the way they might make a different decision.
Speaker 1 (19:22):
Here's the all Worth advice. Bubbles may fund innovation, but
they often deflate retirements. Stick with the plan, not the
hype from riches to rags. What the Vanderbilt family can
teach your family about preserving wealth across generations. You're listening
to Simply Money, presented by all Worth Financial on fifty
(19:42):
five KRC, the talk station. You're listening to Simply Money
presented by all Worth Financial. I'm selling along with Brian James.
It's one of the most famous stories of lost wealth
in American history. The Vanderbilt family, once among the richest
(20:06):
dynasties in the world, built a fortune that would be
worth over two hundred billion dollars in today's dollars. Brian,
Yet within just two generations that wealth was essentially gone, evaporated.
What happened?
Speaker 2 (20:21):
Yeah, this is kind of an American story on the
way up and on the way down. So Cornelius Vanderbilt,
you've heard of him, You've heard of the family. There's
a university named after him. Down to Tennessee, there's the
Biltmore Estate, which was the gigantic house that they all
lived in. Now, all that money came from railroads and shipping,
and at the peak, Cornelius Vanderbilt was the richest man
in America. His son carried on the reputation and doubled
(20:43):
that fortune. But by the nineteen seventies, when there was
one hundred and twenty Vanderbilt descendants all gathered at one reunion,
not a single seven digit millionaire in the room. Everybody
had kind of nobody.
Speaker 1 (20:56):
Had carried the torch forward from that point.
Speaker 2 (20:58):
So what happened? Why did this happen? Well, a lot
of poor planning, people just not thinking ahead. And I
can imagine, Bob, but this isn't necessarily this isn't a
difference between good and bad people. This is just people
having been raised in an environment of the opposite of scarcity.
Speaker 1 (21:12):
I don't have to worry about things.
Speaker 2 (21:13):
Therefore, I don't worry about things, and I don't necessarily
think about the future because it's not really a problem.
Speaker 1 (21:18):
So lack of purpose around money.
Speaker 2 (21:20):
But really what it was, Bob, was the absence of
the financial education and discussions between generations. It just got
quieter and quieter until the the wealth just kind of
went away.
Speaker 1 (21:31):
Yeah, and we could talk about a potential two hundred
billion dollar fortune going away, and people might think, well,
that's an extreme case. I mean, let's bring this back
to real life, because we do deal with this with
folks that come into our office every once in a while,
and you know, it comes down to the adult children
with no financial boundaries. You know, maybe you're helping a
thirty five year old quote unquote get back on their
(21:54):
feet for like the fourth time, or you're covering all
your grandkids' expenses because you want to be a great
grandma and grandpa even though their parents are fully capable
of of doing it. We tend to want to help
make life super super easy for everyone, and that leads
to some you know, expensive you know, doling out of
(22:14):
money that can We think we're helping, but sometimes we're
just enabling bad behavior, or not even bad behavior, but
just not preparing the next generation to be self sufficient
and responsible from the money standpoint.
Speaker 2 (22:27):
Sometimes not helping can be the best help you can
give anyone, you know the old Give me a fish
and I'm good for a day. Teach me to fish
and I'm good for a lifetime. This also can cause
rifts between families, and that's kind of the opposite, right.
A family that is financially stable and doesn't have to
worry about money so much really should be a happy place, right,
That's what we all strive for. But in a lot
of cases, it can cause strife between the generations because
(22:50):
mom and dad, or grandma and grandpa, the ones who
originally built the wealth to provide all of that security
for everyone who comes after them, They view it very
very differently. They view it as their life work, their blood,
sweat and tears and so forth. But the further down
the generations we go, the less impactful that can be. Now,
now there's ways to avoid that. It's basically telling the story.
(23:11):
Make sure everybody knows the story of this family and
how we got where we are, What sacrifices were made
along the way, What were the things that we really, really,
in a heartbroken manner, had to choose not to do
over time because we know we had to. We had
to make that sacrifice at the time. And then how
are the new generations reacting to that? Are they able
to make those same types of decisions.
Speaker 1 (23:31):
You're listening to Simply Money presented by all Worth Financial
on Bob Sponsler along with Brian James. Yeah, Brian. Sometimes
I run into folks who you know, who have worked
very hard. They came from very modest beginnings, They earned
every dime that they have and worked extremely hard. And
sometimes folks will say, I just I just want to
(23:51):
make things a little easier for my kids and my grandkids.
And I understand the sentiment. I feel that way sometimes too,
but that's often not the best way to go about it.
I mean, you got we got to allow people to
earn it and go through some of life's trials and tribulations,
because that's that's what builds character and it builds financial literacy. Okay, Bob,
(24:13):
blocking and tackling. So how do we do this?
Speaker 2 (24:15):
How do we avoid that that that curse of the Vanderbilts. Well,
first off, focus on the values, not the dollars. If
you teach the right values, the dollars will follow. Help
people understand exactly what it means to to to work hard.
Speaker 1 (24:27):
Right.
Speaker 2 (24:27):
That's that kind of goes without saying we all know
the harder your work, the better off you'll be. But
at the same time, that sacrifice quote unquote can be
simply you know what you need to not spend one
hundred percent of your take home pay because you know
there are there are bigger things to worry about. That
is a sacrifice for a very young person who's just
getting started and now finally has money for their own
for the first time. You know, that can be the
(24:48):
standard ten percent of R four one k, or maybe
make it twenty percent. But that's that's a way Again
you're focusing on the values, not the dollars.
Speaker 1 (24:55):
Also use trust in.
Speaker 2 (24:56):
A smart manner, right If you have a trust, it's
not inten only to protect those assets. It can also
distribute money based on what you want to happen. So
that might mean that whatever wealth you have at the
day of your passing, you know, without anything else in place,
that might drop out of the sky on top of
someone's head, is that individual prepared to handle that sum
(25:16):
of money if not, or if you want them to
kind of earn it a little more, you know, Bob,
I've known of trust in my past that would pay
different amounts of money based on different things that that
a person had accomplished over time, different careers.
Speaker 1 (25:28):
They might choose.
Speaker 2 (25:28):
You choose become a teacher or some kind of public servant,
you might get a little more for that. If you
want to become a business person, there were restrictions on
you know, how you could how you could receive it,
those kinds of things. That's a moving target and things
can change and can get complicated. But again that's the
purpose of a trust. You're not just trying to protect
it from somebody who might want to sue you outside
the family, You're trying to protect the family itself.
Speaker 1 (25:49):
Yeah, I want to go back to maybe an example
of it, and I'm going back to you know, I'm old, Brian,
but going back to that first paper route. At nine
years old, I remember my parents sitting down with me
and saying, Hey, you're going to go out collect this cash.
Here's what you're gonna do with it. You're gonna split
it into thirds. A third of it you're gonna save,
a third of it you can spend now on whatever
you want, and a third of it you're gonna give away.
(26:11):
And I'm like, what you know, give away? But fast
forward to today, and I think this is a full
proof way to go about it. Out of every dollar
you earn, give ten percent away to someone else, save
twenty percent, pay taxes on, and spend the rest of it.
If you follow that plan for thirty or forty years,
you're gonna live a great life and have plenty of money. Yeah.
Speaker 2 (26:32):
My parents got a hold of me when I was
probably ten years old, and I was the same age,
so I had a paper out walking up and down
Jesse Road. I would collect my money and I would
spend it immediately at Whistles Deli and Drug Palace and
Supreme Nut and Candy there up on Cheviot Road.
Speaker 1 (26:45):
Didn't bring home a dime.
Speaker 2 (26:46):
Did that for several months, and Mom and Dad finally
noticed that I never had any money even though I
was delivering papers, you know, once a week. And we
had a little discussion about exactly what are we accomplishing here?
Speaker 1 (26:55):
But isn't it isn't it interesting? You know how as
both of us age and we work in the industry,
we both remember those stories formuli. We both had parents
that instilled those values and it sticks with us, you know,
to this day. All Right, here's the all Worth Advice.
The best estate plan passes down not just money, but
(27:15):
meaning structure and values. All Right, you've got questions, We've
got answers, our ask the advisor segment is coming up next.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to
Simply Money presented by all Worth Financial. I'm Bob Sponseller
(27:37):
along with Brian James. Do you have a financial question
for us? There? Is a red button you can click
while you're listening to the show right on the iHeart app.
Simply record your question and it will come straight to us.
All right, Brian, let's get into it. Let's hear from
Susan in Montgomery. My husband and I was sixty three.
I'm recently retired. Well, a two point four million dollar portfolio.
(28:00):
Should we be using roth conversions even though we don't
need the money yet?
Speaker 2 (28:04):
Yeah, that's great, that's a great question, sous I'm glad
you're thinking about this because Roth conversions A lot of
people will roll in and just say, you know what,
I'm retired, it's time to convert to roths.
Speaker 1 (28:13):
Let's just do the paperwork and be done with it.
Speaker 2 (28:15):
Well, Roth conversions, let's be clear, very very very much
an intelligently decided sacrifice in exchange for a benefit. Sometimes
it's appropriate, sometimes it's not. What I would be saying
is it doesn't have anything to do with you needing
the money with.
Speaker 1 (28:28):
That size of a portfolio.
Speaker 2 (28:29):
Susan doesn't give us the detail how much of this
is in pre tax dollars, but we'll just assume you
know most of it is.
Speaker 1 (28:35):
That's a good thing, right, They worked hard.
Speaker 2 (28:37):
But at the same time, what they're looking at in
about twelve years, when they turn seventy five, they're going
to have required minimum distributions that's going to put them
they'll have basically a solid six digit income probably two
hundred thousand dollars at that time from then on, meaning
they're always they're never going to be in a low
bracket again. So what she's thinking about is, Okay, we're
in a low bracket now, we just retired, we have
(28:58):
lower income than we've had in a long time. Answer
to that is unqualified. Yes, you should learn about it, right,
do it not do it? That's different. It differs by situation.
You should definitely learn about it. And the important key
to all this for anybody considering it is that you
want to be able to ideally pay those taxes that
will come DOE the year you do the conversion. Pay
them out of non IRA money. You don't want to
(29:19):
pay taxes on money for the purpose of turning around
and paying taxes again. Use your non IRA money to
pay those taxes. Get that conversion done, all right, So
let's move on to James and Anderson Township, who's got
another question for us.
Speaker 1 (29:31):
My wife and I want to give each of our
kids twenty thousand dollars this year to help for a
home down payment. Is that the best way to do it,
or should we be looking at trusts or something? Well, James,
I like to keep things pretty simple, so I'm gonna.
I'm gonna. I don't think you need to get too
complicated with a trust or some exotic instrument like that.
On The one number I want to point out is
(29:53):
the twenty thousand. The gift tax limit. The limit you
can give to any human being at any time, for
any reason in only twenty five is nineteen thousand dollars.
If your kid is married, you can double that if
you're willing to give nineteen thousand to his or her
spouse as well, so you can give up the thirty
eight thousand. But you can't give twenty thousand dollars to
(30:13):
any one kid without having to file a gift ex return,
which you know we don't need to get into, you know,
doing that if we can avoid it. The other thing
I would point out is before you do all this,
you got to look at the timing of when your
kids are going to be looking at buying the house.
So if it's in the short term here. Make sure
that you're coordinating all this with your kid's lender of choice,
(30:34):
because sometimes the lenders will have a little bit of
a look back period, you know, when they underwrite the loan, saying,
all right, how much of this down payment came from
mom and dad. And sometimes they don't like that. They
don't like twenty thousand dollars hitting that bank account the
month before we pull the trigger on a loan application.
So I'd keep it simple. I'd give them the money.
(30:55):
I don't think you need to put it in a trust,
but check to make sure that there's still going to
qualify for that loan that they need or want, you know,
factoring in the gifts that you and your wife are
giving to them. All right, let's hear from Rick in Westchester.
I have a one point seven million dollar IRA and
I'm charitably inclined. I've heard about qualified charitable and distributions.
(31:16):
How do those work and what should I start easing them? Rick?
Speaker 2 (31:19):
I'm glad to hear that the not only are you
charitably inclient that's obviously honorable, but that you started with that.
A lot of people are looking for all these different
tax techniques that how can I get a deduction right
now without sacrificing anything.
Speaker 1 (31:31):
Well, there's not a heck of a lot that you
can do anymore.
Speaker 2 (31:33):
However, if you are if you start from a standpoint
of yes, I give money to charity anyway, then there
are definitely many, many steps and techniques you can look
at that can give you even more of a tax
benefit than just the plane you know, deduction you might
get for delivering a load of stuff the Goodwill, for example.
So what Rick's talking about is a qualified charitable distribution.
Speaker 1 (31:52):
That is a distribution from an IRA.
Speaker 2 (31:54):
This is an actual, differently coded thing that would appear
on your ten ninety nine. Are qualified charitable distributions are
looted from your taxable income.
Speaker 1 (32:02):
They do not count as income.
Speaker 2 (32:03):
So this means it doesn't it's not going to affect
your Medicare premium surcharge, it will not reduce taxation on
soci security benefits, and it can keep you in that
lower tax bracket. It does count towards your required minimum distribution.
So if you are age seventy three or age seventy five,
if you were born after nineteen sixty, then that IRA
is going to be required to start to distribute money
(32:25):
to the tune of about four to five percent in
the year after starting the year after you turn those
respective ages. So the whole point of this is you
designate to your IRA custodian and that's the financial institution
who holds your money, that this official distribution is a
qualified charitable distribution and here is the five oh one
C three charity to whom it is going. So that
means you have fulfilled your required minimum distribution requirements that
(32:47):
you'll have to do. Anyway, the money goes straight to
the charity. You don't pay any income taxes on it,
and of course neither does the charity, because that's the
whole point of being a five oh one C three.
So again, if you start like rick is, I guess
I already give money to the to to these charities,
then this is a way you can do it without
incurring any taxes all at all, to free up those
dollars to give to the charity. Great idea, right, all right,
(33:08):
So now we're going to move on one more question.
Speaker 1 (33:09):
Here.
Speaker 2 (33:10):
We're talking to Danielle in Blue Ash who's got a
question about rental producies.
Speaker 1 (33:13):
We just sold a rental property and are sitting on
four hundred and fifty thousand dollars in cash. We really
don't need the income right now. What's the smartest way
to invest this? Well, my honest answer, Danielle is I
have no idea. How's that for a qualified answer from
a future of a job today, Bob, heck of a job?
But no, My real answer is don't let that money
(33:34):
burn a hole in your pocket. And what I mean
by that is put that four hundred and fifty thousand
dollars in cash in a safe you know, savings account
or cash equivalent, and then go sit down with a
good fiduciary financial advisor who can look at both your
short and long term goals and devise a plan and
a strategy on how to deploy that money responsibly for
(33:56):
the long term. All right, coming up next Brian's bottom Line,
where Brian is going to attempt to practice law without
a law license and talk about estate planning. You're listening
to Simply Money presented by all Worth Financial on fifty
five KRC the talk station. The moment. You're listening to
(34:18):
Simply Money presented by all Worth Financial on Bob Sponsorer
along with Brian James and It's time for Brian's bottom Line,
Brian's bucket of babbe.
Speaker 2 (34:26):
All right, I'm not a lawyer, but I'm playing one
on the radio today, So I want to talk about
some basic estate planning steps again, talking to clients during
the financial planning process, which involves a lot more than
just investments. Right, that's a tiny piece of everything that
a financial plan encompasses. Eventually, the conversation turns around to
what happens to all of this when when I or
we pass on, And there are some very basic steps
(34:47):
that everyone should take. And a reason I'm bringing this up, Bob,
the reason this is important is because a lot of
people just assume, oh my gosh, I got to bring
in a lawyer for this. I got, Oh, that's going
to be thousands of dollars and a lot of work,
and he's gonna use fancy words that I don't understand,
and I don't want to do it today.
Speaker 1 (34:59):
Well, worry about it in a few months.
Speaker 2 (35:01):
That's the wrong approach, because anything can happen in those
few months, and we've all have those horror stories. Anyway,
easy things you can do. The easiest thing everyone can
and should do is name beneficiaries on everything that you
can primarily in the easiest, absolute easiest place to do
is all your financial accounts. Here I raise your four
oh one ks. That's relatively obvious because it's shoved into
(35:22):
your face. On those retirement accounts, right, you kind of
have to name a beneficiary to get those open.
Speaker 1 (35:27):
So, but always make sure they're up to date.
Speaker 2 (35:30):
And when your company changes four one K providers or
they change the hware HR software system, double check that
because I think I've seen at least five times in
my life where somebody changed the software package of my beneficiaries.
Speaker 1 (35:40):
Win. What's a big one. I've seen that as well.
Speaker 2 (35:42):
It happens very frequently or sometimes our clients while we're
doing a financial plan, they'll log into their four oh
one K and the hey, you know, before we get
the investments click that beneficiary is like, let's just see
what it says.
Speaker 1 (35:51):
Make sure it makes.
Speaker 2 (35:51):
Sense anyway, that's the easy side, because it's kind of
shoved in your face. However, where you can also do it,
it's very easy, but you kind of have to ask
for it is your non hirement accounts, and I'm talking
like a joint investment account or an individual brokerage account,
and we're talking non IRA, non roth, that kind of thing.
You can ask your financial institution for what's called a
transfer on death TOOD form, which does the exact same thing.
(36:14):
That does not change the ownership, but it will establish
beneficiaries on those taxable accounts banks different from investments banks
called a POD payable on death.
Speaker 1 (36:24):
But it's just a.
Speaker 2 (36:25):
Piece of paper where you're naming beneficiaries. If you accomplish
these steps on all of your financial assets, then those
instantly will bypass probate. You don't need a fancy trust.
Matter of fact, they bypass the will too. The will
might say my investment account XYZ goes to my dog,
but if the beneficiary is listed on the account, the
beneficiary that is listed wins out. Doesn't matter what the
will says. A will is still important. I'm not at
(36:47):
all implying that. But at the same time, the will
exists to cover anything where you can't clearly name a beneficiary.
If you can name it on the asset itself via
the title or the account or the whatever, or your
house deed, then you should do so. All that stuff
bypasses probate. And these are easy, simple steps that everyone
should take.
Speaker 1 (37:04):
Yeah, good stuff, Brian, I actually had this come up
yesterday in a meeting with a client. They had done
all the beneficiary work on their iras but completely ignored
their bank accounts, so we were able to walk through
how to get their six different beneficiaries set up through
a pod you know, just by going into the bank
and getting it done. Good stuff. Thanks for listening everyone.
You've been listening to Simply Money, presented by all Worth
(37:26):
Financial on fifty five KARC, the talk station
Tonight what investors safe risk is and what it actually
means for your money. You're listening to Simply Money, presented
by all Worth Financial. I'm Bob sponsorller along with Brian James.
Let's talk a little bit about that four letter word
in investing risk. The moment the market drops a few
percentage points, the headlines start to scream, emotions run high,
(00:28):
and some people start wondering if they should move to
cash by gold or bury their money in a coffee
can in the backyard. But here's the truth. What most
people think is risk isn't and that misunderstanding can cost
you more than a market downturn. Ever will what say you, Brian?
Speaker 2 (00:46):
So let's talk about the difference between volatility and risk.
Volatility is stuff going up and down in a day
to day basis, and I'm not even limiting that, limiting
that to the stock market. That's life, Bob. Sometimes we
have good days, we have bad days. We have good
mornings and good afternoons and vice versa and so forth.
Speaker 1 (01:01):
I like to have all good days, Brian.
Speaker 2 (01:03):
Okay, well, you keep hanging your hat on that and
tell me how that works out. As we know, we
all need to be flexible. Things don't go our way
one hundred percent of the time. Sometimes we fail seventy
eighty percent of the time, like a baseball player. But anyway,
the difference between volatility and risk volatility again, it's just
those ups and down. Risk is really the idea that
something permanent can happen. So you know what I mean
(01:26):
by that is, let's bring that to the market, right. So,
every now and then we'll run across as a client
who maybe they have kids, or somebody who's new to investing.
He hasn't really thought about it. And everybody has the
same story. Bob, I'm sure you've heard this too. Well,
SO and so invested in the market and they lost everything.
And my first in my mind, I go, okay, DS,
because I can show you a chart of the stock
(01:47):
the stock market, the S and P five hundred. It
has gone up, not down for you know, a many,
many many decades now. It has never gone to zero.
So if SO and so lost all their money quote
unquote in the stock market, that means so and so
is investing in things that to permanently go away. That
could be options, It could be you know, it could
be penny stocks, those kinds of things that really do
go poof in the middle of the night.
Speaker 1 (02:07):
That does happen out there.
Speaker 2 (02:08):
But if you're investing in the diversified portfolio, then you
were experiencing volatility, not risk.
Speaker 1 (02:14):
Yeah, I always say the same exact thing to clients, Brian,
I quickly like to differentiate between risk and volatility. And
you said it, risk is, hey, I'm gonna put money
in something and it's going to completely evaporate. I mean,
none of the stuff that we do for clients, and
I know all good fiduciary advisors do for their client,
they're not putting their retirement money into something that can
(02:35):
evaporate or go away. And that's completely different than the
person that says, hey, I tried out the market and
I lost it all. I mean maybe they went out
and put one hundred grand in game, stop thinking it
was going to go to three hundred bucks in two weeks.
That's a whole different ballgame than what we're doing. We're
talking about volatility, and that's the variation in the return,
not the risk of completely blowing the whole thing up.
Speaker 2 (02:57):
Exactly, And there are risks other than the ups and
downs of the market that happens every single day. Real
risk is somebody who you know retires with a three
million dollar portfolio and on paper you want to go, hey,
this person's in good shape. But then they're spending like
they have ten million dollars. That is real risk. So
needing one hundred thousand dollars a year but only planning
for seventy thousand, right, that's overspending.
Speaker 1 (03:17):
That is real, real risk.
Speaker 2 (03:19):
And that's the kind of stuff that doesn't surface until
it's way, way, way too late to do anything about it.
If you live that way for ten, fifteen, twenty years
of your retirement, you're going to have a problem in
the future. So that means we need to be thinking
about now about the risk of not knowing what our
budget is like and what are what it's going to
cost to maintain our lifestyle.
Speaker 1 (03:36):
Yeah, no matter what that top you know, that top
number is, that pile of money is, You've got to
temper that spending up front by understanding what that plan
will support. Because oftentimes that big number might seem like
a comfortable way to proceed, but when you look at
spending at a certain amount for five, ten, fifteen, thirty years,
(03:58):
it can go away quickly. If you're not careful. Yeah.
Speaker 2 (04:01):
Now, let's talk about a third topic of risk here,
and that's the idea of playing it too safe, you know,
as one of our old friends around here used to say,
going broke safely. So a lot of smart discipline savers
out there maybe can be a little too conservative and
perhaps a little, you know, a little too unaccepting of
how reality can be. So after two thousand and eight,
(04:23):
a lot of people out there did make the choice
to shift to CDs and annuities are sitting in cash
for a while, And the bottom of the two thousand
and eight market was March of two thousand and nine,
and a lot of people sat on the sidelines until
twelve thirteen, fourteen, fifteen.
Speaker 1 (04:37):
Sometimes.
Speaker 2 (04:38):
Matter of fact, I have clients who did not come
on back on board till twenty twenty one.
Speaker 1 (04:42):
That was when we got to know them.
Speaker 2 (04:43):
They sat in cash for literally fifteen years and missed
out on They probably should have had three times what
they had even invested conservatively, had they stayed invested over
that time period. And of course, the way the market,
the market thinks it's funny, so is somebody who reinvested
in twenty twenty one, what happened to them, Bob, immediately
over cliff in twenty two, right, so we took it again.
The stock market has a bad, bad, nasty habit of
(05:05):
punishing people twice for trying to time well.
Speaker 1 (05:08):
And we don't ignore the year twenty twenty. I mean,
you have people sitting out of the market, and then
we have a little thing called COVID come along the
way where the market fell what thirty eight to forty
percent about three weeks. That'll scare some people off as well.
Speaker 2 (05:21):
Absolutely, that's true the way I think of that, though,
that was over and done within within thirty days, which
was the up to the top to bottom of the market,
and then we had it all back by the summer.
Nobody remembers that though, Bob, because we were all hiding
in our basements thinking we were going to die. If
you remember what the attitude back then was, twenty two
was a little different.
Speaker 1 (05:37):
That's when we had the great unwinding of all that stuff. Yeah.
I think a lot of times the reason people go
to cash and stay there is perhaps they were over
allocated to two risky stocks or too heavy of a
concentrated position to begin with, going into that kind of situation,
and yeah, when everything tanks fifty to sixty percent because
(05:58):
you're not well diversified, that can't carry you off for
a few years. You're listening to Simply Money, presented by
all Worth Financial on Bob Sponseller along with Brian James.
All right, let's get into some real life examples here
using some real math. What can we and should we
be doing uh to understand and factor volatility into a
responsible retirement plan in portfolio? Okay, Bob, let's set the scene.
Speaker 2 (06:22):
You retired ten years ago and you had two million
dollars back then. He said, you know what, I really
can't stomach the the ups and downs on the roller
coaster ride of the stock market. So I'm just going
to stick to the stuff that's predictable CDs and treasuries.
I'm good to go. I'm never going to read a
headline again. At the time, it feels responsible, like a good, solid,
safe move. But let's do the math behind it. Well,
a sixty forty portfolio, right, and that means sixty percent
(06:42):
stocks forty percent bonds. That's kind of the dried and
true conservative ish goldilock zone portfolio that might have returned
about seven and eight seven to eight percent every year
over that decade, and that those are real numbers. That's
not that that's just the way things have come out
historically speaking. If you're focusing on that cash heavy approach
or the CDs, remember we said ten years ago, we
haven't had these high rates for all ten years, So
(07:03):
you'd be averaging closer to one to two percent in
exchange for not having had to worry about the headlines.
So on a two million dollar portfolio, that's a difference
of a million bucks, Bob. If you average seventy eight percent,
you're gonna wind up with somewhere over three million dollars
in that range. But if you're only getting that one
to too, it's not even gonna come anywhere close to that.
And you have to factor in two. We've got inflation
(07:24):
hiding in the background, right. If we're gonna keep up
with inflation, we can't, you know, we can't stick to
only the safe stuff and predictable. We've got to let
something grow that can keep up with inflation.
Speaker 1 (07:34):
Well, using my simple Green Hills High School math, Brian,
a million dollars profit on two million dollars, I mean,
that's fifty percent return over ten years. That's a game
changer in terms of a long term wealth plan.
Speaker 2 (07:46):
Yes, and it's not a huge amount. It's not a
huge amount of return. That's a conservative portfolio.
Speaker 1 (07:51):
And this isn't saying wor stock picking gurus and we
picked the right stocks at the right time. This is
just basic blocking and tackling, doing the right things, having
a good sound acid allocation strategy, and letting it work
over time. The difference is measurable huge.
Speaker 2 (08:07):
And let's circle back to the whole point of this
particular segment, which is the difference between risk and volatility.
Risk again, is the idea of not allowing your assets
to keep up with inflation so that you can maintain
your lifestyle. Volatility is just the idea of knowing that
if I want these seven eight percent returns so that
I can deal with inflation over the rest of my life,
then volatility is just knowing that sometimes it rains. It
(08:29):
is not the weather man's job to help you avoid
the rain. That's not the case. It's the weatherman's job
to help you navigate it. Make sure you know what
might be coming and what should you do.
Speaker 1 (08:38):
To prepare well. And here's the real point here. I
think it takes sitting down, running numbers, looking at what
amount of risk in return your plan needs to achieve
and tolerate in order to meet your long term objectives.
And if you don't do that and you leave it
all to chance, then everybody, I don't care who you are,
you leave it to emotion, and that's where fear and
(09:00):
greed run in. It could because you don't have a plan,
You don't look fifteen, twenty thirty years out. And that's
what we want to try to help people avoid. Tonight
is just that bury your head in the sand and
forget it kind of mentality.
Speaker 2 (09:12):
Yeah, and remember if you if your safe money is
growing by two percent and inflation is more like four,
you're actually losing money in terms of purchasing bout.
Speaker 1 (09:20):
Here's the all Worth advice. The riskiest thing you could
do with your money is not understand what risk really is.
Coming up next, our take on a headline that suggests
we should embrace stock market bubbles. 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
(09:50):
all Worth Financial. I'm Bob Sponseller, along with Brian James
trying not to laugh at that intro music from our
buddy jokes Trekker. Hey, if you can't listen to Simply
Money every night, subscribe to get our daily podcasts. And
if you think your friends could use some financial advice,
tell them about us as well. Search Simply Money on
(10:10):
the iHeart app or wherever you find your podcasts. Should
you be doing rawth conversions even though you don't need
the money yet. It's one of the questions you asked
us to tackle, and we're going to answer that one
straight ahead. At six forty three, there's a provocative headline
making its way around the financial media right now why
(10:31):
we should welcome stock market bubbles? Brian who is making
this claim? And what's going on here?
Speaker 2 (10:38):
Yet another provocative headlines And it seems like all the
headlines are provocative, But then again, I guess that's what
makes them headlines. We want to grab eyeballs and you know,
and sell advertisement. So anyway, this particular claim is coming
from Mark Hulbert, and he makes it.
Speaker 1 (10:50):
He does make a fair point.
Speaker 2 (10:52):
Some of these the transformative technologies that we've seen have
happened during stock market bubbles. There's something, there's a catalyst
that's causing you know, everybubble has something inside of it.
It's either the real estate bubble from you know, from
twenty years ago, that's when it began. We had the
tech bubble before that, when the internet first came on
the scene. We also had uh there was sort of
another bubble when when mobile phones and smartphones became a thing,
(11:14):
and nowadays we're talking about AI. There's always a catalyst
underneath these kinds of things. So on one hand, that
that's how we grow the market. A new some kind
of new environment, some kind of new tool out there
that can help people be more productive, be more efficient,
can help companies make more money. But at the same time,
just like anything, we overreact to it as investors. We
inflate it too much and then we panic too much
(11:35):
on the downside.
Speaker 1 (11:36):
Yeah, I think I think the word momentum trade comes,
you know, comes to mind. And we can talk a
little bit about AI stocks here over the last few years.
I mean, we've talked about this many times. The S
and P five hundred. If you look at the index,
thirty to thirty five percent of the market cap of
the S and P is weighted in just seven companies
the quote unquote magnificent seven. They've had a great ride,
(11:58):
and then you know, we go back to we go
back to you know, earlier and things the legs can
come out from under some of those stocks. You have
big market volatility in the short term. In other words,
people can ride a momentum trade longer than they need
to and not properly diversify, and that's where they can
get hurt by this, you know, quote unquote bubble and Brian,
(12:20):
I don't know about you. This is why I always
like to have a little dry powder. I like to
have a little cash on hand because I agree with
Mark Holbert, when things start to tank and go down,
that's usually a tremendous buying opportunity to buy things that
got oversold on the downside.
Speaker 2 (12:38):
Yeah, and I think I think these periods can be
extremely educational, not only for people who are just experienced
in the market for the first time, but also for
people who are sneaking up on retirement or who have
retired and then all of a sudden they're now having
to navigate the ups and downs of the market that
have always been there but they haven't paid attention because
they're too busy working, raising kids and so forth. Now
(12:58):
they've got the time to pay attention, and they feel
like they've got more to risk because the nest egg
is bigger, of course, and it's coming closer and closer
to the time where we need to tap into.
Speaker 1 (13:07):
It well and emotionally and financially, people don't care as
much about volatility when you're earning money and putting money
away because you got your paycheck supporting you every month,
and you know long term. People know long term, if
they buy and hold and let it go, it eventually
quote unquote comes back. But I think a lot of
(13:27):
people get over they get over comfortable with large stock
concentrations as well concentrated positions. And then when you do
retire and you've got to turn that portfolio into a paycheck,
that's where you can be left with more potential volatility
than you might think you have. And then if one
of these bubbles rear their ugly head and you're not
(13:48):
prepared for it, it can really derail a good long
term plan.
Speaker 2 (13:52):
Right exactly, And that's the bad side of the bubble.
But where the bad decision making comes in usually comes
during the inflation period. Of the bubble can encourage some
bad behavior. Just from a behavioral finance standpoint, bubbles can
be dangerous because they that means stuff is going up,
and sometimes we own that stuff and we're celebrating it,
or other other times we're watching people other people that
(14:13):
maybe we work with or family members, whatever, who are
talking about these kinds of things at the cocktail parties.
That creates the fear of missing out. So if you've
got one to five million dollars, you know that that's
a really really big deal, because that can if you
get sucked into those kind of things, that can be
a massive loss when that bubble pops.
Speaker 1 (14:29):
Well, one of my favorite sayings is you only need
to get rich once. Brian. You know you don't want
to do all this work, do all this saving, do
all this responsible investing and saving and discipline for twenty thirty,
forty fifty years and then fall into that fear of
missing out trap, you know, overweighting the magnificent seven stocks
or thinking you're going to get cute with cryptocurrency in
(14:52):
the short term and then you completely ruin what you've
spent thirty to fifty years building. It's something we've got
to help people watch out.
Speaker 2 (14:59):
For absolutely and an another way that can sneak in is, Hey,
my brother in law wants to open a restaurant.
Speaker 1 (15:04):
I've got a good chunk of money here staved.
Speaker 2 (15:05):
I'll throw a little thing something at this, you know,
because I can afford to do it. Those kinds of
things can really sneak up. Again, it's that that fear
of missing out that can really catch up to us.
Speaker 1 (15:13):
Well, we've all read stories about professional athletes that do
just that, right, they get these huge signing bonuses, or
people that win the lottery, people that have a bunch
of money, you know, on hand and have you know,
they want to look it away to double or triple
that bunch of money, and they go and make risky
decisions and then have it have it. Then they're surprised
(15:34):
and disappointed how quickly some of that money can disappear
on them. Yeah.
Speaker 2 (15:38):
So, now that we've beaten that horse to death, what
should we do about it?
Speaker 1 (15:42):
Right?
Speaker 2 (15:42):
So, how do we bubble proof our financial plans? Really
the first thing, and this isn't the most interesting of
advice necessarily, but stay diversified, don't wander away from you know,
the dance with the one that brung you, of course,
which is a diversified portfolio is going to keep you stable.
If you want to dabble in things that you think
that you're interested in or that you think might have
a you know, it might might have a nice pop here,
(16:03):
that's fine, go ahead and do that with a small
portion of your money.
Speaker 1 (16:05):
But think about it this way.
Speaker 2 (16:07):
If you already have a solid nest egg, then you
certainly wouldn't take it to the casino to gamble it.
But some of these more speculative things, that's literally what
you're doing. But it's okay to take a small portion.
And if you you know, take one percent of your
portfolio and you hit it right and it becomes three percent,
that's great, but it's not a life changing event. On
the other hand, if you put fifty percent of your
portfolio in and it drops fifty seventy five percent, that
(16:29):
is a life changing event. So so weigh the risk
of the way the risk versus the return. Is this
really going to move the needle for me and change
my life or am I just doing this for fun?
Speaker 1 (16:38):
What we're talking about here, Brian, in the midst of
doing a responsible and building a responsible retirement plan, is
putting some guard rails about your portfolio, around your portfolio.
What do I mean We talk about this all the time.
Stress test the thing, look at your goals, look at
your income sources, look at what you've got, and then
run various scenarios about what can and likely will happen
(17:00):
in the future. Interest rates will go up, interest rates
will go down, We'll have low growth periods in the market,
high growth periods of the market. Kind of simulate that,
kind of those all those situations in advance. And the
nice thing is a lot of this good software that
we use with clients. I mean it goes back and
looks at historical volatility going back seventy years. We're not
(17:21):
going to be one hundred percent accurate, but we could
at least put enough guardrails around a portfolio to keep
the plan from going off the rails and then really
putting someone in a dangerous spot.
Speaker 2 (17:32):
Yeah, and as advisors, we're subject to this stuff too.
We're human as well. So I'll share a quick personal story. So,
so my family decided recently to make a slightly off
the beaten path investment in a kind of a private
arrangement that is very different from the from the ninety
the other ninety eight percent of our portfolio, which is
diversified like we normally would do. And frankly, it's Andy
(17:54):
Stouts problem. He's the one who manages all just along
with the rest of all worths twenty six billion or so.
But in any case, this I had a conversation with
the CPA about how does this work?
Speaker 1 (18:03):
What am I?
Speaker 2 (18:03):
You know, I'm a financial advisor, I'm not a CPA,
so what are the things I'm not thinking of? And
I got the bright idea of, hey, we could do
a little more if we used our IRA dollars for
this and the ants. I'll never forget this one of
those things that stuck in my brain. It wasn't that
long ago, just a few months. His answer to that
was because that's not a simple thing to do. You
can do those kinds of things, but there's a lot
of moving parts to investing iras in things that are
(18:24):
not publicly traded. The quick thing he said to me
was why do you want a complicated life? And Bob,
that knocked me back on my heels and I thought,
my god, what what really?
Speaker 1 (18:32):
What I am I doing?
Speaker 2 (18:33):
Is it really worth jumping through all these hoops just
to get this done, you know, for a very small
portion of my portfolio, because it's something my family is
interested in. And that, yes, that made me take a
breath and go, Okay, let's think about what I'm really
trying to accomplish here and why do why do I
want a complicated life?
Speaker 1 (18:48):
Well, and the good the big point here is you
were willing to swallow your pride and your excitement a
little bit and get a second set of eyes on
the whole situation, get an objective viewpoint on something you
and your family are considering in advance of pulling the
trigger and making the decision. And that enabled you, you know,
through getting that good advice and a second set of eyes,
(19:10):
it enabled you to maybe avoid a huge mistake.
Speaker 2 (19:13):
We all need that financial Jiminy cricket. So find somebody
out there who thinks the same way as you do
and bounce your ideas off and see what they say.
They're in armslength the way they might make a different decision.
Speaker 1 (19:22):
Here's the all Worth advice. Bubbles may fund innovation, but
they often deflate retirements. Stick with the plan, not the
hype from riches to rags. What the Vanderbilt family can
teach your family about preserving wealth across generations. You're listening
to Simply Money, presented by all Worth Financial on fifty
(19:42):
five KRC, the talk station. You're listening to Simply Money
presented by all Worth Financial. I'm selling along with Brian James.
It's one of the most famous stories of lost wealth
in American history. The Vanderbilt family, once among the richest
(20:06):
dynasties in the world, built a fortune that would be
worth over two hundred billion dollars in today's dollars. Brian,
Yet within just two generations that wealth was essentially gone, evaporated.
What happened?
Speaker 2 (20:21):
Yeah, this is kind of an American story on the
way up and on the way down. So Cornelius Vanderbilt,
you've heard of him, You've heard of the family. There's
a university named after him. Down to Tennessee, there's the
Biltmore Estate, which was the gigantic house that they all
lived in. Now, all that money came from railroads and shipping,
and at the peak, Cornelius Vanderbilt was the richest man
in America. His son carried on the reputation and doubled
(20:43):
that fortune. But by the nineteen seventies, when there was
one hundred and twenty Vanderbilt descendants all gathered at one reunion,
not a single seven digit millionaire in the room. Everybody
had kind of nobody.
Speaker 1 (20:56):
Had carried the torch forward from that point.
Speaker 2 (20:58):
So what happened? Why did this happen? Well, a lot
of poor planning, people just not thinking ahead. And I
can imagine, Bob, but this isn't necessarily this isn't a
difference between good and bad people. This is just people
having been raised in an environment of the opposite of scarcity.
Speaker 1 (21:12):
I don't have to worry about things.
Speaker 2 (21:13):
Therefore, I don't worry about things, and I don't necessarily
think about the future because it's not really a problem.
Speaker 1 (21:18):
So lack of purpose around money.
Speaker 2 (21:20):
But really what it was, Bob, was the absence of
the financial education and discussions between generations. It just got
quieter and quieter until the the wealth just kind of
went away.
Speaker 1 (21:31):
Yeah, and we could talk about a potential two hundred
billion dollar fortune going away, and people might think, well,
that's an extreme case. I mean, let's bring this back
to real life, because we do deal with this with
folks that come into our office every once in a while,
and you know, it comes down to the adult children
with no financial boundaries. You know, maybe you're helping a
thirty five year old quote unquote get back on their
(21:54):
feet for like the fourth time, or you're covering all
your grandkids' expenses because you want to be a great
grandma and grandpa even though their parents are fully capable
of of doing it. We tend to want to help
make life super super easy for everyone, and that leads
to some you know, expensive you know, doling out of
(22:14):
money that can We think we're helping, but sometimes we're
just enabling bad behavior, or not even bad behavior, but
just not preparing the next generation to be self sufficient
and responsible from the money standpoint.
Speaker 2 (22:27):
Sometimes not helping can be the best help you can
give anyone, you know the old Give me a fish
and I'm good for a day. Teach me to fish
and I'm good for a lifetime. This also can cause
rifts between families, and that's kind of the opposite, right.
A family that is financially stable and doesn't have to
worry about money so much really should be a happy place, right,
That's what we all strive for. But in a lot
of cases, it can cause strife between the generations because
(22:50):
mom and dad, or grandma and grandpa, the ones who
originally built the wealth to provide all of that security
for everyone who comes after them, They view it very
very differently. They view it as their life work, their blood,
sweat and tears and so forth. But the further down
the generations we go, the less impactful that can be. Now,
now there's ways to avoid that. It's basically telling the story.
(23:11):
Make sure everybody knows the story of this family and
how we got where we are, What sacrifices were made
along the way, What were the things that we really, really,
in a heartbroken manner, had to choose not to do
over time because we know we had to. We had
to make that sacrifice at the time. And then how
are the new generations reacting to that? Are they able
to make those same types of decisions.
Speaker 1 (23:31):
You're listening to Simply Money presented by all Worth Financial
on Bob Sponsler along with Brian James. Yeah, Brian. Sometimes
I run into folks who you know, who have worked
very hard. They came from very modest beginnings, They earned
every dime that they have and worked extremely hard. And
sometimes folks will say, I just I just want to
(23:51):
make things a little easier for my kids and my grandkids.
And I understand the sentiment. I feel that way sometimes too,
but that's often not the best way to go about it.
I mean, you got we got to allow people to
earn it and go through some of life's trials and tribulations,
because that's that's what builds character and it builds financial literacy. Okay, Bob,
(24:13):
blocking and tackling. So how do we do this?
Speaker 2 (24:15):
How do we avoid that that that curse of the Vanderbilts. Well,
first off, focus on the values, not the dollars. If
you teach the right values, the dollars will follow. Help
people understand exactly what it means to to to work hard.
Speaker 1 (24:27):
Right.
Speaker 2 (24:27):
That's that kind of goes without saying we all know
the harder your work, the better off you'll be. But
at the same time, that sacrifice quote unquote can be
simply you know what you need to not spend one
hundred percent of your take home pay because you know
there are there are bigger things to worry about. That
is a sacrifice for a very young person who's just
getting started and now finally has money for their own
for the first time. You know, that can be the
(24:48):
standard ten percent of R four one k, or maybe
make it twenty percent. But that's that's a way Again
you're focusing on the values, not the dollars.
Speaker 1 (24:55):
Also use trust in.
Speaker 2 (24:56):
A smart manner, right If you have a trust, it's
not inten only to protect those assets. It can also
distribute money based on what you want to happen. So
that might mean that whatever wealth you have at the
day of your passing, you know, without anything else in place,
that might drop out of the sky on top of
someone's head, is that individual prepared to handle that sum
(25:16):
of money if not, or if you want them to
kind of earn it a little more, you know, Bob,
I've known of trust in my past that would pay
different amounts of money based on different things that that
a person had accomplished over time, different careers.
Speaker 1 (25:28):
They might choose.
Speaker 2 (25:28):
You choose become a teacher or some kind of public servant,
you might get a little more for that. If you
want to become a business person, there were restrictions on
you know, how you could how you could receive it,
those kinds of things. That's a moving target and things
can change and can get complicated. But again that's the
purpose of a trust. You're not just trying to protect
it from somebody who might want to sue you outside
the family, You're trying to protect the family itself.
Speaker 1 (25:49):
Yeah, I want to go back to maybe an example
of it, and I'm going back to you know, I'm old, Brian,
but going back to that first paper route. At nine
years old, I remember my parents sitting down with me
and saying, Hey, you're going to go out collect this cash.
Here's what you're gonna do with it. You're gonna split
it into thirds. A third of it you're gonna save,
a third of it you can spend now on whatever
you want, and a third of it you're gonna give away.
(26:11):
And I'm like, what you know, give away? But fast
forward to today, and I think this is a full
proof way to go about it. Out of every dollar
you earn, give ten percent away to someone else, save
twenty percent, pay taxes on, and spend the rest of it.
If you follow that plan for thirty or forty years,
you're gonna live a great life and have plenty of money. Yeah.
Speaker 2 (26:32):
My parents got a hold of me when I was
probably ten years old, and I was the same age,
so I had a paper out walking up and down
Jesse Road. I would collect my money and I would
spend it immediately at Whistles Deli and Drug Palace and
Supreme Nut and Candy there up on Cheviot Road.
Speaker 1 (26:45):
Didn't bring home a dime.
Speaker 2 (26:46):
Did that for several months, and Mom and Dad finally
noticed that I never had any money even though I
was delivering papers, you know, once a week. And we
had a little discussion about exactly what are we accomplishing here?
Speaker 1 (26:55):
But isn't it isn't it interesting? You know how as
both of us age and we work in the industry,
we both remember those stories formuli. We both had parents
that instilled those values and it sticks with us, you know,
to this day. All Right, here's the all Worth Advice.
The best estate plan passes down not just money, but
(27:15):
meaning structure and values. All Right, you've got questions, We've
got answers, our ask the advisor segment is coming up next.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to
Simply Money presented by all Worth Financial. I'm Bob Sponseller
(27:37):
along with Brian James. Do you have a financial question
for us? There? Is a red button you can click
while you're listening to the show right on the iHeart app.
Simply record your question and it will come straight to us.
All right, Brian, let's get into it. Let's hear from
Susan in Montgomery. My husband and I was sixty three.
I'm recently retired. Well, a two point four million dollar portfolio.
(28:00):
Should we be using roth conversions even though we don't
need the money yet?
Speaker 2 (28:04):
Yeah, that's great, that's a great question, sous I'm glad
you're thinking about this because Roth conversions A lot of
people will roll in and just say, you know what,
I'm retired, it's time to convert to roths.
Speaker 1 (28:13):
Let's just do the paperwork and be done with it.
Speaker 2 (28:15):
Well, Roth conversions, let's be clear, very very very much
an intelligently decided sacrifice in exchange for a benefit. Sometimes
it's appropriate, sometimes it's not. What I would be saying
is it doesn't have anything to do with you needing
the money with.
Speaker 1 (28:28):
That size of a portfolio.
Speaker 2 (28:29):
Susan doesn't give us the detail how much of this
is in pre tax dollars, but we'll just assume you
know most of it is.
Speaker 1 (28:35):
That's a good thing, right, They worked hard.
Speaker 2 (28:37):
But at the same time, what they're looking at in
about twelve years, when they turn seventy five, they're going
to have required minimum distributions that's going to put them
they'll have basically a solid six digit income probably two
hundred thousand dollars at that time from then on, meaning
they're always they're never going to be in a low
bracket again. So what she's thinking about is, Okay, we're
in a low bracket now, we just retired, we have
(28:58):
lower income than we've had in a long time. Answer
to that is unqualified. Yes, you should learn about it, right,
do it not do it? That's different. It differs by situation.
You should definitely learn about it. And the important key
to all this for anybody considering it is that you
want to be able to ideally pay those taxes that
will come DOE the year you do the conversion. Pay
them out of non IRA money. You don't want to
(29:19):
pay taxes on money for the purpose of turning around
and paying taxes again. Use your non IRA money to
pay those taxes. Get that conversion done, all right, So
let's move on to James and Anderson Township, who's got
another question for us.
Speaker 1 (29:31):
My wife and I want to give each of our
kids twenty thousand dollars this year to help for a
home down payment. Is that the best way to do it,
or should we be looking at trusts or something? Well, James,
I like to keep things pretty simple, so I'm gonna.
I'm gonna. I don't think you need to get too
complicated with a trust or some exotic instrument like that.
On The one number I want to point out is
(29:53):
the twenty thousand. The gift tax limit. The limit you
can give to any human being at any time, for
any reason in only twenty five is nineteen thousand dollars.
If your kid is married, you can double that if
you're willing to give nineteen thousand to his or her
spouse as well, so you can give up the thirty
eight thousand. But you can't give twenty thousand dollars to
(30:13):
any one kid without having to file a gift ex return,
which you know we don't need to get into, you know,
doing that if we can avoid it. The other thing
I would point out is before you do all this,
you got to look at the timing of when your
kids are going to be looking at buying the house.
So if it's in the short term here. Make sure
that you're coordinating all this with your kid's lender of choice,
(30:34):
because sometimes the lenders will have a little bit of
a look back period, you know, when they underwrite the loan, saying,
all right, how much of this down payment came from
mom and dad. And sometimes they don't like that. They
don't like twenty thousand dollars hitting that bank account the
month before we pull the trigger on a loan application.
So I'd keep it simple. I'd give them the money.
(30:55):
I don't think you need to put it in a trust,
but check to make sure that there's still going to
qualify for that loan that they need or want, you know,
factoring in the gifts that you and your wife are
giving to them. All right, let's hear from Rick in Westchester.
I have a one point seven million dollar IRA and
I'm charitably inclined. I've heard about qualified charitable and distributions.
(31:16):
How do those work and what should I start easing them? Rick?
Speaker 2 (31:19):
I'm glad to hear that the not only are you
charitably inclient that's obviously honorable, but that you started with that.
A lot of people are looking for all these different
tax techniques that how can I get a deduction right
now without sacrificing anything.
Speaker 1 (31:31):
Well, there's not a heck of a lot that you
can do anymore.
Speaker 2 (31:33):
However, if you are if you start from a standpoint
of yes, I give money to charity anyway, then there
are definitely many, many steps and techniques you can look
at that can give you even more of a tax
benefit than just the plane you know, deduction you might
get for delivering a load of stuff the Goodwill, for example.
So what Rick's talking about is a qualified charitable distribution.
Speaker 1 (31:52):
That is a distribution from an IRA.
Speaker 2 (31:54):
This is an actual, differently coded thing that would appear
on your ten ninety nine. Are qualified charitable distributions are
looted from your taxable income.
Speaker 1 (32:02):
They do not count as income.
Speaker 2 (32:03):
So this means it doesn't it's not going to affect
your Medicare premium surcharge, it will not reduce taxation on
soci security benefits, and it can keep you in that
lower tax bracket. It does count towards your required minimum distribution.
So if you are age seventy three or age seventy five,
if you were born after nineteen sixty, then that IRA
is going to be required to start to distribute money
(32:25):
to the tune of about four to five percent in
the year after starting the year after you turn those
respective ages. So the whole point of this is you
designate to your IRA custodian and that's the financial institution
who holds your money, that this official distribution is a
qualified charitable distribution and here is the five oh one
C three charity to whom it is going. So that
means you have fulfilled your required minimum distribution requirements that
(32:47):
you'll have to do. Anyway, the money goes straight to
the charity. You don't pay any income taxes on it,
and of course neither does the charity, because that's the
whole point of being a five oh one C three.
So again, if you start like rick is, I guess
I already give money to the to to these charities,
then this is a way you can do it without
incurring any taxes all at all, to free up those
dollars to give to the charity. Great idea, right, all right,
(33:08):
So now we're going to move on one more question.
Speaker 1 (33:09):
Here.
Speaker 2 (33:10):
We're talking to Danielle in Blue Ash who's got a
question about rental producies.
Speaker 1 (33:13):
We just sold a rental property and are sitting on
four hundred and fifty thousand dollars in cash. We really
don't need the income right now. What's the smartest way
to invest this? Well, my honest answer, Danielle is I
have no idea. How's that for a qualified answer from
a future of a job today, Bob, heck of a job?
But no, My real answer is don't let that money
(33:34):
burn a hole in your pocket. And what I mean
by that is put that four hundred and fifty thousand
dollars in cash in a safe you know, savings account
or cash equivalent, and then go sit down with a
good fiduciary financial advisor who can look at both your
short and long term goals and devise a plan and
a strategy on how to deploy that money responsibly for
(33:56):
the long term. All right, coming up next Brian's bottom Line,
where Brian is going to attempt to practice law without
a law license and talk about estate planning. You're listening
to Simply Money presented by all Worth Financial on fifty
five KRC the talk station. The moment. You're listening to
(34:18):
Simply Money presented by all Worth Financial on Bob Sponsorer
along with Brian James and It's time for Brian's bottom Line,
Brian's bucket of babbe.
Speaker 2 (34:26):
All right, I'm not a lawyer, but I'm playing one
on the radio today, So I want to talk about
some basic estate planning steps again, talking to clients during
the financial planning process, which involves a lot more than
just investments. Right, that's a tiny piece of everything that
a financial plan encompasses. Eventually, the conversation turns around to
what happens to all of this when when I or
we pass on, And there are some very basic steps
(34:47):
that everyone should take. And a reason I'm bringing this up, Bob,
the reason this is important is because a lot of
people just assume, oh my gosh, I got to bring
in a lawyer for this. I got, Oh, that's going
to be thousands of dollars and a lot of work,
and he's gonna use fancy words that I don't understand,
and I don't want to do it today.
Speaker 1 (34:59):
Well, worry about it in a few months.
Speaker 2 (35:01):
That's the wrong approach, because anything can happen in those
few months, and we've all have those horror stories. Anyway,
easy things you can do. The easiest thing everyone can
and should do is name beneficiaries on everything that you
can primarily in the easiest, absolute easiest place to do
is all your financial accounts. Here I raise your four
oh one ks. That's relatively obvious because it's shoved into
(35:22):
your face. On those retirement accounts, right, you kind of
have to name a beneficiary to get those open.
Speaker 1 (35:27):
So, but always make sure they're up to date.
Speaker 2 (35:30):
And when your company changes four one K providers or
they change the hware HR software system, double check that
because I think I've seen at least five times in
my life where somebody changed the software package of my beneficiaries.
Speaker 1 (35:40):
Win. What's a big one. I've seen that as well.
Speaker 2 (35:42):
It happens very frequently or sometimes our clients while we're
doing a financial plan, they'll log into their four oh
one K and the hey, you know, before we get
the investments click that beneficiary is like, let's just see
what it says.
Speaker 1 (35:51):
Make sure it makes.
Speaker 2 (35:51):
Sense anyway, that's the easy side, because it's kind of
shoved in your face. However, where you can also do it,
it's very easy, but you kind of have to ask
for it is your non hirement accounts, and I'm talking
like a joint investment account or an individual brokerage account,
and we're talking non IRA, non roth, that kind of thing.
You can ask your financial institution for what's called a
transfer on death TOOD form, which does the exact same thing.
(36:14):
That does not change the ownership, but it will establish
beneficiaries on those taxable accounts banks different from investments banks
called a POD payable on death.
Speaker 1 (36:24):
But it's just a.
Speaker 2 (36:25):
Piece of paper where you're naming beneficiaries. If you accomplish
these steps on all of your financial assets, then those
instantly will bypass probate. You don't need a fancy trust.
Matter of fact, they bypass the will too. The will
might say my investment account XYZ goes to my dog,
but if the beneficiary is listed on the account, the
beneficiary that is listed wins out. Doesn't matter what the
will says. A will is still important. I'm not at
(36:47):
all implying that. But at the same time, the will
exists to cover anything where you can't clearly name a beneficiary.
If you can name it on the asset itself via
the title or the account or the whatever, or your
house deed, then you should do so. All that stuff
bypasses probate. And these are easy, simple steps that everyone
should take.
Speaker 1 (37:04):
Yeah, good stuff, Brian, I actually had this come up
yesterday in a meeting with a client. They had done
all the beneficiary work on their iras but completely ignored
their bank accounts, so we were able to walk through
how to get their six different beneficiaries set up through
a pod you know, just by going into the bank
and getting it done. Good stuff. Thanks for listening everyone.
You've been listening to Simply Money, presented by all Worth
(37:26):
Financial on fifty five KARC, the talk station
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