December 19, 2025 • 38 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian break down a surprisingly tame inflation report that has Wall Street (and maybe the Fed) rethinking the pace of rate cuts in 2026. But don’t get too comfortable—there are warning signs in the job market that suggest the economy is cooling, not roaring. The guys explain what it all means for interest rates, your mortgage, and long-term investing strategies. Later in the show, they dive into the delicate family dynamics that can erupt when estate plans aren’t clearly communicated—think unequal inheritances, caregiver credit, and vacation home squabbles. Plus, real estate expert Michelle Sloan joins the show to walk through the pros and cons of downsizing into a condo versus staying in a traditional home. And in the Simply Money mailbag: when do alternative investments make sense, how to coordinate charitable giving without triggering higher Medicare premiums, and why your IRA investments shouldn’t change just because you plan to leave money to charity. Finally, in Brian’s Bottom Line, a financial planning playbook for high-net-worth investors in a slowing economy: diversification, liquidity, tax efficiency, and more.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Tonight, a somewhat surprising inflation report, new information on the
labor market, and more. You're listening to Simply Money, presented
by all Worth Financial on Bob Sponseller along with Brian James. Well,
you've got a lot to get to tonight in the
way of headlines. Are going to start with the November
inflation report and it's some positive news for a change.
Speaker 2 (00:27):
Brian, Yeah, this is this was a bit of a
stunn So prices rose two point seven percent year over year,
and the core CPI, that's the one we always like
to talk about. That's the one that the government really
pays attention to. It strips out food and energy prices,
and I know a lot of people think that's weird,
but those are extremely volatile things and what they're trying
to do is get a really clear picture without that volatility. Anyway,
(00:47):
core CPI was only two point six percent year over year,
way way lower than expected. And so for the core
and the headline, both of these the economists just did
not see this coming. The lowest estimate in Bloomberg survey
of sixty two economists was two point eight percent for
the core year over year, and that was City Group
so they win the prize for being least wrong, and
(01:08):
then the reading came in two tenths below that.
Speaker 3 (01:11):
So this is this is good news.
Speaker 1 (01:13):
Well hopefully this is good news for everybody. I mean,
let's face it, consumer businesses. I mean, we've got a
little bit of struggles here in the labor market and
job growth that we'll get to here in a second.
But let's face it, when when the prices of things
and raw materials come down, that's great for the economy.
That's great for you know, just everyday pocket books out there.
(01:35):
It's good for corporate balance sheet. It should help the
stock market shoot. It might even you know, induce the
Fed to drop rates even a little more or sooner
that inspect than expected. As we turn the calendar into
twenty twenty six, again, when these numbers go down, you know,
that's good news to everybody. And I the only caution
flag I put out there is we constantly, constantly get
(01:58):
revisions in these numbers, both the inflation number and the
jobs number. You know, revisions happen all the time. You know,
we went through that forty three day period with the
government shutdown where we didn't get any data. So you know,
as good as the numbers look today, we all need
to be on the lookout for revisions, you know, up
(02:18):
or down, because they happen, and they seem to happen
more often than not these days.
Speaker 2 (02:22):
Yeah, that's just the world we live in, unfortunately, and
we always had that, and then of course we had
the the more curveballs from the current administration that was
the kids started to mess with the data sources. So
there's always going to be questioned about this. So just
stay flexible, you know, trust but verify.
Speaker 3 (02:39):
I think is really the really the big thing.
Speaker 2 (02:40):
But if this stays on course, then we we should
be knock on wood, we should be looking at potentially
more rate cuts. If you're a person who has that
mortgage from you know, a few years ago that's in
the seven, seven and a half maybe eight percent range,
time to start looking for those refinancing opportunities.
Speaker 3 (02:56):
So I'd start paying attention to that.
Speaker 1 (02:58):
Yeah, that'll be interesting to see, you know, with this
inflation report, and these are new numbers that just came
out early this morning. You know, the thing we talk
about all the time, Brian, The thing I know I
watch every day is the ten year interest rate number,
not the short term number, the ten year treasury number,
because that's what really moves mortgage rates, and that number
(03:21):
has really not moved much at all in spite of
what happens to short term rates. We're sitting in the
low fours here on that ten year treasury, and you know,
that number could actually go up if we think these
lower inflation numbers are going to lead to stronger than
expected economic growth. So it just it's a yin and
(03:42):
a yang here. You could get good news in one area,
which could be bad news in another area. It depends
on what you're looking for and what's going to benefit
your pocketbook or your profits if you're a business owner.
But you know, keep an eye on that ten year treasury,
you know note as it relates to mortgage rates.
Speaker 3 (04:00):
Yeah, that's a great point, Bob.
Speaker 2 (04:01):
I think I might have been a little bit flippant
there talking about because the Federal Reserve does not just
straight up dictate mortgage rates right.
Speaker 3 (04:08):
Market demand does it too.
Speaker 2 (04:10):
This is why we always talk about what the bond
market is doing with regard to to inter trains.
Speaker 3 (04:14):
But again, if you're.
Speaker 2 (04:15):
In that seven eight percent mortgage range, it really is
time to start paying attention the rate could be low
enough as it is right now to make it worth
your while.
Speaker 1 (04:21):
Don't lose sight of that for sure. All right, well, hey,
let's get into the jobs report. We finally got the
US jobs data that have been delayed for weeks due
to that forty three day government shut down, and what
it tells us is, you know, I think what we've
been seeing in the headlines, you know, in the news
over the last month or so, you know, just kind
(04:42):
of a slowing you know, slightly concerning job market. Here again,
not a lot of people are getting fired, but the
flip side, not a lot of people are getting hired.
You know, it's just kind of a stagnant situation as
far as jobs growth. But now we actually have some
action data and numbers to talk about, you know, in
(05:02):
terms of November and October numbers. Let's get into that tonight,
Brian A.
Speaker 3 (05:06):
That's right.
Speaker 2 (05:06):
This is the US jobs data that had been delayed
for several weeks due to that longest ever forty three
day federal government shutdown. But what it tells us isn't
exactly a roaring economy. Right, So we just gave you
good inflation inflation numbers, but with inflation slowing. Sometimes that
can come along with a slowing economy too. That's kind
of where the slowing role happens from. So this report
(05:29):
gives us a picture of a labor market that's kind
of slowing down a little more than a lot of
people expected.
Speaker 3 (05:33):
Sixty four thousand jobs.
Speaker 2 (05:35):
That's how many of the economy added here in November
twenty twenty five. Good news is that that's ahead of
economists forecast of around forty thousand.
Speaker 3 (05:42):
We have a lot of ere economists out here.
Speaker 2 (05:44):
They were wrong on interest rates and they were they
kind of missed on how bad the jobs report was
going to be. Now that said, that's a relatively small
gain by historical standards and on more importantly, that was
right after, right on the heels of a significant loss
of about one hundred and five thousand jobs in October
Tober drop Bob. That wasn't just a quirk of statistics.
That was the impact of federal workforce reductions. You know,
(06:05):
lots of government workers who had deferred those buyouts because
of that shutdown. They finally got taken off the payrolls
in October, all at once, right leading to that steep decline.
So that's what happens when we you know, the shutdown
and the and the turning off of the data spigots
and then turning them back on again when all the
data starts flowing, and we kind.
Speaker 3 (06:21):
Of we'll get these a bit of these shocks.
Speaker 2 (06:23):
So end result here, US unemployment rose to four point
six percent in November. That's the highest level in more
than four years, even as employers were adding jobs. Because
the overall labor force picture that includes workers who are
re entering the job hunt, and it reflects broader weakness
and hiring outside those few pockets of strength out there
in certain industries.
Speaker 1 (06:43):
Yeah, that that headline number, the four point six percent
unemployment rate, obviously that is up and as you said,
that's the highest percentage figure we've seen in four years.
That could be there could be a silver lining to
that because as you mentioned, Brian, and this is what
you know, doesn't get talked about a lot in media,
and if people don't study this stuff as closely as
we do, you miss out on the point that it
(07:05):
really that these numbers are impacted, as you've already said,
by the number of workers who are actually looking for
a job. If people aren't even looking for a job
that can skew that unemployment rate down. Uh, And to
me that that that doesn't make a whole lot of
sense in defining what's actually going on in the economy.
So I think, I think what we need to see
(07:27):
here is continued, hopefully continued real wage growth and continued
private sector job growth. That would be a sign that
the economy really is improving in real inflation adjusted numbers.
And it would be some evidence of some of this
on shoring that the President and his administration has talked about.
(07:48):
It takes a while for that all that stuff to
take hold. It remains to be seen how quickly we
can add you know, jobs in that manufacturing sector, which,
by the way, uh, manufacturing jobs can continued to shrink
over the latest quarters. So it'll be it'll be interesting
to see how long all that on shoring takes hold
as all this investment is coming back into the United States.
(08:12):
It doesn't happen overnight, but you know, hopefully we'll see
some green shoots of private sector job growth here as
we get into the first and second quarter of twenty
twenty six.
Speaker 2 (08:22):
Yeah, so all this it adds up to a labor
market not really collapsing This isn't you know what.
Speaker 3 (08:26):
We're not kind of waving the flag of the end
of the world here.
Speaker 2 (08:28):
Employers are not slashing thousands upon thousands of jobs, but
definitely slowing down. So job growth used to be robust,
that's kind of become a little more muted, you know,
and definitely uneven across the various sectors, different parts of
the economy or are having different experiences. The FED has
already been cut cutting interest rates all through twenty twenty
five because inflation is stubbornly hanging around. But we did
just get that great headline this morning. Not a labor
(08:51):
market in crisis, but things are shifting, so you know,
we might just be be on your toes and be
ready for you know, for things to come ahead and
and you'll be okay.
Speaker 1 (09:00):
Well, another good news before we leave this whole inflation
and wage growth topic. I mean, Brian, I know you
like to study history and data and I do as well.
I mean, I just took a look at you know,
cause when we see wage growth, you know, we see
stories how wages aren't growing blah blah blah. But you know,
if we look at real wage growth, inflation adjusted wage
(09:21):
growth as inflation has really been coming down since late
twenty twenty one. I mean, I'm looking at numbers that
have been consistently improving really since the third quarter of
twenty twenty two, when inflation really started to go down.
You know, with the exception of a couple of blips here,
we've seen real wage growth, which is inflation adjusted wage growth,
(09:42):
you know, not off to the races, not huge wage growth,
but consistent real wage growth. And let's face it, when
people have more money in their pockets to spend, that's
a good thing for the economy, which leads us to
the next thing we want to touch on tonight, and that's,
you know, taking a look at how consumers spending is doing. Because,
after all, Brian consumer spending makes up seventy percent of
(10:05):
our gross domestic product here in the United States, that's right.
Speaker 2 (10:09):
And as per the season, nearly two hundred and three
million US shoppers hit the stores and of course the
online stores during the five day stretch from Thanksgiving through
Cyber Monday.
Speaker 3 (10:19):
That's the highest turnout we've seen in at least nine years.
Speaker 2 (10:22):
According to the National Retail Federation, they're the ones who
survey the shoppers to calculate, give us the Sanuel estimate.
Speaker 3 (10:28):
So what are we.
Speaker 2 (10:29):
Hearing from big box club retailers like Walmart, Best Buying COSTC. Well,
they're topping quarterly sales expectations. They're beating what Wall Street thinks. Remember,
all we really care about is whether the analysts were
right or wrong. And so those are blowing the doors
off for right now. And those executives saw said they
saw an encouraging start to that crucial shopping season.
Speaker 3 (10:47):
Remember this is this is when Black Friday.
Speaker 2 (10:50):
What that actually means is the beginning of the season
where the numbers for retailers tend to turn black for
the year because of the spike and spending those discretionary retailers.
Speaker 3 (10:59):
Go ahead, Bob, no.
Speaker 1 (11:00):
You go. I just have to laugh, because, Brian, it
seems like Christmas and holiday shopping season seems to start,
you know, around the fourth of July. Now we just
call it different things, you know, we just try to
do everything we can to allure people online and into
those stores to shop, shop, shop, spend, spend, spend. It's
the American way, Brian. But go ahead, go ahead with
(11:21):
the data.
Speaker 2 (11:22):
The United States a profit margin where the Christmas shopping
season starts two Thanksgivings before. But some of these, some
of these other smaller retails like Gap, Gap, Amber, Comby,
and Fitch American Eagle, they also exceeded quarterly estimates, which
is interesting. I have those are names I haven't heard,
you know, and it feels like in a long time,
you know, because they used to be darlings of the
industry and then got real quiet there. But doing okay
(11:43):
there as well. Some other key dynamics we're seeing, you know,
even as concerns about an AI investment bubble and layoffs
by these companies including a Verizon and Target, you know,
kind of cloud the twenty twenty six economic outlook, we're
still seeing these green shoots coming out of the retail industry.
Which that's not something we've talked about long time. It's
all been technology.
Speaker 1 (12:02):
Yeah, if people are still shopping in the Applebee's parking
lot is still packed at six pm, the economy can't
be doing all that bad. All right. Here's the all
Worth advice. A solid long term financial plan will help
you prepare for a year where you know, being intentional,
worth your money and being value oriented could matter more
(12:24):
than ever. Coming up next, we're gonna walk through some
of the most common situations we see where family and
money collide and what you can do now to maybe
hopefully avoid some family drama down the road. You're listening
to Simply Money presented by all Worth Financial on fifty
five KRC the talk station. You're listening to Simply Money
(12:50):
presented by all Worth Financial on Bob Sponsller along with
Brian James. If you can't listen to Simply Money live
every night, we help subscribe and get our daily podcast.
Just search Simply Money on the iHeart app or wherever
you find your podcast. Straight ahead of six forty three,
we're answering your questions about charitable bunching, alternative investments iras,
(13:11):
and how to invest when you and your spouse see risk.
Maybe a little bit differently, if you've ever had tension
in your family around money, you are not alone, especially
when someone passes away, or when parents start aging, or
even just trying to help an adult child who's still
figuring things out in terms of getting rolling from a
(13:32):
financial standpoint. Let's face it, the emotions can run high,
and Brian let's break down tonight some of the common
situations we run into and unfortunately we run into these
quite often.
Speaker 3 (13:45):
We do.
Speaker 2 (13:46):
Obviously, it's not all about one person in their money.
It's usually about a lot of people and how we're
going to deal with all the issues that come up.
So let's pretend, for example, you got three kids. One's
a school teacher, one's a surgeon, and one just went
through a divorce and is barely making it. You know,
obviously you want to want you want to help the
one who's struggling more so the plan is to leave
them a bigger share of the estate because they just
might not be getting the same chance that the others are.
Speaker 3 (14:08):
Well, it makes sense, right, but.
Speaker 2 (14:10):
Unless you communicate that clearly, it can create some resentment.
So you know, this is here's hypothetical example. It kind
of follows. This is a fairly standard when we see this,
it looks like this. So fake family named the Johnsons
four and a half million dollars, left fifty percent of
that to their one daughter, who had some financial issues,
and then twenty five percent each.
Speaker 3 (14:28):
To the other two.
Speaker 2 (14:29):
Nobody told the kids in advance, and so after they
passed what happened while the son stopped speaking to their
sister because they they decided that she had somehow engineered
some kind of way to get half the estate and
cheat the other two thinking you know, she had manipulated them.
This wasn't the case at all. But because because mom
and Dad did not lay this all out to everybody
in advance and allow everybody to share feedback and react
(14:51):
in real time, everybody was simply left to determine for
themselves how this had come to be. And let's just
say nobody gets together during the holidays anymore, So how
do we deal with this? If you want to divide
assets unequally, just have a family meeting while you're alive,
or at least leave a letter explaining your reasoning. You
don't have to justify every decision. These are your decisions
and no one else's, but you do need to communicate.
(15:12):
You can't assume that they're just going to assume you
had their best interest in mind. Better to have that
difficult conversation now than cause permanent damage later after you're
long gone.
Speaker 1 (15:22):
Yeah, Brian, what I find in situations like this is
there could be a little code dependency going on in
the late stages of a couple's life. And here's what
I mean. Oftentimes, let's face it, today, kids live all
over the country in different parts of the country, and
for whatever reason, the thing that I find happens more
often than not is the child that needs some assistance
(15:44):
lives a lot closer to mom and dad than the
kid that's maybe a successful professional or attorney or doctor
that doesn't need money and they moved, you know, for
their job. They're highly successful. And as the parents age
a little bit, you know, they like you only needed
and wanted and having that child around. And that's what
can lead sometimes to this unequal treatment of kids. And
(16:08):
the point we're trying to make is a lack of communication.
So every family's different. We don't have time to go
into all the different scenarios that might crop up. But
I think the point we're trying to make here correct
me if I'm wrong, Brian, is communication. Communication can avoid
a lot of things. Because I've never met one set
of parents that dreams after they're gone of their kids
(16:31):
never getting together, never having the family all together. And
it's just shame when things like this happen simply because
of a lack of proactive communication. Let's move on to
scenario number two, and this is fighting over mom and
dad's care it seems like every generation nowadays is the
sandwich generation where you got to worry about your own
kids as well as your parents.
Speaker 2 (16:50):
So a lot of times, here's as this goes. You know,
families with adult children, one sibling tends to live nearby
and others have moved on a.
Speaker 3 (16:57):
Little further away.
Speaker 2 (16:58):
So for obvious reasons, the one who lives closest tends
to be managing all the doctor's appointments, the bills, and
the errands. Those others they all live out of town,
and they think, hey, everything's great. I never hear about it,
so everything must be fine. Well, so here's a hypothetical story,
and this is again a very common outcome for all this.
Mom falls ill. And let's say brother Tom has been
handling everything because he lives nearby, but his sister and
(17:19):
brother just assume the state is going to be split. Evenly,
Tom's feeling burned out and underappreciated because he's there every day,
mowing the lawn, making sandwiches, dealing with the mail that
comes in, and dealing with scammers and technology and all
that kind of stuff that happens tends to happen to
us when we get a little older, time to settle
the estate. He demanded a larger share, turned into a
lawsuit between the siblings. So how can we avoid this, Well,
(17:41):
this is what a trust can do. A trust can
allocate what's called a caregiver credit, compensating that sibling who
took on more responsibility. But again, make sure everybody knows, Hey,
we know Tom lives close by and he's going to
wind up carrying a lot of the burden of caring
for me, mom and dad. So we're going to make
sure he gets a little bit in advance. It gets
to be aware of this in the future, you can
(18:01):
avoid a lot of blow ups.
Speaker 1 (18:04):
Yeah, Brian, I don't know about you, but in the
situations I've dealt with, you know that involve caregiving, It's
not so much the kids fighting over money. It's just
everyone's busy and we let one sibling get overburdened with
the scheduling and the demands of that care And that's
where I think the siblings need to communicate, getting a
room together and put a plan together. And the folks
(18:25):
that I've seen do that are able to manage this
a little better. Let's get into a last scenario we
want to cover and that's who gets what at the
end of the day. And Brian, we're seeing more and
more families that have that lake cabin, vacation home, you know,
even just family heirlooms, you know, personal property in their house.
And you'd be amazed at how often families and kids
(18:48):
fight over what seem like small things, you know, the china,
the jewelry, all that, but a bigger thing like a
vacation home. Everybody loves it when they're coming to visit,
but then when mom and dad passed away, it's it's
sometimes shocking how the objectives change, and there could be some,
you know, significant arguments over how to handle that ill
(19:09):
liquid vacation property.
Speaker 2 (19:11):
Yeah, there can be a lot of disagreement on how
much time we actually are gonna spend there after mom
and dad are gone. Mom and dad might think that
everybody wants it and wants to hang on to it forever,
but that may not be the case for the kids
who have their own kids and their own lives now.
So make sure you're clear on really how everybody feels
about everything.
Speaker 1 (19:25):
Here's the all Worth advice that the end of the day,
your wealth is a tool and it should bring peace
to your family members not conflict. Here's a big question
when the time comes and it's time to move, what
makes better sense a house or a condo or some
other kind of property to live in like a town home.
We'll explain that question next. You're listening to Simply Money,
(19:48):
presented by all Worth Financial on fifty five KRC, the
talk station. You're listening to Simply moneyed by all Worth
Financial on mops on Seller along with Brian James. Joined
tonight by our real estate expert Michelle Sloan, owner of
Remax Time. Michelle, thanks as always for making time for
(20:10):
us tonight, and we want to get into the pros
and cons of buying a house or you know, traditional
home versus maybe a condo or a townhouse situation. Walk
us through some of the decision points we need to
work through and some of the pros and cons as
we navigate that kind of a decision.
Speaker 4 (20:30):
Yeah, it's very interesting because I have a lot of
new clients who are in their sixties. They're looking to
downsize or right size their home, and with that they
have options. Do you want a single family home? Again?
Do you want what goes with a single family home?
And really, if you look at the when you want
(20:53):
to buy a house, do you want space, do you
want your own yard? Do you want to be able
to control like the color of your front door? And
you have fewer rules, and technically when you buy a home,
most often there's more long term growth. A single family
(21:14):
home historically appreciates a little bit faster than a condo would.
But the cons of buying that single family home is
you have to consider all of the maintenance. You have
to do your own yard work. Still, you have to
maintain the entire home and take on the responsibilities of
(21:37):
maintaining the home. The nice thing is with a single
family home, your HOA or your homeowners' association costs are
usually one time annual fee if you're in a neighborhood
and you don't have a monthly fee like you would
a condo. So then you're looking on the flip side
(21:58):
of do you want to buy a condo? And the
pros of that are certainly it's lower maintenance living. It's
not like you have you're completely like you're renting, you
have no maintenance. You still have maintenance on the interior
of the home. You just may not have all of
the maintenance on the exterior of your home, so that
(22:18):
could save you a little bit of time and energy. Also,
it could be and again it depends on where you're
looking and what you want. A condo could have a
lower price point and have more amenities like a swimming pool,
a fitness center, clubhouse, walking path, you know, all those
kinds of great things. But you have a monthly homeowners
(22:42):
association fee. So you may have a lower mortgage or
a lower price point, but you may need to add
on two, three, four hundred dollars a month for all
of those extra amenities. So it's certainly a lot to consider,
and in the end, it ends up to be right
about the same price if you buy a single family
(23:04):
home or a condo, because you have to factor in
the homeowner's association fee.
Speaker 2 (23:10):
So along those lines, can you share some stories of
where you've seen buyers remorse in either of these situations.
I think that would be helpful for our listeners to
kind of identify when they might be heading down on
a path where they might regret a decision.
Speaker 4 (23:24):
Absolutely, I do. I feel like there is more pushback
or more regret when it comes to moving from a
single family home that you've been in for a really
long time having that autonomy. Going into a condo where
everybody's in your business, you know, you have HOA fees,
(23:45):
you have rules, you have restrictions. You can't just let
the dog out in the backyard do their business. Most
often in a condo situation, you're going to have to
take your dogs for a walk, You're going to have
to pick up after it. You know, it's going to
be not as free like free wheeling in a condo
(24:07):
as it would be in a single family home. And occasionally,
you know, the price goes up. So with an HOA,
just like taxes, you know, the fees may go up
as well. So I find more people that get into
condos that aren't really ready to be told what to
do all the time saying, Okay, I need to sell
(24:30):
this condo. That's just too small, it's too tight, the
world is closing in on me. I need my own space.
And then they go back to looking for a single
family home. So those are kind some of the things
that I have seen.
Speaker 1 (24:44):
Hey, Michelle, correct me if I'm wrong here. But there's
there's another big, potentially huge component to condo ownership, and
that's the reserve fund of the HOA that's designed to
accumulate some money over time to help pay for these
ongoing maintenance repair issues. And I think one of the
big parts of due diligence is to look at the
(25:05):
health of that reserve fund so that you don't go
buy a condo with one set of expectations only to
turn around a year or two later and get hit
with some huge assessment where you've got to write a
big check to help you replace the roof on the
whole building because the HOA, you know, over years and years,
did not manage money correctly. You ever run into that
(25:27):
and how do you advise your clients accordingly? Oh?
Speaker 4 (25:31):
Absolutely, And that's a tough one because we have seen
that situation over and over. If you are paying cash
for the condo, oftentimes you don't have the maybe the
wherewithal or the knowledge to look at those documents and
see what that reserve is and what it means and
(25:53):
how healthy it is. When you are getting a mortgage,
the mortgage company is looking at the health of that reserve.
So that's one of those things that you know, you
really don't know until you get into that situation. A
lot of times now you could do that extra due
(26:14):
diligence and talk to the HOA, which is smart before
or talk to the neighbors, ask them how the HOA functions.
Is it helpful? Is it difficult to get things done
on the exterior of the home. Are you seeing a
lack of maintenance and then all of a sudden, Now
it's really interesting because you know your HOA fees are
(26:38):
usually lower on a newer property, but then they start
to go up pretty quickly. Those monthly fees go up
pretty quickly when you need exterior maintenance. And so if
that reserve is not strong enough, yeah, you definitely are
going to see a huge increase of potential for a
one time a set that could be pretty hefty. Definitely
(27:03):
important to look at all of the latest minutes and
try to gauge the health of that HLA.
Speaker 1 (27:11):
All right, great stuff as always, Michelle, thanks so much
for spending time with us receiving, especially during this busy
holiday season.
Speaker 3 (27:19):
Great stuff as always.
Speaker 1 (27:20):
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to
Simply Money sause I have buy all Worth Financial on
bob Sponseller along with Brian James, do you have a
financial question you'd like for us to answer. There's a
red button you can click if you're listening to our
(27:42):
show from the iHeart app, simply record your question and
it will, as always, comes straight to us. Kyle M.
Anderson leads us off tonight, Brian. He says, our advisor
set our portfolio is overfitted to the last decade. I
love how he phrased that. How do you build an
allocation that can survive a completely different market environment?
Speaker 2 (28:04):
Yeah, that's and he put that in quotes for us too,
So that must literally be the way the advisor said that.
Speaker 3 (28:08):
So it's an interesting way to phrase that.
Speaker 2 (28:10):
So I think what they're talking about here is, uh,
what're what they're saying is that this was built for
the world we just finished, you know, low rates, cheap money,
mega cap tech dominance, you know, rather than the world
we may be moving into. So how do we build
an allocation that's going to be robust across these multiple
changes that are coming? Well, first off, let let's let's
figure out where we're They're saying your portfolio is implicitly concentrated.
(28:32):
Wouldn't surprise me if it's long duration growth stocks, US
large caps, uh, you know, even bonds that benefited from
following rates. If most of your returns came from those factors,
you might be exposed. If we're going to be in
a different rate environment, just a kind of different you know,
different stock market environment too, so you know this this
could be make sure you're looking to diversify this correctly.
That means pairing assets that can win in different environments.
(28:54):
Value in small cap stocks are where we want to
be for inflationary periods, for example, international or emerging markets,
for global growth cycles, and that's definitely happening here in
twenty twenty five. Shorter duration bonds or tips for rising
rate scenarios, so those are just generally speaking to the
kind of moves you want to make in those different markets.
So you know, finally, and then stress test this whole mix.
Run the portfolio through periods like the nineteen seventies. There
(29:16):
are tech tools out there to help you do this,
the two thousand technology blow up and of course the
two thousand and eight credit crisis. If that strategy only
works in one era, it's not durable. So you have
to make sure that you have the buildy to be
flexible if not understand what you already mentioned, you have
an advisor he or she should be taking care of
this for you, So really push on them to get
to be more clear as to what they're asking you
(29:36):
to do. All right, So we're gonna move on to
Brian and Westchester. Who's Oh, here's our favorite topic. He's
talking about bunching charitable gifts every few years. Their CPA, though,
is concerned that that's going to impact medicare premiums. How
do you coordinate these giving strategies, Bob, without triggering these
tax cliffs.
Speaker 1 (29:53):
Well, without understanding the nuanced details of Brian's question. And
here's what I'm you know, it's difficult to answer this
question question, you know, specifically because I don't know the
source that you're using, Brian, to make these charitable gifts. So,
you know, charitable gifts can come in many ways, cash gifts,
qualified charitable distributions from your IRA, or giving away appreciated
(30:15):
assets either directly to a charity or in a donor
advice fund. And depending on where those charitable gifts come
from or the source of them, that can impact, as
your CPA called out, Medicare premiums. And I think he's
talking about, you know, avoiding that irm attax, which we
all want to avoid if at all possible. So, you know,
(30:36):
getting back to your question about coordination, you do have
to sit down and run different scenarios on how to
do this charitable giving and how much to do every year.
And this is where a good fiduciary advisor can run
those scenarios for you. And you know what Brian and
I always do. After we've done all our work, we
always go back to the client's CPA and say, hey,
(30:58):
here's what we're seeing. What are you seeing. Let's all
get on the same page so that we have a
coordinated strategy to help the client accomplish their charitable giving
objectives in the most efficient tax manner possible. So it
does require a little bit of coordination in planning, Brian,
because this stuff is getting more complicated every year in
(31:21):
terms of making sure you take advantage of what deductions
are out there and avoid some of these triggers like
the CPA called out medical Medicare premium adjustments. All right,
Karen and mount lookout, Brian says, we are being pushed
toward alternative investments, But I want to understand what problem
each of those solves. How do you imagine alternative asset
(31:43):
to a specific weakness in your portfolio?
Speaker 2 (31:47):
Yeah, this is another comment when we've had all your
long bobs. What do alternatives? What are alternatives and what
do they mean to me? So a smart way I
think to think about alternatives, Karen. Not a shiny new category.
But these are tools that can address very specific weaknesses
in a traditional sixty forty type portfolio, which we still
believe is the core of where you ought to be.
But that doesn't mean you can't season it a little bit. So,
(32:07):
you know, start by looking at the gaps of these things.
So a lot of portfolios struggle with three things. Too
much reliance on equity markets for returns, too much sensitivitied
interest rates, and too much volatility. During these stress periods,
each of those weaknesses can be matched to it to
an alternative that can address it. So maybe if you're
overly dependent on, you know, on stocks, private equity or
venture capital can add some return drivers that will not
(32:29):
be moving in lockstep with public markets. That's the whole
point of alts in the first place. For example, if
interest rate sensitivity is the problem, then real assets like commodities, infrastructure,
real estate, those historically will respond better in inflationary or
rising rate environments. You know, if volatility is the problem,
look at the strategies themselves rather than the assets. There
are market neutral strategies. These are these are different things
(32:50):
that use more traditional stocks and bonds underneath, but are
positioning derivatives against them to manipulate the markets in certain
ways to support, you know, whatever that weakness might be.
And then, and here's a big question you should ask
finally before you pull the trigger into one of these
in which historical environment.
Speaker 3 (33:06):
Would this have helped out the most.
Speaker 2 (33:08):
If you can't tie an alternative to a specific problem
you're trying to solve, such as rate risk, concentration risk,
or draw down risk, then it's not a solution.
Speaker 3 (33:15):
It's just going to.
Speaker 2 (33:16):
Add complexity to your portfolio. So that's a lot of information,
but I hope that helps also going to be a
continued headline I think throughout twenty twenty six.
Speaker 3 (33:24):
Larry in cold Spring.
Speaker 2 (33:25):
Larry says, part of our IRA money Bob is going
to eventually go to charity, but part's going to go
to their kids. How do you invest differently for beneficiaries
with completely different tax outcomes.
Speaker 1 (33:35):
Well, Larry, my answer might surprise you. I don't think
you should invest differently at all. I don't think you
should focus on this at all. I think you should
focus first of all, on investing this IRA money for
your lifetime and if you're married, for your and your
spouse's lifetime. Make sure this money is invested appropriately to
take care of you first, because at the end of
(33:56):
the day, whatever you leave to charity isn't it isn't
going to be away. So I don't care whether you
invest in all bonds, all stocks, The charities don't care.
They're gonna be able to take whatever you leave them,
convert that to cash on a completely tax free basis,
and go on with life and benefit the people that
you want them to benefit. And in terms of your kids,
it's kind of the same way. They're gonna be taxed
(34:18):
either way they're gonna have they're gonna be subject to
those IRS rules on you know, pulling that money out
over their lifetime or over the ten year period, whatever
the case may be. So again, focus on what you
need to be doing during your lifetime. Don't just by
default change the investment objectives of your iras. Because some
(34:38):
of this money is eventually going to go to charity.
Coming up next, Brian has his ever popular bottom line segment.
You're listening to Simply Money presented by it all Worth
Financial on fifty five KRC the talk station moment. You're
listening to simply Money sent by all Worth Financial. Well,
(35:00):
I'm Bob Sponseeller along with Brian James. And speaking of
Brian James, it's time for Brian's bottom line and he's
got a high net worth financial planning playbook to discuss
in periods where we might have a potentially slowing economy. Brian,
I can't wait.
Speaker 2 (35:19):
Well, yeah, so as eve been, you know, kind of
paying attention and just thinking about how there are different
periods of time throughout the you know, were the market's
going up, things are going down. Today we're going to
talk about, you know, how do I react when the
economy is slowing. I'll tell you in a few years
whether it's actually slowing right now, it doesn't really matter.
We should still have a playbook for it. So, you know,
in a slowing economy, this means growth is cooling, hiring
(35:39):
is slowing down, corporate earnings or being revised lower and
so forth. This doesn't mean we're on the way to
a recession. It just means the foot's coming off the
gas a little bit, and so that's going to have
impacts on on markets. The volatility will increase, and wealthier
households need to be particularly thoughtful about their risk management.
So for affluent families, economic slowdowns aren't only felt first
(36:00):
the job market. They're first felt in the markets with
those overall asset swings through the portfolio, liquidity tightens up,
asset valuations change, and so forth. So we got a
little bit of a playbook here today things you should
be looking at. One of the biggest vulnerabilities for our
wealthy investors is over concentration. This could be a single stock,
maybe it's a company you've worked for, or just in
a single sector or real estate or something like that.
(36:22):
So this is the time to review your exposure to
those single stock positions. How much of your net worth
is tied to your company, your industry, one type of asset.
Remember if your four oh one k is all one
big company, that may that may be wonderful, but remember
your paycheck is also tied to that company.
Speaker 3 (36:37):
So if it hits.
Speaker 2 (36:38):
The skids, your job as well as your portfolio could
be tied to it. So think about how you can
strategically diversify or maybe some hedging strategies to protect that
stock if you can't unload some of it in the
first place and put it into a more diversified portfolio.
The goal is not to eliminate concentration. You're probably always
going to be overly concentrated in some of these situations.
It's just to make sure you're not unintentionally making it worse.
(37:00):
Next play here is let's talk about liquidity.
Speaker 3 (37:02):
So high networth.
Speaker 2 (37:02):
Clients a lot of times have pretty complex balance sheets
with private investments, business interest, real estate, taxbile accounts out
there in a slowing economy. You guessed that liquidity is king,
So make sure you're twelve to twenty four month cash
flow needs are fully funded.
Speaker 3 (37:16):
That's going to protect you from needing.
Speaker 2 (37:18):
To have a fire sale, you know, if some bill
comes due and you didn't have the liquidity to handle it.
Speaker 3 (37:23):
This liquidity can.
Speaker 2 (37:24):
Be cash, short duration bonds, high quality fixed income types
of things that aren't really going to suffer too much
as long as a as long as the price is
hold up. So much so, liquidity that's that shock absorber,
and we want to make sure we've got flexibility.
Speaker 3 (37:37):
I can see you want to have a reaction, Bob,
go ahead.
Speaker 1 (37:40):
No, all it's going to add is here is you
could kind of kill two birds with one stone. Sometimes
avoiding that over concentration risk by default solves that illiquidity risk.
So you know, I think you're making two great points
that should always be talked about. But they kind of
work hand in hand, is what I was thinking as
you as you were sharing that great advice asolutely.
Speaker 2 (38:00):
This isn't pick one thing and do it. These are
all the things you ought to be looking at. So
so yeah, and so evalue a look at private market
and alternative investments if you haven't yet. These are things
that can move in different directions than your other types
of assets. Learn about them, maybe maybe make a commitment
in twenty six to learn what those are and whether
they might help you. Tax efficiency always important thing, tax
loss harvesting strategies if you have. If you if you
(38:21):
haven't done that yet, take a look to see if
there's any opportunities for you there for a little bit
of savings and then finally reinforce that long term plan.
Figure out what you were trying to do in the
first place, which you probably knew at some point. Make
sure you're still on that path.
Speaker 1 (38:33):
Thanks for listening tonight. You've been listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
talk station
Tonight, a somewhat surprising inflation report, new information on the
labor market, and more. You're listening to Simply Money, presented
by all Worth Financial on Bob Sponseller along with Brian James. Well,
you've got a lot to get to tonight in the
way of headlines. Are going to start with the November
inflation report and it's some positive news for a change.
Speaker 2 (00:27):
Brian, Yeah, this is this was a bit of a
stunn So prices rose two point seven percent year over year,
and the core CPI, that's the one we always like
to talk about. That's the one that the government really
pays attention to. It strips out food and energy prices,
and I know a lot of people think that's weird,
but those are extremely volatile things and what they're trying
to do is get a really clear picture without that volatility. Anyway,
(00:47):
core CPI was only two point six percent year over year,
way way lower than expected. And so for the core
and the headline, both of these the economists just did
not see this coming. The lowest estimate in Bloomberg survey
of sixty two economists was two point eight percent for
the core year over year, and that was City Group
so they win the prize for being least wrong, and
(01:08):
then the reading came in two tenths below that.
Speaker 3 (01:11):
So this is this is good news.
Speaker 1 (01:13):
Well hopefully this is good news for everybody. I mean,
let's face it, consumer businesses. I mean, we've got a
little bit of struggles here in the labor market and
job growth that we'll get to here in a second.
But let's face it, when when the prices of things
and raw materials come down, that's great for the economy.
That's great for you know, just everyday pocket books out there.
(01:35):
It's good for corporate balance sheet. It should help the
stock market shoot. It might even you know, induce the
Fed to drop rates even a little more or sooner
that inspect than expected. As we turn the calendar into
twenty twenty six, again, when these numbers go down, you know,
that's good news to everybody. And I the only caution
flag I put out there is we constantly, constantly get
(01:58):
revisions in these numbers, both the inflation number and the
jobs number. You know, revisions happen all the time. You know,
we went through that forty three day period with the
government shutdown where we didn't get any data. So you know,
as good as the numbers look today, we all need
to be on the lookout for revisions, you know, up
(02:18):
or down, because they happen, and they seem to happen
more often than not these days.
Speaker 2 (02:22):
Yeah, that's just the world we live in, unfortunately, and
we always had that, and then of course we had
the the more curveballs from the current administration that was
the kids started to mess with the data sources. So
there's always going to be questioned about this. So just
stay flexible, you know, trust but verify.
Speaker 3 (02:39):
I think is really the really the big thing.
Speaker 2 (02:40):
But if this stays on course, then we we should
be knock on wood, we should be looking at potentially
more rate cuts. If you're a person who has that
mortgage from you know, a few years ago that's in
the seven, seven and a half maybe eight percent range,
time to start looking for those refinancing opportunities.
Speaker 3 (02:56):
So I'd start paying attention to that.
Speaker 1 (02:58):
Yeah, that'll be interesting to see, you know, with this
inflation report, and these are new numbers that just came
out early this morning. You know, the thing we talk
about all the time, Brian, The thing I know I
watch every day is the ten year interest rate number,
not the short term number, the ten year treasury number,
because that's what really moves mortgage rates, and that number
(03:21):
has really not moved much at all in spite of
what happens to short term rates. We're sitting in the
low fours here on that ten year treasury, and you know,
that number could actually go up if we think these
lower inflation numbers are going to lead to stronger than
expected economic growth. So it just it's a yin and
(03:42):
a yang here. You could get good news in one area,
which could be bad news in another area. It depends
on what you're looking for and what's going to benefit
your pocketbook or your profits if you're a business owner.
But you know, keep an eye on that ten year treasury,
you know note as it relates to mortgage rates.
Speaker 3 (04:00):
Yeah, that's a great point, Bob.
Speaker 2 (04:01):
I think I might have been a little bit flippant
there talking about because the Federal Reserve does not just
straight up dictate mortgage rates right.
Speaker 3 (04:08):
Market demand does it too.
Speaker 2 (04:10):
This is why we always talk about what the bond
market is doing with regard to to inter trains.
Speaker 3 (04:14):
But again, if you're.
Speaker 2 (04:15):
In that seven eight percent mortgage range, it really is
time to start paying attention the rate could be low
enough as it is right now to make it worth
your while.
Speaker 1 (04:21):
Don't lose sight of that for sure. All right, well, hey,
let's get into the jobs report. We finally got the
US jobs data that have been delayed for weeks due
to that forty three day government shut down, and what
it tells us is, you know, I think what we've
been seeing in the headlines, you know, in the news
over the last month or so, you know, just kind
(04:42):
of a slowing you know, slightly concerning job market. Here again,
not a lot of people are getting fired, but the
flip side, not a lot of people are getting hired.
You know, it's just kind of a stagnant situation as
far as jobs growth. But now we actually have some
action data and numbers to talk about, you know, in
(05:02):
terms of November and October numbers. Let's get into that tonight,
Brian A.
Speaker 3 (05:06):
That's right.
Speaker 2 (05:06):
This is the US jobs data that had been delayed
for several weeks due to that longest ever forty three
day federal government shutdown. But what it tells us isn't
exactly a roaring economy. Right, So we just gave you
good inflation inflation numbers, but with inflation slowing. Sometimes that
can come along with a slowing economy too. That's kind
of where the slowing role happens from. So this report
(05:29):
gives us a picture of a labor market that's kind
of slowing down a little more than a lot of
people expected.
Speaker 3 (05:33):
Sixty four thousand jobs.
Speaker 2 (05:35):
That's how many of the economy added here in November
twenty twenty five. Good news is that that's ahead of
economists forecast of around forty thousand.
Speaker 3 (05:42):
We have a lot of ere economists out here.
Speaker 2 (05:44):
They were wrong on interest rates and they were they
kind of missed on how bad the jobs report was
going to be. Now that said, that's a relatively small
gain by historical standards and on more importantly, that was
right after, right on the heels of a significant loss
of about one hundred and five thousand jobs in October
Tober drop Bob. That wasn't just a quirk of statistics.
That was the impact of federal workforce reductions. You know,
(06:05):
lots of government workers who had deferred those buyouts because
of that shutdown. They finally got taken off the payrolls
in October, all at once, right leading to that steep decline.
So that's what happens when we you know, the shutdown
and the and the turning off of the data spigots
and then turning them back on again when all the
data starts flowing, and we kind.
Speaker 3 (06:21):
Of we'll get these a bit of these shocks.
Speaker 2 (06:23):
So end result here, US unemployment rose to four point
six percent in November. That's the highest level in more
than four years, even as employers were adding jobs. Because
the overall labor force picture that includes workers who are
re entering the job hunt, and it reflects broader weakness
and hiring outside those few pockets of strength out there
in certain industries.
Speaker 1 (06:43):
Yeah, that that headline number, the four point six percent
unemployment rate, obviously that is up and as you said,
that's the highest percentage figure we've seen in four years.
That could be there could be a silver lining to
that because as you mentioned, Brian, and this is what
you know, doesn't get talked about a lot in media,
and if people don't study this stuff as closely as
we do, you miss out on the point that it
(07:05):
really that these numbers are impacted, as you've already said,
by the number of workers who are actually looking for
a job. If people aren't even looking for a job
that can skew that unemployment rate down. Uh, And to
me that that that doesn't make a whole lot of
sense in defining what's actually going on in the economy.
So I think, I think what we need to see
(07:27):
here is continued, hopefully continued real wage growth and continued
private sector job growth. That would be a sign that
the economy really is improving in real inflation adjusted numbers.
And it would be some evidence of some of this
on shoring that the President and his administration has talked about.
(07:48):
It takes a while for that all that stuff to
take hold. It remains to be seen how quickly we
can add you know, jobs in that manufacturing sector, which,
by the way, uh, manufacturing jobs can continued to shrink
over the latest quarters. So it'll be it'll be interesting
to see how long all that on shoring takes hold
as all this investment is coming back into the United States.
(08:12):
It doesn't happen overnight, but you know, hopefully we'll see
some green shoots of private sector job growth here as
we get into the first and second quarter of twenty
twenty six.
Speaker 2 (08:22):
Yeah, so all this it adds up to a labor
market not really collapsing This isn't you know what.
Speaker 3 (08:26):
We're not kind of waving the flag of the end
of the world here.
Speaker 2 (08:28):
Employers are not slashing thousands upon thousands of jobs, but
definitely slowing down. So job growth used to be robust,
that's kind of become a little more muted, you know,
and definitely uneven across the various sectors, different parts of
the economy or are having different experiences. The FED has
already been cut cutting interest rates all through twenty twenty
five because inflation is stubbornly hanging around. But we did
just get that great headline this morning. Not a labor
(08:51):
market in crisis, but things are shifting, so you know,
we might just be be on your toes and be
ready for you know, for things to come ahead and
and you'll be okay.
Speaker 1 (09:00):
Well, another good news before we leave this whole inflation
and wage growth topic. I mean, Brian, I know you
like to study history and data and I do as well.
I mean, I just took a look at you know,
cause when we see wage growth, you know, we see
stories how wages aren't growing blah blah blah. But you know,
if we look at real wage growth, inflation adjusted wage
(09:21):
growth as inflation has really been coming down since late
twenty twenty one. I mean, I'm looking at numbers that
have been consistently improving really since the third quarter of
twenty twenty two, when inflation really started to go down.
You know, with the exception of a couple of blips here,
we've seen real wage growth, which is inflation adjusted wage growth,
(09:42):
you know, not off to the races, not huge wage growth,
but consistent real wage growth. And let's face it, when
people have more money in their pockets to spend, that's
a good thing for the economy, which leads us to
the next thing we want to touch on tonight, and that's,
you know, taking a look at how consumers spending is doing. Because,
after all, Brian consumer spending makes up seventy percent of
(10:05):
our gross domestic product here in the United States, that's right.
Speaker 2 (10:09):
And as per the season, nearly two hundred and three
million US shoppers hit the stores and of course the
online stores during the five day stretch from Thanksgiving through
Cyber Monday.
Speaker 3 (10:19):
That's the highest turnout we've seen in at least nine years.
Speaker 2 (10:22):
According to the National Retail Federation, they're the ones who
survey the shoppers to calculate, give us the Sanuel estimate.
Speaker 3 (10:28):
So what are we.
Speaker 2 (10:29):
Hearing from big box club retailers like Walmart, Best Buying COSTC. Well,
they're topping quarterly sales expectations. They're beating what Wall Street thinks. Remember,
all we really care about is whether the analysts were
right or wrong. And so those are blowing the doors
off for right now. And those executives saw said they
saw an encouraging start to that crucial shopping season.
Speaker 3 (10:47):
Remember this is this is when Black Friday.
Speaker 2 (10:50):
What that actually means is the beginning of the season
where the numbers for retailers tend to turn black for
the year because of the spike and spending those discretionary retailers.
Speaker 3 (10:59):
Go ahead, Bob, no.
Speaker 1 (11:00):
You go. I just have to laugh, because, Brian, it
seems like Christmas and holiday shopping season seems to start,
you know, around the fourth of July. Now we just
call it different things, you know, we just try to
do everything we can to allure people online and into
those stores to shop, shop, shop, spend, spend, spend. It's
the American way, Brian. But go ahead, go ahead with
(11:21):
the data.
Speaker 2 (11:22):
The United States a profit margin where the Christmas shopping
season starts two Thanksgivings before. But some of these, some
of these other smaller retails like Gap, Gap, Amber, Comby,
and Fitch American Eagle, they also exceeded quarterly estimates, which
is interesting. I have those are names I haven't heard,
you know, and it feels like in a long time,
you know, because they used to be darlings of the
industry and then got real quiet there. But doing okay
(11:43):
there as well. Some other key dynamics we're seeing, you know,
even as concerns about an AI investment bubble and layoffs
by these companies including a Verizon and Target, you know,
kind of cloud the twenty twenty six economic outlook, we're
still seeing these green shoots coming out of the retail industry.
Which that's not something we've talked about long time. It's
all been technology.
Speaker 1 (12:02):
Yeah, if people are still shopping in the Applebee's parking
lot is still packed at six pm, the economy can't
be doing all that bad. All right. Here's the all
Worth advice. A solid long term financial plan will help
you prepare for a year where you know, being intentional,
worth your money and being value oriented could matter more
(12:24):
than ever. Coming up next, we're gonna walk through some
of the most common situations we see where family and
money collide and what you can do now to maybe
hopefully avoid some family drama down the road. You're listening
to Simply Money presented by all Worth Financial on fifty
five KRC the talk station. You're listening to Simply Money
(12:50):
presented by all Worth Financial on Bob Sponsller along with
Brian James. If you can't listen to Simply Money live
every night, we help subscribe and get our daily podcast.
Just search Simply Money on the iHeart app or wherever
you find your podcast. Straight ahead of six forty three,
we're answering your questions about charitable bunching, alternative investments iras,
(13:11):
and how to invest when you and your spouse see risk.
Maybe a little bit differently, if you've ever had tension
in your family around money, you are not alone, especially
when someone passes away, or when parents start aging, or
even just trying to help an adult child who's still
figuring things out in terms of getting rolling from a
(13:32):
financial standpoint. Let's face it, the emotions can run high,
and Brian let's break down tonight some of the common
situations we run into and unfortunately we run into these
quite often.
Speaker 3 (13:45):
We do.
Speaker 2 (13:46):
Obviously, it's not all about one person in their money.
It's usually about a lot of people and how we're
going to deal with all the issues that come up.
So let's pretend, for example, you got three kids. One's
a school teacher, one's a surgeon, and one just went
through a divorce and is barely making it. You know,
obviously you want to want you want to help the
one who's struggling more so the plan is to leave
them a bigger share of the estate because they just
might not be getting the same chance that the others are.
Speaker 3 (14:08):
Well, it makes sense, right, but.
Speaker 2 (14:10):
Unless you communicate that clearly, it can create some resentment.
So you know, this is here's hypothetical example. It kind
of follows. This is a fairly standard when we see this,
it looks like this. So fake family named the Johnsons
four and a half million dollars, left fifty percent of
that to their one daughter, who had some financial issues,
and then twenty five percent each.
Speaker 3 (14:28):
To the other two.
Speaker 2 (14:29):
Nobody told the kids in advance, and so after they
passed what happened while the son stopped speaking to their
sister because they they decided that she had somehow engineered
some kind of way to get half the estate and
cheat the other two thinking you know, she had manipulated them.
This wasn't the case at all. But because because mom
and Dad did not lay this all out to everybody
in advance and allow everybody to share feedback and react
(14:51):
in real time, everybody was simply left to determine for
themselves how this had come to be. And let's just
say nobody gets together during the holidays anymore, So how
do we deal with this? If you want to divide
assets unequally, just have a family meeting while you're alive,
or at least leave a letter explaining your reasoning. You
don't have to justify every decision. These are your decisions
and no one else's, but you do need to communicate.
(15:12):
You can't assume that they're just going to assume you
had their best interest in mind. Better to have that
difficult conversation now than cause permanent damage later after you're
long gone.
Speaker 1 (15:22):
Yeah, Brian, what I find in situations like this is
there could be a little code dependency going on in
the late stages of a couple's life. And here's what
I mean. Oftentimes, let's face it, today, kids live all
over the country in different parts of the country, and
for whatever reason, the thing that I find happens more
often than not is the child that needs some assistance
(15:44):
lives a lot closer to mom and dad than the
kid that's maybe a successful professional or attorney or doctor
that doesn't need money and they moved, you know, for
their job. They're highly successful. And as the parents age
a little bit, you know, they like you only needed
and wanted and having that child around. And that's what
can lead sometimes to this unequal treatment of kids. And
(16:08):
the point we're trying to make is a lack of communication.
So every family's different. We don't have time to go
into all the different scenarios that might crop up. But
I think the point we're trying to make here correct
me if I'm wrong, Brian, is communication. Communication can avoid
a lot of things. Because I've never met one set
of parents that dreams after they're gone of their kids
(16:31):
never getting together, never having the family all together. And
it's just shame when things like this happen simply because
of a lack of proactive communication. Let's move on to
scenario number two, and this is fighting over mom and
dad's care it seems like every generation nowadays is the
sandwich generation where you got to worry about your own
kids as well as your parents.
Speaker 2 (16:50):
So a lot of times, here's as this goes. You know,
families with adult children, one sibling tends to live nearby
and others have moved on a.
Speaker 3 (16:57):
Little further away.
Speaker 2 (16:58):
So for obvious reasons, the one who lives closest tends
to be managing all the doctor's appointments, the bills, and
the errands. Those others they all live out of town,
and they think, hey, everything's great. I never hear about it,
so everything must be fine. Well, so here's a hypothetical story,
and this is again a very common outcome for all this.
Mom falls ill. And let's say brother Tom has been
handling everything because he lives nearby, but his sister and
(17:19):
brother just assume the state is going to be split. Evenly,
Tom's feeling burned out and underappreciated because he's there every day,
mowing the lawn, making sandwiches, dealing with the mail that
comes in, and dealing with scammers and technology and all
that kind of stuff that happens tends to happen to
us when we get a little older, time to settle
the estate. He demanded a larger share, turned into a
lawsuit between the siblings. So how can we avoid this, Well,
(17:41):
this is what a trust can do. A trust can
allocate what's called a caregiver credit, compensating that sibling who
took on more responsibility. But again, make sure everybody knows, Hey,
we know Tom lives close by and he's going to
wind up carrying a lot of the burden of caring
for me, mom and dad. So we're going to make
sure he gets a little bit in advance. It gets
to be aware of this in the future, you can
(18:01):
avoid a lot of blow ups.
Speaker 1 (18:04):
Yeah, Brian, I don't know about you, but in the
situations I've dealt with, you know that involve caregiving, It's
not so much the kids fighting over money. It's just
everyone's busy and we let one sibling get overburdened with
the scheduling and the demands of that care And that's
where I think the siblings need to communicate, getting a
room together and put a plan together. And the folks
(18:25):
that I've seen do that are able to manage this
a little better. Let's get into a last scenario we
want to cover and that's who gets what at the
end of the day. And Brian, we're seeing more and
more families that have that lake cabin, vacation home, you know,
even just family heirlooms, you know, personal property in their house.
And you'd be amazed at how often families and kids
(18:48):
fight over what seem like small things, you know, the china,
the jewelry, all that, but a bigger thing like a
vacation home. Everybody loves it when they're coming to visit,
but then when mom and dad passed away, it's it's
sometimes shocking how the objectives change, and there could be some,
you know, significant arguments over how to handle that ill
(19:09):
liquid vacation property.
Speaker 2 (19:11):
Yeah, there can be a lot of disagreement on how
much time we actually are gonna spend there after mom
and dad are gone. Mom and dad might think that
everybody wants it and wants to hang on to it forever,
but that may not be the case for the kids
who have their own kids and their own lives now.
So make sure you're clear on really how everybody feels
about everything.
Speaker 1 (19:25):
Here's the all Worth advice that the end of the day,
your wealth is a tool and it should bring peace
to your family members not conflict. Here's a big question
when the time comes and it's time to move, what
makes better sense a house or a condo or some
other kind of property to live in like a town home.
We'll explain that question next. You're listening to Simply Money,
(19:48):
presented by all Worth Financial on fifty five KRC, the
talk station. You're listening to Simply moneyed by all Worth
Financial on mops on Seller along with Brian James. Joined
tonight by our real estate expert Michelle Sloan, owner of
Remax Time. Michelle, thanks as always for making time for
(20:10):
us tonight, and we want to get into the pros
and cons of buying a house or you know, traditional
home versus maybe a condo or a townhouse situation. Walk
us through some of the decision points we need to
work through and some of the pros and cons as
we navigate that kind of a decision.
Speaker 4 (20:30):
Yeah, it's very interesting because I have a lot of
new clients who are in their sixties. They're looking to
downsize or right size their home, and with that they
have options. Do you want a single family home? Again?
Do you want what goes with a single family home?
And really, if you look at the when you want
(20:53):
to buy a house, do you want space, do you
want your own yard? Do you want to be able
to control like the color of your front door? And
you have fewer rules, and technically when you buy a home,
most often there's more long term growth. A single family
(21:14):
home historically appreciates a little bit faster than a condo would.
But the cons of buying that single family home is
you have to consider all of the maintenance. You have
to do your own yard work. Still, you have to
maintain the entire home and take on the responsibilities of
(21:37):
maintaining the home. The nice thing is with a single
family home, your HOA or your homeowners' association costs are
usually one time annual fee if you're in a neighborhood
and you don't have a monthly fee like you would
a condo. So then you're looking on the flip side
(21:58):
of do you want to buy a condo? And the
pros of that are certainly it's lower maintenance living. It's
not like you have you're completely like you're renting, you
have no maintenance. You still have maintenance on the interior
of the home. You just may not have all of
the maintenance on the exterior of your home, so that
(22:18):
could save you a little bit of time and energy. Also,
it could be and again it depends on where you're
looking and what you want. A condo could have a
lower price point and have more amenities like a swimming pool,
a fitness center, clubhouse, walking path, you know, all those
kinds of great things. But you have a monthly homeowners
(22:42):
association fee. So you may have a lower mortgage or
a lower price point, but you may need to add
on two, three, four hundred dollars a month for all
of those extra amenities. So it's certainly a lot to consider,
and in the end, it ends up to be right
about the same price if you buy a single family
(23:04):
home or a condo, because you have to factor in
the homeowner's association fee.
Speaker 2 (23:10):
So along those lines, can you share some stories of
where you've seen buyers remorse in either of these situations.
I think that would be helpful for our listeners to
kind of identify when they might be heading down on
a path where they might regret a decision.
Speaker 4 (23:24):
Absolutely, I do. I feel like there is more pushback
or more regret when it comes to moving from a
single family home that you've been in for a really
long time having that autonomy. Going into a condo where
everybody's in your business, you know, you have HOA fees,
(23:45):
you have rules, you have restrictions. You can't just let
the dog out in the backyard do their business. Most
often in a condo situation, you're going to have to
take your dogs for a walk, You're going to have
to pick up after it. You know, it's going to
be not as free like free wheeling in a condo
(24:07):
as it would be in a single family home. And occasionally,
you know, the price goes up. So with an HOA,
just like taxes, you know, the fees may go up
as well. So I find more people that get into
condos that aren't really ready to be told what to
do all the time saying, Okay, I need to sell
(24:30):
this condo. That's just too small, it's too tight, the
world is closing in on me. I need my own space.
And then they go back to looking for a single
family home. So those are kind some of the things
that I have seen.
Speaker 1 (24:44):
Hey, Michelle, correct me if I'm wrong here. But there's
there's another big, potentially huge component to condo ownership, and
that's the reserve fund of the HOA that's designed to
accumulate some money over time to help pay for these
ongoing maintenance repair issues. And I think one of the
big parts of due diligence is to look at the
(25:05):
health of that reserve fund so that you don't go
buy a condo with one set of expectations only to
turn around a year or two later and get hit
with some huge assessment where you've got to write a
big check to help you replace the roof on the
whole building because the HOA, you know, over years and years,
did not manage money correctly. You ever run into that
(25:27):
and how do you advise your clients accordingly? Oh?
Speaker 4 (25:31):
Absolutely, And that's a tough one because we have seen
that situation over and over. If you are paying cash
for the condo, oftentimes you don't have the maybe the
wherewithal or the knowledge to look at those documents and
see what that reserve is and what it means and
(25:53):
how healthy it is. When you are getting a mortgage,
the mortgage company is looking at the health of that reserve.
So that's one of those things that you know, you
really don't know until you get into that situation. A
lot of times now you could do that extra due
(26:14):
diligence and talk to the HOA, which is smart before
or talk to the neighbors, ask them how the HOA functions.
Is it helpful? Is it difficult to get things done
on the exterior of the home. Are you seeing a
lack of maintenance and then all of a sudden, Now
it's really interesting because you know your HOA fees are
(26:38):
usually lower on a newer property, but then they start
to go up pretty quickly. Those monthly fees go up
pretty quickly when you need exterior maintenance. And so if
that reserve is not strong enough, yeah, you definitely are
going to see a huge increase of potential for a
one time a set that could be pretty hefty. Definitely
(27:03):
important to look at all of the latest minutes and
try to gauge the health of that HLA.
Speaker 1 (27:11):
All right, great stuff as always, Michelle, thanks so much
for spending time with us receiving, especially during this busy
holiday season.
Speaker 3 (27:19):
Great stuff as always.
Speaker 1 (27:20):
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to
Simply Money sause I have buy all Worth Financial on
bob Sponseller along with Brian James, do you have a
financial question you'd like for us to answer. There's a
red button you can click if you're listening to our
(27:42):
show from the iHeart app, simply record your question and
it will, as always, comes straight to us. Kyle M.
Anderson leads us off tonight, Brian. He says, our advisor
set our portfolio is overfitted to the last decade. I
love how he phrased that. How do you build an
allocation that can survive a completely different market environment?
Speaker 2 (28:04):
Yeah, that's and he put that in quotes for us too,
So that must literally be the way the advisor said that.
Speaker 3 (28:08):
So it's an interesting way to phrase that.
Speaker 2 (28:10):
So I think what they're talking about here is, uh,
what're what they're saying is that this was built for
the world we just finished, you know, low rates, cheap money,
mega cap tech dominance, you know, rather than the world
we may be moving into. So how do we build
an allocation that's going to be robust across these multiple
changes that are coming? Well, first off, let let's let's
figure out where we're They're saying your portfolio is implicitly concentrated.
(28:32):
Wouldn't surprise me if it's long duration growth stocks, US
large caps, uh, you know, even bonds that benefited from
following rates. If most of your returns came from those factors,
you might be exposed. If we're going to be in
a different rate environment, just a kind of different you know,
different stock market environment too, so you know this this
could be make sure you're looking to diversify this correctly.
That means pairing assets that can win in different environments.
(28:54):
Value in small cap stocks are where we want to
be for inflationary periods, for example, international or emerging markets,
for global growth cycles, and that's definitely happening here in
twenty twenty five. Shorter duration bonds or tips for rising
rate scenarios, so those are just generally speaking to the
kind of moves you want to make in those different markets.
So you know, finally, and then stress test this whole mix.
Run the portfolio through periods like the nineteen seventies. There
(29:16):
are tech tools out there to help you do this,
the two thousand technology blow up and of course the
two thousand and eight credit crisis. If that strategy only
works in one era, it's not durable. So you have
to make sure that you have the buildy to be
flexible if not understand what you already mentioned, you have
an advisor he or she should be taking care of
this for you, So really push on them to get
to be more clear as to what they're asking you
(29:36):
to do. All right, So we're gonna move on to
Brian and Westchester. Who's Oh, here's our favorite topic. He's
talking about bunching charitable gifts every few years. Their CPA, though,
is concerned that that's going to impact medicare premiums. How
do you coordinate these giving strategies, Bob, without triggering these
tax cliffs.
Speaker 1 (29:53):
Well, without understanding the nuanced details of Brian's question. And
here's what I'm you know, it's difficult to answer this
question question, you know, specifically because I don't know the
source that you're using, Brian, to make these charitable gifts. So,
you know, charitable gifts can come in many ways, cash gifts,
qualified charitable distributions from your IRA, or giving away appreciated
(30:15):
assets either directly to a charity or in a donor
advice fund. And depending on where those charitable gifts come
from or the source of them, that can impact, as
your CPA called out, Medicare premiums. And I think he's
talking about, you know, avoiding that irm attax, which we
all want to avoid if at all possible. So, you know,
(30:36):
getting back to your question about coordination, you do have
to sit down and run different scenarios on how to
do this charitable giving and how much to do every year.
And this is where a good fiduciary advisor can run
those scenarios for you. And you know what Brian and
I always do. After we've done all our work, we
always go back to the client's CPA and say, hey,
(30:58):
here's what we're seeing. What are you seeing. Let's all
get on the same page so that we have a
coordinated strategy to help the client accomplish their charitable giving
objectives in the most efficient tax manner possible. So it
does require a little bit of coordination in planning, Brian,
because this stuff is getting more complicated every year in
(31:21):
terms of making sure you take advantage of what deductions
are out there and avoid some of these triggers like
the CPA called out medical Medicare premium adjustments. All right,
Karen and mount lookout, Brian says, we are being pushed
toward alternative investments, But I want to understand what problem
each of those solves. How do you imagine alternative asset
(31:43):
to a specific weakness in your portfolio?
Speaker 2 (31:47):
Yeah, this is another comment when we've had all your
long bobs. What do alternatives? What are alternatives and what
do they mean to me? So a smart way I
think to think about alternatives, Karen. Not a shiny new category.
But these are tools that can address very specific weaknesses
in a traditional sixty forty type portfolio, which we still
believe is the core of where you ought to be.
But that doesn't mean you can't season it a little bit. So,
(32:07):
you know, start by looking at the gaps of these things.
So a lot of portfolios struggle with three things. Too
much reliance on equity markets for returns, too much sensitivitied
interest rates, and too much volatility. During these stress periods,
each of those weaknesses can be matched to it to
an alternative that can address it. So maybe if you're
overly dependent on, you know, on stocks, private equity or
venture capital can add some return drivers that will not
(32:29):
be moving in lockstep with public markets. That's the whole
point of alts in the first place. For example, if
interest rate sensitivity is the problem, then real assets like commodities, infrastructure,
real estate, those historically will respond better in inflationary or
rising rate environments. You know, if volatility is the problem,
look at the strategies themselves rather than the assets. There
are market neutral strategies. These are these are different things
(32:50):
that use more traditional stocks and bonds underneath, but are
positioning derivatives against them to manipulate the markets in certain
ways to support, you know, whatever that weakness might be.
And then, and here's a big question you should ask
finally before you pull the trigger into one of these
in which historical environment.
Speaker 3 (33:06):
Would this have helped out the most.
Speaker 2 (33:08):
If you can't tie an alternative to a specific problem
you're trying to solve, such as rate risk, concentration risk,
or draw down risk, then it's not a solution.
Speaker 3 (33:15):
It's just going to.
Speaker 2 (33:16):
Add complexity to your portfolio. So that's a lot of information,
but I hope that helps also going to be a
continued headline I think throughout twenty twenty six.
Speaker 3 (33:24):
Larry in cold Spring.
Speaker 2 (33:25):
Larry says, part of our IRA money Bob is going
to eventually go to charity, but part's going to go
to their kids. How do you invest differently for beneficiaries
with completely different tax outcomes.
Speaker 1 (33:35):
Well, Larry, my answer might surprise you. I don't think
you should invest differently at all. I don't think you
should focus on this at all. I think you should
focus first of all, on investing this IRA money for
your lifetime and if you're married, for your and your
spouse's lifetime. Make sure this money is invested appropriately to
take care of you first, because at the end of
(33:56):
the day, whatever you leave to charity isn't it isn't
going to be away. So I don't care whether you
invest in all bonds, all stocks, The charities don't care.
They're gonna be able to take whatever you leave them,
convert that to cash on a completely tax free basis,
and go on with life and benefit the people that
you want them to benefit. And in terms of your kids,
it's kind of the same way. They're gonna be taxed
(34:18):
either way they're gonna have they're gonna be subject to
those IRS rules on you know, pulling that money out
over their lifetime or over the ten year period, whatever
the case may be. So again, focus on what you
need to be doing during your lifetime. Don't just by
default change the investment objectives of your iras. Because some
(34:38):
of this money is eventually going to go to charity.
Coming up next, Brian has his ever popular bottom line segment.
You're listening to Simply Money presented by it all Worth
Financial on fifty five KRC the talk station moment. You're
listening to simply Money sent by all Worth Financial. Well,
(35:00):
I'm Bob Sponseeller along with Brian James. And speaking of
Brian James, it's time for Brian's bottom line and he's
got a high net worth financial planning playbook to discuss
in periods where we might have a potentially slowing economy. Brian,
I can't wait.
Speaker 2 (35:19):
Well, yeah, so as eve been, you know, kind of
paying attention and just thinking about how there are different
periods of time throughout the you know, were the market's
going up, things are going down. Today we're going to
talk about, you know, how do I react when the
economy is slowing. I'll tell you in a few years
whether it's actually slowing right now, it doesn't really matter.
We should still have a playbook for it. So, you know,
in a slowing economy, this means growth is cooling, hiring
(35:39):
is slowing down, corporate earnings or being revised lower and
so forth. This doesn't mean we're on the way to
a recession. It just means the foot's coming off the
gas a little bit, and so that's going to have
impacts on on markets. The volatility will increase, and wealthier
households need to be particularly thoughtful about their risk management.
So for affluent families, economic slowdowns aren't only felt first
(36:00):
the job market. They're first felt in the markets with
those overall asset swings through the portfolio, liquidity tightens up,
asset valuations change, and so forth. So we got a
little bit of a playbook here today things you should
be looking at. One of the biggest vulnerabilities for our
wealthy investors is over concentration. This could be a single stock,
maybe it's a company you've worked for, or just in
a single sector or real estate or something like that.
(36:22):
So this is the time to review your exposure to
those single stock positions. How much of your net worth
is tied to your company, your industry, one type of asset.
Remember if your four oh one k is all one
big company, that may that may be wonderful, but remember
your paycheck is also tied to that company.
Speaker 3 (36:37):
So if it hits.
Speaker 2 (36:38):
The skids, your job as well as your portfolio could
be tied to it. So think about how you can
strategically diversify or maybe some hedging strategies to protect that
stock if you can't unload some of it in the
first place and put it into a more diversified portfolio.
The goal is not to eliminate concentration. You're probably always
going to be overly concentrated in some of these situations.
It's just to make sure you're not unintentionally making it worse.
(37:00):
Next play here is let's talk about liquidity.
Speaker 3 (37:02):
So high networth.
Speaker 2 (37:02):
Clients a lot of times have pretty complex balance sheets
with private investments, business interest, real estate, taxbile accounts out
there in a slowing economy. You guessed that liquidity is king,
So make sure you're twelve to twenty four month cash
flow needs are fully funded.
Speaker 3 (37:16):
That's going to protect you from needing.
Speaker 2 (37:18):
To have a fire sale, you know, if some bill
comes due and you didn't have the liquidity to handle it.
Speaker 3 (37:23):
This liquidity can.
Speaker 2 (37:24):
Be cash, short duration bonds, high quality fixed income types
of things that aren't really going to suffer too much
as long as a as long as the price is
hold up. So much so, liquidity that's that shock absorber,
and we want to make sure we've got flexibility.
Speaker 3 (37:37):
I can see you want to have a reaction, Bob,
go ahead.
Speaker 1 (37:40):
No, all it's going to add is here is you
could kind of kill two birds with one stone. Sometimes
avoiding that over concentration risk by default solves that illiquidity risk.
So you know, I think you're making two great points
that should always be talked about. But they kind of
work hand in hand, is what I was thinking as
you as you were sharing that great advice asolutely.
Speaker 2 (38:00):
This isn't pick one thing and do it. These are
all the things you ought to be looking at. So
so yeah, and so evalue a look at private market
and alternative investments if you haven't yet. These are things
that can move in different directions than your other types
of assets. Learn about them, maybe maybe make a commitment
in twenty six to learn what those are and whether
they might help you. Tax efficiency always important thing, tax
loss harvesting strategies if you have. If you if you
(38:21):
haven't done that yet, take a look to see if
there's any opportunities for you there for a little bit
of savings and then finally reinforce that long term plan.
Figure out what you were trying to do in the
first place, which you probably knew at some point. Make
sure you're still on that path.
Speaker 1 (38:33):
Thanks for listening tonight. You've been listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
talk station
Simply Money News
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