December 19, 2025 • 37 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian explore the hidden financial traps even the smartest, wealthiest investors fall into—often because of their own brains. From overconfidence and loss aversion to chasing performance and underestimating taxes, the co-hosts share real-life stories of multimillionaires who made emotional missteps that cost them dearly. They break down how even savvy executives, business owners, and retirement-ready couples can unintentionally sabotage long-term success. Learn how to protect yourself with smart strategies like automated rebalancing, bucket strategies, asset location, and avoiding costly tax surprises.
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Speaker 1 (00:05):
Tonight, why smart people still makes some dumb money decisions.
You're listening to Simply Money, started by all Worth Financial
on Bob Sponsller along with Brian James. You've built a business,
or you've climbed the corporate ladder, you've got a few
million bucks tucked away. So why do even the smartest
people find some way to sabotage their own financial success?
(00:29):
The answer lies in your brain, and tonight the mistakes
we've seen smart successful investors make and how to avoid them.
Let's get into this topic, Brian, A lot to unpack here.
Speaker 2 (00:40):
We're gonna start with the the I know better bias.
So let's say you're you're a retired executive and you've
always been on basically the alpha, and you've managed teams,
you've made the big decisions. You're a smart person, so
when it comes to investing, you're gonna trust your instincts
because they got you this far anyway.
Speaker 3 (00:55):
That's where the mistake happens.
Speaker 1 (00:56):
Though.
Speaker 2 (00:56):
That overconfidence can lead people way too often to take
a concentrated position in stocks they think they understand, or worse,
hold on to a legacy stock too long because they
have some kind of emotional attachment and thinking you understand
a stock a lot of times can mean you're you're
following the herd who you're kind of coming up with
a biases based off of what the crowd thinks, and
(01:18):
hanging on to something that may or may not be
worth it because you're in a bit of an echo
chamber with a bunch of other people that love this stock.
So you know, here's a quick example. It take a
hypothetical Jane who is sixty two. She got three point
two million dollars and recently retired confident about that company
she worked for, and therefore left eight hundred thousand dollars
in the stock, about a quarter of her portfolio. She
had worked there over thirty years and it had built
(01:40):
her own wealth and believed in that brand and wanted
to stay loyal to the company that gave her so
much for her and her family. Over the next two years,
the market decided it didn't care about her her loyalty
to the company. That stock took a forty percent hit,
wiped out over three hundred thousand dollars in value. She
realized way too late that diversification was a lot more
important than sentiment.
Speaker 4 (01:58):
I would this this locally.
Speaker 3 (02:00):
Wow, this is General Electric.
Speaker 2 (02:01):
General Electric is doing a fine place now, it's a
great company, great comeback story, But ten years ago, yeah
not so much. So this does happen to real people
out there.
Speaker 1 (02:10):
Well, Brian, I've been doing this long enough to have
been in a place where I try to advise the
ge executives I worked with to exercise some stock options
prior to when the market tanked in two thousand and one,
two thousand and two. Some people listen, some people didn't.
And yeah, if you get a little overconfident and you
use Jane, you know, a female in your example, you're hypothetical.
(02:33):
And that's great. But what I find is it's us, Brian.
It's men that tie our egos way more often than
women to these kind of decisions. And just because we've
run or managed a large portion of a successful company
or even a private business, does not mean that we
can retire one day and feel like we have the
absolute command over the global economy. And people that try
(02:56):
to get into this kind of mindset can really lose
money quickly. And that's why, you know, it's not that
a good fiduciary financial advisor is any smarter than anyone else.
It's just you know, we're able to help people manage
their own behavioral risks.
Speaker 3 (03:12):
Uh.
Speaker 1 (03:13):
And oftentimes that's worth a lot of money and a
lot of peace of mind as people get into retirement.
Let's talk about another you know, pitfall that we run
into here, and that's loss aversion paralysis. Let's say markets
are down, you're looking at your portfolio that's in the
red for the short term, and you know you should rebalance,
you should buy low, sell high like everyone talks about,
(03:36):
and you know you should stay invested, but emotionally you
just can't pull the trigger. And that's something that we
call loss aversion our brain, Brian, This is just how
human beings work. Our brains hate losing money way more
than they like making money. And when the numbers get higher,
that net worth grows, the stakes feel even higher. Anytime
(03:58):
we have a market pullback and people say, well, I'm
gonna get out and get back in when things look better,
and that's usually a telltale sign that they're about to
leave hundreds of thousands of dollars on the table. Give
us a hypothetical example that from somebody will name Kevin
on what can happen here? Brian and what you and
(04:19):
I both have seen happen.
Speaker 2 (04:21):
We're gonna name him Kevin, but I remember who it is,
so fifty eight years Sometimes.
Speaker 4 (04:26):
These hypotheticals are not that hypothetical, right.
Speaker 3 (04:29):
Everybody's got war stories.
Speaker 2 (04:30):
Kevin had five million dollars in retirement savings in twenty
twenty two.
Speaker 3 (04:34):
Only three years ago.
Speaker 2 (04:35):
He watched his portfolio drop about eighteen percent because he
was pretty aggressively invested, which was which was fine because
he was not a risk averse prior and his plan
supported it and he had a growth mindset. But he
panicked this time because he is fifty eight years old
and you know, a little closer to retirement. And this
time it got him moved about forty percent of his
assets into a money market fund. This is before we
(04:57):
started working with him. This is mal Frankly, this is
how we started working with this hypothetical person. Anyway, he
told himself he was going to wait for things to
cal mm down and come back in, but never got
back in. Missed out on the twenty three rally, which
saw markets rebound by over twenty percent. And if you
look Bob at there are five years that are like this.
Twenty twenty two, two thousand and eight, two thousand and two,
(05:18):
nineteen thirty seven, nineteen seventy four, book it. Every one
of those are the only five that we've had that
have been a more than a fifteen to twenty percent loss.
Those are the whoppers we're all afraid of. But there's
only five of them over the last eighty some years.
But anyways, when we see these things, people tend to panic.
But the thing that the commonality between all those five years,
every last one of them, even two thousand and eight
(05:41):
was followed by a pretty quick upturn the immediate following
year because the herd panics and then it gets way
too excited on the positive side. So if you panic
at the bottom, you are proactively giving up that recovery.
So how do you avoid this? Well, first of all,
hire a discretionary manager who's going to remove your emotion
from your own decisions, because they're not using your decisions.
Automated rebalancing can help create yourself an investment policy statement
(06:03):
to outline how you respond to volatility before you're in
the moment. That's something you could pull out and say, Okay,
when I was in a calmer mindset, this is how
I thought about investments.
Speaker 1 (06:12):
Yeah, and another thing to consider. And you and I
talk about this all the time. If you really feel
like you know, things are coming down the pike that
concern you, you don't have to blow out of your
portfolio and put a bunch of money in cat you know,
long term money, move to cash, just create a bucket strategy.
Because you know, in all those periods that you mentioned, Brian,
when we had severe market declines, in almost every case
(06:35):
they can the market completely recovered in about three years.
So you know, rather than blowing your whole plan up,
maybe you know, build up that emergency fund a little
bit with enough liquid, non risk cash to get you
through that you know, two to three year timeframe, and
and that that allows you to weather the storm the storms,
so to speak, without completely putting an upheaval your entire
(06:58):
financial plan and leaving a lot of money on the
table when the market comes back, just because you wanted
to prove emotionally you were right. Let's move on to
another one, flipping the whole scenario one hundred and eighty degrees.
The old fear of missing out. Someone hears about AI
stocks going up, or bitcoin going up, or private credit
(07:19):
or something that's really been off to the races. I mean,
let's say Gold in twenty twenty five, and they think, Man,
this thing's been flying. I need to get in now
or I'll miss out.
Speaker 3 (07:31):
Yep.
Speaker 2 (07:31):
Another hypothetical of a real person with a fake name.
So we're gonna call her Lisa this time. Were picking
on all the women tonight. They're usually the ones that
do better. We were just picking on Kevin. I think
we're equal opportunities. This is we're picking on human beings
for being human. Is what we're doing, all right, And
advisors are not exempt from this stuff. We sometimes we're
attempted to do these things too. But in any case,
(07:53):
so this is Lisa about two point eight million dollars
mostly in diversified index funds, so already a pretty well
organized portfolio to begin with. But late twenty twenty one,
she started to see that the technology stocks had been
gaining about forty percent in a year, and she decided
that that was too much to resist, and so she
moved about four hundred thousand dollars in aggressive growth tech funds.
Speaker 3 (08:12):
And remember what I said.
Speaker 2 (08:13):
This happened in late twenty one, thinking it was her
chance to catch up on returns, And of course we
all know what happened in came twenty two, and the
tech sector got absolutely hammered that four hundred thousand dollars
position was worth less than two hundred and eighty thousand
within a year. It's completely panicked, sold and fowled. I'll
never do that again. So unfortunately, what she did here,
the move wasn't necessarily bad. If she was still sitting
(08:34):
on those stocks to this day, she probably would have
made a good chunnge. I know, she would have made
a good chunk of money. But she came to us
after this whole panic of buy and sell had actually occurred,
and so unfortunately we just kind of had to sit
down and have a long the talk about history, market history,
how it works, and how those big, terrifying years always
end up with have always historically ended up with a
(08:54):
pretty big upswing. So the fix here performance chasing. That
always leads to buying high and selling low. But if
you're chasing performance, if you're looking at something for how
it did last year, you are behind it, you are
chasing it, and so that's going to lead you to
buying after it's already high. Instead of that, build a
core portfolio that's attached to your goals, your time horizon
for not only retirement, for just any various goals you
(09:16):
may have out there, paying off the house, starting a business,
or whatever. Satellite positions in these emerging themes cryptocurrency to
a little bigger position technology, that's okay, but that's not
a core position. Small and intentional. This is seasoning, not
the main course.
Speaker 1 (09:30):
Yeah, and as I listen to you tell that story
about Lisa in her situation, I can't help but think
about a lot of four to one K participants out there.
They get very little advice on an ongoing basis. And
I've seen this happen many times over the years. You know,
the four to one K advisor comes in for the
annual update, and what do people do. They look at
(09:50):
what has gone up the most last year or over
the last year, year and a half, and they pile
into that just assuming that those returns are going to continue.
And those people get disappointed, and sometimes they're the ones
that move to cash often for a long time, you know,
when the market, you know, moves the other way on them. So, uh, yeah,
it's good to have a plan, and it's good to
(10:12):
have a diversified portfolio. All right, let's talk about taxes, Brian.
A lot of high net worth investors they just focus
on gross returns, but they ignore the tax the drag
that taxes can have on their portfolio, depending on how
the portfolio is structured. Uh, you know, in the way
of bonds, you know, whether they're doing roth conversions. There's
(10:32):
a lot of things that go on here, capital gains,
you know, and ignoring just those capital gains distributions from
those mutual funds that they might have held for you know, decades.
Because as the saying goes, and we repeat this all
the time, it's not what you make that matters, it's
what you keep that's right.
Speaker 3 (10:50):
So we're got one more example here. So this is
Stephen Rachel.
Speaker 2 (10:53):
They had about a one point two million dollars in
their brokers account, and they decided it was time to
simplify their finances, and they were talking about, also, hey,
this tax loss harvesting direct indexing stuff sounds great. Let's
move a bunch of money into it all at once.
So they sold a huge position in a mutual fund
that they had had forever without really understanding how those
embedded capital gains were going to come in and again,
this is what drove them in the door to come
(11:14):
talk to us.
Speaker 3 (11:15):
That sale, Bob Weill.
Speaker 2 (11:15):
It triggered about one hundred and eighty thousand dollars in
capital gains, and that pushed them into a higher bracket,
which in turn increased their Medicare premiums due to how
ERMA works cost them thousands and taxes that they could
have avoided with just by just simply being thoughtful about
what they're doing. So what's the fix for this, Well,
build out your team. Make sure you've got a team
that has a CPA or at least a tax focused advisor,
(11:37):
not just an investment product seller. Pay attention to your
asset location. That means what you own in your IRA,
your tax sheltered investments versus your taxable things that are
exposed versus ROTH. There are different types of assets you
should own in each of those three things.
Speaker 3 (11:52):
Manage those gains.
Speaker 2 (11:53):
And losses proactively planning around those income thresholds that can
help reduce that tax drag and optimize those long term returns.
Speaker 1 (12:02):
Yeah, and again we've talked about this often on the show, Brian.
This tax stuff is getting more and more complicated every
year in spite of tax rates going down, you know
in the big beautiful bill and all that. Along with
that tax bill comes some nuances and how all of
these tax rules and deductions work together. So it really
(12:23):
in this day and age, if you've got if you've
got any you know, amount of money whatsoever, you really
have to sit down and run through these numbers depending
on you know, different scenarios, especially when you're talking about
or considering moving large sums of money around. I mean,
I'll be honest, Brian, I've been shocked this year alone
when I've run some of these different scenarios and seeing
(12:46):
the impact depending on whether we pull lever ABC or D.
The impact the actual impact on an after tax basis
it has on somebody's financial plan. And boy, you gotta
be proactive and run the numbers instead of is going
with your gut so you own that you don't end
up having a lot of regret come next April when
(13:06):
it comes time to file your taxes. Here's the all
worth advice. Intelligence alone doesn't protect you from emotional money mistakes,
but a good plan and the right advisor can protect you.
Got gold or other valuable assets out there, There is
a smarter way to give and save big at tax time.
(13:27):
Plus what a former NFL quarterback wishes he knew about
money when he first got rich, and the lesson it
holds for anyone managing any amount of real wealth. You're
listening to Simply Money presented by Allworth Financial on fifty
five KRC the talk station. You're listening to Simply Money
(13:49):
presided by all Worth Financial on mob Sponsorller along with
Brian James straight Ahead at six forty three. We are
answering your questions about liquidity, premiums, active management and why
d X fund investors like you might be rethinking their strategy. Well,
if you own gold or other precious metals, and especially
if you've held them for a long time, you may
(14:11):
have a tax strategy available to you that also lets
you make a bigger impact with your charitable giving. This
is a timely topic, Brian, with gold prices up, you know,
strikingly here over the last few years. Let's get into
let's get into this strategy. It might apply to a
lot of folks out there.
Speaker 2 (14:28):
If you're a gold bug, then you're probably a happy
bug lately. So here here's how this works. Normally, If
if you sell gold that's gone up in value. Of course,
you're gonna have capital gains anytime you earn you make
money off of some type of investment that the IRS
is gonna come sniffing around. As for physical, physical gold
or bullion, the IRS treats that as a collectible.
Speaker 3 (14:45):
That's not good.
Speaker 2 (14:46):
The tax rate can be higher than the rate you
pay on stocks. Right, collectible's taxes can be a lot
higher than everything else. We're not necessarily only talking about
capital gain here. Now, that said, if you donate that
gold directly to a qualified charity instead of selling it first,
generally speaking, you can deduct the fair market value of
that gold at the time of the donation without triggering
capital gains on the appreciation.
Speaker 1 (15:07):
Right.
Speaker 3 (15:07):
That's not different than you can do the same thing
with stocks. That's the whole point.
Speaker 2 (15:10):
You can donate appreciated stocks to charities as well, and
you're not going to tribute to trigger capital gains because.
Speaker 3 (15:15):
You didn't actually sell anything. So that is a double win.
Speaker 2 (15:18):
No matter what asset you're using, you're supporting a cause
that's important to you, and you're avoiding a major tax hit.
Speaker 1 (15:24):
Yeah, Brian, get into this collectible tax. I mean because
if you correct me if I'm wrong here, But if
you don't give this stuff away and you hold it
and you leave it to your airs, you can avoid
the capital gains taxes, you know, one hundred percent. Is
that that's still the case even with collectibles.
Speaker 2 (15:40):
Right, yeah, yeah, the rules don't change for just because
it's a collectible. It's simply the idea that it's the
taxation that changes. So what we're what we're kind of
tap dance around here. If you sell a collectible after
you've had it for more than twelve months, which is
just a long term gain, that's a maximum of a
twenty eight percent long term capital gains rate. You know,
even high earners who normally only only pay twenty percent
(16:01):
long term capital gains, they would face a twenty eight
percent on collectibles twelve months or less. That's short term,
just like anything else. So it's just taxes income.
Speaker 1 (16:09):
Yeah, And depending on what the collectible is or the
form of this gold or silver and other nuance here
is you do have to get these things valued. You
can't just give coins away and not have some kind
of appraisal and just say, well, I'm going to count
this at the price of gold on the date I
gave it away, you know, And that's where some people
get tripped up. You actually do have to have an
appraisal relatively close to the date you give this stuff away,
(16:32):
so you don't run a file of the irs.
Speaker 3 (16:34):
All right, let's get into a note.
Speaker 2 (16:35):
Hey, Bob, I want I want to throw one more
point is this is how things get super super complicated
with for people. For those of you out there who
might be holding gold precious metals in safes, you're going
to run into some big challenges when it comes to
how are you going to settle this your estate settlement?
If you literally have hard assets in a safe, that
technically is going to have to go through probate because
there's really no way to say that to name a beneficiary,
(16:58):
no clean way anyway. So just make sure that that
is really what you want and that is the right
approach for you. It can feel like the right thing
to do at the time, but there's an awful lot
of extra little moving parts to holding hard assets like that.
Speaker 1 (17:12):
Well, if a lot of these gold coins tend to
get passed down the unclean way, and I'll just leave
that there right.
Speaker 3 (17:17):
Up until somebody's unhappy with what they got at all unravels.
Speaker 1 (17:21):
All right, here's a story that should make anyone with money,
whether it's tens of millions or one hundred thousand dollars,
stop and think. This is a shocking story from New
York Giants quarterback Jameis Winston. He recently shared one of
the biggest financial lessons he's learned over his entire NFL career,
(17:43):
and it did not involve the stock market. Brian, this
one's shocking and actually pretty sad.
Speaker 3 (17:48):
Actually, and I like Jamis Winston. I really like that guy.
He does seem to be a pretty down to earth
kind of guy. But this is a sad story. This
is not new.
Speaker 2 (17:54):
He's doing okay now, but early in his career, when
he was earning big money off the field, he basically
gave his friends and family an allowance of about four
hundred thousand dollars a month. That's not his personal spending,
that's his posse, his entourage out there blowing four hundred
thousand dollars a month living it up. And he has
since admitted that he was very naive back then about money.
He basically saw those eight figures in his bank account
(18:16):
and just thought it was a bottomless pit, you know,
and so that that meant he could really just kind
of give everybody what they wanted and not worry about it.
Obviously a dangerous mindset. You know, a four hundred thousand
dollars burn rate would have com he kept up to that,
it would have blown up his original twenty five million
dollar contract in about five years.
Speaker 1 (18:34):
And I think the lesson to be learned here. I mean,
we all like to talk about rich people, quarterbacks, entertainers,
what have you. This this kind of behavior can apply
to a lot of folks out there. And what we
mean is anytime somebody becomes dependent on your income or
your money and you start enabling that spending, it can
get off the rails in a hurry. And that the
(18:55):
point we're trying to make here is make sure you
put good sound boundaries around any quote unquote help you're
giving others, because it's awfully hard to turn that spickett
off sometimes once that spicket has been turned on, all right,
every Sunday you'll find our all Worth advice in the
Cincinnati Inquirer. Here's a preview. Brian hit this one real quick.
(19:15):
Thomas from Amelia says, I'm sixty years old, I'll work
another fifteen years, which will get me into my seventies
before I retire. Can I get by with less savings
since I'll be retiring later than most people?
Speaker 2 (19:27):
Yeah, well the time was Obviously we can't answer that
question here without a lot more information. But there's no
magic number out there. What matters is that it's not
how much money you have, it's how much you need
to spend. It's the outflows, not the pile. So starting
to figure out what that budget looks like and you
get a clear picture.
Speaker 1 (19:42):
All right, What if you're a person who's got a
great financial plan and you're soon to achieve financial freedom,
is now the time to downsize your home? We'll explore
that question next. You're listening to Simply Money, puts outed
by all Worth Financial on fifty five KRC, the talk station.
(20:04):
You're listening to Simply Money, presented by all Worth Financial.
I'm Bob Sponseller along with Brian James, joined tonight by
our real estate expert, Michelle Sloan, owner of Remax Time
and Michelle, I know tonight you.
Speaker 4 (20:16):
Want to talk about the whole topic.
Speaker 1 (20:18):
Of downsizing and I'm I'm really interested and fascinated to
hear your thoughts on this because it's a topic that
comes up all the time in our office with clients,
you know, heading into retirement. Should we downsize our home?
And the important question is where do we go if
we downsize?
Speaker 3 (20:37):
And what is that.
Speaker 1 (20:38):
Quote unquote downsizing really cost. At the end of the day,
I've seen a few interesting things come across my desk,
but I want to hear your thoughts on this topic.
Speaker 5 (20:47):
Okay, So downsizing, or as I like to call it,
right sizing.
Speaker 4 (20:53):
So I personally, so.
Speaker 5 (20:57):
I'm hitting a big birthday this year and just couple
of weeks actually, and so it was time for me.
Speaker 1 (21:04):
It's okay to be thirty years old, Michelle. You don't
have to be embarrassed by that.
Speaker 5 (21:08):
Oh sweet, I'm only forty two. But anyway, I'm kidding,
really kidding, business, that's not fair. I've been in business
for twenty years, in real estate twenty years, and before that,
I was in radio and television for twenty years. So
(21:29):
the big six was in kindergarten real estate. Yeah, right,
So it's kind of crazy. But anyway, so Scott and
I actually we just recently this summer, right size from
a two story home where we where our kids grew up,
where we lived for twenty years, and into a ranch
(21:49):
style property.
Speaker 4 (21:51):
There are a lot of.
Speaker 5 (21:52):
People in the sixty to sixty five, sixty to sixty
seventy price range or price range.
Speaker 4 (22:00):
I was gonna say, now sixty to Steff.
Speaker 5 (22:05):
See, that's what happens to your brain when you get old.
Speaker 3 (22:08):
We lose it for you.
Speaker 5 (22:10):
H Well, so anyway, so you know, we did we
made a move. After twenty years, our kids grew up
in the two story home. It's time to move to
something that's a little bit smaller. But of course it
didn't end up being a little bit smaller. We wanted
it to be a little bit less expensive. It was
a little more expensive. I think this is what you're
(22:30):
talking about, because when we want to downsize, it doesn't
mean that you're going to be spending less.
Speaker 4 (22:36):
Yeah, no such thing as a financial day.
Speaker 1 (22:38):
And you took the words out of my mouth, Michelle.
I run into this all the time. But go ahead,
you know, talk about the factors that you and your husband,
you know, looked at because I know you're both you know,
intelligent people and you're obviously a professional in this field.
Speaker 3 (22:53):
One of the.
Speaker 1 (22:54):
Things that you really started to evaluate before pulling the
trigger on this quote unquote DOWNSIDEI.
Speaker 5 (23:01):
Well, we wanted to talk about the cash and equity
that we did have. The house that we lived in
was paid off, so we knew that by selling that
home we would have a large chunk of money. Did
we want to pay cash for that next property? Absolutely?
Could we do that? No, I still had to get
a small loan. I don't love the idea of getting
(23:23):
a loan at seven percent, But you know what, it
was time and we you know, sometimes you just know
when it's time. Emotionally, it has it has to hit
all of those buttons. It has to hit the emotional button,
the financial button. You have to be flexible in your location,
and you do want to talk about costs because as
(23:46):
we are going into our the years where we're considering retiring,
then we have to think about, Okay, am I going
to be able to afford this home moving forward? So
there's a lot of questions that you have to ask yourself.
And it just so happened that a property came along,
thankfully someone I knew.
Speaker 4 (24:07):
So off market.
Speaker 5 (24:08):
I was really I was able to sort of pull
some strings within my networks find a home that I
found off market. We purchased that home and was able
to sell our home simultaneously and it all worked out great.
Speaker 4 (24:22):
But it takes a lot, a lot of planning.
Speaker 5 (24:25):
So if if you're someone or you know someone who
is in the market right now to downsize or write size, planning, planning,
planning with your real estate agent, with your financial advisor,
to find out where you want to go. Do you
want to be closer to your kids or do you
want to move far far away from your kids? Do
(24:47):
you want to spend more money? Can you spend more
money or spend less money? And that location of where
you're going to be moving to is that other aspect
of how much money are you going to spend? Do
you want want to live on a golf course? Do
you want to live do you want to have a
swimming pool? You know, what is your lifestyle look like
as you move into the future.
Speaker 2 (25:09):
Yeah, Michelle, I really like the way you put that,
the way you went through that process for your own family, because, yes,
the spreadsheet is important.
Speaker 4 (25:16):
It is important that.
Speaker 2 (25:16):
We can afford our lifestyles and that of course includes
wherever that we live.
Speaker 4 (25:20):
But at the same time that should not.
Speaker 2 (25:22):
I don't ever want the spreadsheet to drive a decision
unless it's truly a dire financial plan. What I mean
by that is, I don't want people going, well, interest
rates are high right now, so therefore we're going to
hold off on moving into our dream home, even though
we've always wanted to do that. If the math works,
do it, because you can always figure, you can always
refinance and that kind of thing later. So you know,
I wouldn't want anybody saying, well, now interest rates are
(25:43):
finally where I want them to be, so now I'm
going to move into my beach home with the tender
age of eighty five.
Speaker 4 (25:47):
But we don't want to put it out well, and if.
Speaker 5 (25:49):
You could be waiting a long time, you know, we
look into the crystal ball of what mortgage rates are
going to look like a month from now, three months
from now, they may.
Speaker 4 (25:59):
Fluctuate a litle little bit.
Speaker 5 (26:01):
I personally don't ever think we're going to see three
percent as a mortgage rate.
Speaker 3 (26:05):
Ever.
Speaker 4 (26:05):
Again, it put.
Speaker 5 (26:08):
Us into a situation where it was great. It made
the whole market flourish for a while, but now so
many people that are holding on to those really low
rates don't want to make a move because they feel
like they're stuck. And that's a conversation, you're right, that
I always have with my clients is okay, if you
(26:31):
feel stuck because you have one hundred thousand dollars at
three percent and you would need to borrow maybe three
hundred thousand dollars at seven percent, Okay, it's part of
the equation. And so if you're ready and you can
afford it, I always say, don't wait to live your life.
And that's the same with real estate. It's the same
(26:52):
with retirement planning too, right, it's.
Speaker 1 (26:55):
The same with you need to run down to Athens,
Ohio this weekend and get that little bungalow, your little
party center.
Speaker 3 (27:03):
You'll help you.
Speaker 4 (27:04):
I can help you by that.
Speaker 1 (27:05):
See, Michelle will have you under contract by Saturday night.
Speaker 3 (27:09):
This is all working out well for everybody.
Speaker 4 (27:12):
My Michelle goes there more often than I do.
Speaker 2 (27:14):
We've got one more week of an empty apartment until
our daughter moves back in, and we're both sad.
Speaker 1 (27:20):
All right, Hey, Michelle, in the minute we got left,
walk us through if you could think of, you know,
maybe a horror story if somebody didn't do the planning,
didn't think ahead, made a rash decision and regretted it later.
You got any stories like that that you can share
where you know the thing kind of the watch out.
Speaker 5 (27:36):
Well, the one thing was I did have a client
who moved out of state, moved to Florida and hated
it and miss their family here. Now they had to
live that, live through that, but after six months they
wanted to move back. Well, financially, if you try to
sell a property within the first year or two, most
(28:00):
likely you're not going to make money on your investment.
You have to be able to be in a home
for a while. They just got to Florida and they're like, gosh,
it's really hot down here. This is unbearable.
Speaker 4 (28:13):
Tell me that, and there's a lot of traffic.
Speaker 5 (28:15):
So if you're going to make a big move somewhere
you've never been before, I recommend going and spending a
month somewhere and see if you really like it before
you invest big dollars into buying a property.
Speaker 1 (28:29):
I think date before you get married, right, Michelle, all right?
Great stuff is always from Michelle Sloan, owner of Remax Time.
Thank you so much Michelle for joining us tonight. You're
listeningly Money presented by all Worth Financial on.
Speaker 4 (28:42):
Fifty five KRC, the talk station.
Speaker 1 (28:49):
You're listening to Simply Money presented by all Worth Financial
and Bob Sponseller along with Brian James. Do you have
a financial question you'd like for us to answer. There
is a red button you can click if you're listening
listening to the show on the iHeart app. Simply record
your question and it will come straight to us. All right,
Brian ron in Mainfield said Mainville pardon me, says, I
(29:12):
keep hearing about tax smart withdraw sequencing, but what happens
to that plan when markets fall early during retirement?
Speaker 4 (29:21):
Great question, great question.
Speaker 2 (29:23):
So actually that the market's falling can play a role
in tax smart investing.
Speaker 4 (29:26):
So it's unfortunate. We never want them to fall. We
never really want.
Speaker 2 (29:29):
To be able to tax loss harvest but or tax
you know, take advantage of the stuff.
Speaker 4 (29:33):
We want things to go up, but it does happen.
Speaker 2 (29:35):
So tax smart withdrawal sequency this is the this is
the strategy of deciding which accounts are going to pull from.
Speaker 3 (29:40):
You have three flavors.
Speaker 2 (29:42):
Taxable, that's the one you get a ten ninety nine
beyond tax deferred as your ten ninety nine are or nothing.
Speaker 3 (29:47):
Tax free, which is your ROTH.
Speaker 2 (29:49):
So the goal being to minimize these taxes and extend
the portfolio life. So the the way that I would,
you know, ensure that this doesn't have too much of
an impact is to have done that kind of a
I know, this doesn't really help a whole lot for
somebody who may have just gone through it, but you know,
make sure you've got a few years worth of cash
or bond buffers, conservative type investments that you can tap into.
(30:09):
And as we've said all year long, this is the
time you got bills. Come do now or coming do soon?
Take that money off the table. You know you're going
to write a check in the next three six months
or whatever. The market's at a peak. Be happy that
you've got more money than you've ever had, assuming you
stayed invested. Pull that money off the table, and then
when the market turns down, be looking to do roth conversions.
You're going to own the same stuff in the wrath.
(30:30):
Don't worry about what the market's doing. Do it at
a time where the market is down, and then when
it inevitably swings back up, as it always does. That's
good that growth is going to happen from that point
on a in a tax free manner.
Speaker 4 (30:41):
So I hope that helps. Ryan.
Speaker 2 (30:41):
Let's move on to Mark in Kenwood, Marcus seeing more
and more references to something called behavioral and investing in
understanding our own biases and just kind of the psychological
side of things. Bob, what are the common blind spots
that you see even in our most disciplined investors.
Speaker 1 (30:58):
Well, Mark, actually he will to know what the most
common blind spot that we see is. And i'd be
interested on your in your take on this mine. And
this is really kind of gone up. We really didn't
used to see this over the last twenty five thirty years,
but I'll say over the next five to seven years.
Speaker 3 (31:18):
Political bias.
Speaker 1 (31:19):
You know, I think we all have we all have
these assumptions baked in, and I think it has to
do with which media resources we tend to engage in.
You know, I find more and more and more people
walk in just sure that depending on who's in the
White House or who's running the government, either great things
are gonna happen or the whole country's gonna, you know,
(31:43):
go down in flames. And the truth is, and we
talk about this all the time, Brian. If you go
back over seventy five eighty years and look at actual
returns of the market, you really got to let this
stuff go because the markets have performed almost identically in
spite of whether Democrats or Republicans are in office. I
(32:05):
think that's the most common blind spot that we're trying
to help people get over. What do you think about
this one? Because behavioral investing's, let's face it, it's behavior
that could truly, you know, move people off of success
of a long term financial plan.
Speaker 2 (32:22):
I don't think this is a new field, Bob, or
a new series of discoveries. I think you and I
have dealt with it for thirty years. It's just a
new It's just identifying, you know what people the reasons
that people make decisions. They've been making decisions this way
all along. We react to what we see and we
actually change, you know, if we Sometimes people investors will
take surveys and describe how they feel about things, and
(32:43):
then they behave in an entirely different manner. When it
comes down to it, money makes people passionate. That makes
people make crazy decisions. So it's good to understand the
range of things you might feel when you're trying to
make a big decision, and that way you can kind
of more clearly step back and see the forest for
the trees rather than.
Speaker 4 (32:59):
Just zeroing in on the emotional.
Speaker 3 (33:00):
Side of things.
Speaker 1 (33:02):
All right, and in Cincinnati, this one's for you, Brian,
She says, I've noticed even professional money managers underperform the
major indices. What metrics beyond performance should investors really use
to judge a portfolio manager.
Speaker 2 (33:16):
Well, it depends on what you're what you're what you're
looking for in this relationship with your portfolio manager. If
if it's if it is nothing more than I have
a pile of money and I want to grow it
as much as I possibly can, well then uh, you
know that that might be the only goal you have.
Speaker 4 (33:30):
But when?
Speaker 2 (33:31):
But but I think realistically the answer is are they
paying attention to my tax situation? Portfolio growth is irrelevant
if or is not as impactful if it's happening without
regard to what somebody's ultimate tax situation is. Because all
of a sudden, we're giving money away to a to
an outside entity in the I R S and all
of a sudden, you know, not very tax efficient and
(33:51):
as well as financial planning, right, I think there's a
lot more to this. If you simply want a uh,
if you simply want a pile of index funds and
you know, just do that, don't pay anybody. But if
you you know, if you're good to go with you know,
if you're looking for more financial plan more educated decisions,
that's going to take a lot more of the of
the impact there.
Speaker 1 (34:12):
Coming up next, we want to make you aware of
a lesser known social security benefit that could impact some
of you out there. 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 Spondseller along with Brian James. If you're over
(34:35):
sixty two years of age, and you're still raising children
at home who are eighteen years or younger and their
dependents they're at home and you're thinking about how to
claim or time your social Security benefit claiming strategy, there
is a little known twist in the social security rules
that can meaningfully impact cash flow for families where older
(34:58):
parents are still per voting for minors. Brian, this doesn't
impact a ton of people, but it certainly impacts some
so I think it's important to take a few minutes
and touch on it.
Speaker 2 (35:09):
Yeah, so this is important because there are there. This
is not a loophole that we want people to rush
out and try to take advantage of. Right you're you're
the best case scenario. You're in the situation, weren't aware
of it. There might be somebody that you might be
able to benefit, But don't rush out and have a
child later in life just to tep into social security panicles.
I know that's what you were thinking, Bob. I'm sure
(35:30):
you have decided, you know what we could squeeze out
a little more. They're you know, they're all what could
go wrong? Anyway, Here's how this works. If you're again,
if you're if you're over sixty two, which means you.
Speaker 4 (35:40):
Could file for Social Security.
Speaker 2 (35:42):
That's true anyway, regardless of this, that's just the earliest
age you can. But also if you file at that age,
you're taking the lowest amount. This is still uh, you
still have a social Security timing decision. But if you're
in that situation and it makes sense to uh, you know,
to go ahead and turn that on, then you're gonna
get a benefit for if you're still raising children who
are eight or younger. Now, obviously this is not a
very common situation for somebody of a later age just
(36:05):
to have children their own children.
Speaker 4 (36:07):
But what happens more and more, and I think this is.
Speaker 2 (36:09):
Who this is really targeted at, is people who may
have adopted perhaps their own grandchildren because just because of
tough circumstances, or maybe adopted later in life, that kind
of thing. So let's not overly simplify things. Obviously a
lot of moving parts, but yeah.
Speaker 1 (36:26):
Well the benefit amount, just to put it out there,
it can be up to about half of the parent's
primary insurance amount, you know, in other words, what they
would get at full retirement age. And in the case,
you know, because we're talking about older folks or relatively
older folks that are raising potentially young kids, if the
parent happens to pass away, that child survivor benefit can
(36:49):
be up to about seventy five percent of the parent's benefit.
So again, for those that are in that situation, it's
at least something to think about, because if you're you know,
vacillating between ten taking benefits between at sixty two or
sixty four, sixty five and you're in this situation. This
really can potentially tip the scales on when you take
(37:09):
your Social Security benefits, so we just want to make
people aware of it.
Speaker 2 (37:12):
Yeah, average check on this is eight hundred to one
thousand bucks a month, so it is significant money. But
that does not mean you should file for Social Security early.
There's still a puzzle to put together here, your own
social Security retirement benefits, the dependent benefits side of things,
as well as the survivorship should something happen to you
for your spouse, that all of it fits together, you've
got to make this decision in concert with all the
(37:33):
other things.
Speaker 1 (37:35):
Thanks for listening tonight. You're listening to Simply Money, presented
by all Worth Financial on fifty five KRC, the talk
station
Tonight, why smart people still makes some dumb money decisions.
You're listening to Simply Money, started by all Worth Financial
on Bob Sponsller along with Brian James. You've built a business,
or you've climbed the corporate ladder, you've got a few
million bucks tucked away. So why do even the smartest
people find some way to sabotage their own financial success?
(00:29):
The answer lies in your brain, and tonight the mistakes
we've seen smart successful investors make and how to avoid them.
Let's get into this topic, Brian, A lot to unpack here.
Speaker 2 (00:40):
We're gonna start with the the I know better bias.
So let's say you're you're a retired executive and you've
always been on basically the alpha, and you've managed teams,
you've made the big decisions. You're a smart person, so
when it comes to investing, you're gonna trust your instincts
because they got you this far anyway.
Speaker 3 (00:55):
That's where the mistake happens.
Speaker 1 (00:56):
Though.
Speaker 2 (00:56):
That overconfidence can lead people way too often to take
a concentrated position in stocks they think they understand, or worse,
hold on to a legacy stock too long because they
have some kind of emotional attachment and thinking you understand
a stock a lot of times can mean you're you're
following the herd who you're kind of coming up with
a biases based off of what the crowd thinks, and
(01:18):
hanging on to something that may or may not be
worth it because you're in a bit of an echo
chamber with a bunch of other people that love this stock.
So you know, here's a quick example. It take a
hypothetical Jane who is sixty two. She got three point
two million dollars and recently retired confident about that company
she worked for, and therefore left eight hundred thousand dollars
in the stock, about a quarter of her portfolio. She
had worked there over thirty years and it had built
(01:40):
her own wealth and believed in that brand and wanted
to stay loyal to the company that gave her so
much for her and her family. Over the next two years,
the market decided it didn't care about her her loyalty
to the company. That stock took a forty percent hit,
wiped out over three hundred thousand dollars in value. She
realized way too late that diversification was a lot more
important than sentiment.
Speaker 4 (01:58):
I would this this locally.
Speaker 3 (02:00):
Wow, this is General Electric.
Speaker 2 (02:01):
General Electric is doing a fine place now, it's a
great company, great comeback story, But ten years ago, yeah
not so much. So this does happen to real people
out there.
Speaker 1 (02:10):
Well, Brian, I've been doing this long enough to have
been in a place where I try to advise the
ge executives I worked with to exercise some stock options
prior to when the market tanked in two thousand and one,
two thousand and two. Some people listen, some people didn't.
And yeah, if you get a little overconfident and you
use Jane, you know, a female in your example, you're hypothetical.
(02:33):
And that's great. But what I find is it's us, Brian.
It's men that tie our egos way more often than
women to these kind of decisions. And just because we've
run or managed a large portion of a successful company
or even a private business, does not mean that we
can retire one day and feel like we have the
absolute command over the global economy. And people that try
(02:56):
to get into this kind of mindset can really lose
money quickly. And that's why, you know, it's not that
a good fiduciary financial advisor is any smarter than anyone else.
It's just you know, we're able to help people manage
their own behavioral risks.
Speaker 3 (03:12):
Uh.
Speaker 1 (03:13):
And oftentimes that's worth a lot of money and a
lot of peace of mind as people get into retirement.
Let's talk about another you know, pitfall that we run
into here, and that's loss aversion paralysis. Let's say markets
are down, you're looking at your portfolio that's in the
red for the short term, and you know you should rebalance,
you should buy low, sell high like everyone talks about,
(03:36):
and you know you should stay invested, but emotionally you
just can't pull the trigger. And that's something that we
call loss aversion our brain, Brian, This is just how
human beings work. Our brains hate losing money way more
than they like making money. And when the numbers get higher,
that net worth grows, the stakes feel even higher. Anytime
(03:58):
we have a market pullback and people say, well, I'm
gonna get out and get back in when things look better,
and that's usually a telltale sign that they're about to
leave hundreds of thousands of dollars on the table. Give
us a hypothetical example that from somebody will name Kevin
on what can happen here? Brian and what you and
(04:19):
I both have seen happen.
Speaker 2 (04:21):
We're gonna name him Kevin, but I remember who it is,
so fifty eight years Sometimes.
Speaker 4 (04:26):
These hypotheticals are not that hypothetical, right.
Speaker 3 (04:29):
Everybody's got war stories.
Speaker 2 (04:30):
Kevin had five million dollars in retirement savings in twenty
twenty two.
Speaker 3 (04:34):
Only three years ago.
Speaker 2 (04:35):
He watched his portfolio drop about eighteen percent because he
was pretty aggressively invested, which was which was fine because
he was not a risk averse prior and his plan
supported it and he had a growth mindset. But he
panicked this time because he is fifty eight years old
and you know, a little closer to retirement. And this
time it got him moved about forty percent of his
assets into a money market fund. This is before we
(04:57):
started working with him. This is mal Frankly, this is
how we started working with this hypothetical person. Anyway, he
told himself he was going to wait for things to
cal mm down and come back in, but never got
back in. Missed out on the twenty three rally, which
saw markets rebound by over twenty percent. And if you
look Bob at there are five years that are like this.
Twenty twenty two, two thousand and eight, two thousand and two,
(05:18):
nineteen thirty seven, nineteen seventy four, book it. Every one
of those are the only five that we've had that
have been a more than a fifteen to twenty percent loss.
Those are the whoppers we're all afraid of. But there's
only five of them over the last eighty some years.
But anyways, when we see these things, people tend to panic.
But the thing that the commonality between all those five years,
every last one of them, even two thousand and eight
(05:41):
was followed by a pretty quick upturn the immediate following
year because the herd panics and then it gets way
too excited on the positive side. So if you panic
at the bottom, you are proactively giving up that recovery.
So how do you avoid this? Well, first of all,
hire a discretionary manager who's going to remove your emotion
from your own decisions, because they're not using your decisions.
Automated rebalancing can help create yourself an investment policy statement
(06:03):
to outline how you respond to volatility before you're in
the moment. That's something you could pull out and say, Okay,
when I was in a calmer mindset, this is how
I thought about investments.
Speaker 1 (06:12):
Yeah, and another thing to consider. And you and I
talk about this all the time. If you really feel
like you know, things are coming down the pike that
concern you, you don't have to blow out of your
portfolio and put a bunch of money in cat you know,
long term money, move to cash, just create a bucket strategy.
Because you know, in all those periods that you mentioned, Brian,
when we had severe market declines, in almost every case
(06:35):
they can the market completely recovered in about three years.
So you know, rather than blowing your whole plan up,
maybe you know, build up that emergency fund a little
bit with enough liquid, non risk cash to get you
through that you know, two to three year timeframe, and
and that that allows you to weather the storm the storms,
so to speak, without completely putting an upheaval your entire
(06:58):
financial plan and leaving a lot of money on the
table when the market comes back, just because you wanted
to prove emotionally you were right. Let's move on to
another one, flipping the whole scenario one hundred and eighty degrees.
The old fear of missing out. Someone hears about AI
stocks going up, or bitcoin going up, or private credit
(07:19):
or something that's really been off to the races. I mean,
let's say Gold in twenty twenty five, and they think, Man,
this thing's been flying. I need to get in now
or I'll miss out.
Speaker 3 (07:31):
Yep.
Speaker 2 (07:31):
Another hypothetical of a real person with a fake name.
So we're gonna call her Lisa this time. Were picking
on all the women tonight. They're usually the ones that
do better. We were just picking on Kevin. I think
we're equal opportunities. This is we're picking on human beings
for being human. Is what we're doing, all right, And
advisors are not exempt from this stuff. We sometimes we're
attempted to do these things too. But in any case,
(07:53):
so this is Lisa about two point eight million dollars
mostly in diversified index funds, so already a pretty well
organized portfolio to begin with. But late twenty twenty one,
she started to see that the technology stocks had been
gaining about forty percent in a year, and she decided
that that was too much to resist, and so she
moved about four hundred thousand dollars in aggressive growth tech funds.
Speaker 3 (08:12):
And remember what I said.
Speaker 2 (08:13):
This happened in late twenty one, thinking it was her
chance to catch up on returns, And of course we
all know what happened in came twenty two, and the
tech sector got absolutely hammered that four hundred thousand dollars
position was worth less than two hundred and eighty thousand
within a year. It's completely panicked, sold and fowled. I'll
never do that again. So unfortunately, what she did here,
the move wasn't necessarily bad. If she was still sitting
(08:34):
on those stocks to this day, she probably would have
made a good chunnge. I know, she would have made
a good chunk of money. But she came to us
after this whole panic of buy and sell had actually occurred,
and so unfortunately we just kind of had to sit
down and have a long the talk about history, market history,
how it works, and how those big, terrifying years always
end up with have always historically ended up with a
(08:54):
pretty big upswing. So the fix here performance chasing. That
always leads to buying high and selling low. But if
you're chasing performance, if you're looking at something for how
it did last year, you are behind it, you are
chasing it, and so that's going to lead you to
buying after it's already high. Instead of that, build a
core portfolio that's attached to your goals, your time horizon
for not only retirement, for just any various goals you
(09:16):
may have out there, paying off the house, starting a business,
or whatever. Satellite positions in these emerging themes cryptocurrency to
a little bigger position technology, that's okay, but that's not
a core position. Small and intentional. This is seasoning, not
the main course.
Speaker 1 (09:30):
Yeah, and as I listen to you tell that story
about Lisa in her situation, I can't help but think
about a lot of four to one K participants out there.
They get very little advice on an ongoing basis. And
I've seen this happen many times over the years. You know,
the four to one K advisor comes in for the
annual update, and what do people do. They look at
(09:50):
what has gone up the most last year or over
the last year, year and a half, and they pile
into that just assuming that those returns are going to continue.
And those people get disappointed, and sometimes they're the ones
that move to cash often for a long time, you know,
when the market, you know, moves the other way on them. So, uh, yeah,
it's good to have a plan, and it's good to
(10:12):
have a diversified portfolio. All right, let's talk about taxes, Brian.
A lot of high net worth investors they just focus
on gross returns, but they ignore the tax the drag
that taxes can have on their portfolio, depending on how
the portfolio is structured. Uh, you know, in the way
of bonds, you know, whether they're doing roth conversions. There's
(10:32):
a lot of things that go on here, capital gains,
you know, and ignoring just those capital gains distributions from
those mutual funds that they might have held for you know, decades.
Because as the saying goes, and we repeat this all
the time, it's not what you make that matters, it's
what you keep that's right.
Speaker 3 (10:50):
So we're got one more example here. So this is
Stephen Rachel.
Speaker 2 (10:53):
They had about a one point two million dollars in
their brokers account, and they decided it was time to
simplify their finances, and they were talking about, also, hey,
this tax loss harvesting direct indexing stuff sounds great. Let's
move a bunch of money into it all at once.
So they sold a huge position in a mutual fund
that they had had forever without really understanding how those
embedded capital gains were going to come in and again,
this is what drove them in the door to come
(11:14):
talk to us.
Speaker 3 (11:15):
That sale, Bob Weill.
Speaker 2 (11:15):
It triggered about one hundred and eighty thousand dollars in
capital gains, and that pushed them into a higher bracket,
which in turn increased their Medicare premiums due to how
ERMA works cost them thousands and taxes that they could
have avoided with just by just simply being thoughtful about
what they're doing. So what's the fix for this, Well,
build out your team. Make sure you've got a team
that has a CPA or at least a tax focused advisor,
(11:37):
not just an investment product seller. Pay attention to your
asset location. That means what you own in your IRA,
your tax sheltered investments versus your taxable things that are
exposed versus ROTH. There are different types of assets you
should own in each of those three things.
Speaker 3 (11:52):
Manage those gains.
Speaker 2 (11:53):
And losses proactively planning around those income thresholds that can
help reduce that tax drag and optimize those long term returns.
Speaker 1 (12:02):
Yeah, and again we've talked about this often on the show, Brian.
This tax stuff is getting more and more complicated every
year in spite of tax rates going down, you know
in the big beautiful bill and all that. Along with
that tax bill comes some nuances and how all of
these tax rules and deductions work together. So it really
(12:23):
in this day and age, if you've got if you've
got any you know, amount of money whatsoever, you really
have to sit down and run through these numbers depending
on you know, different scenarios, especially when you're talking about
or considering moving large sums of money around. I mean,
I'll be honest, Brian, I've been shocked this year alone
when I've run some of these different scenarios and seeing
(12:46):
the impact depending on whether we pull lever ABC or D.
The impact the actual impact on an after tax basis
it has on somebody's financial plan. And boy, you gotta
be proactive and run the numbers instead of is going
with your gut so you own that you don't end
up having a lot of regret come next April when
(13:06):
it comes time to file your taxes. Here's the all
worth advice. Intelligence alone doesn't protect you from emotional money mistakes,
but a good plan and the right advisor can protect you.
Got gold or other valuable assets out there, There is
a smarter way to give and save big at tax time.
(13:27):
Plus what a former NFL quarterback wishes he knew about
money when he first got rich, and the lesson it
holds for anyone managing any amount of real wealth. You're
listening to Simply Money presented by Allworth Financial on fifty
five KRC the talk station. You're listening to Simply Money
(13:49):
presided by all Worth Financial on mob Sponsorller along with
Brian James straight Ahead at six forty three. We are
answering your questions about liquidity, premiums, active management and why
d X fund investors like you might be rethinking their strategy. Well,
if you own gold or other precious metals, and especially
if you've held them for a long time, you may
(14:11):
have a tax strategy available to you that also lets
you make a bigger impact with your charitable giving. This
is a timely topic, Brian, with gold prices up, you know,
strikingly here over the last few years. Let's get into
let's get into this strategy. It might apply to a
lot of folks out there.
Speaker 2 (14:28):
If you're a gold bug, then you're probably a happy
bug lately. So here here's how this works. Normally, If
if you sell gold that's gone up in value. Of course,
you're gonna have capital gains anytime you earn you make
money off of some type of investment that the IRS
is gonna come sniffing around. As for physical, physical gold
or bullion, the IRS treats that as a collectible.
Speaker 3 (14:45):
That's not good.
Speaker 2 (14:46):
The tax rate can be higher than the rate you
pay on stocks. Right, collectible's taxes can be a lot
higher than everything else. We're not necessarily only talking about
capital gain here. Now, that said, if you donate that
gold directly to a qualified charity instead of selling it first,
generally speaking, you can deduct the fair market value of
that gold at the time of the donation without triggering
capital gains on the appreciation.
Speaker 1 (15:07):
Right.
Speaker 3 (15:07):
That's not different than you can do the same thing
with stocks. That's the whole point.
Speaker 2 (15:10):
You can donate appreciated stocks to charities as well, and
you're not going to tribute to trigger capital gains because.
Speaker 3 (15:15):
You didn't actually sell anything. So that is a double win.
Speaker 2 (15:18):
No matter what asset you're using, you're supporting a cause
that's important to you, and you're avoiding a major tax hit.
Speaker 1 (15:24):
Yeah, Brian, get into this collectible tax. I mean because
if you correct me if I'm wrong here, But if
you don't give this stuff away and you hold it
and you leave it to your airs, you can avoid
the capital gains taxes, you know, one hundred percent. Is
that that's still the case even with collectibles.
Speaker 2 (15:40):
Right, yeah, yeah, the rules don't change for just because
it's a collectible. It's simply the idea that it's the
taxation that changes. So what we're what we're kind of
tap dance around here. If you sell a collectible after
you've had it for more than twelve months, which is
just a long term gain, that's a maximum of a
twenty eight percent long term capital gains rate. You know,
even high earners who normally only only pay twenty percent
(16:01):
long term capital gains, they would face a twenty eight
percent on collectibles twelve months or less. That's short term,
just like anything else. So it's just taxes income.
Speaker 1 (16:09):
Yeah, And depending on what the collectible is or the
form of this gold or silver and other nuance here
is you do have to get these things valued. You
can't just give coins away and not have some kind
of appraisal and just say, well, I'm going to count
this at the price of gold on the date I
gave it away, you know, And that's where some people
get tripped up. You actually do have to have an
appraisal relatively close to the date you give this stuff away,
(16:32):
so you don't run a file of the irs.
Speaker 3 (16:34):
All right, let's get into a note.
Speaker 2 (16:35):
Hey, Bob, I want I want to throw one more
point is this is how things get super super complicated
with for people. For those of you out there who
might be holding gold precious metals in safes, you're going
to run into some big challenges when it comes to
how are you going to settle this your estate settlement?
If you literally have hard assets in a safe, that
technically is going to have to go through probate because
there's really no way to say that to name a beneficiary,
(16:58):
no clean way anyway. So just make sure that that
is really what you want and that is the right
approach for you. It can feel like the right thing
to do at the time, but there's an awful lot
of extra little moving parts to holding hard assets like that.
Speaker 1 (17:12):
Well, if a lot of these gold coins tend to
get passed down the unclean way, and I'll just leave
that there right.
Speaker 3 (17:17):
Up until somebody's unhappy with what they got at all unravels.
Speaker 1 (17:21):
All right, here's a story that should make anyone with money,
whether it's tens of millions or one hundred thousand dollars,
stop and think. This is a shocking story from New
York Giants quarterback Jameis Winston. He recently shared one of
the biggest financial lessons he's learned over his entire NFL career,
(17:43):
and it did not involve the stock market. Brian, this
one's shocking and actually pretty sad.
Speaker 3 (17:48):
Actually, and I like Jamis Winston. I really like that guy.
He does seem to be a pretty down to earth
kind of guy. But this is a sad story. This
is not new.
Speaker 2 (17:54):
He's doing okay now, but early in his career, when
he was earning big money off the field, he basically
gave his friends and family an allowance of about four
hundred thousand dollars a month. That's not his personal spending,
that's his posse, his entourage out there blowing four hundred
thousand dollars a month living it up. And he has
since admitted that he was very naive back then about money.
He basically saw those eight figures in his bank account
(18:16):
and just thought it was a bottomless pit, you know,
and so that that meant he could really just kind
of give everybody what they wanted and not worry about it.
Obviously a dangerous mindset. You know, a four hundred thousand
dollars burn rate would have com he kept up to that,
it would have blown up his original twenty five million
dollar contract in about five years.
Speaker 1 (18:34):
And I think the lesson to be learned here. I mean,
we all like to talk about rich people, quarterbacks, entertainers,
what have you. This this kind of behavior can apply
to a lot of folks out there. And what we
mean is anytime somebody becomes dependent on your income or
your money and you start enabling that spending, it can
get off the rails in a hurry. And that the
(18:55):
point we're trying to make here is make sure you
put good sound boundaries around any quote unquote help you're
giving others, because it's awfully hard to turn that spickett
off sometimes once that spicket has been turned on, all right,
every Sunday you'll find our all Worth advice in the
Cincinnati Inquirer. Here's a preview. Brian hit this one real quick.
(19:15):
Thomas from Amelia says, I'm sixty years old, I'll work
another fifteen years, which will get me into my seventies
before I retire. Can I get by with less savings
since I'll be retiring later than most people?
Speaker 2 (19:27):
Yeah, well the time was Obviously we can't answer that
question here without a lot more information. But there's no
magic number out there. What matters is that it's not
how much money you have, it's how much you need
to spend. It's the outflows, not the pile. So starting
to figure out what that budget looks like and you
get a clear picture.
Speaker 1 (19:42):
All right, What if you're a person who's got a
great financial plan and you're soon to achieve financial freedom,
is now the time to downsize your home? We'll explore
that question next. You're listening to Simply Money, puts outed
by all Worth Financial on fifty five KRC, the talk station.
(20:04):
You're listening to Simply Money, presented by all Worth Financial.
I'm Bob Sponseller along with Brian James, joined tonight by
our real estate expert, Michelle Sloan, owner of Remax Time
and Michelle, I know tonight you.
Speaker 4 (20:16):
Want to talk about the whole topic.
Speaker 1 (20:18):
Of downsizing and I'm I'm really interested and fascinated to
hear your thoughts on this because it's a topic that
comes up all the time in our office with clients,
you know, heading into retirement. Should we downsize our home?
And the important question is where do we go if
we downsize?
Speaker 3 (20:37):
And what is that.
Speaker 1 (20:38):
Quote unquote downsizing really cost. At the end of the day,
I've seen a few interesting things come across my desk,
but I want to hear your thoughts on this topic.
Speaker 5 (20:47):
Okay, So downsizing, or as I like to call it,
right sizing.
Speaker 4 (20:53):
So I personally, so.
Speaker 5 (20:57):
I'm hitting a big birthday this year and just couple
of weeks actually, and so it was time for me.
Speaker 1 (21:04):
It's okay to be thirty years old, Michelle. You don't
have to be embarrassed by that.
Speaker 5 (21:08):
Oh sweet, I'm only forty two. But anyway, I'm kidding,
really kidding, business, that's not fair. I've been in business
for twenty years, in real estate twenty years, and before that,
I was in radio and television for twenty years. So
(21:29):
the big six was in kindergarten real estate. Yeah, right,
So it's kind of crazy. But anyway, so Scott and
I actually we just recently this summer, right size from
a two story home where we where our kids grew up,
where we lived for twenty years, and into a ranch
(21:49):
style property.
Speaker 4 (21:51):
There are a lot of.
Speaker 5 (21:52):
People in the sixty to sixty five, sixty to sixty
seventy price range or price range.
Speaker 4 (22:00):
I was gonna say, now sixty to Steff.
Speaker 5 (22:05):
See, that's what happens to your brain when you get old.
Speaker 3 (22:08):
We lose it for you.
Speaker 5 (22:10):
H Well, so anyway, so you know, we did we
made a move. After twenty years, our kids grew up
in the two story home. It's time to move to
something that's a little bit smaller. But of course it
didn't end up being a little bit smaller. We wanted
it to be a little bit less expensive. It was
a little more expensive. I think this is what you're
(22:30):
talking about, because when we want to downsize, it doesn't
mean that you're going to be spending less.
Speaker 4 (22:36):
Yeah, no such thing as a financial day.
Speaker 1 (22:38):
And you took the words out of my mouth, Michelle.
I run into this all the time. But go ahead,
you know, talk about the factors that you and your husband,
you know, looked at because I know you're both you know,
intelligent people and you're obviously a professional in this field.
Speaker 3 (22:53):
One of the.
Speaker 1 (22:54):
Things that you really started to evaluate before pulling the
trigger on this quote unquote DOWNSIDEI.
Speaker 5 (23:01):
Well, we wanted to talk about the cash and equity
that we did have. The house that we lived in
was paid off, so we knew that by selling that
home we would have a large chunk of money. Did
we want to pay cash for that next property? Absolutely?
Could we do that? No, I still had to get
a small loan. I don't love the idea of getting
(23:23):
a loan at seven percent, But you know what, it
was time and we you know, sometimes you just know
when it's time. Emotionally, it has it has to hit
all of those buttons. It has to hit the emotional button,
the financial button. You have to be flexible in your location,
and you do want to talk about costs because as
(23:46):
we are going into our the years where we're considering retiring,
then we have to think about, Okay, am I going
to be able to afford this home moving forward? So
there's a lot of questions that you have to ask yourself.
And it just so happened that a property came along,
thankfully someone I knew.
Speaker 4 (24:07):
So off market.
Speaker 5 (24:08):
I was really I was able to sort of pull
some strings within my networks find a home that I
found off market. We purchased that home and was able
to sell our home simultaneously and it all worked out great.
Speaker 4 (24:22):
But it takes a lot, a lot of planning.
Speaker 5 (24:25):
So if if you're someone or you know someone who
is in the market right now to downsize or write size, planning, planning,
planning with your real estate agent, with your financial advisor,
to find out where you want to go. Do you
want to be closer to your kids or do you
want to move far far away from your kids? Do
(24:47):
you want to spend more money? Can you spend more
money or spend less money? And that location of where
you're going to be moving to is that other aspect
of how much money are you going to spend? Do
you want want to live on a golf course? Do
you want to live do you want to have a
swimming pool? You know, what is your lifestyle look like
as you move into the future.
Speaker 2 (25:09):
Yeah, Michelle, I really like the way you put that,
the way you went through that process for your own family, because, yes,
the spreadsheet is important.
Speaker 4 (25:16):
It is important that.
Speaker 2 (25:16):
We can afford our lifestyles and that of course includes
wherever that we live.
Speaker 4 (25:20):
But at the same time that should not.
Speaker 2 (25:22):
I don't ever want the spreadsheet to drive a decision
unless it's truly a dire financial plan. What I mean
by that is, I don't want people going, well, interest
rates are high right now, so therefore we're going to
hold off on moving into our dream home, even though
we've always wanted to do that. If the math works,
do it, because you can always figure, you can always
refinance and that kind of thing later. So you know,
I wouldn't want anybody saying, well, now interest rates are
(25:43):
finally where I want them to be, so now I'm
going to move into my beach home with the tender
age of eighty five.
Speaker 4 (25:47):
But we don't want to put it out well, and if.
Speaker 5 (25:49):
You could be waiting a long time, you know, we
look into the crystal ball of what mortgage rates are
going to look like a month from now, three months
from now, they may.
Speaker 4 (25:59):
Fluctuate a litle little bit.
Speaker 5 (26:01):
I personally don't ever think we're going to see three
percent as a mortgage rate.
Speaker 3 (26:05):
Ever.
Speaker 4 (26:05):
Again, it put.
Speaker 5 (26:08):
Us into a situation where it was great. It made
the whole market flourish for a while, but now so
many people that are holding on to those really low
rates don't want to make a move because they feel
like they're stuck. And that's a conversation, you're right, that
I always have with my clients is okay, if you
(26:31):
feel stuck because you have one hundred thousand dollars at
three percent and you would need to borrow maybe three
hundred thousand dollars at seven percent, Okay, it's part of
the equation. And so if you're ready and you can
afford it, I always say, don't wait to live your life.
And that's the same with real estate. It's the same
(26:52):
with retirement planning too, right, it's.
Speaker 1 (26:55):
The same with you need to run down to Athens,
Ohio this weekend and get that little bungalow, your little
party center.
Speaker 3 (27:03):
You'll help you.
Speaker 4 (27:04):
I can help you by that.
Speaker 1 (27:05):
See, Michelle will have you under contract by Saturday night.
Speaker 3 (27:09):
This is all working out well for everybody.
Speaker 4 (27:12):
My Michelle goes there more often than I do.
Speaker 2 (27:14):
We've got one more week of an empty apartment until
our daughter moves back in, and we're both sad.
Speaker 1 (27:20):
All right, Hey, Michelle, in the minute we got left,
walk us through if you could think of, you know,
maybe a horror story if somebody didn't do the planning,
didn't think ahead, made a rash decision and regretted it later.
You got any stories like that that you can share
where you know the thing kind of the watch out.
Speaker 5 (27:36):
Well, the one thing was I did have a client
who moved out of state, moved to Florida and hated
it and miss their family here. Now they had to
live that, live through that, but after six months they
wanted to move back. Well, financially, if you try to
sell a property within the first year or two, most
(28:00):
likely you're not going to make money on your investment.
You have to be able to be in a home
for a while. They just got to Florida and they're like, gosh,
it's really hot down here. This is unbearable.
Speaker 4 (28:13):
Tell me that, and there's a lot of traffic.
Speaker 5 (28:15):
So if you're going to make a big move somewhere
you've never been before, I recommend going and spending a
month somewhere and see if you really like it before
you invest big dollars into buying a property.
Speaker 1 (28:29):
I think date before you get married, right, Michelle, all right?
Great stuff is always from Michelle Sloan, owner of Remax Time.
Thank you so much Michelle for joining us tonight. You're
listeningly Money presented by all Worth Financial on.
Speaker 4 (28:42):
Fifty five KRC, the talk station.
Speaker 1 (28:49):
You're listening to Simply Money presented by all Worth Financial
and Bob Sponseller along with Brian James. Do you have
a financial question you'd like for us to answer. There
is a red button you can click if you're listening
listening to the show on the iHeart app. Simply record
your question and it will come straight to us. All right,
Brian ron in Mainfield said Mainville pardon me, says, I
(29:12):
keep hearing about tax smart withdraw sequencing, but what happens
to that plan when markets fall early during retirement?
Speaker 4 (29:21):
Great question, great question.
Speaker 2 (29:23):
So actually that the market's falling can play a role
in tax smart investing.
Speaker 4 (29:26):
So it's unfortunate. We never want them to fall. We
never really want.
Speaker 2 (29:29):
To be able to tax loss harvest but or tax
you know, take advantage of the stuff.
Speaker 4 (29:33):
We want things to go up, but it does happen.
Speaker 2 (29:35):
So tax smart withdrawal sequency this is the this is
the strategy of deciding which accounts are going to pull from.
Speaker 3 (29:40):
You have three flavors.
Speaker 2 (29:42):
Taxable, that's the one you get a ten ninety nine
beyond tax deferred as your ten ninety nine are or nothing.
Speaker 3 (29:47):
Tax free, which is your ROTH.
Speaker 2 (29:49):
So the goal being to minimize these taxes and extend
the portfolio life. So the the way that I would,
you know, ensure that this doesn't have too much of
an impact is to have done that kind of a
I know, this doesn't really help a whole lot for
somebody who may have just gone through it, but you know,
make sure you've got a few years worth of cash
or bond buffers, conservative type investments that you can tap into.
(30:09):
And as we've said all year long, this is the
time you got bills. Come do now or coming do soon?
Take that money off the table. You know you're going
to write a check in the next three six months
or whatever. The market's at a peak. Be happy that
you've got more money than you've ever had, assuming you
stayed invested. Pull that money off the table, and then
when the market turns down, be looking to do roth conversions.
You're going to own the same stuff in the wrath.
(30:30):
Don't worry about what the market's doing. Do it at
a time where the market is down, and then when
it inevitably swings back up, as it always does. That's
good that growth is going to happen from that point
on a in a tax free manner.
Speaker 4 (30:41):
So I hope that helps. Ryan.
Speaker 2 (30:41):
Let's move on to Mark in Kenwood, Marcus seeing more
and more references to something called behavioral and investing in
understanding our own biases and just kind of the psychological
side of things. Bob, what are the common blind spots
that you see even in our most disciplined investors.
Speaker 1 (30:58):
Well, Mark, actually he will to know what the most
common blind spot that we see is. And i'd be
interested on your in your take on this mine. And
this is really kind of gone up. We really didn't
used to see this over the last twenty five thirty years,
but I'll say over the next five to seven years.
Speaker 3 (31:18):
Political bias.
Speaker 1 (31:19):
You know, I think we all have we all have
these assumptions baked in, and I think it has to
do with which media resources we tend to engage in.
You know, I find more and more and more people
walk in just sure that depending on who's in the
White House or who's running the government, either great things
are gonna happen or the whole country's gonna, you know,
(31:43):
go down in flames. And the truth is, and we
talk about this all the time, Brian. If you go
back over seventy five eighty years and look at actual
returns of the market, you really got to let this
stuff go because the markets have performed almost identically in
spite of whether Democrats or Republicans are in office. I
(32:05):
think that's the most common blind spot that we're trying
to help people get over. What do you think about
this one? Because behavioral investing's, let's face it, it's behavior
that could truly, you know, move people off of success
of a long term financial plan.
Speaker 2 (32:22):
I don't think this is a new field, Bob, or
a new series of discoveries. I think you and I
have dealt with it for thirty years. It's just a
new It's just identifying, you know what people the reasons
that people make decisions. They've been making decisions this way
all along. We react to what we see and we
actually change, you know, if we Sometimes people investors will
take surveys and describe how they feel about things, and
(32:43):
then they behave in an entirely different manner. When it
comes down to it, money makes people passionate. That makes
people make crazy decisions. So it's good to understand the
range of things you might feel when you're trying to
make a big decision, and that way you can kind
of more clearly step back and see the forest for
the trees rather than.
Speaker 4 (32:59):
Just zeroing in on the emotional.
Speaker 3 (33:00):
Side of things.
Speaker 1 (33:02):
All right, and in Cincinnati, this one's for you, Brian,
She says, I've noticed even professional money managers underperform the
major indices. What metrics beyond performance should investors really use
to judge a portfolio manager.
Speaker 2 (33:16):
Well, it depends on what you're what you're what you're
looking for in this relationship with your portfolio manager. If
if it's if it is nothing more than I have
a pile of money and I want to grow it
as much as I possibly can, well then uh, you
know that that might be the only goal you have.
Speaker 4 (33:30):
But when?
Speaker 2 (33:31):
But but I think realistically the answer is are they
paying attention to my tax situation? Portfolio growth is irrelevant
if or is not as impactful if it's happening without
regard to what somebody's ultimate tax situation is. Because all
of a sudden, we're giving money away to a to
an outside entity in the I R S and all
of a sudden, you know, not very tax efficient and
(33:51):
as well as financial planning, right, I think there's a
lot more to this. If you simply want a uh,
if you simply want a pile of index funds and
you know, just do that, don't pay anybody. But if
you you know, if you're good to go with you know,
if you're looking for more financial plan more educated decisions,
that's going to take a lot more of the of
the impact there.
Speaker 1 (34:12):
Coming up next, we want to make you aware of
a lesser known social security benefit that could impact some
of you out there. 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 Spondseller along with Brian James. If you're over
(34:35):
sixty two years of age, and you're still raising children
at home who are eighteen years or younger and their
dependents they're at home and you're thinking about how to
claim or time your social Security benefit claiming strategy, there
is a little known twist in the social security rules
that can meaningfully impact cash flow for families where older
(34:58):
parents are still per voting for minors. Brian, this doesn't
impact a ton of people, but it certainly impacts some
so I think it's important to take a few minutes
and touch on it.
Speaker 2 (35:09):
Yeah, so this is important because there are there. This
is not a loophole that we want people to rush
out and try to take advantage of. Right you're you're
the best case scenario. You're in the situation, weren't aware
of it. There might be somebody that you might be
able to benefit, But don't rush out and have a
child later in life just to tep into social security panicles.
I know that's what you were thinking, Bob. I'm sure
(35:30):
you have decided, you know what we could squeeze out
a little more. They're you know, they're all what could
go wrong? Anyway, Here's how this works. If you're again,
if you're if you're over sixty two, which means you.
Speaker 4 (35:40):
Could file for Social Security.
Speaker 2 (35:42):
That's true anyway, regardless of this, that's just the earliest
age you can. But also if you file at that age,
you're taking the lowest amount. This is still uh, you
still have a social Security timing decision. But if you're
in that situation and it makes sense to uh, you know,
to go ahead and turn that on, then you're gonna
get a benefit for if you're still raising children who
are eight or younger. Now, obviously this is not a
very common situation for somebody of a later age just
(36:05):
to have children their own children.
Speaker 4 (36:07):
But what happens more and more, and I think this is.
Speaker 2 (36:09):
Who this is really targeted at, is people who may
have adopted perhaps their own grandchildren because just because of
tough circumstances, or maybe adopted later in life, that kind
of thing. So let's not overly simplify things. Obviously a
lot of moving parts, but yeah.
Speaker 1 (36:26):
Well the benefit amount, just to put it out there,
it can be up to about half of the parent's
primary insurance amount, you know, in other words, what they
would get at full retirement age. And in the case,
you know, because we're talking about older folks or relatively
older folks that are raising potentially young kids, if the
parent happens to pass away, that child survivor benefit can
(36:49):
be up to about seventy five percent of the parent's benefit.
So again, for those that are in that situation, it's
at least something to think about, because if you're you know,
vacillating between ten taking benefits between at sixty two or
sixty four, sixty five and you're in this situation. This
really can potentially tip the scales on when you take
(37:09):
your Social Security benefits, so we just want to make
people aware of it.
Speaker 2 (37:12):
Yeah, average check on this is eight hundred to one
thousand bucks a month, so it is significant money. But
that does not mean you should file for Social Security early.
There's still a puzzle to put together here, your own
social Security retirement benefits, the dependent benefits side of things,
as well as the survivorship should something happen to you
for your spouse, that all of it fits together, you've
got to make this decision in concert with all the
(37:33):
other things.
Speaker 1 (37:35):
Thanks for listening tonight. You're listening to Simply Money, presented
by all Worth Financial on fifty five KRC, the talk
station
Simply Money News
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