December 29, 2025 • 39 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian take a deep dive into what really happened in 2025 — and why the investing fundamentals they shared all year long held up once again. From President Trump’s return and a new wave of tariffs, to a Federal Reserve caught between inflation and politics, to a stock market rally that rewarded patient investors — they told you what to expect, and they were right. Hear what mattered most, what moved the markets, and what lessons investors should take into 2026. Plus, the rise of real financial resolutions, how to measure if your money actually did its job this year, and your smart money questions answered.
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Episode Transcript
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Speaker 1 (00:04):
Tonight, why the fundamentals of investing stayed true despite the
curveballs twenty twenty five through at us you're listening to
Simple Money, presented by all Worth Financial Umbops fond Seller
along with Brian James Well. Twenty twenty five started with
a new presidential administration, a trade war that shook markets
a bit in April, a federal Reserve trying to calibrate
(00:27):
inflation and growth in a rally that tested investor confidence.
We're going to break it all down. What moved markets
this year, what mattered most of your portfolio, and more importantly,
what you should take with you into twenty twenty six.
Brian take us through the beginning of a walk through
twenty twenty five.
Speaker 2 (00:49):
Well, it's hard not to start with this administration, so
let's start with Trump and tariffs. Twenty twenty five first
kicked off with, of course, the return of Donald Trump
for his second term to the White House back in January.
And this definitely, of course, wasn't just a political headline.
The markets felt it. Markets moved with with the the
kind of the changing winds of a new administration, uh
(01:10):
so America first early on, and that turned into tariffs
in April that hit hit our trading partners, and that
shifted a whole lot of economic expectations around the world.
Speaker 3 (01:19):
It wasn't just here, basically reshuffled a lot of.
Speaker 2 (01:22):
Relationships that that had existed for a long time, kind
of with the assumption and nothing would ever change. So
we saw tariffs slapt on goods from India other countries.
And then April second, remember remember Liberation Day, Well that was.
Speaker 3 (01:35):
Yeah, I remember, it was kind of a big headline.
Speaker 2 (01:39):
And uh and we may or may or may not
have had answered a few questions on from the clients who.
Speaker 3 (01:44):
Were worried about the market activity there.
Speaker 2 (01:45):
Global markets were rattled and markets hit hit, but were
hit pretty hard at that time.
Speaker 1 (01:51):
Well, and let's go back to what we were talking
about at that time. I mean, shoot, people were talking
about all kinds of things, going back to a history
lesson on the smooth Holly tariffs, thinking that this was
gonna be economic arm again. And yes, it was certainly
unsettling there for a few days and weeks. But you
know what we priests at the time, you know, and
(02:13):
and and it it it has at least to now
born out to be true that you know, the president
used this as a negotiating tactic, as he often does
and has done. The markets, as we all know, they
hate uncertainty. They didn't know what to think of that
big long list of tear the tariff board and the
percentages and all that. And when the market is uncertain,
(02:34):
when people don't know what to expect, the impulse is
to just sell, sell, sell, and wait for things to
quote unquote calm down, and Brian. For folks that did that,
sell first and not stick with a you know, long term, diversified,
well constructed plan. They paid a price here because markets
recovered as they always do, you know, irrespective of which
(02:58):
parties in the White House and all that. Because at
the end of the day, corporate growth profits is the
mother's milk of the stock market, and it has proven
that yet again to be the case in twenty twenty five.
Speaker 2 (03:11):
Yeah, and I feel like we have so many examples
of that, you know, over the last several decades.
Speaker 3 (03:16):
My feeling, Bob, after all of this.
Speaker 2 (03:18):
You know, I've been doing this since the late nineties,
and the market period that I was raised on was
more like the eighties and nineties when I was a
kid paying attention to what my grandparents and my parents
were doing with investments and things, and that, to me,
that was a period the eighties and the nineties was
that was a period where really nothing bad happened, and
I think a lot of people got to the point
where where we assumed that that was the norm, the
(03:40):
really nothing bad is ever supposed to happen, and we
just go on and things grow and we don't have
to worry about anything.
Speaker 3 (03:46):
And then all of a sudden we got slapped in
the face with.
Speaker 2 (03:48):
The original Internet bubble bursting the nine to eleven, the
recession related to that, and so forth, and then ever
since then, every few years it's been some kind of
absolutely chaotic situation with two thousand and eight and then
we had COVID and a lot of other things in
between there, but it was very, very different from the
eighties and the nineties. I think that was just the
last several decades have just been a reminder that there
(04:08):
is going to be chaos. The market can handle it right.
So over the shorter term periods during those years, the
right thing was never to go run away and hide, right,
because that's a two step transaction. If you're going to
try to time it, you got to get out at
the right time, but then you got to get back in,
so you basically got to be back in a thousand
on those decisions, otherwise you wind up wasting your time.
And that's what happened to anybody who panicked in April
(04:31):
when we had this new regime come in and new
thoughts on tariffs, good, bad, or indifferent, and the world
had to get used to that idea, and the market
immediately took about a fifteen percent hit, very very quickly,
very hard, and eventually the dust settled. And this reminds
me a little bit of COVID, because COVID came out
of the blue when February of twenty twenty came completely
(04:51):
out of left field and had everybody panicked.
Speaker 3 (04:54):
But nobody's really paying attention to the market.
Speaker 2 (04:55):
But the market took the biggest hit over the shortest
period of time that it ever had. But obviously, eventually
the dust settled and people calmed down and realized that
at the end of the day, profits still matter, and
the world still turns, and I still have to run
to the grocery store at the end of the day,
and those grocery store workers are going to get paid
because I was there. They're going to go deal with
their families and things that they need to do, and
(05:16):
dollars keep moving in a circle, and the market and
the economy keep moving forward.
Speaker 1 (05:20):
Now that's an excellent historical perspective. I mean, going back
to the eighties and nineties too, Remember that interest rates
were just in a nice steady drop for twenty to
thirty years. There was really no disruption there, you know,
to speak of, and that game has certainly changed. We've had,
you know, movements up and rates, and then now we're
(05:40):
moving back down a lot of that in response to
COVID and other shocks to the system. So yeah, I mean,
corporate profits always find a way. The way capital gets
injected into the market is always a little bit different.
Sometimes it's government stimulus, sometimes it's cheap money. Sometimes it's speculation.
(06:02):
But just a couple of other historical points, and this
is stuff we drive home all the time, Brian, going
back to nineteen twenty six. These are for folks on
either side of the aisle that think that one party
or another is going to absolutely destroy this economy. Going
back to nineteen twenty six, Republicans have had control of
the White House and Congress in thirteen of those years.
(06:25):
The Democratic Party has had total control again White House,
both houses of Congress for thirty four years, which party
coincided with greater returns from the S and P five
hundred neither And according to Dimensional Fund Advisors, who does
this research and updates it every year, average returns when
(06:46):
either party has complete control of the government is about
fourteen percent average rate of returns for both scenarios. And
the lesson here is we got to leave our politics
at the door, whether or not we agree with certain
policy decisions. As you've already stated and stated very well, Brian,
the markets always find a way, human beings find a way.
(07:09):
We continue to grow, we continue to work, and the
economy marches on. In twenty twenty five was yet another
example of that happening in space.
Speaker 2 (07:20):
Yeah, publicly traded companies have a red playbook and a
blue playbook. They don't care who is in office. They
just want to know what place to run. And I
think back to the inauguration and looking right behind President
Trump and who was sitting there in the front row.
It was all the leaders of the tech companies, which
are the drivers of the universe. The universe's economy right now,
(07:41):
in all of which had been labeled for a long
time to be rather left leaning and only supporting of
democratic presidents and so forth, and then that's obviously not true.
Speaker 3 (07:51):
They support themselves.
Speaker 2 (07:52):
Let's just be super cynical about this and realize that
they are there to support their companies and they're there
to find opportunities.
Speaker 3 (07:59):
What's the thing we can do.
Speaker 2 (08:00):
Well, if it's a Republican president, good, let's go kiss
his butt for a while and we'll get what we need.
And then if we got to pull out the blue
playbook after the midterm, so be it.
Speaker 3 (08:08):
That's what we'll do.
Speaker 2 (08:09):
I don't like that, but that is how things run,
and that's that helps me sleep at night and exhale
when the market gets a little great.
Speaker 1 (08:16):
That's exactly right. All right, Well, let's talk about the
federal reserve. A whole lot of discussion about the Federal
reserve in twenty twenty five. You know, in this ongoing
discussion about Fed independence and dual mandate between inflation and growth,
the Fed obviously is always trying to do something that's
never easy, and that's balance inflation or bring inflation down,
(08:38):
and then also look at employment numbers, and you know,
with with tariff uncertainty, policy uncertainty, they were just really
didn't know. Speaking of having a playbook, they really hadn't
had a playbook to go off of in a scenario
with these ongoing trade negotiations for decades, and you know,
they sat on their hands a little bit, and and
(09:00):
for good reason. I mean, they try to be data dependent.
They try to make decisions based on data, and when
you don't know what data is coming around the corner,
it's awfully hard to make FED decisions about interest rates.
It was an interesting year in.
Speaker 2 (09:14):
Fedland, for sure, you know, and it almost always is
anymore because but this was interesting because the FED almost
became and kind of is almost became kind of the
enemy of the White House. And we've seen a lot
of arguments play out in the media as things got
very political, and that's a new situation that we hadn't
seen before. What would let's let's go over what were
(09:38):
we talking about in twenty twenty five as it relates
to inflation. So really can't say how many times we've
talked about emergency funds. Right, make sure you've got emergency
savings in a high yield savings account. Interest rates are
still higher than they've been in decades. Yes, they've pulled
back a little bit, but just make sure you've got
a pile, you have oil in the engine. There needs
to be cash out there. Should something come out of
the blue and affect you your family and you'll need,
(10:00):
you know, a job loss or healthcare expenses, that kind
of thing, then you don't want that money invested because
the market can do anything at once at any given time,
and you want to make sure you've got that out there.
And again that high yield Daving's account that maybe you
were getting four and a half percent, even close to
five for a brief period there, it's now might be
under four because of where interest rates have moved sincent
that is still better. But regardless, don't worry about where
(10:22):
that money sits as long as you're getting some kind
of interest rate in and it does not need to
be invested. It should not be invested like your longer
your longer term investments as well.
Speaker 1 (10:31):
Now, excellent point and going back to your you know
prior points about just the volatility during twenty twenty five,
I me, we know we're going to have a return
to volatility at some point for some reason. We just
don't know when, and we don't know the fundamental cause.
And as a reminder, this is a mid term election year.
We have threats of an another government shut down potentially
(10:53):
coming in you know, less than sixty days. So there's
always a reason to your point, have fresh oil in
the tank here to allow yourself the time and the
flexibility to get through a period of short term volatility,
so you're not having to make decisions based on fear
or greed. And yeah, whether the interest rate on your
(11:18):
safe money is three point seven or four point one,
it's really immaterial. What we're talking about here is the
fundamental financial planning point of making sure that emergency fund
is filled for whatever your short term cash flow needs
and wants are in the event that we do get
some volatility in the markets, because as we talk about
(11:38):
all the time, Brian, it's not a matter of if,
it's a matter of when exactly.
Speaker 2 (11:43):
So let's always talk about the you know, the market,
of course, to kind of wrap this up. So barring
a catastrophe here in the next couple days, the S
and P five hundred is going to finish up for
the third year in a row. If you stayed in
the market after twenty twenty two, which was one of
the five worst years we've ever had, congratulations. If you
are able to ride that out, then you've seen, you know,
just about the worst the market can behave. Matter of fact,
(12:05):
the last five years have been a microcosm of what
the of the best of times and the worst of
times in terms of the market getting hammered and then recovering.
So you've got some You should be sitting at the
highest level of networth that you've ever had in your life.
So we always will offer this word of caution. Right,
Let's never get comfortable. There will be recessions, there will
be another market downturn. This stuff is coming. We just
don't know when. This is why you need a financial
(12:27):
plan and you need to have stress tested it. Here's
what it looks like if nothing bad ever happens again.
Here's what it looks like if I take a twenty
percent shot to the mouth here in the next few months,
is my plan still Okay?
Speaker 1 (12:36):
Here's the all Worth advice. The headlines will always change,
but long term market growth stays remarkably consistent. Stay invested,
stay disciplined, and trust the power of compounding economic growth
over the pull of short term emotion. As we look
toward twenty twenty six, more people are making financial resolutions
(12:58):
and this year it doesn't peer to just be taught.
We'll explain that next. You're listening to Simply Money, presented
by Allworth Financial on fifty five KRC, the talk station.
Speaker 4 (13:08):
All Worth Financial a registered investment advisory firm. Any ideas
presented during this program are not intended to provide specific
financial advice. You should consult your own financial advisor, tax consultant,
or a state planning attorney to conduct your own due diligence.
Speaker 1 (13:26):
You're listening to Simply Money, presented by Allworth Financial on
pop spond seller along with Brian Chains. If you can't
listen to Simply Money live every night, subscribe and get
our daily podcast. Just search Simply Money on the iHeart
app or wherever you find your podcast. Retiring in stages,
turning off dividend reinvestments and a do it yourself investor
(13:48):
wondering if it's time to maybe get a little bit
of help. Your questions are answered straight ahead at six
forty three. Well, Brian, this is the time of year
where everybody starts thinking about New Year's resids. But here's
what's interesting this year, financial resolutions are surging. According to
a recent survey or annual study done by our good
(14:10):
friends at Fidelity.
Speaker 2 (14:13):
Growing nom American's Bob, about sixty four percent are contemplating
a financial resolution for twenty twenty six. Now that's not shocking,
of course we're going to talk about resolutions. It's it's
pretty much New Years, that's the next holiday coming up.
That's up compared with last year. But the difference is
they're not just saying I want to manage money better.
They're really starting to think intentionally about what that means.
And so Vanguard has noticed this too. They're calling it
(14:34):
a financial resolution rebat because a lot of folks fell
short in twenty twenty five, Inflation hung around people spending
habitts slip. Maybe we're sticking to that budget from our
prior resolution, but instead of giving up those now coming
into twenty twenty six with a purpose and a plan,
at least according to Vanguard in Fidelity, even for individuals
more earning more than a quarter million dollars or you know,
(14:55):
with significant portfolios, this focus on intentional plans really echoes
what we've been preaching for decades now. Formally identified financial
goals drive real behavior. If I know the target that
I'm shooting at, I know exactly how to load my weapon.
And so what are these people focusing on. Well, for
a lot of people, according to the survey, it's just
the basics, right, These aren't shocking things. Emergency savings, you know,
(15:17):
making sure I've got my six, nine, maybe twelve months
worth of expenses saved up in a bank account, liquid investing,
in budgeting, and all this stuff matters at every wealth level,
especially budgeting. It's not just for getting by, it's for
keeping that margin in your plan, making sure you've got
room for err or room for things to happen, you
know that affect everybody, like the economy and the market
not cooperating, or things that might happen just just to
(15:39):
you and your family. We've got to make sure we've
got that buffer zone in there while still accomplishing all
those goals. And that's why it's great to hear that
these people are putting these resolutions in place to really
finally put some some skin in the game, really to
make sure their plans go the way they want.
Speaker 1 (15:54):
Well, Brian, you want to talk about starting with the basics,
just basic blocking and tackling. I'll give you a story
that happened been yesterday at a little Christmas family gathering
my one of my nephews, who if you saw that,
you you would not think this guy had the least
bit of interest in the stock market whatsoever. Uh plays
(16:14):
in a rock and roll band, you know, works odd
jobs to kind of support himself so he can chase
his dreams musically. And he walks up to me and says,
uncle Bob, I'm thinking about getting started with some investing.
He starts talking about day trading and crypto and all that,
and I'm like, dude, just let's let's focus on just
(16:36):
a broad diversified ETF exchange traded fund. Explained to him
in about thirty seconds what that is. And then I
explained to him in another thirty seconds where a wroth
ira is. And I said, just put put some money
in a broad based, one hundred percent stock ETF broadly
diversified and learn about what a wroth ira is, and
keep doing that, uh for about thirty years and you'll
(16:58):
thank me later. And he looked at me and he says,
that sounds like great advice. I'm gonna I'm gonna do that.
So you know, to the point we're bringing up, people
are looking at this stuff, and I think it's good
that folks are starting to get educated and to your point,
if they actually sit down and do a financial plan
and attach some meaningful goals to what they're trying to do.
(17:18):
And as we talk about all the time, know your why.
If you know your why, you're more prone to follow
a more disciplined approach. So there's a little anecdotal evidence
for you yesterday of just the conversation I had with
a young lad at a Christmas party.
Speaker 2 (17:34):
You know, And I have a feeling you're not the
only one, because obviously lots of families are spending time
together over the holiday season, and these topics come up
at the dinner table, and they come up, you know,
just just in the course of normal conversation. I did
have a meeting myself with the with a young lady
last week who was the college age's daughter of a
client of mine, and it was just time for her
to start. She had some investments they had set up
(17:55):
for a while ago for but she's caught caught wind
of roth IRA's and maybe that's a good idea now
that she's got earned income, you know, sporadically throughout the
year as she's in school, of course. But we had
a long conversation about why is roth important and why,
you know, one of the things I told her was,
you're probably you probably should banish the notion of doing
anything but ROTH in your retirement plans for at least
probably the first ten years of your career. Hopefully you
(18:18):
get to a point where you're in a you're in
an income tax bracket where it becomes prohibitive.
Speaker 3 (18:21):
I hope that happens for you, But.
Speaker 2 (18:23):
I'm going to throw out there that that doesn't kick
in really till you're making a quarter million dollars a year.
If I'm being honest, you know that that that that's
kind of a pulled out of the air number. But
the point is it's a lot higher than people think.
When you're talking about somebody who's in their twenties with
forty years of potential tax free growth, I'd be plowing
money into that roth Ira.
Speaker 3 (18:39):
This is what I told her.
Speaker 2 (18:41):
You know, even if you never do it again, well
maybe once you hit thirty, you're married. You're both making
a high income. Maybe you maybe you're kind of forced
to do pre tax Well, you will have spent your
twenties that entire decade building up a core of tax
free money that's never going to be taxed again. And
you may never afford you may never put another dime
into that, but that will grow for forty years, and
(19:01):
that's going to put you in a great position. And
she did go down the path, of course, and I
understand why she went down, briefly, the path of crypto
and all this speculative stuff.
Speaker 3 (19:08):
It's hard to get away from it.
Speaker 2 (19:09):
And it really does seem like I can take a
small pile of money and turn it into a giant
pile of money very quickly.
Speaker 1 (19:15):
Well, let's face it, because just like weight loss or
you know, ozempic drugs or anything else, that's all these
kids see on social media. They see quick hits, quick results,
you know, get get me there tomorrow, and you know
when in reality, it's just spend less than you make
do it for several years. And the great thing about
(19:35):
the evolution of our industry buying is people can put
money into broadly diversified funds with very low season expenses,
and to your point, really leverage that you know what
out of those raw thiras and get a great early
start and really accumulate some serious wealth in a pretty
short period of time.
Speaker 3 (19:54):
Yeah, that's absolutely true.
Speaker 1 (19:55):
And no.
Speaker 2 (19:55):
Now the thing I did find encouraging about this too though,
And I've had a couple of interactions like this. Some
people come in talking about that stuff be for the
reasons you mentioned, but it doesn't take much. A lot
of them are coming in going it doesn't smell right.
Please explain to me why it doesn't. And I'm not
saying crypto is a bad investment. It's a real thing.
It's out there. It just doesn't have a clear place
in a predictable portfolio type of thing. So build the core,
(20:16):
play with that stuff on the outside.
Speaker 1 (20:18):
Here's the all Worth Advice resolutions, fade real plans stick.
Start the year not with wishful thinking, but with a measurable,
intentional financial strategy. Did your money do what it needed
to do in twenty twenty five? We'll explore that question next.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRCE the talk station. You're listening to
(20:44):
Simply Money presented by all Worth Financial on Bob Sponseller
along with Brian James. All most people, especially folks in
the media, look back at twenty twenty five and say,
how did the market perform? But here's a better question,
how do your money? Because unless you're one hundred percent
invested in the S and P five hundred and living
(21:05):
off of headlines, your money has a job to do.
Maybe that's income, maybe that's growth, Maybe that's a balance
of both. Maybe it's protection, charitable giving, or setting up
the next generation for success. And then this comes back
to focusing on your financial plan, not just data spewed
out from the financial media. So Brian, let's talk about it.
(21:28):
You know, how do we evaluate if our portfolio actually
delivered what it needed to in twenty twenty five.
Speaker 2 (21:35):
Yeah, a lot of people get hung up as we
spend thirty forty years of our working careers wanting to
watch the pile grow because we haven't planned on tapping
into it yet. It's just not that time of life,
and so we get ingrained in us that it's all
about growth, growth, growth, that's all that ever matters. Well,
you know, people who are retired to start to think
about that a little bit differently. And the question is
did my portfolio deliver the income I need it? So
(21:56):
let's kind of start with something basic but often gets overlooked,
which is just income. That's what we're trying to do
here in the first place. And in the first place,
I would also say, do you know what you need
to begin with a lot of people don't even have
that idea of what their budget is, what their actual
expenses are, so they can't really tell whether their portfolio
is going to do what they needed to do. They
just know whether it got bigger or smaller. So if
(22:19):
you are in retirement or close to it, the goal,
of course, isn't just returns, it's reliability of that stream
of income. Did you get the income you need? Did
you get the income you planned for? And again I'll
go back to did you plan for it in the
first place. So finally, this year we're talking about bond yields.
Speaker 1 (22:32):
Again.
Speaker 2 (22:33):
It's been decades since that was a thing, but bond
yields finally gave invassadors a chance to earn actual, real
interest off actual real bonds and CDs that they could
look at and go all right, this doesn't stink anymore.
It used to be that we ignored these things for
a very long time. When I started in this industry
in the late nineties, you could get six and a
half percent on a money market fund and that was
something you could actually build, you know. So if I
(22:53):
got you know, a couple hundred thousand dollars, I can
generate twelve to you know, a thousand bucks a month off,
just an income stream that I don't have to really
worry about the ups and downs. But the problem is,
you know, you might have been sitting in outdated funds
or maybe too much cash because you're you're accustomed to, well,
we just can't earn money on cash, it just sits there.
Then you might have missed an opportunity. So you know,
(23:14):
maybe that's something to take a look at. Make sure
that your portfolio is set for the interest rates we
currently have, not the ones we had ten years ago.
Speaker 1 (23:21):
Yeah, Brian, when you were getting that nine point sixty
five percent, I mean, inflation had to be pretty close
to that, right, And I think that's what a lot
of people, you know, fail to realize, is these interest
rates tend to move up and down based on the
inflation rate. So you got to look at real, real
rates of return meaning gross minus the inflation rate to
see if your money's you know, moving forward at all.
(23:43):
And that's even before we factor in taxes. But you know,
as I look here at the Bloomberg Aggregate Bond Index
for twenty twenty five, Now this is total return, not
just yield. I mean we're up over seven percent, which
is roughly twice the inflation rate for twenty twenty five.
So bond investors did pretty well this year. And it's
(24:03):
been a long time semple of years.
Speaker 2 (24:04):
Yeah, yeah, since we could say that for bond investors.
Actually was a good year to be in bonds. For one,
we remember why we own them.
Speaker 1 (24:11):
Yeah, And I think the overall point you're making, and
it's a good one, is, you know, you got to
ask yourself, does your financial plan still fit your life
in twenty twenty five and in twenty twenty six. A
plan made in back in twenty twenty one or twenty
eleven or what have you might be totally outdated now
because let's face it, and we've already talked about this
(24:33):
a lot today, a lot has changed. Did you switch jobs,
did you sell a business, did your kids move out
or move back in? Did you use more money than
you thought you were going to use and are you
sitting on a lot of extra cash that you don't need?
And the point here is your plans should evolve with
your life and your money should move with it. And
(24:55):
that could mean anything from rebalancing, checking the overall risk
level of your portfolio, maybe doing some slight shifting from
growth to income, uh, whatever matches your phase of life.
And that's really what you know. At least an annual
review of your comprehensive financial plan should help dictate moving forward.
Speaker 2 (25:16):
Yeah, and and again that's why this is a great
time of year. You know, don't don't spend the whole uh,
you know, a couple of weeks of lessoned activity watching
old Hallmark Christmas movies, Stop and think about what did
we accomplish this year? And really, where do I want
to go next year? This doesn't have to be a
huge production. If nothing else. If you're married, then sit
down with your spouse and just go over the big picture.
And then because every now and then we just have
(25:38):
to review, make sure everybody knows all the players know
exactly where the stuff is and and we are we
on a good path? Are we not on a good path?
And then what do we want going forward? You know,
set aside with what is actually happening maybe different than
what we want, and are we taking the right steps
now to get where we need? So your plan should
be moving with your life and it should be you know,
looking looking forward and in terms of where do we
(26:01):
want to go with this? And then for now you know,
another question to be looking at for this past year,
did we leave any money on the table? From a
tax perspective, this one is huge and you've pretty much
got about forty eight hours to do anything about it,
which is not a lot of.
Speaker 3 (26:13):
Time for this this current tax here. But if you're
a high earner, you're you're you're an.
Speaker 2 (26:18):
Investor with a large tax bile account. There are tools
out there that will help you reduce that tax burden. Right,
so we're talking about roth conversions. When the market fell
apart in April, that that should be a trigger and
let this let this be a lessoned if it didn't
occur to you, right, if you're somebody who you're a
turtle who pulled your head and in your shell and
didn't and just ignored the market, First of all, that's good,
lisha didn't panic, But remember there are opportunities. The silver
lining to a down market is an opportunity. For example,
(26:41):
in the roth conversion space. If I'm going to do
a Roth conversion, that's time of year, there is no seasonality.
It's when the market is down because we know the
market is going to recover as it always has. So
when it comes down, do the Roth conversion then, and
then you will when when the recovery does occur, that'll
be happening in a tax free space. But you got
to do the math, you got to do the numbers,
learn about it now so that you're prepared to pull
the trigger. You're not going to get two three weeks
(27:01):
to think and learn when that moment actually happens. Another
one at tax loss harvesting. If you have positions in
the red, then there are charitable giving strategies out there
like donor advised funds. In addition, you can take those
losses just sell them. On the other hand, if you
have gains, you can also move those dollars of appreciated
securities into donor advised funds. You're really under the gun
(27:22):
if you're going to try to do this by the
end of this tax here and you don't already have
an account set up. That's been a scramble for us
for these last couple as it always is, the holidays
are donor advised fund season. We end up setting those
up the second half of December. It seems like every
single year, if you're over seventy and a half, you
can do something called a qualified charitable distribution out of
your IRA.
Speaker 3 (27:42):
This will cover your RMD.
Speaker 2 (27:43):
And yes, as we always say, these ages don't match up,
you're eligible to do a qualified charitable distribution at the
age of seventy and a half, even though nowadays the
RMD age is now seventy three. So but regardless either way,
if there are charities that you support out there, there
are ways to do it. And the neatest thing about
a QUS it does not factor into your overall income.
I know that's kind of hard to grasp, but it
(28:05):
does not push you even though you took those net
money out. You get the deduction, but it also doesn't
count towards your income in terms of pushing you into
higher brackets.
Speaker 1 (28:12):
Yeah, and unfortunately, Brian, if that qualified charitable distribution is
a strategy, I see. You know, way too many people
not use and not even be aware of and it's
something we continue to talk about with clients and get
them off that habit. Folks over seventy seventy and a
half of just writing that check and putting it in
the offering plate at church, there's there's a way more
(28:34):
strategic and tax efficient way to go about it. Here's
the all Worth advice. The market doesn't know what you
need from your money, but your plans should. Don't just
measure performance in percentages of in terms of market returns.
Measure it in how well your money served your goals well,
from part time retirement to buffer ets. We're tackling your
(28:56):
smart money questions from across the tri State and it's
come up next. You're listening to Simply Money, presented by
all Worth Financial on fifty five KRC, the talk station.
You are listening to Simply Money because that by Allworth Financial.
I'm Bob's fondseller along with Brian James. Give a financial
(29:18):
question you'd like for us to answer. There's a red
button you can click while you're listening to the show.
If you're listening to the show on the iHeart app,
simply record your question and it will come straight to us.
Brad In Milford leads us off tonight, Brian. He says,
We've always focused on returns, but lately I'm worried about
how those returns show up. They come from dividends, interest,
(29:41):
capital gains. How do you design a portfolio around after
tax cash flow instead of just headline gross performance? Great question?
Speaker 2 (29:49):
Well, yeah, this is a great question and it's an
important one for a lot of people to understand. So
designing that portfolio around the after tax tax cash flow
that never requires we're kind of flipping the script here
a little bit in terms of thinking out performance, in
terms of thinking what did I earn? That the question
really should be what did I keep? And when did
the irs get paid on this? So there's really four
(30:11):
components here to a discipline framework for this. So first off,
classify your income by tax treatment, not asset class.
Speaker 3 (30:17):
There's really three flavors.
Speaker 2 (30:19):
There's pre tax income meaning you're going to pay ordinary
taxes on it, you've got tax free that's your WROTH,
and then anything else might be capital gains, which you
might be paying fifteen percent, maybe twenty if you're a
high income earner. The next thing is intentional asset location.
So now that we've talked about the different types of
tax treatment. Figure out what types of assets you have
that are a subject to those different treatments. You know,
(30:40):
if you've got tax efficient growth assets such as low
turnover equities, exchange traded funds, those kinds of things, then
those put you can safely put in a taxable account
if it's a If you have some investments out there
that are much more active, then we'll need to make
sure that we've got that in a sheltered account such
as a WROTH or a traditional where that activity is
(31:01):
not tacked. Also separate in your mind cash flow generation
from total return. We've spent we usually have spent thirty
forty years just looking at my pile of money.
Speaker 3 (31:09):
Did my pile grow? Did my pile grow?
Speaker 2 (31:11):
When we're going to start switching to income based investments,
then you need to kind of change your expectations and
understand that I'm not trying to grow my pile anymore.
I'm trying to use it to pay the bills. That
just changes the overall goals. And then finally figure out
the timing, not just the level of income. What time
of year do these do these things need to happen?
When should I take out that money. And the answer
is usually, if it's a lump sum, let's try to
(31:32):
do it when the market's at a peak. But as
Bob and I always say, if we know bills are
coming due and the markets at a peak, carve it out,
protect it from the market, and worry about the distribution later.
But if we're at a time where the market is
cooperating and we know we've got to pay that bill
in the next six to twelve months, pull the trigger
and get it out. Okay, So now we're going to
move on to Ron in Florence. Ron says they're planning
(31:52):
to retire in stages, you know, first some part time
work and then fully retire. So how do we just
investment risk when that income fail kind of gradually instead
of stopping all at once.
Speaker 3 (32:02):
That's a great question. This is kind of the very
thoughtful of run.
Speaker 1 (32:05):
Now. That's a good one, and Ron, I would my
first answer is listen closely to Brian's answer to Brad's
question that he just gave, because he gave a lot
of good points there to consider when when doing portfolio construction.
But your question, specifically, I think relates to risk, and
again it comes back to when you need that money.
(32:26):
And I love the fact that you're retiring in stages
part time work all that, I think it's important to
just have a good cash flow plan in place, make
sure you and your spouse are aware of what your
income needs and wants are and when, and then factor
in as much as you can you know what your
part time income is gonna be, and then adjust that
(32:46):
emergency fund accordingly. And then to the extent that that
portfolio needs to deliver you know, regular monthly return or income,
even if that income is going to change, and adjust
in stages. Make sure that the asset allocation is adjusted
as well. Because what we're talking what I think you're
talking about here without seeing your entire picture, is it's
(33:10):
time to just gradually take the gas off a little
bit in terms of being one hundred percent in accumulation
mode and start to shift things a little bit to
some things that can both serve as an emergency fund
and deliver some consistent monthly income without being subjected to
huge market volatility. Hope that helps Sam in Batesville, Indiana,
(33:34):
says Brian. We've always reinvested dividends automatically. At what point
does it make sense to start using portfolio income instead.
Speaker 3 (33:44):
Well, I think that this will be all of a sudden.
Speaker 1 (33:47):
This is a lot of income questions, a lot of
everybody's thinking about income.
Speaker 4 (33:51):
This.
Speaker 2 (33:51):
I wonder if these people all meet for breakfast at
a Bob Evans somewhere, agree, what questions are we setting
in today?
Speaker 3 (33:57):
Anyway? Yeah, I mean, first off, I would all I
would say, you don't.
Speaker 2 (34:00):
You don't have to it just because you need a
steady stream of injection into your checking account to pay
the bills.
Speaker 3 (34:06):
You've reached that point, you don't.
Speaker 2 (34:08):
It doesn't have to come from dividends, so at least
not right away, you know.
Speaker 3 (34:13):
There, I would say, at.
Speaker 2 (34:14):
The point is when you need to pay the bills,
when you get to a point where you say, I'm
backing off on my work and I'm therefore gonna need to,
you know, to kind of come up with another income stream,
I would look at it as an option.
Speaker 3 (34:26):
First off.
Speaker 2 (34:27):
First option is, okay, what if I leave everything alone
and I simply, as Sam mentions, I simply stop reinvesting
my dividends and have them sent directly electronically to my
checking account. That is a function that your broker should
be able to handle for you, which simply means flipping
a couple of switches inside your account to sport it
over into your checking account whenever those dividends pay. Might
be monthly, might be quarterly, but whatever, and see if
(34:48):
that will pay the bills. Some people do that, you know,
at least in the first year or two of retirement,
especially when maybe I'm not fully retired, but I've just
backed off a little bit, I'm working less or whatever,
and I need to fill a gap a little while.
It might be as easy as just having that extra
bit of injection of cash into the account. Try that
for a while, and then beyond that you can start
to look at systematic sales of investments because you may
(35:10):
need that when you completely You probably will at some point,
and that allows you to maintain a little bit of
a growth stance, but also taking advantage of dividends. So
let's see if David and Zena has a question about income,
he's talking about he's a DIY investor, but the decisions
are getting bigger. So, Bob, how do you know when
complexity has crossed the line from being manageable in the
(35:31):
DIY space to kind of risky Because the questions got bigger.
Speaker 1 (35:35):
Well, David, and I'll say Brian as well. You know,
I don't know about you, but over the years, you know,
folks that are successful do it yourself investors, they tend
to come in looking for some health help under either
one or both scenarios. One is, they know their portfolio
is really growth oriented because that's what's fueled the tremendous
(35:56):
growth in wealth, and they don't have the means or
the way to do a good stress test of the
risk of their portfolio. That tends to be one reason
people come in, and then they don't they know that
if they just you know, start turning over pieces of
their portfolio, they're just going to expose their portfolio capital gains.
The other reason people come in is when they you know,
(36:16):
perhaps they listen to the show and we talk all
the time about some of these tax strategies and they're
sitting there thinking, I've never done any of that, I've
not even thought of that. I'm probably missing the boat
in terms of tax efficiencies. So, you know, those would
be the two things, the overall risk exposure of your
portfolio and then really taking maximum advantage of some of
(36:36):
the tax strategies that are out there all right. Coming
up next, I've got my two cents. A couple of
factoids about gold. You're listening to Simply Money, presented by
all Worth Financial on fifty five KRC, the talk station.
You're listening to Simply Money, You've said by all Worth
Financial Bobs Fonseeller along with Brian Jane. Well, Brian, I
(37:01):
know you're a bit of a history buff and I
am as well. I came across a couple of fun
facts here about gold. I mean, let's face it, gold's
been in the headlines this year. It's up almost seventy percent,
you know here in five in twenty twenty five. But
I thought it'd be interesting to take a look at
what does that actually mean. You know, when we take
a look at our national debt. As we all know,
(37:22):
we're about thirty eight trillion dollars in debt in the
United States and that.
Speaker 3 (37:26):
Number one we owe money?
Speaker 1 (37:28):
Wait what, yeah, we we do. You know it's up
to you to pay it. But anyway, I found this,
I found this a little bit interesting. And this is
assuming that we're able to track where all the gold is.
But supposedly the US government is sitting on almost two
hundred and sixty two million troy ounces of gold. We're
(37:48):
the largest gold holder by a bunch, you know, of
any country in the world, next to Germany, which which
holds less than half as much gold as the United
States does. But here's the point I want to make.
Due to a statutory you know law going back to
nineteen seventy three, the government has to value the book
(38:09):
value of that gold at only forty two dollars and
twenty two cents an ounce, meaning that I just found
a trillion dollars. Brian. If you value our current gold holdings,
it's worth over a trillion dollars when the government's only
carrying it a book value of forty two billion. We
just reduced the national debt by over a trillion dollars, Brian.
Speaker 3 (38:32):
Look at you. It's own rate news.
Speaker 2 (38:34):
Going into its twenty six day too, Bob, good job.
What's only Monday, You're early in the week. I'm quick contest.
The federal government has to value it at forty two
dollars of per ounce. That translates to forty five hundred dollars,
which is the actual price about now. So we are
(38:54):
well well well under in terms of how we value
that now why this isn't a bigger headline.
Speaker 3 (38:58):
Maybe it will be after Bob mentioned it.
Speaker 1 (39:02):
Thanks for listening tonight Tomorrow we help you ensure that
you own your money and not the other way around.
You've been listening to. Simply money, was noted by all
Worth Financial on fifty five KRC, the talk station
Tonight, why the fundamentals of investing stayed true despite the
curveballs twenty twenty five through at us you're listening to
Simple Money, presented by all Worth Financial Umbops fond Seller
along with Brian James Well. Twenty twenty five started with
a new presidential administration, a trade war that shook markets
a bit in April, a federal Reserve trying to calibrate
(00:27):
inflation and growth in a rally that tested investor confidence.
We're going to break it all down. What moved markets
this year, what mattered most of your portfolio, and more importantly,
what you should take with you into twenty twenty six.
Brian take us through the beginning of a walk through
twenty twenty five.
Speaker 2 (00:49):
Well, it's hard not to start with this administration, so
let's start with Trump and tariffs. Twenty twenty five first
kicked off with, of course, the return of Donald Trump
for his second term to the White House back in January.
And this definitely, of course, wasn't just a political headline.
The markets felt it. Markets moved with with the the
kind of the changing winds of a new administration, uh
(01:10):
so America first early on, and that turned into tariffs
in April that hit hit our trading partners, and that
shifted a whole lot of economic expectations around the world.
Speaker 3 (01:19):
It wasn't just here, basically reshuffled a lot of.
Speaker 2 (01:22):
Relationships that that had existed for a long time, kind
of with the assumption and nothing would ever change. So
we saw tariffs slapt on goods from India other countries.
And then April second, remember remember Liberation Day, Well that was.
Speaker 3 (01:35):
Yeah, I remember, it was kind of a big headline.
Speaker 2 (01:39):
And uh and we may or may or may not
have had answered a few questions on from the clients who.
Speaker 3 (01:44):
Were worried about the market activity there.
Speaker 2 (01:45):
Global markets were rattled and markets hit hit, but were
hit pretty hard at that time.
Speaker 1 (01:51):
Well, and let's go back to what we were talking
about at that time. I mean, shoot, people were talking
about all kinds of things, going back to a history
lesson on the smooth Holly tariffs, thinking that this was
gonna be economic arm again. And yes, it was certainly
unsettling there for a few days and weeks. But you
know what we priests at the time, you know, and
(02:13):
and and it it it has at least to now
born out to be true that you know, the president
used this as a negotiating tactic, as he often does
and has done. The markets, as we all know, they
hate uncertainty. They didn't know what to think of that
big long list of tear the tariff board and the
percentages and all that. And when the market is uncertain,
(02:34):
when people don't know what to expect, the impulse is
to just sell, sell, sell, and wait for things to
quote unquote calm down, and Brian. For folks that did that,
sell first and not stick with a you know, long term, diversified,
well constructed plan. They paid a price here because markets
recovered as they always do, you know, irrespective of which
(02:58):
parties in the White House and all that. Because at
the end of the day, corporate growth profits is the
mother's milk of the stock market, and it has proven
that yet again to be the case in twenty twenty five.
Speaker 2 (03:11):
Yeah, and I feel like we have so many examples
of that, you know, over the last several decades.
Speaker 3 (03:16):
My feeling, Bob, after all of this.
Speaker 2 (03:18):
You know, I've been doing this since the late nineties,
and the market period that I was raised on was
more like the eighties and nineties when I was a
kid paying attention to what my grandparents and my parents
were doing with investments and things, and that, to me,
that was a period the eighties and the nineties was
that was a period where really nothing bad happened, and
I think a lot of people got to the point
where where we assumed that that was the norm, the
(03:40):
really nothing bad is ever supposed to happen, and we
just go on and things grow and we don't have
to worry about anything.
Speaker 3 (03:46):
And then all of a sudden we got slapped in
the face with.
Speaker 2 (03:48):
The original Internet bubble bursting the nine to eleven, the
recession related to that, and so forth, and then ever
since then, every few years it's been some kind of
absolutely chaotic situation with two thousand and eight and then
we had COVID and a lot of other things in
between there, but it was very, very different from the
eighties and the nineties. I think that was just the
last several decades have just been a reminder that there
(04:08):
is going to be chaos. The market can handle it right.
So over the shorter term periods during those years, the
right thing was never to go run away and hide, right,
because that's a two step transaction. If you're going to
try to time it, you got to get out at
the right time, but then you got to get back in,
so you basically got to be back in a thousand
on those decisions, otherwise you wind up wasting your time.
And that's what happened to anybody who panicked in April
(04:31):
when we had this new regime come in and new
thoughts on tariffs, good, bad, or indifferent, and the world
had to get used to that idea, and the market
immediately took about a fifteen percent hit, very very quickly,
very hard, and eventually the dust settled. And this reminds
me a little bit of COVID, because COVID came out
of the blue when February of twenty twenty came completely
(04:51):
out of left field and had everybody panicked.
Speaker 3 (04:54):
But nobody's really paying attention to the market.
Speaker 2 (04:55):
But the market took the biggest hit over the shortest
period of time that it ever had. But obviously, eventually
the dust settled and people calmed down and realized that
at the end of the day, profits still matter, and
the world still turns, and I still have to run
to the grocery store at the end of the day,
and those grocery store workers are going to get paid
because I was there. They're going to go deal with
their families and things that they need to do, and
(05:16):
dollars keep moving in a circle, and the market and
the economy keep moving forward.
Speaker 1 (05:20):
Now that's an excellent historical perspective. I mean, going back
to the eighties and nineties too, Remember that interest rates
were just in a nice steady drop for twenty to
thirty years. There was really no disruption there, you know,
to speak of, and that game has certainly changed. We've had,
you know, movements up and rates, and then now we're
(05:40):
moving back down a lot of that in response to
COVID and other shocks to the system. So yeah, I mean,
corporate profits always find a way. The way capital gets
injected into the market is always a little bit different.
Sometimes it's government stimulus, sometimes it's cheap money. Sometimes it's speculation.
(06:02):
But just a couple of other historical points, and this
is stuff we drive home all the time, Brian, going
back to nineteen twenty six. These are for folks on
either side of the aisle that think that one party
or another is going to absolutely destroy this economy. Going
back to nineteen twenty six, Republicans have had control of
the White House and Congress in thirteen of those years.
(06:25):
The Democratic Party has had total control again White House,
both houses of Congress for thirty four years, which party
coincided with greater returns from the S and P five
hundred neither And according to Dimensional Fund Advisors, who does
this research and updates it every year, average returns when
(06:46):
either party has complete control of the government is about
fourteen percent average rate of returns for both scenarios. And
the lesson here is we got to leave our politics
at the door, whether or not we agree with certain
policy decisions. As you've already stated and stated very well, Brian,
the markets always find a way, human beings find a way.
(07:09):
We continue to grow, we continue to work, and the
economy marches on. In twenty twenty five was yet another
example of that happening in space.
Speaker 2 (07:20):
Yeah, publicly traded companies have a red playbook and a
blue playbook. They don't care who is in office. They
just want to know what place to run. And I
think back to the inauguration and looking right behind President
Trump and who was sitting there in the front row.
It was all the leaders of the tech companies, which
are the drivers of the universe. The universe's economy right now,
(07:41):
in all of which had been labeled for a long
time to be rather left leaning and only supporting of
democratic presidents and so forth, and then that's obviously not true.
Speaker 3 (07:51):
They support themselves.
Speaker 2 (07:52):
Let's just be super cynical about this and realize that
they are there to support their companies and they're there
to find opportunities.
Speaker 3 (07:59):
What's the thing we can do.
Speaker 2 (08:00):
Well, if it's a Republican president, good, let's go kiss
his butt for a while and we'll get what we need.
And then if we got to pull out the blue
playbook after the midterm, so be it.
Speaker 3 (08:08):
That's what we'll do.
Speaker 2 (08:09):
I don't like that, but that is how things run,
and that's that helps me sleep at night and exhale
when the market gets a little great.
Speaker 1 (08:16):
That's exactly right. All right, Well, let's talk about the
federal reserve. A whole lot of discussion about the Federal
reserve in twenty twenty five. You know, in this ongoing
discussion about Fed independence and dual mandate between inflation and growth,
the Fed obviously is always trying to do something that's
never easy, and that's balance inflation or bring inflation down,
(08:38):
and then also look at employment numbers, and you know,
with with tariff uncertainty, policy uncertainty, they were just really
didn't know. Speaking of having a playbook, they really hadn't
had a playbook to go off of in a scenario
with these ongoing trade negotiations for decades, and you know,
they sat on their hands a little bit, and and
(09:00):
for good reason. I mean, they try to be data dependent.
They try to make decisions based on data, and when
you don't know what data is coming around the corner,
it's awfully hard to make FED decisions about interest rates.
It was an interesting year in.
Speaker 2 (09:14):
Fedland, for sure, you know, and it almost always is
anymore because but this was interesting because the FED almost
became and kind of is almost became kind of the
enemy of the White House. And we've seen a lot
of arguments play out in the media as things got
very political, and that's a new situation that we hadn't
seen before. What would let's let's go over what were
(09:38):
we talking about in twenty twenty five as it relates
to inflation. So really can't say how many times we've
talked about emergency funds. Right, make sure you've got emergency
savings in a high yield savings account. Interest rates are
still higher than they've been in decades. Yes, they've pulled
back a little bit, but just make sure you've got
a pile, you have oil in the engine. There needs
to be cash out there. Should something come out of
the blue and affect you your family and you'll need,
(10:00):
you know, a job loss or healthcare expenses, that kind
of thing, then you don't want that money invested because
the market can do anything at once at any given time,
and you want to make sure you've got that out there.
And again that high yield Daving's account that maybe you
were getting four and a half percent, even close to
five for a brief period there, it's now might be
under four because of where interest rates have moved sincent
that is still better. But regardless, don't worry about where
(10:22):
that money sits as long as you're getting some kind
of interest rate in and it does not need to
be invested. It should not be invested like your longer
your longer term investments as well.
Speaker 1 (10:31):
Now, excellent point and going back to your you know
prior points about just the volatility during twenty twenty five,
I me, we know we're going to have a return
to volatility at some point for some reason. We just
don't know when, and we don't know the fundamental cause.
And as a reminder, this is a mid term election year.
We have threats of an another government shut down potentially
(10:53):
coming in you know, less than sixty days. So there's
always a reason to your point, have fresh oil in
the tank here to allow yourself the time and the
flexibility to get through a period of short term volatility,
so you're not having to make decisions based on fear
or greed. And yeah, whether the interest rate on your
(11:18):
safe money is three point seven or four point one,
it's really immaterial. What we're talking about here is the
fundamental financial planning point of making sure that emergency fund
is filled for whatever your short term cash flow needs
and wants are in the event that we do get
some volatility in the markets, because as we talk about
(11:38):
all the time, Brian, it's not a matter of if,
it's a matter of when exactly.
Speaker 2 (11:43):
So let's always talk about the you know, the market,
of course, to kind of wrap this up. So barring
a catastrophe here in the next couple days, the S
and P five hundred is going to finish up for
the third year in a row. If you stayed in
the market after twenty twenty two, which was one of
the five worst years we've ever had, congratulations. If you
are able to ride that out, then you've seen, you know,
just about the worst the market can behave. Matter of fact,
(12:05):
the last five years have been a microcosm of what
the of the best of times and the worst of
times in terms of the market getting hammered and then recovering.
So you've got some You should be sitting at the
highest level of networth that you've ever had in your life.
So we always will offer this word of caution. Right,
Let's never get comfortable. There will be recessions, there will
be another market downturn. This stuff is coming. We just
don't know when. This is why you need a financial
(12:27):
plan and you need to have stress tested it. Here's
what it looks like if nothing bad ever happens again.
Here's what it looks like if I take a twenty
percent shot to the mouth here in the next few months,
is my plan still Okay?
Speaker 1 (12:36):
Here's the all Worth advice. The headlines will always change,
but long term market growth stays remarkably consistent. Stay invested,
stay disciplined, and trust the power of compounding economic growth
over the pull of short term emotion. As we look
toward twenty twenty six, more people are making financial resolutions
(12:58):
and this year it doesn't peer to just be taught.
We'll explain that next. You're listening to Simply Money, presented
by Allworth Financial on fifty five KRC, the talk station.
Speaker 4 (13:08):
All Worth Financial a registered investment advisory firm. Any ideas
presented during this program are not intended to provide specific
financial advice. You should consult your own financial advisor, tax consultant,
or a state planning attorney to conduct your own due diligence.
Speaker 1 (13:26):
You're listening to Simply Money, presented by Allworth Financial on
pop spond seller along with Brian Chains. If you can't
listen to Simply Money live every night, subscribe and get
our daily podcast. Just search Simply Money on the iHeart
app or wherever you find your podcast. Retiring in stages,
turning off dividend reinvestments and a do it yourself investor
(13:48):
wondering if it's time to maybe get a little bit
of help. Your questions are answered straight ahead at six
forty three. Well, Brian, this is the time of year
where everybody starts thinking about New Year's resids. But here's
what's interesting this year, financial resolutions are surging. According to
a recent survey or annual study done by our good
(14:10):
friends at Fidelity.
Speaker 2 (14:13):
Growing nom American's Bob, about sixty four percent are contemplating
a financial resolution for twenty twenty six. Now that's not shocking,
of course we're going to talk about resolutions. It's it's
pretty much New Years, that's the next holiday coming up.
That's up compared with last year. But the difference is
they're not just saying I want to manage money better.
They're really starting to think intentionally about what that means.
And so Vanguard has noticed this too. They're calling it
(14:34):
a financial resolution rebat because a lot of folks fell
short in twenty twenty five, Inflation hung around people spending
habitts slip. Maybe we're sticking to that budget from our
prior resolution, but instead of giving up those now coming
into twenty twenty six with a purpose and a plan,
at least according to Vanguard in Fidelity, even for individuals
more earning more than a quarter million dollars or you know,
(14:55):
with significant portfolios, this focus on intentional plans really echoes
what we've been preaching for decades now. Formally identified financial
goals drive real behavior. If I know the target that
I'm shooting at, I know exactly how to load my weapon.
And so what are these people focusing on. Well, for
a lot of people, according to the survey, it's just
the basics, right, These aren't shocking things. Emergency savings, you know,
(15:17):
making sure I've got my six, nine, maybe twelve months
worth of expenses saved up in a bank account, liquid investing,
in budgeting, and all this stuff matters at every wealth level,
especially budgeting. It's not just for getting by, it's for
keeping that margin in your plan, making sure you've got
room for err or room for things to happen, you
know that affect everybody, like the economy and the market
not cooperating, or things that might happen just just to
(15:39):
you and your family. We've got to make sure we've
got that buffer zone in there while still accomplishing all
those goals. And that's why it's great to hear that
these people are putting these resolutions in place to really
finally put some some skin in the game, really to
make sure their plans go the way they want.
Speaker 1 (15:54):
Well, Brian, you want to talk about starting with the basics,
just basic blocking and tackling. I'll give you a story
that happened been yesterday at a little Christmas family gathering
my one of my nephews, who if you saw that,
you you would not think this guy had the least
bit of interest in the stock market whatsoever. Uh plays
(16:14):
in a rock and roll band, you know, works odd
jobs to kind of support himself so he can chase
his dreams musically. And he walks up to me and says,
uncle Bob, I'm thinking about getting started with some investing.
He starts talking about day trading and crypto and all that,
and I'm like, dude, just let's let's focus on just
(16:36):
a broad diversified ETF exchange traded fund. Explained to him
in about thirty seconds what that is. And then I
explained to him in another thirty seconds where a wroth
ira is. And I said, just put put some money
in a broad based, one hundred percent stock ETF broadly
diversified and learn about what a wroth ira is, and
keep doing that, uh for about thirty years and you'll
(16:58):
thank me later. And he looked at me and he says,
that sounds like great advice. I'm gonna I'm gonna do that.
So you know, to the point we're bringing up, people
are looking at this stuff, and I think it's good
that folks are starting to get educated and to your point,
if they actually sit down and do a financial plan
and attach some meaningful goals to what they're trying to do.
(17:18):
And as we talk about all the time, know your why.
If you know your why, you're more prone to follow
a more disciplined approach. So there's a little anecdotal evidence
for you yesterday of just the conversation I had with
a young lad at a Christmas party.
Speaker 2 (17:34):
You know, And I have a feeling you're not the
only one, because obviously lots of families are spending time
together over the holiday season, and these topics come up
at the dinner table, and they come up, you know,
just just in the course of normal conversation. I did
have a meeting myself with the with a young lady
last week who was the college age's daughter of a
client of mine, and it was just time for her
to start. She had some investments they had set up
(17:55):
for a while ago for but she's caught caught wind
of roth IRA's and maybe that's a good idea now
that she's got earned income, you know, sporadically throughout the
year as she's in school, of course. But we had
a long conversation about why is roth important and why,
you know, one of the things I told her was,
you're probably you probably should banish the notion of doing
anything but ROTH in your retirement plans for at least
probably the first ten years of your career. Hopefully you
(18:18):
get to a point where you're in a you're in
an income tax bracket where it becomes prohibitive.
Speaker 3 (18:21):
I hope that happens for you, But.
Speaker 2 (18:23):
I'm going to throw out there that that doesn't kick
in really till you're making a quarter million dollars a year.
If I'm being honest, you know that that that that's
kind of a pulled out of the air number. But
the point is it's a lot higher than people think.
When you're talking about somebody who's in their twenties with
forty years of potential tax free growth, I'd be plowing
money into that roth Ira.
Speaker 3 (18:39):
This is what I told her.
Speaker 2 (18:41):
You know, even if you never do it again, well
maybe once you hit thirty, you're married. You're both making
a high income. Maybe you maybe you're kind of forced
to do pre tax Well, you will have spent your
twenties that entire decade building up a core of tax
free money that's never going to be taxed again. And
you may never afford you may never put another dime
into that, but that will grow for forty years, and
(19:01):
that's going to put you in a great position. And
she did go down the path, of course, and I
understand why she went down, briefly, the path of crypto
and all this speculative stuff.
Speaker 3 (19:08):
It's hard to get away from it.
Speaker 2 (19:09):
And it really does seem like I can take a
small pile of money and turn it into a giant
pile of money very quickly.
Speaker 1 (19:15):
Well, let's face it, because just like weight loss or
you know, ozempic drugs or anything else, that's all these
kids see on social media. They see quick hits, quick results,
you know, get get me there tomorrow, and you know
when in reality, it's just spend less than you make
do it for several years. And the great thing about
(19:35):
the evolution of our industry buying is people can put
money into broadly diversified funds with very low season expenses,
and to your point, really leverage that you know what
out of those raw thiras and get a great early
start and really accumulate some serious wealth in a pretty
short period of time.
Speaker 3 (19:54):
Yeah, that's absolutely true.
Speaker 1 (19:55):
And no.
Speaker 2 (19:55):
Now the thing I did find encouraging about this too though,
And I've had a couple of interactions like this. Some
people come in talking about that stuff be for the
reasons you mentioned, but it doesn't take much. A lot
of them are coming in going it doesn't smell right.
Please explain to me why it doesn't. And I'm not
saying crypto is a bad investment. It's a real thing.
It's out there. It just doesn't have a clear place
in a predictable portfolio type of thing. So build the core,
(20:16):
play with that stuff on the outside.
Speaker 1 (20:18):
Here's the all Worth Advice resolutions, fade real plans stick.
Start the year not with wishful thinking, but with a measurable,
intentional financial strategy. Did your money do what it needed
to do in twenty twenty five? We'll explore that question next.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRCE the talk station. You're listening to
(20:44):
Simply Money presented by all Worth Financial on Bob Sponseller
along with Brian James. All most people, especially folks in
the media, look back at twenty twenty five and say,
how did the market perform? But here's a better question,
how do your money? Because unless you're one hundred percent
invested in the S and P five hundred and living
(21:05):
off of headlines, your money has a job to do.
Maybe that's income, maybe that's growth, Maybe that's a balance
of both. Maybe it's protection, charitable giving, or setting up
the next generation for success. And then this comes back
to focusing on your financial plan, not just data spewed
out from the financial media. So Brian, let's talk about it.
(21:28):
You know, how do we evaluate if our portfolio actually
delivered what it needed to in twenty twenty five.
Speaker 2 (21:35):
Yeah, a lot of people get hung up as we
spend thirty forty years of our working careers wanting to
watch the pile grow because we haven't planned on tapping
into it yet. It's just not that time of life,
and so we get ingrained in us that it's all
about growth, growth, growth, that's all that ever matters. Well,
you know, people who are retired to start to think
about that a little bit differently. And the question is
did my portfolio deliver the income I need it? So
(21:56):
let's kind of start with something basic but often gets overlooked,
which is just income. That's what we're trying to do
here in the first place. And in the first place,
I would also say, do you know what you need
to begin with a lot of people don't even have
that idea of what their budget is, what their actual
expenses are, so they can't really tell whether their portfolio
is going to do what they needed to do. They
just know whether it got bigger or smaller. So if
(22:19):
you are in retirement or close to it, the goal,
of course, isn't just returns, it's reliability of that stream
of income. Did you get the income you need? Did
you get the income you planned for? And again I'll
go back to did you plan for it in the
first place. So finally, this year we're talking about bond yields.
Speaker 1 (22:32):
Again.
Speaker 2 (22:33):
It's been decades since that was a thing, but bond
yields finally gave invassadors a chance to earn actual, real
interest off actual real bonds and CDs that they could
look at and go all right, this doesn't stink anymore.
It used to be that we ignored these things for
a very long time. When I started in this industry
in the late nineties, you could get six and a
half percent on a money market fund and that was
something you could actually build, you know. So if I
(22:53):
got you know, a couple hundred thousand dollars, I can
generate twelve to you know, a thousand bucks a month off,
just an income stream that I don't have to really
worry about the ups and downs. But the problem is,
you know, you might have been sitting in outdated funds
or maybe too much cash because you're you're accustomed to, well,
we just can't earn money on cash, it just sits there.
Then you might have missed an opportunity. So you know,
(23:14):
maybe that's something to take a look at. Make sure
that your portfolio is set for the interest rates we
currently have, not the ones we had ten years ago.
Speaker 1 (23:21):
Yeah, Brian, when you were getting that nine point sixty
five percent, I mean, inflation had to be pretty close
to that, right, And I think that's what a lot
of people, you know, fail to realize, is these interest
rates tend to move up and down based on the
inflation rate. So you got to look at real, real
rates of return meaning gross minus the inflation rate to
see if your money's you know, moving forward at all.
(23:43):
And that's even before we factor in taxes. But you know,
as I look here at the Bloomberg Aggregate Bond Index
for twenty twenty five, Now this is total return, not
just yield. I mean we're up over seven percent, which
is roughly twice the inflation rate for twenty twenty five.
So bond investors did pretty well this year. And it's
(24:03):
been a long time semple of years.
Speaker 2 (24:04):
Yeah, yeah, since we could say that for bond investors.
Actually was a good year to be in bonds. For one,
we remember why we own them.
Speaker 1 (24:11):
Yeah, And I think the overall point you're making, and
it's a good one, is, you know, you got to
ask yourself, does your financial plan still fit your life
in twenty twenty five and in twenty twenty six. A
plan made in back in twenty twenty one or twenty
eleven or what have you might be totally outdated now
because let's face it, and we've already talked about this
(24:33):
a lot today, a lot has changed. Did you switch jobs,
did you sell a business, did your kids move out
or move back in? Did you use more money than
you thought you were going to use and are you
sitting on a lot of extra cash that you don't need?
And the point here is your plans should evolve with
your life and your money should move with it. And
(24:55):
that could mean anything from rebalancing, checking the overall risk
level of your portfolio, maybe doing some slight shifting from
growth to income, uh, whatever matches your phase of life.
And that's really what you know. At least an annual
review of your comprehensive financial plan should help dictate moving forward.
Speaker 2 (25:16):
Yeah, and and again that's why this is a great
time of year. You know, don't don't spend the whole uh,
you know, a couple of weeks of lessoned activity watching
old Hallmark Christmas movies, Stop and think about what did
we accomplish this year? And really, where do I want
to go next year? This doesn't have to be a
huge production. If nothing else. If you're married, then sit
down with your spouse and just go over the big picture.
And then because every now and then we just have
(25:38):
to review, make sure everybody knows all the players know
exactly where the stuff is and and we are we
on a good path? Are we not on a good path?
And then what do we want going forward? You know,
set aside with what is actually happening maybe different than
what we want, and are we taking the right steps
now to get where we need? So your plan should
be moving with your life and it should be you know,
looking looking forward and in terms of where do we
(26:01):
want to go with this? And then for now you know,
another question to be looking at for this past year,
did we leave any money on the table? From a
tax perspective, this one is huge and you've pretty much
got about forty eight hours to do anything about it,
which is not a lot of.
Speaker 3 (26:13):
Time for this this current tax here. But if you're
a high earner, you're you're you're an.
Speaker 2 (26:18):
Investor with a large tax bile account. There are tools
out there that will help you reduce that tax burden. Right,
so we're talking about roth conversions. When the market fell
apart in April, that that should be a trigger and
let this let this be a lessoned if it didn't
occur to you, right, if you're somebody who you're a
turtle who pulled your head and in your shell and
didn't and just ignored the market, First of all, that's good,
lisha didn't panic, But remember there are opportunities. The silver
lining to a down market is an opportunity. For example,
(26:41):
in the roth conversion space. If I'm going to do
a Roth conversion, that's time of year, there is no seasonality.
It's when the market is down because we know the
market is going to recover as it always has. So
when it comes down, do the Roth conversion then, and
then you will when when the recovery does occur, that'll
be happening in a tax free space. But you got
to do the math, you got to do the numbers,
learn about it now so that you're prepared to pull
the trigger. You're not going to get two three weeks
(27:01):
to think and learn when that moment actually happens. Another
one at tax loss harvesting. If you have positions in
the red, then there are charitable giving strategies out there
like donor advised funds. In addition, you can take those
losses just sell them. On the other hand, if you
have gains, you can also move those dollars of appreciated
securities into donor advised funds. You're really under the gun
(27:22):
if you're going to try to do this by the
end of this tax here and you don't already have
an account set up. That's been a scramble for us
for these last couple as it always is, the holidays
are donor advised fund season. We end up setting those
up the second half of December. It seems like every
single year, if you're over seventy and a half, you
can do something called a qualified charitable distribution out of
your IRA.
Speaker 3 (27:42):
This will cover your RMD.
Speaker 2 (27:43):
And yes, as we always say, these ages don't match up,
you're eligible to do a qualified charitable distribution at the
age of seventy and a half, even though nowadays the
RMD age is now seventy three. So but regardless either way,
if there are charities that you support out there, there
are ways to do it. And the neatest thing about
a QUS it does not factor into your overall income.
I know that's kind of hard to grasp, but it
(28:05):
does not push you even though you took those net
money out. You get the deduction, but it also doesn't
count towards your income in terms of pushing you into
higher brackets.
Speaker 1 (28:12):
Yeah, and unfortunately, Brian, if that qualified charitable distribution is
a strategy, I see. You know, way too many people
not use and not even be aware of and it's
something we continue to talk about with clients and get
them off that habit. Folks over seventy seventy and a
half of just writing that check and putting it in
the offering plate at church, there's there's a way more
(28:34):
strategic and tax efficient way to go about it. Here's
the all Worth advice. The market doesn't know what you
need from your money, but your plans should. Don't just
measure performance in percentages of in terms of market returns.
Measure it in how well your money served your goals well,
from part time retirement to buffer ets. We're tackling your
(28:56):
smart money questions from across the tri State and it's
come up next. You're listening to Simply Money, presented by
all Worth Financial on fifty five KRC, the talk station.
You are listening to Simply Money because that by Allworth Financial.
I'm Bob's fondseller along with Brian James. Give a financial
(29:18):
question you'd like for us to answer. There's a red
button you can click while you're listening to the show.
If you're listening to the show on the iHeart app,
simply record your question and it will come straight to us.
Brad In Milford leads us off tonight, Brian. He says,
We've always focused on returns, but lately I'm worried about
how those returns show up. They come from dividends, interest,
(29:41):
capital gains. How do you design a portfolio around after
tax cash flow instead of just headline gross performance? Great question?
Speaker 2 (29:49):
Well, yeah, this is a great question and it's an
important one for a lot of people to understand. So
designing that portfolio around the after tax tax cash flow
that never requires we're kind of flipping the script here
a little bit in terms of thinking out performance, in
terms of thinking what did I earn? That the question
really should be what did I keep? And when did
the irs get paid on this? So there's really four
(30:11):
components here to a discipline framework for this. So first off,
classify your income by tax treatment, not asset class.
Speaker 3 (30:17):
There's really three flavors.
Speaker 2 (30:19):
There's pre tax income meaning you're going to pay ordinary
taxes on it, you've got tax free that's your WROTH,
and then anything else might be capital gains, which you
might be paying fifteen percent, maybe twenty if you're a
high income earner. The next thing is intentional asset location.
So now that we've talked about the different types of
tax treatment. Figure out what types of assets you have
that are a subject to those different treatments. You know,
(30:40):
if you've got tax efficient growth assets such as low
turnover equities, exchange traded funds, those kinds of things, then
those put you can safely put in a taxable account
if it's a If you have some investments out there
that are much more active, then we'll need to make
sure that we've got that in a sheltered account such
as a WROTH or a traditional where that activity is
(31:01):
not tacked. Also separate in your mind cash flow generation
from total return. We've spent we usually have spent thirty
forty years just looking at my pile of money.
Speaker 3 (31:09):
Did my pile grow? Did my pile grow?
Speaker 2 (31:11):
When we're going to start switching to income based investments,
then you need to kind of change your expectations and
understand that I'm not trying to grow my pile anymore.
I'm trying to use it to pay the bills. That
just changes the overall goals. And then finally figure out
the timing, not just the level of income. What time
of year do these do these things need to happen?
When should I take out that money. And the answer
is usually, if it's a lump sum, let's try to
(31:32):
do it when the market's at a peak. But as
Bob and I always say, if we know bills are
coming due and the markets at a peak, carve it out,
protect it from the market, and worry about the distribution later.
But if we're at a time where the market is
cooperating and we know we've got to pay that bill
in the next six to twelve months, pull the trigger
and get it out. Okay, So now we're going to
move on to Ron in Florence. Ron says they're planning
(31:52):
to retire in stages, you know, first some part time
work and then fully retire. So how do we just
investment risk when that income fail kind of gradually instead
of stopping all at once.
Speaker 3 (32:02):
That's a great question. This is kind of the very
thoughtful of run.
Speaker 1 (32:05):
Now. That's a good one, and Ron, I would my
first answer is listen closely to Brian's answer to Brad's
question that he just gave, because he gave a lot
of good points there to consider when when doing portfolio construction.
But your question, specifically, I think relates to risk, and
again it comes back to when you need that money.
(32:26):
And I love the fact that you're retiring in stages
part time work all that, I think it's important to
just have a good cash flow plan in place, make
sure you and your spouse are aware of what your
income needs and wants are and when, and then factor
in as much as you can you know what your
part time income is gonna be, and then adjust that
(32:46):
emergency fund accordingly. And then to the extent that that
portfolio needs to deliver you know, regular monthly return or income,
even if that income is going to change, and adjust
in stages. Make sure that the asset allocation is adjusted
as well. Because what we're talking what I think you're
talking about here without seeing your entire picture, is it's
(33:10):
time to just gradually take the gas off a little
bit in terms of being one hundred percent in accumulation
mode and start to shift things a little bit to
some things that can both serve as an emergency fund
and deliver some consistent monthly income without being subjected to
huge market volatility. Hope that helps Sam in Batesville, Indiana,
(33:34):
says Brian. We've always reinvested dividends automatically. At what point
does it make sense to start using portfolio income instead.
Speaker 3 (33:44):
Well, I think that this will be all of a sudden.
Speaker 1 (33:47):
This is a lot of income questions, a lot of
everybody's thinking about income.
Speaker 4 (33:51):
This.
Speaker 2 (33:51):
I wonder if these people all meet for breakfast at
a Bob Evans somewhere, agree, what questions are we setting
in today?
Speaker 3 (33:57):
Anyway? Yeah, I mean, first off, I would all I
would say, you don't.
Speaker 2 (34:00):
You don't have to it just because you need a
steady stream of injection into your checking account to pay
the bills.
Speaker 3 (34:06):
You've reached that point, you don't.
Speaker 2 (34:08):
It doesn't have to come from dividends, so at least
not right away, you know.
Speaker 3 (34:13):
There, I would say, at.
Speaker 2 (34:14):
The point is when you need to pay the bills,
when you get to a point where you say, I'm
backing off on my work and I'm therefore gonna need to,
you know, to kind of come up with another income stream,
I would look at it as an option.
Speaker 3 (34:26):
First off.
Speaker 2 (34:27):
First option is, okay, what if I leave everything alone
and I simply, as Sam mentions, I simply stop reinvesting
my dividends and have them sent directly electronically to my
checking account. That is a function that your broker should
be able to handle for you, which simply means flipping
a couple of switches inside your account to sport it
over into your checking account whenever those dividends pay. Might
be monthly, might be quarterly, but whatever, and see if
(34:48):
that will pay the bills. Some people do that, you know,
at least in the first year or two of retirement,
especially when maybe I'm not fully retired, but I've just
backed off a little bit, I'm working less or whatever,
and I need to fill a gap a little while.
It might be as easy as just having that extra
bit of injection of cash into the account. Try that
for a while, and then beyond that you can start
to look at systematic sales of investments because you may
(35:10):
need that when you completely You probably will at some point,
and that allows you to maintain a little bit of
a growth stance, but also taking advantage of dividends. So
let's see if David and Zena has a question about income,
he's talking about he's a DIY investor, but the decisions
are getting bigger. So, Bob, how do you know when
complexity has crossed the line from being manageable in the
(35:31):
DIY space to kind of risky Because the questions got bigger.
Speaker 1 (35:35):
Well, David, and I'll say Brian as well. You know,
I don't know about you, but over the years, you know,
folks that are successful do it yourself investors, they tend
to come in looking for some health help under either
one or both scenarios. One is, they know their portfolio
is really growth oriented because that's what's fueled the tremendous
(35:56):
growth in wealth, and they don't have the means or
the way to do a good stress test of the
risk of their portfolio. That tends to be one reason
people come in, and then they don't they know that
if they just you know, start turning over pieces of
their portfolio, they're just going to expose their portfolio capital gains.
The other reason people come in is when they you know,
(36:16):
perhaps they listen to the show and we talk all
the time about some of these tax strategies and they're
sitting there thinking, I've never done any of that, I've
not even thought of that. I'm probably missing the boat
in terms of tax efficiencies. So, you know, those would
be the two things, the overall risk exposure of your
portfolio and then really taking maximum advantage of some of
(36:36):
the tax strategies that are out there all right. Coming
up next, I've got my two cents. A couple of
factoids about gold. You're listening to Simply Money, presented by
all Worth Financial on fifty five KRC, the talk station.
You're listening to Simply Money, You've said by all Worth
Financial Bobs Fonseeller along with Brian Jane. Well, Brian, I
(37:01):
know you're a bit of a history buff and I
am as well. I came across a couple of fun
facts here about gold. I mean, let's face it, gold's
been in the headlines this year. It's up almost seventy percent,
you know here in five in twenty twenty five. But
I thought it'd be interesting to take a look at
what does that actually mean. You know, when we take
a look at our national debt. As we all know,
(37:22):
we're about thirty eight trillion dollars in debt in the
United States and that.
Speaker 3 (37:26):
Number one we owe money?
Speaker 1 (37:28):
Wait what, yeah, we we do. You know it's up
to you to pay it. But anyway, I found this,
I found this a little bit interesting. And this is
assuming that we're able to track where all the gold is.
But supposedly the US government is sitting on almost two
hundred and sixty two million troy ounces of gold. We're
(37:48):
the largest gold holder by a bunch, you know, of
any country in the world, next to Germany, which which
holds less than half as much gold as the United
States does. But here's the point I want to make.
Due to a statutory you know law going back to
nineteen seventy three, the government has to value the book
(38:09):
value of that gold at only forty two dollars and
twenty two cents an ounce, meaning that I just found
a trillion dollars. Brian. If you value our current gold holdings,
it's worth over a trillion dollars when the government's only
carrying it a book value of forty two billion. We
just reduced the national debt by over a trillion dollars, Brian.
Speaker 3 (38:32):
Look at you. It's own rate news.
Speaker 2 (38:34):
Going into its twenty six day too, Bob, good job.
What's only Monday, You're early in the week. I'm quick contest.
The federal government has to value it at forty two
dollars of per ounce. That translates to forty five hundred dollars,
which is the actual price about now. So we are
(38:54):
well well well under in terms of how we value
that now why this isn't a bigger headline.
Speaker 3 (38:58):
Maybe it will be after Bob mentioned it.
Speaker 1 (39:02):
Thanks for listening tonight Tomorrow we help you ensure that
you own your money and not the other way around.
You've been listening to. Simply money, was noted by all
Worth Financial on fifty five KRC, the talk station
Simply Money News
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