December 31, 2025 • 38 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian explore a simple phrase that could mean the difference between financial freedom and struggle: “the sooner the better.” They unpack new data around Gen X’s looming retirement crisis and what it means to be the first generation largely retiring without pensions. Then, they dive into a compelling new study showing how saving—not spending—could be the true key to financial happiness. Plus, career expert Julie Bauke joins to dissect “the executive dilemma”—when a promotion might not actually be the best next move. Finally, Bob and Brian answer real listener questions on managing capital gains, tapping into dividends, and planning for long-term care.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Tonight, a deeper dive into the Fed's latest interest rate cut,
plus how to unlock those golden handcuffs, and a lesson
on faith based investing. You're listening to Simply Money, presented
by all Worth Financial umbob Sponsller along with Brian James. Well,
yesterday we told you that the FED lowered interest rates
by a quarter of a percent to no one's surprise.
(00:27):
Let's spend a couple of minutes dissecting what Fed chaired
Jerome pal actually said after the FED announcement to gather
some clues on what might be coming up next.
Speaker 2 (00:37):
Brian, Yeah, while the actual rate cut or hike or
whatever the interest rate update is is rarely the headline itself.
Speaker 3 (00:44):
Usually we kind of see it come in.
Speaker 2 (00:45):
So it's more about what we're saying in between the lines,
or in this particular case, exactly precisely o the words
that came out of his face. So the major takeaway
from Chair Powell was this quote quote and I am
quoting here, I can no longer say the labor market
is very solid end quote.
Speaker 1 (01:01):
So what he was.
Speaker 2 (01:01):
Saying is telling the reporters that labor demand has softened
and the recent pace of job creation seems to be
currently running below the break even rate that we need
to keep that unemployment rate constant. Remember that's the Fed's
dual mandate keep unemployment where we need as low as
possible without being zero, and also keep inflation under control.
Speaker 1 (01:18):
Well, my answer to that is no kidding. When you
get a job's revision revising down almost a million jobs
between April of twenty twenty four in March of twenty
twenty five, it's no doubt. It shouldn't come as anyone's
surprise that Fed Palace saying the labor market is not
very solid. I mean this goes back to what we've
(01:40):
talked about a few times now. And I'm trying to
be a political and I mean this, it doesn't matter
who's in the White House or whatever. The data that
we're getting from the Bureau of Labor Statistics is flawed.
And it's just baffling to me why we can't use
the internet in twenty twenty five and collect better data
(02:01):
so the Federal Reserve, you know, can actually stay on
top of this stuff. But there's my little rant for
a Thursday morning.
Speaker 2 (02:08):
No, I think you're spot on. I'm a huge fan
of actual data. My brain works that way because I
don't like I don't like sitting with a client and
making up a financial plan on the fly. I want
numbers in front of my face so that we know
what the numbers are there. That numbers are always the
elephant in the room. Are we right or are we wrong? Well,
let's get the right numbers. I have a thousand percent
agree with you, Bob. Let's get the right numbers and
react to them accordingly. And that goes to whether I'm
(02:29):
sitting in front of an individual person or a married couple,
or three hundred and thirty million people in this in
this country.
Speaker 3 (02:35):
That's all right, Sorry that our government view it.
Speaker 1 (02:37):
Yeah, sorry to digress there. Talk about what happens next? Well,
where do you where do you see the dot plot
headed here?
Speaker 2 (02:45):
Now you're talking to me like a Mandy stout, But
my brain is not that big.
Speaker 3 (02:49):
But yeah, well, what we're talking about here, So the
dot plot, So the.
Speaker 2 (02:52):
Dot plot is is basically every time we get an
update from the Federal Reserve. Remember there's a board of
governors here, there's not we have we have the head
of the Federal Reserve, Droum Palell, but we also have
the rest of the Board of Governors, who all have
their own opinions. The dot plot tracks what those opinions are,
and that can tell us, you know, kind of where
everybody stands when all those votes come through around the
next time.
Speaker 3 (03:12):
Is everybody in a good mood, bad mood, whatever.
Speaker 2 (03:15):
So the policymakers updated their economic projections this time around,
and they now see two additional quarter point cuts this year.
That's one more than projected in June. So, in other words,
that's why we do the dot plot. By the way,
we knew what they were thinking in June, and we
know what they're thinking now. And there's an increasing number
of those of Fed Board governors looking for rate cuts
(03:35):
in twenty twenty six and another one to hear twenty seven.
Speaker 1 (03:39):
Yeah, I think we should all ignore those forecasts for
a quarter point cut in twenty twenty six and twenty
twenty seven, because no one knows what's going to happen
between now and then. You know, to me, Brian, correct
me if you think I'm wrong. I think the two
additional quarter point cuts that are likely coming, you know,
before the end of this year, have to do with
(04:00):
two things. Inflation due to tariffs is coming in a
little less hot than expected, and these labor numbers are
coming in worse than expected, so it would make sense
that we cut rates, you know, an additional quarter point
two more times going into the end of the year.
That you know, to the point I think you're driving
home here. That's what good data based to research and
(04:23):
decision making should look like. And the markets factoring that in,
and we saw futures headed higher this morning. So hey,
anytime the cost of money comes down, that tends to
be a good thing for consumers and the stock market
and everyone's let's have a great fourth quarter.
Speaker 3 (04:40):
Yeah. Now, I want to throw out one thought there.
Speaker 2 (04:42):
I agree with you in terms of I wouldn't I
don't want I don't agree with ignoring the dot plot.
And I don't think this is really what you were saying.
I think we should be careful and not treated as gospel.
All it is is, here's where we stand right now,
here's what we're going to do today. That was the
rate cut boom. That's black and white. The dot plot
just helps us. No, here's what's in their minds, because
they're going to be just because we only hear from them,
you know, once a month or however often they have
(05:04):
meeting doesn't mean they're not thinking about it in between time.
Speaker 3 (05:07):
That's their job.
Speaker 2 (05:07):
We've got a bunch of people who make these decisions.
The dot plot tells us what are they thinking right
now any given time, and it does change. Like we said,
you know, in June there was there was less of
an expectation of further rate cuts. Now there is more
of an expectation, and that actually matches. Like you said,
that matches what we're seeing in these jobs numbers. We
are now in an environment where it makes sense to
do rate cuts. And one here, let me throw one
(05:29):
out here. One Fed official, this is only one of them,
actually projected that the policy rate's going to drop another
one and a quarter percentage points by December. That's mind blowing,
and that's kind of way out there for me. That
would be literally five more rate cuts between now and
the end of the year. I don't see that at all.
But I'm also not a FED official, so somebody else.
Speaker 1 (05:46):
Well, I don't know who that Fed governor was. I
have to assume it was the newly sworn in FED
Governor Stephen Moran, who voted for a half point rate
cut yesterday. It's no secret that he's an appointee of
President Trump. He wants these rates to come down. I
have to think that's the guy that you know is saying,
I think they're gonna come down a point and a half.
(06:07):
I don't see it happening. But let's pivot here. Let's
talk about what we should be doing with our cash.
I'm looking at the treasury yield curve right now, and
it's very interesting. I mean, the one month treasuries are
yielding still over four percent, and then you have an
inverted yield curve all going all the way out to
(06:28):
the ten year treasury, which is sitting a little over
four point one percent. So I don't think in my mind, Brian,
nothing has changed in terms of how to manage cash.
You got to look at your short term lump some
spending needs and get money out of harm's way into
the market. If you've got short term goals, you can
(06:49):
still get close to or right at four percent on
risk free short term money for money that is designed
by those for those kind of purposes. Really nothing has
changed here in terms of, you know, the need to
really make drastic changes as far as how we manage
our emergency funds and cash needs.
Speaker 3 (07:10):
Yeah, yeah, I think these are important points, Bob.
Speaker 2 (07:13):
I'm glad you're bringing it up because, and I would say,
there's probably a lot of people. I know there's a
lot of people out there because I see this at
my table every single day meeting with clients. If you're
sitting on a pile of cash, right, A lot of
times we come into windfalls inheritances or we sold some
asset or something, and there's a pile of cash, and
a lot of people have been fact dumb and happy
with a big pile of cash in the bank and
we're riding high because the stock market is currently as
(07:33):
we're sitting here, at all time highs. But what that
can do, the move you haven't made that you should
have and it shouldn't have taken a rate cut to
do it is is thinking logically about your cash, the truly, truly,
truly liquid stuff. Don't fall asleep with the notion that
I can just throw in the bank and get four percent.
Speaker 3 (07:48):
I haven't had that in my entire life.
Speaker 2 (07:50):
That's true. But at the same time, you're going to
lose that four percent. So what I'm really getting at
here is figure out what you truly, truly need to
have liquid for what Bob just said, you've got expenses
coup we know you're going to spend money in a
very short period of time, then that's fine, leave that liquid.
But if you've got a bigger pile than that and
beyond what you need for your your six to twelve
months emergency funds and whatever projects you've got coming up,
(08:11):
that should mean and if you truly want it to
be safe, that ought to be getting locked up in
a treasury bond, a CD or something. Take advantage of
these rates and lock them in, right, that's the opportunity
you might be missing. But that advice is not different
just because we had a rate cut. You should have
done that a while ago.
Speaker 1 (08:25):
Absolutely, you're listening to Simply Money, presented by all Worth
Financial on Bob spun Seller along with Brian James. All Right, Brian,
let's pivot to something that's going to impact just about
everybody collecting Social Security, and that's the upcoming cost of
Living adjustment for twenty twenty six. And that news is
scheduled to come out on October fifteenth, and that datea
(08:46):
is creeping up here. That's because that's when the Social
Security Administration officially announces what are you know, twenty twenty
six RAIS is going to be. And while the headlines
will likely say, you know, quote unquote historic increase, the
reality it's a little more complicated than that, Brian, and yeah,
walk us through this, because there's some nuances to this
(09:09):
that people might not be completely aware of.
Speaker 3 (09:12):
Yeah, so here's what's happening.
Speaker 2 (09:14):
So, for the fifth year in a row, social Security
is cost of living adjustment or COLA is what that
stands for, is expected to hit a right around at
least two and a half percent, could be slightly higher.
Speaker 3 (09:24):
That hasn't happened since the nineties.
Speaker 2 (09:26):
We're talking about a stretch from nineteen eighty eight to
nineteen ninety seven where those colas were consistently that high.
We really haven't seen that inflation driven bump in almost
three decades.
Speaker 3 (09:35):
And now let me kind of clarify.
Speaker 2 (09:36):
What I just said, because a lot of people are
disappointed that they just heard me say two and a
half percent, because everybody got super excited about those nine
percent increases that we got a few years ago when
inflation was absolutely on fire.
Speaker 3 (09:48):
That's not a good thing. That's not a sustainable pace.
Speaker 2 (09:51):
It was nice that that got built into our beneficiaries checks,
but at the same time not sustainable. So the inc
preases that we're seeing are higher than average. But the point,
the historic point of this is that we're back to
a consistent level of higher, slightly higher increases versus the
absolute lack of increases that we have for a good
(10:12):
long period of time, you know, about fifteen years ago
up until you know three for five years.
Speaker 1 (10:17):
Well it's all peg to inflation, right, so you know,
people could celebrate nine percent increases, but when inflation is
nine percent, you're not gaining any ground. Here's what I
want to make sure we cover here. And you know,
with a with a two point seven whatever percent social
Security increase that we're going to get on average, that's
(10:38):
that's going to be around fifty four dollars a month
for the average you know social Security beneficiaries starting in January.
Not a big deal. Here's the big deal. Medicare Part
B premiums, which are automatically deducted from solid security checks.
Those are expected to jump by eleven and a half
percent in twenty twenty six. So really, Brian people aren't
(11:03):
going to get any kind of a raise at all.
Next year, their net social Security check is likely going
to go down because of the social security premium.
Speaker 2 (11:12):
Increase, right, and Bob, I want to throw out one
more bullet that we found here, because I just I
love this concept of this organization. I'm derailing slightly, but
I wanted to squeeze this one in when I first
read it. So there's an organization out there called the
Senior Citizens League, which entertains me to no end because
I picture something like the Hall of Justice with a
bunch of rocking chairs in front of it, with people
doling out advice that the rest of us, well, we
(11:34):
will realize was very good, but we didn't pay attention
to it early enough.
Speaker 3 (11:37):
But anyway, they sound like superheroes to me. Anyway.
Speaker 2 (11:39):
They So this opinion is not relegated only to the
Federal Reserve. Senior Citizens League obviously a think tank of
very smart people paying attention to things and telling people
what to expect. They're expecting the twenty six kola to
come in around two point seven percent. Other analysts similar
are even saying maybe two point eight percent. So if
that holds, the average higher ee is going to get
another fifty four bucks a month starting in January.
Speaker 3 (11:59):
These are not life changing numbers year over year.
Speaker 2 (12:02):
However, it is where we are back to a point
where a social scurity is more consistently keeping up with
inflation than it used to, which is not a bad thing.
Speaker 1 (12:10):
Here's the all Worth advice. This is just another reminder
that you should have a portfolio that doesn't have to
just rely on outside forces or government benefits that you
can't control to keep pace with inflation and make sure
your financial plan works long term. All right, we're just
getting started tonight. Next how to keep golden handcuffs from
(12:31):
holding you back from the next chapter in your career.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to
Simply Money presented by all Worth Financial on Bob Sponseller
along with Brian James. Got a big required minimum distribution.
(12:52):
You don't need wondering if a buyout makes sense or
if one point five million dollars is enough to go
it alone. We're going to tackle those questions and more
straight ahead at six forty three. All Right. We hear
from people all the time who are thinking about making
a career move. Maybe it's a better title, more flexibility,
or just time for a change. But then comes the hesitation.
(13:15):
I don't want to walk away from my restricted stock
units or stock options, or I'll lose part of my pension.
And that's what we refer to, you know, as the
golden handcuffs, so to speak. So we're going to get
into a little bit of that tonight and how to
evaluate all this as you consider your next career move.
Speaker 3 (13:36):
So this is not easy, though, is it, Bob.
Speaker 2 (13:38):
So this can be tricky if you're in your forties
and fifties, especially, you know, if you have a net
worth of a few million dollars, maybe you're trying to
figure out how a job change fits into your long
term financial plan. We run into this all the time
with people who have built something that can sustain them
and they could be okay, but they kind of sort
of know that, but they also kind of can't figure out.
(13:59):
It's very terrible, find very scary to leave and do
something different. So and the companies know this. Therefore they
build structures to keep you in place. Let's talk about
some of these different tools that they use. So restricted
stock units or RSUs, if you work for a publicly
traded company. There's a good chance that you've been given
stock because you've just shown up day after day after
day and done a good job and the company still exists,
(14:19):
first of all, and maybe it's even grown over time,
so they might give you stock that vests over time,
meaning of course, and most people know this, but meaning
you don't actually get access to it. It has your name
on it, but you don't get to open the present
until some stated time in the future. Common vesting schedule,
for example, is twenty five percent of it every year
for four years. The company's intent, of course, is that
(14:40):
you stick around. If you leave before it's fully vested,
you leave it on the table. So let's pretend you
get four hundred thousand dollars worth of restricted stock units
or RSUs, and you're two years in. That means two
hundred is years walk away. Take it if you want
the other two hundred, Well, that's going to keep you
quote unquote handcuffed to your job.
Speaker 3 (14:56):
Whether you like it or not.
Speaker 2 (14:58):
It doesn't mean you got to stay, but it it's
definitely going to make you think twice before you actually leave.
And that's not just money on a piece of paper.
That's a couple of years of private college tuition or
second home down payment. That's what makes these decisions so difficult.
I may not be able to get out of bed
anymore to go to this job, but I would walk
away from such in financial resources if I chose to
(15:18):
make a different move. That the money is not the
reason for the decision, but it's a major factor.
Speaker 1 (15:24):
Yeah. And other things like stock options I mean, very
somewhat similar to rsues, except you're given the chance to
get actual shares given to you when they vest. And
you know, most people just exercise these options for the
difference between the grant price and the current price of
the stock when they vest. And another big part of
(15:45):
executive compensation something you need to factor in. Another thing
is bonuses Brian. Some of these bonuses are paid quarterly,
but more often than not they're paid annually or you know,
given in long term incentive bonuses. So depending on how
someone's compensation is structured, you might have to repay a
signing bonus if you leave early, or you might miss
(16:07):
out on a year end performance bonus if your departure
date is before a certain cutoff. Those are things that
we have to help people look at as well.
Speaker 2 (16:17):
Yeah, and then some of the other things we see
that this is a little little bit. We're seeing it
less and less these days, of course, but pensions, so
there's a lot of scenarios where, especially for older higher
level employees executives at legacy companies still have vestiges of
the you know, the fifties and sixties, when you didn't
work for a four h one k, you worked for
a pension. The design back then, the way that we
(16:39):
as a society wanted our businesses to run was we
wanted employees to come work their entire careers at one place,
and we wanted to attract them by offering them financial
stability well after they retire.
Speaker 3 (16:50):
This worked.
Speaker 2 (16:51):
Life expectancy wasn't quite as long in the fifties and
sixties as it is today, so.
Speaker 3 (16:56):
The math has kind of worked against that.
Speaker 2 (16:58):
A company wanting that now, I want somebody to work
for me for you know, thirty, maybe forty years, and
I want to pay.
Speaker 3 (17:03):
For them for the rest of their lives.
Speaker 2 (17:04):
Well, the rest of their lives now can be an
additional thirty or maybe even forty years themselves. So pensions
have kind of gone a little bit by the wayside
partially for that reason, and interest rates were so low
over the last couple decades that a pension couldn't conservatively
invest prudently and still get the bills paid, so we
don't see them so much anymore. But here's an example.
Let's say you're eligible for full pendefit pension benefits at
(17:27):
age sixty, but you're fifty eight. Now you get that
dream job offer you've always wanted, and you won't know
in the back of your head, while I'm on my fifties,
I'm not going to get more opportunities like this. If
you leave now, that pension could be permanently reduced, sometimes
by as much as thirty percent. That doesn't mean don't
do it, however, it does very much mean that we
need to We need to really think twice before making
it a big move.
Speaker 1 (17:47):
And don't forget about four oh one K match vesting schedules. Remember,
while your own contributions are always yours, the employer match
often vests over a few years. Most of the time
we see vesting schedule of three to five years. So
if you're thinking about leaving your current position and you're
not fully vested in the match, you could be walking
away from thousands, if not tens of thousands of dollars. So,
(18:12):
you know what the point we're trying to make here is,
here's where life lifestyle choices come into play. And like
a lot of things in life, you've got to count
the cost, you know, and the opportunity cost of leaving
versus staying in your current position. And uh, you know,
maybe the place that you're going through, going to financially
or for non financial reasons, is just much more exciting
(18:36):
and much more palatable than where you are. But the
point we're trying to make here is this is why
you need to sit down, have a good financial plan
before you pull the trigger on something like this, and
actually run the numbers. And that helps people make these
decisions with their eyes wide open. Yep.
Speaker 2 (18:53):
And I want to throw out there too, don't be
terrified of the decision, dig into those numbers and look
under every stone for the savings could be.
Speaker 3 (19:00):
So I went through this once.
Speaker 2 (19:01):
Matter of FACTI but when I joined, When I joined,
what was simply money back in the day.
Speaker 3 (19:05):
I had to go through a process of Okay, what's
the what am I gaining? What am I giving up?
Speaker 2 (19:08):
One of the big things I didn't really even think
about was the idea of no longer working downtown where
I was for my prior few years. I didn't have
to pay for parking, there was no city taxes. There
are hidden savings sometimes to making a job job change,
so make sure you take all of that into account.
It can make the decision a lot easier and you
can go in eyes wide open.
Speaker 1 (19:26):
What if you hadn't come to Simply Money and all
Worth you would have bypassed this multimillion dollar radio contract
that you enjoy right now? Aren't you glad you made
the move? Brian?
Speaker 3 (19:36):
I'm sorry. Who's doing what now?
Speaker 1 (19:37):
Bob? What?
Speaker 3 (19:38):
What again? What contract do you have that I was
not informed of?
Speaker 1 (19:41):
Here's the all Worth advice. Golden handcuffs only work if
you don't have a plan. Know the true cost of
leaving and the true value of staying before you make
your next career move. Next, we dive into investment solutions
designed for those who want their portfolios to align with
their values. Listening to Simply Money presented by all Worth
(20:01):
Financial on fifty five KRC the talk station. You're listening
to Simply Money presented by all Worth Financial. I'm Bob
sponseller along with Brian James, and we're joined again by
all Worth Chief investment Officer Andy Stout. Andy, thanks for
sticking on with us tonight. And we occasionally have clients
(20:24):
across our firm that come to us and say, hey,
we would like our investment portfolio positioned based on our
personal religious values. We want things skewed in that direction,
and we want to take some time and just talk
about what the options are out there to do that.
Our industry has evolved quite a bit in the way
(20:45):
of being able to screen out companies and industries to
cater to folks that want specific values reflected in their
investment portfolio. Walk us through that, Andy, what's available out there?
And I guess, more importantly, what are people coming to
you asking for on a regular basis?
Speaker 4 (21:04):
Well, I guess a lot of times when they come
to me and ask for I might be at some
you know, church festival on the weekend, whether it be
IHM where my kids went to or I know, Brian,
your kids went to Mother Teresa, so oddly, uh, you
might get questions there and you know, kind of makes
sense because you know you're there, But when you look
(21:26):
at what's out there, I mean the changes that have
the fund offerings that have become available in the just
broad investment strategies for someone who looking to invest alongside
with their values, They've really broad and that's been a
key to helping investors become more comfortable with their investments
(21:46):
because you know, I think a lot of people, most
people at least listening to this program, I would think,
you know, they're positioning themselves for retirement and trying to
you know, get themselves as situated as possible to enjoy,
you know, some financial peace of mind. A lot of
times though, depending on how they how people might be
thinking about things, they might want to be I'll call
(22:08):
it investing alongside their values. And there's a number of
ways you can do this. And what we're talking about
here is really, you know, what sort of Christian value
investing options that there are out there. I mean, there's
other types of ways that you can invest alongside your values,
but from the Christian standpoint, there's a few things that
you can do. We do have access to a lot
(22:30):
of institutional quality research and institutional quality funds, and right
now what's available just for the broad marketplace, there's lots
of exchange traded funds or ETFs as they are known,
or mutual funds that have an objective dedicated to investing
with Christian values in mind. And so one thing that
(22:50):
we've done here at all Worth, which I think is
pretty cool, we've essentially created investment strategies centered around those funds.
So if you want to invest in heavier investments aligned
with Christian values, you know we can tailor that. So
you could have a very aggressive portfolio one hundred percent stock,
(23:11):
zero percent bonds. It could be maybe more conservative, like
a thirty stocks seventy percent bond type of strategy. Either way,
all of these investments that we would look to put together,
every single one has an objective and this is critical.
They're objective is Christian values.
Speaker 1 (23:27):
First.
Speaker 4 (23:27):
It's not something that it's kind of back into like
hey look at we have all a sudden No, it's
like a pre screening sort of upfront filter, if you will,
in order to make sure that how these funds are structured.
They are structured very intently for that.
Speaker 3 (23:44):
So, andy, what is somebody giving up?
Speaker 2 (23:46):
I mean this is important stuff, right, this is your
your investment decisions are important anyway. And then when you
couple them with with your your deepest held beliefs, it
just kind of goes up that much more in the
important scale. So, if this is something someone is inclined
to do, what what should we keep in mind that
they might be sacrificing. Is there any real sacrifice for this?
Speaker 4 (24:07):
Well, I mean we could always go back to the
past performances. You know, no guarantee of future results. But
you know, with that said, a lot of the overall
returns that investors get is more it's really determined most
by acid allocation. So how much stocks relative to bond
(24:28):
you there's lots of studies that support this. It's not
so much as to you know, necessarily what's in your
stocks is if you're diversified. You know, that's you know,
really the key from that perspective, it's that overall allocation.
So would you be giving up some Maybe maybe not.
It depends on you know, what outperforms in a various cycle.
So if you happen to go into a cycle where
all of a sudden, you know, alcohol stocks are doing
(24:51):
really really good. Although I guess to be fair, there
is a lot of alcohol at those church festivals that
you go to, but they you know, you know, what
I mean.
Speaker 2 (25:00):
Uh, weren't raised in Cincinnati, so that is a very
familiar fair.
Speaker 4 (25:05):
Yeah, but broader, more broadly speaking, those types of sin stocks,
if you will, uh, if they do better than the
broad market, you might underperform a little bit. But in
all honesty, those types of stocks don't really make up
too much of the overall market. So really you're getting
rid of some of those things on the margin. That's
going to help to sleep better at night because you
(25:26):
know you're investing alongside your values and that's going to
give you some comfort, right and when you know push
comes to shove, market volatility will happen. If you're investing
in a way that you believe in your heart is
the right thing to do and you're not uh and
you still have broad diversification, uh, you know, you're probably
more likely to avoid those costly emotional decisions that really
(25:49):
hurt investors across the board. When you see markets go
down and you're really worried about the world coming to
an end, or you know, markets rallying and you don't
want to miss out that fear of missing out, So
those types of emotions can really derail a financial plan.
But if you're investing alongside your values. It's sometimes it's
a little easier to look at a longer run.
Speaker 1 (26:10):
And you mentioned these institutional investing firms that the folks
that run these ETFs to specifically screen out, you know,
various companies and industries. Can you give us an example
of what that looks like, you know, practically, when we
look at a Christian Values fund, what are these institutional
firms screening out of these portfolios? On average?
Speaker 4 (26:32):
Well, it is going to be those types of sind stocks.
And there's a number of companies out there that do this.
I mean, there's like Guidestone Funds, there's Timothy Plan Event
TID I mean those are not endo worstments of anything whatsoever,
by the way, that's just some of the funds out there,
fund companies that are you know, doing this screening to
(26:53):
exclude those sin types of stocks like alcohol tobacco as
an example. So when you look at that, I mean,
that's something that can be done with the funnelovel. Another
another thing you can do, Bob is at the individual
stock level, with like a direct index, you can actually
kind of create your own sort I'll call it, you know,
Christian Values. You might say, hey, let's just get rid
(27:14):
of these and I can still have access to other
areas too, So it's certainly a lot of choices out there.
Speaker 1 (27:19):
Yeah, so this really can be individualized on a client
by client basis based on their deeply held values and beliefs.
Thanks for joining us as always Tonight, Andy, you're listening
to Simply Money presented by all Worth Financial on fifty
five KRC the talk station. You're listening to Simply Money
(27:40):
presented by all Worth Financial on Bob Sponseller along with
Brian James. Do you have a financial question you'd like
for us to answer. There's a red button you can
click while you're listening to the show right on the
iHeart app. Simply record your question and it will come
straight to us. Speaking of questions, Bill and fort Wright
leads us off tonight, Brian. He says, I'm seventy seven,
(28:00):
I'm pulling a huge rm D every year, more than
I actually need to spend. What strategies can help reduce
the tax? Bye?
Speaker 2 (28:09):
Well, congratulations Bill obviously on if you've got a huge
rm D, that means you have a huger four oh
one k And apologies to my English teachers out there
because a requirementimum distribution of any size comes from a
pretty sizeable four oh one K. So for those who
may not know, when you hit a certain age, it's
either seventy three or seventy five, depending on your year
of birth. The IRS says, hey, the gravy train has
come to a stop. You got to start paying taxes
(28:30):
on these pre tax dollars. And that's the situation Bill
is in. So he's asking what does he need to do.
He doesn't need these dollars. And by the way, the
IRS doesn't care what you do with these dollars. They
just lose the tax shelter. You can take them out
and stick them in the bank, you can throw them
on the floor, roll around it and it doesn't matter.
But the point is they lose the tax shelter and
you've got to pay the income taxes on it. So
he's asking what he can do to reduce the tax bite.
(28:50):
The answer is not really a ton unless you're charitably inclined, right,
So you can't. The R and ds are what they are.
There's no way to reduce them. They're pretty much written
in stone. On Year's Eve every year, that's when you
know what you'll have to take out for the following year.
But one thing you can do if you're charitably inclined,
there is something called a QCD or qualified charitable distribution.
If you are charitably inclined anyway, then you can send
(29:13):
those dollars straight to that charity. This is a little
different than taking it out. Matter of fact, it's very
different from taking it out sticking in checking account, than
writing a check to the charity. This is working with
the custodian of your IRA, whoever the financial institution is,
and instructing them those dollars a financial account in the
name of the charity. There's rules, there's other things out there,
(29:34):
but that's something I would look into, Bill, if that's
if that's on your mind. For those of you hearing
this thinking that might be you in the future, start
looking at ROTH contribute or what ROTH conversions. And I
can see we're going to talk about that here in
just a couple of minutes. So now we'll go to
Lisa in Montgomery. Lisa's sixty two and she's still working hard,
but her company is now offering her deferred compayout and
she's wondering whether she and what that means is she
(29:55):
has a retirement plan out there that GENEFA tax is
on yet and she was able to first some of
the income. It's now time to choose.
Speaker 3 (30:01):
Does she want to lump stump some or does she
want installments without screwing up or taxes? What do you think?
Speaker 1 (30:07):
Bob Well at leasta, What I always do with folks
when we look at this situation is you want to
look at two things you want to look at. You
want to do a calculation what's the net present value
of those installment payments? Meaning you take a stream of
payments over however many years the company is offering them,
and you discount that back to a lump some value
(30:30):
based on a interest rate, and you want to know
what that interest rate is that the company is offering
you to take installments, and then compare that to what
your personal investment risk tolerance is, So you know, depending
on the client, and depending on how risk averse you
are versus growth oriented you are, people make different decisions.
(30:51):
So I have been finding in recent years that those
numbers are coming much closer together than they used to.
Sometimes folks end up just saying, hey, I love the
idea of having a guaranteed income stream or something close
to that over a period of years. That allows me
to let the rest of my investment portfolio stay intact
and grow. Others say, Shoot, that interest rate that the
(31:14):
company's offering me is way less than I think we
can do by investing the money. Therefore, we take the
lump sum and invest it. So it has to do
with what kind of an offer you're being given in
terms of a rate of return, and then comparing that
to your personal risk tolerance. Hope that helps, all right, Tom,
and Madeira He says, I'm fifty seven. I got one
(31:34):
point five million dollars in my four to oh one
k plan. Do I start converting some to roth now
while taxes are lower, or just wait and take my
chances in retirement? Brian, I know you don't like to
take my chances. Answer.
Speaker 2 (31:48):
Yeah, I'm not a fan of let's see what happens. No,
that's the opposite of planning. But sometimes, Tom, the answer
is in the question. You already know this. Do I
start converting some to roth now while taxes are lower? Yeah,
because the opposite would be waiting until they're higher, and
that's not what we want to do. Now, I'm being
a little facetious. I'm having some fun with Tom here,
but no, you've got the right path here. Now is
(32:09):
the time to do it. I think what Tom's really
saying is, is this idiotic to write this big and
this fat of checks to the irs voluntarily so that
I get some kind of tax re benefit out the
back end. And the answer is probably. It makes some
sense anyway, because somebody's going to pay taxes. You're either
doing yourself a favor by lowering your rmds because roths
will not have requirementimum distributions, or you're giving your kids
(32:30):
your heirs the benefit of tax regrowth. Remember if they
inherit a wroth, then they get not You get not
only the tax free growth for the remainder of your life,
your heirs get another ten years because of the way
the IRA inheritance rules work. So yeah, I definitely think
it's something to looking to just understand the math behind it.
Let's go on to John and Emily in Mount Washington.
They're in their mid sixties, two and a half million dollars,
(32:51):
and they're wondering how they balance spending on fun stuff
like travel without running the risk of running short. In
their eighties, Bob this pretty common one. What do you think, Yeah,
John and Emily.
Speaker 1 (33:01):
I mean, the simple answer is, sit down and have
a good fiduciary advisor, create a financial plan, you know,
for you based on varying goals, and you can play
the what if game. You can run different scenarios and
see how your plan performs into your late eighties to
mid nineties based on whatever spending assumptions you want to make.
(33:23):
And some people and Brian, we see this all the time.
We have people who refuse to travel now because they're
worried about running out of money in their late sixties,
and they really regret it later because now they got
this whole big pile of money left to leave to
their kids and grandkids and they and they did not
take that cruise or you know, those big trips that
(33:43):
they all And then we've got the other extreme where
people go a little crazy here in their sixties and
they want to give money away, they want to travel,
they want to do all those things, and they they
don't look at the impact of how that's going to
how that's going to manifest it self in the viability
of their long term plans. So long way of saying,
(34:04):
put a good financial plan together, running multiple assumptions and goals,
and I think working with a good advisor, you will
arrive at a plan that works. And this is just
another reminder that that plan could change and evolve as
time goes by. You don't have to lock it in
stone when you're sixty five. All right, Coming up next,
(34:25):
we're going to discuss the sneaky cost of raising our
standard of living. You're listening to Simply Money presented by
all Worth Financial on fifty five krs the talk station.
You're listening to Simply Money presented by all Worth Financial
on Bob Spondseller along with Brian James. Let's talk about
(34:47):
something that happens to just about everyone who starts making
more money, something called lifestyle create. Brian walk us through
it because this is a common topic.
Speaker 2 (34:58):
Yeah, a lot of people are going to wreck themselves.
And I'm human too, I recognize me in this. I
remember when this happened to us, And it's happened. It's
happened even you know a couple of times. So it
goes like this, you got a raise or a bonus,
some kind of new income sources coming in, somehow, maybe
the business picks up and you think, you know what
I've done my time. I have earned this. So now
I'm going to get that next upgrade on the car.
(35:18):
I'm going to buy the higher level trim with all
the bells and whistles that I'm never going to read
the manual to learn how to use. You might move
to a nicer neighborhood. It has three more bedrooms that
you're never going to be inside of. Join the fancy
golf club, start flying first class. These aren't bad things, right,
I'm not. I'm being a little funny here, but these
aren't terrible things. These are things that, yeah, they're the
niceties of life. You can make life easier, make yourself
(35:39):
more comfortable, and take advantage of some of these things,
and you have earned it. They could just be fine
depending on your overall financial plan. But that's the point.
Did you have a plan? Do you know what you
can get away with? Lifestyle creep can be dangerous because
it is literally it's so quiet. It's like your own
little inflationary world. Some inflation we can control, some we can't.
(35:59):
But this is a case definitely where we are subconsciously
choosing to introduce inflation into our lives. It can be
an okay thing, but you got to know, you know,
if you can get away with it.
Speaker 1 (36:09):
Yeah, Brian, I think the people we're talking to right now,
and I have more than a few meetings like this
every year with people that come in and want to
talk about planning for retirement. And one of my first
questions is, well, what do you want to spend you know,
every year, every month when you retire? And I get
this deer in the headlights. Look, they have no idea.
(36:31):
And what I suspect, which ends up almost always being true,
is these folks are working hard, making a lot of money,
you know, getting raises and all the things you just
talked about, and they just spend their net paycheck, you know,
they even though they do save responsibly in their four
to one K plans and do a lot of good things,
but they just assume that their current lifestyle is going
(36:55):
to be able to continue forever. And they've never run
the numbers, they've never looked at it. And uh, this
is where oftentimes, quote unquote rich people can get big
surprises as they start to approach retirement because they haven't
planned enough to have enough money to continue that lifestyle.
And that's where some tough decisions need or tough conversations
(37:18):
need to be had.
Speaker 3 (37:19):
Yeah, but it's just it's all.
Speaker 2 (37:21):
It's all about that that that you know, that that
conversation with yourself or with the rest of your family.
Speaker 3 (37:26):
So how do we avoid this? What do we do
about it? Well? Track it, pay attention to it.
Speaker 2 (37:30):
Every time your income goes up, make a rule to
save or invest at least half of that increase. So
for example, you know, if you if you get a
ten percent raise, that's fantastic, go over and bump your
four oh one k by five percent or go over
and you know, increase your savings. Maybe start doing backdoor
roth ire egg contributions. If you don't know what that is,
google it or whatever. But if you can do that,
(37:52):
take half that raise and squirrel it away, you're still
coming up with more spendable cash at the you know,
at the at the end of the month, and you're
saving more. So that way, it's almost canceling out your
default behavior is saving first and spending second. But because
you're still proactively starting to save more than you'll be
able to take that in stride and that lifestyle creep
(38:12):
is not going to In fact, you affect you so
much because you did it consciously alongside deeper savings there
and make sure you're on top of your spending ratio
to just just understand, am I still spending the same
percentage of my asset or of my income? If the
percentage is the same, then cool. Knock yourself out, do
what you want, but be paying attention and if you still.
Speaker 1 (38:30):
Have questions, like Brian says, google it. Thanks for listening.
You've been listening to Simply Money, presented by all Worth
Financial on fifty five krc V talk station
Tonight, a deeper dive into the Fed's latest interest rate cut,
plus how to unlock those golden handcuffs, and a lesson
on faith based investing. You're listening to Simply Money, presented
by all Worth Financial umbob Sponsller along with Brian James. Well,
yesterday we told you that the FED lowered interest rates
by a quarter of a percent to no one's surprise.
(00:27):
Let's spend a couple of minutes dissecting what Fed chaired
Jerome pal actually said after the FED announcement to gather
some clues on what might be coming up next.
Speaker 2 (00:37):
Brian, Yeah, while the actual rate cut or hike or
whatever the interest rate update is is rarely the headline itself.
Speaker 3 (00:44):
Usually we kind of see it come in.
Speaker 2 (00:45):
So it's more about what we're saying in between the lines,
or in this particular case, exactly precisely o the words
that came out of his face. So the major takeaway
from Chair Powell was this quote quote and I am
quoting here, I can no longer say the labor market
is very solid end quote.
Speaker 1 (01:01):
So what he was.
Speaker 2 (01:01):
Saying is telling the reporters that labor demand has softened
and the recent pace of job creation seems to be
currently running below the break even rate that we need
to keep that unemployment rate constant. Remember that's the Fed's
dual mandate keep unemployment where we need as low as
possible without being zero, and also keep inflation under control.
Speaker 1 (01:18):
Well, my answer to that is no kidding. When you
get a job's revision revising down almost a million jobs
between April of twenty twenty four in March of twenty
twenty five, it's no doubt. It shouldn't come as anyone's
surprise that Fed Palace saying the labor market is not
very solid. I mean this goes back to what we've
(01:40):
talked about a few times now. And I'm trying to
be a political and I mean this, it doesn't matter
who's in the White House or whatever. The data that
we're getting from the Bureau of Labor Statistics is flawed.
And it's just baffling to me why we can't use
the internet in twenty twenty five and collect better data
(02:01):
so the Federal Reserve, you know, can actually stay on
top of this stuff. But there's my little rant for
a Thursday morning.
Speaker 2 (02:08):
No, I think you're spot on. I'm a huge fan
of actual data. My brain works that way because I
don't like I don't like sitting with a client and
making up a financial plan on the fly. I want
numbers in front of my face so that we know
what the numbers are there. That numbers are always the
elephant in the room. Are we right or are we wrong? Well,
let's get the right numbers. I have a thousand percent
agree with you, Bob. Let's get the right numbers and
react to them accordingly. And that goes to whether I'm
(02:29):
sitting in front of an individual person or a married couple,
or three hundred and thirty million people in this in
this country.
Speaker 3 (02:35):
That's all right, Sorry that our government view it.
Speaker 1 (02:37):
Yeah, sorry to digress there. Talk about what happens next? Well,
where do you where do you see the dot plot
headed here?
Speaker 2 (02:45):
Now you're talking to me like a Mandy stout, But
my brain is not that big.
Speaker 3 (02:49):
But yeah, well, what we're talking about here, So the
dot plot, So the.
Speaker 2 (02:52):
Dot plot is is basically every time we get an
update from the Federal Reserve. Remember there's a board of
governors here, there's not we have we have the head
of the Federal Reserve, Droum Palell, but we also have
the rest of the Board of Governors, who all have
their own opinions. The dot plot tracks what those opinions are,
and that can tell us, you know, kind of where
everybody stands when all those votes come through around the
next time.
Speaker 3 (03:12):
Is everybody in a good mood, bad mood, whatever.
Speaker 2 (03:15):
So the policymakers updated their economic projections this time around,
and they now see two additional quarter point cuts this year.
That's one more than projected in June. So, in other words,
that's why we do the dot plot. By the way,
we knew what they were thinking in June, and we
know what they're thinking now. And there's an increasing number
of those of Fed Board governors looking for rate cuts
(03:35):
in twenty twenty six and another one to hear twenty seven.
Speaker 1 (03:39):
Yeah, I think we should all ignore those forecasts for
a quarter point cut in twenty twenty six and twenty
twenty seven, because no one knows what's going to happen
between now and then. You know, to me, Brian, correct
me if you think I'm wrong. I think the two
additional quarter point cuts that are likely coming, you know,
before the end of this year, have to do with
(04:00):
two things. Inflation due to tariffs is coming in a
little less hot than expected, and these labor numbers are
coming in worse than expected, so it would make sense
that we cut rates, you know, an additional quarter point
two more times going into the end of the year.
That you know, to the point I think you're driving
home here. That's what good data based to research and
(04:23):
decision making should look like. And the markets factoring that in,
and we saw futures headed higher this morning. So hey,
anytime the cost of money comes down, that tends to
be a good thing for consumers and the stock market
and everyone's let's have a great fourth quarter.
Speaker 3 (04:40):
Yeah. Now, I want to throw out one thought there.
Speaker 2 (04:42):
I agree with you in terms of I wouldn't I
don't want I don't agree with ignoring the dot plot.
And I don't think this is really what you were saying.
I think we should be careful and not treated as gospel.
All it is is, here's where we stand right now,
here's what we're going to do today. That was the
rate cut boom. That's black and white. The dot plot
just helps us. No, here's what's in their minds, because
they're going to be just because we only hear from them,
you know, once a month or however often they have
(05:04):
meeting doesn't mean they're not thinking about it in between time.
Speaker 3 (05:07):
That's their job.
Speaker 2 (05:07):
We've got a bunch of people who make these decisions.
The dot plot tells us what are they thinking right
now any given time, and it does change. Like we said,
you know, in June there was there was less of
an expectation of further rate cuts. Now there is more
of an expectation, and that actually matches. Like you said,
that matches what we're seeing in these jobs numbers. We
are now in an environment where it makes sense to
do rate cuts. And one here, let me throw one
(05:29):
out here. One Fed official, this is only one of them,
actually projected that the policy rate's going to drop another
one and a quarter percentage points by December. That's mind blowing,
and that's kind of way out there for me. That
would be literally five more rate cuts between now and
the end of the year. I don't see that at all.
But I'm also not a FED official, so somebody else.
Speaker 1 (05:46):
Well, I don't know who that Fed governor was. I
have to assume it was the newly sworn in FED
Governor Stephen Moran, who voted for a half point rate
cut yesterday. It's no secret that he's an appointee of
President Trump. He wants these rates to come down. I
have to think that's the guy that you know is saying,
I think they're gonna come down a point and a half.
(06:07):
I don't see it happening. But let's pivot here. Let's
talk about what we should be doing with our cash.
I'm looking at the treasury yield curve right now, and
it's very interesting. I mean, the one month treasuries are
yielding still over four percent, and then you have an
inverted yield curve all going all the way out to
(06:28):
the ten year treasury, which is sitting a little over
four point one percent. So I don't think in my mind, Brian,
nothing has changed in terms of how to manage cash.
You got to look at your short term lump some
spending needs and get money out of harm's way into
the market. If you've got short term goals, you can
(06:49):
still get close to or right at four percent on
risk free short term money for money that is designed
by those for those kind of purposes. Really nothing has
changed here in terms of, you know, the need to
really make drastic changes as far as how we manage
our emergency funds and cash needs.
Speaker 3 (07:10):
Yeah, yeah, I think these are important points, Bob.
Speaker 2 (07:13):
I'm glad you're bringing it up because, and I would say,
there's probably a lot of people. I know there's a
lot of people out there because I see this at
my table every single day meeting with clients. If you're
sitting on a pile of cash, right, A lot of
times we come into windfalls inheritances or we sold some
asset or something, and there's a pile of cash, and
a lot of people have been fact dumb and happy
with a big pile of cash in the bank and
we're riding high because the stock market is currently as
(07:33):
we're sitting here, at all time highs. But what that
can do, the move you haven't made that you should
have and it shouldn't have taken a rate cut to
do it is is thinking logically about your cash, the truly, truly,
truly liquid stuff. Don't fall asleep with the notion that
I can just throw in the bank and get four percent.
Speaker 3 (07:48):
I haven't had that in my entire life.
Speaker 2 (07:50):
That's true. But at the same time, you're going to
lose that four percent. So what I'm really getting at
here is figure out what you truly, truly need to
have liquid for what Bob just said, you've got expenses
coup we know you're going to spend money in a
very short period of time, then that's fine, leave that liquid.
But if you've got a bigger pile than that and
beyond what you need for your your six to twelve
months emergency funds and whatever projects you've got coming up,
(08:11):
that should mean and if you truly want it to
be safe, that ought to be getting locked up in
a treasury bond, a CD or something. Take advantage of
these rates and lock them in, right, that's the opportunity
you might be missing. But that advice is not different
just because we had a rate cut. You should have
done that a while ago.
Speaker 1 (08:25):
Absolutely, you're listening to Simply Money, presented by all Worth
Financial on Bob spun Seller along with Brian James. All Right, Brian,
let's pivot to something that's going to impact just about
everybody collecting Social Security, and that's the upcoming cost of
Living adjustment for twenty twenty six. And that news is
scheduled to come out on October fifteenth, and that datea
(08:46):
is creeping up here. That's because that's when the Social
Security Administration officially announces what are you know, twenty twenty
six RAIS is going to be. And while the headlines
will likely say, you know, quote unquote historic increase, the
reality it's a little more complicated than that, Brian, and yeah,
walk us through this, because there's some nuances to this
(09:09):
that people might not be completely aware of.
Speaker 3 (09:12):
Yeah, so here's what's happening.
Speaker 2 (09:14):
So, for the fifth year in a row, social Security
is cost of living adjustment or COLA is what that
stands for, is expected to hit a right around at
least two and a half percent, could be slightly higher.
Speaker 3 (09:24):
That hasn't happened since the nineties.
Speaker 2 (09:26):
We're talking about a stretch from nineteen eighty eight to
nineteen ninety seven where those colas were consistently that high.
We really haven't seen that inflation driven bump in almost
three decades.
Speaker 3 (09:35):
And now let me kind of clarify.
Speaker 2 (09:36):
What I just said, because a lot of people are
disappointed that they just heard me say two and a
half percent, because everybody got super excited about those nine
percent increases that we got a few years ago when
inflation was absolutely on fire.
Speaker 3 (09:48):
That's not a good thing. That's not a sustainable pace.
Speaker 2 (09:51):
It was nice that that got built into our beneficiaries checks,
but at the same time not sustainable. So the inc
preases that we're seeing are higher than average. But the point,
the historic point of this is that we're back to
a consistent level of higher, slightly higher increases versus the
absolute lack of increases that we have for a good
(10:12):
long period of time, you know, about fifteen years ago
up until you know three for five years.
Speaker 1 (10:17):
Well it's all peg to inflation, right, so you know,
people could celebrate nine percent increases, but when inflation is
nine percent, you're not gaining any ground. Here's what I
want to make sure we cover here. And you know,
with a with a two point seven whatever percent social
Security increase that we're going to get on average, that's
(10:38):
that's going to be around fifty four dollars a month
for the average you know social Security beneficiaries starting in January.
Not a big deal. Here's the big deal. Medicare Part
B premiums, which are automatically deducted from solid security checks.
Those are expected to jump by eleven and a half
percent in twenty twenty six. So really, Brian people aren't
(11:03):
going to get any kind of a raise at all.
Next year, their net social Security check is likely going
to go down because of the social security premium.
Speaker 2 (11:12):
Increase, right, and Bob, I want to throw out one
more bullet that we found here, because I just I
love this concept of this organization. I'm derailing slightly, but
I wanted to squeeze this one in when I first
read it. So there's an organization out there called the
Senior Citizens League, which entertains me to no end because
I picture something like the Hall of Justice with a
bunch of rocking chairs in front of it, with people
doling out advice that the rest of us, well, we
(11:34):
will realize was very good, but we didn't pay attention
to it early enough.
Speaker 3 (11:37):
But anyway, they sound like superheroes to me. Anyway.
Speaker 2 (11:39):
They So this opinion is not relegated only to the
Federal Reserve. Senior Citizens League obviously a think tank of
very smart people paying attention to things and telling people
what to expect. They're expecting the twenty six kola to
come in around two point seven percent. Other analysts similar
are even saying maybe two point eight percent. So if
that holds, the average higher ee is going to get
another fifty four bucks a month starting in January.
Speaker 3 (11:59):
These are not life changing numbers year over year.
Speaker 2 (12:02):
However, it is where we are back to a point
where a social scurity is more consistently keeping up with
inflation than it used to, which is not a bad thing.
Speaker 1 (12:10):
Here's the all Worth advice. This is just another reminder
that you should have a portfolio that doesn't have to
just rely on outside forces or government benefits that you
can't control to keep pace with inflation and make sure
your financial plan works long term. All right, we're just
getting started tonight. Next how to keep golden handcuffs from
(12:31):
holding you back from the next chapter in your career.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to
Simply Money presented by all Worth Financial on Bob Sponseller
along with Brian James. Got a big required minimum distribution.
(12:52):
You don't need wondering if a buyout makes sense or
if one point five million dollars is enough to go
it alone. We're going to tackle those questions and more
straight ahead at six forty three. All Right. We hear
from people all the time who are thinking about making
a career move. Maybe it's a better title, more flexibility,
or just time for a change. But then comes the hesitation.
(13:15):
I don't want to walk away from my restricted stock
units or stock options, or I'll lose part of my pension.
And that's what we refer to, you know, as the
golden handcuffs, so to speak. So we're going to get
into a little bit of that tonight and how to
evaluate all this as you consider your next career move.
Speaker 3 (13:36):
So this is not easy, though, is it, Bob.
Speaker 2 (13:38):
So this can be tricky if you're in your forties
and fifties, especially, you know, if you have a net
worth of a few million dollars, maybe you're trying to
figure out how a job change fits into your long
term financial plan. We run into this all the time
with people who have built something that can sustain them
and they could be okay, but they kind of sort
of know that, but they also kind of can't figure out.
(13:59):
It's very terrible, find very scary to leave and do
something different. So and the companies know this. Therefore they
build structures to keep you in place. Let's talk about
some of these different tools that they use. So restricted
stock units or RSUs, if you work for a publicly
traded company. There's a good chance that you've been given
stock because you've just shown up day after day after
day and done a good job and the company still exists,
(14:19):
first of all, and maybe it's even grown over time,
so they might give you stock that vests over time,
meaning of course, and most people know this, but meaning
you don't actually get access to it. It has your name
on it, but you don't get to open the present
until some stated time in the future. Common vesting schedule,
for example, is twenty five percent of it every year
for four years. The company's intent, of course, is that
(14:40):
you stick around. If you leave before it's fully vested,
you leave it on the table. So let's pretend you
get four hundred thousand dollars worth of restricted stock units
or RSUs, and you're two years in. That means two
hundred is years walk away. Take it if you want
the other two hundred, Well, that's going to keep you
quote unquote handcuffed to your job.
Speaker 3 (14:56):
Whether you like it or not.
Speaker 2 (14:58):
It doesn't mean you got to stay, but it it's
definitely going to make you think twice before you actually leave.
And that's not just money on a piece of paper.
That's a couple of years of private college tuition or
second home down payment. That's what makes these decisions so difficult.
I may not be able to get out of bed
anymore to go to this job, but I would walk
away from such in financial resources if I chose to
(15:18):
make a different move. That the money is not the
reason for the decision, but it's a major factor.
Speaker 1 (15:24):
Yeah. And other things like stock options I mean, very
somewhat similar to rsues, except you're given the chance to
get actual shares given to you when they vest. And
you know, most people just exercise these options for the
difference between the grant price and the current price of
the stock when they vest. And another big part of
(15:45):
executive compensation something you need to factor in. Another thing
is bonuses Brian. Some of these bonuses are paid quarterly,
but more often than not they're paid annually or you know,
given in long term incentive bonuses. So depending on how
someone's compensation is structured, you might have to repay a
signing bonus if you leave early, or you might miss
(16:07):
out on a year end performance bonus if your departure
date is before a certain cutoff. Those are things that
we have to help people look at as well.
Speaker 2 (16:17):
Yeah, and then some of the other things we see
that this is a little little bit. We're seeing it
less and less these days, of course, but pensions, so
there's a lot of scenarios where, especially for older higher
level employees executives at legacy companies still have vestiges of
the you know, the fifties and sixties, when you didn't
work for a four h one k, you worked for
a pension. The design back then, the way that we
(16:39):
as a society wanted our businesses to run was we
wanted employees to come work their entire careers at one place,
and we wanted to attract them by offering them financial
stability well after they retire.
Speaker 3 (16:50):
This worked.
Speaker 2 (16:51):
Life expectancy wasn't quite as long in the fifties and
sixties as it is today, so.
Speaker 3 (16:56):
The math has kind of worked against that.
Speaker 2 (16:58):
A company wanting that now, I want somebody to work
for me for you know, thirty, maybe forty years, and
I want to pay.
Speaker 3 (17:03):
For them for the rest of their lives.
Speaker 2 (17:04):
Well, the rest of their lives now can be an
additional thirty or maybe even forty years themselves. So pensions
have kind of gone a little bit by the wayside
partially for that reason, and interest rates were so low
over the last couple decades that a pension couldn't conservatively
invest prudently and still get the bills paid, so we
don't see them so much anymore. But here's an example.
Let's say you're eligible for full pendefit pension benefits at
(17:27):
age sixty, but you're fifty eight. Now you get that
dream job offer you've always wanted, and you won't know
in the back of your head, while I'm on my fifties,
I'm not going to get more opportunities like this. If
you leave now, that pension could be permanently reduced, sometimes
by as much as thirty percent. That doesn't mean don't
do it, however, it does very much mean that we
need to We need to really think twice before making
it a big move.
Speaker 1 (17:47):
And don't forget about four oh one K match vesting schedules. Remember,
while your own contributions are always yours, the employer match
often vests over a few years. Most of the time
we see vesting schedule of three to five years. So
if you're thinking about leaving your current position and you're
not fully vested in the match, you could be walking
away from thousands, if not tens of thousands of dollars. So,
(18:12):
you know what the point we're trying to make here is,
here's where life lifestyle choices come into play. And like
a lot of things in life, you've got to count
the cost, you know, and the opportunity cost of leaving
versus staying in your current position. And uh, you know,
maybe the place that you're going through, going to financially
or for non financial reasons, is just much more exciting
(18:36):
and much more palatable than where you are. But the
point we're trying to make here is this is why
you need to sit down, have a good financial plan
before you pull the trigger on something like this, and
actually run the numbers. And that helps people make these
decisions with their eyes wide open. Yep.
Speaker 2 (18:53):
And I want to throw out there too, don't be
terrified of the decision, dig into those numbers and look
under every stone for the savings could be.
Speaker 3 (19:00):
So I went through this once.
Speaker 2 (19:01):
Matter of FACTI but when I joined, When I joined,
what was simply money back in the day.
Speaker 3 (19:05):
I had to go through a process of Okay, what's
the what am I gaining? What am I giving up?
Speaker 2 (19:08):
One of the big things I didn't really even think
about was the idea of no longer working downtown where
I was for my prior few years. I didn't have
to pay for parking, there was no city taxes. There
are hidden savings sometimes to making a job job change,
so make sure you take all of that into account.
It can make the decision a lot easier and you
can go in eyes wide open.
Speaker 1 (19:26):
What if you hadn't come to Simply Money and all
Worth you would have bypassed this multimillion dollar radio contract
that you enjoy right now? Aren't you glad you made
the move? Brian?
Speaker 3 (19:36):
I'm sorry. Who's doing what now?
Speaker 1 (19:37):
Bob? What?
Speaker 3 (19:38):
What again? What contract do you have that I was
not informed of?
Speaker 1 (19:41):
Here's the all Worth advice. Golden handcuffs only work if
you don't have a plan. Know the true cost of
leaving and the true value of staying before you make
your next career move. Next, we dive into investment solutions
designed for those who want their portfolios to align with
their values. Listening to Simply Money presented by all Worth
(20:01):
Financial on fifty five KRC the talk station. You're listening
to Simply Money presented by all Worth Financial. I'm Bob
sponseller along with Brian James, and we're joined again by
all Worth Chief investment Officer Andy Stout. Andy, thanks for
sticking on with us tonight. And we occasionally have clients
(20:24):
across our firm that come to us and say, hey,
we would like our investment portfolio positioned based on our
personal religious values. We want things skewed in that direction,
and we want to take some time and just talk
about what the options are out there to do that.
Our industry has evolved quite a bit in the way
(20:45):
of being able to screen out companies and industries to
cater to folks that want specific values reflected in their
investment portfolio. Walk us through that, Andy, what's available out there?
And I guess, more importantly, what are people coming to
you asking for on a regular basis?
Speaker 4 (21:04):
Well, I guess a lot of times when they come
to me and ask for I might be at some
you know, church festival on the weekend, whether it be
IHM where my kids went to or I know, Brian,
your kids went to Mother Teresa, so oddly, uh, you
might get questions there and you know, kind of makes
sense because you know you're there, But when you look
(21:26):
at what's out there, I mean the changes that have
the fund offerings that have become available in the just
broad investment strategies for someone who looking to invest alongside
with their values, They've really broad and that's been a
key to helping investors become more comfortable with their investments
(21:46):
because you know, I think a lot of people, most
people at least listening to this program, I would think,
you know, they're positioning themselves for retirement and trying to
you know, get themselves as situated as possible to enjoy,
you know, some financial peace of mind. A lot of
times though, depending on how they how people might be
thinking about things, they might want to be I'll call
(22:08):
it investing alongside their values. And there's a number of
ways you can do this. And what we're talking about
here is really, you know, what sort of Christian value
investing options that there are out there. I mean, there's
other types of ways that you can invest alongside your values,
but from the Christian standpoint, there's a few things that
you can do. We do have access to a lot
(22:30):
of institutional quality research and institutional quality funds, and right
now what's available just for the broad marketplace, there's lots
of exchange traded funds or ETFs as they are known,
or mutual funds that have an objective dedicated to investing
with Christian values in mind. And so one thing that
(22:50):
we've done here at all Worth, which I think is
pretty cool, we've essentially created investment strategies centered around those funds.
So if you want to invest in heavier investments aligned
with Christian values, you know we can tailor that. So
you could have a very aggressive portfolio one hundred percent stock,
(23:11):
zero percent bonds. It could be maybe more conservative, like
a thirty stocks seventy percent bond type of strategy. Either way,
all of these investments that we would look to put together,
every single one has an objective and this is critical.
They're objective is Christian values.
Speaker 1 (23:27):
First.
Speaker 4 (23:27):
It's not something that it's kind of back into like
hey look at we have all a sudden No, it's
like a pre screening sort of upfront filter, if you will,
in order to make sure that how these funds are structured.
They are structured very intently for that.
Speaker 3 (23:44):
So, andy, what is somebody giving up?
Speaker 2 (23:46):
I mean this is important stuff, right, this is your
your investment decisions are important anyway. And then when you
couple them with with your your deepest held beliefs, it
just kind of goes up that much more in the
important scale. So, if this is something someone is inclined
to do, what what should we keep in mind that
they might be sacrificing. Is there any real sacrifice for this?
Speaker 4 (24:07):
Well, I mean we could always go back to the
past performances. You know, no guarantee of future results. But
you know, with that said, a lot of the overall
returns that investors get is more it's really determined most
by acid allocation. So how much stocks relative to bond
(24:28):
you there's lots of studies that support this. It's not
so much as to you know, necessarily what's in your
stocks is if you're diversified. You know, that's you know,
really the key from that perspective, it's that overall allocation.
So would you be giving up some Maybe maybe not.
It depends on you know, what outperforms in a various cycle.
So if you happen to go into a cycle where
all of a sudden, you know, alcohol stocks are doing
(24:51):
really really good. Although I guess to be fair, there
is a lot of alcohol at those church festivals that
you go to, but they you know, you know, what
I mean.
Speaker 2 (25:00):
Uh, weren't raised in Cincinnati, so that is a very
familiar fair.
Speaker 4 (25:05):
Yeah, but broader, more broadly speaking, those types of sin stocks,
if you will, uh, if they do better than the
broad market, you might underperform a little bit. But in
all honesty, those types of stocks don't really make up
too much of the overall market. So really you're getting
rid of some of those things on the margin. That's
going to help to sleep better at night because you
(25:26):
know you're investing alongside your values and that's going to
give you some comfort, right and when you know push
comes to shove, market volatility will happen. If you're investing
in a way that you believe in your heart is
the right thing to do and you're not uh and
you still have broad diversification, uh, you know, you're probably
more likely to avoid those costly emotional decisions that really
(25:49):
hurt investors across the board. When you see markets go
down and you're really worried about the world coming to
an end, or you know, markets rallying and you don't
want to miss out that fear of missing out, So
those types of emotions can really derail a financial plan.
But if you're investing alongside your values. It's sometimes it's
a little easier to look at a longer run.
Speaker 1 (26:10):
And you mentioned these institutional investing firms that the folks
that run these ETFs to specifically screen out, you know,
various companies and industries. Can you give us an example
of what that looks like, you know, practically, when we
look at a Christian Values fund, what are these institutional
firms screening out of these portfolios? On average?
Speaker 4 (26:32):
Well, it is going to be those types of sind stocks.
And there's a number of companies out there that do this.
I mean, there's like Guidestone Funds, there's Timothy Plan Event
TID I mean those are not endo worstments of anything whatsoever,
by the way, that's just some of the funds out there,
fund companies that are you know, doing this screening to
(26:53):
exclude those sin types of stocks like alcohol tobacco as
an example. So when you look at that, I mean,
that's something that can be done with the funnelovel. Another
another thing you can do, Bob is at the individual
stock level, with like a direct index, you can actually
kind of create your own sort I'll call it, you know,
Christian Values. You might say, hey, let's just get rid
(27:14):
of these and I can still have access to other
areas too, So it's certainly a lot of choices out there.
Speaker 1 (27:19):
Yeah, so this really can be individualized on a client
by client basis based on their deeply held values and beliefs.
Thanks for joining us as always Tonight, Andy, you're listening
to Simply Money presented by all Worth Financial on fifty
five KRC the talk station. You're listening to Simply Money
(27:40):
presented by all Worth Financial on Bob Sponseller along with
Brian James. Do you have a financial question you'd like
for us to answer. There's a red button you can
click while you're listening to the show right on the
iHeart app. Simply record your question and it will come
straight to us. Speaking of questions, Bill and fort Wright
leads us off tonight, Brian. He says, I'm seventy seven,
(28:00):
I'm pulling a huge rm D every year, more than
I actually need to spend. What strategies can help reduce
the tax? Bye?
Speaker 2 (28:09):
Well, congratulations Bill obviously on if you've got a huge
rm D, that means you have a huger four oh
one k And apologies to my English teachers out there
because a requirementimum distribution of any size comes from a
pretty sizeable four oh one K. So for those who
may not know, when you hit a certain age, it's
either seventy three or seventy five, depending on your year
of birth. The IRS says, hey, the gravy train has
come to a stop. You got to start paying taxes
(28:30):
on these pre tax dollars. And that's the situation Bill
is in. So he's asking what does he need to do.
He doesn't need these dollars. And by the way, the
IRS doesn't care what you do with these dollars. They
just lose the tax shelter. You can take them out
and stick them in the bank, you can throw them
on the floor, roll around it and it doesn't matter.
But the point is they lose the tax shelter and
you've got to pay the income taxes on it. So
he's asking what he can do to reduce the tax bite.
(28:50):
The answer is not really a ton unless you're charitably inclined, right,
So you can't. The R and ds are what they are.
There's no way to reduce them. They're pretty much written
in stone. On Year's Eve every year, that's when you
know what you'll have to take out for the following year.
But one thing you can do if you're charitably inclined,
there is something called a QCD or qualified charitable distribution.
If you are charitably inclined anyway, then you can send
(29:13):
those dollars straight to that charity. This is a little
different than taking it out. Matter of fact, it's very
different from taking it out sticking in checking account, than
writing a check to the charity. This is working with
the custodian of your IRA, whoever the financial institution is,
and instructing them those dollars a financial account in the
name of the charity. There's rules, there's other things out there,
(29:34):
but that's something I would look into, Bill, if that's
if that's on your mind. For those of you hearing
this thinking that might be you in the future, start
looking at ROTH contribute or what ROTH conversions. And I
can see we're going to talk about that here in
just a couple of minutes. So now we'll go to
Lisa in Montgomery. Lisa's sixty two and she's still working hard,
but her company is now offering her deferred compayout and
she's wondering whether she and what that means is she
(29:55):
has a retirement plan out there that GENEFA tax is
on yet and she was able to first some of
the income. It's now time to choose.
Speaker 3 (30:01):
Does she want to lump stump some or does she
want installments without screwing up or taxes? What do you think?
Speaker 1 (30:07):
Bob Well at leasta, What I always do with folks
when we look at this situation is you want to
look at two things you want to look at. You
want to do a calculation what's the net present value
of those installment payments? Meaning you take a stream of
payments over however many years the company is offering them,
and you discount that back to a lump some value
(30:30):
based on a interest rate, and you want to know
what that interest rate is that the company is offering
you to take installments, and then compare that to what
your personal investment risk tolerance is, So you know, depending
on the client, and depending on how risk averse you
are versus growth oriented you are, people make different decisions.
(30:51):
So I have been finding in recent years that those
numbers are coming much closer together than they used to.
Sometimes folks end up just saying, hey, I love the
idea of having a guaranteed income stream or something close
to that over a period of years. That allows me
to let the rest of my investment portfolio stay intact
and grow. Others say, Shoot, that interest rate that the
(31:14):
company's offering me is way less than I think we
can do by investing the money. Therefore, we take the
lump sum and invest it. So it has to do
with what kind of an offer you're being given in
terms of a rate of return, and then comparing that
to your personal risk tolerance. Hope that helps, all right, Tom,
and Madeira He says, I'm fifty seven. I got one
(31:34):
point five million dollars in my four to oh one
k plan. Do I start converting some to roth now
while taxes are lower, or just wait and take my
chances in retirement? Brian, I know you don't like to
take my chances. Answer.
Speaker 2 (31:48):
Yeah, I'm not a fan of let's see what happens. No,
that's the opposite of planning. But sometimes, Tom, the answer
is in the question. You already know this. Do I
start converting some to roth now while taxes are lower? Yeah,
because the opposite would be waiting until they're higher, and
that's not what we want to do. Now, I'm being
a little facetious. I'm having some fun with Tom here,
but no, you've got the right path here. Now is
(32:09):
the time to do it. I think what Tom's really
saying is, is this idiotic to write this big and
this fat of checks to the irs voluntarily so that
I get some kind of tax re benefit out the
back end. And the answer is probably. It makes some
sense anyway, because somebody's going to pay taxes. You're either
doing yourself a favor by lowering your rmds because roths
will not have requirementimum distributions, or you're giving your kids
(32:30):
your heirs the benefit of tax regrowth. Remember if they
inherit a wroth, then they get not You get not
only the tax free growth for the remainder of your life,
your heirs get another ten years because of the way
the IRA inheritance rules work. So yeah, I definitely think
it's something to looking to just understand the math behind it.
Let's go on to John and Emily in Mount Washington.
They're in their mid sixties, two and a half million dollars,
(32:51):
and they're wondering how they balance spending on fun stuff
like travel without running the risk of running short. In
their eighties, Bob this pretty common one. What do you think, Yeah,
John and Emily.
Speaker 1 (33:01):
I mean, the simple answer is, sit down and have
a good fiduciary advisor, create a financial plan, you know,
for you based on varying goals, and you can play
the what if game. You can run different scenarios and
see how your plan performs into your late eighties to
mid nineties based on whatever spending assumptions you want to make.
(33:23):
And some people and Brian, we see this all the time.
We have people who refuse to travel now because they're
worried about running out of money in their late sixties,
and they really regret it later because now they got
this whole big pile of money left to leave to
their kids and grandkids and they and they did not
take that cruise or you know, those big trips that
(33:43):
they all And then we've got the other extreme where
people go a little crazy here in their sixties and
they want to give money away, they want to travel,
they want to do all those things, and they they
don't look at the impact of how that's going to
how that's going to manifest it self in the viability
of their long term plans. So long way of saying,
(34:04):
put a good financial plan together, running multiple assumptions and goals,
and I think working with a good advisor, you will
arrive at a plan that works. And this is just
another reminder that that plan could change and evolve as
time goes by. You don't have to lock it in
stone when you're sixty five. All right, Coming up next,
(34:25):
we're going to discuss the sneaky cost of raising our
standard of living. You're listening to Simply Money presented by
all Worth Financial on fifty five krs the talk station.
You're listening to Simply Money presented by all Worth Financial
on Bob Spondseller along with Brian James. Let's talk about
(34:47):
something that happens to just about everyone who starts making
more money, something called lifestyle create. Brian walk us through
it because this is a common topic.
Speaker 2 (34:58):
Yeah, a lot of people are going to wreck themselves.
And I'm human too, I recognize me in this. I
remember when this happened to us, And it's happened. It's
happened even you know a couple of times. So it
goes like this, you got a raise or a bonus,
some kind of new income sources coming in, somehow, maybe
the business picks up and you think, you know what
I've done my time. I have earned this. So now
I'm going to get that next upgrade on the car.
(35:18):
I'm going to buy the higher level trim with all
the bells and whistles that I'm never going to read
the manual to learn how to use. You might move
to a nicer neighborhood. It has three more bedrooms that
you're never going to be inside of. Join the fancy
golf club, start flying first class. These aren't bad things, right,
I'm not. I'm being a little funny here, but these
aren't terrible things. These are things that, yeah, they're the
niceties of life. You can make life easier, make yourself
(35:39):
more comfortable, and take advantage of some of these things,
and you have earned it. They could just be fine
depending on your overall financial plan. But that's the point.
Did you have a plan? Do you know what you
can get away with? Lifestyle creep can be dangerous because
it is literally it's so quiet. It's like your own
little inflationary world. Some inflation we can control, some we can't.
(35:59):
But this is a case definitely where we are subconsciously
choosing to introduce inflation into our lives. It can be
an okay thing, but you got to know, you know,
if you can get away with it.
Speaker 1 (36:09):
Yeah, Brian, I think the people we're talking to right now,
and I have more than a few meetings like this
every year with people that come in and want to
talk about planning for retirement. And one of my first
questions is, well, what do you want to spend you know,
every year, every month when you retire? And I get
this deer in the headlights. Look, they have no idea.
(36:31):
And what I suspect, which ends up almost always being true,
is these folks are working hard, making a lot of money,
you know, getting raises and all the things you just
talked about, and they just spend their net paycheck, you know,
they even though they do save responsibly in their four
to one K plans and do a lot of good things,
but they just assume that their current lifestyle is going
(36:55):
to be able to continue forever. And they've never run
the numbers, they've never looked at it. And uh, this
is where oftentimes, quote unquote rich people can get big
surprises as they start to approach retirement because they haven't
planned enough to have enough money to continue that lifestyle.
And that's where some tough decisions need or tough conversations
(37:18):
need to be had.
Speaker 3 (37:19):
Yeah, but it's just it's all.
Speaker 2 (37:21):
It's all about that that that you know, that that
conversation with yourself or with the rest of your family.
Speaker 3 (37:26):
So how do we avoid this? What do we do
about it? Well? Track it, pay attention to it.
Speaker 2 (37:30):
Every time your income goes up, make a rule to
save or invest at least half of that increase. So
for example, you know, if you if you get a
ten percent raise, that's fantastic, go over and bump your
four oh one k by five percent or go over
and you know, increase your savings. Maybe start doing backdoor
roth ire egg contributions. If you don't know what that is,
google it or whatever. But if you can do that,
(37:52):
take half that raise and squirrel it away, you're still
coming up with more spendable cash at the you know,
at the at the end of the month, and you're
saving more. So that way, it's almost canceling out your
default behavior is saving first and spending second. But because
you're still proactively starting to save more than you'll be
able to take that in stride and that lifestyle creep
(38:12):
is not going to In fact, you affect you so
much because you did it consciously alongside deeper savings there
and make sure you're on top of your spending ratio
to just just understand, am I still spending the same
percentage of my asset or of my income? If the
percentage is the same, then cool. Knock yourself out, do
what you want, but be paying attention and if you still.
Speaker 1 (38:30):
Have questions, like Brian says, google it. Thanks for listening.
You've been listening to Simply Money, presented by all Worth
Financial on fifty five krc V talk station
Simply Money News
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