January 13, 2026 • 39 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian talk with Allworth's Chief Investment Officer Andy Stout about why markets could get noisy this week—and what that means for high-net-worth investors. They also break down smart money moves to consider in 2026, including new retirement contribution limits and tax strategy shifts. Plus, they explore whether artificial intelligence stocks are entering bubble territory and answer your real-life money questions—like what to do if you missed your RMD and how to handle solo 401(k)s with a side hustle.
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Episode Transcript
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Speaker 1 (00:04):
Tonight, why the markets could get a little noisy this week,
plus some opportunities you definitely want to think about taking
advantage of in twenty twenty six. And as always we
answer your money questions. You're listening to Simply Money presented
by all Worth Financial. I'm Bob Sponseller along with Brian James.
We've got a lot to get to tonight and we
(00:25):
want to start by bringing in all Worth Chief Investment
Officer Andy Stout. Just as a reminder, Andy manages I
don't know over thirty five billion dollars worth of our
client's money for all Worth clients from right here in Cincinnati. Andy,
thank you for making time for us tonight. We were
ready to talk to you about the inflation report coming
(00:46):
up tomorrow, but we've got a few extra tidbits that
I know you want to talk about tonight, because, as
we know, the news is always moving, especially with our
current presidential administration hit it Andy, Yeah, I.
Speaker 2 (01:01):
Mean you could definitely say that it's a fluid news environment.
There's no question about that. There were certainly some developments
late on Sunday. We had Chair Pow in a relatively
unusual approach, he released a video on the fed's website,
which is not the norm at all, But what he
was doing, he was addressing that the FED was served
(01:25):
some grand jury subpoenas tied to his testimony of June
of last year. The testimony was before the Senate Banking
Committee and it was related to the two and a
half billion headquarter renovation, So there is the potential for
criminal charges there. However, what chair Pal posted in his
video and what most people believe, is that this is
(01:46):
really an investigation. This investigation is really related to the
FED not bowing to what President Trump wants in terms
of lower interest rates. So the chair Pal talked about it,
you know, the political pressure being tied to monetary policy,
and that's kind of how he reframed it. So when
you look at that from that perspective, it certainly calls
(02:08):
into question the fed's independence. I mean, that's been one
of the main stays of our economy and it's really
critical that we do have a central bank that is
independent and can make interest rate decisions without being pressured,
because otherwise you end up making decisions that may or
may not be in the best interest of the public,
(02:29):
and even if they do end up being in the
best interest of the public. The lack of independence from
the markets perspective definitely increases the likelihood that you see
a about of market volatility. There's no question about that.
Speaker 1 (02:44):
You know.
Speaker 2 (02:44):
So far though, this is what's interesting. There really hasn't.
I mean, there's been some fallout, but it's not been
to two material obviously, it's early stages. And I say,
there's really two reasons for this, Okay. The first reason
is that this doesn't really change anything regarding what the
FED actually does. It's what we call their reaction function.
(03:06):
So policy it's still driven currently by inflation and the
labor data. And I know, we got some data last
week and that doesn't really go that's not really going
to force a head hand. And we have some important
data coming up this week and we'll talk about that
in the met But right now, the Fed's reaction function
remains intact. It's currently still based on monetary policy. Look
where markets pricing in the terms of any sort of
(03:27):
FED fund rate cuts coming up, and it's pretty much
negligible here in the near term.
Speaker 3 (03:32):
Now.
Speaker 2 (03:32):
The second, and really i'll call this the more important
one is the Senate Banking Committee politics. They support the
FED Republican. Republican Senator Tom Tillis publicly said he would
oppose confirming any Federal Reserve nominees while this investigation is ongoing.
And he also pretty much said that this investigation is
(03:53):
very political in nature and not really related to anything
of materiality. So when you look at the Senate Banking Committee,
it's a relatively narrow margin, and what his statement does
and what he plans to do, it creates a procedural roadblock.
So without getting into the week too much, it really
just creates that roadblock in going to essentially kind of
(04:16):
stop any sort of near term leadership changes. Now when
we look a little bit longer term out, it's important
to note that Chair Pal's term ends on May fifteenth
this year. That's his term as the FED chair. He
can't remain as a governor until twenty twenty eight, So
it's possible he might decide to resist political pressure to
(04:37):
or excuse me, to help the Fed resist political pressure.
He could stay on until twenty twenty eight if he
thinks that's the right thing to do. So there's a
lot of moving pieces there. There's no question about now.
I would say it's not any sort of like immediate catalyst,
but it's a longer term institutional risk that you have
to monitor. But what's more important than the near term,
(04:58):
I guess from an economic standpoint, is what the FED
is going to look at at regarding the jobs market
and the inflation data, because that's their duel.
Speaker 3 (05:05):
Land Andy, how much more crazy can the world take
of the United States behaving the way that we currently are.
Is there a point in the future where you feel like,
at some point investors are going to start thinking very
very differently about whether they're willing to continue with the
level of debt that that they own. You know, other countries,
(05:25):
Japan owns a lot of our debt, so this is China.
Is there some point where they're going to say, we
just cannot feel comfortable with predictability out of out of
the United States. That's a great question.
Speaker 2 (05:37):
It's what I've heard a lot from just some people
in general. And the short answer is, you know, the
US economy drives the global economy, and a lot of
people will look you know, past any sort of short
term you know, volatility in terms of you know, what
might be coming out of Washington because they know, you know,
(06:00):
where the money is right and that's ultimately what's going
to drive it. So the short answer is no, I
don't really see a material global impact from this where
you see investors pulling money out, because when it comes
to the when it comes to everything, at the end
of the day, you know, we're still the largest economy,
and that's ultimately what's going to matter. I mean, when
(06:20):
you ask what matters, you know, money talks.
Speaker 1 (06:23):
Andy speaking of what matters. I mean, just you know,
from where I sit here, even without all this noise
about the Federal Reserve subpoenas and all that, the FED
was not really or the market is really not pricing
in any FED rate cuts until the middle of twenty
twenty six at the soonest, right, So let's get into
a little bit about the upcoming inflation report and the
(06:46):
latest labor report. Those are the two you know, dual
mandates that the FED has. What's the latest data telling
you and telling us in terms of where the economy sits?
Here on a Monday morning, January, Well.
Speaker 2 (07:01):
Yeah, the really nice thing is we're finally starting to
get some data following a shut down in a timely manner.
So we did receive the December jobs market report last
week and it wasn't great, but it wasn't terrible. And
what it continued to show was what we've been talking
about for the past basically six twelve months. The labor
(07:22):
market is cooling, but it's not collapsing. So when we
look at the job report, it has there's two surveys
in there. Right, we have the government who talks to
businesses and one survey to get the data on the
number of jobs being at it. Then we have a
second survey that's independent of the first one. That's where
the government reaches out to households or individuals and say, hey,
do you have a job? Do you not have a job?
(07:43):
That's where we get the unemployment rate from. So we
get two different you know, data points there. So the
first one on the what employers were at it, they
added fifty thousand jobs in December. That was, you know,
definitely less than the seventy thousand that economists we're looking for.
But on top of that, you know, what we also
saw was that the prior two months were revised lower
(08:04):
by seventy six thousand. So it's not good from that perspective.
And I was looking at it just like a chart
of the number of jobs being added by employers, and
it looked pretty strong until like the last seven months,
and you see it flattened and get really close to zero.
We even had, you know, a pretty sizeable draw down
just a few months ago in October of almost two
(08:27):
hundred thousand. But when you look at like the average
number of new jobs added since last May, it's only
twelve thousand. You know, that's not a strong environment. Now,
on the bright side, the household Survey that's where the
government talks individuals, that actually showed that the unemployment rate fell.
It fell from a four point five to four point
(08:49):
four percent, so essentially reversing a prior uptic and that
improvement came really on two levels. One is that the
number of people saying that they were unemployed actually fell
by two hundred and seventy eight thousand. Meanwhile, the number
of people who said they found a job or were
employed increased by two hundred and thirty two thousand, and
(09:09):
that's essentially why we saw that unemployment rate drop from
four point five to four point four percent.
Speaker 1 (09:14):
So when you look at.
Speaker 2 (09:15):
It, you have part of it being part of the
report strong, part of it not so strong. Taken together,
it's a cooling labor market. It's not collapsing, and it's
stable enough to keep the FED from really having to
cut rates because the economy is slowing down on the
labor side.
Speaker 3 (09:31):
And I want to clarify one point because doesn't that
you know, sometimes when we talk about the unemployment rate dropping,
that sounds good. That's a good thing, right, our brains go, Okay,
more people are working, that's a good thing. But that
can't that also mean that fewer people are even looking
for jobs, people drop out of the job hunt. How
does that relate to these most recent numbers.
Speaker 2 (09:51):
Yeah, the change in the labor market participation, it wasn't
too much. I mean it dropped by like fifty thousand
or something like that. I mean it was pretty immaterial. Again,
the real improvement came when they when the government asked, hey,
do you have a job, and you had two hundred
and thirty two thousand people saying yes, I have a job.
And when there was also how many people's you know,
(10:11):
few were said that they lost their job, and that
was that was a further improvement where it was less
a decline of two hundred and seventy eight thousand, so
you had a lot more people saying I have a
job and a lot fewer people saying I don't have
a job. So that was the real big drivers. It
wasn't necessarily the labor force participation in this round of things.
Speaker 1 (10:32):
All right, Ay, we've got one full week of trading
in the books. You know, we had a slight bump
higher in the markets last week. We've got earning seasons
starting to you know, come into play in earnest this
week with a lot of bank earnings coming out. We
always hear the media talks about this all the time
as January goes, So does the year? Is there any
(10:52):
truth to that, you know saying? And is does history
tend to bear.
Speaker 3 (10:56):
That out at all?
Speaker 1 (10:57):
Or is that just noise that we should just kind
of ignore.
Speaker 2 (11:00):
Or yeah, there is I guess a little bit of
truth in that. You know, January you know, uh, you
know uh as saying, uh, you know that said when
you look at it, January has historically been one of
the stronger months. If you just look at the returns
by month and the person of months that are positive,
(11:20):
really the November through Jane or mid October really through
the end of January is really one of your strongest periods,
But that doesn't mean that an investor should really you know,
exit and you know, get out for the rest of time,
because there's still positive returns on average and still better
than you know, the chance that you see positive returns
at least historically on the following months. But so, you know,
(11:41):
what really drives it. I think to your point that
you're really getting that is earning in corporate profits. And
when you look at profits over the past uh, you
know year, we look at all of twenty twenty five,
and we're starting to get we're going to start to
get fourth quarter earnings this year. We have seen quarterly
profits somewhere between ten and fifteen percent for each of
those first three quarters. When we look at what's expected
(12:03):
in the first quarter or expected this to be released
in this week for the fourth quarter of last year,
we'll probably see that continue in all I see right
now Wall Street's expecting in the upper single digits. But
what I'm really looking for most likely is a continuation
on that ten to fifteen percent year over year profit growth.
And that's really what drives stocks over the longer run,
(12:24):
because if you think about in the stock market, it's
really a collection of stocks and what matters for stocks
is if they're making money or not making money. And
when you when it comes down to it, they make
money when the economy is growing, when there isn't a recession.
So that's why we want to really pay close attention
to whether or not we see recession risk getting elevated.
Right now, I'll call the recession risk over the next
(12:44):
six to nine months kind of I'll call it slightly middle,
maybe a little bit low to middle, certainly not high,
and that tends to build well for the stock market.
Doesn't mean there will be short tom Rois, especially you know,
you know, as things might come out of Washington regarding
the Federal Reserve, that can certainly have an impact. But
for longer term investors, intermediate term investors, paying attention to
(13:06):
corporate profits, economic growth, that's really the drivers of what's
going to help your portfolios or not.
Speaker 1 (13:14):
Sounds good, Andy, Thank you as always for spending time
with us tonight. Coming up next, a few key financial
opportunities you'll want to consider in twenty twenty six. These
are some smart moves that could position your portfolio for
a stronger year coming up in twenty twenty six. You're
listening to Simply Money, presented by Allworth Financial. Right here
(13:34):
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. If you can't listen to Simply
Money live every night, subscribe and get our daily podcasts.
Just search Simply Money on the iHeart app or wherever
(13:55):
you find your podcasts. Multiple accounts, missed, r and ds,
oh boy, and messy donations straight ahead at six forty three.
We're gonna clean all of that stuff up for you
with our quick, quick hit answers to your top money questions.
All right, Brian. Each year brings a new set of
(14:15):
challenges and a new set of opportunities, and there are
several opportunities out there to take advantage advantage of Pardon me.
In twenty twenty six.
Speaker 3 (14:25):
YEP numbers change as the seasons. In the years do
so retirement contribution limits have changed. The IRS has announced
that contributions to four oh one k's, four h three b's,
Thrift Savings Plans and governmental four to fifty sevens can
now be maximized up to twenty four thousand, five hundred dollars.
That's up one thousand bucks. It was twenty three and
a half and twenty five. Now in twenty six it's
(14:46):
twenty four thousand, five hundred. That's the everybody under the
sun can make those contributions. Those over fifty we have
what's called that catchup and that's eight thousand dollars. Now again,
if you're fifty year older, then now your total limit
is thirty two five hundred dollars. Brand new rule though,
if you are a high earner, which is one hundred
and fifty thousand dollars. This is an individual if you're married.
(15:08):
Doesn't matter if you're married or not, it matters how
much you earn under your Social Security number on your
W two. New rule for twenty twenty six is gonna
require you to make that catchup contribution to a designated
broth account. This could be a challenge or it could
be an opportunity. I mean, I'm not overly bothered by this.
My happiest clients wind up with two piles of money
of some pre tax stuff that they benefited from on
(15:30):
the deduction side, and also you know, some some wroth
type stuff that has grown over time and won't be
taxed at all. But any case, remember that catchup contribution
that has to happen in a WROTH. You're not gonna
get a choice about it. So don't be surprised if
you look at your your four to one case statement
and you see something looks a little funky. I didn't
choose WROTH. It's just happening in the background because of
what that ketchup has to be.
Speaker 1 (15:50):
Now, yeah, Brian and we brought these things up, you know,
I think in December we talked about it, you know, conceptually.
Now twenty twenty six though, is here, so you know,
one thing to check on. And sometimes people want to
do this. All of these spreadsheet people that you like
to talk about that stay on top of this stuff
all day every day, are probably already on it. But
(16:10):
for those of you that are just more casual participants
in your retirement plans at work, you know, do check things.
Check that website here once payroll is processed in January,
and just make sure that if you really should be
taking advantage of these catchup provisions, you're doing so, and
that your payroll provider has this stuff updated in terms
(16:30):
of the updated numbers. And then yeah, make sure that
that catch up money is going into the Wroth bucket. Again,
just a good reason to log into your account and
just make sure everything is up to date. We're pretty
confident it probably is. You know, most of these companies
are all on top of it. But again, good reason
to spend thirty seconds, a couple of minutes just logging
(16:53):
into your retirement account just to make sure Brian get
into some of the IRA and WROTH limits. In terms
of contract, we've got some updates there to discuss as well.
Speaker 3 (17:02):
Yeah, so what we just covered was the employer based
retirement plan, you know, something you get through your job.
Now we'll pivot here to the individual retirement or individual
Wroth IRA type thing that you're doing outside of your employer.
So for twenty twenty six, IRA and Wroth IRA contribution
limit is seven five hundred dollars with an additional eleven
hundred dollars catchup. So it's a thousand dollars or eight
(17:25):
thousand dollars ketchup in four one K eleven hundred, just
to keep people confused. Catch up contribution for age fifty
and over, So now eighty six hundred dollars total contribution
for those fifty plus that's up from twenty twenty five,
and for a single filer, eligibility for this to begin
with phases out between one hundred and fifty three and
one hundred and sixty eight thousand dollars worth of modified
(17:47):
adjusted gross income. This is getting a little bit brow
beating with the numbers here, but if you earn between
one hundred and fifty hundred and seventy be paying attention.
As a single filer. If you're married filing jointly, it's
going to phase out between two forty and two hundred
and fifty seven thousand, so watch for that if you're
in that range. HSA. Let's pivot to hell savingscounts, one
of our favorite topics here twenty twenty six. The contribution
(18:08):
limit is forty four hundred dollars for an individual, only
eighty seven fifty for family coverage, and again an additional thousand
dollars catchup contribution if you're fifty five or over. So
if you are funding those accounts, as we always like
to say CURI, if if you're not using it for
current expenses, treat it like an investment. Make sure it's
landing in something that looks like a you know, a
mutual fund or something like that. You may or may
(18:30):
not be able to do that with your current custodian,
but you can move those dollars. You're not getting the
benefit of tax free growth if you're leaving it sit
in that optim bank account or whatever. Those banks are
all right.
Speaker 1 (18:39):
And then one other thing we want to cover quickly
is this big beautiful bill deduction which goes into effect
here in twenty twenty six. It's a if the bill
does not become permanent, it's a temporary thing that runs
through twenty twenty eight, an extra six thousand dollars temporary
deduction on top of the standard deduction per spouse. But
(19:03):
there is a phase out on that as well, and
that phase out starts for taxpayers with incomes above seventy
five thousand for single filers one hundred and fifty thousand
dollars for joint filers. Brian, you and I have gotten
into this already, you know, with some reviews at the
end of last year, when people are starting to do
some income planning for twenty twenty six. It's just one
(19:24):
more thing to keep on top of. If you try
to pull money forward, pull taxable income forward, you could
you know, get into a situation where you're kind of
pricing your incoming yourself out of this. You know, senior
deduction for those age sixty five and older. So just
one more thing to keep an eye on. Here is
(19:46):
you do income planning for twenty twenty six. Here's the
all Worth advice. Twenty twenty six could provide a series
of opportunities for your investments. Talk to your financial advisor
about which opportunities make the most sense for your individual situation.
Should you worry about an AI bubble in twenty twenty six, Brian,
(20:06):
I feel like we talk about this every other week,
but with earning season coming up, it's worth mentioning again.
We'll break that down. What's real, what's the hype and
what could happen next. You're listening to Simply Money presenting
by Allworth Financial on fifty five KRC the talk station.
(20:27):
You're listening to Simply Money presented by all Worth Financial
and Bob Sponsller along with Brian James Well as we
talk about all the time. AI stocks have powered most
of the S and P five hundreds gains in recent years,
but with soaring valuations and big warning warnings from some
season portfolio managers, people that you know, let's face that
(20:52):
are talking their book might even be shorting these stocks
right now, Brian, Should we be worried about a bubble
in AI stocks? And if there is a bubble, is
it going to burst this year? Something we should probably
mention here with fourth quarter earning season starting to really
get into full gear here over the next couple of weeks.
Speaker 3 (21:11):
Yeah, we'll be paying a lot of attention to this
because AI has been the catalyst, right There's always a
catalyst driving something behind the market, you know, and most
recently it's been artificial intelligence and the scale that it
can bring to public traded companies. But investors haven't really
reacted to this yet, Bob, so nine out of ten
investors who already own AI related stocks say they plan
to either hold or buy more in twenty six. That's
(21:32):
coming from Motley Fool, aptly named because you know, I
feel like, of course, of course that's what they're saying.
They're saying, no, we're not stampeding right now, We're gonna
stampede later, you know. So that's not necessarily an indicator
of the If these people were saying, yes, I'm gonna
get out they'd be getting out right now. So but
in any case, surveys are worth what they are. So
(21:52):
ninety three percent of current AI investors do remain bullish
on the long term return potential. And again that's coming
despite those warnings from those portfolio managers that that that
you referred there.
Speaker 1 (22:04):
Well, and I think, as we talk about all the time, Brian,
it all comes down to valuation and other in other words,
how much are you willing to pay for a dollar's
worth of earnings and what's the expected future earnings growth rate?
And really these numbers fly all over the place. There
are companies that are trading at you know, over one
(22:24):
hundred times earnings on a forward moving basis, and and
that you know, can be a little rich, and those
kind of stocks can really tank in a hurry if
and when we get a little blip in any kind
of earnings news that creates any negativity. There are other
AI related stocks that are really not trading you know,
(22:45):
at obscene multiples. The growth rates have justified the stock
prices and are expected to do so. So it's really
on a stock by stock basis, which again for the
investor listening out there, it all comes down to how
you are managing your portfolio personally, or if you have
an advisor, how your advisor and his or her team
(23:07):
are managing things. I think the point we want to
make here is stay diversified. Don't have all your eggs
in one basket. If you really have ridden the ride
here on some of these AI stocks and have some
really nice gains and you have a need to diversify
your portfolio for tax reasons or risk management reasons, now
(23:28):
might be a time to sit down with your advisor
and really look under the hood, see what you own,
see what some of these valuations are, and be proactive
about adjusting the overall allocation of your portfolio.
Speaker 3 (23:40):
Yeah, I would agree with that, And I mean there's
really never not a good time to be paying attention
to that. But the worst time to pay attention to
to not pay attention to that is never, And that's
what a lot of people do, just kind of blindly
let things wander and don't come back into that. And
to review what that portfolio actually looks like. So that
we always talk about those magnificent seven stocks, make sure
(24:01):
that you've spread your portfolio out beyond those those are
and you know all the names at this point, we
don't need to beat it to death. But those are
a huge part of the S and P five hundred.
So even if you're sitting on index fund, yeah, you're
kind of diversified. But at the same time, just remember
that those those stocks are making up a large portion
of your overall portfolio. And that group lost a trillion
dollars in one week in late late last year, and
(24:24):
we started to see a big, big bearish investors like
Michael Burry. I don't remember him, but he's famous from
two thousand and eight. He is one of the ones
that predicted the real estate downturn, doesn't meganma genius. He's
also made some bad guesses too, but he certainly was
moving against alter artificial intelligence type stocks. Also Ray Dalio,
another famous name soothsayer if you will, He feels like
(24:45):
the AI boom is getting into an early bubble territory.
To use his words, just kind of saying that the
has characteristics to similar pass bubbles. So just be careful
what we're getting into, you know, don't necessarily throw good
money after bad if if things move south on you.
Speaker 1 (25:02):
Well, and Brian, you raise a good point. I mean,
just looking back over at the last say, four to
six weeks of twenty twenty five, if you look at
these big cap stocks, they really didn't do much and
in fact, they kind of pulled back a little bit,
while the overall market did just fine. And I think
we've already started to see a little bit of this
rebalancing and sector rotation, you know, amongst institutional money managers.
(25:24):
I personally think that's a good thing, you know, for
folks that are managing portfolios responsibly, because you know, if
you get away from just these AI hyperscalers that are
putting huge capital investments into AI, it eventually it's going
to come down to who can make money and generate
profits from utilizing this up and coming technology. And the
(25:46):
answer to that should be every industry, every sector, if
they're really paying attention and allocating capital correctly. So I
think we've already started to see a little bit of
healthy sector rotation. I expect that personally to continue twenty
twenty six. Again while not abandoning all these big cap
AI stocks who let's freight, let's face it, they still
(26:07):
have really nice earnings growth. Again, it's just don't pile
in to just a handful of stocks because you could
end up, you know, being sorry if and when the
whole earning story maybe pivots a little bit.
Speaker 3 (26:21):
Yeah, I have zero concern about AI going away, and
just as if it was never here. This kind of
feels like that when the Internet was first a thing
and people were saying, well, this is a flash in
the pan. Nobod's gonna want to use their computers to
buy stuff online? Right with this Amazon company they sell books?
Who cares about that? I can get books for free
from the library. But I feel like the AI is
definitely these are tools that do make things more efficient
(26:44):
and they make work easier. Is it going to be
the hype that is currently presented. No, that's what makes
it hype. But at the same time, these tools will
not go away. They do allow for much more efficient
day to day business activity. So again, just just be
just be responsible and mindful of what the limitates.
Speaker 1 (27:01):
Here's the all Worth advice. Diversify, diversify, diversify and focus
on fundamentals and plan for both corrections and continued growth.
And as Brian said, planning ahead is better than planning
after it already happens. That's what we call discipline, not
fear or fear of missing out. That's what protects and
grows your wealth over time. Did you forget your R
(27:24):
and D last year? Well, you're not alone. We'll tackle
real listener questions on that topic and some misdeadlines on
rmds to Wroth moves and smarter giving strategies. All that
and more coming up next. You're listening to Simply Money
presented by all Worth Financial on fifty five KRC the
talk station. You're listening to Simply Money presented by all
(27:49):
Worth Financial Lambob 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 if and only if you're listening to
the show on the iHeart app. Simply record your question
there and it will come straight to us. All right.
Brian Arthur in Hyde Park leads us off tonight. He says,
(28:10):
we delayed Wroth conversions for years and now we're in
twenty twenty six wishing we had done more. Is it
too late to make meaningful changes to our portfolio and
text strategy?
Speaker 3 (28:23):
Brian, Now, I would say it's never too late to
really think about roth conversions, because we're you're talking about
something that is a sacrifice right now but will do
nothing but benefit as we go forward. And roth conversions
really need a lot of time to be beneficial anyway.
So don't feel like just because we missed a year
that it no longer makes sense. But so what I
would suggest is separate the missed opportunity from the remaining opportunity. Yeah,
(28:46):
converting aggressively when you're in lower tax years, of course,
that would have reduced fewer RMD exposures. That's perfect. So
would betting on last year's lottery numbers. You'd have been
fine doing that too, if you can predict the future.
But WROTH planning, it's not an on and off switch.
It is very much a multi decade tax rate arbitrage problem.
You're simply trying to say, I want to pay taxes
now because I feel like taxes are gonna go up
(29:07):
in the future, or because I think the overall growth
will be beneficial to me, And so just make sure
that you understand, you know what the impact you haven't
really lost, And tax planning and roth conversion to me
is an annual decision anyway. So I feel like there's
still plenty of room. I wouldn't worry about too much
about that. So let's move on to Beth and Mainville,
(29:27):
who says she forgot this can give me PTSD forgot
to take my rm D and I'm freaking out. Well
what can she do? Bob?
Speaker 1 (29:35):
All right? Well, first of all, Beth, calm down, no
reason to freak out. By the same token, you do
need to address this. We see this come up from
time to time. So the first thing is, don't bury
your head in the sand and just wish and hope
this problem is gonna go away, because I can promise
you the IRS is not going to treat it that way.
So here's what you do. First, figure out what your
(29:57):
rm D should have been for twenty twenty five. Figure
out what that number is and make sure that gets processed,
and then work with your tax professional CPA if you
have one, or if you do it yourself. You're you know,
either way, you're gonna have to file something called an
IRS Form five three two nine to address the missed
rm D. So what's gonna happen is you got to
(30:19):
take this rm D, and I'd recommend taking it sooner
rather than later. The IRS is going to want to
see evidence that you address the problem, recognize it, and
dealt with it. Don't try to, you know, take advantage
of seven more months of tax deferral and try to
get out from under penalties. Uh, address it right away,
file form fifty three twenty nine, you know, because again
(30:41):
as a reminder, there is a twenty five percent penalty
on the missed rm D amount that the IRS can
levy on you if they want to. They ten that's
reduced to ten percent if you correct it within the
first two years and file that fifty three to twenty
nine form properly. In a lot of cases, the IRS
(31:02):
will waive the penalty entirely if you can show reasonable
cause on that form for why you missed it and
show evidence that you fixed it promptly. Brian, I've had
a couple clients go through this over the last couple
of years, and we got on it in the first
couple weeks of January, and we went ahead and pulled
out both the rm D for twenty twenty five plus
(31:24):
any earnings that accrued in twenty twenty six on that
missed rm D amount. We pulled it out right now,
got it out of there filed the form. Now, remember
you also still have to take your twenty twenty six RMD,
and for tax planning purposes, both of those distributions are
going to be treated as taxable income for twenty twenty six.
(31:46):
I've yet to have a client that addressed this, you know,
promptly and thoroughly get assessed a penalty. Have you had situations,
you know, similar to this, And how is this all
shaken out for you and your clients?
Speaker 3 (31:58):
You know, honestly, honestly, Bob, I've never had a negative
interaction with the I R S when people are just
trying to figure things out.
Speaker 1 (32:04):
Yeah, there is.
Speaker 3 (32:04):
There is so much that it's so complicated that even
the I R S folks, they'll never tell you, you know,
here's the exact playbook. What you do in this situation.
You simply make your case. And I've always found them
outside of situations where somebody is obviously trying to commit
fraud or or you know, is just blatantly, you know,
just ignoring their taxes if it's just a one off, whoops,
(32:25):
I did my tax is wrong, They've always been flexible.
One quick thought I want to throw out to Beth
is that if this happens to be your first time
taking an RMD, you haven't missed a deadline yet because
the first year you take it is that the deadline
is tax time for the prior year, so that would
be April of twenty six. So if this hacks will
be your very first you're still okay. So but yeah,
(32:45):
just pay attention to that. We don't we don't know
if that's the situation for you, but you might you
might be okay.
Speaker 1 (32:49):
Yeah, so, Beth, no reason to freak out. But by
the same token, get on top of it, be thorough,
do your filing, and I think everything's going to work
out just fine. All right. John in Blue Ash says,
I have a four to one K plan through my employer,
but I also have started a site hustle that's bringing
in some pretty significant income. Am I allowed to also
have a solo for a one K? Brian?
Speaker 3 (33:11):
Yeah? So here this is where it gets a little confusing.
So the quick answer to John is yes, you're allowed
to have both plans. Here's a situation. You've got a
W two type job with an employer sponsored for a
one K and a bona fide self employment income. That
means you've got a schedule see our partnership K one
single member LLC that kind of thing. Then yes, you
can establish and contribute to a solo for a one K.
(33:32):
However that this might be what you're asking. That employee
salary deferral limit, which is as we said earlier in
this broadcast is twenty four five hundred plus to catch up.
That applies across all of your all of your retirement plans.
So you'll still need to pay attention to the total
dollar amount going into these. You don't get that twenty
(33:53):
four and a half in twenty six using for each plan.
It is a total. You can't double it, so make
sure you're paying attention to that. It's really the employer
contributions that's what's separate. That's the real advantage of the
solo for OH one K, because you get to put
some more on money on top that comes from the business.
I know it's confusing if you're a soul prop because
you're both the employee and the employer, But the IRS
(34:14):
looks at those two contributions, those two sources as very different.
The employer contribution does not count against your personal deferral limit.
That's why you're doing this, that's the benefit of the
solo for O on K. It's not to take advantage
of the twenty four to five that everybody gets, is
to take advantage of the employer side of things.
Speaker 1 (34:31):
All right. Coming up next, we're going to unpack what
the latest legit research says about where investors are actually
getting their information with which to make investment decisions, and
the big question should you follow suit. You're listening to
Simply Money Presided by all Worth Financial lung fifty five
KRC the talk station. You're listening to Simply Money Presided
(34:57):
by all Worth Financial on Bob Sponseller along with Brian
ja Games. Well, let's talk about, Brian. One of the
hottest trends in personal finance right now, finn influencers and
social media advice, something I know nothing about, but I
know you're a hip gen X kind of dude, so
you're probably all on top of this. Brian. Do you
get your financial advice off TikTok? Is that where you
(35:20):
get all your great trading ideas?
Speaker 3 (35:21):
That's all That's all I do. I mean, it's a
financial advisor. All I need to do is regurgitate stuff
I see in thirty second video clips on the internet.
That's really it's tops easy about.
Speaker 1 (35:30):
All right, Well, tell us tell us about what the
Finra Investor Education Foundation has concluded after some fairly significant research.
Speaker 3 (35:40):
Yeah, so this is limited to they interview at finn
by the way, that's one of the governing bodies of
our industry, and it surveyed nearly three thousand people with
non retirement investment accounts. So we're talking about people who
have investment money, because that's normally where people kind of
play with their assets in some kind of broker's account
that is not a four one K, not an IRA.
So among these three thousand people, three and ten of
(36:02):
them report on relying on social media as an information source,
and when asked separately about the social channels they actually
use for investing information, YouTube is the most popular. And
also three and ten stated that they use these recommendations
from these social media influencers when making investment decisions. In
other words, it's just not something to stare at. They're
actually acting on the information they're getting. Six in ten
(36:24):
of those under thirty five and six and ten of
those with less than two years of investing experience. What
that tells me is that that is the most that
is good, bad, or and different. But social media is
viewed as the most obvious way to get started. These
are younger people and people who don't have much investing experience,
and that's where they're starting. And I don't mean to
sound Ryan Bryan.
Speaker 1 (36:45):
Does this mean that I can go on YouTube and
simultaneously learn all about tying fly fishing flies and learn
about what the best triple leverage bitcoin ETF is? Can
I get all that in one location?
Speaker 3 (36:59):
Yes, you can get lots of terrible advice from social media.
Speaker 1 (37:02):
No.
Speaker 3 (37:02):
I help me to sound an alarm here, because there
is good information to be had out there, But the
flashyar it is and the more obnoxious it is, probably
the more useless it actually is. I would be looking
toward the more boring influencers out there, right. There are
some out there that do provide a much broader picture
than just invest in this one XYZ thing because it's
(37:25):
going to make a bazillion dollars next week. That's where
the attraction starts, and that's where people can get stounded
down the wrong path. And my concern there is if
for these folks who are using these types of resources
for their very first time investing. There's a real good
chance that they're just going to get a bad taste
in their mouth. These are the people who ten years
from now we'll talk about, well, I lost all my
money in the stock market, which is simply a silly
(37:46):
comment because I'm looking at the stock market right now.
It didn't go away. It's still here. If you lost
or so and so lost all their money in the
stock market, so and so is gambling on stupid ideas.
So that's the kind of stuff that you have to
watch for. Build the core, do the boring stuff first,
and then look to the If you really still have
that temptation, look for these influencers and these these little
take a flyer on something, but do it with a
(38:06):
small portion of your assets and learn how it works.
Speaker 1 (38:09):
Well. A positive spin on this story, and I mean
that I think it's positive that folks are out there
trying to learn more about investing. The good news here
is that the folks that are going out on these
social media challenge channels, they're getting about seventy five percent
of their recommendations and ideas from actual brokerage firms and
financial professionals, which means this industry is starting to evolve
(38:32):
enough to be to have a presence on these channels
where actual young people are and live and operate. Education
is always a good thing. It's just interesting to watch
how it all unfolds. And you know the hard thing
for these young folks is to sift the bad information
from the good information, and that's what makes things so
(38:53):
challenging out there in social media land. Here's the all
Worth advice. Social media can spark financial creosity, but your
wealth deserves insight grounded in expertise, not just likes in views.
Thanks for listening tonight. You've been listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
talk station
Tonight, why the markets could get a little noisy this week,
plus some opportunities you definitely want to think about taking
advantage of in twenty twenty six. And as always we
answer your money questions. You're listening to Simply Money presented
by all Worth Financial. I'm Bob Sponseller along with Brian James.
We've got a lot to get to tonight and we
(00:25):
want to start by bringing in all Worth Chief Investment
Officer Andy Stout. Just as a reminder, Andy manages I
don't know over thirty five billion dollars worth of our
client's money for all Worth clients from right here in Cincinnati. Andy,
thank you for making time for us tonight. We were
ready to talk to you about the inflation report coming
(00:46):
up tomorrow, but we've got a few extra tidbits that
I know you want to talk about tonight, because, as
we know, the news is always moving, especially with our
current presidential administration hit it Andy, Yeah, I.
Speaker 2 (01:01):
Mean you could definitely say that it's a fluid news environment.
There's no question about that. There were certainly some developments
late on Sunday. We had Chair Pow in a relatively
unusual approach, he released a video on the fed's website,
which is not the norm at all, But what he
was doing, he was addressing that the FED was served
(01:25):
some grand jury subpoenas tied to his testimony of June
of last year. The testimony was before the Senate Banking
Committee and it was related to the two and a
half billion headquarter renovation, So there is the potential for
criminal charges there. However, what chair Pal posted in his
video and what most people believe, is that this is
(01:46):
really an investigation. This investigation is really related to the
FED not bowing to what President Trump wants in terms
of lower interest rates. So the chair Pal talked about it,
you know, the political pressure being tied to monetary policy,
and that's kind of how he reframed it. So when
you look at that from that perspective, it certainly calls
(02:08):
into question the fed's independence. I mean, that's been one
of the main stays of our economy and it's really
critical that we do have a central bank that is
independent and can make interest rate decisions without being pressured,
because otherwise you end up making decisions that may or
may not be in the best interest of the public,
(02:29):
and even if they do end up being in the
best interest of the public. The lack of independence from
the markets perspective definitely increases the likelihood that you see
a about of market volatility. There's no question about that.
Speaker 1 (02:44):
You know.
Speaker 2 (02:44):
So far though, this is what's interesting. There really hasn't.
I mean, there's been some fallout, but it's not been
to two material obviously, it's early stages. And I say,
there's really two reasons for this, Okay. The first reason
is that this doesn't really change anything regarding what the
FED actually does. It's what we call their reaction function.
(03:06):
So policy it's still driven currently by inflation and the
labor data. And I know, we got some data last
week and that doesn't really go that's not really going
to force a head hand. And we have some important
data coming up this week and we'll talk about that
in the met But right now, the Fed's reaction function
remains intact. It's currently still based on monetary policy. Look
where markets pricing in the terms of any sort of
(03:27):
FED fund rate cuts coming up, and it's pretty much
negligible here in the near term.
Speaker 3 (03:32):
Now.
Speaker 2 (03:32):
The second, and really i'll call this the more important
one is the Senate Banking Committee politics. They support the
FED Republican. Republican Senator Tom Tillis publicly said he would
oppose confirming any Federal Reserve nominees while this investigation is ongoing.
And he also pretty much said that this investigation is
(03:53):
very political in nature and not really related to anything
of materiality. So when you look at the Senate Banking Committee,
it's a relatively narrow margin, and what his statement does
and what he plans to do, it creates a procedural roadblock.
So without getting into the week too much, it really
just creates that roadblock in going to essentially kind of
(04:16):
stop any sort of near term leadership changes. Now when
we look a little bit longer term out, it's important
to note that Chair Pal's term ends on May fifteenth
this year. That's his term as the FED chair. He
can't remain as a governor until twenty twenty eight, So
it's possible he might decide to resist political pressure to
(04:37):
or excuse me, to help the Fed resist political pressure.
He could stay on until twenty twenty eight if he
thinks that's the right thing to do. So there's a
lot of moving pieces there. There's no question about now.
I would say it's not any sort of like immediate catalyst,
but it's a longer term institutional risk that you have
to monitor. But what's more important than the near term,
(04:58):
I guess from an economic standpoint, is what the FED
is going to look at at regarding the jobs market
and the inflation data, because that's their duel.
Speaker 3 (05:05):
Land Andy, how much more crazy can the world take
of the United States behaving the way that we currently are.
Is there a point in the future where you feel like,
at some point investors are going to start thinking very
very differently about whether they're willing to continue with the
level of debt that that they own. You know, other countries,
(05:25):
Japan owns a lot of our debt, so this is China.
Is there some point where they're going to say, we
just cannot feel comfortable with predictability out of out of
the United States. That's a great question.
Speaker 2 (05:37):
It's what I've heard a lot from just some people
in general. And the short answer is, you know, the
US economy drives the global economy, and a lot of
people will look you know, past any sort of short
term you know, volatility in terms of you know, what
might be coming out of Washington because they know, you know,
(06:00):
where the money is right and that's ultimately what's going
to drive it. So the short answer is no, I
don't really see a material global impact from this where
you see investors pulling money out, because when it comes
to the when it comes to everything, at the end
of the day, you know, we're still the largest economy,
and that's ultimately what's going to matter. I mean, when
(06:20):
you ask what matters, you know, money talks.
Speaker 1 (06:23):
Andy speaking of what matters. I mean, just you know,
from where I sit here, even without all this noise
about the Federal Reserve subpoenas and all that, the FED
was not really or the market is really not pricing
in any FED rate cuts until the middle of twenty
twenty six at the soonest, right, So let's get into
a little bit about the upcoming inflation report and the
(06:46):
latest labor report. Those are the two you know, dual
mandates that the FED has. What's the latest data telling
you and telling us in terms of where the economy sits?
Here on a Monday morning, January, Well.
Speaker 2 (07:01):
Yeah, the really nice thing is we're finally starting to
get some data following a shut down in a timely manner.
So we did receive the December jobs market report last
week and it wasn't great, but it wasn't terrible. And
what it continued to show was what we've been talking
about for the past basically six twelve months. The labor
(07:22):
market is cooling, but it's not collapsing. So when we
look at the job report, it has there's two surveys
in there. Right, we have the government who talks to
businesses and one survey to get the data on the
number of jobs being at it. Then we have a
second survey that's independent of the first one. That's where
the government reaches out to households or individuals and say, hey,
do you have a job? Do you not have a job?
(07:43):
That's where we get the unemployment rate from. So we
get two different you know, data points there. So the
first one on the what employers were at it, they
added fifty thousand jobs in December. That was, you know,
definitely less than the seventy thousand that economists we're looking for.
But on top of that, you know, what we also
saw was that the prior two months were revised lower
(08:04):
by seventy six thousand. So it's not good from that perspective.
And I was looking at it just like a chart
of the number of jobs being added by employers, and
it looked pretty strong until like the last seven months,
and you see it flattened and get really close to zero.
We even had, you know, a pretty sizeable draw down
just a few months ago in October of almost two
(08:27):
hundred thousand. But when you look at like the average
number of new jobs added since last May, it's only
twelve thousand. You know, that's not a strong environment. Now,
on the bright side, the household Survey that's where the
government talks individuals, that actually showed that the unemployment rate fell.
It fell from a four point five to four point
(08:49):
four percent, so essentially reversing a prior uptic and that
improvement came really on two levels. One is that the
number of people saying that they were unemployed actually fell
by two hundred and seventy eight thousand. Meanwhile, the number
of people who said they found a job or were
employed increased by two hundred and thirty two thousand, and
(09:09):
that's essentially why we saw that unemployment rate drop from
four point five to four point four percent.
Speaker 1 (09:14):
So when you look at.
Speaker 2 (09:15):
It, you have part of it being part of the
report strong, part of it not so strong. Taken together,
it's a cooling labor market. It's not collapsing, and it's
stable enough to keep the FED from really having to
cut rates because the economy is slowing down on the
labor side.
Speaker 3 (09:31):
And I want to clarify one point because doesn't that
you know, sometimes when we talk about the unemployment rate dropping,
that sounds good. That's a good thing, right, our brains go, Okay,
more people are working, that's a good thing. But that
can't that also mean that fewer people are even looking
for jobs, people drop out of the job hunt. How
does that relate to these most recent numbers.
Speaker 2 (09:51):
Yeah, the change in the labor market participation, it wasn't
too much. I mean it dropped by like fifty thousand
or something like that. I mean it was pretty immaterial. Again,
the real improvement came when they when the government asked, hey,
do you have a job, and you had two hundred
and thirty two thousand people saying yes, I have a job.
And when there was also how many people's you know,
(10:11):
few were said that they lost their job, and that
was that was a further improvement where it was less
a decline of two hundred and seventy eight thousand, so
you had a lot more people saying I have a
job and a lot fewer people saying I don't have
a job. So that was the real big drivers. It
wasn't necessarily the labor force participation in this round of things.
Speaker 1 (10:32):
All right, Ay, we've got one full week of trading
in the books. You know, we had a slight bump
higher in the markets last week. We've got earning seasons
starting to you know, come into play in earnest this
week with a lot of bank earnings coming out. We
always hear the media talks about this all the time
as January goes, So does the year? Is there any
(10:52):
truth to that, you know saying? And is does history
tend to bear.
Speaker 3 (10:56):
That out at all?
Speaker 1 (10:57):
Or is that just noise that we should just kind
of ignore.
Speaker 2 (11:00):
Or yeah, there is I guess a little bit of
truth in that. You know, January you know, uh, you
know uh as saying, uh, you know that said when
you look at it, January has historically been one of
the stronger months. If you just look at the returns
by month and the person of months that are positive,
(11:20):
really the November through Jane or mid October really through
the end of January is really one of your strongest periods,
But that doesn't mean that an investor should really you know,
exit and you know, get out for the rest of time,
because there's still positive returns on average and still better
than you know, the chance that you see positive returns
at least historically on the following months. But so, you know,
(11:41):
what really drives it. I think to your point that
you're really getting that is earning in corporate profits. And
when you look at profits over the past uh, you
know year, we look at all of twenty twenty five,
and we're starting to get we're going to start to
get fourth quarter earnings this year. We have seen quarterly
profits somewhere between ten and fifteen percent for each of
those first three quarters. When we look at what's expected
(12:03):
in the first quarter or expected this to be released
in this week for the fourth quarter of last year,
we'll probably see that continue in all I see right
now Wall Street's expecting in the upper single digits. But
what I'm really looking for most likely is a continuation
on that ten to fifteen percent year over year profit growth.
And that's really what drives stocks over the longer run,
(12:24):
because if you think about in the stock market, it's
really a collection of stocks and what matters for stocks
is if they're making money or not making money. And
when you when it comes down to it, they make
money when the economy is growing, when there isn't a recession.
So that's why we want to really pay close attention
to whether or not we see recession risk getting elevated.
Right now, I'll call the recession risk over the next
(12:44):
six to nine months kind of I'll call it slightly middle,
maybe a little bit low to middle, certainly not high,
and that tends to build well for the stock market.
Doesn't mean there will be short tom Rois, especially you know,
you know, as things might come out of Washington regarding
the Federal Reserve, that can certainly have an impact. But
for longer term investors, intermediate term investors, paying attention to
(13:06):
corporate profits, economic growth, that's really the drivers of what's
going to help your portfolios or not.
Speaker 1 (13:14):
Sounds good, Andy, Thank you as always for spending time
with us tonight. Coming up next, a few key financial
opportunities you'll want to consider in twenty twenty six. These
are some smart moves that could position your portfolio for
a stronger year coming up in twenty twenty six. You're
listening to Simply Money, presented by Allworth Financial. Right here
(13:34):
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. If you can't listen to Simply
Money live every night, subscribe and get our daily podcasts.
Just search Simply Money on the iHeart app or wherever
(13:55):
you find your podcasts. Multiple accounts, missed, r and ds,
oh boy, and messy donations straight ahead at six forty three.
We're gonna clean all of that stuff up for you
with our quick, quick hit answers to your top money questions.
All right, Brian. Each year brings a new set of
(14:15):
challenges and a new set of opportunities, and there are
several opportunities out there to take advantage advantage of Pardon me.
In twenty twenty six.
Speaker 3 (14:25):
YEP numbers change as the seasons. In the years do
so retirement contribution limits have changed. The IRS has announced
that contributions to four oh one k's, four h three b's,
Thrift Savings Plans and governmental four to fifty sevens can
now be maximized up to twenty four thousand, five hundred dollars.
That's up one thousand bucks. It was twenty three and
a half and twenty five. Now in twenty six it's
(14:46):
twenty four thousand, five hundred. That's the everybody under the
sun can make those contributions. Those over fifty we have
what's called that catchup and that's eight thousand dollars. Now again,
if you're fifty year older, then now your total limit
is thirty two five hundred dollars. Brand new rule though,
if you are a high earner, which is one hundred
and fifty thousand dollars. This is an individual if you're married.
(15:08):
Doesn't matter if you're married or not, it matters how
much you earn under your Social Security number on your
W two. New rule for twenty twenty six is gonna
require you to make that catchup contribution to a designated
broth account. This could be a challenge or it could
be an opportunity. I mean, I'm not overly bothered by this.
My happiest clients wind up with two piles of money
of some pre tax stuff that they benefited from on
(15:30):
the deduction side, and also you know, some some wroth
type stuff that has grown over time and won't be
taxed at all. But any case, remember that catchup contribution
that has to happen in a WROTH. You're not gonna
get a choice about it. So don't be surprised if
you look at your your four to one case statement
and you see something looks a little funky. I didn't
choose WROTH. It's just happening in the background because of
what that ketchup has to be.
Speaker 1 (15:50):
Now, yeah, Brian and we brought these things up, you know,
I think in December we talked about it, you know, conceptually.
Now twenty twenty six though, is here, so you know,
one thing to check on. And sometimes people want to
do this. All of these spreadsheet people that you like
to talk about that stay on top of this stuff
all day every day, are probably already on it. But
(16:10):
for those of you that are just more casual participants
in your retirement plans at work, you know, do check things.
Check that website here once payroll is processed in January,
and just make sure that if you really should be
taking advantage of these catchup provisions, you're doing so, and
that your payroll provider has this stuff updated in terms
(16:30):
of the updated numbers. And then yeah, make sure that
that catch up money is going into the Wroth bucket. Again,
just a good reason to log into your account and
just make sure everything is up to date. We're pretty
confident it probably is. You know, most of these companies
are all on top of it. But again, good reason
to spend thirty seconds, a couple of minutes just logging
(16:53):
into your retirement account just to make sure Brian get
into some of the IRA and WROTH limits. In terms
of contract, we've got some updates there to discuss as well.
Speaker 3 (17:02):
Yeah, so what we just covered was the employer based
retirement plan, you know, something you get through your job.
Now we'll pivot here to the individual retirement or individual
Wroth IRA type thing that you're doing outside of your employer.
So for twenty twenty six, IRA and Wroth IRA contribution
limit is seven five hundred dollars with an additional eleven
hundred dollars catchup. So it's a thousand dollars or eight
(17:25):
thousand dollars ketchup in four one K eleven hundred, just
to keep people confused. Catch up contribution for age fifty
and over, So now eighty six hundred dollars total contribution
for those fifty plus that's up from twenty twenty five,
and for a single filer, eligibility for this to begin
with phases out between one hundred and fifty three and
one hundred and sixty eight thousand dollars worth of modified
(17:47):
adjusted gross income. This is getting a little bit brow
beating with the numbers here, but if you earn between
one hundred and fifty hundred and seventy be paying attention.
As a single filer. If you're married filing jointly, it's
going to phase out between two forty and two hundred
and fifty seven thousand, so watch for that if you're
in that range. HSA. Let's pivot to hell savingscounts, one
of our favorite topics here twenty twenty six. The contribution
(18:08):
limit is forty four hundred dollars for an individual, only
eighty seven fifty for family coverage, and again an additional thousand
dollars catchup contribution if you're fifty five or over. So
if you are funding those accounts, as we always like
to say CURI, if if you're not using it for
current expenses, treat it like an investment. Make sure it's
landing in something that looks like a you know, a
mutual fund or something like that. You may or may
(18:30):
not be able to do that with your current custodian,
but you can move those dollars. You're not getting the
benefit of tax free growth if you're leaving it sit
in that optim bank account or whatever. Those banks are
all right.
Speaker 1 (18:39):
And then one other thing we want to cover quickly
is this big beautiful bill deduction which goes into effect
here in twenty twenty six. It's a if the bill
does not become permanent, it's a temporary thing that runs
through twenty twenty eight, an extra six thousand dollars temporary
deduction on top of the standard deduction per spouse. But
(19:03):
there is a phase out on that as well, and
that phase out starts for taxpayers with incomes above seventy
five thousand for single filers one hundred and fifty thousand
dollars for joint filers. Brian, you and I have gotten
into this already, you know, with some reviews at the
end of last year, when people are starting to do
some income planning for twenty twenty six. It's just one
(19:24):
more thing to keep on top of. If you try
to pull money forward, pull taxable income forward, you could
you know, get into a situation where you're kind of
pricing your incoming yourself out of this. You know, senior
deduction for those age sixty five and older. So just
one more thing to keep an eye on. Here is
(19:46):
you do income planning for twenty twenty six. Here's the
all Worth advice. Twenty twenty six could provide a series
of opportunities for your investments. Talk to your financial advisor
about which opportunities make the most sense for your individual situation.
Should you worry about an AI bubble in twenty twenty six, Brian,
(20:06):
I feel like we talk about this every other week,
but with earning season coming up, it's worth mentioning again.
We'll break that down. What's real, what's the hype and
what could happen next. You're listening to Simply Money presenting
by Allworth Financial on fifty five KRC the talk station.
(20:27):
You're listening to Simply Money presented by all Worth Financial
and Bob Sponsller along with Brian James Well as we
talk about all the time. AI stocks have powered most
of the S and P five hundreds gains in recent years,
but with soaring valuations and big warning warnings from some
season portfolio managers, people that you know, let's face that
(20:52):
are talking their book might even be shorting these stocks
right now, Brian, Should we be worried about a bubble
in AI stocks? And if there is a bubble, is
it going to burst this year? Something we should probably
mention here with fourth quarter earning season starting to really
get into full gear here over the next couple of weeks.
Speaker 3 (21:11):
Yeah, we'll be paying a lot of attention to this
because AI has been the catalyst, right There's always a
catalyst driving something behind the market, you know, and most
recently it's been artificial intelligence and the scale that it
can bring to public traded companies. But investors haven't really
reacted to this yet, Bob, so nine out of ten
investors who already own AI related stocks say they plan
to either hold or buy more in twenty six. That's
(21:32):
coming from Motley Fool, aptly named because you know, I
feel like, of course, of course that's what they're saying.
They're saying, no, we're not stampeding right now, We're gonna
stampede later, you know. So that's not necessarily an indicator
of the If these people were saying, yes, I'm gonna
get out they'd be getting out right now. So but
in any case, surveys are worth what they are. So
(21:52):
ninety three percent of current AI investors do remain bullish
on the long term return potential. And again that's coming
despite those warnings from those portfolio managers that that that
you referred there.
Speaker 1 (22:04):
Well, and I think, as we talk about all the time, Brian,
it all comes down to valuation and other in other words,
how much are you willing to pay for a dollar's
worth of earnings and what's the expected future earnings growth rate?
And really these numbers fly all over the place. There
are companies that are trading at you know, over one
(22:24):
hundred times earnings on a forward moving basis, and and
that you know, can be a little rich, and those
kind of stocks can really tank in a hurry if
and when we get a little blip in any kind
of earnings news that creates any negativity. There are other
AI related stocks that are really not trading you know,
(22:45):
at obscene multiples. The growth rates have justified the stock
prices and are expected to do so. So it's really
on a stock by stock basis, which again for the
investor listening out there, it all comes down to how
you are managing your portfolio personally, or if you have
an advisor, how your advisor and his or her team
(23:07):
are managing things. I think the point we want to
make here is stay diversified. Don't have all your eggs
in one basket. If you really have ridden the ride
here on some of these AI stocks and have some
really nice gains and you have a need to diversify
your portfolio for tax reasons or risk management reasons, now
(23:28):
might be a time to sit down with your advisor
and really look under the hood, see what you own,
see what some of these valuations are, and be proactive
about adjusting the overall allocation of your portfolio.
Speaker 3 (23:40):
Yeah, I would agree with that, And I mean there's
really never not a good time to be paying attention
to that. But the worst time to pay attention to
to not pay attention to that is never, And that's
what a lot of people do, just kind of blindly
let things wander and don't come back into that. And
to review what that portfolio actually looks like. So that
we always talk about those magnificent seven stocks, make sure
(24:01):
that you've spread your portfolio out beyond those those are
and you know all the names at this point, we
don't need to beat it to death. But those are
a huge part of the S and P five hundred.
So even if you're sitting on index fund, yeah, you're
kind of diversified. But at the same time, just remember
that those those stocks are making up a large portion
of your overall portfolio. And that group lost a trillion
dollars in one week in late late last year, and
(24:24):
we started to see a big, big bearish investors like
Michael Burry. I don't remember him, but he's famous from
two thousand and eight. He is one of the ones
that predicted the real estate downturn, doesn't meganma genius. He's
also made some bad guesses too, but he certainly was
moving against alter artificial intelligence type stocks. Also Ray Dalio,
another famous name soothsayer if you will, He feels like
(24:45):
the AI boom is getting into an early bubble territory.
To use his words, just kind of saying that the
has characteristics to similar pass bubbles. So just be careful
what we're getting into, you know, don't necessarily throw good
money after bad if if things move south on you.
Speaker 1 (25:02):
Well, and Brian, you raise a good point. I mean,
just looking back over at the last say, four to
six weeks of twenty twenty five, if you look at
these big cap stocks, they really didn't do much and
in fact, they kind of pulled back a little bit,
while the overall market did just fine. And I think
we've already started to see a little bit of this
rebalancing and sector rotation, you know, amongst institutional money managers.
(25:24):
I personally think that's a good thing, you know, for
folks that are managing portfolios responsibly, because you know, if
you get away from just these AI hyperscalers that are
putting huge capital investments into AI, it eventually it's going
to come down to who can make money and generate
profits from utilizing this up and coming technology. And the
(25:46):
answer to that should be every industry, every sector, if
they're really paying attention and allocating capital correctly. So I
think we've already started to see a little bit of
healthy sector rotation. I expect that personally to continue twenty
twenty six. Again while not abandoning all these big cap
AI stocks who let's freight, let's face it, they still
(26:07):
have really nice earnings growth. Again, it's just don't pile
in to just a handful of stocks because you could
end up, you know, being sorry if and when the
whole earning story maybe pivots a little bit.
Speaker 3 (26:21):
Yeah, I have zero concern about AI going away, and
just as if it was never here. This kind of
feels like that when the Internet was first a thing
and people were saying, well, this is a flash in
the pan. Nobod's gonna want to use their computers to
buy stuff online? Right with this Amazon company they sell books?
Who cares about that? I can get books for free
from the library. But I feel like the AI is
definitely these are tools that do make things more efficient
(26:44):
and they make work easier. Is it going to be
the hype that is currently presented. No, that's what makes
it hype. But at the same time, these tools will
not go away. They do allow for much more efficient
day to day business activity. So again, just just be
just be responsible and mindful of what the limitates.
Speaker 1 (27:01):
Here's the all Worth advice. Diversify, diversify, diversify and focus
on fundamentals and plan for both corrections and continued growth.
And as Brian said, planning ahead is better than planning
after it already happens. That's what we call discipline, not
fear or fear of missing out. That's what protects and
grows your wealth over time. Did you forget your R
(27:24):
and D last year? Well, you're not alone. We'll tackle
real listener questions on that topic and some misdeadlines on
rmds to Wroth moves and smarter giving strategies. All that
and more coming up next. You're listening to Simply Money
presented by all Worth Financial on fifty five KRC the
talk station. You're listening to Simply Money presented by all
(27:49):
Worth Financial Lambob 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 if and only if you're listening to
the show on the iHeart app. Simply record your question
there and it will come straight to us. All right.
Brian Arthur in Hyde Park leads us off tonight. He says,
(28:10):
we delayed Wroth conversions for years and now we're in
twenty twenty six wishing we had done more. Is it
too late to make meaningful changes to our portfolio and
text strategy?
Speaker 3 (28:23):
Brian, Now, I would say it's never too late to
really think about roth conversions, because we're you're talking about
something that is a sacrifice right now but will do
nothing but benefit as we go forward. And roth conversions
really need a lot of time to be beneficial anyway.
So don't feel like just because we missed a year
that it no longer makes sense. But so what I
would suggest is separate the missed opportunity from the remaining opportunity. Yeah,
(28:46):
converting aggressively when you're in lower tax years, of course,
that would have reduced fewer RMD exposures. That's perfect. So
would betting on last year's lottery numbers. You'd have been
fine doing that too, if you can predict the future.
But WROTH planning, it's not an on and off switch.
It is very much a multi decade tax rate arbitrage problem.
You're simply trying to say, I want to pay taxes
now because I feel like taxes are gonna go up
(29:07):
in the future, or because I think the overall growth
will be beneficial to me, And so just make sure
that you understand, you know what the impact you haven't
really lost, And tax planning and roth conversion to me
is an annual decision anyway. So I feel like there's
still plenty of room. I wouldn't worry about too much
about that. So let's move on to Beth and Mainville,
(29:27):
who says she forgot this can give me PTSD forgot
to take my rm D and I'm freaking out. Well
what can she do? Bob?
Speaker 1 (29:35):
All right? Well, first of all, Beth, calm down, no
reason to freak out. By the same token, you do
need to address this. We see this come up from
time to time. So the first thing is, don't bury
your head in the sand and just wish and hope
this problem is gonna go away, because I can promise
you the IRS is not going to treat it that way.
So here's what you do. First, figure out what your
(29:57):
rm D should have been for twenty twenty five. Figure
out what that number is and make sure that gets processed,
and then work with your tax professional CPA if you
have one, or if you do it yourself. You're you know,
either way, you're gonna have to file something called an
IRS Form five three two nine to address the missed
rm D. So what's gonna happen is you got to
(30:19):
take this rm D, and I'd recommend taking it sooner
rather than later. The IRS is going to want to
see evidence that you address the problem, recognize it, and
dealt with it. Don't try to, you know, take advantage
of seven more months of tax deferral and try to
get out from under penalties. Uh, address it right away,
file form fifty three twenty nine, you know, because again
(30:41):
as a reminder, there is a twenty five percent penalty
on the missed rm D amount that the IRS can
levy on you if they want to. They ten that's
reduced to ten percent if you correct it within the
first two years and file that fifty three to twenty
nine form properly. In a lot of cases, the IRS
(31:02):
will waive the penalty entirely if you can show reasonable
cause on that form for why you missed it and
show evidence that you fixed it promptly. Brian, I've had
a couple clients go through this over the last couple
of years, and we got on it in the first
couple weeks of January, and we went ahead and pulled
out both the rm D for twenty twenty five plus
(31:24):
any earnings that accrued in twenty twenty six on that
missed rm D amount. We pulled it out right now,
got it out of there filed the form. Now, remember
you also still have to take your twenty twenty six RMD,
and for tax planning purposes, both of those distributions are
going to be treated as taxable income for twenty twenty six.
(31:46):
I've yet to have a client that addressed this, you know,
promptly and thoroughly get assessed a penalty. Have you had situations,
you know, similar to this, And how is this all
shaken out for you and your clients?
Speaker 3 (31:58):
You know, honestly, honestly, Bob, I've never had a negative
interaction with the I R S when people are just
trying to figure things out.
Speaker 1 (32:04):
Yeah, there is.
Speaker 3 (32:04):
There is so much that it's so complicated that even
the I R S folks, they'll never tell you, you know,
here's the exact playbook. What you do in this situation.
You simply make your case. And I've always found them
outside of situations where somebody is obviously trying to commit
fraud or or you know, is just blatantly, you know,
just ignoring their taxes if it's just a one off, whoops,
(32:25):
I did my tax is wrong, They've always been flexible.
One quick thought I want to throw out to Beth
is that if this happens to be your first time
taking an RMD, you haven't missed a deadline yet because
the first year you take it is that the deadline
is tax time for the prior year, so that would
be April of twenty six. So if this hacks will
be your very first you're still okay. So but yeah,
(32:45):
just pay attention to that. We don't we don't know
if that's the situation for you, but you might you
might be okay.
Speaker 1 (32:49):
Yeah, so, Beth, no reason to freak out. But by
the same token, get on top of it, be thorough,
do your filing, and I think everything's going to work
out just fine. All right. John in Blue Ash says,
I have a four to one K plan through my employer,
but I also have started a site hustle that's bringing
in some pretty significant income. Am I allowed to also
have a solo for a one K? Brian?
Speaker 3 (33:11):
Yeah? So here this is where it gets a little confusing.
So the quick answer to John is yes, you're allowed
to have both plans. Here's a situation. You've got a
W two type job with an employer sponsored for a
one K and a bona fide self employment income. That
means you've got a schedule see our partnership K one
single member LLC that kind of thing. Then yes, you
can establish and contribute to a solo for a one K.
(33:32):
However that this might be what you're asking. That employee
salary deferral limit, which is as we said earlier in
this broadcast is twenty four five hundred plus to catch up.
That applies across all of your all of your retirement plans.
So you'll still need to pay attention to the total
dollar amount going into these. You don't get that twenty
(33:53):
four and a half in twenty six using for each plan.
It is a total. You can't double it, so make
sure you're paying attention to that. It's really the employer
contributions that's what's separate. That's the real advantage of the
solo for OH one K, because you get to put
some more on money on top that comes from the business.
I know it's confusing if you're a soul prop because
you're both the employee and the employer, But the IRS
(34:14):
looks at those two contributions, those two sources as very different.
The employer contribution does not count against your personal deferral limit.
That's why you're doing this, that's the benefit of the
solo for O on K. It's not to take advantage
of the twenty four to five that everybody gets, is
to take advantage of the employer side of things.
Speaker 1 (34:31):
All right. Coming up next, we're going to unpack what
the latest legit research says about where investors are actually
getting their information with which to make investment decisions, and
the big question should you follow suit. You're listening to
Simply Money Presided by all Worth Financial lung fifty five
KRC the talk station. You're listening to Simply Money Presided
(34:57):
by all Worth Financial on Bob Sponseller along with Brian
ja Games. Well, let's talk about, Brian. One of the
hottest trends in personal finance right now, finn influencers and
social media advice, something I know nothing about, but I
know you're a hip gen X kind of dude, so
you're probably all on top of this. Brian. Do you
get your financial advice off TikTok? Is that where you
(35:20):
get all your great trading ideas?
Speaker 3 (35:21):
That's all That's all I do. I mean, it's a
financial advisor. All I need to do is regurgitate stuff
I see in thirty second video clips on the internet.
That's really it's tops easy about.
Speaker 1 (35:30):
All right, Well, tell us tell us about what the
Finra Investor Education Foundation has concluded after some fairly significant research.
Speaker 3 (35:40):
Yeah, so this is limited to they interview at finn
by the way, that's one of the governing bodies of
our industry, and it surveyed nearly three thousand people with
non retirement investment accounts. So we're talking about people who
have investment money, because that's normally where people kind of
play with their assets in some kind of broker's account
that is not a four one K, not an IRA.
So among these three thousand people, three and ten of
(36:02):
them report on relying on social media as an information source,
and when asked separately about the social channels they actually
use for investing information, YouTube is the most popular. And
also three and ten stated that they use these recommendations
from these social media influencers when making investment decisions. In
other words, it's just not something to stare at. They're
actually acting on the information they're getting. Six in ten
(36:24):
of those under thirty five and six and ten of
those with less than two years of investing experience. What
that tells me is that that is the most that
is good, bad, or and different. But social media is
viewed as the most obvious way to get started. These
are younger people and people who don't have much investing experience,
and that's where they're starting. And I don't mean to
sound Ryan Bryan.
Speaker 1 (36:45):
Does this mean that I can go on YouTube and
simultaneously learn all about tying fly fishing flies and learn
about what the best triple leverage bitcoin ETF is? Can
I get all that in one location?
Speaker 3 (36:59):
Yes, you can get lots of terrible advice from social media.
Speaker 1 (37:02):
No.
Speaker 3 (37:02):
I help me to sound an alarm here, because there
is good information to be had out there, But the
flashyar it is and the more obnoxious it is, probably
the more useless it actually is. I would be looking
toward the more boring influencers out there, right. There are
some out there that do provide a much broader picture
than just invest in this one XYZ thing because it's
(37:25):
going to make a bazillion dollars next week. That's where
the attraction starts, and that's where people can get stounded
down the wrong path. And my concern there is if
for these folks who are using these types of resources
for their very first time investing. There's a real good
chance that they're just going to get a bad taste
in their mouth. These are the people who ten years
from now we'll talk about, well, I lost all my
money in the stock market, which is simply a silly
(37:46):
comment because I'm looking at the stock market right now.
It didn't go away. It's still here. If you lost
or so and so lost all their money in the
stock market, so and so is gambling on stupid ideas.
So that's the kind of stuff that you have to
watch for. Build the core, do the boring stuff first,
and then look to the If you really still have
that temptation, look for these influencers and these these little
take a flyer on something, but do it with a
(38:06):
small portion of your assets and learn how it works.
Speaker 1 (38:09):
Well. A positive spin on this story, and I mean
that I think it's positive that folks are out there
trying to learn more about investing. The good news here
is that the folks that are going out on these
social media challenge channels, they're getting about seventy five percent
of their recommendations and ideas from actual brokerage firms and
financial professionals, which means this industry is starting to evolve
(38:32):
enough to be to have a presence on these channels
where actual young people are and live and operate. Education
is always a good thing. It's just interesting to watch
how it all unfolds. And you know the hard thing
for these young folks is to sift the bad information
from the good information, and that's what makes things so
(38:53):
challenging out there in social media land. Here's the all
Worth advice. Social media can spark financial creosity, but your
wealth deserves insight grounded in expertise, not just likes in views.
Thanks for listening tonight. You've been listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
talk station
Simply Money News
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