Another Day of Q and A

SPEAKER_01 0:35

I am just really I'm having fun.

AI Jingle Intro

SPEAKER_01 0:38

Uh it's so much different than just a boring old theme song that, you know, I put together 15 years ago. We can just have a different themed jingle for pretty much every episode if we want to, thanks to Artificial Intelligence, licensed artificial intelligence. Hi, everybody, welcome to the Friday QA podcast. I'm Don answering your questions that came in at talkingrealmoney.com on that their contact form. And um, well, not on the contact, you could have sent them in on the contact form, but the new way of doing it on the new Talking Real Money website is to use the button in the lower right hand corner that says uh you know, just record a question or record something. What does it say? Now, you know, now I inquiring minds want to know. Let's see, talkingreal money.com. It's gonna play along. Uh oh, it's just a microphone. So there's the ask a question button, and you can click on that, and then it'll just tell you to go to the microphone button in the corner, and then you hit start recording. And if you make a mistake, just say, oops, I want to do it again. Don will edit it for you. Okay, I take every question that you send in and I run it through a uh an audio enhancer that makes it sound almost as good as if you were in the studio with me, even if your equipment's not very good audio-wise. So we try to make it sound as good as possible. And we're always trying to innovate as long as it doesn't cost much money. If it's cheap. If we could do it on the cheap, we'll innovate like heck. All right, so um let's get to some of these questions. We've got a bunch of them. We have a few less than last week. I think we're going with one less than last week because the the the quantity has come down just a little, but it's still a lot of questions. Thank you for all of those. Let's get to the first one. Hey Tom and Don.

SPEAKER_08 2:36

Um, I got a question for you. So um we have a why can't you pause on this?

Fund Count Question

SPEAKER_08 2:50

Hey Tom and Don. Uh this is Dave from Rhode Island. Um, I have a question. We've got a little over two million dollars assets under management with a fear advisor. They generally are doing a good job for us, uh well diversified. The fee they charge is reasonable, um, et cetera, et cetera. But um they have us in twenty-one funds to accomplish this. No individual stocks, um, just various funds. Everything gets rebalanced, they uh they reinvest the dividends automatically, et cetera, et cetera. But uh what's an appropriate number of funds to accomplish uh global diversity? Because it just seems like this is kind of a lot. Um it's not costing us. Uh maybe it's, you know, there's some real advantages. But I'm just curious on your opinion. And also what questions should I ask them about when I ask them why they have 21 funds to manage our portfolio? Thanks.

SPEAKER_01 3:53

Aaron Ross Powell Well, it uh this sounds like one of those cases where a money manager, a financial advisor planner is trying to make themselves appear valuable. Uh yeah, I mean, you can have maybe up to a dozen funds or so to cover all the bases, you know, to get the small values in the emerging markets and maybe some of those other alternative asset classes that I'm not totally thrilled with, but you know, I can see eight or nine or ten, twelve max. Twenty-one seems like overkill. So questions. I would ask things like, what are these funds doing? What are their purposes? Um and is there serious overlap? And how much are the individual funds? You see, there's a fee they're charging charging you for management, but you want to look at what the expense ratio is of the fund. You may have some overlapping funds that are more expensive and you can reduce your fee structure. And um what would I lose by having fewer funds? That's another good question. So is it bad? Only in that you may have a couple of funds in there that cost a lot more and probably don't add much. That's worth looking at. I think it's time to take a close look at it. Just get a report from your advisor and find out what where the overlap is between these funds and what the fee structure is of those funds. Otherwise, if you've got a good advisor, is it a big deal? Not really. Thanks so much for the question. And now we have another.

SPEAKER_06 5:34

Hello, Tom and Don. This is Anthony in Huntersville again for an update.

RMD Planning Trap

SPEAKER_06 5:40

I had a sinking feeling about the way I asked Chat GPT my question about RMDs and taxes, and so I re-asked it in a less leading way, and also presented my problem in a uh wrong angle. So I should have said I am gonna let the RMD tell WAG, the retirement dog. So I'm not going to do Roth Conversions while working, but I will Roth convert or not Roth convert, but spend down my pre-tax accounts between retirement and social security so that I can avoid RMDs. And I wonder your thoughts on that. And I um apologize for the previous question, which was uh had a focus on the wrong syllable, and now I think I've realized that I need to be careful about how I ask Chat GPT questions. Thanks a lot.

SPEAKER_01 6:57

You have to be careful about how you ask anybody questions because of the the answers can be biased by the question. But I I think I probably mentioned this before. If not, let me iterate it, not reiterate it, but iterate it uh and and emphasize it. If you're trying to plan for retirement and the most tax-advantaged strategy, quit thinking about RMDs or Roth conversions or whatever it is. Don't let those tails wag the retirement dog at all. What you want to do is create a true retirement income and tax plan. You need to look at what your current rates are, what your retirement rate might be, how many years we're talking about between retirement and social security, uh, what your future RMD age is going to be, whether it's 73 or 75. Uh you need to figure out what the taxation of Social Security might be, what those IRMA surcharges might be, the surviving spouse who might have to file a single, that has to be factored in, state taxes now or later, uh even possible inheritance. And these are the kinds of things. And it's not that we're trying to sell you on us. We're trying to sell you on like the previous questioners advisor. When you you can build a portfolio on your own, it's not that hard. This is where it gets hard. When you start getting to retirement age and you're starting to plan for that, this is when even if you even if you hire a uh an advisor just for a few hours, or you sit down and you pay five thousand bucks for a plan. Part of the the plan is gonna be tax planning. And you're at the point where it's better to get that and get specific and get down and dirty with this thing than to just give it to uh AI, no matter how good AI might be. Uh it's close. I'm gonna tell you, it's getting close. But you need a human to really go through this with you. Thanks for the question. Appreciate it so much.

SPEAKER_07 9:12

Hey guys, I was wondering at what point you actually do change your plan.

Nursing Care Portfolio

SPEAKER_07 9:18

For instance, uh I've been handling my mom's finances for a number of years with a portfolio that's roughly 6040, spread between IRAs, Roth IRAs, and a brokerage account with the hopes of growing and having a couple of years of cash or cash-like equivalents for immediate needs, rent, et cetera. However, she just went into a skilled nursing facility that is upwards of $15,000 a month, all in with expenses. Um, and we don't know whether it will be a respite-style care of two to six months or whether it will be the more traditional permanent stay, um, because a lot of times people don't come out of that. So in this instance, there's a rather major life change we weren't expecting. Um and I'm just curious, you know, if at that range, if you look out and you see the, you know, you should never have any money you want to use in the next five years invested kind of mentality, do you go back and move all of this to cash or cash-like equivalents or CDs? Um and then if she comes out of respite care, you reinvest it again. Um not really trying to time the market here, but wondering if this is the type of lifestyle timing that you do have to make decisions around.

SPEAKER_01 10:48

Yeah, this isn't market timing by any means. No. Things change. And um I think and this is based on statistics, your worst case scenario generally is gonna be 12 to 24 months is really typical, one way or the other, either out permanently or out with slightly better health, but that's still gonna be that part's gonna be temporary, even the temporarily out of uh skilled nursing care. So, but five years is really long-term, worst case typical. Yeah, there are cases where it has gone longer, but you know, if it goes way long, you can always just use up all the assets and go to Medicaid. So I think when you get someone like this, if if if she has a million dollars, it's really pretty easy. I would build a five-year ladder of CDs or a uh five-year ladder of CDs with a short-term high yield savings account in there for the more immediate purposes, and you know, have $180,000 come out every year to pay those expenses from the cash account. Anything over and above that, you could do a little bit of stocks for hopefully rebuilding the asset slightly. But if it's that or below, then you gotta just keep it pretty safe. You gotta keep it close to the vest. And no, if she gets out, you don't go back to a more aggressive portfolio because she's nearing the end. And that money may be needed to keep her comfortable, and that's what it was put away for. We keep forgetting that. We're putting this away for our worst case scenarios in our long-term future. We worked a l a whole life to not have a miserable end of it. But yeah, you're fine. This is not market timing. Don't don't think of don't think about that. No, absolutely not.

Roth Conversion Timing

SPEAKER_04 12:46

Let's go to our next question. Hi, Tom and Don. This is Dominic from Michigan. I have a question for you regarding my daughter's company-sponsored 401k plan. She's going to be leaving the job and moving back to our home in Michigan, working part-time and going to school. She has about $20,000 saved, which I believe is all pre-taxed between her contributions and company match. What I'm wondering when we move that money out of the company sponsored plan, she'll probably move it into her existing Fidelity account. And I'm wondering if you might advise just doing a Roth conversion now with that pretext money to get it onto the uh non-taxable growth going forward that a Roth will provide her. Because of her part-time work, she'll be in a lower income bracket. And I just thought this might be a good time to do that. Appreciate your thoughts. Thank you.

SPEAKER_01 13:49

Oh, yeah, this is a great time to convert uh a pre-tax account like a 401k or a regular IRA into a Roth. It is uh the tax could be very, very low. I I roughly ran some numbers, and it really depends on what her age is. But if she's over twenty-four, um, and let's say she made fifteen hundred a month, which may be high. I don't know. If it's less than that, even better. Um, her total federal income tax, including the full conversion on the the twenty thousand dollars, would be just over two thousand dollars. So, you know, if you guys could help her with that or she can pay that out of her wages, don't pay it out of the Roth. Convert the whole thing. Um then there's Michigan tax, so that comes into the scenario too, and I'm not sure how that's gonna shake out. But um Yeah, if she's under 24 and a full-time student, then you can get into the kitty tax thing. But still, it's a great time to do it. She's not gonna have a big tax bill, probably either way. Uh depends on what the parents' rate is, though, if it's a kiddie tax situation, which may mean you want to wait a little bit. That might not be a bad idea if the parents make a lot of money. But it does require a little bit of tax planning, maybe, but it's again the total her tot uh if i again, and if she makes less, even better. But uh we're still looking at you know, a few thousand bucks to get rid of taxes forever, which is a great deal. Thanks for the question. And here's another.

Quiz Show Feedback

SPEAKER_05 15:33

Hi, Don and Tom. Or should I say Tom and Don. Since Tom was running the show on the July 9th episode and Don was getting drilled.

SPEAKER_01 15:41

Yeah, he's talking about the quiz show that Tom asked me the question. So anyway, let's go on.

SPEAKER_05 15:46

This is JJ from Atlanta. I'm a longtime listener and I've called in a couple of times before. First of all, I love the show. I don't think I've missed an episode in years. I look forward to every new episode. Now, after listening to that quiz yesterday, I've come to one important conclusion. Don needs to be the one getting quizzed way more often. Why? Because competitive Dawn is absolutely hilarious. The moment he doesn't know an answer, you can almost hear the gears turning. Well, maybe the question was wrong. Duh. Of course Don. That's like me saying compound interest isn't real because I ignored my retirement account for a decade. And Don, I've got to say, you are a lovable store loser. That's not an insult. That's one of the reasons the show is so entertaining. Case in point, the avalanche method. I've heard it discussed for years on other personal finance podcasts. Like stacking Benjamins and Affording, I think.

SPEAKER_01 16:39

You think I listen to them?

SPEAKER_05 16:40

Just because you haven't heard of it doesn't mean it's it isn't a real thing. That's some impressive confidence right there. And you kept on bickering about it. Every p question after that, you kept on bickering.

SPEAKER_01 16:51

I don't give up.

SPEAKER_05 16:52

Compared to Tom, who is a very you know very gracious loser, you know, even if he loses, he's he laughs about it. Anyway. Let bygones be bygones. Seriously though, I'm only giving Dawn a hard time because you two have built such a fun dynamic.

SPEAKER_01 17:08

I'm over it.

SPEAKER_05 17:08

The back and forth between you guys is what makes the show so enjoyable. Thanks for all the great episodes over the years. Keep up the fantastic work. And please keep putting Dawn on the hot seat every now and then.

SPEAKER_01 17:20

No.

SPEAKER_05 17:21

It's comedy gold.

SPEAKER_01 17:22

No, terrible. Take care, guys. Bad idea. No. Was there a question in there somewhere? Apparently not. All right. I deserved it. It's okay. I deserve it. I that's why Tom and I are such different creatures. I mean, I don't know how we've gotten along as well as we have for what are we at now? Okay, a a a long, long time, like 30 some odd years. Longer than I've been married? Longer than he was married the second time. He's been married the second time. Way longer than that. Anyway, thanks for your commentary.

Annuity Sales Taxes

SPEAKER_01 18:04

And this one is actually a question. Good morning, Tom and Don.

SPEAKER_03 18:08

This is John in Colorado. On July 10th's program, I heard two people call in and ask about MIGAs, multi-year guaranteed annuities. One thing that I did not hear anybody uh say was the fact that some states charge a sales tax or a sales fee on multi-year guaranteed annuities. In my state, Colorado, it's two percent. Some insurance companies are willing to waive that fee, but not very many do.

SPEAKER_01 18:41

Yeah. And you know, that's something I had forgotten about. I'd heard about it before, and I I they it's another drawback to buying an annuity product. Not only do you pay uh the the the salesperson tends to get a very nice commission, but the state gets its commission. Uh and again, there's complexity to the to these things. They I'm just not a fan. I I just don't think annuities as investments are necessary.

60/40 Return Expectations

SPEAKER_01 19:10

I do not believe it. I don't like them. Thanks for the information, though, and thanks for sharing it. And let me look here at my question pile. Yeah, here's the last one for today.

SPEAKER_02 19:20

Hi, I'm Don from uh Florida around Spring Hills um Crystal River. Anyway, I'm wondering what returns we should expect when we're going uh sixty forty on a um on our portfolio or sixty-five, thirty-five, you know, should we expect eight percent, ten percent, you know, what the average would be versus you know, we're not gonna get the uh market uh rate of like eight or ten percent.

SPEAKER_01 19:55

Yeah. Well, no, you you're you're not gonna get the stock market long-term rate of return, which has historically over about a hundred years been about approximately not guaranteed going forward ever, uh been around ten percent, but let's be conservative and say, okay, eight. If stocks return eight percent and bonds going forward return four percent, a sixty-forty portfolio is going to give you a return of about six and a half percent. And I believe it's better to think conservatively and be surprised on the upside than to plan for eight or nine, which some people do, some even say ten, and end up being disappointed by market conditions that have changed dramatically from what we experienced in the past. I mean, we're looking at a hundred-year track record, so it means the next ten years could be very different, or the next twenty years could be very different, which could be for many of us the rest of our lives. So we have to plan more conservatively. So that's why, you know, five or six. Just put that in your head. Thanks for all the questions and the comments and participation and really appreciate you listening and telling people about the podcast and your loyalty to it. Agree or disagree, that's okay. We don't mind disagreement. We don't mind being corrected. We like being corrected. And please keep asking questions at talkingrealmoney.com. You can type them if you like. That's with the ask a question button form, or just use that little green microphone in the lower right corner and record your question. That comes on the Friday QA podcast. The more we have, the longer the Friday podcast is. So keep sending them in. And if you need some more detailed help, you want to spend a little time with somebody who will look at your portfolio and go, this is good, this is bad, or maybe, you know, for most people, it's I'm sorry, it's gonna be this is bad. Uh we're just not great investors for the most part. Go to talkingrealmoney.com, click the button that says meet an advisor, set up an appointment with one of our Appella full fiduciary advisors, including Tom. Ask for Tom if you want. And uh spend a little time, you won't be charged, and you will not be subject to a high-pressure sales pitch. I promise you. TalkingRealMoney.com, go check it out. And thanks for listening to Talk and Right.

Disclosure and Goodbye

SPEAKER_00 22:39

The opinions and views expressed on this podcast were current on the date recorded. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice, including any forward-looking estimates or statements which are based on certain expectations and assumptions. Although information and opinions given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness, or accuracy. Information presented on the podcast is not personalized investment advice from Apollo Well. The views and strategies described may not be suitable for everyone. This podcast does not identify all the risks, direct or indirect, or other considerations which might be material to you when entering any financial transaction. Performance does not guarantee feature results, and profitable results cannot be guaranteed. We hope you realize that the information provided on Talking Real Money is for informational, educational, and hopefully enjoyable purposes only. The podcast is not trying to get you to buy yourself any financial products or securities. Instead, the program is provided as a public service by Apello Wealth, a fee-only registered investment advisory. A public capital LOC DPA Apellow Wealth is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in the states where it is properly registered, or excluded or exempt from registration requirements. Registration with the FCC or any state securities authority does not imply a certain level of skilled training. Appello does not provide tax or legal advice, and nothing either stated or implied here should be inferred as providing such advice. Thanks for listening, and please visit talkingrealmoney.com for more information and important disclosure related to performance of any specific index or fund quoted in this podcast. The lawyers get richer.