Five Questions, No Magic

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Come hark, gentle folk, and pray tell what you seek. Shall I sell all my shares if the market grows a week? Doth an annuity serve me? Is gold worth the price? Should I trust yonder broker who peddles advice? May bring your questions each Friday and here. All is done with the answers here. Baking for dear. No riddles, no roses, no fee and no lie. Just fight a QA with Don. I'm talking real money.

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That has to be my favorite one so far. I really like that one.

AI Jingles and Fridays

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And if I'm getting a kick out of my songs, I hope you are too. These, you know, they take me about an hour or so to make. And with with the help of artificial intelligence. But my gosh, um, yeah, after you've done a show like I have, some variation on the Don McDonald show since well, for 38 years now. Um, you gotta do things every now and again to keep the host happy. And these make the host happy. I'm just finding them to be so much fun to create and to hear. I I hope you like them. I I what I thought this might do is really just kind of make it I give you another reason. It's like, I wonder what tomorrow's song is gonna be. And I'm trying to get really creative about them. I I went for uh sort of an Irish minstrel-ish kind of thing on that one. Um, and uh I oh I've got some I've got ideas. I have ideas. There have been a couple I've tried that after I tried them, I went, no, not gonna do that one. That's not very good. So I'm I'm being discerning about it. Hey, welcome to the Friday QA edition of the Talking Real Money program. I'm Don. This is my day to take the questions that come in on the website, talkingrealmoney.com, that you speak into your microphone. This thing here. I'm pretty sure that yours is not as expensive as this one. But that's okay because I use another artificial intelligence tool to take kind of cruddy sounding computer audio and make it sound pretty darn good. Uh and and again, these are things I I once sat down and did the math a while ago on uh having jingles made. And this isn't me putting somebody out of out of work with jingles because if it wasn't for this technology, I wouldn't do it. I mean, a non-union jingle with a full band and singers and a writer and producers and engineers, you're looking three to five thousand dollars per. Do you think we're gonna spend three to five thousand dollars per episode to make a jingle? Heck no. And I wouldn't I wouldn't process your audio because it could take me hours manually to do that, to clean it all up. And even if I could get it there, I I don't even know that I could. It would it would be a lot of work. So this is the thing, before we get to the questions, this is the thing about artificial intelligence. It it can do jobs that wouldn't have otherwise gotten done, at least in my case. I find it enhances my creativity. I'm the I'm the creative director of all of this stuff. I sit down and I tweak and I I can reconsider and rewrite and redo and you know, reprompt and until I get something that really appeals to me. I mean, it took this one took a couple hours, the uh the Irish folk song. So uh, you know, for those of you who are anti-AI, it's here and uh it's a powerful tool. We all need to learn how to use

Q&A Kicks Off

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it. Or you're gonna get left behind. Like it or not. Nobody has liked it. I mean, we can go before we get to the questions. We don't have as many questions today. Go back and f as far back as you want. Go back as far as you want. What is the most popular last name in English speaking countries? I'm pretty sure it's Smith. What's the uh from what is Smith derived? From a trade that so many people did that they were called Smith. So many people were blacksmiths because of horses, our primary human means of transportation for much of our history. A lot of Smiths required. How many blacksmiths exist today? Very few. But how many car mechanics? There were none of those. Things change. Technology has always changed, and the change has come with both detriments and improvements. And um I I I I'm I'm pro-AI as long as it's used responsibly. It's a great tool. It has allowed me to do things I couldn't otherwise do. So um I'm pro. We are going to get some questions answered. Now, I think we're in the summer doldrums because the question count has declined somewhat. Today, just five. I always try to keep another of the same amount of questions for the next week. So there are five more for next week. Hopefully we get five more or six more for the week after, so I can ratchet up the count again a little bit. So send those questions in. Well, you don't really send them in. You just go to talkingrealmoney.com, you click the mic, the little green mic in the lower right hand corner, and you speak. And if you mess up, don't worry about it. You can re-record it, or you can just say, no, Don, skip that part, and I I'm I look at the waveform and I edit it on my screen. Oh, there's another technological advance. When I started in radio in 1985, and I wanted to edit something, I had to take a reel of tape and run it through a machine and put it on a metal block and grab a literal razor blade and cut it and then cut it again and then move those two bits of tape together and literally tape them to one another to edit. Now I point a line at a screen, I click, I drag, I delete. Do you know how much more productive that has made me? Now, tape editors were put out of business, but it's still a business in which a lot of people make a living editing audio. And AI is not very good at that yet. It's really not. I've I've tried it because editing is a chore, but uh humans are still good for a little while anyway, maybe a few more months. All right, let's get to the first question that came in at talkingrealmoney.com.

Charitable Giving Dilemma

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That would be um, well, this one.

SPEAKER_02 7:06

Hi, Don. This is Randy from Missouri. I have a question. I turned 70 and a half this summer, and I want to start, and I have started making charitable contributions out of my 401k. I I gave away about it's about $800 a month. Um but I wanted to keep my market participation the same. So what I did, I've I've opened up another account with Fidelity that's basically an AVGE like my other fund, and I just mail them back a check for $850, or I'm sorry, for the $800 I take out. So I didn't know if there was smarter ways to do this than what I am doing it, or is it just keep it simple and just $800 out and $800 in, just to keep me where I was. I do not have a Roth IRA currently set up. I don't know if that's something I could look into. Uh just for the record, I'm I've been retired for a year, and my income floor covers all our expenses comfortably. So thank you very much. Bye.

SPEAKER_00 8:15

Well, Randy, I I I don't see any reason for you to do anything with a Roth. There's the Roth does not play into this. You you're no longer employed unless you're talking about doing IRA to Roth conversions or something like that. Um and I'm really not sure what you're asking. I I see that you're doing charitable contributions and that you want to maintain your investment, but where's the 800 coming from? If the 800 is just coming from cash somewhere, well, why not get it all invested properly in your portfolio somewhere instead of it just sitting in a cash account? I'm I guess I I have no issue with that. What I might consider, and I again I don't know enough about it, but um maybe move your 401k into an IRA. Then charitable contributions can become qualified charitable distributions and save you from the taxation of your required minimum distributions at 73. So you can't do QCDs from the 401k, but you can do them for the IRA. So if you convert the 401 to the IRA, then when you have to start taking distributions, those can go to the charity and save you from being taxed on that distribution. So that's the only thing I can see. If you've got money sitting around where you can put 800 into AVGE, then why not just put that money into it? It would have, over the long term, have in the past done better. I don't know what the future looks like, but it really should be built for your situation. I think you need a little bit more overall guidance on this. But thanks for the question. I do appreciate

Dividend Reinvestment

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it. Thanks for sending it in. And here's our next one.

SPEAKER_07 9:58

Hey guys, this is James from West Palm. Um, I had a question about reinvesting dividends from ETFs and bond interest. Currently in my account, I have ETFs automatically set to reinvest, and I have some bonds that will pay out interest. So I'm wondering: should I have everything go to cash and then apply it to the allocation as is necessary to get the allocation closer to what it's supposed to be? Or should I reinvest wherever I can reinvest? And for bonds, take the interest and buy bond ETF. Thanks for your help.

SPEAKER_00 10:33

I am generally a big fan of having money working when you have it. When it's there, it should be at work. It shouldn't be waiting around for some eventual purpose, even if that purpose is something as good as rebalancing. Uh, I like that you're letting the dividends reinvest in other investments. I get why you can't let the bond interest do that because it's paid out and you you have to do something with it. But if you leave it sitting in cash, then you leave it to the whims of the interest rate market. And if it's not needed for emergency money potentially, then it's a okay, it's a minor quibble, really, really tiny, tiny little minor. But uh I just think it's better off working for you. So I would I would invest it in the right proportions in your portfolio, because that's going to help you get back to balance too. If you're like a 6040, instead of just putting it all in a bond ETF, add it to your other ETFs and a bond ETF, which the bond ETF's a good idea. I like that. But I like having the money going to work as opposed to just sitting there waiting to

Pension or Lump Sum

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work. Thanks for your question. Here's our next one.

SPEAKER_03 11:39

Hey, Don. I have a couple questions since I'm starting a new job in the private sector. I'm 32 years old and recently left a government job after five years, so I can either leave my pension alone and receive about six hundred dollars per month at retirement with a cola, or take a lump sum of about thirteen thousand dollars and roll it into a traditional IRA today. I know you guys love pensions, but with thirty plus years of investing ahead of me, would you keep the pension or invest the lump sum in a globally diversified portfolio? My thought is that six hundred dollars today is the same six hundred dollars thirty years from now, and that will not have kept up with inflation.

SPEAKER_00 12:18

Well, but but wait. You said it had a cola. Um if it has a cola, and if it has a cola, wow, what a deal. Um that means it's going to be increased over time, so it will be worth whatever 600 is worth today. Um, wow. Um that's really good. That's really good. I I would, wow, I would definitely keep the pension because if you invest it, you know, you might end up with somewhere between 120 and 150,000, but that's barely going to generate 600 then. So yeah, I'd keep it.

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And then I have a second question about my old traditional 401. Should I roll it into my new employer's 401k, which offers very low-cost index CITs, one basis point for US stocks and four basis points for international? Or should I roll the 401k into a traditional IRA where I would have access to dimensional or Vantus funds? And then do you think it's worth rolling the funds to the IRA versus keeping the ERISA protections of the money in the 401k? I appreciate you guys' answers on this and look forward to hearing.

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All right. While we're not huge fans of the CIT plans, uh, these trust plans, they are, as you discovered, very inexpensive. And for the most part, they're pretty darn safe. It's just there's a lot less regulation on these accounts, which is one of the reasons why they can be cheaper. Major employer, major trust company handling it, those very, very low prices, and yeah, it's a minor benefit, but you do have the ERISA protections from creditors uh attaching that that money. Yeah, I think if you've got good products available to you, the the the transfer to the new one is the new 401k is probably a good idea. And then use IRAs, Roths, or just regular accounts to get your Avantis and dimensional exposure elsewhere if you can afford it. Thank you so much for listening. Thanks for the question. And please, everybody, send us more. Go to talkingrealmoney.com and speak your question by clicking on that little mic button. You have a mic. If it's uh if it's on your phone or your iPad or your computer, you probably have a mic. Unless your computer's really, really, really old and not a Mac. You have a mic. So ask questions. Here's

Warning on Student Loan Notes

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the next one.

SPEAKER_05 14:52

Hi, Tom and Don. This is Brian from North Carolina. I just want to give you a personal, heartfelt thank you for all the great advice on your podcast. And well before that, uh, I moved from Japan to Portland, Oregon in the 90s, early 90s, and uh had the benefit of listening to Don on the radio. Uh our company moved us to North Carolina several years later, and we had to put a 401k plan together for our factory. Uh, I remember Don and uh called Vestry, talked to Tom, and it was the best decision I've ever made. Our employees have benefited ever since. Thank you so much. I do uh have a question. One of our employees has asked about a company called whyrefi.com that they have saw on TV. I kind of looked into it, and it seems like it's based on risky student loans. But I don't want to give him bad advice. Uh I just wanted to hear what you guys thought about it. If you wouldn't mind, I'd really appreciate it. Thank you again.

SPEAKER_00 16:04

No, thank you. Nicest comments ever. Thank you. That was very, very nice. And I remember you well, Brian. I'm glad it's all working out. Your employee. Everybody thinks there's some magical product out there that's gonna pay a lot and has no risk. Um why, Refi? Be afraid. Be very, very afraid. This is dangerous stuff. Distress student loans? Oh yeah. People don't default on those completely, even if you buy them cheap. If you buy them cheap and you never get paid, well, you don't make any money. You you lose your money. Well, no, no, this is this is really not a good idea. I mean, this is a this is a reg D security, which means it's exempt from SEC registration. It means it requires an accredited investor. Uh there these these are individual promissory notes, I believe. Uh you could lose every single penny. There is no secondary market for these notes. There's you're you're you're not likely to be able to get out. There's no liquidity. Uh it's incredibly dangerous. And they're advertising rates that aren't really that high. Like 10%? 10% for incredible risk, like off the charts almost risk? No. No, no, no, no, no, no, no, no. Not for the faint of heart, heck. Not not for the brave. I don't think these things are for anybody. Except people who don't mind losing everything in pursuit of a mediocre return. That doesn't sound good to me. Thanks for your call, Brian. Really appreciate you being there. And let's take the last question for this week. And and and maybe we'll have more in the future if more of you ask questions at talkingrealmoney.com.

Withdrawal Strategy Debate

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But we only have five. Actually, it's more like six because there was a two-parter. But here's the last one.

SPEAKER_06 18:07

Hi, Don and Tom. You have spoken about your guys' plan to do the flexible five percent withdrawal strategy with your own portfolio Sunday. I think that sounds like a good and easy way to implement a withdrawal strategy, especially if you plan to do it on your own. But how do you guys feel about the guardrail strategy employed by Vanguard and other similar guardwheel guardrail withdrawal strategies that other firms use to withdraw savings? It seems to me this would be better than the flexible 5% strategy as it allows for capped raises when markets do well and capped reductions when markets do bad, helping to protect for sequence and return rates. Also, what withdrawal strategy does Appella use for its clients? Thank you for all that you do and keep up the good news.

SPEAKER_00 18:56

Let me answer the Appella part first. Um Appella personalizes everything to the client. So we're building portfolios that are appropriate for the client, based on plans that are created for the client, based on the ongoing needs of the client, the situation the client is in, the client's psychological perspective. Uh so it's gonna be some probably more often than not, well, it will be, some form of a flexible strategy. Now the guardrail approach is just a slightly more complicated version of the flexible withdrawal strategy. It's setting you up so that the the decline in income might not be as great in a big downturn. It it's protecting your income stream a little bit. It's saying you can't go below this. That's the guardrail, and that's great, except in a protracted decline, you could be drawing down your assets and hurt the flow in the future. I'm not saying that's a bad thing. That could be a very good thing. It could be very workable, it probably will work. It's a sensible strategy in that it is disciplined. We like discipline in the strategies. Whether it's the 4% plus inflation rule, the 5% flexible, uh, a 5% with guardrails, as long as the client, as the recipient of that income, has flexibility in their life, those flexible strategies work really well. Uh, I think for most people, just a simple flexible works. We're trying to keep it very broad here because a guardrail strategy gets really difficult for individuals to manage. If you have an advisor, yeah, that's gonna work a lot better. And an advisor can tailor those guardrails even to your specific situation. So, yeah, we want to get better, get a tailored approach. Thanks so much for all the great questions. Please keep sending them in at talkingrealmoney.com. For the Friday podcast, you need to speak them. We only use spoken questions on the Friday podcast, of course, unless we run out of spoken questions, and then I'll probably have AI read them just so there's another voice. Otherwise, you can type them in at talkingrealmoney.com using the ask a question button in the upper right corner, record in the lower right, ask in the upper right, and we will uh get some of those in on weekday podcasts. And the preference apparently still. We like to type more than we like to talk. We've changed. We've changed a lot from the always talking on the telephone culture to we're typing everything now. Whatever you like works. We try to do what's right for you. And if you need a little help from an advisor, you want somebody to look that portfolio over? It's really easy to get it done. And it's not going to cost anything, and it's not gonna get you subject to a high pressure sales pitch. Just go to talkingrealmoney.com, click on the button that says meet an advisor, set up an appointment with one of our 100% fiduciary fee-only advisors who won't even charge you a fee for this little get together. Okay, thanks for listening. Please tell a friend or two about the show. Let them know that we'll have uh we have the the uh ever-changing theme songs now, and we even have ever-changing tags when I say we're talking real money.

Disclosures and Sign-Off

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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 our subjects 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 a fellow wealth. 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. This 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 or sell any financial products for securities. Instead, the program is provided as a public service by Apello Wealth, a fee-only registered investment advisor. A public capital L O C D B A Apello 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 exempted from registration. Registration with the SDC or any state securities authority does not imply a certain level of skill or training. Apollo 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 talkerealmoney.com for more information and important disclosure related to performance of any specific index or fund voted in this podcast. And the lawyers get richer.