Money Talk with Carl Stuart

Carl Stuart takes caller and text questions on a range of personal finance topics, including advice on Social Security, retirement account distributions, investment strategies, and charitable giving.

The full transcript of this episode of Money Talk with Carl Stuart is available on the KUT & KUTX Studio website. The transcript is also available as subtitles or captions on some podcast apps.

Carl Stuart [00:00:01] This is Money Talk with Carl Stuart. Carl Stuart is an investment advisor representative of Stuart Investment Advisors. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:00:20] Welcome to Money Talk, I’m Carl Stuart and you’re listening to KUT News 90.5 and the KUT app. Welcome. If you are a regular listener, you know about, you don’t know what I’m going to say, which is Money Talk is a broadcast now in our almost 31st year. I guess this is our 31st year coming up on our 31th anniversary next month. Money Talk as a broadcast about the to financial and investment planning, where you always determine our agenda. By calling or texting 512-921-5888. It’s always a great idea to call or text early in the hour. Give me ample time to do my best to answer your questions. I take today’s calls first, and then today’s texts, and then previous texts that I haven’t had the opportunity to answer. So before I get started, and you will hear, I hope, the dinging of the text coming in soon, 512-921- 5888. During the week I got this text from Craig. I am responding to a question you had on last week’s show about deferring Social Security until age 70. Your caller briefly touched on an issue that you did not directly address. That is the fact that by deferring the start of receiving payments, your monthly payments will be larger, but you will not received the payments during the deferral period. So, when you do start receiving those payments, it will take a number of years before you recoup the deferred payments. I became eligible for full Social Security recently and am deferring payments until I turn 70. The way I figured it, by using simple calculations, if I defer payments for three years, I would miss 36 payments, but my payments would be 24% higher at age 70. Regarding rounding to 25% That would mean I would recoup three payments each year and have to live and receive increased payments for 12 years to break even. Now with compounding and inflation adjustments, it may be closer to 11 years. In my case, longevity runs in my family and I am in good health. I have other funds to live on in the meantime, so it appears to make sense in my situation, but otherwise it would seem one should consider their own estimate of life expectancy. Before deferring payments. One more consideration and complication would be if you do not defer and do not need the money immediately, you could take the three years of payments and invest the money and use the proceeds and earnings to boost monthly income after you turn 70. This assumes positive returns, which of course are not guaranteed. I was confident in my decision, but after further consideration, I’m beginning to wonder if I should just take the money and invest it. Is my math correct and is there anything that you could add? I do regularly tell people that it’s good to defer until age 70 to turn on the social security benefits because it does grow from full retirement age to age 70 at 8% and that’s guaranteed and there’s no such investment that guarantees 8%. I think it is, as you imply, Greg, a very personal decision based on my reading an awful lot of people. Retire without enough income and a lot of people turn on Social Security at age 62, which is really really unfortunate And so the thing I like about that waiting until 70 is you have that base you that you can’t Essentially lose you can make a mistake the stock market can go down You’ve got that base, you know, it’s coming in and you know that the government has an inflation adjustment to it there’s no question that if you have a life-shortening illness or you really are a savvy investor and you think you’re willing to take the risk over that three-year period or have two and a half year period, whatever it is, that your return will exceed 8%. I understand your point of view, but it’s not guaranteed. You know, you could have a year like 2022 where the S&P 500 was down 19%. And the Nasdaq was down 33% and bonds were down 13%. So it’s kind of the old saying about a bird in the hand versus two birds in the bush. I think that for most people, having that higher guaranteed income with some form of inflation adjustment is a wise and prudent thing to do. And I think probably that was the right thing for you to do too. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Also I got another text today from Michael. I am a San Antonian who has long enjoyed Money Talk and the wealth of knowledge you provide. Thank you. My question regards the timing of when to take required minimum distributions. From a traditional IRA. My philosophy is to wait until December to take the RMD from a Traditional IRA invested in an S&P 500 index fund. That way, I can leave the money with the fund for as long as possible to continue to grow, as in most years, the fund tends to grow year on year. Also, the money coming out in December will reduce the fund’s total value at year’s end, resulting in a smaller RMD the following year. Are there flaws in this strategy? And I appreciate your assessment. You’re welcome, Michael. I would say this. If you sound like a person who is not going to need to live on that RMD, a lot of people who take the required minimum distribution count that as part of their annual spending money. So, it depends on your position. It’s very common for people to take it out at the beginning of the year, as well as at the end of the years, based on my experience. Some people even treat it, I would call it, periodic payments coming out. That is, they set up a periodic what’s called ACH with their commercial bank and every month money comes out of their RMD, comes out to their IRA, and they spend that money. If on the other hand, if I infer from your comments that you’re not going to spend the money, you can just as easily take the money out anytime from your S&P 500 index fund and reinvest it in the S&P 500 index fund in your own individual or perhaps joint account. Particularly if, obviously you could take out, have your custodian withhold 20% of your IRA, take it out whenever you please, and then go ahead and put it right back in the same investment. It will reduce your 1231 value regardless of whether you do it in the first of the year, the middle of the year or the end of the year. Because it’s going to be whatever it is minus whatever you take out. So I’m frankly watching how people have done this over the years. It just seems to me, if you’re not gonna spend it and you’re gonna keep it invested, there’s no particular time to do it. You just turn around and reinvest the proceeds. If you’re living on it, then it needs to fit your budget. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. So this lack of calls and texts occurred last week, and then we picked it up later in the broadcast. So I came prepared today to bloviate, and that ought to be it for those of long-term listeners on another station know the horrible bloviation threat. So I suggest you call or text 512 921-5888. Next Saturday, my friend Jimmy Moss and I are going to be doing money talk. So, and I know you’ll enjoy it. I sure as heck enjoy it, I think it’ll be fun. So this will be my last Saturday to do it here without Jimmy. And I’m just gonna give you some retrospective on 2025. So every Saturday, I go to various investments that represent underlying indexes. We cannot invest directly in an index. And I choose them from different companies so that I’m not showing any favoritism because I don’t make recommendations for specific investments and securities on Money Talk. So through yesterday, the Vanguard total stock market, that would be U.S., as opposed to the gain of 17.1%, the, that’s not the iShares, it’s the Spiders S&P 500 up 17.49, the Fidelity ONEQ, which is the NASDAQ, of 21.27 and the Vanguard ex-US, which is the Vanguard International, everything but the United States, up a remarkable 30.99. And then I look over at bonds. The traditional index, the Bloomberg aggregate bond index, there’s an iShares ETF called AGG, it’s up 7.15%. So all of those are really wonderful returns for their asset classes. And what are the things that jump out for me? I think one of them, and you’ve heard me talk about this before, is the strong outperformance of international equities versus domestic. Now, while we never know when these moves occur, if they’re short or long-term, but there is a history, and I may get to it, but we do have a call coming in, and give you a chance to call or text 512. 921-5888. Jason, you’re on the air. How may I help? Hello Jason, okay, Mark, I am not hearing Jason. So it says here, I have an inheritance in a managed mutual fund. Should I sell it into a low cost index fund? It looks to me like, let’s just go back here and let’s see on air. Jason, are you there? Yes, hi, I sure am. Okay, good, we’re having some volume problems. Jason, you there.

Jason [00:11:29] Yes, hi, can you hear me Carl?

Carl Stuart [00:11:31] Yes I can. Please go ahead and ask your question.

Jason [00:11:34] Yeah, hi. So, um, I have inherited a mutual fund. It’s a couple different mutual funds that’s actively managed, but it’s really not actively managed. I feel like with Edward Jones, because it hasn’t moved or changed any type of mutual funds or activities in several years. And the fees on that are around 2%. Would you recommend that I sell those and reinvest them in a low-cost index fund, like a Vanguard V.O.

Carl Stuart [00:12:12] Hello? What Jason’s talking about, when it comes to stock and bond funds, traditional mutual funds can be what we call passive. And that means they just follow a certain index, like Jason’s talking about the Standard& Poor 500, or the NASDAQ, or some other of the Bloomberg AG. And those are very cheap. And if you buy the exchange-traded fund, rather than the open-end mutual fund, They have a history of also not distributing capital gains. Now, Edward Jones, for many, many years, has used a lot of different fund companies, but one of the ones they’ve used is the Capital Group American Funds. Funds like Growth Fund of America, Washington Mutual Investors Fund, Euro Pacific, New Perspective, and others. And as far as active funds go, they are very highly regarded. One of the largest fund companies. And their expenses are higher, but they’re not 2%. So they’re under 1%. So if you’re paying 2%, I would tell you that that is above the market. If you feel like you’re not getting value for the 2%, then moving it is perfectly legitimate. If you have the time and the interest and you sound like you do, to consider doing it directly, you can open an account with Vanguard or Schwab or Fidelity. And use their proprietary index exchange traded funds and they will be very cheap and very tax efficient. So I think given what you’ve told me and given the 2% fee, which seems high to me, moving to an index exchange-traded fund is a perfectly reasonable thing to do if I were in your shoes, Jason. Wonderful, thank you very much for your advice. Really appreciate your show here. You bet, thank You. You’re listening to Money Talk. On KUT News 90.5 and the KUT app. Call or text 512-921-5888. Andrew, you’re on the air, how may I help?

Andrew [00:14:25] Hey, thanks for taking my call. I’m getting married in a month, and mine and my fiancé’s credit scores are different. What should I be aware of going into that? Is there going to be any massive impact or anything that I need to think of?

Carl Stuart [00:14:42] I’m not an expert in this area, Andrew. What I do know is that once you’re married, the debt is your joint liability. I’ve encountered people who owned, who were married, who had credit cards and when they divorced, they were not able to get rid of the liability of the credit card debt. So that’s the one thing I would keep in mind. Pretty obviously, if you’ve got one spouse who has a higher credit rating than the other, if there’s no reason to keep two cards, the plain simple thing would be to cancel the card of the spouse with the lower credit rating and just use the card of a spouse with the higher credit ratings. That’s what I would do. And then over time, it may be that the lower rated spouse will gain a higher rating. But to keep one that’s lower credit rating and also higher credit rating, I can’t think of a reason to do that unless you’ve already decided, if you’ve signed some kind of prenuptial agreement or you’ve decided you wanna keep your finances separate, then yeah, I’ll have the two cards. But otherwise, I’ve canceled the card with the lower credit if I were in your shoes.

Andrew [00:16:02] All right. That’s awesome. Yeah, our finances will be joined. So thank you for your help.

Carl Stuart [00:16:06] You bet Andrew, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here we go. Harvey, you’re on the air, how may I help?

Harvey [00:16:26] I think that i think my call you’ve got a way to get your opinion uh… On uh… Uh… Read the recommendation and got galloway uh… Last month he was uh… Mentioning how goldman fact is expecting uh… That u s equity pool likely underperform uh… Over the next next decade i guess compared to this emerging markets and what not yeah uh… And that the depth of what the kind of the birth of by uh… And not just into emerging markets but to consider equal weight s and p five hundred e p f over traditional at the end of the year They’re expecting it to perform 8% over 5% respectively, just your thoughts.

Carl Stuart [00:17:11] Yeah. So there’s a lot of debate about this, including in the Academy, the peep. So for everybody else, uh, the S and P 500, uh is what’s called a market capitalization weighted index. So every day, presumably every trading minute, then they take a company stock, the price of the stock times a number of shares outstanding. And that’s the market capitalization, the largest market capitalizations. Have larger positions, the smaller market caps have smaller positions. It’s not about whether the company has a large payroll or lots of revenues. So the people, the academics who believe in market cap investing, which includes the originator of Vanguard, Jack Bogle, believe that what you get with market cap is the consensus of global investors. The reason… NVIDIA has a higher market cap than, I’m making this up, say Procter& Gamble, is that global investors believe that the earnings and cash flow future of NVIDia over the next period of time is much greater than it is of Procters& Gambles, and they’re going to pay more for it. The other side, which gets to the equal weighting, is pretty much what you and would call a reversion to the mean argument that and when you think about securities prices that over time things get settled back to some form of equilibrium. That if you look over long periods of time, decades of periods of times, you find that leadership in the stock market by industry changes. So we had the last five years of the 90s where tech beat everything else. But then we had so-called .com bust, but it was a lot more than .com. It was companies like Dell Computer and Cisco Systems. And what you saw were other kinds of companies. That people at the time called value stocks performed far, far better. So maybe those were more traditional consumer non-discretionary or retailer or healthcare. And so the argument for equal weight is when the predicted and anticipated reversion to the mean occurs, you won’t be hurt as badly because you won’t have over-weighted the market winners up to that time. I’m not persuaded personally that the Equal weighted is particularly more attractive. I am persuaded that not emerging markets per se, but international equities are very, very interesting compared to their US equities. We’ve had some over a decade of US equites outperforming. And if there is a reversion to the mean, it could be occurring this year. Whereas I said at the beginning of our broadcast, The S&P 500 ETF is up 17.49, and the Vanguard XUS, which includes emerging as well as developed markets, is up 30.99. So I really like leaning into international, but I’m somewhere neutral to slightly on the side of market cap. And finally, the fundamental reason for the value, the prediction of very low returns is not because of corporate profits are somehow not gonna grow, It’s because valuations are so high. When compared to traditional earnings ratios and other measurements of value that leads to the lower expected return. So that’s a long-winded answer, but that’s how I see it.

Harvey [00:20:44] Great, thank you so much. As a recalcitrant FOGO head myself, I kind of like to sort of index proportionally. Ha ha ha!

Harvey [00:20:52] It kind of threw me off, and I was like, I respect the guy, but I’m kind of resistant to the idea of going equal weighted, but thank you.

Carl Stuart [00:20:59] You bet, thanks for calling. It’s time for me to take a break. It’s for you to call or text 512-921-5888.

KU Announcer: Jimmy Maas [00:21:21] Money Talk airs every Saturday at five o’clock on KUT News 90.5 FM on the KUT app and at KUT.org. This podcast is produced by KUT and KUTx Studios as part of KUT Public Media, home of Austin’s NPR station and the Austin Music Experience. We are a non-profit media organization. If you feel like this is something worth supporting, set an amount that’s right for you and make a donation at supportthispodcast.org

Carl Stuart [00:21:51] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:22:05] Welcome back to Money Talk, I’m Carl Stuart and you’re listening to KUT News 90.5 and on the KUT app. When you have a question, call or text 512-921-5888. So I am going to get back, we have some calls coming in, but I did want to talk about this last question was actually on my Bloviation list, looking at 2025. The lesson I have to learn over and over from time to time. At the end of last year, I had always been convinced that in a stock portfolio that you ought to have exposure to every public company you can. And my colleague and daughter Lindsay looked up something like over 90%, maybe closer to 94 or 5% of all public companies in the world. Or outside the United States. So to turn away from that seems to me not to be a very wise and prudent course of action. Having said that, for years and years and year, it wasn’t that international stocks were bad, it’s just that they so underperformed their domestic counterparts. It got to be, not this time last year, but a little earlier, but probably in the fourth quarter, I got to the point where I said, you know, I have been wrong on this for so long That I am really beginning to doubt whether or not This is something that we ought to continue to do. And of course, sure as shooting, calendar changes, 2025 comes in and we have excellent returns international. How long will this last? I have no idea. But I will tell you that when you study these cycles, they tend to last longer than a year. Now, we also seldom have four up years in a row for the stock market. We’ve had three and so it’s certainly plausible. That the stock market could go down in 2026. But if you’re thinking about asset allocation, it still seems to make sense to me that what you wanna have is international exposure. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. And I would like to see, okay. We have looks like a call coming in. I don’t want to start bloviating and then get out of that, but let’s just wait. Okay, I’m going to talk about another lesson this year then. So you may have read, certainly I’ve talked about, as Americans, as consumers, we’re in a bad mood. The Michigan sentiment index, which measures how we feel about the outlook for future shows us being very, very negative. We have, oh good, here comes a call, so I am just gonna take that. By the way, call or text 512-921-5888. Terry, you’re on the air, how may I help? Hey Carl.

Terry [00:25:14] Just kind of speculatively Social security question for you. So I’m 63 and I’m Eligible to take it pretty soon, but I was going to wait. However, I have heard some voiced concerns that I Wanted to get your opinion on do you think that waiting at this point? Could have more of an impact or I could be more affected if they do change the uh… Minimal year to get it sat or in the next couple years in other words is it possible do you think that the people that have an elected social security that could have our and again and up getting on the ride to the deal compared to somebody that took it early

Carl Stuart [00:25:59] If not you personally, if we as Americans aren’t worried about Social Security, then we’re not paying attention. When Social Security started, there was something like 30 people or more working for every Social Security beneficiary. Now it’s not two to one, but it’s pretty close to that. And at the same time, life expectancy extended. So we’re now eating into the Social Security Trust Fund. And periodically the board of of the Social Security Administration looking at the current rate that they’re sending money out makes a prediction when they will have to reduce benefits, and it’s pretty soon. Here’s my view. They call Social Security the third rail, and the reason they say that is if you touch it, you burn, and that’s why Congress looks at it. One of the ways we behave in human beings is once we get a benefit. It turns from a benefit into a right. And I cannot conceive of any elected official in a representative democracy standing up and saying, we’re gonna cut the social security benefits of beneficiaries or we’re going to change the rules so that Terry is not gonna get the same benefit that he thought he was gonna get. I think there’s a couple of logical things. Don’t ask me about Medicare and Medicaid because that’s a whole nother, much in my view, more insoluble, social security eventually. The answers will come from several ways. One, right now, if you make more than it changes every year, it’s around 160,000 or so, if you have more taxable income than that, you don’t pay social security on that, and neither does your employer. That’s 12.4%. You put in 6.2%. And they put in 6.2. You could raise that or even eliminate it, and people who are making more than that amount would pay more into Social Security. You don’t even have to eliminate, you can just raise the income level for which it’s taxable. That’s number one. Number two, you could do what you implied, which is you could change the dates of benefits. I think that could happen, but they won’t do it. To people in your age cohort. They’re gonna do it to people that are a lot younger, if they ever do it, so those people can begin to plan on that. Still gonna be a very, very tough vote, but I think in your aged cohort, the odds of them changing the rules on you are zero. And then the last thing is this inflationary adjustment that they have. They could always fool around with that. Frankly, I think that’s the least attractive because we do have inflation just typically in the United States. And so. I think you’re safe. I think should make the decision without any concern about that. I think that you should decide what’s the best for you if you’re gonna live on it or not. You’re at anticipated life expectancy. And then if you can wait till 70, it grows at 8% per year from full retirement age to 70. That’s the the best. Taking it before full retirement, you’re paying a heck of a price unless you have a bad. Medical diagnosis, taking it early is really a bad idea. So at the bottom line, I understand your concern. I’m concerned for the system, but I do not believe that people in your age bracket, Terry, have any worries whatsoever, and that’s my opinion.

Terry [00:29:36] I’d greatly appreciate your feedback carl

Carl Stuart [00:29:39] Okay, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here we have a call. John, you’re on the air. How may I help?

John [00:29:59] I have a friend who’s offered to name me as a beneficiary on a CD upon his passing and it’s 250k and what he would like me to do, I’ve provided him with my address information and my social security number, which he’s attached to that CD and named me as the beneficiary. What he would want me to with the 250k is split it five ways between a group of that are friends. Can you give me any tips on how we should handle this? Sure. I’m 70 and basically retired.

Carl Stuart [00:30:39] I didn’t know that certificates of deposits have beneficiary designations. Certainly, a normal securities account in your name or my name doesn’t have a beneficiary. An IRA has a beneficuary designation. Now, I know in securities accounts, you can put on their pay-on-death POD or transfer-on death TOD and identify you, and then it’s my understanding that you would get that. But you want to check with the financial institution, make absolutely sure. Because I find that banks can be very difficult to work with when you’re dealing with the decedent’s affairs in the state. So I would want in writing from the financial institution as soon as possible what documents they are going to require for you to get your hands on the money. Just because he wants it to happen and my sad experience. Doesn’t mean it will happen easily. So find out what they operationally demand and have those documents prepared and even at the bank if that’s plausible. Now, that receiving the money, John, is not a taxable event to you. Unless this is in some form, I presume this is not in a IRA or a 401K, is that correct?

John [00:32:02] Correct, it’s in cash and it’s getting like 4.5% interest.

Carl Stuart [00:32:08] So what will happen is when you get the money and he hasn’t named the other four people, it seems to me there’s no tax consequence. It is you own it. You can make gifts to the other people. It has an impact on your estate. I doubt that it matters. We’re all walking around right now with a lifetime. Exemption of 13.9 million, next year it’s 15 million. So you would reduce your lifetime exemption by giving $200,000 away from 15 million to 14,700,000.

John [00:32:48] I doubt that. I’m okay. I’m still big.

Carl Stuart [00:32:50] I’m still good. I’m good. Okay, I thought so.

John [00:32:54] Some room, some room left.

Carl Stuart [00:32:57] That’s good to know. So I don’t see you have a problem. It’ll go into you go into your account. And as far as I can tell, it’ll go onto your account, you’ll write checks to your friends, and and go on down the road, there’s somebody’s gonna pay interest, I beg your pardon, someone’s gonna pay tax on the interest. But once you get once you Get that, presumably the interest of when he dies. The interest will be taxable by his estate, because it’s interest in respect of the decedent. But you get the 250, you can turn around and write those checks as far as I’m concerned, and move on down the road.

John [00:33:39] I have no tax implication at all. That’s the thing to do. Okay? That was my question. Yeah, my question was if I needed to get 1099s to the recipients or if they had tax implications. No, no, no. You’re indicating no tax implications.

Carl Stuart [00:33:53] No, there’s no taxes, there are no taxes whatsoever. He dies, you get the money, you turn around and give it to those people, it’s a gift, they receive the gift, they have no tax consequences whatsoever. They don’t have to file a 1099, is my understanding.

John [00:34:10] Thank you so much.

Carl Stuart [00:34:12] You bet. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. I keep forgetting to say that if you would like to listen to previous broadcasts, or you have friends or kids or whoever that you think would benefit from this, they can go anytime to KUT, I should say they can just go to KU-T, I’ll get it out here, I’m reading from this KUT.org slash money talk. And look up all the previous broadcasts and listen to those. Very interesting. We had texts last week and no calls, and today we have calls and no texts. So let me just make sure that you have that number, 512-921-5888. So where I was going is that we have really, Americans, based on the survey data, are in a bad mood, and yet you look at The global situation, I wouldn’t call it rosy, the war in Ukraine, problems in Gaza, Israel, problems with Venezuela. So if you said, okay, I think things are really going to go badly. I’m going to, in my 401k or in my individual account, I’m just going to get out. We’ve had a good year. Let’s just get out and go to CDs or go to a money market fund or whatever the case is. And I would tell you that’s not been a good advice in my experience because you can’t know how long the move is gonna take. If I told you at the beginning of 2022 that we were gonna have a sharp drop in stocks and bonds, I didn’t know that was gonna occur anymore than I didn’t know that in 2023 and 24 and now 2025, we’ve had terrific years for stocks and darn good years the last couple years for bonds as well. I think investing by the headlines is a big mistake. Also, as my colleague, Lindsey, points out, in 2020, when COVID hit, we all painfully remember that we basically stopped everything. We closed the schools, we closed down the economy. Look, people were dying in nursing homes in New Jersey. And it was a scary, scary time. Not surprisingly, that unanticipated thing. Caused the stock market to sharply drop. Guess what? It was back to where it was before the pandemic in 43 days. That’s crazy. So what you want to do, this is a good time of the year to look at your mix. What the fancy term is your asset allocation. How much do you have in stocks? How much in bonds? How much cash? How much and other alternative investments, real estate, other kinds of investments? Make sure that you’re at your target. It’s a good time next year if you feel you’re out of balance and you have some nice gains. You wait till January so you can kick the tax liability if it’s in a taxable environment. Kick the tax tax liability down the road and then rebalance your portfolio. That’s not investing based on the headlines. That’s just good solid portfolio strategy. I’m gonna take a break. It’s great time for you to call or text 512-921-5888. I’ll be back.

KUT Announcer: Mike Lee [00:37:49] If you’re a regular KUT listener, you know by now that member support makes everything we do possible, and you know all about becoming a sustaining member. But you might not know about another way to support the reliable news on KUT. If you have a donor-advised fund, you can support the station by recommending a grant to KUT! It’s a great way to show your support and to help ensure that KUT is your reliable news source, and it is way easier than it sounds. Find out more at KUT dot org slash legacy.

Carl Stuart [00:38:25] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:38:39] Welcome back. You’re listening to Money Talk. I’m Carl Stuart on KUT News in 90.5 and on the KUT app. We’ve got another 20 minutes here together. If you’ve been thinking of calling or texting, that would be a great time to do it. We have all of our lines open and I haven’t received any texts this afternoon. 512-921-5888. I get a daily piece from an economist on Wall Street. And this one just really, I got this back on the 12th of December and it was, I wouldn’t call it a wake-up call. I wasn’t surprised, but it’s important. So it says this. Fewer than one in six U.S. Workers aged 45 to 54 contribute the maximum to their 401k counts, coupled with rising costs, inadequate savings, and the looming depletion of the Social Security Trust Fund. These factors underscore a retirement crisis in the United States, requiring many households to boost their savings to achieve stable and sufficient income in retirement. If you have an employer-sponsored plan, a 401k or a 403b, and you’re not contributing the maximum amount, you’re making a mistake. And what I would recommend is, as you make your New Year’s resolutions, that you raise it 1%. So if you’re giving 4% of giving, keep saying giving, it’s not your money, it’s your investing. But if you’re contributing 4% of your compensation. Into an employer-sponsored plan, then let’s go to 5% in 2026, and another percent in 2027 and on. If your employer makes an employer contribution, it’s called a match, which I think is not quite really the same as the way I understand the word match, make sure that you at least start by putting in enough to get the full contribution. So one of the standard numbers around is 4%. So. If your employer is contributing 4% of your compensation, you want to be sure that you put in a minimum of 4% because now you have 8%, that’s you’ve doubled your return and raise it 1% a year. I really believe that we’ve got to make these changes because we can’t plan on the tooth fairy bailing us out. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text, 512-877-9000. 921-5888 and we have a collar. Martha, you’re on the air. How may I help?

Martha [00:41:30] Hey there, I’ve had an unfortunate year health-wise this year, and I’m on disability, I work part-time and I am on disability and I hope that changes, but are there tax implications for that? And also, it’s through my employer, and then I also know you can have disabilities through the government of the state, but I didn’t know, like how does that all work as far as taxes.

Carl Stuart [00:41:55] That’s a really, first of all, I’m sorry I’ve had a bad year. That really is a specialized question. And one of the things about what I’ve been doing here for so long is I know not to get out says, they say these days out over my skis where I’m giving you advice and I’m not confident in it. I do not understand, I have not encountered your question. I don’t understand the implications of disability income from a tax standpoint. I really think. Of course you and I we can do what we always do you can go online and Google and see what you hear But ultimately that’s in them. That’s a such a specific tax related question that You really need to talk to a tax expert You shouldn’t count on your friends or count on me because that’s a very specialized tax situation Martha So I’m sorry. I can’t be more helpful, but I do some online looking but I would I would talk to a human being and get expert advice if I were in your shoes, Martha. I’m sorry, couldn’t be more helpful.

Martha [00:43:01] No problem at all. Thank you.

Carl Stuart [00:43:02] You bet you’re very welcome, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. I was talking about, if you will, New Year’s resolutions increasing your contributions to your employer-sponsored retirement plan. I’m starting to see more and more Roth 401k. I think this is a wonderful invention. My understanding, and I’m not completely ignorant, but I’m a not a complete expert on this, is you put your money in, and it’s not pre-tax, it’s post-taxe. Your employer puts the matching in. It is the employer’s pre-tax. Then the money grows, and when you retire or leave that employer, You have the ability uh… To transfer to a new employer the pre-tax and the Roth also you can then say let’s say you retire or your new employer doesn’t offer that you can than put that into your own individual Roth one of the benefits of this is doing your own Roth IRA has a limit as to how much you can put in if you’re over fifty eight thousand dollars is here i recall but also there’s an income test. And so, if you’re married and filing jointly and you both have good jobs, it’s entirely plausible that you won’t be able to be eligible to do a Roth IRA on your own, but you’re not that limited that way for doing a Roth 401K. So it just seems to me that that’s a wonderful thing to consider. Now, will it increase your tax liability when compared to doing a pre-tax? The answer is, of course it will. But what I’ve observed is When you get to be in your 60s, 70s, and 80s, it’s a wonderful thing to have some money put away. It’s growing and you’re not paying any taxes, and you don’t have a required minimum distribution. And when you take the money out at your discretion, you don’t pay any income tax on it. And if you’re married and you predecease your spouse, she or he gets it, and they don’t to have to take the the money and then when he or she passes away. Goes to another beneficiary, and they have 10 years to take it out and not pay any taxes on it. Because you’re going to pay taxes on your IRA, they have a required minimum distribution, and unless you keep working that 401k, if you’re not working, you’ll then have required minimum distributions on that. So give that some thought. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-9228. 5 8 8 8 Sarah you’re on the air. How may I help?

Sara [00:46:02] Hello and thank you. I really enjoy your show. Thank you so much for all the advice you give. Thank you. My question is the following, I am middle-aged, I’m 63 years old, and I recently purchased a home with my partner, my live-in partner, and it’s a significant amount. We are both on the deed, but we’re not legally married. What is the best way for me to handle it? If anything happened to me, I want my share to go to my two adult daughters.

Carl Stuart [00:46:38] So Sarah, do you have a will?

Sara [00:46:41] I do.

Carl Stuart [00:46:43] So that’s where I would start. Because you will make your wishes known, and that would be one of them, is that upon your death, you want your 50% ownership in the house to go to your two daughters. It’s a pretty straightforward situation. And the challenge, of course, and we both know this, is your partner Might not be really excited about being a co-owner with your two daughters, but that’s his or her problem. Because I’m sure you’ve been straightforward with him or her. And yeah, I would put it, I’d get my lawyer, if you had a lawyer do it. But I’d add that to my will that they get your ownership of the house. That seems very straightforward to me, Sarah.

Sara [00:47:39] Okay. I have not updated my will, but you just reminded me that I should include that. Is that not automatic? Like let’s say any property that’s under my name would go to my beneficiary?

Carl Stuart [00:47:50] So that’s another way to put it. The answer is yes, any and all of your assets would be just divided evenly between your two daughters. It probably would be good, not from a legal standpoint, but just from a process standpoint, to think about what that means, because let’s just say, even though you are young and sound like a healthy woman, if you predecease your partner, Does does your partner have the financial wherewithal to buy out your daughters? Your daughters may not there’s not a lot of benefit for your daughters During your partner’s remaining life to be passive owners of a piece of residential real estate So I would want to think that through and had that conversation with my partner What occurs if I were to predecease you and and my daughters the girls get that the half of the house? What happens if they want to sell it? They can’t sell it because they don’t have a majority interest. And what if your partner wants to sell? Your partner can’t sale it because she or he doesn’t have the majority interest, so I think this could be pretty complicated. So you can put that in your will or you can just say all my assets are to be distributed 50-50, but how that works when you’re gone and your two daughters are 50% owners. I think that could be a challenge and possibly a problem.

Sara [00:49:20] Yes, I agree. Okay. I will speak to an attorney, but I really appreciate your help. Thank you very much and happy holidays.

Carl Stuart [00:49:28] You as well, thank you. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. We’ve got some time left. If you’ve been thinking you’re calling or texting, do so now at 512-921-5888. And by the way, you can catch past shows at kut.org slash money talk. Let’s talk a little bit about philanthropy, which I find to be one of the most beneficial aspects of my life. If you have a requirement of distribution, I’m not sure you can do it this late in the year, but if you’re in that situation where, for example, an earlier caller implied that he probably didn’t need. The income from his required minimum distribution or to use it for income. If you’re inclined to your church or social service organization or temple or mosque or whatever, you can make that contribution from your IRA once you’re 70 and a half. You don’t even have to wait for your required minimum of distribution. You can do it beforehand. So let’s say your RMD is when you’re 74. And you’re 70 right now, or 71 right now. You could do it now. And you can work with your custodian to have the money sent directly from your custodean to the recipient, or you can have the custodians have the checks, of course, made to the recipients, but come to you so that you can hand deliver them or put them in a letter, however you’d like to work. You avoid taxes on taking money out of your IRA. Now, you don’t get a tax deduction. You can’t double dip, so to speak, but you avoid having to pay taxes on the requirement of a distribution or on the distribution from the IRA. The maximum is $100,000, so if you had a multi-million dollar IRA, you wouldn’t perhaps be able to use all of it for qualified charitable distributions. But nevertheless, I just think that’s a terrific idea. The other thing I’ve read that’s having to do with charities and with philanthropy, starting in 2026, is my understanding that when you make a charitable deduction, the first amount is not deductible up to 0.5% of your taxable income. So, if your taxable income is $100,000, then if you give… An entity $500, my understanding is that that’s not a tax deduction. I’m not a CPA, don’t play one on television, you want to check this on yourself, but I’ve read this in a couple of places. But I haven’t seen a lot of publicity about this. If you are a high income person who is charitably inclined, the numbers get pretty ugly pretty quick. I mean, at 200,000, you give an institution a 501 C3 $1,000. No tax deduction. So you oughta talk about this with your tax people. I think there’s gonna be a significant move for people who are charitably inclined and for whom this doesn’t allow them to get the full deduction of moving money into something called donor-advised funds or DAFs. This is where you put cash or securities into a donor-Advised fund. All of the securities firms offer these, whether it’s Fidelity or if you have an advisor, their firm has a donor-advised fund, and you put the money in there, it’s a tax deduction when you put money in. If you’re fortunate enough to have some highly appreciated securities in your own account or joint account, and that’s certainly plausible given the last three years what’s happened in the U.S. Stock market, rather than putting cash in there. You could put those appreciated securities in there. You get the tax deduction, because if you want, otherwise you sell the securities, you’re gonna pay capital gains tax, probably long-term, on the sale of the securities. So you put the securities or you write a check in there, now, it’s called donor-advised-for-purpose, and a reason, and that is you’re the donor, and you advise the custodian how and to whom you wanna give the money, the amount and the institution. Technically, the custodian could decline to do that, but I’ve only seen that happen when the entity that the donor wanted to send money to was not a 501c3 entity. So if it’s a traditional tax deductible, charitable contribution, then you can advise your custodians to do that and there’s no rule as to when you have to do it. That this drives the IRS crazy, I understand, but allows you to, if you want to put $10,000 in there and turn around and get $10 thousand dollars back, you can. If you want put $100,000 and not give any out in a year, you can and depending on the, depending on a custodian, you will have a range of investment options. Some custodians will have a limit. On what you can do based on the amount of money that you’re putting in, the larger the amount of money you put in, it’s my understanding the more flexibility you have. And so again, they’re called donor advised funds, or DAFs. I think with this new ruling of this new part of the statute that you don’t get full deductibility for your contributions will cause people to think more about that. I’ve seen people do it. I think it’s a terrific, terrific thing. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. We’re down to about our last three minutes, so rather than give you those numbers, let me tell you a little something else that is important to know this time of the year. And that is the power of step up and basis. There’s a bunch of jargon. I think a lot of people don’t realize that when you have your savings and investments, And typically you might have them in different buckets. You might have a retirement plan, an IRA, or a 401k, or FCP IRA, a Roth IRA. But you also may have investments in your name, or if you’re a joint filer, you and your spouse’s name. And I’ve seen this summer several people I knew pass away. And they had accumulated over a lifetime sizable amounts of capital in their own name. And so they had lots and lots of gains that they hadn’t sold their securities, they were truly long-term investors. And so those gains were going to be, if they sold them, were going be subject to substantial taxes. But because they passed away owning those, their beneficiaries, their heirs got a new cost basis, which was the value at the date of their death. And it’s a really magnificent way in your long- term planning to pass on assets in the most tax-efficient fashion. Well, I’ve enjoyed the broadcast this afternoon. I want to thank Mark for doing his usual great time. And because Kenny and I will be on together next week, we won’t be taking calls. So this will be my last chance to wish you a very happy and joyous holidays and be sure on Saturday to tune in to Money Talk.

Carl Stuart [00:57:27] You’ve been listening to Money Talk with Carl Stuart. Carl Stuart is an investment advisor representative of Stuart Investment Advisors. And this is KUT and KUT HD1 Austin.

This transcript was transcribed by AI, and lightly edited by a human. Accuracy may vary. This text may be revised in the future.