Money Talk with Carl Stuart

Carl Stuart takes on several topics from callers and texters, like the right ratios for your asset allocation, drawing down pre- and post-tax retirement accounts, Social Security Disability Income (SSDI), planning for the future even at an advanced age, and more.

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.

[KUT Announcer Laurie Gallardo] [00:00:02] 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 [00:00:21] Good afternoon and welcome to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and on the KUT app. Welcome, Money Talk is a broadcast about the world of financial and investment planning where you always determine our agenda by calling or texting 512-921-5888.

It’s always a terrific idea to call or text at the beginning of the hour and giving me an ample opportunity to do my best to answer your question. And also, if you’re a regular listener, you know that sometimes I don’t know the answer and we have informed listeners who give us the answer, which is always terrific. So I have some text to cover here and I’m gonna start those. But if you do text or call, you’ll hear the text thing go off, the noise. And then I’ll stop what I’m doing and take that. Five, one, two, nine, two one, five, eight, eight eight. I had this over the couple of weeks and I’ve done some homework. It says…

[Text] Hi, I live on social security disability income because I have stage four breast cancer. I’m in remission and back in grad school for a new career, starting at the age of 55.

Congratulations.

[Text] I make decent SSDI income because of my prior career’s income, but I’m not sure how it works if I say, work in my new career from age 58 to 68. How do they calculate retirement income in this scenario? Thank you. To be clear, I’ll have 10 years of income during which time I, of course, won’t be getting Social Security Disability Income. I’m just assuming I’m going to live a long time, really. I decided.

Good for you. So, I talked with my CPA and we both agreed that fundamentally social security benefit to up to a great extent is driven by the amount of income you make because that drives how much you contribute to the social security. So, our best guess is that when you start working again and making more money, that that will be calculated into your social security benefits, which what neither of knows for certain. Is if— because it’s Social Security disability income— if that makes a difference in the calculation. It may, we don’t know the answer to that, so I apologize. But we both believe that if you make more money, that that will go into calculating what your benefit is. And I don’t the answer better than that. If you find that answer out, I’d sure like to know it, and I’d encourage you to send me a text if either confirming what I’m telling you or if there’s a different answer. Thank you.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call me or text at 512-921-5888. Dan, you’re on the air. How do I, how may I help?

Dan [00:03:24] Yes, I have supported a couple of young people for college tuition, and I know that if I pay the tuition directly to the college, it’s not considered a gift. My question is I have another young gentleman who I’m going to support going to university here soon, and he is required to be on campus for the first year, and so consequently I’m wondering if I can pay his room and board directly to university and be under that gift tax exclusion like tuition is.

Carl [00:03:55] So the answer is I’m not sure about the gift tax exclusion, but the good news is we’re all walking around with a lifetime exclusion. And so, what you could do is you’ve got almost $14 million of a lifetime exemption. And to the extent that you give more than the $17,000 annual limit, I think that’s it this year, you can claim that lifetime exemption And all it would do is reduce your lifetime exemption from $13,990,000 to whatever the amount of the gift is. That’s my understanding, Dan.

Dan [00:04:29] Okay. And that, that, uh, that lifetime exclusion is per person.

Carl [00:04:33] Yes it is. So if you’re married it’s 24 million and I believe in the new bill they raised it to 15 million. So now if that’s the case and if that goes into effect next year then you’d even be then it would even be 30 million for people for a married couple. That’s right.

Dan [00:04:50] And you wouldn’t have to know what the annual gift exclusion is going to be for 2026, would you?

Carl [00:04:55] No, I don’t know, but they’ve been raising it a thousand dollars. And so if I had to bet, I’ll bet that’s what it’s going to be. Okay, great. Thank you very much. You bet. 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’s the text.

[Text] Let’s see, is asset allocation 60% stocks? In 30% bonds and 10% cash, reasonable for a retired 77-year-old. I’m in Vanguard index funds. Thanks much, Richard.

Great question. And it really gets to the heart of something that I think all savers and investors should think about and come to understand. There’s no question based on history and based on my 46-plus years’ experience, there’s a single biggest determinant. Of return and risk is the asset allocation, and that’s the mix of various asset classes. And I’ve learned that the hard way by having an inappropriate asset allocation. And I would tell you that 60-30-10 is a very reasonable thing to do. I would also add to that that some people would say, oh my goodness, you’re… 77 years old, you shouldn’t have so much in the stock market, and I disagree with that. I think it really is a function of your total financial situation. If you have adequate income, if you have few or no liabilities, which I suspect is your case, and you’re investing for the future, I think that’s a perfectly reasonable thing to do. You may come to a that you see your assets and know that you’re not gonna outlive them. And if that’s the case, you begin to think about what is the longer-term purpose of my investing? And that’s what we call a legacy. And when you invest for a legacy, you do want the money to grow. And having it all in bonds or CDs will not allow you to accomplish that objective. So I think that’s perfectly reasonable.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Let’s see here, got another text.

[Text] Hi Carl, thank you for the great show.

You’re welcome.

[Text] Can you give your thoughts on how to start with a drawing from the three accounts? IRA, Roth IRA, and after-tax account.

I would assume the Roth IRA till the last possible date. For everybody else, this person is a successful saver and investor, and he or she has money in three different buckets in his or her own name, and then in an IRA, and in a Roth IRA.

So, the first thing you wanna do is pay attention to your tax bracket, because you know that when you take money out of the IRA, that will be added to your income. If you’re young enough that you don’t have a required minimum distribution, but you but you’re over 59 and a half years of age. You can take that money out and pay the taxes on it You know back in the day Then then the kind of the common concept was defer taxes as long as possible. I’ve really come to not necessarily agree with that. It depends on the individual depends on their situation and frankly their psychology The benefit of letting the other two grow is that in the case of the raw thyroid, you never have a required minimum distribution. And if you own that and pass away, if you’re married, your spouse gets it. And if you’re a widow or not married, your beneficiaries get it. They have 10 years to take it out and it’s completely tax-free. And on your individual account, uh… You’re going to be subject to long term presumably long-term cap gains taxes which are significantly lower than income taxes and so for example if you’re married filing jointly and this year if your income’s over 96,000 but not over 600,000 your tax rate on a long- term capital gain is only fifteen percent –pretty attractive. On the other hand, If you leave the IRA alone. You avoid having to pay income taxes now, but upon your demise if you’re not you have a spouse he or she gets it They’ve got their subdued your required minimum distribution and upon their demise their Beneficiaries are subject to taking the money out and paying income tax on it So you have to kind of think do I want to pay the taxes now? Or do I only defer them as long as I can and let my heirs and my beneficiaries pay it no right answer here But if you like the idea of passing on the most wealth, if that’s appealing to you. The good news about your individual account is it continues to grow and upon your demise, your heirs get what’s called a step-up in basis. So let’s suppose that when you die, it’s worth $200,000 and you paid $100,000 for it. The day after you die the cost basis to your beneficiaries is $200000. It’s one of the only good tax laws that may be the only tax law that I’m familiar with. So I would look at it that way. I would kind of think about, do I want to pay the taxes now and have the most later on to either have it at a lower tax rate, long-term capital gains or zero, or pass on the most capital to my beneficiaries? I think that’s how I would like to look at that. Thanks for the question.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921. 5888. Here is a text.

[Text] Hi Carl. Thanks for all that you do for small investors through your show.

You are very welcome.

[Text] My question concerns how you view liquidity and safety differences between short-term treasuries and a money market fund. T-bills with low fees, like an exchange traded fund such as SGOV, seems to be every bit as liquid with a higher yield as Schwab’s Money Market Fund. With its higher fees. Thanks. Bruce in South Austin.

Well, first of all, Bruce, you’re a knowledgeable investor. So, for everybody else, one of the places you can, shall I say, park your money, is a money market fund. And you can get these, as this person does from Schwab, Fidelity, Vanguard, if you use an advisor, from Herb.

And money market funds are mutual funds. And they invest in short-term, high-grade securities. There are three types of them. There’s what’s called a treasury, one’s called the government, and one’s call the prime. The prime invests in corporate paper, very high quality, but corporate paper due in less, maturing in less than a year. The government one invests in treasuries but also government agencies like Fannie Mae and Freddie Mac. And the treasury one invest strictly in straight treasury securities. As you would predict, that the prime yields a bit more than the government and then the treasury. I happen to like the Prime. So if you’re considering a money market fund, they keep the price of the net asset value at a dollar per share. It’s easy to get in and get out, and the interest you’re going to get is frankly a function of short-term interest rates, Federal Reserve policy, and supply and demand. An exchange traded fund trades, as the name says, on an exchange, let’s say the New York Stock Exchange, you can sell it any time during the day, and this particular one invests in treasury securities. There will be some volatility in the price, not a lot because it’s short term. So you should get a little more yield because there should be something called a risk premium in there. So if you are comfortable with a little bit of volatility, then SGOV would be fine. The other possibility, of course, is there’s a potential for gain if the Federal Reserve lowers rates and short-term treasuries yields come down. The price in your SGOV for a brief period of time will go up and you actually could have a capital gain if you chose to sell it. So that’s my view. Thanks. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. It’s time for me to take a break. A perfect time for you to call or text 512-921-5888. I’ll be back.

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[KUT Announcer Laurie Gallardo] [00:14:50] This is Money Talk with Carl Stuart . Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:15:04] Welcome back to Money Talk, I’m Carl Stuart and you’re listening to KUT News 90.5 and the KUT app. When you have a question call or text 512-921-5888. Here’s a text.

[Text] I am 88 and too old to start investing. That’s the text. I disagree, I disagree. I remember teaching a class over at the UT OLLI system and somebody said, I’m so old that I don’t buy green bananas. But anyway, I come back to this. I think there’s a teaching moment here and that’s that you, if you’ve got money and you know that you’re not going to spend it all, then I think you have a wonderful opportunity. One is philanthropy. And it can be organized philanthropy, a traditional 501c3 non-profit. I think that’s fine. But you can also do what this person called earlier this afternoon and said. And he said he was helping pay for college education for people. So it seems to me that if you’re 88 and you’re listening to Money Talk. Fuck that you have some interest in the world of finance, investing, and saving. And so in my view, you can make a difference in the word today by giving to causes that are dear to you, or you can a difference in the work tomorrow by investing in assets that grow over time, and that you can leave to those institutions or people as well. So my personal view is, When I’m 88, I’m going to keep on investing, but thanks for the question.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888.

[Text] Carl, what is your opinion on Yield Max ETF investments? Thanks, Pratik.

This is a really technical question and these are relatively new products. Where frequently derivative securities are used to increase the yield while giving you daily liquidity. They’ve become very popular. And I would say to you, I always approach newer financial asset investments with an extremely high level of skepticism. Early in my career, back in the dark ages, I made some mistakes. Because I didn’t fully understand the investment. I always like to ask myself the question, girl, what could go wrong? And I’m pleased to say that I listened to a speaker last December who had done long interviews with Charlie Munger, Warren Buffett’s partner, and Mr. Buffett always attributed their best investment ideas to Charlie Munker. And… Charlie Munger, when he was making investments, would say what can go wrong. So if you look at these, be sure you understand how they’re obtaining the yield. Because if there’s a 10 or 11 or 12% yield, and 10% and 10-year treasuries are yielding 4.4. That ought to raise your concern. And if you understand how they’re doing this and you can ask yourself the question, what are the circumstances that would result in the yield going down? And if the yield goes down, what will happen to the price of the investment? This is not a bond investment where yields go down and prices go up. There could be selling pressure in a lower interest rate environment. So I would just be very, very careful if I were you.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. This is the person that says they’re too old. Okay, that was another text. Let’s see if I’ve got some others down here. I believe that I do. 512-921-5888

[Text] Carl, I discovered that I can listen to episodes I had to miss, or hear them again on the KUTKUTX.Studio.PODCAST website. And thank you for that. But, after listening to the special episode you did July 5th, I keep looking for that episode because my sister up in Seattle there should hear it. Any chance that episode can be made available?

Well, first, let me tell you why you can go to kutkutx.studio slash podcast. You can just also go to kut.org slash Money Talk and you will get that as well. That decision was not mine and I believe that we will broadcast that, but it’ll be at some time in the future. So thank you for listening to the podcast, but that one will just simply not be available in the short term.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888.

[Text] Carl, I have a long time stock mutual fund with a long standing company that has experienced a high number of redemptions due to fees. I feel I should sell this fund and buy the equivalent fund in an exchange traded fund from another of the largest ETF funds. This isn’t an IRA, thoughts?

Yeah, well. Again, I always like to say, like our political leaders might change my mind, I say my thoughts have evolved. Here’s where I am on actively managed stock funds, making a distinction between stock funds and bond funds. I think you can find, because I have, actively managed funds that have higher fees than exchange traded funds, and that they will outperform in good times, outperform their index. Or I can find funds that are actively managed and will out perform on the downside with their active management. But if you want the actual return of the market, whether that’s the NASDAQ, the S&P 500, whatever, exchange-traded funds are a fantastic innovation. I’m familiar with some of the Vanguard funds, and believe me, this is not an advertisement. I never advertise funds or any investments on this broadcast. But the exchange-traded funds at various big producers or asset managers like BlackRock and Vanguard and Schwab, or less than five basis points, 0.05%, that’s almost free. So is that a good idea? If you haven’t lost confidence in the higher fee fund, then I would keep some of it, and then I will move to the exchange-traded fund. Yes, you’re fortunate in a sense that it’s in an individual retirement account, so you don’t have to worry about the tax consequences. So would that be a reasonable thing to do? As long as you understand the distinction. Between the actively managed fund and the ETF. A lot of actively managed funds have small portfolios, they’re highly concentrated, and that gets them those kind of performances that I’m talking about. Before you make the decision, you might look at how your actively managed fund did in 2022, and 23, and 24, because we had a down market in 22, and two good markets the next year, and compare that to the exchange traded fund, that will give you some idea of relative performance. Jade, you’re on the air, how may I help?

Jade [00:23:33] Idea i’m not quite my quick question is uh… So i i have to give you just a a really small reason i’m asking bitcoin in my opinion purely speculative based on the we have those the world where and where as xrp seems to be at the actual protocol that the finance industry is using to, you know, transfer funds. So my question to you is, is there a difference in the two, is Bitcoin just as tangible as XRP, or is XRP just as speculative as Bitcoin?

Carl [00:24:18] Is XRP a stablecoin?

Jade [00:24:23] I have no idea. It’s a protocol that Ripple is using to, you know what SWIFT is, where they transfer funds internationally. SRP is a faster protocol and Ripple is the owner of that protocol.

Carl [00:24:42] The answer is the answer is I don’t know I know stable coins are backed by US treasuries and so I’m based on my reading Governments becoming comfortable with regulating stable coins and I’m familiar with swift because when I when I’ve made transfers myself wire transfers Internationally I have to put in the swift code or the swift number, but I’m not familiar with XRP I don’t want to tell you something to be mistaken so If you get the answer to that, I’d love for you to call us back and let us know, but I just don’t know. I’m sorry. Okay.

Jade [00:25:16] Well, let me just ask, is Bitcoin, in your opinion, a tangible or a split of product?

Carl [00:25:23] It’s a speculation. Anything that has the return characteristics that it does does not meet my definition of a currency. It meets my definition of an asset and a speculative asset in my view, Jay.

Jade [00:25:38] Alright, thank you for your time.

Carl [00:25:39] You bet, 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.

[Text] Hi Carl, love your show, thanks. I am not yet at full retirement age. If I take one half of my ex-spouse’s social security at 62 to 65, do I still get to claim my full amount at 70 or do I get into some other category? Well first of all let me say that the questions that have generally stumped the chump here have to do with social security. So I do not purport to have really solid understanding, but it is my understanding that you will be able to claim your full amount at 70 based on your work record. That’s my understanding. If you find out anything else, call back or text and let me know, but I believe you’re entitled to your full benefit. You hit 70.

You’re listening to Money Talk on KUT News 90.5 and on the KUT App. Call or text 512-921-5888.

[Text] I have a family member who’s 17 years old and received an inheritance worth more or less $100,000. No immediate concerns about college tuition or car payments. What type of financial advisor should be used for low fees and careful management for growth over the next 10 years?

So, my preference is for you to use what we call an investment advisor. That is a term of law. Not everybody can call themselves that. They’re regulated under the Securities and Change Commission and they have what is called a fiduciary responsibility just like your lawyer does or your accountant and that means that they must act in the client’s best interest. They can receive no transaction-based compensation. They have what’s called a duty of care and that’s where I would go if I were you. It’s perfectly reasonable for you to go interview an advisor or advisors if you used to do that? You don’t want to start with what’s the fee, because frankly, the marketplace is going to drive the fee. If you chose to go to four different CPAs and they were all similarly situated, they’re going to have comparable fees for the work that you want done.

More importantly are the following things. Number one, what’s their investment strategy for the 17 year old person? And how did they come to that? What have they learned over their career? Do they have experience? Okay. If they say, oh, we can make them 20% a year, Run as fast as you can. Out the door. If they use the term guarantee, also run as fast as you can out the door. So what is their investment philosophy or strategy? And then, because this is a young person, what is there own personal business plan? What are their retirement plans? They have a succession plan because this is the long-term situation. And then if this person, this advisor, receives a What does a happy, healthy client relationship look like in terms of contact? What if this young person has a financial planning question? I’m thinking about buying a car, or I’m think about taking a trip, or whatever the case is. Is this advisor open to having those kinds of conversations? And finally, and only finally, how are they compensated? Because again, the marketplace is gonna drive the compensation. Now you may run into an issue which is While $100,000 is a lot of money, I don’t think anybody would argue with that, because a lot the investment advisor’s fees are relatively low compared to commission-based fees, that they may not be interested in $100000 because the fee is sufficiently low that it’s not a profitable client relationship for them to have. That doesn’t make them bad people. They deserve to make a living. So. You’re also going to explain your situation, ask them if they have a minimum before you get into all of this, but then that’s what I would do. The marketplace is gonna drive the fee, so good luck.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. I’m gonna take a break. It’s 512-921-5888. I’ll be back.

[KUT Announcer Jimmy Maas] [00:30:21] 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

[KUT Announcer Laurie Gallardo] [00:30:56] This is Money Talk with Carl Stuart . Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:31:10] Welcome back to Money Talk, I’m Carl Stuart and you’re listening to KUT News 90.5 and on the KUT app. I keep forgetting to tell you that you can catch past shows at KUT.org slash Money Talk. Just go to the website 512-921-5888.

[Text] Hi Carl, is there a benefit to maxing out my 401k beyond what my company will match? I think the only benefit would be to lower my modified adjusted gross income so I can contribute to my Roth. The alternative is to invest more in my brokerage account that doesn’t limit investment options like my 401k does. Thanks.

Terrific question. Lots of moving parts. So, for everybody else, if you work where you have an employer sponsored defined contribution plan, and that’s a mouthful, a 401k, or if it’s a non-profit, a 403b, The employer can make a voluntary contribution, it’s called a match, doesn’t mean it dollar for dollar. A lot of employers will say a certain percentage of income. So, for example, 4% of your compensation, they’ll match, if you put in 4%, they’ll put in four, or some other calculation like that. So the question then becomes, should I put more in than that? I would tell you, if don’t get the match, and if there’s not a Roth 401k, a Roth 401k option because the 401k, it’s my recollection this year, 23,500 is the max you can put in unless you’re over 50, then I think it’s 31,000. So, if you’ve got the ability to put a lot of money in the 401K, that’s interesting. If you could put it in a Roth 401k, that’s very interesting, but let’s assume you can’t. If you invest it on your own, you bring up one point that’s good and I’ll bring up the other. One is that when you have a 401k you’ve got to choose from the menu. You can’t go to a Mexican food restaurant and ask for egg foo yung, okay? So, you’re limited. Some people, some group of people, because they have fiduciary responsibility, have gotten together to choose a supplier, an asset manager, and to use their options. Fine. If you have the time and the interest and you invest that same money in your Granted, granted you’ll have to pay taxes. But you’ll have to pay taxes when it comes out of the 401k. But by doing this, you have a broader selection, and you can choose your own funds. You have complete liquidity, which you don’t have in the 401K. And you sub you to the favorable long-term capital gains tax when you sell. And if you die with it, you’ve got to step up in basis for your spouse or your beneficiaries. So I lean towards investing it on my own and paying the taxes, frankly.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. John you’re on the air, how may I help?

John [00:34:22] Hi Carl, i’m here so and i’m really enjoy listening to the advice that you give me to all the callers thank you uh… My question is about that i’ve worked my whole life uh… We grew up where we didn’t have very much now i’m accumulated this what to call it you know if it’s it’s a pretty good amount of money i’m having a hard time spending it yes and the reason The reason that I tell myself, Carl… Is that it just seems like there’s just unbridled greed out there and I just It’s just something that is unsavory to me sure You know, um That’s really the bottom line. I mean when I work for people and they ask me if I want more money I Say no, I say no. It’s fine. What you’re paying me is fine I don’t need more money sure and I’ve said that over and over my whole working When I had my business

Carl [00:35:24] So John, let me interrupt you if I might please, and do you have a question for me please?

John [00:35:30] Yes, so that’s the question, is how can I, you know, basically what’s your take on that?

Carl [00:35:38] Yeah, not really.

John [00:35:39] It’s more just, you know, I’m calling to reach out to somebody. I mean, you can’t tell me how to spend money, I understand that. I’m just calling you to say, how is it that in small ways I can somehow, you know, flip the script?

Carl [00:35:56] Well, I think the first thing that stands out for me, of course, is congratulations on your saving and your investing. Secondly, we live in a consumer-based society. I’m old enough to remember that when I was at university, I would get credit cards, just come in the mail. And I had no credit whatsoever, but I could go off and buy stuff and put it on the credit card. 70% of our economy, the largest economy in the world, is consumption. And consumer debt, whether it’s auto debt, credit card debt, or whatever, is pernicious to financial freedom.

So, you and I are on the same page there. I would tell you what I would do. I would look at my life, you’re 64 years old. I would at my expenses, and I would this on my own, or I’d get together with someone that has a software package. Put in my life expectancy, put in my goals if I have some expenditures out there that I want to have. I would then look at various investment strategies and there’s something that’s a very fancy name called a Monte Carlo simulation. You can figure out, going the way you’re going now, can you live on your assets? If the answer is yes, I’ve got more than enough to live on, then you have a wonderful choice. You can put aside the fact that people are engaged in unbridled greed and say, how can I make a difference in the world? And the way you make a different in the world is to be an intelligent philanthropist. A thoughtful, intelligent philanthropists. And the ways to start with that, because there’s no shortage of good deeds. In fact, my colleague and daughter told me there are 13,000 non-profits in central Texas. The way I would approach it is I would look at the world and I would say, Where are the needs that resonate for me? For example, for example, for example it may be education because we have a lot of problems in education. Maybe it’s healthcare. Then make a difference in that way and that’s what I would do. I’m gonna have to move to the next call. Sean, thank you for calling.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-58. Here’s a text.

[Text] Carl, I have about 238 shares in an energy stock that is hemorrhaging money really bad. It was at a high of $259 in 2022 and is now worth about $40 per share. I’ll have to pay the service fee to sell it and be subject to tax as well. So should I hang onto it and hope there is a turnaround or get out now while I can my money in case they claim bankruptcy. Of course, I don’t know all the context of the company. I had this experience many, many years ago, and it’s the reason I don’t own individual stocks. Because when you own an individual stock, you can make a lot more money when it’s right than you can making a diversified mutual fund or exchange-traded fund. But when it goes bad, I remember when AT&T split out and there was lucent technologies and it was considered a blue chip, and it went from something like $80 to $4. I remember when Dell Computer was the number one performing in the standard and poor for one, three, five, and ten years and went to $70 and then it went private at $10.50. Those are the kinds of risks that I’m unwilling to take. So if I were in your shoes based on what you’ve told me, on Monday I’d sell it. I wouldn’t worry about the transaction cost. I sell it, not look back and invest in something more diversified. Good luck.

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[Text] Hi, I’m a first time listener.

Thank you, I am glad you’re listening.

[Text] I turned 69 July 8th, congratulations. I contributed to Social Security since I was 16. I know how that goes. I’ve held out for 70, for 50 years to get the max, but I’m now nervous about the cuts. What would you do?

So, I think anybody who’s not nervous about Social Security is not paying attention. Here’s my prediction. There’s nobody in Congress, there’s no president, who’s gonna stand up and say, let’s cut social security benefits. What’s going to happen? In my view, we wait till the very last moment and we make fundamental changes. And the fundamental changes are, right now, your 6.2% contribution and your employer’s contribution stops when you earn a certain amount of money. I think it’s 160,000. I’m not positive. Raise that limit, eliminate that limit and the money would flow in. That’s number one.

Number two, change the age of full retirement. People are living longer, make sure social security doesn’t kick in till a later age. And third, if you have to adjust the inflation adjustment which has been very volatile in recent years. If all those things would happen, we would make sure that social security is solved. Is that gonna happen in the next two years? Are you kidding me? There’s no way that that’s gonna happen. Here’s my view. At your age, you’re gonna get your benefit. Now, if you’re listening to Money Talk and you’re 30 years old, do you think you’re going to get your full benefit? I think you gonna get a different benefit for the reasons that I just said. I think it puts more responsibility on the individual to save for her or his retirement. But you are so close that I would hold out for seven. What everybody needs to understand is that the monthly benefit grows from your full retirement age, 67, 67 and a half, to 70. It grows at 8% per year. And there’s no investment that you and I can make that has an 8% guaranteed return with the government backing. So you’re going to get your money and young people are going to have a different benefit stream in my view. Thanks for the call.

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[Text] Hi, Carl. I’m 40 years old and have $100,000 in my 401k. Other than that, I only have about $10,000 in savings. I bought a condo at the end of last year and after my mortgage and basic expenses like groceries, I have very little at the end of the month to save. I’ve been putting $500 a month in a high-yield savings and just started putting money into a money market fund, just about $50 a month. But I have no idea what else I should do for my long-term financial health and eventual retirement. And also I’m single and childless. Analyze the solidity of my employment. If I thought under foreseeable circumstances that I’m gonna keep my job, then having $10,000 in savings is plenty. Because you’re paying a price, it’s a hidden price, it’s what the economists call the opportunity cost. What could I be making on my money over the next 10 years if I were investing it the U.S. And foreign stock market. Versus keeping it in savings. So you have to look and ask yourself the question, what are the chances? What are the odds that I’m gonna have an emergency that’s gonna wipe out that $10,000? And if you can’t come up with one, then you need to become, you need them invest for growth, just like I hope you’re doing in your 401k. You can open an account and invest, you have money automatically withdrawn from your checking accounts called an ACH. Into a cheap, cheap, cheap index, what’s called an index exchange traded fund. The big companies have these, Vanguard, Fidelity, Schwab have these. And you can start that. Now you may have to save some money to make the initial investment. Maybe it’s got a 500 or $1,000 initial investment, but once you’re past that, you can get into this ACH and invest. And the deal here is, that sometimes the market’s gonna go down, like in 2022, and your monthly or bimonthly, semi-monthly, if that’s the case, money goes in and the exchange traded fund is cheaper and you buy more of it. And then some years, like 2023 and 2024, the market goes up and your monthly investment buys fewer shares. But over a 10-year period, you’re buying more shares at lower prices. You’re buying fewer shares at higher prices. Guess what? You have what’s called a lower average cost. That’s a really good thing. So that’s what I would do if I were you.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. If you’ve got a minute, I’ve got about six minutes left, call or text 512-921-5888. Hi Carl, what are my options for part-time financial advice? I only need guidance occasionally regarding investing or finances. Your suggestions would be appreciated. This is a really tough one. I’ve had this question over the years. Because what you’re looking for is someone with experience, intelligence, that has integrity, to look at what you are doing and give you some guidance. The problem is, they don’t get paid very much. And it’s like getting part-time advice from, I don’t know, your doctor. It’s gonna be a challenge. There are people who are fee only, and they charge an hourly fee, because there’s two kinds of fee only. There’s the investment advisor, which I talked about previously this afternoon, that charges the fee based on the value of the assets, and is responsible for your investing your money on your behalf. That’s not what you want. You want someone that you can bounce ideas off of and pay them some money. I would tell you that I don’t have an answer for you that’s going to be satisfactory. Because the people I know in the financial advisory world are not going to do that. And it’s just simple economics. They can’t make a living charging you $250 or $500 or $1,000 every year and giving you their advice. The second piece is what we call the compliance risk. What happens if you go in and they give you some advice and it turns out to be either bad advice or through no fault of their own. The investments drop. I mean, they could have told you to put it in a stock index fund at the beginning of 2008. At the end of the year, the S&P 500 is down 37%. That’s not their fault. They couldn’t see that occurring. So that’s a perfectly understandable question that you’re asking. I do not have a perfectly good answer to give you. I’m sorry. Let’s take this text. Thanks so much, Carl. My dad keeps saying to hang on to it that don’t need the money. Maybe this is it. No, that was the stock, okay. Your dad says to hang on to it if I don’t need the money right now. I disagree. I just think that the potential for individual stocks on a, I’m gonna use a little wonky stuff now on what’s called a risk adjusted basis because you’re in one industry. What if it’s, you said it’s an energy stock, okay, and oil prices are mid-60s and we have in the world more production, not a lot, about a million barrels a day. Than consumption. What if we have a recession so that demand for energy goes down? What if continue to have technological breakthroughs so supply goes up? Have you followed what’s going on in Guyana and Suriname? We’re looking in Guyanna at possibly having oil reserves that are greater than the reserves in the Permian Basin. So I’m just not a fan of individual, even if you’re right on the stock and the market may not care. I’ll give you an example. Back in the day when Dell Computer was skyrocketing, Whole Foods Market was doing nothing. People would call me on Money Talk and say, Carl, what in the heck is wrong with Whole Foods market? I go there and the place is packed, but the stock just lays flat. And Dell was sky rocketing. That’s because the market was focused on IT, high tech stocks. And consumer durables and consumer non-durables and retailers were completely out of favor. Then as I said earlier in the broadcast, when Dell took a nosedive and eventually went private at a little over $10 a share, Whole Foods market was a terrific stock. So I see the stock market when you own individual stocks that you have at least two significant risks. One is the company gets in trouble, that’s the experience that you’re having. But the second is the focus of the market goes someplace else. For those of us who follow these things, you think about right now that the so-called Magnificent 7 or Magnificient 10 are something like 35% of the entire value of the S&P 500. And so if you think of it from that standpoint, you’re really making a concentrated bet in individual stocks, an even more concentrated bet. So from my point of view, if I were in your shoes, I would disagree with your father. I think you’re better off to invest and diversify. If you’re just getting started, a passive index ETF, I’d put 75% in domestic and I’d 25% in international. And if you wanna buy individual stocks, first have a basis, if you will, a basis to your pyramid of saving and investing before you go out and do individual stocks.

Well, we’re running out of time. Lot of fun this afternoon. I enjoyed the broadcast. I hope you did as well. And I hear that. Text coming in, but sadly it’s too late. So I will tell you thank Marc. Thank you very much for doing a great job I’m gonna thank KUT for everything that you do in our community during this difficult time and also to invite you next Saturday after the news at 5 to be sure and tune in to Money Talk

[KUT Announcer Laurie Gallardo] [00:50:37] 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.