Money Talk with Carl Stuart

Carl Stuart takes on topics including the Austin real estate market, using home equity (or HELOC) to open a yogurt shop, capital gains taxes, diversifying an investment portfolio into bond funds, and moving out of state during retirement. And much more on Money Talk.

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

Carl [00:00:21] Welcome to Money Talk, I’m Carl Stewart, and you’re listening to KUT News 90.5 and on the KUT app. Now in our 31st year here together, 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 great idea to call or text early in the broadcast. Enhancing the opportunity I can have to answer it before we run out of time. Last week or the week before I recall we had two or three calls at the end that naturally I was unable to answer. I like to take calls because it gives me a chance to further understand your question and have a dialog with you. However, you’re welcome to text my policy as I take today’s calls first and then today’s texts and then any texts that I have not answered previously.

The number again 512-921-5888.

Every month I get data on the Austin metro area markets. This is the residential real estate market. So if you’re listening and not living in central Texas, this may or may not be interesting to you, but because it is an interesting phenomenon and it’s not only happening in Austin, Texas, I’ll share that with you –I should also say that I always interrupt myself if I have a call or a text.

You will hear the phone going off when I get a text, but right now I have call. BJ, you’re on the air, how may I help?

BJ [00:02:01] Uh… I croatia i have uh… Diversified portfolio mutual funds in mind for one cat not sort my my rock iraq and uh… I have seven percent and a international index one and four percent international actively managed from i think and I took a look at these two funds. And so that they have almost exactly the same holdings yeah so uh… I’ve been looking at for the four percent uh… Allocation international small cap funds and wonder what you thought of that or if there’s a better option for you

Carl [00:02:47] Sure. Sure. Well, that’s a good question and you’re a thoughtful investor. So for everybody else, what we’re talking about is that when you want access to the international stock market, just like the domestic market, you can use a passive index. And I don’t make recommendations on Money Talk, but one that I follow to see how they’re doing is the Vanguard XUS ETF, or you can have management. Because I’m pretty sure, BJ, that your index fund is market cap weighted just like the S&P 500 is, you’re going to have more large companies, large cap companies in that international. So if you wanted to really diversify away a small cap international, would absolutely give you something else. I think the other thing is you might also look, because growth stocks have dominated Returns you might look at an international fund. That’s more of a value.

I’m talking actively managed now More of a more of two things more value oriented and secondly Perhaps more concentrated you’re going to get the broad market But if you can find funds that say have maintained somewhere between 30 and 60 or 70 positions Then you’re gonna get a very different return profile And the last thing I would say is what I’ve observed, both domestically and internationally, is that there are some managers, their investment style leads them to outperform in bull markets and rising markets, and there are some that tend to be, just by virtue of the way in which they manage their money, to be more defensive and tend to go down less. And so a good test of that, when you look at various funds, what are the problems with looking at trailing one, three, five, and 10 years. Is it really takes away the volatility. And so I would say I would look at an international fund and see how it’s did in 2020-22, which was, as you know, a bad year for equities across the globe, and then how it how it has done year to date or even last year when the dollar weakened and international stocks started to perform. So I have no problem with a small cap. It would pull you far away from the index and that’s a good thing. But I’d also look at active managers that have those other criteria that I just mentioned if I were in your shoes.

BJ [00:05:13] Okay, I appreciate the options. One thing that concerned me about small cap, the international small cap at least one is available from Schwab. They all had high feed.

Carl [00:05:26] Yeah, that’s a legitimate concern. I would tell you in my 47 years, international has always been more expensive than domestic. Yes, that is my experience as well. Okay, thanks for calling. You’re listening to Money Talk on AUT News 90.5 and on the KUT app. Call or text 512-921-5888. Call or texts, now let’s get back to the Austin metro area market snapshot for residential real estate. For the month of July, the median sales price was $499,945. That is no change from a year ago. That may be meaningful, we’ll wait and see because if you’ve been following these or been listening to me, the decline in the median sale price has been modest in the two to three or 4% range. I don’t recall it being the same year over year. And then the median sales price per square foot was down, however, to $219. That’s a drop. Pretty meaningful drop of 4.4% year over year. I see I have a call coming in, so I am going to take that. Jim, you’re on the air. How may I help?

Jim [00:06:48] Hi carl i appreciate that in the call i am in the process of opening up a yogurt shop ice cream shop. I purchased the franchise about two years ago. We’re battling with the city and have been for about eight months to get the permitting done and we’re ready almost ready to start uh… just waiting one thing for the city however we are now two years in this process and getting a little low on funds. I had waited to, and probably stupidly on my part, to take out the SBA loan because I didn’t want to be paying interest on something that hadn’t happened yet. But I’m low on funds now. One of the things, and I need about $200,000-300,000 to push me to the top. I gotta say one more thing about that. In my lease agreement, I do receive $350,000 back from the property company for a tenant improvement once we’re about to open.

Okay. Now, the caveat is, is our DTI has grown, our debt income, all this, my wife is working right now. I’m trying to get this up and going. One of the options we’re looking at is refinancing the house. Yeah, we have about two hundred and thirty four thousand left on a mortgage

Carl [00:08:13] Yes.

Jim [00:08:13] We bought it for $340,000. It’s now worth close to six or a little over six. I’m talking to my mortgage company, we could get it, pull roughly about $240,000 out by refinancing. Is this a smart move or am I going to see my family to poverty forever?

Carl [00:08:34] Well, first of all, you’re not going to go into poverty forever, but the fact that you’ve decided to go in to business for yourself means that you are at some level, a risk taker. You’re an entrepreneur and I salute you because the country wouldn’t be where we are economically if we didn’t have risk takers. So, congratulations on that.

Given the short-term nature, we hope of this because if I understand you once you get the approvals from the city. Then it’ll be a very short time before you open, is that correct?

Jim [00:09:08] Yes, all i need now in the structural engineer to verify the root can help handle the a c once i get that done hopefully this week rubber stand by the city but it’s been going on for seven months plus other delays, the loss of an in-law… We are now I’m going, ‘Okay i don’t have the money to open it up’

Carl [00:09:28] Yeah, I understand.

Well, I think using the equity in your home is a reasonable thing to do. I would talk with the lender about the nature of the refinancings. Because you expect this money coming back from the landlord, it may be that you won’t need to owe this money for a long period of time. And so whether or not, and I’m not in the lending business, whether or you’re refinancing into a variable rate mortgage or. You’re getting a home equity line of credit or home equity loan.

Jim [00:10:00] It was not, it was going to be a HELOC, we’re going to look at the refinancing, but that pushes a $340,000 mortgage, directly $600,000 mortgage just going, trying to alleviate my fears and those of my wife.

Carl [00:10:15] I think her fears are legitimate, but I think that that train has left the station. You’ve already made the decisions. You’re already into this. You do have equity. I don’t see any other reasonable place to go, and the risk obviously, as we all know, is that the yogurt shop doesn’t take off. It’s slow to grow, and you’ve got a higher, much higher mortgage expense, and You’re gonna have to. Refigure your monthly budget, but I don’t see that there’s a viable alternative And if I were in your shoes based on what you’ve told me this afternoon I would usually I would get the home equity line to credit if I review

Jim [00:10:56] Thank you so much. I really appreciate it. Have a great day.

Carl [00:10:58] You too. Good luck. You’re listening to Money Talk on KUT News and the 90.5 and on the KUT app. And oh, by the way, you can catch past shows at KUT.org slash Money Talk. And I have a call. I may be having a call coming in. I tell you what, we usually take a break about this time. So rather than wait for that call, I think what I’m going to do is take a break and come back. As I always say, it’s a great time for you to call or text. 512-921-5888. I’ll be back.

KUT Announcer Jimmy Maas [00:11:34] 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 [00:12:04] This is Money Talk with Carl Stewart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:12:18] Welcome back to Money Talk, I’m Carl Stewart 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 and we have a caller. Ian, you’re on the air, how may I help?

Ian [00:12:39] I asked this question, I texted in, I don’t know if you’ve answered it already, I wasn’t able to stick around for the answer, I have, I bought my house in 93, so it’s gone up a bunch in value in Austin here, and so I looked at, I’m single, so I only get the $250,000 capital gains exemption or deduction, so, I noticed when I did some reading that it said if you don’t make any money, if you dont exceed like $46,000 or $42,000 a year. You don’t have to pay capital gains tax. So I tried just, you know, with TurboTax, pretending that I made less than that and put in a big gain. And it said, oh yeah, you stole a hundred thousand dollars in taxes.

Carl [00:13:25] Well, I’m afraid, yeah, here’s the, I think, the point of confusion. When you go and look at the tax on capital gains, it says if you’re a single person and your income is zero to $48,350 this year, your tax rate is zero. But the fact is, you take that gain and you count that as income to determine what your capital is. So if you had. What would you estimate is your gain over and above the 250,000 Ian?

Ian [00:14:01] Like, 800,000? Yeah, so. 550,000.

Carl [00:14:06] Okay, so from over $533,400 this year, the capital gains rate is 20%. So you have a 20% tax liability, and sadly TurboTax is right.

Ian [00:14:21] I lost you.

Carl [00:14:23] Okay. Can you hear me? Can you hear me. Okay. Yeah. Okay, okay. The 20% tax rate applies to you for capital gains. Yeah, darn. Okay, thank you very much. You bet, you bet. Thanks for calling. Having to give bad news here on the air, you’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call with your questions or text me at 512-921-5888. I have one text today, it says, Carl, last week you mentioned exchange-traded funds for European or international index funds. What are they again, especially Fidelity? I don’t know which ones they are. What I do every week is I take four different exchange traded funds, so I’m not picking on one or selecting one custodian. I use for the total stock market, the Vanguard Total Stock Market ETF symbol feed VTI. For the S&P 500, I use the State Street Spiders SPY. For over the counter, I used the Fidelity. Nasdaq oh not over-the-counter. That’s an old term Nasdaqu. Oh No, oh in EQ and for the international as I mentioned to an earlier caller I use the VX us So all you would do is just go to morningstar.com or better than that since you said specific Specifically fidelity go to Fidelity’s website and pull down their exchange traded funds If they have a search function, I use Morningstar, but if it’s like Morningstar you can actually trim, all you just type in international index ETFs. Otherwise, they tend to break down all of their funds, the fund companies by category, and that’s what I would do. And if you’re at Fidelity, then you wanna check the expense ratio. If you have full flexibility, then I would compare and contrast that to VXUS. I believe that expense ratio is 0.05%. I’m doing that from memory, and good luck. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call me with your questions or text at 512-921-5888. Let’s just see. Where was I? I was pointing out that while… Median sales prices in the Austin residential market in July of 2025 were flat year over year. The median sales price per square foot was down considerably 4.4%. That’s at $219 per square of foot. And the total number of homes sold was up a bit. There were 2,868. That’s 2.2% up year over a year. But here’s a significant piece. Median days on the market. Or 65 days, and that’s up 25% year over year. I don’t know about you, but when I take a walk every morning in my neighborhood, I see some homes that I know have been on the market for a year. Supply of inventory, not surprisingly, is up. It is up 6.3% on a year over a year basis, another big number. Sold above the list price, 12.4%, that’s down 10% on year over your basis. And I think people are responding new listings, which were $3,693, are down a remarkable 25.5% from last month. You have to wonder if people, knowing that they can’t get the price they want, are not continuing to list their house.

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

Kevin [00:18:23] Hi, Carl. I called in a couple of months ago about my property tax thing about, Oh, yes. Yeah. Going up three times. Yeah. Yes. Yeah, so I finally got my appraisal review board thing, right? Yes. And I told them about my flooding, you know, that I have water coming in to my property from all four sides. And they were like, that’s interesting. What’s next? So they, you They have no qualms about that, but I was able to get my agricultural exemption back for the bees after that big thing, so basically whatever they’re charging me, it changes with the ag exemption, so I’ll be okay. You will be okay!

Carl [00:19:17] Okay, I really appreciate that. I’ve been wondering what happens. Thanks a lot for your call, I’ve really appreciate it. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. When you have a question, call or text 512-921-5888. I was looking at something today and this I think is a big deal and it doesn’t get a lot of coverage in the financial press. When you start thinking about. Your long-term financial plan, whether it’s to have a comfortable retirement or if it’s long- term because you wanna help pay for a college education for a child or a grandchild or you wanna leave a legacy and you look at returns in the stock market, for example, the data are all there, but what you actually experience can be very, very different and it’s really a function of when you start. And now if you’re saving through a 401k plan or regularly investing on your own, then that’s gonna help you as markets decline and you will have a chance to get lower prices. That’s a good thing. But I was looking here at an actual portfolio of a friend who started investing with a lump sum on November 15th of 2021. Those of you who follow the financial markets know that 2022 was a very challenging year. The S&P 500 was down over 19%, the NASDAQ over 33%, and the worst bond market I believe in 40 years was down, the Bloomberg Ag was down something like 13%. So these people happened to invest at just the wrong time, no fault of their own. And so I’m gonna share with you, I think some really interesting information, but I did get a text. By the way, call or text 512-921-5888. Is there a way to ascertain if an annuity company listed on BankRot.com is legitimate? I came across this company with an AM Best Rating of A- with 5.8% for 5 years for $100,000 or more. Is there an insurance that protects consumers like FDIC? For CDs. Insurance companies which offer insurance products in Texas is my understanding that they pay into a state-sponsored pool. And so in that way, it is comparable to the FDIC. And there’s a limit as to how much the insurance is. And when I have seen this actually happen many years ago, an insurance company failed. And the policyholders at that time. Uh… Were given a range of choices they could move to a new insurance company who bought up those policies or they could cash out uh… So if i were in your shoes i would do some homework around the tech i don’t know the name of the pool but the texas state pool that that is for insurance companies number one number two the way that an insurance company can offer you an attractive return. Like 5.8% for five years, is that they need to know that that money is going to be there. And so they’re likely going to give you something like a surrender charge if you take the money out too early. As you know, the interest will accumulate and it will not be taxable. And when you take it out, it will be taxible. And if you’re over 59 and a half, it’ll be income tax. And if your younger than 59 and half, when you’re taking it out it’ll be income tax plus a 10 percent penalty. So not only do you need to be concerned about the safety of the insurance company, but you also have to understand the tax consequences and the liquidity needs that you might have because they’re counting on you not taking the money out of five years. They’re putting the money into their bond portfolio and they need to make a profit. And they should be making a profit, you want them to be profitable and stable. So this is an attractive rate. You can get over 4% in a daily money, government money market fund. You can more than 5% in bond funds. Now if you’re comparing to CDs, bond funds go up and down in value. CDs obviously do not. So that’s what I think about. I’d be very cautious and you can start with the assumption that it’s a solid insurance company but what you really want to understand is what are the consequences when you take the money out.

Listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888 and by the way, you can catch past shows at kut.org slash Money Talk. Here we go. Camille, you’re on the air. How may I help?

Camille [00:24:40] Hi, I’m living in a home that’s owned by my mother, but it’s not her homestead. She has, you know, a separate home where she claims homested exemption for property tax. And I’m wondering, is there a way that we can claim that homestay exemption for myself? I’ve heard that there is, but I don’t know what to do to make that happen. Yeah.

Carl [00:25:04] Yeah, yeah, I’m surprised you can do that because you’re not the owner. I mean, you’re effectively a renter. And I don’t understand why a person, even though your mom owns it, I mean I don’t understand why you could get a homestead exemption when you rent. You couldn’t do that if you moved into an apartment, I don’t think. So I don’s think that’s correct. I’ve never run into this question in 30 plus years. Camille, you can go to our friends Google. And do that and see if you can get any answers. But that doesn’t seem logical to me that the taxing authority would give a renter, a person in a property she doesn’t own a homestead exemption. So I’m very skeptical that that’s the case, Camille.

Camille [00:25:49] Okay, I heard it had something to do with a living well or something where it would be claimed to be owned while she’s alive that it would go to me after she passes.

Carl [00:26:10] Well, that’s certainly very common, that that would be that you’re her heir, her beneficiary, and you would get it. But it seems to me that you would get two homestead exemptions. One for the home that she’s living in and owns, and the one that you are living in she’s owns. We have a lot of good smart listeners, and if we have a real estate expert who knows the answer to this, then I hope that they will contact us. But I’ve never encountered this, so again. I’m pretty skeptical. So thanks for calling and good luck. Oh, you’re listening to money talk on KUT news 90.5 and on the KUT app call or text five one two nine two one five eight eight eight Hi, Carl. Can you think of any reason not to be 100% in stock such as VTI? If the account isn’t a Roth or a traditional I presume that means traditional IRA and the money won’t be withdrawn in 15 to 20 years? Great question. The answer really is, if you took all of the emotion out of investing and you just put it in a total stock market index, and like Rip Van Winkle went to sleep for 20 years, would that be a reasonable investment strategy? And the answer is, You’ll note that large institutions, like the Employees Retirement System of Texas and the University of Texas Investment Management Company, do not do this. And they have an infinite life. They have other asset classes in there. So my life experience is that there will be long periods of time when stock market returns will be attractive, and then there will be long periods time when stock market return will be unattractive. And you have to have the patience to live through that. And there’s a whole area of academic study called behavioral finance, which says that as human beings, we experience a gain, a 10% gain as a 10 percent gain, and we experience 10% loss as a 20% loss. So if you are one of those rare individuals who can live through this and does not need to take money out in a downtime, Does that work in a purely academic, intellectual sense? The answer is yes. And as long as we’re talking about this, we may be entering a period of time of several years where international equities may outperform domestic equities. That has happened multiple times in my 47-year career. And so if I were gonna do what you’re doing, then I would take 25% and put it in. Since you mentioned the VTI, because I’m not making recommendations about specific securities. But you’re already talking about Vanguard, then it would make sense that you would put 25% in VXUS. And as Rimp Van Wick said, go back to sleep and wake up in 15 or 20 years and see how you did. 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 question. Hi, Carl. If I buy an investment property with funds from an IRA and the IRA holds the property as an investment, can I later buy the property from the IRA? When it comes out of the IRA, that’s a taxable event. So it seems to me you’d have to have the money from another place. I mean, you can’t, when you take that out of an IRA, that’s taxable. So you’re going to have an income tax liability when you’re take it out. You already own it. IRA stands for Individual Retirement Account. You’re gonna own it in the IRA and you’re gonna to own it outside the IRA. So I don’t see logically the need to purchase the property, but there will be substantial income tax liability, not capital gains, because presumably the investments in the IRA, the cash went in on a pre-tax basis. The growth in value has been on a tax deferred basis, and you would take it out as taxable income. So I think you pay income tax on the value, I’m not a CPA. You would pay income tax on the value of the property, the investment property, when you take it out of the IRA, but you still own it just like you did inside the IRA. That’s my best guess.

You’re listening to Money Talk on KUT News 90.5 and the KUT App, it’s time for me to take a break. It’s a perfect time for you to call or text 512-921-5888. I’ll be back.

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KUT Announcer Laurie Gallardo [00:31:54] This is Money Talk with Carl Stewart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:32:08] Welcome back. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. I’m Carl Stewart. We have lots of time left. If you have a question, call or text 512-921-5888. I have a follow-up text from the person who asked about the annuity. She said, thanks for your response, Carl, I am a retiree. And do not mind keeping the money for more than five years. That was in the annuity. I talked about liquidity issues. I can’t find any better rates anywhere without taking risks. This tax-deferred annuity would not be counted towards required minimum distribution calculations in the near future, correct? It would only be counted if you own this annuity in your IRA, if you owned this annnity and it’s with your own after-tax dollars. Then when you take the money out, it’ll be taxed as income. But your required minimum distribution is determined by the custodian with the bank or credit union, savings loan, mutual fund company. They get the value of your account, the value your investment at the end of the calendar year and within the first few days of January, they calculate based on your date of birth, they calculate the required minimum of distribution. So unless you had that annuity inside, the IRA, there would be no calculation for the RMD. Thanks for the follow-up. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call me with your questions or text at 512-921-5888. And if you’d like to listen to this broadcast again, and after all, who wouldn’t? Or if you have friends or colleagues who you think would enjoy the broadcast. Then they can go to pastshows at kut.org slash money talk. Here comes a call. You’re on the air, how may I help?

Gavino [00:34:13] Yes, my name is Gavino and I live in East Austin and I’m looking at selling my home for $800,000. I’m 70 years old and I only make $18,000 a year. So my question is, What tax liabilities am I facing?

Carl [00:34:31] Of course. Are you a single taxpayer or married filing jointly, sir? Single. Okay. So what happens is the $800,000 gets added to your other income to determine what the tax is. The first $250,000 of profit or gain, the first 250,000 no taxes. The rest of it will be taxed at 20%. What did you, what did you pay for the house, Gavino?

Gavino [00:35:05] I inherited the house my grandma paid two thousand for it we’re talking about East Boston for all this right I wonder properties have died rocketing right

Carl [00:35:14] Right. I wonder what the value was when your grandma died, because that’s your cost basis, you see. Not what she paid for it, but the value that when she died, that house had a certain value. That becomes your cost bases, Covino’s cost bases. So I’ll just give you an example. Let’s suppose when she die, it was worth $200,000. Now you sell it for $800,000, Okay, there’s a gain there of $600,000. You add that 600, the gain of$ 600,000, you get to subtract $250,000 from that. You don’t have to pay taxes, okay? And then the remaining $550,000 or whatever the amount is goes, gets added to your income to determine what the tax rate is. You do not pay what is called income tax like you do now if you pay income tax. You pay something called a capital gains tax and it can be either 15% or 20%, depending on the total gain. You take your income from Social Security or work or whatever, you add the gain on the price of the house, take away the 650 from the price of the the house. And what’s left? If what’s less than 533,000, you pay 15% tax. If it’s over 533 thousand, you pay 20% tax This is a big deal and you want to get professional help. You want to an accountant, preferably a CPA, but not necessarily, you want to get an accountant to help you with this because the last thing you want to do is get in trouble with the IRS.

Gavino [00:36:55] Okay, one last question. I also understand that if I buy additional property within a certain time frame, I’m immune from this tax rate.

Carl [00:37:05] That’s not my understanding. I believe it was that way once upon a time. I do not believe that’s the case. So I would really check into that if I were you.

Gavino [00:37:16] Okay, well I just want to thank you and commend you on your knowledge of this issue and the public service that it is to us and being able to call you.

Carl [00:37:26] You’re very welcome. Thanks for the call. That means a great deal to me. You’re listening, I love this show. You’re listen to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here comes a call. Josh, you’re on the air. How may I help?

Josh [00:37:50] Hey, Carl. Hope you’re having a great day so far. I am, thanks. Thanks for taking my call. You bet. I’m curious what you might recommend for someone under the age of 40 with a high risk tolerance when it comes to the quantity of bonds in my overall portfolio.

Carl [00:38:04] I like about 20% and I like them in three different categories. I’m going to use somewhat of the Morningstar categories. I’m gonna have a short-term bond fund, preferably investment grade, not high yield, short- term bond fund. And then I’m gong to have what Morningstar calls a core fund, which is an intermediate bond fund and then I am going to have a what Morningster calls a multi-sector bond fun. That being a high-risk investor, you’re gonna really enjoy, because it can go anywhere, anywhere in the world, and any maturity. And so if interest, the reason I like it this way, Josh, is interest rates are gonna change. If interest rates go up, this intermediate one will go down, but the short-term one will up because the yield will go up. On the other hand, if interest rates fall, the short term one will down in yield, But the other two will go up in price in a falling interest rate environment, so I spread it among those three and I feel like maybe 20% would be a reasonable thing.

Josh [00:39:11] And do those funds include a blend of international and domestic funds?

Carl [00:39:18] Those are domestic with the exception of the multi-sector, but the multi sector may well hedge their currency risk so that it’s not really a currency risk. I like international for equities a lot. I’ve been wrong for years that domestic has outperformed, but I really like international equities. I’m much more interested in bonds as an instrument for total return. I don’t buy bonds for income. I buy them for total returns. And for their low correlation to equities. 2022 was an outlier when everything went down in bonds and stocks. But by and large, if you look at the correlation between, say, large cap U.S. Stocks and high grade corporate bonds, it’s down to about zero, it’s about 0.4, whereas high yield bonds are about 0,84. And you want to avoid high yield bond, you might as well buy stocks, because in a bear market for stocks. High yield bonds will go down just like stocks. That’s my view.

Josh [00:40:18] Amazing. Thank you, Carl. I appreciate the input.

Carl [00:40:20] You bet, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text me at 512-921-5888. Let’s see here, okay. Please don’t say my name, okay?

KUT Announcer Laurie Gallardo [00:40:40] You’ve been listening to Money Talk with Carl Stewart. Carl Stewart is an Investment Advisor representative of Stewart Investment Advisors. And this is KUT and KUT HD1 Austin.

Carl [00:40:56] Hello. Well, I don’t know what that was. Okay, let’s see. It says, please don’t save my name, okay? If one spouse gets a credit card in their name only and runs up debt and takes out a personal loan for more debt, is the other spouse responsible for the debt should they divorce? What of that debt was never disclosed to the other spouse? Well, that’s a tough question. I’m not gonna say your name. I think that’s the legal question, and I don’t wanna speculate, because I’m a not a lawyer. I think you really want to go to, the euphemism is family law. You want to a lawyer that says she’s in family law and ask that question of whose liability. Because if you’re married, I know you’re married finally and jointly for your income tax. So I’m concerned that the credit card company might come after you for that debt. But I don’t know that for a fact unless we have a divorce attorney listening. That can get to us in the next 10 minutes or so. I don’t know the answer for sure, but it’s too big a deal to speculate. If I were you, what I would do is I would get an expert. Thank you. 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. Carl, this is Mary. I have the bulk of my money in a non-interest bearing bank account. A friend recommending transferring it to Schwab interest bearing account. Your thoughts? I think what I’m going to tell you about you can do at Schwab, but you can do it at Vanguard, you can it at Fidelity. What you want to get is a money market fund. A money market funds is not a money-market account. A money- market account you would get at a bank. A money market fund is a mutual fund, but it doesn’t invest in stocks. It doesn’t investment in bonds either, except short-term securities of a year or less. You have day-in, day-out liquidity, there are three kinds, government or treasury, I beg your pardon, treasury, government, or prime, treasuries only by U.S. Treasurys, Government by U.S. Treasuries and and government agencies, primarily Fannie Mae and Freddie Mac mortgages. The prime buys high-grade corporate debt. I like the middle one, government, and so all of those entities offer government money market funds. You will get whatever short-term interest rates for paying minus the expenses. Right now, it’s over 4%. They keep the share price at $1 a share. In my 47 years, there was only one failure of a money market fund that I knew of called the Reserve Fund. And that was during the global financial crisis and they had Lehman Brothers’ debt and they have no sponsor, whereas Schwab or Fidelity or Vanguard or Bank of America or anybody else would come in and support their money market fund because it would be too big of a reputational risk in my view to do otherwise. So that’s what you should do if I were in your shoes.

You’re listening to Money Talk on KUT News 90.5 and the KUT app. Here we go. Clark, you’re on the air. How may I help?

Clark [00:44:24] I was just catching the end of one of your answers to a caller a little bit ago about capital gains tax. And he suggested that he could save the tax by just buying another house. I’m a real estate agent. I’ve dealt with this quite a few times. I believe that what he’s talking about is a 1031 exchange.

Carl [00:44:44] Yeah, I think he’s talking about that old law that you had 18 months after you sold your principal residence to roll it into another house. I think that’s what he was talking about, Clark. And I believe that that’s no longer allowed or no longer the case in my understanding.

Clark [00:45:01] Okay, yeah, that makes sense. I thought maybe he’s talking about a 1031 exchange, but it’s not as simple as just going and buying another house.

Carl [00:45:07] Buy another house. That’s for sure.

Clark [00:45:09] There has been something, there has been something called a reverse 1031 exchange. I think it’s still around and that’s where you can buy the house, you know, sell the house, sell property, buy it, and then buy another one and apply it in that regard. But one thing I would always recommend is working with a 1031 facilitator, not trying to handle it yourself. Yeah. And there are good companies out there that handle that for a pretty reasonable fee.

Carl [00:45:32] Good, great, thanks for calling and thanks for your advice. You’re listening to Money Talk on KUT News 90.5 and on the KUT app, call or text 512-921-5888. Hi Carl, looking for some financial advice regarding relocation best practices. I plan to move out of Texas when I retire in the next year or so. I own my home outright and have been saving for a hefty down payment. Would you recommend selling first and moving and renting or purchasing? Or purchasing my new house first and then selling my Texas home? I can tell you I have a strong view on this. I would sell the house here first and I would move and I will rent. And I tell you that my spouse and I, my wife of 55 years and I moved to Austin. We’d never been here before and we bought a house. Lovely home. Raised our kids there, but both of us looking back know that we should have rented till we really understood the city We had to understand traffic patterns. My real estate agent told me it was 10 minutes to the office It was 45 minutes to be office. Thank you very much And so I think selling it first the last thing you want to do is have the house here It’s not sold you’re living out of state and now you’ve got a renter which would be just a horrible mess, because you’re not around, or the house just sits there and deteriorates. I just visited with people, my daughter Lindsay, colleague and I visited with people today where they moved across the country but left a house in beautiful island in the state of Washington, and they rented it and they got their rent checks on time and didn’t realize that the renters had dogs in the house chewing up all the woodwork, had people living in the garage. I mean, it was just a nightmare. Now they want to sell it. And they’ve got to put a bunch of money in to rehabilitate it. So don’t leave Texas until you sell that house. Move to where you’re going to move, and get used to traffic patterns and your new life. And who knows? You might want to know where the library is, or you might want know where, if you’re a church-going person, where the church or the synagogue or the cathedral is. And there’s all kinds of things that I would, if I were in your shoes, that’s exactly what I would do. Great question. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Hi Carl, my 401K at my job offers a Roth IRA option, but I already have a Roth IRA account with Vanguard. Is there any added benefit to investing in a Roth through my 401k? Is the max annual contribution the same? I turned 50 this year, so it’s about 8,000 for me this year. The answer is yes. These are relatively new. Here to four. When you put money as an employee in a 401K, it was tax deductible when you put it in, the employer’s contribution is tax deductable, it grows on a tax deferred basis, and when you take it out, provide you over 59 and a half, it’s taxable income. As long as you work there, you can work to pass the required minimum distribution age if you want and not be subject to the RMD, but when you stop working there, you’re subject to RMD. Depending on your employer, You can leave it there, or you can move it to an IRA rollover. But if you do the Roth, as I just said, my understanding is the employer’s contribution is pre-tax, but your contribution is after tax. And I would tell you this, there’s a lot to be said for being able to retire and not have a required minimum distribution on some of your money, and to be able to take it out on a tax-free basis whenever you want. I have learned over my 47 years of doing this that a lot of people, if they’re good savers and investors, when they retire, they don’t necessarily fall into a sharply lower tax bracket and they don t necessarily want all the money that they’re required to take out. So if that fits your situation, then the flexibility of not having the required minimum distribution and the ability to take it out tax free. If you’re married and you predecease your spouse, she or he gets that. And then if they don’t spend it, then because they don’t have a required minimum distribution, it goes to their beneficiary, and they have 10 years to take it out tax free. I think that’s a pretty attractive deal. Now if you tell me you’re gonna fall from the 37% bracket to the 22% bracket when you retire, you can just forget what I said, because that’s called a tax arbitrage and you’d be better off. To not do the Roth 401k. But I think based on what you told me, a Roth 401K sounds like a good idea. Hi Carl, thanks for your input and expertise. What data points do I need to consider when evaluating a Roth conversion versus yearly IRA distributions? I am 66 years old.

Well, I am running out of time. That is a great question. I hope that you are a regular listener to Money Talk because I will answer that question next time. I want to thank Corrine for helping me this afternoon.

Thank you for listening and remind you as always next Saturday after the news, be sure and tune in to Money Talk.

KUT Announcer Laurie Gallardo [00:51:11] You’ve been listening to Money Talk with Carl Stewart. Carl Stewart is an Investment Advisor representative of Stewart 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.