Money Talk with Carl Stuart

Carl Stuart dives into several questions from calls and texts, including Roth IRA conversions, dividend reinvestment, asset allocation, mortgage rates, retirement savings, and gifting money.

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 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] Welcome to Money Talk, I’m Carl Stuart, and you’re listening to KUT News 90.5 and the KUT App. If you’re a new listener, Money Talk – I’ve been doing this for over 30 years – 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 at the beginning of the hour, giving Give me ample time. To do my best to answer your questions. You will hear the text coming in, just like you did just then. I take today’s calls first, and then today’s texts, and then any texts from previous broadcasts that I haven’t had the opportunity to answer. So again, 512-921-5888. I heard that bang, but I don’t see the text. So I’m gonna go back to this one. Here we go, just a second, sorry. Let me give you that number again. Here we go. Hi Carl. 512-921-5888. Hi Carl, thanks for your input and expertise. You’re welcome. What data points do I need to consider when evaluating a Roth conversion versus yearly IRA distributions? I am 66 years old. That is an excellent question. So, for everybody else… If you have an IRA and you contributed to that with pre-tax or tax deductible contributions and it grew in value, when you take that out, you pay income tax on it. You’re also subject to something called the required minimum distribution. It goes up every year. Right now I believe it’s 73, so if you turn 73 this year, your custodian, your Bank, Credit Union, Charles Schwab, Vanguard, whoever, will tell you… Early in January, probably the first few business days of January, what your required minimum distribution or RMD is for this year because it’s based on the value at the end of last year. So they know the value of your portfolio, your IRA, and you have the rest of the year to take it out. That’s income taxable because you didn’t pay any tax on the contribution and you didn’t any tax on the growth in value. A Roth IRA subject to income limitations, just like a tax-deductible IRA, you can put after-tax money in a Roth IRA and grows without taxation, provided it’s in there for five years from your initial contribution and you’re over 59 and a half years old when you take it out, there’s no income tax on it, ever. And, importantly, there’s no required minimum distribution. So when deciding whether you should put money from a pre-tax IRA. Into a Roth IRA, which is called a conversion. There are several things to consider. Some of them are just pure numbers, and some of them are kind of a financial planning beyond that. So what I have observed over my 47-year career is that a lot of people who are good savers and investors do not fall into a lower marginal income tax bracket when they retire, or very little. They may go from 24% to 22%. Secondly, there are people who see the required minimum distribution but don’t really want it. They have a pension or the other means of social security, other means, of income. They don’t want it but they have to take it. And there are are people that believe during their working years that they’re not going to be in the lower bracket and they want that flexibility and they’re prepared to pay the taxes today. So when you consider doing a conversion. One of the things you want to watch out for since you’re only 66 years old and you have time to do this is to not throw yourself into a higher income tax bracket. So let’s suppose that you are married finally jointly. Using 2025 tax rates, if you were married finally jointly, you are in the 22% marginal bracket once your income exceeds $996,950. But not $206,700. The next bracket up is 24%. That goes from 206 to 394, but the next one is a big jump. Once you have over 394 600 of taxable income, everything above that up to 500,000 is taxed at 32%. So if you’re going to do a conversion, you want to think about not getting into a substantially higher tax bracket. I think that’s always a good idea. The other thing frankly is if you’re married, your spouse is your beneficiary, and if, let’s say you’re a male, if she gets the Roth and does not spend it down, then your kids or whoever that beneficiary is get the Roth IRA, it’s called a beneficiary IRA, and they have 10 years to take the money out, also tax-free. So from a financial planning standpoint, if you are in this wonderful position where you’re not gonna need all the money, you’d like the flexibility of no required minimum distribution and you like the idea of your beneficiaries having the opportunity to take it out tax-free then a Roth IRA conversion is a very interesting idea. I’m not sure you can justify it purely on the numbers if you were going to take it at yourself the Roth IRA but if those other considerations are significantly important to you then it’s worth your consideration. Thanks. 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. And by the way, you can listen to past shows by going to kut.org slash money talk. Here is a text today. Hi Carl, I heard you say you favorite dividend reinvestment, I believe you said this is in reference to exchange traded funds. If that is indeed what you said, does that apply to EDFs, regardless of the type of the account in which they’re purchased? Either retirement account, IRA, or outside, such as an account in a brokerage account. By the way, I really loved your show. Thanks, wish I had known about it before you moved over to KUT. Well, I’m glad you’re listening to me now. I’ve already learned so much. Thank you so much.” I like the reinvestment of dividends, and if it’s not an exchange-traded fund, the kitchen. Actively manage say equity fund and they pay capital gains I like reinvesting those because it just compounds that you cut you have more shares and As it grows over time it helps compound the growth So while I like that for exchange traded funds I like it for all funds whether they’re traditional 40 act mutual funds or whether they are exchange traded Funds whether they were in a tax-deferred environment like like an IRA or whether there in your own individual taxable or brokerage account. The other thing, by doing it in your taxable or brokeraged account, you open yourself up to the opportunity of doing some tax law selling to help you. Let me just give you an example. Let’s suppose that you have some actively managed stock and bond funds, as well as passive exchange traded funds, and there’s a year in which the stock funds pay a capital gain. And you look at your bond funds and even though your bond funds are worth more than what you paid for them, because they pay a substantially higher dividend typically than stock funds, you may have what’s called an adjusted cost basis where your cost basis for tax purposes is not what you originally invested, but it’s what you invested plus the reinvested dividends and capital gains, which allows you to sell that bond fund and book the capital loss. Go to a similar but not the same bond fund to avoid something called the wash sale. Now you have that loss which can help offset the realized capital gains from your actively managed stock funds. At the end of 31 days you can trade out of that bond fund back into the one that you liked in the first place. So I really like the flexibility that’s provided when you do reinvest dividends in capital gains. 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. Okay, here’s another text. Let’s see. Vanguard Wealth Advisor recommended allocation from 60-40 stock to bond to 37 stock to buy due to high stock valuations. Any comments? Yeah, I disagree with that. First of all, certainly I’ll agree that high stock valuation, there’s no question about that. But if you’re a long-term investor and you ought to be, if this is what you’re doing, that’s a tactical switch. And my life experience having done this for 47 years, as I like to say, my two best teachers have been trial and error. Good things in the stock market last longer than you ever think they will. And bad things in this stock market always last longer then you think they would. If you have a 70-30 allocation, which is a relatively aggressive allocation. And you’ve had good returns in the stock market. So now you don’t have 70-30 if you haven’t been rebalancing. I’d rebalance back to the 70. And if you really wanna take some risk off the table, go to 60. But the fact is, if the stock markets declines, you don’t know when to get back in. I mean, a bear market might go from March of 2000 until September of 2001. On the other hand, COVID hit. The stock market collapsed in March of 2020, and then did a complete U-turn and went back up. And even this year, when President Trump announced the tariffs in April of 2025, stock market dropped 20%, and then it did a U-Turn and went right back up, you do not know the duration of a bear market, nor do you know the depth of the bear market. So I don’t like market timing, I do like asset allocation, I think it’s the single biggest. Determine the risk you’re taking in the return. So if you’ve been 70-30 for some time, the odds are you have more than 70 in your stock allocation. Selling some of that and balancing it back to your target allocation would make a lot of sense in my opinion. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here is another new text. Hi, Carl, would you talk about how possible interest rates dropped by the Fed might affect mortgage interest rates, please? Thanks. You bet I will. That’s a really important question because the Fed controls the Fed funds rate, the overnight rate that they pay banks, and the Fed can lower short-term interest rates and certainly global investors think that’s what’s going to happen after Chairman Powell’s in Wyoming. This week, but that doesn’t necessarily affect mortgage rates. Mortgage rates are determined by longer-term interest rates, mainly the 10-year Treasury. So if and when the Fed lowers interest rates you’ll have to watch and see if interest rates across the yield curve decline. That’s a technical term. What I mean by the yield-curve is if you picture interest rates and you think about that x-axis or the horizontal axis with the left-hand corner being six months and the right hand being 30 years, and you track, you put a dot for the six, 12, 18, 24 month, et cetera, all the way out. That curve should go from the lower left to the upper right. But it may change depending on what global investors think about a number of things. One of them would be the outlook for inflation in the United States. Another one would be our fiscal policy where we continue to add trillions of dollars to our debt. So it’s plausible that the Fed will lower interest rates this year and longer term interest rates will fall as well. That would be a good thing if you’re looking to make a mortgage to borrow money, but it’s not guaranteed. So I would say we could have what’s called a steepening yield curve where short term rates go down, but longer term rates do not necessarily go down. So there’s a relationship, but its not a one to one or locked in relationship. You’ll just have to stay tuned. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here is another text. Hi Carl, Bear from Smithville. I am 40 and putting 20% of every paycheck into a pre-tax IRA because I was advised by my father that I will pay less taxes once I am of the age to retire. Versus paying tax now. Can you advise me which one would be a smarter move for a man in my position? I am married, my wife is not putting money back for retirement, but I own two houses. Well, when I started in this profession in 1978, the absolute accepted facts were the ones that your grandfather had, which is, you work during your working lifetime, you’re in one tax bracket. And when you retire, you’re in a lower tax bracket. I just can tell you my life experience, that is not necessarily the case. I would tell you the best way to do this, the most objective way to this is just Google the irs.gov income tax rates and you’re married, so you’re finally married jointly. Look at what your income is now, okay? And then look at what you hope and anticipate. Will be your income in retirement, a combination of social security, if you’re going to be in a 401K, a 403B, or a pension, and also making investments in your IRA. And if it turns out that you’re gonna fall into a lower bracket, then I would agree with your grandfather. On the other hand, that may not be the case. And let me just give you an example. Married finally jointly this year, if your taxable income is over $23,850, but less than $96,950, everything over that $23000 is taxed to 12%. But there’s a big jump if it goes over $96950. All the way up to $206,000, you jump from the 12% to the 22% bracket on the amount over $9600. So I would think about that very carefully. Because you’re a young person and you have to look at what you think will be the case at the time of your retirement, then I think that’s a more logical way to look at it. Good luck. You’re listening to Money Talk on KUT News 90.5 and then on the KUT app. Call or text, pardon me, 512-921-5888 and you can catch our past shows at kut.org slash Money Talk. Okay. So let’s see, we don’t have any other text today, so let me just go to this one. When I am named as a POD, which I suspect is like a TOD, transfer on death account, should I transfer the funds into that account to an estate account when the original owner dies so that I will avoid the tax hit from receiving those funds as income? Or does the transfer of funds from an account versus pay-on-death designation count differently than ordinary income? Okay in a related question as an executor of an estate in which there is a home Should the home stay in possession of the estate if that’s even legal until such time as the house is sold. Thank you You’re awesome. Thank You. Okay, so here’s my understanding Of course I always say I’m not a CPA if you are named as a POD on the account and the other person dies It’s your account. I’m unaware of any reason that you would transfer that to an estate account. That whole idea behind a POD or a TOD account is that it passes outside probate and you are on the account with the other person. The executor or you would deliver the death certificate to the custodian, whoever has the account, and the account would become yours and the other persons name would be taken off. So I don’t see reason to move it into an estate account at all. Just the transfer of the account, you talk about receiving those funds as income. You won’t receive them as income if they’re in stocks or bonds and they’ve appreciated in value, what’s going to happen is you’re going to get a wonderful tax break, you’re going to step up in basis, and what that means is that you’ll have a new higher cost basis have been appreciated and there’s no income to you. I hear the music in the background, but I’m going to finish answering this question, because you say in a related question, as an executor of the estate in which there’s a home, should the home stay in possession of the state? I don’t think that that’s legal, and I see no reason for it to do it. It should go to whoever the will says the house goes to, and just like I said before, the praise value of the house is the new cost basis for the person who’s received that. Thanks for the text. Now it’s time for me to take a break and a great time for you to call or text 512-921-5888, I’ll be back.

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KUT Announcer Laurie Gallardo [00:19:13] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:19:27] Welcome back. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. When you have a financial or investment plan in question, call or text 512-921-5888. Okay, here’s the text. If I have saved a substantial amount of my after-tax retirement savings brokerage account in a large cap mutual fund, is it worth shifting that money over to comparable large cap ETF fund if I still have a 20-year time horizon for saving from my retirement? I would say the answer is probably. If you’ve had it for a long time. You probably have some embedded capital gains, as I was answering the question earlier. I hope that you have been reinvesting those dividends and capital gains. So the first thing you wanna do is look at your brokerage statement. Usually there’s two columns, the amount in three actually, the amount invested column, the market value column, but the adjusted cost basis because you’ve reinvested dividends and cap gains. That will tell you the difference between that adjusted cost basis and the market value will be what your gain is and then to calculate your long-term capital gain so you’ll know what the cost of this is is you add that gain to your regular income and then you find out what capital gains rate is so if you’re married filing jointly and your income plus that gain. Is over $96,700 this year, but less than $600,000 at $50 this year. You’re gonna pay 15% tax on the gain, not on the sale amount, but on the game. If, on the other hand, you add that gain to your income, it’s over $533,000, that bumps you to 20%. If that were the case, and I decided I wanted to move to the ETF, I would do it not in one calendar year. There’s no rush, so you would do it over a period of time to stay in that 15% tax bracket if you are in that bracket altogether. If you’re in the higher bracket, 20%, then it really doesn’t matter. You can go ahead and sell all of it. Now, is it better to be in the ETF? Okay, let’s talk about that. The benefits of an exchange-traded fund to an individual investor in a brokerage account as opposed to a tax-deferred account like an IRA or a Roth IRA. Is that they are very tax-efficient in that they don’t distribute capital gains. I mean this is not a guarantee, but that is their plan and so far the ones that I’m familiar with they have delivered on that. The second thing is that their expense ratios are less. So that means you keep more of the gain over the years. So I would say the benefits of active management I think are worth it in bonds and I like actively manage bond funds. I think if they’re stock funds, I like the bulk of the stock fund allocation and exchange traded funds. I do like actively managed equity funds for small portions because I have learned and observed over my career that some managers will outperform in bull markets their index and some will out perform in bear markets by going down less. So I like that what I call maybe a core and satellite where you have the majority in an exchange-rated equity fund or funds. And some small portions 5% or less than those other kinds, maybe two or three of those. So you’re gonna have to decide your opportunity cost, is it worth taking the tax liability and paying the tax to get into a more tax-efficient, lower-cost strategy? I can’t answer that for you, but if you come to the conclusion that it is, then as long as you don’t throw yourself into a substantially higher capital gains bracket, that seems like a reasonable thing to do. You’re listening to Money Talk where nobody wants to call on the telephone. Listen to Money talk on KUT news, 90.5 and on the KUT app. Call or text at 512-921-5888 and listen to previous broadcasts by going to kut.org slash money talk. Here we go. Hi, Carl. We have a nine month old. Congratulations. And he recently inherited $10,000 from my grandma. I was wonderfully generous, who passed. Do you have a suggestion on how to wisely invest it? I was thinking some mix of education, savings account, and maybe a target retirement amount. I, those are not my first choice. You have such a long horizon. 529 college savings plans are a wonderful thing. And they were invented because people were showing up when their kids were 18 going, holy moly, I can’t afford to pay for college. And now our child’s gonna have to take out a pile of student debt. So starting early like this is a great idea. However, there’s less, not a lot of flexibility in those 529 plans because they’re issued primarily by states and they They have a business relationship with Vanguard or Fidelity or JP Morgan or American Funds or T. Rowe Price or whoever. And so that’s their menu. You can’t go to a Chinese restaurant and order Mexican food. What I like, and I just like better putting that money in an exchange traded stock funds. There’s your child’s so young, I’d put 75% in the exchange traded U.S. Total stock market fund. And 25% in a total US, ex-US, international fund, reinvest the dividends, not gonna be any capital gains, and you do not know today what purpose you may want that money for. After all, it’s possible that your child will be a brilliant student and get an academic scholarship. Or she or he, I think you said, you said nine-month-old, she or she. May be a great athlete or a great musician or a dancer. So you want maximum flexibility with that money. Put it in there, leave it alone, it’s gonna go down, it’s going to go up, do not worry about that. And to the extent that you and your husband can do this, then what you should do, or you and you wife, I guess I can’t tell your gender from your text, add to it, get a regular savings, just like you would do for a 401k. Sign up with the mutual fund company and have them deduct or take from your savings account or your checking account a modest amount every month and then as your income grows add to that and you will be really pleased what you have 18 years from now so good luck. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921. Five eight eight eight. Okay. I heard some more text coming in. So let’s see where we are now Hi, carl. I have a three hundred thousand dollars in a high yield savings And want to invest sixty percent into index funds. Should I wait for a market drop to do so? I am interested in long-term gains. I am 41 years old No I wouldn’t put it all in at once There’s a risk called the sequence of returns. If you put it all in and it turns out to be 2022, the S&P drops 19% and the NASDAQ 33%. No, you’re not gonna like that. If it turns to be 2023 or 2024, it goes up 20 plus percent. Take that 60%, which is $180,000. $20,000 every month. I said this is 60 times 3, 180. For the next nine months, pick a day of the month and put $20 thousand every month into two index funds. There’s one I just said, and I’m not recommending a specific one from Fidelity or Vanguard or Schwab or anybody else. A total stock market, US stock market and a total international. And take your time to get in. That is exactly what I would do. And good luck. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. I have a caller, I don’t have this person’s name, so. Hi you’re on the air, how may I help?

Caller [00:28:31] Account thank you i appreciate you uh… Couple of months ago and i was the first time caller and gave me some advice about putting the money into a stock market i didn’t do that i’m a nervous now i but uh…

Carl [00:28:46] From now on when you call in, just tell the producer your name is Nervous Nellie and I don’t know who you are.

Caller [00:28:53] Okay, thank you, and so I have you know several hundred thousands of dollars and all these CDs that I’m getting a really good return on Right and so all of the interest covers my big for the month Is there any reason that I can’t just leave it safely sitting there where I can look at it? And my daughter calls it my looking at money and just live off the interest since it covers my expenses

Carl [00:29:17] No reason whatsoever except that the interest rates are going to go down and then what are you going to do when you have less income?

Caller [00:29:25] Well, I already have a plan for that.

Carl [00:29:29] Okay okay so i’m gonna i’m i’m going to i’m going to answer your question but for everybody else who’s not nervous nelly there’s all kinds of historical data that cds are not an investment because after taxes and after inflation they have a negative return that’s what we call a real return so i can tell you back in the 70s when CDs paid 10%. Inflation was 13% and people were losing money while they thought they were doing great. So the best way for you to do is to have a CD ladder where you never have the same, you never had the same maturities, right? So you have a six month, a 12 month, an 18 month, the 24 month, et cetera. Because if you stagger the maturities and you don’t spend the principal, every six months a CD comes due. And that CD that was due in 30 months is now only 24 months, you take the proceeds from that CD and you go buy a 30 month CD. In this way, you will reduce the risk of interest rate fluctuation. You can’t eliminate it, but you will have less fluctuation in income rather than having all your money is six months or 12 months. So a CD ladder for someone who’s in reverse Nellie is exactly what I would do if I were in your shoes.

Caller [00:30:47] Well, that’s perfect because that’s what I’ve done. Oh, good! I’ve gone 6, 9, 12, and 24.

Carl [00:30:55] You need to extend further, you need to extend further because rates are going to come down. I don’t know when, maybe real soon, as soon as September, next month they may start lowering rates. So when that next CD matures, extend the maturity further out.

Caller [00:31:13] All right. Well, thank you very much. I do appreciate you and your show.

Carl [00:31:17] 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. Patrick, you’re on the air. How may I help? I just hit the wrong button. Patrick be sure and call back. I think I saw your name on there and I thought I hit the phone but it looks like I made a mistake. Give me a call again, I’m sorry. 512-921-5888, it’s live radio folks, here we go. Carl, they say to invest 10% of your income, is that realistic for those of us earning under $60,000? No, no it’s not. It’s a good rule, but you can’t do that. So here’s what I would do. Most of us, and you may be the unique person, Most of us don’t really know where all of our money goes. The only way you’re gonna be able to save money is have an absolute understanding of your expenses. So, what you wanna do, I think the simplest thing is to write down, well first of all, get a cash receipt, even if you use a charge card or cash, get a receipt for every expenditure and at the end of the week or end of two weeks, sit down and put those expenditures into categories, groceries, gasoline, whatever it is, rent, and look at that because sometimes people tell me when they do that, they go, wait a minute, I didn’t recognize I was spending that money, that much on that. There’s your first opportunity. There’s you first opportunity to start putting some money away. And that’s what I would do if I were you, because it’s not comp- it’s just not- something you’re going to do when you earn under $60,000, so good luck to you. You’re listening to Money Talk on KUT News 90.5 and the KUT app, and Patrick this time I’m going to answer the phone properly. Patrick you’re on the air, how may I help?

Patrick [00:33:25] Second time’s a charm.

Carl [00:33:27] Um…

Patrick [00:33:28] That’s right so my my thought was um i am 63 now planning to retire vaguely 65 to 66 i’ve got a business i need to sell off so it may take me up to a year to do that whether it’s at home or in parts but um i’m thinking of going abroad for my retirement but um my question was that I heard that you can only be overseas for six months, drawing Social Security, and then you have to come back for a month, and then, you can leave again for six month. So, my question is, is that true? And I know that all the rules for Social Security are likely to be changing in the next few years, so I’m just wondering what my foothold is on any of this.

Carl [00:34:25] Well, congratulations with over for over 30 years on the on the year. No one’s ever asked me that I don’t I know some people who are permanent residents in Paris. I had talked to a person recently who’s moving to Thailand, but he’s in his 40s is going to work remote. I know there’s a question about taxation of of your income when you’re abroad. I will tell you this, I will make a note of this, Patrick, because I don’t want to say something. Social Security is arguably, in the world of financial and investment planning, the most complex and confusing of anything that I have to deal with. You know, I don’t want to tell you something just and be mistaken. So the answer is I have not heard that, but I haven’t heard the opposite either. So I will look into that this week and I will answer your question next Saturday, okay? Thanks for calling. Thank you. You bet. Bye. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. I think we’ve got some calls coming in rather than get in the middle of the call and have a time to take a break. I’m gonna do that now. So it’s a good time for you to call or text 512-921-5888. Stick around. I’ll be back.

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KUT Announcer Laurie Gallardo [00:36:27] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:36:41] Welcome back to Money Talk. I’m Carl Stuart, and you’re listening to KUT News 90.5 and on the KUT app. And I don’t ever do advertising for any other entity, but I had to tell you, I went to the ATF Explained event. It was a lot of fun, and my spouse and I are gonna go to this next one. I think you’d enjoy it as well. Now, call or text, 512-921-5888. Lisa, you’re on the air, how may I help?

Lisa [00:37:11] Hi thank you for taking my call you guys had a question uh… Couple years ago i loaned my daughter and then thirty thousand dollars to put down on the house that was pat i already had been taxed on that money atlanta so she’s telling her happen she’s going to give that money back to me Is that? Does that, do I have to pay taxes on that again if she just gives it back to me or does it increase my taxes for my income for that year or what?

Carl [00:37:45] No, it doesn’t. You made a gift to her, so she didn’t pay taxes on that. Again, I’m not a CPA. She’s making a gift for you, and you don’t pay tax as a recipient of the gift. I don’t think this is going to keep you up nights, but we’re all walking around with a exclusion and next year our state would have to exceed $15 million if we were single and 30 million if we were married before we have a state tax. And that 130,000 will reduce that lifetime exemption by $130,000, which frankly, for most people, is no big deal. She wasn’t paying you interest. If you treat that as a gift and not as a loan, because there’s an imputed interest on that, I understand. You loaned on again you I would say you gave her the money and she turned around and gave it to you back, and you can give anybody you want any amount of money, and the recipient of it is not subject to tax. So I think this is, my personal view is this is not a taxable event, Lisa.

Lisa [00:38:58] Okay, I appreciate that so much. Thank you.

Carl [00:39:00] 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 we have another caller. Tony, you’re on the air, how may I help? Tony, you’re on the air. Hello Tony, now I can hear you, please go ahead, now.

Tony [00:39:31] Yeah, I’m 63 years old. I have $200,000 in cash, just sitting in a bank account. Yeah. And I was pulled out of the stock market because earlier this year, the tariffs would uh… Hurt me but uh… Fainting to level out on just wondering what i should do with that uh… I’m uh… With schwaub right now and i was doing something with schvaub

Carl [00:40:04] If you’re a stock investor, I think you’ve learned a really important lesson here, which is that it’s unwise to invest based on the headlines, that the biggest market sell-offs in my 47 years are the ones you didn’t see coming. And that would be the global financial crisis in 08-09. That would be the bursting of the dot-com bubble in 2000 and 2001, the collapse of central Texas real estate in the late 80s and the 90s, and back in the early 70s and early 80s, the Collapse of oil. Those are things that take years to come out of, and so what do we know? We know two things right now that affect your decision. Stocks are expensive, especially U.S. Stocks by traditional valuation. And tariffs haven’t had the effect yet, but that doesn’t mean that they will not have the effect. And so I think it’s good to be cautious. And now that you’re in cash, I think you should get back in, but I think that you should do it in a prudent fashion. You have $200,000. I think, you ought to take six, nine, or 12 months depending on your risk appetite to get back. So let’s say you take nine months, you divide 200,000 into nine different pieces. And every month on the same day of the month, regardless of what the headlines are, you put money in. If you’re lucky, this may sound weird, the stock market will go to heck in a hand basket. In several of those months, you’re gonna get a much better pricing than you would have if you put all the money in and the stock markets declined later. So become a dollar cost averager with your 200,000. Do six or nine months, get back in. The odds are, I mean, as high a price as the stock market is. Or could we have a decline in the next six months? The answer is you bet, absolutely. And so take some time to get in, but get back in, because remember, the stock market is not gambling. The stock market’s is betting on human ingenuity, and you and I have lived long enough, you were around when there was no iPhone. I mean, things change. We don’t know how artificial intelligence is gonna affect. The world but it is going to increase productivity and you want to be part of that so get back in but take take plenty of time to do it that’s what I would do if I were in your shoes Tony

Tony [00:42:30] So earlier, you had mentioned a little bit at a time, like 20%.

Carl [00:42:35] Yeah, I did. Yes.

Tony [00:42:38] So in a nine month period, just.

Carl [00:42:40] Take your 200,000 divided by 9, whatever that number is, I can’t do it in my head, and then put it in every month. Yes, sir.

Tony [00:42:48] In uh… In a total u s and a total of them

Carl [00:42:51] next uh… You have a total international yes absolutely Absolutely.

Tony [00:42:54] Okay, perfect.

Carl [00:42:56] Okay. All right. Good luck. 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 we go. Jordan, you’re on the air. How may I help?

Jordan [00:43:17] Uh… You’ve got twenty-six profit worried it’s the right time it’s been

Carl [00:43:30] Sure. It’s absolutely the best time. The sooner you start, the less you have to put in to get the most you want when it comes time for retirement. People who start with their 23, and then every time your income goes up, you increase your contribution because you will end up being financially independent. Does the nonprofit you work for have what’s called 403B retirement plan.

Jordan [00:44:00] I’m not entirely certain.

Carl [00:44:02] Okay, so here’s what you should do then. First thing is on Monday see the HR person and find out if there’s a retirement plan. Number one, find out if the organization makes any what’s called employer matching contributions. Okay so we’re going to take this two ways. If the answer is yes they have a 403b which is like a 401k in the pro-profit sector. They put money in alongside you, but they won’t put it in unless you put it. You put enough to get their full mass contribution, might be 3% of comp, 4% of compensation. If they don’t do that, then you start taking money every month and putting it into an account. Now, if you put in an IRA account or a Roth IRA account, you have to be willing to say goodbye to that. Until you’re 59 and a half. Nothing wrong with that. You won’t pay any taxes on it as it grows. If, on the other hand, you’re reluctant to put it away for that long period of time, then you just open your own account at Charles Schwab or Fidelity or Vanguard and you get in a regular savings plan and because you’re 23, you wanna take risk. You wanna take the benefit of the growth in human ingenuity and new products over your lifetime. So you want to do you want, to do cheap? What are called index funds. Vanguard has them, Schwab has them. Fidelity has them and you want to do two. You want to one that’s called a total stock market. That’s US stocks and the one that is called a total international, that’s companies outside the United States. If you do that on a regular basis, I don’t have to see the future. You have got 40 plus years and I can tell you, there’s not been a 40 year period in the United States when you wouldn’t have had a positive return. So that’s what I would do. First find out if you have a company plan and if they put any money in. If they do, you put enough in to get theirs. If they don’t, then you decide whether you can stand to put it away for until you’re 59 and a half, do an IRA or a Roth IRA. And if you think you might want the money before then, then just invest it in your own name. And that’s how I would proceed if I were you.

Jordan [00:46:22] Okay, excellent. Thank you so much, Carl. I appreciate your time.

Carl [00:46:25] You bet, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. By the way, you can listen to previous broadcasts by going to KUT.org slash Money Talk. 512-921-5888. I’m doing about three things here at once, bear with me. Scarlett, you’re on the air, how may I help?

Scarlett [00:46:51] Hello i i i think that i i just recently went to a financial adviser infidelity i don’t i don’t have to win managing my account that they like to talk to them what the air in he calculated that it would be best to take michael security at the age of sixty eight that is then leave my money in my retirement account but they would earn more money during that period of time However, she did not calculate in the possible. Seventeen twenty four percent decrease that they’re thinking is going to occur in 2033 So my question is should I take my money early because according to the calculation at 24% The amount I would get it 70 if it’s decreased is actually less than if I would start to take it at 65

Carl [00:47:41] Why do you think it’s going to decline 17 or 24% Scarlett?

Scarlett [00:47:46] The Brookings Institute, the Committee for Responsible Federal Budget, they’re all speculating that.

Carl [00:47:53] They’re wrong. How old a person are you?

Scarlett [00:47:59] On sixty-three.

Carl [00:48:01] I don’t think anybody who’s 63 is gonna have a reduction in their Social Security benefits. I don’t think, we live in a representative democracy and there’s nobody who’s gonna stand up on the floor of the United States Senator of the House of Representative and say, let’s cut Charlotte Social Security. Not going to happen. Now, if you told me you were 23, like the previous caller, I would say, do not count on a full Social Security benefit. But you’re too close to retirement and retirement age, and too many people count on Social Security. And that benefit, if you don’t take it at 68 and you take it at 70, it grows at 8%. There is no investment Fidelity can make or anybody else that guarantees you an 8% return. It does not exist. So frankly, I think you ought to wait until 70 because you get 8% a year and you can’t get that anywhere else. And I think that you’re going to get the full benefit, Scarlett.

Scarlett [00:49:00] Thank you keep that don’t take it seventy i would be depleting my four oh one k by so much that i would actually lose money but you know about that

Carl [00:49:08] Well, that’s that that that assumes that 401k is going to make more than 8% guaranteed. How do we know? We don’t know that. I mean, that I mean I would never if I someone said to me, Carl, here’s a guaranteed 8% for two years, or you can keep it in the 401k. What if the 401k, what if the stock market drops 20%?

Scarlett [00:49:31] Understood

Carl [00:49:32] okay good luck you’re welcome bye oh nuts saw way i just went to the next one and hung up on the next person eli i think if eli if that was you we have plenty of time it’s 5 52 it’s time for you to come come back and i’ll take your call give us another call at five one two nine two one five eight eight eight okay i’ve been hearing these texts coming in but thank goodness I’ve been getting all of these phone calls. So let’s just see here where I was. Okay. Carl, I just bought some bonds, but the prospectus I received described them as annuities. Do bonds equal annuites? They absolutely do not. Wait a minute. That’s not, either you made a very big mistake, or the entity from which you purchased them made a big mistake. Bonds and stocks are completely different. Annuities are an insurance contract. You better talk to the people from whom you purchased it, because that really sets up red flags for me. I’m worried that you have been misled. Bonds and annuities are two very, very different things. So do not, on Monday, get ahold of those people and be sure you completely understand it. If you do understand it, but you still want more thoughts. Then you can call me or text me next week, and good luck. 512-921-5888. Here we go. Eli, you’re on the air. How may I help?

Eli [00:51:16] So it’s about travel, we are going to be traveling to Europe and I want to give some money gift. And the question is, should we take dollars? I know that in the past that was a good idea. And now I hear there’s an egg everywhere and they can use euros a little better.

Carl [00:51:42] That’s exactly right. The dollar has declined, uh, this year a lot, maybe 10% or more. Uh, I was in, uh. And you’re in, in England and then also in Italy in July. So I was, I, I wasn’t pound sterling country and then in euros, and there’s no question that, uh both euro and the pound, uh have appreciated when compared to the dollars. So if you wanted to give. The most benefit to your friends in Europe, you would give them Euro, if you’re gonna be in the European Union, you’d be better off giving them Euros rather than dollars, Eli.

Eli [00:52:25] And in the past, I took some extra cash. So is that still a good idea or just rely on my ATM card?

Carl [00:52:38] Yeah, I think I’d rely on the ATM cards. I don’t think there’s any real reason. I can tell you, I always took a little cash with me, but I mean, you can get on the subways in London with your credit card, so you can take some cash, but there’s no reason to take a lot of cash in my experience, Eli. Thank you very much. You’re very welcome. Thanks for calling. You’re listening to Money Talk on, I’ll get it right, I always made that mistake, on KUT News 90.5 and on the KUT app. Here we got another call. I’ll just take this. Anthony, you are on the air. How may I help?

Anthony [00:53:17] I have two questions. The first question is, so I am fifty-four years old and I’ve been working for last thirty years. Now, what I know I can start drawing social security at earliest is sixty-two. My philosophy is this day and age, you never know how long somebody is going to live, 70 to 80. So should I start drawing right at 62 or should I wait?

Carl [00:53:44] I think it’s a big mistake to draw at 62. And I think unless you know you have life-shortening health conditions, the longer you wait, the larger the benefit. Because once you lock in that benefit, you have no way of increasing it. The Social Security will be increased by, they have a certain calculation, but some years it’s been very, very little. I think if you can afford it, you should wait as long as possible. Let the benefit grow. So that when you do finally take it, it’ll be a bigger number on which you will get the inflation adjustment. Too many people in this country are taking it at 62, and generally it’s a huge mistake as you’re locked into lower income for the rest of your life. The cost of living goes up, the cost of groceries goes up. The cost to gasoline goes up and you’re stuck at a lower rate. So if you can keep working, do not take it as long as you can. And as I mentioned a moment ago, even if you take it at full retirement age, which might be 66 or 67, the benefit, the monthly benefit grows from full retirement age until you’re 70 if you don’t take it. The monthly benefit goes at a very high 8% a year, which is substantially greater than the rate of inflation. So if a person can’t afford it, he should wait as long as possible because then that benefit will be a lot longer. You need to plan on living a long time because you do not want to be old and not have enough money to live on. So I would postpone it as long as I could if I were you. Okay?

Anthony [00:55:18] Now, the second question is, if I have half a million dollar cash in the bank, what should I do at this time?

Carl [00:55:28] Uh… At the answer i p you’ve given me about a minute to answer this that the it’s a fundamental question about risk in return and indian i thought what i would tell you is this if you have the opportunity uh… Next week to call in big that question it because you’re not the only person listening to has a question it’s really really important and i’d like to have time to answer so if you’d be so kind Next week to call in earlier in the broadcast so you and I can have a conversation. I really appreciate that. Is that okay? Okay. Thank you. God appreciate it. You’re very welcome. Thank you, okay. Wow, a lot of fun this afternoon. I want to thank SAWA for helping and I want thank you for listening and as always to remind you that next Saturday at 5, be sure and tune in to Money Talk.

KUT Announcer Laurie Gallardo [00:56:18] 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.