Money Talk with Carl Stuart

Carl Stuart talks with callers and answers text questions about how to approach retirement with an age gap between spouses, how to invest cash holdings, bond investing, and the role of the Federal Reserve — 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 Stuart. Carl Stuart is an investment advisor representative of Stuart Investment Advisors. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:00:21] Welcome to Money Talk. I’m Carl Stuart and you’re listening to KUT 90.5 and on the KUT app. 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 early in the hour, giving me a better chance to do my best to answer your question. If you wait till the last quarter hour or so, it’s a pretty good opportunity that I’m not gonna get to your text or call. I do take today’s calls first. I like those because then we can have a conversation and I can make sure that I fully understand your question, your situation. But of course you’re welcome to text as well. And then I take todays text second and then finally any text that I haven’t answered from previous broadcast. I have two or three of those today. So let’s get started. Call or text 512-921-5888. Okay, let me just see here. We’ll get, here we go. What is the best, well, here go. Okay. Carl, a great show, thank you. I learned a lot and appreciate each tip you share. Thank you. Can you help settle a disagreement? My wife will be 62 next summer, and ah, you know, I answered the beginning of that. I’ll do it again. Cause the last part I didn’t get to. My wife will be 62 next summer in 2026, more or less $21,000 a year in social security at that time. And I’ll be 69 plus with more or less $55,000 year in Social Security. I say we take our Social Security and other assets about $1.2 million to retire at this point. She thinks that waiting to draw her Social Security later is the right approach. Can you comment and how should couples with an age gap approach retirement. It’s waiting till 70 gets her an 8% rate of return every year from the difference between taking the benefit of full retirement age and taking it at 70. There’s certainly no guaranteed investment that you’re gonna make 8% per year. So my, and my sense is that I would probably postpone it till age 70 if you had needed more income, You could even draw down some of your… $1.2 million to supplement your Social Security and then when hers kicks in, you can reduce your withdrawal from your portfolio. Let me see what else we can get here. I did comment, how should couples with an age gap approach retirement? You have to plan on living to be 90, just to be on the safe side, because you certainly can live longer. And because the younger person in your marriage is a female, you really have to plan on a living a long time, which means that you have to make sure that you don’t have too conservative an asset allocation with your money, and secondly, that you don’t take too big of a withdrawal rate. So that’s how I would think about that. The last part of your question. What is the best way to help our heirs? My wife is listed as a beneficiary. If I list each kid in a percentage, should I do anything else? If the money is in IRA, then there’s a beneficuary designation. It’s automatically spouse, unless the spouse says it’s okay not to be him or her. And then listing the kids in the percentages that you want them to get it is the way to do that. And it sounds like you’ve already done that. So I think that you’re in good shape there. 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. Looks to me like I’ve got somebody on the air here. Scott, you’re on the error. How may I help?

Scott [00:04:37] I’ll set up our financial situation and then the question. My husband and I, three years ago, we built a small house in the back of our property. We moved into it and the existing house, we reconfigured and made it into a studio and then a two-bedroom, so two separate properties we rent. These are furnished midterm. So it’s mostly to traveling nurses. Um, our combined income last year was, uh, 190,000. Okay. We have a mortgage of 384,000 for this property at 3.375.

Carl Stuart [00:05:23] Okay.

Scott [00:05:24] Uh, my husband is coming into a gift from his parents of 250,000.

Speaker 4 [00:05:32] Mm-hmm.

Scott [00:05:32] So here comes the question. He wants to take that all and put it to pay off to help towards paying off the mortgage. My question is what are some other options? What’s your opinion You know on on taking it. Yeah, so there’s a question

Carl Stuart [00:05:52] In today’s world, if you said we have a mortgage at 6.85%, for me, it would be a more difficult decision, but when it’s less than 4% mortgage and a properly invested and balanced portfolio in my 47-year experience, we’ll have a return of 6% to 8% annualized. Now, clearly, you’re gonna have some down years like we had in 2022. The benefit of investing that, I think you’ll have a better return over time, number one. The second benefit is paying down on a lower interest rate mortgage simply further concentrates your investments, if you will, in real estate. And I know and I say on the air all the time, the two asset classes which in American history have consistently outpaced inflation are rental property because rents go up over time and that leads to higher market values. And the other is common stocks, because you’re investing in human ingenuity. So if I were in you and your husband’s position, I would not pay down the mortgage, because I think your return over time will be a better return than the mortgage. So you have a net gain on your net worth. And secondly, you further diversify your asset allocation and not concentrate it as much in real estate. If I think that’s what I would do if I was in your shoes, Scott.

Scott [00:07:20] Great. I appreciate that opinion. It’s closer to what I’d like to do.

Carl Stuart [00:07:27] Well, that makes us two smart ones on the phone.

Scott [00:07:32] Well, I’ll agree with you on that. Okay. Thank you.

Scott [00:07:36] For your opinion and invite you.

Carl Stuart [00:07:37] You’re welcome. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. And by the way, because I frequently forget to say this, you can catch past shows and they start with the first Saturday in April of 2025. You can catch past shows at kut.org slash money talk. Here is another call James, you’re on the air. How may I help?

Scott [00:08:12] I’m 63 and a half, currently drawing a civil service public safety pension, but I’m also still working. So I haven’t started drawing my social security yet, and I’m thinking about kind of quitting and starting to draw the social security. And I’m trying to understand if I stop in the middle of the year and start drawing it is the annual amount the same. You know, I’ve already earned quite a bit up to this point, I guess, is what I’m trying to figure out.

Carl Stuart [00:08:43] Well, I think the way it works is, and I find Social Security to be extremely confusing. I think why it works as your benefit will be determined by your compensation, whether it’s compensation. I don’t know that it’s a calendar year. I’m just not an expert in that, but it seems to me like you’ve paid into Social Security in 2025 for eight months if you decided to quit on Monday. And that that would calculation would go into what your social security benefit is That’s my understanding if anybody’s listening who’s a social security expert and tells us tells Scott tells James I’m sorry that he has to work the rest of this calendar year. That’s not my understanding James

Scott [00:09:26] And the amount that I’ve earned already doesn’t penalize me for drawing. It’s like working going forward if I make too much a month.

Carl Stuart [00:09:36] Well, now you can’t make too much a month. Once you turn on your social security benefit, then it is what it is. The only way you get hurt is if you make enough money that you get $1 over what’s called the IRMA, which is the Medicare premium, and then the premium jumps fairly significantly, you may or may not have already jumped over that. You would have to go in and see if you kept making the income this year. What that would do to your Medicare premium. But even if it did that, it wouldn’t do that for all your future years if you retired. But social security benefit shouldn’t be impacted in my experience.

Scott [00:10:16] Thank you so much. Appreciate it. Enjoy your show, too.

Carl Stuart [00:10:19] Oh, thank you. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. When you have a question, call or text 512-921-5888. Here we go. Mary, you’re on the air. How may I help?

Mary [00:10:41] Hi Carl, last week you said that you would be able to look up the taker symbols of the short-term bond funds. Yes, I did that.

Carl Stuart [00:10:56] I was, and I’ve given this a lot of thought. I know you said that you were unable to do the search on Morningstar yourself. I have two different sets, but I will tell you this. I’m not comfortable giving them out on the air because I don’t want people to think I’m giving advice and suggesting you do something. Here’s what I’m gonna do. I’m going to give you my business phone number, and then you call me this week. And I will give you the names and the ticker symbols of the funds, okay?

Mary [00:11:28] Okay, what is it? Oh, here we go.

Carl Stuart [00:11:33] Okay, here we go, it’s 512-478-2275, 512, 478, 2275, that’s correct.

Mary [00:11:46] Has found ticker symbols for these bond cards and did he, you’re allowed to release that to me, isn’t it?

Carl Stuart [00:11:56] Mary, I’m really sorry. I’m sorry, Ken. You’re breaking up, so I’m gonna have to hang up, but you give me a call this week Thank you. You are listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888 Mary Lynn, you’re on the air. How may I help?

Marilyn [00:12:22] I had a question about your first caller and the woman that had social security option at 62 and her husband was 69. My question is, isn’t she eligible to take half of her husband’s social security benefits right now and do that until she turns 70?

Carl Stuart [00:12:41] My understanding is that she can take half of his benefits. What I don’t know is the duration of that or not. That’s why I find Social Security so confusing. The question will be, can she take his until she turns 70, or can she his only until she reaches full retirement age? That’s the part I don’t know, but she can half of this benefits. Currently, that is my understanding, but I don’t know what happens when she has full retirement age. Does she lose half of his benefit or can she continue to get it until he turns 70? Once again, if we have any expert, go ahead please.

Marilyn [00:13:22] Well, I actually have done it and you can take it to 70.

Carl Stuart [00:13:25] Oh, well, you’re the expert. Terrific! You’re good. I’m glad that you answered that. That’s what I love about this show is I get people with real life experience to help me. Marilyn, that’s great. Thanks for your call.

Marilyn [00:13:39] Okay, thank you.

Carl Stuart [00:13:40] You bet, buh-bye. You’re listening to Money Talk, where we regularly stump the chump. I’m Carl Stuart, and is it not yet time for me to take a break, so I’m gonna give you the number to call or text 512-921-5888. And I did see, I thought I got a message, but these are, nope, they’re not messages for this show, so, I’m not gonna worry about that. Here we go. From last week. It’s a long one, so bear with me. I’ve been looking at discussions of FIRE, which I do not know what that stands for, and we’re in the position where we have say one million dollars and our expenses per year are letting us to say just under four percent or thirty five thousand dollars. That he this person means a retirement withdrawal from retirement from that one million. We are a couple and are 60 and retired. We’re very comfortable. That our mandatory expenses may be one half of this, so we’re okay with available income going up and down. We’re thinking of following variable percentage withdrawal, and we’re pretty comfortable with risk, have been all of our lives. Currently we have 96% to 4% in terms of stocks and cash. What are the arguments for and against maintaining that allocation? Well, I think because you’re so heavily in the stock market, if you’ve done this long enough. You know that there’s gonna be a period of time when that million dollars is gonna be $800,000. Now, could it be worse than that? Of course it could. I don’t know exactly how you were invested in the stock market, because if you were, say, in the NASDAQ index, it was down 33% in 2022. If you were in the S&P 500, it was done over 19%. Most people in my life experience are not comfortable with those kinds of drawdowns. Particularly when they’re 60 and when it’s a million dollars, so it really comes down to Your own comfort level you have you have modest living expenses So that you have the ability to have a variable walk draw down from your from your savings You’re a unique situation most people I’ve encountered don’t have that kind of Willingness to take that kind risk. So in theory if you’re willing to take kind of risk then that kind of allocation is okay. You also ask any other thoughts on our plans and what we need in terms of emotional makeup for this plan to work. I just covered that. You need to have lots of courage. The notion is that our kids don’t need money from us, but we’d be happy to have lots left to them and charities, but that’s not a must. Big thing is enjoying life, including lots of donations while we’re relatively young. Well, good for you. And if this is not in a IRA type environment. The really good news is since you’re likely to leave a nice nest egg for your kids if it’s in your joint account and not in an IRA and you have these gains from being in stocks, they will be able to get what’s called a step up in basis and the value, let’s say you predeceased your spouse, he or she will get a new cost basis and then when the second person dies, then your heirs get another cost basis which presumably is more than. What you paid for it, and that’s a very good thing. And of course, because you’re philanthropic, you ought to be giving appreciated securities rather than selling securities and giving cash. Give the appreciated securities, take the tax deduction if you can, and then let the nonprofit go ahead and sell the securities. And if this is an IRA and you get to the age where you have to take money out because of a required minimum distribution. You should take charitable qualified charitable distributions. You can actually do that when you’re 70 and a half. You don’t have to wait until you’re eligible for the required minimum distribution. Thanks for the question and congratulations for being philanthropic. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. We’re coming up on the time for me to take a break. So that’s what we’re gonna do. Five, one, two, nine, two one, five, eight, eight eight. I’ll be back.

KUT’s Jimmy Maas [00:18:04] 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 nonprofit 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 [00:18:34] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:18:47] 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, give me a call or send me a text at 512-921-5888. I did find out from our text or what fire is, financial independents retire early. And she or he said, what a concept. Sounds pretty good to me. 512-921-5888. Pam, you’re on the air. How may I help?

Pam [00:19:22] Well, I’m calling you, by the way, good afternoon, I am calling you because my sister is on Medicaid and we’re both, we’re all getting an inheritance from our parents and it’s not a large amount, it’s about 90,000 that she’s going to receive, but it will knock her off her Medicaid. And the only thing that I’ve been able to find that might be a solution is a Medicaid annuity and that sounds pretty safe however once you put that money into the annuity you can’t ever get it out. That’s right. And if something happens to Medicaid you know what would happen with that Yeah. Do you have any ideas about that?

Carl Stuart [00:20:15] Yeah. So I think this is really, really complicated. And the reason is that Medicaid and for everybody else, I know you obviously know this, Medicaid is different than Medicare is for people with low income and little, if any assets. And so that’s why she’s, that’s why she is on Medicaid now. And now these assets, when she gets them, will cause her to not be on Medicaid. My understanding is you have to be really careful. That you don’t inadvertently engage in fraudulent behavior. Of course. Yeah, my understanding is that there’s a, when people, I’ve had people say on the air, well, I’d like to, I got assets, can I give them away and then go on Medicaid? And the answer is no.

KUT Announcer Laurie Gallardo [00:21:01] No i know that that’s that’s

Carl Stuart [00:21:03] I know you do. I really worry, I’d really look into this annuity thing, because you’re absolutely right. That’s an irrevocable decision. It has to be irrevocables, otherwise the asset would still be hers, because she could cash in the annuity. So, I, you know, this may seem, I don’t know what the word is, harsh or hard, but why, I’m just, we’re and go off Medicaid. And if and when the $90,000 is depleted to a level, then she would be back on Medicaid again.

Pam [00:21:42] Reapply which is yeah, we’re just you know what we may have to do because I don’t they make it so difficult I mean like 90,000 isn’t a lot for somebody to have to live on for another 20 years of their lives

Carl Stuart [00:21:54] You’re absolutely right.

Pam [00:21:55] But you know i at the same time here from drop it but i’m understanding is that he had some drugs that are like two thousand and they’re paid for on the truck plan so that ninety thousand will go pretty quickly

Carl Stuart [00:22:11] Yes, yes it will. Yes it will I actually had a relative where it looked to me like if she lived a little bit longer she was going to run out of money and then and turned out she passed away but I think I just think that’s the only only honorable and logical way that I can think about it. You’re in a heck of a bind pan but I that’s if I were in your shoes I think that course of action that I would select.

Pam [00:22:38] Okay well i appreciate it but they’re really difficult to find

Carl Stuart [00:22:41] It really is. Good luck to you and thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 921-5888. And by the way, you can catch past shows at KUT.org slash Money Talk. Let’s see here, I knew I had another one. Okay, this is from last week. Hi Carl, I am a late bloomer in career. Higher income and investing, good. I am 53, my income is $130,000. I’m a homeowner with a 3.1% interest rate, congratulations. Never married and I have $51,000 and a 401k with a good allocation based on things that I mentioned that you, Carl, mentioned. $20,000 in stock from my company, $50,000 in cash and if I’m frugal, I have $40,000 disposable income each year. I know it’s not wise to hold so much cash. Oh, I was going to tell you that, but I tend to feel totally unsure how to invest. My question is, how would you suggest I invest my current future cash flow and current future catch flow? Secondary question is based on how some people think the economy will crash hard in the next few years where the US may default on debt and we end up like Argentina. Some people in history have done well during huge economic crashes. Is there any specific strategy to prepare for such extreme economic events? Okay, first of all, let me go back to what I would do with the cash. I would invest it. You’re a young person, and you need to, at this point in your life, you’ve got a long life expectancy, you need a plan of living in 35 or 40 years, and so you can’t leave it, I mean you can, it’s your money. If you leave it in cash, based on history, after taxes and after inflation, you lose money. It has a negative, what we call, real return. So I think you need to take the risk of the stock market. You just don’t need to do it all at once. We’ve had two, now, two years and nine months, over two and a half years of great returns in the stock markets. If you’d have told me at the beginning of this year, after two years of plus 20%, that through this time we’d be up about 11%, I’d say it never happened and that’s happened. So take the money, pick an amount that cash that you just have to have to sleep nights. Shouldn’t be very much because you have good income as long as you have stable employment. And then every month take a sixth of the balance and invest if you’re gonna do this on your own and you don’t wanna spend a lot of time thinking about it, then you wanna do what are called index exchange traded funds. I’d probably do 75% in something called the total stock market and 25% in the total international. I think that that’s the logical thing to do. Right now, international’s substantially outperforming domestic for the first time in several years. And if the U.S. Does get in trouble, foreign stocks could easily do better. It looks like the dollar is weak. That’s good for foreign investing. Looks like interest rates may come down. That’s typically good for stocks. But I just think that’s what I would do with my cash because of your age and because of your good financial situation. Now, do I think the economy is going to crash? I do not. I think that we are in uncharted waters because of the tariff situation. We have yet to see the impact on the economy. The people say, why is the stock market doing so well? Because corporate earnings are holding up, that’s why. And people are uncertain about how long the duration of the tariffs, because most of these are going into litigation. And so we live with a time of uncertainty. It’s hard for me to picture an economic crash. This is such a robust and productive economy. Could we go into a recession? Yes, absolutely. We could go into reception. Unemployment, or I shouldn’t say unemployment, employment numbers are slowing down dramatically. And in some. I was just reading this today and in some businesses or industries that are very sensitive to tariffs, they’re seeing negative employment growth, they are dropping in employment but in aggregate the economy in terms of employment is growing. So I don’t think we’re going to end up like Argentina. Could we? Yes. But you have to ask yourself the question, the U.S. Dollar is the global reserve currency. What will take its place? That because that not the chinese currency because it’s not free-floating uh… It’s got it that it’s it’s read its exchange rate is determined by the chinese government that yet and pounds sterling and the euro are sufficiently not large enough to become a reserve currency now what should you do probably has a gold exchange traded fund you can buy them for like nine basis points zero point nine percent and They actually hold the gold. I mean, the one I follow is up 37% this year. So you’re not getting in cheap, but if I’m answering your question about economic crashes or ending up like Argentina, if you go back to the 1970s, when we had rising inflation and falling economy, that was a heyday for gold. So putting some of that away in an exchange traded fund where you can add to it or reduce it when you want, I think is a reasonable thing to do. If you have the time, I’m giving you some very kind of what I would call high level. Consideration and advice, there are strategies called market neutral, called arbitrage, called trend following, which do not move with the stock market and in many cases do not move with a bond market and this year up 5 to 6 percent all the way up to 12 percent. So you can also look at those because their returns are not correlated to the stock market if you’re concerned about an economic crash. Good question. You’re listening to Money Talk on KUT News 90.5. And on the app, call or text 512-921-5888. Good, here is an answer from a listener. The Medicaid person needs to put that money in a special needs trust as soon as possible. Thank you very much. That’s an excellent idea. I am not an attorney. I’m sure as heck not a social security expert, but you need to talk to an attorney, there are attorneys who specialize in this. And they may very well be able to help you. That’s great advice. You’re listening to Money Talk on KUT News, 90.5, and on the KUT app. Right now, we don’t have any incoming texts or any incoming calls, so let me just think about what would be a good thing for me to bloviate about. I would say I would bring you up to date on the data. I do this every Saturday before I come on the air, and I think it’s very interesting this year. We talk about the stock market, at the bond market. Is having a great year. If I follow the bond market, I use the Bloomberg Ag, that’s kind of the standard and poorest 500 of the US bond market. And the iShares ETF symbol, AGG, is up through yesterday, 6.03%. And I remember these are bonds, and what’s called the trailing 12-month yield. My understanding of that, and I get this information from Morningstar, is that you take the dividend, the Malfi Dividend that the ETF pays. Use over the last 12 months and you divide that by the price per share and you get a number, a yield number and on the ag it’s 3.82 and then I also look at short-term and intermediate or core bond and then multi-sector bond and short- term bond fund that I followed to kind of understand what’s going on in that space in the bond market through yesterday as a positive return to 3.25 percent. And a trailing 12-month yield of 4.78. Listen to these numbers. The core, which follows the Barclays Ag, has up 6.26% with 3.95% yield, and then the multi-sector is up 7.63% with a 6% yield. So, you know, those are terrific yields and total returns for bonds. So as you think about how you invest, you don’t wanna overlook that. 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. C, okay. My niece is 19 and just started college and also has a part-time job. Good for her, I sure did that in college. Should she get started investing with the Roth IRA or regular brokerage account since her work probably won’t be Consistent until she graduates in four years or more. Thanks. Well, I in my view It comes down to what? She would need in terms of liquidity because the beauty of putting that money in a Roth and Just basically forgetting about it is a wonderful thing. It’s the magic of compounding. She puts the money in. She’s not in a high income tax bracket. It goes in after tax. The money grows. You select good solid stock funds. The money grows over time. She doesn’t pay any tax on that. And once she’s 59 and a half or older, she can draw it out without any taxes. And if she gets a job and puts money in a 401k or a 403b, when she hits whatever the time will be at that time, right now, 73 years of age, she’s gotta start taking the money out and paying income tax on it. And this Roth, which could be worth a pile of money, she’s not gonna have to worry about taking that out until she wants to. So the only reason to put it in a brokerage account is if she wants that future liquidity. If she says, gee, you know, I’m gonna get out of school and I wanna take a year off or I’m going to. Get out of school and eventually I’m going to want to buy a house and I’m going to need money for a down payment, then the Roth IRA in my view is the wrong vehicle. But if she wants to start towards financial independence, putting the money in a Roth IRA is just a terrific idea. Thanks for the text. 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. We have a call coming in. Let’s see. Bob, you’re on the air. How may I help?

Bob [00:33:33] Hello Carl, how are you doing? I’m good, thanks. I’m very disappointed to report to you that I did not have the winning Powerball last weekend. Whoa, there goes your $433 million right out the window. No, no, no. It was a very good investment because I have the Winning Powerball ticket in my hand right now, and it’s now $846 million or something like that.

Carl Stuart [00:33:56] Oh, I’m so pleased for you. I can’t wait for you to call and tell me you won. And I want to make sure that you don’t, that your name is Zimbabwe if that’s the case. Cause you’ll have more good friends than you ever knew you had.

Bob [00:34:08] That makes two of us okay so um i have a very simple question yeah and uh i said i’ve been thinking why why does the fed fed have a dual mandate i mean they’re yeah they’re trying to bring down inflation

[00:34:24] Yeah.

Bob [00:34:25] And they’re trying to get employment up and going. And to me, that’s a no-win situation because in my opinion, you can’t have both and it just confuses the issue and I don’t know what their goal really is.

Carl Stuart [00:34:46] So, here’s my understanding. When the Fed was started, it was monetary policy, which for everybody else, Bob knows this, but monetary policy is to use interest rates that they have control over. It’s called the Fed funds rate, which they pay banks for deposits to use interest rate to help the economy be stable and have stable inflation. So, if starts to heat up. Then they’re supposed to raise interest rates, which cause businesses to borrow less because the cost of borrowing goes up and causes businesses to be more cautious and not borrow money to invest, which means that it causes fewer jobs to be created. The economy softens, sometimes goes into a recession. Now, they bring interest rates down so that borrowers have more incentive to borrow and invest in productivity. And grow the economy. That’s the plan. That’s monetary policy. My understanding, Bob, is the specific answer to your question is that is a congressional mandate that at some point in the past, and I’m not a Fed historian, the Congress of the United States said, guess what, boys and girls, we are going to not only want you to be in charge of monetary policy and keep us at the stable inflation rate, we also want you to bring down unemployment. Unemployment was apparently high at the time. And I remember when they said, the economists say, boy, if we ever get to 5% unemployment, that’ll be terrific. That’s really, that’s great. Well, it’s been below that for a long time. I don’t think they have a choice, Bob. I think that that’s a congressional mandate.

Bob [00:36:32] Okay, Carl, so I’m just a farm boy. I’m not very smart, but I know whenever they, they can’t control the interest rate. So even if they lower their rate, it’s only affecting the short term. It doesn’t affect the long term and it doesn’t effect housing and mortgages and things like that. So I don’t get it.

Carl Stuart [00:36:54] I don’t either and you may be a farm boy but you figured out something that I’m not sure a lot of people in the administration have figured out. You can get the Fed to lower interest rates but what Bob’s saying is the mortgage rate and the rate you pay on your credit card and the rate you play on your on your car note is not the short-term interest rate it’s the rate that’s priced off of the 10-year treasury note and the yield on the 10 year treasury note is a function of what global investors are willing to pay and what yield they want. So it’s possible that we would have, this is really down to the weeds, something called a steepening yield curve where short-term rates come down because the Fed lowers them, but long-term rights don’t come down and we don’t get the kind of boost to housing that we’d like. So you’re right, it’s gonna be very interesting. I mean, the odds now according to the futures market are 100%, the Fed’s gonna drop rates 25 basis points. In the September meeting. It’ll be interesting to see what happens to the 10-year treasury. It’s possible because these employment numbers are starting to soften that we’ll still get a lower rate on the 10 year don’t know. So you and I’ll stay tuned. And when you get those hundreds of millions of dollars, you be sure and give me a call, Bob.

Bob [00:38:08] Okay, Carl, and that’s all for today. Hook them. Okay, thanks. Ha, ha, ha.

Carl Stuart [00:38:13] You’re listening to Money Talk. It’s time for me to take a break. A great time for you to call 512-921-5888. I’ll be back.

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KUT Announcer Laurie Gallardo [00:38:58] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:39:12] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and on the KUT app. A lot of fun this afternoon. If you’ve got a question, call or text 512-921-5888. Here is a call. Scott, you’re on the air. How may I help?

Scott [00:39:33] Yet how i got a question for you about bonds first cd right now i have all my money in cd yeah i’m getting about four point one five and i guess i just do monthly i’d just heard you talk about bond

Carl Stuart [00:39:52] That’s right.

Scott [00:39:54] And I don’t really know anything about them.

Carl Stuart [00:39:58] So when we think about the various asset classes of financial assets, we have stocks, bonds, and cash, and CDs are considered cash because they don’t fluctuate and the principal amount doesn’t fluctuated in value and they’re daily liquid. So when you own CDs, you are going to get whatever short-term interest rates are available in the country. And so you do not have price appreciation or ability to increase your return number one number two interest rates go up and down i’m so old i remember back when people would sit around and brag about having a 10 cd but what they failed to take into account was inflation was 13 and they really were losing money when you’re in cds right now rates are attractive compared to where they were when interest rates were so low, but what’s going to happen? Is eventually the Federal Reserve is gonna lower interest rates, your CDs are gonna mature, and you’re gonna get 3% or 2.5% instead of 4% or 4.25%. So you’re going to ride the wave of short-term interest rates. The reason to do this is either A, you just want the money short-terms back in your hands, or two, you have to sleep nights. If you have sleep nights, then I have no argument with that. When you own bonds. They will fluctuate in value. They will go down in value and they will go up in value, however, when interest rates go down, I’m not gonna go into the mathematics, but I will just say, when interest rate go down bond prices go up. When interest rates up, bond prices goes down. Think of it like a seesaw. So if interest rates goes up, the other side of the seesaw goes down, bonds go down. But if interest rates go down, bonds go up. That’s why bonds are having a very good year this year. That’s not actually why. Bonds are having good year this year because investors are buying bonds because they anticipate that interest rates are gonna come down. And if they’re right, those bond returns that I quoted earlier in the broadcast will continue to be much more attractive than CDs. So what I would do if I were you is you don’t have to abandon your strategy of CDs. But when you have CDs mature, you ought to begin to put some money in bond funds. That’s bond mutual funds or bond exchange traded funds. You can do this on your own or you can hire an advisor to help you. That’s up to you. That’s a whole nother decision process. But if rates go down, either because the Federal Reserve lowers rates, which it looks like they’re fixing to do, or because we go into a recession, I’m not saying we will, but it’s certainly plausible, bonds will do better than CDs. Based on history because rates when rates go down bonds have a negative return after inflation and after cash so you don’t have to go one way or the other but i think it’s an appropriate time to put some money in bond funds here’s what you want to avoid you want to avoid bond funds that are called high yield or strategic income because those are riskier bonds and based on History if we go into a recession and if the stock market goes down. Those bond funds will go down as well. You want to stay with something called investment grade bond funds, which are either government agencies, like Fannie Mae and Freddie Mac, government securities, or high grade corporate bonds. If you do that, they pay monthly dividends. You do not take the dividends. You simply reinvest them and buy more shares. Over time, as bonds go down, you buy more share, if bonds go up, you buy fewer shares. That’s what I would do with a portion of the money. If right here where we are in this particular economic cycle, if I were in your shoes.

Scott [00:43:54] Okay, one more question if I have time.

Carl Stuart [00:43:57] Yes, you do. Please go ahead.

Scott [00:44:00] So three years ago, I bought into an annuity and they promised me that they, if I bought into this annuity, and I know you’re going to say it sounds too good to be true, but they would add $30,000 and I was like, no way, that doesn’t make sense at all. You give me 30,000 to invest 90,000. So when I started getting my my statement that they just do once a year yeah um… The thirty thousand dollars is that i can have a call several times is what i found out it was just if i died they would throw in thirty thousand yeah uh… You have that make them

Carl Stuart [00:44:50] No, what makes sense is you were misled. You were dealt with in an unethical and immoral fashion. And that you’re, I mean, you’re out of luck because that was a decision, they called it a irrevocable decision. It’s a life insurance policy and you’re stuck. If you try to get your money out, you’ll pay big surrender charges probably. So you just have to look at it as an error, a mistake and find out get call the annuity company. And say, if I cash this in today, how much money am I gonna get? And find out what that number is, and then you can decide, it’s worth doing. It’s worth admitting my mistake, licking my wounds, take what I can get, and move on down the road, or I’m unwilling to take that loss, and then, you’re stuck.

Scott [00:45:42] Okay all right

Carl Stuart [00:45:44] Okay.

Scott [00:45:46] I appreciate that information.

Carl Stuart [00:45:48] Okay, you bet. Good luck and thanks for calling, Scott. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Okay, I’ve been getting, you’ve been hearing them so you know that I’ve, let’s see here, okay. Carl, I’d love to hear you bloviate about direct investing. It’s obviously a long-term listener who knows that I bloviated. I don’t need any incentive. Carl, I’d love to hear you bloviate about direct investing in government bonds. I’ve been doing it since 2022. I know you would tell me that I have too much cash in these relatively low yield funds. Nevertheless, I am risk averse and bond yields are pretty good lately. Well, there’s nothing wrong with it. I mean, just let’s make the argument on your side the why that’s a good idea. There is no other investment that when you buy it, You know exactly what your cash flow is gonna be in the future, and you know exactly what the future value is if you hold it to maturity. That’s true of government bonds, it’s true a tax exempt bonds, it’s through of any bonds, the risk you take is what we call credit risk if the issuer fails, which is not gonna happen if you’re buying government bonds. So that’s just fine. I don’t do that because I own bonds as part of an overall portfolio. I don’t buy bonds for income, I buy bonds for total return. Bonds this year are doing exactly the reason that I own them. Because if you look at a standard and poor 500, now here I’m just using an ETF through yesterday, it’s up 11.10% and the bond, the Ag, the Berkeley Ag, is up 6.03, plus a 3.82 trailing 12 month yield. That comes in at all nine. Getting really close to 10%. I’m getting close to ten percent and I’m taking substantially less risk than I’m the stocks. Now, I own a lot more in stocks than I do in bonds. And there’ll be times when interest rates were really low. I didn’t know what was gonna happen in the future. I just knew that interest rates weren’t going to get lower. We have listeners with 3.1% 30 year mortgages, really? You don’t have to be an economist to know that the next big move would be higher rates, which is what occurred. So what did I do? I reduced my bond position. I can do that because I have daily liquidity and because I’ve capital gain potential. If I own government bonds and rates fall, the market value of my bonds go up, but if I don’t sell them, they’re gonna mature at par and all of that benefit that when they were higher goes away because I’m gonna get par value. So you have to decide the purpose in the first place for why you’re buying the bonds. If you’re buy them because they’re safe, you absolutely intend to hold them to maturity. Then I think that’s just fine, and you should just go ahead and do that. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. I do have a little time to take a call or a text. 512-921-5888. Hi Carl, I’m in my early 40s, co-owner of a home, started late in my professional career, so I don’t have much savings, and I’m trying to dig out of $20,000 in debt. Not including student loans. Oh boy. I’m paying almost $1,000 a month to this credit card and loan debt, which is a quarter of my monthly income. This is not sustainable. Should I get a long-term loan to consolidate this debt and hope for a $500 a month payment for 10 years, I have a credit score of about $700. And how do I know what loan companies to trust? My credit union doesn’t offer long- term loans. First of all, I’m sorry you’re in this predicament. I don’t mean to sound mean-spirited, but how about getting another job? You may have to work more, you may have work Saturday and Sunday. You’ve got to do something because you’re never ever going to be financially independent. And I’ve never known of a place that does debt consolidation that turns out to be a good deal. I’ve had people call me or text me on the radio and say, I tried that and it It was a bad deal. I don’t know where you’re going to go, you can go online and check those out, but boy, just like our caller a while ago had a bad experience with annuity, you really got to understand it, you got to read the small print, you have to figure out what the real cost to you is, it’s going to be high. Why is it going to high? Because you are a credit risk. Why are credit card interest rates so high? Because it’s a personal note. You put up no assets. To get a MasterCard or a Visa. They’re more than happy for you not to pay it off because they’re charging you 20%. So you’re in a hole, you know that, and I admire you for texting me and having this conversation. There’s only two things you can do, increase your revenues or decrease your expenses. And if you can’t decrease your expense, then you gotta increase your revenue. You cannot make your employer pay you more money because you have a lot of debt. So the other option is to take another job. I’m sorry to say that, but you can look at your expenses. I’m guessing that you feel like there’s nothing you can reduce. I do tell this regularly to people who are in trouble with debt, is a lot of us don’t pay attention to all of our expenditures. Get a cash receipt for everything that you buy. Sit down on a Saturday while you’re listening to Money Talk and put it into categories and see where your money goes and look for places. That you can find an opportunity to reduce your expenses. And then I think you have no choice but to do something about your revenue. So good luck to you and thanks for the text. Five one two nine two one five eight eight eight. Let’s just see here. Okay. Hi Carl, this is Andy. My question is, what is the best way to contribute toward an adult child’s purchase of their first home? It is a function of your asset mix. If they are in a lower tax bracket than you are and you have appreciated securities, give them those appreciated securities. They can then sell them. They will have inherited your cost basis and they will pay the capital gains tax at a lower rate than you will. This year I believe you can give them $18,000. If you’re married that’s $36,000 not subject to a gift tax. But what people forget is we’re all walking around with a lifetime exemption. This year it’s $13.99 million. It’s gonna be $15 million next year. I’m guessing you’re not gonna have to worry about paying a state tax and having an estate of greater than 15 or if you’re married, $30 million. So you can give them more than 18,000 and just reduce that lifetime exemption by the amount of the gift. So I would give them appreciated securities if I had it. If I, or any other kind of appreciated asset that they can easily sell and let them take the tax liability. After all, that seems reasonable to me because you’re being so very, very generous. You’re listening to Money Talk on KUT News 90.5 in the KUT app. You can listen to today’s broadcast and previous broadcasts by catching past shows at kut.org slash Money Talk. Okay, getting down to the end of the broadcast today. 10 years ago. I inventoried about $40,000 worth of actual gold and silver in my mom’s garage safe. Of course she did. Ha, ha, I love it. I suggested she traded in for cash. She wants to sit on it even though she doesn’t need any money. Should she keep it in the garage, put it in a safety deposit box or cash it out? Inheritance from a hoarding relative who passed. So there’s no doubt, I mean, gold’s $3,500 an ounce. So if she sells it. You said, let me see here, you said now, inherits from a hoarding relative who passed. Well, if it’s passed. Determine what the value of the gold was when she passed away. If she passed in a recent past, then you’re not going to have a lot of tax on that gold if you sell it, because the value at the date of her death, and you can find that out, you can do a search for that, will be your cost basis, and if you sold it above that, you’ll have a capital gain to pay, but it’s probably not a big deal. I don’t know about what the goal’s worth today, and I don’t know your situation as to what percentage this would be if you sold it, what you would do with the money. Do you keep some of it? Yeah, I think that’s a good idea. I don’t particularly want gold and silver ingots and bullion. I’d rather see you own, if you want silver, a silver exchange traded fund and a gold exchange traded funds because you have liquidity, you don’t have storage problems, you don’t have risk. Of it losing it or being stolen or whatever. So I like that idea. If you can determine what your cost basis is and that will help you determine what your taxable gain is, that would be the first thing to do. If you don’t have a huge taxable capital gain, I would liquidate it, pay the modest capital gain and reinvest some of it in gold. If you want silver, I’m not a big fan of that, but if you want it, fine. And if this represents a huge portion of your financial net worth, yeah, you need to reduce it, but I wouldn’t eliminate it, particularly, completely. After all, there are reasons why gold’s up 37% this year and central banks have been reducing their holdings of treasuries. That’s not something new, that’s been going on for many years under different presidents. So it’s not about the current political situation, but it is about our current government debt and the outlook for our fiscal situation, so. Having some money in the precious metals makes a lot of sense to me. Hi Carl, my husband is in his mid-50s and I am early 50s. We own our home that is valued at $620,000 but would most likely sell for a teardown for $550,000. We have $600,000 in two high interest savings accounts combined earning of about $1,800 a month. A Roth 401k, say 860,000, and a Roth IRA of $33,000. We max out on this, his Roth IRA, 401k I mean, plus the back for loop hill contribution and get his company’s 401k match. We have no debt. What should we be doing to better prepare for financial security in future years? Wow, that is a terrific question. So I like the idea that you’re in the Roths because it gives you maximum flexibility. When you retire, the Roth 401k will turn into a Roth IRA. You can roll it over. That’s a good idea. You have too much money in cash. You are early in your life. You have a long life expectancy, and you need to be investing for growth. I showed that it’s 59 minutes after the hour, so I’m gonna come back to that question next week if I have a chance. Thanks for listening. Lot of fun this afternoon. Thank Mark for doing his usual terrific job. And remind you next Saturday after the news at five, be sure and listen to Money Talk.

KUT Announcer Laurie Gallardo [00:57:40] Support for Money Talk comes from Better Business Bureau, serving the heart of Texas, providing businesses with educational resources, marketing solutions, dispute resolutions, and more, with BBB accreditation. Details at BBB.org. 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.