Money Talk with Carl Stuart

Carl Stuart answers calls and text questions about managing a large inheritance, investing in crypto, and deciding when to take Social Security, investment diversification, considering factors like inflation and longevity when planning for retirement — and more.

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

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

Carl Stuart [00:00:20] Welcome to Money Talk, I’m Carl Stuart and you’re listening to KUT News 90.5 and on the KUT app. Money Talk is a broadcast about the world of financial and investment planning. You always determine our agenda by calling or texting 512-921-5888. It’s always a terrific idea to call or text at the beginning of the show, give me the best opportunity I can have. To answer your question.

We end up with a lot of texts at the end of the broadcast that I don’t have a chance to get to. My rule of thumb is that I take today’s calls first, today’s text second, you’ll hear those texts coming in, and then text from previous broadcasts. I will tell you I like phone calls because it gives me an opportunity to make sure I understand your question, perhaps to ask you a question to make that I’m hitting the right number for you, getting the right information, and also giving you the opportunity to ask a follow-up question. Of course, I’m happy to answer your texts as well. Call or text 512-921-5888.

Last week I got a question. I remember laughing and saying in over 30 years on Money Talk I’d never gotten the question. A person said that she or he was retiring and planning on living. In retirement outside the country, but that this person had heard that he would or she would have to come back every six months to sustain their social security payments.

So I sent that question to my CPA and here is his answer, “Carl, I did some very elementary research. I think that this phenomenon is for non-U.S. Citizens that qualify for social security benefits, but then move back out of the country. It doesn’t seem as if this rule, or anything similar, applies to citizens that move abroad. The only thing I’m seeing is you lose your benefits if you move to Cuba or North Korea or someplace like that. So don’t do that. I suspect that’s not your plan anyway. Thank you, my CPA.”

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text, 512-921-9228. Five eight eight eight. Here we have.

Mary, you’re on the air. How may I help?

Mary [00:02:48] I’m looking for the short-term bond funds that you’ve spoken about so much recently.

Carl Stuart [00:02:54] Yes.

Mary [00:02:55] I’m with E-Trade by, you know, Morgan Stanley.

Carl Stuart [00:03:01] Uh-huh.

Mary [00:03:01] And I cannot find…

Carl Stuart [00:03:07] Pardon me? You can’t find him? Okay.

Mary [00:03:11] And so I’m asking you a ticker symbol for something these would be proprietary right you know

Carl Stuart [00:03:17] You know, yeah, I can’t give you a ticker single. I just don’t give specific advice like that But I use Morningstar. You don’t have to be a member

Mary [00:03:29] I’m somewhat disabled and I can’t go online, so that’s why I’m with E-Trade because they hold my hand and they tell me stuff, so is there any other way, the Morningstar terms that you use, of course I’ve written all this down, you know the ultra short, core and multi-sector. You know, maybe if I, you know, somebody knew one at Vanguard or something like that, I could find one. But they’re proprietary, right? So it would be… No, they’re not.

Carl Stuart [00:04:02] No, they’re not proprietary. You can buy a Vanguard fund through E-Trade. I’m assuming, I don’t know this, you could buy a Fidelity fund, a Schwab fund, but certainly Vanguard would be available, I assume, on E-trade. You mentioned Morgan Stanley, which is not Go ahead.

Mary [00:04:23] E-Trade is owned by Morgan Stanley.

Carl Stuart [00:04:28] Okay, well that may be a problem. I am aware of the fact that Morgan Stanley got into a disagreement with Vanguard and doesn’t have their funds, but you could also look for fidelity and E-Trade may have them. But what I would do, you say someone holds your hand, so that’s what I’d do is that I would talk to that person and ask her or him to give you some short-term bond funds. It’s a common category.

Mary [00:04:56] No, I don’t that’s the thing ultra multi-sector i’m looking for you know the ones that the morning star category

Carl Stuart [00:05:08] category. Well, what I would suggest is I would drop the ultra because that may narrow it. But I’m puzzled because I don’t know what to tell you about unless you, because you don’t use the computer, I can’t have you go to a website. You need to talk to a human being that can show you various fund companies like the ones I mentioned that have short-term bond funds. I will tell you this. I will this week look up Vanguard and Fidelity bond funds and I will name them next week for, I’ll name them the next week, just like I started the broadcast today answering a question from last week. I will look this up this week and you tune in at the beginning of the hour and I’ll give you the names of a Vanguard and a Fidelity short-term bond fund.

Mary [00:06:01] And so this would be the ultra-short core and multi-sector. I’d be able to tell what it is.

Carl Stuart [00:06:09] Yes, I will tell you this. I’m not sure it’ll be ultra-short. It may be short, but that’s okay. I will give you the name and the symbol of a short-term or ultra- short- term bond fund next week.

Mary [00:06:25] And would that be Fidelity or Vanguard, so you’re not looking for one that’s from E-Trade?

Carl Stuart [00:06:34] I don’t know that E-Trade has funds, frankly, and so I think E-Trade is a brokerage firm. I don’t think they have their own fund families, so I’m just using two of the largest with Vanguard and Fidelity. So listen in next week and I’ll do my best to help you out.

Mary [00:06:56] I certainly will. Thank you so much, Carl.

Carl Stuart [00:06:58] You’re very welcome, Mary. 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.

Now, I’m going to go here and look for the from last week. Here we go. Okay.

[Text] We max out our IRAs and have a little extra to play with. We’re youngish. And should be more aggressive with what investments would you invest? Your thoughts on crypto. I’m skeptical of crypto. It’s certainly gained a lot more traction in the last couple of years. And I’ve read that big asset managers like Fidelity and BlackRock are offering opportunities in crypto.

I will tell you that I personally haven’t and probably won’t invest in it. I just find that it’s not a currency. It’s a speculative asset. I know iShares has an exchange traded fund, IBIT, that is Bitcoin, just like IAU is gold or SLV is silver, but again, that would not be something that I would particularly be comfortable suggesting.

Now, having said that, I don’t know how your IRAs are invested, but you clearly want to have exposure to the stock market. And you want to have exposure to the international stock market. So if you don’t have international equities in your IRAs, then I would recommend a larger allocation.

Normally I would say something like seventy five percent domestic and twenty five percent international. But if it turns out that you don’t have international, then I will do more like fifty percent international, having said that, if your overall allocation with your IRAs and your This individual account should be 75/25% if you’re younger and more aggressive.

If you have your IRAs and something like certificates of deposit or something like that, then absolutely you want to be $70.25 in equities and fixed income. 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. Okay, let’s just see where the next text is.

[Text] Hi Carl, we have a nine month old and he recently inherited $10,000 from my grandma who passed away. That’s a wonderful gift. It’s a real legacy. 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 account.

Target retirement accounts really weren’t designed for this purpose, and because you have this basically 18-year timeline, I think you ought to be in equities and to some degree very similar to what I just said, $10,000, $7,500 in index exchange traded fund, either a total stock market or the S&P 500. And then the other 25% in the total international. You could put it in a college savings account, but I will tell you, if you do this other thing with the two exchange-traded funds, you pick up the benefit of having liquidity, and Kate, you can’t tell for the nine-month-old person, maybe she’ll be such a bright person that she’s gonna get scholarships, or maybe. Uh… We need some tutoring in middle school or whatever the case is and by buying these exchange traded funds they don’t distribute capital gains so they’re very tax-efficient they pay a very little bit in the form of dividends and you just reinvest those and increase your cost basis and then if you get any additional cash flow you add to that if you have any other gifts you add today you keep it in your name uh… And then it grows over time and you’ll be quite pleased based on my experience. When that person’s ready to have the money for education. 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.

This is Nell, you’re on the air. How may I help? I guess I did mean Neil. The print on my computer is so small, Neil, that I thought it was Nell. I apologize.

Neil [00:11:53] Oh, no problem. Thank you for taking my call. I was paying attention to the question that was about retiring abroad in social security. Actually, I happen to know quite a bit because I am in the process of doing that. You don’t need to be a citizen or no citizen, which permanent residence, legal residence, so there are half the social security. They can actually cash that abroad. They are, they can retire abroad. There are three, there are three groups of countries. The ones that you shouldn’t go, you mentioned a couple of them, there’re more. The second one is the middle way, which is a little bit of paperwork. And the third one is, the one that is actually friendly to this. There are countries like Panama, for example, that have a retirement agency. I think you need to show that at least your social security income is over in that case $2,000 a month and that varies from country to country. That’s very friendly and they facilitate the…

Carl Stuart [00:13:11] Great information Neil, thank you so much for calling.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Okay, here is the text that came in this afternoon.

[Text] Carl, can you explain what SIPC protection covers? Should investors be concerned with any coverage limits and look at splitting accounts across multiple brokerages?

SIPC stands for Securities, I think, Investor Protection Corporation. So I think most of us know that if you have deposits at a bank, you have what’s called FDIC, Federal Deposit Insurance Corporation. If you have money at a credit union, credit unions have a very similar model. And if you had money at securities firm, a brokerage firm, that’s what SIPCs is. I haven’t thought about this in several years, but I believe the coverage is $500,000. But the fact of the matter is, it’s coverage not for loss in the stock market or the bond market. It’s coverage if the brokerage firm fails. Your mutual funds are still going to be there. They don’t hold those. They’re going to in custody. The mutual funds still there. The exchange traded funds, the stocks and the bonds are still there, but the company’s bankrupt.

While I have not encountered this in any way in my 47-year career, I think it’s just common sense that if you have confidence in the custodian of your securities, if it’s a firm, a large firm like Morgan Stanley or UBS or Wells Fargo or Charles Schwab or Fidelity, I would have no concern about having cash more than $500,000. I have no concerns about having securities of any amount. People can’t keep tens of millions of dollars in the names that I just mentioned and don’t lose a minute’s sleep. So no, I would not go to multiple brokerages. Plus, I just think it would make your life a lot more complicated. So I’m very comfortable. I have the SIPC works, and as long as your cash balances are $500,000 or less, you’re covered. And frankly, even if your cash balances are greater than that, still I’m comfortable. And of course, if you want to keep lot of cash in your brook reach firm. You can always also ask whoever you connect with, your advisor or if you’re a do-it-yourself investor, you can also ask about CDs because these securities companies have access to certificates of deposit as well. Thanks for your text.

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 that came in today.

[Text] I just retired from the state of Texas. I should get a lump sum for my vacation time, probably around $23,000. Should I defer it to my 401k and 457 accounts or take the payment? I’m not in need of the monies. I’m 62 and I will not be drawing Social Security.

Frankly, I think all your income is going to be taxable in the future because you are part of the Employees Retirement System of Texas, so you have what we call a defined benefit plan. You worked there long enough that you qualified by years of service and your chronological age to get a lifetime benefit. This benefit, the responsibility to pay the benefit is not on you.

You don’t have to worry about the stock market or the economy or any of that. You’re gonna get that money. So as a result of that, putting more money in a tax deferred event where you’re going to have to pay the taxes eventually.

Anyway, I would like to see you be able to invest that. Yes, it’s taxable income coming out at 23,000, but I would take that because your other income’s fully taxable. You’re not gonna fall into a lower tax bracket. So there’s no benefit in waiting unless you can wait till January. If your pension income is gonna be less than the income you’re earning, okay, and you’ve earned so far this year, maybe you’ll have a lower income tax rate next year. I doubt it. You can just look up the tax brackets, the tax tables online, but I would not, I think based on your question and the fact that you’re going to have lifetime pension subject to income tax, I think I would not defer it. I think would take it out and I would invest it. The other thing I would suggest is this. I don’t know what we call risk tolerance, but that pension is like having a giant bond portfolio. You’re going to have lifetime income. It would take you probably millions of dollars of bonds to generate the income that you’re going to get if you’re a healthy 62-year-old person. Your big enemy is the cost of living going up. You cannot make ERS pay you more money because the cost to living goes up. You don’t know year after year whether you’ll get an inflation type bump on your income. So your cost of living and inflation are your enemies, and so you want to invest in the stock market. Sure, it’s risky, but over your lifetime, based on history, you’re gonna be glad you did this because that $23,000 will have a chance to grow so that should it come where you’re not able to live comfortably on the pension or the defined benefit plan, you can tap some of the money that now is worth a lot more than $23000 in my view. Thanks for the text.

Time for me to take a break. We have all of our lines available. No new text this afternoon. 512-921-5888, I’ll be back.

KUT Announcer Jimmy Maas [00:19:14] 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 [00:19:50] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:20:04] Welcome back to Money Talk. I’m Carl Stuart. You’re listening to KUT 90.5 and on the KUT app, as you just heard Lori say, call or text 512-921-5888. Okay, let’s just find the text. Here we go.

[Text] My friends and I have had discussions in the past about this topic without ever coming to a conclusion. So hopefully you can provide some clarity, assuming you have enough cash, is it better to pay for current occasional medical expenses with normal cash or with HSA funds? I currently have about $20,000 in my HSA invested in growth mutual funds and it is my understanding that it is almost the same as having them in the Roth IRA, so I have not been using those funds at all for any medical expenses, saving that money for retirement.

So I will tell you, I am not an expert on health savings accounts, and I’m glad that you have it invested the way you do. My understanding is that when you take the money out, provided it’s for legitimate medical expenses, that you’re not going to be paid income tax. But I presume that if you take it out for any other purposes, that would be a taxable event. So I would say this. If it’s quite a while before you’re gonna start needing to take it out, but say you’re a long time before you retired, for example, going ahead and paying it on your own and letting it compound in that growth fund is a terrific idea, but at some point, you’re going to want to start to take that money out. So I can’t tell from this about your age or how close you are to retirement, but I would say leaving it in there since you obviously have the cash flow to do something about it would be a good thing to do. So. If I were you, I think that’s what I would do. 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. And by the way, if you missed today’s or previous broadcasts, I came over to KUT in the first week of April. You can go to kut.org slash Money Talk and listen to the broadcast at your convenience. 512-921-5888.

[Text] Carl, great show. I’ve learned a lot and appreciate each tip you share. Thank you. Can you help settle a disagreement? Uh-oh, my wife will be 62 next summer in 2026, of more or less $21,000 a year of Social Security at that time. I’ll be 69 and I have about $55,000 of Social security. I say we take our Social Security and our other assets, about $1.2 million, to retire at that point. She thinks we should wait to draw our Social security later is the right approach. Can you comment? How should couples with an age gap approach retirement?

Obviously health concerns and longevity come into play, but what else matters or should be considered? If your wife is a healthy 62-year-old, she has to plan on living to be 90. Now that may not be plausible, I don’t know, or health situation, but you don’t want to be 85 and run out of money.

So you really want to maximize potential growth in your income. The nice thing about waiting until 70 is that period of time from full retirement age to 70 grows at 8% a year. There are no investments that you can make. That you will know you can get 8% per year. And if you’re 69 plus, if you wait until 70, you get that 8% return before you turn it on. I am not particularly excited about taking her money now at 62. I’m inclined to agree with her athletic compound, and you take your social security at 70. And you can take your 1.2 million. The general rule of thumb, that’s why I’m gonna be real careful how I say this, the general rule thumb is a prudent withdrawal rate. If you have say 60, 65% of the money in equity stocks and the balance in non-correlating assets, you can about 4% a year and increase that by the rate of inflation of the previous year. So 4% of a million too is $48,000. If you took $48,000 plus $55,000, that’s probably going to be plenty of money for you to live on and if that’s the case, then I would be inclined to wait to have her take Social Security and then when she does get it, you can stop, or not stop necessarily even, but you can reduce the amount of money you’re taking from your other assets because you have that big bump in her income as well. Great question.

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

Jerry [00:25:16] Yes, good afternoon Carl, this is Henry. I got you on Bluetooth but I’m in the countryside so we might get dropped. I’m going to try to be brief. I had a late start in investment and I invested in stocks myself because I didn’t want a broker to invest in things that I didn’t want contribution-wise. So I invested in BioGene, and I don’t know if I can tell the names over the- Sure, you can.

Carl Stuart [00:25:47] Sure, sure you can. Nobody, nobody knows who you are, Jerry. Say whatever you want, please.

Jerry [00:25:52] Because they were like doing research on mRNA and they were working with another company called Regulus Therapeutics, but their stock went down and just kept going down and down and now it’s like close to like zero, it’s, like.

Carl Stuart [00:26:07] You

Jerry [00:26:07] zero. So I don’t know if there’s, I know they’re not FDIC insured, but I don’t know if they’re things that we can do as consumers, like to prevent things like that from happening and losing everything. They’re still on the market but it’s like And my other question was about crypto because I wasn’t like in accordance with you because it’s already a reportable tax income so whether you invest to get dividends from it or not you still have to report it at the end of the year. Some investments you can get rewards like every week, every month, and almost every day and you have to record that so at the end you have hire someone to do it because it’s complicated.

Carl Stuart [00:26:49] So I’m going to answer, I’m not an expert on crypto. I’m gonna answer your first question. When you invest in stocks, you’re investing in an operating business. And operating businesses go broke all the time. And there’s nothing you can do except not invest in individual stocks, but that was something that you wanted to do. You were having an experience that I had early in my career that was really a wake-up call for me and the reason I stopped investing in individual stock.

There is no doubt that if you invest in individual stocks and you pick the ones that everybody in the world wants to own, you’re gonna make a lot of money in that stock. But you can also invest in a company where you believe that the outlook for the company is good and the stock can go down. I’m gonna give you two examples of local companies. If you had invested in the 1990s, 1995 to 1999 in Dell Computer. You would have made a fortune based on whatever amount you put in, okay? But then, it went all the way to 70, and then it went to $10.50, and Mr. Dell took it private. You had a massive loss if you bought it at 70. That doesn’t mean it was a bad company, that’s just what happened. Another example, during the last half of the 90s, Whole Foods Market was a very poor performing stock, and people would call me on Money Talk and say, What’s wrong? I go to the grocery store and it’s full of people but the stock just sits there. Then when the dot com bubble burst and the tech stocks collapsed starting in March of 2000, the next seven or eight years, Whole Foods was a terrific investment. So two things can happen to stocks that are not good. One, the business can fail, competition, poor management, whatever. The second is you can be in a good company but nobody cares. Right now, we’re in a situation in the U.S. Stock market… Where the big performers are Nvidia, and Amazon, and Microsoft, and Apple, and companies like that. There are plenty of good companies out there who are not doing very well in the stock market, but their businesses are growing. Based on my 47-year experience, things will change, and the companies that are leading the race now will not lead the race five years from now. So if you want to invest in individual stocks, you have a couple, a big risk. One, you don’t have any diversification. Because you can’t know companies and other industries. And secondly, you stick in the United States because 50% of the world’s public companies are outside the United State. So what you experienced, I’m sorry that you’ve experienced this Jerry, but what you’ve experience is very common. I had the brokerage firm I worked for at the time recommended a stock. I didn’t hardly have anybody to sell it to, but I bought it at 32 and it went to zero and I learned my lesson. I’m gonna invest in mutual funds and exchange traded funds where I’m not gonna eliminate my risk, but I am gonna eliminate the risk of it going to zero. So I’m sorry you’ve had that experience, but it’s not uncommon in the stock market.

Jerry [00:29:49] No, I was trying to diversify too, so…

Carl Stuart [00:29:52] Yeah, okay. Good luck, thanks for calling.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text, and you heard the text come in a while ago, call or text 512-921-5888. Let’s just see.

That is a first time during the show. I just got a junk mail, so we’ll just have to go on down here and look at some of the previous texts, so bear with me while I go down there. Here we go.

[Text] Hi Carl, my question is, I have a pension with the state of Texas. How much more money should I be additionally saving for retirement versus investing in a brokerage account? My income currently sits right around $100,000.

So I would suggest that you should be saving but investing. I think the two are the same. I think you should investing in a broker-age account in equities and stocks and the The reason is, what I said earlier… Is when you have a pension, whether it’s the state of Texas, the teacher’s retirement system, a city, county, the fact is that the cost of living goes up and your pension income doesn’t go up or doesn’t up enough to keep up with it. So then you have to have some other investment that, based on history, goes up more than inflation. There are two of those, income-producing real estate, not residential real estate and common stocks. Income producing real estate, because over time, rents go up, and as rents goes up, that means the value of their real estate goes up. Does it always work? Absolutely not. People have lost a lot of money in real estate in Texas before, and in California, and probably everywhere else. But that’s how that works, and you don’t want to be a person that has to go out and call on the renters because they haven’t paid their rent. The other one is you’re investing in human ingenuity, and that’s stocks. And because that will grow over time and it will have bad years. 2022 was a real stinker, it will have bad years, but you’re not investing for a year, you’re investing for lifetime so that you can offset the risk of rising inflation. So that’s what I would do if I were in your shoes. Thanks for the text.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. And I’m just looking here at my script, call 512, try to do three things here at once. Read the screen, read the text, and read this. 512-921-5888. I’m just not that smart. Here we go. We got a caller. Randy, you’re on the air. How may I help?

Randy [00:32:27] Hello, Carl, this is Dithering Randy, a long-time listener, and you helped me set up my balanced approach when I retired at 60-40. But I’m now in my mid-70s, and I’m wondering what the magic numbers are for my age, or Also, who is the authoritative source of that information or? Should I just call your show every five to ten years?

Carl Stuart [00:33:01] I think that’s the answer, Randy. Thank you so much. So, you know, you sound like you’re an energetic, healthy person. Am I right about that, Randy?

Randy [00:33:13] So far it’s a positive attitude just doing it.

Carl Stuart [00:33:16] You have to plan on living a long time. When I first got into this work, 47 years ago, people said, you’re supposed to put your age in bonds. It’s just a terrible piece of advice, because people, by the time they hit 60 or 65, they had 60 or 75% of the bonds. The bonds can’t grow in value, because they’re bonds. The income is the income, but you outlive that income. And so I really have learned. That people say, well I’m 60, I need to be more conservative. Not necessarily because you can outlive that stream of income from the bonds. And I would tell you that, in my view, 60% in stocks for a healthy 70-year-old is not a bad thing. What you might consider is think about if there are other assets that you can study besides bonds. Have bond-like returns that are not susceptible to rising interest rates like bonds are. Now that’s real jargon and I have to be very careful here what I say because I’m not giving specific advice but I have learned over the years that there are other strategies available in mutual funds and exchange traded funds that allow me to take some of the bond risk off and still get bond- like returns. A couple of them fancy names one’s called market neutral. You can listen to the podcast and write these down. And another is called merger arbitrage. OK, fancy terms that I that have bond like returns. But when bonds have gone down like they did in 2022, these strategies either held their value, went down one percent or went or went up about five or six years ago. I also reduced my bond allocation and my personal account. And I added gold. Now, gold’s been a huge performer. It’s up 32% over the last. Over the last 52 weeks, but if you buy a gold exchange traded fund that has daily liquidity, I think over the next five years that will be helpful for you as well. But there’s no question that it’s had a heck of a run, but so is the stock market for that matter. So I would consider if you wanted to cut back on the equity side at five to six or seven percent perhaps in gold because it’ll have more volatility like stocks and on the on site. Cut back from 40% and pick up 5% each of those two other strategies, and I think you’ll have a smoother ride over the next 70 years.

Randy [00:35:51] Oh, boy. Okay, thank you, Carl.

Carl Stuart [00:35:53] 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. Let’s see what this is.

[Text] Question, I have $35,000 in credit card debt, $200,000 dollars in investments, and 5,000 returns income each month. I am planning to refinance my house. The interest rate will go up from three and a half percent to six and a halve percent to pay off the debt. Zowie. Not what I wanted to do, but I’m not sure what is best. I’m 71 years old. By the way, the debt is because I helped some family. Thoughts.

You have $5,000 in monthly income from pensions. Should I withdraw the money from my investments? Boy, that’s tough. Because interest rates on credit cards are at least 20 percent so you’ve got to reduce that you’re right uh… I think because you have only two hundred thousand dollars and and and investments uh… And you have sixty thousand dollars in debt and you’ve thirty five thousand credit card debt uh… I guess i would probably lean toward refinancing at six and a half but that’s just painful. If you took the $35,000 out of your investments, you’d have $165,000. I can’t tell, and you have the investments and they return $5,00 each month. Yeah, I think I would, I do the home loan, I’m sorry you’re in this situation. You’re a good person to help out your relatives. But I’m starting a situation where I think that I use the refinancing on the house because at least the house has a chance of growing in value.

You’re listening to Money Talk. It’s time for me to take a break. A great time for you to call or text 512-921-5888. I’ll be back.

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KUT Announcer Laurie Gallardo [00:38:43] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:38:58] You’re listening to Money Talk, I’m Carl Stuart. We’re here together at KUT News 90.5 and on the KUT app. And by the way, if you wanna listen to today’s broadcast again, or for that matter, any previous broadcasts since the first Saturday of April here on KUT, all you have to do is go to kut.org slash Money Talk. But this afternoon, call or text 512-921-5888. Here is a text that just came in.

[Text] I invested in common stock NVIDIA right after September the 11th, a long time ago. It is currently dominating my portfolio, I’m sure that’s true, and I want to rebalance. What’s the best way to reduce my tax burden when trying to re-balance and be more conservative?

Well, you own this in your own account, you have long-term capital gains because NVIDia has just been on fire. There’s no way to get around it because when you sell… Some of these shares, the custodian, broker dealer, securities firm, after the first of the year, you’re going to get a 1099, you get one every year anyway, and it’s going to have your cost basis in the sales proceeds and it is going to say what your long term capital gain is. The good news is long-term capital gains rates are tied to your income. But they’re much, much lower than your income tax bracket. They can be somewhere between 0%, 15%, 20%, and 23.8% versus income, which goes all the way up to 37%. So what I would do is I completely agree with you. I think you’re doing the wise thing. I have no idea how much higher Nvidia’s gonna go, but by getting, I would tell you that if you were a portfolio manager and you were an active equity fund portfolio manager. And you had purchased Nvidia on September the 11th, that you would be pulling some of that out, not because the outlook for Nvidia is bad, not at all, but because you are out of balance, and if and when, and I suspect it’ll be when, Nvidia takes a big nosedive, it’s gonna have a really deleterious effect to your portfolio. So I think you’re thinking very correctly. I also think that you just have to recognize. There’s no way to avoid the taxes, but you’re creating long-term capital gain, which is a lot better than income. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. We have all of our lines available. I think I’ve gotten through today’s text, 512-921-5888. Let’s just see. Oh, here’s one that just came in. I can’t believe you’ve already been on since April. Wow, love your show. Keep it up. Thanks, you’re welcome.

Oh, this is a great one. Ha!

[Text] Carl, I just purchased a winning Powerball ticket.

Well, congratulations. Ha, I’ll give you a call next week and we can decide how to invest the $453 million. Bob, okay Bob, I’m counting on it and so are the rest of our listeners.

Let’s just see if I’ve got something else here where I can go down if I haven’t answered all of these from the past.

[Text] Okay, I have a question. I see when this was last week. I have a question, my mom and I jointly owned a home. We had a transfer on death on this home. She passed away two years ago. When I go to sell the home and my tax on the whole house or just on your portion, my understanding is your tax on a whole house.

As I always say, I’m not a CPA, but if this were a joint securities account and she passed, because it was transfer on debt, it wouldn’t go through probate, you would get a step up on basis. A cost, step on cost at the time of her death, just as if it were a husband and wife. That’s now your new cost basis. So it’s the new cost base that’s in your home. You can use the appraised value. In my opinion, I’m not a CPA. And then you will pay tax on the gain because you own it and you don’t have a joint owner any longer. My understanding is the first $250,000 of gain over and above your new costs basis from two years ago is not subject to tax. Then everything over that is subject to tax. You may be in a situation because of that step up in cost basis that you won’t have, that the gain will only be $250,000 or less. We had that huge run-up in central Texas real estate, but that was three or four years ago, so it’s entirely plausible that you may not have a gain or may not a large gain, so good luck.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Let’s just see if I’ve got, what’s this?

[Text] File a gift, that’s about gift tax. I guess I was, this is, somebody was talking about giving gifts. That’s all right, what we’d rather do is go back and get today’s text. So let’s just about that.

[Text] Carl, I’m a 53-year-old with a stock portfolio that was gifted to me when I was 13 years old. Wow, 40 years ago. Amazon, Coca-Cola, I’m sorry, I misread that. Amgen, Coca Cola, et cetera. Incredible gains now. Not sure what to do other than sell. We have terrible capital gains and have terrible cap gains, question mark. In the 35% income tax bracket, what to to?

So let me pull out my handy tax table. If you’re in the 35 percent bracket and I believe you said we, so I’m gonna assume that you are joint, You were filing, married, filing jointly. 35% bracket is your income is above 501,000 and not above 751,00. I will tell you that you will have probably 23.8% to pay on that, but that’s a lot different than 35%. And if you have a concentrated portfolio because these companies have done so well, as I said to the other tax person, I would start to pare it back. You don’t have to do it all at once. But it is essentially a flat tax. You’re not gonna pay more capital gains rate if you do it all this year, or part this year and part next year. So I don’t have an opinion about the timing of it, but if it’s grown that much, I think the risk is that you have concentrated portfolio and then we have big declines and a lot of your wealth evaporates. I know no one likes to pay taxes, but you’ve done really, really well and you’ve invested. Or whoever gave you that when you were 13 years old that allowed you to invest in human ingenuity and you’ve been a huge beneficiary of that and I would take some of the chips off the table if I were you. Thanks for your text.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here we have a call. Steve, you’re on the air. How may I help?

Steve [00:46:12] I’ll turn 65 this next year. I might have caught you just answering some of this in the last couple questions back, but I have pretty good income coming in with rental and some investment. I’m doing pretty well. My question is, do you think I should start my Social Security now and go ahead and invest that and something. Something like, you know, the S&P rather than waiting until I’m 70 when I’m getting more. Now, I know you said something about it. They do. You said something about there’s an 8% increase that you can’t beat in the stock market.

Carl Stuart [00:46:57] Little curious about that. Yeah, well, what I hoped I said is it’s a guaranteed 8 percent, because I can’t guarantee you 8 percent of the stock market. I can guarantee you that it went down 19 percent in 2022 and it went up over 23 percent in 2023 and 2024 and it’s up 10 percent year to date. So what you have to decide is the risk-reward trade-off. Is the guaranteed 8% more attractive. Then the potential for a higher return, but also the potential of a lower return. Have there been five year periods when the S&P 500 has returned less than 8% annualized? The answer is you bet there have. And so the fact that you have rental income tells me that you’re an investor and that you are accustomed to risk. I wouldn’t talk you out of putting it in the SMP, but I would tell you if you’re gonna, my current thinking is that if you gonna, If you’re going to take the social security benefit, I would say that you want to also not just do the S&P, but you want add a significant portion international. International stocks have underperformed U.S. Stocks for years and years and years. Today U. S. Stocks as a group are more expensive than foreign stocks and the dollar is weakening and when you have a weakening dollar and less expensive stocks abroad, based on my experience. That’s setting up for several years of international outperformance. I don’t know when that’ll happen, but it’s happened in my experience. So if you’re comfortable with the risk of foregoing the guaranteed 8%, then I would put it in the S&P or the total stock market. It’s got a lot more stocks in it. It’s very similar in return. This year so far, the total market ETF, I followed up 10.51. In the standard and poor ETFs up 10.72. So there’s not much difference, but the international ETF is up 22.36. So I think if you are more on the risk side, then go ahead and get to Social Security and invest it in global equities. I think you’d be comfortable with that.

Steve [00:49:07] But now with the five years that I wouldn’t be getting money and waiting if I were to wait, that would be compounding as well with the investment, am I just not thinking.

Carl Stuart [00:49:21] Your future income is compounding, the difference between full retirement age and 70 is 8% so your future income check is growing at 8% per year.

Steve [00:49:32] Yes. That was something I wasn’t quite aware of. Thanks so much.

Carl Stuart [00:49:36] You bet. Thanks for calling.

You’re listening to Money Talk on KUT News, 90.5, and the KUT app are running out of time. It’s a good time to call or text 512-921-5888.

[Text] Hi Carl, my nephew just turned 18 and is receiving an inheritance of about $500,000. How would you advise him on what to do with this substantial amount other than Don’t blow it.

Well, Sarah, that is a really really really good piece of advice. So let’s just start off, since I don’t know your nephew, so I’m not criticizing him. He’s 18. We know the prefrontal cortex where judgment occurs doesn’t mature until 26 or 27. And the way we males behave when we’re 26 or 26 is entirely plausible, it doesn’t mature then either. So he’s not in a position to make thoughtful decisions. He hasn’t had enough life experience, but he’s 18. You need to decide this. You’re either going to help him and he’s going to do it himself, or you’re going to engage an advisor. I’m very clear on this broadcast that I do not put my finger on the scales about having an advisor or not having an adviser. Because not having an advisor… It’s dirt cheap, and you live with the consequences. Having an advisor between you and the investments, if you make the right choice on the advisor, that person deserves to get paid, just like your CPA gets paid or your attorney gets paid, and you need to go through a thoughtful process to select an advisor, then she or he can help your nephew so that it will grow over time. This is a magnificent gift, and this properly invested and patiently invested will be, let’s just take 6%. In 12 years, when he’s 30, it’ll be a million dollars. And in 12 years when he is 42, it will be two million dollars and 12 years he is 54, it would be four million dollars and when he 66, it’d be eight million dollars, that’s right, at 6%, that’s a reasonable, in my view, plausible rate of return. In global equities. So that’s where I would go with it. He should go on and select, perhaps if it’s good for him, go to university. He should try various careers. He should leave this alone. I have absolutely seen this occur. Just had a 13-year-old conversation with a woman that started getting in here at this size when she was 13 and now she’s gonna put $500,000 in a donor advised fund to give away the money. And she’s built a house for her mother and she still has plenty of money. So this is a wonderful opportunity handled wisely and prudely. Take your time and good luck. Thanks for the text.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app, 512-921-5888. Here we have a caller. Dave, you’re on the air. How may I help? Hi there. Hi. Thanks for taking my call.

Dave [00:52:58] I’m recently retired from the state of Texas and I have a decent pension, but I also have my own investment of which I have little over half invested in mutual funds and the remainder is in treasury bills. And I’ve been doing that for a while and I’m pretty comfortable with that. So I know, just had some questions about, you know, mutual funds. Are there anything else like, do you think ETFs are a better investment for the stock market? I don’t really want to pick individual socks And then on the treasury bills, I know interest rates will probably be going down soon on that. Is there anything other than that that’s fairly safe that I could invest in? I know you mentioned bond funds before, but I didn’t really follow that. So I’m just curious about the mutual funds. What could I do other than the mutual fund is good for half my portfolio and then the treasury bill.

Carl Stuart [00:53:55] So, of course, mutual funds have been around forever, like since the 1930s, and exchange rated funds are much more recent. There are two benefits to exchange rated funds. One is they tend to be very tax efficient. They tend not to distribute capital gains. And the ones that are index ETFs don’t distribute capital gain, and they’re cheaper. So, when you have lower expenses… Over a period of time, your return, if you had two funds, a mutual fund and an exchange traded fund, and they were invested exactly the same, in theory, you’ll have more money five, 10 years from now in the exchange traded fund because the annual expenses are lower so you keep more of the return. So if you put, so exchange traded funds, I like them for what I call passive investing like the S&P 500, the total stock market, the international total stock market. When it comes to active management where there are active people managing portfolios, if they have an exchange traded fund that is substantially similar to an active fund, I’d probably look at the exchange traded funds. If they don’t, then I would don’t have any problem with active management in mutual funds and stocks. What I have observed over my career is that some managers will do better in good And some managers will do better by not going down as much in bad times. I can’t find managers who can do both because when you buy an actively managed fund, you expect them to not look like the Standard& Poor 500, not to look like NASDAQ because if they do, you might as well put your money in the ETF. It’s a lot cheaper and more tax efficient. You want to stray far away from the index with small amounts of your portfolio if you want active management, which is what I do personally, but the bulk is still in the passive funds. As it comes to bonds. If your view, and I think your view may well be accurate, the rates are gonna be falling. I’ve said this before on the broadcast and you can listen to today’s podcast if you want to. I like three different funds because I think it protects me better on changing interest rates. I’m using the categories that Morningstar uses. Short-term or ultra short-term bond fund, an intermediate or core CORE bond fund. And a multi-sector which is a go anywhere bond fund. Now bonds have had a good year this year. The index which is the Bloomberg AG is up 5.01% through yesterday and it has a trailing 12 month yield at 3.82%. The biggest bond fund I’m not recommending, you can buy the ETF, AGG. The biggest fund is not actively managed, it’s passive BND, that’s Vanguard at 4.97. I like active management, I like a short-term fund. The one that I like is up 3.2% and the trailing 12-month yield is 4.78. And then I get that core fund, the one I’m looking at as a barometer or a benchmark is up 5.35% with trailing twelve-months yield 3.95. And then the multi-sector, which can go anywhere, U.S., foreign, etc., etc., has had a very good year, up 7.38 and has a 6% trailing yield. If rates go down, that short-term funds that is not going to go up very much because rates are coming down and they’re reinvesting at lower rates. But the other two will give you capital appreciation as well as better income. If rates goes up for some reason, then the short one will be better.

I’m going to have to get off the air. I hear the music in the background. A lot of fun today. Marc, thank you for doing a great job. Thank you for listening everybody and next Saturday after the news at five. Be sure and tune in to Money Talk.

KUT Announcer Laurie Gallardo [00:57:48] 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.