Money Talk with Carl Stuart

Carl Stuart takes your calls and texts on a lot of questions, including from the treasurer of a Home Owners Association about managing their reserve funds, a retiree who moved to the Austin area and wants advice on what to look for in a financial advisor here, and from an investor looking to push his luck on under-performing Russell small-cap funds.

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

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

[Carl] [00:00:20] Good afternoon, and welcome to Money Talk. I’m Carl Stuart, and you’re listening to KUT News 90.5 and on our KUT app.

Today, like all days, the show is about the world of financial and investment planning, where you always derive our agenda by calling or texting 512-921-5888. It’s always a terrific idea to call early in the broadcast. I take today’s calls first and then any Texts that I’ve received today than any previous text. I don’t have any previous texts. I’ve answered all those last week, and so we have a clean deck today. So, call or text, 512-921-5888.

If you’re a long-term listener, you know what happens next. If I don’t get any calls or texts, is that I will be bloviating. I was actually talking with a medical professional who’s a long-term listener. He said he misses the bloviation. Well, I’m not so sure that that’s a widely held opinion.

You will hear the noise go off when I get a text because that’s how I know you’re texting me. 512-921-5888.

So, I’m gonna, these are evergreen topics and I touch on them when they’re relevant to the question, but I also find that a lot of people need to hear this. More than once because it’s so important as you think about saving for retirement or for a college education or to leave a legacy. And frankly it’s a technical difference and it’s the difference between what we call diversification of your investment assets and the correlation between them. The diversification concept, very straightforward, we think about the choices let’s say in your 401k plan You’ll probably have some various stock funds. And bond funds, you may have a money market fund opportunity as well, and occasionally you may a commodity fund or something else like that. And the idea is that you don’t put all of your eggs in one basket because the different asset classes don’t always perform together. So generally speaking, way back in decades ago when I got started in this profession. We thought that we should have 60% in stocks and 40% in bonds because typically what happened was in good times when the economy was growing, the stock market would go up and then when the economic was shrinking, the Federal Reserve would lower interest rates and bonds would go and so they were somewhat negatively correlated one to the other. And that was really fundamental and if you own a balanced fund. And that was the basis of a balanced fund, that it had more or less 60% in stocks and more or least 40% in bonds. Now that’s not a bad way to start, but I have learned through thick and thin that there are lots of other asset classes that you can add that will be beneficial to you over the horizon for which you’re investing.

By the way, call or text 512-921-5888. Here comes the text. You heard it. Here we go.

[Text] I’m an HOA, that’s a Homeowner Association board member.

Good luck with that. I was treasurer of ours. What a thankless job.

[Text] And I’m curious to hear your advice on managing the $1 million we have in reserve. They’re currently in CDs and CDARS, CEDARS. Okay, so for everybody else, CEDARs is a program that banks can utilize so as to take money. That will be in CDs but exceeds $250,000, the FDIC limit. And so if you will, those CDs, that money is farmed out to other certificates of deposit in the participating program so that you know that you’re covered by the FDIIC insurance. Other banks who don’t participate in CDARS, also, it’s my understanding, I’m not a commercial banker. They can style the various accounts up to maybe six different stylings and get enough coverage there as well. So CDs are fine, not my favorite. I’ve been in the situation you’re in, frankly I am, right now with a couple of non-profit organizations and what we’re doing is that we are staggering U.S. Treasury securities.

So, if, just make this hypothetical. If you have a million dollars, you could put $250,000 in a six-month, a 12-month, an 18-month, and a 24-month treasury security, and then every six months, you knew that you had a quarter of a million coming due. And if you didn’t need that money, the other ones last, six months earlier, you had one year, that’s now a six-month, and you just go out to your two-year. Over time, interest rates will go up and down, but this is the safest way to do it in the sense that you don’t have to worry about the FDIC coverage, because you’ve got the full faith and credit of the United States government, and you have liquidity, and not that you’re ever gonna sell them, but it’s plausible that you can sell them for more than you paid for them. Of course, if you had an emergency and you chose to sell one when interest rates were higher, and let’s say you were selling the two-year one, you could have a loss. So you want to really understand your cash flow needs, but I like the idea of staggering treasury securities and I would suggest you and your colleagues look into that. Thanks for the question.

You’re listening to Money Talk on KUT News 90.5 and the KUT App. Call with your questions or text me at 512-921-5888. Bob, you’re on the air. How may I help?

[Bob] [00:06:25] Hi Carl, nice to talk to you again. Thank you. I have ran across a concept, someone was brought to my attention and it’s basically the difference between the Russell 3000, which we know those stocks have been in the toilet for about four or five years now. The concept was selling out of the Russell, Russell 3000, like all of your small caps, and instead investing your money in a high-yield bond ETF. I know risk and I’m a very risky investor and I can afford to take the risk but give me your pros and cons on that.

[Carl] [00:07:06] Yeah. So the 3000 would be large and small-cap stocks. The 2000 is the one that’s really underperformed. The 2000 as is both growth and value. The 2000 growth is outperformed the 2000 value. But the Russell 2000 has sharply underperform the S&P 500, which is mostly large-cap because of its market weighting. I am not a fan of this strategy. I see high-yield bonds. As a highly correlated to large-cap stocks. I was doing some work today when I was getting ready to talk about correlation. And you can do this too. It’s an open website, the JP Morgan Guide to the Markets. And if you go there and you go to this segment that’s called alternatives, you’ll see a grid where you have about 10 or 12 different asset classes and you’ll how they’re correlated one to the other. So in a perfect correlation, two assets to go exactly in the same direction at exactly the same time, you would have a 1.0 different correlation. And the US large-cap stocks have a correlation to high-yield bonds of 0.87. So yeah, all you’re doing is loading up more on the risk of large-cap stock, which is not what you wanna do. So I think that as I think this through, I think that’s a remarkably bad idea. Yeah, it just there’s no question that if you- if you put any kind of value metric, the international is cheaper than than domestic and small-cap is cheaper than large-cap. And that’s just a function of this bull market that we’ve had in the for the last several years. And so I’m enough of a value investor that I like the small-cap space and I like international space. But I think selling small-cap stocks and buying high-yield bonds would be a very bad idea.

So, do you go with a small-cap growth or value? I don’t I don’t make that bet. I’d buy the Russell 2000 if you’re a passive investor or if you really are a contrarian, if you are the kind of Warren Buffet kind of investor, you can buy the small-cap value. They have really stunk it up. I have a small-cap value fund in my portfolio. And I’ve met my colleague, Lindsey. I met with the portfolio managers in New York two weeks ago. And they just look like a terrible group of investors. And yet, Morningstar ran a 10-year model and said, what are the best funds to hold up in the bear market? And that was one of the 10. So it’s just way out of favor. It doesn’t mean that somehow. These managers took a stupid pill. So if you’re a passive investor and you want to be a contrarian, the Russell 2000 value or a small cap value active fund, either one of those would fit the bill.

[Bob] [00:09:56] If I knew I’d live as long as Warren Buffett, I’d go ahead and make that bet, but who knows?

[Carl] [00:10:01] That’s exactly right. OK, Bob, thanks for the call. You bet. You’re listening to Money Talk on KUT News. I beg your pardon, the old brain goes right there. KUT news 90.5 and on the KUT app. Call or text 512-921-5888. Jim, you’re on the air. How may I help?

[Jim] [00:10:25] Well, this question has become highly politicized recently. Yeah. So there is very few sources to have information, instead of argument. Yeah. I’m really curious. I want to understand how social security is not upon these things. I mean, the early adopters, old people are going to get their money. The new investors- myself, other young people- are going to get hosed. And it just really seems like a they’re robbing the new investors to pay out the old investors, which is my understanding. Everybody insists it’s I’ll find you a scheme I’d like.

[Carl] [00:11:13] Yeah, yeah. I mean, technically, a Ponzi scheme is what Bernie Madoff did, which was he guaranteed people a certain return and he would take the new investors money to do that. The Social Security system started to I think it was something called the Old Age Security Act. And we had something like 30 or 35 people in the workplace for every person who was 65 or older. And the people were dying three or four years after they started getting benefits. So my grandfather, who was born in the 19th century, never had to worry about it. Then the baby boom came along, and as long as we were in the workforce, that was terrific. But now we’re receiving Social Security benefits. So the fundamental math worked. It wasn’t a Ponzi scheme, but the population demographic changed. That’s all that happened. And so the answer to your concern is yes, that’s going to happen. It’s gonna happen soon. The next six or seven years where the trust fund will still be there, but it won’t be sufficient to pay out all the benefits. And because we live in a representative democracy, no president and no member of Congress wants to stand up and say, I’m for cutting benefits. The answers are very straightforward. But people don’t want to do it because they don’t want to get thrown out of office. Here are some of the things that could easily fix it. You draw a line in the sand and you say people of a certain age are not gonna get the full benefit, number one. Number two, you change the cost of living adjustment. Number three, you move out later years for the full retirement age. And number four, this is the easiest one because right now, Once your income, a taxable income passes $169,000, you don’t pay Social Security. Think about that. That hasn’t been very much adjusted for inflation. We have lots of two-runner couples where they’re both making $125,000 as 250,000 and on $80,000 they don’t paid Social Security so it’s not a Ponzi scheme. Your concerns are totally valid and based on what we typically see in the United States We’ll wait till the very end. Until it’s a crisis and then we’ll make some adjustments. So thanks Jim for your call.

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

[Cynthia] [00:13:49] Hello uh… I was wondering how do i open up with bank account

[Carl] [00:13:55] I have no idea because there are all kinds of regulations about that. Of course you have the currency risk, and as a U.S. Taxpayer, I’m assuming that any foreign bank will be required to report whatever interest you get. So what I would do is go to our best friend Google and ask that, but I happen to have some friends who are ex-pat Americans who live in Paris and live in England, and it’s complicated. It’s even difficult for an expat to open up a bank account in some countries because those countries don’t want to be responsible for complying with all the US rules. So first of all, it’s hard. You’ve got to really want to do it. And I think if you really want to do, I would just Google it. But I would discourage you based on my experience, Cynthia.

[Cynthia] [00:14:47] Okay. Well, thank you. I appreciate it.

[Carl] [00:14:49] Okay, 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. I’m going to take a break. I’ll be back.

[KUT Announcer Laurie Gallardo] [00:15:20] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

[Carl] [00:15:34] Welcome back to Money Talk, I’m Carl Stuart, and you’re listening to KUT News 90.5 and on the KUT app. When you have a question, call or text 512-921-5888. Here’s the text.

[Text] Carl, really appreciate your move to Kut. Thank you, I am thrilled. One of your fortunate long-term investors, I am about to withdraw a significant amount. Roughly 5% over and above my required minimum distribution. Taxable and IRA accounts are almost equal. From which should I withdraw?

Terrific question. So it really depends on your long-term goals and objectives. One of my two favorite books many years ago was a popular business book. It was called The Seven Habits of Highly Effective People. And when I face tough decisions, or even just important decisions, I ask that the first habit is begin with the end in mind. So here’s the thing. I’m gonna assume, because this has been my observation, that you are not gonna spend all your capital. That at some point, you are gonna pass away and there’s gonna be money left. Now, if that is in an IRA, your beneficiary, if it’s your spouse, then she or he will take money out as a requirement of a distribution and pay income tax. If it’s a child or grandchild or some other third party, they’ll be responsible for taking the money out over no more than 10 years and paying income tax, when you die, if you were a single taxpayer and you have an individual account, what we call it and you and I call a taxable account about the only good tax law there is, is all those gains disappear, that’s right. So let’s assume that you’re married. You die, you have this taxable account, your spouse gets the assets, and his or her cost basis is the value at the time of your demise. Then she or he doesn’t spend all the money, it continues to grow, and then when she or she passes away, her beneficiaries get the assets with a step up in basis. It’s the most tax-efficient way to pass on assets. So if your long-term goal is to leave a legacy, then bite the tax bullet and take it out of the IRA. If you prefer to reduce your taxes to the extent that you can, then take it from your individual or taxable account because you’ll be selling at the long-term capital gains tax rate, which is a significant discount to the income tax rate. So begin with the end in mind, decide what it is you’re trying to accomplish, and then proceed from that. Thanks for the question.

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

[David] [00:18:40] Yes, Carl, this is David Crump, and I appreciated your very intelligent comments about Social Security.

[Carl] Thank you.

[David] I’d like to hear your comments regarding Medicare financial stability.

[Carl] [00:18:56] I think this is, in my opinion, the biggest challenge that we have from a government. We have the government entitlements of Medicare, Medicaid, and Social Security. And our health care system is a mess. In terms of expenditures per capita, we rank number one in the world. And in terms of health care outcomes, we ranked 17th. Now, you and I may have access to good health care. But a lot of Americans don’t. And so the healthcare system is broken. There’s nobody involved in the system who says to me, boy, I love this system. Doctors or hospital people or any kind of healthcare professional, it’s a mess. And I don’t have an answer because there are, coming out of World War II, it was fascinating. What are now our allies, the Germans, the French, the Spanish, the Brits, they were decimated and they didn’t have a private insurance industry and so they created national healthcare. We had a booming economy, we didn’t national healthcare, and General Motors had to compete with Ford for workers, so they started offering two things, a defined benefit pension plan and health care. As a way to compete for labor. It worked great till it didn’t. The problem is, if we go back to the Europeans, while it’s controversial in this country, most Poles in Europe say people like their healthcare plan, but they’re having the same kind of problems because it’s demographics, right? Because we got older people, so we have more demand for healthcare, and they’re running into trouble. This is an absolute mess. And when I talked to a prominent Central Texas health care attorney, he said the issue is any time someone makes some organization suggests a change, you’ve got the physicians, you have the lawyers, you have insurance companies, you have the patients, you the hospitals. Two or three of those get together to oppose it because they don’t want their particular ox to be gored. I just, I’m sad to say. I think that it will be like I answered the other person on Social Security. I think unless and till people who are on Medicare like you, all of a sudden, not all of sudden perhaps, but over time, experience a real deterioration in your access to good healthcare, there won’t be enough pressure to do anything about it. The taxes is 1.35% of taxable, when you work, 1. 35%. Your employer puts in 1.75%. The answer is right there. You gotta raise it. You gotta rise it. And I will tell you the one thing that I’m very optimistic about. I was at a program at the University of Texas and Dean Puccinelli, or however she pronounces her name, interviewed a gentleman who had run the hospital up in Rochester, the famous one, and then Michael Dell. And they were talking about artificial intelligence and the healthcare system. Michael Dell, who I don’t know what the heck he’s talking about, says, I’m making up this number, but it’s order of magnitude. If we spend $7 trillion on healthcare, we spend two trillion, or three trillion, say two trillion on operations back office. He thinks AI can eliminate 70% of that cost. And you know, that would be fantastic. So technology could help. But I think we have to raise taxes. And unless and until we do that, the system is just going to get more and more, it’s just going get worse. So higher taxes, Frank, I can say that, I’m not running for office today, but that’s the only answer. We’re not going to do anything until it gets a lot worse, I’m sorry to say.

[David] [00:22:59] I’m a student of this fiscal financial issue and I’ll tell you, Medicare is going to destroy our currency.

[Carl] [00:23:08] Well, and that and just the debt, government debt is going to, it’s a huge problem. Well, thanks for the call. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888.

Joanne, you’re on the air. How may I help? Hi, Joanne. You know what? I got you on hold. I apologize. Don’t go away. Joanne, are you there? Okay, Marc I says it says on air, and I click on the on-air sign, like I did with the other one. It turns red and I do not hear Joanne. So I am just gonna I apologize Joanne. Let’s see. Let’s just read yours- try again. Okay. Thank you Joanne you’re on the air. How may I help? Okay, I’m gonna read this. It’s on the screen here, Joanne. I’m sorry we’re having a problem, because when I hit on air, it’s worked every other time this afternoon, but it’s not working now.

[Text] I’m a widow. I have a financial advisor who lives in another state. He’s going to retire in a year or so. Could you give me advice on how to pick another financial advisor?

Boy, this is an evergreen question. I’m so sorry that I can’t talk to you, because I’d really like to have conversations. This is really, really important. Two kinds of people when it comes to investments. Do-it-yourselfers and people who don’t want to do it themselves. I’m not gonna go there right now because I want to answer your question specifically. You are one of the people who doesn’t want to do. I don’t wanna do my own income taxes, that’s why I have a CPA. So, you’re a person who wants to have a professional help you. I would tell you this, you live in a city in an area with a robust selection of financial advisors. I would, the first cut I think I would make is, I would look for people who are fiduciaries. These people are called investment advisors. Their companies are registered investment advisors and their legal name is investment advisor representative. By being a fiduciary, they’re not supposed to take any transaction compensation, no commissions. Also, they’re required to put your interest above theirs. And they have what the law calls a duty of care. Right off the bat, I think that’s a good thing. That’s a good thing because they charge you a fee based on the value of the assets. So if your portfolio declines, they get paid less. If it grows, they got paid more. So they have the same outlook, the same interests that you do. So you start there. You’ve got time and you’re not 25 years old. You have life experience. What you wanna do is go face to face because human beings, we have a lot of intuition. And when we do it over the phone, we lose that visual component of it. So you go face to face with the advisor and she or he ought to be able to explain three things in ways that you understand it. Number one, she ought to explain her investment strategy. How does she believe she would invest your money to meet your goals and objectives, okay? Number two, and that’s a big deal. That’s a very big deal because it’s really gonna determine your risk in return. Number two… What’s a happy, healthy client relationship look like? There’s data that indicate when people are dissatisfied with their professional servant, their CPA, their lawyer, their investment advisor, it’s because there’s a mismatch of expectations. So, when are you gonna hear from this person? When are you going to meet? Et cetera, et cetera, etc. So, what does a happy healthy client relationship look? And third, how are they compensated? What is their fee? Okay? Because if you visit two or three Their fee ought to be driven by the marketplace. It should be a function of the value of your assets. The larger the asset portfolio, the lower the incremental fee. The other thing is, in my opinion, they ought to engage in a diagnostic process. If you walk in and sit down, and they start talking about what they’re gonna do for you without engaging you in a conversation, understanding your background, your personal story, your professional life. They ought to get to know you, because you’re paying this person and you’re establishing what you believe would be a very long-term relationship. And so as a result of that, they should ask you questions, just like your doctor does for your annual physical, and then they oughta explain, number one, their investment strategy, number two, what will a happy, healthy client relationship look like, and number three, how are they compensated. So thank you for your question. 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. Okay, as you could hear, I’ve been getting some texts here. Could you discuss the positives and negatives of a family trust? So, you didn’t use the term living trust, you called it a family Trust. So I’m not sure exactly what that is. If it’s where you’re putting assets into a separate legal instrument, then you’re going to appoint a trustee, whether that’s a person or an entity, like a trust company. You’re going identify the beneficiaries and you’re gonna make distributions to the beneficiaries because in a traditional trust, if you don’t do that, and the income from the trust will be taxed at the trust level, and trust income tax rates are much higher than individual rates. If you’re asking me about a living trust, a living Trust is used by people who wish to avoid the probate process. They put all of their assets in the trust, and they style their assets also in financial markets. They can use joint, in Texas, joint tenants with the rights of survivorship. Or transfer on death. And of course, they name their beneficiaries on IRAs, SEPRAs, Roth IRAs. And upon their demise, they do not go through the probate process. You have to think long and hard about this because in Texas, we have something called independent administration, and the probates process is straightforward. If you have a very large estate, a very complex estate, then perhaps putting it in that. And a living trust is a wise thing to do, but they can be expensive, five to $10,000 to set up. Probating will be much less expensive than that, so you need to think that through. Another benefit of a family trust is you have real clarity about the beneficiaries and what they get. So that way, there’s no argument upon the death of the grantor. If you want one person to get 10% of the assets, another person to 20%. It’s all set up. So those, I would suggest, are the positives. The negatives I talked about were that the taxes can be quite high if you don’t distribute the income. And you want it to be a revocable trust because life changes. And if you make an irrevocable trust, it is, as the word says, irrevocble. You’re listening to Money Talk on KUT News 90.5 and the KUT app. I’m gonna take a break. A great time to call or text 512. 921-5888, I’ll be back.

[KUT Announcer Jimmy Maas] [00:31:07] Money Talk airs every Saturday at five o’clock on KUT News 90.5 FM on the KUT app and at KUT.org. This podcast is produced by KUT and KUTx Studios as part of KUT Public Media, home of Austin’s NPR station and the Austin Music Experience. We are a non-profit media organization. If you feel like this is something worth supporting, set an amount that’s right for you and make a donation at supportthispodcast.org

[KUT Announcer Laurie Gallardo] [00:31:42] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

[Carl] [00:31:56] Welcome back. That’s our Monday Talk theme we did near that last Saturday, Music for Fedora Wearing Dudes, which was written, performed, and produced by KUT’s Music for fedora wearing dudes band. Thank you very much. When you have a financial or investment planning question, call or text 512-921-5888. Okay, here we go. Just a second. Let’s get this text. My father passed away this year, and I am the beneficiary of many accounts now from IRAs, retirement funds, and stocks. The greatest value is about $150,000, and the lowest is about 5,000 dollars. I make about $90,000 a year and owe on my house, student loans, and a car. I have a 401K through my job, and that’s about it. I have no immediate need for the money. So what is the best way to have the funds distributed and then invested? Okay, first of all, the odds are that your car note is at a rate that likely exceeds the plausible rate of return on your investments. If you have one of those really low rates, like a 2% car note, then paying off that note would not make sense, but if you have a note that’s anywhere from 6% on up, then we’re gonna go figure out where to get the money, but you oughta pay off the car note. The student loans, same thing. Look at the interest rate on your student loans and figure you’re gonna make six to 7% on your investments. I wanna be conservative here. If the student loans are six or 7% and you pay those off, you have an imputed guaranteed return of six or seven percent versus a prospective return of 6 or 7 percent. Your house, based on history, will appreciate about 4% a year. Now, if people are listening or all this, the general rolling of the eyeballs across Central Texas, that’s the national average. And yes, we had a 40% increase in Austin real estate back during COVID. That’s an outlier experience. And talk to people in California who lost their houses in 2009. I’m giving you the national averaged. But when you have a mortgage, you are paying down. You’re building up equity and the interest you’re paying is front-end loaded, I doubt that it would be wise to do that now. As regards the IRAs and retirement funds, you will have what are called beneficiary IRAs and you have 10 years to take that money out and you’ll be paying income tax on it. So you don’t have a choice about that. If your father was taking required minimum distributions before his demise, it’s my understanding you’ll have to start taking distributions. If he was not, then you have 10 years to take it out and you can take it as you choose to, but if you have to take out as a required minimum distribution, then that’s it. You wanna understand all this, you wanna work with a custodian to find out what your required distributions are. And what that impact will be on your taxes. And because you’ve not done this before, when you take money out of the retirement plans, what you wanna do is have tax withheld. I would say maybe 20% tax. So if you take $10,000 out, have 2,000, have the custodians pay the IRS $2,000 so you don’t have a very bad experience when taxes are due next year. If you have stocks and they are not invested in retirement funds or IRAs, then the question is, do you have interest in these stocks? Because right now, because he’s passed away this year, you have what’s called a step-up in basis. You could sell those stocks and reinvest the money in something that perhaps is more appropriate for you in the stock market, and you wouldn’t pay taxes on that if it was in an individual or taxable account. So that’s a lot, you got a lot to look at. One of the things you’re going to have to decide, and this goes back to a call we had before the break, you’re gonna have to have decide if you wanna do this yourself, or if you want to hire somebody. Because this is complicated. Doesn’t mean you can’t do it, and if you wanted to do it then you work with the custodians of the various retirement accounts, you work the firm that has the stocks, and do it yourself. Or go out and hire somebody, the marketplace is gonna drive whatever their fee is. But you have a lot to do, and good luck. 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. Carl, big fan of the show, a regular listener and texter, thank you. The information you gave the caller about Social Security being a Ponzi scheme is incorrect in this way. The example was two people married to 125,000 each combined 250, and you stated they didn’t pay over 169. Agree that’s the limit, which based on individual earnings, you’re right. Each earner pays until wages is 169, I’ve experienced this in my household. Thank you very much. My mistake. I love this show. We have so many intelligent listeners bail me out. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. I just realized something I’ve forgotten to say today and I apologize. You can listen to past shows at kut.org slash Money Talk. I recommend you do that. 512-921-5888. Hello, I have a condo that I bought several years ago and have now bought and moved into a house. It is a one bedroom unit. And it was bought at $150,000. I owe about $70,000 on the 15-year mortgage at 2.5. Unbelievable. We lease the condo currently, but we’re not really looking forward to the ongoing upkeep. My question is, since we’re paying about $1,300 a month, including mortgage and homeowners association, that seems like the max that we can’t rent it for. With rents trending down in Austin, would it be better to sell the property at a profit and invest the difference after paying off the loan? And the answer is yes, you bet. I mean, the two happiest days of a boat owner’s life is the day she bought it and the day sold it. If you are not the kind of person who enjoys having rental real estate and you’re listening to a person who does not, then you bet, I would sell it, I’d pay the taxes, I’d reinvest in financial assets so that you. Don’t have the day-to-day hassles, and you have daily liquidity. That’s a terrific idea. Good luck. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. 512-921-5888. Derek, you’re on the air. How may I help? Is this Carl? It sure is.

[Derek] [00:39:19] Call I’ve never heard your show before except last weekend when I was coming back from Fredericksburg from rolling cigars at a winery. I’m a professional cigar roller that’s what I’ve been doing for the last 27 years. Good. My father and mother passed away. Mm-hmm. My mother in 2019, my father in 2021.

[Carl] [00:39:46] Mm-hmm

[Derek] [00:39:47] I was contacted by an insurance company that I had no idea about or anything and they said well your father was a policyholder for the life insurance policy and I said well he’s been dead for like four years now and they were like well we did an audit and you’re You know, like you, you are a beneficiary of like a $585 policy from a $5000 policy. Right. Like, okay, that’s interesting. I called my brother and my sister and said, did y’all hear anything from this? They said, nope. Yeah. So I’m like, okay. So they said, well, if you send in your father’s death certificate, you know, accompanies your mother’s death, okay? I did all those things And I sent in the thing and they said, okay, here’s a check for $585.90. Okay, payable to the estate of my father.

[Carl] [00:40:53] Okay.

[Derek] [00:40:54] Okay, I’m like, okay, what do I do?

[Carl] [00:40:59] Yeah, you should have made…

[Derek] [00:41:02] And they’re like, well, man, you can’t really do that. And it was like on a Wells Fargo account. So my wife has one. And I said, well let’s go to Wells Farga. And they were like, we can’t do that?

[Carl] [00:41:18] Yeah, here’s what you need to do, Derek. This is a hassle. You’re going to have to get in touch with…

[Derek] [00:41:24] A small estate

[Carl] [00:41:26] Yeah, you’re going to have, please, Derek, excuse me, let me just give you the answer. You’ve got to start, you’ve got go to the insurance company and they have to make the check payable to the beneficiary, the human being beneficiary.

[Derek] [00:41:41] The only one that will contact it.

[Carl] [00:41:42] Right, that’s that. You’ve got to get them to make that check to a human beneficiary. If that’s you, then you’re going to get the check and the bank will be glad to check to cash it or deposit it for you. The bank will not let you put it in your name, okay?

[Derek] [00:41:58] Okay. But I also talked to an attorney because my father had a very complicated mess. And, uh, one of the things that this one attorney that we had to pay $6,000 to, uh, sold a, uh a commercial where he used to have a gas station. And so they sold it and there was other people involved and they had to split it up, but that’s the only person. That ever gave me a check from the estate of my father.

[Carl] [00:42:29] Yes, so Derek, what’s your, Derek, I’m sorry, Derek I’m running out of time, what is your, what’s you’re question please?

[Derek] [00:42:35] I contacted the attorney that had the estate of my father. I said, well, should I bring this check to y’all since y’al control the account of the estate of my Father? They said, yeah, fine, you can bring it here and we could do something about it. And I’m like, okay. So should I do that?

[Carl] [00:42:54] Yes, the attorney has to be sure responsibility to do what’s in your best interest.

[Derek] [00:42:59] Start with the attorney. Make it to all the account from the estate of my father.

[Carl] [00:43:02] Yeah, I don’t know that, but start with the attorney, that’s what you want to do.

[Derek] [00:43:05] Okay. Well that’s what I just wanted to know because. You bet.

[Carl] [00:43:08] Alright, thanks for calling. Thanks for calling, you’re listening to Money Talk on KUT News 90.5 and on the KUT app 512-921-5888. Kevin, you are on the air, how may I help?

[Kevin] [00:43:25] Uh, yeah, I called you about my property tax stuff, but I just wanted to salute you because I used to do live calling shows on ACTV and, uh, that the comment I have is you’ve been talking about social security and Medicare, right?

[Carl] Yeah.

[Kevin] I think that, you know, the reason that’s becoming insolvent is because we’re having less babies, right.

[Carl] [00:43:49] Exactly right, the population, the only way you grow the economy is through immigration and productivity, that’s exactly right.

[Kevin] [00:43:57] That’s my point. We should be getting more immigrants in here to save the security thing.

[Carl] [00:44:03] Yes.

[Kevin] [00:44:04] There are lots of babies and they’re all in check.

[Carl] [00:44:07] Yes, that’s absolutely right. We ought to have a path to citizenship so people can get into our economy, pay social security tax, pay Medicare tax, and become beneficiaries. The answer is as obvious as a nose on your face, but you know what the politics are, but you’re absolutely right, Kevin. So thank you.

[Kevin] [00:44:24] But nobody in politics talks about it, yeah.

[Carl] [00:44:26] I know I know it’s it’s that well we don’t talk politics on money help, but thanks for your call You’re listening to money talk on KUT news 90.5 and on the KUT app 5 1 2 9 2 1 5 8 8 8 Okay, let’s see

[Text] Hi, could you please give your opinion on whether it is safer to invest money in the stock market or to save money? And rental home My husband and I are at opposite ends of this. Uh-oh, marriage counseling. I feel like investing in rental homes is more like stepping over dollars to pick up dimes. Well, he feels the market’s so risky that it’s nice and comfortable and safe to have a strong foundation of a dependable property or three, including one for each of our children we pass, thank you. I should add that card rental homes are in central Texas and are quite possible.

Thank you, Christine. Just based on history, two asset classes that outpace inflation. Income producing properties, okay, and stocks. And stocks are not risky, any more than rental properties are risky. Stocks are only risky if you don’t know the rules of the road, and it’s same with rental properties. Your husband may not have seen people go bankrupt in Central Texas in the 80s and 90s. May not have see architectural firms go bankrupt. May not have seen all of the banks, major banks in Texas, except Frostbank go bankrupt. Why was that? Real estate loans. I couldn’t stand it. Everybody was making money in real estate. So two buddies and I bought a rental property on 32nd Street within walking distance of UT. You can’t lose money. There’s always 50,000 students. God’s not gonna make another acre of land. Rents were $1,600 a month, they went to $800 a month. I noticed the mortgage didn’t drop by 50%, nor did the property taxes, nor did they upkeep costs. People who make money in rental real estate have the personality to take care of it, and they’re long-term investors, and they are diversified. Owning three houses in central Austin is like owning three oil stocks. As long as oil prices go up, you’re doing great. If oil prices go down… You’re in a world of hurt. That is not diversification. Let me tell you why the stock market’s not risky. Because it’s human ingenuity. It’s human ingenuity. That’s what you’re betting on. Now, if you can’t stand the up and down movements every day, either don’t invest or don’t look at it. But the numbers are absolutely clear. But the companies that win are not the same ones year after year after a year. When I moved to Central Texas in 1978, no one knew about Dell Computer. And yet, at one point in time, it was the best performing stock in the S&P 500 for the preceding one, three, five, and 10 years. Then it went to $70 a share, and then it went $10.50 a share. And then Mr. Dell took it private. Nothing’s forever in this world. Real estate cycles are much longer, on the way up, on the down. Stock market cycles are must shorter, and the reason is liquidity. People can vote with their dollars, They can move stocks up and they can move them down You shouldn’t be investing in the real estate market with less than a 10 year horizon. You shouldn’t be investing the stock market with less of a three to five year horizon, the longer the better. So, I happen to think both of you are right. If you play by the historical rules, I think you can make good money in either one of them. It’s a question with rental real estate if you are a hands on kind of person and that’s what you wanna do, then that’s fine with me. Fine, well let’s see, we have time for another call. We do not. Let me just take this text. Okay. My husband and I have a few IRA and SEP accounts, although the company we have been with had a poor performance, so money didn’t grow much. Now they’re offering a forever account. Offering a forever account. Interesting, my husband getting close to retirement age to get Social Security. We’re not sure what is the best, to withdraw and handle the money on our own which we are capable, or do the forever account until either of us is alive. The forever account, Ellie, sounds like an insurance product. Then I’ve learned to be extremely, extremely skeptical of the insurance products. If you and your husband are capable. Then go manage your own money. Go to a do-it-yourself Schwab or Fidelity or Vanguard. The costs are really, really low and build your own portfolio. Or go to an advisor, preferably a registered investment advisor. But I don’t know what a forever account is, but that just makes me very, very anxious. So I’d probably really have to understand that very, very much before I knew what I would do that. Thanks. Carl, I live from paycheck to paycheck my whole life, now at 35. I’ve gotten my first real job working in healthcare. Congratulations. One of my first goals is to get out of paying insane rent. How much do I realistically need to put down on a house to get the best possible deal? I have great credit and only student debt. Save that money, keep track of your expenses, save as much as you can, because the more you put down, the lower the lifetime interest. And also, you’ll have financial freedom sooner. So this five or 10% down, you’re gonna be in a lot of debt, in my view, if I were in your shoes. I know you’re paying rent, but rents are going down in central Texas. You got plenty of houses to buy. The housing market’s quite slow. Prices are dropping, and the metro market at about a 3% annual rate. So do not be in the rush to do this, because what you’re thinking here is makes a lot a sense to me, but you’re trying to build… Financial freedom. So yes, you have a house, but you also have to have savings if you have at your health care place If you have 401k and if there is start with a with two or three percent of your income going in there If there’s an employer match be sure and put enough in to get the maximum employer match and then increase that Contribution by 1% a year. You won’t notice the difference in the compounding will be really to your benefit So that’s what you ought to do Great broadcast today. I want to thank you for listening. I want thank Marc for doing such a great job and to remind you that next Saturday, after the news at five, be sure to tune in to Money Talk.

[KUT Announcer Laurie Gallardo] [00:51:10] 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.