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Carl Stuart takes text and caller questions on timely investment, the emotional side of financial decisions, and how to plan for your golden years.
The full transcript of this episode of Money Talk with Carl Stuart is available on the KUT & KUTX Studio website. The transcript is also available as subtitles or captions on some podcast apps.
KUT Announcer: Laurie Gallardo [00:00:01] This is Money Talk with Carl Stewart. Carl Stewart is an investment advisor representative of Stewart Investment Advisors. Call or text him with your questions at 512-921-5888. Now, here’s Carl.
Carl Stuart [00:00:21] Welcome to Money Talk. I’m Carl Stewart and you’re listening to KUT News 90.5 and the KUT app. Money Talk is a broadcast about the world of financial and investment planning where you always determine our agenda by calling or texting 512-921-5888. It’s always a terrific idea to call or text earlier in the broadcast, give me ample time to do my best to answer your question. I take today’s calls first and then today’s texts and then any previous texts that I have not been able to fully answer. So let me give you those numbers again. You will hear the text coming in. Five one two nine two one five eight eight eight. I got a text at the end of the broadcast last week. It’s a really thoughtful text and it’s an interesting situation. And the question is. I want to answer it in a little more detail than I did in the past. I’m having a little problem here, so let’s just see here. There we go. 512-921-5888. Tell you what, I’m a little bit problem here with my phone, so let just see if I can get this to go. Here we go, nope, all right. Okay, so here we go, terrific, I got it. Hello Carl, how do I decide when to withdraw money from a Roth account? I’m 68 years old and have been deferring social security until age 70. My expenses are low, my house is paid for and I have no debt. I’ve been selling stock in a cash account to live on. The basis on my stocks is about 50%. So with the standard deduction for a single filer over age 65 being about $23,000, I can take about 50,000 out of what he calls the cash. He or she, I should say, means their investment account, not in a retirement account. So if they sell $50,000 of stock and they have $25,000 taxable gain, but they have 23,000 she or he of the standard deductions. This person looks at that as the tax-free, which is more than I need to live on. This allows me to let the Roth grow tax- free, correct. This works great for now. My question is, if I have a need to withdraw more, say for a new car, should I take it from the cash account and pay the taxes, presumably at a low rate, which is correct, or is this when I should draw from the Roth? Is there a tax bracket where it makes sense to draw from the roth? Both accounts have approximately equal balances and holdings. Thanks in advance for your advice. Well, thank you for such a thoughtful and detailed question. What I don’t know is your attitude toward leaving a legacy. And the reason I bring this up is you’re clearly not going to spend all the money in your IRA and in your Roth IRA and in your taxable account. So… If you have kids or grandkids or other people that you’re going to believe in your assets to, and they’re not your spouse and you say you’re single, then when they inherit that IRA, that’s a beneficiary IRA, and they’ll have 10 years to take the money out, and that comes out as taxable income. If they inherit your Roth IRA, that’s the beneficiary Roth IRA. That will come out also over 10 years, but tax free. So the question then is, should you defer as much as possible until you have the required minimum distribution in a few years, taking money from the IRA and allowing your beneficiaries to pay the income tax? Then you would want to take money from your Roth or from your individual taxable. If for some reason you believe, since you are, must be in a low tax bracket, if you’re going to be leaving money to a loved one who is in a higher bracket and you want to benefit them and you’re prepared to pay some taxes today, then you could start taking it out of the IRA. If you seem to be quite knowledgeable about taxes, and I think if I were in your shoes, the question is, if I don’t have a legacy, goal in mind and I just want to take money to live on and keep my taxes low, then taking it out of the Roth would be tax free. Taking that first $50,000 with $25,000 of gain from your individual account and then taking money from the Roth would keep you in the lowest tax bracket. So it’s an interesting question. I think thinking longer term what it is that you’re trying to accomplish would be a helpful way to at that. Thank you. We have all of our lines available. No incoming texts. 512-921-5888. So, there’s a lot of conversation in the financial press about the outlook for inflation in the United States. Inflation has been rising. Most economists would say that’s a big function of the closure of the Strait of Hormuz and the sharp increase in the price of oil. Which is now down to where it was prior to the beginning of hostilities. And the question is, is this a temporary or transitory or is this something we’re moving towards a regime of higher inflation? You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Hello Carl, your thoughts on gold these days? I know you did a lot of research on gold’s historical outperformance. Would you still be comfortable with a 7% allocation? I tend to look at gold, that’s not accurate. I look at Gold as not a trading position. It’s in the portfolio for the following reasons. Historically, it has not been positively correlated to stocks and bonds, meaning When they go down, it does not necessarily go down. The most recent example of that was in 2022 when the S&P 500 was down 19%, the NASDAQ down 33%, and the Bloomberg bond index down between 13 and 14. And if you’d owned a gold exchange traded fund, you’d have been down maybe six-tenths of 1%. So it really, it did its job. Then of course, last year, Beyond anyone’s expectations, both gold and silver just skyrocketed. If you’d owned that gold ETF, it was up 64%. The silver was up 144%. This year, the trend has moved in the other direction, and gold and silver are down and had a bad week last week. Silver using again the exchange traded fund down over 17% and gold down about 5.65%. I think the 7% feels right for me. But that’s because I’m not thinking about it in a vacuum. I’m thinking about with other asset classes, stocks and bonds and some other alternative strategies. So if I were to raise my allocation to gold, I’d have to reduce it to something else. I think five to 10%, there’s nothing magic about seven. It’s just the way I’ve built my portfolio. That’s what feels right to me. The other thing is… I don’t think I’d be terribly surprised that gold is down this year for a couple of reasons. One is it has such a terrific year last year. And the second is the dollar has strengthened. And historically, a stronger dollar is usually not good for the price of gold. And that may also be a headwind for what’s going on now. And as I was getting ready to talk about. If inflation turns out to be persistent, while it doesn’t always work, there are no guarantees in investing. Gold does tend to have a positive correlation to inflation, meaning it tends to rise in inflationary times like it did in the 1970s. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888 and we have a call. Steve, you’re on the air, how may I help?
Steve [00:09:34] I’ve heard that general advice is to not put extra money to pay down your mortgage if like the interest rate is lowered, but instead invest in something that can yield better returns.
Carl Stuart [00:09:46] Mm-hmm.
Steve [00:09:47] But for me, there is like this psychological aspect of that monthly payment. Um, and, and so is it a flat out, a well understood, um, concept? The other thing is, if that’s true, then does that mean people should then, uh, if they have a low mortgage interest rate, uh, take out a more mortgage and then invest that money?
Carl Stuart [00:10:10] Sure. I think this is where I come down. I think there’s a fallacy that I hear a lot, that home, my home’s been a great investment. That doesn’t, I don’t think of a home as an investment. I think of home as a home because first it’s illiquid, as I always say on Money Talk, you can’t sell the bedroom if you need an extra $50,000. It’s a long cycle investment, prices for homes around here declined for probably seven years. Um, and today. Based on the latest data in the Austin metro market, the median time to sell a house is 88 days. And I’m a homeowner and had been one for decades, so I’m not opposed to home ownership. And I am not opposed to making extra payments on your mortgage if you have plenty of other financial resources. Because at some point, you want to be financially independent. You want to have no liabilities, no car debt, credit card debt or mortgage debt, but that’s just half of it. You have to have sufficient assets that you can take money from those assets every month or every quarter to supplement any other sources of income like social security or pension. And if you’ve tied up the vast bulk of your net worth in your home, you’re stuck. If you sell the house, you gotta go live someplace else. You either have to rent or buy another house. People talk about downsizing. I can only speak about local experience. To downsize in central Texas, you’ve got to move a lot further away from Austin, Texas, and you have to think about access to healthcare. So I personally, it’s okay to pay extra if you’re in that position where you can say, you know, given a modest return over my working lifetime, let’s say 6% if I’m invested in stocks as well as other asset classes in my 401k and in my own, on my own. Will I have enough money when I want to retire that I won’t pay a mortgage, but I’ll be able to draw down three or 4% of that big pool of capital and live on that? If the answer to that question is yes, be my guest and go ahead and pay down on the mortgage. If it’s not, you’re fortunate to have a low interest rate mortgage. Now, would I borrow more money against the home to invest? No, I would not. That is because to borrow more against it is probably going to be since it’s a second lien on your home, a higher interest rate that could be equal to or more than the rate of return you could get on your investments. So that’s how I look at it, Steve. Okay, thanks. You bet. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Here we go. And you’re on the air. How may I help?
Anne [00:13:14] Hi and i think that one uh… Talked to my might and i know it might like that he’s twenty-six and you taking uh… A four one k from a dot he had a lot of it with all his but you can i don’t think there was any back from
Carl Stuart [00:13:29] Mm-hmm
Anne [00:13:30] the uh… From the employer but hypothetically he picked that and he put it into uh… He picked up in the rock with his bank and and it’s been a it’s in a uh… Like a one-year certificate deposit or report that that’s not what he’s not figuring out what to do with that uh… But i understand that if you had a third third circumstances bike even an emergency like a car repair. Is there is there any opportunity for him it’s like thirty five hundred dollar but it’s a happy for him to take any of that for the birth of the how does that work
Carl Stuart [00:14:09] Okay, so first of all, was the money in his 401k, was that in a pre-tax 401k or a Roth 401k? Do you know, Ann?
Anne [00:14:23] It was oh i don’t know no because if it’s
Carl Stuart [00:14:25] Because if it’s in a pre-tax, then what he did or should have done is you go to wherever custodian you select, if it is pre-tax, you open an IRA, you put the money in there, you open at the same time a Roth IRA, and then you move the money from the IRA to the Roth IRA. That’s called a conversion, and that’s a taxable event. So he would own income tax on $3,500. So you know his financial situation and whether he can afford to do that or not, or whether he would take some of that $3500 and put it aside for the income taxes and the balance in the Roth. So I recognize that I’m not answering your question, but since you said he went from a 401k to a Roth, I just wanna make certain that if it was pre-tax. He did the conversion. It didn’t go directly to the Roth from a pre-tax 401k because that’s
Anne [00:15:23] Yeah, he did pay. It was before taxes, but I think he opted to do the conversion and pay like an 8% tax.
Carl Stuart [00:15:32] Good, good, whatever his tax rate is. Good, it’s added to his income this year. There are certain extreme examples, but a car is not one. And this has been around with IRAs, and I’m making the assumption that it’s the same with Roth. I don’t know that. One is for a first-time purchase of a home. Another is for medical emergency. But just a large consumer purchase, no, that’s not the kind of thing that’s allowed.
Anne [00:16:00] Oh, okay. I was reading somewhere that as long as it was your contribution that you had
Carl Stuart [00:16:06] Oh, oh, okay. I see what you’re saying. If it’s your own after-tax contribution and you take it out, that’s right, because you’ve already paid the taxes on it. I misspoke. I see what your saying. Yeah, you put the money in, you put three thousand dollars in, it grows to three thousand five hundred, you take money out, the three thousand that comes out, your own original after- tax investment. That’s correct. You’re right.
Anne [00:16:32] But you can’t touch the 500 that grew in there.
Carl Stuart [00:16:35] That’s my understanding would be that would be subject to that penalties. My understanding.
Anne [00:16:40] Right, right. Okay, great. Thank you for that. I appreciate it.
Carl Stuart [00:16:44] Okay, you’re welcome. 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. Hi Carl, I’ve been hearing a lot lately about auto callable exchange traded funds. I was wondering if you’ve also heard anything about them and what you might know about autocallable ETFs and how they work. I know nothing. I’ve been reading articles about the hundreds of exchange traded funds have been coming out. And I would just say to you, really do your homework because what I’ve learned in my 47 year career is Wall Street is nothing if not innovative. And when there’s a trend like the issuance of exchange-traded funds, Wall Street jumps on it. And really pumps out the new products. I would say anything is auto-callable. When you say callable, that reminds me of, say, municipal bonds that are issued with 20-year maturities but have a 10-year call feature where the issuer can call it back and pay you a certain amount of money. But when you add the word auto, I’m not sure about that. So I would just say approach this with a high level of skepticism. And also be sure and do your homework before you put a dollar in. Sorry I couldn’t be more helpful. It’s time for me to take a break. We have all of our lines available. A perfect time to call or text 512-921-5888. I will be back.
KUT Announcer: Laurie Gallardo [00:18:35] This is Money Talk with Carl Stewart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.
Carl Stuart [00:18:48] Welcome back to Money Talk. I’m Carl Stewart and you’re listening to KUT News 90.5 and the KUT app and you can catch past shows at kut.org slash money talk. Give me a call or send me a text at 512-921-5888. Here’s the text that came in. Hi Carl, thank you for a wonderful show. You’re welcome. When it comes to social security, I keep hearing about the break even point when trying to decide when to take your benefit. What is the break-even point? Well, I think what that means, I’m not sure, but I’m pretty sure, is you look at your projected benefit at your full retirement age, and you look your projected benefits at age 70, and you say, okay, if I take the full retirement age, this is what I’m gonna get. If I wait, how many years will it take? Getting that extra money and waiting until 70 before I’m better off waiting until 70 than taking it to 67 or whatever your full retirement age is. That’s my understanding. Now I will tell you, when deciding when to do this, if you don’t desperately need the money, when you think about it, there’s three things that you don’t know. You don’t know how long you’re gonna live and you don’t know what’s gonna happen to the cost of living. And you don’t know what the return is on your other savings and investments. So you have to approach this like all long-term planning with a high dose of humility. The reason I like the seven, waiting until 70, is that people are living longer and people who listen to this show are gonna, in my opinion, because I know what demographics are for people who listened to KUT, you tend to have access to healthcare. You have good habits, you don’t abuse alcohol or tobacco, and you have savings. And the life expectancy tables tanks all of our country, including people who don’t have those access to healthcare and have bad habits. And like a lot of people, maybe they have chronic diseases because they’re in their genealogy. But when you wait till 70, that three years or two and a half years, the benefit grows it. Eight percent a year and you’re not going to be able to invest the money and have a guaranteed eight percent. That’s why I tend to err on the side of waiting until 70. Obviously if you need the money to live on and you can’t wait or you believe that you have a life shortening chronic disease, taking the money makes a lot of sense but that’s how I think about it. You’re listening to Money Talk on KUT News 90.5. And the KUT app. Call or text 512-921-5888. Here is a caller. Casey, you’re on the air. How may I help?
Casey [00:21:57] Hi Carl. So I’m about to start a new job and I don’t have any kind of retirement savings at the moment, but this job does offer a contribution to a retirement plan of some kind. Good. I’m not sure what to choose, I’m kind of older, I am 45 years old, and I’m also kind of concerned about this whole overvalued SpaceX IPO thing. Is there anything I should keep in mind when choosing the type of thing?
Carl Stuart [00:22:35] So, several parts to that. You should automatically put in enough of your compensation to get the full employer matching contribution. No less than that. If you have to have the rest of the money to live on, so be it. If that’s the case, then I strongly recommend each year, on or about the anniversary of your employment date. You raise your contribution limit by 1% of your compensation. Likely, you’re not gonna notice the difference. You won’t even probably know that you’re adjusting to it because you’re right, you are way behind and the long term thinking is if you want $40,000 in income, you need more or less a million dollars in savings. That’s a long ways for someone to go who’s 45. So you need to be Fully invested in the stock market number one number two I share your concerns about valuation But you don’t have any exposure to the stock Market and the beautiful thing about employer sponsored plans is that you put the money in every pay period So suppose you’re paid twice a month you put your four or five percent in twice a Month the best thing that could happen would be with the stock Market to go to heck in a handbasket because you’re buying more shares every month at lower prices And you’re not gonna be taking this money out for 20 years and maybe longer than that. And when you look at the, if you go back and say, what are the odds of an attractive return over a 20 year period in the US stock market? They’re really high, Casey. And so because of your age, you need to put the pedal to the metal and invest in equity. So what you wanna do is in a broad base, stock index fund. If they have something called target date funds, you can study those. They’re very popular. Sometimes they’re called life cycle funds where you pick a date where you’re going to retire, say 20 years from now, and then the company Schwab or Vanguard or Fidelity or JP Morgan or whoever that is the investment company will change your allocation between stocks and bonds, domestic and foreign stocks. And make it more conservative as you reach retirement. The problem with that is if you don’t have enough money to retire and they’ve got you at 40% in bonds, you got a long ways to go. You got to plan on living to be into your 90s. So be careful on the target date fund. If you have the option, I would invest my pay period, 75% in a US stock index fund, S&P 500, or total stock market, and 25% in international. And frankly, what the stock market does this year and next year is irrelevant because you’re building for your future financial independence. And that’s what I would do, Casey, if I were in your shoes.
Casey [00:25:42] Alright, thank you. That’s a lot to think about. It kind of eases my mind a little bit.
Carl Stuart [00:25:48] Well, good luck to you and thank you for your call. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Here is a call. Claudia, you’re on the air. How may I help?
Claudia [00:26:10] Oh, hi, can you hear me?
Carl Stuart [00:26:14] Yes i can please go ahead claudia i can hear you please go ahead
Claudia [00:26:23] I am sorry. That’s okay. So my question, I guess obviously it has to do with my circumstance, I’m in my early thirties and I got myself into a lot of debt. I don’t make very much money and I’ve been thinking about looking to somebody for professional help, but I have no idea who I talk to about that, so I’m wondering if you can suggest any type of professional that can help me with like the little money I have getting out of debt and etc.
Carl Stuart [00:26:59] Yes, you need to go to a credit counselor and you want to you have to be very very careful about this because I’ve heard horror stories about this. Your best bet is to take some time, do a Google search or chat GBT search and look for credit counseling that’s sponsored by and affiliated with a Non-profit institution, okay? So, you know, a social service agency. I know that the Help People, there’s a place called Foundation Communities, and they help people with their taxes. You might check the Foundation Communites, but I’m sure there are others. And keep listening this afternoon for the next half hour. Let’s see if any other of our listeners can text or call me with some other ones. But you want to stay away from the for-profits. You want to do it with the non-profits, They will help you. Uh… Work through this because that’s exactly what they do and they’re not trying to sell you anything so it’s good that you read it’s it’s bad that you got a lot of debt it’s a good that your in your thirties so you have time to dig yourself out of this hole just be very cautious and align yourself with whether it’s uh… Religious organization or social service agency A lot of people are in the same boat you are in and there are people out there. Who all they want to do is help you. And that’s what I would do if I were you, Claudia.
Claudia [00:28:31] Okay, okay, thank you.
Carl Stuart [00:28:32] You bet good luck. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here is the text. Hi Carl, my husband and I are 79 and a half years old and retired. We would like your opinion on how to set up our portfolio with one of the retail brokerages. We’re totally debt-free. Including our home. We have $1.5 million we are investing now. We will sell some rental properties in the next few years, which will net us approximately $1,500,000. We are currently receiving $115,000 in fixed income, including Social Security. We have enough cash to cover one and a half years of expenses. Both of us have a long-term care insurance policy. Assuming a life expectancy of 100, which I really appreciate that, because I think you that you’re being conservative and that’s wise. What percentage of stocks, bonds, et cetera, should be in our portfolio and how conservative should we be? So I would tell you that you’re looking eventually, because you’re gonna sell the other and be up to three million, and you’re totally debt free. You’re gonna want a balanced portfolio. Probably, I’m just thinking out loud, about maybe 50 to maybe 55% in global equities. My mix that I like is 75% in domestic and 25% in foreign. You’re going to want money in bonds, but probably I tend to err on a lower allocation to bonds than a lot of people would for somebody your age, because I think there’s some other strategies that may help when we have rising interest rates. So if you’re going go to a national firm, One of the things that I would recommend There are kind of two ways people are compensated as financial advisors. There’s transaction-based compensation, which would be similar to if you bought a house through a real estate agent, she would get paid a commission. These people charge commissions, or sometimes they’re called sales charges when it comes to mutual funds. And they call themselves financial advisors, which is fair and accurate. It’s just not a term of law. Or they’re also people at national brokerages. Who are either themselves registered investment advisors or under the firm’s registered investment advisory. These people are fiduciaries and like your accountant or your lawyer, they have to put your interest before theirs. They can charge no transaction-based compensation and they have what the law calls a duty of care. They’re paid based on the value of the assets. So if the assets grow over time, their fee goes up, and if the asset falls over time their fee goes down. So they have the same economic interest you do. They don’t have an interest to generate a commission. I think if you’re going to do this, and you’re old enough, you’ve been around, you want to get in front of people, and I think there are following questions that you might want to make sure. First, when you go to see someone, they should ask for a lot of information. They should. Want to have the kind of information that you just described to me. Because if they just start making advice in a vacuum, that’s a little bit like going to a doctor and not telling her what your symptoms are, and she just says, here, take this medicine. So you want to a long conversation and fully explain, this is a confidential conversation, and you can ask them if it’s confidential. Fully explain your situation, okay? And then explain. What you believe you’re going to need in the way of income. Because that’s also going to drive how they decide what your asset allocation is. Once you’ve got the basic there, then there’s at least three things that you should ask them about. If we engage your services, what’s your investment strategy? How do you understand the world of investments? Because they ought to be able to articulate that. And if she or he cannot do that, keep looking. Or if they do it and it doesn’t resonate for you, keep looking. Secondly, if we engage your services, what does a happy, healthy client relationship look like in terms of communication and contact? I’ve read that the reason people get unhappy with their service provider, their attorney, their accountant, their architect, their investment advisor, is because there’s a misunderstanding of the services provided. So you wanna have real clarity about all of that. What’s it look like? Not just your investment strategy, but what’s this experience gonna be for us? And third, how are you compensated? Which I’ve already covered. This is gonna take about an hour, may take a little longer, and that you are going to then, you and your husband are really gonna have a sense of this person. Never make a decision on the spot. Go home and talk about it. You may have more questions. I hope you would have more question. And you would go back and contact this person and ask her or him what those questions are. I think that’s the best way to do it. Now, there are three models of delivering this advice. There are people who are employees, they get a W-2, they’re an employee and they work for large companies and small companies and that’s neither good nor bad, it’s perfectly fine. There are are people who are independent contractors. Who don’t work for a company, they own their business, and they have two kinds of, they have a securities license called a series seven, and the legal compliance oversight is with that firm, and then there are people who are called registered investment advisors who own their own firm, and they use a custodian, and the custodians provides the online access, all the things that the other larger firms do, and they may even be a large firm, that’s their custodial. But they have their own standalone business and they don’t have a series seven and they have own compliance consultant that either works in-house or that they pay and they a regular oversight there. That’s the process I would go through. I think if you have 50 to 55% in equities and 20 to 25% in bonds and then some things and this is important. What if the stock market goes down? Are there strategies that will hold value or even go up? What if the bond market goes down? Are there strategies that will whole value or go up?” That’s a pretty thoughtful question to ask, and I think that’s what I would do it if I were in your shoes. Thanks for the question. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-588, I beg your pardon, 512921. 5888. And remember, you can catch past shows or have your friends listen to previous shows by going to kut.org slash money talk. Here comes a call. Philip, you were on the air. How may I help?
Phillip [00:36:09] They are all uh… Afternoon i think the near me yes i think i know the answer question i was wondering i have a pretty healthy savings account and the tune of about four hundred thousand dollars and i have about fifteen to twenty thousand dollars in credit card do you think i should just go ahead and uh… Bite the bullet and wipe out that credit card debt once and for all
Carl Stuart [00:36:35] Absolutely, without question, Monday morning, you bet, that credit card debt will be at a higher interest rate either now or in the future. It supports consumption. It doesn’t create any lasting economic value. And you’ve got a lot of savings. You should be debt free and use some of that savings to grow the money over time, Philip. If I were in your shoes, I’d pay it off immediately.
Phillip [00:37:05] Exactly the advice I thought I could get from you. Thank you so much, Carl. Take care.
Carl Stuart [00:37:09] Okay, thank you. Thank you for going. I knew you were going to say that. It’s time for me to take a break. We’ve got lines available and you can also text me, Call or text 512-921-5888. I shall return.
KUT Announcer: Laurie Gallardo [00:37:36] This is Money Talk with Carl Stewart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.
Carl Stuart [00:37:49] Welcome back. You’re listening to Money Talk on KUT News 90.5 and the KUTF. When you have a financial investment plan in question, call or text 512-921-5888. We have a call. Dan, I hung up on you. I apologize. I hit the wrong button. I’m sitting here. I’ve got a computer off to the right hand side and I went over and clicked on the wrong one. So give me a call back and you’ll get on the air at 512-921-5888. Okay, here’s the text. Hi Carl, my husband and I are retired. Just sold our house for $825,000. We’re moving to another state and want to rent a house there. We have money in savings and investment accounts can well afford to pay rent. However, potential landlords want your monthly income to be two or three times the monthly rent. Our monthly pensions are not quite what they are requiring. Is there a way to move money from savings or investment accounts or from the sale of our house so that it will count as monthly income? Well, here’s the problem. Most people who… And I’m just inferring this. What’s happening is they don’t encounter people who show up with $825,000 in savings. They encounter people who have a job. And what they’re going after, obviously, is are you a good risk for them to sign a lease? And the answer is you are. I would tell you, this just frustrates the heck out of me. If you put it in some other instrument, It’s not gonna be income. If you put it in an investment account, it’s still not income. You put it into a savings account, it’s not income, it’s the difference between assets, which is what you have, assets and no liabilities. That’s what’s called a balance sheet and income. So I’m frustrated by this because there’s no way you can turn the sale of your house into income and you shouldn’t have to because you’re a terrific risk to rent a lease for a year. So I wish you luck. I’m sorry you’re running into that. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Now we’ll do it. Dan, you’re on the air, how may I help?
Dan [00:40:21] I carl thank you so much for your program it’s a lot of it’s always fun to listen to you but i can tell you uh… I have uh… Experience with financial advisors because you have a call previously as how to choose one yes and i a you know i had a great experience with my financial advisor here in austin texas to help me get set up after so my business and i had about your money i don’t know what to do it and they were really excellent. They got me all the legal help I needed and so forth and so on. But one thing they did, which I didn’t appreciate, was they got me invested into funds that if I parted ways with them, I wasn’t able to continue investing in those funds. There was diversified financial… Uh… By your funds right and so what happened was if i have parted ways with my financial advisor then i was not able to take any of the proceeds of gains and reinvest them as they can’t
Carl Stuart [00:41:27] So let me ask you, were the funds, dimensional funds, were they DFA funds? Yes, yep, yep. Okay, things have changed. Back when Mr. David Booth started dimensional fund advisors, and it’s based on the academic work coming out of the University of Chicago, principally from two people named Kenneth French and Eugene Fama, they said, we want people and individuals to have the opportunity to buy our funds, but we’re going to restrict where those funds can be purchased. We’re only going to work with stand-alone registered investment advisors. We’re going help these advisors, we’re gonna help them build their business. We can even have big advisors or small advisors, but you’ve got to stay with us. That thank goodness has changed. They finally, they finally, I… Because they moved from Santa Monica here and they invited me out and I spent a day and a half with them and had lunch with Mr. Booth, and they figured out finally that they should work through financial advisors. I will tell you this happened years ago with Vanguard. I’ve been around here for a long time and there was a period of time where you could not go to a financial advisor and buy a Vanguard fund. Vanguard would only sell to individuals directly from Vanguard. And there was a time where that was the case with Fidelity. One of the great things that’s happened for investors is those barriers have been eliminated. So if somebody’s looking for a financial advisor as that person was, and I’m really glad you called them, then they ought to say, do you have a wide range of funds? There’s a secondary issue that comes up from time to time. That you would be aware of, and they’re called proprietary funds, where the company actually not only has the advisor as an employee, but they also have their own branded mutual funds. And these particularly large companies, and the thing there is, you’ve got to find out if I leave our relationship, are those transferable? There was a period of time, a long time ago, where they weren’t. That’s just plain conflict of interest. That also is changing as well. But you had a bad experience, and I know about the DFA, and in my view, they’ve wizened up. And if you own a DFA fund at one advisor and you wanna go to another one, as long as his custodian, this is the key, not where you’re leaving, but where you are going, if his or her custodians will hold dimensional funds, then you can go ahead and do that today, Dan.
Dan [00:44:09] Okay, yeah, no, it’s good. I actually, I had the transition from DFA to Vanguard back in 2008 during the crash, and that was actually why I kind of separated my relationship with my advisor. Sure. And that’s when I found out the whole implication. So I’m glad this changed. I’m glad the whole environment is much better. And so, yeah. Great. Thank you so much.
Carl Stuart [00:44:33] You bet, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Okay, here’s a text. Carl, your advice for everyone to wait until 70 to collect Social Security seems to be falling on deaf ears. I just saw some statistics that say that only four to 8% wait until 75. Personally, I’m 66. And I’m having a difficult time not pulling that lever before my full retirement age of 67. I don’t need the money, but tomorrow’s not promised to anyone. Well, there’s also the one that said, if I ever, that Mickey Mantle, the famous baseball player said, if I knew I was gonna live this long, I’d taken better care of myself. So all I can tell you is that, and I repeat myself. People who have access to quality healthcare, and a lot of Americans don’t have access to quality health care, are not obese, are not smokers, the longevity tables are much longer than the life expectancy tables. And you turn on Social Security, and three years from now, you want more money, you can’t call them up and say, you know I’m a little tight this month, can you increase it? Can you increase the amount? So I understand, life is uncertain, but that’s. I still stand by my view. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Let’s see here where are we? Go to the top of this and also if you’re in a job that’s killing you to work 40 hours week and really need to work part-time for their own health. Apply for your Social Security and work part-time under the earnings limit to affect your check. Otherwise, work to your full retirement age of 70 if you have someone who will benefit from the money beforehand. Okay, let’s see. I retired from Social Security and here’s one thing I would add, one thing here. If you are a single adult without a spouse or ex-spouse or dependent children, no one will receive the Social Security you were waiting to get if you die. If you don’t need the money but someone to get it, but want someone to get it, start getting it at your full retirement age and invest it for them. Okay, we got a good conversation going here. Money Talk, KUT News 90.5, 512-928-5888. And here is another one. Carl, I worked for the state for seven years and accumulated roughly $40,000 in my teacher’s retirement fund. I am now self-employed. And have been for the last two years, and that money is just sitting there. I know that withdrawing it will lead to a massive tax, but what should I do with it? Or better question, what can I do it with it, signed Johnny. Actually, I know because our daughter had a career and had TRS, but the way pensions work, you have to be there a full long time because it grows greatly at the end of their time. If you meet the criteria for years of service and your chronological age. You can do an IRA rollover. You can take that money from TRS and put it in an IRA. You pick a custodian, who you a bank, a credit union, Vanguard Fidelity, Schwab, an investment advisor, and you get that’s your custodians, you open the IRA, you contact TRS because they got to have these come in every day. And they will help you, and the place you’re going will help, and you can put the money over there, you pay no income taxes when it’s done properly, and then you can invest it. Given the modest amount that it is, based on my experience, that’s what I would do if I were in your shoes. Good luck. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921- 5 8 8 8. Here is a call. Lauren, you are on the air. How may I help?
Lauren [00:48:57] Yeah hi i have twin eighteen-year-old and a twenty-year old and they are interested in starting their investment journey and i’m not really sure if there’s a company or uh… Recommendation you would have for a young people that are just starting now
Carl Stuart [00:49:14] Well, first of all, you had a rough time. Three kisses.
Lauren [00:49:20] He is going to be free in college this fall
Carl Stuart [00:49:24] Whoa, you need to go take a nap. Oh my goodness. Okay, first of all, you’ve done a heck of a good job because they’re all going to college and secondly, that they’re interested in investing. I mean, when I was 18 or 19, you can’t be serious. I was interested in girls. I wasn’t interested in the investing. Okay the good thing is they are very very fluid with the internet and they can learn a lot that the uh the websites of the large custodians can be very educational uh and the the the big ones that are the do-it-yourself ones are Fidelity Schwab and and Vanguard and they can also look at other companies because they’ll have information on investing they They can, you know, whether it’s JPMorgan or T. Rowe Price or wherever, they can learn a lot online. And that’s where I would get started. Secondly, the magic of compound interest, if they start investing when they’re young, they will become financially independent very early in their life. And they’ll be able to do whatever the heck it is they wanna do, professionally or personally or whatever. So yes, they’re doing the right thing. And What I’ve learned is I’d be very careful about recommending particular books, particularly I would avoid any books that have a strategy. This is a way to invest for young adults and they go through it. Because sometimes these books are trying to sell something and I’d very cautious about that. And then frankly, why don’t you have them listen to the podcast of this show? Because they can do it at their leisure and you’ve listened long enough. Do we get all, I get all kinds of questions on here. And I think they would enjoy it and they may even want to call sometimes. So do the online stuff, if it smells like they’re trying to sell something, then run away from that and continue to do the objective education. That’s what I would recommend, Lauren.
Lauren [00:51:33] Thank you.
Carl Stuart [00:51:34] Okay, you’re welcome, good luck. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Let’s see here, I think I got a text. Hey Carl, how does someone research the receivership of a failed private equity fund in Austin, Texas? Holy moly, wow, I don’t know because it’s private. It’s a private equity fund. I don’t think that there’s no need or desire for the part of a company to provide research on a private-equity fund that failed. I mean, I suppose there are legal documents around the failure, but that really isn’t gonna be what you’re looking for. I just don’t see how there would be anything other than the legal documents, perhaps, of a bankruptcy. But I’m not sure how much that’s gonna tell you, but that’s the only thing I can think of. You’re listening to Money Talk on KUT News 90.5 and the KUT app 512-921-5888. Gary you are on the air, how may I help?
Gary [00:52:48] Yeah i think carl i i i’m not great uh… I have no doubt uh… Maybe two million dollars worth of assets retired and i often tell those people like i just like to stay how much you want to grow your money at percent here twenty two percent of the happy with four percent just keep it stable i’ll be happy with a four percent return I still think that’s pretty good advice for someone that has no debt in their age. What do you think of that equation?
Carl Stuart [00:53:21] I think it’s a little low only because it doesn’t factor in the cost of living.
Gary [00:53:31] Call it the limit is what anybody wants to pay for.
Carl Stuart [00:53:34] So, you know, historically, the value of your of your portfolio will decline. If you’re making 4%, if you’re paying income tax on it, and if inflation is 3%, you what’s called your real return is a negative number. So I’m, I’m so I’m not comfortable with that, Gary. I’m uncomfortable with eight or 10 or 20% either. I think I’m in the middle. I think if I can find a strategy. Where I could make six to 7% a year, lose 3% to inflation, I still have a positive return. If I’m making a 4% before inflation and taxes, I have a negative real return every year. That’s how I see it.
Gary [00:54:19] Yeah, you look at the inflation numbers, I believe inflation is caused by people paying, it gets to a point where you say, enough is enough, I ain’t paying $8 for an apple or whatever, and they stop buying it, that supply and demand breaks it down.
Carl Stuart [00:54:40] Well, it may, but it may be other factors in the 1970s when we had high inflation, there was no way around it. Prices went up, the economy went down, real estate went down. Stocks went down it was really bad, but I appreciate your call. Thank you, Gary. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Let’s see if we can sneak another call in here. Fernando, you’re on the air. How may I help?
Fernando [00:55:10] Hey Carl, thanks for taking the call. Simply, I’m a federal employee, just about to retire. This year I’ve become 70 and I took my Social Security about a few months ago. Good. I somehow I divested from my TSP into annuities, two annuaries. That bad, huh?
Carl Stuart [00:55:36] Well, I don’t know. I don’t know enough about the annuities. They’re really complicated and they’re expensive, but maybe you got some good ones. I don’t know that. We’ve got about a minute, so please go ahead.
Fernando [00:55:48] You know, simply, if it is good to get out of them, even paying the penalty, whatever it is, or…
Carl Stuart [00:55:56] Yeah, I’m going to, pardon me for interrupting you, by and large in my experience, they are the ones that have big surrender charges, have lots of high fees inside the annuity that reduce your returns over time. And so I would say consider looking for what you’re going to do with the money if you take it out of the annuities before you make any decisions whatsoever. But you’re going to have a federal pension and then you had your TSP, which is like a 401k. That’s the money you want to grow because you can’t make the pension grow, but you can make the other money grow. Keep listening to this show and do some homework. And if you have more questions, call me another time, okay? Thank you, Carl. You’re welcome. I’m sorry to have to cut you off. Well, I want to thank Alyssa and Mark for doing their usual terrific job. Thank you for listening and remind you that next Saturday… Be sure to tune in to Money Talk.
KUT Announcer: Laurie Gallardo [00:57:01] You’ve been listening to Money Talk with Carl Stewart. Carl Stewart is an investment advisor representative of Stewart Investment Advisors. And this is KUT and KUT HD1 Austin.
This transcript was transcribed by AI, and lightly edited by a human. Accuracy may vary. This text may be revised in the future.
