Money Talk with Carl Stuart

Carl Stuart takes caller and text questions on Roth conversions, investing in private credit/equity, and managing an inherited brokerage account with unknown cost basis. He also provides insights on the current state of the Austin real estate market based on recent data.

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

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

Carl Stuart [00:00:20] Welcome to Money Talk, I’m Carl Stuart and you’re listening to KUT News 90.5 and 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. If you’re a regular listener you know that I take the following priority, that is today’s collars first. And then today’s text, you’ll hear those coming in, and then there’s one right there, and then texts that I have not had the opportunity to answer. Terrific idea to call or text early in the broadcast. You have a much higher odds of getting my answer and getting on the air if you call 512-921-5888. Let’s go to the text and see what we’ve got. Carl, I am 46 years old, and a Texas State employee. I’m contributing to my Employees Retirement System pension with 15 years of service credit, maxing out my pre-tax 401k and looking to increase my 457b contribution to one-half of the annual max and increasing to the full max within the next year. Good for you. My question for you, what is your recommendation to go pre-tax or Roth. On the 457B plan. I am 45 years old and plan to retire at 62. Any concerns if I retire earlier at rule of 80 with the Roth 457 rules? Well there’s probably some things there that I don’t know. For example, I’m not really familiar with 457 plans. I know that they are plans available to government employees. But I would say this to you. You’re going to have a bunch of guaranteed income. And because you’re a Texas state employee, you’ve been also paying into social security. Some school teachers with TRS do not do that, but you have been. So when you think about your future, you’re going to have at least two guaranteed streams of income, the pension from the state as well as social security, and I would just say this to you. When the money comes out of your 401k and you go into a briary rollover, you’ll be subject to a required minimum distribution and that money will come out subject to income tax and I’m assuming unless your contribution to your 457 is Roth that you would have that money would come out also as a pre-tax. Now the Roth 457 rule, I know about 457, I but those that are employer contribution plans, I believe the 457 is strictly the employee contribution, if that’s the case. So I think having a future stream that has two characteristics, it’s income tax free and also not subject to the required minimum distribution would be a terrific asset. So if I were in your shoes, just based on what you’ve told me, I would… Probably, if you had an after-tax Roth 401k contribution option, you might consider switching to that. Your employer contribution would be, of course, if there was one pre-taxe, but I just think the idea that you have these two guaranteed streams, Social Security and a bigger part in ERS, makes that future where you’re going to have freedom and flexibility about when you take it out, if at all. And also that it’s tax free. And of course, if you don’t take it out and you pass away, your non-spouse beneficiary has 10 years to take out the money. So I like the idea of building up some Roth IRA savings. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. I got this question after I was off the air last week. Carl, I’m 76 years old and retired. I’m selling my home, hopefully getting $500,000. Will this be enough to carry me through the next 10 to 15 years? And if so, what’s the best options? Well, this is a really complicated decision and I have to make some significant assumptions about what we call your risk tolerance. If you had a balanced portfolio of stock and bond mutual funds, perhaps some other alternatives as well, the standard thinking in the financial planning profession is that a 4% withdrawal rate is sustainable and can be increased with the rate of inflation. So 4% of $500,000 is $20,000. That’s not a lot of money. Presumably, you’ll have Social Security or do have Social Security already because you’re 76. Now, you could take out maybe more, 5%. But you have to recognize that if you don’t take some risk with that, you put it, let’s say, in certificates of deposit or Treasury securities, well, the risk will be nominal and minimal, actually, because it’ll look like it stays flat. But the nominal return. Is there, but the after inflation return is probably going to be negative, and you’re going to have to continue to buy groceries and gasoline and live in the world with everybody else, and you don’t know three things that you should, but you can’t. One, what’s going to happen to the cost of living over the next 10 to 15 years? It’s reasonable to think that it’s going to go higher. And secondly, how long you’re gonna live. If you have access to good health care and good habits, you could be looking at that 15 years easily. And you don’t know the rate of return on your savings and investing. So this is complicated. You can do this on your own if you want to. If you’re a do-it-yourself type person, then you need to take your time because you don’t want to make mistakes. You need to probably do some homework. You can get educated at some of the websites of the do- it-your-self. Firms like Fidelity and Schwab and Vanguard or you can engage, you have enough money to engage an advisor. I recommend an advisor who works on an advisory fee basis rather than a transaction basis so they’ll find people to do that. But you’ve got to come up with an asset allocation. That’s a mix of different assets that when things go badly and periodically they will. There’s just no question about that. You don’t lose a whole bunch of money. But you also have to have money at risk to increase the value of your portfolio as you’re withdrawing from it so that you can keep up with the cost of living. So that’s how I would go about it if I were in your shoes. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here is another one Carl, what has been your experience with special purpose private exchange funds as a mechanism to diversify concentrated stock positions without triggering a taxable event? I am age 71 with highly concentrated positions in Microsoft and Amazon that have been very good to me, congratulations, that I now want to begin diversifying without current taxation. I’m thinking about a fund like the Eaton Vance, Belnova Capital Fund. Thank you, Jim and Austin. I went to the Eatin’ Vance website, couldn’t find the Belnova Fund, but I remember hearing about theirs many, many years ago. So for everybody else, what Jim is talking about is a concentrated position. So let’s suppose that you have saved and invested and you have invested in individual stocks and you had this. Huge gain, maybe you have invested $100,000 in Amazon and now it’s worth, I don’t know, $800,000 and you don’t wanna stay in one stock or two stocks as it’s frankly so risky, but you’re also not excited about paying the long-term capital gains tax. I’m a big fan of the phrase do not let the tax tail wag the dog, but these kinds of funds are actually made for someone like this person who texted. Where you put your highly concentrated position into this diversified portfolio, and then you end up with performance that is not as volatile as the individual stock. So you’ve postponed the tax liability, and you’ve reduced the volatility of your portfolio. And just that concept right there makes sense to me, so I think it’s worth taking a look at. I would just make sure I looked at competitive offerings. To understand the technique that they’re using and also what the ongoing costs are. Good luck. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Another text. Hi Carl, basic question, but why do you recommend 6535 balance between domestic and international equities. And when you say international, do you mean a world fund without US or a total world which includes US companies? If the latter, the domestic holding would be higher, obviously. Well, this goes back to over my 47-year career, frankly, where I have observed that there are substantial periods of time when US companies will outperform foreign companies, followed by substantial periods of time where the opposite occurs. Until last year, we had a long period of time where domestic outperformed international. Last year, the tables turned dramatically and they have again this year. So I like to have exposure to both. I remember reading many years ago that a lot of public companies are headquartered outside the United States. I’ve heard people say, well, I can own Microsoft because they do a lot business in Europe. That’s true, but Microsoft is a US-based company. And it tends to fall in line with U.S. Equity market. I would prefer international over global. You’re right, global means a certain percentage in international and a certain percent in domestic. And kind of my recollection over the years is a global fund will have 60 to 65% international and the domestic would be the balance. I like to have, if you will, a more pure allocation. You can either do this with passive indexes, you can buy a total US or an S&P 500, I like the total, and then you can by a total X US or you can pick active managers or frankly do what I do, which is a bit of both, and that’s how I think about that. I of course don’t know how long the current outperformance will occur, but just listen to this. This is pretty amazing. This as of yesterday. I’m just using these exchange-traded funds, I hasten to add, as benchmarks. I am not making, nor will I ever make, specific recommendations on money talk. So through yesterday, Friday, the Vanguard total stock market was up 1.49 percent. The Spider S&P 500 was up one point one percent. And the Fidelity NASDAQ Exchange Traded Fund was down 1.46%. But the Vanguard ex-US, which is all those international companies, listen to this, was up 10.51%. That’s right. It’s a remarkable difference. So my sense is, just based on reading and talking with portfolio people, that there’s a couple things going on here. One is, when you look at valuation, as a group, international equities are cheaper than U.S. Equities. And secondly, the outlook for the dollar. Is probably stable to weaker if for no other reason than we’re piling on trillions of dollars of additional government US government debt and so when you have a falling dollar that’s a tailwind for international companies and valuation matters over time when it comes to the equity market. Thanks for your question. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text, 512-512-7000. 921-5888. Here’s an incoming text. Carl, I’m nearing retirement and I am sitting on a sizable amount of appreciated stock in two large companies, 36% of my portfolio, Zowie. I plan to liquidate most of it in the next year or two. The proceeds will be used to fund the fixed investment and alternative strategies plus some cash to live on, live off for the next two to three years. Should I use taxable or tax-deferred funds for fixed and alternative investments? And should I liquidate all stocks in year one or over two years? Well, you’re probably going to be paying because they’re at large positions, the 23.8% is the maximum long-term capital gains tax, whether you divide it into two or you do it in one year. So unless your capital gains tax differential is large, like 15% versus 20%, I see no benefit, frankly, in doing it over two years. Secondly, even if the taxes were different by doing it two years, which I really doubt, it doesn’t take a whole lot of decline in the value of one of these positions to where you’d have been better off selling it and taking the after-tax proceeds anyway. So my sense is, as you near retirement, I think I like your idea of diversification. Personally, I would probably sell those stocks. As an example, when I visit with active equity managers on Wall Street, a large position in a concentrated portfolio of say 35 to 50 or 60 equities might be a 4% position, but you have 36% in two companies. And when it works, there’s nothing better. And when doesn’t work, there is nothing worse. So I like the idea of you liquidating those, I would do it sooner rather than later. Now. Should you use taxable or tax-affirmed funds for fixed and alternative investments? The idea is you’re going to buy bond funds for fixed investments, in my view. And so what you want to look at is that you can do this at Morningstar or you can your homework. What you want to do is determine what you believe your marginal tax bracket is. In other words, on the next dollar of taxable income, are you going to be taxed at the 35% or 37% rate or a lower rate? And you apply that to what’s called the trailing 12 month yield of a taxable bond fund and a trailing twelve months yield of a taxi exempt bond fund. And that tells you where the better net is for you and because it could be a considerable amount of money I think you should spread it over two or three funds in the taxable arena using Morningstar’s category, a short term tax, a short-term fund, a core CORE bond fund and a multi-sector fund. Because I also think you have potential for appreciation, and I think appreciation potential, particularly in a multi-sector taxable bond fund, is probably greater than it would be in a tax-exempt bond fund. You could split the difference and do the short, if you’re in a high enough bracket, you could split difference and a tax exempt bond fund for the short fund and for the core and do a multi sector in the taxable because that’s a go anywhere fund, it can buy domestic or foreign. Bonds it can buy across the credit spectrum and that’s where I think I would add that if I were you the alternatives I Think in that case it depends most of the alts that that I’m familiar with are pretty tax-efficient a global macro Market neutral merger arbitrage trend following and managed futures. They pay out small amounts in tax as taxable events but they’re pretty tax efficient. And I think if you said I had to have a tax deferral in an alt investment, I think you’d have a hard time having a robust group from which to choose. That’s a very thoughtful question, and thank you. You’re listening to Money Talk, where nobody’s talking but me, you can call and you know, 512-921-5888. And by the way, I’m gonna try to remember to do this a bit earlier today than last week. You can catch past shows at KUT.org slash Money Talk. You know the number, 512-921-5888. I see that time is close enough to a break, Mark, that I think we’re gonna take a break. Let me give you that number one more time. Call or text, 5 1 2 9 2 1 5 8 8 8. I’ll be back.

Jimmy Mass [00:18:29] 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 [00:19:05] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:19:19] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here’s a text from this afternoon. Hi Carl, I need to know if I can contribute to my health savings account for 2025 if I turn 65 in August of last year. Is it possible to calculate a pro-rated contribution based on the months of 2025 when I was still 64. I enrolled in Medicare in August of 2025. The short answer is I don’t know. I hope we have a listener that knows. I looked at what I have here is the tax rate schedules and contribution limits for 2026. And it just says that an individual could put in up to 4,400, a family 8,750. And there are catch-up contributions for taxpayers who are 55 or older. And in 2026 may contribute an additional $1,000 or $5,400 for individuals, $97.50 per family. Sadly, it doesn’t answer your question. My guts, my intuitions, you probably make the full contribution. But frankly, I don’t know. It’s not that I have such a working knowledge of HSA. So I’m sorry I couldn’t answer that. Stick around. Keep listening. You never know. We have such brilliant group of people who listen to Money Talk that we may get the answer. Time to call or text, all the lines are available. 512-921-5888, okay. Carl, this is from last week. How do you distinguish between if the estate holds all the money when it sells a property or does it get divided amongst the heirs? Also, does the estate heirs pay the capital gains tax? So, since it’s an estate, then the owner is deceased. And so. The proceeds from this property go to the heirs based on the will. There is no tax because it was a property owned by an individual. That would be true if they’re mutual funds as well or any capital asset. The difference is there’s tax in respect of decedent and then tax to the heir if you have inherited tax-deferred assets. The classic one would be an individual retirement account. Then if you’re a non-spousal heir, so the person to succeed might have three children and all three of them get a third of the IRA and they have to take the money out over time within 10 years. On the other hand, if it’s a piece of property, the property is sold, the value of the property, the cost basis to determine the taxable gain is the estimated value of property at the date It’s easy to do with financial assets. You probably, I don’t know how you do that with real estate. Maybe it’s just the taxable value or maybe you have to get an appraisal, but there’s no estate tax because of that and if you sell it, there’s not gain. There’s no tax. If there’s a gain, it’s only the modest amount that occurred. Could be a loss, but it could be a modest amount of the gain. Thanks for the text. You’re listening to Money Talk. On KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Rob, you’re on the air. How may I help?

Rob [00:23:00] Hello Carl, it’s Bob, but anyway, it is close enough. I’m good.

Carl Stuart [00:23:04] You know what? I’ve got these glasses on and I gotta look over my computer and the B turned into an R So I apologize

Rob [00:23:12] We’re the same age, and that stuff happens to me all the time, man. Yes. So I’m a long time follower, and I’m just thinking this week, what a great time to be invested in the market. I mean, the noise is being fed to us like through a fire hose, and you just got to filter through it. I have a question, and then I also have a compliment. Thank you. I’ve been thinking about this a lot lately. And you are, your financial show has been a great service to our community. I’ve been listening to a lot of stuff on the radio and they’re all pushing something and you don’t do that. And I’ve listened to you for over 30 years and you’ve never done that. And you’ve been a. Service to our. Community. And I also want you to sit up straight and pump your chest out. The call you made. The call you made on gold like four years ago is off the chart. I listened to you when I’m in my shop and walk around outside and I said, I said the old man, you’re the same age as I am. I said you must have fallen down and hit your head because there’s no way. And so you’ve made us a lot of money. Unfortunately, I’m a doubting Thomas. So I don’t invest in gold. I don’t like it. Yeah, well, that’s here, here and over there.

Carl Stuart [00:24:37] Well, first of all, thank you very much. I appreciate that. Now, did you did you have a question also, Rob?

Rob [00:24:43] Yes I did and my question is I know you read barons every morning and I saw Saturday morning with coffee so I saw a news feed come across here and they were talking about private credit and alternative investments and I want you to be my AI bot and decipher the article because I don’t want to do it. I know the pros and cons, but I want you to narrow it down because I’m thinking that some of those stocks like Blackstone and Apollo and Blue Isle are going to bottom here in the next couple of weeks. And so I have a little Vegas money and I want to go ahead and maybe pick up 20% in like trading them in like six months or so. So please give me a take on that. Okay. Love your show.

Carl Stuart [00:25:28] Thank you. You bet. I’m going to go ahead and hang up, and you’re very welcome, and thanks for those nice comments. So, for everybody else, when we talk about private credit and private equity, what does that mean? For many, many years, large institutions, say, for example, the Teachers’ Retirement System, or the University of Texas Investment Management Company, or the Employees’ Retirement System, which they had… To say they’re long-term investors is kind of an understatement because they’re supposed to be around forever, you don’t get much longer term than that. They have return assumptions that they make because they are making promises to pay out over people’s lifetime, pensions, annuities some people call them. And so they can’t put all the money in what might be perceived as safe like U.S. Treasuries because it won’t meet their actuarial obligations. They can put it all in stocks, but that’s probably not a good idea. They need some other assets, and they invest in private securities that don’t trade. Typically, a private equity investment’s in the neighborhood of seven years, and a private credit could be even longer. Venture capital’s even longer than both of those, but private credit can be shorter, and they give these companies money, and these companies turn around and invest it, and thus just take private equity for first. So let’s say that University of Texas gives, and Bob mentioned some of the big players, let’s they they give Apollo $50 million. Apollo takes that plus millions of dollars from other clients and goes out and buys companies, actual operating companies, and their objective is to grow the business of the company. They may have a founder, and they think that if she had more money she could really make it grow, or they may have someone. Who’s built a wonderful business but who wants to retire, and they will go in and pump money into, put money and pump it into the company and hopefully make it worth more and then at some future date turn around and sell it maybe to another private equity company. So there’s a real movement on Wall Street and frankly in the President’s administration to bring private assets into Retirement plans, specifically 401K plans. My initial reaction to this is it’s probably a bad idea because you have a 401K plan and you move to a new employer and you transfer it. What if the new employer doesn’t have access to private credit or private equity? Or let’s suppose you retire and you wanna start taking money out and 25% of your money is tied up something you can’t get your hands on for six years. So the illiquidity should generate what’s called an illiquidity premium of a higher return. One of the big firms is Blue Owl, and Bob referred to this, and they are going to close down one of their funds, Business Development Corporation fund, and they’re gonna distribute the proceeds from selling private credit, and those are bonds, but they’re not bonds like treasury bonds or trading cordible. Trading bonds like corporate bonds or municipal bonds. These are loans to these private companies. And so Wall Street got very nervous when Blue Owl said we’re closing our deal down. Now, according to my reading today in the Wall Street Journal, the latest thinking is that other institutions are buying up those and that the odds are. That the people who own the Blue Owl are likely to get very close to what they put into it. I’m just repeating what I read today. So as an investment for individuals, I’m skeptical to negative, but you’re talking about speculating in the companies. I would tell you these companies are extremely well-managed. They didn’t get to be this big and this successful, but there’s a lot of money flowing in, and when that happens, returns come down. I’ve seen it in oil and gas. I’ve seen it in venture capital. The psychology turned negative, it’ll probably go back up. So if I were in your shoes and you’re a speculator, then put a little bit of money to work this coming week and we’ll see what happens. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. And if you would like, you can catch past shows at kut.org slash Money Talk. Lines are all open. Incoming texts at 512. 921-5888. Carl, my name is BJ. I have a small business that I take a modest pay of $1,000 a month from. Is there a problem if I take 100% of that as 401K up to the limit? I make money through my other business but I don’t put money into a 401K from them. My understanding is it’s just fine. I know because I’m self-employed, I have an SEP IRA. And there’s a maximum that I can put in, but $12,000 is significantly below the maximum for a 401k. So if that’s what you have instead of an SEP IRA, and again, I’m not a CPA, but it’s my understanding, I think it’s something like 23,500 or 24,500 is perhaps the maximum you can put in as a plan participant, but you also have the opportunity to put money in as the plan sponsor as well. So I’m no aware of any problem. You go ahead and put the $12,000 in. You’re listening to Money Talk on KUT news 90.5 and the KUT app. Call or text 512-921-5888. Let’s just see here. I already answered that one. I’m just going through the former text here to see if I have anything else. I am looking at a HELOC with a 7% interest in financing $75,000. Some of the interest is at 29.99. In other words, you owe 30% interest. Sounds good to me. What should I be aware of? Well, my understanding of home equity letters of credit or line of credit, either one, are variable rates, but I’ve never heard of them going all the way up to 30%. So my advice to you is to take that HELOC to pay down the 29.999, but I have to also ask yourself. How did you get 30% interest? That’s an unsecured note, probably a credit card debt, and now you’ve still got all this interest to pay, and that cuts into your ability to be financially independent. So if it’s a function that you had in a medical emergency or some unanticipated expense, then I understand that. But if it is a function that just simply you spent more than you make, then obviously you need to be looking at changing your behavior as well. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Tamra you’re on the air, how may I help?

Tamra [00:32:53] Hi, I want to say I love your show too, by the way, but I was wondering if a will has individuals mentioned that they’re going to gift amounts of money to, and then it says also that it will be dispersed among the estate, which, you know, is family members. Do they disperse that money first to the gifts and then give it to the estate?

Carl Stuart [00:33:19] That’s not my understanding. So when it goes, if it goes through probate or not, the executor delivers a death certificate to if it’s financial assets, the custodian, if it is the bank, the bank. And then the executors responsibility is to follow the rules of the will and distribute it at that time. So what you may be talking about is a bequest. Where there’s a specific, rather than three children each getting a third of the estate, there’s bequest to give $10,000 to a university or a church or a synagogue or something like that. That’s not, that should not be, there shouldn’t be a priority by time. Those things should happen more or less at the same time, in my experience.

Tamra [00:34:10] Thank you so much for your time.

Carl Stuart [00:34:11] Very welcome. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-588. I may have gotten through all of my texts from the past. Let’s just see what this is. No? Okay. I’m 34. Now I’ve done that one. All right. I’m going to bloviate here unless you call or text 512. 921-5888. Listeners know that I get the monthly Austin Metro market residential real estate data. So I now have the January data. And the median sales price in Austin was $431,277 compared to a year ago. That’s down 4.2%. And the medium sales price per square foot was $207 a square foot. That’s down 5% from where it was a year ago. The total home number of homes sold was up, 2,593 homes in January. That’s a 3.2% increase year over year. And the median days on the market, this is significant, 106 days. That’s up 16 and a half percent from a year over a year basis. That’s significant number. The supply of the inventory, has been no change, about 4.1 months. And the home sold above list price is 10.7% sold above the list price. That’s up a little from year over year, up 2.9%. But the number of new listings is volatile because it’s month to month. So I don’t place as much emphasis on what this last one is, which is new listings 1,672, down 21.1%. There was. An article in the Wall Street Journal, which listed the 50 largest markets population and then ranked them by the, shall we say, the health of their residential real estate market from worst on down. And at that, with that measurement, Austin had the worst in terms of probably time on the market and year-over-year price. But again, I’m not trying to scare anybody is down four percent. That’s not a big number, but if you got a $400,000 house, 4% is a few thousands of dollars. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-928-921-5888. Calvin, you’re on the air. How may I help?

Calvin [00:36:59] Other carl uh… You mentioned the uh… Inheritance question that came up about giving a particular item out of the state to uh… Help the queen to get to a certain person one of them on the recipients of the estate and uh… We went through that one of the father passed away

Carl Stuart [00:37:13] Mm-hmm.

Calvin [00:37:14] And what he did is he gave a property with four acres and a house on it to my brother who had been living there, and the entire rest of the estate was then divided into the usual four. So my brother got the property plus his, say, $100,000 out of a $400. So that was, though, I believe that might have had to be. Described in the estate, in the will and testament, and I don’t have it in front of me, but I remember reading it and he said something like, John will get this property, blah, blah blah, described it, and the remainder of the assets will be divided equally, so John got a little extra there, which we wrote that with.

Carl Stuart [00:38:01] No, I completely understand. That’s exactly the case. The executor had to close, close up the estate. John gets the house and everybody else along with John gets some money. Yeah, that’s pretty, so you’re right. It’s a very straightforward process. I appreciate it. Okay, Calvin, thanks for calling. Okay. You might have.

Calvin [00:38:16] We’d have to specify that in the will, though.

Carl Stuart [00:38:18] Yeah, exactly. You do specify. You absolutely do. You’re right. Thanks for the call. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. I’m going to take a break. Stick around. I’ll be back.

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KUT Announcer: Laurie Gallardo [00:39:31] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:39:45] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and on the KUT app and you can listen to past shows or call your friends or your relatives and tell them you can’t believe what a terrific show this is you should listen and you do that by going to Kut.org slash Money Talk this afternoon you can call or text 512-921-5888 here is They call. And this says you’re nervous Ellie.

Ellie [00:40:17] Hi, remember me?

Carl Stuart [00:40:19] Yes nervous Ellie go ahead

Ellie [00:40:21] Yeah, you know I just could not bring myself to jump into the stock market so I took your advice and did the stair stepping ladder CDs and so that’s been working out great for me. My question to you now is I have an opportunity to invest in a brand new business and I can’t decide on if I should use my own money or get an SBA loan.

Carl Stuart [00:40:48] So first of all, let me say that investing in an individual business is massively more risky than investing in the stock market, and I hope you understand that. The vast majority of businesses fail, just across the board. So you’re making a very high-risk investment, and that’s okay, because I’ve invested in operating businesses, and I’ve lost a lot of money doing that, and I invested with smart people. I’ve invested with CPAs. I’ve invest with biomedical engineers. I’ve investor with all kinds of experts and lost all kinds money.

Ellie [00:41:22] You’re not helping

Carl Stuart [00:41:25] I’m telling you the truth, so here’s what you have to do, you have to say I’m prepared to lose all the money, I am prepared to lose all of the money. It is illiquid, most businesses don’t cash flow from the very beginning and so you’re going to have to assume that you’re in this for five to ten years, the odds are you’re gonna lose money because the business is gonna have to be so successful. That it can pay all the operating expenses, all the staff, all the taxes, have money left over that they can distribute to you, all right? So what are the odds of that? Not very good. But if you’re gonna do it, do not borrow the money. Do not borrow money. You put your own money at risk, you lose it all, you don’t owe anybody anything. So do not go to the SBA, sink that money in. You can call me in five years and tell me you made $50 million.

Ellie [00:42:24] Honey, I’ll be in Belize and won’t be able to make a call, but…

Carl Stuart [00:42:28] All right. Good luck. Thank you. You’re welcome. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text five. I’ve lost money in every conceivable asset class. Call with your questions or text me at 512-921-5888. Another call. Barbara, you’re on the air, how may I help?

Barbara [00:42:56] Hi carl uh… I’m responsible for uh… Handling my mother’s brokerage account

Carl Stuart [00:43:04] Mm-hmm.

Barbara [00:43:04] And I thought we were going to be able to just use I should clarify. A lot of the money in her account, a lot of the stocks were gifted to my parents back in probably the late 50s and the 60s. And we don’t have a cost basis.

Carl Stuart [00:43:25] Oh boy.

Barbara [00:43:26] And I haven’t found the stock certificates or anything anywhere. I had hoped to be able to leave all of those stocks until we establish a new cost basis at my mom’s death, but she’s spending more money per month as she ages and needs more help. So I’m just wondering, when I run out of stocks that I have a cost basis for, what’s best way to approach these other ones.

Carl Stuart [00:43:55] It shouldn’t be, I don’t think, you wouldn’t, if there were stock certificates and you couldn’t find them, you wouldn’t even know about them, right? So I don’t think there’s stock certificates, probably you’ve got the stocks in the account. I mean, so that’s that. So this is a tricky deal, because when I first started doing this 47 years ago, Securities firms were not responsible for or required to put in cost bases. Now they are. But because these were purchased so long ago. There is a database where you can pick a date and it’ll show you if the company existed back then. Let’s say it’s Coca-Cola just for fun.

Barbara [00:44:42] Uh… Well it’s that

Carl Stuart [00:44:44] Okay, so it’s PepsiCo. So PepsiCo has been around a long time. You can estimate a date when your parents receive it. No one’s going to say, oh my gosh, it wasn’t Tuesday. It was Wednesday. You could estimate the date and you can go to the database and find out what the price of the stock was that day. My staff does that for me. I’ve never done it personally, but this does come up from time to time. And we were able to do that. So that’s where I would go if I were in your shoes Barbara.

Barbara [00:45:17] Okay, so just the best estimate I can come up with when they mine a product.

Carl Stuart [00:45:22] It’s all you can do.

Barbara [00:45:24] Okay, and IRS won’t ding me for that.

Carl Stuart [00:45:27] The IRS will not ding you for that is my experience. Obviously, neither you nor I are tax experts, but in my 47 years, I have not seen the IRS go after somebody in a situation like this.

Barbara [00:45:40] Great, I appreciate that help. Thank you.

Carl Stuart [00:45:42] Okay, you bet. Good luck. You’re listening to Money Talk on KUT News, 90.5 and the KUT app. Call or text 512-921-58. Harry? Harry, you’re on the air. How may I help?

Harry [00:46:01] Well, Carl, I’ve been listening to you for a while, but I have a really pleasant problem in that I have my IRA basically exploded enough that I had to pay essentially maximum tax, just on the distributions, and I’ve had some several people saying, well, convert the law to a right. Of course, if I convert it to a Roth, I’ve got to pay…

Carl Stuart [00:46:32] Income.

Harry [00:46:32] 37 percent. And I’m not a hamster. Ha ha ha!

Carl Stuart [00:46:40] So here’s a couple things to think about. First of all, on a regular basis, do you make any significant charitable contributions here?

Harry [00:46:50] I have not been making

Carl Stuart [00:46:53] Okay, well that’s up to you, but I do that with mine, and if you’re 70 and a half or older, you can give up to $100,000. So if you wanted to reduce your RMD, you could give some money to your college or church or whatever, but if you don’t want to, that’s fine. Now because the income

Harry [00:47:13] It’s a hundred thousand total that you can give for a year, is that correct?

Carl Stuart [00:47:17] That’s right. I mean, your RMD might be $250,000. In this hypothetical example, you could give away $100,000 doing qualified charitable distribution. You still have to take $150,000 as a requirement of a distribution, but that’s a lot less than $250. So yes, that’s something you can set up with your custodian. They will either send you the check and you can deliver it to the nonprofit or they will send it directly to the nonprofit. Personally, I like to get the It’s payable to whatever nonprofit, and then I write a letter and make sure they know it’s coming from me because I did have a situation one time where the money went directly to a university and they didn’t know who it came from. So I like to do it with the custodian, send me the check, I write the letter and send it to the nonprofit. Now for the Roth question, as you know, the income tax tables are graduated. And so… If it’s possible to say, for example, this year, are you a single taxpayer or married filing jointly?

Harry [00:48:27] Single taxpayer

Carl Stuart [00:48:29] Okay, so you pay 32% up to $256,000. And then from 256,000 to 640,000 of income, you pay 35% and then above 640 thousand forever after that, 37. So you don’t have to be in the 37% bracket for all of it. What you oughta do is look at all your sources of income social security, interest, dividends, pensions, whatever. And then sit down and say, how much can I take from my IRA into a Roth IRA? It doesn’t throw me into the 37% bracket or doesn’t through me into 35% bracket, okay? That way you can manage it better for taxes.

Harry [00:49:16] But my problem is, as I said, a pleasant problem. I’m stuck in the 37%.

Carl Stuart [00:49:24] Okay, well, then I would think that…

Harry [00:49:26] And how is it still worthwhile?

Carl Stuart [00:49:27] Yeah, yeah. Is it still worthwhile? Terrific question. And the answer is if you’re never going to spend the money and you want to leave a legacy, the great thing is that your heirs don’t pay taxes on it. We worked with a person this week who he said, I’m not going to do that. I’m perfectly happy to let my heirs pay the taxes, in which case do not do the Roth conversion. The other hand is you pay the 37%. You live, You live, you’re not a kid, but you live a long time. No required minimum distribution, and if you take it out, it’s tax free. So it’s really, I either pay the taxes now, or I pay some and then I die and my heirs pay the tax. There’s, in my view, do you see this common question? I don’t think there’s a right answer. I think it’s, do want to take the pain today for the future tax-free treatment and no RMD, or do you want to just take as little pain as you can and let your heirs have the rest? That’s how I would make my decision if I were in your shoes, Harry.

Harry [00:50:28] Okay, uh, yeah, yeah. It’s not an easy decision. No, it’s not

Carl Stuart [00:50:32] No, no, the mathematics doesn’t matter because if you take it out and pay the taxes, you have less to invest. And if you leave it in there, you don’t pay the tax, but then it comes out and you pay the taxes. So, you know, it’s much more, it is a much more behavioral question in my view.

Harry [00:50:48] Well, if the inheritance gets split between multiple people, possibly their tax might be lower. Yes, that’s right.

Carl Stuart [00:51:04] Yes, yes, yes. That’s exactly right. You could say, well, I’m going to go ahead and take the required minimum distribution because I don’t have a choice, leave the rest of it to compound because my ears are going to be in the 28% bracket or whatever. You bet. And that makes sense as well. I agree with you.

Harry [00:51:22] You pretty well answered the questions, thank you very much, you do a great job.

Carl Stuart [00:51:27] Thank you very much and good luck to you. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Let me get these phone calls. Here we go. Michael, you’re on the air. How may I help?

Michael [00:51:42] Thank you, thank you. I live in Texas. I bought the house wholly myself but it’s a common property state. So the house in Vermont was fit willed to me by my dad. Is that subject to common property restrictions.

Carl Stuart [00:52:08] I think maybe you mean community property restrictions. I’m not familiar with restrictions. If you receive it in a will, it’s your property. There’s no tax to you because it’s a gift to you. There may have been a tax, some other tax, but when you inherit something, whether it’s real property or financial assets, unless it’s in an IRA, there’s no tax to your, is my experience, Mike.

Michael [00:52:37] Well, it’s not taxes. It’s whether I can do with that property that I inherited in Vermont as I wish. Obviously, the one here in Texas, though I bought it completely, were married. And I think I can’t do with it as I solely wish.

Carl Stuart [00:53:00] I don’t know why it wouldn’t be separate property. You were the sole recipient of it. It would be, it would be Michael said, it’s just like my wife inherited securities from her father and we opened a separate property account and she’s, it’s her money and it’s not mine. And if we ever got a divorce, I have no call on that money. It would seem to me that the, you would own a house in separate property

Michael [00:53:27] How about then let me ask back to the Texas property. I bought it totally in my name, but I understand that under Texas law, I can’t just do whatever I want with it. I need her permission.

Carl Stuart [00:53:49] That’s that’s if it’s separate property that’s not my understanding that you’re but you’re out there beyond my area of expertise that’s a legal legal situation but my understanding is that that’s does not so talk to a lawyer is exactly what i would do if i were in your shoes good luck thanks for calling you’re listening to money talk on kut news 90.5 and the kut app we’re going to keep going here Bill, you’re on the air. How may I help?

Bill [00:54:19] All right, in your opinion, are we devaluing the dollar to the point where we may be changing to a digital currency? If so, should we be investing in digital currency now to get ahead of the curve?

Carl Stuart [00:54:39] Uh… The answer is no i don’t believe that i will tell you what’s going on central banks for several years now have been diversifying their portfolio but the demand for long-term treasuries rather than shrinking is growing and when there’s a big risk event so far what happens is money flows into u.s. Treasurys So central banks don’t want to have all their eggs here. In volatile times. They’re one of the reasons, their purchases are one of the reasons gold’s been going up in my opinion. But when you are a central bank or sovereign wealth fund and you need to have some of the money safe, as of this afternoon, you can’t go anyplace else with size. You can go to the yen and the euro and sterling, but they’re not that big a currency. So, I think the dollar weakens over time for the reasons that you just articulated. I think alternative assets become attractive, but we are so far away from that right now. All you have to do is judge by what the world does when things go badly, they buy U.S. Treasuries. And I just read this week that more people are buying, and it’s foreign money, foreign money buying U. S. Treassuries. So we’re way early in the move to Bitcoin or any other digital currency. They’re still way too speculative and because they are opaque. They are also prone to criminal activity, and I think eventually could be prone to manipulation as well. The dollar can’t be manipulated because it’s a tradeable. The reason the Chinese yuan won’t be a good currency is because the government controls it. We don’t control the dollar. The global supply and demand controls the dollar, so I think I’d be. Diversifying some into gold. I’ve talked about that for several years in an exchange-traded fund, not the bullion and not the coins, but that’s where I would go. I’m running out of time, so I don’t want to be rude, Bill, but I’m going to have to hang up on you. A lot of fun this afternoon. I want to thank Mark for doing his usual terrific job and, as always, remind you that next Saturday at 5, be sure and tune in to Money Talk.

KUT Announcer: Laurie Gallardo [00:57:17] 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.