Money Talk with Carl Stuart

Carl Stuart takes caller and text questions on taking a 401(k) loan, and when you should avoid reducing your 401(k) balance, managing required minimum distributions, using qualified charitable distributions to reduce taxable income, and the benefits of exchange-traded funds compared to mutual funds.

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

KUT Announcer: Laurie Gallardo [00:00:01] This is Money Talk with Carl Stuart. Carl Stuart is an investment advisor representative of 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 Stuart and you’re listening to Money talk on KUT News 90.5 and on the KUT app. Money Talk now in our 31st year here together 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 a great idea to call or text at the beginning of the hour, giving me an ample opportunity to do my best to answer your question. As always, I take today’s incoming calls first, and then incoming texts. You’ll hear those come in on the phone here, and texts that I haven’t had the opportunity to answer. So when we get started, let me give you that number one more time. 512-921-5888. And I tear up, tee up. Text, here we go. I’m 45 years old, 20 years from retirement, and I have $1 million in my 401k, as well as $300,000 cash in a money market checking account. More importantly, I’m in a stable job I plan to stay in long-term. I own my own home, so my largest monthly expense after food is actually my electricity bill. I was wondering your thoughts on taking a 401k loan specifically to install solar panels to reduce or eliminate my monthly electric bill. It seems like free money since I pay myself back and will save $200 to $400 a month. I think, first of all, congratulations on your financial situation, that’s terrific. I think taking a loan, it means that the money is not there. To grow. I mean, I obviously don’t know how you have it invested and, of course, don’t know what the returns will be over the time that you would have to pay it back. But we’ve just had three terrific calendar years of double-digit returns that you wouldn’t have had. Had you borrowed the money, you’d be paying it back, but the balance of that loan would still be there. And because you’re in such good financial shape and You don’t have any liabilities? I would use the cash if I were you because in your situation with a stable job, you have too much money in cash in my view. What we know from history is cash after the return on cash after inflation and income taxes is a negative number. So I think you have too much in cash. I’m glad that you’re debt free. I would not take the loan. I would reduce my cash position if I was 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 512-921-5888. Gonna get somebody here. Bob in Arlington, you’re on the air. How may I help?

Bob [00:03:36] Thanks for taking my call call carl i’m calling because it’s tax season and in terms of uh… Investing but trying to keep and they are m a g i down i’m uh… I’m hitting the limits because of required r m d so going to open security uh… Uh… Income from investments and and the RMDs, I’m just fighting both Irma and NIIT. And I know that you have a lot of clients that are in that same situation. I’m wondering what you end up recommending that they try to do to get that MAGI down.

Carl Stuart [00:04:28] Yeah, I guess the one thing you could do, but you have to have the desire to do it, is you could take your required minimum distribution, or even more than that, but you could your required minimum distribution as a qualified charitable distribution and give that money away, thereby reducing your modified adjusted gross income. Other than that I know you’re, because you’re a long time listener. I know that you love CDs and that you spend three hours a day looking for the best CD returns, as I recall, and I’m teasing you, Bob.

Bob [00:05:05] Yeah, I know.

Carl Stuart [00:05:06] And you may want to consider getting out of CDs, depending on how much your interest income is, and investing in either a tax-exempt money market fund, or if you want low volatility, a short or intermediate term tax- exempt municipal bond fund so that you reduce your interest income, charitable contributions. Those are really the only two things. That come to my mind that seem plausible, Bob.

Bob [00:05:40] Where I’m going with this is I’m already hitting all the all those bells and whistles there. Okay Okay, the problem with trying to take it out of the CDs and going to the tax exempt. Yeah It does lower some of the taxable income But that ends up getting added back in for these

Carl Stuart [00:06:01] Yes, yes, yes. You’re right. Yes, I forgot that. Yeah, you’re still…

Bob [00:06:06] So i thought i’ve got a lot of other i can do that and it’ll help a little but it it helped a little and it hurt a little so i was wondering even about if you’re finding many clients that are trying to address maybe a q lack

Carl Stuart [00:06:22] I have not run into that. As you research that, keep us posted if you were to keep me posted, but I haven’t run into the qualified, tell people what QLAC stands for, please.

Bob [00:06:36] Actually, I’m not sure what it stands for, but it basically is a recognized IRS annuity for taking IRA dollars and deferring it for up to a 10-year period before you have to start taking it back out. So if you’re like me and fail to do enough for off conversions by the time you’re 73, then the QAC is about the only way to, um, to get money out of that i are a proposal of the r m d but i can’t do the rock conversion because it’s just party put me way over her and then

Carl Stuart [00:07:16] Yeah, yeah just exacerbates the situation. I tell you what I’m gonna remember this I’ll do some homework this week and see if I can figure out what a QLAC is and and then we can visit about it on another broadcast

Bob [00:07:28] Well, the one thing I’ll tell you on that is it only kicks the can down the road for up to ten years, but it can help, especially if it allows you to do some raw conversions between now and that ten-year period, but they’ll come back to haunt you eventually.

Carl Stuart [00:07:47] Exactly. Okay.

Bob [00:07:49] Okay, Carl, thank you.

Carl Stuart [00:07:49] Alright, well you bet. Thanks for calling. You’re listening to Money Talk on KUT News, 90.5, and on the KUT app, call or text 512-921-5888. You hear those texts coming in. We have all of lines available, or I’ll like your show. Thank you. I really enjoyed, regarding, whoops, hang on. I’ve got, what you have to understand here is that I’m working with a Galaxy phone, which I don’t own except now that I do this with it. And I’ve gotta figure out how I’m gonna get to where I wanna get to this thing right here. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Here we go, let’s see. I apologize. I will tell you what I’m gonna do. I’m going to take an early break, Mark, so that I can work here on the phone and get these texts coming in. You’re listening to Money Talk on KUT News 90.5. Call or text 512-921-5888.

Jimmy Mass [00:09:15] Money Talk airs every Saturday at five o’clock on KUT News 90.5 FM on the KUT app and at KUT.org. This podcast is produced by KUT and KUTX Studios as part of KUT Public Media, home of Austin’s NPR station and the Austin Music Experience. We are a nonprofit media organization. If you feel like this is something worth supporting, set an amount that’s right for you and make a donation at supportthispodcast.org

KUT Announcer: Laurie Gallardo [00:09:46] This is Money Talk with Carl Stewart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:10:00] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and the KUT app. I tell you a funny story. I am so illiterate with this phone. There were two weeks where I received no text and I couldn’t figure out what the heck is going on. So I googled why am I not getting text on my Samsung and somehow I put the darn thing in airplane mode and I wasn’t getting my text. So that was an interesting lesson. I do have my I do have my tax capability back now, which means that you can call or text 512-921-5888. Hi Carl, like your show, thank you. I’m close to retirement. I have a 403B employer-sponsored plan with CoreBridge. Upon retirement, I can annualize my funds. However, I’m encouraged to consider Assured Edge Income Builder. Which I’m told provides higher payments and more flexibility. It seems very complicated, and I don’t understand it. I’m wondering what your thoughts are on this and if assured edge is better than straight annuitization. Thanks, Christina. So it sounds like your 403B is with an insurance company and you’re looking at various features to provide income for everyone else who’s listening. Whether you do it with retirement money or your own after-tax money, you can purchase something called an immediate annuity, and it will provide you with monthly income for the rest of your life. Very straightforward. And these have been around a long time. In my experience, they’re very efficiently priced. They don’t have a big commission involved with them, and you know exactly what you’re going to get. Now, is it a good thing? Well, it may or may not be. Certainly, if you don’t have, if you’re worried about not having enough income to retire, okay. But if you retire and you live a long time and the cost of living goes up 3% a year, you can’t make the annuity go up. This is a irrevocable decision. I want you to know that you don’t have to stay with Corbridge when you retire. You can take that money and do a trustee to trustee transfer into an individual retirement account where you have the full world of financial assets available to you, stocks and bonds and CDs and money market funds and mutual funds and exchange traded funds. So I think I would really broaden my range of options if I were you and I would consider If I’m being offered something like what you’re describing, it’s a short edge. And it’s hard to understand. One of my personal rules is if I can’t understand it, I’m not gonna buy it, okay? And so I’m with you. Don’t do the fancy thing you don’t understand. Before you do the lifetime immediate annuity, take a look at going to an IRA on your own, or you can engage an advisor. Take your time about that, but I just think there’s a lot more opportunities for you. Some of which will give you a chance to increase your income over your retirement lifetime because they’ll grow in value. Thanks for your text. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888 and you can catch past shows at kut.org slash Money Talk. Here is an incoming call. Peter, you are on the air, how may I help?

Peter [00:13:55] Stuart, thank you so much for taking my call. I appreciate it. I am 46 years old, married, no kids yet, but I’m on the opposite end. I have nothing saved for retirement. I’ve neglected that aspect. I am in tech sales and I want to know what, if you were in my situation, what you would do. Sure.

Carl Stuart [00:14:17] Are you a W-2 employee or a 1099 contractor?

Peter [00:14:23] IW2, sir.

Carl Stuart [00:14:25] And does your firm have an employer-sponsored retirement plan?

Peter [00:14:29] They do.

Carl Stuart [00:14:30] And do you know if they have some form of employer contribution along with employee contribution?

Peter [00:14:39] Yes, I found that it’s at three percent, sir.

Carl Stuart [00:14:43] The first thing you can do is start by putting at least 3% in so that now you’re getting 6% putting in there. You’ve doubled your money by just putting in 3%. Also, when you leave it in there you pay no income taxes on it and because you’re putting in a little bit every pay period some years and months the stock market is going to go down and so you’re going to buy more Because the prices are lower In some years, your market’s gonna go up and you’re gonna buy fewer shares, and over time, you have a lower average cost and a greater opportunity for profit. Because you’re getting a very late start and because you don’t have a balance right now, you need to take an appropriate but significant amount of risk. So what you wanna do is you wanna look at the menu of the fund options, investment options in the employer-sponsored plan. And I would discourage you from doing a target date or whatever they call where they’ll manage it for you between stock and bond funds until you retire. Because you don’t have, you’re behind, you know that and that’s fine. And so what you wanna do is you wanna probably put 70% of it in a U.S. Stock index fund, probably an S&P 500 fund. And the other 30% you wanna put in an international fund that buys no U.S. Stocks. And you want to do that from now on and then because you haven’t been saving every year add your contribution bump it up by one percent or if you can two percent because what i’ve learned is you won’t notice the difference in your paycheck you’ve got to get started by putting money away on a pre-tax basis it lowers your income taxes you don’t pay taxes on it and if you leave this company you can take that money You need to put it in your next company’s employer-sponsored plan. Or put it in your own IRA. So those are the things that I would do if I were in your shoes, Peter.

Peter [00:16:45] Thank you so much. I appreciate you Stuart. Have a blessed day.

Carl Stuart [00:16:49] Thank you, good luck. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Okay. Hi, Carl. What rebalance strategy would you recommend for a buy and hold portfolio with 60% U.S. Stocks and 40% international? Annual, biannual, quarterly, or some other interval? That’s a great question. And what this person is asking is, there’s a long-held position in investing that your first and most important decision is what’s your mix of stuff? How much do you have in domestic or foreign equities? How much to you have on bonds? How much you have cash? How much of you have commodities? Because that will be much more significant in determining both the return you’re going to have and the risk you’re going to take. And so when you have a sustained period where one asset class, let’s say US stocks, outperform everything else, and your target, as yours is, is 60% US stocks and now you have 70% US Stocks, now you’re out of balance. So the question is, how frequently do you rebalance? I’m a fan of infrequent. I know there’s some automatic plans that do it quarterly. Frankly, I think that’s too much, too frequent, plus the market’s volatile. You may say, well, I’m at 65%, I’ll rebalance at the end of the quarter and the market drops and you’re at 62%, so it’s not worth it. So I think I would do it annually, just my gut feel. I don’t have any academic evidence that I’ve been able to ascertain that quarterly or semi-annually or annually is best. So I tend to lean toward, because of volatility in the market, I tend lean toward. Fewer times rather than lots of times. Thanks for the question. You’re listening to Money Talk on KUT News and on the KUT app. Call or text 512-921-5888. Hi Carl, I’m new to Exchange Traded Funds. Where and how would be a good place to start and dip my toes into the investment platform? So, Exchange Trader Funds, I need to explain a little bit for everybody else. Mutual funds, which have been around since the 1930s, almost as back when I graduated from high school, are priced at the end of the day. So if you buy a fund from Schwab or Vanguard or Fidelity or UBS or Wells Fargo, the value of the portfolio, stock fund or bond fund, is determined at the the end the day, divided by the number of shares outstanding, and that number’s called the net asset value. And so if you put an order in to sell at noon or put an in to buy at 2 p.m., you’re gonna get the same price. So they’re not traded on any exchange. Exchange traded funds trade every day all the time on exchanges. They have several benefits. One, if you’re talking particularly about index exchange traded funds, they’re extremely cheap. And because of the structure, They’re very tax efficient. When you own an actively managed fund, they have to distribute to you the shareholder their net realized gains and income, whether you want it or not. Most people properly reinvest and buy more shares at no cost. So low cost exchange traded funds are in my view an excellent idea. I would start with the grandmother and grandfather of them all. I’d start with a big index. I particularly like the total U.S. Stock market, but you could do the S&P 500. And then I like the Total International Market, not global, because that includes U. S. So I’d start with those two, because they’re very inexpensive and they’re tax efficient. You can be done right there if you want to have a balanced portfolio with fixed income. There’s also exchange traded funds that follow the Bloomberg aggregate bond index. AGG. You could do that. So you could do your asset allocation between domestic and foreign stocks and bonds. That’s how I would start before I get into the more exotic ideas. Thanks for the question. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Hi Carl, I really enjoy your show. Thank you. Regarding the recent question about taking a loan from a 401k, in addition to missing out on growth opportunities, don’t you end up paying tax on it twice when you withdraw in the future for retirement, but during the loan period you pay the loan back with after-tax money? Yes, that makes sense to me. I think I agree with you. Good point. Okay, all of our phones are available. 512-921-922-512-5217. 5888. Hi Carl, we enjoy your program, thank you. We’re in our 70s and retired. After so many years in the accumulation phase, we’re having trouble moving into the spending phase and suggestions. Well, first of all, this is a common event. Some people who don’t have a lot of savings and investments may go, really you have a problem spending money, but it’s the habit of saving and investing that is so critically important. But it’s a little bit like. I’ll give you an example, I am a right-handed person. I have officed in such a way for the last 20 years that I use my mouse with my left hand. I can’t use it with my right hand. And when I’m forced to, it’s really difficult. So you have created a very good habit. What I would do is I would take a percentage withdrawal, make it low, say 3% of your total, Do what’s called an ACH between where your investments are and your bank account and feed that money in on any given day of the month to begin to have additional spending money. That’s one thing I would do. The second thing is if you have philanthropic intent for your religious institution or your alma mater or some deserving. Social service agency, consider making contributions to them. I will tell you that I started doing this decades ago and it’s wonderful. It’s a lot of fun and those are two ideas that I would think about. Thanks for your question and congratulations. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. And you can catch past shows at kut.org slash money talk. We have a call coming in. Sam, you are on the air, how may I help?

Sam [00:24:21] Hey, great to be on the air. Thank you so much for taking my call. Thank you. My name’s Sam. I’m in my mid 30s. And I’m lucky enough, I work in the tech sector in Austin, and I’ve started receiving RSU’s Restricted Stock Unit. It’s been really hard to predict the best way to deal with them from a tax perspective. Trying to guess the value of them when they vest for me halfway through the year is challenging. And I’m having to make additional withholdings to stop being fined by the IRS, things like that. So I’d be interested to know what your opinion is on the best way to deal with RSUs from a tax point of view.

Carl Stuart [00:25:00] I think it’s really difficult. I mean, I really do. I mean what you’re talking about here for everybody else is, if you have a large, I would call it a windfall, but it’s not a wind fall. You have a larger increase in your taxable income and the next year, what you have to pay in taxes is either determined by or significantly determined by that event that happened the previous year. I frankly have had this. I had a stock options. They weren’t RSUs. And as you know, I could create a significant tax liability with those if I exercised them and sold them. And I’m sorry to disappoint you, Sam, but I would tell you that I would find a really good, thoughtful CPA. Now in Central Texas, I will tell you, that’s challenging because so many of the firms have consolidated. But without a question, you are not the only person. And particularly with the tech sector so prominent in this area of the country. Go, you can welcome to talk to your colleagues about it, but this is exactly, I’ve got a terrific CPA and I can’t give out his name over the air. He’s told me he won’t take any more clients, but this exactly the kind of thing I would turn to a tax expert because she or he may know something I don’t know, but I’m sorry I don’t have any better answer for you than that Sam, but thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. I am retired, in early 70s, own my own home, no debt, and good health, congratulations. I collect social security and pension from a city. I have some part-time gigs that pay for my taxes and insurance, meaning that I am able to significantly add to my savings, which are not huge, but more than I ever had in my life. Question, I have a TMRS retirement from a different city. Which I did not touch because of the WEP. Well, we’re really digging in here. Now the WP is repealed and I have no longer have to worry about my social security being reduced. What are the pros and cons of collecting that retirement now? Thanks, and I love your show. I don’t see any negatives to taking it. I just don’t any negatives taking it, I think what I would do, and this really isn’t. Something that you alluded to, but you’re in one of these situations that very few Americans find themselves in where you have guaranteed income. And if that retirement plan at the other previous employer, if you take the annuity of lifetime income and it’s significant and you want it, that’s what I would do. If you’ve got enough income now that you’re not even spending all your income, you’re up savings. Find out if you can take a lump sum from the previous. Some defined benefit plans will allow their employees to take a lifetime income or to take lump sum. For a lot of people, I recommend the lifetime income because they don’t have other sources. But here you are with Social Security, which is not gonna go away for you, the pension, which is gonna go way for you in this other retirement plan. And you know, your risk is more that you live a long, healthy life. And you can’t make Social Security go up, and you cant make your existing pension retirement go up. I like the idea of taking the lump sum, if I can get it, and do an IRA rollover, and invest the money. Because if you do that, it will properly accomplish, it will over time grow, allowing you, if you live long enough, and inflation is high enough, to tap into that whenever you want to, other than the required minimum distribution to supplement. Your guaranteed income. Thanks for the question. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Here we go. Carl, my financial advisor is through my credit union. He is recommending I move 60,000, I have an American Funds Capital Group mutual funds and move them to Ameriprise ETFs. He charges 1.25%. What do you think? Doesn’t sound. You have 60,000 and you’re in American funds and you have already paid the sales charge and they are known for their competitive expenses, expense ratios. Because you have this money already, and if you own it yourself, what you’ve been doing is reinvesting dividends and capital gains and growing your cost basis. And frankly, the big fund companies, Fidelity and Vanguard and Schwab and American Funds Capital Group, didn’t get to be that way because they’re bad. I have a lot of confidence in American funds, and I would not go with Ameriprise. I don’t I don’t know enough about them. It’s a broker dealer, okay? It’s not necessarily an asset manager like the one you have now. So I think if I were in your shoes, I would stick just with what you’ve got. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. It’s time for me to take a break. A terrific time for you to call 512-921-5888. I’ll be back.

KUT Announcer: Mike Lee [00:31:14] If you’re a regular KUT listener, you know by now that member support makes everything we do possible, and you know all about becoming a sustaining member, but you might not know about another way to support the reliable news on KUT. If you have a donor-advised fund, you can support the station by recommending a grant to KUT! It’s a great way to show your support and to help ensure that KUT is your reliable news source, and it is way easier than it sounds. Find out more at KUT dot org slash legacy.

KUT Announcer: Laurie Gallardo [00:31:50] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:32:04] Welcome back. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. When you have a question call or text 512-921-5888 and here we have a call. Frank, you’re on the air, how may I help?

Frank [00:32:23] Good evening, Carl. Could you tell me why you, as a financial advisor and other advisors, you tell a lot of people to have balanced type or diverse portfolios, certain amount in each type of fund and stock market. Do you believe in the future there will come a time then that the stock, when I say the stock market S&P 500 Dow with. Could crash and never return or is it just a matter of time?

Carl Stuart [00:32:55] You know, it’s a great question, and there have been long, long periods of time when the stock market has crashed, certainly after the, in 1929, after that with the Great Depression which was a global phenomenon, stock market was terrible, and then in the lifetime of a number of our listeners today, Frank, the 1970s, the general stock market and bond market. Were very bad because we had rampant inflation and we had the OPEC uh… Energy oil embargo if you had it if you were investing as a texas investor and and energy related companies or or in a texus related real estate uh… Or farmland in iowa you did really well but the overall stock market had very disappointing returns So, these things happen from time to time. But the reason that when you stop and think about it, and you ask yourself the question, based on American history, what are the asset classes that outpace inflation? Because if you’re not interested in outpacing inflation, you’re okay with, on an after-tax basis, having a negative return every year. Put your money in the CD, and there you have it. But when you think about the two that work… One of them is income producing real estate, not residential real estate. Income producing real estate. And the reason is that income producing real estate over time, not every year, over time rents go up and if interest rates are stable and rents goes up, then the value of the property appreciates. That’s one asset class. The challenge is it’s illiquid, right? You can’t sell off a bedroom when you want to raise $50,000. The other asset class that, over time, is outpaced inflation is the stock market. And so you have to ask yourself, gee, I understand why rental real estate works, why does the stock market work? Stock market works because of human innovation. Frankly, that’s the answer. It’s human innovation, it’s a forward-looking mechanism. The difference between the two asset classes is that when you invest in rental properties you invest for a long time because they’re illiquid. You should make more money there because there’s something called the liquidity premium. You should get paid for it. When you invest in the stock market, you have daily liquidity. You can get scared and call your advisor or do it on your own, cash out and have the money the next day. As a consequence of that, you have a lot more volatility. When rental real estate goes down, it’ll go down for five, six, seven years. That’s what happened. In Texas in the Southwest in the late 80s and early 90s. The typical decline in the stock market would be when the dot com bubble burst in March of 2000 and the market bottomed in September of 2002. When the global financial crisis occurred in September 2007, the market bottomed in March 2009, I think. So the reason those declines, which were horrible, were shorter, it was because of liquidity. So when you invest in human ingenuity, the way to do that is invest in equities. Now, that leadership changes all the time. In the 90s, Cisco Systems was probably the hottest stock. Right now, it’s probably Nvidia. Leadership changes. I remember in the 80s, you made money in Halliburton, Schlumberger, Exxon, and Mobile. So leadership changes. But we have to remember we didn’t have an iPhone until 2007, so the reason the stock market doesn’t crash and stay down is because of human innovation.

Frank [00:36:50] Okay, thank you.

Carl Stuart [00:36:51] You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. And you can catch past shows at kut.org slash money talk. Here is a text. I am an 84-year-old male with a long-term insurance policy, 18 years paying the premiums. My dilemma is that premiums keep escalating, but the option of getting a paid up policy with a lifetime maximum benefit of $73,000 when needed. Other option is to keep paying the premiums estimated at 21,500 for the next three years to 2028. The premiums continue after 2028, of course. This option has a max lifetime benefit of $650,000 to cover elder care. Is it worth to pay the $21,500? This is a nursing home care policy when it becomes necessary. My pertinent financial picture is that I have roughly $350,000 in savings, CDs, with a comfortable pension and social security benefit. Debt-free and no mortgage. I don’t think you ought to pay the extra premiums. The fact of the matter is that you’re debt-free, okay? You said you have no mortgage, and that means that you have a residence. And if that’s the case, that’s also something you’re gonna turn into cash, along with your $350,000, and you’re 84 years old. I would not go for paying the extra money if I were in your shoes. Thanks for the question. You’re listening to Money Talk on KUT News, 90.5 and the KUT app. We have all of our lines available. I’ve just got a couple of texts here. 512-921-5888. Hey Carl, thank you. Do you recommend Fidelity? Go for all investing. So I would tell you this, and I mentioned this earlier, I’ve been doing this for 47 years, and the behemoths, if you will, of investing have been over that time. Fidelity, I remember when Vanguard came along on the active management side, call our texture of american funds now capital group and they’ve made it through thick and thin uh… Because uh… They’re honest and they provide competitive investments uh… So i’d fidelity was started by uh… Family uh… In uh… It was the johnson’s in in boston for the vanguard by jack bogle Charles Schwab, obviously. The, I’ll get their name in a minute, the people in Los Angeles at American Funds. I have no problem with you investing with them. I will tell you that Fidelity will give you the options of investing passive index funds as well as active funds. They’ll have stock funds and bond funds. And if you want to hit the ball down the proverbial middle of the fairway, I have no problem with them at all. They’re all competitively priced in terms of their expenses. They are not going to offer you some of the more, from my point of view, interesting and arcane investments. One of the things that’s occurred during my career is that investments that were not available to the individual investor, or they weren’t available except in an illiquid environment like a limited partnership. I remember If you wanted to invest in a portfolio of commodities, you had to invest a limited partnership. You had a K-1 tax return, and you couldn’t sell it. Or if you did, you had wait, and there was no active market. The general partner bought it back from you at whatever the general partner frankly wanted to do, in my opinion. And today, you can invest in commodities with daily liquidity through exchange traded funds or actively managed funds. The same ways with precious metals. I’m not recommending here, I’m just explaining that those kinds of things, if you wanted to own silver or you wanted the own gold, or another example is you wanted to own Mandy’s Futures, or there are a number of other, what I would think of as institutional strategies that are now available to the everyday investor, and in my experience, because of competition, they’re competitively priced. I’ve noticed that a lot of the big active managers, like T. Rowe Price and Massachusetts Financial Services or Capital Group are moving to exchange traded funds because they have to, that’s what investors want. And that means their expenses for active management come down even more and they’re tax efficient. So Fidelity’s a fine company if you wanna do that, but there are some other things to think about. And though some of those investments may well be available on Fidelity’s platform. So that’s a long-winded answer, but I just think it’s important to understand the distinctions. Thanks for your text. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Carl, what is your opinion on all in one? HELOC programs, that’s a home equity line of credit. I would say that the reason, I don’t know what the phrase all in one means. In general, debt’s a bad thing. You know, the fewer liabilities you have, the better off you are. Because when you hope to retire and you wanna be financially independent and when you get up in the morning, you do whatever the heck it is you wanna do and not what you have to do. And you can’t do that if you owe a bunch of money because your expenses don’t stop when you retire even though your revenues stop or decline sharply. So I’m okay with home equity lines of credit. My understanding is you cannot then subsequently get a traditional mortgage. I learned that from a listener in the future. But if you have, you know, you want to remodel or you’ve got yourself in a financial hole because of some emergency, then, yeah, they’re okay. And, yeah. Presumably they’re going to be what I would think it would be a floating rate. So, because they don’t know how long it’s going to before you pay them back. Plus probably a floating rate, interest rate, so of course what you have is you’re going to have some interest exposure. Thanks for the question. You’re listening to Money Talk on KUT News 90.5 and the KUT App. Call or text 512-921-5888. Hello, my husband’s job was eliminated back in October, I’m sorry. So he is currently unemployed. He is a musician and is making around $1,500 a month in gigs, but that’s no match to his salary before. He’s 61 years old. We’re currently making it with him gigging. I am 69 years old with Social Security and still teaching piano part time. My question is, if we continue in this way, how does not drawing a full paycheck like he did before he stood before till he is 65 impact the amount. Social Security that he will draw. We have close to a million dollars in ASAP, a 401k in savings, and we are debt-free except for one car payment that will be done in two years. I really got to the last part. I was getting feeling anxious about the situation. Social Security is my understanding is that you get that statement every year at your age and it tells you what the benefits are going to be. It’s not like a defined benefit plan where, say, you’re a teacher and they look at your three highest paying years. I think your social security is a function of what, there’s a calculation of what you put in. So, if he puts less in simply because he’s making less money, I don’t think that that’s going to, I mean, will it affect the amount of social security? Yeah, it’ll affect it in the sense that when he was making a lot more money, he was building up a bigger benefit. But frankly… It’s not going to be punished that he’s making less money. It’s just going to cause him to have a smaller benefit. Also, because you have close to a million in a 401k, and you’re debt-free, if you can afford it, he’d be well off to wait until he’s 70 because that monthly benefit grows at 8% per year from the time of his full retirement age until age 70. And there’s no investment that that will happen. And I don’t know the ability for you to get your hands on some of that million dollars, but you do have savings as well, so 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. Hi Carl, give me what you just said about Fidelity and the other big ones that you trust. Could you compare and contrast some of the other funds, like Fisher Investments? When is that more appropriate for someone as opposed to one of the big four? Thank you. There are several ways that you can invest. I’m gonna put aside whether you choose to do it yourself or you choose engage in advisor. Big decision. Okay, so you can invest in mutual funds, you can do it directly or with an advisor, and you can in exchange traded funds, same way, or individual securities, stocks, and bonds. There’s another area that in my world, The abbreviation is SMA, separately managed accounts. These are accounts where you engage someone like Fisher, and I’m not speaking pro or con on Fisher, where they will have you fill out, they’ll learn about you, and then they will create a portfolio based on their models of individual securities, and they will charge you what’s called an annualized asset-based advisory fee. Absolutely nothing wrong with this. They are registered investment advisors under the Securities and Exchange Commission, and they just happen to be one. This is, from what I can tell, the fastest-growing aspect of the financial services industry. These people are under the SEC. They cannot receive any transaction-based compensation, no commissions or anything, and they have what’s called a duty of care, to put your interests before theirs. That’s called the fiduciary of duty. And Fisher makes a big deal of that in their ads. I’m a little skeptical because it sounds like they’re special. They’re not. That business model of investment advisory is common and been around for a long time. So the question is, do you want someone to stand between you and your investments? If the answer is yes, then engaging an investment advisor is a perfectly reasonable thing to do. You can get a small firm, the fancy term is boutique, you can get large firm like Fisher, and everything in between. And the real fundamental question is, do I wanna do this on my own, or do I want somebody to help me? Because if I’m a do-it-yourself person, and I hire somebody and I’m unhappy because they don’t do what I want them to do and I look them over their shoulder, then do it yourself and live with the consequences, good and bad. Or if you’re gonna engage somebody, the investment advisory model, I like it a lot. Fisher’s one example, but there are lots of investment advisors, whether those are national or whether those Texas or local or whatever is the case. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. I’ve got some text that I’m not gonna take because it is about 5.57. And I just wanna say that today, if you are listening to a podcast, uh… We uh… We attacked iran and if you’re wondering what that will happen to your investments as you know i’ve been doing this forty seven years and here’s what i can tell you the direction that investments were heading before this event will ultimately where they will go if we were in a bear market something happened and they rallied we would go back to a bear bargain My experience, when something unexpected happens… Because of liquidity, the market reacts quickly and it returns, reversing to the mean, to where it was before the event occurred. Do not let the headlines, do not let fear interfere with your investment strategy and philosophy. Thanks for listening. I’m gonna thank Mark for doing his usual great job and to remind you that next Saturday, after the news at five, or maybe just at five you never know, be sure and tune in to Money Talk.

KUT Announcer: Laurie Gallardo [00:50:46] You’ve been listening to Money Talk with Carl Stuart. Carl Stuart 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.