Money Talk with Carl Stuart

Carl Stuart takes caller and text questions on managing retirement accounts, maximizing emergency savings, navigating estate planning and trusts, and evaluating investment options.

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. It’s a terrific idea to call or text early in the broadcast. So I will have ample time to do my best to answer your question. I take today’s calls first. And then today’s text, which you will hear coming in, and then texts from previous broadcast weeks that I haven’t had a chance to answer. So before we get started, one more time, 512-921-5888. I got a really thoughtful email from a listener during the week, so I’m gonna start this broadcast by reading it. Hello, Carl. I admire the great service you provide in your program Money Talk on KUT Radio. Thank you. I’d like to just make a comment which you may or may not find of interest, I did. Recent programs have at times featured questions about transfer on death, or TOD, and other steps to make settling at a state easier for survivors. It seems you and other advisors I have heard have a bias in regard to marital status. Not all of us are married as we approach our golden years. As an unmarried senior woman, I am of course concerned for my children and grandchildren. Especially as I had great difficulty when my mother died in test date 25 years ago. As you’ve observed, there’s no need for people with simple situations to go to the trouble and expense of setting up a trust. The retirement accounts I own all have designated beneficiaries. As long as those are kept current and they are borne out by the contents of a will, the accounts will not need to go through probate. Same for life insurance. My term life’s term will expire next year, however. In my opinion, single people should always avail themselves of the ability to name various other assets as transfer on death. My bank account at Wells Fargo bears my name and those of my son and daughter as transfer on death, so the account will go to them immediately upon verification of a death certificate, no probate. Every Texas homeowner can easily go to the county tax assessor office, as I have, and enact a TOD deed. There is a small fee, and it’s very important to get the property description exactly right and have it notarized, but the small amount of trouble is worth in avoiding probate. Again, there can be secondary beneficiaries named in case of the primary one’s death or inability to assume ownership. Even automobiles can be dated as TOD in Texas. Which is interesting in terms of how complex the situation often becomes with autos after death. I feel happy that almost all my rather small assets will pass to my heirs outside of probate, hurrah. I would just ask that you be a bit more aware of the scenarios of people who aren’t married and will not have a spouse to automatically become owners of all assets upon death. And in that vein, I will just say that Texas, not my state of birth. Does not make everything easy for heirs. As my mother’s only child, it was quite unpleasant to finally manage to be named administrator as her stock accounts in 2001 were tanking to about half their value. Thank you again for the learning value of your program, as well as the humor and geniality you convey there. You are very welcome. Thank you for listening and for your thoughtful comments, and I must keep those in mind. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. So here is a text from last week. It was a fairly long one, so let me make sure. Hello, Carl. Thank you for all the information every week. You’re welcome. I’m about to retire from a school district. I have a pension. I am at the moment planning to use all my sick days and vacation days to get a few more paychecks. I have the option of selling some of those back to my employer for less than my daily pay rate. I have an option of leveraging them to buy an extra year of service with my pension plan. It seemed like the better course of action was to get as many paycheques with my time as possible and use that money to invest myself. Is there a rule of thumb for making these choices? And here’s how I think about this. And this is a question that, not surprisingly, I’ve gotten over the years, particularly in central Texas, where we have large employers with pensions like the state of Texas, various school districts, in some cases, the University of Texas. So the way I think of that is this. The benefit of a pension and buying time back to have a larger monthly contribution, or I should say payment to you, is the guarantee. You can’t outlive it. My father was, shall I say, probably I would call him a working class individual, worked at a hydroelectric power plant all of his career. And when he retired, because he also had social security, he went from owning Chevrolets, and you have to be older to know what I’m about to say, to buying Osmobiles. And why was that? Because he had actually had more cash flow in his life after retirement. And he knew that it wasn’t going to go away. He had very small amount of savings. He had identified my mother as his beneficiary of that pension should he predecease her, which he did not. So if you were in a situation where you have social security and a pension, you’re very fortunate. Most private companies no longer do this. The question then becomes, what are the other assets that I have? Because when you have a fixed income, your risk is not that the income goes away. I guess you could say the employer could go away but not these public entities in my view. Your risk is that the cost of living continues to go up, but you can’t make your pension provider or social security increase your income by the amount of that inflation. And you live long enough that the pension which seemed just fine when you retired becomes less than fine when get a lot older. So how I would think about this is if you invested the money Would you do better than the incremental income you get? I don’t know. I suspect if you’re willing to take the risk, if you say to yourself, look, I’ve got these two large sources of guaranteed income. I need something that will likely keep pace with or outpace inflation. And you have the courage and the staying power to stay with stocks. Yeah, you’re probably better off with that. If, however, that doesn’t meet your sleep at night comfort level. Then perhaps buying more time in the pension would be more appropriate for you. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. You heard at the beginning of the broadcast about the upcoming KUT Festival. If you want to see Money Talk in person, and let’s face it, who doesn’t, you can end at the first ever KUT festival coming up on May 1st and 2nd. Join me and the rest of the staff. KUT on the UT Austin campus for live music, thoughtful speakers, engaging panels, and more. Grab your passes now and check out the speakers and performers at KUTFestival.org and I did get a text wanting to know if I would be appearing on both days and the answer is no. We’ll be broadcasting on Saturday just like we are today. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here’s the text that just came in. Hi, my question is concerning my retirement at this point. I’m scheduled to retire May 15th. I’m 59 years old, had a 1.5 million dollar fund mostly in 401k and IRA with about $100,000 in cash since November my partner has gone down nearly what? Since November my portfolio has gone down nearly $700,000 and now I’m very concerned with whether I should leave my job with the coming potential recession. Do you have any advice for me should I move ahead with my planned retirement or put it off for another year or so? I have no need to tap into my 401k for a few years. My wife is still working and will for the next four or five years So my monthly needs are minimal. Any advice you can give me would be very helpful. Thanks a lot, Chris and Austin. Well, I was about to tell you you should keep working for a while until you explain the rest of your situation, so I’m glad you did. For you to have experienced that big of a decline, you must have had a pretty aggressive or aggressive asset allocation in your 401k. For you be able to come back, you’re going to need to retain that asset allocation. Because if you get too conservative by going to cash or bonds, it will take much longer, years perhaps, to get back to where you were. So I would do this, since you have the ability to wait this thing out, if you think you can live for the next three years without having to tap your 401k plan, based on history, obviously I don’t have a copy of tomorrow’s newspaper, based in history, that will come back, but you have to be patient. The dot com bust, which we didn’t know was the dot com bust at the time, peaked and began in March of 2000 and bottomed in September of 2002. That was the bottom, okay? So that was all of 2000, all of 2001, and the majority of 2002, and then it came back, but you had to be patient for that to happen. If you had happened to have had all your money in the NASDAQ index, which has a lot of tech stocks, It took 15 years for that to come back. You’re going to have to retain an aggressive, to get in this big hole, to get back out of it, you’ve got to be patient. Fortunately, your spouse is working and is prepared to continue to work. As long as you have that three, obviously five years is even better, you have history on your side that you will recover a lot of the loss. So I think it’s probably okay. You’re an aggressive investor. You’re not gonna panic. Don’t be looking at your statement very often. Then I think it’s okay to go ahead and retire. 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. We all heard a text come in. Let’s see what this has to say. Carl, you the man. Thank you. I am 67 years old and partially retired. I have $2.2 million in my 401k, and my stock portfolio is about $4 million. Congratulations. I am debating whether to go ahead and start collecting Social Security now versus wait until age 70. I have been getting different opinions from my accountant, financial advisor, and business-savvy cousin. I have a family history of cardiac issues, and I don’t expect to live past my early 80s. What say you, financial guru? Um, because you have a substantial amount of financial assets to draw on. If you hadn’t mentioned your health history, I probably would have told you to wait till 70 because the benefit is going to grow at 8% a year from full retirement age until 70. And that’s a heck of a deal because you can’t guarantee any investment that will get you 8%. But given the fact that You don’t think you’re going to live well beyond your early 80s, and it’s probably okay for you to go ahead and take it. Since you are not in the situation where you need that Social Security benefit, and you’re already an investor in your own stock portfolio, I would be adding to that. You can become a dollar cost averaging investor and take that monthly Social Security check and add to your portfolio. Thanks for the question. You’re listening to Money Talk. On KUT news, 90.5 in the KUT app. Now we had a lot of calls last week and today we haven’t had any. So if you think you’d like to talk, you’ll get on the air and it’ll help me because I can ask you questions to make sure I fully understand your question. Call 512-921-5888. Okay, let’s just see here what this is. I’ve already got that text. Let me just keep going down to, okay. This is a… There comes the text. Hang on a second. We’ll go back to that. Hello, I’m wondering about the best way to maximize my emergency savings as someone in their early 30s. I suspect you meant someone in the early 30’s. I was unemployed and laid off twice between 20 and 2024. I’m sorry to see that. I finally caught back up and I’m in good place financially. It’s incredibly important to me to make sure I have a one year’s worth of pay and savings. Approximately $75,000. Currently, I have $15,000 in savings with an annual percentage rate of 3.75%. Should I leave as is, or is there a better option to maximize my savings? Well, if you want the nominal safety, meaning you don’t want to see this money fluctuate because you’ve had this bad job experience, and you can make set 3. 75, That’s a heck of a deal. Generally, I would recommend a money market mutual fund. All the big securities firms have them. Vanguard Fidelity Schwab, if you have an advisor, his or her firm has one. There are three kinds called a prime, a government, and a treasury. The prime invests in investment grade, short-term securities that mature in a year or less. The government does the same thing, but with treasuries and government agencies. Like Fannie Mae and Freddie Mac. And the third, invest strictly in treasuries. I would use the middle one, the government one. It will fluctuate in interest rate, but it will not fluctuate and value. The price will stay at $1 per share, and you can get the money with one business day’s notice. So it meets your liquidity need, should you sadly be laid off again. It will flexuate with interest rates. The last time my colleague Lindsay checked, I think it was about 3.65. So it’s very competitive with what you’ve got and that’s where I would put the money. 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. We’ve got a call coming in. Sam, you’re on the air. How may I help?

Sam [00:16:19] Well hey thanks so much for taking my call this seems to be a really good uh… Uh… Show you got there and i’ve already found you on uh… Spotify so i’d say that thank you uh… My question is this so by three other siblings have deemed me to be the one responsible to take care of my mom’s estate basically her house that might uh… Father passed away and she had uh… I set up a durable power of attorney. Clearly very novice to the situation and would appreciate any recommendations you can offer.

Carl Stuart [00:16:54] Do you plan on selling the home, Sam?

Sam [00:16:59] So, I have a cousin who is a lawyer, and she recommended that it might be best to divest her assets in the inevitability of taking care of her if she needs to be in a home and then utilizing, I believe it’s Medicare?

Carl Stuart [00:17:25] Yeah sadly it’s not it’s medicaid okay that’s the medicaid yeah that’s the problem so what we’re talking about here is that if she were to go into a medicaid facility there’d be a period of years look back to see what her assets were and if you move the ownership of the home to someone else that would be deemed a sale and so there would be some if if the gain from your father’s death until the price at the time of the sale, that would be if she, if it was $250,000 gain or less, there’d be no tax, but you’ve get, you now have new owners and I would just tell you that you, I know you love your mother and your siblings do. You do not want your mother in a Medicaid facility. Trust me, that’s for low income people that have no other option. And so you don’t want to do that. What you, in my view, do is, because she’s still living in her house, is she continues to live in her home, and if it comes to the time where she needs to have either in-home care or she goes to another place, you will have several choices. You can sell the house and you can have all those proceeds to support her, number one. And again, she has the cost basis is the date of death of your father. If the gain is less than $250,000, she has no tax liability. Secondly, you could use the equity in the home. You could borrow against it. There are two ways to do that. You can go to a traditional lender, and they’ll loan you a certain amount of money. You don’t have to take it all at once. And then upon her demise, you can sell the house, which would pay off the debt. Or you can do your research on something called a reverse mortgage that will allow her to stay in her house. It has to be sold upon her leaving the house, but she can have monthly income without ever having to pay it back, and the lender will then sell the house and get the proceeds. Naturally, the interest rate has to higher because the lender doesn’t know when they’re going to get their money back, right? So keep her in the house. Borrow against the value of the house or sell the House or look into very carefully Now, I’m not an expert, but very carefully into reverse mortgage. Those are the steps that I would consider if I were in your shoes.

Sam [00:19:52] Okay, thanks. Yeah, I’ve heard about a reverse mortgage and heard very strong pros and cons about it.

Carl Stuart [00:19:59] Yeah, yeah, that’s why you hear caution in my voice Sam

Sam [00:20:03] Okay, super, I appreciate the assistance and all the advice.

Carl Stuart [00:20:06] You’ll be very welcome and thanks for calling. You’re listening to Money Talk on KUT News 90.5 in the KUT app. It’s time for me to take a break, a perfect time for you to call or text 512-921-5888. I’ll be back.

Jimmy Maas [00:20:37] 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 [00:21:07] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:21:21] Welcome back to Money Talk, I’m Carl Stuart and you’re listening to Money Talk on KUT News 90.5 and the KUT App. When you have a financial or investment planning question call or text me at 512-921-5888. Harry, you’re on the air, how may I help?

Harry [00:21:43] Hello, Carl, really appreciate your program. Thank you. I have one general question. I’ve been hearing a lot about charitable living trusts versus regular living trusts.

Carl Stuart [00:22:02] So let me just start by saying that I want that to be obvious I’m not an attorney or a CPA. So here’s what I understand about a charitable trust and I there’s two kinds of charitable lead trust and charitable remainder trust but the concept is you have philanthropic intent. You want to give a sum of money. To your church or synagogue or to your alma mater or to a social service organization. What you do is you put the money in the trust and depending on obviously the amount, and I believe it’s also depending on your life expectancy, you get a certain tax deduction and then you can take money out of that to live on and when you die, the balance goes to the charity. You can have money to live on and then you can also benefit the charity. A living trust is something where you put a hundred percent of your assets into it so that when you pass away there’s no probate because you don’t own anything, the trust owns everything. Now I would tell you this is a very this this is nothing about philanthropic intent and I want you to be very cautious with this because in Texas When we die, there’s something called independent administration, and we have one of the fastest and cheapest probate situations. I am told in Florida, where there are a lot of old people, that they have a very long and arduous probate process, which starts with the assumption that the executor is going to be either foolish or crooked, and they have to constantly go back for oversight from the court. That is not the case in Texas. If there’s a specific reason for you to not want to go through probate, then consider it. But otherwise, if you title your home and your bank and securities accounts, you may not need to have probate whatsoever. And that is very important because I am told that you can be charged $5,000 to $10,000 to set up a living trust. And I’m seeing cases of people of modest means. Setting up to avoid a few hundred dollars in probate and some people you would have to be extremely wealthy say today if you’re single net assets upon death over 15 million married 30 million before you’d have an estate tax some people who are very wealthy don’t want their assets publicized when they pass away and so they do this kind of trust that’s the difference between the two trusts in my understanding, Harry.

Harry [00:24:52] Okay, well do you also, is there also, do you have live interview?

Carl Stuart [00:25:02] I’m sorry, I hear you, I’m having a really hard time, I can’t hardly hear your voice, would you say it again please?

Harry [00:25:08] We’re getting a reverb on my statement, but, um…

Carl Stuart [00:25:12] HIT TURN OFF THE RADIO

Harry [00:25:15] Do you also take straight customers?

Carl Stuart [00:25:20] Okay, I don’t ever talk about what I do professionally because I want everybody to see me as an independent person, but the answer is I do. And you can always Google me and go to the website here.

Harry [00:25:34] That’s what I want.

Carl Stuart [00:25:35] Thank you very much. You’re welcome. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Brie, you’re on the air. How may I help?

Brie [00:25:53] Okay, yes, hi. I’m trying to position myself for retirement. Oh, okay. I’m sorry. And, and so, um, I have prior, um uh, state employment and I’m vested. Okay. I left my pension and my contributions there when I left that position. I am now reinventing myself, um going to, doing a career change and I’m almost ready to graduate, but I guess the thing that worries me is that I’m an older student, I’m in my 50s, and I’m trying to decide is it worth it to try to get another job with the state, the county, or the city to finish the rule of 80, to maximize my benefits for retirement. Or should I just pursue my new career and make more money somewhere else? I don’t know.

Carl Stuart [00:27:14] So there’s two or three layers to this, a really important question. So first, let’s just take the most important layer, which is psychology. You’re in your 50s. The last thing that you want to do and I want you to do is let this decision be driven by the money and you end up unhappy in your career. So the first thing is I would ask myself, if I were to go to work for a state related agency with my new degree, could I find a job that I would find interesting and emotionally satisfying? If the answer is yes, let’s just say the answer’s yes, then the question is, if I stay in the private sector, what is the level of income that I will have? And will they lead me to have enough money to put aside for my future? And if it doesn’t, if you can’t, at your age, if you cant save 15% of your after tax income. Then that’s going to be problematic. If your new job is $75,000 a year and it costs you $68,000 to a year to live on and you pay the other money in tax, you’re not going to have enough to save on to get to where you need to be on retirement because you are starting in that position later in life. So that’s how I would balance it. The thing about working for the state is once you hit that rule of 80, as you said, You are never going to have to worry about that income. You’re not going to worry about the stock market, the bond market, the real estate market, any darn market. That check’s going to come in every month. But it’s not worth paying the price of being unhappy the rest of your working career. But if you think you can get a job in the private sector that would be emotionally satisfying and intellectually interesting, and would allow you to put away 15% of your after-tax income in a 401k or in your own investments. Then that would be an attractive alternative in my opinion, Brie.

Brie [00:29:12] Okay. And then my last question to that is, if I get a job back with the state, how can I maximize my, um, my pension? Because the last I checked there, it was, it was pretty sad, um what I would get back.

Carl Stuart [00:29:31] Well, what you can do is the state would also have some form of what we call in the private sector 401k. So you could have a side by side. You want to see if there’s investment options with the state that are, that are purely discretionary on your part. I know that, I know the school districts allow that with their teachers. So you want to check the state job before you ever take it and say, do you have any other employer sponsored retirement plans to which I can make additional contributions? If the answer is yes, then that’s how you would begin your saving over and above the pension.

Brie [00:30:05] Because right now I’m in the ERA.

Carl Stuart [00:30:08] Not the ERS?

Brie [00:30:10] I’m sorry, ERS.

Carl Stuart [00:30:11] Yeah, that’s what you’re in. That’s the state pension system, yes.

Brie [00:30:15] And so I’m going to have an opportunity to go to the TRA, but…

Carl Stuart [00:30:19] I’m not sure. Yeah, yeah.

Brie [00:30:21] TRS

Carl Stuart [00:30:21] Yeah, yeah, okay

Brie [00:30:25] Well, thank you, I appreciate your help.

Carl Stuart [00:30:27] You’re very welcome. Good luck. You’re listening to Money Talk on KUT News 90.5 in the KUT app. Call or text 512-921-588. William you are on the air, how may I help?

William [00:30:44] Thank you for being with me, Mr. Stuart. Thank you. I was wondering, like, I work for my mom and I’m a miner, and I try to figure out what investments I should be putting my money into. And I’ve heard online about people saying there’s certain things I can invest in where it won’t be able to get taxed, so I pull it up and I write my order.

Carl Stuart [00:31:05] Yeah, so there are two or three things you could do. What you can’t do is what we call employer-sponsored plants is your mom owns the business, is that correct? I have an SEP IRA because I own my own business and it’s an employer-sponsored plan and it allows people to put away a lot more percentage of their income. But if your mom, for whatever reasons, doesn’t want to open this SEP because you get to choose the investments inside this account, then the next two choices are an individual retirement account or a Roth IRA. The benefit of putting money in an IRA is you retain complete control of it. You pay no taxes when you put the money in, and if it grows properly invested, you pay not taxes as it grows. Now, the drawback is, it’s designed for your future. It’s not designed for anything other than retirement. And so the government has put in a big penalty if you take the money out before you’re 59 and a half. So if you don’t want to do that, you shouldn’t. The other thing you can do is called a Roth IRA, and you put money in there, You don’t get a tax deduction like you do with the IRA, but similar to the IRA you pay no income tax as it grows in value. And again, if you’re over 59 and a half and it’s been in there from the first investment for five years, it comes out absolutely tax free. But the drawback for a really young person is you’ve got to be willing to put this away. The benefit of it is, if you start doing this as a young person and you do it up to the maximum, I think it’s $7,000 this year, or it might be $8,000. If you make that much, you could put that in, and it’ll grow, and 30, 40 years from now it’ll be worth a whole pile of money. If you want to have the ability to get your hands on the money, then you shouldn’t do either of those, you’re a smart person, do your homework, go to the websites of the big do-it-yourself people like Fidelity and Vanguard and Schwab, and read up on investing. And you can invest in what are called exchange traded funds. They’re very, very inexpensive and they’re very very tax efficient. They don’t throw off capital gains taxes. You retain total liquidity. You can get your money whenever you want. So if you decide you need the money to help for a college education or a down payment on a home, there’s no waiting until you’re 59 and a half. You sell that, now are you gonna pay tax? Yes, but. You’re gonna be taxed at a much lower rate because when you sell an asset that you’ve held for longer than a year, you don’t pay income tax on it, pay what’s called capital gains tax, and you only pay on the gain, not on the total sale price, and it’s at a lower income tax rate. So those are the three choices that come to my mind.

William [00:34:04] Alright, thank you. What was that last one called again?

Carl Stuart [00:34:06] It’s just a straight investment account. It would just be a William account, what you might call a brokerage account. All right, thank you, sir. You’re very welcome, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Ken, you’re on the air, how may I help?

Ken [00:34:30] Hi carl thanks for your thank you show thank you most informative thank you uh… I’m retired and i’ve been reading lately that the traditional sixty forty stock to bond portfolio probably is is not the best way to go uh… For the future that the bonds don’t provide the ballast that they used to And I would be very interested in getting your opinion on this 60-40 split.

Carl Stuart [00:35:01] So for everyone else, this is a really thoughtful and can you write timely question. So the idea behind having both stocks and bonds in a portfolio is that when the economy is growing and the outlook is positive stocks go up and when the economy is weak and recession is in the air, stocks go down, but when the The economy is good, eventually. The Federal Reserve raises interest rates, which for that period of time causes stocks and bonds to go down. And then when the Federal Reserves begins to lower interest rates because the economy is weak and they want to stimulate the economy, bonds go up in value. So there is somewhat of a negative correlation over time. I’m going to be really geeky here because I know you can understand this. If you have two assets that are correlated perfectly one with the other. They go up together, they go down together, they go sideways together. That’s a 1.0 correlation. Investment grade bonds are about 0.4 correlated to the stock market. But here’s the problem and you’ve just identified it. If we get into a position that happened in the 1970s as a result of the OPEC embargo and the government spending on both the Vietnam War and the Great Society, we have extremely high inflation. Which put upward pressure on interest rates and downward pressure on stocks. And so bonds went down and stocks went down. If we have in 2026 and 2027 stagflation where we have rising interest rates and falling stock prices, then bonds will be positively correlated and the concern that you’ve been reading about will be absolutely valid. But we don’t know if that’s going to happen. I’m not a big proponent of 60-40. I think there are other asset classes out there. You know, I’ve been doing this for 47 years, and I’ve managed to lose money in every darn possible way. And I’ve learned, I’d like to think, that trial and error are my two best teachers. And I have learned that either with an advisor or on your own, take the time to look at other strategies that are not possibly correlated to stocks or not possibly correlate to bonds. They’re out there and you can… Back when I got started, they didn’t either exist or they’re only available to large institutions. They’re now mutual funds and exchange-traded funds that provide return patterns that when stocks go down, they stay solid or even go up, and when bonds go down they stay solid or they even go up. If you have the time and the interest, you could add those to your portfolio, reduce some of your allocation to bonds, reduce some of your allocation to stocks, although you want to keep a good allocation to stocks because that’s where your growth after inflation exists. So I share your concern about 60-40. Personally, that would not be the portfolio that I would likely have for myself. I don’t hear from you, so I’m just gonna keep going. You’re listening to Money Talk on KUT News 90.5 and the KUT app. It’s time for me to take a break. A terrific time for you to call or text 921. That would be 512-921-5888, and I’ll be back.

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KUT Announcer: Laurie Gallardo [00:39:09] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:39:22] Welcome back. You’re listening to Money Talk on KUT News 90.5 in the KUT app. When you have a question, call or text 512-921-5888 and you can catch past shows or tell your friends to catch past show at kut.org slash Money Talk. And if you’d like to see Money Talk in person, you can at the first ever KUT Festival, which is coming up on May 1st and 2nd. Join me and the rest of the KUT staff at the UT Austin campus for live music, thoughtful speakers, engaging panels, and more. So you grab your passes now and check out the speakers and performers by going to kutfestival.org. Five one two nine two one five eight eight eight. Nick, you are on the air. How may I help?

Nick [00:40:17] Thanks for taking my call. You bet. Is there an echo for you?

Carl Stuart [00:40:22] No, you sound like you’re far, far away, but there’s no echo.

Nick [00:40:26] Sorry about that I’ll try to speak clearly thank you I’m not wealthy by any means but in my 20s I saved up money and I have about 80 or 90 grand in a brokerage account

Carl Stuart [00:40:39] Uh-huh.

Nick [00:40:40] And now I’m married and have a house and a child and some credit card debt, that’s tough to tackle. And I want to use that money to pay off the credit card debt because market returns are not as high as credit card interest, but they’re still kind of a psychological blocker for me, taking that money I paid for a long time to pay of this debt that’s piled up in a short amount of time.

Carl Stuart [00:41:07] Of course. So, because no one knows who you are, and I love the fact that you called in, I’m going to ask, and, I always say this, I don’t mean to be disrespectful, but did you get the credit card debt because your expenses exceed your income or was there some special event, some medical emergency or some other event that is not going to occur again? If you paid off the debt, and you and I had this conversation 18 months from now. Would you have credit card debt?

Nick [00:41:39] Great question, Carl. I might, but there was an event, which was a hailstorm, that did some damage to my house. And now that I know North Austin gets nailed by hailstor, I probably would live in North Austin.

Carl Stuart [00:41:56] That’s the key, because there’s no question, the ugly math is that credit card expense is, interest is super high, and a reason is, it’s unsecured debt. You don’t have to put up collateral. You don’t have to have very good credit. And so as a result, it is extremely high, much, much higher than you can reasonably anticipate making with your investments. So when you pay if you’re paying 20 plus percent on credit card debt Every dollar that you eliminate is a 20 plus percent return, which is way above the stock market historical return. But if you don’t change your daily living, then you’re never going to be financially independent. You’re not going to have money to save for the child’s college education. So I’m going to expand on your question and say that what people should do, like you and your spouse is start keeping. Absolute track of every expenditure. Get a receipt. I mean, when I go out and buy something, would you like a receipt? What do I say? No. But what I find, because we live in a consumer-based society and because credit is so available to us, a lot of us don’t have a clue what we spend. And if we kept every receipt, and every Saturday, right before we listen to Money Talk, we sit down and put those in categories, and we had a sincere desire to save money to change our behavior. And we do this together, you’ll find ways to save that money to invest. There’s a lot of data that says when couples work through financial issues, both positive and negative together, it’s very strengthening to their relationship. So would I take some money and pay off the credit card debt? Yes. Would I then engage in changing our collective behavior so that we become cashflow positive invest? The answer is absolutely. And that’s the best answer I can give you, Nick.

Nick [00:43:48] I appreciate it and that makes a ton of sense. I think we also don’t want to be shackled by, you know, constantly thinking about money. But obviously when you don’t think about money, you end up thinking about money.

Carl Stuart [00:44:00] That’s exactly right, okay, good luck. Thank you, thanks for calling. You’re listening. That is an age-old problem in the United States of America. 512-921-5888 would be the call to make. Here we go. Chala, you are on the air. How may I help?

Chala [00:44:26] Thank you. Thank you for taking my call. Thank you. I’m hearing more and more.

Carl Stuart [00:44:32] I’m sorry, would you say you’re muffled a little bit, so I’m having a hard time understanding you.

Chala [00:44:37] I’m hearing me, I do.

Carl Stuart [00:44:40] I’m sorry, Chara.

Chala [00:44:42] I am hearing my own voice.

Carl Stuart [00:44:44] You’re hearing your own voice. Do you have the television on? A radio on?

Chala [00:44:49] I’ll turn it up.

Carl Stuart [00:44:49] That’s what turn off the radio.

Chala [00:44:52] Okay now no well anyway perfect um i’ll be brief i’m 84 years old um and i’ve been living in the state for 20 years um and um i have my own my own home good i only have one daughter who just graduated from school and I’m back in her forties.

Carl Stuart [00:45:20] Mm-hmm.

Chala [00:45:20] Um and I have an investment account about a million and a half. Good. So um I was on the loom pressure about 10-15 years ago that if you had uh money in the home maybe you should go uh create a trust go to the state planning lawyer which I did, and paid about $7,000-$8,000 in loans. Just fill in, just fill in names and all that. I don’t want to bag me with that, but never once did this person say that in Texas there is no probate.

Carl Stuart [00:46:08] So, yeah.

Chala [00:46:10] I’m mentioning this because you may want to explain it further so that people who are in that condition just don’t think, oh, I have this morning, I am my home, let me create a trust.

Carl Stuart [00:46:22] Yes, I agree with you. I completely agree with you. It’s one of the things that drives me crazy. There’s a small percentage of attorneys who encourage everyone they see to put this in a trust. And it’s very frustrating to me. There are reasons for people to have a trust, so maybe the air is not competent or there’s some other purpose that they need a trust and that’s fine. But the situation is, yeah, in my view, did that person have uh… An ethical responsibility to explain to you at the answers yes they didn’t do it that was wrong uh… And i and i will i i i take you i completely agree with you i’m gonna move on now but thank you very much for saying that you’re listening to money talk on k u t news ninety point five and on the k a t f caller text five one two nine two one 5 8 8 8 Yes, you’re on the air. How may I help?

Cis [00:47:34] I wanted to check, I know that the 401k can go to a beneficiary, and I know a bank, you can assign somebody a payable upon death, but I heard you say something about just

Carl Stuart [00:47:51] That’s right.

Cis [00:47:51] Have stocks go to a beneficiary?

Carl Stuart [00:47:54] Yes. What you do is you set up a transfer on death account, you add that to your account, and you designate who that person is or people are. You can do that with a securities account. It’s not like an IRA where when you set an IRA or 401k, the law requires you to designate a beneficiary. When you set-up an individual account to own stocks, bonds, mutual funds, you are not required to set up a beneficiary. Upon your death, it will go pursuant to what your will says, but you can also add the terms transfer on death, identify those beneficiaries, and then it doesn’t have to pass through the probate process. That’s right.

Cis [00:48:38] Okay, and the other question is, on the trust, that would be secure from being sued, right?

Carl Stuart [00:48:49] You’re r- yeah, you’re-

Cis [00:48:50] The transfer pull-up on death, is that the bank accounts and the stocks, would that be protected as well or no?

Carl Stuart [00:48:58] No that would not be protected not as well

Cis [00:49:01] Okay, alright, because I have a teenager that strives, and he’s a boy, so that’s the reason why I want to ask.

Carl Stuart [00:49:08] That’s the bit the biggest when our son turned 16 My insurance person said Carl the best bet in the world is to bet on your 16-year-old son having a car accident but the good news is that insurance premiums are a function of two things a function a frequency and a function Of severity and teenage boys accidents frequent. But not severe. Whereas losing your roof to hail is very infrequent but when it occurs it’s really severe. So there’s a distinction there. The odds of him really hurting himself or somebody else are quite low. The oddest of him having a fender bender, you and I ought to be able to go to Las Vegas and make that bet and make a lot of money.

Cis [00:50:03] Wonderful. Thank you so much.

Carl Stuart [00:50:05] You’re welcome, thanks for calling. You’re listening to Money Talk on KUT News and the KUT app. You’re running out of time. If you want to call 512 or text 921-5888. Well, you’ve been hearing these texts come in, so let’s just check and see what we’ve got here. Significant inheritance, sibling power of attorney, should fiduciary be on the legal document. Oh boy think so. The sibling has the power of attorney. He or she is going to do whatever you say in your will. I don’t think that there’s a need, if you’re thinking of a fiduciary as being say for example an investment advisor or a CPA or an attorney, the answer in my view is no. You’re listening to Money Talk on KUT News 90.5. And the KUT app. Call or text 512-921-5888. Hello Carl, Money Talk Show. You’re welcome. My question is about near to long-term focus. My girlfriend and I are recent graduates and have a combined income of $185,000. Congratulations. And have recently paid off all credit card debt. Fantastic, fantastic. After building an emergency fund. Should we focus on building a Roth IRA and 401k positions, paying off student loans or saving for a house? Our total student loans are about $80,000. I’m 37, she’s 28, we’re soon to be engaged. So you’re right, this is all about priorities. It’s not that you do one and not the other because you do wanna pay off your student loans and you do want to save for a House, but you also wanna save for the future. So I think that what I would do, because you could look and say what’s the interest rate on the student loan? What reasonable return can we make on our investments? And should we do this in a tax-deferred investment? I think if you’re working and have a 401k, the first thing you do is you make sure if your employer has a matching contribution. Have at least as much if they’re matching four percent of compensation. Be sure you put in four percent of your own pre-tax income because that’s a hundred percent return. I love Roth IRAs because they grow without taxation and you don’t have to take the money out for a required minimum distribution and once you’re 59 and a half you get to take money out tax free. So I like that. If you’re employer offers a Roth 401k option. Their contribution will be pre-tax, but you might want to do an after-taxe 401 Roth 401, get it out of here, for Roth 401K. And so I just, for the heck of it, probably start by dividing it into thirds and start, make sure you get the employer match, do the raw 401k. Put money against your student loan and take that third bucket to save for your house. And depending on the length of time you expect before you buy the house, if it’s three to five years or longer, take some risk with it, put some of it in the equity market. If it’s shorter than that, then probably put it in a money market fund or in a shorter term investment grade bond fund. Good luck. You’re listening to Money Talk on KUT News 90.5. And the KUT app. Let’s just keep going because it’s too late to give out those numbers again. So here we go. Julia, you’re on the air. How may I help?

Julia [00:54:06] Yeah i have a little uh… That i did my bill uh… And i have the exact Also, a lot of echo.

Carl Stuart [00:54:18] Yes, well, I think you have your radio turned on, turned it off.

Julia [00:54:21] Nah, I don’t have a radio.

Carl Stuart [00:54:22] I’ll be darned.

Julia [00:54:26] Okay well anyway i caught the lawyer about doing it but you know what detracted mention through

Carl Stuart [00:54:33] No, I don’t think you do. Typically, for most people, you would do a trust because you thought if I died and the beneficiary was a child, I want to have a trust. If the beneficuary was someone with special needs that might need help, but would not be capable or competent of managing what she or he received upon my death. That’s a legitimate reason to have a trust. But other than that, for most people, if you die with a home and investment savings either in 401k, IRA, Roth IRA, or an individual account, for most of people you do not need a trust has been my experience, Julia.

Julia [00:55:19] Okay.

Carl Stuart [00:55:20] Okay.

Julia [00:55:22] I think as you mentioned probate, there’s not a…

Carl Stuart [00:55:26] Probate is not a problem in Texas. No man.

Julia [00:55:28] That’s what they were trying to tell me.

Carl Stuart [00:55:30] That’s what this other woman called about. Run away as fast as you can, okay? Okay. Alright. Good. Thanks for calling. Thank you. Okay, thanks for calling, okay. Juan, I may not have a lot of time to answer your question, but please go ahead.

Juan [00:55:49] Yes, sir. Thank you, Carl. Um, I was recently laid off of a tech company here in Austin and I have the opportunity to buy some stock in the company for the next six days. Given that they just became public in the last, let’s say, two months. I was wondering what your thoughts are on whether or not to take a risk like that. Obviously, I would like you to give me some more advice.

Carl Stuart [00:56:13] Yeah, I wouldn’t be taking risks until I knew that I had another job if I were you. I mean, you don’t want to put money away in something like that and then find out that you thought you were going to get a job and you weren’t. If you’re confident that because of your skills and the strength of the market in your area is sufficient, that you could get a, a job. And this stock is that, and you believe it’s an attractive thing for you to do, and it doesn’t represent a whole bunch of your savings. Then I would do it. Otherwise, if I wasn’t certain about my future, I would not do it if I were in your shoes once.

Juan [00:56:46] I appreciate your time.

Carl Stuart [00:56:47] You’re very welcome. Well, it’s been a lot of fun this afternoon. I want to thank Mark for doing his usual terrific job. I wanna thank you for listening and to remind you that next Saturday, Guess what? It will be time at five o’clock to tune in to Money Talk.

KUT Announcer: Laurie Gallardo [00:57:05] 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.