Money Talk with Carl Stuart

Carl Stuart answers a carryover question from the previous week on protesting property tax assessments with the help of informed listeners. He also takes on other complicated topics like how to position ranch land for their heirs or themselves, the possibility of combining pension, 401k, and 403b accounts into one for easy management, why Carl is shying away from U.S.-only stock ETFs for the near term, and other questions.

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

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

[Carl] [00:00:20] Good afternoon and welcome to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and on the KUT app. Money Talk, now in our 31st year, 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 what I’m about to say, that is, it’s always a great idea to call or text early in the broadcast to give me a chance to do my best to do it in ample fashion, answer your question.

And the other thing that happens here on Monday Talk is you will ask questions for which I do not know the answer, and if you call or a text early enough, what frequently happens is that we have other experts listening. Who will either text or call with their experience. I take today’s calls first and then today’s texts and then previous texts one more time. Five one two nine two one five eight eight eight.

So, I have several texts from last week.

We had an individual who called in from Manor, Texas, and said that he had had this huge increase in the appraised value of his property. And wondered if there was anything he could do about that. And we had a couple of people text some information.

One person texted that, he pasted this from the TCAD, the deadline to file your protest is May the 15th or 30 days after your notice is mailed, whichever is later. So that caller for Manor may have missed his deadline.

And you’re a first time listener and glad to find your show. I’m glad you found it as well. Okay, let’s see this. Here’s another one– Okay, I think I’ve already answered that one. We had another one, here it is.

[Text] Hi Carl, another long-time listener from the 1990s.

Well, good.

And see TCAD about property tax increases under $5 million on non-homestead properties. This was from David and it said, the Texas legislature has limited the increase to 20% per year. And he believes this ends in 2026, so covered those.

You’re listening to Money Talk on KUT News and 90.5, the KUT app. Also, you can catch past shows at kut.org slash Money Talk. I have some other texts.

We had a call last week from a person or a text who said that he or she had gold coins. And were selling gold coins, and it was their understanding that if the sales price was less than $10,000, and they sold them for a gain, that that was not a taxable event. And I said, I doubted that, that they had $9,000 of a mutual fund, and they paid $5,000 for it, and they’d sold it, they’d have to pay tax on the capital gain.

So, I texted my CPA, and he said, that my understanding was correct. There’s no form of exclusion on gains on the sale of coins. The entire gain is taxable. The second caller is somewhat correct in that a cash sale of points is only reportable if over $10,000.

When I think he means reportable, he doesn’t mean by the seller, but he means by the other entity, say a dealer, will issue a document when the transaction is more than $10.000.

There are other instances below this threshold that may require the purchasing dealer to send you a 1099, but $10,000 is the general limit. And just this is important. And just because you don’t get a 10 99 does not make it non-taxable. This is a common thing that he has to remind a lot of folks.

Thank you. You’re listening to Money Talk on KUT 90.5 and the KUT app. Call or text 512-877-9000. 921-8888.

You will hear the bings going off here in my studio when we do get a text. Want to make sure I have another text here? Yes. We had a text a few weeks ago.

[text] A person inquired, sure he had a number of retirement plans, but they were based outside the United States. And the person wondered if they could bring those in and consolidate those in the United States.

And once again, I asked my CPA and this is his response. My general understanding is that you are not able to directly roll over any sort of foreign retirement plan into a U.S. Plan. Qualified retirement plans are U. S. Based plans only. My advice would be for this person to reach out to a firm with an international arm to assist here. And he mentioned two firms called Weaver or Cherry Becquart.

He says, I try to stay away from stuff like this.

I don’t blame you. There may be current tax implications and also a lot of record keeping they may need to be doing on their end for when they eventually take distributions. There are also tax treaties that need to considered as well. That reminds me of something that my colleague Lindsay and I have run into and that is when a person lives abroad, even though they may have an account in the United States, say they open the account here, an investment account, and then they move to England, which was the circumstance that we encountered, securities are taxed very differently there in the UK than they are here. And so even owning certain kinds of investments like mutual funds, when there’s tax liability on the mutual funds from a capital gain distribution or the sale of a fund.

The taxes are much much higher here in the United States as you know we have a two-tier tax system we have income tax and we have capital gains tax and capital gains taxes the amount is based on your total income which is your income from all sources plus the amount of the gain that you get upon sale but then if you’re taxed at either zero fifteen percent or twenty percent at the game. And if your income’s above a certain level, that’s 23.8%, was much higher in the UK.

So, he was not allowed, he could have been allowed, I suppose, but certainly didn’t want to, buy 40 act normal mutual funds will be found that certain exchange traded funds like trade like common stocks and as a consequence, have a different and more favorable tax treatment.

You’re listening to Money Talk on KUT News 90.5. And on the KUT app, call me with your questions or text 512-921-5888. Well, that is all of the texts that I have and I don’t have any incoming calls or texts, so be the first time in the last seven weeks that I’ll have a chance to bloviate.

For those of you who are first time listeners, when we have a down period like this and the lesson until I get a text or a call, I didn’t bring up what I think are. Common questions that I’ve received over the years.

And see, I knew it. You heard that? It’s wonderful. Here we go.

[Text] Hi, Carl. I have three retirement accounts from previous employers. A public employee’s retirement account, a 403B, and a 401K. I would like to consolidate them so I can manage them more easily. Should I roll them over into my current employer’s 401K? Or would you suggest an IRA or maybe some other option? I enjoy the show, thank you Eric.

You’re welcome, Eric. So, here’s the part of your question to the answer I do not know because a 403B for everybody else is a 401K type plan but it’s for a nonprofit, for a 501C3 nonprofit or for a public entity like a school district, a state or a university. And 401k is an employer-sponsored plan for a business, for a for-profit enterprise.

They have very similar rules in terms of the tax deductibility of the contribution. Typically, you have a menu of mutual funds from which to choose, and as it grows, you don’t pay any tax on it. If you take the money out after you’re 59 and a half, you pay income tax on.

Here’s what I don’t know. Can you consolidate a 403b into a 401k? I don’t know the answer to that. I will check on that this week.

I believe you can take a 403B and a 401K into an IRA rollover. And because of that, I think that that would be a consideration if I were in your shoes. Any time you’re considering taking a defined contribution plan, 401K or a 402B from a former employer and putting it into an IRA, of course there are pros and cons to that one of the pros you’ve just articulated, which is the ability to consolidate so you can see everything at one place.

And that, frankly, is, for many people, a big reason to do it. However, you do realize it’s possible, not always possible, your cost could be higher. Let me explain why.

If you’re in a 403B or a 401K, your employer has hired somebody to have a) what I think is a partly fiduciary responsibility to go out and select the menu of funds. So, someone’s done the homework for you. That can either be an asset or a liability, but someone’s does the homework you.

Secondly, because the expenses of the plan are distributed among all the plan participants, unless it’s a very small employer, the odds are that the expenses of the plans and the investments are going to be lower than possibly what you could get on your own. Simply because there are a lot more players in it.

Having said that, you do get the consolidation and if you’re the kind of person who would like to have a greater sense of control over some of your most important financial assets, then doing an IRA rollover may well appeal to you. You can either do it yourself and you can go to any of the do-it-yourself custodians like Vanguard or Fidelity or Schwab, or you can engage an advisor. That’s a totally separate decision.

But at this level, if I were in your shoes, I believe that the attraction of an IRA rollover would be something that I would consider. And I’ll look into whether you can put a 403B into a 401K. Thanks for your text.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call with your questions or text me at 512-921-5888.

[Text] Hi Carl, first time listener, so far so good.

Good, stick around, see if you can stump the chump here.

[Text] I have $300,000 cash and I keep rolling over into CDs because I’m nervous about the stock market. Is this okay to do?

Boy, what an important question. And I think there’s a longer answer to this and I’m gonna give it, but it’s time for me to take a break. It’s also a great time for you to call or text 512-512-7000. 921-5888. Stick around for the rest of Money Talk.

[KUT Announcer Jimmy Maas]  [00:12:22] 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] [00:12:51] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

[Carl] [00:13:05] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and the KUT app. When you have a question call or text 512-921-5888.

So, as I read just before the break,

[Text] hi Carl, first time listener. So far so good. I have $300,000 in cash and I keep rolling over into CDs because I’m nervous about the stock market. Is this okay to do?

If you’re not nervous, you’re not paying attention. There are always reasons to be nervous about the future and the stock market in my 46 plus year career, and now is no different. So, here’s how I think about that.

The benefit of having your cash and CDs is very straightforward. You can look on there and you know if you’re $300,000 is 300,000. It’s not 290 or 310. And so that’s- that’s nice and right now because short-term interest rates are higher than they have been for several years You’re getting over four percent and that’s good, too.

However, history teaches us that over longer periods of time returns on cash CDs short-terms treasury bills after inflation and after inflation, and after taxes the returns are negative That’s what the economists call the real return. So, you have a negative real return, so then you have to think about what is the purpose of the money?

If you’re gonna spend money, keeping it in the CD, sure. If you are gonna give it away, fine, but if you want the money to grow and you have three-to-five-year time horizon or longer, especially longer, either for your own future financial independence, or because you wanna leave a legacy for your children or grandchildren or provide for a spouse, then CDs were actually inappropriate.

So, it’s a risk-reward trade-off. As regular listeners know, I always think about investing in the stock market as investing in human ingenuity. I mean, I learned from my colleague, Lindsey, that the iPhone didn’t exist before 2007. So, I remember. back, oh, in the early 80s, when the highest, the most widely admired company, according to Fortune Magazine, was then IBM. They then got into real trouble before they recovered. Then it was General Electric, which is a shadow of what it was back then.

So, times change, human ingenuity comes along, and you’re investing in human ingenuity.

So, here’s what I would do if I were you. I’d think about where do I want that $300,000 to be in the next one, two, and three years.

Do I want to keep some money in cash because it helps me sleep at night? If the answer to that is yes, then rolling it in short-term CDs is fine.

But if you want the money to grow after inflation for some future goal, then you need to have money in the U.S. Stock market. You don’t have to have all of it in there. Frankly, given the volatility of what’s going on now and the uncertainty of the global economy, This may be, we may look back on 2025 as the beginning of a great time to buy. Because when you buy, it makes a big difference over time in what your return’s going to be. So what I would do if I were you is I would start slowly. I would say, let me take $100,000, one third of my money, and let me put in $25,000. Let me do $25,000 now. So, this is the end of May. And then in three months, at the end of August, another $25,000 and then do that another three months in November, and then another three in the following year in February.

Now between now and then, stock market’s gonna go up, and the stock market is gonna go down. And during the times when it’s now, and your $25,000 is gonna buy more shares. And if you do that over time, based on history – I can’t see the future – you will end up with superior returns to the CD, okay?

So that’s without knowing any more about your situation than that. Is that I would say you ought to be nervous, but being nervous, being anxious is part of being an investor. Warren Buffett said, I like to get, I lie nervous, I am fearful when others are greedy, and I’m greedy when others were fearful. And we’re now into fearful time. Consumer sentiment’s very negative, people are really worried, stock market goes way down, then it goes way up. So I would take that $100,000 and do that if I were you. 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. Kevin from Maynard, you’re on the air, how may I help?

[Kevin] [00:18:07] Yeah, I called last week and you had a follow-up. Yes I I have my Interview this Thursday admit the deadline good and You said some night that I thought was true, which was you can’t race The appraisal more than 20 percent

[Carl] [00:18:27] That’s what, yes, that’s what a listener sent me, he sent me a copy from TCAD, he photocopied–  or photo-ed –  sent me copy on the text and said it was 20%. So, you’re going to find out, but that’s he said. Now another texter said it on non-residential property, I did not read that, so I don’t know that Kevin, but I think you have reason now to be optimistic.

[Kevin] [00:18:54] Yeah, yeah, because.

[Carl] [00:18:56] I can’t hear you, Kevin.

[Kevin] [00:18:58] I said that none of my neighbors have had their property go up three times in one year.

[Carl] [00:19:06] That’s crazy. Well, good luck to you. In fact, once you have your appointment, give us a call back on Money Talk and tell us what occurred, please.

[Kevin] [00:19:15] Okay, I’ll do it. Thank you, sir.

[Carl] [00:19:16] You bet, thanks you, Kevin. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Christopher, you’re on the air. How may I help?

[Christopher] [00:19:33] Hey Carl, yeah, I had a question on 401ks and IRAs. So I switched to a new job, so I rolled over my 401k into an IRA. The new job has its own 401k that I did not want to put all the money into that one because it’s kind of a smaller one. So my question is what’s the process or can I contribute my own personal money to the IRA if I’m also doing contributions via the company to the 401k?

[Carl] [00:20:09] It’s a great question because, first of all, congratulations. The fact that you want to be saving like this is really, really important and everybody in the country ought to be doing this.

The answer is because if 401k is considered an employer-sponsored plan and an IRA stands for an individual retirement account, the answer is yes, you can. Now, that IRA contribution – and you should, but– that IRA contribution may or may not be tax deductible. So, you want to look into whether that IRA is deductible, because it actually depends on your taxable income and your participation in the employer-sponsored plan.

If it turns out that it’s tax deductible and you want that tax deduction, then do a regular IRA.

On the other hand, it’s also possible, since you already have money in an IRA, you may want to consider doing a Roth IRA if you don’t make too much money. Because that’s non-taxable but it grows without taxes just like an IRA and once it’s been in five years and if you’re over 59 and a half you can take that money out tax-free whereas the money coming out of your 401k and your pre-tax IRA will be taxable.

Also, there’s no required minimum distribution when you hit 74 or whatever the year is going to be at that time in a Roth. So, look into whether or not two things. Is your IRA contribution going to be tax deductible? And secondly, does your income exceed the limit to do a Roth IRA? If your income exceeds the limit to do a Roth IRA, then go ahead and do an after-tax IRA contribution to your existing IRA.

Now, what will occur is, in the long run, because some of that money in there is pre-tax, and if some of the money in there is after-tax, When you start taking money out of there, there will be a special calculation as to how much of it’s taxable.

Let’s say you put $7,000 in, when that comes out, that portion attributable to that $7000 investment, that portion won’t be taxable, so it gets a little tricky coming out of it, but you can do your own IRA, and you can do a Roth IRA subject to an income limit. So, Christopher, I think that’s a terrific idea.

[Christopher] [00:22:26] Awesome. All right. Well, thank you. And that that last little bit there. Do I have to keep track of that? You just remember the–

[Carl] [00:22:32] Keep track of your after tax. If it turns out that your IRA contributions are after tax, just keep track of them. What the dollar value is you put in over the years, then there’s a form the IRS has helped you figure out how much of your withdrawals are taxable and how much or not. Perfect. Awesome.

Well, thank you so much. You bet. Thanks for calling.

You’re listening Money Talk on KUT News 90.5, and on the KUT app. Call or text 512-877-9000. 921-5888. Marianne, you’re on the air. How may I help?

[Marianne] [00:23:08] Hi carl you’ve already answered that most of my questions but and i think that i still have one when come up with and those of us who have held property like maybe it’s a pasture or whatever you know that’s not a not a not an income-producing uh… Uh… Home or something but anyway when uh… We decide to uh… If we’re not giving them to uh uh… some grandchildren or whatever, [the] tax on that, can you kind of go over a little bit about what the tax situation is, because it’s certainly appreciated.

[Carl] [00:23:46] You bet. So, it’s a capital asset, and so it’s subject to capital gains when you sell it. You have a cost basis. Let’s just suppose it is raw land. You have a cost basis You probably have very little that you’ve done to improve it. You can always talk to a tax professional, because I know that when you make major improvements to your home, you can raise your cost basis, say you put it on a new roof, for example. Or you remodel, or you add a bedroom.

I don’t know anything about, say it’s ranch land and periodically you have to put in a new fence or something like that. That may change slightly the cost basis over your original purchase price, but there will be long-term capital gains tax to be paid to you’ll owe that.

Now the good news is, and there’s nothing going on in Washington that I’ve been able to read that suggests this is gonna change. The maximum, so let’s say it’s a large number, because you and I have visited about this before. It’s a larger market value. So, your income’s gonna be above $250,000 or whatever the limit is, that’s gonna cause you to have an additional 3.8% surtax on top of the 20%.

So you’ll have a 20% on the gain, plus a 3.8. So you plan on a gain of about 23.8%. And for everybody else who’s listening, and Marianne and I’ve had this conversation. Then the other thing that you can always consider is if you don’t get income from it and it’s highly appreciated, and you can also leave it in your estate and your beneficiaries get a step up in basis. So let’s suppose Mary Ann has a cost basis of a million dollars, and let’s supposed it has a market value of $5 million, and Mary Ann passes away, and she leaves that ranch to her grandchildren, for example. Their cost basis is the value when she dies. So the cost basis now is five million dollars. If they then wanted to sell it and they sold it for five million or less, they’d have no tax liability.

So you have to decide the ultimate disposition. Do you want to leave it in your estate? And of course you can also give it away as well. Or do you want sell it yourself and enjoy the proceeds? So those are the considerations I would have, Marianne, if I were in your shoes.

[Marianne] [00:26:10] Thank you, Carl. That’s a good, concise answer for me. I appreciate it.

[Carl] [00:26:16] You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888 and by the way, you can listen to past KUT Money Talk shows by going to KUT.org slash Money Talk. Here we go. Vincent, you’re on the air. How may I help?

[Vincent] [00:26:40] Hi, thanks, first time listener and I’m excited to ask my question. We just sold our home and purchased a new one waiting on the closing, but we’ll walk away with some earnings and we’re in our forties, have a seven-year-old, we’re going to take some of those earnings and try to do some security for my daughter’s education.

[Carl] [00:27:04] Yes.

[Vincent] [00:27:05] So we just got our first-time financial advisors, and we’re trying to find someone for it. And they’re suggesting, which was a surprise to me, that we take the earnings and instead of paying down our new mortgage, which has a higher interest rate of around 7.5%, they’re suggesting that we really take all of the earnings, and try to invest them in the instead. In the hopes that that would set us up for a better retirement in the future. And my question is just a quick take on a second opinion on that because it’s pretty nerve-wracking to leave our other mortgage so outstanding to me.

[Carl] [00:27:51] I, yeah, yeah. Well, this is a question that I’ve taken and heard over the years, Vincent. It’s a really important one.

It was easy back when mortgages were 3%. Then you can make the case, since the long-term average return in the stock market has been probably between eight and 10%, but when your mortgage cost is over 7%, every dollar that you pay down on the mortgage. Is a 7% return. You don’t see it in your pocket or your bank account, but it’s that interest that you did not pay. So that’s the opportunity cost.

So I don’t agree with what they’re telling you. I think because mortgage rates are high now compared to where they used to be, that putting money down on the mortgage makes a lot of sense to me. If you paid off the mortgage with the first house proceeds, would there be any money left to invest for your daughter?

[Vincent] [00:28:47] Uh, no, if we used all of our proceeds, we’d be left with around 70,000 in the mortgage and, and nothing else on the place.

[Carl] [00:28:57] Yeah, you might want to compromise on this then. You can do some math. If you said she’s seven years old, there are websites where you can go and plug in the age of the child and you can say the University of Texas or Texas A&M, I don’t want to get in trouble here, or Rice University or whatever.

And then you can plug it– you can plug in a certain amount of tuition and expense growth, say 6%, and then you can choose what you think is a reasonable investment return, and it will tell you how much to put away today to meet the beginning obligation when she turns 18 or 19.

So perhaps what to me putting all of it in and in it for her and nothing in the mortgage makes me anxious because the mortgage rate is high compared to where it’s been. So, putting some money aside, but she’s young enough, you don’t have to put aside $100,000. You can put aside a much more modest amount as long as you wisely invest it and put the rest in the mortgage.

And of course it’s always plausible that interest rates could go down enough that in the future you could refinance the mortgage. Create a lower monthly income–  I beg your pardon–  a lower month expense, and then take that extra savings from the mortgage and add that to your daughter’s college savings. So I think that makes more sense to me, Vincent.

[Vincent] [00:30:27] Well, thanks so much. I really appreciate it.

[Carl] [00:30:29] You bet, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. It’s about time, well, let me just take this before I take the break, here we go. Berkey, you’re on the air, how may I help?

[Berkey] [00:30:45] Hey Carl, I have a question for you about a mortgage or a business investment. So right now the prices, especially in Austin, Texas, they are pretty down, but the mortgage rates are super high and I’m a self-employed person, so if I want to buy a house, I need to pay at least 20% down payments with 7.5% APR on the mortgage rate.

[Carl] Yes

[Berkey] On the other hand We are talking about $150,000 of investment to buy the property that I want if I want to go through that.

[Carl] Yes.

[Berkay] Should I secure the loan, get the place and have a place to live or should I invest it into my business and double maybe triple it in the next two years and then go from Since the market is not stable right now and the rate is super high for me with of the $50,000. Down payment and I’m not eligible for first-time home buyers advantage since I’m self-employed. I cannot have sleep so I’m just thinking what should I do?

[Carl] [00:31:57] So, I think you make some really good points. The pricing, if you look at the data I look at every month, pricing in Austin is coming down about two to three percent year-over-year. And now there’s more homes on the market, so it’s become much more of a buyer’s market. And if interest rates stay where they are, it’s reasonable to think that there will continue to be plenty of houses to choose from. Given what you believe to be the rate of return on the money invested in your business, and your willingness to live in a rental property, I think it’s a very straightforward thing.

A lot of people, in my view, misunderstand and they say, well, a house is a great investment, and I disagree with that. I live in my own home, so I’m not against home ownership. But the fact is, you’re always gonna have to live somewhere. You’re not going to sell your house in 20 years and live in your car. So, a house is illiquid. You can’t sell off a bedroom for an extra $50,000.

So given everything you’ve told me, the opportunity you have in your business is so attractive. Interest rates are so high compared to where they were recently that if I were in your shoes, based on what you told me Berkey, I would go ahead and invest in the business and be patient about the local real estate market.

[Berkay] [00:33:16] Thank you so much, Carl. Can I add one more thing and get your opinion about that?

[Carl] Yes.

[Berkay] What if I think about turning this property into an income source? Because I’m planning to buy a dub suplex. And if I rent the other side in a yearly lease or something, I possibly pay off my mortgage with it and maybe get like a thousand dollar or a little bit more income, plus paying my property taxes and my mortgage. Would that be doable if I go that soon?

[Carl] [00:33:55] You’d have to really check the market because people who did that when mortgages were 3% had a lot lower hurdle rate than you do at 7-plus percent. You’d really have to push, you know, run the numbers on what the property taxes are, what the mortgage is, and what the local rental rates are because we have a surplus of rental properties in Austin. We have come online with hundreds if not thousands of new apartment units and the apartment market and the multifamily market is softer than the single-family market in Central Texas right now. So, you’ve got to make sure that your assumptions are valid because rents can go down as well as go up. So, you don’t know that you’re gonna get the rent to make the mathematics work for you. And then lastly, at least if you’re living next door – this is less of a risk— but people who have rental properties, they need to have a hands-on interest in the rental property, otherwise they gotta pay 5% or more for a property manager.

I’m not a big fan of rental real estate unless you have the time and the interest, and you may or may not have that time because you’re spending time investing in your business. So, I’m immediately excited about the idea of the duplex unless you can really find comparables and you’re confident that you can accomplish cash flow. After paying all the operating expenses, because frankly, I’m skeptical of that, Berkay.

[Berkay] [00:35:26] Thank you so much. I was doing short term rentals, but after the Corona breakdown, like two years ago, I just got out of it. That’s why I was debating to get back into that. But thank you so much, Colin. That was super helpful.

[Carl] [00:35:38] Okay you’re welcome. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call with your questions or text me at 512-921-5888. I’m going to take a break and I shall return.

[KUT Announcer Laurie Gallardo] [00:36:13] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

[Carl] [00:36:28] Welcome back. Listen to that music! I’ve got this here on my desk. Money Talk’s theme, music for fedora wearing dudes, was written, performed, and produced by KUT’s Music for Fedora Wearing Dudes Band. Good for them. You’re listening to Money Talk on KUT News 90.5 in the KUT app. Call or text 512-921-5888.

Our long time listener Gary got to me on the 401K-403B and 457 question. He just said,

[Text] Carl, the listener wanting to consolidate tax-protected plans should call the custodian of their active 401K. My 401K custodial told me I could roll my old 403B and my old 457 into my active 401k, but that was several years ago and may vary between plans and custodians. Thanks, Gary.

Well, Gary, thanks to you as well. 512-921- 5888. Here’s some text. Let’s get started.

[Text] Hi Carl. I am a 65-year-old male with two kids in college with funded 529 plans and I do not plan to retire for at least two more years. I own my home and have sufficient savings to meet my retirement cash flow needs with a 3 to 4 percent withdrawal rate without relying on social security which I’ll start taking at age 70. My asset allocation very aggressive though. With 95% in S&P 500 ETF and 5% in cash. I’m concerned about sequence of return risk with my current allocations, but I’m also wary about moving into fixed income in a potentially inflationary period. I’m curious if you think a high-yield dividend stock fund would make sense as a way to effectively annuitize my assets while staying invested in equities, thanks.

That is a terrific and sophisticated question. First of all, congratulations on your savings in investing. The fact that you’ve got the college funds planned and that liability taken care of, and that you don’t need to have social security right away and then you can live on a three to 4% withdrawal rate. I like all of those.

I am uncomfortable with the 95% in the S&P ETF. Two or three things I would consider. And for the rest of our listeners, I do my best, sometimes without success. To answer the question in the way that I understand at the level that the person who’s asking it wants to be communicated with.

So, I’m gonna do this at a global asset allocation portfolio strategy answer. And that is, I think that we’re in possibly a period where we’re seeing global flows out of US equities into international equities. We’ve had a long period where we’ve called American or U.S. Exceptionalism, where loads of money came into U.S. Equities and international equities underperformed the U. S. That is absolutely not happening right now. I obviously don’t know if this is temporary. I was reaching over to get the data, but through yesterday, the S&P, if you own the SMP ETF, SPY, your return was a minus 0.89. I’m making no recommendations. And if you owned the VXUS, which was the Vanguard XUS, it was 13.6%. That is a huge difference.

And again, we never know if this is a temporary thing or it’s a permanent thing, but I think I would add international equities without a question. If you’re a passive investor, meaning, and I don’t mean you’re passive person, but if you’re investing passively, then I would look at an ETF that was outside the United States because if you, I was reading today that if you choose the MSCI equity global, you’re gonna get a big, big dollop of U.S. Equity.

So, I don’t like 95%. I think it’s on the high side. Secondly, I think you ought to have 20, if you gonna have. And equity allocation, whatever it is, 25 to 30% ought to be international. I know gold’s had a heck of a run, nevertheless, with what’s going on in the world, I think having 7% in gold is a perfectly reasonable thing for you to do.

And then I think you ought to have some money in three kinds of bond funds. I think should have a short-term bond fund, I think have a core bond fund and you should have multi-sector bond fund. And I think you ought to have 15%, maybe even 20% divided evenly among those. If rates go up, you’ll do fine in the short fund. If rates stay the same, you will do fine in the core fund, and the multi-sector fund will give you exposure around the world. So it’s a long-winded answer to a really sophisticated question. Thank you for asking that.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512. 921-5888. Here’s another text.

[Text] Carl, my Fidelity brokerage account has a message to the effect that I can earn money by lending out securities in my account. How does this work? Is it a good idea? Thanks, long time listener.

So, one of the ways in which brokerage firms make money is they take the securities that their clients have and they loaned them out. And of course, that’s not, I want to say of course, that doesn’t, it’s not a risk to the client, the fidelity client, because they have plenty of the stock and they can also call the stock back. That’s common.

There are periods of time, particularly during flat or bear markets for equities, where a major source of revenues for brokerage firms is disk lending income. And if they have cash balances in clients’ accounts, they can go lend that out as well. So, is this a good idea?

The answer is yes. Believe me, Fidelity is not doing this because they think you’re a swell person. They’re going to lend that out, but you are not going to get all the interest they’re going to make on that. I don’t think I’m being cynical. I may be slightly skeptical, but I do not see a problem with this. So if that looks good to you, I would go ahead and do that.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call with your questions or text me at 512-921-5888 and You can catch past shows at kut.org slash money talk. All right, let’s see what’s next here.

[Text] Good afternoon. I recently turned 73 years of age and I’m now required to take a distribution from my IRA. My wife and I will not need these funds to meet our expenses. Is it too late to consider converting my conventional IRA to a Roth IRA? Thanks for all your advice over the years. Martin

Well, you’re very welcome. Uh… It is absolutely not too late to do that you have the money in the IRA and you can take but you’re still going to be subject to your required distribution uh… Unless you were to convert the entire amount you’re subject to it this year anyway based on last year’s December 31st value. You can begin to take money out of that IRA and put it into a Roth IRA for everybody else who’s listening, this is called a conversion. Now, when you take money out of your IRA and put it in a Roth IRA, that’s gonna be a taxable event.

So, you wanna pay attention to two things. What that would do, since you’re on Medicare, what would that do to your Medicare premiums? Because the premium you pay on your Medicare is determined by how much your taxable income is, and what would it do to you income tax? So, you want to get real clear about the tax brackets because it may be that taking a large distribution into a conversion would cause you to have a significant increase in your IRMA, what it’s called, and a reduction in your Social Security benefit, net to you, and it may put you in a significantly higher income tax bracket.

On the other hand, if you’re in the 22% bracket and all it does is put you in the 24% bracket, in my view, that’s not a big deal. But if it takes you from the 24% bracket to 32, that’s a big deal.

So, unless there’s some reason because of your health to hurry up and do this, I would look at the tax consequences. If you have a CPA, ask her or him what they think. Or else if you’re good with numbers, just go and download the 2025 tax schedule. Look at married finally jointly, if that’s your situation, which it is, and to determine if I took 50,000 making this up. How much tax would I pay on that? And what would that do to my Medicare premiums? And then I think you can decide on that.

So, I think that’s an excellent idea. And, as people may or may not know, you are subject to required minimum distributions on your IRA, and you are not subject to required of minimum distributions on your Roth IRA. And if you pass away with the money in either one of those, your heirs or beneficiaries, if it’s a non-spousal beneficiary, has to take the money out over ten years. But if it’s a beneficiary Roth IRA, at least those distributions are not subject to income tax.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. We’re down to about our last six minutes. If you have a question, call right now at 512-921-5888 or you’re welcome to send me a text because I’ll get to the text. If not today, then next week.

[Text] Carl, my house value has gone up a lot since I bought it in the early 90s, no kidding. I’m single, so I get $250,000 deduction. What this person means is the first $250 thousand of gain will not be subject to tax. I have read that if I don’t make more than about $46,000, I didn’t have to pay capital gains tax. I can live off savings for two years between my projected last day of work and when I start taking Social Security. If I don’t have to pay that $100,000 savings in Texas, but when I put it in TurboTax, it says I still owe.

You still owe, because what you have to do is, yes, you have the income, let’s say that that’s $46,000, but you have add the gain into your total taxes. That then tells you what capital gains tax rates you’re in. You may be in the 15% or you may be on the 20%.

But you have to take the gain at it as if it were taxable income, along with your income from earnings. Then that tells you what tax brackets you’re going to be in for capital gains. You look at the total gain on the sale of the house as you have just implied, you subtract the $250,000 and then what’s left is gonna be subject to capital gains tax. So, you will have a capital gains taxes liability and as I always say, I am not a CPA.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Let’s see if we can sneak one more of these in. Okay, let’s go back here. And we go down here.

[Text] Hi, Carl. I’m 67 years old and planning to work three more years. I’m doing home renovations right now. Need to extract about $30,000 from my 401k.

I have two options. One, I can take a loan against my 401k at 8.5%. Or two, I can take the $30,000 disbursement and pay 22% taxes. As far as I can tell, the trade-off is the loss of the interest that I would pay on the loan versus the loss of projected income of the 30,000 should I remove it from my 401K. You have any thoughts about this or recommendations of which route to go? One million thanks, and this is Sherry from Austin.

Well, Sherry, what we’re gonna have to do is make some assumptions about future returns because eight and a half percent is expensive. And so you got to think about if you left the money in there would you avoid the eight and a half percent and and get the— I guess I’m thinking faster because it’s the end of the broadcast—  I think I would probably take the money out 22% boy that’s a tough one I’ll think about that but my my Intuition is because that interest rate is so high. But I’m kind of inclined to take the money out and do that. So that’s kind of how I think I would look at that. So that is an ambivalent answer if you’ve ever heard one.

[Text] Hey there, I have my savings in a high-yield savings account through Wealthfront. I also have both a Roth IRA and a traditional IRA. Should I also a brokerage account with money tied up in the market or is the high- yield savings account a smart move? I’m new to this.

Well, I don’t know how you have your Roth IRA and your traditional IRA invested, but if it’s invested in the stock market, I think that’s a good idea. And I think high-yield savings are attractive now because short-term interest rates are high, but rates are gonna go down over the next year or two, and you’re gonna have paid an opportunity cost for not having money in the equity market.

I don’t think you need to have a lot of it all at once, but I think I would do what I mentioned to a previous texture. I would look at that high-yield savings and say, how much do I have to have here for just to sleep nights or because I’m gonna buy a new car or take a trip? Then I would take the amount over that and over the next six months in equal dollar amounts, I think I would invest it.

And you can do that on your own or with your advisor, if you’re on your own, I would advise you— I’m just guessing that you’re a younger person—  I’d put 75% in the US. Total stock market exchange traded fund in 25 to 30, or 70, 30 into international. I think that’s going to do better than what the high yield savings account is and you’re going to have that money there in the high-yield savings account for a rainy day.

Thanks for the text. Well, we’re out of time. I want to thank Mark for doing his usual terrific job today and thank you for listening and to remind you next Saturday after the news at five, be sure and tune in to Money Talk.

[KUT Announcer Laurie Gallardo] [00:51:13] 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.