Money Talk with Carl Stuart

Carl Stuart takes caller and text questions, recommendations on how one can rebalance their portfolio, including investing in a balanced mix of equities and bonds, as well as advice on researching international funds and defined outcome ETFs.

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 on the KUT app. Now in our 32nd year here together, 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 hour. Giving me the opportunity to do my best to answer your questions. I take today’s telephone calls first and then today’s texts, and then texts from previous broadcasts that I haven’t had the opportunity to answer. So here we go. 512-921-5888. Here’s a text that came in today. Let’s just see if we can get to the bottom of this. Hello, Carl. I am a healthy, single, 76-year-old female. I have not rebalanced my portfolio since my early 40s. Wow! I am now retired, receive Social Security of about $40,000 per year, required minimum distributions from my 401k and traditional IRAs, and also have a rental income of $25,000 per year plus a $500,000 Roth IRA. The Roth is invested in a balanced fund and has no withdrawals. I have no debt, but do plan to purchase a new vehicle this year for about $50,000, which I plan to keep for 15 years. After taxes and expenses, I save around $60,000 annually in a checking account and CDs. How should I rebalance my portfolio to a moderately conservative mix to ensure that my assets will last my lifetime, and, also, so that I can leave a substantial legacy to my heirs. Who will seriously need this inheritance. Thank you for your insights. Well, you’re welcome. And first of all, congratulations on a successful life of saving and investing. And for the rest of us listening, one of the things that you’ve done that’s practically un-American is that you have eliminated all your debt. And for people who are listening and someday want to be in your situation, increasing assets and decreasing debts has the same impact. On your balance sheet. So you need to do both because when you quit working, your expenses are not going to go away. So if you can reduce your mortgage expense to zero, you have a lot more flexibility in your own financial plan and your financial life. So if I were in your shoes, a couple of things jump out to me. You have a significant amount of money and cash and CDs and other than anticipated expenditure for your automobile at your stage in life. You don’t have unexpected expenses. You have Medicare. You probably have a supplement. You have plenty of savings in investing. So I would think seriously about adding to your own individual portfolio in your own name and investing in a balanced fashion. And the good news about that, and I suspect you’re well aware of this, a lot of your assets are in tax-deferred portfolios. Pre-tax money went in and they’re tax- deferred. And you’re interested in leaving a legacy for your heirs who will really need the money. One of the nice ways of planning for the future and investing for a legacy is to invest in our own names, in an individual account or for married, perhaps a joint account, and investing for growth and not putting it in CDs and not put it in cash because we don’t need that and having it grow over time because when we pass away, the value of the portfolio becomes the new cost basis for our heirs. I’ll get back to that in a minute. Whereas the money that comes out of a 401k or a money that come out of an IRA is taxable. Plus, there’ll be a time limit on those. They’ll have ten years to take it out, whether they want to take it out then or not, and they can’t keep it in there for their own retirement. They have to take out over time, which is okay. If you leave them money in your own individual name, and let’s say you have, because you have and you recognize this, the long life expectancy, longevity really as a female, that let’s it grows to $250,000. Let’s say that your investment’s $175,000, upon the date of your death, the cost basis becomes $250.000. Your heirs inherit that. They can hold the investments and let them continue to grow. Or they can sell some or all of it. And if they sell it shortly after your demise, their gain will not be subdued to tax because if it’s worth 250 and they sell at 250, there is no gain, even though you paid $175,000 for it. So that’s something to think about. I think the way now to answer your question, to rebalance, is because you are in good health, and you know that the risk you identify is you could outlive your money, you still wanna have growth in your plan and you wanna probably have, and again, I don’t know you personally, but I would think you wanna have maybe 55% to 60% in equities, in mutual funds or exchange-traded funds. And you may not have, a lot of American investors, according to the data, don’t have a lot or any of international stocks. And that has not been a problem over the last few years because of the outperformance of the U.S. Equity market. But last year and this year so far, international equities are doing far, far better than domestic. And in the past, these kinds of periods of outperformance, whether foreign or domestic, tend to last longer than just a year. So make sure with that equity allocation that you have 25 or 30% outside the United States. If you buy mutual funds or exchange-rated funds that have the word global, that means they have both U.S. And foreign domiciled companies. I would recommend against that because you’re gonna get your U. S. Domicile over there at the 70 or 75% allocation. And then if you’re going to do this yourself and you don’t have the time or the interest to look at some of the more, shall we say, sophisticated strategies available in daily liquid funds. At least then put the money in bond funds and spread it out over the entire yield curve by having a short-term investment grade bond fund, an intermediate term or what Morningstar calls a core bond fund and then what Morning Star calls is a multi-sector bond fund that allows the managers to buy various kinds of fixed income instruments, whether they’re domestic or foreign, whether they’re short, intermediate, or long-term duration. And I think that would be a good place to go if I were in your shoes. 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. This is a response to a question that I got last week. Someone asked if they stopped working or started working part time, how would that impact their Social Security payments. And I am not, as long-term listeners know, I may be a lot of things, but one of them is not a social security expert. And this person said, Carl, the social security payout is based on the average of your top 35 earning years. Just a four-year information for those persons who recently became unemployed. That’s exactly it. Love the show, thank you. Well, we have all of our… Lines available no new texts 512-921-5888 and I want to mention that you can catch past shows or you can refer your friends to past shows by going to kut.org money talk okay let’s just see what’s next here hi Carl love the show the earlier thank you the earlier texture who asked what’s the best way to get started investing was I’m 71, I’m wondering if I should use an IRA or what kind of investment vehicle I should use to start investing in exchange traded funds. So I would say because you’re 71, you’re fairly close to the time that you’re going to have to be taking required minimum distributions. I would invest in my own name. You have total liquidity and if you choose to switch funds or to sell some for some expenditure, as long as you’ve held them for a year or longer, you’re going to be taxed at the favorable long-term capital gains rate rather than the income tax rate. And as I said in my earlier answer, upon your demise, your heir, if you’re married, your surviving spouse gets to step up in basis. And I would probably not use an IRA. I think when you’re young and beginning investing, certainly if you have an employer-sponsored plan, you want to get into that, certainly to the extent that your employer makes what’s called a matching contribution, but when you are 71, I like the idea of building capital on an after-tax basis. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text. 512-921-5888. Let’s see, here’s one. Carl, love the show. Thank you. Would love some wise wisdom, it’s the best kind. I am 40 and male. I currently have $1 million in retirement accounts. Congratulations at age 40, that’s terrific. And no real debt, except a 3% home mortgage. Well, you were very fortunate there. I’m looking to invest my extra funds, but debating if I should really continue maxing the 401K contribution, or just get the company match and invest the rest in a brokerage account to allow me to retire earlier and be financially independent. What says the wise? Well, I don’t know what the wise say, but I’ll tell you what I say. Back at the beginning of my career, I was, the literature said put the maximum you can, and employer-sponsored plans, or IRAs, because then when you retire, you’ll be in a lower tax bracket when the money comes out. You’re in a higher tax bracket when you worked. Maybe, but not always. I’ve learned the hard way that people who do a good job of saving and investing, maybe they drop from the 24% marginal bracket to the 22%, which is not a big deal, and I really like the flexibility of doing it on your own. So, yes, I would make sure I would get the company match, but I think all of the things being considered, putting more than that in when you’re already 40 and have a million dollars, why not build up over the next 25, 30 years a wonderful pool of capital, invest in exchange-traded funds, and if they’re actively managed, tax-efficient funds, hold them for the long term for the favorable long-term capital gains rate. I think that’s what I would do. Thanks for the text. And you do hear texts coming in at 512-921-5888. Oh, and we do take phone calls here as well. Hi, Carl. I would appreciate your opinion of private placement investments. Thanks. What a timely and terrific question. So for the rest of us, a private investment is one that you lack liquidity. The very definition is… It doesn’t trade on a public exchange, okay? And there’s been a big move on the part of Wall Street to bring private investments to individual investors. I don’t know whether to call it a theory, but the proposal is that institutions like endowments and foundations and pension funds have been getting superior returns because they have very long or frankly indefinite or infinite is a better term time period and so they can invest in illiquid investments whether they’re private equity or private credit or venture capital and that they get better returns in the stock market. And so. Something for individuals to consider. Color Me highly skeptical. We’re experiencing right now some problems with people who have been in private credit and for whatever set of reasons, whether it’s the difficulty in software companies dealing with artificial intelligence or concerns over the war in the Middle East or whatever it is, people have knocked on the door and said, give me the money. As Jerry McGee said, show me the money. And guess what? If everybody shows up, the private company is not, the investment company is not obligated to give you the money, so there ought to be a significantly better return than the equity market because there’s something called the liquidity premium, meaning if I have whole illiquid assets, I should get a higher rate of return. My life experience in this over the last 47 years is almost always when it gets to the individual investor, the juice has pretty been squeezed out of the orange, that the best deals have already been taken, and that you’re going to get, if you go with a reputable company, you’re gonna get a return, but you’re not going to give the returns that have been shown to you that have happened over the 10, 15, and 20 years, number one. Secondly, there’s so much money. Looking for a home in these private investments, both at the institutional and at the individual level, that when a lot of money flows into something, Economics 101 is the future returns diminish because prices go up and you’re paying a higher price then. So I am not a fan, simply put, I am NOT a fan. I’ve managed to lose money in all asset classes. I’ve lost money in private investments but they’ve been private investments that I made on my own where I knew the people who were running the company. And not something that came out of Wall Street, so color me skeptical. You’re listening to Money Talk on KUT News 90.5 and the KUT app. We have all of our lines available. Call or text 512-921-5888. Here’s the text. Hi Carl, my husband and I are debt free except for our new home mortgage at 31 years old. Good for you. Would a $3,000 bonus go further in a Roth or IRA or it’s a principal payment on our new mortgage? It’s when you think about your house and there’s a lot of, when I use the term mythology, that sounds judgmental. But it is a myth that a house is a great investment. There’s no long term evidence that that’s true. What happens is it’s a forced savings because you got to make the darn mortgage payment every month for 15 or 25 or 30 years. So you pay interest, a whole pile of interest. But at the end of it, you own an asset. Is worth a lot, and you can sell it. The challenge is, if you want money in between, you can’t sell a bedroom for a quick $50,000. And when you sell it, you gotta go live someplace. And so, I would just say to you, I’m a fan of home ownership, I’m, I, I am a homeowner. I’m not talking against it. But you have to think about, it’s kind of like having a, a three-legged stool, and for your future financial independence, okay? You’ve got your home and hopefully you’re going to have an employer-sponsored retirement plan, but a lot of Americans don’t, and you’re gonna have your own investments, whether it’s a Roth IRA or it’s in your own name. I love the idea for someone your age of a Roth IRA because that money compounds over time with no income taxes, and once it’s been there five years and you are over 59 and a half years of age, you can take the money out whenever the heck you want to. And pay no income taxes. But here’s a real benefit that may seem kind of weird when you’re 31, but I know a lot of people, frankly myself included, who are subject to the required minimum distribution, I don’t want the money. But I gotta take it and it adds to my tax liability. So I think Roth IRAs are wonderful. Now you have to understand that if you start making a certain amount of money, you won’t be eligible to do a Roth IRA. If you think that your income over the next 25, 30 years is gonna rise, and we both hope that it will, doing a Roth IRA now, when you’re at a low enough income level that you can afford, that you can do a Roth, that your qualify for a Roth. That’s exactly what I would do. So you have this, the leg to the stool that’s gonna grow and be helpful for your future independence. You get to there, you don’t owe money on your house. And you have this other pool of savings and investment is the target, not reducing the debt on the house. Now, this was a lot easier when mortgages were 3%, but I still think the argument stands. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. It’s time for me to take a break and a perfect time for you to call or text 512-921-5888. I’ll be back.

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KUT Announcer: Laurie Gallardo [00:19:41] This is Money Talk with Karl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Karl.

Carl Stuart [00:19:55] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and on the KUT app. When you have a question, call or text, you can just hear that text coming in at 512-921-5888. Here we go. Carl, I am single, 70 years old and retired. I have always invested in mutual funds, maxed out 401k contributions. Plus investing in a mutual fund that is not tax deferred, that has done very well over the 30 years I’ve had it. Congratulations. I have no debt, and the formulas predict I won’t outlive my savings in Social Security. Given all this, what would be the value of a financial advisor? Well, first of all, congratulations. You’ve done all the right things. So here’s what I know about financial advisors and the decision to select one or not. It’s really about our personalities. So let me just give you a painful personal example. Many years ago, I did my own income taxes and I got this envelope in the mail with the absolutely frightening return address internal revenue service. And I had made a mistake and for all I recall, several mistakes on my tax filing and I thought to myself, This is not going to be pleasant. I don’t want to do this anymore. I’m going to hire a CPA. Now the minute I made that decision, I knew that I was losing control, which was just fine with me. And so I knew if I went to five local CPAs, that their fees would be similar for the kind of work that I needed, because that’s how the marketplace works, okay? Whether you’re choosing a financial advisor or an accountant or lawyer, or whatever. So what I’ve observed is we divide along the lines of do-it-yourselfers and not do-yourselvers. And for example, I’ve noticed in income producing properties, people who make good returns over 30, 40 years in income-producing properties, let’s just say rental properties, houses and duplexes to make it easy, are hands-on people. They understand that it hurts their return if they have a property management company. They had the time and the interest to negotiate with renters, to take care of the maintenance, and to reap the benefits. That’s the kind of person that if she went to a financial advisor, would probably cause her hair to go on fire. Because she’d want to know, why didn’t you do this? Or I read about this in the Wall Street Journal, why didn’t she do that? So I think you really want to reflect, and you’re certainly old enough to know yourself, on your own, if you will, style around control. If you wanna have control, then I think a good financial advisor is not somebody that you ought to engage. If you are at a point in your life where you would like professional advice and you are willing to give up control, then yes, what a financial advisor can provide you is years of experience, that’s the big deal. Secondly, big deal, opportunities in mutual funds and exchange-traded funds that you would not know about. So I would do to use to stretch the story about accountants, it’s perfectly reasonable to interview. And because we live in central Texas, there are a lot of these people. You can ask friends at work or church or your bridge club or mahjong or whatever, who they use, you can then go interview that person. It doesn’t mean that they’re right for you, but that’s how you start. You go and you sit down and you ought to be prepared to disclose all your financial situation. It’s a diagnostic process. If this person’s going to help you, they need to understand your situation. So you have to be trusting in that regard. And then they ought to be able to do the following three things. Explain what their investment strategy or philosophy is, because if they can’t explain it, or they explain it in a way that is not understandable, all kinds of jargon, or you say that doesn’t sound good to me, keep looking. Secondly, they ought to be able to answer this question. If you engage my services, here’s how we’re gonna connect, here’s our communication, here’s we meet, all those kinds of things so that there’s clarity and expectations. And then last, how are they compensated? They’ll either be compensated by the transaction, just like a real estate agent is, or they’ll be compensating based on the value of the underlying assets. That’s what people who are called investment advisors do. That’s the process that I would go through if I were in your shoes, and good luck. Thanks for the text. You’re listening to Money Talk on KUT News, 90.5, and the KUT app where nobody wants to call, but they will text at 512-921-5888, and you can catch past shows at kut.org slash money talk. Here we go. Can you explain how to research a non-US exchange-traded fund or some other balanced non-U.S. Fund? I’m not familiar with non-us investing. Okay, first of all, the category you want to consider is international. Because as I mentioned earlier today, if you look at a mutual fund and it’s in a global category, that means that it has both U.S and foreign funds. You already have U.S. So you wouldn’t be asking this question. So you want international because you want a different return profile, okay? So how do you go about researching them? The first thing you decide is if you’re going to have an exchange traded fund, are you going to a passive one or an active one or both? The passive ones are easy because they’re designed to follow an index. Some of the popular indexes include, sorry for the jargon, M- SCI, Morgan Stanley Capital International, XUS, ACWI, ACQI, and mutual fund companies, the big ones, the do-it-yourselfers like Schwab and Fidelity and Vanguard have international index funds, and you can research those to see if you could find two or three, compare returns. And see if they tend to move, they ought to move in a similar fashion. Then the active ones, and this is a relatively new thing in the financial world, the ability to have actively managed funds, but in an exchange traded fund wrapper, if you will, where the benefit you get is not the daily liquidity, because you have that with a regular mutual fund, not intraday trading, because you shouldn’t be doing intradays trading anyway, but tax efficiency. And so there should be more tax efficiency in an actively managed ETF than in an actably managed, for a bigger part, 40 act mutual fund. So a lot of these mutual fund companies that have been around for decades are now coming, that have had history of international investing, are now come out with exchange traded funds and it’s a very good thing for people who want to have active management and tax efficiency. All the big mutual fund companies have these, okay? And so now you start to, now I’m gonna get down to perhaps the nuts and bolts. And that is, and this is complicated, and I’m telling you this out of 47 years trial and error, you can look at two funds and they could have the same five year return or the same 10 year return, but have completely different ways in which to get there. When we’re talking active, what I have observed and learned. Is some strategies tend to outperform on the upside, meaning when their category is in favor, they’ll do better than the index, and then others who tend to outperform the downside, meaning when they’re category does badly, they tend to go down less. So my view is, have a core of a passive index fund, and then find active management. Based on looking at the various calendar years. If you look at point to point, like five years, you can miss a lot. So for example, because 2022 was a down year in the global equity market, look and see how the fund did in 2022. Now, last year, 2025 was a terrific year for international. See how they did there. And if there’s this huge dispersion, Drill down and find out what they own. You can do all this on Morningstar. It may be worth your buying the Morningstar membership at the lowest level. You don’t need it higher than that. That’s what I use. So that’s how I would go about that. That’s the methodology that I would use if I were in your shoes. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Carl, my wife recently met with a new financial advisor. The advisor recommended that she put a fair amount of her available cash assets in a defined outcome buffered exchange traded fund. I’ve never heard of this type of ETF. Can you provide some clarity on what it is and the pros and cons of it? Thanks, Craig. These are funds that use options to limit the downside risk of an equity portfolio and limit the upside return. They say, we’re going to give you a smoother ride and the way we’re gonna do it is let’s just say we’re gunna buy the S&P 500 and then we’re goanna buy some put options so that as the S&P has a bad year and goes down, the value of those put options go up, and the total value of the fund doesn’t go down as much as the underlying index. On the other hand, we’re also gonna go sell some call options so when it goes up, once it hits a certain level, we won’t get the additional return. Do I like these? No, I do not. What I have learned through trial and error of the last 47 years. Is you want the full return of the equity market, both up and down, because it’s not a solid 8% a year, 6% a years, nice and smooth. Let’s just look at 22, 23, 24, and 25. In 2022, the S&P was down 19%. If you were a more aggressive investor and owned the NASDAQ, it was down 33%. Then the next year, then 23 and 24, The S&P was up over 20%. And last year it was up, as I recall, about 17%. And so far this year, it’s down about 1.5%. But if you had been limited to an 8% return or a 10% return, you’d have a lot less money today. These are the kind of things that retail investors, like you and I, meaning human beings on institutions, get sold because they sound terrific. Run as fast as you can. In the other direction. You’re listening to Money Talk on KUT News, 90.5 and the KUT app. Call or text 512-921-5888. Uh oh, Ola Senor, I hope the question’s not in Spanish or we’re in real trouble. Okay, let’s just see, where I just lost it. Ah, here it is. I’m not sure this question is valid enough for the level of your expertise. Trust me, it’s not that to a kind of level. But I’ll throw it out, and on the off chance, you’re willing to entertainment. Entertain it. I’m in my bid 40s, have nowhere near the level of investment prowess or active capital as it sounds like the rest of your listeners who message you do. But I’m curious if you’d be willing to roll off the top of your head, the top five or three or two or one smart money moves a person can start doing starting right now later in life. Again, I’m aware this may be too vanilla for the level of your show. But I know I’m not alone in this situation of not having ever been in a position to invest, at all, ever. It would just be nice to at least start doing some small things now, you know? Anonymous due to the slight embarrassment of being in this to begin with. Well, first of all, thank you so much for the question. Money Talk is a broadcast for everybody. Some weeks we get the kinds of texts that you’re alluding to. With really successful investors who were just wanting to bounce ideas off of my flat head. And other times we have people that have either gotten a late start in life of investing or just starting out. So here’s what you want to think about. Capital money has three buckets. The first bucket is the money in your checking account to pay your rent, to buy the gas and groceries. You’re not interested in making money on that. You just want to know it’s there when you need it. The second bucket is money for a rainy day. If you have a solid job, that number does not have to be six months’ worth of expenses. If you a volatile income, or you’re in an industry where there’s lots of layoffs, then you want to make this more money. And where you want put this is something called a money market mutual fund, or a money market fund. You can study these online by going to the websites of Fidelity, Schwab, Vanguard. They all have these, and it’s like a savings account. It is not FDIC-insured. And the fund buys very short-term, one year or less, corporate paper or treasuries or agencies. I like what’s called a government money market fund. But the money in there now, it’s yielding probably between three and a half and four percent, and that yield will go up and down as interest rates go up down over time. And you have daily liquidity, which means you can put the money in and take it out when you want. Now we get to the third bucket, which is the bucket for your financial independence. This is the one where you’ve got to get started. And what you want to find out is what’s the minimum investment to invest in an index exchange traded fund, ETF. Go to those same websites. All those companies have exchange-rated funds. Look for one that says total stock market. Look for a one that’s says total international. Find out what the minimum investment is. Set an account up. Set up what’s called ACH with your bank and have money withdrawn from your account on a regular basis to invest in the exchange traded fund. You can always change this. If your cash flow increases, you can increase the investment. If you have cash flow decreases, you can stop it, but you wanna get on a regular plan because the stock market’s gonna go down and that money’s gonna buy more shares of the ETF. The stock market will go up and you will buy fewer shares, but you will be doing something that investors love to do which is buy when prices are cheaper, okay? So that’s how you get started, one step at a time. You have the cash bucket, you have the emergency bucket and the money market fund. And then you save up to get to the minimum investment for an index exchange traded fund. And this is not below this show, this is exactly what we wanna do on Money Talk. And believe me, there are a lot of people listening to this who really appreciate you doing that. Thank you for the text. You’re listening to Money Talk on KUT News 90.5 and the KUT app. I’m gonna take a break. Great time to call or text 512-921-5888. I’ll be back.

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KUT Announcer: Laurie Gallardo [00:37:23] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:37:37] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and on the KUT app. And you can catch past shows at kut.org slash money talk. When you have a question, call or text 512-921-5888. Carl, if I have to take required withdrawals next year from my 401- Could I move it all to an IRA and save it because I don’t need the money right now? If not, an IRA, then what? It’s only $19,000. Well, here’s the bad news, there’s no way to get around it. The only way to not pay tax on it is to give it away. There’s something called a qualified charitable distribution, I use these personally, where You can take your required minimum, actually you can start when you’re 70 and a half. When you may not have an RMD, but you’ve got an RMB, if you have a philanthropic area that you support, your alma mater or your grandchild’s PTA or, I’m just making these up, a religious organization, you can give them the money. The custodian will write you, will write the check to the institution, they’ll either send it to you if you want, or directly to the institution. And you can do all, if your IRA, if you’re RMD is 19,000, you could do all of it if you wanted to. Make the world a better place. Get rid of the liability of the tax liability of the RMD and do a good dude. Deed and be a good dood. Now, if don’t wanna do that, the answer sadly is, there’s absolutely no way around it. You cannot take an RMD, put it in another tax deferred account like an IRA. Thereby not have to pay the taxes. Not going to let you do that, sorry. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Hello Carl. I’m 62 and planning to retire this year. I’m fortunate to have substantial funds in my taxable, tax-deferred, and tax-free accounts. What does this mark? Roth conversion look like for a person like me? My plan is to delay Social Security until I’m 68 or 69. Well, first of all, I think delaying it’s a great idea if you don’t need the income. And it grows from your full retirement age to 70 at 8% a year, and there’s no guaranteed investment that you and I can make at 8%. So unless you need the money or you think you’re not going to live very long, I’d wait until I was 70 if I were you. Now. What does a smart Roth conversion look like for a person like you? You wanna get a hold of the tax tables. You wanna look at what all your taxable income is, and then you wanna see how much you can take out of your tax-deferred account and put it in a Roth without throwing yourself into a substantially higher tax bracket. Now, some of the taxes brackets are really close to one another, and some of them or not, and you hear me rustling the papers, I’m getting out the 2026, there it is, the 20 26 tax rates. So let’s just see if you’re 62. I can’t tell if you are single or married. So if you think about it, a single person goes from 22 to 24% when he or she makes more than, let’s look, taxable income, single. You are in the 22% bracket from 50,000 to 105,000, and 24% from 105,001 to 201. If you’re married finally and jointly this year, you’re in the 20% bracket on everything over 100,000 up to 211,000. And then from 211 thousand up to 403,000 you’re the 24% bracket. Well I would argue the difference between 24 and 22 is not that big a deal. The big deal is the next bracket, which goes to 35 as I recall. And that’s at 32, I apologize, 32%. That’s unpleasant. So as you think about taking money and doing a conversion, get a hold of the tax tables and look at all your taxable income and determine what’s left that you can take out and add to your current taxable income that will not throw you into a substantially higher tax bracket. That’s what I would do. You’re listening to Money Talk on KUT News 90.5. And on the KUT app. Call or text, we may make a new record if we don’t get a call today. 512-921-5888. Carl, I started a 529 account for my grandson many years ago. He is now studying at the University of Zurich in Switzerland, good for him. I am now told that the funds in the 2529 account cannot be used abroad, really. That really is bad, unbelievable, that’s terrible. What can I do to make this money available to this grandson? I don’t see a way out of it, except to simply take the money out and pay the taxes, because unless he had some education-related expenses that could be paid here in the United States, I don t know what it would be. I mean, I just really, this is just so disappointing that the tax laws are against him while he’s in Switzerland. Are there things that you can buy? Your grandson a computer or some other things that you can buy in dollars and have shipped over there because then you can get the money out without the tax consequence but if you want to get the morning to him and he can’t take it on a tax-free basis unless he comes back here and continues his education the only thing that I can think of off the top of my head is what I just said. I’m disappointed to learn that. Thank you 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. Mark, you’re on the air, how may I help?

Mark [00:44:08] Yes sir, I’m 71, my wife is 68. I have started in the last couple of years converting all of our traditional IRAs, which were originally 401Ks, into Roths. And I will just about get all of mine converted. Before my RMDs kick in here at 73 and hers, we’re going to have about maybe a half million dollars left.

Carl Stuart [00:44:52] Mm-hmm.

Mark [00:44:53] Before her RMDs kick in. But of course I, you know, I can take the RMD and then convert the rest of it. But we currently have maybe $130,000 of income. Don’t have any debt at all houses paid off nothing. Does it make and I’m converting at the 24% tax rate I mean does it make sense for me to do that and to you know go from the 22 to 24 percent Right? Houston. Kind of speed it up so that I don’t have to have a bunch of, because I’m talking about maybe just under $2 million left to convert.

Carl Stuart [00:46:03] Yes, if I were in your shoes, and for everybody else, if you’re married, filing jointly, you leave the 24% bracket at $403,550, and you leave that 24% at $4.03. You leave the 22 at$ 4.11. The question is, Mark, the next one, as you know, is 32. If you can stay under $404,000 total, because you make $130,000, then I’d do that in the 24 because of the value of your Yes, I’d accelerate taking more money out of the tax deferred and putting it in the Roth conversion. I like that idea very much.

Mark [00:46:47] I just wanted to check.

Carl Stuart [00:46:49] Okay, good luck to you, sir. 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. Gary, you’re on the air. How may I help?

Gary [00:47:08] Yeah carl i just called in to say i’ve been listening to you know that other station for i’ve been thirty years and uh… And i i thought that you’re on f m now and yes sir if you say that you have got any voice calls today at the i thought there was because f m frequency doesn’t except voice called only text

Carl Stuart [00:47:31] Ha ha ha ha!

Gary [00:47:34] Anyway, to your audience that you’ve had for years, they ought to listen to you. I’m about your age, 74 years old, and you give some good advice. Now, I don’t know if you’re a wealth manager, a financial advisor, a stock broker, or a stock pimp, but you do a hell of a job of educating them. Of the American public on, uh, you even told them what initials BPA stand for.

Carl Stuart [00:48:12] Well, I appreciate it, Gary. Thanks for calling.

Gary [00:48:14] Yeah

Carl Stuart [00:48:15] Bye-bye now. That was terrific. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Carl, we’d love to get more information on the advantages and disadvantages of forming a trust to own real estate and other assets. Thank you, Andrew. There are different kinds of trusts, and I’m not an attorney. So if you put something in a trust to keep it out of your assets, it would have to be irrevocable. You would have put assets in there, and they could not come back to you. So I know people that have a small family business, and they want to pass it to the next generation. And they’re really thinking about whether or not to take the value of that business and put it in a trust. The next generation would be the beneficiary of the trust, but the trust would be a separate entity. To just put it into a trust for any other reason during your lifetime and have it in real estate, I can’t come up with an idea because if it’s income producing real estate you’re going to have to distribute the income to you as a beneficiary. And pay tax on it, because if you don’t, the trust pays tax. And my recollection is that the trust tax bracket is much more onerous than the individuals. So I would say only if you wanted to take the asset and give up ownership of it to protect it, otherwise to put real estate in a trust, I can’t think of a reason off the top of my head to do it. 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. Carl, this is not a time-to-market question, thank goodness, but it is a time sensitive question. Given the series of challenges thrown at the economy, is it time for defensive investing approaches? In my view, the answer is yes, but I think it’s always time for defensive investing. There is a huge difference between diversification and correlation. Most people look at diversification as different asset classes, real estate, stocks, bonds, cash, commodities, metals, and they are. But also these asset classes historically have patterns of return when compared to one another. And so if you look at something like gold and its correlation to the stock market, it’s low. If you look as something like bonds and its correlations to interest rates, there’s a high correlation. When interest rates go up, bonds go down. When interest rate go down, bonds goes up. It’s a negative correlation, but it’s high. And so I have learned through The rise and fall of oil and gas, a rise and a fall of Texas real estate, the rise and the fall of high tech stocks, the global financial crisis. I have learned to always invest assuming something bad is gonna happen. Acid allocation is the single biggest determinant. How much risk for how much return? If I want the money to grow, I’ve gotta be in the stock market because that’s where I get paid for human innovation. And then I need other assets. That have different return patterns than the stock market. I can do this myself, I can hire an advisor, but in my career, the great thing is so many of these non-correlating strategies, which were not available to me when I first started out in 1979, are now fully available to do-it-yourself investors and to investment advisors with daily liquidity. So is it time to do this? Yes, but it was time to this last year, and it was to do to this 10 years ago. Don’t time the market, but be prepared to help yourself understand what amount of risk am I truly taking? And I’ll just give you an overly simple idea. Let’s suppose you have 60% in global equities, and you have 40% in some other stuff. And let’s suppose that the stock market drops 30%. That’s a huge drop, okay? And this other stuff is flat. You’d be down 18% because 60% of your portfolio went down 30%. Then go think about that in dollars to get an emotional check. You have $1 million, that’s $300,000. You have a $100,000, that $30,000 How’s that going to feel? That’s what you want to think about and risk in thinking about your tolerance and look for those assets that are not positively correlated one to another. That’s a really thoughtful and I think particularly timely question. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. I’m just going to get some text because it’s frankly too late to have you call. I will say though that you can catch past shows of this broadcast and previous ones at kut.org slash Money Talk. Okay let’s see what’s next here. Let me see this the Can RMDs be donated to an individual? No, RMD’s cannot be donated to an individuals, they can be donated only to 501c3 non-profit organizations. That’s the only place you can go. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. For information about the disadvantages of trust, I’ve already covered that. Can real estate in a trust have a homestead exemption? I have no earthly idea. That’s a great question, and I just don’t know. I suspect, but I don’t now. Carl, can you explain how to research a non-US ETF or some other balanced non-U.S. Fund? I’m not familiar. Oh, by the way, you’re spot on with a real estate trust advice, thank you. People don’t think about the different tax brackets. Well, I think I got at this. What I would do is be sure you’re looking at international and ETFs, the first decision is whether or not you’re going to end up with passive, follow an index like the EAFE, the MSCI, the ACWI, and remember, you don’t have to write all these down. You can go and listen to previous podcasts. Decide if you’re gonna have passive, which follows an index, like I just said, or are you gonna have active stock pickers. If you want active stock pickers, be sure that they don’t just mirror the index. There’s no reason to have them. They ought to be more volatile. They oughta have smaller portfolios because they’re making active bets on what they think is going to work. Some will do better in good times, like last year, some will do better by not going down as much in bad times like 2022. So I would put together a combination of a passive index. Exchange-traded fund that only owns companies outside the United States, a total international, and the big companies have those. And then I would have smaller position in one or two actively managed ETFs or 40-act mutual funds. If they’re regular mutual funds, check out their tax efficiency, how often and how much of capital gains do they tend to put out. And then I would put those two together. I would understand the return path of the actively managed one before I did that any further. Just a quick, not sure this question makes it in before the show ends, but here we go. I’m part of a slice of the public that is absolutely drowning in student loan debt incurred by an undergrad and grad. You know what? It says the amount is enough that seeing its final payment in my lifetime has now gotten beyond comprehension. The total amount, it says… Wait for it over a quarter of a million dollars. I am so sorry, yeah. Outside of being balanced from ex-service provider to why service provider, and then back to the federal government, that amount has nearly made it unthinkable to keep up with. You know, I’m gonna read this off the air, and if I think I can answer this, or I can do some research on it, I’ll take a look and see if I can answer that the next Saturday. Been a lot of fun this afternoon. Thanks for listening. I wanna thank Mark for doing his usual terrific job. And to remind you that next Saturday at five, be sure and listen and tune in to Money Talk.

KUT Announcer: Laurie Gallardo [00:57:22] 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.