Money Talk with Carl Stuart

Carl Stuart takes caller and text questions on personal finance, including replacing your paycheck after retirement and tax implications of rolling over a 401(k) into an IRA.

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 Annoucer 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 news, beg your pardon, you’re listen to Money talk on 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 the agenda by calling or texting 512-921-5888. Excuse me, it’s always a terrific idea. To call or text at the beginning of the broadcast, giving me hopefully ample time to do my best to answer your question. The order in which I proceed is I take today’s calls first and then today’s texts and then texts from previous broadcasts that I haven’t had the opportunity to answer. So I’m gonna give that number one more time. You will hear the text coming in, by the way. And so you may hear that coming as well. Five, one, two, nine, two one, five, eight, eight eight. Here is a text that just came in. It says, let’s see. This is the one, that is not the most recent one. This is most recent, you just heard it, here we go. Good afternoon, need your insight, comments and perhaps advice. I am 72 years old and have been managing my portfolio with Fidelity for approximately 36 years through all the ups and downs. It’s now 1.5 million dollars. Due to the current uneasiness of the country and the many predictions of a downturn, in September of this year, I decided to switch my entire portfolio to a managed account to help reduce volatility and pull back from my top heavy NASDAQ portfolio. The managed strategy, 40% domestic stocks, 28% international, 27% bonds, and five others. In this current bullish market. The managed portfolio is stagnant and is still at one and a half million dollars since September. I am thinking I should switch back to self-managed. What are your thoughts? And PS, my wife kept her self- managed portfolio with mostly mutual funds and is doing much better. Okay, well let me just help everybody else. So what a managed account is, is that you go to Fidelity or Morgan Stanley or wherever and you sign documents and you turn over your money and some other group of people manage your portfolio. Typically, they manage it in individual stocks and bonds. That’s what’s called a separately managed account, SMA. And that’s probably what’s going on here, although it’s not necessarily the case. But you give them legal discretion, meaning that they have the responsibility and the right to trade securities on your behalf. And a managed account should have a point of view. In other words, are they, shall we say, in the jargon of investments, do they tend to be a growth strategy? Are they more of a value strategy? And that’s a big deal because we have really narrow market, stock market leadership, and you were participating in that because you had a heavy allocation to NASDAQ and because you had a heavy allocation to technology. And that’s where the action has been for quite some time. And they may have a different focus. They also, some would say they’re not value or growth, but what they do is they wanna outperform and down markets by having a different asset allocation. Other SMAs may be more heavily concentrated in fast growing companies, in which case in a growth market, they’ll do better. I would say to you, you haven’t given them enough time. You really need to, in my view, observe them through a period of rising equity prices and falling equity prices. They do have a nice allocation to international. The international is having a very good year. Every Saturday, if you’re a listener regularly, you know I look at the Vanguard total stock market, the S&P 500, SPY, the Fidelity NASDAQ, and then the Vanguard XUS International. And the ex-US threw yesterday’s up over about 27.8% versus the total stock market at just under 15%. So I like that allocation. I don’t know what the other 5% is. So I would say two things. Number one, I think you haven’t given them enough time. In fact, we saw a pullback this week in the NASDAQ, the worst week for the NASDAC since the great big tariff, the big beautiful day with the tariffs came out in April. Give it more time. And also seek to understand what their investment strategy is. That would be something that should have been part of your original due diligence. So I would do that and I would give them more time. Thanks for the, thanks for the question. You’re listening to Money Talk on KUT News 90.5 and the KUT app. By the way, you can listen to past shows, simply go to kut.org slash Money Talk. In any event, let me give that number and then we have a call coming in. 512-921-5888. Chuck, you’re on the air. How may I help?

Chuck [00:05:51] Hi carl i i’m a long-term listener and i want to thank you for all the service you provide thank you i have a question about taking a more defensive position with all the uncertainty in the environment uh… Yes i mean i have run up and already expensive stock market yes uh… No one can time the market at the bulls game to try and hold enough to have lived through all the downturns in the last twenty five years

Carl [00:06:14] Oh yeah, I’m pretty

Chuck [00:06:15] into the choir. You know saying the course paid off even when it took a long time. Yes. But I also can’t shake this feeling that we’re in for a rough ride in the foreseeable future. I don’t know when but I’m pretty sure at some point we’re going to see a big market pullback. Yeah. And a significant downturn. My wife and I are both retired in our mid to late 60s. I have a pension and my wife started taking social security at full retirement age this year. Uh… We paid off her house uh… Before retired we’ve been very lucky and have several million and what i would think with a fairly diversified portfolio we have both uh… Traditional and roth ira’s and non-retirement brokerage account uh… With always been heavy into equities uh… Right now across our portfolio probably in the retirement account seventy five percent equity twenty five percent liquid The liquid portion is a combination of bonds and money markets. We’re about 10% international and 15% bonds.

Carl [00:07:14] Okay.

Chuck [00:07:14] Uh… And uh… Non-retirements by fifty fifty equity in liquid uh… So my question is uh… Given the market and economic uncertainty should we stay the course with our current allocations to be ready to buy into the market down to market downturn although i know that’s difficult because uh… To actually do that because you don’t never feels like the bottom until you know that

Carl [00:07:38] no it doesn’t

Chuck [00:07:39] But so right now, do we rebalance into more defensive positions? And do we do that by actually selling out of some of the equities we have and use that cash for the diversify? Or should we use some of the liquid assets we’ve got to increase our market exposure? Even at our age, I consider us long term investors.

Carl [00:08:01] I do too, Chuck. When you use the term liquid separate from the term bonds, what is your liquid investment?

Chuck [00:08:10] It’s CD ladders and yeah, and I know bonds aren’t liquid but I can you know, you know if you buy of course It’s more liquid. It’s not equities. I guess

Carl [00:08:19] OK, so there’s two or three things I think about. First, I want to congratulate you. Too many people in their 60s say, oh, I’ve got to put everything in the bank because I’m old, when in fact, they need to plan on living till 90, even if they don’t. And inflation will eat up a lot of return over the remaining part of their lifetime. So I salute you for that. I think 75% is a little heavy in equities, myself. My personal portfolio is 55% in equities. I think you’re light and international. I’m just sharing my personal portfolio, doesn’t mean it’s right. I have, my equity allocation, I have 25% international. And that’s been a long, patient, painful wait, but now it’s really paying off. I also have had, for several years, for most of my career, I was very negative on gold, but I added a gold exchange traded fund a few years ago at a small position, 7%. But where I think you need to take the time, and this is, you have asked a really thoughtful and sophisticated question, and I’m gonna give you an answer in the same vein. So there are some strategies that you can buy in mutual funds that deal with the kinds of risks that you’re contemplating. So if you think about a portfolio, there are a minimum of three what we might call systemic or permanent risks. There’s equity risk, which means the stock market goes down. Credit risk, which means your bonds fail, and there’s duration risk, which means interest rates go up and the value of your bonds go down. I would tell you that if I were in your shoes, I would look at those three risks and say, are there other asset classes that, based on history, because there are never any guarantees, where we can own some other strategies that help ameliorate those three risk? And the answer is yes. In the case of equity risk… I think there are two strategies that really jump out, and they’re old, old set strategies. One is called market neutral, and the other is called trend following. And I’ll give you an example, in 2022 when the Bloomberg aggregate was down 13 to 14, the S&P down 19, and then NASDAQ down 33, trend following strategies were up 15 to 20%. The other thing is when interest rates rose, which they didn’t… And that’s why the bond market went down in 2022. Another strategy is called event driven. And the event driven asset that I own was down 1% and bonds were down 13. So I think two or three things stand out to me based on what I understand. I’m really glad you called me instead of text so I could understand it. I’d reduce my equity allocation to 55%. I’d increase the portion of international to 25% and the balance 55% in domestic. I’d have a bond position of about 20%. I’d had my bonds in three different buckets. I’d use funds, you may use individual bonds, so this may not be helpful for you. I’d a short-term bond fund that would participate if rates go up. I’d having a core bond fund like the Bloomberg Ag that follows that, that will give me more yield, but will have some interest rate sensitivity. And then I would use a multi-sector fund that allows the active manager to go anywhere in the bond market and anywhere in the world. It’s having a heck of a year this year through it’s up almost 10% before you add in the yield. I’d have my 20% there. Then I would have an event-driven strategy, a trend-following strategy and a market-neutral strategy for the other portion of the portfolio. So that’s a long-winded answer to a really thoughtful question.

Chuck [00:12:03] No, I appreciate that. One of the things my wife and I have been talking about is possibly dividend producing ETFs or mutual funds.

Carl [00:12:13] That’s fine, but you need to consider how much of that is interest rate sensitive. You got to be careful there because a rising rate environment will be a headwind for dividend paying. So if you’re going to do that, only look at ETFs that hold stocks that raise their dividends all the time, not high yield ones because they’re frequently high yield for a purpose. If you’re going to own dividends, you want to own companies. The dividend yield may be lower today, but it has a history of raising them every year. I would do that. But understand that if we get into a rising rate inflationary environment, they will underperform because they’re interest sensitive, and you just have to be prepared for that. That would be okay for part of the 55% and part of domestic part. But I think using a broad ETF index that owns all the international stocks, including emergency markets. Makes a lot of sense as well, Chuck.

Chuck [00:13:12] Hey, well, thanks, Carl. I really appreciate that. And thanks again for everything you do for people.

Carl [00:13:18] Thank you so much, and thank you for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Let’s just see what this one is. Okay, that was the one that was just about the managed account, so I’ll go down to the next one. Let’s see here. Bear with me, I’m just reading this to see if this is okay. This is a really good one. Hello, Carl. Thanks for sharing your knowledge and experience. You’re welcome. This may be a long question, feel free to edit. And thanks so much for this opportunity. In the mid-2000s, I worked a few years for a public entity that paid into ERS, that’s the Employees Retirement System of Texas. Upon my departure, I rolled over my pre-tax pension dollars to my own pre-tax, traditional IRA. In that course, it was not a taxable event. I later worked many years for a TRS affiliate. That’s the Teacher’s Retirement System of Texas. I worked many for a trs affiliate from where I will take my pension soon. In discussions with TRS, I learned that I may be eligible to buy back the years of service at ERS, which would effectively increase my TRS pension. That’s correct. I look at this as similar to buying an annuity. I look out at it that way as well, so I agree with you. I have not yet learned the cost of the buyback, which would be the original investment, I beg your pardon, the original withdrawal, and interest. Two questions. What is your opinion doing such with that buyback? So here’s how I think about that. Probably because you were in T or S, you may not have social security, but your wife does. So when you think about your retirement, several things you want to think of. One, you want them to retire with no debt. No mortgage, no auto, no credit card debt. Secondly, you wanna look at your guaranteed sources of income. The benefit of that ERS slash TRS is that it’s guaranteed. ERS takes all the investment risk. They’ve made you a promise, TRS has, and you had to put that money in. And they had to put money in, your school district had to, educational district had to put the money in and you can’t outlive it. And you can take various options, one for your life and goes away upon your demise. Obviously, that’s the one with the biggest monthly payment. But being a male, we have to assume you’ll predecease your wife. You can take one that will provide you and your surviving spouse the same amount of money, which may be not necessary. Or you and your surviving spouse, and she gets maybe 75% of what you were getting. And so that’s really the foundation of your retirement. And you have no financial market risk. So the question then is, is that okay with you? Because what is the risk in that? The risk is not the obvious one. The risk of something I touched on a moment ago, which is that at 3% inflation, let’s just say, You’ll need twice the income if you have the same expenses in 24 years. So there’s no inflation component. You can’t call up TRS and say, this year I’d like 5% more, and you can’t do that with Social Security. So having some exposure to equities, to stocks, is really a good idea. And so I think you have to think about both of those, a couple moving parts. If you were to add to your TRS with money out of your IRA Would that then give you sleep at night comfort then yes, would I do it? Yes, if I had to take out all of my IRA to do it and I didn’t have something that could grow over time I would be reluctant to do that Okay, let me see if there’s something else. I May be wrong, but am I allowed to use a traditional IRA? Which is pre-tax money to buy back the IRS pension. My understanding is I think so, but I don’t know that I may be wrong, and this is you now saying this, but I look at this as a simple rollover from one lack of account to another. I do too, but don’t know that. If I use after-tax dollars, it appears to me I’ll be subject to paying taxes twice. Yeah, I get that. Are you qualified to answer the second question? Absolutely unequivocally no way. That is a, say, should you consult a CPA or ERS or IRS? I would consult a CPA, it’s where it’d start, but you’re talking about putting money… Uh… Into that back in the year as pension you could talk to somebody there as well because they offered this obviously to a lot of people so that’s what i would do thanks for the question listening to money talk it’s about time for me to take a break and say we have all of our lines available and no incoming text a perfect time to call or text five one two nine two one five eight eight eight i’ll be back

KUT Annoucer Laurie Gallardo [00:18:30] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:18:44] Welcome back, I’m Carl Stuart and you’re listening to Money Talk on KUT News 90.5 and on the KUT app. When you have a financial or investment plan in question, call or text 921-5888. Here’s a text that just came in. Carl, I am single, self-employed, 62 years old and intend to work another 8 years. I had a managed SEP and Roth for many years. That was in conservative investments and did not benefit much from the recent market increases. I recently took the accounts to Self-Managed and I’m wondering if at my age you would still recommend dollar cost averaging and getting into an equity index fund. My house is my largest asset and I have several CDs and a money market as well as a very small pension from a prior employer. If you do recommend getting back into equities, what frequency and amount do you recommend? I love dollar cost averaging, and let me explain that for everybody else. Let’s just pretend that you are a participant in your employer-sponsored plan. Let’s call it a 401k plan. You’ve signed up for it, and you’ve signed it at, let’s say, the 6% of compensation level. Every pay period, typically twice a month, 6% percent of your compensation goes into that. Now, some years, like 2022, the stock market goes down, and your money goes even though you’re putting money in. Not a lot of fun, but you don’t touch it, because you listen to Money Talk and you’re a long-term investor. And then in 2023 and 2024, and so far in 2025, the market’s gone up. But some of those years you bought when the market was declining make you look like a genius today because you bought them at attractive prices. Is the market gonna go down? Of course it is. Are people worried about it? Of course they are. Am I worried about? I always say, if you’re not worried about the stock market, you’re not paying attention. However, I know this sounds trite, but it’s absolutely my 47 year experience in investing. And I’m talking about real estate just as well as stocks and investing in risk assets. Good things last longer than you anticipate. And when things go down, bad things last longer than your anticipate. And as one of our earlier callers said, if you are a long-term investor and you’re investing in human ingenuity. You need to get into equities, absolutely need to get in. And so what you want to do is look at your total portfolio. You are a young person. You have energy. You’re going to work till at least 70. You have to plan on living a long time. Your risk are you run out of money. If you sell your house, you’ve got to live someplace else. You’ve got a big gain in the house, but it’s not an investment. You can’t sell off a bedroom for $50,000. So you’ve gotta depend on these financial assets you have. And having CDs in the money market is way, way, way too conservative. So yes, you need to take a large portion of your allocation. I’d start with 50%. It’s a big number. I’m doing that on purpose just to frighten you, but as I mean it. And then you want to do it either once every month or once every two months and spread it out over a long period of time, say six months to nine months. The odds that we have a stock market decline. In the next to six to nine months in my professional view are very high and you will be taking advantage of it. So absolutely that’s what I would do 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. Here is a call. Thomas you’re on the air. How may I help?

Thomas [00:22:41] Hey Carl, thanks for taking my call. You bet. I have a question about the new standard deduction for people over 65. I’m looking to adjust both my RMD and my Roth conversion this year and I wanted to see how the new deduction for 2025 would affect that.

Carl [00:23:04] Oh gosh, I know I’ve read about this, Thomas, but I haven’t got it deep in my mind and I don’t want to… Are you talking about the one where there’s just a sliver of time for people of a certain age to do this, or are you talking just about the normal standard, raising the normal standard deduction? I’m confused.

Thomas [00:23:23] No, I’m sorry, just a new standard deduction and there’s incentives for people over 65.

Carl [00:23:30] I think it lasts for a certain period, a certain number of years, if you’re 65, to a certain time. So what you’re saying is you’re going to have, because of your situation and because of the larger deduction, you’re gonna have the ability to have less taxable income. So you’re thinking, rather than just take your required minimum distribution, maybe take more than the normal required minimum of distribution because you can take more and still not go into a higher bracket, correct?

Thomas [00:24:04] Yes sir, either that or put more in a Roth conversion, it will avoid going into a higher tax bracket.

Carl [00:24:13] Yes, I agree. The answer is I think that’s a terrific idea. I would absolutely take advantage of this and you’re going to either way if you take the required minimum distribution and keep it, that’s taxable income and if you take more than the RMD, that is taxable income and If you take money and put it in a Roth from your pre-tax IRA, that is tax able income. So now that you have more gap or more space before you go into a higher bracket and you like the idea of a Roth conversion, which I do, because then you lose any required minimum distribution, and if the money comes out after five years from when you start, it’s tax-free. So if I were in your shoes, I’d probably increase money out of my pre-tax IRA over and above my required minimum of distribution, and I would convert that money into a Roth IRA. I think that’s a terrific idea.

Thomas [00:25:04] Great, thank you very much, Carl.

Carl [00:25:06] Okay, you’re quite 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. I heard the phone go off so let’s just see here about. Text. Here’s one. Hi Carl, I was recently laid off at age 66 and had hoped to work a few more years before retiring and I plan to take Social Security at age 70. In this environment I doubt I will re-enter the job market and will likely need to begin tapping my investment portfolio to replace my paycheck. What is the ideal asset allocation for someone in my position to be able to live off a 3-4% of my investments? Excellent question. And this is where I think a lot of people make a mistake. They think, I can’t stand to put money at risk because I got to live on this the rest of my life. And generally, unless it’s millions of dollars, that’s a mistake, there was a study that was done long time ago that suggested that if you have 60-65% of your money in the global stock market, in the balance in bonds that you could take 4% a year and increase that by the amount of inflation figured at the end of each year and the odds were quite high that you can live into your 90s. Now, of course, things can go way bad. The risk with this is you start to do this, but you’re already invested, you start do this at the beginning of 2022. And your stock portfolio goes down 20% and your bond portfolio goes out 13%, that’s the risk. So what I would do is I would take a year’s worth of expenditures and I would put it in a money market fund, not a money-market account and then I would the balance and I will build a stock and bond allocation or if you were listening earlier in the broadcast, I gave some other. More sophisticated ways to deal with stock market risk and bond market risk. And if you weren’t listening, you and everybody else can go to kut.org slash money talk this coming week and download today’s broadcast. So I would, I think that’s a great idea, but I think I would have, if you want to be on the conservative side, you might get away with 55% in equities, but I don’t think that I would go below that. I like the idea of you’re waiting until age 70 to take social security. Because, as a lot of people don’t realize, that the time from full retirement age to age 70 grows, the benefit grows at 8% a year, and there’s no guaranteed investment that you can make at 8 percent a year. So I think the ideal allocation might be 55 to 60 percent equities. If you want to be straightforward, you can do the balance in bonds. If you’ve been listening, you know if I would do that, I’d have three different bonds with three different durations. And that would be a short-term bond fund, a bond fund that some people call an intermediate, Morningstar calls it a core bond fund. And then I would do a multi-sector fund. I would have the same amount of money in each one for the bond portfolio. And I think that gets you a long ways, but take a year’s worth out so that if the stock market does go down, which is always possible, the stock does go, you’re not taking money out while it goes down. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Hi Carl, we have a large portion of our stock portfolio in total market exchange traded funds and mutual funds. I assume they include the S&P 500. I know the S&P 500 has been largely driven by the performance of the Magnificent 7, and I’m worried that a downturn in the technology sector, or a bust in the AI bubble, could have a significant negative impact on the S& P 500. If we’re in total market funds, is that enough protection from a downturnt in the Magnificents 7, therefore the S and P? What are your thoughts on the S&P funds that equal balance all the stocks in the index? Rather than include them based on market capitalization. It’s a terrific, thoughtful, and educated question. So let me dig into that for the rest of us. So the S&P index, 100 and poor 500, is what’s called a market capitalisation index. What does that mean? Every company, every public company has a market capitolization. A market capitalisation is the price of the company’s stock times the number of shares outstanding. As the company, as the good news comes by, whatever it is, let’s just suppose good earnings, good future earnings, a company like the Bellwether, Nvidia, as people, as they report huge earnings gains and people extrapolate that into the future and they drive up the price of the stock, then the market capitalization of Nvidia becomes larger and because the index is a market capitalisation index, Nvidia becomes a larger portion of the index. So when small cap stocks are out of favor, as they have been for quite some time, they become smaller aspects of parts of the index. The technology becomes better, bigger parts. Now, this is where there’s a huge, how should I say this, argument disagreement among the academics. People who favor market capitalization index, and that’s what Jack Bogle did when he started Vanguard Funds, their view is, This represents the sum total of investors’ expectations. This is a vote about the outlook for the future. And so it’s the most efficient way to have participation in that. And I would tell you my experience is the total stock market is slightly different, but not much. This year’s a good example. The SPYR SPY, which is the S&P 500 ETF. Through yesterday is up 15.49%. And the Vanguard total stock market, VTI, the exchange traded fund, is up 14.96%. So that’s less than a one percentage difference over the first 10 months of the year. So you’re not getting a lot of diversification there. I guess, how shall I say this? Intellectually going to an index that gives every stock the same weight. Will accomplish your objective of reducing your exposure to the MAG-7, but still getting you exposure to the stock market? So the short answer is yes. I’m not gonna do that myself personally because of my asset allocation and other assets that I have in my portfolio. But to answer your question in a somewhat narrow fashion, yes, you would still have exposure to all the US stocks or the S&P 500, I guess I should say. But on an equal weighting basis. I personally haven’t done that, but I can’t argue with your logic. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Hi Carl, I have $40,000 in a 401k I’ve had for two years. My company has changed. And I need to roll over the 401k into another retirement account. I think my traditional IRA rather than my Roth is the best choice, so I don’t have to add to my annual income. Should I invest it all at once or should I spread it out over several months? Am I even allowed to do that? I’m single and make 150 to $165,000 a year and I’m 49 years old. So the way I look at that is You’re in the $40,000 401k, and you’re going to go to another vehicle, the pre-tax IRA, but you’re the same person there as you were when you were in your 401k. So you ought to have the same allocation. So it doesn’t make, in my view, intellectual sense if you’re fully invested in whatever your allocation is at your company, and now you’re gonna do it in the IRA, getting out of your allocation and then dollar cost averaging back into your allocation. Adds a layer of unnecessary risk. Where you will see me talking about the pros and cons, but the pros for many people of dollar-cost averaging, is for people who have got cash, they’ve been sitting on the sidelines, they have a big lump sum that they’ve received, or they’ve sold their home, or inherited a large sum of money, and they are reluctant to put it all in the stock market, which has done so well for the last two years and 10 months. I get that, and dollar- cost averaging reduces some of that anxiety. But you’re already allocated to whatever your allocation is. Secondly, you’re 49 years old, you have a long life expectancy, and even if the stock market does go down, and when it comes back, and it does, there may be other leadership. Maybe it won’t be technology stocks. Maybe the AI boom will be a bubble, I don’t know. Maybe something else will come along. After all, my colleague Lindsay said they didn’t have the iPhone until 2007. So keep your same allocation, because you’re the same human being with the same goals and objectives. Keep your same allocations, but do it in your IRA and just put all the money back in there. Thanks for the question. By the way, if you have either missed previous broadcasts or would like to listen to them again, or you have a friend, colleague, or relative who you think would enjoy and perhaps benefit from Money Talk, you can always catch past shows at kut.org slash Money Talk. And you’re going to hear the bing, because I see a text coming yet. 512, there you are, 921-5888. Hi Carl, I’ve enjoyed listening to your program since you moved to KUT this year, so thanks for all you do. You’re welcome. I’m thrilled to be here. A few minutes ago, I heard you mention that your personal equity split is 25 international. I’m 26 years old and have a fairly aggressive portfolio, and that is 100% in equity, okay? But I exclusively buy the VT, I suspect that’s VTI, in my IRA and have structured my 401k to be roughly the same. At 60% US, 40% international split. OK, my thought is that if my goal is to eliminate systematic risk, which I feel is all that I really have control over, you’re right, then I should keep my equity holdings as broad as possible. Do you support this thinking, or do you think I’m undervaluing the US’s inherent advantages? I absolutely support your thinking. I read years ago, 50% of the world’s public companies are headquartered outside the United States, number one. I think propitiously now, with a weakening dollar, that is a headwind for US equities and a tailwind for foreign equities. And in terms of valuation, what we know is that many foreign companies are selling at more attractive values. So I think you ought to keep your strong allocation to international. I happen to think that that’s a terrific idea, and I would do it. Across all of my investments, whether it was a 401k or an individual account or wherever it is. Okay, it’s about time for me to take a break. We have all of our lines available, no incoming texts, 512-921-5888, I shall return.

KUT Annoucer Laurie Gallardo [00:37:38] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:37:52] 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 financial or investment plan in question, call or text 512-921-5888. Okay, I am going to go to some previous text, let’s see. That’s the one about the buyback, I already did that one. Let’s just see about this. In a month, I’ll be 59 and a half years old. I have $493,000 in my 401k. I quit my job in January of this year. I’m separating in good terms. I think he means separating from his spouse or her spouse. How can I transfer 50% of my plan to my wife? This year, my business started in February, 2025 will have a loss. What do you advise? Okay, I’m really out here on the edge of my knowledge, But There’s something called a qualified domestic relations order, or a quadro. If you’re saying I’m separating, and you mean separating and getting a divorce, and you’re seeing good terms, which according to a quadros, you don’t even have to be on good terms. You can take money from your retirement account and your spouse can get that money in an IRA, it’s my recollection, and she can begin to take money. Without being subject to a penalty if she’s younger than 59 and a half. It’s called a qualified domestic relation order. So you look that up, look up a quadro, see if it fits your situation, that’s number one. And then this is really important and you do not wanna make a mistake because you could have big problems with taxes. You take taxes out, you take that out and don’t pay the taxes, that would be a very bad thing. So look into qualified domestic relations order. 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. Here’s a text that just came in. Hi Carl, I have in the past had a good experience investing in commodities by an advisor named Commodex. I invested the money in real estate and I’m ready to go back. What do you think about that? Well, I’ve never traded commodities. I’ve ever had a commodity license. It is something that involves, most commodity trading involves having a lot of debt associated with it. Leverage, not a bad thing. It’s done to increase the volatility and increase the potential return. If you’ve had good experience, I think that that’s a reasonable thing to do, but you were in real estate and now you’re ready to go back. Personally, I would like to see you have some other things, and because you do have had that experience with commodities, take a look at something I talked about earlier in the broadcast, which is called trend following, and these people using strictly quantitative stuff, not fundamentals. What these people do is that they trade the four global asset classes of equities, fixed income and gold, I’m sorry, commodities, and I’ll get this out, commodities, currencies, fixed income, and equities, okay? Look into trend following. It’s an extremely old, old, long track record. There’s some that trade literally trillions of dollars of contracts, and, I think, if I were in your shoes, based on your positive experience with commodities, if I was in your shoe, I would take a look at that as well. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. This just came in. Carl, I’m 42 years old and have been investing pretty heavily for the last 5 to 10 years catching up from time when I wasn’t able to. When we think about the larger number, when we think about the target number that we’re trying to hit for retirement. I feel like the current algorithms or programs are reducing the anticipated cost of when in fact there is an increase in inflation and also the idea that I maybe want to not tailor down my lifestyle but increase my lifestyle that I want to be in a position of reward and not feeling limited to what I’m spending and how I am enjoying my retirement. That being said. I lost my place, I beg your pardon, because I got another text in, and it moved this text. Let me just see. I maybe want to tailor down. I’m enjoying re, okay. I may not want to tailor down my lifestyle, but increase my lifestyle. That I want to be in a position of reward and not feel limited to what I am spending and how I’m enjoying my retirement. That being said, I’m struggling trying to figure out what that true number is, because the second part of my question or problem is, once I know that number, why do I feel like no one’s been able to give me a solid target and how to work backwards from measurable expectations of what I need to monthly and annually. I’m a very focused person. When I ask our advisor with that hard number, I feel like I’m not really getting a solid answer that I can work towards. Do you have a recommendation for a program, tool, or a process of how I can measure how much I need to invest and by month or year to meet that target? The answer is yes. What you need is to find, either with your advisor or on your own or someplace else, what you need to find is a goals-based plan. Many of the software are income-oriented plans, goal-based plans, G-O-A-L, goal based plans, allow you to work in what it is you want in retirement. Some people, they’ve been putting off around the world crews. Some people, want to be able to help with their son’s or daughter’s wedding. There are a variety of things. That they may want to do in the future and you enter these goals with a stated dollar amount, okay, then you take what you’ve got. You have to do some of this, of course, not some of it, all of it is educated guesswork. You put in your current portfolio and you put in what you believe is a reasonable return rate on that. You enter in your goals, you enter in your ages. It does a life expectancy deal. You can change that if you want. You can make it longer if you choose. It wouldn’t make it shorter. You edge in social security, edge in everything, and then you push a button, and it runs like a thousand simulations of things that have actually happened in the financial markets using something called Monte Carlo simulations. So if you get something like a goal planning and monitoring software, that will allow you to say, look, I don’t wanna pinch pennies when I’m retired. I wanna have more money, or I wanna be able to do these things, and you put that in, and it can be time consuming, but why not, it’s important. Once you get to that, it will then, once you get that Monte Carlo simulation, it will give you a percentage chance of success. You have 100% chance, a 50% chance whatever. And then, if you say it doesn’t give you 100%, you can go back and put in additional contributions and play with that until you get the outcome that you’re looking for. So I think that would be a great thing to do. 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. And you can catch past shows at KUT.org slash Money Talk. Carl, so glad to have you here on KUT, thank you. I am glad to be here. Quick question about a point you just made for one of your last answers regarding diversifying for international exposure in all of your investments. My portfolio is diversified in total, but doesn’t hold the same diversification in each investment bucket. I use my 401k for my bond and some equity investments, while I hold my international investments in a separate fund. Is that something I should change? Thanks again. Actually, again, I’m gonna answer this in a similar fashion to what I did a minute ago. From a purely intellectual standpoint, putting the tax-efficient things in your own name and the less tax-sufficient things in tax-deferred accounts makes all the sense in the world. I find over my 47 years in this world, that that makes it difficult for people to really get comfortable with their investment returns and to understand what they’ve got. So I end up usually saying, look, we’re the same people with the same goals and objectives. Let’s do the asset allocation. That’s the single biggest decision. It’s the most important investment decision we can make. It determines the risk we take. It determines. The return we’re going to get, okay? And then let’s plug in that allocation across all of our accounts. Now, if you’re in a really high tax bracket and you use bonds than in your individual or joint account, you can use tax exempt municipal bond funds instead of taxable. I just find over my experience, it’s easier to understand your portfolio and what’s going on, but I’m not talking you into it. If you like to do it with your tax so-called inefficient in the IRA or tax deferred, that’s a perfectly reasonable thing to do. So thanks for the text. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 521-921-588-8. Laurel? Laurel, you’re on the air. How may I help?

Laurel [00:48:46] Well, hi. I’m 68, and I’m kind of thinking of retiring in the next couple years, and I’m looking at how I can invest the money that I do have. Most of it is in IRAs, or a 401K, and in the IRA, the way that I have it right now is over 90% stocks. And I’m and domestic and I’m thinking that I need to diversify a little bit more and decrease my, or increase my risk adversity, you know, so that I don’t have, um, so I have more to play with later on in my life. So, but I’m looking at like a, you, you were saying earlier to think like I might live until I’m 90, so think of 25, 22 years of investment ideas. But, um…

Carl [00:49:43] Exactly. Well, first of all, I want to congratulate you on being 68 and having that allocation because it’s allowed you to grow this money over your working career at a rate faster than inflation, so that’s terrific. Yeah, I would agree with you. I think it’s more important to have international. I’ve mentioned earlier in the broadcast my personal preference is to have, of the amount that I have in stocks, 25% international. I still think that that’s what I would do. I think that there. And then I think if you want to put, if you think 90%, if you’re still comfortable with that large equity allocation, you’ve been through some bad times. And if you are still comfortable with that larger allocation, you can keep it. But the other thing you could do If you want to reduce some of the risk, but not eliminate the growth, you could consider adding some other assets to it. You might consider, for example, just as an insurance policy, looking at a gold exchange traded fund. I know the price is high, but I think it’s over time. I still think it is a good idea. You could have maybe five, six, seven, eight, maybe I use seven percent in a gold ETF. That will help you. In lots of ways perhaps in rising inflation perhaps in a sharp sell-off in the stock market And and then in the bonds as I’ve been saying For quite some time. I don’t wouldn’t windowed in one bond fund because Bonds are very sensitive to interest rates And so I would have a short-term bond fund and then that core bond fund in a multi-sector So you could have you could reduce your equity allocation a bit uh… And had some of those other things but the big thing would be to reduce the u s allocation and get that uh… Twenty five percent international i think that would be important for you to do

Laurel [00:51:49] uh… As you said they’re being sensitivity to inflation there is a multi-sector core and what was the third

Carl [00:51:55] The first one is short-term because that’s better than a money market fund if you’re a longer-term investor. If interest rates go up, it’ll have the least sensitivity to price and the dividend will go up. The core will be the one that’s what we call intermediate. And if interest rates just stay where they are, that will be just fine. And then the multi-sector allows the managers to go anywhere in the world, whether the short term or intermediate term or long term. I just like that flexibility and that’s how I would do the bond portfolio if I were you.

Laurel [00:52:32] Okay. Oh my gosh. Well, thank you. I appreciate your insight to the…

Carl [00:52:39] You bet. You bet, you’re very welcome. Keep listening and thanks for the call.

Carl [00:52:45] Okay, bye-bye.

Carl [00:52:46] You’re listening to Money Talk on KUT News, 90.5 in the KUT app. Let’s see here. I’m going to run out of time, so let me look at these texts. Carl, I have a great niece that I would like to open an investment account for the future. I don’t want it to be for education or to interfere with any financial aid or loan she may apply for. What type of account should I open for her? She’s five, and I do use Charles Schwab. Well, I will tell you what I do What you can do is you can just open another account for Charles Schwab and just call it whatever you want to call it, John Doe Great Niece account. Just what the heck. And she’s five, so you’re going to invest in the stock market. You’re going want to do it and start anyway with equity index funds, 75.25 as I’ve been speaking. And the benefit is that it’s in your social security number, right? It’s yours. You’ve got it for her, and you can even put the disposition of that in your will. And then it grows over the next 15 years, it could be a sizable amount that she would have the discretion to do with as she wanted. And if she were eligible for scholarships for education, it’s not in her name, she doesn’t own it. And if it turns out that she doesn’ go to school, other purposes, Or if it turns out, frankly… That you’re not happy with how her life is going, you don’t have to give her the darn money. So that’s what I would do if I were you. I think that’s how I would handle that. You’re listening to Money Talk, I’m not gonna give you the number. I’m gonna see if I can answer this one in a couple of minutes. Carl, I’m 75 years old with enough money from a pension and social security to live on. What would be a good allocation for my savings? I’m going to tell you, I want to answer this. In a broad way, and I’ll probably answer it again next week, so please listen for that. I think when you get to be your age and you have more money than you need to live on, you have a choice. You can just freeze dry the money and leave it in the bank, or you can make a legacy. The legacy can be for your family, it can be your church or synagogue or mosque, it can for some other organization that you support. And then if that’s how you look, you’re a long-term investor. I had a friend who died at 102, and when he was in his 90s, he had 65% in equities. I said, you know, Lou, all the textbooks say you should be in bonds. He looked at me and he said, Carl, I’m never going to spend all of this money. And he smiled and he chuckled. He said, I am a long-term investor. And you are a long term investor for whatever legacy you choose to live, and consequently that’s how I would invest the money. And we are out of time. I want to thank Mark, for doing his usual terrific job. I wanna thank you for listening and to remind you that next Saturday at five o’clock, be sure and tune in to Money Talk.

KUT Annoucer Laurie Gallardo [00:55:58] 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.