Money Talk with Carl Stuart

Carl Stuart takes caller and text questions on personal finance, including retirement planning and navigating pension/retirement account options.

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

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

Carl Stewart [00:00:20] Welcome to Money Talk, I’m Carl Stewart and you’re listening to KUT News 90.5 and the KUT App. Now in our 31st 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 always a great idea to call or text early in the broadcast. Giving me the ample opportunity to do my best to answer your questions. I take today’s calls first and then today’s texts and then any texts that I’ve been unable to answer or answer completely in the past. So I’m gonna give those numbers, give that number again, you will hear the text start to come in. 512-921-5888. This was a question from last week. And it’s particularly relevant in central Texas because of the state number of people that participate in the employees retirement system and number of the people that participate in the teachers retirement system. And this question says, how to calculate the choice between a pension annuity versus a lump sum and investing it myself. So what we’re talking about here, and I see this fairly frequently when people. Have not perhaps spent their entire career at a city, county, job or police officer or firefighter, school teacher. They’ve gone on to another career and they have an opportunity to take a lump sum from their what we call a pension, the technical name is defined benefit plan. They’re called that because unlike a 401k or a 403b which are called defined contribution plans. These plans force the employee and the employer to put money in, and then it is the employer’s responsibility to invest the money. And once you qualify as a plan participant, typically that’s a combination of years of service and probably your actual age, you get this benefit which has been previously defined for the rest of your life. And in fact, at least the ones I’m familiar with, when you qualify, you can take it for your life or for your if you’re married and your spouse or for something less if your spouse survives you. So the question then is, this is a person who is trying to decide, should I just take the money and put it in my IRA, thereby not paying any taxes, and invest it myself, or should I leave it in the pension? There probably are some highly sophisticated actuarial assumptions to answer this in a technical fashion, and I’m not capable of doing that. I’m an actuary and I don’t play one on television or on the radio, but I will tell you what I’ve observed in my 47 years. The benefit of the pension is that it’s guaranteed. It doesn’t matter if the stock market goes way down, you’ve got that guarantee. The liability. Invest the money is not yours. It’s the teacher’s retirement system or the employee’s retirement systems of Texas, for example. So when you think about this and you think about the basis for your retirement savings, you may have social security. You can look up what that future benefit is going to be, and you also probably can look at the future benefit if you don’t take the money out of your defined benefit plan. So there’s that sense of certainty that doesn’t come when you’re investing on your own, or when you in a 401k or a 403b. On the other hand, when you have a defined benefit plan, once the beneficiaries have died, the money goes to zero. There’s just nothing left, that’s part of the deal. So when you think, gosh, if I take the lump sum, can I make as much income from that as if I left it in with, say, TRS? The answer is complicated because if you were to, if you were singles, make this easy and you died shortly after your retirement, there’s may not be any, there probably not going to be anything left that may or may not acceptable. Now I encounter a lot of people in central Texas who have social security and a pension and a 401k. That’s a wonderful thing. So I would think if I were in your shoes, I take a good, hard look at what my assets and liabilities are, what this money would be worth. It’s some reasonable compounding in the future, say 6% or 7%. And also my enthusiasm for investing on my own or with my advisor. That’s the way I would think about that. And if you are a knowledgeable investor or you have a satisfactory quality relationship with your advisor and you wanna take control, then I take the lump sum. On the other hand, If you’ve been there quite a while, let’s say 10 or 15 years, and you like the idea of that guaranteed income, then I would stick with it and not be concerned about the fact that the terminal value of it would be zero. Great question. Thanks. Thanks for your text. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Someone just texted, here we go. I have 17 years with ERS, and for me, when I joined, if I took money out, I’d also lose my state paid for insurance benefits in retirement. Whoa, okay, that’s a big deal, which, I’m just looking to see if I can get the rest of this on my, which is very valuable. That’s a terrific point that I didn’t know about. So there’s a good reason, because you also get those insurance benefits. And if you’re going to need insurance until you qualify for MediCarlle, that’s a big deal as well. That actually comes from our producer, Mark. Thank you, Mark, we have all of our lines available, no incoming texts. Call or text 512-921-5888. If you’re a longer term listener, you know that on a monthly basis, I get the residential sales numbers. I guess they’re retail, retail, residential. House numbers for the previous month and I’ve got those here for what’s called the Austin Metro Area. So as of in the month of October the median sales price in the Austin metro area was $419,900. That’s down 2.3% on a year-over-year basis. When you look at the median sale price per square foot it was $212. That’s down a bit more, about 3.2% on a year-over-year basis. Now, the total number of homes sold last month was a nice increase of 2,537, which was up 10.2%, year- over-year. The median days on the market, this is an indication of supply and demand. Median days on market were 91 days. That’s up significantly, almost 20%, 19.7% year over year. I’m not in the real estate business. I don’t propose to be an expert, but I have read that some people feel like even up six months is a healthy market. This is 91 days. The supply of inventory, that’s the number of homes out there for sale, is 5.6 months. That’s down 3.4% on a year-over-year basis. And the houses that sold above list price. The number of that would be 10.8% of the homes sold above list price, and that’s down 2.7% on a year-over-year basis. And finally, the number of new listings, 2,930. That’s also down 10.5% since last month. 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 listen to past shows at kut.org slash money talk. Here is the text. Next year, I will be 73 years old and am required to take withdrawals from my 403B which only has $19,000 in it. I don’t want to spend that money. What are my options to still save it and draw interest? Well, since you’re required to the money out and that will be a taxable event. It’s not something that you can take and put in, say, another tax-deferred investment like an IRA or a Roth IRA. And so what you want to know is, well, how should you invest that after-tax proceeds to continue to get some benefit from it? And I would say to you, use the term draw interest. So if you are considering interest only, and it’s a modest amount of money, you have the following choices. You can use something called the money market fund. That’s not a money market account. A money market is a mutual fund, but it doesn’t invest in stocks. It invests in very short term, high quality securities. There are three types, something called a prime fund that invests on high grade corporate securities. Then there’s a government fund that invest in treasuries and agencies like Fannie Mae and Freddie Mac. And then there’s strictly the treasury. I like the middle one, the government money market fund. They maintain the price at a dollar a share. It’s not FDIC insured. I’m totally confident in these because the ones I would use are backed by big companies like Charles Schwab or Vanguard or Morgan Stanley or somebody like that. They’re not going to let it go away. And it will get you interest based on what occurs in the short-term interest rate market. So you’re not taking principal risk, in my view. You have daily liquidity, you can add to it or take money out, and it will be whatever short-term interest rates are. In my experience, the return will be more than you would get in a money market account at a bank, for example, and certainly more than would get a savings account. On the other hand, you could also purchase a certificate of deposit. That should get you, you want to pick a maturity, and that should get some reasonable out more than the money market fund. Because you’re locking it up, you lose that liquidity, you do pick up the FDIC insurance. And then finally, a short-term investment grade bond fund that invests in high grade corporate bonds, can invest in government agencies as well, can invest frankly in any high grade debt security, you will get a decent dividend, it will fluctuate in value. Now it won’t fluctuate value a lot. But if you’re in a period of falling interest rates, it will be best of the three performers because the value will appreciate. So I think what you want to do is match up your own risk tolerance and your need for liquidity that short-term money, beg your pardon, bond fund has daily liquidity just like the money market fund. Thanks for the question. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512. 9 2 1 5 8 8 8 here is a call Correct Chris. You’re on the air. How may I help?

Chris [00:12:28] Hello, Carl, good to talk to you. Thank you. I have two questions, one specific and one general. The specific question is about CPAs in the past. I’ve heard you on many shows talk about investment advisors and how to pick one. I’ve also heard you talk about CPA’s when you say I’m not a CPA and that’s who you need to talk too. So my question, my question in that regard would be… How would you go about picking a CPA? I’ve got a good one, and I’m very pleased with her work. She’s in another city and I even get a lower fee because of that, but she’s not gonna be here forever. And I’m wondering what would you do because it’s changed now quite a bit, I believe, with CPAs.

Carl Stewart [00:13:19] Well, I will tell you, first of all, my experience here in Central Texas is that it’s very difficult to find a CPA. Supply does not equal demand, so you need to be patient about doing this. Secondly, I favor smaller firms, preferably even local firms. I don’t think most of us and most listeners really need to get a huge international firm to do our work. They’re really interested in large accounts and large incorporations in there. They have a lot of overhead and consequently their fees are higher and they’re typically not looking to have clients who are individuals like you and like me. The other thing I would say is that you like maybe multi-generational firms because you might like a firm that has some senior partners, perhaps even founders, but you also want to know that. They have people coming along with them, so you’re not going to have to go out and search again. And then lastly, and I think importantly, is you want to have the same conversation with a prospective CPA as you would with an investment advisor. And I know you’re a long-term listener. The question I always say is, what does a happy, healthy client relationship look like? And I always this because I think it’s accurate. I read some time ago. That when people are unhappy with their service professionals, it’s typically a result of a mismatch of expectations. You didn’t return my call, I emailed you, I never heard back from you, that kind of thing. So you wanna have real clarity between you and the CPA about what services they provide. Now having said that, I’ve always made the following assumption, and that’s what it is. I haven’t got data, it’s my assumption. That similarly situated CPAs are gonna charge similar fees. That’s just the marketplace. I have encountered recently that CPAs that I’ve encountered they’re not trying to compete with TurboTax. They’re not interested in straightforward, simple tax returns. I think that makes sense because they can’t compete on a financial, on a money basis. And I would say you need to be prepared for a minimum fee of maybe 1,000 to $1,500 just based on my own little due diligence. So that’s how I would go about it if I were you. I had a CPA for many years and she retired and moved to practice. I don’t know that she sold it or not to another firm that was a local firm. And they just. The service just collapsed. It wasn’t anything like I’d experienced for probably the better part of 35 years. And so I had to go through this myself. And I actually, my colleague and our daughter was very happy with our CPA. And I ended up choosing his firm and him, and he subsequently closed the practice. So that’s why I said it’s tough. And if you’re gonna do it, be patient. And if can’t, stick with local firms. And what’s your second question, Chris?

Chris [00:16:42] Carll, in the same other city, I have some financial advisors. I met with them in February. And this, of course, was just after the election and the inauguration. And they told me that they thought we were, they warned me about volatility in the markets for a while. And they ascribed it to national politics, AI, geopolitics. And climate was thrown in there somewhere. And all of these things seem to be the case. This is maybe more of a philosophical question. Do you think we are in for a long period and perhaps longer periods of volatility than we’ve seen in the past? Things are moving so fast now and there’s been such disruption on in so many ways for the last five years. I’m wondering if this doesn’t just become extremely volatile for for a long time.

Carl Stewart [00:17:48] That’s a great question. And of course I read and think about these things all the time. But I’ve, I’ve been beaten up enough in my 46 47 year career that I don’t place a lot of emphasis on the political and geopolitical and economic outlook. And the reason is, um, that you end up, you end up if you build a portfolio and asset allocation around that, uh, you can be wrong so easily and the opportunity cost is so extreme. There was nothing I saw at the beginning of 2022 that suggested that we would have a 19 percent decline in the S&P, 33 in NASDAQ, and a 13 plus percent decline and the bond market. By the same token, we had a great 2023, an election year, 2024 was excellent, and this year’s been excellent. That I will say that when something unforeseen occurs, I’ll give you two recent examples, that will absolutely affect the market. The most recent example was April of this year. As you point out, shortly after the president assumed office, and he came out in the Rose Garden with that long list of tariffs, and boy, the stock market’s cratered because it was No one believed what he said during the campaign to the degree that he proposed what he was going to do. And that rattled the financial markets, it sure rattled a stock market. And ultimately it rattled the administration because they pulled back from that. The other one which was more serious was COVID. You remember when we closed down the economy, it was the Friday, Saturday, Sunday, 13th through the. 15Th of March of 2020, boy, the market just went in the tank. But do you know how it was down for something like 40 or 50 days and came back to where it was? And that was a global pandemic. So do I expect volatility? I always and I know you’ve heard me say this. If you’re not worried, you’re not paying attention, but I just have discovered that while I pay lots of attention to geopolitics and macroeconomics and all kinds of other things, I haven’t found them helpful. In constructing a portfolio. And so that’s a long-winded answer to a philosophical question, but I just don’t invest with an eye to those things.

Chris [00:20:20] No, that’s a good answer. And I don’t think that these, well, these fellows don’t invest for me that way either. And I wouldn’t follow that either. I think they were trying to tell me, just expect a little bit more volatility this year than seen before for a while.

Carl Stewart [00:20:39] Yeah. Well, I mean, so far so far, so, so so far. So good. Okay, Chris. Oh, good to talk to you. Thank you. You bet. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. I’m going to take a break. It’s a great time to call or text 512-921-5888. I’ll be back.

KUT Announcer: Laurie Gallardo [00:21:06] Money Talk airs every Saturday at five o’clock on KUT News 90.5 FM on the KUT app and at KUT.org. This podcast is produced by KUT and KUTX Studios as part of KUT Public Media, home of Austin’s NPR station and the Austin Music Experience. We are a non-profit media organization. If you feel like this is something worth supporting, set an amount that’s right for you and make a donation at supportthispodcast.org

KUT Announcer: Laurie Gallardo [00:21:36] This is Money Talk with Carl Stewart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stewart [00:21:49] Welcome back to Money Talk. I’m Carl Stewart and you’re listening to KUT News 90.5 and on the KUT app. And when you have a financial or investment plan in question, call or text 512-921-5888. Here’s a text that came in. Carl, do you think I should go to all cash on my stocks right now? Absolutely unequivocally no. And here’s the reason why. Let’s suppose that your intuition or fear causes you to sell all your stocks or stock mutual funds or exchange-rated funds on Monday. And let’s suppose that you are right and that we go into a protracted decline in stocks. When will you decide it’s time to get back in? And that’s the key. You have to make not one but two correct decisions. You have to know when to get out, and then you have to when to know to get back in. And here’s the problem. Chris and I were talking about volatility. The thing about real estate is, in a real estate bear market, just because you want to sell a property doesn’t mean you can sell it. In a stock market, if you want to sell your mutual fund, you can sell it because there’s daily liquidity. And that leads to more short-term. Price move both up and down, then you typically see in an illiquid asset class like real estate. But I just gave Chris a couple of examples. When President Trump announced his tariffs and the stock market sold off about 20%, then it came roaring back. I think even more significantly was when the stock markets collapsed because of COVID. I mean, if you were investing then, You could have easily said, my goodness, this is terrible. People are dying, a lot more of us are gonna die. So the last thing I wanna do is be in the stock market. And you got out, and you have massively less money today than you would have had if you’d stayed in. So the secret, isn’t the secret at all. I talk about this all the time. You have to have the right mix of assets. Stocks and bonds and real estate. You don’t have to have rental real estate. You can have public real estate, commodities, all kinds of things that you get to choose how many of those you want. But what you want to think about is your exposure to the stock market. And the best way to think about that in my experience is to say, okay, if the stock had a 20% decline and everything else in my portfolio didn’t work, didn’t go up, it just laid flat, what would be the percentage decline? And then convert that to dollars and just experience what that’s gonna be like. Because you have to realize, and there’s a lot of data that indicate this, as human beings, when we have a 10% gain, we experience it as a 10 percent gain. But when we a 10-percent loss, we experience is as a 20-per cent loss. We are attuned to risk and we have fight or flight. Type of response. That’s probably a reason why we’re still on the planet and you have to overcome that. Warren Buffett is famous for saying, I am fearful when others are greedy and I am greedy when others feel fearful. So my long-winded answer to you and to everybody else is no, you should not go to all cash. You won’t know when to get back in. You should have an exposure to the stock market that you can sleep nights having. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. We have a caller. Stephanie, you’re on the air. How may I help?

Stephanie [00:25:52] Well, when the person said he’s going to have to take his required distribution, our money manager has suggested that with that distribution that we… Needed for all of our campaign we don’t think i would be about about the dollar a year but the required it that money for that yes

Carl Stewart [00:26:20] Yes. That’s right. That is a terrific idea. The formal term is Qualified Charitable Distribution, or QCD. You don’t even have to wait until you have a required minimum distribution. You can do this starting at 70.5, and what you do, you are absolutely right. You go your advisor or your custodian, you indicate you want to make this contribution. They give you a form to sign and then you have a choice. You can have the check sent to you payable to the nonprofit or you can have it sent directly to the non-profit. I’ve been doing this myself for quite some time. The reason I answered his question the way I did was he wanted to draw interest on it. Obviously, once you give the money to your church or your school or whatever, you can’t draw money on it, but it’s a terrific idea. I’m really glad you brought this up, Stephanie. If you, as a listener, are what I would call philanthropically inclined, and you are a regular donor, this is a great way to do that, because you can do this up to a level of $100,000. For most people, they can put all or part of their requirement and distributions in that qualified charitable distribution, so that’s a great idea. Thanks for your call, Stephanie. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888 and by the way, you can listen to past broadcasts at kut.org slash Money Talk. Okay let’s just see. Hi Carl, once again, thanks for all your useful information. Thank you, you’re welcome. We are a retired couple, and most of our assets are in equities and real estate. We’re thinking it may be time to put 10 to 20% of our asset in a more liquid instrument. What types of liquid instruments would you recommend? Thank you. So, great question. And I think the first cut is I’ve been investing in the two asset classes. Which over many, many years have outpaced inflation. Income producing real estate, why? Because over time, rents go up, and as a consequence, the value of that property goes up. Now, there are lots of things that can go the other way. All of us who were here in the real estate crash remember that. But by and large, rent’s go up and that drives up value. The analog to that in the equity market is over time earnings go up. And as a result, the value of the companies go up. So when you start talking about taking 10 to 20%, if you are interested in doing something else that would be not correlated, because over long periods of time, the real estate market and the equity market are sensitive to the economy because of the reasons that I just said. So if you want the simplest thing, You could own quality bonds or bond funds because they tend to outperform real estate and outperform stocks when interest rates rise. When interest rates rise stocks and bonds, I beg your pardon, stocks and real estate go down and I’m going to start all over again because I’ve got myself confused. When the economy grows, real estate and stocks tend to do well. Bonds are solid, but when the economy is weak… A recession, typically what happens is that’s bad for real estate, it’s bad for stocks, and the Federal Reserve ultimately begins to lower interest rates. And because interest rates are coming down, that’s good for bonds. So in that classic economic environment of good growth being good for real estate and stocks, recessions being poor for real estates and stocks and good for bond, give bonds that feature. It doesn’t always work, of course. It didn’t work in 2022. Now, if you want to step out from that and you either have an advisor or you’re a person who has the time and the interest in this, there are other strategies besides bonds with daily liquidity. And I just named the categories as they appear in Morningstar, just because it’s easy and I don’t give specific names of funds here on Money Talk. There are a couple of other strategies. That have, as their goal, positive returns that are not correlated to the stock market and the real estate market, and are not as correlated as much to the bond market. One large group is called event-driven, and the other large group called market-neutral. Event-driven and market- neutral. These are strategies in mutual fund or exchange traded fund format that give you daily liquidity have based on history or strategies that for example when we have a bad bond market like 2022 the event-driven strategy, I think was I recall was flat and the The market neutral strategy was up So to the degree that you want to step out away from bonds that would be something that I would consider Thanks for the question Okay You have a question call or text five one two 921-5888. Carl, my father just passed away, I’m sorry, and I am in the process of working with my mother and his estate as he was a schoolteacher. The pension he got is supposed to go to my mom and his healthCarlle as well. We got a preliminary death certificate but are waiting on the actual certificate. Should she get back payments for the months she will miss. Once the survivor benefit documents have been approved. I’m 35 years old. My understanding is yes, but I’m not an expert in this area. But once the death is confirmed, it’s my understanding that the benefits that your mom was supposed to get will be paid. Now, I would just encourage you that if this doesn’t occur, and I hope you’re a regular listener or become one. Please text me or call me with an update if there’s anything that I’m saying that’s incorrect, but it’s my understanding that you will and good luck to you. Thanks for your text. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Carl, with the TCJA Extended should a 50-year-old start rolling over pre-tax to Roth at a 24% tax bracket to take advantage of the current remaining bracket threshold or wait till later years? What a great question. So let me just unpack that for everybody else. The tax code right now that this person is saying is that there’s not something that’s passed legislation that’s going to raise income taxes. The tax brackets go up a little bit every year. A lot of people are in the 15, 20 to 24 percent bracket. And then from 24 it jumps sharply to a 32 percent bracket and what you’re asking is you’ve got money in… IRAs or something like that should you go ahead and begin to do a Roth conversion and you’re a young person, in my view the answer is yes. You have to be prepared and willing to go ahead, and pay the income taxes, but having a future benefit where you don’t have required minimum distribution and because it’ll be in there over five years from your original investment, you You can take it out on a tax-free basis. It grows on a tax-free basis, and upon your demise, if you’re married, your spouse gets it, and she has, or he has the same rules, and upon the second person to die, if you are a married person, your beneficiaries get it. They have what’s called a beneficiary, Roth IRA, okay? And they have 10 years to take it out, and they pay no income taxes on that. So if you were willing to take the tax by today, and the future benefits that I just articulated are particularly attractive to you, then if I were in your shoes, I would 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, I work for the Austin Independent School District. I have state retirement and a 401k. What do you think about investing part of my 401k in gold and how to find a reliable way to do this? Well, it’s a two-part question. So for people who follow these things, gold was a terrific investment in the 1970s. It peaked in 1980, and it was just a terrible investment for decades. And now it’s had a great couple of years up this year, year to date. About 55%. In the old days, to invest in gold, you had to buy the metal in a bullion, or you had buy the coins, which were expensive because you had trading costs and you paid for mint costs, and then when you sold them, you had training costs. Or you buy the gold mining companies, which when times are good, like they are currently, they will skyrocket. If gold’s up 55%, they might be up 85 or 90%. But when gold goes in the other direction, they go down much quicker as well. Now the question is, this new thing, relatively new, are exchange traded funds. Gold exchange traded fund trade with daily liquidity and they actually own the metal. They own it. You can go to their websites and you can see it. And they’re inexpensive. Their internal expenses run from as low as 0.09%. 0.25% and you had daily liquidity. Now, that’s what I would buy. I would by the exchange traded fund. Now, having said that, the last part of your question is how to find a reliable way to do this. So, the question is can you buy a gold exchange traded funds in your 401k? I don’t know that you can. You may not be able to. You may have to buy a gold mutual fund which owns perhaps gold but also the gold mining stocks and that’s just the choice you have. So first see if you can buy a Gold Exchange Traded Fund and if you cant see if can buy a Gold Mutual Fund. It should be on your list of a menu of what you can do and that is how you would do it. I think it is a reasonable thing to do. I wouldn’t go overboard. Clearly buying an asset that’s up over 55% this year. There’s always the risk that it will decline after a sharp increase like that. Having said that, I think this is not a short-term investment. I think is part of your homeowner’s insurance, frankly. I think that’s where it fits. And so I’d be happy for you to do that and that’s the way in which I would do it. Good luck. It’s time for me to take a break, a perfect time for you call or text 512-921-5888 and I’m gonna talk to… Charon, when I return.

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KUT Announcer: Laurie Gallardo [00:39:21] This is Money Talk with Carl Stewart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stewart [00:39:35] Welcome back to Money Talk, I’m Carl Stewart and you’re listening to KUT News 90.5 and on the KUT app and you can listen to past shows by going to Kut.org slash Money Talk. Call or text 512-921-5888 and I got a follow-up question I’ll answer quickly from the person was thinking about where could he draw interest, or she, it says. Who do you go to when wanting to put your money in a money market fund? I would start by going online and looking at the large companies that allow you to deal directly with them. The big ones are Charles Schwab that I’m aware of, and Fidelity. There may be many others, but I would just go to the Vanguard website. I said Fidelity, I meant Vanguard, but Fidelity also. Charles Schwabb, Fidelity and Vanguard, that’s it. Go to their website, they’ll list all of their investment offerings. Uh, and you can go to their money market funds and study up on there. You can even then, you can even, then compare them. So I think that’s what I would do if I were in your shoes. Five, one, two, nine, two one, five, eight, eight. Let’s go to the calls. Sharon, you’re on the air. How may I help?

Sharon [00:40:51] So I got a quick question, which one is better, is a living will or a trust when you’re trying to live like you have a property that is already paid off and you have cash bank accounts and everything for your people so then they don’t have to go to probate and all that trouble. What is the best way to do?

Carl Stewart [00:41:09] Um, so, uh, I know this is true with, uh financial assets and if you own financial assets and your name and you put on their transfer on death TOD, then it doesn’t go through probate. You don’t even need to have a trust. That’s, that’s one thing. Secondly, so I would, what I would do is I would study up on real estate and see whether you can own your home. On a transfer on death basis. And then I would also go to my bank. Sometimes I understand they’re called payable on death, but my experience is transfer on debt when it comes to financial assets avoids probate. See if you can do that with real estate. Otherwise, I would tell you, I’d be very Carlleful about spending a lot of money on a living trust because probate in Texas is frankly very straightforward and not expensive. And not terribly time consuming, particularly because if you have only one family member who’s going to receive the assets and you can make her the executor or executrix, whatever it’s called, and they can go get the documents at the courthouse and go to the bank and they can change the deed on ownership on the house. So be Carlleful about doing anything that. That will cause significant legal expenses. I think you can avoid those. I would not put it in a trust if I were you. I don’t think that based on what you’ve told me, there’s a real benefit for that. Trusts are great when you leave assets to people who are minors or people who have some form of disability, but it doesn’t sound to me like you have a taxable estate of over $15 million. And so I think I would look at transfer on death and payable on death first before I did anything else you’re on.

Sharon [00:43:09] Got it. Thank you so much for your help.

Carl Stewart [00:43:11] You’re very 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. Here is another one. Sam, you’re on the air, how may I help?

Sam [00:43:30] Yeah thank you for taking my call. I’ve got a question sort of related to a few of the past questions but I’m also considering whether or not to leave money I currently have in stocks in stocks since I’m about to attend graduate school and I’ll be dipping into it to some extent yearly for the next three or four years. So I’m just sort of curious if I know it’s over time dependent on the stocks but what you’d recommend there.

Carl Stewart [00:43:55] I think what I would do, that the odds of the stock market having a positive return over the next three years is really quite high. The odds of having the stock markets higher over the year are probably 50-50. That’s not because I’m predicting what’s going to happen. That’s just data. When I’ve looked at historical data and played with various holding periods, Sam the one you’re holding period, the odds of a positive return in the S&P 500 approach 50-50. The longer you have them in the the S& P 500, the greater the return and also the lower the risk. And so to be on the safe side, I’d probably take what I thought I was gonna need for my first year and take that out of stocks and put it in a money market fund. Then slowly take money out as you need it. I think it’s worth taking the market risk to do that, and so I wouldn’t take it all out to pay for it, but I would eliminate the 12-month risk by taking what I thought I was gonna need for a year and putting it in a money market fund if I were in your shoes.

Sam [00:45:09] That’s super helpful. Thank you so much.

Carl Stewart [00:45:11] You’re very 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. Andrew, you’re on the air. How may I help?

Andrew [00:45:30] Hi Carl, I’m 60 and I’ll probably be retiring at 67 and so I’ve been researching investment strategies and a popular one out there seems to be something called the Three Bucket Strategy and I was wondering your opinion of it or are there other strategies I should be looking into?

Carl Stewart [00:45:48] Well, that’s for everybody else and I’m not really familiar with it, but the idea is that you put some money, you step it out in terms of risk and return. So you have the very low risk stuff and then you have medium and then the higher risk. And as my colleague Lindsay says, in retirement planning there’s the go-go years. Then there’s the slow-go years, and then there is the no-go-years. And with our healthCarlle system the way it is, a lot of times the no go years, the last decade of our lives, can actually be very expensive, as you might imagine, if you’ve got to have in-home Carlle or things like that. And so I don’t criticize that. I don’t personally ascribe to it. Because I’ve been doing this for so long, frankly, Andrew, and what I’ve seen is if you have a pension-like investment strategy, okay, an endowment or foundation-like investment strategy where you have a thoughtful mix of both diversified and non-correlated assets, that you will have a smoother ride and you will more return. And have a better chance of outpacing the rising cost of living. So I personally haven’t done that. I like the other strategy in spending my time thinking about asset allocation and then thinking about what asset classes should I own and in what proportion and how they respond one to the other. So I have no argument with the buckets and I think it’s a straightforward concept. I just happen to prefer to do it. I think of it as I’m investing uh, for the Carl, you’re investing for the Andrew pension fund. You want, you want, don’t want to run out of money. You presume that the cost of living will go up. You presume you cannot predict what your investment returns are. And you’ve put yourself in the same position as the teacher’s retirement system or anybody else and building that kind of portfolio. So I’m okay with the buckets, Andrew.

Andrew [00:48:05] Okay. Well, good. Thank you. I appreciate your help on that.

Carl Stewart [00:48:07] You’re very 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 thought I had Sharon on the air and I think I just hit the wrong box and I apologize Sharon so if you will call back at 512-921-5888. Good evening Carl, I have a Roth and a SEP IRA in Vanguard. Both are 50-50 domestic and international mutual funds that are mostly equity based. Are there any advantages or disadvantages to investing in exchange traded funds? Over mutual funds? The answer is yes, generally speaking, in my experience, for example, a Vanguard total stock market fund, since you have Vanguard, the expenses on that are 0.03%, that’s ridiculous. And they’re tax efficient, which doesn’t matter to you because you have a Roth and SEP IRA. I believe their international Vanguard XUS, I believe, I’m doing this from memory so don’t count on it, has an expense ratio of 0.05. So over time, and I know you know this but a lot of people don’t, one of the factors and frankly an important factor to your rate of return over the years is your cost of investing. If you’re going to pay more than you anticipate, you’re going to get some return. That’s not consistent with the stock market. Either it does better in good times or it does in better and worse times but not going down as much. If you’re going to have a passive investment, S&P 500, XU International, the Bloomberg AG, whatever you choose, exchange traded funds will be cheaper. And if you’re investing not like you are but you’re in investing in your own account, they’ll also be more tax efficient. Thanks for the question. Here we go. 512-921-5888. Terry, you’re on the air. How may I help?

Terry [00:50:33] Hey, Carl, I’ve got two for you and hopefully we can get through both. Okay. My first question, I hadn’t talked to you in a while, Carl. Having more experience in the market, um, or seeing the market as far as crypto, Bitcoin, et cetera, over the last year, could you just give me an update on your thoughts on stability at this point, et Cetera? That would be great.

Carl Stewart [00:50:54] Yeah, it’s become more mainstream. I think the president talking about it has been a tailwind. Fidelity now allows people to own crypto. When a big firm like that does it, it gives it additional street cred. Also, I believe it’s BlackRock has a Bitcoin exchange traded fund. So you can own the exchange rate of fund like the gold fund that I talk about frequently here. So I think that the audience of prospective investors is widening because of that. I think the big banks will begin to be involved in it because they don’t want to lose out to the profitability of it. I still am, it’s not something personally that I invest in, I know the benefit of it’s being. Not part of a currency, I get that, but I also get the risk associated with malfeasance as well. So it’s gotten much more credibility in the last year or two, so that’s my answer.

Terry [00:52:08] Thank you, Carl. And one more quick one. I think I know the answer to this, Carl, but if I got some positions on a couple of high risk stocks that I’ve had high yields on, I want to sell them, but they’d be short-term gains. Is there any, there’s no alternative to roll into a like stock, et cetera, if I find them really volatile, am I just I will take you to short-term gain.

Carl Stewart [00:52:37] No, there’s a certain kind of mutual fund that take people that have millions of dollars in one company and they put it into that fund and it goes into the fund portfolio and they own shares of the overall portfolio. That’s been around for years. But for the average investor, there really is nothing that I’m aware of, sorry.

Terry [00:52:58] Okay i thought so i appreciate it thanks for the feedback Carl

Carl Stewart [00:53:01] You bet, thanks for calling. You’re listening to Money Talk, five, one, two, nine, two one. Let me get rid of that, thank you very much. Now, nine two one, five eight, eight eight. Here we go. Sharon, I’m sorry, is this Sharon? Yes, what’s your follow-up question?

Sharon [00:53:19] Yeah, so the question I guess I always get confused on what is the right strategy for stock-wise short-term long-term and region for amassing because like I do some day trading and what have you. Lately, I thought I’ll go for long-terms. Guess what? All my profit was in good hands. I could have quick bucks out, but it’s gone now. So which one is a better strategy?

Carl Stewart [00:53:42] I would tell you the people who manage serious money are looking at long-term, that they just have history on their side. Now, if you’re investing in extremely speculative securities, and you want to trade them on a regular basis, you just have to accept the fact that you’re going to pay a lot more taxes. The tax code is designed to encourage people to be longer-term investors. And so, frankly, when I talk with portfolio managers of mutual funds… And they prefer to hold their securities for three to five years or longer. I’ve looked at accounts that I’ve worked with of 30 years and 40 years, and the returns are absolutely ridiculous. They’re so good. And so I’m a long-term investor, and there’s no way around the taxes. If you want to take short-term profits, you just have to pay the income tax. That’s not something that I have seen work consistently over time. So, I stick with the long-term, frankly, Sharon. Got it. Thank you so much. You bet. Thank you. Okay. What we’re going to do is let this person ask the question. Houston, you’re on the air for a couple of minutes. You may have to call back next week. How may I help?

Houston [00:54:57] Hey, thanks, Carl. A two-part question, one for me and one on behalf of my dad. I’m 40 years old, just quit my job to go back to school for my master’s. I’m pretty well diversified. Got cash, I’ve got a healthy 401k, I’ve gotten quite a bit in individual brokerage account. First question is, general advice for things that I should be thinking about with how I manage my money, just to give me the security over the next couple of years while I’m in school. The second question, if we get to it. My dad’s in his late 70s. He is way heavy in individual stocks in the company that I used to work for. Um, I’ve tried to encourage him to diversify, kind of go bonds, safer securities, that sort of thing. Um. I need some advice on what to tell him to encourage them to do that.

Carl Stewart [00:55:45] So I’m going to answer the first one, because we’re going to start hearing the music in the background and we’re both going to have to go goodbye. The first one is, because you’re moving back into school, take what you think are your expenses for the first year and sell securities and put them in a money market fund. You’ve taken all the risk off of your portfolio and then if it’s a two-year program as you approach the beginning of the second year, sell some more. But by and large, keep everything exactly where it is, it’s the most tax-efficient thing to do, and you just absolutely have history on your side. But by reducing the risk over a 12-month basis, you reduce your anxiety, you don’t have to watch the market all the time, you can focus on your studies, and that’s what I would do if I were in your shoes. That’s great, thanks Carl. And I’m gonna tell you, this deal of concentrated position your dad had, I’ve encountered this throughout my 47-year career. Uh, and if you have time, call back next week or another broadcast. I’d be happy to talk with you about it.

Houston [00:56:47] Maybe I can get him on the line with me appreciate appreciate the call always welcome in next time

Carl Stewart [00:56:52] And next time, call earlier in the broadcast so we have plenty of time to talk, please. Yes, sir. Will do. Thank you, sir! Okay, you bet. You bet. Thank you. Well, that’s the end of our broadcast today. I want to thank Mark for doing a great job. Thanks for your advice on turning in his defined benefit plan. I want thank you for listening and, as always, remind you that next Saturday after the news, or maybe not even after the new, next Saturday at 5, be sure and tune in to Money Talk.

KUT Announcer: Laurie Gallardo [00:57:29] You’ve been listening to Money Talk with Carl Stewart. Carl Stewart is an investment advisor representative of Stewart Investment Advisors. And this is KUT and KUT HD1 Austin.

This transcript was transcribed by AI, and lightly edited by a human. Accuracy may vary. This text may be revised in the future.