Money Talk with Carl Stuart

Carl Stuart answers caller and text questions about selling concentrated stock positions, standards for selecting a financial advisor, managing different income sources in retirement, and more.

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 [00:00:02] 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 [00:00:21] Welcome to Money Talk, I’m Carl Stuart and you’re listening to KUT News 90.5 and the KUT app. Money Talk is a broadcast about the world of financial investment planning now in our 31st year here together. Call or text 512-921-5888. Also, you can listen to past shows at kut.org slash money talk and I really recommend you do that. Bye. We, Jimmy Moss and I pre-recorded two broadcasts. I was not available and I happened to listen to both of them when I had a chance and I really enjoyed them, I think you would too. And besides having a lot of fun, we shared what I think are some really basic, fundamental approaches, concepts, important things regarding financial independence and how to get there, financial planning, et cetera, et cetera. So when you have a chance, go back and listen. At kut.org slash money talk. But this afternoon, when you have a financial or investment planning question, call or text 512-921-5888. I take today’s calls first, and then today’s texts, and then previous texts that I have not had the opportunity to answer. I did get a text today, and oh, by the way, you’ll hear them come in on the KUT phone. Here is the text I got today. Hi, love your show, thank you. We’re a married couple, both 56 years old and self-employed with about two and a half million dollars combined in 401Ks, $200,000 in a Roth 401K, and $600,000 dollars in a brokerage account. All of it is 100% invested in the S&P 500. We also hold individual stocks, about $1.3 million dollars and $700,000 in one stock. Because it unexpectedly grew over time. Our home is mortgage free. We’re concerned about timing Roth conversions and if it’s worth just doing it now even though it puts us in a higher tax bracket. Also, we’re very concerned that we’re heavily weighted in the S&P 500. So would like advice on how in the world at this stage to rebalance our portfolio given talk of a market correction and what’s a smart strategy for us. Well, first of all, Congratulations on savings and investing. That’s a substantial amount of money, and you’re 56 years old. I share your concern about having a lot of eggs in one basket. I guess the good news is it is the S&P 500. It’s not one stock, but you do still have that large position in one stock. My experience is that if you own individual stocks, when they work, you’ll do better than any mutual fund. And when they don’t work, you’ll worse than any of mutual funds. So congratulations on your good fortune. Capital gains tax is lower than the income tax. You may pay the extra three and a half percent. You may be looking at a 23.5% capital gains tax. Nevertheless, if I were you, I would sell at least half of that stock. I don’t have to know what the company is. It can be NVIDIA, which has been a darling, or it can be some other ones. I just think that that would be a prudent thing to do. Well, here we are in the fourth quarter. Uh, if you want, you could sell some now and some after the first of the year. But the other thing is that the greater concentration is in the S and P 500. And again, I think I would begin to reduce my exposure there as well. There are two or three things that seemed to me to be worthy of your consideration. One is… That until this year, international stocks have been very disappointing when compared to the performance of the US stocks, the so-called US exceptional, what’s it called? The exceptionalization of the United States. I think that owning international stocks makes a lot of sense for you. This year, every Saturday, I look at, for benchmarks, the Vanguard Total Stock Market, the Spyder SPY S&P 500, the Fidelity NASDAQ ONEQ, these are the symbols of their various ETFs, and the Vanguard XUS. And through yesterday, the Spyder S&P 500 had a very nice return of 16.57, and the Vanguard XUS had a remarkable return of 29.13%. So I would reduce my S&p 500 exposure. And I would increase my, well, you’re at zero, I’d increase my international. I’m comfortable with the stock portion of your portfolio being 25% international and 75% domestic. The other thing you need to consider, of course, is are there other assets that would perhaps help you? You say you’re concerned about a market correction. I am too, but I’m always concerned about a marketing correction. We had a bad year in 2022. We’ve had two very good years in 23 and 24, and so far a very good year in 2025. And I’ve learned the hard way over my 47 years that good things in investing last longer than I anticipate and bad things last longer then I anticipate. So I think you ought to consider diversifying into some other asset classes. I’m gonna name some of the categories. Some are very straightforward, others are. Thank you. Perhaps more arcane, but you are probably sophisticated investors. You can look at bonds Depending upon your tax bracket. You might consider taxes at municipal bond funds But you’re gonna have to do the character I guess you would call it the calculation to determine if the after-tax yield was better than the taxable yield you get in Other bond funds. I would like to see you stagger your bond funds and these are in the Morningstar categories of short term or ultra short and then core and then multi-strategy. I think that’s what I would look at for bond funds. You could easily put 10 to 20% in there as well. And then I think you also could look at some other strategies. I happen to like event-driven strategies. That’s a strategy called merger arbitrage. I also like what are called market neutral, global equity market neutral. These are strategies that are designed not to be positively correlated to the stock market. And in the case of event driven, not even positively correlated to the fixed income market. So you look at the last time we got tested in 2022, the S&P 500 was down 19% plus. The NASDAQ down 33% and the Bloomberg Ag, which is the bond index, was down between 13 and 14%. That event-driven was down, I think, about 1%. The global equity was up. So I think I would consider that. And long-term listeners know that for many, many years, I was a gold skeptic. But several years ago, I added gold to my portfolio. And, you know, again, it’s the The ETF’s up over 56%, so I’m anxious about that, but it’s an insurance policy, and so you might wanna start with a three to 5% position in a gold exchange traded fund. So what you end up with is reducing your exposure to the S&P 500. You still stay in stocks, but you add exposure to the international market, and then you look at these other strategies as well, so good luck. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text with your financial or investment planning questions at 512-921-5888. Let me look here on my phone to see if I have some other texts coming in. I think I had some I hadn’t had a chance to, here we go. Okay. Let’s just see. My wife and I will both turn 65 years old next year. She is recently a retired school teacher with a modest pension, and I want to retire from my job with a non-profit. We have a mortgage on our primary residence. We owe $300,000 on the home, appraised at three times that amount. And we have a rent house that is fully paid for, worth a bit more than our current outstanding mortgage. Our interest rate on the mortgage is quite low, less than 3%. The taxes and insurance, exclamation point, exclamation point, and those are not going to get lower and are as much as the principal and interest. We’re having to draw on our savings, which are substantial, about one little over a million dollars, to keep up with the monthly expenses. Once I retire, our monthly household income of $10,000 will fall to $5,000. The question, should we take Social Security at 65? Full social security for us would be at 67. That’s called the full retirement age. Or should we use our savings for the next two years and wait until 67 to draw social security? You know, you have the pension, but you say it’s modest. That social security benefit grows nicely after full retirementage. In fact, it grows at 8% per year, all the way up to 70. There is no investment that I’m aware of that can guarantee 8% a year. So my, I guess I would say my intuition is that I would look to my other savings and keep, postpone the Social Security because that 8% is a lot better than you’re gonna get in other places. So I think I would do that. Now, your second question, should we sell the rent house and retire on mortgage debt? Probably. It seems to me that if you can retire and have no liabilities whatsoever, no mortgage debt, credit card debt, auto debt, you have a lot more flexibility in managing your budget because you have fewer fixed expenses. So the idea of staying in your home, eliminating the mortgage debt taking advantage of the favorable long-term capital gains rate on the sale of the real estate seems like a reasonable thing to me. So I think if I were in your shoes, I’d postpone the Social Security and I also would probably sell the rent house to eliminate the debt on my house. Understand that we are in central Texas is not the kind of housing market that you just immediately sell. You may have seen the story was in the Wall Street Journal. I don’t know what company did the analysis, but said the best housing market for buyers in America was in Austin. Because we have over a six month supply and that is now much more of a buyer’s market. You’re listening to Money Talk on KUT News 90.5 and the KUT app. I have all of my lines available and no new incoming texts. Call or text 512-921-5888. Hi Carl, love your show, thank you. I am old school, have always prepared our own tax returns each year on paper, on paper. Had a guy. When I have something out of the ordinary, I research and then call the IRS customer service. They have always been very helpful, so thank you. Well, good. It wasn’t a question, but I’m glad that I took that. Let’s see. Okay, here we go. This looks at the top of this one. Carl, I read that Social Security Trust Fund will be facing shortfalls in the 2030s. What will happen to folks relying on Social Security? I’m only in my 30s and I’m not very optimistic about the program’s future in my lifetime. Well, I think your skepticism is justified. I think because you are a young person that you should take the very conservative approach and presume that Social Security will not be there for you. I think it will be, but I think it won’t be the same type of benefit or the same level of benefit. That perhaps your parents or grandparents have enjoyed. I think people who are older, I don’t know what older means in the case of this argument, but I would think at least 55 or 60 are unlikely to see a diminution in their promise benefit. But the fact of the matter is that the trust fund is going to be going down and we’re not gonna have fully funding. We know the answer, but we don’t have the political will to do this. And that is. Right now, when your income is above, I believe it’s $160,000, you don’t end up paying Social Security not any amount above that. You could change that, Congress could change that and pick up a lot more tax revenue by raising or eliminating that number. Wouldn’t be popular with people who have higher income. You could also really limit the so-called coal of the cost of living adjustment, which is volatile. And you could make that so that it was more modest. That would also not be popular. And you can extend the age at which full retirement benefits come. That also would be unpopular. These are all reasons why we don’t do it. Nobody can run for Congress and suggest that she or he would do this. But I would tell you that the answers are there. I don’t know the answers for Medicare, frankly, or Medicaid, but for Social Security. So I think if you’re a young person. Giving our unwillingness and our lack of political will, I would just plan on saving and investing on my own and not be considering really relying on social security. Now, oh by the way, let me give that number again. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Okay, oh and of course as I mentioned at the top of the show, you can listen to previous broadcasts, including the last two which I thought were really fun with Jimmy Moss by going to kut.org slash money talk, continuing with this text. Carl, let’s see, thanks for taking my question. What’s your take on indexed universal life insurance? I’ve had some agents approach me wanting to sell me an IUL product. They seem to be a little complex. With monthly premiums ranging between $300 and $500 a month, depending on the face value of the policy and any associated riders. Am I just better off purchasing a term policy and prioritizing my money on other investments instead? And this is from the same person who said that she or he was in their 30s. So I learned a lot about life insurance many years ago from some life insurance professionals. And they really explained it in a way that’s really stuck with me about when we should have life insurance. And they said there are really three common reasons. State preservation, business continuation, and income protection. State preservation has gotten to the point where it doesn’t affect a lot of people. If you die this year, your assets have to exceed $13.99 million before you have an estate tax. In a few months, that goes to $15 million, and then it will be indexed, and we’ll have an inflationary index. And so, if you’re single, that’s 15 million. If you’re married, it’s 30 million. So buying life insurance to fund an estate tax liability may be for some people, but not for most. If you had that kind of liability, that would be a permanent need, not a temporary need, and you would want permanent life insurance, whole life insurance. The second one, which only affects people Basically, we’re business owners, and that’s because you and I have built a successful, I always say, dry cleaning business, and I own half and you own half. It’s your biggest asset and mine, and so we get it independently appraised, and I buy life insurance on your life. I’m the owner, you’re the insured, I’m beneficiary, and vice versa. I die, I pre-decease you, the life insurance shows up, the death benefit is not taxable. You get the money, you pay my spouse or my heirs, and you own the business free and clear. That’s a permanent type of need, and as a consequence, you would want permanent life insurance, right? And so that’s another reason to have whole life. The most common reason for life insurance is income protection. So many, many years ago, when we had kids living at home and my wife was having to do all the hard work by staying home with three children, had I passed away, she would have been in real difficulty. We hadn’t funded our kids college education. We had a mortgage and so her earning capacity after child care was dubious so I needed life insurance on my life but that was a temporary need. Now temporary may be 20, 25 years nevertheless the kids are grown and gone. We don’t have a mortgage. We’ve saved and invested for our future. And so I don’t have that need any longer. So that’s a temporary need and term insurance is what I should have had. You don’t purchase life insurance for a long term need with term insurance and you don’t purchased it for what you anticipate to be a need that will go away. You don’t buy long term or the kind of insurance you’re looking at. And I would say that the kind of insurance you’re look at is expensive, is extremely difficult to understand. I agree with you. Generally has high costs. And the investment returns by definition have to be lower because the investment return happens but then you have all the other costs associated with life insurance called mortality costs or expense that reduce the overall investment return. So I would discourage you from doing that. It’s time for me to take a break. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Stick around, I’ll be back.

KUT announcer Laurie Gallardo [00:19:27] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:19:41] Welcome back. You’re listening to Money Talk on KUT News, 90.5 and the KUT app. I’m Carl Stuart. Thanks for listening. When you have a question, call or text 512-921-5888 and we have some texts coming in. My wife and I have combined income of about $180,000 here in Austin. I got lucky on a stock purchase on Nvidia at $5.10 cost basis. Wow, you are lucky. Currently, Nvidia is still almost 70% of my $120,000 portfolio, and I wanna know if I should cash that out and put that money in a more stable spot like a mutual fund. Yes, you should. You have hit the home run. This is painful, but let me just give you an example. I remember those glory years for Dell Computer. Where it seemed like it split two for one every 15 minutes. I mean, it was just nuts and created a great amount of wealth in central Texas and no doubt around the world. But eventually all things could, things come to an end. And my recollection is the company peaked about $70 a share. And by the time Michael Dell took the company private, he took it private as I recall of $10 and 50 cents. That’s a permanent loss of capital. So yes, you should sell it. If you… Have some reason that you just continue to be wildly optimistic about it, keep a little of it. You don’t have to sell all of it, but yes, you should sell it. You’ll pay a long-term capital gains tax, which is lower than income tax, and should you put it in mutual fund? The answer is yes. If you want to stay in equities, in stocks, and you don’t want to take the time to select actively managed stock funds. Or you don’t want to hire an advisor to help you, then in my view, put 75% of it in a total U.S. Stock market fund and 25% in an international fund. And you are right, and I’m proud of you for being modest enough to say that you were lucky and it wasn’t your brilliance that got you there, and congratulations. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Okay, let’s just see, where am I here? Okay. Hurl, love the shows with Jimmy, thanks. I thought they were really great. I plan to retire at age 69, which is in four months. It sounds like you would recommend using other assets until age 70 to receive the max payout from Social Security. That is exactly what I would do. I mean, you’re close already. And you get that eight percent Annual return which you can’t get anyplace else guaranteed So it just seems to me that it makes sense for most people when when they end up doing that That that would be the best thing to do. So yes, I would do that if I were in your shoes You’re listening to money talk on KUT news 90.5 and on the KUT app call or text five one two nine two one five eight eight eight Okay, let’s see here. Hi Carl, I do not have a financial advisor. I am a 73 year old single woman who lives in a mortgage free house and also has a rental property house that’s mortgage free and that’s about $1,300 per month. I’m assuming that was your cash flow from that. I deferred collecting social security until I was 70 and that amount is $3,200 a month. I also have a very small pension from the federal government of $700 per month. I have an IRA that amounts to about 300,000 and other accounts for stocks and investments that amount to 400,000. Each of my homes is estimated at about $400,000 My question is, do I need a financial advisor or do I just stay the course? I would tell you. First and foremost, as regards having a financial advisor, it’s a little bit like owning rental real estate. People who have been successful have a hands-on kind of approach to rental real estate. Now you can be lucky and have a renter for 25 years. They keep the place great. You don’t have any kind of concerns about that. But that’s not always the case. I find most people who handle real estate other than their personal residence, tend to have a kind of a do-it-yourself, hands-on mentality. And if that’s you, then you have to think about if you engage a financial advisor and you get a good one, she or he is gonna have what’s called discretion because they’re gonna handle your financial assets on your behalf. You wanna look, and so think about that. And if you think that that sounds attractive. Then you want to get into a process. I would prefer that you look at people who do not receive transaction-based compensation. They don’t receive commissions or sales charges from stocks or bonds or mutual funds or annuities. They get paid based on the value of your assets. They’re called investment advisors. The formal term is investment advisor representative. And if they have 100, I forget the number, but it’s 100 million or maybe a bit more under management. They’re under this Texas State Securities Board. And if more than that, they’re under the Securities and Exchange Commission. They have what’s called fiduciary responsibility. It means they have to put your interest above theirs. They can receive, as I’ve said, no transaction-based compensation. And they have what the law calls a duty of care. And if you think this through, And that sounds like it would be a relief to take this off of your shoulders and have someone else do this. It’s worth the fee. Now what is the fee? I don’t know, but I do know this. It’s driven by the marketplace. If the going fee is 1% and somebody wants to charge you 3%, they’re not gonna have any clients. And so we’ve had a real sharp decline in fees over my career. And I think the real issue then is interviewing people or lots of investment advisors in central Texas. You can ask your friends, your colleagues, your people at church or your synagogue or whatever, but then you wanna have a face-to-face meeting. This person should ask questions about you. It’s a diagnostic process. They wanna know about you, your background, your professional path, what it is you’re trying to accomplish, your goals and objectives, and then they should discuss three things. And you can ask them this if they don’t bring it up. If I were to engage your services, help me understand what is your investment philosophy or strategy? How would you invest my money? If they cannot explain that to you in plain English, run away, run away. Or if it doesn’t make sense to you or flat out, you just don’t agree with it. The second is, if I engage your service, help me to understand what the happy and healthy client relationship looks like in terms of contact, et cetera, et cetera. A lot of data show that people get unhappy. With professional servants when there’s a mismatch of expectations. In the third part, which I described a moment ago, is how are they compensated. And if they’re compensated based on the value of the assets and all those other things work, then I think that’s a good idea. But I come back to my opening comment, which is you’ve gotta be okay with giving that up. If the stock market goes to heck in a handbasket and you get mad at them, that’s not a good thing. Right and they you need to understand what they’re gonna do and then you need to trust them because you’re looking for someone pretty obviously with integrity and intelligence and experience. Good luck. 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 muddy talk. Okay, what’s this one? Carl, my son was a lifeguard this summer and put $1,000 in a Roth IRA. He will earn less than $5,000 for the year. Will he owe taxes on the Roth? The answer is no. You can put money in a roth as long as you have taxable income from labor. If you had dividends, that doesn’t count, okay? And you’re putting in after-tax money. There’s no tax deduction, but you’re puttin’ your own money in there. And there are no tax consequences to that. And I would just say, I think that’s a terrific idea to get a young person started on saving and investing. So there’s no negative tax consequences to that, you’re listening to Money Talk on KUT News 90.5 and on the KUT app. Give me a call or text at 512-921-5888. Okay, here we go, let’s see. Hi Carl, that’s the one I already read. Okay, let’s try this one. My wife has about $70,000 in a rollover IRA. Is there any disadvantage aside from paying the taxes to moving this to a Roth IRA? So for everybody else, this is a really popular question and the reason is because Roth IRAs can be an extremely attractive opportunity, an option. So what will happen is the money’s in the IRA. I’m going to assume that all the money that’s in there, she put in on a pre-tax basis and it grew without taxation. She can do what is called a conversion with any or all of that amount into a Roth IRA. So she has an IRA custodian today. She can set up the Roth IRA with the same custodians and move the money over. And yes, that is a taxable event. I would say the one thing you want to be careful about is if you are in I don’t know, the 12% tax bracket, whatever the 15, whatever that is, and it would drop and take you to the 22% bracket, you don’t have to be in a hurry to do the whole thing. I’m going to get the tax code out here, the tax bracket so let’s see. So you’re married finally jointly. If your income, joint income, is 96,950 or less. You are in the 12% marginal bracket. Above 96,950, you’re in the 22% bracket. That’s a fairly healthy jump. Then you go all the way up to 206,000 and then you go into the 24% bracket, which is not a big move. So I would suggest that you look at your tax bracket based on your taxable income minus all your deductions, your standard deduction, and then, you think about how much more could I add? From doing the conversion without throwing me into a significantly higher bracket, and if that’s a thing you can do, then yes, because then she gives up, provided it’s been there for five years from the first time she puts the money in, she no longer has a required minimum distribution when she hits 73 or whatever it would be at that time, and if she takes the money out, it’s tax free after that. If she predeceases you and you’re the beneficiary, You had the same rules, and if you don’t take it out, then your beneficiary has 10 years to take it out again on a tax-free basis. So that’s how I would look about that if I were you. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here we have someone calling. Stefan, you’re on the air. How may I help?

Stefan [00:32:03] Okay, I worked previously for a non-profit organization and we had like an IRA retirement fund. I can’t remember the number, what it’s called.

Carl [00:32:11] Probably a 403B would be my guess.

Stefan [00:32:16] Yes, exactly. And I stopped working there in 2015. And it wasn’t that much at the time. It was like 15, I don’t know, $15,000. But it’s now it’s worth like, a lot more than that. And it’s increased a lot this last year because it’s because of the stock market, right?

Carl [00:32:32] Yes. Right.

Stefan [00:32:32] I currently work for the city and I have a deferred compensation fund, and I’m debating whether or not it makes sense to take that money out of that non-profit fund and move it over and combine it all into the deferred compensation fund.

Carl [00:32:51] So the first thing you do is you go to, I get, presumably it would be the HR department at the city and see if you can do this, because if you were in, that’s the key. If you were at an, if you worked at another nonprofit or a for-profit and they, and they had a 401k plan or a 403B plan, you could take that money out of your former plan and put it in the new plan. But deferred compensation is a very different animal. And so you may not be able to, my guess, I don’t know this and I’m not an accountant, but my guess is you cannot do that. What you can do is you can either leave it at the nonprofit, obviously they allow that, or you can put that into something called an IRA rollover where you select the custodian, do it yourself or do you hire somebody. And then you go to your private employer and you say, I want the money. And the employer says, do you want us to write you a check payable to you? And the answer is, absolutely not, because that’s taxable income plus a penalty, because you’re under 59 and a half. Or they would write the check to your, you know, ABC, bank, Vanguard Fidelity, Morgan Stanley, custodian for the benefit of your name, IRA. They will either send the check to the custodian or they’ll send it to you. But if they send it you, it’s no big deal because you’re not the person, they’re not payee. And you put that in the IRA. So you can avoid the taxes and you can either leave it there or you can move it to an IRA. I’m skeptical you can put it in deferred comp, but I would check with AR because that’s a very different instrument than a 401k or a 403.

Stefan [00:34:39] All right. Okay, great. I appreciate your help. Thank you very much.

Carl [00:34:44] You bet, 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. Let’s just see. Okay, that’s one I just did. Okay. Regarding when to take Social Security, my analysis shows that unless I’m going to live far past the age of 85, Bye. There isn’t a benefit to waiting to take social security. I’m 63 and deciding whether to take social security at 65 or 67. The net amount at age 85 is basically the same. And by age 95, it’s a total net difference of about 70,000. Of course, waiting till age 70 is another option. You know, if it’s personal decision, you’re obviously a person who looks at the mathematics of it. I think that’s great. And the reason I often. Recommend people wait till 70 is because of that investment return I always talk about and because it be that that monthly benefit, you know You can’t mess it up It doesn’t matter what happens in the stock market or the real estate market or whatever But I you you have the math on your side Obviously would be even further compounded depending on your personal situation If you are a male and you’re married and your spouse is likely to live seven years longer than you are, or whatever it is, and your benefit is greater than hers or his so that upon your demise they would get your benefit, well, that makes postponing it seem more attractive. On the other hand, if you’re single or you don’t anticipate a long life just because of your genetics or a chronic disease, taking it earlier makes sense as well. I like postponing it for the reasons I said. But I wouldn’t, without knowing more details, I wouldn’t insist that that’s something you do. But good thinking and good luck. I’m gonna take a break. It’s also a great time for you to call or text five one two nine two one five eight eight eight. Stick around for the rest of Bunny Talk.

KUT announcer Laurie Gallardo [00:36:57] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:37:11] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT News in 90.5 and on the KUT app. When you have a financial or investment plan in question, call or text 512-921-5888. And you can listen to past shows at kut.org slash Money Talk Let’s get this text here. Hi Carl, great show. Thank you. Thanks for an excellent public service that too few people think of early enough in life. That’s for sure. My son is turning 30. He earns an excellent income, a bit over $220,000 per year. Good for him. He has low expenses, but is generally too busy to make an allocation into long-term investments outside of his 401k. What fund investments would you recommend that he could plow his disposable income over his expenses into? And just leave it for 30 years, given that the U.S. Market has been on such a terror with the S&P heavily distorted by the MAG-7 with price earnings multiples at ever-increasing levels above historic levels. Thanks and keep up the good objective work. Thank you. Well, the key here really matters, and that’s the 30-year perspective. I mean, there’s no doubt that the stock market’s been on a terror, and there’s not doubt that you wouldn’t say it’s cheap. Uh, but he should be, uh, because he generates free cashflow, he should be a natural for dollar cost averaging. Uh, and he can get on, you know, if he’s got a lot of cash now, he doesn’t need to put all of it to work now. But like I said, at the beginning of the broadcast, I’ve learned the hard way that in the, in the stock market and investing And in the real estate market, for example, good things last longer than you anticipate and bad things last long than you’d anticipate. Just ask people about what happened to real estate in central Texas in the late 80s and early 90s. Okay, so I think that if he wants to hire an advisor, I’ve already talked about how he can go about doing that. If he wants do it himself, the simplest way is to go to one of the do-it-yourself providers. Like Schwab or Fidelity or Vanguard. Put money in passive exchange-traded funds. They won’t cost him anything to get in. The operating expenses are de minimis, you know, three basis points, five basis points. I’m talking about 0.03%. And then I would think he should be in the stock market. In spite of the tear that it’s been on, when you look over a 30-year time period, the odds of beating inflation Lie with the stock market. They just do And so I think that’s what he should do I think he should get set up what’s called an ACH with his bank and then every month However, his cash flow works twice a month, whatever He put he puts money in and if you’re a regular listener You know that I the simplest thing I would do would be seventy five percent a total stock market fund and twenty five percent international And I think it’s based on history and my own personal experience, I’ve been doing this for close to 47 years, people who have done this over that time period have really enjoyed inflation-beating returns. And I think he’s betting on innovation, he’s bidding on human innovation, and ever since the Industrial Revolution, that’s been a pretty darn good bet. And that’s what I would do. Take your time, but don’t try to time the market, admit that it’s been great, admit that it’s not cheap. Hold your nose and jump in the pool. 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. Okay. We have a call. And you’re on the air. How may I help?

Speaker 5 [00:41:25] Yeah, hi, Carl. Thanks for taking my calls.

Carl  You bet.

Speaker 5  I had a question. I’m not too familiar with this annuity plan, but I used to work for the state of New Jersey. And I left there about maybe 25 years ago. And that plan has about $265,000 there. Since then, I have my TSP about $350,000. And in my Vanguard, another $450,000 I’m just wondering if I should transfer that annuity plan to my Vanguard account.

Carl [00:42:00] So the annuity plan is money that you had deducted from your paycheck, I presume. Is that correct? Yeah, so it’s, so its pre-tax and the growth on that you haven’t paid tax on. So if you were to take it out of that annuity, plan and put it in your own individual Vanguard account, uh, that would be, that amount would be subject to income tax. How, how old a woman are you, Ann?

Speaker 5 [00:42:31] I’m 58. I was planning on transferring into the retirement plan.

Carl [00:42:36] Okay, you okay. Good. You didn’t say that’s my misunderstood I already that’s quite all right, then I think that’s a great idea. Yes consolidation

Speaker 5 [00:42:48] Why is it a good idea annuity is not good because I’ve never understood what exactly is this

Carl [00:42:55] Well, I don’t know that particular annuity either. Now, if it’s a defined benefit pension plan, that’s sometimes, it is, okay. All right. That’s different than we people. Annuity is a broad term. So I was thinking it was like a fixed annuity or variable. Don’t it? It’s not that it’s in pension. It’s a pension plan. Okay. So the benefit of that is that once you reach a certain age, you’ll get monthly income for life. And it’ll be guaranteed and that you don’t have to worry about the stock market or the bond market or of the economy is that state’s liability to pay you and so the question is would I would I prefer that component of my retirement to be fixed and guaranteed and Not subject to market risk if the answer is yes Keep the annuity because that’s that could be something along with Social Security that would be guaranteed to you. Now, having said that, because you haven’t worked there for a long time, I would say that if you took that money and put it in your TSP, which would be, and you have choices of stock funds, and you’re okay with not having that guaranteed income, the odds are that you will have a better return over time. By taking it out of the annuity and putting it in your TSP. You’re giving up the guaranteed nature of the annuity in return for a probability of a higher investment return. That’s how I think about it.

Speaker 5 [00:44:35] Okay, thank you so much. The other question I had is, given the volatility, I don’t know what the market has been good, but I’m yes, it was worth any minute. Yes, and I’m 58. So I’m not sure if I want to give up this guarantee. Yes.

Carl [00:44:49] Yeah, I get that. I understand that. That’s perfectly understandable. I will tell you as a 58 year old female, you have to plan on living to your 90 and perhaps longer. And so if that in Yes, the stock market is always volatile, it’s going to go down, it’ll go down a lot, I don’t know when and it’ll kill go up a lot. And if that kind of volatility concerns you, and you already have exposure to that through your TSP. And you sleep nights better keeping the other annuity from the previous employment, then keep the darn annuity and sleep nights and know that at least that part is guaranteed.

Speaker 5 [00:45:29] Got it. Thank you so much. I really appreciate your help.

Carl [00:45:32] Okay, you’re welcome, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-58. Joe, you’re on the air, how may I help?

Joe [00:45:51] Appreciate you taking my call. Thank you. We were both my wife and I retired from our jobs. I started a small business. We’re not 65 yet. So we cannot. I have to bridge my way to Medicare. Yes. And so we’re gonna have to buy insurance on the open market. But the government shut shut down. I believe there’s not gonna be any subsidy. So I’m not sure if this is a question you can answer. I know on taxes, you get to write off your medical expenses. I believe it’s 8.5%. And I believe on the, I’ll call it the Obamacare website, it’s gonna cost me 8. 5% of my income. So my question is, Do I pay the 8.5% to get health insurance? And then can I turn around and write that off on my federal taxes?

Carl [00:46:58] Well, first of all, I’m not a CPA. And any kind of deduction has to exceed your standard deduction that you and your wife have. Because my understanding of taxes is you get a standard deduction. You would have to have deductible expenses above that for there to be a deduction, right? I don’t know if your income minus the standard deduction leaves you in a position where that tax deduction is still available to you. But I don’t know, you were right when you said I may not be able to answer that. I don’t want to tell you something and be wrong. I think you need to do more homework with ChatGBT or with Google or somebody or some entity like that because that’s really technical. I’m sorry but that’s just not my area of expertise, Joe.

Joe [00:47:53] I thank you again for taking my call.

Carl [00:47:55] You bet Joe, thank you. Thanks for calling. You’re listening to Money Talk where occasionally we stump the chump just like there. Call or text 512-921-5888. Okay. Let’s see what this is. Thank you for answering my question. I made my birthday today. I’ve been holding off on selling because of what is darling Nvidia has been. Tempted to cash out half and put in SPY, VTI, or even SCHD for a nice dividend, but I have a bit of a hard time not gambling on Nvidia, climbing even further than it is currently. I have a stop loss set on my Nvidia shares, but it’s sitting pretty low, thanks again. You’re very welcome. It’s a nice problem to have. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. And Mark, if that’s an incoming call, you just go ahead and tee up the person’s name. You don’t have to put what they’re calling for because we’re running out of time and I’ve got one text to do here. Let me get that. Hello, I need a new car and want to get an EV. What are your thoughts on leasing versus purchasing? Love your show, thank you. Well, in the old days, pre-COVID, This was. Fairly easy answer because cars depreciate so dramatically that if you had the ability to pay cash for it and you were going to own it for a long time and you can live with the depreciation I do that. I will tell you that EV depreciation is bad. I know this from a personal note. I bought a 2014 Tesla for $135,000. And I gave it to, I will just tell you, Austin PBS, and it was sold at auction for $16,900. That’s right. Because what I learned was, even though it only had 34,000 miles, it was because of the battery. It’s like selling an old computer. So be prepared for that. Even because of that sharp drop, you might want to lease it, but you want to understand what the interest rate is on the lease if I were you. But I had bad personal experience, so good luck. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. We’re down to our last six minutes, but we do have time. 512-921-5888. Bob, you’re on the air, how may I help? Let’s see. Go ahead. Start over again, please. We had a technology.

Bob [00:50:50] I just bought myself a Powerball ticket, I’m planning on winning. And with the cash value, I am going to get over $100 million after tax.

Carl [00:51:03] Okay, good!

Bob [00:51:05] So my plan is to give the maximum contribution without paying a state tax to my kids and then with the rest because I don’t want to be stupid and blow it, I’ve heard about charitable remainder annuity trusts and thinking that is something I could do so I could guarantee that money goes to a charity but at the same time I could get maybe four or five percent given my age each year. So is that a wise idea?

Carl [00:51:37] Yes, it’s a wise idea. Absolutely, if you wanna eliminate the investment risk and you want lifetime income and you are charitably inclined, then your homework has done you a great favor and you should do that. And when you win that, you call us back and tell me, okay?

Bob [00:51:58] Absolutely sir, thank you very much, you’re welcome.

Carl [00:51:59] You bet. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Alright, let’s see here. Oh, I skipped your question. Well, thanks for getting back to me. I’m 45 years old and want to invest for the first time ever. I have $50,000 saved and very weary of the stock market. Therefore, I’m looking into an insurance annuity. At 5.5 for a five-year term with no wage restrictions for collection returns at the conclusion of the five- year term. Are there better options that you recommend? Any other pitfalls or concerns, considerations you could suggest at this time? Well, since you’re 45, you put it in an annuity. If you take that money out when it matures, you’re only gonna be 50, you’re gonna pay income tax and a tax penalty. That sounds to me like a very bad idea. And if you’re worried about the stock market, that’s common sense. But I will tell you at your age that the annuity is going to get you after taxes and after inflation, somewhere between zero and a negative return. And I think you’re too young to do that. I think it’s time to take some risk, but you don’t have to do it all at once. Why wouldn’t you take that $50,000 and take it in $10,000 increments or $12,500 increments? And put it 75% in a total stock market index exchange traded fund and 25% international, hope like heck that the stock market goes to heck in a hand basket because the next time you put the money in, you’ll be buying at lower prices. This is a perfect time to consider this strategy because you’re the third or fourth person today who’s talked about your concern about the stock markets. One would argue maybe the stock market won’t go down because everybody’s so worried about it, but let’s suppose it does go down. That’s when you get to take advantage of it. Warren Buffett said, I get nervous, or I get fearful when others are greedy, and I get greedy when others were fearful. So now’s a perfect time to begin dollar cost averaging. And annuity, all it does is kick the can down this road to get the money, and then you end up, You say you have no tax penalty. So that’s interesting. I don’t know how that would be, because if it’s an annuity and the money, the interest is tax deferred. But even if you don’t have a penalty, you still have to pay taxes on it. I don’t see that as being, I think that’s an inferior return over longer periods of time for a 45-year-old person. So I would not be inclined to do that if I were you. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Let’s see, here’s a question. I’ve got about a minute to answer. Is revocable trust a good idea? And the answer is, if you will listen next week, I’ll make sure I get to this question. Because the answer about when you use trust, regardless of the kind of the trust, it’s a little bit like pharmaceuticals. Some drugs are good for heart disease, and other drugs are for high blood pressure. It depends on your personal situation. You could also call, and then you and I could talk about it next Saturday if you would like. I wanna thank Mark for doing such a great job this afternoon. I wanna think you for listening and remind you next Saturday after the news at five to be sure and tune in to Money Talk.

KUT announcer Laurie Gallardo [00:55:31] 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.