Money Talk with Carl Stuart

Carl takes on your questions, including a holdover from the end of last week’s program on the cost of probating a contentious estate, another on managing multiple retirement accounts from multiple employers in multiple countries, 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] [00:00:02] This is Money Talk with Carl Stewart. Carl Stewart is an investment advisor representative of Stewart Investment Advisors. Now, here’s Carl.

[CARL] [00:00:12] Good afternoon and welcome to Money Talk. I’m Carl Stewart and you’re listening to KUT News 90.5 and on the KUT app. Money Talk is a broadcast about the world of financial and investment planning. We always determine an agenda by calling or texting 512-921-5888.

It’s always a great idea to call or text at the beginning of the hour. And giving me ample time to do my best to answer your questions. I take today’s calls first and then today’s texts which you will hear beep when they come in and then previous texts that I have not had a chance to answer.

I am going to break that rule today at the beginning of the broadcast because we had an important question right before we went off the air last Saturday from Sabrina. My understanding is Sabrina had hired an attorney to help probate an estate. And when the process was finished, she was surprised, I suspect shocked, that the attorney said that he would take 35% of the amount of the estate.

I had not encountered that before. I agreed with her, that sounded like a lot. And so I called an attorney, who I have great confidence in, spoke with him. He then went and spoke specifically with an attorney who practices in the way in the area of estate. And here’s what I’ve learned.

You anticipate that the settling of the estate will be contentious. For example, your parents have passed away and you have siblings who are the beneficiaries of the estate. And they’re estranged, one of them’s estranged, or they’re very difficult relationships. You may go to an attorney because you expect this will be difficult. And if an attorney anticipates that this will be contested. She is likely to talk about a contingent fee, and the reason is she doesn’t know if she’s gonna spend three hours or 10 hours or 40 hours on the estate. So, there’s no way to calculate what the fee would be, and that’s a circumstance where you would end up with a contingency.

The other possibility is there fits independent administration. Typically, that means that it’s a straightforward process and the attorney does this all the time and she will have a fixed or flat fee.

If it’s dependent administration where one of the beneficiaries is a minor then the probate court will look at the fee structure on behalf of the probates on half of the minor.

So, Sabrina, I hope you’re listening today. I have to infer from what you said by my recollection and what I’ve learned, is that you anticipated this would be a contested situation with some of the beneficiaries, and consequently the estate attorney argued that there would be a, you heard the end, would be contested, it would do a contingent fee.

Here comes a text. Carl, please discuss the possibility of a financial advisor acting as both, and I think that’s a previous one. Let’s just see. No, there’s a new one today.

[text] “Please discuss the possibility of a financial advisor acting as both a trustee and investor. I have received from my parents’ estate a check in the amount of $146,000. I am a vet concerned with this affecting benefits and income restrictions on my affordable housing.”

Well, first of all, an advisor should not act as a trustee. That’s just not good practice. Um, the advisor will be compensated for investing your money, and that would put, in my view, at least the appearance, if not the actuality, of a conflict of interest. So, you wouldn’t, and I wouldn’t want to have an advisor be a trustee.

Frankly, the word trustee is a really articulate term because what you want is someone who’s trusted, someone who, in your experience, has judgment. They don’t have to be. An investment expert, you can hire someone to do that, but you want someone who you know will have your best effort, your best interests in mind, and not, while the advisor may well have that as well, those are two separate functions.

Regarding the $146,000, that’s not affecting your income, and as a result of that, I don’t see how it would affect your affordable housing. Or for that matter if you had any kind of, say, social security or disability from a social security, this will not be reported as income to you. Just as if someone gave you a gift of money, that’s not a taxable event to you in my understanding and that’s also not going to affect your affordable housing. So good luck.

Thanks. Thanks for 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.

I have some text from last week. Let’s just take the next one.

[text] “Carl, can you talk about recharacterization of the traditional IRA to a Roth? And who could help me figure out my taxes on the conversion?”

Well, the word you use is properly the right word, and that’s conversion. So, here’s how this works. If you have money in an IRA… And you would like to make take that money and put it in a Roth you can do that that process is called a conversion you go to your IRA custodian and you set up a Roth and then you instruct the custodians to move money from the IRA into the Roth now if the money that you put in was pre-tax you got a tax deduction for the contribution to the IRA then all of the money which comes out and goes into the Roth will be subject to income tax. So, you just wanna be tax sensitive.

If you are in a specific tax bracket and this will thrust you into a higher bracket, you wanna be aware of this. And if it goes into Roth for the first time, you wait for five years and then you can take the money out income tax free and you’re not subject to a required minimum distribution.

Well, I’ve learned over my 47 years. In this world of investments in financial planning is that people get to a stage in their life where if they’ve done some good planning, and good saving, and good investing. They get to the point where the government says you’ve gotta start taking money out, and they don’t necessarily want to take the money out, and that’s when the possibility of a Roth seems more attractive.

The second thing may be that they like the idea of being able to take money out on a tax-free basis. Because they haven’t fallen into a sharply lower tax bracket when they retired. Or it’s even plausible that their beneficiaries are in higher tax brackets than they are, perhaps, they’re high-income professionals.

There is one difference, and this is something called a backdoor. People refer to it as a back door Roth IRA conversion where you put new money into an IRA. It’s an after-tax IRA. Because you make too much income to take a tax deduction, and then you immediately move it to a Roth IRA, then because there was no tax deduction on the money going in, there’s no tax coming out of that IRA, with one important distinction. If you have IRAs elsewhere that you made contributions to, and you got a tax reduction for that, then some portion of that money in your new IRA will be subject to tax. It’s complicated, but you don’t want to get caught in that situation. So, and as far as helping figure out the taxes on the conversion, it’s all income. So what you can do is you can just Google the IRS tax tables, you can determine what your income is going to be, and you can look at the various brackets and determine if you took a certain amount out of your IRA and converted it to your Roth, and added that amount to your income. What your taxes would be. And that conversion will be reported by your IRA and Roth IRA custodian to the IRS, just like any dividends or interest in a taxable account.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call me with your financial planning or investment questions or text at 512-921-5888. I think I had another text come in, yes, so let’s just see.

[text] “I’ve built up retirement funds not only with several companies, but in several different countries, specifically the Netherlands, Belgium, France, UK, in addition to the U.S. Is there a way to bring them together? And does each fund need to be handled independently?”

I got to tell you, in 30 years of Money Talk, I don’t believe I’ve ever had this question. It’s much simpler when they’re all in the United States, because you can consolidate into one IRA. So, I think the place to start is since you have these retirement funds with several companies, start with each company and go to, they will have a plan administrator and they deal all the time with people who want to take their money from that plan where they’re no longer an employee and put it in another one. I don’t know when it comes to foreign countries how that conversion occurs in terms of currency. I don’t know if your plan is dollar-denominated, or if it’s euro-denomicated. That’s a layer that I just have never encountered before.

The place you start is with the existing plan. Also, the thing is, because you’re not working there, unless you wanna go, and this sounds difficult to me, to see if you could take it into your current plan if you have a 401k at work, it might be simpler to set up an IRA.

So that with a domestic custodian, you decide whether you want to do this yourself or if you want somebody else to help you, and then you set up the custodians with somebody like do-it-yourself like Vanguard or Fidelity or Schwab, or if want to, on the other hand, have an advisor, then you go through that process as well, set up with the custodian, and then if you’ve got someone to help, I would ask them. If you work with a large company, they may have encountered this before. It’s worth asking them as well. So that’s how I would start and good luck.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Give me a call or a text at 512-921-5888.

[text] “Hi Carl, thank you for continuing this amazing show.”

— You’re welcome. —

“I’ve listened for a few years. I wanted to get your thoughts on target date funds for diversification. I look at the allocation and these seem to be close to what you describe. I wanted add 10 years to my end date to stay 60-40 at 80 years old, thanks.”

That’s a great question. So, here’s what happened. After the invention of defined contribution plans, we know them as 401K plans and as 403B plans. People began to –experts, and employers, and even the Department of Labor– began to observe that even though the employee plan participants were given lots of choices, some people just left it in cash because it was just frankly too intimidating to make the choices, and the education provided by the employer was insufficient to make them feel comfortable to choose.

And also, I remember this vividly, when Enron went broke. There were stories in the Wall Street Journal of Enron employees who had 100% of their 401k plan in Enron stock, so they were wiped out.

So along came the target date funds. Sometimes these are also called lifestyle funds. And the idea is a fund will have, usually it’s like five-year increments, 2025, 2030, 2035, 2040. Fund provider, whether it’s American funds or JP Morgan or T. Rowe Price, or Fidelity, or Charles Schwab, or Vanguard, they put in a mix of various funds, stock and bond funds has been my experience. And the idea is as you approach that target date, they’re going to assume that that’s going to be your retirement date and they move more and more. Out of risk assets, stocks, and into dead instruments, bonds, so that you have a heavier bond allocation when you reach that date.

And to your point, when I say this, I’m not saying this negatively. You can game this. You can say, okay, I know I’m gonna retire in five years, but I don’t wanna have so much money in bonds, so I’m going to choose a target date fund that has a longer date when it turns into it.

Is that a reasonable thing to do? The answer is yes, because as you know, having listened to Money Talk for several years, the single biggest determinant of your investment return and your investment risk is the asset allocation. In this case, the mix of stocks and bonds.

And I would say this, I think compared to doing nothing, leaving it in cash or putting it in company stock, I think target date funds is a terrific idea. If you are either uninterested in all the other choices in your employer’s plan or simply overwhelmed by those choices, then I think a target date fund is just fine.

But there’s a couple of things you want to consider. Some of the providers will look at the fact that you’re retiring and they may assume, let’s just say for argument, that they’re going to have that target set up for someone uh… who turns up who turned 65, okay? And so they do that, and that may be more conservative than you want it to be. Another plan may say, no, you’re gonna be 65, but you gotta plan on living to 90, and they have a different allocation, and they more risk.

So you wanna understand the glide path, that’s what it’s called, to that target date fund, and make sure that it makes sense to you. For other people who have time and interest and you have other mutual funds or exchange-traded funds in the company plan, then I think it’s reasonable to build your own portfolio.

It’s time for me to take a break. It’s a great time for you to call or text 512-921-5888. I shall return.

[KUT] [00:16:10] This is Money Talk with Carl Stewart. Now, here’s Carl.

[CARL] [00:16:16] Welcome back to Money Talk, I’m Carl Stewart and you’re listening to KUT News 90.5 and on the KUT app. Oh, I forgot to mention you can listen to our past shows at KUT.org slash Money Talk. That’s KUT dot org slash Money talk.

This afternoon when you have a financial or investment planning question call or text me at 512-921-58. We have all of our lines available, I have no new text coming in.

I was reflecting on last week’s broadcast and we had several interesting questions or interest in gold. That’s not surprising. And I was checking today if you owned the gold, IWN, that’s the iShares Micro Gold, it’s up, my goodness, 25.91% on a year-to-date basis. That compares to, say, the Vanguard Total Stock Market, which is down 6.28, the SPY, that’s the S&P 500, 5.76, and the NASDAQ minus 9.87.

However, someone asked, is it too late to buy gold or not? I said, I don’t think the moves in gold historically have been short-lived, and I think that I probably would be best. To put some money in, but not all at once. But here’s what you have to be aware of. It isn’t that any investment is always a good investment in all times.

I read this today into the Wall Street Journal. Gold did not surpass its January 1980 close of $834 an ounce until nearly 28 years later. And then it did not rise above in August of 2011 closing high of $1,892 an ounce for almost nine years after that. So just be careful.

I believe for people who want to own gold that a modest position in your portfolio is a reasonable thing to do. But I’ve learned the hard way that things that can go up go down. And right now, gold has a lot of momentum.

Clearly, central banks are buying gold. They’ve been reducing their holdings in treasuries long before the current administration and adding to gold. So that’s an underpinning there. But that doesn’t mean that you should go right out and put a whole bunch of money in there. I think that would be a mistake.

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

[text] “What is the law regarding paying taxes on capital gains from selling your home in Texas? My husband and I are both over 65 and plan to buy another home in another state. Do we have to reinvest right away? Pay capital gains tax on the difference in price, thanks.”

So here’s my understanding. If you own the house jointly, and if the first $500,000 of gain is not subject to capital gains tax, the balance, if it’s over a $500,000 gain, is subject to capitol gains tax. You don’t have to be concerned about being in Texas because there’s no Texas income tax and certainly no Texas capital gains taxes.

Now here’s the part that I haven’t thought about in a long time. In the old days, you had 18 months to reinvest in a new home. I do not have that at my fingertips. If we have an expert listening who would call or text and give me the answer, I would appreciate it and I’ll look into it this week. But the fact is that if you buy another home and reinvest it, my understanding is there may be some tax benefit, but I’m not positive of that.

So, you might wanna also talk to a tax expert. But you do, if the gain, from the purchase price is less than $500,000, then you don’t have to worry. Also, you can change what you paid for the house, frankly, by if you’ve made and kept track of substantial improvements to the house. Then you have the possibility of going ahead and adding that to your original cost basis and that raises the cost basis and reduces the amount of gain.

You’re listening to Money Talk on News Radio KLB–. I’ve said it again on Money Talk, on KUT News 90.5 and on the KUT app. What happens is I’m trying to redetect, talk on the radio and I can’t do two things at once. So, call me or text me with your questions at 512-921-5888. Let’s see, anything coming in now? No, all our lines are available. And so is the text 512-921-5888.

All right, another thing I did some thinking about this week, and it was a good article in today’s Wall Street Journal, is if you’re going in your 401k or in your own portfolio, it’s entirely plausible based on the data that you have either all US stocks or mostly US stocks. Uh… And uh… I understand that because it’s been a number of years where U.S. Equities have clearly outpaced foreign equities. That is not the case on today, in the year to date. I told you earlier, if you own the S&P 500 by buying the SPY exchange traded fund, you’re down 5.76. If you bought the international market by buying Vanguard exchange traded funds VXUS, Year to date, you’re up 7.84. So that’s 13 to 14% difference, that’s huge. And so you might want to look at your portfolio and look at you’re weighting in terms of US and foreign stocks. There is an interesting thing that a lot of people don’t realize because they haven’t been investing for this long, but international versus domestic, from 1971 through 1990, the MSCI EFI, what the heck is that? That is the Morgan Stanley Capital International, Europe, Australia, and Far East index outperformed the S&P 500. Think about this. Virtually 20 years, 1971 through 1990, that foreign index outperform the S& P 500 by an average of 4.2 percentage points a year, it’s according to T. Rowe Price. So that’s a big deal. So I, long time listeners to Money Talk. Know that I have had a long time commitment to international stocks, and it has been difficult, but I think that what we’re seeing is perhaps a global shift in asset allocation, based on my reading, a lot of large institutions around the world, because of the outperformance of the U.S. Equity market. Are overweighted and they’re beginning to make changes in capitals flowing into foreign equities and that’s why you see such a disparity in returns you’re listening to money talk on KUT news ninety point five and on the KUT app you can catch past shows at KUT dot org slash money talk that’s KUT.org slash moneytalk and give me a call or a text at five one two 921-5888. I’m going to start bloviating here until you give me a call. So let me just put this text here just in case now. Looks like we might be getting a call coming in. I’m just going to sit here and give you the numbers again because something’s coming up. 512-921-5888. I see that nothing’s going on So, oh, I heard that, and so did you. Let’s see what we’ve got here. I’m new to selling stocks. All stocks I have is from my company in 401k. I want to sell some stocks. How do I calculate the capital gains? And in general, what are the other ways of saving in taxes other than the Roth and 401k? All the stocks you have are from your company in 401k. If the stocks that you own, and in a 401k they may not be individual stocks, they may be stock funds, as long as they’re in the plan, you can change that and sell those and you do not get any tax consequences because it’s inside the plan. If you have stocks or stock funds and you own them in your own name We call that a taxable account versus your 401k, which is a tax-deferred account, then when you sell those, if you sell it at a profit, then the difference between what you paid for it, that’s called your cost basis, and what you sold it for, that amount is subject to tax. Now if you’ve held those stocks or stock funds for a year or longer, you’re going pay tax at a lower rate than your income tax rate. And all you have to do is just look up the tax tables, and you look at what your income is from work, or social security, or pensions, or dividends, or interest, and you add that to the amount of the capital gain, and then you look at the tax table, and it will tell you what the tax is. And if we get a law later in the broadcast, I got the tax tables here, and when I take a break, I’ll look them up and explain that to you. That’s how you calculate the capital gains. And in general, what are other ways of saving the taxes other than Roth and 401k? I would tell you that in my view, the best way to save on taxes and grow the money is in passive stock funds, okay? Where you buy an index fund and you buy and exchange traded fund and to go do some homework or engage an advisor. Because the invention of an exchange traded funds has led us to own. A big index like the NASDAQ or the S&P 500, and they’re very tax efficient, they’re designed not to pay out capital gains, and they just pay out the income from the underlying stocks, it’s a modest amount, and as long as you don’t sell that exchange traded fund, then you are not going to have to pay taxes, and that is a heck of a deal. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Shailen, you’re on the air. How may I help? Okay, let me just see if I know how to answer this. Okay. Shailen, you’re on, go start over again. I didn’t, I hadn’t clicked the right one. Please proceed.

[Shailen] [00:27:53] Okay, hey, this is Shailen here. Thank you so much for all of your insight. My question is regarding the capital gains. At what level do capital gains begin to start? Because we bought our home and we put probably about 50 grand into it. I don’t know how much we’re going to end up getting for it, but I do have receipts for that. So I’m just wondering at what dollar amount your capital gains start?

[CARL] [00:28:22] Okay, you’re going to hear me shuffling papers here because I have the 2025 tax rate schedules and contribution levels and let’s just see. Okay, if you’re married finally jointly, the tax on capital gains, if your income is over $96,700 but not over $600,000, the tax rate on the gain is 15%. If your income is over six hundred thousand remember that would be including the gain into your income to determine that number the tax rates twenty percent so that’s how that works shaylen shaylan

[Shailen] [00:29:03] real quick if we were to take the money that we put into the house and apply it to what we think we can apply it what we originally bought it for at my yes

[CARL] [00:29:13] Yes. It’s not like a tax write-off. It is adding to it. It increases your cost basis, which then when you sell the house, it’s the amount you paid for the house plus those improvements so you have a smaller gain and therefore lower taxes.

[Shailen] [00:29:32] Got it. Okay. I appreciate that. Thank you.

[CARL] [00:29:34] Okay, thank 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 go. Dave, you’re on the air. How may I help?

[Dave] [00:29:53] Hi, this is Dave. I’m calling, I’m asking about if we’re shifting our allocation from large US stocks to more bonds, are there funds that do a good job mixing the duration instead of me having to get multiple funds, mixing the duration like you would with today’s uncertainties and unusual bond market, and also what about bonds outside the US and the falling dollar?

[CARL] [00:30:18] Great question. And I take it you know that I use, and I’m using here, the Morningstar categories. I like to have an ultra-short fund, then a fund that matches the index, a core fund that looks like the Berkeley Ag, and then a multi-sector fund. And the reason is because I don’t know if interest rates are gonna go up, go down, or stay the same. If interest rates stay the the same, I’m gonna get a decent good dividend from the core fund and its interest short rates stay high from the ultra short fund. On the other hand, if rates decline, then I’m going to have a lower return than the ultra-short. I’m to get some capital appreciation in the core funds and I’m have a very nice return in the multi-sector.

So I like that approach. Now. I also like active management in bonds. I’m a big fan of passive management in equities with a little bit of active management, but I really like active managing bonds and I’ve read enough and observed enough personally that I think active management is a better place to be. As it regards international bonds, I’ve never owned an international bond fund and it’s not because they’re bad, it’s because of the currency risk.

But to your point, it can also be a tailwind rather than a headwind. Right now. The dollar has been declining after being strong for a long time. And what happens when you own international stocks and international bonds, and I know you know this, what happens is not only do you get whatever the gain is, if there’s a gain, but you get an additional bump because you’re owning euro bonds and when they’re converted to dollars, you get extra benefit because of the weakness of the dollar. I’m just, I’m perfectly comfortable taking the currency risk in international stocks because that’s a risk portion of my portfolio. I don’t look at the bonds the same way so I don’ have an opinion on international bonds because I just haven’t bought them. Now if you want to go anywhere fund and you sound like someone who can live with a bit more risk, the multi-sector bond funds are going to do that. They’ll have varying credit and they’ll have varying domestic and foreign. They’re really unconstrained. And I would look at the multi-sector. If I were gonna do one, based on your question, a multi-sector bond would come the closest to meeting what you’re looking for, Dave.

[Dave] Great, thanks a lot.

[CARL] You bet, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. I’m gonna take a break. A perfect time for you to call or text 512-921-588. I’ll be back.

[KUT] [00:33:22] This is Money Talk with Carl Stewart. Now, here’s Carl.

[CARL] [00:33:28] Welcome back. You’re listening to Money Talk. I’m Carl Stewart. Money Talk on KUT News 90.5 and on the KUT app. Give me a call or give me a text at 512-921-588 and you can listen to previous shows at kut.org slash money talk. I read this text because it’s an answer to an earlier question. There is no issue of rolling over the profit from one house to another anymore. In 1984, when we sold our old house, we rolled over the sale of that into a new house. No taxes! But, they changed the rules so that now it is simply $250,000 for a single person or $500,000 from married capital gains exclusion for the sale. Our house cost $300,000. We have made a number of improvements to it. I keep track of all of those, just the materials, not our labor. If it adds up to $200,000 in improvements, our new basis is $500,000. If we sold it, like our neighbors, for $1.2 million, then our profit would be $700,000 500,000 of that is excluded and we owe capital gains on the remaining 200,000, that’s all, doesn’t matter what we do with the money.

Terrific, thank you so much for that. 512-921-5888. Raja, you’re on the air, how may I help?

[Raja] [00:34:59] Hi, my name is Raja. My question is, what are some good rates that you would recommend the real estate investment?

[CARL] [00:35:10] They can sure are you talking about interest rates

[Raja] [00:35:15] uh… Any uh… Not interest rates but the uh… I think uh… The to something i uh… You can be heard about blame the warning from related properties sure i can by

[CARL] [00:35:27] I will tell you about REITs. So REIT stands for Real Estate Investment Trust. And this is a very old investment vehicle and these vehicles own income producing real estate. They may specialize in retail or office or multifamily or they’ve even years ago had golf courses and they operate the business and they have something called funds from operations. After they get revenues from the rent, they pay all the operating expenses, taxes, upkeep, et cetera, and then they must distribute virtually all of what’s left over, 95% of what is left over to you, the holder, the trust holder. And in some cases, that may partly be not subject to income tax.

There’s a feature called return of capital. And so if you’re going to do this, what you want to do is make sure that either you own several that own two things. They are in different parts of the country because real estate is very local and in the late 80s and early 90s, real estate was a big loser in Texas, but not in California.

In 2008, things were okay in Texas and terrible in California, so you wanna diversify by region and you wanna diversity by property type because if all you had owned was retail, and COVID hit, you would have been in real trouble because retail just stopped and shopping centers were empty. So that’s the way to go about getting real estate investment trusts. They pay higher yields or higher rates, if you wanna use that word, than the typical common stock.

What are the risks? One risk is that interest rates go up. I don’t think that will happen, but it could. Because it’s an interest-sensitive investment, and rising interest rates puts downward pressure on the price of REITs, and then I’ve already mentioned the other one, that you could be in a particular type of real estate, let’s say multifamily, and there could be overbuilding. But you have heard that they pay higher yields than you would get for a savings account or a money market fund. So that’s my answer for you, Roja.

Okay we’ll drop that call. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-836-5888. All right let’s see I’ve got a lot all of a sudden. Let me just see if I can go back here and see where we are. Okay let’s, see.

[text] “Hi Carl, not to wade into a controversial subject. Uh-oh. But I, like many others… Or afraid of upcoming recessions, loss of my retirement funds, et cetera. Do you have any advice on how to protect myself financially for the next few years? I’m retired, not bringing in an income other than Social Security and what I’ve invested with Fidelity. Also, should I be buying all my big-ticket items now? Water heater, dishwasher, et Cetera. I’m referring to imports and tariffs concerns. Thank you, Barb.”

Boy, that’s a heavy question, Barb, And of course, I can’t tell the future any better than anybody else. I would tell you this, if you can afford to purchase those bigger items, that the odds are that prices are going to go up.

We just don’t know what the administration is going to do and how it’s gonna negotiate. But it certainly appears to me that the Chinese are in no interested in particularly. Negotiating at this point, and to the extent that these products either come from China or the parts come from from China, you can anticipate higher prices. It’s a reasonable thing to go ahead and do that.

The thing you have to think about for advice on protecting yourself financially is this. Because you’re a female, you have a longer life expectancy than a male, and Social Security is a fixed amount. Yes, there’s an inflation so-called COLA, cost of living adjustment. But you don’t know what that’s going to be. I remember recently one year it was a big number, like 8% and another year it like 1%. So you need to have something else, because your real risk is not the short-term decline in the stock market in my view. Your risk is that the Social Security won’t keep up with the costs. We’re talking about buying merchandise now because of higher prices. We can anticipate higher food prices as well. So much of our food is imported. And so if I were in your shoes, I would still lean in to risk simply because you have a long life expectancy and you need to have something that will help you make up for the loss of purchasing power. So you don’t have to take a lot of risk. I don’t know what kind of funds you have of Fidelity, but stick with the index funds unless you like to pick your actively managed funds. I would suggest that you have probably Oh, maybe 40% in Fidelity bond funds. Make sure they’re not high yield funds, because they tend to act like stocks in bad times and go down. And also you want to then, Fidelity has very inexpensive exchange traded funds that you can buy for the S&P 500 and then for an all international, take that 60% and put 75% of it in the SMP and then the remaining 25% in a broad based international. I think if you can do that and don’t look at your statement. I think you’ll be better off and good luck. Thanks for your text. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call with your questions or text me at 512-921-5888. Here we have a call. Srakesh, you’re on the air, whoops, I just, yeah, uh oh. I’m sorry, I hit the wrong one, I apologize. Please call back. 512-921-5888. If you call back, I will take your call. Okay, let’s see here. That was that text. Let’s take the next one. Money talk question. Amongst the equities you own, what is your allocation between international and domestic? Well, I accidentally answered your question a while ago. I have, for a long time, had 25 percent of my equity allocation outside the United States it just seems to me with fifty percent of the world’s public companies outside the United States it just makes sense that that’s where you want to have some of your money so that’s that’s the uh… That’s allocation that i would use thanks five one two nine two one five eight eight eight

[Text] “Hi Carl I’m enjoying your show but have to admit that most of its way over my head…”

i’m sorry i really try to make this understandable.

“I’m 65 and still working. I have a 401k and high yield savings account. But only about $200,000 saved. I carry a mortgage with a low interest rate. I don’t have a lot to invest, but I’m wondering if there is a group out there that can help me make smart decisions about the money I do have. It’s a great question. I can tell you that you are an intelligent person and that the best place, when you can go online, you can study. I will tell you some things to avoid. Avoid any literature. That promises you high returns, or promises you that you can’t lose money. That’s, I think, always trouble. I think reading broadly, and you can read investment material where no one’s trying to sell you something, I think that’s a good idea. If there is a group, you might Google the American Association of Individual Investors, the American association of individual investors. They have clubs. Around the country at least, and I would think that that would be something that would helpful for you as well. So good luck.

You’re listening to Money Talk on KUT News 90.5 and the KUT app. Here we go.

Robert, you’re on the air. How may I help?

[ROBERT] [00:44:01] I have a question, so I own a house that I lived in for 6 years and have rented now for 22 years. The house has improved in value, if I were to say it now, what is my tax situation like?

[CARL] [00:44:19] So it’s my understanding that because it’s been a rental property, you will pay capital gains tax on the gain because it is no longer a personal residence because you’ve rented it out for 22 years. So the gain is subject to capital gains. There’s no tax savings like there would be for a residential real estate. As I said to an earlier caller, you would take whatever your normal income is and you would add the gain to that and whatever that amount is. Than would be the tax rate on the capital gain. So if you have a big, if your income, are you single or married filing jointly, Robert? Are you single or married filing jointly taxes?

[ROBERT] [00:45:06] Married, highly jointly.

[CARL] [00:45:07] Okay, if you’re married finally and jointly, if you sold this property and your combined income plus the proceeds from the gain of the property was not over $600,000, the tax rate would be 15%. If the gain was over$ 600,000 the tax would be 20% on the gain. That’s how you figure it’s my understanding.

[ROBERT] Thank you.

[CARL] You’re welcome. Thanks for calling 5 1 2 9 2 1 5 8 8 8.

I’m going to get this right this time Srikash, you’re on the air. How may I help? Chakras, you’re on the air.

Speaker 7 [00:45:49] I have a very, very informative session, thank you for sharing that. Thank you. I listen to it every week. My question is, you know, I don’t have time to read through companies for requirements and yearly returns, etc. What I do is, I usually invest below Vanguard S&P 500 index fund and I just invest in But most of my portfolio is turned down. One index I wanted to check with you if that is an okay strategy or do you want me to diversify

[CARL] [00:46:27] Right. I think the benefit of the index fund is that particularly when it comes to the stock market, there’s a lot of data that indicate that over longer periods of time, most of the actively managed, and Vanguard has actively managed stock funds, most active managers underperform the index. Now, there are managers who in good times will do better than the And there are managers in bad times, which won’t go down as much as the index. And because you don’t have an interest or time, I don’t think that that would be appropriate for you. I would use the, you say you’re at Vanguard, their broadest index for domestic equities is called the Vanguard Total Stock Market. And it’s, you can buy the exchange traded fund, it’s extremely cheap and it’s very tax efficient. And you can buy the Vanguard XUS, and it’s also very inexpensive and tax efficient. And while I don’t know your personal situation, I just wanna make sure that you have 25% in the international one. You can do that and be finished with it rather than doing the homework for the other. Now, when it comes to bond funds, the largest bond fund is Vanguard’s total bond market, which you can by in an exchange traded fund called BND. I’m not as much enthusiastic about that as I am about the stock funds. I prefer managed bond funds as opposed to bond index funds. But for stock funds, for the person who doesn’t want to take the time to figure it out or doesn’t wanna pay an advisor, you can do that at Vanguard. You can do it at Schwab. You can that at Fidelity. That’s entirely up to you. I think that would be just fine. OK?

Speaker 7 Sounds good, thank you so much.

[CARL] You’re welcome. You’re listening to Money Talk and we are running out of time so I think I’m gonna not give out that number anymore. Let’s just see if I can go through some texts here.

[TEXT] Carl, I want to give my daughter about $100,000 worth of stocks to kickstart her retirement savings. Will either of us have to pay tax on that gift? No. What will happen is she will inherit your cost basis. You will not pay tax. She will not pay tax unless and until she sells those, and then she will pay capital gains tax on the difference between your cost basis, which is now her basis, and the sales price.

Now, all of us are walking around with a lifetime exemption. It’s a huge amount, $13,990,000. That exemption will be reduced by $100,000, unless you’re a very wealthy person that doesn’t really either matter amount at all.

Will either of us have to pay tax on the gift? No.

How can I open an account for her? So if she’s an adult, then she should open the account.

If she is, if you’re getting a kickstart on retirement savings, I’m guessing she’s a an adult. If you were younger, you could open a custodial account that would then revert to her ownership when she’s And if you say, anyone would I recommend in Austin? The answer is, and thank you, the answer is no, and it’s just because my purpose here is to help people and educate people and not talk about what I do or anybody else does, but if you’re going to decide to work with an advisor, here’s my kind of rule of thumb. First of all, you can always ask friends and relatives and people in your social circle, but that’s just a way to start. You can also interview people, just like you would a CPA, or an architect, or an attorney. And you ought to find out, number one, how do they invest money? Because if you just want them to hold the securities and not sell them, they’re not gonna make any money.

So, you can just go to a do-it-yourself custodian like Vanguard or Schwab or whatever. But if you want her to have investment advice, they deserve to get paid. How are they going to advise your daughter and how are they gonna invest the money on her behalf? Secondly, how are the gonna be compensated? I’d like them to be compensating on the basis of the assets and have no commissions or sales charges. That’s called an investment advisor.

And then how are going to interact with your daughter? What does a happy, healthy client relationship look like? In other words, is this someone who can help educate her because good advisors, in my view, are good teachers. Things are going to not always go up and how are they going to be able to help hold her hand so that she doesn’t make unfortunate decisions. But if all they’re going to do is hold the securities then they’re probably uninterested in doing it simply because of a lack of compensation.

Well we’re out of time. I want to thank Marc for doing a terrific job. I want thank you for listening and to remind you next Saturday after the news at five be sure and tune in to Money Talk.

[KUT] [00:51:37] This is Money Talk with Carl Stewart. Carl Stewart is an investment advisor representative of Stewart Investment Advisors.

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