Money Talk with Carl Stuart

Carl Stuart takes caller and text questions on how to be financially literate, and the independence of confidence in your personal finances, retirement savings, and future planning.

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 Stuart [00:00:20] You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. And I forget to do this and it’s important. And that is, if you want to see Money Talk in person, and who doesn’t, you can at the first ever KUT Festival. That’s coming up real soon on May 1st and 2nd. Join me and the rest of the KUT staff. On the UT Austin campus for live music, thoughtful speakers, engaging panels, and yes, money talk. You can grab your passes now and check out the speakers and the performers at KUTFestival.org. 512-921-5888 Michael, you’re on the air. How may I help?

Michael [00:01:14] Hi, good afternoon, Carl. Yeah, I had a question about financial advisors who are fiduciary. My understanding is that they’re legally obligated to act in the client’s best interests. The question really is about what rules or practices would fiduciaries do to ensure they’re acting in the clients’ best interests, or rules that can be monitored externally, specifically. Level of reporting or oversight.

Carl Stuart [00:01:46] Yeah. There are no specific rules. It’s the same type of fiduciary responsibility that your attorney would have or your CPA would have and so they have to act in the best interest and not receive and in the investment advisory world they’re not to receive any transaction-based compensation but it’s a little like the old thing you know it when you see it. They are held to a standard but there are no specific rules that you can say, I’m gonna measure Bob or Sue against this benchmark. The reason it’s a higher standard is if someone does not act in a fiduciary manner, they can be held legally accountable. Easier, the bar to hold them accountable is lower than if they’re not a fiduciary. So, and also, they typically, if they have, if they are a smaller investment advisor, they’ll be under the auspices of the state where they are, like Texas Securities Commission. If they have more assets under management, they’re under the SEC. If they’re the SEC, they have a compliance consultant, not the SEC the advisor has a compliance consultant that makes sure that they are doing everything according to the SEC all the annual filings and then frequently they’ll do every five to seven years or be an SEC. In-person called SEC exam. The other thing is if they are a registered investment advisor they have to file something called an ADV and I believe that’s a matter of public record and it describes their practice so you can go to the ADV to understand about the practice but there are no lists of specific rules or benchmarks to measure against a fiduciary.

Michael [00:03:43] Okay, thanks a lot, Carl. I appreciate it. You bet, thanks.

Carl Stuart [00:03:47] Thank you, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. I heard some texts coming in, so let’s see here. Hi, Carl, thank you for a wonderful show. You’re welcome. On August the 7th, the president signed an executive order. Allowing 401k savers to invest in companies not publicly traded. Your thoughts please, Casey. My first thought is be very, very careful because when it’s a not a public company, then you’re going to have a lower level of disclosure than you would with a public companies. And unless you have expertise in that area that the company is in. I would be more inclined to avoid it. What they’re talking about is allowing people to have in their retirement plans what’s called private equity and private credit. The theory is that over the years, these two types of investments have delivered higher returns than public securities that you might own in a mutual fund, for example. Now if you think it through, they ought to because there’s something called a liquidity premium. What does that mean? That means if I can’t get my hands on my money when I want it, I ought to be able to earn a higher return. That’s why you should get a higher in investment real estate because it’s illiquid. You might want to sell it in a poor market. It might take six months. In a bad market, you might not be able to sell. So, private equity invests in private companies. And private credit lends money to private companies. Typically, these are higher risk companies, they’re earlier in their corporate lives, and so you should expect a higher return. The challenge is, what would happen if you moved to another company, you may not be able, in fact, I think you won’t be able to move that private investment to another employer, because that other employer is likely not to have the ability to hold it. Whereas if you have a 401k invested in mutual funds or exchange-traded funds that are daily liquid, you can have those liquidated at your prior employer. The money can be moved to your new employer and have no tax consequences when you do that from just doing a trustee to trustee transfer. Or if you want to put it in your own IRA, you could do that. This is a very complex part of the financial world. It’s that place where institutions, pension funds, and endowments and foundations have invested for decades, but I’d be very cautious about it when it comes to the individual investor. Thanks for the question. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888 and you can catch past shows. At kut.org slash money talk and I understand the podcasts are available in all kinds of places. Here comes a call. Amy you are on the air, how may I help?

Amy [00:07:20] Hi, so I’ve called before, I’m 67 and we determined that it would be probably a good idea for me to go ahead and start taking Social Security while I’m working to pay off some debt. But then I was told by someone else that I was over the cap of… What you can make and that I wouldn’t get that amount with Social Security and I’m like I think that’s the way it used to be but I don’t think it is now but I needed to confirm. Would they cap how much Social Security payment I would get?

Carl Stuart [00:07:56] When you are taking, when you take Social Security, here’s my understanding, I’d have to look this up and we may have an expert who will answer this. My understanding is if you take social security early, at 62, that if you make above a certain amount of income, there’s tax on that. And when you’re take it at 67, there’s not that penalty. But once you start taking Social Security and you have income, social, above a certain limit, social security is taxable, is my understanding. I was just seeing, I think that’s the way it is. I was hoping I could look here quickly on my tax rates and schedules, but I can’t.

Amy [00:08:41] I mean, I double-checked to make sure I wouldn’t be making to put me in a new tax bracket and it won’t. Good, good. So that was definitely something I looked into, but I think there was, maybe he was addressing that about when you’re younger or that at one point, if you made over like $60,000 a year, then you would only get a percentage of what you would normally get. And it’s like, that is not my understanding that I wanted to double check.

Carl Stuart [00:09:05] That’s not my understanding either. It just has a negative tax consequence, but it’s not that you would get a smaller benefit. I agree with you, that’s not my understanding.

Amy [00:09:16] Okay, thanks so much.

Carl Stuart [00:09:17] You bet, Amy. Thanks for calling. Bye-bye. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Let’s look at another text here. Let’s see. That one’s nothing. There we go. Asset protection, separate property protection, but there’s not a question, so I can’t really know what that is. Hi Carl. I have a tech stock that is up 78%. Congratulations. I have 229,000 invested. I believe it will go much higher, but I’ve been told I should take some profit. However, if I’ve only owned it for six months, it’s just short term gain. Any advice on when or when not to take some gains out when it’s not even reached target price and it’s a taxable short term game? Well, this is a challenge. It’s not a problem because you got a lot of profit. I would just say to you, if you were a professional investor managing a portfolio of stocks, let’s say you were managing a stock mutual fund and you had the good fortune to have a stock up 78%, would you take some money off the table? The answer is yes. And I don’t know your tax bracket. You can look at the tax brackets if you’re single or married, finally jointly. But my sense is… Usually when you own a stock that in six months has gone up 78%, the prudent thing to do is take some money off the table. And the target price you mentioned, that’s a Wall Street term that analysts use. They say, we think the earnings are going to grow at this pace, and we think that if that occurs, then we think price ought to be this higher level. There’s nothing guaranteed about that. And if we go into a bear market, target prices are useless. So my experience having lost money in every conceivable asset class is I know it’s painful, see what tax bracket is gonna put you in because the tax brackets are pretty broad, but I think I would take some money off the table if I were your shoes. Thanks for texting. It’s time for me to take a break. It’s a perfect time for you to call or text 512-921-5888 I’ll be back.

Jimmy Maas [00:11:58] 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 nonprofit 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 [00:12:34] This is Money Talk with Carl Stewart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:12:48] Welcome back. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. When you have a financial or investment planning question, call or text 512-921-5888. And Amy, here’s what I found out during that very brief break. The maximum earnings before Social Security benefits are reduced. If you’re under full retirement age, so you take it at 62 or 63. The under full retirement age, $1 is withheld for every $2 above $24,480. At full retirement and over, there is no limit as to the income that you can make. You’re listening to Money Talk on KUT News 90.5 and the KUT App. Call or text 512-921-5888. Here we go. Hello Carl. Please help me understand where tips belong in my portfolio, taxable or tax-deferred accounts. How much of my portfolio should I consider being part of my portfolios? I’m in my early 60s, I have a sizable, diversified portfolio, and I’m open to more risks. Well, I would say if you’re open to risk, that tips which stand for treasury, inflation, and protective securities. Are not designed to add risk to your portfolio. The other thing we learned, sadly, if you own TIPS, is that when interest rates go up because of inflation, TIPS can go down. How do we know this? It happened in 2022 when we had that sharp spike in inflation that went up to, I think, a reported number of 9%, and TIPS did not provide the protection that TIPS owners had hoped that they would. If I were going to have tips, I would have them in a managed fund rather than just buying a fund that held a certain type of tip. I would give the managers the opportunity where they saw the cheaper valuations versus more expensive. When they first came out, I thought they were a terrific idea. I frankly have cooled on them now. I’m much happier for the fixed income portion of your portfolio. As regular listeners know, I would have three different funds. I’d have a short investment grade bond fund. I’d an intermediate or what Morningstar calls as a core bond fund, and then I would a multi-sector fund. I would say that’s true whether it’s in an IRA or in your own account. To worry about the tax consequences, you need to be sure, if you think you’re in a high bracket, you can look at the… Yields on tax-exempt municipal bond mutual funds and exchange-traded funds and plug in your own marginal tax bracket. But that’s pretty high because this year, if you are married finally jointly, you do not go into the 37% bracket until your taxable income exceeds $768,700 and if you’re a single taxpayer it has to exceed $640,600. Before you decide if it’s taxable or not taxable, I would plug in my tax bracket to see if I was that high up. Otherwise, I don’t have a strong inclination whether you do it in a taxable or tax deferred. I prefer those three alternatives personally. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. And here we are. Laurie, you’re on the air. How may I help?

Laurie [00:16:49] Hi, I am a recent widow and I understand when my husband died that I get a bump up on my real estate, like my house and I would assume that, I don’t know for sure, that it applies to rental properties. I’m trying to retire and I have a rental property that’s going to net me about $700,000. I get every month’s net at about $3,000 per month. I don’t know if I could do better putting that money somewhere else or leave it in my rental.

Carl Stuart [00:17:23] Okay, so that’s a complicated question. First of all, your assumption is accurate. If you and your husband owned your home and you owned your rental properties jointly, then upon his death, your cost basis is adjusted upward to the value at the time of his demise. So you’re correct on that. Now as it regards the rental property, there’s two things to consider. One is the one that you suggested. You’re getting $36,000 a year. And so that’s coming in at about a 5% return on the $700,000. But the other issue, and this is frankly, where it affects a lot of people. There are two kinds of people who ought to have rental property. The people who have a hands-on, take-charge, get-involved personality, and people who don’t want to do it. If you’re in the former category, you have him with this property and you’re okay with the oversight of it and I don’t mean to be negative, but you know the hassle part of it. Because if you invested that $700,000, that typical kind of financial planning rule of thumb, and I say it with equivocation in my voice because there’s no guarantees, but if you had a diversified portfolio, and you could take 4% a year out, and the money could still grow based on history. That’s $28,000 a year. That’s 12,000 dollars a year, less than what you’re getting now. If you took, could you take 36,000, 3,000 a month out? The answer is yes, but it would put more stress on the portfolio. You may have said this, I didn’t hear you. How old a person are you?

Laurie [00:19:14] Sixty-seven.

Carl Stuart [00:19:16] Yeah, you’re young. So I would be cautious about taking maybe 5%. And if you were to invest it and you took 5%, that’s $35,000. That’s a reasonable thing to do. I wouldn’t stretch it any further than that. If you’re comfortable with the rental property, you’ve owned it for years, that kind of hands-on person, then keep the rental properties. I regularly talk with people. Who reach a certain stage and age in their lives, so they just don’t want to deal with it anymore, and then that’s a good time to sell it. So that’s how I would think about it if I were in your shoes.

Laurie [00:19:54] Okay, thank you very much.

Carl Stuart [00:19:55] You’re very welcome, thank you for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-588. And I need to read this again, because it’s important. Would you like to see Money Talk in person? You can at the first ever KUT Festival, which is coming up right away on May 1st and May 2nd. Join me and the rest of the KUT staff. On the UT Austin campus for live music, thoughtful speakers, engaging panels, and more. You can grab your passes now and check out the speakers and performers at kutfestival.org. And this afternoon, you can reach me at 512-921-5888. Okay, let’s see. Carl, this is Bob. What are your thoughts on our new Fed Chairman, Kevin Warsh? He has gotten, I would say, real strong support from people who are familiar with him and his track record, his public commentary. So I would say… Based on my reading, now that they pulled the indictment against, or the suit against Chairman Powell, that Senator Tillis is probably going to let him go through. And I think if that happens, he’ll be approved. The thing that concerns me a little is he used to be a very articulate inflation hawk. Meaning, the Federal Reserve has two mandates. One is stable inflation, and the other is healthy employment or low unemployment. And if he now is more concerned about the employment and less concerned about inflation component, and is amenable to lowering interest rates, which of course we know is what the president wants. I think if he were to articulate that, remember he’s only one of a group of people, and on the Federal Reserve Board, if he could convince his colleagues for that, and global investors thought that inflation was coming because of higher oil prices or for whatever reasons, that would be, I think, very bad for the financial markets. He’s got to walk a tightrope here, if and when he does get in, and if he can moderate his views. And once he gets in, withstand the pressure from the administration. So he’s got a very good reputation to answer your question. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Good afternoon. My fiance is an executive at a company. And she has received stock options for the entirety of her employment. Her portfolio now has over $500,000 worth of stock options at current value for this company and she would like to diversify some of her portfolio holdings into other stocks with minimal tax impact. I have done a 1031 exchange for real estate in the past and was curious if there was a similar mechanism for stocks for a like kind transaction. She is a high-wage earner, so her tax bracket is also very high. We have discussed tax loss harvesting for some of her investments. Do you have any other ideas? There is no exact analog to a 1031 exchange when it comes to stocks. There are some very unique mutual funds where you can put in highly appreciated securities into a portfolio. And postpone the capital gain, like a 1031 does a postpone for real estate. But if she has stock options, are these the kind of options that when she exercises them with their non-qualified options, that’s a tax liability, unless she’s turned it into the stock already. But you say she has options. So the first challenge is, are these incentive stock options or are they non-qualified options? And if they’re incentive stock options, she exercises, and then she has to hold for a year and get the long-term capital gained. If they’re non-qualified, then she exercises and it could be a tax liability. That’s complicated. I think it may just be that if she could spread out, if she’s already in the 37% bracket, if your joint income is over $768,000, and she’s in the 37% bracket. She’s gonna pay 37% no matter when she liquidates. Then I agreed, go ahead and bite the bullet. I don’t think taxes rates are gonna go down. If she’s, if your joint accounts and the joint tax is at a lower bracket, pay attention to that and begin to liquidate this with an eye to what the marginal bracket would be. The other thing I would say, Generally speaking, I am not a fan of having a significant portion of your net worth in the company stock where you’re working. You’re already making your biggest investments, your time, your talent, and you’re doing that with the company. Yes, there are examples of people becoming wealthy by having just one stock, but there are example of people losing all their money by having it in one stock. So I applaud the idea that she has to be moving. Some of the money out. Talk to a tax expert about how that taxing will work on the exercise of the options. You’re welcome to look into those mutual funds. I don’t have a category name for you, but you can consider that as well. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Hi there, and thank you for taking my question. We’re about to sell our house. We’ve never done this before. After closing costs, we expect to have about $400,000 to put aside for retirement. We are novices about this kind of thing, as we only have retirement funds in a 401k. How would you suggest we proceed? The really great thing about this is, when I started in this profession 47 years ago, what I’m about to tell you just frankly wasn’t an option. The first decision is we have the time and the interest and the motivation to do this ourselves, or we don’t. That’s fundamental. Because if the answer is yes, we will do this ourselves, then obviously you don’t need to pay an advisor. If you’re going to be fully on your own, then you need to go to, I would start with the websites of the large do-it-yourself custodians, Fidelity and Schwab and Vanguard, and start doing some homework there. Or if you decide, no, this isn’t something we wanna do on our own, at $400,000, you will have a robust selection of advisors who will talk with you. And so the question then is, how do you go about that? And you can talk to your friends and neighbors, people in your social circle, but there are a lot of them in this listening area, and you should go face to face. They should ask you about you before they start talking about what they would do with your money, because this is a diagnostic process. Number one, they should ask about you. Number two, they be able to explain in plain English. How they would invest your money, what their investment strategy is. Number three, they ought to tell you, if you become a client, this is what a happy, healthy client relationship looks like in terms of communication and contact. And number four, how are they compensated? Are they compensating by the transaction? That would be someone who could call herself a financial advisor. Or are they compensation based on the value of the assets that they’re managing? That person is an investment advisor. And has this fiduciary responsibility. So that’s the thought process I would go through if I were in your shoes. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. And you can catch past shows at kut.org slash Money Talk. Hi Carl, do you have any advice? For a good passively managed ETF tracking companies of a specific country, something like an iShares India or another company, country. The answer is I don’t give out specific funds and advice here on Money Talk, but that should be a fairly easy Google search. I remember back 40 years ago that you could buy country-specific funds. Back then, there were closed-end funds. But I would suspect there are exchange traded funds that would be, certainly by the region, there might be emerging market exchange traded funds, developed market exchange trading funds. But I bet, particularly some of the larger countries, like you said, like India, that there may be. But I don’t know that for a fact. And I would just tell you that I don’t personally, I’m fond of those because they have the return characteristics. Of individual stocks. You could love the country, but if investors don’t care about it, it doesn’t matter. Or it can be really terrific and then the lighthouse light can move on to someplace else and you can lay dormant for a really long time. So I’m not a fan of country-specific funds, but I got to believe they’re out there for you. Thanks for the text. You’re listening to Money Talk on KUT News, 90.5 and the KUT app. It is time for me to take a break. Great time for you to call or text 512-921-5888. I’ll be back!

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KUT Announcer: Laurie Gallardo [00:31:29] This is Money Talk with Carl Stewart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:31:43] Welcome back. You’re listening to Money Talk on KUT News 90.5 in the KUT app. When you have a question, call or text 512-921-5888. Here is a call. Matthew, you’re on the air. How may I help?

Mathew [00:32:03] Uh… I have cancer uh… And so i’m concerned about uh… How the annuity that i have and the myself security are going to play out for my wife if if i should

Carl Stuart [00:32:20] So, tell me about the annuity, because annuities can mean different things. Is this an annuity like teacher’s retirement system annuity or is it some other type of annuity?

Mathew [00:32:29] It’s a 403B with Medlife, and it’s got about $450,000 in it.

Carl Stuart [00:32:43] The market value is $450,000. If and when you pass away, because it’s a retirement plan, she’s already identified as your spousal beneficiary. She will then have that. Some companies or nonprofits will allow it to stay there, a lot don’t. She’ll be able to take that capital on a tax-free basis and put it in her own And then did you say, are you receiving social security as well?

Mathew [00:33:26] Uh, not yet.

Carl Stuart [00:33:28] And when, would you, who has the higher social security benefit, you or your spouse, Matthew? I do. Okay, so she would qualify for that. And then the value of the annuity, presumably, if it’s a fixed annuity which I’d be surprised by, your death will trigger that total amount if it’s… Variable annuity invested in, is it invested in various kinds of investments that look like mutual funds in your opinion, Matthew? Yes. Yeah, so it’s a variable annuities and some variable annuities have a death benefit which says upon the death of the owner the beneficiary receives either market value or the amount of money invested, whichever is higher. So I suspect that you have gains in there in excess of your contributions. She would get that and put it in an IRA and then she could then begin to take the money out to supplement her income and also she would be, my understanding, eligible for your higher social security benefit. I’m not an expert on those, but that’s my understanding.

Mathew [00:34:53] And and so what would be the expected uh… Rated which she could the funds from that sure

Carl Stuart [00:35:01] Sure, how old a woman is she right now?

Mathew [00:35:05] She’s in her early 60s.

Carl Stuart [00:35:08] The general rule of thumb in the financial planning world is that if she continues to have money at risk to make it grow because she’s a young woman with long life expectancy, if she has that in a balanced portfolio of stocks and bonds and things like that, she could take 4% out, which would be $16,000 a year on 400,000 and not run out of money. The risk she has is if she takes too much out. Then the corpus or the amount drops. It doesn’t keep up with the rising cost of living and now she’s 77 or 82 and it isn’t there. So she needs to plan on taking the most modest amount that she can and letting the rest of it grow. What I would suggest on the unfortunate event of your demise is she takes an amount that’s equal to what she anticipates for a year. And put that inside her IRA in a state of what’s called a money market fund which invests in government securities. It doesn’t go up or down. She’s taken that year’s worth of income and basically freeze dry, de-risked it so then she can take monthly income from that and not worry about the fluctuations in the financial markets.

Mathew [00:36:34] Okay, well thank you very much.

Carl Stuart [00:36:36] You’re welcome. Thanks for calling, Matthew. And good luck to you, sir. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Hi, Carl. I’m hoping you can clarify the fiduciary responsibilities of someone acting as a durable power of attorney for their parents. I think that. What I’ve encountered is that you are held to the standard of acting in their interest. It’s very straightforward. It’s squishy, if you will. It’s not a list of things you should do, but they are your parents, and you do have their durable power of attorney. And so, if upon either their demise or they become infirm, you can bring that to their securities firm, to their bank. Whatever the case is, and act on their behalf. But I don’t think there’s a list of responsibilities that you are held to. If there is, I’m unaware of them. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and the KUT app, 512-921-5888. Let’s see, oh, this is somebody thanking me. You’re welcome, okay, let’s see. Carl, love the show. Interested in your opinion on the following? Since artificial intelligence and robotics eliminate human jobs, company using these tools should contribute to the Social Security Fund. Good luck! First of all, I think your analysis of eliminating jobs is an interesting one. I think that history doesn’t necessarily bear that. I think we can see that there will be a disruption. There’s no question about that. And some people will lose jobs, and that’s bad for the individuals who lose jobs. But if you look at what occurred with the arrival of the internet in the 1990s. There was this huge explosion in productivity that was a huge boom for the economy. You wanna go all the way back to the early 20th century when a huge percentage of Americans worked on the farm and we had this huge increase in productivity in agriculture that allowed those people. Have other kinds of work, and we had, over time, we had certainly recessions, but we had strong economies as well. So it’s just way too early to make, I think it’s, I wouldn’t call it superficial, but I think its an easy analysis to say that jobs will be lost. I think jobs will lost, but if you look at it from a macroeconomic standpoint, which is what you’re doing, because you’re talking about social security, I remain unconvinced. About the longer-term effects. I just think it’s too early to say. Thanks for the text. You’re listening to Money Talk, KUT News 90.5 and the KUT app. Call or text 512-921-5888. For a retired senior, age 75, what kind of bond ETF or funds might suggest for the current market? Short, medium, or long-term? Thank you, this is Anne. And I’m gonna answer your question, I do all three. I just absolutely would because if inflation comes back and the Federal Reserve leaves interest rates where they are, you’re gonna see longer term rates go up because those are not determined by the Federal reserve and that’s gonna penalize longer term bonds. If the Fed raises interest rates to fight inflation, that’s going to help. Your short term bond fund because it’ll be investing in those new higher yielding short-term securities. And so I like the idea of having I stay with investment grade, I like to idea of a short- term bond and a core bond fund that that pretty much matches the Bloomberg Ag and then what’s called a multi-sector fund. The reason I do that is that’s a much more I shall say sophisticated than just a long-term fund. A multi-sector manager or managers can buy bonds where they think they’re particularly attractive. I’m thinking of one where they’ve been buying government agency bonds because they’re considered ultra-safe, but they have a nice yield premium over treasuries. I like to give managers that opportunity to have the broadest menu from which to choose, and I’d have a third of my in each of those. You’re listening to Money Talk on KUT News 90.5 and the KUTF. You know the number 512-921-5888. Carl I’m 79 years old and waiting for a response for a sale of my shares, which is a little over 1,800 shares of Franklin BSP. I have overspent all other investments and no longer have anything else left. When I receive that money from Franklin, which will be 23,000, I need sound advice because I’ve not taken care of my savings. Would you please give me a suggestion on how I should invest this money so that I may save some and at the same time make a few repairs? Thank you, Katrina. I think that it’s because of your experience, I think, that I would look at a money market fund. There are three kinds. A money market fund is not a money market account at your bank or credit union. It’s a mutual fund, but it doesn’t invest in stocks. It invests in fixed income securities, bond-like securities and bonds, but that mature in a year or less, and the price stays at a dollar a share. And it will pay out whatever short-term interest rates are. And there are three kinds. One’s called a prime, the other one’s called government, and last one’s called treasury. The prime fund invests in high-grade corporate bonds. The government invests in U.S. Treasuries and government agencies, primarily Fannie Mae and Freddie Mac. And the third one, called treasurys, only invests treasureries. I like the middle one. Right now, I think it’s paying over 3.6%. And it will go up and down with interest rates. If the Fed holds interest rates here, you would expect to continue to earn that. If it raises rates, you could expect it to go up. But the good news is… That it’s daily liquidity so you can take money out as you need to to work on your house and let the rest of the money compound for you and based on my experience it will earn you more interest, more yield than you would get at the bank or credit union and good luck. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Carl, if you have restricted stock units with a company they offer the opportunity to increase the automatic withholding from 22% up to the max of 37%. Would you recommend doing that? Would you recommended keeping it at 22% and getting the extra shares so you can decide when to sell them? But no, you may need to pay estimated tax to make up the difference. Yes, I’d take the 22% if I were in your shoes. Thanks for the question. You’re listening to Money Talk on KUT News 90.5. And the KUT app. Okay, hi. I work at a major tech company. I’ve been receiving restricted stock units. My plan has been to sell immediately and max my Roth IRA versus a backdoor IRA, okay. The rest I’m keeping in taxable accounts and funds like Vanguard Total Stock Market, Vanguard XUS, and Vanguard, I don’t know what that one is. Is this a good strategy? I’m not sure if this is best option for taxes or growth. You’re investing in exchange-traded funds that are extremely cheap and they’re very tax-efficient. You know I don’t make recommendations for individual funds or stocks, but I think what you’re doing is that you’re receiving them and you’re selling them immediately so that you’re not overweighted in the company where you’re already investing your time and talent and you are putting in taxable accounts. I like that because those funds don’t pay capital gains and they’ll grow over time Based on history, no guarantee. You’ll be accumulating at the long-term capital gains tax rate and it gives you maximum flexibility. The odds are if you’re a major tech company you’re also going to be in a 401k so that you’re building a tax deferred component of your future and you’re doing the taxable which gives you a maximum flexibility and by converting money over into your Roth IRA you’re avoiding the required minimum distribution. And you’re getting tax free treatment when you take it out provided you’re over 59 and a half and you’ve had it there for at least five years. Thanks for the text. Hi Carl. I’m considering moving my $400,000 after tax portfolio from exchange traded funds to low cost direct investing service like FREC or Fidelity portfolios to take advantage of tax loss harvesting. Low cost direct indexing that mimics something like an index fund like the S&P 500 is a relatively new option. I’m generally curious about your thoughts. The thing about it is $400,000 and you’re not paying any capital gains. I’m not sure that the tax losses harvesting amount to a sufficient amount to go do that. I’m, not really familiar with enough of them in depth. I really like the low cost ETFs. I guess what I would say is I would look at what kinds of tax harvest harvesting have they done. On an annual basis as a percentage of the net asset value. And then if it’s 2%, then you’ve got 400,000, they’re gonna generate hopefully $8,000 taxable losses. If you’re in a high enough tax bracket to justify the extra costs associated with that, because it is an actively managed one, then it’s reasonable for you to do that. I always worry about things that frankly feel a little gimmicky to me, so be careful. Hi, Carl, is it better to invest proceeds from a house sale in a new house or invest in the market? I’m 63 and my husband is 67. We’re worried about the relative value of investing versus interest costs of a mortgage. Great question. The problem is if you have all your money in your house, it’s a concentrated investment and you can’t sell a bedroom when you want extra money and you’re subject to the real estate market and you don’t have liquidity. I realize that interest rates are higher and that makes it a more difficult decision, but I don’t think putting the house proceeds all back into the house unless you have substantial financial asset investment someplace else is necessarily a good idea. We have people texting me who say their houses are worth less than they paid for it and there’s no guarantee that it will grow, historically it has, but you’re concentrated in one place, in one house. And if that’s the primary source of your assets, that makes me anxious. I might split the difference and put some to invest and some put into the house and take a mortgage. Well, we’ve run out of time. A lot of fun this afternoon. You didn’t know this, but we really got the A team at KUT with Jimmy Moss. Thank you, Jimmy, for being such a terrific producer and good friend. To remind you all the next Saturday after the news at five, be sure and tune in to Money Talk.

KUT Announcer: Laurie Gallardo [00:49:03] 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.