Money Talk with Carl Stuart

Carl helps several callers and texters, like one trying to figure out what percentage of an inheritance to invest in markets and in her Austin home, what happens when the federal government requires minimum distributions from Individual Retirement Accounts (IRAs), and weighing how long to wait to take Social Security benefits — 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 [00:00:01] This is Money Talk with Carl Stuart. Carl Stuart is an investment advisor representative of Stuart Investment Advisors. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:00:21] Good afternoon and welcome to Money Talk. I’m Carl Stuart. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Money Talk is a broadcast about the world of financial and investment planning. You always determine our agenda by calling or texting 512-921-5888.

It’s always a terrific idea to call or text early in the hour because my, I guess you Mode of operation is I take today’s calls first and then today’s texts and then any texts that I haven’t had the opportunity to take care of or to answer amply. So, I do have some texts to answer from last week and I will do that. But let me just suggest one more time that you call or text 512-921-5888.

And the phone is right here by the mic. And so you will hear him if it comes in. Here’s the first one. Okay

[Text] So sorry, I misstated a question. I meant to ask, as a non-spouse beneficiary of an inherited IRA and the decedent was already taking required minimum distributions, do you have to take annual required minimum distributions or can you take your distributions at any time as long as the entire balance is distributed by the end of the 10th year?

Thank you, Benjamin. So, for everybody else, we do a little explaining. When you have an IRA, if you are married, your spouse is automatically your beneficiary. And if you want another beneficiary, he or she would have to sign off on that.

But let’s take a more normal circumstance because men tend to die before women. Let’s take, a couple, the husband dies, the wife receives the IRA. She does not spend down the IRA either by taking out withdrawals when she wants to or by taking out required minimum distributions. And upon her demise, they had two children and the two kids each get half of that remaining IRA. They now have what is called a beneficiary IRA. They cannot include that or transfer that into an IRA that they already have. A beneficiary must remain separate from any other IRAs. They have 10 years to take out that money.

Now, here’s the tricky part. Let’s suppose that the surviving spouse, in this case, a female, when she died, she was already taking out required minimum distributions, okay? Now the question is, does this child have to take RMDs in any particular area or order? And the answer is yes.

If you are a non-spousal beneficiary IRA holder, The person from whom you received, it was already taking required minimum distributions. You have a choice. You can continue to take required minimum of distributions at her rate and then in the 10th year, take all that’s left or you can take it at your rate based on your age. Okay. Now, why is this significant? Because we assume that the female spouse was older than the child and so If the child wants to reduce the taxes from the required minimum distributions in the short term, that person could then take the required minimum distributions just based on his life expectancy and not on the life expectancy of his mom. On the other hand, he could continue to take it at her rate if he wanted, but in either case, he would have to be fully withdrawn within the 10th year.

That’s pretty darn technical. 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. Here’s today’s text.

[Text] Hello, Mr. Money Talk.

Hello.

[Text] What do you recommend for storing money in a place that can be accessed without penalty like a Roth IRA? This is from Adam.

Well, first of all, you’re going to have to decide what it is that you want to do with the money. So, if you, if you want just put the money in a savings type of event, then you would go into a money market fund, a money market mutual fund. And because short-term rates have isn’t risen recently, um, you can get your hands on that any business day and you currently get about a 4%, okay. But you’re talking about storing it in a place that can be accessed without a penalty.

You could also open your own securities account or with an advisor, and you could put the money in there and invest it. There’s no penalty for taking the money out. It’s completely liquid. There’s another value there as well. Let’s just say that you take some of this money and you invest in the global stock market and you leave it alone. For at least a year and let’s further presume that your investment gains in value. You can still get your hands on it at any time.

So, there’s no penalty for taking it out. But if you were to sell some of it, you would pay something called the long-term capital gains tax, which is significantly lower than the income tax. The amount of long- term capital gains, it depends on your own taxable income. It can be as little as 10% and as high as 20%. So, there’s no penalty for taking it out.

Is there a cost? Of course, there’s a cost, the cost of taxation, but at a much lower rate. Whereas if you take it out of an IRA or a 401k, you’re subject to income tax. And if you’re under age 59 and a half, you’re subdued to penalty. Certainly, there’s not magical way to invest, have the money grow and come out with no cost. Now, the other thing you could do, if you really wanted to avoid taxes. Is that you could put the money in either a tax-exempt money market fund or if you wanted a little higher yield and you were willing to live with a little more volatility then what you could do is go into a short or intermediate term tax exempt municipal bond fund either an exchange traded fund passively or actively managed.

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

[Text] All right, Carl, could you explain how to avoid more tax when you were in a high-income W-2 person apart from 401ks and HSA options?

Well, the tax code is made in such a way that there really is no way to avoid it. And the answer I have for you is probably the one that I just finished giving, which is, if you have savings… You can put it in the tax-exempt money market fund. If you want to make investments, you can put in tax exempt mutual funds. And of course, you can buy individual bonds as well.

The income from those are not subject to taxation. If you own individual bonds when they mature, they’re not subject to the taxation unless you bought them at some discount. And if you own exchange traded or actively managed funds, you may sell them for a bit more or a bit less. I would tell you my experience. Which is if you buy taxes at municipal bond funds and you reinvest the dividends because you don’t need the money, your adjusted cost basis goes up every year as you reinvest those dividends. And in the long run, if you want some of that money out, it’s even plausible that you can take money out and have a taxable loss.

So, you’ve earned tax-free income and for tax purposes, you’ve had a loss. Amazing, what a country.

You’re listening to Money Talk. On KUT News 90.5 and on the KUT app. Call or text me at 512-921-588. And by the way, this week I’m going to be remembering earlier in the broadcast, you can catch past shows at kut.org/moneytalk. Here’s the text.

[Text] Hi Carl, once you meet your required minimum distributions for the year, Can you then use your IRA in the same year to make a Roth conversion? Thanks for your help.

My understanding is yes, and you make a good point because your required minimum distributions is based upon the value of your IRA at the end of the previous year. So that RMD has already, so let’s just use a real-world example. Here we are at the End of June. You wanna do a Roth Conversion. The required minimum distribution is that it will be based on whatever your IRA was worth at the end of last year. And so you will have to do the RMD but you can also do the conversion and you don’t have to wait because you know what the RM is so you can do the conversation whenever you would like.

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

[Text] I’m turning 73 this year. Will I be notified by the retirement company, 401K, or do I contact them for my RMD?

So, here’s my understanding. As long as you are working and are a plan participant, and you have an employer-sponsored plan, 401K per your question, you do not have to take required minimum distributions. Once you are in an IRA, you do have to take required minimum distributions. There’s only one thing I don’t know. If you quit working, but you’re in one of those plans where your employer has allowed you to remain, you’re not working, but you remain a plan participant, my just my pure common-sense guess is that you would be subject to an RMD. But the key takeaway here is if you’re 73 and still working at the company, and you have a company 401k it’s my understanding that you’re not subject to a required minimum distribution good question you’re listening to money talk on kut news 90.5 and on the kutf Call or text 512-921-5888. Gary, you’re on the air. How may I help?

Gary [00:11:19] Uh, hi, Carl, you had a caller a couple of weeks ago who was handling her husband’s will and he had passed without a will, I should say she’s handling his estate and she was trying to sell some property within the estate. They were the, uh, somebody was saying, you got to go back to court. Yes. Hurt so much I think it.

Carl [00:11:39] And I think it was her title company, Gary, but something really weird like that.

Gary [00:11:44] Yeah, yeah. And I just wanted to chime in because I listened to that one this week on the podcast. And back when I worked at UT, we used to have a benefits fair down on campus. Professor Johanson would come over from the law school and he said, when you write your will, you must include these magic words, independent executor without bond. If you don’t do that, then you don’t have independent administration.

Carl [00:12:13] I see

Gary [00:12:15] So, and if you don’t have independent administration, then you have to go back to court every time you buy or sell something, is my understanding. And since her husband died intestate without a will, then I presume he could not have granted, he could have not included those words and said, okay, independent executor. Yeah. We’ll get through that, yeah.

Carl [00:12:38] I’m really glad you did. I’m glad you listened to the rebroadcast on the KUT website, Gary.

Gary [00:12:44] I did. I did, and I wanted to recommend for people who are dealing with this or think they might, reading through the law is not terribly bad. Some of it, about a third of it you won’t understand, about third of it you’ll understand, and about a third of should be going, okay, I have some notion of what they’re talking about. So, if you think you may be dealing with that or are dealing, it’s a few pages.

Carl [00:13:11] Terrific, good. Well, thanks for your call. You’re listening to Money Talk where we have these really informed listeners who take advantage of listening to past shows at kut.org slash Money Talk. Right now, call or text with your financial or investment planning question at 512-921-5888. It’s time for me to take a break. I shall return.

KUT Assistant Program Director Jimmy Maas [00:13:35] Money Talk airs every Saturday at five o’clock on KUT News 90.5 FM on the KUT app and at KUT.org. This podcast is produced by KUT and KUTX Studios as part of KUT Public Media, home of Austin’s NPR station and the Austin Music Experience. We are a non-profit media organization. If you feel like this is something worth supporting, set an amount that’s right for you and make a donation at supportthispodcast.org

KUT Announcer Laurie Gallardo [00:14:05] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:14:19] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and on the KUT app. You know the number, call or text 512-921-5888. Here’s today’s text.

[Text] Hello, I am 63 and have not started collecting social security. I realize the longer I wait, the more I get.

That’s true.

[Text] I have some investments, mostly stocks. I still have some part-time income, but have been selling some stock to help pay rent. I’m wondering if I would be better off taking Social Security and keep my stocks, letting them continue to increase in value.

That’s a tough one because you and I can’t predict the future.

What I do know is that way too many Americans take Social Security at 62 and they lose thousands and thousands of dollars because of that. And I would tell you that the rate at which the benefit grows is significant. And the rate of which it grows from your full retirement age to when you’re 70 is 8%, but that’s a guaranteed 8% and the stock market might deliver 8%.

Now, sure, some years it’s going to deliver 20%. Some years is going to lose 20%. And you have individual stocks, which have even more volatility and you have this guaranteed income. From Social Security. So I think the way in which you talk about this, if I were in your shoes, I think that I would go ahead and sell some more stocks if I had to, so that I could continue to make rent, et cetera, et cetera. But then also what I would want to do is wait as long as I could to get to Social Security, I think, that’s exactly what I will do.

You’re listening to Money Talk on News Radio, KLB— ha ha! I did it once again! So sorry, folks! 30 years, I’m working here, looking at the phone, trying to look at all of the texts, and then while I’m doing that at the same time, I say the wrong thing, so I apologize. You’re listening to Money Talk on KUT News 90.5 and on (the) KUT App. I’ve got it right here in front of me, and I should be able to do that. All right.

[Text] Hi, Carl. Good thing you can’t see my red face. Okay, let’s just see what happened here. I think I just made a mistake on that text, so I am sorry. I have somehow just archived your text. So, if you just texted me, text me again, please. 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. Okay, let’s go back here and see some more. Here’s one.

[Text] I own my house outright with no mortgage. I’m looking at estate planning. What’s the best way to minimize taxes payable when I die and the house sells and the funds are distributed to beneficiaries?

Well, I’ve got some good news for you. So, you own this house and you pass away. Your beneficiaries, let’s say they sell the house. Their cost basis is the value at your death. So they could either keep the house and have a newer cost basis, or they could sell the house and know that they would not have to pay any taxes because the appreciation would be next to nothing. I mean, it’s even plausible with house prices in central Texas declining on a slightly like down two or 3% over year over year, they might even sell the House for less than the value at the time of your death. So, the good news for you is selling that house, regardless of its amount, unless it’s worth more than $14 million, you are not going to have an estate tax.

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.

[Text] Hi Carl, I built a house with someone and they may need to move out soon. Is the home equity loan the easiest way to pay them for their half of the home value? Or rather buy them out of their half of ownership. I can afford the house myself and I do not want to sell or refinance, but the other owner is surely entitled to what we could profit if we did sell it.

So, if you were able to, you asked is a home equity loan the easiest way to pay them? The answer is yes. You can go to, if you are in a situation where you either don’t have a mortgage or you have so much equity. That you can get a home equity loan and pay the other person off. Is that the easiest way? Yes.

Of course, the other thing you could do is to the extent that you have cash, as long as you’re not upsetting your financial plan or taking money out of your retirement plan, you could pay them off as much as possible. But if you take the home equity alone, then depending on your tax situation, that interest rate may be deductible. So, if you can afford the house yourself and you don’t want to sell or refinance, then taking the home equity loan. Back when interest rates were two and 3% for mortgage, probably refinance would have made sense. At 7%, I would imagine the home equity loan would be more than that. But if you think you can aggressively pay it off, then a home equity loan seems like would be a reasonable thing to do.

You’re listening to Money Talk on KUT News 90.5. And on the KUT app. Call or text 512-921-5888. Let me just see here if I can find these other texts. OK, here we go.

[Text] This is a Money Talk question. I really enjoy your show.

Thank you.

[Text] My question, my husband and I are building a one bedroom property behind our small home in central Austin. We’re borrowing about $240,000, but the total cost is $350,000. We have a HELOC— that would be a home equity loan [line of credit]— to help fund this, and the interest rate is around eight to eight and a half percent. With this loan and all the related fees, property tax and insurance increases, etc. The monthly payments will be manageable but only just. I plan to use the building for my parents to visit for extended periods from Europe as they enter their 80s, the occasional visit from friends, and a short-term rental during busy tourist weeks.

Given the interest rate, should we try to pay down the debt as soon as we can? For example, a short-term rental is as often as term rent debt as often as we can at first, or enjoy the chance to house my family in the later years. Well, given the level of interest rates and the fact that you’ll have plenty of debt, I would do the short-term rental. I just think that makes a lot more sense. It would give you anything you can do to reduce that debt is going to be to your long-term benefit. And because, as you point out, there’s going to be more operating expenses. You know, things fall apart, and of course, you’ve also got, as you point out, you’re going to have higher property taxes because of a higher appraised value.

So, it’s a balancing act, but because your parents live abroad, they know at some significant time in advance when they’re going to be coming to visit you, you know, when your rentals will be up. And so I think that’s a good idea. And I think if I were in your shoes, that’s what I would do.

You’re listening to Money Talk on KUT News, 90.5, and on the KUT app. You’re welcome to text, but you could call as well, 512-921-5888. Okay.

[Text] Hi, Carl. I recently discovered your show while driving around Austin on Saturday afternoon and have been obsessively listening to past episodes on Spotify.

Ah, thanks.

[Text] I have a question for you. I work for a public company in the healthcare sector that offers an employee stock purchase program with a look back provision on the enrollment date. I get 15% off either the fair market value at enrollment date or at the time of purchase. How do I determine that this is a good investment? I am currently contributing 5% of my paycheck. We’re getting second thoughts on doubling down on a single stock. Thank you in advance.

This is a fascinating question. And you ought to be nervous about doubling down on a single stock because of the risk. For older listeners, I can say a word like Enron. Because there were stories when Enron went out of business that there were people who had their 401k entirely in Enron stock. In fact, the Department of Labor Which looks over these types of plans, talks about the problem with either company stock or just cash, and that’s how we ended up with target date funds, for example.

So, here’s what I would do. I’d go ahead and take advantage of the 15% off the fair market value. I would hold it until I had a favorable long-term capital gains tax treatment, and I would not necessarily worry about it. As long as when I looked at my financial net worth, not your house, but your retirement savings, your individual savings and investments. If I talk to a mutual fund portfolio manager and they run a concentrated portfolio of equities, they still won’t have more than four or 5% in one stock.

So, I think you’ve got some wiggle room there. If you have confidence in the company. You know, getting a 15% discount if you don’t have confidence in the company, obviously, is a bad idea. But if you think the outlook for the company is positive over the years, I would take advantage of the 15% discount. I would set myself a cap. I would say, okay, all my other financial assets are worth this. I’ll go up to 5%. If I get above that, I’ll sell it at the favorable long-term capital gain rate. Thanks for the text.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. And by the way, you can catch past shows at kut.org slash Money Talk. Here we go to another one.

[Text] Hi, Carl. I built a house with someone. Let’s just see. This looks like a long one. I want to make sure. Here we. Hi, Carl. I built the house with. Someone and they meet. No, I’ve already done that one. This looks. Like this. I read, okay. It’s the person who built the. House and wants to keep it. I refinanced at 2.75 and know that I will likely never get that rate again. I think you’re absolutely right. I still have 20 years to pay off that refinance mortgage. Well, thanks for the update.

Number’s five one two nine two one five eight eight eight. Here we go.

[Text] I inherited $40,000 and needs. Let’s just see. This is interesting. This is today. My husband and I have inherited $43,000 from my dad. We have life insurance retirement funds. I am still working for one more year. I’m an educator. I haven’t begun taking my social security. I’m 69, my husband’s 71. He takes his Social Security, we want this money to be liquid with a good return. What do you suggest we do with this? My husband is retired and his thrift savings plan earns 19 to 24%. I can tell you his thrifts savings plan is invested in all stocks to get those returns. He did not get those returns in 2022 when the standard and poor 500 was down 19% and the Nasdaq was down 33. I’m not talking you out of it because you have these other guaranteed the other guaranteed sources of income. So if you have the 43,000 And you want it money to be liquid with a good return. I will go through the sources of opportunity. You can put it in a money market fund make 4%. Is that a good returned? Well right now It’s above the rate of inflation, and you have daily liquidity. The next step out would be to invest in a bond exchange traded fund, or a bond actively managed mutual fund. If you can take a little bit of risk, I would suggest you do it in something called a core bond fund, or an intermediate term investment grade bond fund. Currently, they’re up this year. I always do the stats before I come on the air. They are up about 3.6% year to date, and they’re paying over 4% over the last 12 months in dividends, those are also daily liquid. And then, of course, you could also invest in an exchange-rated passive index fund, like the Total Stock Market or the Total International. So each step out, you have a better perspective return. In each of those cases, I described to you are totally liquid. They obviously, the thing is they have different risk and return parallels, I should say risk and return profiles. Thanks.

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

[Text] My niece wants to give me money from the money she got when her brother passed away. She asked if I wanted $10,000 per year or all the full amount, 100,000, which would benefit me the best.

I can tell you this. First of all, you’ve got a generous niece. I would take the lump sum and I would either figure out how to do this myself or go to an advisor. I would because I’m going to make some assumptions here. This is why calling is more interesting, sometimes I could ask you these questions.

I’m gonna suppose that you don’t need this money since you I’m going to suppose that. You can build a portfolio on your own or with help. And depending on your age and other things you can build it out of the stock mutual funds or exchange traded funds and bond mutual funds or exchange-traded funds on a very simple process. Leave it alone. You can invest in tax-efficient funds so that you don’t have to pay ongoing capital gains taxes. You pay a little taxes on the dividends from the underlying securities.

And based on history, because you’re looking at a 10-year time horizon, 10,000 per year for 10 years or 100,000, I think you’ll be far better off by doing that. And because it’s a lot of money, I would also suggest something that we call dollar cost averaging. Where you take that $100,000 and once you’ve decided what your portfolio allocation should be, how much in stocks, how much bonds, or other assets, if you have other ideas, but again, I wanna make them financial assets, and then take that and say, you put, oh, $20,000 every month for, until for five months, or I don’t know, there’s nothing magical about this. You could spread it out. Every month for 10 months if you will because what’s going to happen in this year’s a perfect example Is you’re going to have periods of time when the stock market is going to collapse and your $10,000 or 20,000 is going buy more shares, and then they’re going be other times and prices have risen You’re going have fewer shares and over time You’ll have a lower average cost be sure not just to stick in the US.

For years US stocks about performed Foreign stocks, that is not the case this year by a wide margin. I would have at least 20%, my personal number is 25%, in foreign securities, foreign, same model, tax-efficient funds, and based on history, 10 years from now, you will be very, very well off, and you started with a larger sum. That’s what I would do if I were in your shoes.

You’re listening to Money Talk on KUT News. And on the KUT app. Call or text at 512-921-5888. Okay, let’s see. You know what? I think I will do. We’re getting close to time for me to take a break. Let’s do that. 512 921 5888, I’ll be back.

KUT Announcer Laurie Gallardo [00:31:37] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl [00:31:51] And I want to thank KUT’s Music for Fedora Wearing Dudes band. Of course, we’re all familiar with those folks as they have written Music for fedora wearing dudes, our money talk theme. You’re listening to money talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here’s a new text. OK.

[Text] Hi, Carl, in addition to TRS. My new job offers 403B or 457B plans. I’ve read about each and have no specific questions but wanted to see what your preference would be.

TRS stands for the Teacher Retirement System. And the benefit of that is you’ll be making contributions and your school district will make contributions. And when you qualify for a pension based on the number of years you’ve worked and your age, you have guaranteed lifetime income.

Stop and think about that. Guaranteed lifetime income, that’s a terrific deal. And so that’s the base of your retirement plan. You have these other options that you talked about, the 457s, for example. Now, you can put money in there, and you don’t have to pay taxes when you put the money in. You’re given a range of investment options, and when you take the money out, provided you’re over 59 and a half, you’re gonna pay income tax on it. I was thinking wrong with that. But here’s something I want you to think about. If when you retire, you believe that your teacher’s retirement system income is gonna be close to what your living expenses are. You may wanna forego the 403B and the 457 because- excuse me- in my experience, the school district’s not going to be making employer contributions, which is fully understandable because you’re making significant contributions to TRS.

What about considering putting at least the maximum every year into a Roth IRA, because the odds are your income is below a certain level that will allow you to do that. You will not get a tax break, but then you make good investments that will grow, and you don’t pay taxes during that period. Now you retire, you’re over 59 and a half, you’ve had the Roth for over five years. If you need additional money, you can take it out tax-free. But if you don’t need additional money You don’t ever have to take it out because it’s not subject to a required minimum distribution. And let’s assume you’re a single person because it makes it easier for me to say this. Upon your demise, your beneficiaries get that money and they have 10 years to take it out.

So at least look into a Roth IRA in addition to the 403B and the 457. We can now… There may be, this is really tricky, I see this in 401Ks, which are the for-profit analog to 403Bs. Some employers are offering Roth 401K options, where your money goes in on an after-tax basis and grows, you have a menu to choose from, and then when you retire, you roll that over to your own Roth IRA. Here’s what I’ve learned over the years. The guaranteed income is not gonna go away. But you don’t know if and how much you’re going to be able to keep up with inflation because you can’t call TRS and say, my groceries are too expensive, send me more money. You have something else that will grow, but you also in a tax deferred basis, but gives you that freedom of not having to take the money out like you would in IRA and not paying the taxes on it. The last thing I’ll say about this is because TRS is guaranteed, in my view, it’s like a huge bond fund. You can’t call up TRS and say, send me the present value of a lifetime of income, but you can treat it as a very conservative part of your investments, and therefore, you wanna be more risk-oriented with your own money, whether you choose to go with a 403B, 457, or Roth IRA, because your enemy long-term is the cost of living. You may live to be 90 years old, and the cost living’s gonna go up two, 3% a year, and having money that’s in growth. In global stocks, in my view, would be a best thing to do with that. Thanks.

You’re listening to Money Talk on KUT News and on the KUT app. Call or text 512-921-5888. Let’s just see where I am here. It’s just thanks so much for answering my question. All right, folks, we have no incoming texts. I have answered the previous texts from last week, and we have no call, so. For the first time in weeks, I’m going to threaten you with the bloviation, which is what I’m gonna do now. If you don’t call or text, 512-921-5888. I do want to talk a bit because I know we have listeners who are savers and investors, and I know from reading in the financial press that the majority of investors in America who have, oh, there, I told you that threat would work. Here we go…

Carl can people hire you to go over their investments and make recommendations. I am a retired state employee, own my own home, I’m 76 years old with no kids. Congratulations on owning your own home. Nothing complicated, but when I go to my bank for assistance, the endless turnover of 25-year-olds— ha ha ha— often know less than I do. I need someone I can trust, been listen to you for 10 years.

Okay, this is tricky. I have a personal rule, because so many people who get a show like this, are busy promoting themselves on the air. And for long-term listeners, and you’re one of them, you know I don’t do that. I don’t talk about what I do personally. I don’t talk about where I am or how to get a hold of me.

But the answer to your question is yes. I’m gonna say this. You can go to stewardadvisors.com. That’s S-T-U-A-R-T, stuartadvisors.com. You will see there me and our daughter, Lindsay. You’ll see everything about our firm, and there’ll be a place where you can click on and contact us. And that’s the way we can get together. I look forward to it.

You’re listening to Money Talk on KUT News 90.5 and on the KUT app. We do have an incoming call that Mark’s working on right now. I don’t wanna bloviate it too much longer, but I will say that I read that most investors in America when they have stocks have a massive weight to domestic stocks. And it’s been a nice thing to have over the years, but I’ve been doing this long enough. To remember when there were years, not just one or two years, but years upon years when international outperformed domestic. And given our fiscal situation at the government level and the weakening dollar, be sure you have some exposure. Okay, here we go. Jennifer, you’re on the air. How may I help?

Jennifer [00:38:58] Yeah hi and i’m trying to uh… Moved from a rental situation to buying a house uh… In austin i’ve lived in the south boston area for a really long time and one of the day there but uh… Of course helping prices have exponentially written last night i have uh… Money from inheritance coming to me and from the sale of a parent’s house and wondering if it makes sense for me to use it much of the income from that inheritance to the down payment of the house uh… So that i can reduce the amount of the you know mortgage and mortgage interest

Carl [00:39:46] This is great. That’s why I’m so glad you called. For me to give you, hopefully, a good answer, let me ask you some questions. How old a person are you, Jennifer?

Jennifer [00:39:55] I’m 56.

Carl [00:39:57] And tell me what about your retirement savings. What do you, how much do you have and where is it? And how, you know, I’m saying it’s a 401k IR.

Jennifer [00:40:05] Right, right, right. So I have, I have like three or four, between three and four hundred thousand dollars right now in retirement. It’s, part of that is a pension, but I can’t remember how much of that it’s a pension. And none of it’s an IRA there. But I also have some inheritance that. An IRA. That part is, I believe it’s 170. Okay. And then the rest of the trust money is another, you know, 300.

Carl [00:40:52] OK.

Jennifer [00:40:53] This is not normal for me to be surrounded by options.

Carl [00:41:03] It’s a good problem to have. The reason I’m focused on this is when you think about where you put the money, the first thing you do is you think, okay, what are my current living expenses? And when I retire, I’m 56, when I retire, most of those expenses aren’t gonna go away, right? I’m still gonna have grocery expenses, et cetera, et cetera. So, using today’s dollars, how much do I need to live on? When you look at what you think your pension benefit’s going to be, since you have a pension, are you also contributing to Social Security, Jennifer?

Jennifer Yes.

Carl So you can go online and get a benefit there. What we’re trying to figure out is, when you take what you need to live on and you subtract your guaranteed income, there’s gonna be a gap left based on my experience. And that’s where you’re gonna go to your various investments to draw those down over the rest of your life so that you can live the life you wanna live.

So right now, three or $400,000 to a lot of people is a lot money because it is, but it’s not nearly enough. To draw down to provide you your living expenses, because a general rule of thumb is when you turn 65, if you decide to retire, you should be taking about three or 4% a year out of all of your investments, okay? That, so that you can supplement your social security and you can implement your pension. And so this is a— it’s a real balancing act. Obviously to the extent that you don’t— to the extent you put money into the house, you’re really making about a 7% return because that’s what the mortgage rate’s gonna be. So, there’s an imputed 7% returned.

On the other hand, when it comes time to retire, if you’ve paid off the mortgage but you don’t have enough money for cashflow to live on, you don’t want to live in your car and so you still got a problem. You still got to problem. So, there are, there’s a lot of moving parts. I would only put. A large amount down on the house, if I thought through my future savings and investments that I could have enough capital when I retire, that I can draw down three or 4% a year because it’s a 65-year-old female, you have a very long life-expectancy. And that drawdown, that withdrawal, plus my Social Security and my pension, I can live on that, then I can put more money on the House. If I can’t, then you need to invest the money.

Jennifer [00:43:47] Okay, perfect. Thank you so much.

Carl [00:43:50] You’re welcome. Thanks for calling. You’re listening to Money Talk on KUT News 90.5. Call or text 512-921-5888. Sarita, you’re on the air. How may I help?

Sarita [00:44:05] Hi carl i’m a new listener i have thinking appreciating all your financial advice so I’m in my early 40s uh… I grew up with very limited financial literacy skills and my parents are immigrants and so it was all about save, save, save. Do not spend what you don’t have and avoid any kind of credit card debt

Carl [00:44:28] Yes, good, good, good, good.

Sarita [00:44:32] I’m a gig worker so I work in the entertainment industry, I’m self-employed and I’m currently sitting on about 40-or so give or take-thousand [dollars] in my savings and I constantly have friends saying it’s just sitting in a savings account and it’s depreciating in value and I guess the pandemic really shook me up as somebody who kind of goes paycheck to paycheck or tries to assess each year, how many gigs, what I can save, et cetera. I’m just wondering, like for those of us, what’s kind of like a good bare-bones strategy.

Carl [00:45:11] Yeah.

Sarita [00:45:11] Where I could put some of that

Carl [00:45:13] Yeah.

Sarita [00:45:13] High yield savings account, et cetera, and thank you so much.

Carl [00:45:19] So here we go. So tell me again, how old are you, Sarita, please?

Sarita [00:45:26] I’m about 40. I’m 43. [Giggles]

Carl [00:45:28] Okay. Okay. All right. Now, the issue is that when you’re 63, 73 and 83, the odds that you’re being able to be an artistic gig worker diminish. But your living expenses don’t diminish, right? And in fact, with inflation, your living expense, even living modestly will rise because you still have to go to the grocery store or the gas station, etc. So, you need to start growing your money, but you also have a volatile income stream.

So, I would take an amount, maybe $10,000 unless you don’t think that’s too little. I’d take $10 thousand and I’d put it in something called a government money market fund. So you go to the websites of Schwab, Fidelity, and Vanguard. Look at their money market funds. They had three kinds, prime, government, and treasury. I’m not gonna bother with definitions. Look at the government money market fund. You can put the money in there. You can get it any business day you want. It’ll pay whatever short-term interest rates are, which right now are above 4%.

And then you need to take that other $30,000 or whatever amount is, and you need start putting that away. Because if you don’t, you’re gonna be in real trouble when you’re an old person. And so, you need to invest that other stuff, and you need do invest it carefully and cautiously, but you need invest. One of the things, I obviously don’t know your family history, but people who have come to this country and have worked hard and saved and have invested in the global stock market over years have made good returns because they’re investing in human ingenuity. They’re investing in human ingenuity, I’ll say it again. And so, you need start.

You can look at all three of those websites. They have things called index funds, and you wanna take that $30,000, and you want to put 75% of it in something called a total stock market exchange traded fund, and put the other 25% in something called an international exchange traded funds, and then you don’t wanna look at it— because it’s gonna go up and it’s going to go down— and unless you have a real emergency and you’ve already gone through that $10,000 that’s over there in the money market fund, you can get your hands on this money with a call immediately and get the money the next business day.

But start to build your savings because you wanna be financially independent and you’re not gonna get there if you don’t start doing that. So that’s what I would do if I were in your shoes,

Sarita [00:48:12] Great, thank you so much, Carl.

Carl [00:48:14] Okay, good luck, thanks for calling. You’re listening to Money Talk on KUT News 90.5. We’re gonna sneak this in. Kendall, you’re on the air, how may I help?

Kendall [00:48:26] Well, I’m a real estate broker of 40 years. And to end the story, there’s a nonprofit named NACA.com.

Carl [00:48:36] Uh-huh.

Kendall [00:48:36] And and they do long zero down and all you pay is prepaid and they don’t look at your uh… Uh… Credit but seat they also post the interest rate now what what happens is they have a new weapon are and you can watch the uh… Weapon are in any of them by and then bank of america provides the funds So, you know, I do residential my background is accounting from u t and seventy seven and i work for chevron now i’ve got real estate from eighty-five president and over and Taylor i’ll give you a for instance

Carl [00:49:16] Mm-hmm.

Kendall [00:49:16] Like the builder Starlight, they can buy the interest rate down to 3.47 with 10,000 assistance, but that’s 1,400 square feet for 2,000.

Carl [00:49:31] Okay, terrific.

Kendall [00:49:31] And then now i’d be our horton that there’s people that have down the snack alone you get approved and what happens is they can buy the interest rate down call

Carl [00:49:43] Okay. I appreciate it. I thank you. So I’m sorry. I got things coming in, but I really appreciate Kendall. Thanks for your help. Thanks for calling. Okay, let’s just try to get this one.

[Text] Hi, I live on social security disability income because I have stage four breast cancer. I’m in remission and back in grad school for a new career starting at the age of 55. I make decent social security because of my prior career’s income. I not sure how it works by say working my new career from age 58 to 68. How do they recalculate the retirement income in this scenario?

Well, the answer is that is such an important question, and I don’t know the answer, so I’m gonna work on this.

I will not be able to tell you this next Saturday because we have a really super-duper special surprise show next Saturday, but I’m keeping your text, okay? And I am gonna look into this, that is a really important question. And if there’s one thing I find hard to understand, it’s social security.

I will thank you all for listening. I’m going to thank Marc [producer V. Marc Fort] for doing his great job. I also really want to invite you to tune in next Saturday after the news at 5 to Money Talk. We’re going to surprise you with a really unique and terrific show and I’ll see you Thanks.

KUT Announcer Laurie Gallardo [00:50:55] 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.