Money Talk with Carl Stuart

Carl Stuart takes caller and text questions on when to start taking Social Security benefits, the pros and cons of investing in money market funds versus CDs, and the importance of carefully evaluating annuity products. Carl discusses the importance of long-term investing and cautions against making hasty decisions during market downturns, while also providing guidance on managing debt, budgeting, and tax-efficient retirement 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 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 Stuart [00:00:20] Welcome to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and on the KUT app. This is into our 32nd year here together. If you’re a first time listener, Money Talk is a broadcast about the world of financial and investment planning where you always determine our agenda by calling or texting 512-921-5888. It’s always a good idea. Call or text earlier in the hour and give me a chance to do my best to answer your question. I take today’s telephone calls first and then today’s texts and then any texts that I haven’t been able to get and haven’t had the time to get to in past broadcasts. So before we get started, one more time, 512-921-5888. Here’s a text that came in today. Let’s just see, get to the top of this. Hi Carl, love your show. Thank you. My wife and I are retired and currently get all of our income from monthly withdrawals from stock and bond funds in our IRAs. About a year ago, I increased our IRA cash reserves to approximately 18 months of our living expenses because the market had increased for so long and I was concerned there may be a correction or other events which might send the market down. My question is, when is the best time during a downturn to start drawing from a cash reserve versus your stock and bond funds? With the recent downturn due to the Iran war, is now a good time. Thanks for your sage advice, John. So John, I would say that now is a good not because I’m predicting the future, certainly not doing that, but taking money in a declining period of time for your portfolio. Can simply exacerbate the problem and make it more difficult to come back. So if you had said to me, should I have, I know I’m gonna spend this money, should I keep a cash reserve and spend it down? I would have said, yes. Frequently, what I encounter and what I actually do is if I know that a person is gonna be taking income and particularly if they’re just starting to invest, which is not your situation. I’m fond of putting a year’s worth of expenditures in a money market fund. Frankly, that reduces anxiety, because bad things can happen as we’re now experiencing and you don’t see them coming. And if you think back to 2022, when the S&P was down 19% and the NASDAQ was down 33% and the bond market was down between 13 and 14%. Had you invested at the beginning of that year and you were taking monthly withdrawals, let’s just say, that would have exacerbated the decline. Having money in a cash reserve, I prefer a government money market fund, was a good idea. So I think if I were in your shoes and you already have the cash reserve yes, that is exactly what I would do. Thanks for the text. And you do hear text coming in call ORTEX 512-921-5888. And we have a call. Reese, you are on the air. How may I help?

Reese [00:03:48] Hey, okay, I got a question for you. Mm-hmm. So I’m about 40 years old. I’m making $66,000 a year. I am putting money into a Roth IRA and also a 401k with my job at about a 4% match. Not a whole lot, maybe a few hundred dollars into the both. But I’m curious if I should continue doing that or whittle it down to just one.

Carl Stuart [00:04:17] It’s a terrific question. I think I like the idea of doing both. Certainly, I would put at least the amount in to get the full match, because that’s 100% return, if you’re putting in four and the employer’s putting in four. I also like the ideas of building up a pool of capital that is not subject to a required minimum distribution when you’re a lot older. And if you take it out after age 59 and 1.5, you is tax free, whereas we all know that eventually that you’re gonna stop working and the money in the 401k is probably gonna go into your IRA, and since you haven’t paid taxes on that money, it’ll come out of taxable income. One other possibility is if your employer plan has a Roth 401k option, the employer contribution will be pre-tax, but your contribution will after tax. And if and when you retire, for example, and the money goes into an IRA rollover, the pretax money goes in to that, and the after-tax money goes into a Roth IRA rolover. So I like doing both. If you think that your income is gonna grow over time, putting money in the Roth has an extra benefit because there are income limits above which you cannot put money into a roth IRA. So you might Just Google the tax code or the tax brackets, find out as a single or joint file or how much money you can make and still do a Roth. And if you think you’re going to exceed that in the foreseeable future, then I would accelerate money into the Roth while I still had the opportunity to do it. But bottom line, I congratulate you at your age and income level, putting money away. And I like what you’re doing currently, Reese. Okay, thank you, I appreciate that. You bet, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. I heard some texts coming in. Let’s just see what we got here. Hi, Carl. I just realized that I’ve been paying mortality and expense fees for my employer-sponsored money all along since I signed it up. I’m close to retirement and do not need the money for my daily expenses. Should I take it out to invest it on my own and cut the losses for M&E for all these years, or should I leave it there? How should I handle this? Thanks, Jay. So for everybody else, when you own an insurance investment product, probably annuity, probably a variable annuity because some retirement plans use insurance companies for their investments and there may be mortality expense. And what I would do is if I could, it says you’ve been paying all along and since you signed up and you’re close to retirement. What I would is if you’re closed to retirement is when you retire, do an IRA rollover out of the plan into your own custodian. You’re either gonna have an advisor or you’re gonna do it yourself. You’ll avoid the M&E payment. But now, the other thing you could do… Is since it’s an employer sponsored plan and you’re close to retirement, is you could reduce your contribution to the minimum that gets the employer match and put the other money, if you don’t make too much income, in a Roth IRA and build that up or just invest it yourself in your own individual or joint account or with your advisor. I’m with you about paying the M&E fee. I don’t like that one bit. But if you were just getting started or you had another 10 years to retirement, it would be really problematic. But since you’re close and you can’t get out of it until you retire, I would consider building up money outside the plan, either in my own name or in a Roth IRA. Thanks for the question. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512. 921-5888 and you can catch past shows at kut.org slash money talk okay we have a call here let’s just see Chuck, you’re on the air, how may I help?

Chuck [00:08:56] Yes sir i just heard you mention to uh… One of the previous colors uh… That at about fifty nine and a half he’s likely going to take his money from his four one k and put it into his uh… I a r a i don’t have an i a i have a four one can i wonder what’s the benefit of doing that or should i do that or

Carl Stuart [00:09:11] Yeah, sure. So what I was talking about is a bit different than that. When you’re in a 401k, that means you’re a plan participant and you’re an employee. Most 401ks that I encounter do not allow plan participants to take money out of the 401k as long as they were working. This was a situation where eventually this person was gonna retire and then he would take the money out of a 401K. And put it in an IRA. Chuck and I was talking also about, if he put new money in the Roth IRA, or he had a Roth IRA 401K component, he could do that. But whether you take money out of a 401K, an IRA, or a Roth, IRA, you get penalized if you take it out before you’re 59 and a half. But if you’re making a good solid contribution to your employer-sponsored plan, and if the employer’s putting in what’s called a matching contribution. There’s no reason to put it in an IRA. You can continue to do it in the employer-sponsored plan, Chuck.

Chuck [00:10:16] Yes sir and that makes perfect and pressure appreciate i’m sorry i cut the last thing that i can’t reach them just got off work and so it is of course

Carl Stuart [00:10:22] Of course. Well, I appreciate you listening. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. By the way, I’m just going to start talking about this a little bit each week. We at KUT are going to do something special early in May and have in conjunction with the University of Texas a KUT Fest. It’s going to be Friday and Saturday, the first and second of May. And I’m going to do money talk on Saturday the 2nd. Live in front of a studio audience. So if you wanna come and have some fun, my friend Jimmy Moss and I will be on the stage or whatever the heck it is. And I know it’ll be a lot of fun and you’ll learn why everybody says I have a great face for radio. You’re listening to Money Talk on KUT News 90.5 in the KUT app. Call or text 512-921-58. Scott, you’re on the air, how may I help?

Scott [00:11:24] Yes, sir. So, I’ve been reading everything and it’s getting kind of confusing, but I turned 65 this year. I contribute to my HSA at $100 a week. My employer seats $600 a year. So if I’m reading things correct, because I’m over 55, I can do catch up to a total of $5,800 for a year, but because… I turned 65 in October, I had to cut that back.

Carl Stuart [00:12:01] I’m really glad that you are doing your homework. I just don’t get involved with health savings accounts. What Scott’s talking about for everybody else is you can put money in on a pre-tax basis into a health savings account, and you can take it out for medical expenses and not pay any taxes when you get it out. I’m gonna tell you, I just know that, I don’t wanna guess at this. I’m going to try to see if I can remember this week to look into that, Scott, but I don’t know the answer today, so. I’m just gonna go on and hang up, but thanks for calling. You’re listening to Money Talk on KUT News 90.5 where we regularly stump the chump. Call or text 512-921-5888. Amy you’re on the air, how may I help?

Amy [00:12:49] By carl uh… I’m going to be sixty seven in less than two months uh… And i’m still working and plan on working until and seventy But But I ran into some unexpected things, and I have about $23,000 in debt. And I’m thinking I’m eligible for Social Security, and it might make sense to take it, pay that off, and then start just throwing that money into Roth IRAs for the next three years. What do you think of that plan?

Carl Stuart [00:13:20] Do you know the interest rate on your debt, Amy?

Amy [00:13:25] Uh… It’s eight percent

Carl Stuart [00:13:29] It’s not interesting as a coincidence because that Social Security benefit is growing at 8% a year.

Amy [00:13:36] From the time where you are right now.

Carl Stuart [00:13:37] Where you are right now until 70. So it’s kind of a wash. And you’ve looked at your, I’m assuming, you’ve look at your projected social security benefit and it’s significant enough that you can see that you will get rid of the debt over time.

Amy [00:13:53] Yeah, I mean, less than a year. Well, maybe around a year, I think, probably.

Carl Stuart [00:14:01] And if you don’t do this, if you don’t take Social Security until 70, how long is it going to be something where you’re either never going to get paid off or it’s going to take a long time to get it paid off?

Amy [00:14:13] I think it’s going to take me several years.

Carl Stuart [00:14:16] Yeah, and this debt was created by a one-time expense. You’re not going to be back in debt again after this.

Amy [00:14:26] I don’t, I’m not looking to that, that is for sure.

Carl Stuart [00:14:30] Good, good. Well, if this is a one-time experience.

Amy [00:14:33] Yeah, I’m putting money into an emergency. I’m replenishing my savings, but yeah.

Carl Stuart [00:14:40] Good, so it didn’t occur, it’s not like credit card debt because you’ve been living beyond your means, this was a one-time expense.

Amy [00:14:48] That could have been a little bit of both.

Carl Stuart [00:14:52] See? How diplomatic I was as I got to that. Well, you know, that’s, I mean, the best thing you can do, first of all, I think I would follow your plan. Yes, I would take Social Security. But I would also tell you that if I were in your shoes, I would get a paper receipt for every expenditure and about every two weeks I’d sit down and I’d chart that, the source of the expenditures. And see if you could bend the curve a little bit because a lot of people, when they do, I’ve been giving this advice for over 30 years and people say, gosh, I didn’t know I spent that much on going out for food or expensive coffees or whatever because if you can bend the, if you bend the curb on your expenditures and also pay off the debt in one year, that would be a terrific outcome in my opinion.

Amy [00:15:46] Okay, thank you very much.

Carl Stuart [00:15:47] You’re very welcome. Good luck. Thanks for calling. Bye-bye. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Okay. Hi, you’re on the air. How may I help? Hello, uh… Hello? I’m sorry, could you start over again please?

Unknown caller [00:16:19] Yes. Hi, Carl. Can you hear me?

Carl Stuart [00:16:20] I can hear you now, please proceed.

Unknown caller [00:16:23] Yes hello carl i’m really appreciative of your time in your program thank you for all the help in given the current uh… Economic uh… In the u.s. And around the world and the political situation i was wondering how i could minimize that in my future distribution for my four one k this year i’m in my early fifty and i’m trying to minimize My exposure, in case the market… Get affected by the global situation this year. Thank you.

Carl Stuart [00:16:55] Well, since you’re young, I would argue the other side of that. If you think about all of the crises that I’ve been through, the collapse of energy prices in the 80s, the collapsed of real estate in the Southwest in the late 80s and early 90s, collapse of the technology stocks in the early 2000s, and the global financial crisis. As those occurred… Typical downturns in the stock market will last far shorter than downturn in the real estate market. So let’s suppose you have a downturn of 8, I’ll give you two examples. The so-called dot com bubble burst in March of 2000 and the market declined until September of 2002. If you were in a 401k and as painful as it was psychologically You kept putting money away every pay period during that time. And then from September of 2000, it went straight up from there. Or if you had done that during the global financial crisis when Lehman Brothers failed in September of 2007, and the market bottomed in March of 2009, you would have huge returns. If you said to me you were 75 years old. But I think I would argue that you’re looking at it incorrectly. You’re looking the risk and I’m looking at the opportunity. So if you really want to de-risk your portfolio, of course you can go to cash. You can in your, in your 401k, you can put it in a money market fund, but I’ll tell you people who did that when COVID occurred made a huge mistake. Do you remember COVID? We closed down the economy in middle of March of 2000 and people were Hi around the world and the market collapsed. Do you know how long it took to come back? 43 days, 43 days before it came back. And people who panicked and got out had huge mistake because of what they could have done. So if you want, I’ll answer your question, go to a money market fund or a short-term bond fund. But if I were in your shoes and I was your age and I was putting money in regularly, I would see this as a terrific opportunity. Let’s remember what Warren Buffett has to say. He says, I am fearful when others are greedy and I am greedy when others are fearful and people are fearful today and that makes it an opportunity. So that’s the way I look at it and I’m gonna thank you for your call. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. It’s time for me to take a break. A perfect time for you to call or text 512-921-5888 I’ll be back.

Mike [00:19:51] If you’re a regular KUT listener, you know by now that member support makes everything we do possible, and you know all about becoming a sustaining member, but you might not know about another way to support the reliable news on KUT. If you have a donor-advised fund, you can support the station by recommending a grant to KUT! It’s a great way to show your support and to help ensure that KUT is your reliable news source, and it is way easier than it sounds. Find out more at KUT dot org slash legacy.

KUT Announcer: Laurie Gallardo [00:20:22] This is Money Talk with Karl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Karl.

Carl Stuart [00:20:36] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and the KUT app. Don’t forget that you can catch past shows at kut.org slash money talk. The number to call or text is 512-921-5888. We have a call coming in. Ken, you’re on the air. How may I help?

Ken [00:21:03] And carl thanks for your show this is what i’m calling to try to provide a little bit of information maybe your caller about two colors ago asking the hsa question

Carl Stuart [00:21:15] Okay, please go ahead.

Ken [00:21:17] I went through a similar situation on 67. I believe that when you turn 65 and sign up for Medicare, you can no longer contribute to an HSA. I think it’s probably the framework that he’s trying to find. I’m sorry I’m not an expert in the field, but I did go through a familiar situation and I had to stop making contributions to my HSA at 65 when I turned Medicare on. That may be, that may be what he’s trying to get to the bottom of, he needs to talk to a professional, but I had that.

Carl Stuart [00:21:56] All right, Ken, I sure appreciate it. Thank you for your information. Got a lot of smart people listening to Money Talk. I’m sure you’re one of them on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Jack, you’re on the air. How may I help?

Jack [00:22:19] Uh, good afternoon, Carl. Thanks for taking my call. I appreciate what you do. Thank you. Um, so I just turned 62 trying to figure out, I’ve heard varying, um, people say different things about, uh, if you’re still employed, whether you should start taking your, uh social security benefits out at 62 or at a later date, uh 67 or even as late as 70. And I’m just curious about, oh, the benefits of the pros and cons.

Carl Stuart [00:22:45] I am a big fan of waiting as long as possible. I can’t do the math in my head, but I’ve seen the chart of the difference in the monthly benefit from taking it at 62 or taking it full retirement age. And then at full retirement, until 70, it grows at 8% a year, and there’s no investment that you and I can make that has a guarantee of 8% per year. So I like postponing it. There are very few circumstances that I would take it earlier. Maybe if I were single and had a terminal disease, something like that, but too many people take it early and then they’re stuck because they can’t make it, you can’t call social security and say, my groceries are getting expensive, send me more money. I really like postpone. That’s what I did personally. And generally, if you are a, reasonable health and, you know, you’re not obese or you don’t smoke heavily or you don’t abuse alcohol, you have a healthy lifestyle and you have access to good health care, we have to remember there’s a difference between life expectancy and longevity. Life expectancy is a number based on our entire population. A whole bunch of us are very unhealthy and have bad habits. A bunch of, us on the other hand, fit what I just said. And people like that live a long time. So if I were in your shoes, unless there’s a mitigating circumstance, I would postpone it as long as I could if I was in your shoe, Jack. Thank you, Carl. You bet, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-58. Richard, you are on the air, how may I help?

Richard [00:24:41] I’m in my nineties and I got plenty dough, but I’m investing for my grandkids and great grandkids. And I want, what I, like gold is up 700%, they say, I wonder if it would be wise for me to get into gold.

Carl Stuart [00:25:01] Yeah, it’s up. It’s not up 700%. It was up 64% last year. Here’s what I think you should do with a portion of your portfolio. I think he should buy a gold and you should buy an exchange traded fund. You do not buy the coins. That’s a loser’s deal because you pay for the minting. And if you ever want to buy them or sell them, you pay huge transaction costs. Do not buy The Bullion because it’s not a liquid asset and you have to store it. Do not buy the gold mining companies because they tend to do better than gold and good times for gold and far worse than gold and bad time for gold. You can buy an exchange traded fund that actually owns the gold, actually owns a gold. You have daily liquidity at trades every day. And there are two, because I don’t make securities recommendations on Money Talk. I will just say that there are too large ones. And they have two symbols, one is GLD as in gold, and the other is IAU as in what gold on the periodic table. So if I were in your shoes, having a modest position of my total portfolio, more than five but less than 10%, I think based on history is a reasonable thing to do, both for yourself and for your children and your grandchildren, Richard.

Richard [00:26:18] Okay, that’s a change traded fund GLD.

Carl Stuart [00:26:23] GLD or IAU. Thank you. You’re very welcome. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. I want to be really clear, I don’t know Richard’s situation and I’m not making specific recommendations. I want make sure my lawyers hear this. 512-921-5888. Okay. You’ve been hearing the The text’s going on, so let’s just see. All right, Carl, how should we invest with this happening? We’ve added $1 trillion in only 71 days. Yes, that’s absolutely right. But isn’t it interesting? Guess what happened during those days? The dollar strengthened. Stop and think about that. Our governmental and national fiscal situation deteriorated, right? Got worse. What would that do for the value of the dollar? It ought to go down. It went up. What should it, what the heck is going on? This is the unique position that we are in that allows us to spend like drunken sailors because we still have the world’s reserve currency. And when people get scared, they go, what do they do? Well, historically they might buy gold, but they do buy dollars. And that’s just the reality. So the fiscal situation is terrible. Is it going to get worse? Of course it is. Nobody, whether she is a Democrat or he is a Republican, is gonna stand up and say, let’s cut Social Security, Medicare, and Medicaid and raise taxes. We’ll talk about waste, fraud, and abuse, but my waste, fraud, and abuse is different than your waste, fraud, and abuse. So is this situation gonna deteriorate and get worse without a There’s nothing you and I can do about it, and so far we’ve been getting away with it. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Carl, I’m of the thought that paying taxes now versus later, like a typical 401k, makes more since, since we are at historical low tax rates. And I am betting it will be higher when I retire. What are your thoughts on this strategy? Well, it ties into what I just said. The only way we are gonna, there’s two ways we’re gonna dig ourselves out of this fiscal hole. One is we’re going to raise revenues, that means higher taxes. And the other is we are going to debase the currency and end up like Argentina, right? Because we can, you can borrow money from, you can buy government bonds, let’s say you buy a 10-year treasury. And it pays 4%, 4.2%. And you’re gonna get your money back in 10 years. Will it buy similar goods and services, or will it be worth less? The way governments around the world have gotten out of it is that they print more money, making the value of the currency decline. So, if I were in your shoes, I believe the taxes are likely to go higher sooner, but I don’t think they’re gonna go sharply higher. And they’re probably going to go higher on high income people, so that’s likely. So if that’s your conviction, I have no problem with that. There’s a second reason that you might want to consider this. One is that if you took that money and you invested it in stocks, I’m not talking individual stocks, I don’t want to think about that, you invest in global equities, you’re investing in human innovation, and you have three to five year time horizon, you’re going to create gains that are not taxed, particularly if you buy tax-efficient mutual funds and exchange traded funds, you’re growing your capital, you are not paying any incremental tax on it, it will never pay tax on it unless you sell it, and if you sell you’ll pay at a lower capital gains rate. I happen to think that the capital gains differential between income tax and capital not wealthy. But own a ranch or a farm, and they’re what we call cash poor and land rich. And if they sell that, and they have to spend money that was their future because they had a taxed income, I don’t think that’s gonna happen. And in the really long term, if you’ve made these investments and upon your demise, if you’re married, your profit goes away for tax purposes and your spouse gets a new basis. And when he or she dies, the heirs get a new basis. So, the one thing about that 401k, you get to reduce your income taxes today, as you point out, and the other thing that happens is if you have an employer contribution, that is free money. If you have employer contribution in a typical 401k as you call it, I’d put enough money in to get the maximum contribution. If I have the ability to do a 401k, a Roth 401k I would do that serious consideration. As you are doing, invest the balance of the money on your own. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and the KUT app. You can catch past shows at kut.org slash money talk. Okay, let’s just see what we’ve got here, some work texts. Love the broadcast, thank you. Regarding partial Roth conversions, if the rollover IRA mutual funds have high unrealized gain, is an in-kind transfer of the fund to the Roth the most tax-efficient method or does it matter? I’m using cash to cover the tax liability. Is there any reason to target high or low unrealized gained funds for the conversion other than for diversification percentages? No. It makes no reason whether you transfer in kind and you’re transferring high gains or low gains, that conversion is subject to income tax. So it makes no difference whatsoever. And you have to make sure that you can do in kind transfers. You may have to sell it and do a cash transfer. I vaguely remember that may be the possibility. But the bottom line answer to your question, is it doesn’t matter it’s all going to be taxable income regardless of your cost basis inside that tax deferred account. Thanks for the call. I beg your pardon the text. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Hi Carl, former President Reagan used to say trust but verify. When someone or company says that they’re fiduciaries, how do you know? Many thanks. Well, first of all, they probably have a website. And if they are part of a registered investment advisory firm, they have to put that on the website. And if we call them registered investment advisors, the technical term is their company is a registered investment advisor. And the human beings are investment advisor representatives, but the industry standard is to be called an investment advisor. Anyone can say financial advisor, and that’s an umbrella term, but it’s not a legal term. Investment advisors have a fiduciary responsibility. They have to put your interests before their own. They cannot receive any transaction-based or commissions or sales charges, and they have what the law called duty of care. So I suppose someone could falsely claim they have fiduciary but you can do the homework and find out if they are part of a registered investment advisor then they by definition have fiducia responsibility. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. My husband and I both turned 73 this year and we’re going to need to be taking required minimum distributions. We do not need the money right now. We know we can give some directly to charity without taxes, but also like to give some to grandkids either their 529 plans or savings or investment plans. Can we do all of those without tax implications or just the charity and 529 plan? I can’t find much info on direct donations to 529 or grandkids plans. Thanks, Susan. Susan, I don’t think you can put money from a required minimum distribution into a 529 plan and not pay tax on it. I’ve never encountered that. Just for everyone else, what Susan’s talking about, once you’re 70 and a half, you You can take money out of your tax deferred IRA. And you can give it to a charity, a legitimate 501c3 organization, and it’s called a Qualified Charitable Distribution, or QCD. And once you hit required minimum distribution age, as Susan is, you can take your required minimum distributions and give them to the charity up to a total of $100,000 a year. You can have your custodian give them directly to the Charity, or you can have the custodians send it to you. It’s because the checks made payable to the charity and you give it to them personally. That’s what I like to do because first of all you deserve the credit with the charity and plus they may get it and the custodian may not identify that it’s coming from you. So that’s what i would do if I were you but to the best of my knowledge you cannot get out of a tax-deferred IRA into a 529 and avoid the taxes. If somebody’s listening and there’s some… Change in the tax law that says you can do that, please let me know. You’re listening to Money Talk on KUT News 90.5 and the KUT app. It’s about time for me to take a break. It is a great time for you to call or text 512-921-5888 and I shall return.

Jimmy Mass [00:37:24] 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 [00:37:55] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:38:08] Welcome back to Money Talk. I’m Carl Stuart and you’re listening to KUT News 90.5 and the KUT app. When you have a financial or investment plan in question, call or text 512-921-5888. Hi Carl, I’m 67 and I have $1.8 million in my IRA. I also have real estate with minimal rental income. I’m trying to wait until I’m 70. To take Social Security. Could I take Social security based on my ex-husband? I hate Social Security questions. I think it depends on how long you were married. You really need to look into that. That’s very tricky. You do say you were a married for over 15 years and then still receive your maximum Social Security distribution when you turn 70. My sense is yes. You will get your maximum social security distribution when you turn 70, that’s my guess. But I tell you, I find social security, just like health savings accounts, really complicated. So if I were in your shoes, I’d do some homework. I will tell you. Years ago, I had a question about Social Security, and I actually was allowed to set an appointment with a human being, believe it or not, and I talked to, it was sometime in the future, so I knew it was gonna happen, I had question and I got what I felt was a thoughtful answer. So that’s also something that you may consider. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888 Hello Carl, I heard your earlier caller speaking about Social Security but working for three more years. My experience was I’m 63 and still working. Tried to start my Social Security benefits to pay off debt. As it happens, I make far more than they will allow to receive those benefits. I believe my age, it was less than $2,000 a month. I’m sure it’s variable by age, but should she check into it before she signs up and expects to be paid? Well, you said your experience was you tried to start your social security, and it happens I make far more than they will allow to receive those benefits. I never knew there was an income test. My understanding was once you turned 62, If you want it, you can take it. I’ve never had someone tell me that the Social Security Administration refused to take it, so that’s news to me. Thanks for your text. 512-921-5888. Here’s the text. Love your show, thanks. I caught part of his show on the radio where you talked about pros and cons of money market funds versus CDs. Wanted to listen again, but darn it if I can find it in the podcast archive. Could you cover the topic again? Thanks, Sharon. Sharon, I would be glad to. A money market fund is not a money market account that you get at your bank. Money market fund as a security. It is a mutual fund, but it doesn’t invest in stocks. It invests in very short-term, high-grade debt instruments of maturity of one year or less. And the sponsor seeks to keep the price per share at $1 per share, and you can buy it and sell it on a daily basis. So as one business day settlement, you put money in, you want money, you call your custodian or your advisor, on a Tuesday the money is available on Wednesday. There are three kinds based on what they invest in. They’re called prime, government, and treasury. Prime money market funds. By high-grade corporate debt, government money market funds by U.S. Treasuries and agencies, primarily Fannie Mae and Freddie Mac, and treasury money market fund, excuse me, only by treasurys. I like the middle one. In my 47-year career, I’ve seen one of these fail, and it was because it was a non-sponsored money market, it wasn’t sponsored by Fidelity or Schwab or Merrill Lynch or BS. And they own paper that failed during the global financial crisis. I can tell you there was a time back when interest rates were so low that I read in the Wall Street Journal that Schwab was losing money on its money market fund because the expenses to operate their money market funds exceeded the interest income they were getting on the dead instruments. What did they do? They subsidized it Because they have billions of dollars of their clients money and money market funds I like it. I like them. I use them. I will tell you that they will follow the general direction of interest rates. So as interest rates rise and the bonds in the portfolio mature, they reinvested at higher rates. And as interest rate fall, over time, the interest rates on your money market fund will fall because as their higher yielding bonds mature, they’re going to buy lower yielding launch. But you have daily liquidity, which you do not have with a CD. Are they subject to the $250,000 FDIC insurance? They are absolutely not. So there are pros and cons, but I think they’re an excellent way for a place to park your cash. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-588. Regarding when to start taking Social Security, if I’m in the position to retire by 60, is the right plan to start living off my retirement assets until I’m 70, then start collecting the Social Security after? Without knowing all the details, my kind of 30,000 foot answer is yes, because your investments will go up and down, and your Social Security is a guarantee of a certain amount of lifetime income. It has an inflation adjustment, but you never know. You’re out of control as to how that is done. And because you are 60, I am confident in the future for you getting Social Security benefits. If you’re 30, I’m not so confident. But at 60, there are simply too many people, frankly, sadly, living off Social Security, to put those benefits at risk. So if you have other assets that you can take down, letting the social security benefit grow, I would say the answer is yes. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Hey there, my name is Winston and I sobered up about a year ago after too many years of drug abuse and alcoholism. Well, congratulations. I don’t think any of us who have not suffered from what you do can imagine how hard that is, so congratulations. I’m 50 years old. I haven’t paid taxes in probably 10 years. I owe money everywhere and to everyone. I recently accepted a job at Boeing where I’m earning good money for the first time in years. How do I start the financial repair? It’s really messy. You’re making an income. You have cash. You put the cash in three buckets, Winston. The money that you’re gonna pay your daily monthly expenses. Groceries, gasoline. The second bucket is money that you’re gonna need because you’re going to buy a car in the next two or three years. Or you just want to have some money put aside, even though Boeing’s a big company, you can’t guaranteed a job there. So you want to some money put aside in a money market fund, like I just talked about, that you can tap if you need it. And then you’re planning for your future. Yes, you’re way behind at age 50, but that’s water under the bridge. And so Boeing will have a 401K plan. It’s called an employer-sponsored plan. They will have what’s called a matching contribution. They’ll put in a certain percentage of your income that they put in, and then you put money in. You can start at a small amount, say 3% or 4% of your in come goes in every pay period, and then every year increase that by 1% so that you get your target above 10%. The money will grow, there’s no income taxes on it as long as it grows, and it will reduce your taxable income, and in 10 years when you’re 60, if you retire, you can get your hands on it. It’s the most tax-efficient way to do it. So that’s what I would do if I were in your shoes, and good luck to you, sir. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call with your questions or text at 512-921-9227. 5888. Thank you for your time and knowledge. You’re very much appreciated. Listening every Saturday. Thank you very much. 512-921-5888 Hi, Carl. We’re going to put our rental house for sale soon. And if we were going to get half a million dollars as net profit, where do we suggest we invest this chunk of money? Do we need to take some time to invest in gradually, as you suggested? Thank you, Fay. Yes, that is what I would do. I always have to say this. I can’t find an independent study that suggests if you’re going to invest for three to five years or longer in financial assets, stocks, bonds, mutual funds, et cetera, that you should go ahead and put it in all at once. But I would tell you the psychological pain of putting it all in at once and watching it drop 20%. Is significant, and there’s a lot of evidence that we as human beings treat a 10 percent gain as 10 percent, but we experience a 10-percent loss as 20 percent. And so what I would do is I would take a long period of time, more than six months, maybe nine to 12 months, divide it into equal amounts, and invest it either on own with an advisor and tax-efficient exchange-traded funds. In a balanced portfolio of stocks and bonds and other assets, and I would do it over time. I would say to you, based on my 47-year experience, that you’ll look back on this five years from now and be glad that you did. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and the KUT App. Boy, I’ve been talking a lot today. Starting to lose my voice. 5 1 2 9 2 1 5 8 8 Mike, you’re on the air, how may I help?

Mike [00:49:34] Hi, I am 67, I’m a retired firefighter, and I have $800,000 in deferred compensation that’s making a guaranteed 5%. I’m 67, and have to have it out by 70 and a half, and then I have to pay income on it because it’s a deferred comp. How would you recommend that I go about getting that money out? And my financial situation, I also have a retirement, so my financial estimate is pretty good. But I want to be able to get that money out the most tax-advantages way, with good interest.

Carl Stuart [00:50:11] Good, so let me ask you a couple questions. Are you a single taxpayer or are you married filing jointly?

Mike [00:50:17] Married filing jointly.

Carl Stuart [00:50:19] And how much would you estimate is your joint taxable income going to be this year?

Mike [00:50:25] About one thirty

Carl Stuart [00:50:30] So if you’re married filing jointly, this year you’re in the same tax bracket. If your taxable income is above 100,000, all the way up to 211,000. And that amount is taxed at 22%. But the good news, Mike, is that the next bracket from 211 thousand all the up to 403 thousand is tax only at two percentage points more, 24%. So I would take the time that I have left Take the money out in such a fashion as to stay in the 24% bracket or lower, and that way you’ll pay the least amount of taxes that you’re gonna pay it. Take it out, go study the tax code, and then, or the tax rates, which you can just Google, and take it out in that fashion rather than taking it all at once. That’s what I would do if I were in your shoes.

Mike [00:51:22] What was the max rate that you mentioned for the next text?

Carl Stuart [00:51:25] Sure, so this is the 2026 rates and they go up, the brackets go up every year so it actually gets actually to your benefit. Right now, married filing jointly, the taxable income is over 100, up to 211, that’s taxed to 22 percent. From 211 to 403, that is taxed at 24 percent. So if you’re making 130, you could take out another 270 up to 400, my understanding.

Mike [00:51:53] Okay, so I can get it out in, say, three chunks.

Carl Stuart [00:51:56] I think you can, yes, based on what you told me.

Mike [00:52:00] So I need to start by next year. Great. And where should I put it?

Carl Stuart [00:52:08] That’s an entirely different thing. I’m going to answer it this way. You are fortunate, I know you know this, because as a firefighter or a police officer or a military, career military person or a school teacher, you have what’s called a defined benefit plan. You called the retirement. You can’t outlive it. You’ve chosen either to take it for your life or for your wife and your spouse. That’s a huge benefit. And I believe you’ve been putting into Social Security. So when you get, you will be able to get that at 70 as well. So you have two guaranteed streams of income. So what is your risk? The risk is that the cost of living goes up. You can’t make the firefighter’s pension go up. You can make Social Security go up, so this is the place you take the risk. You take the risks to grow the money. So you are either gonna spend some time, because you’re retired, doing some study. Figure out to build a portfolio. If you’re a do-it-yourself kind of person, you can go study the websites at Vanguard and Schwab and Fidelity, probably T. Rowe Price and a bunch of others. And you can set up an account there and invest it yourself. Or you can to an advisor. If you gonna do that, go see these people face-to-face because you gotta have a good feeling about it. They need to ask your personal situation, not just start talking about how smart they are and what great investments they have. And then they ought to be able to do, number one, after they understand your situation, they oughta be able answer three questions. What is my investment strategy? The advisor should be able to articulate that in a way that it makes sense to you and that this person can explain stuff that you would otherwise not understand in plain English. Number two, how are you gonna work with me? What does a happy, healthy client advisor relationship look like in terms of contact, meeting, et cetera, et cetera? And third, how are you compensated? And it ought to be all completely transparent. And if they say, well, we’re gonna put you in this investment, it’s not gonna cost you anything, run away as fast as you can. Everybody deserves to get paid, firefighters, CPAs, and investment advisors. So that’s the process I would do if I were in your shoes, Mike.

Mike [00:54:25] Fantastic, I really appreciate it.

Carl Stuart [00:54:26] Ok, you bet. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT App. Carl, my wife and I are in our early 80s and considering a life care retirement facility. The buy-in ranges from 90%, 50% or 0% return upon death. Please comment on your thoughts. Well, it is a financial decision. The more you buy in… Then the more it comes back out for your heirs. And that’s, I mean, it’s a financial decision, but it’s also a psychological decision. If you think, you know, some people, I’m gonna do two extremes, okay? I saved and invested all this money, my kids are doing fine, I’m going to take care of myself and have the lowest monthly fee by putting in the most money, Or, I’m going to build a legacy. For my family, for my church or synagogue or mosque, whatever the case is. That’s how I would make that decision rather than strictly on dollars and cents. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Hi, Carl. I have $1.7 million between my stocks and bonds. My advisor is recommending me to take 359,000 from my bonds to buy annuities. To supplement my Social Security payment, I plan to take when I’m 70. What do you think about annuities? According to my advisor, the bank pays the fees on the annuaries, not me. Run away as fast as you can. That’s simply not true. And this person either doesn’t know what she’s talking about or does and is not telling you the truth. You trust me, you’re paying for it. And the way is that there will be surrender charges and it will be the cockroach motel you get in and you can’t get out. Nobody works for free, not the annuity company, and not the advisor. So you are getting poor advice. I would take a look at some other advisors if I were you, because annuities, they’re not desperately bad on their own. Insurance companies deserve to make a profit, and the advisor does, but when they say they don’t get paid, the insurance company pays it. It’s simply not the case, okay? Thanks for the text. Well, it’s been a lot of fun this afternoon We are running out of time. I want to thank Corinne for doing a terrific job. Thank you for listening. And as always, next Saturday at 5, be sure and tune in to Money Talk.

KUT Announcer: Laurie Gallardo [00:57:07] 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.