And the chance to be yours far.
Good morning, folks. My name is Martin Shields.
I'm the chief wealth a Visor at Bruchet Financi Group, and I'm going to be your host today for let's talk money. As always, it's great to be here with you, and I look out this the window on this gorgeous sunny day. Boy, this is fantastic, folks. The weekend here is going to be in the sixties and sunny.
I don't know if you're.
Out there driving or walking, or maybe you're sitting having a nice pumpkin spice latte. I'm having my pumpkin spice coffee right now, and so I hope you enjoyed this weekend. But as always, it's great to be here with you on this Saturday morning to answer any questions you may have regarding your financial planning or investment management concerns, and I encourage you calling with those questions. You can reach me at eight hundred eight two five five nine four nine.
Once again, that's eight hundred eight two five five nine four nine, And for the first time I'm going to say ever, we also have an email address that if you're too shy perhaps to call in, but you will want to ask a question, you can now email that to us at ask Bouchet at bouchet dot com. Let's ask Bouche all one word at bouchet dot com. And in case you don't know how to spell bouchet, it's b.
O u v h e y.
And again one of the last time is ask Bouche at Bouchet dot com.
So whether you want to call.
In with your question, whether you want to email me your question, whatever the case is, feel free to give me a holler or shoot me an email. And they always say you you may be doing enough fello or listener favor by asking the questions they have as well, and of course there's no dumber silly questions. A lot to discuss this week. Once again, folks, it's great to be here with you on the radio and let you know that we are hitting all time highs again in
the market this week. The S and P five hundred is up over twenty four percent year to day. It is by far the best dock market index out there, better than every category, even better than the Nasdaq one hundred. But it is just really powering through and there's a.
Number of things.
That are allowing that to happen. As we've talked about, I would say we're we're in that process. I mean, where do we actually say the economy has been landed softly by the FED? I think we're right there. What I'd like to see is the next few months, next few quarters, this trend have to continue, and that trend is strong economic growth, good labor markets, good corporate profits continue to grow, and at the same time, have an
inflation moved to that two percent target. If we continue that trend, it would be safe to declare the soft landing is in place. I think at this point what we have is we have the wheels just getting close to touching down. So we're not quite there, but we're getting close. And you know, I think it's important as investors to appreciate that, yes, the markets are maybe a little fraudy from evaluation perspective, but there's a lot of things lining up that could continue to support both the
economy and the market's doing well. And you know, we just hit the two year anniversary for this bull market from you know, because basically when you look at market performances, we talk about a bull market or a bear market. A bull market is when the market's just trending up over time. A bear market is when there is a correction within the market that's down twenty percent.
So usually what.
Happens is after that happens, there's a new snapshot that says, okay, now we're in a new bull market after that period.
So this this two.
Year bullmarket's been going on since the middle of October of twenty twenty two, and it's a very unique bullmarket. You compare it to other bullmarkets historically, there's a number of differences. Probably one of the stark differences is where we started with unemployment. So quite often when a bull market starts, it's after a recession, and so unemployment is much higher. In this case, unemployment was at three six three seven, so very low unemployment rate to start with.
But certainly even you know, to the environment we got in where there's a market correction, this is a unique environment, right, So you had the whole pandemic element. You had you know, free very I gonna say free money are very inexpensive money from the for the reserve, and then you had them raising indust rates five hundred basis points. So this
is a very unique environment. But without a doubt, you know, what I would say is, you know, there's a lot of reasons why this bull market continue, and I think there's a few elements that, to me as I look at it, are very positive. One of which is you see the breath of the market now expanding. Right. So before it was just the large megacap companies that we're doing well, and they are still doing very well. Apples hitting all time highs, and the number of the tech
companies are doing very well. There's you know, just reading an article about Navidio, which is the big AI chip maker that could hit a market cap of four trillion dollars four trillion dollars. So there are a number of different things that really support the markets moving higher. But at the end of the day, what it comes down to is it's about profits. You've got to have profits in order to make that happen.
We're going to go to the phone lines.
We have Marie from Loudenville there. Yes, hi, hi, questions.
Yes, I have a question. When the money market rates were five percent, I found it advantageous instead of doing a money market, putting like a couple hundred thousand to a money market, I found it advantageous to put into a treasury to save New York state taxes. Now that the rates are coming back down and the treasury. You know, I'm trying to figure out a better course of action for some non retirement money and looking at like VOO and BTI some I believe they're a vanguard like ets.
The question to you is, if you put non retirement money into an ETF like that, can you talk about the tax implications of that. It makes me quite nervous to have to pay taxes on hundreds of thousands of dollars of non retirement Yeah. The second parts of the questions, I planned holding it a long time. I don't want to buy and sell. Thank you.
Yeah, you're welcome. So great question. Just a couple of things.
One is just to kind of go back on your point on yields.
You know, yields what.
Very low, let's say, two three, four weeks ago, but they've come up quite a bit. I'm looking at the current yields right now for US treasuries. You can get a ten year US treasury that's yielding four percent, right, So I like your idea of getting a US treasury. You don't pay New York State taxes on that many
people don't know that, So I like that idea. And you know, the upside again of buying this your treasury, at least for some of your more conservative dollars, is you've locked into that four percent rate, which is not as good as the five plus percent rate that was there a year ago, but certainly from a historical perspective, you think about that, if you can get four percent
annually and it's risk free, then it's great. Now to go on to your question regarding an ETF, uh, basically, from a tax perspective, in ETF, when it comes to income being produced by that ETF, whether it's dividend income or if it's a bond ETF, you're just gonna pay taxes.
For it like you would any other.
If it was a treasury bond right now, if it's corporate bonds in there, you're gonna pay state taxes on it as well. So any income being produced you would just pay it just like it normally would. Again, it could be dividend income, you could have it as qualified dividend income where it would get the fifteen percent tax rate. It could be interest income from bonds and you just pay ordinary income taxes on that. Now the only difference.
The thing you have to be aware of is if it's a stock ETSU and you have it in a taxable account, then as that grows, that ETF grows, and then you sell it, then you have a realized capital gain and which case you're going to pay long term capital gains taxes if you've held it for a year. If it's less than a year, then you're gonna have to pay short term capital gains, which is really just
ordinary income tax. But again, the weight of you an ETF from a tax respective really is the same way as you would view holding that individual security.
Uh.
And of course if it is in an IRA, you're not going to pay any taxes on that, whether it be a wroth or traditional ray.
Uh.
The traditional ray you would only pay taxes when you take those dollars out. And with a wrow, of course you'll never pay taxes on any of the income or growth.
So once you max out your wroth for the year and you max out your four K for the we here there's really no other retirement vehicles.
There's not there's not and that. But you know, one thing I want to stress is that's okay, Yeah, don't don't it's not a problem you did, just put the money into a tax will account. And you know what I would tell you is if you're in one of the highest tax brackets, or if you're a high income earner,
then you know you think about it. It can be managed in a very tax efficient manner, meaning that you only sell when you absolutely either need the money or you think it's the absolute right to do from an investment perspective. And as I mentioned, you're most likely will only be paying fifteen percent federal or five percent state, depending on
what how much you sell. And in that situation, if you're a high income earner, you can use muni bonds municipal bonds for your more conservative part of your portfolio. So if you buy New York State media bonds, whether it's in an individual bond or a bond fund, you don't pay federal taxes on that income and you don't pay state taxes on that income as well. Now, in general, those funds like that go ahead.
Like a Vanguard, like immune municipal bond.
I believe, yeah, that's right, that's right. So again the mess circumstances, like Vanguard will have one that's dedicated to New York or Puerto Rican bonds also qualify for the New York state tax exemption. Now, if you had a AMUNI bond fund that had Pennsylvania bonds, you would still not pay any federal tax don it, but you would pay New York state taxes. So you really, if you're in a higher tax bracket, you really want to have
the one that's dedicated to New York State. And there are a number of them that are specific to New York State, and that way you don't pay state or federal taxes. But the thing that's important with this is it's just sometimes I have clients that just don't want to pay taxes, and I said, well, this is good, but we have to really be aware of it's what's
called your after tax yield. So what you do is you compare, Hey, if I bought a corporate bond or a corporate bond fund, and I compare that to a minibond fund after taxes, how does that yield match up? And so for our clients that are the highest tax brackets, it's beneficial for them to have mini bonds because in
that situation, their after tax yield is low enough. But the one last thing I want to share with you, Marie, is that it's actually really nice over time, as you grow your taxable account that you have those dollars, because what we see sometimes people that have millions, millions of dollars in a pre tax IRA or a four one K, and now they want to access those dollars to buy property or for whatever reason, and when every dollar they take out, they got to pay ordinary income on that distribution.
And so you can imagine if they want to take out one hundred fifty thousand dollars they got to take if that's not they got to take out gross about a two hundred and twenty or two hundred and thirty to pay ordinary income on that distribution.
So I would tell you.
That you maybe would like to have more tax preferential treatment for your savings.
But don't.
It's really not a bad thing to have dollars in a taxi account if it's managed in a tax efficient manner that you can utilize and have complete flexibility. Whenever you need those dollars, you can go after them.
Well, thank you for that. You're extremely well versed in your field. Thank you. My concern though, is I feel like like I do my own management but I feel that if I go to an advisor and pay the one percent, am I getting the discussion about taxes or whatever advisor's charge? Like? Do I do I get that tax discussion or do I have to go to a financial advisor for you know, for money and management and then I have to go to an accountant to talk about tax savings?
Like?
Is there someone who can handle all of that? Is that a reasonable request?
That's a great question.
So just to look at the lens you should look through when you if you're going to make this decision. One is I would almost always use a fiduciary, right, So we're a fee only NATA fiduciary. NATA is the organization we belong to. We are feeling we don't charge anything. If we're going to give you advice on anything else, there's no additional fee. The other thing is with our firm, and there are other firms like this as well that in the area that we are our client's personal CFO.
So what that means is along with us managing the portfolio and doing tactical asset management for the portfolio, we're all with conversations with our clients and anything finance related and I mean anything finance related along those lines is taxes. So we've continued to increase our tax knowledge at the firm.
We have a number of CPAs, we have a number of enrolled agents, and what we find is our clients really appreciate having that all under one roof because there are other firms that they may engage with their CPA and we'll do that, but for us to be able to give you specific guidance on decisions you're making, it is very important to have that tax piece there because for most people that's one of the most important parts of their financial decisions. So you can our again, our
firm does that. We also do tax prep for certain clients, not all of our clients, but certain clients, and we do charge an additional fee for that. That's the one thing or we do charge an additional fee, but otherwise our tax planning is all incorporated in the one percent fee.
And that's where we talk about in anything you pay for in life, it's important to know what you're paying with more iportant though, is the value you're getting right, and you know it's constantly okay, what is the value we offer our clients because with our clients We have
no term to our agreement. They can leave any time they want, but we keep our clients trust day to day, months and month, and it's that value that we offer from our portfolio management, from our personal CFO fundage planning services, and also for us, what's very important is our client service team. So with we use Charles Schwab as a custodian. Any interaction between our clients and Charles Schwab always goes
to our client service team. And it's just the value in that is when you pick up the phone and call us, you're dealing with a person right away. There's no eight hundred numbers, there's no call tree, there's no whatever. And you know that's another element as you get older, making sure those things get done properly. It's so important, I mean, it's it really is very important.
So can you schedule when on Monday? Can I call and schedule like a consult free consultation just to talk about your services? Is that something you offer or on the phone.
Yes, we absolutely do that. So you just call on our offices five one eight seven to zero three three three three. I will let you and any of our listeners know that we do have a half million dollars minimum investments that we would manage if you were to come work with us. And that's just so we can because we spend an awful lot of time with our clients. So it's just it's one of those things where if you don't have that, we can still give you the
guidance and point in the right direction. But to come on as a client, we do have that minimum, and yes, we can set up an hour. It's about hour and a half. It could be in person or sometimes maybe the initial meeting is zoom, so you can just learn more about our firm and noy'be if please go ahead and call on them in Monday, and any one of our client service team members can schedule that meeting. Sounds great.
Thank you, Thank you for your expertise. That really learn so much from your show.
To appreciate answering questions.
Take care, Mary, We're gonna stay with the phone lines. We have Peter from Sarget East. Yes, Mike, how you doing?
What can I help you with them?
Oh?
Fine, fine, fine, thank you. It's a beautiful day to be outside when it warms up a little. That's your show. You were talking about inflation, about the about the rate has has come down to about two percent, but nobody seems to mention or discuss the scenario that would have to happen to have twenty percent deflation. In other words, that we're well, this, this two percent we're getting is on top of the twenty plus percent that we've we've gotten in the in the in the last three and
a half years, which which is totally inordinate. So what's what's the scenario to to deflate prices twenty percent?
That is a great question.
Yeah, So it's a great quote, and that is the challenge we're seeing, right. I actually just wrote a blog on this, which is I call it two to state economies. Right, if you're a high income earner and you you own a house, which most many high incomers do, and you're putting money in the stock market, you know this economy is pretty good, right because you've seen you know, your
house appreciate. You've seen maybe you have a second home that's appreciated, maybe investment property that's appreciated, your portfolio is appreciated, maybe your income's gone up.
All these things where.
If you're in that group, hey, life's pretty good. But there's a whole other group of people that have maybe seen some slight increase in their compensation at four percent, but the inflation was at nine percent, and even more recently it's still at four percent. You know, it's trending down to two And to your point, these prices are still away elevated. We're talking about inflation from that higher number, and you know, things like healthcare has increased threefold, threefold
in the last fifteen year. Premiums in healthcare, rents have increased much faster than income has. So if these quite often people own that lower income group, they're rent the renters quite often, and so they've seen they haven't appreciated their houses since have not appreciated, but the rent has increased quite dramatically. So yeah, so he your point is valid, and frankly, I don't think you're going to see deflation. You're not, and it just shows you the real negative impact of inflation.
Right.
I'm fifty five, you know, in the seventies, I was a kid. I don't really remember. I kind of remember inflation,
but I don't. But for the most part, since I've been you know, a teenager adult, we really have not had inflation, and you know, we had it obviously there for a period of time, and boy, if you didn't think it was ugly and you didn't think it was a problem, I think the last four years have shown you the importance of really trying to maintain a two percent less or left level of inflation.
And uh, again.
To your to your point, I don't think you're going to see deflation. The only way you may see that a little bit is in real estate. But you know, I've said this before. You have rates increase from less than three percent on a mortgage rate to over eight percent, and yet prices stay the same or continue to go up. So to me, what that means is, as I said this before, there is a supply issue. Uh, there's just
not a house enough houses out there. So I don't see housing going down if anything, As rates continue to drop, if that happens, prices are going to stay the same, if not go higher, because now people can afford more homes.
Perhaps, though, if if we can produce more energy and sell sell sell it abroad to to to ready markets, that that it would bring that bring down the cost of energy in this country. And since every since energy is built into every every thing that we that we purchased that might bring prices down a little bit.
Yeah, No, it's it's interesting because certainly it does flow through. We saw that when oil was up over one hundred dollars a barrel. The thing to appreciate is a couple of things. One is we are less certainly relying upon foreign energy by all means. A second, it is these energy markets are.
In general global markets.
So just because we do something depends on what the other big producers are doing, and they have many incentives to keeping prices higher more so than we do. And you know, I just I think it's great to have lower energy cost I think that would be very important, but I'm not sure that would actually flow through to deflation. What I think it would perhaps do is limit some of the inflation.
Yes that that we do, we we do. We were importing you know, Sota, dirty oil from from from Venezuela, and that the analysts seem to say that we we have an immeasurable amount of oil here and natural gifts and in this country that that that we we we could produce and of course supply and demand if we produce enough. Uh, we're going to control the price to a certain extent.
Yeah, but they had to appreciate. This is what happened, is that a number of those oil drillers went out of business because if prices dropped too low, they can't make money out of it, right, because there is a cost to drilling, especially fracking in some of those other ways there are more expensive than than you know, what
had been in the past. So again, if you're you think about it, if you're an oil driller, you actually want prices to be higher, right, And uh so there is that balance that these you know, even within the US, these oil drill is we'll stop drilling if prices go too low. So that's you know that this is the economics of any business, but in particular when it comes to the oil drilling.
Sure, but you can't make money.
You can't make money on negative margins, right, So if it costs you more to drill, it doesn't matter how much value you have, you know. And again I just say, I do know that with these these drillers, if they do want prices to be higher. So, but great question
there from Peter. I mean it it is tough when you see the fact that inflation's going to two percent, but for many people it's the challenge of trying to meet uh and balance their budgets with incomes that are not going up that much anymore, but prices that are raised certainly. Well, folks, we're gonna go to commercial break, but come back and join us as we take your questions. You're listening to Let's Talk Money, brought to you by
Bouchet Financial Group. Well, we help our clients prioritize their health while we manage their wealth for life. Come back and join us, folks, and the.
Chance to be us.
Good morning, folks, welcome back, and it's great to have any new listeners joining us. As always is great to be here with you to answer any questions you may have regarding your financial planning or investment manager concerns, especially on this fantastic fall.
Morning, whatever it is. And I hope that you're enjoying.
Yourself, and it's great to answer any questions you may have. And you can reach me at eight hundred eight two five five nine four nine. That eight hundred eight two five five nine four nine, or as I also said at the beginning of the show, we have an email address.
If you're too shy to call.
You can email me at ask bruche at dot com. That is, ask bouche one word at bouche dot com, and bouche is b O U c h E y dot com. And as I always say, there's no damer silly question except for the one you don't ask. And you may be doing your fellow listener a favor by asking the question that they have, So go ahead and give me a call. So the number of things to discuss. As I talked about the market hitting all time highs, which is fantastic, it's just great to certainly be on
with you when that's happening. Although we always say with our clients one of the biggest values we add.
Is when there times are tough.
Right, when when the market's going up, it's people are less stressed. But when times are tough and there's volatility, uh, that's where our clients really rely upon us. But I do think it's important to take a step back and say, hey, with the market hitting all time highs, what are things you need to be aware of? And I think just a couple of things. One is it's not a bad
time to balance. I mentioned this on the show last week, which is we did that for many of our clients' portfolios if they got way out of whack with their equities to their target. So let's say we had a client that was in a growth and income portfolio, so they had sixty percent equity target, forty percent target for bonds, cash and alternatives. Well over the past five years or so, since maybe we did a last rebalance, those targets got
out of whack. So the clients now the allocation was almost seventy thirty or sixty five to thirty five or something much greater, and we let that run. That really
added a lot of value to our client portfolios. But at some point what's important is that our client portfolios reflect the current risk and return characteristics that they want, and so we rebalance back to target, in particular in our what we call our qualified accounts, which is our retirement accounts, because there's no tax consequence to doing.
That, so it's not a bad time to do that.
And also, as we always say, even though the markets are hitting all time highs, it's still a good time to put cash to work. You know, it all comes down to the right time prizing. If you need that money in the next six months or a year, I wouldn't put it in the market. I would put it into a money market fund or something that's very liquid
that you get a good yield on it. But if your time rising is five plus years, to have more than what we call your emergency reserve fund, which is about three to six months maybe on the high end, one year's worth of cash.
It doesn't make any sense.
You know, we see perspective, clients come in all the time with significant amounts of money in cash, and you know, really over time you.
Can take on more risk, even if your retirement you can take on more risk.
Matter of fact, you really need to have that growth, whether it's for yourself or for your spouse, or even for your errors to be able to, you know, have that portfolio growth for them, and it just really needs to be managed proper relate. So you know, I would just say to you, just be aware that you know, having that right time horizon, that then you're still in a good spot to go ahead and invest that cash.
And the best way to do it is if you have a large amount, is to put it in lump sum, don't try the time of markets.
From a statistical perspective.
That is the way that you can have the greatest return. Now I say that, and I'm fully aware that with with the individuals in investing, there's a lot of psychology, there.
Is a lot of emotion to those decisions.
So one of the best ways, if you can't pull the trigger to put that money in lumps is to dollar cost average, and all that means is simply taking dollars, whatever that amount is, and investing it either constantly over time, or if you want to get a lump a certain amount invested in a defined period of time. Let's say you have a million dollars you sold the business you want to get in the bar, but it just doesn't It just scares.
You too much to put it all in at once.
Then you can go ahead and let's say invest in over four periods. You invest one quarter now, a month and a half of out, you invest in another quarter. Three months from now, you invest the third quarter, and then finally, say four and a half five months from now, you invest the final tranch amount, and then at that point.
You're fully invested.
So the advantage of this is, let's say you invest one quarter now and then there's market volatility, well, you can move up those additional amounts to invest and take advantage of it. But the downside is that the market may just keep moving higher. And that's what the market does do.
Right.
There is times of volatility, but in general, the market trends higher so that you after your four or five month period, many times you would have been better off putting all the money in first at once in a love sum versus dollar cost averaging. But again, without a doubt, investing is analytical, but it's also very emotional. So if you just can't stomach doing that, then dollar costs averaging gives you a way to get some of those dollars invested, but also hold back in case.
There's volatility to take advantage of that. Let's go on to another topic. But again, if you have.
Any questions, you can reach me at eight hundred eight two five five nine four nine. That's eight hundred eight two five five nine four nine. But before we do, I just want to give a shout out to my son Hayden. He is back home for his first weekend on break. He's at a freshman at Saint Lawrence University, great school up there in the North Country, and he is just he's rocking it. He's doing a great job.
As a student. Uh, and he's got a few club sports going on.
We kind of joke with him that he sounds like he's at summer camp maybe, but fully engaged.
So congratulations Hayden on doing well as you go through your first semester of college there.
But let's talk about I want to bring up our blog at Bouche dot com as always really a lot of great information that we put out there.
Uh it's under a Bouche.
Dot com and go to the insights page and uh, there's blog and webinar out there. We put a blog out pretty much every week on a on a topic, and a webinar pretty much every month.
We have one at the end of the quarters.
We have uh more the investment one that we put out there. So those are those usually get a big attendance. But I would really encourage you to look at that and you know that gives you some good insight on topics and how we approach both financial planning and investment management. But before I continue that discussion, let's go to the phone lines. We have Alan from Glenville. Allen are you there, yes, good morning, can you I can, How are you doing?
Oh?
Good good? Thank you for the show two points I want to start with. I'll start with the first one. Do you feel the stock market has an automatic bottom mechanism in it by virtue of the fact that only eight percent of the population gets a pension and that every thirty days people just automatically have money put into their four h one K and that creates like a floor to the market because that's money that's going into
the market one way, shape or form every month. So seemingly the market, Yeah, you'll have fluctuations, you know, maybe a bear market over a three month period, but in the longest of terms, it would seem to me the market can never really bottom because of all the money that goes in there by default.
Yeah, So a great question and comment.
You know, if we had talked about this thirty years ago, I might agree with you. I remember I was working in the nineties and I probably had that mindset.
But you think about it, how many bare markets.
We've had, in particular eighth nine, when the market was down fifty five percent over that time period, when people were contributing significant amounts to their full and K accounts. So what I would tell you is, you know, we're talking about trillions of dollars trillions, so that the amount that is being put in is significant, but not relative
to the overall dollars. So if dollars start moving and their's sales going on, it's going to overpower the dollars that are constantly going into buying.
So I don't think there's a floor necessarily.
Now, what I would say is perhaps under this FED there's a floor that's the FED floor that if let's say something were to happen, the FED, Fed Reserve and even the government like we saw in COVID, are going to step in and put a floor in there. I think, relatively speaking, if it wasn't for that, the market would have been down to say fifty or sixty percent during COVID, but instead it hit thirty five percent and then hit
it all time high that year. So I do think that under you know, this current FED, there's there's a floor into where it could go. And you know, we saw it to be around down thirty thirty five percent, got.
It, fair point? And one other question the fact that the T bill rates have gone up about fifty basis points in the last let's call it forty five days since the early mid September, do you feel as either a the bond market is sifting out, inflation is here and it's going to be a problem longer term, or b is it sifting out the fact that to attract investors for now and for the foreseeable future, that you'll have to have higher rates, especially on the long end of
the curve to bring those investors in. I just like to get your thoughts on that, and otherwise have a great weekend and listen for your answer.
Another great question, Allen. I'm gonna probably go more with the idea that, you know, the bond market, like the stark market, overreacts, and you know, I think it's interesting when people, whether it's the Fed or the market or agnosticators talk about where interest rates are going because they don't know where they're going. Let's be clear, they really are doing a bad job of forecasting where interst rates
are going. So I think what happen is simply the market overshot and it got a little bit anticipating too much of a dramatic increase or just a decrease in interest rates, and then there was this recognizing that said, hey, you know what, this has got to be still really strong. The Fed will most likely cut rates twenty five bases points in November and December. But it's not a given, you know, you think about it.
If you're the Fed and.
Inflation really isn't continue to trend to that two percent target, even if it's just kind of moderating around. If the economy is strong and the labor markets is strong, and that's dual mandate for the Fed, right full UH employment and managing prices, prices or inflation, well, you know, if employment is still very strong and unemployment not taking up UH and inflation is not heading two percent target, they
may not. They could pause. It is all by the way, it's not out of the realm of possibility that inflation is starting.
To go back up.
They could actually have.
To increase interest rates.
Is that likely?
Probably not likely, but it's not zero as far as the odds, So I think again, it's just more of a function that the market, bond market, stock market will always overshoot, and uh, you know that's just the way it's going to happen. So just just something to be aware of. So we're gonna go to a commercial break, we'll come back. Can join us as we take your questions.
You'll listen to let's talk money, brought to you by Bouchet Finance Group, where we help our clients prioritize their health while we manage their wealth for life.
Welcome back, folks, as always.
Folks, if you have any questions, feel free to give me a ring. You can reach me at eight hundred eight two five five nine four nine. That's eight hundred eight two five five nine four nine. So we only have a little bit less than fifteen minutes less. So if you have any questions, let's chat so I can give you some guidance. Also, as I mentioned to you, you can reach us via email. If you're a little shy about calling on the show, you can reach me
at ask Bouchet at Bouche dot com. That's asked Bouchet all one word at Bouche dot com. It's b O U v h e y dot com. So before I took that last caller, we're talking about our website and under our insights page where we have all of our blogs and we have our webinars.
And you know, one of the things I want.
To mention we have a webinar that our colleagues John Malay, who's one of our advisors, but also our chief operating officer and Dave Clark, who is our director of Operations and also our chief compliance officer, did on cybersecurity and identity theft, and I would really encourage you to watch that. You know, I can't stress how often we see individuals having issues with a number of different what I called phishing attacks and cybersecurity issues. So you have to be
hyper hyper aware of that. And I always say, this is not just something that happens to people. We'll call it more mature individuals that are older individuals. We see it happen to executives and people in different situations. It's amazing about how often this happens, and I would really
encourage you to watch that webinar. We actually had a situation I'm going to go too much detail with you, but a client that sat through that webinar and then just this week they had a cybersecurity issue that they recognized from the webinar and they able to cut that off right away. And the individual said that they may not have understood that it was basically a cybersecurity issue if.
It wasn't for the webinar. So I would really encourage you to watch that.
I can't stress that enough to you.
It's so important. We're going to go back to the phone lines we have. Dave gave you there.
Yes, Yes, sir, good morning, Thank you for your service. I have a question regarding raw AUTHI raise when they say you cannot contribute to a ross if you are taught, if you are retired, or you don't have an income.
What is the actual rule.
Yes, in order to contribute, whether you're fifteen or whether you're seventy, you have to have earned income W two income. If you do, it doesn't matter how much you have. Did you have one thousand dollars, You can contribute up to one thousand dollars. You contribute up to eight thousand dollars if you're fifty in older, if your under fifty eight amount is seven thousand, and all you have to have is W two income. So I have three teenagers.
They have all have jobs, they all have W two income, and they all contribute to roth.
I rays. But in order to.
Contribute to a roth you have to have that. Now you could do what's called a roth conversion.
Will you bring dollars.
That are in a traditional array and you convert them to a roth. You can do that at any point. As a matter of fact, you're better off doing it when you don't have income. But that's uh, that's not a rough contribution.
Okay, Now if I am receiving a pension and can I still contribute or no.
You can still contribute again if you have W two income, But that pension is not W two income. That's not that's not earned income.
Not earn I guess, well, all I know is Uncle Sam, what's their money?
And they're gonna give you opportunities to uh save money. I mean, just the only thing I will tell you. I mean, think about this way, which is they view that pension is retirement income. So they're not going to allow you to also save for retirement on that retirement income.
I mean, that's that's what their view is. So you have to ye, if you get a job, you work anywhere, you have any amounts of W two income, you can contribute, you can save and oh, by the way, your spouse can too if even if they don't work.
Right, So let's say you made.
Uh you know, you're over fifty, you made sixteen thousand dollars and that's all you made. You and your spouse can contribute eight thousand dollars each into your wroth.
Okay, all right, so you clarified everything for me, Thank you, sir.
You so a great question from Dave, and I want to jump into one last thing before we wrap on the show because he brings it up. I think it's an important topic. But again, if you have any last questions before we wrap up, you can reach me at eight hundred eight two five five nine four nine. Again that's eight hundred eight two five five nine four nine. The last thing I want to bring up is this idea of trying to contribute dollars and the way to
do it. So what I mean by that is, when you're younger, you should primarily be focused on contributing to a roth and to a taxable account, and whether it's a wroth IRA or whether it's a ROW four and K, you should be looking to put munch all your dollars while you're relatively speaking in a lower tax bracket into
those two accounts. So, for example, if you max out on your wroth, whether it be an IRA in a four one K, then and you could put up twenty three thousand dollars into a four and K, So those would be a lot of dollars to put in there along with a WROTH, which is another seven thousand. But if you do and you have more income, you should put that into a taxi account versus pre tax. Right,
that's the way you should be thinking about it. Then as you get older and you move up too higher tax brackets, then you should be putting money into a ROTH, a pre tax and a taxable account. So then you start moving money into a pretax. And ideally, if you do this the right way, when you're at your very peak of your income, you will be putting money only into a pre tax and to a taxble account, not to a ROTH. That would be the ideal way to do this. And now there's going to be something that
changes that. With individuals that earn over one hundred and forty five thousand dollars starting in twenty twenty six, any of your catch up amounts in your.
Four and K are going to have to be wroth.
Right, So if you are an owner of a company and you're an HR person, you have to make sure that by twenty twenty six your wroth I'm sorry, your four and K has a WROTH component. If you have a higher incomers right, So you have to be aware of that. And also you have to be aware if you're contributing and you're a higher income earner that's starting in twenty twenty six, you're going to your CATCHPU amounts
are going to have to be WROTH contributions. Now, the one other element that is extremely important, and I wrote a blog about this as well, which is you almost never want to be putting dollars that are post tax dollars into an IRA. And all that means is, let's
say you're earning too much. You're putting money to a four and K, but you and your spouse earned too much to put either a ROTH contribution or to put a pre tax contribution into an IRA, and you have outside dollars in iras that are pre tax, so you can't do a backdoor WROTH in those circumstances. You can always put post tax dollars into an IRA and let them grow tax deferred. Sounds like a good idea, but
I'm going to tell you never do that. There are a number of reasons including you're going to have to track that amount, that post tax amount for the rest of your life. And oh, by the way, your errors are going to have to track that post tax contribution. And then also when you take those dollars out, whether it be you or your heirs, you're going to have to pay ordinary income on those taxes versus if you had put those dollars into a taxbi account, you'd be
paying long term capital gains. And then, finally, and one of the most important reasons is that if you put those dollars into a taxbile account instead of a post tax IRA, and then they grew substantially and then you passed away all those gains in that taxible account with those positions gets wiped away, your errors get a step up in cause bases, those gains which could be sizable, are wiped away. If it's a post tax contribution into an IRA, guess what, they still have to pay ordinary.
Income on the.
Distributions out of those iras. So it really there is really almost no circumstance that you should be putting post tax dollars into an IRA. And I think it's important to note that because there are other advisors who might say counter to that, but it's something that I believe very strongly in. You know, I mentioned a situation where we see clients with a lot of money in iras and they want to access them to some amounts or to buy a house or whatever, and they got to
pay ordinary income to get those dollars out. So it's just really important that you kind of take that appro to outlined for you about how to be saving dollars in these types of accounts. Well, one last thing I want to kind of share with you before we wrap up is, you know, we talk about the importance of having a good investment fiduciary, but that financial planning piece Marie mentioned in the call earlier is so important. And you know, I think about with our clients the situations
we get involved with them. Some of them are very straightforward, you know, helping them budget, helping them managed debt, helping them put a retirement plan in place. But others that we get involved with are very complex. Helping them with real estate on what's called ten thirty one exchanges, helping them with a Delaware statutory trust, helping them with exchange funds. That element of working with an advisor who's a fiduciary
is so important. That financial planning piece. We always say, if many of the clients come to us first for investment management, but the real value that we many times offer our clients is that financial planning piece that just becomes so important and so really I would give you that guidance to have those conversations, especially if just situations becomes more complex. Well, folks, we spend an hour together.
It's been great.
As always, you're listening to Let's Talk Money, brought to you by a bouchet financial group. While we help our clients prioritize their health, while we manage their wealth for life. Take care of yourself, folks, take care of each other.