Let's Talk Money

Good morning, folks. My name is Martin Shields and I'm going to be your host today for Let's Talk Money. I'm the chief Wealth Advisor at Bruchet Finnch Group and as always, i'd love to be here with you on either Saturday or Sunday morning to provide some insight from an investment perspective or a financial Plenty perspective and taking your questions as well. And you can reach me at a hundred Talk WI. That's eight hundred eight two five five nine four nine.

Once again, eight hundred eight two five five nine four nine. And as I always say, there's no dumb or silly question except for the one you don't ask. You may be doing your fellow listener favor by asking that question. They have as well, but they're just too shy to call in with the question. So whatever it is, let's talk. I hope that you're doing well on this June summer morning. We've got a little rain here,

but that's okay, right, We've had some great weather. And I do need to take a shout out to all graduates that are out there, both college and high school. My son Haydi graduated from Saratoga High School this past Wednesday. It seems like an odd day to have a graduation on Wednesday, but it get pushed off so late this year. I think usually it's it would have been last Friday. But this Wednesday, it was a gorgeous

day. And we're very fortunate with Saratoga, I think shen in Boston, Spa, maybe a few other schools graduations held it's back and so just an amazing venue, a great event that was actually for four hundred and fifty kids, moved along very quickly, some great speeches, and they used one of the main rules to be successful, which is they kept it short, an interesting entirely. And again, so congratulations to all graduates out there. Please

be safe if you're celebrating. I know there's a number of celebrations going on. Please please please be safe about that. I always tell my kids, in particular my son, if there's any celebrations, risk assessment. You got to always just be aware of decisions being made, whether the ramifications, because you know, you don't want to be in a situation where you make a

bad decision and it alters your life. So and you know, as we're going through this time period with these graduates and also just kind of put out there something that we always talk about, which is the importance of educating that next generation or the generation after that on what it means to be smart financially.

It's, you know, you see it from the very beginning. If you can get these kids or grandkids on the right track, they can you know, do really whatever they want to do in their life as far as a job and be successful financially. And if you are successful financially, you have accumulated assets and wealth, which is now more the case with individuals having foreign K plans and I rays and whatnot to the extent versus pensions where you

had before. So you're going to have wealth that transfers to that next generation. It becomes even more important that those kids and grandkids are educated. And you know, it really comes down to it some simple discussions, and we've talked about this right which is you know, managing spending. It's that's the key element to being successful financially, having a plan to save money. And

you can start this in junior high or high school. Certainly, you know, when they start having jobs or even if they're doing work around the house or receiving money from parents or families for birthdays or different celebrations. You know, talk to about where those dollars go, and they can spend some of those dollars, they can save some of the dollars, maybe even give some

of those dollars to a charity some cause that's important to your family. You know, you start practicing these ideas early and it becomes habit for them. And that's where it becomes so important. And in particular, as they talk about this transfer of wealth to this next generation, we've seen it. I see it both ways, right. We really do try to work with our

clients, with their kids or grandkids to educate them. You know, in different circumstances they come on as clients of ours, but it's not every situation. Sometimes clients don't take us up on that. And I will tell you I see the difference starkly with those individuals where the next generation is educated, they're saving on their own, they're in a good financial spot. And again I've always said, this doesn't matter what job they have. It's not as

though they're necessarily they have to be earning a lot of money. But if they have that right mindset where they're going to save first before they spend those dollars. Then when that wealth comes to that next generation, they're in a good spot, they can handle it. Whereas if they're not in that right mindset and that wealth comes to them, they spend that money within months or years it's gone. They literally will spend that money down at an incredible rate.

And it doesn't matter how much we do to try to give them guidance on that if they don't have that right education, that right mindset, and you know, you think about that whole hard people work for those dollars, and in many cases, you know, one of the education processes we have is for our retirees to educate them to spend those dollars. Right. They're so used to saving that to move into retirement and appreciate that they can actually

spend those dollars. That's a struggle for many people. But what I always tell them is listen, if you don't, somebody else will, and they'll probably spend it quicker than you would. And they're not going to appreciate how hard you had to work to save those dollars, right, all those hours you work, to all that discipline you had, They're not going to appreciate that, perhaps and that's where it is kind of disappointing to see that.

So again, if you've got this situation where you've got kids moving into college, kids moving out of college into their twenties to start working, really get them educated. Maybe the advisor you're working with will sit down with those individuals like we will, and even if it's just thirty minutes, to give them the right guidance. Make sure that they're saving in their former K plans,

make sure that they have an emergency reserve fund. Right, we talk about the importance of that having some money set aside in a separate savings account within the bank that if you have an issue either you write check you over which rowle on your checking or where you just need an additional amount of money for an unexpected expense that you know where you can go to. You don't panic. You go to that additional savings account and you pull those dollars over into

your checking to cover that over withdrawal or to cover that additional expense. Having that mindset is so important, you know, really give them an understanding of the difference between good debt and bad debt. Right, Not all debt is the same. Certainly, credit card debt. If it's not paid off, that's bad debt, right, You're gonna be that you're usually using those dollars for usually quite a variable spending consumption, spending going out buying goods and services.

And if you don't want to be in a situation where you can't pay that off monthly, because in most cases that credit card interest rate is especially now in the higher interest rates, is in the high teens, if not mid the low twenties. So you think about that, if you're not paying that credit card off on a consistent basis, you are really going to start accumulating more debt. You're not gonna be paid it at off. And so

just that concept a loan is so important that they understand the difference. And you know, a housing debt in general, if as long as it's not too much, can be good debt. Right, you're providing yourself and your family a place to live. As you pay down that debt, you're building equity in that house, So that that in general is good debt and having them understand that is just so important. What's going to some new topics, But again, if you have any questions, you can reach me at eight

hundred talk w GUI. That's eight hundred eight two five five nine four nine. Once again, eight hundred eight two five five nine four nine. So I'm talking to you from our offices in Saratoga. And you know, before the pandemic, I would be making the drive down to w gui's studio in Latham. Now the upside of that is I would see our great producer Zac

personally. But now I get to talk to them via an app that we have, and so the you know, the nice piece of this is, you know, I live within ten minutes of our office, and so I could do the radio here. And also that we can be anywhere around the country if we have Wi Fi, we can do the radio, which is which is great. And that's as you As we went through that pandemic, we came out on the other side really in many ways, being better off and doing things we never thought we could do. But as I sit here

in the office, we're almost almost done with our office remodeling. So our offices are on the third floor at three forty Broadway, right kitty corner across from Starbucks. And we acquired a firm and advisor that was retiring last year. So now we have the whole front of this floor. And you know

this space is it's been around. This building was built by Jeff File back in the early nineties, and I think in general our office space kind of still had that early nineties, late eighties feel, and you know, didn't wasn't quite updated. But we decided when we acquired this other office space that was right next to ours, to expand and to update it. And they've done an amazing job and it's all almost there, and so it's nice to

be looking forward to coming back in the office. Our firm has always been kind of a hybrid firm, and so we do work remotely on Fridays, and we do have flexibility to be able to work remotely, which is great, and you know, many of our clients we meet with via zoom, but we do also appreciate being in person. There's a lot of value that we find from being in the office and collaborating in person and also meeting with our clients in person. We're going to go to the phone lines. We

have Paul from Connecticut. Paul you there, Hey, Martin, I'm a fairly sophisticated investor and I'm confused on something that specific to your firm, but in a broad sense going to are you from oment Barry Dvelt Bloomberg Radio, Yes, I am sure you are. He interviewed this guy, I think, Peter Malouk, who made a statement a big three hundred thousand financial advisors in the United States, only thirty thousand in his estimation adhere to the fiduciary

standard. And I said, I've been hearing this word fiduciary a long time, and I'm a nonpracticing CPA, and we have very strict guidelines of CPAs, and it's not analogous to being an advisor so much as I know what

the rules are as a CPA and they're printed out and so forth. And he made the point, this Maluk guy, I believe is his name Peter Miluk or something to Rid Hoolts that reg d one regarding broker dealers that came out in twenty twenty, which is suitability and client best interest is not equal to or the same thing as the word fiduciary that you guys use as an example. And I said to Ridholts in an email, and he got back

to me. He didn't answer the question clearly enough. He sent me a link about NASDAK or NASD and it goes back several years, six years. I think that there was conflicts of you know, the interpretation of what the standards would be, and he was getting a bit you know, heated an email, but he did respond to me, can you define where the standard for fiduciary is for financial advisors? In print? Anywhere? And I didn't go to your website, but is there a clear cut standard in print versus

verviage? That's an interpretation of a clear cut standard versus the B one rag which says suitability and client best interests, which even then you have to delayer. What does that mean if you follow my question? What is the clear cut Where can I find the definition of fiduciary for financial advisors? Because he claimed this guy Peter, only thirty thousand out of three hundred thousand are really

truly fiduciaries. Yeah, so that's a great question. So, first of all, I'm not are from Chief Compliance Officer Dave clark Is, and if he were on he could probably clearly answer this question. But I would say, but let me, let me let me. So what I would say is, in general, you might find if you're looking for a written definition somewhere on the SEC website. So, but you bring up a good point. So if we are a broker, so we're not. We are are

ari I Registered Investment Advisor. We're regulated by the SEC, and if you're a broker, you're regulated by FINRA. And with us, we have our own chief compliance officer internally, and being under the SEC umbrella, we are subject to all their requirements and we self regulate with that and then we're audited on a let's say five to seven year basis. To go further, Well, okay, you actually answered the question pretty well. So you're saying that

you are not a broker dealer. Oh that's right. No, no, no, we're an independent firm. Okay, s I'm complimenting you. I'm saying for people that aren't in the weeds, which I am, they're very confused. I listen to shows on this geography in Connecticut, in upstate New York, and in Massachusetts, and this word's thrown out a lot, a lot for neuciary. So you're pure in the SEC bucket, and the people

who are broker dealers are not pure in the SEC bucket. And that's a big distinction because I'm telling you something people who don't get in the weeds, and again it's favorable to what you guys do. I'm just trying to clarify something that people would never pursue this. But when you go to a random person and you don't pursue this, it gets back to what used to happen, I think, which is and it's not the annuity thing, which I

do by migas. It's the issue that they may sell you something and then they're getting a backdoor commission in a graphic way, which means that they're biased going in. They're going if I sell this guy this one hundred thousand dollars whatever, I'm going to make two grand for sure. Hey, I'm not adhering to you know, uh, the standard of the SEC. It is suitable for the guy and it is in their best interest, but it's not

per se that that can be measured because you're making a judgment. It could be a junk bond, there's something, it could be anything, right in a fair statement, that's a fair statement. Great, Yeah, and Paul, I'm gonna I'll let you go here, but I'm gonna I'm gonna wrap up your question. So, but I think I thank you for your question. So, uh, you know, Paul brought it brings up a lot of great points and the big element this the way to simplify this simply two

things. One is, you know, we don't get paid beyond our fee, which is an au M fee for all the services we provide our clients. The only additional fee with that is that we do tax prep for a

few select clients. But otherwise our fee is our fee. And whether we're recommending cash, gold, you know, stocks, bonds, alternative, and it doesn't matter what we recommend, we're not going to get additional compensation, and same thing from a financial planning perspective, So you know, along those lines, if we're recommending anything, it's clearly because we think that's in our

client's best interest. We're a client's personal CFO. And I think one of the easiest ways to do this one is, you know, most individuals can't say they're a fiduciary if they're not a fiduciary, so that you can ask

them that and get it in writing. The other thing is, you know, we're a member of a firm called association called NAFA National Association Personal Financial Advisors, and this is even a tighter element of fiduciary, because the fiduciary world it's kind of it's, you know, it is a little bit broad, whereas this NAFA is fee only, so it is clearly you cannot be part of this organization if there's any element where even an outside ownership could have

you receiving a fee for services offered. And also with NAPA there's a big stress on planning. They go through and every advisor that's part of NAFA has to do a plan and get it vetted. So I would if you're listening out there you want to really make sure you have a fiduciary, I would go to NAFA dot org and they any firm list there you can feel comfortable

is clearly in that fiduciary and very strictly in that fiduciary camp. So again, there's always conflicts of interest, but you want to reduce them as much as you can, and in our firm will even highlight perhaps where a conflict exists. We're gonna go on. We have Jim from Hadley. Jim, are you there, Hi, Marty? How are you good? How are you pretty good? Congratulations to your son? Okay, thank you? Yeah, you're you go through these milestones and as you get older, you know

they're big. And we're very excited for him. And you know he's going off to Saint Lawrence University and you know, to start that next chapter in his life. We'll miss him, but excited for his next opportunity. Well, best of luck to him. I want to talk to you about I read somewhere that a lot of the mutual fund companies are getting out of mutual funds and converting the holdings over to ETFs. Now, I have several mutual funds, and I hesitate to say why I have so many mutual funds,

but I bought them before ETFs existed. Sure, very well over the years, and I wonder. I understand that if the company converts the holding over to an ETF, that it is not a taxable event. How about if I want to convert a mutual fund over to an ETF. Yeah, and now in general, if you this isn't a taxable account, it's going to be a taxable event. So but yeah, unfortunately it's the case. But you are correct. So many of these companies that had mutual funds are moving

them to ETFs. And you know, a mutual fund in of itself is there's nothing necessarily inherently wrong. Uh, you know, it's just it's a wrapper that you know, fund families use for whether it's either active management or passive management. And uh, you know, you could get them in a phone k or you can buy them yourself. You can put them in an

IRA or a taxible account. The two many differences. One is an ETF you can trade during the day, whereas a mutual fund really buys themselves at the end of the day, right, so it's not being traded during the day. So that's that of itself. It's not that big of a deal, the biggest deal. And this is where it's more problematic with a mutual

fund. Let's say you buy a mutual fund and it's in a taxable account, and you buy it in October. It can literally be the case that you buy it in October, it goes down, the market goes down, so it's down five ten percent and you just bought it. But because of what happened within that mutual fund, gains are distributed, so maybe they made

sales in that mutual fund. Gains are distributed. You as a mutual fundholder and it's taxable gains, and so you have you have a tax bill in you know, for that year when you just bought it in October, and oh, by the way, it's down, it's not up. Whereas an ETF, not one hundred percent, but ninety nine point five percent of the time, there are no gains distributed with an ETF, and you only have a taxable event if you sell that position, right, So really a much

different thing. So we have, you know, clients that came on, they had an advisor to put them in mutual funds, and now they had these big gains in there, and we're slowly working them out because other wise we've had situations where, you know, if it depending on the size of the portfolio, you know, a client can have fifty sixty seventy eighty thousand dollars in distributed capital gains annally and yet not sell the position, right, so that that is when they can move it over from an ETF, I'm

sorry, from a mutual fund to an ETF. It is very advantageous for you as an investor, but there's nothing you can specifically, specifically do yourself to make that change without it being a taxable event. Okay. One follow on to that is our mutual funds more difficult to switch the switch to another account to another company. Let's say at company mutual fund and I want to switch it to X y Z. That is that a problem? No, in general, no, Now it's not an absolute statement. But you know

we r Charles Schwabbers are custodian. Uh. You know percent of mutual funds Adelity can hold, schwab can hold. Now you know where if you're going to try to move to Vanguard, now you've got a problem because they're more proprietary funds. But in general, if you want to move it between financial custodians, there's a few exceptions here and there, but in general you can move those without a problem. Okay, thank you very much. All right, Jim, you enjoy your weekend. And oh, by the way,

I love Handley It's great spot. I love climbing a Handley Mountain. So so, uh yeah, great question Jim had there. You know, it's something that you have to be aware of. That's why one of the reasons we use ETFs, and they're just much more tax efficient. And in general, mutual funds historically were with an active manager, right so you have a manager that's buying and selecting stocks or bonds. ETFs tend to be passive. It doesn't mean there can't be. You know, when you when you set

up in ETF, there's a lot of ways to set them up. The most basic one is just in ETF that tracks the S and P five hundred, and you can have that same type of investment style that tracks the SP five hundred in a mutual fund. But in general, when you're talking about ETFs, they tend to be almost exclusively set up with a screen that determines how that ETF is selected and the funds the positions in there, and there's a lot of rules. It's gonna be rules based, but you're not paying

for a manager to make those decisions. And you know, when you are paying for a manager to make those decisions, in general, it's much more expensive. That was one of the big reasons we switched is you know, our average cost for a ETF portfolio is around fifteen to twenty basis points. The average cost of an actively managed mutual fund is over one percent. So and then we look at performance that active management did not outperform the mutual fund.

That you can I'm sorry the Active Management much Fund did now perform the ETF that you can get for much lower costs. So in general, it just was not worth it for us to go to on that route, and it's something that our clients really appreciate and benefit from. Well, folks, you listen to Let's Talk Money, come back and join us as we take your questions and if you have any questions, think about what those are and

we can give you some insight. This is brought to you by Bouchet Financi Group while we help our clients prioritize their health while we manage their wealth for life. Welcome back, folks. For those of you are just joining us, my name is Martin Shields. I'm your host today for Let's Talk Money, and as always it's great to be here with you to answer any questions you may have. You can reach me with those questions at eight hundred Talk

WI. That's eight hundred eight two five five nine four nine again eight hundred eight two five five nine four nine. So a lot to discuss in this last half hour of the show. U things I want to highlight is we did have intra day highs for the Nasdaq and the s P five hundred yesterday, and they came off of those highs as we closed the session, so we didn't close with all time highs. But as always we talk about it's great to celebrate those highs when they occur, even if they're just intra day

they're just starting to set a new trying to go through those ceilings. The Nasdaq hit over eighteen thousand on yesterday, and the SP five hundred was at fivey five hundred and nineteen, just below five twenty. And so again in general, as we look out at the economic and corporate data, everything conteams look good. This combination of what we always defined as this goldenlocks environment, right, some elements of weakness, some elements of strength, and you know

that is really right where we like it to be. And you know, I do always want to stress it doesn't mean that you can't have some intro year volatility. As we've talked about before, the average introy year volatility for the markets is fourteen percent, a decline of fourteen percent, right, so

that's pretty significant. Now when we talk about averages, of course it's driven by some of the more extreme volatility within a particular year, but it is important to remember that just because we are at or close to all time highs doesn't mean that we can't have some volatility within that year. And you know, it's one of the things I was listening to, which is, you know, we could even have a recession, right, you always been hearing

this recession, recession, recession. It's not happening, and you know, it is very possible that we could even have an economic slowdown or even a recession, And it doesn't mean that the markets, you know, have to go into bear market territory like they did in twenty twenty two. I graduated from college in nineteen ninety one, and in that year there was a pretty bad economic recession, but the markets had about a year or two before that

had hit lows. And of course in eighteen eighty seven is when you had the severe drop in October of that year. So we went through an economic recession nineteen eighty one, and yet the markets really weren't phased at all. So I think that's also important to remember, is just because we have a recession, people always go back to with COVID or the housing crash or even the tech bubble. It's not ever the case that those two are really not

connected. Right. There is the economy and then there is the markets, and you certainly could have you know, weakness in the economy and the markets move higher. We're gonna go to the phone lines. We have ron from Glenn's Falls. Ronnie there. Yes, I am, thank you for taking

the call morning. The reason why I'm calling is I was listening last week and there was a caller that that called up and spoke to Brian, and he brought up an interesting situation, and I was I was kind of looking at my situation and it was very eerily similar to his, but I didn't understand the whole process. Uh. Basically, he had he had called and he said that uh uh he was a government employee because he was retired government

employee. He has a TSP, and and he had called regarding a converting for for inheritance purposes. He uh he called regarding converting the the TSP because he he has several children, so he wanted to do whatever it was, uh the least taxable situation and uh he was considering converting his TSP uh in in transferring them into his uh roth I r a uh pay the taxes now and this way if something happened to him, Uh, they wouldn't have that

ten year required distribution and they would have that RUTH. Be you totally non taxable. And I'm saying to myself, you know I have It's an unusual situation because I'm retired. I'm living on a pension and Social Security and I had to start taking the r m ds. But we don't need the r m ds to live on. And basically I said to my wife, maybe we should start because we have a twenty three year old daughter and that's going

to be starting to look for a teaching job in this summer. And so I'm thinking, maybe it would be beneficial for me to start looking at increasing the r m D and taking that amount and transferring it to a small roath that I have. And I know that he mentioned like a five year looked

back for a RUTH. So I've had that. Well, most of my money is in pre tax dollars, and so I'm thinking, does that make sense because I never heard of that before, and so I'm thinking, you know, maybe that might be an option pay the taxes from my r m ds. Now, it's just that right now, between the pension and Social Security we're doing. Okay, so an r M D is increasing my income?

Is that? Does that make sense? Sure? So what you're talking about is a Wroth conversion, and it can potentially make sense, and as you're describing, it mostly makes sense when you are when you want to think about that next generation. And you know, because we look at there is a break even point with how this works from a tax perspective, and the longer time horizon you have for those dollars to grow tax free, which is what it is in a Wroth, the better off that conversion makes. And

it's also a function of what your income is now. Right, So let's say you know it's I don't know exactly where your income is, but if it we're much higher for a half a million dollars, Well, with that Wroth conversion, you're going to be paid as ordinary income taxes on that conversion. But it sounds like maybe with your pension and social security you're not too high that it might make sense. And this is what we do with our clients. We do an analysis that runs them through and shows them, hey,

this is what it would be to do a Wroth conversion. Now, I just want to highlight a couple of things that you mentioned, just so we're clear. One, with a wroth conversion, there's no five year lookback, right if I don't know what you're maybe confusing that with with medicaid planning or whatever, whether there's a five year look back, but you can do the Wroth conversion. There's no five year look back. There is when now, when your kids do receive the inheritance, that's going to be an inherited

array and they will still need to take it out within ten years. Right, So the only difference is with a traditional rray, these rules keep changing, but the idea is that they're going to have. With a traditional array, they may want to and the government's going to require them to take a certain amount every year and that within ten years it's fully drawn down. Now

with a wroth IRA, there is no requirement. With that you can hold They can hold those dollars in that wrath to year ten and take it all out because guess what, there's no tax consequence to take it out, So there's really no advantage to spreading it out over years to limit their tax liability. The other thing I just want to make sure you're clear on you cannot convert rm D dollars. Right, So if you're doing if you're doing your

rm ds, those cannot be converted to a WROTH. So it had to be additional distributions from your IRA above your R and D that you can convert those dollars. And then the other element with this is if you're gonna do a WROTH conversion is one of the things you always have to have is cash on the outside to pay the taxes. Otherwise it doesn't make sense to convert the dollars and use IRA dollars to do that conversion. But yeah, it

can be a great strategy. But again, you might want to just do the math on it, either yourself or with an advisor, just to see how it works and plays out. So if the rm D was like twenty four thousand, and I decided that I was going to take out fifty, it would only be the twenty six thousand that could go into the rows. That's correct, That's correct, Okay, Okay, you clarify, I'm not sure exact Yeah, that I didn't do the math yet, I'm not really

sure. I know she's not making anything now because she's just starting a teaching career and I'm at like one hundred and twenty five thousand dollars because of the RMD. So you know, I'm looking at it. I'm paying more taxes than she is. But you know it doesn't make sense right now, and you know that this yeah I don't know, yeah, but yeah, it was just an interesting concept that I said, Gee, you know, it may be something that that makes sense, you know, but I have to

look into it more of I thank you so much, You're welcome. It's a great question. And you know something that we do give our guy, our clients a lot of guidance on. And you want to run the numbers on this, you know, not just kind of do it on the back of an envelope, just kind of see in general where your overall tax situation

is. But really a big part of this decision is, you know, do you want to incur more taxes now to save you know, your kids money or you know, many of our clients are like, listen, my kids are fine when they get the money, they get the money. I don't want to have more taxes now. So you know you'll have to kind

of go through that analysis as well personally to come to that decision. Well, let's let's move on to some other topics I want to cover, But 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. While we're talking about Wroth conversions, one of the things I want to highlight is this idea what's called a mega Wroth conversion, and it's really a very powerful tool that you can utilize potentially in your foreign K plan. So let's say you're you have a foreign K plan at work, and you maximize the contribution to that, and let's say you're fifty years old, so that amount that would be a maximum contribution with thirty thousand, five hundred.

Now, many foreign K plans have a Wroth option, right, so you've got your pre tax option and you've got your Wroth option, So you know, you could put dollars in both those buckets and bring it up to thirty thousand, five hundred, and many times you can. Many plans have either what's called a safe harbor contribution from your employer, or they have a profit

sharing contribution from your employer. The safe harbor removes some testing that needs to be done under a riskle law, and the profit sharing is something that's a little bit more flexible. When your company has a good year, they can go ahead and make contributions to your phone and K. And in many cases, if it's a small business, the owner and the executives of that business are utilizing the FORE and K plan and the profit sharing and the safe harbor

to maximize their dollars as well. So our firm, we have great retirement plan. You know, we do have a form and K. We have both employee contributions, we have employe er safe harbor, we have employer er profit sharing. We also have a pension plan at our firm. It's a phenomenal retirement plan. So, but with a mega Wroth conversion what it is, so you maximize your thirty thousand, five hundred, and let's just for simplicity's sake, say that there is no employer contribution, right, there's no

safe harbor, there's no profit sharing. So the maximum amount that can be put into a defined contribution plan, which is what a four and K is, is sixty nine thousand dollars. So all that sixty nine thousand, thirty thousand, five hundred is the employee amount the other thirty eight thousand, five hundred is additional amounts that really are going to come from the employer er.

But under some plans, they allow you as an employee to put that thirty eight thousand, five hundred to bring you up to sixty nine thousand dollars. They allow you to put it in not to a WROTH, but it's just it's post tax dollars into the pre tax traditional phone and K. I know it's a little confusing, So again it's you can put up to So you

put your thirty thousand, five hundred, that's your employeee contribution. You can put another thirty eight thousand, five hundred to bring it to the max of sixty nine thousand, and that is a post tax contribution, not into a WROTH, but into the traditional phone and K and then what you can do

is convert it. It's kind of like a backdoor wroth, right. So the backdoor wroth is for individuals that earn too much money that are in the income phase out for WROTH contributions and they what they can do though, is if you have no outside iras, you can put post tax dollars into a traditional IRA and convert it into a wroth. That's that's called the backdoor wroth. Well, the megabackdoor wroth is the same idea, except you do it

in your form and K plan. So you think about that, you're able to put in thirty eight thousand, five hundred dollars, put it into the post tax as a task contribution, and then convert that into a wroth. That's a really powerful process to put money into a wroth. Thirty thirty eight thousand, five hundred dollars, right, so you know, right now, the contribution into a wroth per person if you do, if you're able to, this is seven thousand. So we're talking, you know, let's say

five times as much into this mega backtoor wrath. So the only big caveat with this is your plan has to allow you to do this. Many plans don't. So if you you know, if you don't have any proper staring, you don't have any safe harbor for your plan, you might want to look into this if you have extra dollars to be able to save, and in particular, if you're above the phase out amount for a wroth contribution, it could be very very powerful. Let's go on to some additional topics.

But again, if you have any questions, give me a call. We can chat at eight hundred eight two five five nine four nine. That's eight hundred eight two five five nine four nine. One of the things I want to highlight, and this is Paul who called in earlier. You know, was talking about this fiduciary guidance. You know, we always talk about how important is for us as a firm as we operate as a fiduciary, and you know, this idea of conflicts of interest and as a fiduciary you really

remove conflicts of interest. Uh. And he talked about, you know, a broker's and again they're we're regulated by the SEC. A broker is regulated by FINRA, and you know, just in general, brokers are your A. G. Edwards, your Merrill's, your Morgan's, uh, and they're regulated under FINRAM. And the thing with a broker is that they don't have to do necessarily listen our client the client's best interest. What they have to

do is what's suitable for a client. And all that means is, Okay, let's say there's two investments A and B, and they get paid more for investment B. So both those investments could be suitable for that client depending on the risk tolerance, but they're probably going to push investment B because they get paid more for that investment. And so that's where that conflict exists, right, which is from our perspective as a fiduciary, we get paid just

you know au M fee assets and management. You know, it starts at one percent and goes down from that annually. So from our worldly going to say what is in our client's best interest, not you know, what is suitable and that that's a very clear change and kind of the way it lends to use to view a client relationship. The other thing that's important is that you know, with our clients, we're an independent firm, So the only thing that we care about is what's in our best answers for our clients.

And oh, by the way, you know, we've grown so much giving idea. I've been with the firm for twelve years. When I started with Steve, we were managing one hundred and fifty million. Now we're close to one ero point five billion, And the reason for that is we just consistently do what's in our client's best interest. And oh, by the way, our clients love that and they refer their friends and friends of family and colleagues

to us. But that independent fiduciary approach, whereas even you know, I say this, even like let's say with Charles Schwab or any entity that's a publicly traded entity. First of all, you know, you're real the CEO's main idea there is to maximize shareholder value. That's where they actually have fiducial responsibility to do that that may not line up with what's in the best interests

of the clients. And you've seen this over time, you know, with different institutions like Wells Fargo, where you know their bankers or their advisors were doing things because it was driven from up top by the CEO, and they were putting people into you know, banking accounts and all these accounts where they

didn't need but that's how they got compensated. Right for us, for myself, all of our colleagues being independently owned, local firm, it's clearly what isn't our client's best interest and that really clarifies things when it comes down to

the client relationship. And the other element that you know kind of comes up is we see this as with annuities, right, And I just have to bring it up because I just had a situation where, you know, we had a client and their son and daughters now in the annuity sales, and this client wants to help out the son and daughter and buy an annuity, and you know, they want to put it into an I RAY. And I was like, Okay, listen, do you want to help your son

and daughter out? This is great, but you know, putting an annuity into an iray. To use this analogy, it's like using belt and suspenders, right, they both do the same thing. One of the advantages of an annuity is as you put those dollars into the annuity, they grow tax deferred. Right. So if you put a one hundred thousand dollars, if you put into a brokerage account, well all the income and even capital gains are going to be taxed. Whereas you put it into annuity, it is

going to be taxed. Refer nature of that, It's not gonna be any taxes until there's a distribution. Whereas if you put an annuity into an IRA, well, guess what, the IRA already has that advantage, right, So you know the reason that advisors put annuities into iras is because there's dollars there to do it. But one of the real advantages of having annuity is already done by the IRA. So you just see this thing, these things

that that are purely about sales. Right. It goes back to this fiduciary guidance, which is they are simply doing this not because it's the smart thing to do for the client, but it's because that's how they get compensated is uh is by selling these annuities. And you know, it's just frustrating to me as an advisor where you know, frankly, my whole goal, whether it's to educate us listeners or with our clients, is to really help you

out. And if you're doing if you're selling an annuity and you're putting into an it's not really the right approach, right, You're losing one of the real advantages of an annuity. And I really stress this any listener out there, or you know, you know somebody, a friend or a family before you buy an annuity, you really need to make sure you talk to a fiduciary, even if it's just you know, kind of one time guidance to say, hey, this is how I'm thinking of buying this annuity? Is

this the right approach? Because so often we see individuals that come to us with annuities and they have no idea why they have it. And you know, we talked about this. We there are certain situations where an annuity can work. Right, if you are definitely afraid of the of the market, if you are really have no kids, you're not worrying about passing money onto airs, and you want to stream of income, you can't have an annuity.

It basically takes your dollars and turns into a pension through that insurance company. In that scenario, an annuity might be the right approach, may not be, but it might be. But again, you have to really know what you're getting and why you're getting it and not be sold in annuity that at the end of the day you're like, I don't know why I have this because let's let's face it, the fees with the annuities are going to

be high. There's sur render penalties, uh that are going to lock up your dollars you know, in many cases for eight, ten, twelve years. So before when once you make that decision, you're really locked in and in anything in life, in particular business. If you're going to commit dollars and be locked in to that, then you better get compensated more for that, right. So you know, we always say, you know, with our clients, we earn their keep day to day, week to week.

If they ever decide they want to go a different direction, they can just let us know and we can move them from the institutional side of Charles Schwab, where we have the ability to trade on their accounts, to the retail side of Charles Schwab and where you know they have they can manage their own money. And you know that is that ability to make those changes is worth a lot, right. They're having that flexibility that you're not locked up for

years on this is very powerful. So please make sure that you do that research and not just through what that salesperson is telling you. Well, just a few more minutes before we wrap up here. But one of the other things I want to talk to you about is just as you're making decisions, I see this often where people just get caught up on trying to save pennies,

stepping over dollars and making things more complex. I've talked about this on shows before which is as you make these decisions, you really want to understand what the tax impact is, what the numbers look like. And that's where we work a lot with our clients in giving that guidance. But what's really important is what does this mean for you personally? And just giving a guidance to a client about she was looking to maybe to decide to retire, but

she had some decisions to make and there might be a tax impact. And I said to her, I said, what is more important to you? Are you more concerned about these few hundreds or thousands of dollars from our tax perspective. Are you ready to retire? And the answer was very clearly, I'm ready to retire. I said, well, let's go ahead and retire then, right, Let's make your life simple and don't worry about Yeah, it's gonna you're going to pay a little bit more in taxes, but it's

okay. Right, If this is important to you, you're in a great financial spot. You've been doing all the right things all along. Don't be afraid to make that decision and go with your gut. And again, you don't want to, it's not like you don't want to consider, uh, the financial impact and have do that analysis. And again that's what we do

with our clients. But quite often if you can simplify that decision making process and not be worried sometimes about the pennies and not consider the either the dollars that it could cost you and or what I call the opportunity costs. Right, So for this person, uh, you know, being she's in her sixties, she's healthy, Uh, you know, being able to enjoy retirement

for another year versus waiting. Uh you know that that's important. Uh. You know, We've always say that you just don't know what you have from day to day. So if you have your health, go ahead, and if you're in a good spot financially, go ahead to make that decision to retire. And again from my perspective, for us to be able to work with our clients and give them guidance on this from a numbers perspective is so

important. Right, That's where I think, Frankly, even though I'm a numbers guy, of are trying to make these decisions on my own as I go into retirement, I'd be very nervous that I'd be making the wrong decision. And in particular, I'll tell you is I probably would be too conservative, right, I would probably be spending not enough money versus what I could be spending. And that's that's kind of a problem. You really want to utilize all your dollars to have a great retirement. Well, folks, we

spend an hour together. Hopefully you're a little bit smarter. As always, has been great to be here with you to give you some guidance. We'll come back tomorrow at eight o'clock for eight o'clock show. You'll listen to Let's Talk Money, brought to you by Bouchet Financial Group, where we help our clients prioritize their health while we manage their wealth for life. Take care of yourself and take care of each other.