Is WG wise financial analyst Steven Bouche or one of his capable colleagues.
Good morning, and welcome to our show.
Thanks so much for joining us on this wonderful holiday weekend. As noted in the news, the unofficial end of summer is tomorrow.
I'm Nicole Goebel.
I'm the director of Financial Planning also one of our wealth advisors here at Bouchet Financial Group, so we appreciate you tuning in this morning. I happen to be a CPA and also a certified Divorce Financial Analyst, and so I help the team in many ways working with our clients, and I've been doing this working in financial services for
about twenty five years. So I'm happy to sit in for Steve today and we welcome your phone calls, So please give us a call eight hundred eight two five fifty nine forty nine if there's anything that we can address for you today. Before we get into the what the market looks like this week and any big events that we saw from an economic perspective, I'd like to introduce my co host, Scott Strohecker.
Making Nicole. Good morning everybody. As Nicole said, my name is Scott Strohecker. I'm one of the wealth advisors here at the firm as well. I am a CFP professional as well as an enrolled agent. I'm a local to the Capital region. I was born and raised and went to college here over at Union College, and actually am now raising my family as well. So great to be on this morning with Nicole.
Thanks Scott, and we're really happy to have you on our team. And we here at Bouchet we have just a wonderful group of people and as you heard in the beginning.
We are a fiduciary.
It's really important to us to act in our client's best interests. So along with Scott, we have many individuals with their CFP designations see pas eas because we really believe in making sure that we have the expertise to take care of our clients. So, without further ado, let's talk about what happened this week. If you tuned in yesterday, this may be a bit of a repeat from what Paalo and Vinnie talked about yesterday, but you know where
did we end up. You know, we had some volatility this week to end August and August itself right was a you know, certainly a vital month, came full circle. So you know, the Dow was actually up the most this week at a little under one percent point nine to four percent, and it is up a little over ten percent on the year.
The S and P was up slightly as well.
It did come back at the end of the week to end at point two four percent up, and that index actually is doing the best overall for the year at this point at eighteen point four percent. The Nasdaq, which has certainly outperformed you know for the first part of this year, was actually down close to one percent point nine two percent. So we are seeing a shift that I'll talk about in different industries, you know, and
their performance during the month of August. And that index is you know, in line with the S and P five hundred, up about eighteen percent on the year. So again when we're talking about the Dow ten percent, the S and P nastic being up eighteen percent, certainly we've we've.
Had a very strong year thus far.
International markets, while they were up you know slightly for the week point three percent, are still lagging, you know, they're at nine and a half percent on the year, so closer to the Dow, and you know, we really talk about that a lot here at Bouchet, and we don't currently have any direct international exposure, but we realize that all of the megacap US companies, we certainly have
exposure to international markets and revenue sources there. But again, the international markets have continued to lag, not only from an economic perspective, but also because you know, again they're they they haven't had that kind of tech heavy side of the US market that has outperformed up to this point. But again, the story here for August is we've definitely.
Seen some other sectors coming back.
Bonds, you know, so really you know, bonds have been we've been watching quite closely. We've really had some great opportunities, you know, across the market to invest in short term bonds and money markets and be earning over five percent, which hasn't happened in many years. So we've been taking advantage of that for our clients, certainly with you know, funds that we need to have liquid for distributions or large purchases and still able to again make those those
great interest rates. But you know, as Pallo talked about yesterday and my colleagues have been talking about for weeks, right, the expectation is the fet is going to cut rates, you know, so you know, the disadvantage to continuing to use these short term vehicles or money markets is you know, the ability to reinvest those funds at a high enough
rate later. So we see the ten year treasuries about three point nine to one percent, right, so that's still a really that's a good number when we think long term, you know where the ten year treasury has been. So so we're you know, again taking advantage of you know, investing our clients at the appropriate kind of duration is what it's called. So again, the the bond index was down slightly this week, but still up over three percent year to date, and really the ten uere is is pretty much.
Flat on the year at this point.
Has had some ups and downs, but again now the expectation that is going to come down. And then oil, right we heard from Opec and an oil production. So really we saw oil take a big dip one point six percent this week and down at about seventy three
sixty one a barrel. So you know, again it is up on the year still, but you know, we certainly have seen even though we we we do have demand, you know, production is coming back online, so you know again, we've we've seen some recovery there, so again we'd love to hear from you if you have any questions on the market. We're going to talk about some planning items here today too, so give us a call eight hundred
eight to five fifty nine forty nine. So, you know, really we also saw some volatility in the market related to Navidian. I know Palo talked about this yesterday, but right it's been everybody's favorite stock to talk about, and they really had, you know, great numbers on Wednesday, with beating revenue at thirty billion and profit at sixteen point six billion, And Pollo made the point yesterday that the stocks, you know, those numbers are up one hundred and twenty.
Two percent year over year. However, the stock price itself is.
Up over four hundred and fifty percent, So you know, we did see a comeback on Friday, thankfully, but you know, that really has shown us, you know, again the volatility in kind of some of these bigger tech names. As I mentioned earlier, though, we did see in August overall the best performing sectors were actually those that have lagged the last couple of years, right coming out of really the the COVID recovery and the recovery last year and
the first half of this year. Consumer staples right again, so that's you know, something they performed the best during August.
Real estate, health care, which Paula talked about yesterday. We do have an overweight to healthcare, and certainly like that area, utilities which I know Marty talked about a few months ago as being a recipient of some movement due to AI, right, because of the power needed to supply you know, these different facilities and that the whole artifical artificial intelligence industry.
Utilities have benefited from that. And actually financials, right, so financials were beat up quite you know, quite a lot, I guess, you know, just from evaluations perspective, were hit hard,
and so financials are also coming back. And again they do tend to to, you know, be sensitive someone to interest rates as well, because again right now they're able to lend at higher interest rates, but less and less people have right taken out loans because of the higher interest rates, So they're going to see their volume increase, and as Vinny talked about yesterday, with people refinancing mortgages, more people being willing to you know, buy and sell homes.
If rates come down and they can get a rate closer to what they maybe had locked in a few years ago, we're going to see the volume in financing increase for financial companies and banks.
So again, give us a call if you have any questions.
We're at eight hundred eight to five fifty nine forty nine for the economic update this week, you know, we did have inflation come out, so we had two and a half percent, We were in line with expectations, and core PCE was slightly lower than expected at two point six percent. So those numbers again really emphasize the act that everyone is expecting a rate cut. The September eighteenth FED meeting, we did have some revisions to the main
jew numbers slightly higher. But again I think, you know, seeing some of the labor numbers that have come out, and you know, really the viewpoint that now the labor market is softening a bit. So that's one of the things that certainly has held back, you know, the FED making any moves because they didn't want to risk you know,
really companies cutting a lot of jobs. So now that we've seen some softening in the labor market, the expectation is they are going to cut rates and you know, hopefully or not too late.
Right.
That was the criticism last time, with inflation going up and the term transitory being used, that they didn't take action soon enough and then had to you know, make cuts.
Very quickly, very steeply increased rates.
So at that point, right, it was really a playing a game of catchup. So the hope here is that you know, we're we're not behind the eight ball, and the FED can cut rates and stimulate the economy and the labor market and you know, get back to that kind of unemployment number we're looking to keep things at. So before I go on, why don't we take a
quick commercial break. You're listening to Bouchet Financial Group, where we take care of our clients' wealth so they can prioritize their health and manage and we manage their wealth for life.
If you want to learn more about Bouchet Financial Group, visit their website Bouche dot com. That's b O U c h e y dot com. Sign up for their blog, which is updated every week Stephenbouche dot com. Follow them on Twitter at Bouchet Group, Like them on Facebook. The phone lines are open eight hundred Talk WGY. That's eight hundred eight two five five nine four nine.
Here is Steven, Hello, and welcome back to Let's Talk Money. I'm Nicole Goebelt, director of financial planning here at Bouchet Financial Group, here with my colleague Scott Strohecker, and we'd love to hear from you. I have been talking about the market and economic recap for the week, but we're going to get into some planning topics now, so again, give us a call if there's anything we can help you with. Eight hundred and eight two five fifty nine
forty nine. You do have two tax professionals on the line as well as two financial planners, so you know, Scott and I recently did a webinar where we talked to our clients about whether they should relocate out of New York, how to make that decision during retirement, and what factors really to consider. So I'm going to turn it over to Scott for a couple of minutes to really talk about how we coach our clients when working with them on these decisions.
Thanks Nicole. There are absolutely a bunch of factors you need to think about when possibly making a move in retirement. Obviously, people think about the financial impacts of income taxes New York while it does have one of the higher income tax rates as far as you know comparable states, there are some states like Florida where you often think about
retirees moving that have no income tax. You really want to take into consideration all other factors, including social family, friends, hobbies, volunteering. You want to think about the actual environment. But we actually have a caller on the line of Pat from Schenectady.
Good morning, Pat, How can we help you?
Well, I'm not sure. I have a little issue. My grandmother left me some savings bonds and the estate lawyer catched them all in. She didn't wait till maturity date and then made me file it on my income tax. Was that legal? I thought, yeah, access you didn't.
What's not an inheritance tax? I believe what you would be paying income tax for is on the interest earned on those saving bonds. And when the account owner passes away, you know, typically you would turn those over, you know, and and you know even if they hadn't matured potentially, So really you're you're not paying an inheritance tax. You're paying income tax on the interest earned on those bonds without knowing the specifics. I wouldn't know, you know, but
you know what what that looked like, you know. But certainly that would be something that in a state attorney would typically do or or should I say the executor execu tricks of the estate would handle and you know and liquidate those bonds in most cases, Oh.
They would.
They would have liquidated them. They weren't even ready to be cashed in. They didn't even transfer them over.
They hadn't they hadn't transfer them to me to you?
Is that your is the attorney, the executor of the estate or executrics of the estate. Yes, so yeah, so I mean it would be up to whoever was in charge of that. Obviously they should have spoken to you to ensure that you were aware of that and in agreement with doing so. But it would be up to that person who was named in uh you know, in that role to make the decisions.
Out didn't want to have to have she didn't want to claim it on income text because it was all being donated. Okay, so that's my question.
So it was being donated, So the bonds were being donated.
Everything the other part of the property, everything was being donated, and she did want to take it out it as part of the estate. She wanted me to pay instead of her. That's what she told you.
Did you receive the proceeds from the bonds once they were cashed out?
Yes?
Okay, so get yeah, so either.
To claim on my income tax as income.
Yes, so you received the net after the income tax. I guess if again, the other assets were being donated. You know, I don't know that she had the ability to liquidate any of those to pay the income tax on the bonds.
Well, my question was why did she Well you wouldn't know why she catched the minatce and just rolling them over to me so that in ten years I could catch them in when they were mature.
Yeah, I'm honestly not sure it's a savings bond if you can change the account owner name a beneficiary or if you're forced to.
Essentially do that else but uponing.
I don't know if you can, because again it would be left to the estate if if there was no specific beneficiary left on it, so again it would be in the estate. I don't know if the if the estate can take those over right as an owner of a bond has to be an individual.
Good.
Yeah, all right, well thank you, okay.
Thanks for calling us, Pat, And before we get back into Scott's presentation, I mean that's a great point. We're actually doing a women's legacy planning event with two partners, Leah Henderson from Tillbecker and Claire McRae from Lemurray Grisler and a state attorney a CPA. So if you're interested in that, check out our website at bouchet dot com. We do have information, but you know, that's one of
the key factors. And I actually just wrote a blog on inherited iras this past week and specifically talked about what type of beneficiaries you might want to name on a beneficiary IRA. And to Pat's point, if you know other assets are left to charity, really that would be
kind of the reverse of what you would want. You would want to leave to charity any assets that do have an income tax tax impact, right, so you know, whether that's an inherited diarray, whether that's you know, in a savings bond that hasn't paid interest been paid interest on. But those assets are best to leave to a charity because they're not going to pay tax when they liquidate those assets, whereas a home or a brokerage account that gets a step up in cost basis and essentially wipes
out any income tax impact to a beneficiary. Those are what you ideally would want to use to leave to say, adult children who may be in their highest tax bracket and earning years currently. You know, so that's certainly something to think about. And as I mentioned, did write a blog on inherited diarrase that talks about beneficiary choices. And we do have our legacy planning event for our Women and Wealth Initiative on September twenty fifth at Wolfers Routes.
So please take a look at our website or reach out to us if you're interested. Scott, I'll pass it back to you to talk about again, you know, what goes into the decision of whether to move out of New York for retirement.
Thanks Nicole. As I was saying, there are a bunch of different factors you want to think about, you know, not only the social factors I went over already, but also environment. Where do you see yourself being able to live? You know, do you see yourself wanting to be part of fast paced environment of a city with everything within walking distance, or maybe you prefer the serenity of a
beach or mountains. Each environment really comes with its own climate, so you need to figure out, you know, what is the best climate that's suitable for you. You know, while the beach on in Florida may seem appealing during the cold days of winter that we experiences up here, you may not like it as much when it comes to the hot days with the humidity of July and August. So maybe you want to still have the heat without the humidity. So possibly, you know, a desert environment might
be best for you. And exactly what you know. Even a doctor may have prescribed considering what health issues you may have going on. So with speaking of medical he also want to consider medical factors as far as accessibility to high quality healthcare. Do you have access to caregivers? Oftentimes we see family as the first line of defense of what we use to help provide care as we begin to age. So you know how close are these family members to you, and if none of them are around,
are there people within that community? You know, qualified health professionals that can give you that care that you need, and even Medicaid. You really want to think about Medicaid eligibility, as each state really has its own eligibility rules around it. And then I'll just touch on financials real quick as well. You want to think about cost of living. Depending on where you're looking to buy a house, the price can really vary even you know, additional costs that come with
that home purchase. Insurance you know, each state has its own type of insurance that you need to buy. Obviously, down in Florida, by the coach, you need to think about flood insurance. How much is that going to cost you? Even maintenance, you know, is the house ready and up to your standards? Do you need to put in some additional repairs and maintenance before it's up to your standard? And then the final real piece of financials is everybody's favorite part.
Taxes.
You know, there's real estate taxes to consider, personal property tax, sales tax, a state tax, and even income tax. And again we really go over this and have a actual case study that we go through comparing New York State compared to other states up here in the Northeast and talk about no income tax states. So really is a great eye opening example to see. Okay, while we may think taxes are high, in New York, it may not be so bad once you actually do retire.
Thanks Scott. And as Scott mentioned, so this is on our website. Does it make sense to leave New York in retirement? It's one of our webinars we did recently.
And again, there are so many different financial costs and types of taxes to consider, and you have to really think about if a state is not collecting income tax, they're having to make revenue some other way, right, So you know, whether that is higher real estate taxes, whether it's taxing personal property like a vehicle, right, Some states like Virginia, for example, tax vehicles, whether it's very high sales tax, right, so you know they're they're looking to
tax anything from a retail perspective as well as you know, vacationers who may stay there. You know, very few states
nowadays really have a state tax. New York does have kind of a separate estate tax from the federal level, but again and some taxes have Some states have inheritance tax certainly that you may want to consider for your errors, but income tax seems to be one of the biggest things you know, people are running away from, so to speak, in New York and it doesn't it doesn't necessarily add
up to a large amount for most retirees. So as Scott mentioned, we do have a case study in our website, but we kind of took a look at a retired couple and you know where, Well, after the break, we'll kind of go through that example and talk about what would it mean for that couple if they move to a different state or if they stayed in New York and again just bring that kind of example to life as to what other places to consider.
So we'll be right back after the break.
You're listening 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.
Is WG wise Financial Analyst Steven Bouche or one of his capable colleagues.
Good morning, and welcome back to our show. Thanks for listening. This is Nicole Goebel, director of financial Planning and one of the wealth advisors here at Bouchet Financial Group. We appreciate you tuning in this morning to the tail end of summer certainly again unofficially ending tomorrow, so thankfully, you know, we do have another couple of days before we have to go back to the office on our end, although we're doing the radio show this morning, my colleague Scott show Or and I.
So Scott was just going over some.
Of the content we reviewed with our clients as to what factors to consider if they're potentially going to move out of the area during retirement, you know. So Scott went over a lot of the social factors, environmental factors, and talked about some of the financial costs, and I was going to talk a little bit about income taxes.
So you know, in our case study, which again is on our website at bouchet dot com from our recent webinar and available to anyone to review, we talked about a couple that we feel, you know, kind of a typical couple from New York. So they have, you know, a brokerage account that's earning about ten thousand dollars in
interest and dividends. They're taking funds from either a pension or an IRA of about seventy five thousand dollars, and they're receiving about fifty thousand dollars twenty five thousand dollars each in social Security benefits, so you know, they're income is a little under one hundred and thirty thousand dollars
for tax purposes. So you know this couple again, for for federal purposes, they're they're not itemizing until we look at you know, the sunsetting that's going to happen in twenty twenty six.
So you know, again they do own a home.
They pay about eight thousand dollars in real estate taxes, eight thousand dollars in mortgage interest, and about two thousand dollars they make in charitable donations. But for federal purposes, right they're not getting any benefit to those deductions right now, but may certainly when the rules change in twenty twenty six.
You know, that's yet to be seen, you know.
So for federal purposes, they're paying about ten thousand, five hundred dollars in taxes. But for New York purposes, New York is actually you know, a benefit for retirees in number of ways. So one, Social Security is not taxable, and i'll talk about you know, the states to avoid that do tax Social Security to some extent, but none of your Social sek gcurity benefits are taxable in New York,
which which is a great benefit. So again, all of that social Security income, that fifty thousand dollars is you know, again tax free in New York State.
And then retirement income.
You each each person over fifty nine and a half gets to exclude twenty thousand dollars of their retirement income. So whether that's a pension or IRA distributions or an annuity, twenty thousand dollars each. Now that's over and above. If you have, you know, say a pension from New York State or teacher's pension, that's you know, already state tax free. So again that those funds are already tax free if
you've worked for the state. So another reason that you may want to stay here that that income could be taxed in another state, but again is specifically not taxed for New York State purposes. New York also, you know, has a pretty good standard deduction, So for a married couple filing jointly, they get to deduct sixteen thousand and fifty dollars is the standard deduction. There's a lot of
states that have again lower deductions or exemption amounts. So in total, and this couple, again they still have some real estate taxes, mortgage interest, charitable deductions, so they can actually for New York purposes, they can itemize and take a higher deduction. So this hypothetical couple Jim and Pam, their taxes starting out with that almost one hundred and thirty thousand dollars of gross income amount to only about
eleven hundred dollars. Right, So again we have to think about it's not just that the tax rate, which Scott talked about earlier, being a relatively high rate. They're in the marginal tax bracket of five point twenty five percent in this case, but only forty five thousand dollars of their income is taxable for New York purposes, and then with their deductions, only twenty seven thousand, right, So that's
what you want to think about. It's not oh, the tax rate is five and a quarter percent, it's how much of your income is taxable in that specific state. So in this case, again, a couple that has about one hundred and thirty thousand dollars of gross income and is paying over ten thousand dollars in federal taxes, you know they're again paying a small percentage of that, only about eleven hundred dollars for New York purposes. Scott, do you want to talk about the states that don't have
any income taxes. You mentioned Florida before, but do you want to mention some of the other ones people consider.
Yep, there are nine total states without an income tax. We have Washington State, we have South Dakota, Nevada, Wyoming, Alaska, Texas, Florida, New Hampshire, and Tennessee. Typically we have, you know, being up here in the northeast, a lot of retirees looking to move to Florida, maybe a few also looking for Texas. But you know, there are other states without any income tax to consider. Again, more often than not, we see Florida as the primary place that we see retirees moving to.
And when we took a look at, you know, what states people are actually moving to, you know, some of these were certainly on the list, you know, Florida, Tennessee, Texas being some of the overlap, even Nevada. But in twenty twenty two we had some census data the top
ten states where retirees were moving. Again, aside from those states I mentioned the other ones that still had income tax so certainly people were moving there more for environment or family or other factors that Scott considered were Arizona, South Carolina, North Carolina, Georgia, Alabama, and Kentucky. So again you do see certainly a trend with people moving south maybe for that you know, more mild climate, and potentially some of these areas have a lower cost of living
than New York as a whole. You know, but again you know, not only for savings on income taxes. As I mentioned before, you know, New York State does not tax Social Security, but there are a few states that's
still social Security. So as of twenty twenty five, there will only you know, be a few states Colorado, Connecticut, which again we do have clients who live in Connecticut that we work with or you know, move there in retirement due to family, Kansas, Minnesota, Montana, New Mexico, Rhode Island, another one up here in the northeast, Utah, and also Vermont up here. So again New York is not included
in that. But you know, some of the states nearby certainly do tax Social Security to some extent, So something to think about. So you know, again, when we we did our case study, we looked at areas around here and we found out that you know, if this couple Jim and Pam moved to Massachusetts or Connecticut, they'd be worse off than stay in New York. And you know, again for various reasons, Massachusetts was not on that list
of states that tax Social Security. However, you don't get nearly as much of a standard deduction or the ability to itemize like you do in New York. So again, more of this couple's income would be taxable. So actually Massachusetts, this couple ends up paying about three times as much an income taxes, about thirty six hundred dollars. Connecticut, as we talked about, was one of those few states that
still tax to some extent social Security. So this couple only gets to you know, really exclude that thirty about thirty thousand dollars of their Social Security income and only a very small amount of their retirement income five percent of taxable IRA distributions gets excluded, whereas again in New York, you each get to exclude twenty thousand dollars. So you know, in this case, they're they're getting a tenth of a deduction compared to this couple who is, you know, excluding
forty thousand dollars of that income in New York. So you know, in both cases Massachusetts and Connecticut, the person would be worse off. And again, the savings to move to Florida from an income tax perspective or any of
the other states would only be eleven hundred dollars. So you have to think about you know, doesn't make sense because you know, it's really the cost of selling your home, the cost of buying or renting somewhere else, the cost of the actual move you know, as Scott talked about earlier, increased insurance right hurricane flood insurance.
Potentially if you're moving to somewhere like Florida.
And again it may make sense if you can buy a house for two hundred thousand dollars there and you're selling yours up here for four hundred thousand, So right, you're going to have more funds to live off of and last you longer, you know, and increase your you know, lifestyle.
But with that asset. But again, you know, prices.
Have certainly gone up in Florida and elsewhere, you know, just to due to COVID and people you know, certainly relocating and retiring sooner than expected a few years ago.
So again that was our thought.
Pennsylvania is actually one of the states that only that does not tax any retirement income, so they're you know, this couple would only pay tax on interest and dividends, so you know, about three hundred dollars in taxes. So again, Pennsylvania does tend to work out better for most people who have any you know, pension or IRIY distributions because none of that gets taxed by Pennsylvania. So you know, again you've now considered all of the factors and you're
thinking about, you know, where should I relocate. You know, you're thinking about who you want to be near, where's your family, what climate do you like? And so now you're ready to make that move. So what are the next steps? So Scott's going to talk about a little of you know, the to do's what do you need to do if you want to establish residency somewhere else?
Thanks Nicole. Yeah, when you're ready to make the move, it really get to start considering how do you change go about changing your residency or your domicile. New York in particular, is one of those states that will try to tax you if you cannot establish that you've made a move to another state. So in order to establish your new residency or domicile. You want to make sure a few different factors. You want to take a look at where you have your home or where you own property.
If you own property in a few different states, then maybe that won't be the primary driver of what's looked at when considering your residency or domoicile. So you want to also think about where is your business involvement, where do you spend most of your time, and how much of that time are you in each one of the states. There's a number of different ways to track that. Nowadays, there are different apps that people will utilize to really established whether or not they are in a state for
a particular period of time. You also want to think about where you have your friends and family located, because these are all factors that will be examined if you ever run into an residency audit. You also want to make sure that there's a few official changes that you make as part of the move. These would consider be considered moving your driver's license to the new state, also
your vehicle registration. They'll want to go make sure that your voter registration is up to date in multiple states. This will actually happen when you do apply for your new driver's license. But you just want to make sure you know how each state is handling it. And even there's an official IRS form that you can use to notify them of your change, and that's just Form eighty eight twenty two letting them know that you have a
new address. And even some states have their own domicile form which you can complete and file with them to establish your new residency, you know in let's say Florida or another state that's no longer in New York.
And Scott.
I know, we have a lot of clients who, you know, instead of making a move, you know, we really try to counsel as to you know, maybe other ways to try this out. So what would you tell somebody who said, you know, I'm thinking about it, I'm really not sure.
What would would you recommend that they try out? Yeah?
Absolutely, you never know exactly how you may like a particular state. You know, maybe you enjoy going down there in the winter time, but as I talked about, you know, the summer down south is very different from the weather
you'll see when you're escaping the cold. So it's always great to go and become a snowbird to escape, you know, the cold winter months, see if you can go live there full time, even taking an extended vacation, take a few weeks, you know, either right upon retirement or even leading up to retirement, to see if it's an area of interest that has all the amenities that you're really
looking for and testing it out. You know, it's one thing to have a little break maybe from your family, but do you really want to have to jump on a plane or in a train to go visit them every few months? You know, can you see yourself living in this new place.
And we've had a number of clients who have moved to be closer to children and grandchildren, you know, but sometimes that doesn't work out from the perspective of you know what, We recently had a client one of our cogs was working with, and you know, they got their child got called away to a different area due to work, so they were forced to relocate. And again their parents had only come down there to be closer to them. So,
you know, that's something I think about as well. While we all want to be close to friends and family, picking up immediately and doing that and again maybe selling your lifelong home looks like we have. Warren from half Moon Online Warren, How can we help you today?
Yeah, I have a question. I've been hearing in per amount about bufferd ETF and I wonder if you could explain them a little bit more and where they might fit within a portfolio.
Sure, that's a great question.
So we've used buffered ETFs, you know, since May of twenty twenty one, actually, so I think we were an early adopter of that on our investment team. What a buffered ETF is is essentially, you're buying a product that uses options within it to you know, give the money manager or the ability to buy and sell a specific index or a specific market you're investing in at different prices.
So they're doing that behind the scenes, and the product you're getting is essentially giving you access to let's call it the S and P five hundred in this case, and it's giving you upside during a twelve month period up to a certain cap. But in return for that
cap on upward performance, it's giving you downside protection. So for example, if you bought an ETF that's say today, was giving you upside of ten percent, right, So it's saying if the S and P five hundred between September first of this year and September first or twenty twenty five goes up anywhere between zero and ten percent, you're making that full amount less, of course, than the underlying
fee for that exchange traded fund. However, if during that twelve month period the market goes down, let's say that this also has ten percent downside protection, you would not feel that if you held it for that full year. Basically how that product was built with options would allow that to go back to zero, right, so you wouldn't feel that ten percent decrease. If it went down anything
above that ten percent, you'd feel incrementally. Right, So the market's down fifteen percent, your investment is down about five percent, but it's giving you almost insurance on the back end. So these kind of in all different shapes and sizes, different indexes, different caps on the upside, different downside protection.
You know, we have used a number of First Trust ETFs.
They're issued typically monthly, so again every month we would we would look out for our clients and say what is priced the best you know, giving us say the most upside protect potential and the most downside protection for the best price. But First Trust is a good one to look at like a ticker you could use as an example is.
Like h d.
J u L.
I'm trying to think of one.
D j u L would be a good one to take a look at.
So that's a first trust.
If you don't by it on the first of the month, you know, because the price of this varies, how do you determine what your upside downside is?
Well, again, as you're looking at it, it's it's it's not necessarily you have to buy it on the first of the month. It's just you have to think about, like, so you can buy something that was issued back in June or back in February, so you're really looking at the price of that, what is the upside, right, you wouldn't want to buy something say that.
Let's say hypothetically.
There was one that was issued in June and it had ten upside potential and you've the market's already been up eight percent since then. Well, now you only have two percent room on the top, right, So you wouldn't necessarily want to buy that. And you can buy and sell these at any time. It's just that the insurance piece of it works. The downside protection of it works up to a year. But you can buy and sell.
So for as an example, back in May of twenty twenty one, we bought these as a bond alternative, right, So at that time.
We knew that with inflation.
Increasing, right and rates increasing, bonds would not do well. But we didn't want to just put all of our money into the stock market, and also you weren't getting anything for cash, So by using these buffered atfs, we put them often in the alternatives piece of our portfolio. So we use, you know, a percentage in stock depending on the client's risk tolerance, and then a percentage in
fixed income bonds and alternatives. So we bought this during you know, the first few months, the stock market actually still went up, so we were making money and bonds went down, and then we sold that May issue in July and bought a July issue, So you're not locked into a twelve month period.
You can buy and sell at any point. And again, if the market.
Goes up and now you've you've used up part of that kind of upside potential, you may want to sell it and reinvest it into a different one, or you may you know, have a better feeling on the overall equity market and want to put that money to work in the equity market. Or conversely, you may say, hey, bonds are looking very attractive. Now let me put that back to work in the bond side of the portfolio.
But it is just an alternative to you know, investing into stocks with no downside protection or again in our case, we used it back in twenty twenty one twenty twenty two as an alternative to bonds and it worked out very well. When you know bonds were down, you know, eighteen twenty percent, these were only down you know, seven eight percent during that period. And then you know, certainly you know that downside protection helped.
So as a part of the going to pretty much follow what their indict is doing.
No, so so the again.
Somewhat, but it's each of these again has a different flavor, a different kind of cap. So you know, really it's a timing issue as well, so you know you're you're going to look at so yes, it's somewhat follows the index, it's tracking. But again each of these has different upside caps or downside potential. But First Trust is a good
company to take a look at their products. Again, one of the ones we had used in our portfolio was d j U l you can take a look at that as just an example and again just a there's you know, a lot of these out there, but the key is you can buy and sell them whenever you want. But it's just a good alternative to have when you want some downside protection in the portfolio. But you still feel that there's the potential for the equity market to be increasing further. So you're you know, you don't want
to be sitting on the sidelines. So we'll be right back after the break. You're listening 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.
Here is Stephen Bouchet.
Hello and welcome back to Let's Talk Money with Bouchet Financial Group Group. I'm Nicole Global Director of Financial Planning and Wealth Advisor here at Bouchet Financial Group and I have with me my colleague Scott Strohecker. Thank you, Warren for your call about Buffer ATFS. So before we end the show, I think you know Scott wanted to talk a little bit about some tips given where we are at the end of the summer.
So Scott, what did you want to share with the listening audience.
Yeah, now, it's definitely a great time to review your overall budget and financial plan with a trusted financial advisor like ourselves. You know, you're coming back from vacation and other traveling that you may have done. Maybe you're going out to the track spending some money this summer, so it's a great time to make sure that everything is in line with your budget. And you know, again maybe you spent extra money this summer that you weren't planning on.
So as we get ready to approach the upcoming holiday season, it's a great time to just again do an overall financial check in with your budget and financial plan to see if things are in line and what adjustments you should make accordingly.
See that's some good advice, and hopefully anyone who's still out there on extension for their tax returns, you're getting things finalized now. The corporate deadline is September fifteenth, to certainly make sure that you're funding all of your cash balance plans, pension plans and then October fifteen. And also as a reminder, your estimated payments are due for the third quarter September sixteenth, so make sure you're working with your tax provider and your tax planner. So I think
we've come to the end of our show. So we really appreciate you tuning in and listening to us again. All these resources, our webinar on moving out of state as well as our blogs are on our website at Bouchet dot com. You're listening to Let's Talk Money, brought to you both by a Bouchet Financial Group, where we help our clients prioritize their health while we manage their wealth for life.
Thanks again for tuning in. Have a great Labor Day.