0:06

This is retire Right with Brad White. As financial advisors in San Diego.

0:12

Brad White and the Mercer Advisors formerly Epstein and White team have developed their business

0:18

by reaching out, nurturing, and maintaining close, trusting relationships with each of

0:24

their clients. Now here's your host, Bruce Steinbrock and Brad White. Thanks

0:32

for joining us for retire Right with Brad White. I'm Bruce Steinbrock joined by

0:36

Brad White with Epstein and White Retirement Income Solutions, a proud part of Mercer

0:41

Advisors right here in San Diego. Well fed chairman Jerome Powell. He said,

0:48

before the start of this year we could see three rate droppings of the

0:55

interest rate. But things haven't worked out quite like they planned and fact there

1:00

maybe having a thing. Do we have to inch this thing back up a

1:03

little bit because inflation is not under control? And Brad, you know,

1:07

the question is did the hikes we did over that you know, period of

1:11

whatever eighteen or twenty months spark the US economic boom that we're having right now?

1:17

You know, there was a lot that was a very intelligent phrasing in

1:21

question, and yet I felt the need to circle back to the order of

1:23

which we use droppings, right. I don't know if you caught that about

1:26

halfway through the sentence there, right, so I just felt indeed, right,

1:30

then maybe we just we have a good little laugh about that. Now

1:33

we realize, right, as part of the English language, you have to use dropping of interest rates, not necessarily more droppings. Yes, very good.

1:38

It's something different here, I picking up what you're laying down. I

1:44

think back to the seriousness of the subject, because it is certainly a serious

1:48

subject. Right, And look, let's kind of go back to some of

1:51

the basics here. Okay, when we have a horrible economic recession, right,

1:55

think two thousand and eight, think pandemic. The first thing, the

1:59

biggest tool in our country's toolbag is lowering interest rates. We lower interest rates,

2:04

and we do that to spur the economy to grow again. It is

2:07

cheaper for people to get cars and car loans, houses, right, and mortgages, which may spur more construction and more development, right and more.

2:15

You know, you name it, right. It is cheaper for businesses right

2:20

to borrow and do various different projects and possibly then have a lot more room

2:23

in the budget to hire more people. Right to do all of that. Okay, it's cheaper for everything. So again, lowering interest rates helps an

2:31

economy. So the opposite is true during times of high inflation. Right,

2:35

when an economy is too hot, we raise interest rates to slow it down.

2:38

Right, we have the same amount of goods, but less demand chasing

2:40

it because everything is more expensive. So we knew we had to raise interest

2:46

rates a lot to combat this crazy inflation that was clear by the end of

2:50

twenty twenty one, beginning of twenty twenty two, you can say post pandemic,

2:53

right, a lot of that kind of created the perfect storm for it.

2:57

So we knew, right, we had to raise interest rates. But

3:00

the fear logically is that, Okay, when you raise interest rates, you

3:04

combat inflation, but it gets you into recession, right, A lot less

3:07

demand, a slower economy, aka a recession. So yeah, part of

3:10

that, if you're wondering, right, it's a little bit of like is

3:13

the medicine worse than the disease? And it's it's it's fair to kind of

3:15

wonder that when you hear the word we're kind of like going into a recession,

3:19

but it really is the answer. You just have to hope it's not

3:22

a bad recession. So we go on this rate height shopping spree, the

3:25

likes we haven't seen in over forty years. Okay, I have the speed

3:29

of which rate heights happen. We haven't done it in over forty years.

3:31

Okay. So therefore, look around right now, and how the heck is

3:37

our economy humming along so great? Which it is right now. There's a

3:42

million numbers I can throw at you, which you know may be boring,

3:45

maybe not, so let's keep it, keep it tight. Here. The final estimate of the fourth quarter GDP revised growth to three point four percent.

3:52

That's great. Personal consumption three point three percent. Consumer spending, particularly on

3:57

services is very very strong right now. So people are out there spending money

4:01

doing lots of things, you know, which is obviously the whole economy.

4:04

Right We are very much, you know, a consumer driven economy. Unemployment

4:09

still very low at three point nine percent. That's incredibly good, right historically

4:13

speaking, it's humming along. Okay. So how do you like what's going

4:16

on with inflation? Right Well, in February, core inflation came in at

4:19

three point eight percent, which is, you know, the lowest level since

4:23

May twenty twenty one. But the headline came in at three point two,

4:26

which was above consensus estimate. Then at March it rose again to three point

4:30

five. So, in other words, like not trending in the right direction, surprising people given what the trend was doing last year. It's like kind

4:35

of a uh oh, Like we're going back in the wrong direction here.

4:39

Why is this happening that spooks the heck out of markets? Okay, So

4:43

what you've noticed right around, you know, March and April, right,

4:46

is markets all of a sudden, especially April at the beginning, giving this back once these numbers came out. One thing that's important to point out when

4:53

we talked about inflation, though, was is homes, right, Shelter and

4:57

energy have been the biggest, biggest components of this, so obvious. We

5:00

know what's going on right now in the Middle East, right, and that's

5:03

not going to help when it comes to oil and energy, and from a

5:06

home standpoint, you know that doesn't necessarily affect everybody the same way. But

5:11

rents himself have skyrocketed. So people who have locked in mortgages, right,

5:15

you're not feeling that part of the inflation, whereas people that are renting almost

5:17

certainly are so here's the question, right, and this all stems from an

5:24

article that's going on around there right now, which is are are these FED

5:27

hikes actually sparking a US economic bone? Like? Is all this good economic

5:31

news happening in spite of rates being higher? Or is it actually somehow because

5:35

of that? Okay, which flies in the face of everything we believe in.

5:41

I want to go through this for a little bit here, Bruce,

5:43

So why don't I take a quick pause and make sure that you have our

5:45

phone number absolute. We need to know how to get a hold of you, Brad. Yeah. Look, we've been doing this as Epstein and White

5:49

for over a decade and we are now proudly part of Mercer Advisors, right,

5:54

and Mercer for those of you if you don't know it, manage about

5:56

sixty billion dollars nationwide. We've been around since nineteen eighty five. It's very

6:00

much exactly how we believe. We've always believed in things as we've been Epstein

6:03

in a White for over a decade. We are fiduciaries. We are not

6:06

broker dealers. We do not have broker's license. We absolutely do what's legally

6:11

what's in our client's best interest at all times, and again, Mercer's been

6:13

doing that since nineteen eighty five, well before it was even something other firms

6:16

we're thinking about. We are certified financial planners. We are retirement specialists.

6:21

Here. We eat, sleep, live, breathe retirement planning. We've helped

6:25

over fifteen hundred families here in San Diego. Specifically, you know on our

6:29

office and if you've listened to our radio show or you come to one of our events around town, you have the ability to come in for up to

6:33

two times to meet one of our certified financial planners, completely free of charge,

6:38

no cost, no obligation to do anything. It's honestly the thing we're

6:42

most proud about here because we basically let invite any one of you in and

6:46

whether you become clients or not, it's not the idea. It's just simply,

6:48

what are your questions? Do you have a retirement plan? Do you

6:51

have any clarity? Are you worried about anything? What can we solve for

6:55

you? And you meet with us from up to two times, And we're

6:57

proud to say that while not everybody needs, you know, to become ongoing

7:00

long clients, certainly many have. We're proud to say that everybody kind of

7:03

says, hey, it was really worth it to come in here, like you've really showed us x or helped us with why. And again, that's

7:08

probably the thing we're most proud of here. So if you'd like to take

7:11

us up on that, our number is eight five eight five six four eight

7:15

zero three six. Once again, it's eight five eight five six four eight

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zero three six, which you can call or text us at that number,

7:23

or you can always go to our website Epstein and White dot com and you

7:26

can reach out to us that way. That's Epstein and White dot com.

7:29

So again, the question a million dollar question right now, is all of

7:33

this good economic stuff happening in spite of rates being higher or somehow because of

7:39

it. So here's what this article is pointing out. This is a very

7:42

radical idea, right You normally would get laughed at for even saying it,

7:45

so, but there's some now that are saying, like, the evidence is getting harder to ignore. Okay, for the first time in fifteen years,

7:51

people are actually making five percent in their cash or CDs writer or bonds things

7:56

like that. By the way, if you aren't making that in your cash

7:59

again, reach out as a call if you're exploring conservative investments and you're just

8:03

not doing it right. But in other words, for the most part,

8:05

people in businesses, right, companies sitting on large amounts of cash or earning

8:09

a lot more on this cash. So in turn, people and companies are

8:13

now turning around and spending that extra money, which is creating extra demand in

8:18

the economy. So that's a bit of kind of what this radical theory is.

8:20

It's like, hey, interest rates are supposed to slow an economy down

8:24

when you rise the right, that's always what's happened. That's our tool, and that is what always has happened. So why are we facing this good

8:30

economic news? And that's kind of what this theory is is proposing, which

8:33

is, hey, people are actually earning more on all this safe stuff,

8:35

and that is sort of counteracting this and actually creating more demand. Now,

8:39

the thing is, like, here's the question, the people that have this

8:43

extra money, does that pale in comparison to the mass amount of other people

8:46

who don't have money and aren't experiencing any of this benefit and are just out

8:50

there with less money because inflation's higher, right, and interest rates are higher.

8:54

That's kind of the idea, right, is that's why people still think

8:56

it's a radical theory. Is, Yeah, no doubt for any of us,

9:01

for any of you that have money, that cash is earning more.

9:03

That's great. But then I think if you know the profile of ninety five

9:05

percent of Americans, they're not sitting on hundreds of thousands or millions of dollars

9:09

of cash. They're just flat out facing more expensive stuff. So you'd think

9:13

that that would ultimately carry more weight. They quote green Light Capital's David Ihorn,

9:18

who's been a pro proponent, excuse me of this new radical theory.

9:20

So he's noting us households receive income on more than thirteen trillion of short term

9:28

interest rate assets, right, cash CDs almost triple the five trillion in consumer

9:33

debt, which excludes mortgages, right, because mortgages are fixed for the most

9:35

part. So in other words, like he's basically saying thirteen trillion of short

9:39

term interests is in assets and only five trillion in debt. You know,

9:43

at today's rates, that is a net gain of households of about four hundred

9:46

billion a year. So look, I would have thought, right, hey,

9:50

that's not how the numbers would look. Certainly, David Ihorn has done

9:54

some research that I haven't there, and that's with this article in Bloomberg, right, not necessarily a specuative association here, So you know, for the

10:01

moment, unless we see something otherwise, let's just run with these numbers. It's interesting right now. He does state that none of this works of interest

10:07

rates are like eight or nine percent, right, So it's a fickle thing.

10:11

Right. Once interest rates are too much, then the whole everything crashes, and that's where you get recessions. And to be clear, the vast

10:16

bulk of economists and investors do believe in the old principle that higher rates choke

10:22

off growth, right, so this is still a bit of a radical theory.

10:24

They are pointing out things like rising delinquencies and credit cards right now,

10:28

and auto loans, and the fact that job growth, which is robust,

10:31

has at least slowed down. So it is an interesting concept. And again,

10:35

one thing to point out here is that a huge amount of Americans have

10:37

locked in low rate thirty or mortgages over the last decade and they're holding them

10:41

tight. So it does mean higher rates aren't affecting again that portion of the

10:45

housing debt, which is a big portion of household debt across our country.

10:48

So you know it's interesting, Bruce, right, You know it's logic when

10:52

you hear it, but it's just it's it's almost like, is this just

10:56

a new world? Right? Some of these tools that we used in the

11:00

twentieth century not as applicable for X, y and Z reasons in the you

11:03

know, twenty first century, especially kind of post pandemic, and you know,

11:07

jobs being created through AI right as much as other things. It just

11:11

kind of makes you wonder, well it be. You know what it tells us, Brad, is how we've been conditioned. So again, like Pavlov's

11:18

dogs, I mean, we hear a bell ring, we salivate, right,

11:20

So in the conditioning theory of how we've been raised around our economy,

11:26

it's not supposed to react like this, so we're uncomfortable with it now.

11:31

First of all, great point. That probably is the point, right,

11:33

It's one Glad I asked to you, and I think if there's any lesson

11:37

to be taken right for you listening on this, it's you've got to understand

11:43

how you position your assets, and you've got to understand how you position your

11:46

budget, and you've got to understand kind of the nuances and some of the

11:50

flows of all these things throughout your retirement, so that no one environment can

11:56

take you out. Right, If you have all your investments position in a

12:00

certain way and then whoops, like wow, inflation's worse than we thought of

12:03

your retirement and these type of investments do poorly with it, that can catch

12:07

you by surprise. And if you're not diversified or you don't have the right

12:09

assets in place, that could really hurt your retirement plan. If you've got

12:13

all your income and budgets like air tight and you can only afford this and

12:18

then all of a sudden taxes go up on your iras or other things happen

12:22

in your budget, Where does that leave you? And does that cause you

12:26

to run out of money sometime in your retirement? So, without even getting

12:28

terribly specific here, this is just it's kind of one of those humbling things

12:33

that says, the best and brightest people in the world and the tools that have worked, you know, for a century, are all of a sudden

12:39

not working at least in the short term right the way that we think we are. And if that can happen at that level, right then you know

12:45

who are we as individual people to not have something like a retirement plan and

12:48

not have something, you know, like diversified things in place so that we

12:50

know, you know, our own household budget, our own household assets can

12:54

handle a surprise or two right, and everything is still going to be okay

12:58

within our family. So again, that's why we offer you this. We've

13:01

been doing this for over a decade. There is no cost, no obligation.

13:03

You will come see one of our certified financial planners who are fiduciaries and

13:07

who eat, sleep, live, breathe retirement planning. Two meetings with us,

13:11

no cost, no obligation, And here's our number eight five eight five

13:16

six four eight zero three six. That's eight five eight five six four eight

13:20

zero three six. Again, you can call or text us at that number,

13:24

or you can always just go to our website at Epstein and White dot com. That's Epstein and White dot com and you can reach out to us

13:30

that way. Well, we are in an election year, Brad, and

13:33

it does make people wonder, Okay, if X is elected or if Y

13:39

is elected re elected in one of the cases obviously, but you know Congress

13:43

is going to change in some way, shape or form as well, so

13:46

if government's philosophy switches, should we also pivot? And I think people do

13:54

get caught up in some of the rhetoric that is out there. I mean,

13:58

good grief, this election will be crazier than the last one. I

14:01

have a feeling, and so I mostly all have that feeling. I think

14:05

so too, you know. So I think people get caught up in some

14:07

of that, and then they're thinking, oh my gosh, I need to

14:11

switch what I'm doing or how I'm thinking. And so what's your theory or

14:15

thought on all of this? Well, it's almost sort of the opposite on

14:20

this subject that I'm talking about now. You're one thousand percent, right,

14:22

which is like the visceral nature of every headline and every article and every you

14:26

know, scroll down your Facebook for three seconds, right or whatever of like

14:31

ping ponging this new issue. Right. I'm referring to you kind of from

14:35

a tax standpoint and from like a retirement account standpoint. That's something where the

14:41

current philosophy, right, So, and I'm gonna speak to my clients,

14:43

right, I'm a retirement specialist, So my clients are in somewhere between their

14:46

fifties and seventies, almost predominantly right. Right, So if you look at

14:50

our clients like that means you were kind of raising your working career through the

14:52

Reagan era through the introduction of four to one k's and iras, through this

14:56

introduct right, the doctrination right of lowering taxes and then again you know,

15:01

defer your taxes while you're working, pull them out later in retirement while they're

15:05

lower. So that's that philosophy has has been again I mean, completely wrapped

15:11

into my client's minds for forty five plus years. But my point is it

15:16

seems like the government's philosophy is finally starting to switch now, and this is

15:20

one where people are not this early changing their minds, and I think they should. Okay, So again, if the government's goin a philosophy is going

15:26

to switch, like, shouldn't you pivot too, Which, again to your point, I'm actually glad you started out our conversation like that, right,

15:31

because people seem to have no problem doing that on like certain you know,

15:35

current issues here or there, But this kind of long standing one, it's almost like it's flowing, it's flying under the radar that the philosophy itself seems

15:41

to be changing through it from a country, right from a congress and legislative

15:46

level. Again, forty six years since Congress packed the Revenue Act passed the

15:50

Revenue Act of nineteen seventy eight, which is what created Section four one K

15:54

of the tax code. Right. For the first few years it was a

15:56

little known. Again, Reagan administration changed the legal interpretation of this and allow

16:00

it for it to be more widely adopted. It was supposed to simply be

16:03

a supplement to social security and pension plans. It is obviously then dominated now

16:10

it is the predominant tool, right that we have in our country. So

16:14

because industry decided, hey, hey, I can get out of this pension

16:17

thing and just make a contribution and wash my hands. Well, this is

16:21

the first part right of the mindset slowly shifting right to replace defined benefit plans

16:25

and leaving the average American like woefully underprepared for retirement. Those who do have

16:30

money, they don't really understand how to translate this into reliable income. Right,

16:33

that doesn't make them have a panic attack every time the markets go down

16:37

or a pandemic happens, right, or et cetera, et cetera. Again in nineteen eighty three, which is According to Protect Pensions dot Org, sixty

16:42

two percent of workers had a pension and only twelve percent had a defined contribution

16:47

plan like a four to one K. And then by twenty sixteen, seventeen

16:49

percent had pensions and seventy three percent had the four and K And that's obviously

16:53

even more dramatic than twenty twenty four. So that kind of is one example,

16:57

right of like the philosophy changing and you've got to change by that,

17:00

I wouldn't have a job as a retirement planner, right if that philosophy never

17:03

changed, Right, you'd all have pensions. That's what you would do in

17:07

retirement. Maybe you'd come see me here or there for something. But like,

17:10

the predominant thing that we do as an office is basically for the ninety

17:14

percent of you that don't live off of pensions. How the heck you're going

17:17

to translate all that money you saved your whole life into living off of it through volatile markets and inflation and everything else. That's why we exist, because

17:23

we have to write because that philosophy changed, well, and because tax code

17:26

continually changes as well. And guess what, you haven't paid taxes on the

17:30

majority of that money. You've been saving in those vehicles that were again put

17:37

in place of pensions. Yeah, and that speaks to this next philosophy change,

17:40

which is predominantly what I'm talking about right now, which is the prospects

17:42

of what tax rates will do in your future. Right again, the entire

17:47

ideology was for you to put money in these tax deductible I raise in four

17:51

to one k's in your working years, because the thought was your tax rates

17:53

were higher, then you would pull it out in retirement pay taxes when your

17:57

tax rates are lower. Us. What I think people keep forgetting that worked

18:03

taxes are now at all time low rates, and if you were tired,

18:07

your rates should be lower than probably if you were making any sort of decent

18:10

money in your working career. So theoretically like that worked like a dream for

18:14

you or now okay, because the problem is we have thirty three trillion in

18:18

rapidly growing debt, and the deficit itself, not just the debt this coin

18:22

even the deficit grows each year, and on top of that, interest rates

18:26

are higher servicing the higher debt is happening each year. There is not a

18:32

mathematical answer that anybody in the world can look at that says, like,

18:36

how are we that can explain any of this without raising taxes in the future.

18:41

Well, yeah, well sure we can. There's either debt goes to

18:44

infinity, or we completely stop spending money in certain areas that nobody is voluntary

18:49

to stop spending money on it, or at least any Again, Republicans would

18:52

certainly say we're voting on certain things. They're right, but like not in

18:56

something that will balance the entire budget, and certainly not something that's going to get passed. Well, and let's tyson, you have to fund social Security,

19:00

you have to fund defense, you have I mean, there are obligations

19:03

that we as a country have said we have to fund. Do you know

19:07

if you look at the Social Security, the Medicare, and the interest on

19:11

our debt alone, that's like our entire budget right now. That's before we

19:15

touch anything like infrastructure, defense spending nine dollars that's hard to fathom. It's

19:21

it. That's it, Solid Security, Medicare, and the interest on our debt alone is basically the entire the revenue that we have. So that's my

19:26

point. My point is, it's not like it's on the margins anymore.

19:30

It's not like it it's a tough call. If we have to trim ten

19:33

percent of infrastructure or ten percent of defense, right, Like, that's not

19:36

where we're That sounds like a bummer in one direction or the other. But

19:40

a realistic scenario, right, there's nothing realistic about where we're at at all.

19:44

And we have tax rates which are, however you want to view this,

19:48

are around one hundred year lows. I just can't see a world where

19:52

they don't go up. They're already supposed to starting in twenty twenty six,

19:55

right, so we're a year and a half away from boom that happening anyway, and they revert back to at least at least twenty seventeen. Yeah,

20:02

so I kind of like. But but the other part of this, too is just the shifting attitude that we kind of have from our government. It

20:07

used to be please save as much as humanly possible in these tax deferred plans,

20:11

like promoting them right right now, it's very much since the Secure Act

20:15

and everything else going on, it's like, hey, if you have too

20:18

much like your r and ds, Like there's proposals right now. It's like,

20:22

hey, if you have ten million or more in iras, we're going to make you take fifty percent on every year. You know, now,

20:26

if your kids in here at iras, like within ten years, they've got

20:29

to deplete it all. And so it kind of feels like it's happening so

20:32

slowly that no one's really paying attention to just the mindset shifting of this,

20:37

right. No, nobody's sitting around right now being like, perfect, I won, I won, like the whole ring everything that happened in the eighties,

20:42

every like that happened. I saved my money. Now tax rates are

20:45

low, I'm retired like I won, And in order to win, you'd

20:49

have to do things like roth conversions, right, you would essentially be saying,

20:52

cool, I'm gonna pay, I'm gonna rip off the band, and I'm gonna pay today's tax rates. That way, whatever happens in the country

20:56

in the future does not impact me whatsoever. Nobody really is thinking like that.

21:02

I'll give you kind of a quick pause on this and give you our number, because look, you, I think you, as a consumer have

21:07

to decide are you actually working with a financial advisor or an investment specific advisor.

21:14

Investment advisors will call themselves financial advisors. That's just a general term for

21:18

our industry. But so many people that we see where it's like, what's

21:22

your current retirement plan? Look like? It's like, I don't know. What's your current tax plan? Look like, I don't know, I don't

21:26

have one. What's your current person saying about when it takes sole security?

21:30

They say they don't know, they don't do that area. What's your current

21:32

person saying about your taxes? I don't know, they don't do that. They told me to ask my CPA. What's your current person saying about how

21:37

to choose medicare? What's your current person saying about your estate plan and what

21:40

your family's going to pay if the estate tax assntion goes down and your assets

21:45

keep growing, rightly, So we see that all the time. It's your

21:48

choice, right Like your person might be great at investments. That may be

21:51

all you care about it. And if that's all you care about, that's that's great. But if you're sitting there saying, I don't want to get

21:56

shocked by rising taxes in the future on my I raise my four and case,

22:00

I want to have a plan for it. I don't want to get surprised if inflation happens someday and I look up and I think, well,

22:04

how am I going broke? In my eighties? I thought I had enough

22:07

money? What do I do now? If you don't want to sit there

22:10

and fumble through Medicare decisions and social security decisions or estate planning decisions. If

22:15

those things bother you, then either you have to be working with someone you

22:17

already trust, or we will certainly offer you through our radio show, up

22:21

to two meetings with us. We'll assess the entire situation. We'll take a

22:23

look at everything we have, and we'll give you a good, bad,

22:26

or ugly or anywhere between. We'll answer any questions you have, and we'll

22:30

go from there. Our number is eight five eight five six four eight zero

22:33

three six. You can call or text us at that number eight five eight

22:37

five six four eight zero three six, or you can always go to our

22:41

website Epstein and White dot com and you can reach out to us that way.

22:45

That's Epstein and White dot com. Obviously a great topic there, and

22:49

I hope people got some, you know, valuable information out of that,

22:52

because I think, again, we're all the one thing you don't want to

22:57

do is panic. Ever, so let's switch to short term capital gains.

23:03

Now, we all hope to have some of those at some point in time

23:07

in our life. But should when I have those opportunities, should I sell

23:12

or do I risk waiting? How do you help people? Because there does

23:17

have to be some money growing within our retirement income portfolio. Yeah, so

23:22

really this concept is, you know, short term capital gains rate versus long

23:26

term capital gains. Right, So, if you buy something and it makes

23:29

a lot of money, and you sell it before a year, you pay

23:32

short term capital gain rates. What are short term capital gain rates? They

23:34

are whatever your normal tax bracket rates are. So it's like you get no

23:38

special break. It's just like you get tax on your income from work.

23:41

If you wait at least a year, it becomes long term capital gains and

23:45

you get special rates which are lower. However, you don't get in California.

23:48

By the way, California long term capital gain rates are the same as

23:51

your income. So congratulations. It's just unbelievable in the state, it just

23:55

really is. They just are never happy taxing you the most possible in every

24:00

possible way. So for us in California, it's just on the federal side

24:03

that we look at this for right, So I'll give you kind of an

24:06

example. Somebody buys a stock for fifty grand. Six months later it's worth

24:10

one hundred grand. So we see this sometimes where it's like, hey, maybe this was kind of a specuative trade. This wasn't like hey, I'm

24:14

going to buy Amazon or Apple and hold it forever. This was like,

24:17

hey, I bought like this thing, and like now that it made some money, like I kind of want to just cash my chips and leave the

24:22

table right before the casino takes it back. If you were to sell it

24:26

right now, let's say you're in a twenty four percent bracket. That's what

24:30

you'd pay on that fifty thousand game, But if you waited six more months

24:33

to sell it, you'd only pay fifteen percent. Right. Well, let's

24:37

a lot of times that This is where you know you let the tax tail

24:40

wag the dog way too much, right because in the context, you have

24:44

one hundred thousand dollars investment here, and you'd have the difference in nine percent

24:48

in taxes on the fifty thousand gains. So it's forty five hundred dollars in

24:52

extra tax. Divide it into one hundred thousand dollars value. That's a four

24:56

and a half percent, So you have to think of it like, hey, if I wait six months and this goes down four or five percent,

25:00

that I'm worse off than having just sold it and paid the taxes at the

25:03

short term rate right now, right, Yeah, Obviously, if you're eleven

25:07

and a half months in on something like you probably shouldn't sell it, and

25:10

you should wait that extra couple of weeks, right like to get a better tax rate. So this is, you know, not a huge subject that

25:15

happens all the tiny people, but this is kind of one drop in the

25:18

bucket of a larger example, which is when we make money, we're expecting

25:22

to make money over our lives. We're gonna pay taxes when we make some

25:25

money over our lives. And it's just sometimes making sure you don't get so

25:27

lost in the forest, right You can't lost in the forest, you can't

25:30

see through the trees. Ye, what it is right now, I'll pick

25:33

an analogy that I memorize a little bit better next time. But the point

25:36

being right is again just not getting so blinded by like small tax savings in

25:41

relation to something bigger, because again, nobody wants to teach you how to

25:44

save taxes more than me. Nobody does promise you, so make sure that's

25:48

clear before people yell at me. It's just this was kind of one example.

25:52

We've seen this a couple times over the last year or so, where it's like, hey, like let's think this through right, so to speak.

25:56

There are infinite decisions like that happen every month, every year, and

26:02

certainly over the course of your retirement. So we can't stress enough making sure

26:04

you have a retirement plan, you have clarity, you have answers on all

26:07

these things. We can give you that no cost, no obligation. You'll

26:11

have up to two meetings with US certified financial planners, fiduciaries and people who

26:15

eat, sleep, live, breathe retirement planning. We've helped thousands of San

26:18

Diegans. We will happily help you next. Our number is eight five eight

26:22

five six four eight zero three six. You can call or text us at

26:26

that number that's eight five eight five six four eight zero three six, or

26:30

you can always go to our website Epstein and White dot com and reach out

26:33

to us that way, that's Epstein and White dot com. We get great

26:40

client questions, we get great listener questions, and right now on the program,

26:44

we want to dive into the mail bag and bring up one of the

26:47

popular questions that's been coming up, and one was posed by a listener just

26:52

a few days ago, So we want to bring that up on the program

26:56

and dive into the Epstein and White Mercer Advisors mail bag. Yep. So

27:02

this question comes and the question is from a gentleman named Craig, and he

27:06

says, what is the connection between an IUL policy which is index Universal Life

27:11

right, so a life insurance policy that also grows cash value, so it

27:14

can kind of be an investment as well as life insurance. So he says,

27:17

what's the connection between an iu A policy and a living trust? Should

27:19

the trust own the policy or be named as the beneficiary? I really really

27:25

like this question, by the way. Yeah, it's a great question. And he says, and further, can the policy be owned in a roth

27:29

account, et cetera. There's lots of layers to this onion, and it's

27:32

a great question. So one thing here, let's kind of talk about what

27:36

a living trust is. So normally there's lots of types of trust, the

27:41

normal you know, quote unquote normal trust that you're thinking of and I'm sure

27:44

Craig's thinking of as something that typically you can own as an individual, or

27:48

if you're a husband and wife as an example, Right, you guys would own it. It's really like you guys owning something. The trust is its

27:53

own entity, but you guys are the grantors that you create the trust.

27:59

You're the trustees, which means you make decisions on what happens in the trust,

28:02

and you're the life beneficiaries of the assets in the trust. The main

28:06

reason people have a trust is when you own non retirement accounts and non life

28:10

insurance assets, so things like your properties, any homes, any properties you

28:14

have, or just non retirement you know, stock accounts and bank accounts.

28:17

And the reason why is because when you own things in a trust, it completely avoids probate for your family when you die. Right, So if you

28:22

want like your kids to be beneficiaries of your stuff and you don't have a

28:26

trust, if you only have a will, it's a nightmare for your kids

28:30

and your family to go through court and go through probate, and it adds

28:32

expenses. So we highly recommend living trust for most anybody with assets. Okay,

28:37

if you don't really have any assets, in your life. Then maybe

28:40

we don't. But for most anybody with assets, we highly recommend a trust

28:42

again to own non retirement accounts. Now, your trust has its own beneficiaries

28:49

in it. So when your trust owns your home, you might have put

28:52

in your trust. Hey, my son and my daughter are fifty to fifty

28:56

beneficiaries. So when we die, they split fifty percent of the house or

29:00

splend of the other accounts. Right, So you list all your life,

29:03

all your net worth. You list these things in your trust, and then

29:06

you say who gets what when you guys die. You don't need a trust

29:11

necessarily for an index universal life policy. So if you have a life insurance

29:15

policy, one is you might be using it for cash value over the course

29:18

of your life. But it also has a death benefit. So again if

29:21

you own it, I'll just say me as husband own it. As an

29:23

example, if my wife dies, if she's not the beneficiary of the policy,

29:27

that doesn't pay a death benefit. Yet, like I'm the owner,

29:30

or if I'm the beneficiary of the life in church policy, it doesn't pay

29:33

till I die, that can go straight to the kids. I can name

29:37

my trust as the beneficiary. And so this is how I actually do it

29:40

in my life Craig, my life insurance policy. While I own it and

29:44

I'm the person who's life it's on, my trust is the beneficiary because that

29:49

way, the proceeds go to my trust, and my trust says exactly who

29:52

gets what, how my kids get in and all that stuff. So that's

29:56

important now for higher net worth people for a state planning reasons right is,

30:00

if our estates are above a certain amount, then the government will take forty

30:04

percent of our states before our kids get it. This is where we get

30:07

complicated and we do what's called irrevocable life insurance trust. It's called an islet,

30:12

and you actually do want that type of revolcable trust to be the owner

30:15

of a policy. I don't want to complicate what we're talking about on today's

30:18

show. That's a particular niche area. And for those of you that are

30:22

worried about a state taxes, you should certainly reach out to us as a

30:25

firm. We spend a lot of time in this and we think the tax laws are going to change in twenty twenty six and a lot more of you

30:30

are going to potentially have a state problems in your retirement. So it's really

30:33

something you should think about. Not to confuse that though, Craig just kind

30:36

of a normal life insurance policy that you know, kind of any of us

30:40

might own for kind of what I would call normal reasons. You can have

30:42

your trust own it, or you can own it yourself. It's really not

30:45

a big difference. You can have your beneficiaries be directly you know, your

30:49

spouse or kids, or you can have your trust be the beneficiary. None

30:52

of that really matters too much. But on things like your properties and your

30:57

stock accounts, you absolutely want the trust be the owners of those. And

31:00

again I typically like the beneficiary being the trust on the life insurance policies a

31:04

little bit more. Your last part of this question is can the policy be

31:07

owned in a wrath. The answer is no. And the reason why life

31:11

insurance is not allowed inside retirement accounts. And the reason why is because,

31:15

well, I'll just give you the easy reason why anything in the world you

31:18

put in a wrath that's normally taxable, stocks, bonds, you know,

31:22

real estate, whatever. Normally you'd have to pay taxes on all those things.

31:26

But if you have those things in a wroth, everything is tax free.

31:30

The reason people buy IUL policies is because those that type of policy,

31:33

when you take it out right, is tax free anyways. So you would

31:37

never take something that is already privileged with tax free like the municipal bond interest

31:41

right, or life insurance in this case, and stick that inside a retirement

31:45

account like a wroth. You just you don't need to do that. So

31:48

to answer your question, no, it would not be owned by a wrath. Though, fantastic question on multiple layers. It allowed me to kind of

31:53

explain multiple things. I don't think we maybe talk quite enough about estate planning

31:57

and what it means for you all to have trust, That's what it means

32:00

to have wills, how you should title things, which accounts should have what so. So thank you Craig for not just kind of the life insurance I

32:06

you will side of that equation, but kind of a good reason for me to go into something maybe we don't touch on enough on this show. I

32:12

think Craig represents one of what's probably a million questions out there right that comes

32:15

up just for any one of you or your spouse's or your family situation.

32:21

There's so much that goes into retirement planning and kind of what I like to say a lot and maybe I don't say it enough, is there's a lot

32:27

of you that probably would be fine. Right if you don't see somebody like

32:30

us, you know, and you don't do some deep planning, you'll probably be fine. And for some of you, if that doesn't bother you that

32:35

you may be missing out on better, then that's great. It's your money,

32:38

it's your life. You know, you're adults. You make these decisions.

32:40

I would say for those of you that really don't like the idea of

32:44

wasting money, whether it's on taxes, or whether it's on Social Security,

32:47

or whether it's on investments, because you're not doing things, you know in

32:51

a great way, you're not actually having somebody to take a look at this and really look at it. If that stuff bothers you to think that you're

32:55

missing out, it certainly would be. That's why we exist, right,

33:00

no cost and no obligation. We'll look at everything you have, and we'll

33:02

talk to you about everything you're looking to do, and then actually build you

33:05

a custom retirement plan that looks at all of it. And by the way we do it in a way, we built a proprietary way that we show

33:10

you this so it's actually easy for you to understand as we walk you through

33:14

it, because I think that's equally as important, right is not only getting

33:16

all the answers to what your life and retirement plan and investments look like,

33:21

but actually being able to understand right what we're saying and what we're showing you

33:23

on that. We want you to have what's called our exhale moment where you

33:25

go, oh, okay, this is how we're going to do this and

33:29

retirement. Here's all the answers, no cost, no obligation. You can

33:31

meet with us for up to two visits. Our certified financial planners, fiduciaries

33:36

and retirement specialists we are waiting for you. Our number is eight five eight five six four eight zero three six. You can call or text us on

33:43

that that's eight five eight five six four eight zero three six, or you

33:46

can always go to our website Epstein and White dot com and you can reach

33:50

out to us that way. That's Epstein and White dot com. Well, Brad, as we were doing research for the show, we came across the

33:55

article Fox News put out and it was talking about buying a home using retirement

34:04

funds. Is this a good idea because some people maybe want a second home

34:08

in retirement or they're downsizing and they want to, you know, maybe look

34:13

at different ways they can finance at home. What's your thought. Yeah.

34:15

Brec Dumas for Fox wrote this article stating that one out of every ten American

34:21

homeowners said that they pulled money from retirement savings to cover down payment and closing

34:25

costs with buying their home, and Bankred did a study and said they found

34:29

nine percent, which again so basically the same conclusion unretable you know studies here,

34:32

and they said the numbers get higher as you go into younger generations,

34:36

which also makes a ton of sense considering that we know what home prices are

34:39

like today, and regardless of how much I will certainly make fun of some

34:43

of the younger generations for work ethic and all sorts of other things, it

34:45

is pretty fair looking at how much harder it is for them to buy at

34:49

homes, especially in places like San Diego. So here's what's always been my

34:52

stance on things, that the harm is mostly the psychological impact of doing this,

34:57

even more than the financial impact of the actual move. What do you

35:00

mean by that? Is this like buying a home. Locking in your housing

35:04

and the amount of equity that people have, you know, thirty years down

35:07

the road, is a huge benefit. I love to see people find a

35:09

way to buy a home. It is forced savings, right, because not

35:14

everybody remembers to save money for their future into a separate account every month or

35:17

like ever. Frankly, but when people have a home, like they make

35:20

their mortgage payments every month. And I know a lot of people that I've

35:22

met over you know, my time doing this, right, I've talked to

35:25

thousands of you doing what I do for a living, and it's like the

35:28

equity you have in your home now might be more than all of your retirement accounts combined, or certainly it helps, right, So I know that the

35:35

only way some people can do this that an opportune time is to have to

35:38

tap into some retirement funds. I get that. And theoretically, if they

35:42

did this this one time for a home purchase and never tapped into their retirement

35:45

accounts again, I would say I love it, go for it. But every study in the world shows that people who tap into their fore own care

35:52

retirement accounts end up doing it not just once, but a lot. It's

35:55

almost like this extra piggybank. Now, like, once you do it right,

35:58

you've opened up Pindor's box, and then in the future there's just more

36:00

and more excuses to tap into it, whereas people that never tap into it

36:04

once it just becomes the sanc to sainct thing over there that I can't touch.

36:07

And those people end up with a lot more money in retirement some days,

36:10

right than people who don't. So I think for me, Bruce,

36:14

that's always my biggest fear when I see something like this is not so much

36:17

is it a terrible idea from like a finan you know, look, it's

36:21

usually not a great idea, you know from a Hey, you might pay a lot of extra taxes, you know, because you're pulling a lot of

36:25

money out in one year. So to be clear, financially, you know,

36:29

pulling a lot of money out of like an IRA and a given year is not a financially great decision from a tax standpoint. If it was your

36:35

only way to buy a home for an opportune time and then you are financially

36:37

disciplined for the rest of your life, I would be fine with that,

36:40

even if it's not the greatest tax move in the moment, right, But

36:44

you know it is you know, like, as an example, let's say you at one hundred fifty thousand saved up, you're thirty five years old,

36:50

and you think you're going to retire at sixty five someday. So with some assumptions on rate of return and stuff, I said, okay, you'd end

36:55

up with two million, almost two million, three hundred thousand at age sixty

36:59

five. But it's like, well, hey, what if you tapped into one hundred grand of that to buy a home, So now you only have

37:04

fifty thousand left, and then I ran everything else the same, You'd have

37:06

about one and a half million at sixty five, right, So you have like almost eight hundred thousand less in retirement savings now, obviously, though you

37:13

have home equity and maybe a paid off mortgage. So I think when you look at the calculation that way, again, it's not a giant difference like

37:20

one versus the other. You both end up in a pretty solid spot.

37:22

But again, it's more of the if you do this, or if you're

37:24

listening, maybe it's if your kids are thinking about doing this, be very

37:28

very careful of that kind of lifetime piggy bank concept. So again, we've

37:31

been doing this for over a decade here at Epstein and White and now part

37:34

of Mercer. We eat, sleep, Live, breathe retirement planning. We

37:37

are certified financial planners fiduciers. There's not a question or scenario you have that

37:42

we haven't come up with in help. I will pretty much state that I'd

37:44

be pretty shocked if there was at this point. So we love seeing you come in, we love being able to help you, and you can do

37:49

it for up to two meetings. Again, no cost or obligation at all.

37:52

Our number is eight five eight five six four eight zero three six.

37:55

You can call or text us at that number it's eight five eight eight zero

38:00

three six, or you can always go to our website Epstein and White dot

38:02

com and reach out to us that way. That's Epstein and White dot com.

38:07

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