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Reality Radio. For a really

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the Radio edition of Talking Real Money. The

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Saturday's show where we talk with you

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Live at Eight, Five Five Nine Three

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Five Talk Eight Why Five Nine Three Five

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with your questions and comments and

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and. Answers even at eight Five

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five Nine three five eight to Five

0:48

Five. I'm Dawn Mcdonald. In. The

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for a studio com gawkers

0:52

in the. Washington.

0:55

State Studio. Not the not the District

0:57

of Columbia but Washington State there in

0:59

north where the elaborate wanting to me

1:01

that's what they used to call it.

1:03

The thousand Deaf out order and window.

1:06

Yeah. Supposed to go away soon as

1:08

it on his that's it until June

1:10

they said see a the all congratulations

1:12

I'm so I'll try my last. You

1:15

would also give us golly five five

1:17

nine three five talk. We want to

1:19

help you manage money better and the

1:21

biggest goal we have is to help

1:24

you get to retirement better. Because.

1:26

That is the number one thing

1:28

you're supposed to be saving and

1:31

investing for. I'm not at all

1:33

of you do that, but. You.

1:35

Should be doing that. And here's

1:38

the thing. You.

1:40

Need to understand. Some basic

1:42

facts. About retirement.

1:46

And. So that's what led

1:48

me to read this article. From.

1:50

Money Magazine, The

1:54

headline is most adults

1:56

fail this five question

1:58

quiz on retirement. basics

2:01

only on average

2:04

people only got this right 40% of

2:07

the time this is from TIAA yeah

2:09

I think that's only two questions right out of the five

2:12

yeah that's really low

2:14

it is low kind of

2:16

sad so we're gonna give you

2:18

the quiz you take this at home go ahead and

2:20

take this at home and then we're on the

2:22

car we'll tell you or in the car and

2:24

just kind of keep track just you

2:27

remember ABCD yep okay that's it you

2:29

it's four letters so it'd be

2:31

like number one whatever the letter is number two

2:33

and then I'll tell you the correct answer wait

2:35

we got to tell them the answer after each

2:37

one though right can't remember all the way through

2:39

all right we'll tell you the correct answer after each

2:42

one yeah then you don't have to remember the whole

2:44

thing yeah good point Tom thank you thank so glad

2:46

you thought of that you must you must have son

2:48

you must got a little son on your brain it's

2:50

growing again all right so let's

2:52

get started so we

2:57

have plenty of time to get this quiz done all right

3:00

question number one which

3:03

statement about

3:06

Social Security is

3:08

false Tom a

3:11

the amount the amount someone receives

3:14

in benefits depends upon his her

3:16

earnings during the last two years

3:18

of full-time employment that's a okay

3:20

so remember this is which one

3:23

is false so the

3:25

amount that you will take from Social

3:27

Security depends on your earnings during the

3:29

last two years of retirement all right

3:32

okay be a worker

3:34

receives Social Security benefits if he

3:36

she becomes disabled before retiring okay

3:39

okay see see Social

3:41

Security benefit payments will continue as

3:43

long as an individual is alive

3:45

no matter what no

3:47

matter how pardon me long he or she lives in

3:49

other words you get the money the rest of your

3:52

life or D Which

3:55

seems terrible. Answer: I Mean don't answer

3:57

the quiz? Yeah, let's just say there's

3:59

a through. C B go how we

4:01

gonna do that but I had Nash you

4:03

proud of. That is like Roka. We can

4:06

skip the it's a dummy answer. so a

4:08

beer see which is your answers wrong, wrong,

4:10

incorrect, which one is in Korea. Now think

4:12

about this. Social Security Benefits continue as long

4:15

as you live. Yep, that's true,

4:18

You receive social security benefits if

4:20

you become disabled before retiring. That

4:23

I drew on. This is how I jumped s

4:25

and school. That. He and right there

4:27

are there are also right the once the

4:29

up. That means that. The. Amount you

4:31

receive. Depends. On your last

4:33

two years of earnings, which does seem like ten

4:35

of a dumb idea, doesn't it? You work though.

4:38

you made a lot of money during the first

4:40

thirty eight, you know? But. People

4:42

believe that because of pensions that are have a similar

4:44

sort of thing how much you're making at the end.

4:47

Like it or looks at Thirty five years

4:49

of running, So that one is probably the

4:51

one that most people got right? Now.

4:54

The next one doesn't have a correct answer in

4:56

my opinion, but as my no I agree. I

4:58

agree. You want me to read it? Going to

5:00

go ahead. Of wages were

5:02

dagger music chosen. Susan see residents

5:05

know you have to wear your

5:07

biases are very very blessed. This

5:09

question after the fourth of to

5:11

go with a five I've nice

5:14

revive Zoc is our phone never

5:16

gets home. In

5:27

medicine, a second opinion might save

5:29

your life. With investing a second

5:31

opinion. My Save Your future. The

5:33

trick is getting one without a

5:35

high pressure sales pitch. Well, I'm

5:37

Dawn Mcdonald and if you been

5:39

listening to Talking Real Money, you

5:41

know that our goal is to

5:43

help everyone create a brighter future

5:45

by investing and managing money better.

5:47

That's why in addition to helping

5:49

everyone on our show and podcast,

5:51

we are also committed to making

5:53

our one hundred percent fiduciary advisers

5:55

and of our available. to help everyone

5:57

make the best financial decisions based on

5:59

site So if you're being

6:01

pitched a financial product or a system, make

6:04

sure you get a second opinion with

6:06

no cost, no obligation

6:08

and no annoying sales pitch

6:10

by going to talkingrealmoney.com or

6:13

call 800-386-3004. That's

6:17

800-386-3004 or talkingrealmoney.com. Your

6:25

guys do a really great financial future.

6:31

We're trying to help

6:33

you manage your money better and

6:36

understand how it works and

6:38

get to retirement comfortably and survive the

6:41

earning years and thrive in those and

6:43

later years.

6:49

855-935-TALK is our phone number, 855-935-8255. I'm

6:53

Don, that's Tom. And we're doing

6:55

a quiz. This is a quiz that

6:57

was created by TIAA, the Annuity People,

7:00

the financial

7:03

people. They help a

7:05

lot of educators. Yeah, you

7:08

should just sell annuities, but then they were annuities

7:10

and funds too. So we

7:12

were asking some questions. The second question

7:15

is, Tom, Susan

7:17

worries about living a long life and running out

7:19

of money. What is the

7:21

best way for her to address that

7:23

possibility? Is it A, buy

7:26

an annuity, B, buy life

7:28

insurance, C, there's nothing she

7:30

can do about this? What a terrible question and

7:32

what terrible answers. A new life insurance or nothing

7:35

she can do about it? Oh, wait. I

7:37

just realized this quiz was made by a

7:39

company that sells annuities. I

7:42

was waiting for you to pop up on that one.

7:45

Okay, so for them,

7:48

because life insurance doesn't do a

7:50

darn thing for retirement, forget it. There's

7:53

not nothing you can do about this. You

7:56

can buy an annuity, but would it be

7:58

our first choice? No. No,

8:01

no, because you can still worry

8:03

about running out of money and

8:06

properly invest your portfolio for

8:09

that worry. You see, that's

8:11

the thing, is that if

8:13

you have the right plan, then you can

8:15

actually own your own money for the rest

8:17

of your life instead of giving it up

8:20

to an insurance company to get a guaranteed

8:22

payment. You can own your

8:24

money and then take a payment from

8:26

your own money and still own your

8:28

money. It's

8:30

a much better option that isn't offered.

8:33

Yeah, they don't mention it, but in their

8:36

case, they went with A, buying

8:38

annuity. Terrible answer. Okay. Terrible

8:41

answer. I hate that.

8:43

Number three. This one's kind of tricky. Last one was

8:45

kind of weird. Medicare and

8:47

other government programs cover how much

8:50

of an individual's healthcare expenses in

8:53

retirement? On average. Medicare covers...

8:55

On average. So it's higher for some, lower

8:57

for others. Yeah, of course. A is over

8:59

90%. B

9:02

is about two-thirds. C

9:04

is about one-half. 90,

9:07

two-thirds or one-half. I

9:09

wish it was 90, but

9:12

you got to know that it's not

9:14

90, given the fact that part A

9:16

is an 80-20 split right off the

9:18

bat. So it couldn't

9:20

pay 90. It just couldn't

9:23

do it, not with an

9:25

80-20 split on hospitalizations. So

9:28

it's got to be B. Got

9:31

to be B. Got to be B. Yeah, that

9:33

was... Well,

9:35

when you know it's 80% for A, then

9:37

you figure that B and C and D

9:40

or whatever combos you have are not going

9:42

to be as low as half, and

9:44

even if they were 90 or 100, they're still not

9:47

going to get you back. Exactly. So

9:49

it had to be B. Had

9:51

to be B. All right. This is a

9:54

long one. Let's go with four. So you need to pay very

9:56

close attention to this question. And this

9:58

is about saving. Letitia, please. plans to

10:00

start saving for retirement by setting aside $2,000

10:02

this year. Her

10:05

employer offers a 401K plan, that's

10:07

great, fully matches a worker's contributions

10:09

up to $5,000 a year. Under

10:14

which scenario does Letitia have the

10:16

largest amount in retirement savings at

10:18

year end? Okay, we have to

10:20

read the question very carefully. So

10:23

the employer is saying, I

10:25

will give you a dollar

10:28

for every dollar you pay. You put in right

10:31

to $5,000. Okay, so how

10:33

much would that be? If you put $2,000

10:35

in an IRA, you will have $2,000. Even

10:41

after five. Ah, look

10:43

at you. Doesn't matter. Doesn't.

10:46

No, it doesn't. Only matters in the 401K. Right,

10:49

the 401K has to be the correct

10:51

answer. Has to be. I

10:53

haven't given the option yet. Well, but we can

10:56

just figure that one out. All right, go ahead.

10:58

A, she contributes $2,000 to the 401K plan, invest

11:01

the money in a mutual fund that earns 5%

11:04

a year during the year. Irrelevant. Okay.

11:07

B, she contributes $2,000 to an IRA,

11:10

individual retirement account, and invest monies in

11:12

a mutual fund that earns 5% a

11:14

year. Irrelevant.

11:17

C, yep. C, the old, it

11:19

doesn't matter. She'll have the same amount of year

11:21

end savings either way. No, that's not right. Yeah.

11:24

So this is pretty obvious, but people overlook it. But

11:26

they overlook it. They forget the match part. How

11:29

can you forget a free dollar for every

11:32

dollar? I don't know. We're going to

11:34

do it all the time. Here's $2,000 and

11:36

you're going to give me $2,000 right off the bat?

11:40

I run into people all the time that don't

11:42

even save up to the match, even though they

11:44

have the money available. They

11:46

think, ah, I'm doing a couple thousand. That's

11:48

fine. I mean, in this case, you'd want to

11:50

do the $5,000. Exactly. And

11:52

then I have. $5,000 free dollars. Well,

11:54

really, if she was smart, she'd figure out a

11:56

way to put $5,000 in to get the other

12:00

I know. Yeah. Because LaPena,

12:02

just doing two means you've left $3,000 laying on the pavement.

12:08

And this would be a way for, if

12:10

the case holds for somebody in your life,

12:12

maybe, if somebody, one of my kids, grown

12:14

kids came and said, look, I don't have

12:16

the five, I would give them the three

12:18

so they could make up the entire five. That'd be my take.

12:21

I would, see, I would say,

12:23

hey kids, it's your Christmas birthday.

12:26

Yeah, right, exactly. Playing

12:28

gift all rolled into a free

12:30

$3,000. Free. Because

12:32

it's such a big deal. All right, you ready? This one

12:34

was kind of tricky too, I think. Number

12:37

five. Really? Yeah.

12:39

One for me. Because I don't really pay it. And this

12:41

goes up and down. It changes. On

12:44

average in the United States, on average, how

12:46

long will a 65-year-old man-woman live? A,

12:48

man 79, woman 82. Yeah,

12:51

that'll be my case. B, man

12:53

age 84, woman age 87. C,

12:58

man age 89, woman 92. Yeah.

13:03

C, I wish. I thought it was one. I thought it

13:05

was A, actually. So I would be one.

13:07

Yeah, see, I know I read that it was

13:09

all 80s. If

13:12

you reach 65, that you're going to get into your,

13:14

you're likely to get into your 80s. But

13:17

what is the bigger question here? What

13:19

is the bigger issue? Oh, I know

13:21

where you're headed with this. What is

13:23

the bigger issue here? Why

13:26

do women get an extra

13:28

three years? Yeah. Every

13:31

time. I have a theory. It doesn't matter.

13:33

By the way, we didn't give the correct

13:35

answer. Men, 84, women, 84. Oh

13:38

yeah, that's right. The correct answer. B is the correct answer, 84, 87.

13:41

But I still want to know why

13:44

women have stolen three years from

13:46

us. I

13:48

really have no comment on the matter in light of

13:51

the fact that I'm going to get in trouble no

13:53

matter what I say. I do because I know my

13:55

wife is not listening right now. So, mine either. Mine's

13:57

working right now. I blame her. Hey. talking

14:00

to a friend. Yeah. That's

14:02

her work. Yes, it is. That's what

14:04

she does. So, you blame her? What do you

14:06

mean, you blame her for living three years longer?

14:08

I actually get blamed for that. Because

14:11

she makes me work hard for her. I

14:13

see. Okay, we're back to this. She

14:15

does. The slaving over a

14:18

hot microphone, Don McDonald. I'm just

14:20

waving. Yeah, okay. In fact, every

14:22

time, it's like, can you take this for me?

14:24

Can you carry that over there? I

14:27

know I'm your servant. Actually, that would be different.

14:30

I probably can carry the stuff where I couldn't,

14:32

as you well know. So, we

14:34

don't face it. I don't face that. No, you don't.

14:36

You don't. You have other dresses. I face getting up

14:39

at four in the morning going to work. That one

14:41

I face. All right. Well, anyway, there's

14:43

your quiz. How did you do? That was a fun

14:45

quiz. How did I do? I got them all

14:47

right. Yeah, how did you do? Did you? I

14:49

only got four out of the five. I did. I actually

14:52

got them all right. Again, because of the whole... On

14:55

those you don't know, taking

14:57

a quiz. That's a lesson for all students out

14:59

there. It's not

15:02

always about knowing the right answer.

15:05

It's about being able to suss out the

15:07

wrong answers. Eliminating the one that are not

15:09

correct. And they're pretty obvious on every one

15:11

of these, even the Medicare one. If

15:13

you know anything about Medicare, you could not

15:15

have said the 90, and

15:17

about half just doesn't make sense.

15:20

So, you could throw those out and go, I don't

15:22

know the answer, but it's probably B. And most

15:25

of the time... You're going to be right. It's

15:28

a wonderful thing about multiple

15:30

choice tasks, particularly when there are only

15:33

three choices. 855-935-TALK, call us now. Tom

15:39

and Don are talking real money.

15:43

For your real life and real future,

15:45

Tom and Don are talking real money.

15:47

And we want to talk about real money with

15:50

you. We really do prefer talking with

15:53

you rather than with each other. I mean, we've

15:55

been talking to each other for way

15:59

too long. 855-935-talk is our phone

16:01

number 855-935-8255. And

16:07

Frank, it's your turn. Welcome to Talking

16:09

Real Money. Good

16:13

afternoon, fellas. I

16:15

have a question about how long my

16:17

mother's money will last. Unfortunately,

16:19

I don't have as much information

16:22

as I'm sure you'd like to have.

16:26

She is 92 widowed. A

16:29

doctor recently described her as a spry 92

16:31

and said she could go another

16:33

10 years. She

16:38

is the beneficiary of three

16:40

defined benefit pensions, two from

16:42

my dad and one of

16:44

hers. She

16:46

is in independent learning in a senior

16:48

apartment yet, so she's doing well. She

16:53

has about $440,000 in IRAs and whatnot.

17:00

And recently, which I take to be a,

17:02

you know, last year, she's been

17:05

drawing down on that money to

17:07

the tune of $1,500 a quarter.

17:13

Okay. What can you tell me about

17:15

how long that money would last? I

17:17

know it's much higher than the... Well,

17:20

where is the money? Where

17:24

is it invested? That,

17:28

well, I'm the youngest

17:30

and when you're the baby of the family, you're

17:32

always the baby. So I'm not really privy to

17:35

all the information we'd like to have. My

17:38

sister has an advisor, obviously likely

17:40

not a fiduciary advisor. Chances are

17:42

good. But has an advisor of

17:45

her own and that

17:47

advisor is handling my

17:49

mother's money. So I know it is... Okay.

17:53

...in stocks, maybe all 50-50. I'm

17:55

not sure the rate. All right, Frank, but I just want to

17:57

make sure we get the numbers right because you said she's taking...

18:00

taking out $6,000 a year out

18:02

of a portfolio that's $440,000. Is that correct? That's

18:05

what he said. Correct. Correct.

18:07

Okay. So that

18:10

money should last a very, very long time because if you

18:12

took out— 73 years. 73

18:14

years if it made not a penny. Right.

18:17

If you took out 4% a year, that's $17,000 a year. Yeah.

18:22

It'll last her 73 years if it

18:24

was sitting in a Bank of America

18:27

savings account at point zero one percent.

18:29

She would still—it would last forever, literally.

18:35

It's a very low withdrawal rate. Given

18:39

that thumbnail sketch, how

18:42

do you think that money should be

18:44

invested as far as

18:46

stocks versus bonds and large cap,

18:48

small cap? At this point,

18:50

given the fact that it's going to last her

18:52

for the rest of her life, the only time

18:55

it would be used would be in case of

18:57

emergency, in case she had to go into some

18:59

higher cost care, I would

19:02

keep it relatively liquid and

19:05

absolutely safe. Yeah. I

19:08

mean, I like a 50-50 approach. I mean, even that's

19:10

probably more risk than she needs to take. 50-50? Okay,

19:14

40-60. You want any stocks

19:16

in this portfolio? I do because it's going

19:18

to be left to others. I don't care.

19:20

I don't care because what if she has to go into $100,000 a year in Erchingo? Okay,

19:25

then you take that $100,000, take that $200,000, set

19:27

it aside, and then invest the rest of it.

19:30

You could do it that way. What if she's in a nursing

19:32

home for four or five years? At

19:34

$100,000? I mean, we don't know the

19:36

entire—as you said, we don't know the whole story because we don't

19:39

know the other person. We're going to disagree on this one. Yeah.

19:42

So, you could—I would do

19:44

it with whatever she's comfortable with, too, because that plays

19:46

into it. My mom, at the end of her life,

19:48

was only 20% in stocks, 80% in bonds because she

19:50

didn't like

19:52

the volatility. That's fine. Maybe

19:55

yours doesn't as well. So that's a reasonable

19:57

thing to consider as well. lot

20:00

though about risk profile

20:04

as opposed to risk tolerance. And

20:07

the fact of the matter is she

20:09

has no need to take any risk

20:11

whatsoever. Well that's true. I was thinking

20:14

about the people that are going to

20:16

do that. I do not think about

20:19

the heirs because they shouldn't be part

20:21

of the equation until the person is

20:23

gone. Till they're the heirs.

20:25

This belongs to your mother and

20:27

therefore here's my opinion is if I was

20:29

going to have any stocks it wouldn't even

20:31

be any more than 10% because

20:34

it's volatile. But because

20:36

of the fact that she's 92 years old

20:38

and when you're 92

20:41

the odds of staying in a nursing home

20:43

get a lot higher I would

20:46

have CDs. I would

20:48

have probably a bunch of money market. 10%

20:51

stocks which you say and 50 that I

20:53

say somewhere in between them. Way

20:55

between them hopefully way up at the

20:57

other end conservative end. 855-935-talk is our

20:59

phone number 855-935-855. Home

21:04

and Don are talking real money.

21:12

Reality radio for a really great

21:14

future. We're talking real money. Hi

21:16

there. Welcome back to the show. I'm

21:18

Don McDonald. Give us a call at

21:20

855-935-talk. That's

21:23

855-935-8255 to discuss all kinds of money stuff. Anything oriented

21:31

toward financial topics. We'd love to

21:33

talk with you. 855-935-talk and Steven

21:37

you're next. Welcome to talking real

21:39

money. Hey

21:42

good afternoon. Okay my

21:45

wife and I I'm 75 my

21:47

wife 73. We have no bills.

21:50

We have military retirement and

21:52

Social Security. But

21:54

when I permanently retired in 2012 we

21:56

started. Federal

22:00

long-term health care program and we

22:05

we paid the The

22:08

maximum the best we could in other

22:10

words, we've got the inflation coverage and

22:12

everything else and we pay a little over

22:15

$500 a month total And

22:18

when we started this There

22:20

was not a way to recoup cash

22:24

Because that there's programs now that do that

22:27

Do you have any ideas and how we can

22:29

recover value of the money we've paid in

22:31

or? Recoup the

22:33

cash would be great Wait,

22:35

you still have the insurance care,

22:37

right? This is long-term care, right?

22:40

Oh long-term This is a federal

22:42

long-term care program. Ah, okay

22:45

That you can no longer get into

22:48

hmm. I think they they

22:51

stopped applications a couple of years ago But

22:55

there are still a ton

22:57

of people in the program and The

23:01

program is still operational and as a

23:03

matter of fact, Stephen, you shouldn't want

23:05

anything back from this You

23:07

should be grateful you have this because

23:10

this will provide very good care

23:12

coverage Should either of

23:14

you have to go into a nursing home? And These

23:18

kinds of policies we can get coverage at home

23:21

Or you can get coverage at home But

23:23

that what I'm saying is these kind of

23:26

policies because the payouts have been so much

23:28

bigger than the insurance industry expected Many

23:31

they've either gone away completely or been

23:33

changed to such an extent that they

23:35

cover almost nothing You have one

23:38

of those old policies that covers almost

23:40

everything Yeah, and they've raised

23:42

the premiums on the private one So what

23:44

is your motivation for getting out of the

23:46

program and getting your money back? Well,

23:50

I'm not so sure I want to get out of the program But

23:56

it it would be nice to have the option

24:00

Recouping value than this is

24:02

a insurance Stevens has been

24:04

having I or somebody. Yes

24:06

this is true insurance and

24:08

if you gotta term life

24:10

insurance policy and you didn't

24:12

die. You wouldn't

24:14

want the insurance company to pay you premiums

24:16

are are give you some way to get

24:18

some of that. I mean you probably would

24:20

want them to with to give you some

24:22

of that money back but you couldn't expect

24:24

that because they were. They're taking on the

24:26

risk. Are renting? Yeah you're you're renting insurance

24:28

and that's what you're doing here. But oh

24:30

my gosh, you have such a good policy.

24:35

Oh. I would trade you. I

24:37

would buy. I would buy your policy

24:39

from you. If. I forgot,

24:41

all your years in the military is meant

24:43

there. Mr. Macdonald, No, no, I'm just saying

24:45

if I could I would i that policy so

24:48

that I could have that kind of long

24:50

term coverage for only five hundred dollars a

24:52

month. It's.

24:54

Cheap. Now. It's.

24:56

Okay, I would

24:59

count my lucky stars sir. Well okay but

25:01

being a federal employee of you don't get

25:03

the his salary that you might get try.

25:05

I know how Contentment and the programs not

25:07

around any. I mean they've there was not

25:10

letting people in because it's such a good

25:12

program and they're spending. They're paying out a

25:14

lot more than they're bringing in. Certain.

25:19

Okay, okay I cried. would be

25:21

thrilled to have it says that

25:23

and be as a you should

25:25

die Yeah now don't worry, be

25:27

happy. Thank. You so Much. I've

25:30

literally never heard of that program previously.

25:32

I had heard of it, but I

25:34

did not know it had been suspended.

25:36

I just looked it up. They are.

25:38

They stopped applications for coverage. December Nineteen,

25:40

Twenty Twenty Two. Like to.

25:42

but think about this is like like g.

25:45

With. Their long term care. They it's

25:47

total to yell. We stop writing new

25:49

policies and years ago and that was

25:52

and years ago because what has happened

25:54

is the cost of long term care.

25:56

Has risen at our life

25:59

expectancies. Have risen. And.

26:01

So more of us ended up

26:04

needing care than the actuarial tables

26:06

lead the insurance industry to believe.

26:09

And they're on the hook for that. Or.

26:12

They raise it with those policies that

26:14

still exist and are able to are

26:16

raising premiums. No Roof. You. Seen

26:18

him seen big increases their so.

26:21

Yeah. Has gray animal. I'm glad it all worked

26:23

out then. so hang on I well as is real

26:25

to have that. Absolutely. Thrilled!

26:27

Thank you so much for the call.

26:29

We really appreciate it. A Five Five

26:31

Nine Three Five Talk is our phone

26:33

number. Eight Five Five Nine Three Five

26:35

Eight To Five Five I'm just looking

26:37

to see what else it covers. Boy

26:40

get that even covers some this for

26:42

Federal employees, Federal employees over the U

26:44

S L Dental and vision coverage in

26:46

their. Of. It

26:49

was really great. Hundred really does.

26:51

That was great. Ah gives com

26:53

Woodstock about your financial issues and

26:55

your retirement and your long term

26:57

fair at all about other stuff,

26:59

it's really a bye bye bye

27:01

for if I thought I. Did

27:06

you suffer from Hodgepodge Riders? I'm

27:08

Dawn Mcdonald and hodgepodge right? as

27:11

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27:13

portfolios who symptoms include lots of

27:15

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27:17

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27:19

to most to suffer from hodgepodge.

27:21

I just read opening their quarterly

27:24

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27:26

confused. Investing seems overwhelming in the

27:28

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27:30

you suffer from hodgepodge Riders C

27:32

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Hundred Three Eight Six, Three Zero, Zero,

27:57

Four. hundred much of this is not

27:59

a real disease but treating it has been shown to

28:01

improve mood, reduce fear, and even lead to a brighter

28:03

financial future. Your

28:06

guys to a really great financial future.

28:10

Tom and Don are talking real money.

28:12

And we want to help you deal with

28:14

money better. And you know a little earlier

28:17

we talked about a bank,

28:20

a very famous big gigantic bank,

28:23

one with which Tom and I both still

28:25

foolishly bank. It's...

28:30

Not to. I know but it's too

28:32

hard to change. It is.

28:35

I just can't even imagine going through and

28:37

changing all my bill pay stuff from Bank

28:39

of America. Maybe when I just quit

28:42

working and I got fewer of them maybe

28:44

then. If I have three things I'm paying

28:46

or something. So right now if I have

28:49

money that I want to keep in short-term

28:51

savings I don't keep it at

28:53

Bank of America because they

28:57

pay... Call

28:59

it that. as

29:06

high as .04% How

29:08

about Chase? JP Morgan Chase. They're

29:11

probably about the same. Chase

29:14

Sapphire, Chase Premier Plus, Chase

29:16

Private Client Checking Accounts. Doesn't

29:19

matter. The deposit is $5.5 million. Yeah.

29:23

0.01. But I

29:25

tell you if you have a relationship,

29:27

if you have a relationship rate with them,

29:29

if you're like tight. I

29:32

should be tight with them. I have a lot of credit cards. Yeah.

29:34

0.02. So you get a double there. Well

29:37

that's with Bank of America. If you have some special deals you

29:39

could get as high as .04. Wow.

29:43

But you better have a balance over $10,000 on average

29:45

or they'll charge you a $25 a year,

29:47

$75 a year. They

29:50

charge a huge fee. I can't remember what it was but

29:52

I went, you guys have been charging me a fee? Didn't

29:56

even know it. Yeah. But

29:58

here's the good news about all of this. because this

30:00

is something we've been harping on for a long time. Your

30:03

inefficiency with money, because there's like $18

30:06

trillion that are not

30:08

properly ... Shitting in point zero one. Yeah, whatever it is,

30:10

however you want to put it. Just

30:14

learned that JP Morgan reported its net

30:16

interest income, which is something you're probably

30:18

familiar with, net interest income. Isn't

30:21

that the difference between what you've ended

30:23

at and what you've collected? Yeah, exactly.

30:26

Right, right, right. First three months, or

30:28

pardon me, fell in the first quarter from the

30:30

first three months, and the stock got

30:33

beat up. Wells Fargo

30:35

reported that it's NII missed analyst

30:37

estimates. Both banks cited increased pressure

30:39

to pay out more for deposit,

30:42

which offset the benefit of higher interest

30:44

rates earned on loans. But here's the

30:46

bottom line. You all are

30:49

getting wiser with your cash.

30:52

Yay. Because there's all

30:54

kinds of ways to just be more efficient

30:57

that are in today's world, really, take

30:59

no time. Let me tell you, I

31:01

went in to ... I'm

31:04

a president of a homeowners'

31:06

association, went into our new

31:08

bank, which is Regions Bank.

31:10

It's a regional bank in the part

31:13

of the country. We

31:16

have a money market account with a hundred and

31:18

some odd thousand dollars in it for payroll and

31:20

the like. We

31:23

asked how much it was paying, and they said, oh, 0.01%. I

31:28

said, wow. It'd probably be

31:31

smart for us to move that to something higher

31:33

yielding. She goes, well, since

31:36

you asked, we

31:38

do have a money market

31:40

account paying 3.44. I

31:43

said, why aren't we in that? She goes, you have

31:45

to ask. Nicely. You're not

31:47

going to put you in that unless

31:51

you ask. What?

31:54

Wait. Let's

31:57

give an analogy in another business. Well,

32:00

you go into a store and

32:03

you have a television on the wall and

32:05

the television is $500. Now

32:10

another guy comes in and buys the same TV for

32:12

$200 and you go in and they said, oh, why?

32:16

He asked for the $200 price. Oh,

32:19

God, that's something. Here's

32:21

another number. We're saying

32:23

all this so that you pay attention to it, but we're also

32:26

giving you kudos here. Cross-commercial banks held $2.26

32:28

trillion of large CDs. That's

32:33

up from $615 billion a

32:36

year before. That's the sharpest annual increase on record.

32:39

The banks know this. They're saying, yeah,

32:41

people are getting smarter. They're not just letting all that

32:43

cash sit around at 0.01. They're

32:46

moving it up. I think the one-year CD could still get

32:48

5% off. Five plus? Five

32:50

plus? If you go to the secondary

32:52

market, you can do five plus. You

32:55

could get a money market for

32:57

over five. I

32:59

have high-yield savings for most of

33:02

my savings at over 5% at

33:04

two different banks. Over

33:07

five. I

33:09

love the fact that JP Morgan's CFO

33:11

says, the migration of deposits from checking

33:13

and savings to CDs is a dominant

33:16

trend. That's good.

33:19

It's good. It worries

33:21

me a little. It's wrong that the bank is

33:23

going to make you say, hey, wait your arm.

33:25

It worries me a little that people

33:28

are putting what may be emergency money and

33:30

that they'll need it and they'll have to

33:32

pay a penalty to get that money back

33:34

out. That's why I like

33:36

the money market. I hate, I really truly

33:39

hate this, oh, you

33:41

get a better price if you

33:43

ask. Do we have to negotiate

33:45

everything? I know. That is

33:47

ridiculous. That's something to consider, by the way, along

33:50

this line because we have run into

33:52

people that have had a lot in

33:54

cash. They do have it

33:56

in banks. They're getting interest. They feel great about

33:58

it, but they forget about that.

34:00

partner they have with all that interest. It's

34:02

called the federal government, right?

34:04

So if you're getting 4% ... Yeah,

34:06

bank interest is taxable at your income

34:08

bracket. Yeah. So if you're in a

34:11

high income bracket and you are creating

34:14

a lot of interest, maybe it's time

34:16

to consider, for example, for example, a

34:18

municipal bond fund where that interest comes tax-free.

34:21

Yeah, but you've got to be

34:23

careful. That's where people have a lot of

34:25

cash. Yeah, right. You've got to be careful,

34:28

though, about the ... You can't

34:30

just say, go out and get a

34:32

tax-free mutual fund

34:34

because the devil's in the details

34:36

with those. Yeah, you've got ... Well, okay, but I can narrow that.

34:38

You want short term ... Short

34:40

term, and I want a lot of

34:43

securities, and I'd probably go to Vanguard. I think they're

34:45

the best at this business. They're probably the best at

34:47

it, yeah. They probably have the biggest muni bond desk

34:49

... Yeah, they do. ...

34:51

in the country. Well, they did at one time. I don't know

34:53

if they still do, but probably there. I can't imagine who would be

34:55

bigger. I mean, so something

34:57

like that would be an alternative, but

34:59

at any rate, just pay attention. Be

35:01

more cognizant because, again, I see

35:04

this every day. People walk in, oh, I got that 100,000

35:06

sitting there. What's the purpose of it? I don't really know.

35:09

I just got 100,000 sitting there. That's

35:12

bad for your overall financial health,

35:14

and great for Jamie

35:16

Dimon, for example, who runs ... Or Bank

35:19

of America's. J.P. Morgan, yeah. Don. Bank

35:21

of America. Don. You

35:24

know, if you looked at my Bank

35:26

of America holdings, though, you'd say, these people

35:28

are broke because I don't keep ... I mean,

35:30

money goes in, money comes out. That does not

35:32

stay there. But there's still money, though, that ...

35:35

Yeah. There's a few thousand bucks ...

35:37

That's right. ... that's in the account

35:39

that just hangs out on a regular basis because you

35:41

don't want to drop too low. No,

35:43

you don't want to go down too far. And

35:46

possibly not be able to transfer. That's the

35:48

other issue, is ... That's

35:50

why I'm looking at banks that do

35:52

an automatic sweep from a high-yield money

35:54

market. Love that. So

35:57

that ... Because right

35:59

now ... Now to get money from my bread

36:01

or my markets or whatever the heck it is

36:03

I have, I have to

36:07

wire it over. I have to do a transfer and

36:09

that can take a couple of days. And

36:11

if an emergency arises... You know, I've found the

36:13

job lately, yeah, has been faster than that, really

36:15

fast. You sell the ETF, money gets... I

36:18

think the next day is available and it goes right

36:20

there. So it's like a one and a half day.

36:22

It's fast. So... Well, that's

36:24

good. Better than it's ever been. In most cases,

36:26

it's still a little

36:28

while. And if you have a big bill,

36:31

you know, like you have a big medical bill and you got to

36:33

pay it right now and

36:35

the money, some of it's in savings. This is

36:37

why I wish the banks made this a little

36:39

bit easier and

36:41

didn't require that you jump

36:43

through all these hoops. And

36:46

you're... I mean, I'm as bad

36:48

as anybody. I'm still at Bank of America because

36:51

I'm lazy, because I don't want to

36:53

do the work necessary to set up

36:55

bill pay somewhere else. But

36:57

you don't keep much there. No, but

36:59

it still bothers me that I'm

37:02

making nothing on the

37:04

five or ten thousand that I keep in the

37:06

checking account. So that I have

37:08

enough when my daughter needs a big fat chunk

37:10

of money for something. Good thing she doesn't

37:12

listen either, I guess. No,

37:15

she doesn't listen. She doesn't believe

37:17

in podcasts like this. We're

37:19

not hip enough. We're way

37:21

too old. If we were

37:23

breaking up the Taylor Swift lyrics trying

37:25

to understand all that, then maybe. And

37:27

how it relates to investing. Oh, there's

37:30

the next podcast. There you go. 855-935-TALK.

37:32

Give us a call. We'd

37:34

love to talk with you. Tom

37:37

and Don are talking real money.

37:41

For your real life and real future,

37:43

Tom and Don are talking real money.

37:47

And you can send us questions too if you

37:49

don't want to call. You just send them in

37:51

at talkingrealmoney.com. You can either speak them, they get

37:53

answered on the Friday show, or you can type

37:56

them and they get answered on this show or

37:58

on podcasts like the one Tom has. right there.

38:01

This from Alex in Westminster, Colorado.

38:03

I have substantial savings in my

38:05

retirement account. I've heard that it

38:07

is possible to access these funds

38:10

without penalty. If I fill out

38:12

the correct paperwork and let the IRS know I've

38:14

retired, is that true? And so what forms are

38:16

they? Yes, that is true. You

38:19

have to take the money out in

38:21

what they call substantially equal distributions over

38:24

your life expectancy. So if

38:28

you're doing it at 55, for example, you

38:30

might have to do what, 25 years

38:33

or something? You have to do

38:35

whatever the schedule says. I don't

38:37

know what the schedule is. I

38:42

don't know, is there a form? I

38:46

don't think there is. I don't think there

38:48

is. I think it's one of those things

38:50

where you just do it. And if they

38:52

see you're not doing it, then they might

38:54

come back and slap you. Yeah. But

38:59

they're not slapping anymore, they said. They

39:01

might write you down. They stopped the

39:04

slapping? Yes. It's like the Spanish Inquisition.

39:06

They're bringing out the comfy pillows now.

39:10

Everybody gets a medal. It's okay.

39:13

Sorry. So yeah, no, you

39:15

can definitely do that prior to 59 and

39:17

a half where you

39:19

normally could take the money out and

39:21

not pay a penalty. But basically what you've

39:23

done is you've turned on the RMD. That's

39:26

right. For all intents and purposes, that's

39:29

what it means. Yeah. It means that

39:31

every year you're taking out the equivalent

39:33

of a required minimum distribution that you

39:35

would take at 73. And the reason

39:38

we discourage that, except in cases of

39:40

absolute emergency, is because

39:42

with an IRA, even if it's not

39:44

a Roth, you

39:46

still got from your 50s to your

39:48

70s, pretty

39:51

much a couple of decades of

39:53

tax-deferred earning power that

39:56

can cause that account to balloon.

40:00

in value. So

40:02

we'd rather see you take that money

40:04

from somewhere else and leave it alone.

40:08

That would be among the

40:10

last places. The Roth would be the last, but yes,

40:12

this would be among those final. You want to take

40:14

it from a taxable account if it could be. And

40:16

I think a lot of people look at it as

40:18

just a way to retire early, and

40:20

I think that's a mistake. If

40:23

you don't have enough money elsewhere

40:25

outside of your IRA or your

40:27

401 to retire early,

40:30

then it's too early to be

40:32

retiring. I thought you were

40:34

just saying it's wrong to retire early. I mean,

40:36

after this week, I was thinking that it would

40:38

be early for me anyway. No, it wouldn't be

40:40

early for either of us. Then

40:43

it's okay. I'm raising my hand. Yeah,

40:45

you can stay if you want. That's

40:48

the thing. You can stay in the system if you

40:50

want. And I

40:53

personally, from a personal standpoint,

40:58

would hate to retire. I

41:00

would. Despite the occasional frustrations

41:03

and bothers and bewilderment of

41:05

corporate America, it's still like,

41:09

what would I do? I

41:11

don't know. We're going to test it this summer in the Airstream for

41:13

a little bit. 30. Yeah,

41:15

I'm looking forward to your trip. When are

41:17

you putting that up online? Fine is this

41:19

coming week. This is coming week.

41:21

I'm already working on it. Okay.

41:24

Get the pins out. As

41:28

Tom calls it, Silver Bullet is on its

41:30

way to its parking spot.

41:32

And if you want more, just go to

41:34

talkingrealmoney.com. You can look up the trip. You

41:36

can get help from an advisor. Just click

41:38

on the Meet an Advisor button, and you

41:40

can find a lot of stuff. talkingrealmoney.com. Thank

41:49

you. resources

42:00

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42:02

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42:04

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42:06

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42:08

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42:11

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42:13

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42:15

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42:17

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42:25

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of skill or training. Appellawell does not provide tax

43:01

or legal advice, and nothing either stated or implied

43:03

here should be inferred as providing such advice. Thanks

43:06

for listening, and please visit talkingreelmoney.com for

43:08

more information and important disclosure related to

43:10

performance of any specific index or fund

43:13

quoted in this podcast. And

43:15

the lawyers get richer.