0:05

reality radio for a really

0:07

great future. We're talking real money.

0:10

Hello again. Welcome to talking

0:12

real money, the radio show,

0:15

and then the podcast. It's

0:17

one and it's the other.

0:19

It's both all at once. And

0:22

there are two of us here to be both

0:24

all at once. I'm Don McDonald here in Florida.

0:27

And over there is Tom Koch in

0:29

the Seattle metropolitan area, which

0:32

is in Washington state. Next week, I will be on

0:34

the road. We'll see if it works. Oh,

0:37

that's true. You're going to be

0:39

down in Arizona, sunny Scottsdale AZ.

0:42

Yeah. We've written an article today about how real

0:44

estate prices at cost. The

0:46

police in Phoenix has gone through the

0:48

roof. They're way

0:50

up. Yeah. Way up. And that means next week

0:53

they'll be way down. I mean, that thing is

0:55

like a four percent. It's like Florida, like Florida,

0:57

all over the place. Anyway,

0:59

we're here to talk about

1:01

money, including real estate, anything that

1:03

has to do with money, and we want

1:06

you to call us and talk with us

1:08

about the things that are important to you

1:10

financially. And our phone number is 855-935-8255

1:12

855-935-TALK T-A-L-K. Lots

1:19

of fives in that. And this

1:22

hour, we want

1:24

to look back. We want to look

1:27

back at the recent past

1:30

for, if you

1:32

watch the news and you hear

1:34

about the market, you've probably noticed

1:36

that the market, whatever the definition

1:38

of that is, has been

1:40

up. It's up. Oh, it's up again. The Dow's up.

1:43

The S&P's up. This is up. That's up. It's

1:45

been a good year this year for the big

1:48

stocks anyway. Yeah. Been

1:50

very good. In fact, do you remember 2019? Do

1:53

you remember pre-COVID and everything was going along really

1:55

well? Oh, yeah, it was great. Yeah. Yeah. Yeah.

1:58

Good times. Yeah. Well, I... They're all working. good

2:00

right up until they aren't. Exactly. Or they're

2:02

always bad right up until they're good again?

2:05

A measure of the 500, it's not the 500 largest stocks but

2:07

it's kind of

2:10

a measure of that, is

2:12

off to the best start since 2019. Wow!

2:14

I mean the S&P 500

2:17

up 11%. Oh great, that means we're gonna get a

2:19

disease or something now. A

2:22

global portfolio up five and a half

2:24

percent, no pardon me, I have that

2:27

right, five and a half percent. All

2:29

right, hold on that point because there's

2:31

something very interesting hidden in those numbers.

2:34

Remember the whole concept of buy low and

2:36

sell high, that kind of thing that a

2:38

lot of people don't do very well. Yeah.

2:40

Let's see, if the S&P 500 is up,

2:42

what'd you say, 11? 11.1. Yep. And the

2:48

global portfolio is up five and a

2:50

half? Yes sir. Isn't

2:53

that interesting? So that means that

2:55

the international stocks that make up

2:57

that global portfolio are down.

3:01

Then they haven't done as well as US

3:04

stocks, as US large. By the way, a

3:06

couple of large, you mentioned large companies, a couple

3:08

large companies had a pretty bad quarter. One

3:11

of them's Apple, the other is from a

3:13

guy who generally calls us when the stock

3:15

is raging. Tesla bull has not been on

3:17

the phones as late because

3:19

Tesla lost over 30% of

3:21

its value in three months.

3:24

Now, I'm not saying it's not a great company, I'm

3:27

not saying it's not a great car, but it's gone

3:29

down a lot. Well, I would say that. I drove

3:31

a Tesla for the first time. You didn't like it?

3:33

I did not like the Tesla. I did not like

3:35

it. I don't know if you thought it really said

3:38

what you didn't like about it. I didn't like that

3:40

it was, it felt flimsy because it was

3:42

a model 3, which is the E

3:44

in sex. Okay. It

3:46

felt, that's what it is.

3:49

Why do you think they have a Model S, a Model

3:51

3, a Model X, and a

3:53

Model Y? Musk is all about X. He

3:55

wants everything he needs. No, no, no, but why do they have a Model

3:57

S, 3, X, Y? I

4:00

haven't even thought of that, but I'll allow

4:02

you to say it. It is true. It

4:04

felt sexy, and that was intentional. Yeah.

4:07

But let's talk about the reasons why. I

4:09

mean, the first name for his rocket was

4:11

the BFR, BFR, BFR, something.

4:15

You know what that stands for. Yeah, I do know

4:17

what that stands for. The

4:19

economy doing better than people expected.

4:21

Recession worries, they're kind of down.

4:23

Corporate profits, still pretty good. Enthusiasm

4:26

about artificial intelligence, pretty good. And

4:29

the big one that

4:31

everybody thought was going to happen six or seven times this

4:33

year, interest rate cuts, how many have we had so far

4:35

this year? None. None,

4:38

that's right. Exactly. I thought it

4:40

was a trick question. I went, was there an interest rate cut

4:42

I didn't? They forgot to wake

4:44

you up last Tuesday. No,

4:47

we've all been waiting around, and now they're saying

4:49

at least until June. And

4:52

of course, yesterday's consumer

4:54

price index didn't

4:57

push it one way or the other. Now

4:59

quit dating the show with this yesterday stuff.

5:02

The only thing that will date me. Anyway, it's been

5:04

a great year. We'll talk about bonds, I guess, if you

5:06

want to in a minute too. Sure. Why

5:09

not? You want to? All right.

5:12

Don't have to. We'll do it at some point.

5:14

Phone calls are better. Yeah, phone calls are always

5:16

better. Phone calls take precedence over bonds. I mean,

5:18

stocks. Yeah, we'll do them first. But bonds? 855-935-talk.

5:21

Tom and John

5:23

are talking real money. Your

5:28

guys do a really great financial future.

5:31

Tom and John are talking real money.

5:34

Well, we did say that calls to

5:37

855-935-talk take priority over boring bonds. And

5:43

therefore, it is now time to talk

5:46

with Dave. Not Dave. I'm

5:49

sorry. Rose. Well, it was

5:51

Dave's last hour. Hey, Rose. Welcome.

5:54

I got Dave on loan. Oh, Dave is here. Okay. I'm

5:56

sorry. Bellview. Hey,

5:59

Dave. Thank

6:01

you for having me. Our

6:04

pleasure. What's up? Yes sir,

6:06

we can. Yeah,

6:09

so I'm going to be 67

6:11

this summer and I'll be honest,

6:13

I'm not a financial guy. My

6:16

wife and I, we kind of just live

6:18

by faith. We don't look at numbers. We're just

6:21

saying, you know, that has been kind of fitness

6:24

in the bud a little bit, you know, we

6:26

realize. And so, I mean, I'm an artist, musician,

6:28

and I just think it'll all kind of work

6:30

out in the end. Bright brain

6:32

kind of guy. Yeah,

6:36

in any case, so we have a

6:38

house in Bellevue that's paid for that

6:40

I think is about 1.5 million.

6:44

And we have 30 acres

6:47

in this place called Deer

6:49

Park, Washington, north of Spokane.

6:52

And our whole family wants

6:54

to move out there and

6:56

we're going to build

6:58

kind of a little compound. Dave, that's

7:00

hysterical. Tom is

7:03

talking about doing the exact same thing. Maybe you

7:05

guys can split it. No, you just solved my

7:07

problem. Can you take my brother on and his

7:09

family? That'd be perfect. I just won't tell him

7:11

that I wasn't going to be there. There's

7:14

the compound. You're very good, Dave. Make

7:17

sure you got firewood for the winter season. So

7:19

thanks for that, Dave. Yeah. We

7:22

have lots of trees. So

7:24

I'm trying to figure out

7:26

how to make it work

7:28

financially because we'll sell our

7:30

paid for

7:33

house in Bellevue and then we'll have

7:35

some cash to

7:37

build a house. But I don't

7:39

know if it's going to

7:41

cost $500,000 to build a house. I'm

7:44

kind of a modest, nice house. Of course,

7:46

my wife wants a dream house

7:48

that's going to, and she wants a

7:50

casita to build that for friends that

7:52

come over. And I'm thinking, honey, it's,

7:55

you know, I don't know. We got

7:58

to have some nest egg money too to live on. Yeah,

8:00

that was gonna be my next question

8:02

was what other money do you have?

8:07

Well, I'll have a little

8:10

pension from a school district that I've

8:12

worked for and Social Security and we

8:15

probably have about Right

8:17

now about maybe four or five

8:20

hundred thousand dollars and some sort of

8:22

investments that we've got away But it's

8:24

not a lot, you know That's

8:26

considerable. I guess here's another thing to think about

8:29

about the 1.5 million dollar home Remember

8:31

you're gonna have partners on that sale You're

8:33

gonna have the partner the people that listed

8:35

for sale You're gonna have the county

8:38

and state that are gonna take their little piece and

8:40

then there's the federal government What

8:43

did you end up paying? What do you

8:45

believe your cost basis for the home is?

8:50

Mean what did we pay for the house? What did

8:52

you pay for and how much did you put into it?

8:54

I mean in a jet mean because these are things

8:56

in other words I'm guessing if you've

8:58

been there a long time, maybe you have half

9:00

a million into it I mean there's something like

9:02

that Remember the difference between that number and what

9:04

you sell it for net of the cost of

9:07

sale The government's going to want

9:09

you to pay capital gains tax minus the half million

9:11

dollars gonna say minus the half million exclusion You get

9:13

to take out but that's I would want to know

9:15

that number before I started anything I look at that

9:17

all the time to think if I'm moving here's what

9:20

I'm gonna net out That would be number one number

9:22

two is never too early to start

9:24

looking around a construction because all kidding aside as

9:26

Don said I'm kind of looking

9:28

at this too and it is far

9:30

more Expensive than I ever imagined even

9:32

for something that's not fancy a couple

9:34

thousand square feet. Yeah, I mean the

9:37

according to some

9:40

official sites the cost of

9:42

a average house in

9:44

Spokane Is about a

9:46

hundred and twenty dollars a square foot, but

9:48

that's a very average house to build a

9:50

new one Assuming you have the land What

9:54

you do and it has water and it has

9:56

energy. Yeah We

9:58

have a well and we have power. There you

10:01

go. That's helpful. So figure, but that's an

10:03

average. If your wife wants a

10:05

Taj Mahal, then you're in

10:08

the twos, two

10:10

as high as three for real luxury.

10:13

You know, I guess this always goes back to

10:15

having the plan in place. I would want to

10:17

know what, after I build all this, what my

10:19

cost of living is going to be, because then

10:22

I would be taking the money that I'd saved,

10:24

I'd throw in Social Security, and make sure that

10:26

I have the sort of monthly income figured out,

10:28

then go backwards and say, therefore, out

10:30

of the house sale, we need to net this

10:32

much to pay the bills. You don't want to

10:34

build it and then have to burn the furniture

10:37

to keep it warm in the winter, right? I

10:39

mean, that would be a bad thing. So I'd

10:41

probably work it that way. You mean we come back to that

10:43

same old boring advice we give all the time to have a

10:45

plan? I have a plan. I have a plan. I have a

10:48

plan. Yeah, that's a lot of fun. Well,

10:50

then we paid $1.80 for

10:53

the house we live in now, and

10:55

we put on a new roof, new

10:57

driveway, new ... We

11:01

have a new kitchen, new

11:04

bathroom remodel. We're getting

11:06

it ready to sell. All right. Well, let's assume

11:08

your cost basis is then $300,000. Yeah,

11:10

it's going to be $3,000 to $4,000 somewhere in that

11:12

range by my rough calculation. And you would be selling

11:14

it for 1.5? 1.5. You got to take out, what,

11:16

8% or 9% cost of sale. That includes real

11:23

estate commissions, all the other stuff that's in there.

11:25

So you're taking out $950, $902,

11:29

just under a million dollars. And then you take

11:31

off the $500,000 and you don't have to pay

11:33

the capital gains on. So now you're only looking

11:35

at capital gains on ... $400,000. So that wouldn't

11:39

be horrible. That times 20%. So

11:42

those are the kind of numbers I would do very carefully.

11:44

Yep. Okay. But

11:47

you're not going to be rich. You're

11:49

not going to be rich enough to build a

11:51

huge thing. Like a deer park. Well, but if

11:53

you're going to build a ... If people are

11:55

going to be part of this compound, don't do

11:57

like Tom, make them pay for their ... own

12:00

little compounds. I'm going to

12:02

send you my brother's name and number. He'll love it. They're

12:05

all building their own home. We're

12:08

not building our own home. You've

12:10

got good people. Maybe

12:12

we can make a swap or something. And

12:15

as for the casita, unless it's going to be for

12:17

rental income, build

12:20

a guest house is sort of a waste

12:22

of money in retirement particularly. He

12:24

said casino. I would say it's a little

12:27

tiny casa. It's

12:29

got a town, it's got water, some power

12:31

and everything. Could be old Indian reservation. Who

12:33

knows? Who knows? All right. Good

12:36

luck to you, sir. We appreciate the call. Well,

12:38

thank you. Thank you for helping

12:40

bring some clarity to this whole dream.

12:42

Thank you so much. You're welcome. Thank

12:45

you. That sounds cool. It sounds,

12:47

it was so funny when he said that

12:49

because this is something Tom has been talking

12:51

about for a couple of years now. I

12:55

don't think it's going to work in my situation. You can't

12:57

find the land? You can't find the right

12:59

place. Yeah. Oh, so you have to go a

13:01

little too far out? And

13:03

I won't do that because my kids and grandkids live

13:05

here. I've already stayed. I'm not going to move far

13:07

away from them. Particularly when you figure

13:09

you probably have somebody who wants to be in

13:12

the mountains and somebody wants to be on the

13:14

water. Well, good luck. You have to go out

13:16

to the peninsula to get that. I

13:18

think I might have to go to Mars to get

13:20

that on the South Pole to get the water and

13:22

the waterfront and all that. It's not going to be

13:25

easy. New Zealand has it. New Zealand

13:27

is, yeah. That might stretch the travel a

13:29

bit, but yeah. 855-935-8255 is

13:31

our phone number, 855-935-TALK. And

13:37

I know we sound like a

13:39

bloody broken record, but

13:41

we cannot emphasize enough,

13:44

particularly as you're

13:46

getting to the latter years of your

13:48

working life, the

13:51

critical need for

13:53

at least a little tiny bit

13:56

of planning. You cannot wing it

13:58

anymore. Yes, you

14:00

can get away with winging it through your 20s and 30s and

14:02

40s and maybe even 50s. Maybe.

14:07

Maybe. But once you

14:09

get to your 50s and 60s, it is

14:11

absolutely time to

14:13

begin planning. And the trick is

14:15

to not succumb

14:19

to all of the terrible advice out

14:21

there. Yeah, I mean, you don't want planning from

14:23

an insurance. Well, they don't even do planning. Yeah,

14:25

or they're going to pretend to. You don't want

14:27

planning with somebody who works in the brokerage industry

14:30

who doesn't have to put your interest ahead of

14:32

their own. So there's a lot of people to

14:34

sort of put a line through. You do not

14:36

want to start there. And

14:38

give us a call anytime during the

14:40

hours of noon to 2 Pacific time

14:42

and we'll try and help you solve

14:44

some of these problems. 855-935-TALK. Tom

14:47

and Don are talking real

14:50

money. And

14:55

we love phones. I

15:01

got a text question for you. I

15:03

have a phone call. Okay,

15:05

we'll get that real quick. This is a

15:07

question from Don from Paul. It says, I

15:09

just bought an Airstream classic model that weighs

15:11

about 8,000 pounds. I'll

15:14

be towing it with my 2020 Toyota Tundra. It

15:17

has a 5.7 liter V8 engine. That

15:20

sounds powerful. Produces 382 horsepower and 401 pounds of

15:22

torque. That

15:25

sounds like a lot. No, actually, my armada is out of

15:28

the way. I

15:30

got hired. Okay. It says

15:32

the real question is, is crypto

15:34

a good investment? Thank you, Paul.

15:37

I appreciate the sense of humor here on

15:40

the holiday weekend. Really needed it. Oh,

15:42

wait. Oh, wait. I'm going to

15:44

hold up. No, I'm going to go to the call.

15:46

No, I've got another crypto call though that I've got

15:48

on tape. All right, perfect. Anyway, 855-935-talk is our phone

15:51

number and Rose, you're up next. Welcome

15:56

to Talking Real Money. Thank

16:00

you for taking my call. I have

16:04

four, I'm blessed with four granddaughters,

16:07

one of whom is just about to

16:09

turn 20, the other

16:11

just turned 18, and they

16:14

both, thank heavens,

16:16

are gainfully employed in addition to going

16:18

to school. And so

16:21

what I'd like to do is get

16:23

them started investing

16:25

and perhaps

16:28

help them establish IRIS.

16:32

They both get W-2s, so

16:34

they have some income, not a lot of

16:36

income, but I was thinking to start them

16:39

off with perhaps

16:43

gifts of $1,000 each

16:46

per year, at least while

16:48

they are still in school. And

16:52

I'm thinking it would probably go

16:54

into, I'd open the IRIS with

16:56

Vanguard, but what

16:59

else do I need to know? No,

17:01

first of all, you're a great grandmother. That's not a great

17:03

grandmother. You're just a great grandmother. You're a

17:06

very nice grandmother. Yeah, that's really great. I

17:08

mean, that's nice. That's really nice. Because you're

17:10

a next generation. Yeah, helping people get started.

17:12

This is going to be very easy, okay?

17:15

Because you can open, for a 20-year-old,

17:17

you can open a regular Roth Ira, right? Yes, you can. I

17:19

think you can open a regular one, right? Yes, you can. You

17:22

have to be a miner. So you

17:24

simply would go open those. I think they may need

17:26

their signature to open. They'll need their social. Yeah, their

17:28

social. And they'll need a

17:30

signature, yeah. But you could go to Vanguard

17:32

and open them. I would take the $1,000 for each

17:34

one of them and put them in a one-fund global

17:37

stock portfolio. Like VT. V

17:41

is in Victory, T is in Thomas. Why

17:43

not start with that? That's simple to do.

17:45

It's a Vanguard product. It's very low expense.

17:47

And it holds thousands of stocks. It teaches

17:50

a great lesson about diversification, a great lesson

17:52

about not paying others a lot of money.

17:54

And they don't have to do a darn

17:56

thing. They could let that ride for 40

17:58

years. You'd be doing them

18:00

a great favor if they left that in their Roth

18:02

for that period of time. Okay.

18:07

So just because I used to

18:09

know how to do it, I

18:11

don't anymore, future value of money

18:14

and if

18:16

I were to, even

18:19

if I continue to help them after

18:21

they graduate, but let's say for

18:24

the next seven or eight years,

18:26

I put $1,000 or gave them

18:28

$1,000 a year to go into the IRA, what

18:33

would that IRA be worth, let's

18:36

say at age, I'm just going to say 60

18:38

because who knows what retirement would

18:40

be? The

18:43

bad money is running that right now. I am, I

18:45

am, I am, I am. But a lot, I can

18:48

tell you that much right now. Let's just say six

18:50

years at 1,000 each. Well, no,

18:52

she's saying until they retire. No,

18:55

no, she says she's only putting the money in the... Well,

18:57

no, I know, but then she says for how much will

18:59

they have and then letting it roll until they retire. And

19:03

just that money would

19:08

be about, come

19:12

on, quickly, a couple

19:15

hundred thousand dollars, about

19:18

200, about 200,000. That's a lot.

19:20

And then that way they'll hopefully

19:23

can ignore it when the

19:25

time, you know, suggests that. Yeah,

19:34

and that's a lesson. What you want to

19:36

do is right off the bat is say

19:38

to them, if I do this for

19:40

the next seven or eight years for each of you and

19:43

you never add another penny, if

19:45

you leave it alone, it could be worth over

19:49

$200,000. Okay, but you need to say

19:51

one other thing. The minute the money goes in, you should

19:53

tell them if you ever touch this money while I'm still

19:55

putting it in, you're going to stop. I'm not putting another

19:57

down. You must stop. You've got to give them a little

19:59

bit of a... camera on this because

20:01

we don't want them thinking, ah here's my next

20:03

car or whatever it is. You

20:05

don't want that. Yeah, good advice. Thank you. Yeah,

20:08

I don't think they're inclined that way but thank you

20:10

so much. That gives me what I need to know.

20:12

And thank you for doing it for the kids. That's a

20:15

wonderful gift. Much better than

20:17

giving them electronics. 855-935-TALK. Call

20:20

us. Tom

20:23

and John are talking real money.

20:31

Reality Radio or a really great

20:33

future. We're talking real money.

20:36

And we invite you to call us at

20:38

855-935-TALK, 855-935, 8255 with your money questions. Sometimes

20:46

though people kind of ask

20:48

questions online at talkingrealmoney.com

20:50

when we're not here

20:53

or they call the number and just leave

20:55

a call. This one came in from talkingrealmoney.com

20:57

and it kind of fit with the text

20:59

about crypto. Hey,

21:02

John. It's the

21:04

loyal listener. I just wanted to thank you

21:06

for banning Bitcoin Bob from the Friday Q&As.

21:09

I just don't get it week after week.

21:13

And out of the many hundreds

21:15

of investment and personal finance podcasts,

21:17

I just can't imagine continuing to go

21:20

to the well that comes up every

21:22

time. I mean, honestly, you'd have

21:24

better luck converting you to a Raiders

21:26

fan than a Bitcoin promoter. I just

21:28

don't get it. As

21:30

we used to say, turn a dial, go

21:33

where you can be heard and

21:36

maybe even pack up your stuff and go

21:38

start your own podcast called TalkingReal Crypto. I

21:40

mean, that might be the way to go

21:42

for you. The reason

21:45

I wanted to play that is the Raiders fan comment.

21:47

That was great. Crypto

21:50

Bob. And he went by

21:52

other names. He would go to

21:54

talkingrealmoney.com at least every week, sometimes

21:56

multiple times. And

21:59

my philosophy. philosophy had always been

22:01

to include every single question or comment that

22:03

came in. I didn't screen anything out. You

22:06

fit two Eagle Parry in there for me.

22:08

You've got to cut some off. I know.

22:11

I don't. I try not to

22:13

do that. I don't want to

22:15

be accused of favoritism. So I

22:17

let him in over and over

22:19

and over again, but it got

22:21

so old I just couldn't

22:24

do it anymore. He's constantly harping and

22:26

harping about crypto. And

22:28

it's such a minor thing in the world

22:30

of money anyway. It

22:32

is. It gets a lot of press. It gets

22:34

a lot of press. But it's tiny. But

22:36

it really doesn't do

22:39

anything for anyone except some

22:41

speculators. And that's like

22:43

doing entire shows if we did

22:45

weeks on casino gambling. It's

22:48

a multi-trillion dollar, or

22:50

a multi-billion dollar, multi-billion dollar business.

22:52

It's not trillion. But

22:56

it's not worth it either. We

22:58

banned it, but I love the call. Yes,

23:00

I am very unlikely to ever be a

23:02

Raiders fan. You know,

23:05

that is possible. No, it's not.

23:08

Yes, it is actually. No. And I've already

23:10

figured out how to make you a Raiders fan. Uh-huh. Yeah.

23:13

What is the... I'm going to bleed you dry

23:15

until the place you're broke and then you need money from me

23:18

and then I'll make you root for the Raiders at that point.

23:20

It'll be a financial... Too late. Too late.

23:23

I'm too old for it to even matter. I

23:25

don't care if you bleed me dry. I

23:28

live in the Airstream. That's

23:30

a good point. You got that. I

23:32

have the Airstream. I have the Airstream and no crypto.

23:35

What did you say his torque

23:38

was on his Toyota truck?

23:42

I'm going to look that up now because I don't remember.

23:44

I'm not a car guy. I know.

23:46

And how many horses? What's the torque on mine?

23:48

How many horses? 382 horses. I

23:50

don't know how they fit. 401

23:53

foot pound. I knew it. I

23:56

knew my armada was better. What pound? I

23:58

knew my armada was better. It's 400 horses. and

24:00

413 pounds of torque. I have 400 horses in my driveway.

24:02

Can I change the topic

24:07

to something that I think deserves some attention?

24:10

Is it bond? Other than your foot

24:12

pounds? Is it bonds? Okay, as long

24:14

as it's not bonds. This is so

24:16

important and it didn't used to get

24:19

much attention. It gets more attention today.

24:21

I'm talking about behavioral economics, right? There's

24:24

always an aspect of this in every

24:26

story we do. Oh, in everything we

24:28

do because it's your bad behavior that

24:30

gets you all messed up. It doesn't mean

24:32

you're a bad person. It just means you are.

24:34

It just means you

24:37

are a bad person or you are?

24:40

No, you just you are. You exist. You're

24:42

human. So this is an existential discussion.

24:45

It really is. I mean, a guy

24:47

named Daniel Kahneman who really turned things

24:49

around on all this, won the Nobel

24:52

Prize a long time ago,

24:55

passed away this week. He's somebody I

24:57

think you should pay attention to. Why is that? Jason Zweig

24:59

wrote a great piece. Yeah, because

25:01

his writing lives on and Jason Zweig wrote a

25:03

great piece about him in the Wall Street Journal.

25:05

Why should you care about him? Well, because he's

25:07

the one who kind of figured out why you

25:09

do what you do. I love

25:11

this. You already know

25:13

this, Don, but people have a tendency

25:16

to do anything, anything other

25:18

than lose. I'm not gonna, it

25:20

doesn't, right? They will, it's

25:24

way more painful to lose than it

25:26

is to win. And then it is

25:28

pleasurable to win. Yes, exactly. We know

25:30

it's so clear. And this

25:32

always, by the way, number one thing when people

25:34

call me and say, I'm thinking about doing this

25:36

with my money, but I don't want to lose

25:38

anything. They always say that. And I say,

25:40

what do you mean? Well, I don't want it to go down. Well,

25:43

then it's not gonna go up. And

25:45

you have no chance of it going up if it can't go

25:47

down. I know. So hold that thought. I want to hear. I

25:49

want to hear some of his great stuff because the final thing

25:51

is, the funny thing is, until you

25:54

told me the name, I didn't even know who you

25:56

were talking about. I mean, I hadn't heard of him.

25:58

855. 935-8255. Call it.

26:04

Tom and John are cooking real

26:06

money. Do

26:09

you suffer from hodgepodgeitis? I'm Don

26:11

McDonald and hodgepodgeitis is a disease

26:13

of your investment portfolio whose symptoms

26:15

include lots of snacks, loads

26:17

of random loaded mutual funds, and maybe

26:20

an annuity or two. Most who

26:22

suffer from hodgepodgeitis dread opening their

26:25

quarterly portfolio statement. They feel lost

26:27

and confused. Investing seems

26:29

overwhelming in the financial future uncertain. If

26:31

you believe you suffer from hodgepodgeitis, see

26:33

a 100% fiduciary investment

26:36

advisor immediately. A proper diagnosis

26:39

is the first step to creating a

26:41

portfolio with a purpose based on a

26:43

personal plan. Start on the

26:45

road to recovery now by scheduling

26:47

a free meeting with an Appellate

26:49

Advisor at talkingrealmoney.com. There is no

26:51

cost obligation or high pressure sales

26:53

pitch. Take the first step at

26:55

talkingrealmoney.com or call 800-386-3004. Hodgepodgeitis

27:00

is not a real disease, but treating it has

27:03

been shown to improve mood, reduce fear, and even

27:05

lead to a brighter financial future. Results may vary.

27:09

Your guys do a really great

27:11

financial future. Tom and Don are

27:14

talking real money. Hello

27:16

again. Welcome to the show. I'm Don along

27:18

with Tom and this is where we talk

27:20

about your dough and darn

27:22

that's poetic. It

27:24

really is. Thank you. And then next

27:26

hour is going to be your new program, right?

27:29

Talking Real Trailers. Talking Real Trailers. So I'll

27:31

be tuning in for that. Actually, you know

27:34

that might be fun. Don't

27:37

include me on that one. I could go... Because I don't know

27:39

anything about per pound whatever

27:41

it was. The trip is coming together.

27:44

It is. But the web page is not

27:46

yet because I keep changing the

27:48

routing. I can't get

27:50

going. I know. I know.

27:52

I have it down up

27:57

the east coast and

27:59

I think that I'm going to go

28:01

up the East Coast and I'm going to go all the

28:03

way to HQ for a Pella and

28:06

pull the trailer in there so that we can meet

28:08

the ... Actually,

28:10

here's an idea. Just pull it in and leave it

28:12

there. See if anybody notices. I just figured I'd camp

28:15

in the parking lot. Just the heck with it. Demand

28:17

a free tuna fish sandwich or something. I don't know.

28:20

Get the hose out. Get the hose out

28:22

and just get it in the gutter. You know what,

28:24

Paul? Yeah, got it. Yeah.

28:26

Not good. Hey, we were mentioning

28:28

Daniel Kahneman. I think a

28:31

lot of the work that he did is something that people should

28:33

pay attention to. He did

28:35

write a book, several, but thinking fast and

28:37

slow with a guy named

28:39

Jason Zweig, a writer for

28:41

The Wall Street Journal whose work we greatly respect. He's got a

28:43

new book coming out sometime soon too, I think. Yeah, because he

28:45

took a book leave. A long time off for it. Yeah.

28:48

Yeah, we kind of alluded to this, but Kahneman

28:50

once said, ask people if they want to

28:52

take a risk with an 80% chance

28:54

of success, right? Most

28:57

will say, sure, I'll do that. But then if you

28:59

say, wait, there's a 20% chance of failure, they

29:01

say, no. That changes the

29:04

whole equation. Yes. It really does. It's

29:06

a fascinating, I mean, that's fascinating. And all you have to

29:08

do, it's how you state the question.

29:11

Do you want to get into an investment where there's

29:13

a 20% chance of losing? No.

29:16

Do you want to get into an investment with an 80% chance of

29:18

winning? Yes. And

29:21

both of us- It's the same question. I know,

29:23

but both of us have done things where he

29:25

calls it the base rate. That's

29:27

the figuring out the

29:29

objective odds of success. We've gotten into

29:31

things that have really low, I mean,

29:33

our own business. Oh, well, that's entrepreneurism

29:35

at its finest. You think you charge

29:37

in, you think it's going to work,

29:39

it has to work. But

29:42

it doesn't. Because well, that's also

29:44

overconfidence. Yeah, call it whatever you like. We

29:47

both, we just suffer- We greatly

29:49

from that. We reek of overconfidence. I

29:52

love those. Thank God, or we would have never done this.

29:56

That's a good point. The other one

29:58

I really love is that once people make

30:00

it- decision. This is more about men. Oh,

30:04

it's just hard to get. People come

30:06

in all the time and they bought a

30:08

stock and the stock is worth

30:10

less than it was. Yeah. I'm

30:13

going to stick with it until I make

30:16

money on it. You cannot pry their hands

30:18

off that stock certificate. Because? Yeah, but I'm

30:20

not going to admit it. No way. It's

30:25

a huge, huge problem among, even

30:28

in our, particularly in

30:30

our relationships, the fact that we

30:32

don't admit we're wrong because we

30:34

hate saying we're sorry,

30:36

not just to others, but to

30:38

ourselves. Oops. I messed up. Yeah.

30:42

Anyway, I mean, this is great stuff. I love the

30:44

book. I love the lesson. So what do

30:46

we take away from his life? That

30:51

he was a smart guy, won

30:53

a Nobel prize? He's a smart

30:55

guy. No question there. No, but

30:57

I'm talking about that for all

31:00

of us. That everything we think

31:02

is not necessarily right. Our emotions

31:04

are killing us financially. That's really

31:06

what it is. Our brains are

31:08

wired incorrectly today. Our brains are

31:11

bad for disciplined approaches with financial

31:14

issues. This has been a challenge

31:16

for me my entire life, that

31:18

is learning how all of this

31:20

works. It is

31:22

very, it's simple, but it's

31:24

highly complex emotionally. Money

31:27

is far more emotionally complex

31:29

than anything else in

31:32

our lives on an ongoing basis. It

31:34

just sucks up so much worry and

31:36

brain power. Ah, and that's one

31:38

thing that I think you should try to eliminate at all costs, but it

31:40

goes way back. I mean, it goes back to us being others. You mean,

31:42

yeah, you're going to tell people to relax. I'm

31:45

not supposed to do that. My mom

31:47

told me. I don't tell people. Don't

31:49

tell people their emotions. No, okay. And

31:51

now, ladies and gentlemen, welcome to financial

31:53

anthropology with Tom. No, because it

31:55

does go back, right? It goes back to the

31:57

days. Keeping what you've got rather than risk... to

32:00

try to make, I mean, the conservative

32:02

nature. This is where I want to

32:04

live. Because Austro-Lopithecus is running through the

32:06

savannah in search of... We move from

32:08

the trailer to... This has

32:10

been a wide-ranging and not so successful

32:12

program at many levels. But

32:15

Daniel, great work. Thank you for that

32:17

because I think it helps all of

32:19

us if we pay attention. I really

32:21

do. To our emotions. Pay close attention

32:24

to your emotion. And figure out how

32:26

to screen them off. Leave them there.

32:28

You want another caller? Sure. All

32:30

right. Go ahead. Okay, here we

32:32

go. Hold on. I'm going

32:34

to turn it on for you. I'd

32:36

like you to walk through converting a

32:39

529 college fund into a Roth IRA

32:41

and the parameters. Thank you.

32:44

There you go. Pretty simple. Okay. Now

32:46

you can convert a portion of a 529 plan

32:48

into a Roth IRA. What

32:53

are the rules and how do

32:56

you do it? Okay. I can give

32:58

you the rules. I've

33:00

never actually done one. Well, because it's brand new.

33:03

Yeah. Okay. But

33:05

the rules are fairly straightforward. Number one, the

33:07

person you're giving it to, this is a

33:10

529 where Don McDonald is the beneficiary. That

33:12

has to be number one. Number two, Don

33:14

McDonald has to have a Roth IRA. Number

33:17

three, Don McDonald has to have earned

33:20

income this year to be able to do that.

33:23

You can't just take the $7,000 out

33:25

of the 529 and plop it in the Roth without income.

33:28

Number three, I believe the 529 has to have

33:31

been open at least five years. Five years. No.

33:34

Yes. Five or more. It might be more.

33:36

I think it's five. It has to have been open for a

33:38

while. Anyway, it has to have been open for a while. But

33:41

then actually the technical part of doing it, I'd

33:43

have to ask somebody like Schwab or something. I

33:45

would do it. The technical part is

33:48

actually pretty easy. The contributions or

33:51

the earnings on the contributions cannot

33:55

have come from the last five years.

33:57

So this is going to require an

33:59

old five. Yep. Yep.

34:03

And the way you do it is you can

34:05

actually do it as a rollover. You

34:07

can literally take the check and

34:10

then move it and give

34:12

that money to... And make a deposit. Correct. It

34:15

is an accounting process

34:18

with you. As long as it

34:20

meets all the rules, you can go ahead and

34:22

put it in and not pay the penalty on

34:24

the... or the taxes or the penalty on the

34:26

withdrawal. And we should have stated

34:28

this earlier. This is new as part of Secure

34:30

Act 2.0 where the government is now allowing you

34:33

to take up to $35,000 from a $5.29 and

34:35

move it to a Roth IRA. I

34:40

totally forgot the other rule. And

34:42

this is going to rule out almost

34:44

every $5.29 out there. Hold on. Let

34:47

me make sure I'm right. Hold on. Hold

34:50

on. There was a five-year rule,

34:52

but that's on earnings. That's on

34:54

contributions and earnings. Oh yeah, yeah, yeah. Here it

34:56

is. Here it is. How?

35:00

15 years. Must have been open for 15 years. I

35:02

knew there was a longer number this time. Yeah. So

35:04

you had to have had the $5.29. Yep.

35:07

Yep. Since 2009? That's

35:09

right. Yeah. Wow. How

35:12

many people have had it? My

35:15

kids and grandkids would have been

35:17

okay because I started them

35:20

right away. Now, my grandkids aren't there yet,

35:23

but they will be at that time because of... Yeah.

35:25

Yes. That's another reason to start early.

35:27

Start when they're little. Yeah. Because...

35:30

They may need it for college. Yep. They

35:33

may not. Or they may need a portion for college. By

35:35

the way, I think it's going to make total sense when

35:37

you get to college to pay the college out of your

35:39

pocket, keep the money in the $5.29 and

35:42

then give that to them in the rock. Up to the $35,000. 35

35:44

total. Total. That's the lifetime

35:47

you can do. Right. But what a

35:49

huge head start that is. Oh, gigantic.

35:51

855-935-TALK. Give us

35:53

a call every Saturday from noon

35:55

to 2 Eastern or if you're

35:58

listening to the podcast, 3 to 5. me

36:00

three to five Eastern noon to two Pacific

36:02

time. I flip my coasts all the time.

36:04

We'll be right back. Tom

36:09

and Don are talking real money.

36:12

For your real life and real future,

36:14

Tom and Don are talking real money.

36:17

And we do have another question

36:19

that came in from talking real

36:22

money.com that shouldn't take very long

36:24

to answer, Tom. Hi guys. So

36:26

I heard your podcast on March

36:28

23rd and you

36:30

mentioned that all 403b accounts

36:33

are connected to annuities

36:35

or at least that

36:37

market. But I've

36:39

also heard you say that the Washington

36:41

TAP annuity is a

36:43

good annuity to put

36:45

money in if you want that kind

36:47

of income stream during retirement.

36:50

So please comment on this. I'm a

36:53

teacher kind of struggling with how to,

36:56

you know, and use my

36:58

money when that retirement date comes in about

37:00

a year. Thanks.

37:03

TAP annuity. I like the TAP annuity.

37:05

I mean, I think it's a good product. Why is

37:07

it different though than

37:10

the regular variable annuities? It

37:13

doesn't have a big commission

37:16

on it. The fees are low. And

37:19

it's got some pretty good products in it. I

37:21

think it has a guaranteed inflation rate of something

37:23

pretty generous if I remember right. I don't remember

37:25

all the specifics up, but I just know that

37:27

I've looked at it in the past and because

37:29

people say, you say all annuities are bad. Well,

37:31

not all. That one is actually one I can

37:33

live with. But remember, I

37:35

mean, like any annuity, part one is your

37:38

money is tied up. So

37:40

if you get into a situation where you need the

37:42

money, you can't get, that's one thing I don't like

37:44

about it, right, for anybody because

37:46

I think liquidity is everything. We never know how

37:49

life is going to change and you may need

37:51

it. Yeah. If you annuitize

37:54

an annuity, this is something you

37:56

must understand. I don't care which

37:58

annuity it is from whom

38:00

it comes, if you

38:02

annuitize the annuity, you are

38:04

giving up the money. Yes.

38:07

At least a portion of it. There are

38:09

some annuities that have expensive riders that might

38:11

give your estate some of it at some

38:14

point, but generally speaking,

38:16

it is no longer your money.

38:18

You're trading in all of your

38:20

money for an income guarantee. And

38:23

the, I do believe the TAP has

38:26

an inflation adjuster on it. You're right.

38:30

Most annuities don't have inflation adjustments.

38:33

No. So again, that's why we're okay

38:35

with it. It's not something we're jumping up and

38:37

down and saying, everybody go get this. No,

38:40

no, no, no, no. But as an option, it is not

38:43

an awful option. I

38:46

just read through 37 pages of an equity index annuity. At

38:50

the end of it, I couldn't

38:52

understand what they were saying. The

38:54

people who show equity index annuities

38:56

don't understand them. I mean, this

38:58

is why there are so many

39:00

lawsuits being filed around the country

39:03

about equity index annuities because they

39:05

are designed to confuse. They are

39:07

truly purposefully

39:09

designed to be opaque from the

39:11

indexes they use, which are indexes

39:13

that are usually made up out of

39:16

whole cloth, to the participation rates and

39:18

the cap rates and how

39:20

those are calculated and changed depending

39:23

on all these conditions and all

39:25

these qualifiers. You will never,

39:27

I am

39:29

pretty confident, you go ahead and sit down

39:31

and read every page of an index annuity

39:33

disclosure document and I don't think you'll ever

39:35

figure it out. But if you want some

39:37

help with your money, we'll give you an

39:39

advisor for free for a little while anyway.

39:42

Not forever. Just go to talkingrealmoney.com, click on Meet

39:44

an Advisor. We help you with the Hodgepodge 30,

39:47

the plan, all that kind of good stuff. Or

39:49

you can always call us. We have a lot

39:51

of calls this week, 800-386-3004. People

39:58

Call directly. Your answer the phone

40:01

I answer. Any time you call me I answer the

40:03

phone joke Nobody answers a look at one time I

40:05

did y was call it doctor's office this week and

40:07

every time I dialed in and hit one it hung

40:09

up on me. There. You had

40:11

to way to get rid of

40:14

us annoying potential patients. they were

40:16

being there. Take good care by

40:18

repeating it expresses titans for current

40:20

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40:23

financial market trends that are based on current market

40:25

into since completed our judgment and are subject to

40:27

change without notice including. Any for looking in a

40:29

statement that are based on certain expectations in a

40:31

sentence although information and of and is doesn't have

40:33

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40:35

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40:38

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40:41

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40:43

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40:45

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40:48

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40:50

considerations as maybe material deal with entering

40:52

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40:55

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40:57

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40:59

the information provided under to No Money is

41:01

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41:04

suddenly the practices are trying to get you

41:06

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41:08

Instead the problem is provided at a public

41:10

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for more information and important disclosure related

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to performance of any specific index. Or

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