Talking Real Money - Investing Talk
Financial talk radio veteran, Don McDonald and former host of Serious Money on PBS, Tom Cock, join forces to talk about real money issues. In each episode, they solve real money problems, dole out real investing (not speculating) advice, and really explain the financial issues that effect all of us. Plus, it's actually fun! Talking Real Money is a podcast designed to provide the real help we all need to enjoy a really great future. Call in with your questions anytime at 855-935-TALK (8255).
Talking Real Money - Investing Talk
Money by the Decades
Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.
From your 20s to your 60s, the priorities change—but the basic job doesn’t. Don and Tom walk through emergency savings, Roth IRAs, 401(k) matches, rebalancing, retirement planning, Social Security, Medicare, and estate planning, decade by decade.
Then Mary calls with a smart Roth-conversion puzzle. They weigh whose IRA to convert, how much to move without wasting a low tax bracket, the age-59½ penalty, and why a household’s accounts should be managed as one portfolio—even when the spouses have very different tolerances for risk.
Finally: whether retirees still need emergency cash, how much umbrella insurance is enough, when a family office begins to make sense, and three near-identical retirement portfolios from a listener in Wagner, South Dakota—whose hometown briefly steals the show.
00:25 Tom’s brassy choice
01:36 Financial priorities, decade by decade
02:58 Start early with a Roth IRA
04:02 Your 30s: emergency cash and the 401(k) match
06:02 Your 40s: fixed obligations and retirement planning
09:13 Your 50s: risk, HSAs, and getting on track
10:45 Your 60s: Social Security, Medicare, and estate planning
14:48 Roth conversions and household asset allocation
24:12 Emergency funds in retirement
27:01 Umbrella coverage and family offices
30:16 Three retirement portfolios from Wagner
All right, this was Tom's choice for the uh the jingle for today's episode.
Money Milestones Decade by Decade
SPEAKER_01Uh he went for a 70s sort of Chicago-ish brassy uh rock sort of thing. Uh and uh I actually haven't heard it yet, so I don't know how it turned out, but I'm hoping it's good.
SPEAKER_04Hi there, welcome to Tom. I'm gonna put out there, by the way, it's the first time I've had my choice for basically anything in my life in the last month and a half, so I'm very excited about that.
SPEAKER_01So Well you chose to go to Lake Shellan. That's true. Okay. You all you choose that one.
SPEAKER_04So you can you get a few. You're right. I wonder if I if I just didn't say anything one year, if anybody would say, Hey, what didn't we used to go to Lake Shellan or something?
SPEAKER_01So Oh, yeah, they'd say something. They're kind of used to it. Not like retire meat, anyway. Not like retire meat. All right, let's start it. Let's start the show. It's so exciting. We're all pumped up from that big brassy music. Uh I am Don McDonald. That's Tom Cock, the guy who made the choice for the first time in his life. He got to make a choice. And we are here to talk about money, and we're gonna do something a little different today. We're going to step way back from retirement and start early. The the the the the phases of life. What should you be doing, just on a cursory level, at various points in your life? We know we have a lot more listeners now in their in their 20s and 30s. We don't just have people in their 50s and 60s. And so we want to give you some guidance. What should you be doing at X age? Where should you be? And then what's the next step? Is that pretty much what we're covering, Tom?
SPEAKER_04I think it is. I mean, the article is entitled Financial Priorities Decade by Decade: An Expert Guide for Your Thirties to Your Sixties, which I thought missed the mark right off.
SPEAKER_01From source it.
SPEAKER_04I don't remember the source. I don't know. It's just generic. It doesn't mine just generic, so I don't remember the mighty Kiplinger, it might be Morningstar, it might be I think it was I think somewhere on Apple News.
SPEAKER_01It's from Kiplinger. Okay.
SPEAKER_04I think they missed the mark right off the right out of the gate. Really?
SPEAKER_01Kiplinger missing the mark. They've really become a very strange publication lately. But go ahead.
SPEAKER_04Well, when you pay to play, you know, you're gonna get what you pay for. I the thing is right out of the gate, um, you're missing. I think most people, if they can do certainly anything in their teens, but in their twenties, if you could save something.
SPEAKER_01Yeah.
SPEAKER_04And save it in a tax-free Roth IRA. I I think if I did if I taught people one thing, ask Santa for a Roth IRA. Yeah. I just made a contribution to my daughter's because she's gonna max it out. I think again, with all the time she's been working this year. So, I mean, and she's 18 and she already has, you know, a lot of money in a Roth.
SPEAKER_01So she has spending, she gets to use her income as spending money and then you fund the Roth.
SPEAKER_04I make her do half of it. Oh, well, that's right. So she's setting something aside. But again, so they start in the 30s, but I think again, the first if you did nothing else in your 20s, save something and save it in a Roth. That'd be easy.
SPEAKER_01Yeah, and and and and that's it's a great habit to get into. Uh, particularly if you're in your 20s and you're living at home, so you don't have to pay your own bills.
SPEAKER_04One out of three, folks. That's what I read.
SPEAKER_01So, yeah, start in your 20s, but this article starts in our 30s.
SPEAKER_04And they do bring up some okay, I can barely remember my 30s. No, there's a few things I can remember from my 30s, and I don't remember them that fondly. However, meeting I met you in my 30s, I remember that. So that was good. That was a good affiliation.
Build Your Emergency Fund
SPEAKER_04Their n first one is build an emergency fund, which I think is that good flaws. Yeah.
SPEAKER_01And most people are because if you don't build an emergency fund, you start doing some things that can be very harmful. You get into a financial, like the car breaks down. Now you need to spend $10,000 on a car, $20 or $30 on a new car. Uh don't buy a new car, buy a used car. And you don't have it in your checking or savings, and you do have it in your $401 or your Roth IRA, and you go, Well, I need a car. I guess I'm gonna liquidate my retirement. No, that's why you want to have the emergency money first. That's actually the best starting place is an emergency pool before you do anything else.
SPEAKER_04I think so. I think especially your first job, you're setting aside something right away to do that. Number two would be uh save at least in your retirement plan up to the 401k match. At least. In other words, there's a certain amount they give you if you put in a certain amount, make sure you're doing that. And I will add to that, which they did not, um, I think every young person, and I do consider you in your 30s to be young, uh, should have a Roth IRA because one way or the other, that tax-free growth is so huge for such a lengthy period. I also added another one to this one, Don, and that is, because I see this a lot, people start a 401k and they have no idea what they're doing with the money in it. Oftentimes it remains in the money market. Oftentimes it if they have a guaranteed account or whatever it is.
SPEAKER_01And then we would suggest that you contact uh the hosts of Talking Real Money and let them look at your options and say this is what you should be doing.
SPEAKER_04No, no, no. You know what? I just did that and I'm I how I did that with the book. I made an offer for free. And that was call us on the show. Go to talkingrealmone.com. Send in your options and we'll do it. No, no, no, no, no, no, no, no, no, no, no.
SPEAKER_01You have to actually become part of the program. There's a cost to this.
Retirement Plans in Your 40s
SPEAKER_01Yeah. It's all right. Let's go to our forties now, shall we? Okay.
SPEAKER_04Yeah, we should. Uh because they're closer to something we can actually remember at this point, right? Can you remember your forties? What were you doing in your forties?
SPEAKER_01Uh uh forties. Uh that would have been forties.
SPEAKER_04Uh you can't remember. You can't that's like 30 years ago.
SPEAKER_01Oh my gosh, I was here. I was in Florida then. I had already moved from Colorado to Florida. I was working out of Walt Disney World for a while, and then in fact, 40, yeah, that would be a little bit of Disney, a little bit of uh the antique map store in celebration. Yeah.
SPEAKER_04Yep. Yeah. I can remember visiting you there. So uh they they talked to some experts about this, and they say the people that struggle in their 40s are carrying too many fixed obligations, bigger mortgages, kids' expenses, aging parents, and higher insurance costs. I think this is important because we always want to talk about the saving and investing, but oftentimes we don't talk about the other side of that equation and the spending, which if people get the spending creep, right? Now I'm in my 40s, I'm making a little more money, I can afford to do X. Maybe, maybe not. Maybe you should be ramping up how much you're spending, etc. So um, and they need to also be sure that they're that they're really having, even then, having a long-term planning uh as part of their overall situation.
SPEAKER_01Yeah, um so one, you gotta make sure the the those credit card, you're not carrying any balances on your credit cards because folks, you're losing twenty to thirty percent a year on your money. You're losing twenty to thirty. That is like being in a bad stock market every single year.
SPEAKER_04Yeah after year after year.
SPEAKER_01And a bank if you put your money into an investment that went down twenty, thirty percent a year, you'd consider yourself fairly stupid if you kept doing that. Uh that's what credit cards do. And then once you get those credit cards down, the your 40s is when you really need to get serious about retirement. Yeah, and you're gonna be able to do that. That's when you start contributions. You gotta look at how much I'm putting away and go, Oh, I don't think that's you need the plan needs to begin. Yeah, you don't really need the plan in your 30s, but in your 40s, you start to need at least a cursory plan.
SPEAKER_04I think that's true. And and retirement contributions should go up. Planning for children's if you're gonna be sending them to college at 529 should be increasing. And here's the other thing when it comes to the asset allocation. Many times people set up the right funds when they're 25, but they never rebalance. I think in your 40s, you need to make sure that the asset allocation, the uh percentage in each one of those funds.
SPEAKER_01Actually, I'm more worried about that in your 50s, when you start getting into the period when you you're really starting to think about not losing money going into retirement. You're just a little bit more concerned about the ups and downs of the market. That's when your portfolio is become is going to become slightly less volatile, we hope. And that's where rebalancing really comes into play. You're gonna you're gonna change the balance, you're gonna just really start to determine what your risk profile looks like in your 50s.
SPEAKER_04Aaron Ross Powell Yeah, and uh the in the article it says pay more attention to volatility. I don't think that's a particularly good idea.
SPEAKER_01No, pay more attention to your reaction to volatility and adjust your portfolio accordingly.
SPEAKER_04Yeah, they add in a health savings account. I see no reason if you can afford it not to start that in your 30s and forties, right? I mean, because that's another tax-deferred way to save. Uh you know, and I guess in your 50s, I would say at 50, at least you should have a perfunctory plan for when you might retire and how you're going to pay for it.
SPEAKER_01You need to see if you're on track. That's really the primary purpose is to say, okay, I want to retire at 65, 67, 62, whatever the age is, 71. I have saved this much so far. This is how much it has made, this is how fast it has grown, this is what I can do going forward. Are these numbers likely to pencil out in my 60s or 70s?
SPEAKER_04Wait, you can retire in your 70s? I didn't know that. That's so cool. I'm gonna put circle the calendar for myself here. So Yeah, I'm already there and I'm not. So I guess I'm teasing you teaching myself a little bit. Uh so the 50s, yeah, uh planning should be there, maxing things. I mean, you should hopefully have the income to max out all those contributions. I still like the idea of the Roth IRA, either regular contribution or if your income doesn't allow to do a backdoor. And as Don said, the asset allocation should be lessening in terms of risk a little bit because you're getting closer to needing the money or using the money.
Social Security and Healthcare
SPEAKER_04Um so then you get to your 60s. I I can actually remember my own.
SPEAKER_01This is when the the some of your decisions become pretty substantive about one of one big one, and that's when to take Social Security. We talked to a lot of people in their 60s about this, a lot of you, and there is a great deal of disagreement and misinformation and confusion around when to take it.
SPEAKER_04Yeah, and I'd say part one of that is, and it's gonna the the noise will get louder in the years ahead. Is Social Security going to be there for me? Because right now I'm hearing in seven years are gonna be a 20% reduction. You know, I would advocate here taking policy as it is today. We don't know what it'll look like in seven years, eight years, ten years. If I was a betting person, said this many times, my guess is they won't mess with Social Security because it's too integral to most people's retirement. But you could we could have a great political debate about that if you want to.
SPEAKER_01It's a political debate, and it's and it really is foolish to even dive into it because we're just speculating.
SPEAKER_04Yep. But we can tell you this remember, eight percent a year gain basically from the time you turn 62 to the time you turn 70, waiting on so Don waited, I'm waiting. And here's the other part of all that. Not just your benefit, the surviving member of your household if there are two of you. So if Don dies first, Debbie's gonna have that larger benefit. If I die first, which you can pretty much guarantee, Danielle's gonna have the bigger benefit with her after I'm gone. So it just makes a lot of sense.
SPEAKER_01And then the other thing that ties very closely in with Social Security is your uh your health care. How are your health care needs gonna be taken care of? Are you going to go on Medicare at 65? Or are you gonna continue to work and stay on an employer plan? You gotta kind of run the numbers on both of those. Uh, you got that. You've got where are you gonna live? In your 60s, that's where you got to figure out okay, where do I think I'm gonna spend the last quarter of my life? Or third and I like your optimism.
SPEAKER_04I like your optimism there. I and another one that they mentioned that I think doesn't get much mention on this program, but should probably, and that is estate planning. If your if your money or your estate is going to outlive you in some substantiative way, or not that substantiative, you should still have a plan in place for that.
SPEAKER_01As Pink Floyd said, shorter of breath and one day closer to death.
SPEAKER_04So gloomy, I just love it. Thank you. I really appreciate that. But sun's out here in Seattle, so you can get away with that kind of thing.
SPEAKER_01So these are these are our peers, these old rock and rollers. Exactly. And they were gloomy in their twenties. They were gloomy. They really were. Dark eye. Uh so you know it's kind of uh there there's a there's a different approach in every one of these decades. But the whole the big goal throughout all of them, the the resonating theme is the biggest expense you're gonna have is retirement. That's the thing you gotta plan for.
SPEAKER_04Aaron Powell And that's the biggest financial decision. I think you hear a lot of times your house is your biggest asset. But really it's not because the house doesn't
Listener Roth Conversion Questions
SPEAKER_04pay the bills. Your retirement savings will be.
SPEAKER_01Unless you take out a reverse mortgage.
SPEAKER_04Yeah, which uh we're not gonna open that can of worms right now.
SPEAKER_01But we don't have time anyway, because guess what we have to do? We got a lot of questions that came in at talkingrealmoney.com. Tom's got this big old pile, and every once in a while he looks at one of them and he goes, I think this one really needs a conversation. And then he actually makes it happen. Thanks, Don. Let's go to the phones.
SPEAKER_04Uh beautiful Etonville, Washington, where Mary joins us here on Talking Real Money. Hi, Mary, how are you? I'm doing great, Tom. How about you? Ah, just love the summer times in Seattle. I tell my wife that we got 200 days a year of this. I'd love it, but I know we're only going to get 25, so get over yourself.
SPEAKER_02It's getting better. As the years go by, it's getting better. That's true.
SPEAKER_04That's true indeed. But how can we help you today?
SPEAKER_02Well, I have a couple questions. Um, I'm looking at doing some Roth conversions uh for 26, 27, 28. And we have two uh you know, traditionals that we can pull from my husband and myself. So I'm trying to decide which one to do the conversion with. So my husband's is invested pretty safely. Mine's a little bit more aggressive. Um, we would touch his first, so we would spend down from that one first, but he's first to take RMDs. So I'm just kind of wondering which one would be the best to do the conversion from his or mine.
SPEAKER_04Yeah, I mean, so let's go up, let's just step back a little bit here on your situation because I know your husband's a little bit older, so he's but he's still gonna have 10 years until he has to start drawing from it at all, right? Age 75, correct? Yeah, he's gonna be saying 75. And you're younger than he is, so because I know that from talking to you off the air. So, I mean, so you got plenty of time. So we're not in a hurry here. And um, so let me ask you so are are either of you working or your income is pretty low right now?
SPEAKER_02Our income's low, and either one of us are working, been retired for about six years. I was blessed.
SPEAKER_04That's ripped true. Yeah. Um, so under that scenario, I probably would work his first because he does have a shorter window, even though both windows are very long. Um, I would also say I'm never going to go higher than fill in the blank in terms of the you know tax bracket. I don't want to go higher than 12, I don't go higher, whatever the number is. So I would fill that, but I'd probably start with his uh because his his window is closing sooner than yours, right? I mean, that just kind of makes sense.
SPEAKER_02And that's what I kind of thought too. But then I look at our value of them and I look at the RMDs, you know, when they come, we'd spend his down first. I don't know if it'd be smarter to do mine.
SPEAKER_04So who has the so I think from your notes here, you mentioned that you have more in your IRA than he does. So you're actually and if you're gonna try to convert, then that does become a factor, I guess. Yes, you're right about that. I wouldn't worry about how they're invested because you can build due to the fact that all this money is qualified money, either pre-tax or uh tax-free with the Ross, you can build the portfolio any way you like. So I don't think that should play into it. It is truly the amount of time and um the tax bracket and then the amounts. And seeing as how he has less than you, which is a good place for you to be, I guess. Um but uh but um the fact is his window's shorter. So I don't think there'd be a perfect right or wrong answer there. Um Okay. And I mean I think the question then kind of becomes how much each year, sort of gaming the tax system. And here's the other part. Do you have the cash to pay the taxes for that?
SPEAKER_02Yep, we do. Because I figured if I took from mine, I could get penalized because I'm fifty not 59 and a half. Correct. So yeah, so I we have the cash. In fact, I've already started paying estimated taxes for 26, full well knowing that we're gonna do a conversion at the end of the year.
SPEAKER_04Aaron Powell, which is another reason, you know, the to wait on you another year and to or two until you've reached that 59 and a half. I probably just and here's the thing about Roth conversions. When we do these with our clients, it's an it's a year-by-year thing. There isn't, okay, we're now gonna do this every year through 2029 or whatever it is. You wake up each year and you look at the situation, you look at your income, you look at the portfolio design, and then to make a decision as to you know how what we're gonna move and how that's all gonna work. So I wouldn't, I again, I wouldn't be in a hurry to do it more than one year at a time. I would be looking closely at the tax bracket, but it also make sure I had the cash to pay the um to pay the bills.
SPEAKER_02Right. Yeah, exactly. And that's kind of what we were doing. We were doing ACAs, so we were trying to keep our income low.
SPEAKER_03Sure.
SPEAKER_02And uh so now we're not worried about that. And so we're have room and you know, I just think it's silly to waste it. I just want to utilize that low tax bracket.
SPEAKER_04Which I think makes a lot of sense, yeah.
SPEAKER_02Yeah, and conversions I don't think are like critical for us because our our our tax bracket when our RMDs come in might not be that horrible, but I definitely think we'll be up in the 22, if not 24. So if you can pay 12 now, I just want to take advantage of that.
SPEAKER_04I think that's really good strategy. Again, and I again I'd be looking at that closely, making sure and the brackets could change. We don't know how that works.
SPEAKER_02Oh, exactly. Yeah.
SPEAKER_04So and but the fact is you still have a long time until you have to start pulling that money out.
SPEAKER_02Exactly.
SPEAKER_04Um but so no, I think that's a good strategy. I mean, I think you also in your note here asked about asset allocation. That's where it's tougher because you know, you have you've got an IRA, he's got an IRA, you've got a Roth, you got a Roth. I mean, you need to, if you can, look at this in its entirety and say, as a group, here we have this much in stocks, this much in bonds. We're trying to make this much, we're willing to accept this much volatility. That's where it can be difficult with a partner, and you've already mentioned this to me off the air, who's more conservative than you are, right? This is really the tough part of all this. And I have tried in my lengthy career, uh, you're gonna laugh, to try to turn Republicans into Democrats. I never it never works out very well, right? You tell people, look, trust me, this is the way things have always looked, and then what happens? 2000 comes along, or 2008 comes along, or 2020, 20. And then what people do, they say, See, I told you I was right. I want to go back to just having it all in cash. I don't want to mess around with this because I knew this would happen. So I would I I don't argue with them anymore because I th they eventually will be correct, right? It's paying.
SPEAKER_02We ran into that 22 because we retired 21, 22 came along. Right. And we were looking at his 401k, and stocks and bonds were both down, and we were both kind of like, oh gosh, I wonder if we made the right choice.
SPEAKER_04I know it's just hard. So you could you could you could technically you could manage it still saying, look, I want our household to be whatever it is, 60, 40, whatever, moderate. You guys have been great savers, you're in a great position. Um, and then just put all the bonds and the cash in his stuff and then put all the stocks in yours.
SPEAKER_02Right. That's exactly what I was thinking.
SPEAKER_04Yeah.
SPEAKER_02I look at I look at his stuff and my stuff, and I think, okay, his stuff could be the 40 and mine'll be the 60.
SPEAKER_04That's right.
SPEAKER_02Yeah, that's it.
SPEAKER_04And then complaining it will be a lot less. And you know, and you know, and and then maybe change the online login so he can't see his account. No, I'm kidding.
SPEAKER_02Well, I do yeah, and he doesn't look at all that way more. So he would never know.
SPEAKER_04Yeah. You don't we don't encourage that sort of marital uh infidelity financially, if you will. But um, but all kidding aside, I mean that's the way I would do it if I had one partner who was completely risk averse. I knew I wanted to have some growth, you know, and and we need we all need growth because inflation is an issue. It it is today, it always has been. And so we gotta we've got to make sure we're covered there. But I love the conversions. I love the fact you're thinking about all this stuff. You've done so many things right here when reading your note, and uh and I'm just uh a tickled for you both. I think it looks like a pretty great retirement to me.
SPEAKER_02Well, thanks, Tom. And quick other questions before I let you go. So uh do you think that as far as the asset allocation, I should start with my Roth and move to my traditional, maybe put a little more equities in that than what I have to balance out his um very conservative investments or I would be doing that today.
SPEAKER_04I but I would I would probably in your circumstance at least get a professional to look over my shoulder to say, here's what I'm thinking about doing. Right. Does this make sense? Yes. The Roth is where you'd want to, and you have substantial Roth holdings. That's where you want to have the riskiest of stocks. The bonds, yes, you want to put those in the pre-tax or IRA situation here. Uh because the interest or pay is not going to be taxed. So yeah, though that makes total sense. But you've got to try to do this in its totality. That's gonna be the toughest part. Because you're gonna get pushback like, well, why are you taking all this risk? We don't need to take risk. And that gets back to having a professional that looks at it and says, Exactly. You only need to make five percent a year, you're gonna be great. How about a portfolio that's half in stocks, half in bonds? Something like that. Right.
SPEAKER_02That'll be and it works, right?
SPEAKER_04Paul Merriman. Yeah.
SPEAKER_02So Paul Merriman is.
SPEAKER_04It's worked for a long time. So that's probably where you're at. And uh, and and congratulations to you being so assertive and trying to make all this happen. It's really cool.
SPEAKER_02Well, Tom, thank you for your advice. It takes a lot of pressure off with the conversion, it sounds like either one, but we'll go with Rob's, my husband's. I'll do his, and I think that's smart. And then I'm looking forward to meeting with somebody to do some uh resetting of our assets and some of our accounts.
SPEAKER_04So thank you, by the way, for uh for your kind words and for listening and uh being part of Talking Real Money. It's a pleasure.
SPEAKER_02Okay, you guys are great. Keep up the good work. I love the podcast. The radio show, I'd hit and miss, but the podcast I put my little headset on and go up in the mountains and I listen to you almost every day.
SPEAKER_04So thank you so much for that. You take care, Mary.
SPEAKER_02All right, you take care, Tom. Bye-bye.
SPEAKER_01He does that, he talks to you just like that, and then he goes to the pile, the big old thick pile. How many how many in the pile these days? About 40 seconds?
SPEAKER_04Still like 40 something. They can't.
SPEAKER_01All right, so he goes to the pile and and he reads a few of your questions. Um, today, starting with this question.
SPEAKER_04Yeah. From Los Angeles, California.
SPEAKER_01City of Angels. I thought you'd love that.
SPEAKER_04Jim uh writes, hi, Don and Tom. I enjoy your show and appreciate all your advice. My question is do I need an emergency fund in retirement? I've maintained an emergency fund throughout my working career, but as I transition into retirement in the coming months, I'm wondering what I should do with this fund. Historical reason for the fund has been financial protection in the event of job loss or major unexpected expense. Well, by retiring, I'm intentionally losing my job. I like that. Intentionally losing my job. That's funny. That's a whole new way to look at retirement. I love that. Um, and my protection from that is my my pension in retirement. Can I mention the fact that I tried to send out an all-company email to shut down? I can't do that. Okay. Well, I mean, how does it relate to this question? It relates because every time something like this happens, I think they're telling me, you're out the door, old man.
SPEAKER_01When stuff like that, oh, oh, oh, you're thinking they're involuntarily pushing you into retirement. Personally, I think you're a little paranoid. Maybe so. Anyway, uh and and to quote the Jonas brothers, you may be paranoid. I just know that because of my daughter.
SPEAKER_04Yeah, she was big Jonas. Still is, I guess.
SPEAKER_01Uh anyway, the point is Yeah, she's going to a Joe Her mom is flying up to New York. They're going to a Jonas Brothers concert together. I love that.
SPEAKER_04In my house, it would be Taylor Swift. So probably the Jonas brothers are cheaper.
Emergency Funds in Retirement
SPEAKER_04So uh back to the question. He goes on and on and on, but um the the at the end of the day, he says his target allocation for the emergency is 35% bonds, one fourth in short-term treasuries. I so the real question here is the question emergency fund in retirement, yes or no?
SPEAKER_01Yes. Still yes, because the emergency fund You're again overthinking, overdoing, overanalyzing. The emergency fund is that short-term savings, that money market fund. That's what it is. It it's that few months of not few months of of income, of spending, of of not even spending, of something happening that's going like the roof blowing off the house. You know, or just get it's sprung a leak, or you gotta replumb, or you know, the ACs go out like they do in Florida about every other day. Uh, you know, you gotta and you got a ten thousand dollar bill that you hadn't expected. That's what that's for. And then you rebuild it. But uh because you don't want to you don't want to sell your bonds in a down market. You don't want to sell your stocks in a big down market, so that's why it's there. It's just there so you don't have to sell other things. That's all. You don't have to have a lot of it, just enough to cover an out-of-pocket expense that might cause you to dip in at a bad time.
SPEAKER_04Yeah, I think that's sage advice. Uh, from somewhere in Pennsylvania, anonymous rights.
Umbrellas and Family Offices
SPEAKER_01Wow, it's a big state, Pennsylvania. That is.
SPEAKER_04What level of umbrella coverage should one have when compared to their net worth? What if their net worth is 10 million, 20 million? 401k assets are considered state.
SPEAKER_0110 or 20 million, you need to have like the giant beach umbrella.
SPEAKER_04Aaron Powell That One of those ones you can put up without having to blow away. Um in a similar fashion, is there a point where one should definitely explore a family office? Family office being your own place that manage your money. We're talking about real money here. We're talking real money here.
SPEAKER_01We're we're t again, we're talking real money there. We're not talking twenty million dollars. We're doing that's more like a hundred. We're yeah, we're nine figures now where that starts to come into play. And as for umbrellas, actually, the more money you have, the less you need an umbrella. Yeah, because you have it covered. Right. You self-insure. Yeah. Think about this. A lot of giant corporations self-insure for their health insurance plans, even. They pay for them because insurance, you most people lose when it comes to insurance. That's the way the system must work. So if you insure yourself, then you are more likely to pay less, although you're on the hook for that potentially big payout. But you you the problem is you you're betting against yourself when you're betting uh when you're buying insurance. And you're likely you're gonna lose because you're gonna lose those premiums. Yeah, you won't have the big out-of-pocket. The reason you have an umbrella is if I've got a million dollars uh of assets, and if I lose that million dollars of assets, I'm in trouble. So I might need a million dollar umbrella to cover that.
SPEAKER_04Yeah, oh especially if they're illiquid assets. In other words, if you had a home or wages that could be, you know, uh confiscated, right? If you had a big I mean, the umbrella is all about the uh completely unexpected and outrageous. Exactly.
SPEAKER_01And here's the thing you don't need a bigger umbrella as you get richer because what we're insuring against are really unlikely events. Yeah. What is the likelihood that you will do something that will cause you to be sued for damages of greater than a million dollars? Very few things. Very few things. And generally they're all car related.
SPEAKER_04Yeah, right. I mean literally car related. Yeah.
SPEAKER_01That's where we cause human beings cause the most harm and damage. It's not slip and falls because generally those come in well under a million dollars. As one who served on many government boards and agencies, uh been sued for slip and falls, it usually comes in in the five or six figure numbers, never never seven.
SPEAKER_04Have you guys had to paint any out there in beautiful celebration floor? Oh, yeah. It happens, yeah.
SPEAKER_01That's why they're that's why we have crews out here right now pulling up half the sidewalks in town because the trees lift them an inch and somebody will trip and fall. Okay.
SPEAKER_04So umbrella, I think you're right, but yeah. And in terms of the family office, that takes a hundred mil. Yeah. Yeah. At least real money. I would get time to squeeze one more in here. Yeah, we
Portfolio Choices for Retirement
SPEAKER_04have plenty. Okay. From Wagner, South Dakota. Snow. Which apparently they probably get a lot of in Wagner, South Dakota rights. Hi, Tom and Don. Thank you for your outstanding podcast. Could you please tell me the pros and cons to these three retirement portfolios? Number one, yeah. Number one, 40% US, 40% international, 10% small value, 20% bond.
SPEAKER_01Okay. Keep going.
SPEAKER_04Okay.
SPEAKER_01I'm supposed to comment on each one?
SPEAKER_04Well, I'll give you all three and then you can comment on the whole thing. Uh, number two, 40% US, 30% international, 10% AUV, AVUV, 10% SGO V, 10% BND.
SPEAKER_01Okay.
SPEAKER_04Number three, 40% U.S., 30% international, 10% AVUV, 20% bond, uh tent of short-term treasuries. I don't know what that means.
SPEAKER_01Uh latter, probably.
SPEAKER_04All three portfolios would include one year emergency fund and high yield savings account. There's almost no difference. There's not a lot of difference.
SPEAKER_01There's not a lot of difference. We're really getting into the weeds here. I mean, who knows? I literally who knows. Uh a I I'm a big fan. I'm a big fan of having, you know, like 50% U.S., 50% international. That's me.
SPEAKER_04Yeah. But in all these, you're including, you know, a significant amount of U.S. stocks, significant significant amount of international, and then you're throwing in a little bit of the smaller.
SPEAKER_01The more bonds, the lower your volatility is likely to be. So the the the scare factor, the fear factor is going to be reduced somewhat. But there's so little potential difference, it's hard to Well, in fact, we cannot possibly tell you what that would be going forward. Uh the more aggressive the portfolio, the more you have in stocks, the more you have in value in small, the better your returns would have been historically, and we imagine might be, the more you have in bonds, the less the returns, but the more comfortable the portfolio might be. That's a decision you have to make.
SPEAKER_04Yeah, I think that's true. I can tell you more and more of you ask me every day when's the big crash coming? Because people are feeling it like the market's gone up so much, and we've got this AI bubble, and interest rates are going up, and the more people have been asking when the next crash is coming since 2009.
SPEAKER_01Yeah, well, we had I mean, depends on your definition, but Well, because the market went up in 2009 and everybody went, oh, well, this is just a dead cat bounce. When are we going to get the other one? Yeah. And we've been asking ever since.
SPEAKER_04Snow also asks, at what point do I start adding the 20 percent fixed income? Because they're in four to five years from retirement, right now 100% in stocks.
SPEAKER_01Four to five years? It's usually now. No, I would say that's the same. No, but but yeah. I think now is probably the most likely scenario. If you haven't gone and taken the risk quiz at talkingrealmoney.com, go take that. That's gonna tell you a lot right there. How much risk can you stand? And then it becomes the question of how much risk you need to take. If you don't need to take a lot of risk, why take it? Are you are you just trying to be the the person in your neighborhood with the most money? I mean, maybe in your little town there you can that could be you, but on a on a national or global scale, you're not gonna win. Sorry. I hate to break it to you, not even on a state level, probably. No, but maybe in the town. I don't know how big the town is.
SPEAKER_04What was the town again?
SPEAKER_01It's a small place.
SPEAKER_04It's called Wagner, South Dakota.
SPEAKER_01Wagner? I don't even know that. I don't either.
SPEAKER_04I'm not that familiar with South Dakota.
SPEAKER_01I'm pretty familiar with the colour. Is that where they got the price on the rocks? Oh gosh. Holy cow. Is okay, she could be the richest person in Wagner. How big? Um, well, um, it is it's right in the wow. It's um, boy, it's almost dead center in the state. It's over it's kind of close to Mitchell and Yankton. Mitchell, where the Corn Palace is? You ever been to the Corn Palace in Mitchell? No.
SPEAKER_04Uh-uh.
SPEAKER_01You've never been to the Corn Palace?
SPEAKER_04No, but is that where they got the presidents up on the side of the hill there? I've been there.
SPEAKER_01No, okay, that's in the state, but not in the same area. Okay. Oh my gosh, hold on. Let's see what the pop it is. Wow. I mean how big. How big? Okay, well, on one side of Highway 46, you have first through 5th Street.
SPEAKER_04Yeah.
SPEAKER_01Okay. That's it. Yeah. And then on the other side of Highway 46, you've got uh North Street, A and B Street, and Main Street, really. Um yeah.
SPEAKER_03There's a can't believe they ruined our our city by putting that freeway right through the middle there, Don.
SPEAKER_01There's a there's a Wagner building supply and ace hardware. Well. Um, it's it's re it's really near the reservation. And there's a casino, of course, because it's near the reservation near the city.
SPEAKER_04You got an ace, you got a casino, you're all set. So we're gonna go.
SPEAKER_01I gotta figure out what the population is now.
SPEAKER_04Wagner, I gotta go. You gotta go. No, you don't. I gotta roll. Thank you for coming.
SPEAKER_01All right, I'm gonna just give you the population because you know everybody wants to know, and it wouldn't be fair to leave them.
SPEAKER_04Wagner, you're having your moment.
SPEAKER_01Yes? Uh 1,490. Yes, you could be the richest person in Wagner. Congratulations.
SPEAKER_04Thank you for listening to us in Wagner. I think that's cool. I do too. I gotta go back to Mount Rushmore. I've only been once.
SPEAKER_01So I've been several times. I I really do love the Black Hills and the Badlands and I'm sorry, the area over around Yankton, not exactly my favorite part of the country, no offense, but you know. And uh, if you have questions, well, go to talkingrealmoney.com and type them up for Tom so you can add to his paper pile, or hit the little green button and speak them to me for the Friday podcast. Either way, we're gonna try and get your questions answered in a not too distant program. And uh if you want to meet with an advisor, like a real one, like somebody like Roxy, who just got her her CFP, go Roxy.
SPEAKER_04Oh, you get to make the big announcement. Nice work. I snuck it in.
SPEAKER_01Uh you just go to talkingrealmoney.com and click on the button that says meet an advisor, and you can meet with one of our advisors for free for nothing and with no cost or obligation or high-pressure sales pitch. There. Thanks for listening. Take good care of yourselves. And we are continuing and will continue to be. I forgot to go to the word.
SPEAKER_00The opinions
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SPEAKER_00of views expressed in the podcast were current on the date recorded. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice, including any forward-looking estimates or statements which are based on certain expectations and assumptions. Although information and opinions given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness, or accuracy. Information presented on the podcast is not personalized investment advice from Ophello Wealth. The views and strategies described may not be suitable for everyone. This podcast does not identify all the risks, direct or indirect, or other considerations which might be material to you when entering any financial transaction. Past performance does not guarantee feature results, and profitable results cannot be guaranteed. We hope you realize that the information provided on Talking Real Money is for informational, educational, and hopefully enjoyable purposes only. The podcast is not trying to get you to buy or sell any financial products or securities. Instead, the program is provided as a public service by Appello Wealth, a fee-only registered investment advisor. See Appello Wealth ADV Part 2A on our website for information regarding Appello's fees and services. Apello Capital, LLC, DBA Apello Wealth, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in the states where it is properly registered or excluded or exempt from registration requirements. Registration with the SEC or any state securities authority does not imply a certain level of skill or training. Apello does not provide tax or legal advice, and nothing either stated or implied here should be inferred as providing such advice. Thanks for listening, and please visit talkingrealmoney.com for more information and important disclosure related to performance of any specific index or fund quoted in this podcast. And the lawyers get richer.
