Wealth from Wisdom

How to Teach Your Kids About Financial Planning

December 21, 2019
Wealth from Wisdom
How to Teach Your Kids About Financial Planning
Chapters
Wealth from Wisdom
How to Teach Your Kids About Financial Planning
Dec 21, 2019
Carson Wealth

Do you remember your first lesson as a kid on how to take care of money? Getting that first crip $20 bill to start your own savings account or even filling that piggy bank with pennies – we all have memories of where our personal finance lessons started. 

How do you teach your kids and grandkids these lessons? What conversations should you be having and when? Often, learning what not to do with money is just as important as knowing what to do with it.

On this episode of Wealth From Wisdom, we’ll be talking about how kids and finance – from how to teach them those first lessons on handling money to leaving assets for them in your will and estate plan. 



Show Notes Transcript

Do you remember your first lesson as a kid on how to take care of money? Getting that first crip $20 bill to start your own savings account or even filling that piggy bank with pennies – we all have memories of where our personal finance lessons started. 

How do you teach your kids and grandkids these lessons? What conversations should you be having and when? Often, learning what not to do with money is just as important as knowing what to do with it.

On this episode of Wealth From Wisdom, we’ll be talking about how kids and finance – from how to teach them those first lessons on handling money to leaving assets for them in your will and estate plan. 



Speaker 1:
0:00
Okay, and here's the legal mumbo jumbo. The opinions voiced in wealth from wisdom with rod Carson are for general information only and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consult a qualified professional. All indices are unmanaged. I may not be invested into directly. Investing involves risk including possible loss of principle. No strategy assures success or protects from loss. Past performance is no guarantee of future results. Advisory services offer through CWM LLC, an sec registered investment advisor.
Speaker 2:
0:30
The stock market hit another all time records $10 billion in social security benefits go unclaimed every single year. The federal reserve announced that they will raise interest rates by 250,000 rocket and cost of healthcare and retirement could now run 350,000 you've worked hard and saved for retirement. That's great, but it's what you do with that money that really matters. Welcome to wealth from wisdom with Carson wealth. Carson wealth is a Barron's hall of fame advisor at recognized by Forbes magazine as one of America's top wealth advisors and they're right here in Omaha. This is where you can count on straightforward and objective advice that can help you make the most out of every dollar you've saved for retirement. Welcome to wealth from wisdom with Carson wealth. Let's think
Speaker 3:
1:14
all the way back to your childhood. Do you remember your first lesson as a kid and how to actually take care of money? We were getting that first crisp $1 bill, $5 bill 10 20 or maybe the even rare $2 bill to start your own savings account or fill up that piggy bank. Actually truly with pennies, what the penny piggy bank was created for, but we all have memories of where our personal finance lessons started. Many of us was with our first collection from a job, whether it was putting money in your piggy bank, that elusive tooth fairy or whoever else taught us about money, but now let's think about it. You've grown up a little bit. How are you teaching your kids and your grandkids? These lessons? What conversations are you having with them and when, and often learning what not to do with your money is just as important as knowing what to do with it.
Speaker 3:
2:14
Am Paul Weston today on wealth from wisdom. I'm lucky enough to be joined by Aaron Wood or vice president of planning. Aaron, welcome to the show. Thanks for having me again. Yeah, glad to have you. Welcome back. She just got back from beliefs. So tan, sunny, happy, ready to go. I'm trying to figure out how to keep this tan all winter. Yeah. Well, um, probably don't stay dehydrated but other ways. But today, Aaron, I think we're talking about a fun topic here for us kids and finance kids and grandkids and how to teach them these first lessons on how to handle money or more importantly, how to teach them the last lesson, which is you're listening right now and you're in your 80s or 90s, and you know your kids are going to get some of your inheritance. What do you want to still teach them here in life to make this happen? To help them understand. Part of your legacy isn't the dollars you give them, but the way you've taught them how to think about money or more importantly to behave about money. Aaron, so I asked the question again. Do you remember your first lesson as a kid about money? What was yours? What was your first last then?
Speaker 4:
3:20
So the one I remember most clearly is taking my son to school for lunch money. Uh, at that time, of course you had lunch money tickets or your parents would give you a check and you'd get your tickets for the week or the month or, or cash on a daily basis. And so most of my first memories amount around money, uh, involved taking money to school for lunch, money, maybe stopping at the gas station and buying some candy, going to church, putting money, uh, in the, in the plate or the offering. So those were the things that I remember. But what is interesting to me now is that was a very tactile thing, right? When you're, when you're young and you're a very small child, it's the touch, the feel. You actually remember touching the money and doing something with it. I'm very curious to see how this generation of debit cards is going to affect some of these uh, kids. Uh, you know, my, my oldest is in junior high and his idea for the longest time was a debit card where with our youngest one we've made much more effort to make sure that we do more with actual cash.
Speaker 3:
4:18
Yeah. Well I think one of the interesting things, and let's talk about faith here for a second. Faith does a smart job of having children come up and to put money in the basket. Right? So when it comes to a collection time, at many church services, they have the kids come up. And so that's often one of their first money memories is realizing, Hey, every Sunday I'm going to not only go to my house of worship, but I'm going to help provide for them. And now my church included, we go to ACH on pretty much everything. They still have the basket there for the kid. So I gotta reach to my wallet and hopefully twice. Now that's, yes, yes. They've learned, well, they've always been hitting twice. There's been a second collection for a long time. Uh, th th that's a money memory for many kids.
Speaker 3:
5:00
Others I think about lemonade stands. Yeah. How many of you grew up selling girl scout cookies? Nickel a dime. I was driving my eliminates the only other day and it was a dollar. So then I didn't know if it was capitalism, commercial inflation, what that was. Uh, but also I think about that first job and for many people was that delivering newspapers, shoveling driveways, uh, mowing lawns, all babysitting, all of those things. And what did you do with it? Did you go to the convenience store and buy a bunch of bubble gum or did you save up to buy a video game? People, all different elements of the really spectrum, but I think it's our responsibility as parents and grandparents to teach kids the fiscal, fiscally responsible things to do. There's this phrase out there, Aaron, I like to use no surprise to you. Nature versus nurture, right?
Speaker 3:
5:57
So inherently kids are going to have their internal belief system on is it best to to be a saver or spender. Most people fall in one of those two categories. Well, and so much of that again comes from those first money memories, right? That we'd already talking about. If you gave your child a dollar and the first thing that they did was buy an ice cream cone with it. Well that was instant gratification and the next time they have a dollar, they want to go get that ice cream cone. Whereas if you taught them to say Pavlov's dog there, there's a, the marshmallow test they've done with kids to see how many of them can, can wait and get two marshmallows. But the idea of what was that first money memory and what did you do with it? Teaching someone to save money for those bigger goals, bigger experiences.
Speaker 3:
6:42
It takes a little bit more effort than just here's a dollar, go buy an ice cream cone. Yeah, they don't get it. So we may say, Hey, as a child we're going to let you spend some, donate some or give some and then save some. And save should be the majority. Remember that people always don't understand abstract comments or abstract ways to look at it. Algebra is agreed upon in life, right? Uh, somebody can understand like, Hey, I put the money in the bank, therefore I can get money back out of the bank. But if I tried to explain to a 10 year old the power of compound interest, do you think they're going to get it? No. Most likely not. No. My daughter is just turned six. She has her piggy bank and she also has the savings account. She understands the piggy bank and she will not let me take the money out of the piggybank and go put it in the savings account because it's too abstract for her.
Speaker 3:
7:34
For her. She can touch it, she can feel it, she can take it out of that piggy bank. But the idea of it being in the bank and her getting more, um, doesn't exist yet. Yeah. And I think that's what's important with your grandkids, by the way. So you're listening to your grandparents today. Same fundamental philosophy. So you're giving them money or you're taking them to the store. You should help them think through these things where at the end of the day, we're, we're very much visual learners. Aaron, I know you people that some of our team laughs. I mean not you people, but you are, one of the people is I love writing on our whiteboard. I love explaining abstract really ideals, um, and ideas and actual thinking in a very simplistic way with kids though, you have to make it visual with your grandkids. By the way, think of it this way.
Speaker 3:
8:22
We're talking about giving money to kids, but what's the greatest way people give money, their kids' inheritances or via their trusts. And as soon as I say the trust word, most people like, Oh, it doesn't apply to me. The reality is it applies to so many people because all you're really doing is creating a trust to transfer assets from one person to another. Correct. It's just a vehicle. It's like your piggy bank. You're putting your money in your piggy bank as a vehicle to use it for something else, your trust is that piggy bank? Correct. I always liked to talk about the trust. The same way I talk about it is it's just a bucket. You all the goods in the bucket, it has the handle and you move it to wherever you need to move it to. Uh, because there are so many things that flow into it and you can title them that way so that you can transfer them wherever you need to transform.
Speaker 3:
9:07
But it is a very abstract idea that the same thing as we're talking about the piggy bank to the savings account. Yeah, and I think it'd be interesting to see for many of them. So think about going into a convenience store. If you gave someone $5 at a convenience store and said, all right, spend it on whatever you want. You're going to have some people in there that go buy something that's close to $5 as possible, pick one item. Then you have other people who are going to go in there and buy 30 if 30 items is cheap, they're gonna buy all the Laffy taffy. He's right, the most inexpensive, and you're going to find the other people somewhere in the middle that are trying to maximize and hit that $5 on the nose in terms of what they have and what they're trying to get.
Speaker 3:
9:50
And then you have the others who are the ones who go in and say, you know what? I'm going to buy the candy bar and I'm going to pocket the rest for sure. Or are those that go in there and have the $5 in spend seven so then you got to go bald two more out of the pocket. The point we're trying to make here on your help with this Arunos's, everybody's different. And what we teach people growing up is one of the most important things we do to help lay the groundwork. You can't, you can't do math without understanding how to add, subtract, multiply than divide. Right? You can't go with it. And from that you can't speak Spanish unless you begin learning words or any foreign language and then phrases and then senses and grammar and on and on and on. Let's say we look at wealth.
Speaker 3:
10:34
If you don't have a foundational knowledge about money and finance in your wealth, then you're not going to be able to understand in a timely fashion all these other complicated things. And so a couple of fun facts here in 2019 so this is according to the AI CPA, which stands for the American Institute of CPAs, kids average actually today, $30 a week in allowance. Wow. 30 that was a little higher than I thought. Me too. Maybe I pay less or you ate last area. I pay my kids zero in allowances. Yeah, zero well so that you help keep the average on into that barbell. But the hourly pay rate for kids who have to earn their allowance according to the survey is approximately $6 and 11 cents. So in order to earn that there, they're essentially doing what, five hours of work at home, a week? Chores? I don't I, it sounds farfetched for me.
Speaker 3:
11:32
I mean thinking about most kids, their chores are load the dishwasher, unload the dishwasher, take out the garbage, maybe you desk, maybe you vacuum clean your room, which should actually just be a normal, put away your laundry. Five hours to me seems really high for kids chores. I mean we live on an acre and a half and even to mow our lawn in the summer, we're still only talking an hour a half. And so that just seems really high to me that that much of chore work is being done. Yeah. Well really what they're doing [inaudible] let's ignore the dollar amount, maybe for a second. They're actually being smart about it though is and allowance helps create a budget and the budget, they know if they do X amount of work per week, they get paid Y and the budgeting is something people need to learn early.
Speaker 3:
12:16
Cause if they don't, they then often don't figure it out till too late when they've made, not small mistakes, but big mistakes. So actually we've built a worksheet for everyone. It's called the family budget. It's called financial empowerment at your fingertips. If you'd like a copy of it, just text us to 33 four four four so just put in the number on your texts. Three three four four four text the word budgets, B. U. D. G. E. T. S. I'm glad I had to spell that. That was probably too elementary, but send us a text and we'll be happy to send you that and you can sit down and have a great conversation with your family. You're listening to wealth from wisdom.
Speaker 2:
12:49
Do you own an annuity? Inflated fees and commissions could be costing you an arm and a leg. Get straightforward and objective advice from Carson wealth by calling. (888) 419-8513 are you caring for an aging parent? Are you concerned about the skyrocketed cost of healthcare and longterm care or do you have questions about how to best manage an inheritance? We can help call Carson wealth today at (888) 419-8513 and now back to wealth from wisdom with Carson wealth. Hey, welcome back.
Speaker 3:
13:20
This is Paul. Wes joined by Aaron Wood here today. So are talking about some of the most important things in our life, right? Our family are the number one important thing in our family. And we really have, you know, besides raising them well and creating all the ethics and morals and principles we of our kids, one of the principles that we often forget about is, is budgets and helping them create situation in their finances. And I've talked about this on the show before, it's still fascinating to me that part of grade school and high school curriculum does not mandate kids learning basic finance. Now that's, that's a mistake in our, in our whole entire education system. Well, not only is it a huge mistake, but we've heard it from so many of our clients. No one ever taught me this, I never had this class. And so people grow up to be adults and then they end up having shame that they don't understand something or they don't feel like they have control of their finances.
Speaker 3:
14:15
And so they come into us many times uncomfortable, fearful, feeling ashamed. I'll because of something that wasn't taught throughout their whole education. That should have been. Yeah. And you talk a lot about behavioral characteristics. So there's a lot of people probably, because I don't know, maybe I'll ask you. So if people are what we call money avoiders that just don't want like to talk about it and avoid that, is there, is there actually behavioral evidence behind why they're avoiders? Are they born with it that way? Or is it because they were never trained and taught that when they were growing up there for this because they weren't taught about it, they just avoided it then therefore, later in life they avoid it. So it absolutely has to do with things you learned. You were growing up
Speaker 4:
14:52
many times. It has to do with, uh, a situation where, uh, you saw your parents doing something and you didn't quite understand it. So as a child, your brain will process things differently. So, for example, if you were a family that grew up in, you were very privileged, um, and you owned a company or your family owned a company, but everyone who worked for you, um, did not have the same type of uh, income and all of their kids, uh, you know, were suffering while those kids Poe poke fun and, uh, you're the outsider. Well then you end up being very shameful because you were an outsider as a kid. Um, or the other extreme of that is that your parents, um, had one parent who earned all the money and the other one hid. They would go out and they would shop and they would hide money and they would do things. And so you end up picking up pieces of that without really understanding the full dynamics of the situation. And as a child, you take that in and you internalize it as an adult, you end up having, um, some of the side effects. And so learning through those first money memories we were talking about in the last segment are your first money memories, positive or negative. And if you have negative first money memories, lots of times that carries through to your whole adulthood.
Speaker 3:
16:01
Yeah, well we tend to stick, uh, the, those pain points in our lives. Uh, they stick with us forever or we have a hard time releasing them from our memory banks. And I think it's so important for us to think about because I don't like it when someone isn't going to avoid her, but I understand it now at least as in our profession, many of you recognize when we talk about this all the time on the show, that we are fiduciary. So we have a legal and ethical obligation to always do what's in our client's best interest. Um, we're an advisor. You and I are both CFP, so of certified financial planners. We're also held to certain standards, of course, that we do for our clients. But that doesn't mean we don't cross this realm in the behavioral as well. So we can give advice on what makes sense from an X's and O's, but we also have to understand the person sitting across the table from us, why maybe they're afraid of money or why maybe they're afraid to risk and, and make, um, investments in the stock market or why maybe they don't want to invest in alternative asset classes because their parents complained about losing money in those grown up.
Speaker 3:
17:11
And we have to take life's experiences to turn them into the reality. And we get a lot of life's experiences, of course, through college. Both good and bad. Many experiences for most of us. Yeah, there's probably a few of us that have forgot a couple of those are experiences, whether on purpose or not. But there's so many great ways and I think about having children and that my parents is like, you want your kids to be happy, healthy and safe. Right. And as part of this journey though include school and for a lot of us key goal is getting our kids into college and then getting our kids, um, you know, to have a successful college career now, not scandalous where we have to pay for it to get there.
Speaker 4:
17:55
But these conversations, the same as, you know, talking about how do we save money or how do we spend money helping our kids to decide how to divide up what goes into saving or spending. The same type of conversations need to be happening around the future of their education. Just saying that you're going to go to college and not helping them think through the cost of different schools or different careers. Uh, you know, here in Omaha we have UNO and we have Creighton. If anybody tells me they want to go to Creighton and be a teacher and take out full student loans for that [inaudible] crazy. The type of cost to the type of income that you'd be able to get don't equal up. And those are the types of conversations I think frequently get missed by parents when they're talking to their kids. About school, it's just the, Oh, you're going to go to school, not what are you actually going to get? What's the cost of it? What makes the most sense? And then how do we pay for those things.
Speaker 3:
18:42
Yeah. And I think [inaudible] crate may not like you for that answer there. I'm sure you know has a great teaching program. I've been told, so no bit, this is all you're doing is a math conversation here as well. [inaudible] assuming if teaching programs are both same playing field in terms of what they teach you and prepare you to become a teacher in real life, your compensation is not going to change a lot no matter how much you spent at your university. Correct. So therefore it's hard for a financial plan or to recommend. Now we have to then think about, Oh, what are the qualitative features? Which school are you going to enjoy more? Which one you're gonna have better social relationships? Which one? Proximity. All of those things get into factor. But in the X's and the O's, it's actually a pretty easy decision.
Speaker 4:
19:30
You know, my niece is a senior this year and she is actually going to go to school to be a teacher. And she was looking between, uh, South Dakota and college of Saint Mary. And one of the conversations that she had is I said, you know, how did you make that decision? And her decision was, South Dakota makes you do student teaching for a year, but you have to still pay to be a student and you have to be a student teacher in the state of South Dakota. We're a college of Saint Mary was six months. She could go anywhere she wanted. And so, you know, listening to her how she thought through that. Um, my brother and sister in law have obviously done a fantastic job with her thinking through the realm of, you know, Oh, I just don't want to pick a school. What is, what are the X's and O's that come with that, that I'm, I'm signing up for? And then I'm going to have to ultimately pay for,
Speaker 3:
20:14
yeah. So let's talk about one of the best vehicles to help for our kids for college. They're called five 29 plans. Uh, each state has some different nuances, so be aware of things we may talk about your state specific information may be a little bit different, but usually related to one item and one I own all the deductions and tax deductions that that's often the big difference. Uh, the five 29 plans, as you know, simply you put the money in, it can grow tax deferred and as long as you use it for tuition, room and board books, et cetera, it qualifies for tax free distributions. So it's one of the best techniques you can possibly do to help pay for education. But little known facts sometimes we as parents want to give some money to our kids is they are a little bit older in life.
Speaker 3:
21:02
And why do we want to do that? Because we want to help pay for education. However, that's super nice and they're very appreciative of everybody that does that. However, did you know that when you have a five 29 plan and it's in the parent's name, let me give you a case of point. You as a grandparent decide to give $10,000 to your kid because you want to help your grandchild with school. So you gave the $10,000 to your child, they then put it in a five 29 for the half the kids or just hold it in a bank account. Well those are then counted on what's called the FAFSA, the FAF essay, which is the fine financial aid filing form that's used by these higher education universities across the country. So when your five 29 plan is titled in your grandparents' name, it is not included in the calculation where FAFSA cares about one thing. Mainly mom and dad. A little bit about the kids. Uh, they don't want him to hide all the assets in the kid. Right. But they also can't go out and look at grandparents or other relatives, aunts, uncles. I mean, so this is a technique in running financial planning. Aaron, I'm sure your team recommends all the time. Correct.
Speaker 4:
22:15
Having the five 29 and the grandparent's name can be very helpful in different situations. Uh, the one caveat to that is you want to make sure you would draw those monies from the five 29 the later years of the college experience because the income that comes out of them then would count against that student. So giving you the example of that, let's say that the parents, you know, end up saving 20, $30,000. Grandparents had an another $10,000. They put aside, do you want to spend the parents by 29 money first and then spend the grandparents later because then that would not affect the financial aid. Great tool to do that. Absolutely. Keep it out of that. FASA. Allow yourself to have access to other types of student aid as well.
Speaker 3:
22:57
Yeah. I want to reiterate what you said right now cause this, this happens frequently and we see this is if you have a parent in the grandparent, both have a five 29 for a kid, the sequencing of who's you pull out first, super important, uh, and regularly, the simplistic way is pull out the parents first, but you just really should talk to, uh, a CFP or certified financial planner will help walk you through this process will work. So let's share some fun facts here. So, um, let's say you had a child in 2018, so in 2036, they're 18 years old. The projected cost of a public university will be $180,000. How's that feel? Terrible. Yeah. Terrible. That's more than my first, Oh my boss will say, you go to a private, now you're talking $303,000 or sources CNBC there. So tuition of four year public schools has risen almost 20 per, excuse me, a little bit over 200% in the last 30 years, 200%.
Speaker 3:
24:04
I had seen a chart a while back that had the comparison over time and it had, uh, the cost of a brand new car, the cost of a home and the cost of a college education that graphed 'em out on the chart. And 20, 30 years ago, the cost of a brand new car was the same as the cost of college. And now we're having that same conversation that the cost of college is the same as a home. That is a huge, huge difference more than people's homes. I mean it now it's an investment like a home as an investment. But boy, you sure get to enjoy the home for a longer period of time. Hey, people have a lot of questions about five 20 nines. If you do, just shoot us a note info@carsonwealth.com that's info ifo@carsonwealth.com. Let's talk, we'll help provide you information related to your specifics because the reality is is we're giving you advice today on wealth from wisdom. It is overarching, but everybody's situation is unique. It's a little bit like your fingerprint. Everybody has one. Your situation is personalized. Your FAFSA form, by the way, is personalized. It's based on your data, so if you're filing for it while your overall financial plan isn't any different, if you want to help shoot us a note, we'll be glad to talk to ya.
Speaker 2:
25:13
I'll give you some advice. Any major decision in life is worth getting a second opinion and financial planning is no exception. Let's talk about how you could make your money go further in retirement than you ever thought possible. Call Carson wealth. Just schedule your free initial analysis now at (888) 419-8513 do you have a lot of assets but are short on cash? Learn how you could leverage your assets to free up cash with Carson wealth by calling (888) 419-8513 and now back to wealth from wisdom with Carson wealth. Hey, welcome back to alpha wisdom. Paul last with Aaron Wood here today.
Speaker 3:
25:50
No, we're talking about what are those wise things is we're educating our families, but more importantly our children and our wealth. Our wisdom. Our job is to help give you information to help you be informed to make the right decision at all periods of time. Uh, and again, when we always ask people what's most important to them, uh, family of course family is always ranked number one. So we're talking about good ways to implement financial techniques, whether it's teaching your kids how to save money in a piggy bank, teaching them what actual compound interest is. I know it sounds boring teaching the parents how to put money in five 29 plans, but let's talk about passing money onto our children. So there's this thing that you've probably heard about. You're watching the news and hear about this, what we call the great wealth transfer. They're expecting 68 trillion, not billion, but trillion dollars to pass on from the baby boomer generation to their millennial kids.
Speaker 3:
26:49
Wow. Not only wow, but you know, I felt like I got skipped cause I'm neither one of those groups and they just like leapfrogged over me. Well, does that make you feel bad? Yeah. 68 trillion. How do I get into that? They're already passing along to your next generation. So, um, so why bring it up though is, is there's a lot of money moving and we see so many people make mistakes is that they don't structure up their accounts. Um, their trusts their five 29 plans correctly, so they ended up, they don't transfer as much money as they could be. You know what's funny is you walk down the street and if you saw a dollar bill just laying on the street, you'd grab it in a heartbeat, right? Yeah. A penny. You would grab it in a heartbeat or maybe not quite as quickly. You might have honey.
Speaker 3:
27:37
Uh, so, but with that, we, we forget that when something's on paper or something that's in an electronic account, we don't count the pennies or we don't count the dollars or we don't get as hyper focused on them. But we should, we're, we're making a huge, huge mistake. For example, estate taxes and estate taxes for next year. So it's going to be 11.5 8 million per individual, which then equals 23.16 for married filing jointly. Um, these create opportunities or challenges. Um, there's also things, gosh, something passed earlier this week. What was that called? The secure act, the secure act. So I'll be interested to see, you know, we've been talking about this for months, that this was coming and it looked like it was going to pass. But what is really unique is we're, you know, looking at January 1st, only a couple of weeks away. And this is not something we're, we're, we're staging into this.
Speaker 3:
28:32
This is not something where we're going to say it's going into effect 2021. No, it's going into effect and just a couple of weeks. And so for anyone who hasn't been paying attention to it the last few months, uh, and isn't aware of, um, the upcoming changes, they could be taking out RMDs that are unnecessary. Or unfortunately, if someone passes away in the first couple of weeks of the year and they haven't restructured, uh, their trust documents, they might be in a whole world of hurt. Yeah. I'm telling you right now, uh, and you've probably seen a lot of content out from Carson wealth on the Carson group this week about this. This is single handedly the most important retirement plan. Um, that's been passed since 2006. So it is something you need to pay attention to and an air, maybe it's worthwhile for us to just talk about a few of the themes. Number one, if you have an inherited retirement account, so an inherited IRA used to be able to do what we call stretch it, right? Right. For as long as you're living. Yup. So now though, there's a new rule, they just crunched the 10 years. Yes. And that 10 years is very fascinating in the way that they've done it because you don't have to take
Speaker 4:
29:42
it evenly over 10 years. And so the difference between the stretch IRA and this new rule is that the stretch IRA was saying, here's what you have to take every single year. It is very structured. This is just in 10 years, the account has to be empty. So if you forget or don't take anything in years one through nine or the minimal amount, nobody's gonna come and say to you, you have to take this out. And all of a sudden in year 10 you've take it all out and then that all hits your taxable income and in one year. So there's some really big tax planning that could go around this of making sure that you're taking the distributions in the right year and minimizing your taxes as much as possible. Yeah, and a big reason why people don't take it all out is they either aid needed for income or B, Hey, I got this because of a cherish loved one is no longer on this earth.
Speaker 4:
30:28
And it just, it feels good knowing that they gave something to me that I get a little bit from each year and now there's going to be a finite end period to that faster than most people thought it was gonna happen. So that's one super important. Nobody loves paying, nobody wants to pay any more taxes than they have to. This is actually create a scenario where you may have to, depending on your age, actually most people will, depending on how we're looking at those children are in a higher tax bracket than their parents are. Yeah, I mean most of it, you know, are people who are in RMD stage or are taking their RMDs and have some social security, but that's most of their taxable income where the individuals who are going to be inheriting this are in their working years are in the higher tax brackets already.
Speaker 4:
31:06
So number two, we'll bring up, if you're listening and you've heard of Lucille on the show called all the time, the dreaded RMD standing for required minimum distribution. The rule used to be once you turn age 70 and a half, which I hated that half while we simplified it for you. Now Erin. Yes. Age 72 yep. Yeah. Is that, what do you think? Is that good or bad? So I think for a lot of individuals it is good in the sense that it gives them a little bit more time. That half really messed up a lot of people. Uh, there are so many people who missed it. Uh, and then they had to pay the penalties and the fines on that. So this gives them a little bit of a delay. There's also a lot of people who are still working at 70, and so they were taking out RMD is out of one account and trying to put money in on another and account.
Speaker 4:
31:51
And so it is making that part simpler. Uh, but you know, there's a whole slew of other people where we get and have talked about, uh, when you retire up until those RMD years, those are some good tax planning years for us. So if you retire at 65 and now you don't have to take RMDs till 72, and that gives us a couple more years to do some really good tax planning in that meantime. Yep. Um, so another item that came out of this is annuities are now allowed in all 401ks. I gotta tell you, Aaron, this is one I got really mixed feelings about. I would imagine you would, you've been pretty vocal in your opinions on these. Yeah. Well. So here I'll say it this way. Annuities conserve a purpose to help people really need guaranteed income. Receive it, right? That's why they're designed when, when, when a financial advisor agent says you have to go into annuity,
Speaker 3:
32:41
uh, and that, or that's all they sell are annuity products. That's what just gets my blood boiling. So from my perspective, uh, there is always a place, a percentage of people need different types of investment tools. And so an annuity does give you that guaranteed income. But there's also a whole segment of people which we've talked about before, that, um, behaviorally maybe spend more than they should, where an annuity gives you a, here is what I can spend and gives them more comfort and honestly protects them from themselves of spending what they shouldn't be spending. And so there is a, a pocket of people that I've always seen that this has a good tool for them. But for those individuals who that's the only thing they're being offered. And that's the only thing, a person sales, uh, putting it into a 401k is a very scary thing.
Speaker 3:
33:28
And this was a big win for the insurance companies. Honestly, their lobbyist, uh, obviously put a lot of muscle behind this and it is a big win for them. Yeah, it certainly is. And I won't get on my soapbox on doing fiduciary responsibility. Uh, I've yet to see an insurance company that is a true fiduciary rather than worried only about is this product suitable for a client. But that's a whole nother show. I'm not going to get it. And I tell you the other thing that I wanted to bring up two more things is one good news for those of you who want to keep working past age 70 is you keep contributing to a retirement plan. Uh, you don't have to give that up, which includes IRAs. So that is a great win for people they didn't have before. Oh, that don't bring up his social security and a lot of people, and I've said on the show, it's just around one out of two people, their only income in retirement is social security. So what did this act do for those people?
Speaker 3:
34:22
So I threw you off or you weren't ready for that question we went from, because the answer is simple, they did nothing for them. As I say, I'm like, what am I missing in this here? I had a very confused look on my face for everyone who couldn't see me cause I'm like this didn't solve anything for them. Yeah. Well I think that's my point. I don't think I know. That's my point. Aaron here is so that did nothing. And so we still have this pending 20, 34 date out there where social security is no longer going to be paying 100 cents on the dollar. So I just shared that with you is so this did some really good things. I like the secure act overall. Um, I think it's better for people for the RMDs. They're better to be able to keep contributing. Jury's still out on the stretch, IRAs, disappearance.
Speaker 3:
35:06
Um, I'm not overly happy with the annuities in the 401ks, but what I do like is, is at least our government's looking at it and trying to make some proactive decisions on giving us better ideas for retirement. And how that could potentially help us. Hey, if you need help, you know, and your IRA and your retirement and your budget, just text us. 33 four four, four, text the word budgets and we'll help you think through all of these things. It's 33 four four four to the word budgets. We'll be able help you out. We know structuring and keeping your financial plan in is difficult for yourself, but when you have a family, you have kids. Do you have a new tax law changes? That's where the experience of a certified financial planner and a financial planning firm can really assist you. You're listening to wealth
Speaker 2:
35:49
for wisdom. Have you ever wondered how do other people get away with paying fewer taxes than everyone else? Learn how you could save thousands of dollars in taxes by calling Carson wealth at (888) 419-8513 social security risk, taxes, and healthcare. This is where you can count on straightforward and objective advice on the biggest challenges with investing for retirement. And now back to wealth from wisdom with Carson wealth. Hey, this is Paul West, joined by Aaron Wood.
Speaker 3:
36:19
You're listening to wealth from wisdom. This week we're talking about how to help your family make the right decisions. Uh, we actually were just spending some time with the new secure act was, uh, announced earlier this week and we spent a lot of time on it. If you want to just read more, we got a lot of information on Carson wealth.com. Feel free to go out there. It's under insights. Uh, or you can click connect with us. We're happy to share that, but important things. Your RMD got moved to age 72. You can actually contribute to an IRA now past 70 and a half. Um, and a couple other key features are inside of there. Uh, look for more education on that from us. But what's important here is, is we think about those changes. And at the end of the day, as a financial planning firm, Aaron, we're helping people set their goals and their goals are often number one, they don't run around, want to run out of money in their lifetime. And number two, they want to take care of their families for purpose of saying not so fast. So recent Forbes article listed that only 19% of baby boomers plan to, or excuse me, 19% of baby boomers plan to leave nothing to their children. So one out of five that of you, you may say your family is most important, but you're not willing to give them money at the end.
Speaker 4:
37:34
And that may be true, but you and I have seen this from the other side. We have the conversation a lot with clients. You know, at the end of your life, your money only goes three places. You can give it to the federal government, you can give it to charity or you can give it to your children. Uh, one thing we don't talk about though is the people who plan on spending it all. And there are some of them, definitely a fourth category. Yes. And you know, generally those, those people come up right away and they're like, well, I'm not leaving anything to the three of them because I'm going to spend it. Uh, and for those individuals, uh, I think a big part of this 19% is, um, those ones who are leaving it all to charity. Um, or the ones who are planning on spending it all.
Speaker 3:
38:11
Yeah, I w I would agree with that. Um, and it's okay. I mean there's no right or wrong answer. Each one of you live your personal highs life and how you want to approach it. Um, but what I think you have to do is at least decide on what is your plan? Which one of those four options do you want to go down, give them money to the kids, give them a charity, give them money to uncle Sam or have your last check bounce on the way to the mortuary. That says an interesting thought, isn't it? It is. What happens if your check bounces? Uh, I dunno, we can call up other mortuaries and ask them. I'm sure it has happened by the way. It has to no doubt. Like for somehow miraculously Steinbrenner's not around in the year where there's no estate tax, so life happens.
Speaker 3:
38:55
But I think if you don't create a clear plan for you and your family, you're making a mistake. And it's not too early ever to talk about it. There's no magic age like, Oh, at age 80 I better start talking about this at age 75 70 60 it's whenever you're comfortable. It's whenever. And I always recommend sooner rather than later. You don't know what life's gonna throw at you. Well, I think with all money, I mean we started the show talking about, you know, how do you talk to your children about money? And the simple thing is when you start with simple equations or simple math, and over time you keep building on it, it just gets easier and easier. So having these conversations of how are we going to pass something on? I think some, so many people get caught up in the, it's a big conversation.
Speaker 3:
39:37
I don't want to have it. I don't know how to have it that they never start. And really if you just start with the simple thing of one piece of information and then the next time build onto it. So it might be, you know, we have 10 acres of land. I'm trying to decide how we're going to divide it up or I was thinking that I was going to give your sister this piece. It never has to be solid in the whole story. You can build on it over time and, and help get that, um, to the end. Yeah. May, it makes a lot of sense. And I mean I think people get fixated on Oh well the tax laws going to change or it's not and so I'm going to wait until the next tax change or such. Don't, your job is to take the information you have now and go make the best of it.
Speaker 3:
40:21
That's really no different than uh, we live in Nebraska. Of course there's quite a big affinity in this state to Nebraska football. Well, the end of the day, the coach has their players and they have to play the game with their players on the field. It's right. No different than you can get new ones. Half. No you can't. So you might as well figure it out. Um, some tidbits we share with you is, is if you have heirlooms, uh, whether it's jewelry, uh, pictures, paintings, furniture, whatever it may be, often recommend while you're still living, those are the good times to get them just because it does a couple of things. One, you're going to get enjoyment out of seeing it gifted to your children. A number two probably stops arguments down the road. We, we've seen our fair share of those around here now and it's just be smart about it.
Speaker 3:
41:11
Be a way to have a way to think about when is prudent, but also, um, be a realist here. Mom and dad. And by the way, I'm already preparing myself for this. Just sometimes your kids don't want what was super important to you, maybe isn't super important. I know it's hard. Uh, but we just got, what's that movie called? Frozen and let it go frozen too. Just cause that's out recently. You never thought you were going to get that reference from me today. And you know, I have a small child that I will never hear the end of it. I want to make sure that we actually might have that as the closing song here today just to help you out. Finally, that song, don't we? We ha we can't, we can't be upset. We can't make it personal way. And I want to share something on our strategic retreat we had the other day.
Speaker 3:
42:00
So important and I sometimes us and families, we have disagreements, right? And I'm going to share a phrase we talk about from the corporate world. I work with a lot of business owners. We talk strategy all the time. It's okay to have a battle of ideas, but we don't have to make a personal battle. All right, so we're sitting at the family dinner table or over Hanukkah, Christmas, um, whatever your favorite one is. What's the Seinfeld one? Festivus yeah, so we can have disagreements, but we don't need to take it personal. And I, and I love the phrase ology there is, is let's have candid conversations. Let's be smart about it. But at the end of the day, we're still family. And so we should be able to handle that and move on and not take everything so personal alive. So you know, your kids are older than mine are and so you're starting to see more of this like kid sharing cars or I'm having to figure out those dynamics.
Speaker 3:
43:00
And I'm interested from your perspective, how does that work when you have twins and then a junior high and they have the disagreement, how do you help them have a battle of ideas? Yeah, it's so, there's no perfect answer here. Is it just what I would say is, is when we're having a conversation and it turns into disagreement and someone starts to get up from the kitchen table, sit back down, are, we're not going to be storming away. We're not running away from this. Let's sit and finish the conversation. Um, and something I learned a long time ago was it's okay to let everyone have their say. It just doesn't mean they get their way. And I just share that phrase, ology even with my kids, because I think it helps them think through and learn. You can't run away from your problems. And you can't run away from tough conversations.
Speaker 3:
43:51
But importantly, we have to teach them how to deal with tough conversations. And they may not like the answer, but then they, they're going to have to support it. Or I think more importantly, move on as there is a lot, uh, Aaron, uh, interesting ideas out there in the world and it's, we're talking about planning for the end. I want to share a fact with you here. So do you like Pringles potato chips? I do. My husband hates them. I think they're great. I think they're great too. Well, we'll talk about Mike another time. So what's your favorite flavor of Pringles? The original and the French onion are the two that I said. French onion or sour cream and onion. Now I'm challenging. Oh yeah, I know it's green cam. That's all I know. So Pringles founder, Fred bar's last will and Testament first family requested that he be cremated, but what do you think he wanted?
Speaker 3:
44:39
Were his cremation ashes? Where did you think he wanted them to go? Please tell me he did it. Yes, he did his go scan. I think it's awesome. What flavor candy you think he chose. Oh, well, his favorite original, the start, right? Yep. That's what he chose, but he went out on life his way. He made a choice. I challenge all of our listeners to do the same thing. Figure out what you want to do and make it happen. You're going to feel way better about that. If you've got any questions for us, we're at info@carsonwealth.com Hey Aaron, I've enjoyed the show with you today. Hope everyone does. Hope you have a great holiday season here. You've been listening to wealth from wisdom
Speaker 2:
45:20
risk, social security, income taxes, estate planning. Every week we talk about how to make your money go further in retirement right here on wealth from wisdom with Barron's hall of fame advisor Ron Carson.
Speaker 1:
45:33
Okay, and here's the legal mumbo jumbo. The opinions voiced in wealth from wisdom with Ron Carson are for general information only and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consult a qualified professional. All indices are unmanaged and may not be invested into directly investing involves risk, including possible loss of principle. No strategy assures success or protects from loss. Past performance is no guarantee of future results. Advisory services offered through CWM LLC, an sec registered investment advisor.
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