12/19/24 "Ask Moneywise Anything" Segment + 401k Changes in 2025

The Moneywise Radio Show and Podcast Thursday, December 19th BE MONEYWISE. Moneywise Wealth Management I "The Moneywise Guys" podcast call: 661-847-1000 text in anytime: 661-396-1000 website: www. MoneywiseGuys.com facebook: Moneywise_Wealth_Management instagram: MoneywiseWealthManagement

• 0:00Speaker 00

  From the padded radio room off Stockdale Highway, here is Money Wise. Call or text in at 661-396-1000.

• 0:09Speaker 01

  I need the dollar, dollar, dollar, that's what I need. Hey, hey. Well, I need the dollar, dollar, dollar, that's what I need. Hey, hey. Said I need the dollar, dollar, dollar, that's what I need. And if I share with you my story, would you share your dollar with me?

• 0:30Speaker 02

  Securities offered through SCF Securities, Inc., member FINRA/SIPC. Investment advisory services offered through SCF Investment Advisors, Inc. SCF Securities, Inc. and Money Wise Wealth Management are independently owned and operated.

• 0:40Speaker 00

  Now, let's start the Money Wise Show.

• 0:44Speaker 03

  Good afternoon. Welcome to the Money Wise Show. We got a banging show today, man. It's gonna be great. We're gonna change it up a little bit. We got a great show, and the reason we have a great show is because of you, the listeners, have sent us a bevy of fantastic questions over the past 24 hours. Sherrod got an email question to him. Stephen got a couple of other really, really good questions that came through that we're gonna get into in the next segment. So, we're gonna turn this show into specifically a AMA, Ask Me Anything questions, right? Like the old Reddit.

• 1:27Speaker 00

  Are you gonna lose in fantasy this week, Justin?

• 1:29Speaker 03

  Absolutely not. Third time's a charm.

• 1:33Speaker 00

  Well, you said ask anything.

• 1:35Speaker 03

  Yes, I'm not gonna lose this week.

• 1:37Speaker 00

  You hear that, Sammy?

• 1:39Speaker 04

  Hey, you know what they say, "When ignorance is a bliss, it's failing to be wise." That's what I say. Richard Finuke taught me this a long time ago. Shout out to you, Richard.

• 1:48Speaker 00

  Well said.

• 1:50Speaker 03

  So, yeah, fantasy football coming down to the end. The playoffs are here.

• 1:55Speaker 04

  I think you're just sour because you got beat by a guy that actually played soccer versus football.

• 2:01Speaker 03

  But that's football, right?

• 2:02Speaker 00

  What's guy would say, "Human foosball."

• 2:04Speaker 04

  Human foosball. He said that live yesterday.

• 2:08Speaker 03

  Human foosball.

• 2:10Speaker 04

  I told him I played soccer. He's like, "No, that's human foosball."

• 2:14Speaker 00

  I'm gonna steal it.

• 2:15Speaker 03

  Nice. Uh, welcome to the Money Wise Show. We're live from the padded radio room off Stockdale Highway, live on ESPN Radio 1230 AM, 101.1 FM. And as always, streaming on the MoneyWiseGuys.com website. Uh, like I said earlier, you can call or text into the show 24 hours a day at 661-396-1000, 661-396-1000. I'm Justin Leland. Sitting here with me is?

• 2:43Speaker 04

  Sammy Abiyawie.

• 2:44Speaker 03

  Sammy.

• 2:45Speaker 04

  Hey, I'm excited for this week, man.

• 2:47Speaker 03

  I, you know what?

• 2:48Speaker 04

  It's gonna be a good game.

• 2:48Speaker 03

  It's gonna be great. It starts tonight.

• 2:50Speaker 04

  Yep.

• 2:50Speaker 03

  It's, uh, Chargers against who tonight?

• 2:52Speaker 00

  Broncos.

• 2:53Speaker 03

  Chargers, Broncos. Uh, I don't think I have anybody playing in today's game.

• 2:58Speaker 04

  I don't either.

• 3:00Speaker 00

  So it doesn't start?

• 3:01Speaker 03

  Doesn't start for us until Sunday.

• 3:03Speaker 00

  Yeah. And I think there's some games Saturday, so.

• 3:05Speaker 03

  Is there Saturday games? Okay. So probably Saturday, we'll probably have some. So it's me and Sammy. And, uh, Steven, you're up against?

• 3:13Speaker 00

  Frank.

• 3:14Speaker 03

  Frank.

• 3:14Speaker 04

  Ooh, that's a sleeper, Steven.

• 3:16Speaker 00

  Yeah, watch out.

• 3:17Speaker 04

  Yeah.

• 3:17Speaker 03

  Watch out. He's gonna use AI to beat your butt.

• 3:19Speaker 00

  I, I wouldn't doubt it.

• 3:20Speaker 03

  He probably will.

• 3:22Speaker 00

  Frankly, I don't care.

• 3:25Speaker 00

  You see what I did there?

• 3:26Speaker 04

  Oh, yeah, I saw it. That was smooth. That was smooth.

• 3:30Speaker 03

  So then the winner of these two games, obviously, head off to the championship. So I've been lurking all year in like sixth place. Just to barely make it into the playoffs. How, how bad would it suck if I won the whole thing?

• 3:44Speaker 00

  I've never won it, so go ahead.

• 3:46Speaker 04

  It'll be pretty sucky.

• 3:47Speaker 03

  It'll be pretty sucky.

• 3:48Speaker 04

  That, that's, that's, that's not even funny.

• 3:50Speaker 03

  It, you know what? It could happen. It's happened before.

• 3:53Speaker 04

  It could happen.

• 3:54Speaker 03

  It could happen. I'm peaking at the right time.

• 3:57Speaker 00

  Unlike my Dolphins.

• 3:58Speaker 03

  Unlike everybody else's teams.

• 4:01Speaker 04

  Poor Dolphins.

• 4:02Speaker 03

  Poor Dolphins.

• 4:03Speaker 00

  If I had a dollar for every time I heard that.

• 4:06Speaker 03

  Poor Dolphins.

• 4:07Speaker 00

  I would have a, I would need a financial advisor.

• 4:09Speaker 03

  You would actually need to work with it.

• 4:12Speaker 00

  But no, if you want to dive in, because these questions are deep and

• 4:16Speaker 03

  They are deep. They're definitely some thought provoking and great questions.

• 4:21Speaker 00

  And if you have any questions or comments, feel free, call or text in anytime 661-396-1000.

• 4:28Speaker 03

  Absolutely. So we got three questions that we're going to get to here in the next segment. And what I'd like to do is turn this into that, like I said, the AMA. So throw your questions out. Send those text messages in to 3961000 and we'll get to them. But make them, make them good.

• 4:46Speaker 04

  Like these, like the ones we have.

• 4:47Speaker 03

  Like the ones we have. Well, you'll, you'll see in a moment.

• 4:50Speaker 04

  Yeah, these are good questions.

• 4:51Speaker 03

  All right. Getting to the markets, what we actually do for a living. Congratulations, world. The Dow is not down today. We eked out a gain of basically nothing. It was flat, but at least it wasn't a loss. We were up 0.04% or something like that.

• 5:05Speaker 04

  0.04%.

• 5:06Speaker 03

  0.04%. We broke, we broke the 10 day losing streak. So congratulations for that. The Dow was up a whole whopping 15 points after being down 1100 yesterday.

• 5:22Speaker 03

  And we'll get to that as to kind of why, maybe a little bit later.

• 5:28Speaker 03

  But yeah, Dow is up moderately, it just barely today. And then the other two market indices, indices, the NASDAQ and the S and P were both down today. So really kind of a mixed market. And I think a lot of that has to do with basically what the Fed, you said yesterday, right? Fed said that they're going to lower interest rates maybe two times next year. Whereas Wall Street was betting on four or five. So that was bad news for the market, right? And so you saw the Dow, the S and P, the NASDAQ, all in negative territory yesterday because of Chairman Powell getting close to a microphone and

• 6:06Speaker 00

  Jay Powell.

• 6:07Speaker 03

  Given, given people news that they didn't want to hear.

• 6:10Speaker 00

  So it wasn't bad news or good news?

• 6:12Speaker 03

  Yeah, it wasn't, it was good news, I guess. Bad news for the economy a little bit because it means that inflation is still sticky. Right?

• 6:22Speaker 04

  Yeah.

• 6:23Speaker 03

  And so i- if if the Fed were to say, hey, we're going to continue on this path. We're going to lower interest rates four or five times in 2025. I think everybody on the market would have been happy with that. And we probably would have broken the streak yesterday. Right? Except for the fact that inflation is still sticky. It's kind of staying above that 2% target.

• 6:43Speaker 04

  2.7.

• 6:43Speaker 03

  We're still at 2.7, 2.8%. But on the flip side, the good news is the US economy is growing at more than 3% for like the eighth straight quarter.

• 6:55Speaker 04

  Yeah, I think 227,000 new jobs.

• 6:58Speaker 03

  230,000 jobs in the month of November. So you we're getting good numbers and concerning numbers all at the same time, still kind of this mixed bag of of information. And the Fed is gonna be a little bit cautious in lowering interest rates too fast.

• 7:15Speaker 04

  We're also had the government shutdown looming.

• 7:18Speaker 03

  We did.

• 7:18Speaker 04

  That probably plays a role in stability of the market, maybe.

• 7:22Speaker 03

  Maybe, and it's still looming. It's still looming. We don't have a vote yet, but we do have President-elect Trump backing the Republican-led compromise, I guess you will. And they're waiting to put through a vote, maybe this afternoon or evening. We don't know if that's coming up while we're on the show today, or if that's going to be coming up afterwards. But we should have a vote today. If the vote doesn't pass, well, then government shutdown starts tomorrow evening, Friday. Right? So the the gamesmanship, let the gamesmanship begin. Right? So.

• 7:58Speaker 04

  I also think that, you know, with with Powell talking about two rate cuts, I think when Trump takes office in January 20th, I think things might change. We're talking about tariffs. We're talking about job creation. We're talking about inflation. A lot of that things are at stake. So once he takes office.

• 8:17Speaker 03

  It's definitely possible.

• 8:19Speaker 04

  Maybe.

• 8:20Speaker 03

  Yeah, it's definitely possible. But I think when you're looking at overall, when you'd look at the the the stock market.

• 8:28Speaker 03

  You know, investors in the stock market are doing what? They're they're projecting forward, right? And so we've already known that Trump won the election now for a month, right? So a lot of those bets have already been placed and the Trump bump that we saw right after he won the election, now we've kind of come back down into reality a little bit. And so I think a lot of those bets have already been placed. And I think you're right that there is going to be a certain level of, you know, job creation or, um, you know, inflation coming down the trajectory that it's currently on, you know, without

• 9:04Speaker 04

  I don't think some tax policies

• 9:05Speaker 03

  Tax policies are going to change and we're going to get into tax policies here.

• 9:08Speaker 04

  Hiring and investments in general in 2025.

• 9:11Speaker 03

  And you have to remember that the US economy is just so dynamic and it's one of, you know, 300 economies around the world, right? And, you know, it's the largest, obviously, and it has the most sway on pretty much all of of the world economy where the US goes, pretty much the world follows, right? But, you know, with with the changes that are coming with a new administration, there's definitely possibility of some, uh, changes with tax policy, tariff policy, um, spending policy, you know, uh, government spending, all of those things are going to be coming into, um, really stark contrast, uh, pretty quickly. So we are going to take a quick break and we're going to come back and we're going to

• 9:54Speaker 03

  get to your questions. Trust me, you're going to want to stick around.

• 9:58Speaker 00

  Have you been putting off your finances? Seize the day. Call the Money Wise office at 661-847-1000.

• 10:14Speaker 03

  Welcome back.

• 10:20Speaker 03

  Welcome back to the Money Wise Guys.

• 10:24Speaker 04

  I guess this is Justin's top of music, huh?

• 10:27Speaker 03

  Maybe.

• 10:28Speaker 00

  A little bit, a little bit in mine too.

• 10:30Speaker 04

  Oh, okay.

• 10:31Speaker 00

  I mean, I was gonna, I was looking for the mix in with T-Pain, but I, I got T-Pain for later.

• 10:38Speaker 03

  All right, all right, all right.

• 10:39Speaker 04

  No, no, no, no, no.

• 10:41Speaker 03

  Now we're talking.

• 10:42Speaker 04

  I'm, I'm smiling now.

• 10:44Speaker 03

  Welcome back to the Money Wise Show. I'm your host, Justin Leland. I'm here with Sammy Abiyawi. And, uh, we're gonna, we're gonna get to some questions here that came through over the last 24 hours. Um, and this first one, uh, is, is multi-part. So this is probably gonna take up the full segment. Is on this, on this particular question, but I think it's gonna be a really good conversation. So Sammy, what do we got?

• 11:07Speaker 04

  What percentage of the S and P is made up by the magnificent seven? Is it close to 35, 40% now? And based on it being such a high percentage of the fund, A, do investors continue to add to the problem of said concentration by purchasing simply S and P 500 ETFs? B, and are the values of this magnificent seven getting pushed up higher inadvertently by ETF investors as a result of such large concentration? This has been bothering me because I love ETF investing, but I don't like how it appears that S and P 500 ETF investing is helping to increase the overvaluation of these already puffed up companies.

• 11:50Speaker 03

  Wow, how do we break that down?

• 11:52Speaker 00

  I mean, that's a hell of a question.

• 11:53Speaker 03

  One hell of a multi-part question. So first things first, the first part of that is what percentage of the S and P is made up of the magnificent seven? You might be asking yourself, what the hell are the magnificent seven? It's Apple, Meta, Nvidia, Tesla, Alphabet, otherwise known as Google. Basically tech companies and tech adjacent companies. The largest seven tech companies in the world. Okay. And they make up, you're, you're absolutely right. They make up an inordinate, uh, percentage of the overall S and P 500 valuation. Okay?

• 12:28Speaker 03

  Now remember, for those that don't know, that the S and P 500 is the 500 largest US-based publicly traded companies. Okay. And it's an index of all of those companies. So when you think of the S and P 500, you're thinking companies like AT&T, General Motors, Ford, Nvidia, right? You're talking to these large, large, large companies, the 500 largest. And this individual is absolutely correct. The magnificent seven makes up about 35% of the overall value of the S and P 500. Think about that for a minute. You have 500 companies and you have seven that make up over a third of the value.

• 13:14Speaker 04

  So when you're investing, you're basically creating some type of concentration risk for you because 35% is basically with seven companies.

• 13:21Speaker 03

  Would be considered a concentrated position.

• 13:23Speaker 04

  And you have 493 companies.

• 13:28Speaker 03

  That don't make up the magnificent seven, make up the other 65%.

• 13:32Speaker 04

  Yeah.

• 13:33Speaker 03

  Right. So you're absolutely right. This is a, what we would consider to be a concentrated position if you're looking just purely at the S and P 500 and its valuations. Now, the big question here is do investors continue to add to the problem?

• 13:53Speaker 03

  By purchasing simply the S and P 500 ETFs or index-based mutual funds or, or others.

• 14:02Speaker 03

  There's, there's food for thought there is that yes and no, right? You have to remember that these in a vacuum, these are companies that are traded independently of whether or not they're bought in an ETF or a mutual fund, right? You could go into your IRA or your investment account, your brokerage account right now, and you could buy meta stock just by itself, right? And that's what many, many, many people do. It's not based on an index, right? Now, the indexes, yes, are kind of required to hold if they're trying to match the index.

• 14:35Speaker 03

  Then if you're buying a ETF or a mutual fund that tracks that index, then yes, that mutual fund is going to be roughly 35% magnificent seven if you're trying to match that that index.

• 14:48Speaker 04

  So if you're investing, as an investor, you're looking for performance.

• 14:52Speaker 03

  Correct. You're looking for alpha.

• 14:53Speaker 04

  So, so you're looking for alpha. This magnificent seven have been performing really well.

• 14:59Speaker 03

  Up until recently, yeah. So Nvidia has actually had a little bit of a pullback. Nvidia was actually just added to the Dow, I believe, six weeks ago. And since then Nvidia is down like 30%. So it's actually one of the reasons why the, go back to what we were talking about, the dumb Dow. One of the reasons why the dumb Dow has been down 10 straight days. Well, Nvidia has played a part in that because Nvidia has been under pressure recently. Right? That's just recent, but in the grander scheme, like what you're talking about Sammy is that yes.

• 15:33Speaker 03

  Buying those companies.

• 15:36Speaker 03

  Nvidia, prior to its little pullback, this year alone was up almost 200%.

• 15:41Speaker 04

  Yes, that's, that's, that's what the point I was trying to make.

• 15:44Speaker 03

  Yeah.

• 15:44Speaker 04

  So if you're trying to invest and you're looking for performance, you're going to look, you're going to do your research. These top seven companies are going to come up. And based on their performance.

• 15:54Speaker 03

  If you think it's a good buy or not a good buy.

• 15:56Speaker 04

  Correct. And then you're going to invest. Now it's, I would say, I'm not an expert like you are. Offer and demand or supply and demand. If a bunch of us investors are going in and seeking the same stock.

• 16:11Speaker 03

  If there's more buyers than there are sellers, then the stock price is going to go up.

• 16:15Speaker 04

  Correct.

• 16:15Speaker 03

  Right.

• 16:16Speaker 04

  Is that what the listener is concerned is or talking about? I'm just trying to understand.

• 16:22Speaker 03

  So I think that that's probably one of the concerns is just this over concentration. And when does that end? But there are other ways to invest. It doesn't have to necessarily be in an S and P 500 index fund.

• 16:39Speaker 03

  So if you are concerned, so my, the listener that posted this question. If you are concerned about the concentration of those magnificent seven tech and tech adjacent companies.

• 16:52Speaker 03

  Then there's several options you have to reduce that impact. Okay, one of the easiest ways to do that is to invest in what's known as an equal weight S and P 500 ETF. When I say equal weight, it means if you're you're investing in all 500 of those companies, but at an equal weighting, 500 companies divided by a

• 17:15Speaker 04

  I see.

• 17:16Speaker 03

  Right? So now a half a percent of each, so you'd still own Nvidia, you still own Meta and all of that. But the concentration is no longer 35%.

• 17:28Speaker 04

  It's

• 17:29Speaker 03

  It's 3 and 1/2% or whatever the the number winds up being, right?

• 17:32Speaker 04

  That makes sense.

• 17:33Speaker 03

  So an equal weight S and P 500 index fund is going to be basically allocating the same percentage to all 500 companies, regardless of their size.

• 17:43Speaker 04

  That makes that makes sense.

• 17:44Speaker 03

  Okay, so that's one way to mitigate that concentration risk. Another way to mitigate that concentration risk might be going in and buying sectors that are not specifically tech sectors. Right? So you might have the S and P 500 index fund. But because the concentration is so high in the tech side because of the magnificent seven, maybe you buy a specific ETF that deals with healthcare. Or a specific ETF that talks about the financials, financial services industry or energy.

• 18:14Speaker 04

  Away from this.

• 18:16Speaker 03

  Away from the S and P 500. So you are basically overweighting a certain sector that you think might be underrepresented. While the tech sector is overrepresented. You see what I'm saying?

• 18:28Speaker 04

  That makes that makes total sense for me.

• 18:30Speaker 03

  Yeah, so those are a couple of really easy ways to to deal with that. But then we we go to the second part of the question. Okay. Like, do investors continue to add to the problem? Yeah, to a certain degree, yeah. I mean, we've answered that question is, you know, fear of missing out. Oh, Nvidia is up 200%. I better put all my eggs in that basket. Well, now it's down 30%, right?

• 18:56Speaker 04

  Yeah.

• 18:57Speaker 03

  Not exactly the best way to do it. And so the second part of this question says, are the values of these magnificent seven getting pushed up higher inadvertently by ETF investors? As a result of such large concentration? I would also agree and I would agree with that, that these concentrations are high already and.

• 19:20Speaker 03

  It winds up being pushed higher just simply because of like we talked about.

• 19:23Speaker 04

  Yep.

• 19:24Speaker 03

  The momentum.

• 19:25Speaker 04

  Yep. That makes that makes total sense. Great question, by the way. Learned a lot from it personally.

• 19:30Speaker 03

  Yeah. And so, I mean, there's so those two kinds of ways, like equal weight and or sector investing go or or both, right? If you feel like so so inclined, that would be an easy, easy way to do it. There's other ways to do it, diversifying beyond the S and P 500, like getting out of that and doing something maybe more international or global factor based investing, but that's a little bit more a little bit more advanced. But yeah, you so just just kind of limiting your exposure in some way by by mitigating that risk by doing the E T the ETF that's equal weight.

• 20:06Speaker 04

  Great, great answer. Great question. Should we go into the second question?

• 20:10Speaker 03

  Yeah, I think we can go to the second question. If it takes us into the next break, that's fine. We'll just pick it up where we've left off.

• 20:15Speaker 04

  What do we got? The one about the 10 year bond?

• 20:17Speaker 03

  Sure.

• 20:18Speaker 04

  All right. I have not listened to today's podcast yet, so I apologize if you answered this question already. Why is the 10 year bond rate increasing with continued Fed rate reductions like today? It seems the normal pattern is that the 10 year bond reflects the Fed's moves and often well in advance of the move. But this time has been different. Is investor behavior showing perhaps some dissonance or disagreement with the Fed's choice? Very good question, very loaded question.

• 20:46Speaker 03

  Very well worded, very well posed question. What's your take on that, Sammy? You coming from the from the banking world, you know, where do you lean on that?

• 20:56Speaker 04

  So the the Fed or the Fed rates decision yesterday is affects the short term rates, the short term rates that are used.

• 21:05Speaker 03

  Less than 90 days.

• 21:06Speaker 04

  Correct. Those are the the rates that are used for intra borrowing between banks. Those are the things that the rates that are used for inflation control. So. Typically, what happens if the Fed is signaling that they're gonna reduce short-term rates, that means that they are believing in that the economy is gonna do well. Then, to your point earlier, when we discussed it off, off air, investors are looking at the American

• 21:38Speaker 03

  Economy.

• 21:39Speaker 04

  Economy to perform over a long period of time, next 10 years, well, meaning we're gonna have a rate of return of at least four, four and a half, four and a half percent. So people, people go towards the long-term bond.

• 21:55Speaker 03

  Right. And so, so think about it, you know, the most, the simplest way to think about how the long-term bonds work. Take a look at the US GDP. We just talked about how the GDP in the third quarter was up 3%. I think the previous quarter was like 3.4%. So we've had a number of quarters, one after the other, where it's 3% or more growth. You compound that over 10 years and you come up with roughly 4.5 to 4.6%. Where's the 10-year bond today? 4.59.

• 22:30Speaker 03

  So if we, if we look at it in terms of what is, what the, the bond yields are for long-term investors, that is more of an indication of sentiment and what people are thinking the US economy is going to do over the next five, eight, 10 years. Right?

• 22:45Speaker 04

  Yes. The 10-year treasury yield is determined by market forces, is what I'm hearing you say.

• 22:50Speaker 03

  Yeah. Yeah.

• 22:52Speaker 04

  Investor sentiment and the belief that the economy is gonna do well.

• 22:57Speaker 03

  Right.

• 22:57Speaker 04

  And grow well within the next 10 years.

• 22:59Speaker 03

  And that inflation is gonna come back down into the normal range that the Fed is saying that they're going to, and that the labor market's gonna continue to stay pretty solvent and strong. You know, and that recession fears are maybe easing, or whatever the number.

• 23:12Speaker 04

  We're achieving soft landing.

• 23:15Speaker 03

  Right. Which, two years ago, I, I think everybody was saying, that's, that's a pipe dream, but here we are.

• 23:21Speaker 04

  Yes.

• 23:22Speaker 03

  Here we are. You know, the soft landing is, is actually occurring as we speak. I mean, there's still, you know, time. I mean, anything can change.

• 23:31Speaker 04

  Yeah.

• 23:31Speaker 03

  But consumer sentiment and, and, and bond buyers are saying, hey, we expect the US economy to grow at roughly 4% a year.

• 23:40Speaker 04

  And, and I mean, he came out yesterday and says, we're going to cut the rate by what 25 bips yesterday?

• 23:46Speaker 03

  Yeah.

• 23:46Speaker 04

  And you said potentially twice?

• 23:49Speaker 03

  Yeah, we're looking at probably two more times next year. Prior to, so prior to Jay Powell getting in front of the microphone yesterday, the odds on futures market for another 25 basis point drop in January at the next meeting was basically 95, 97%. The futures market was pricing in that there was like a 95% chance plus that the Fed was going to lower interest rates again.

• 24:15Speaker 04

  In January.

• 24:16Speaker 03

  In January, when we just lowered them here right now. After Fed, the Fed Chair Jay Powell spoke, that number went and flipped the opposite direction. Now it's like basically a 6% chance that they drop the rates in January. So that's one of the reasons why you saw such a big pullback in the market yesterday, because that was just a huge surprise. The market's assuming.

• 24:39Speaker 04

  Banking on.

• 24:40Speaker 03

  Exactly. The market's banking on the Fed lowering interest rates four, maybe five times next year. And then Jay Powell just pulled the rug out from everybody and said, no, we're probably only going to do two times because inflation is still sticky.

• 24:52Speaker 04

  Sticky.

• 24:53Speaker 03

  Which is, you know, the economy is still working and doing what it's supposed to, but it's not coming down as quickly as the Fed would want it to. And so therefore they're going to keep interest rates higher for longer. And you see the, the effect and what happened in the stock market over the last couple of weeks.

• 25:08Speaker 04

  Not a good question from.

• 25:09Speaker 03

  Wonderful question. We are going to go to a quick break. We've got another question coming up. So right after the break, we'll get to that one. And we've got a couple more that popped through. So keep them coming. We're going to be right back.

• 25:20Speaker 00

  Money Wise Wealth Management is the only locally owned, independent firm that uses a comprehensive wealth, tax and estate approach, working closely with a highly trusted CPA and attorney. For information on how Money Wise can help you invest and plan for your future, call 661-847-1000.

• 25:50Speaker 03

  Get your shirt back on.

• 25:52Speaker 04

  Man.

• 25:53Speaker 03

  He's over here dancing.

• 25:55Speaker 04

  Bringing some memories here, Stephen.

• 25:57Speaker 00

  He put some fire in me right now. I was over here dancing too.

• 26:01Speaker 00

  Michelle's looking at me like, what the?

• 26:03Speaker 03

  What the heck is going on in there?

• 26:05Speaker 04

  That's just the T-Pain effect.

• 26:07Speaker 00

  Yes.

• 26:10Speaker 03

  Welcome back to the Money Wise program.

• 26:12Speaker 00

  I'm gonna get Justin one of these days, watch.

• 26:14Speaker 03

  I don't dance.

• 26:15Speaker 00

  Neither do I, but T-Pain does that to people.

• 26:18Speaker 03

  He can.

• 26:21Speaker 04

  I watched this, Stephen. Just do the Trump dance, man. It's easy.

• 26:29Speaker 03

  Just shake the hands a little bit?

• 26:32Speaker 03

  Oh my goodness.

• 26:33Speaker 04

  I made my family laugh so hard. My mom cannot, can barely walk. She's got bad legs. When I visited Morocco, I told her, you walk.

• 26:41Speaker 03

  You walk like Trump dances?

• 26:46Speaker 04

  She said, you're mean. I'm like, yeah, I know.

• 26:48Speaker 03

  I know, I know. But you gotta love me, because I'm your son. Golly. Hey, so we got a couple of other questions to pop through. One is, again, this kind of goes back to kind of the taxes, what's gonna happen in 2025. What do we got, Sammy?

• 27:02Speaker 04

  Yeah, how can families start planning now to take advantage of the 2025 tax updates? Like the higher standard deduction and alternative minimum tax exemptions to minimize tax benefits and reduce liabilities? Thank you, Money Wise.

• 27:17Speaker 03

  Yeah, so there's a couple of things going on. So the standard deduction does increase in 2025, but not as much as you think it does. Okay, so for a single filer, the standard deduction is gonna rise to $15,000. Where is it today? $14,600. So it's an increase of $400 over the prior year. So it's not an appreciable, large, you know, standard deduction increase. Married filing jointly, it's gonna double that. It's gonna increase by $800. So if you're a family, yeah, I mean, it's gonna reduce your tax liability by 800 bucks or whatever.

• 27:55Speaker 04

  It's like they're using the inflation rate here, 2.7%.

• 27:58Speaker 03

  That's exactly what they're doing, because these are just. Adjustments are aimed to account for inflation, period.

• 28:03Speaker 04

  That's like, I'm like, that sounds like a number sounds like an inflation percentage that we have currently 2.7%.

• 28:10Speaker 03

  It's the same thing with what they did with the 401ks. So we're, you know, this year you can contribute 23,000. Next year it's 23,500.

• 28:17Speaker 04

  I see.

• 28:17Speaker 03

  It's basically to account for the difference in inflation. So it's really not something to bank on really per se. Now, things that are going to change after 2025, so right now, the current child tax credit is $2,000 per qualifying child. That is set to expire after 2025, which means it will revert back to its original $1,000 child tax credit. Unless new legislation is passed between now and the end of the year. The estate tax exemption. Now, this is a big one. Okay, this is the one that is.

• 28:58Speaker 03

  If you are a person of means. Right now, the estate tax exemption right now for a single individual is 13.6 million dollars. So if you have a net worth, if you're a single individual and you have a net worth in excess of 13 or 14 million dollars. You would be a subject to the estate tax under current, under the current law. If you're married, double that. It winds up being almost 27, a little over 27 million dollars. So if you are a married couple and have a net worth in excess of 27 million dollars. You would be exempt from federal estate taxes on the money below that. Anything above that would be assessed the estate tax.

• 29:44Speaker 03

  Well, at the end of 2025, if nothing gets done and Congress doesn't do it, do anything. Expect that number to be cut in half. Okay, so yeah, not a lot of people are out there swinging around saying, hey, I'm a net worth of 30 million dollars or more. There's not a whole heck of a lot of those families. Now, is there a lot more families that are in the 10 to 15 million dollar range? Yeah.

• 30:09Speaker 03

  Yeah, you're picking up quite a few more people there. So if you are somebody that's listening who has a net worth that's approaching, you know, seven or eight million dollars as an individual, or 14 or 15 million dollars as a married filing jointly couple. If you're a business owner and your business assets are maybe worth more than, you know, 15 million dollars, you want to pay attention because the estate tax rules are going to change unless there's some significant changes to the current laws. So that's, that's possible something. So as far as family planning is concerned, you know, 2025, the Tax Cuts and Jobs Act of 2017, those rules sunset in October of this year.

• 30:52Speaker 03

  Um, so there could potentially be a little bit of a higher tax rate for some individuals, some, some families. Um, not a huge amount, but there is some talk that, hey, Republicans won the Congress and the Senate. Um, they obviously have the, the White House as well. Are they going to be able to basically renew the Tax Cuts Act that was passed in 2017? And maybe make those tax cuts for individuals a bit more permanent. Right? So there's questions on whether or not that's going to pass coming forward. So, um, keep your eyes open on, on what's going to happen maybe on or around October, uh, because that's when these, um, rules actually sunset.

• 31:30Speaker 04

  Cool. Very good question. Keep them coming. I have another one for you.

• 31:33Speaker 03

  Okay.

• 31:34Speaker 04

  I keep hearing the talking heads saying that groceries will get cheaper. When is that supposed to happen? Because we went last night and it felt like food prices are still on the rise. You and me both.

• 31:46Speaker 03

  You and me both.

• 31:47Speaker 04

  I did not go to Costco, but my wife did. And guess what? I got that bill.

• 31:52Speaker 03

  Let me guess, let me guess. 450 bucks.

• 31:55Speaker 04

  499.

• 31:57Speaker 03

  Damn.

• 31:57Speaker 04

  Almost like, well, actually it's 501.

• 31:59Speaker 03

  501, like a pair of Levi's.

• 32:02Speaker 04

  I'm telling you, like, what did you buy? Oh, we bought the, you know, the prime rib roast we're going to do for Christmas.

• 32:10Speaker 03

  I was thinking you were just going to buy, you know, she, she bought like,

• 32:13Speaker 04

  Some salmon.

• 32:14Speaker 03

  She bought like six pounds of chicken and.

• 32:17Speaker 04

  And other stuff, man. Hey, I'm happy.

• 32:19Speaker 00

  Six pounds of anything.

• 32:19Speaker 03

  Six pounds of anything.

• 32:22Speaker 00

  What's funny is I, I was thinking about Sammy last night. I was watching SportsCenter and you know, Michael Pennix, the Falcons new quarterback, the rookie quarterback, they asked him in an interview, you know, where was he when he found out he was a starting quarterback? He said, I was ordering my hot dog at Costco.

• 32:42Speaker 00

  I was like, man.

• 32:45Speaker 04

  I thought I laughed when you said.

• 32:47Speaker 03

  Oh my goodness. But yeah, so the, the, the question is, you know, when are we going to start seeing that groceries will get cheaper?

• 32:56Speaker 03

  Your guess is as good as anybody's, but here's the flip side of that coin. If we do see groceries actually fall in price, and I mean literally fall in price from where they are currently, then we are in a stage of the economy known as deflation, which is worse, far worse than inflation. Okay. I know that maybe sounds counterintuitive, but deflation is actually far worse for an economy than, than a slight amount of inflation. Now, I'm not saying inflation over the past three to four years hasn't been really, really painful. Trust me. We all know. We've all felt it. A, a, a moderate pace of inflation is what the Fed is trying to do,

• 33:39Speaker 03

  which is to keep it at or around 2%. That's annualized inflation should be about 2%. We have been over the past four years well above that number. Okay. We've all felt it.

• 33:55Speaker 03

  But wishing for grocery prices to actually fall in value brings with it other concerns that would be deflationary pressures. Deflation is actually worse for the economy than inflation is at a, at a moderate pace.

• 34:09Speaker 04

  Yeah, I think what, what people are, what, what you just described. You know, we've seen price increases in the last four or five years.

• 34:18Speaker 03

  It's thirty percent more expensive than it was pre-COVID.

• 34:20Speaker 04

  Correct.

• 34:21Speaker 03

  Everything.

• 34:22Speaker 04

  Right?

• 34:22Speaker 03

  Yeah.

• 34:22Speaker 04

  So the annual two percent we're talking about, we're trying to explain, that would have been, you know, eight percent, ten percent, maybe, over the last five years.

• 34:31Speaker 03

  Yeah.

• 34:31Speaker 04

  Whereas thirty percent, to your point.

• 34:33Speaker 03

  Yeah, triple what we would have expected.

• 34:35Speaker 04

  And it's not just a result of, you know, it's a result of multiple things, supply chain challenges, weather and climate changes. I mean,

• 34:43Speaker 03

  Bird flu is causing the problems with eggs.

• 34:45Speaker 04

  I shop at Costco.

• 34:46Speaker 03

  Yeah.

• 34:47Speaker 04

  Olive oil doubled in price.

• 34:49Speaker 03

  Yeah.

• 34:50Speaker 04

  Like doubled in price. Why? Because Spain, the largest producer in the world of olive oil, had drought for the last five, six years.

• 34:58Speaker 03

  Yeah.

• 34:58Speaker 04

  So the olives were not produced.

• 35:00Speaker 03

  Therefore, yeah.

• 35:02Speaker 04

  Coffee, coffee beans.

• 35:04Speaker 03

  Don't get me started on coffee.

• 35:05Speaker 04

  Well, I did that because I know you buy a lot. Or eggs.

• 35:09Speaker 03

  Yeah.

• 35:10Speaker 04

  I love flying.

• 35:11Speaker 03

  Oh, I eat a ton of eggs.

• 35:13Speaker 04

  Me too.

• 35:13Speaker 03

  Yeah.

• 35:14Speaker 04

  So there's, there's a little bit more to, to the pricing than just.

• 35:20Speaker 03

  There, yeah, when we start talking about things like supply chain and/or disruptions in production, um, eggs right now, uh, you're gonna have that problem because we have the, the issue with, with bird flu and, and those types of things. Um, you know, and so you, you, you start seeing these prices that continue to go up. You know, will supply chain issues help to maybe bring those things back down into reality? Yes, right? But if it's a systemic thing that, hey, all prices across the board are now falling, that's not necessarily good. Now, if eggs start coming down in price to where they're no longer six ninety-nine for a dozen eggs and it drops back down into the mid-fours, that's okay because it's, that would be normal because there'd be some kind of,

• 36:05Speaker 03

  there'd be some situation where production has increased or that we've, we've sourced new eggs from different areas of the, of the, of the globe. Um, all those things can be part of it. So, you know, having a, a drastic drop in prices, not necessarily good, a, a gradual one on certain items.

• 36:24Speaker 03

  That would, I'd be welcoming that.

• 36:25Speaker 04

  Yes.

• 36:26Speaker 03

  You know, hey, I want my coffee to be more affordable.

• 36:29Speaker 04

  I think every American.

• 36:30Speaker 03

  Yeah.

• 36:30Speaker 04

  Would be welcoming that.

• 36:31Speaker 03

  Exactly. We're gonna take a quick break. We got one more question that popped through. We're gonna be talking about Secure Act. So let's, uh, let's talk about that when we come back.

• 36:40Speaker 00

  Check out the Money Wise website at MoneyWiseGuys.com.

• 36:56Speaker 03

  Welcome back.

• 36:59Speaker 04

  One of my favorite Christmas songs.

• 37:01Speaker 03

  Is that Burl Ives?

• 37:04Speaker 00

  Burl Ives, yep. Damn.

• 37:06Speaker 03

  Damn.

• 37:07Speaker 00

  What are you, a Christmas freak or something?

• 37:09Speaker 03

  No.

• 37:10Speaker 00

  How do you know that?

• 37:12Speaker 03

  Cause isn't this the one that's on Frosty the Snowman?

• 37:14Speaker 00

  Yes.

• 37:14Speaker 03

  Yeah.

• 37:15Speaker 00

  And.

• 37:15Speaker 03

  Everything he did was, it's all Burl Ives. It was all the declamation, right?

• 37:19Speaker 00

  Yep.

• 37:22Speaker 00

  Man, you, uh.

• 37:24Speaker 03

  Hey, I've had an.

• 37:25Speaker 00

  You never amazed me, man.

• 37:26Speaker 03

  Okay, so I have three boys, all have watched all of these movies every Christmas season. I've watched these movies probably fifty, sixty times if I've watched them once.

• 37:38Speaker 00

  Fifty-two many times?

• 37:39Speaker 03

  Yeah. So Rudolph the Red-Nosed Reindeer, Snowman, uh, Frosty the Snowman.

• 37:45Speaker 04

  Have you watched Red?

• 37:46Speaker 03

  I have not watched, uh, was it Red?

• 37:48Speaker 04

  It was surprisingly good for me.

• 37:50Speaker 03

  The one for, Red One, Red One?

• 37:52Speaker 00

  The first one or second one?

• 37:53Speaker 04

  No, this, the one that, that's on Prime right now.

• 37:55Speaker 03

  No, the, the Dwayne Johnson, this, Red One.

• 37:57Speaker 00

  The sequel one just came out.

• 37:59Speaker 03

  There was a second one?

• 38:00Speaker 00

  Yeah, the, the sequel's at the theaters right now.

• 38:02Speaker 03

  Really?

• 38:03Speaker 00

  Yeah.

• 38:03Speaker 03

  Didn't that first one just literally come out like six weeks ago?

• 38:06Speaker 00

  No.

• 38:07Speaker 04

  Yeah.

• 38:07Speaker 00

  No.

• 38:08Speaker 04

  Yeah, that's the.

• 38:08Speaker 00

  There's a sequel.

• 38:09Speaker 04

  Dwayne John, Dwayne the Rock Johnson.

• 38:12Speaker 00

  I just had this conversation with, with Scott Cox.

• 38:14Speaker 03

  I think you're talking about Red. I think you're messing with us, cause there's another movie called Red with like, you know, Bruce Willis, Morgan Freeman.

• 38:21Speaker 00

  Oh, that was old.

• 38:22Speaker 03

  That's old.

• 38:23Speaker 00

  Yes.

• 38:23Speaker 04

  Oh, this is a Christmas movie.

• 38:24Speaker 00

  Yes.

• 38:25Speaker 03

  Okay.

• 38:25Speaker 04

  We just watched it last night. Yes, it's on Prime.

• 38:28Speaker 03

  There's only one. Oh God. Well, let's go to the listener questions.

• 38:34Speaker 04

  Steven, you don't know, you don't know everything, Steven.

• 38:36Speaker 00

  If so, then the theater just, just emptied it then.

• 38:40Speaker 03

  It literally came off the theater's right to prime. It didn't do well enough in the theaters.

• 38:44Speaker 00

  That's probably what it is, these streaming movies.

• 38:47Speaker 03

  It's like.

• 38:48Speaker 00

  It goes to theater for a week and then it's streaming.

• 38:51Speaker 03

  Back when you and I were growing up, Steven, it was direct to video, right?

• 38:55Speaker 00

  I had to go to Blockbuster and make sure it wasn't rented.

• 38:58Speaker 04

  Oh, he said direct to video. I think Justin is talking about them bootleg ones.

• 39:03Speaker 03

  Direct to VHS.

• 39:05Speaker 00

  No, it was funny because I, I guess you guys are right, Red One.

• 39:08Speaker 03

  Yeah.

• 39:08Speaker 00

  So it was only in the theater for like a week because me and my son went and saw Moana.

• 39:14Speaker 03

  Oh, yeah.

• 39:14Speaker 00

  The sequel of that one.

• 39:15Speaker 03

  Yeah.

• 39:16Speaker 00

  And we were laughing because The Rock had two movies in the theater the same time.

• 39:20Speaker 03

  Yep.

• 39:21Speaker 04

  The most hard working guy in Hollywood is The Rock, Dwayne Johnson.

• 39:26Speaker 03

  Dwayne Johnson, just like Taylor Swift with like, you know, 10 of the top 10.

• 39:31Speaker 00

  Yes.

• 39:31Speaker 03

  30 of the top 40.

• 39:33Speaker 04

  That was, wow.

• 39:34Speaker 03

  Yeah.

• 39:34Speaker 00

  At least it's not a Post Malone.

• 39:38Speaker 04

  We have a listener question, guys.

• 39:39Speaker 03

  There we go, let's hit the questions.

• 39:40Speaker 04

  Good to hear you guys and please send our love to Gero. Definitely will. Justin, what are the big changes to Secure 2.0 next year? Is there something similar to a 401K for smaller businesses that don't have as many employees on payroll? Merry Christmas.

• 39:57Speaker 03

  Great question. So Secure Act 2.0 was passed in December of 2022. And each year, there's little caveats and little things that have been brought in. Now, this bill was like 1,500 pages long. Uh, I think they passed it before they read it. Um, and there's a bunch of stuff in there that's just kind of, it makes. So, so people that are in the industry like myself and, and, you know, other people that, that do this for a living. We're, we're looking at this and it's like, okay, some of these changes are really, really good. Some changes are really, really good. Other ones, you're like, how the heck are the third party administrators and the people that actually administer these plans? Going to keep track of what you're just asking us to do?

• 40:42Speaker 03

  Like, there's certain things where it makes absolutely no sense. So, one of the big changes for 2025 is.

• 40:52Speaker 03

  Employer matching for Roth contributions in a 401k. Prior to this year. Uh, prior to 2025. All company matching contributions, all company matching contributions had to go in on a pre-tax basis. Okay. Meaning that, hey, if I was putting money into my Roth 401k, that's great. I would pay taxes on it as current, but any matching had to go in on a pre-tax basis. So I wasn't paying taxes. So I would have both in my 401k of Roth and pre-tax. Well, now the employee can choose if they want their match to go in as Roth contributions or as pre-tax.

• 41:38Speaker 03

  Here's one of the caveats that I'm a little bit leery of. How is? Uh, how is the IRS going to treat this? We still don't have guidance. Right? The law says that this is going to change, but as, as a professional in this industry, there is no IRS guidance at this point, how an employer is going to track and make sure that that employee pays taxes on that matching contribution. Cause again, if it's a Roth, you have to pay taxes on that as if you received the income.

• 42:11Speaker 03

  So if your match for the year is say $2,000 or $3,000, how are they going to add that to your W2 or 1099 at the end of the year to make sure that you pay the taxes on that $2,000 or $3,000? We still don't know. That's one of the, the changes. Another change is that. Employers can now offer emergency savings accounts that are tied to the 401k. Okay. Meaning that, so in the past, you really only had two ways to get money out of your 401k. You were either using a loan, which was not a good option in many cases, using a loan. Or you had to use IRS approved hardship withdrawals. You had to meet certain criteria for a hardship, whether it was a medical expense or hey, I'm averting

• 42:56Speaker 03

  a bankruptcy or I'm getting my house foreclosed on or whatever the case was. You had these certain five or six things you had to do. Well, now employees can have up to $2,500 in what's basically a linked savings account that would be considered a, an emergency savings. This would have to be generated by your employer by amending their 401k plan documents to create this for you, but it is something that can be done going forward that there can be these, these emergency savings accounts that are linked up. And the catch-up contributions for high earners. So if you're somebody who makes, say, $150,000 a year and you're maxing out your 401k and you're over the age of 50 and you want to start doing catch-up contributions, you want

• 43:41Speaker 03

  to put that extra $7,500 in there? Well, guess what? If you make more than $145,000 a year, you will be required to make those catch-up contributions to a Roth account as opposed to traditional pre-tax. Basically, the IRS wants to get their tax money from those high earners right now, not later. They want it now. So yes, there are certain things that are changing next year. As far as a small business, if you're trying to do a retirement plan, there's so many different retirement plans, simple IRAs, SEP IRAs, 401ks, you know, everything under the sun, whatever the, the alphabet soup is of the day.

• 44:23Speaker 03

  If you have questions about your company or a small business that is looking to put something together, give us a call. Call me, 661-847-1000. We'll sit down, we'll go through your, your specific goals for your company and see what makes the most sense. And I'm sure as changes happen, Justin will be. Here to to help you out. Yeah, you know, the 401k Fridays, right?

• 44:45Speaker 04

  Hey, we have we have one comment from a listener that I I really like to to to read this one.

• 44:49Speaker 03

  Okay.

• 44:49Speaker 04

  Because it gives us straight to Stephen. Yeah, sorry, Stephen, you are wrong this time. There is no sequel to Red One, and I sure hope there won't be one in the future because it was pretty bad. Have a great holiday, guys. Cheers to 2025.

• 45:05Speaker 03

  Was it that bad? I don't know. I haven't seen it.

• 45:08Speaker 04

  I actually enjoyed it with my son, to tell you the truth.

• 45:10Speaker 03

  I actually am probably going to watch it tonight. My wife wants to watch it, so maybe we'll go home and watch it, you know, and we'll probably throw, you know, Rotten Tomatoes at the television screen.

• 45:20Speaker 03

  I don't know. Hey, so anyhow, you know, thank you very much for all that you do and the listeners for the questions. Chris and Dustin will wrap up the week tomorrow with Dan Betts. He's a local veteran and owner of the Well Comedy Club. And as always, be smart, be safe, be money wise. We will see you tomorrow. Have a great evening.

• 45:39Speaker 02

  Securities offered through SCF Securities, Inc., member FINRA/SIPC. Investment advisory services offered through SCF Investment Advisors, Inc. SCF Securities, Inc. and Money Wise Wealth Management are independently owned and operated.