10/6/26 Inflation, Pensions & the Price of Preparedness

The Moneywise Radio Show and Podcast Tuesday, October 6th BE MONEYWISE. Moneywise Wealth Management I "The Moneywise Radio Show & Podcast" call: 661-847-1000 text in anytime: 661-396-1000 website: www. MoneywiseGuys.com https://www.moneywiseguys.com/ facebook: Moneywise_Wealth_Management https://www.facebook.com/moneywiseguys/ LinkedIn: Moneywise_Wealth_Management https://www.linkedin.com/company/moneywise-wealth-management-bakersfield/ The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

• 0:00Speaker 00

  Live from the basement inside the historic Woolworths Building in downtown Bakersfield.

• 0:05Speaker 01

  Call or text in at 661-396-1000.

• 0:29Speaker 02

  Securities offered through LPL Financial, member FINRA, SIPC. Investment advisory services offered through LPL Financial. LPL Financial and MoneyWise Wealth Management are independently owned and operated.

• 0:37Speaker 00

  Now, let's start the Money Wise Show.

• 0:40Speaker 03

  And welcome to the Money Wise Show. We are live from the basement of the historic Woolworths Building in downtown Bakersfield. For the next hour, you are on News Talk 96.1 and 1230 AM, KERN, streaming live at MoneyWiseGuys.com. You can call or text into the show 24 hours a day at 661-396-1000. We are your hosts. I'm Sharad Waite and

• 1:02Speaker 04

  Sami Abiyawi.

• 1:03Speaker 03

  The dream team.

• 1:03Speaker 04

  Dream team.

• 1:04Speaker 03

  And you know what's also great? No guests today.

• 1:07Speaker 04

  Yeah.

• 1:07Speaker 03

  No guest. I mean,

• 1:08Speaker 04

  Not that I, you know, we don't love our guests. It's just, it gives me a chance to just banter with you.

• 1:14Speaker 03

  I know.

• 1:15Speaker 04

  Answer a lot of the listener questions that we have.

• 1:18Speaker 03

  I love it. Uninterrupted listener comments and questions. We've got quite a few and I just always enjoy, you know, coming in here in the morning and, and, and reading what, what questions and comments. We do try to get to all of them, by the way. We do a pretty good job there. There's a, sometimes we can't get to all of them, or sometimes they're don't, they're not airworthy, but for the most part, we do a pretty good job.

• 1:41Speaker 04

  A high percentage of airworthy questions, 98% even, I would say.

• 1:46Speaker 03

  You know, obviously, I think a lot of people are paying attention to the markets a little bit more than usual because people are tied to gas prices so much and fuel prices and, and grocery prices that that's sort of bleeding over into stock market. And then that's also, politics is starting to play in, in, into all of this.

• 2:06Speaker 04

  We're a month away from

• 2:07Speaker 03

  Yeah, less than a month now, midterm elections, you know, so that's got a lot of people, you know, sort of evaluating the economy and the economy plays a big role in where the economy is on how people vote.

• 2:18Speaker 04

  Correct.

• 2:19Speaker 03

  It's something that, you know, we're not a political show, but finances and economics bleed over into politics. And I would hope that it's the science and, and those experts that are in economics and in markets, that that influences politics. That's, that's my hope. And unfortunately, you know, I'm not a fan of politics because politics just follows the masses, you know, and tries to influence the masses over, over facts and truth.

• 2:47Speaker 04

  I don't ever see you as a politician.

• 2:48Speaker 03

  Never could be. I never, absolutely no way could.

• 2:51Speaker 04

  You say the truth too much.

• 2:53Speaker 03

  Well, then I, I think my, my skin is too thin, too. I just couldn't, you know, I would, it would just be, um, it would be, be really hard. I could see you. I could see you. Oh, yeah. Yeah. I could, if you were interested, I could see you getting into politics.

• 3:08Speaker 00

  I can totally see that, too.

• 3:10Speaker 04

  Yeah.

• 3:10Speaker 03

  Yeah, definitely.

• 3:11Speaker 04

  Maybe I should run.

• 3:12Speaker 03

  Yeah.

• 3:13Speaker 04

  Mayor, go. I'm coming for your seat.

• 3:16Speaker 03

  You talk about the mayor. I, I mean, I have so much respect for our city council members and our, and our mayor because they're, they're volunteer positions. They're not paid. They get a tiny stipend. There's a little benefit, health insurance benefit. There's a little, you know, travel reimbursement, but the, the money is not there to do it. And so,

• 3:36Speaker 04

  I was, I was at the gentleman last week and I saw a friend of mine, Zach Baschertash, and he, he's on the planning committee, I believe, and he's a stern believer of, of saving money and what have you. But so, so him and Patrick Wade were talking and he said that he had some threats against him.

• 3:56Speaker 03

  Oh, really?

• 3:56Speaker 04

  For just putting his foot down and not wanting

• 3:58Speaker 03

  For the planning commission?

• 3:59Speaker 04

  Yeah.

• 4:00Speaker 03

  The planning, I have so much respect for those also. That is, that is a labor of love. It is not an easy position to be in. You don't have really a ton of power. You're sort of this ancillary, necessary part of our local government, but you know, you don't have a final say and yet you're, you are critical

• 4:18Speaker 04

  Correct.

• 4:19Speaker 03

  in so much of the development projects that are happening.

• 4:21Speaker 04

  Yeah.

• 4:22Speaker 03

  So I have a lot, a lot of respect for all those people.

• 4:23Speaker 04

  Me too. After I heard that, I was like, dude.

• 4:25Speaker 03

  No kidding?

• 4:26Speaker 04

  Yeah.

• 4:27Speaker 03

  I would just have no, and I hear it now, like I hear people complaining about, name your city council person. And I'm like, you go and do it then.

• 4:34Speaker 04

  Yeah.

• 4:34Speaker 03

  Like, you could really do this? And, and the, there's a misunderstanding among our general population about the, the city, uh, what do they call it? Like our, not our constitution, but our, our city, uh, how are cities?

• 4:49Speaker 04

  Government or?

• 4:49Speaker 03

  Yeah. How the government is set up and how our charter, our city charter, which sort of outlines what powers do the city council have versus the mayor. A lot of people don't realize that the mayor is, is a tie vote that, and runs the council meetings. Other than that, they're our cheerleader. They're, they're the city's cheerleader, but, but they don't have the centralized control and power that you see in other major cities in this country and in the state.

• 5:17Speaker 04

  Yeah. This is not New York. This is not LA.

• 5:19Speaker 03

  No, it's not. And for better, for worse, I tend to lean towards us changing that because we're dividing up a city, a fairly large city, but we're dividing up into these different councils. And on a county level, we divide it up into different supervisor

• 5:37Speaker 03

  areas. And, and yet, you know, we, we would really benefit from a little bit more centralized, unified message.

• 5:45Speaker 04

  I, I, I know, we're not a politics show or politics show, but I do agree with you because right now, a lot of these powers resides with the city manager and, and other things. But if it's a, a position that gets elected, then you have a certain time in that seat.

• 6:02Speaker 03

  Yeah.

• 6:03Speaker 04

  And you don't get to sit there. I think we had a

• 6:06Speaker 03

  Like a term limit.

• 6:07Speaker 04

  Yes. We had a manager that was here for like 20 years.

• 6:09Speaker 03

  Oh, yeah. Yeah. Tandy was here for

• 6:11Speaker 04

  Yeah, that's right.

• 6:12Speaker 03

  It was over 20 years.

• 6:13Speaker 04

  And, and that's, to me, that's just too long.

• 6:16Speaker 03

  Yeah.

• 6:16Speaker 04

  In a, in a position of power. I love elections. I love, I love our system of election. That just gets you to be there for four years, maybe two terms, and then you're done.

• 6:28Speaker 03

  There's a downside to that though, because what if you get somebody that's really, really good and somebody that is doing all of where you would prioritize things? You'd want them in there forever. You know, you're going to get this guy out and who knows what we have to deal with now for another four years?

• 6:41Speaker 04

  I'm laughing about this just because, name one, Sharad. It's been so good that we need to keep him in office for 20 some years.

• 6:49Speaker 03

  This is why I think that it's, it's such a difficult position as a city council person is because you have control over a very small portion of the overall city because you're one vote. You're just one out of the seven votes.

• 7:03Speaker 04

  That's true.

• 7:03Speaker 03

  There's, you know, six, including the, the mayor, right? So you, you're just one of those votes. And then you're also just over your area, over your council area. And that's why I think, I really think that we would benefit from being able to have a more unified, centralized, um, charter structure where the mayor has true control and true decision-making power.

• 7:26Speaker 04

  Yeah. Cause you have the police department reporting to them. You have fire department.

• 7:30Speaker 03

  That's right.

• 7:30Speaker 04

  Yeah. All those government agencies or government offices that truly need to have a, somewhere to report to so they can be held accountable.

• 7:40Speaker 03

  Correct. Correct. But they're, but you know, they're spreading that among seven people.

• 7:44Speaker 04

  Yeah.

• 7:44Speaker 03

  And, and so, you know, you can go to your city council member as much as you want, but they, they can only do so much.

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  Cause they only have one vote.

• 7:51Speaker 03

  They only have one vote and they can only control so much within their sphere. And they're also volun, basically volunteers. They're paid very little and they all have, most of them, if not all of them, have full-time jobs that they're trying to support themselves with. And occasionally you get some of these in here that it's just a, it's just a stepping stone to go on to bigger things. And it's like, well, we don't want, we also don't want like necessarily career politicians.

• 8:14Speaker 04

  That's true, too. That's true. And we have been stepping stone for a bunch of good people that went on to some bigger cities.

• 8:20Speaker 03

  Yeah.

• 8:20Speaker 04

  Do things in, in bigger cities. Yes, you are correct.

• 8:23Speaker 03

  Yeah. Anyways, that's

• 8:25Speaker 04

  Good conversation.

• 8:26Speaker 03

  Enough about politics.

• 8:26Speaker 04

  Yeah, we do have some questions, Sharad. And the first one, I kind of like started answering it yesterday, but I'm not a licensed financial advisor. So I told the listeners that you will be here today. So can I read that?

• 8:38Speaker 03

  Yeah, yeah.

• 8:39Speaker 04

  Why don't we have pensions anymore? Weren't they safer? Why do government employees still get pensions?

• 8:46Speaker 03

  All right. Great question. This is something I'm actually pretty passionate about. When, when you look at, you know, the number of Americans that have pensions now, it's roughly 14%, 14% of the population of workers have a pension.

• 9:05Speaker 04

  Is that private or government or both?

• 9:07Speaker 03

  Both.

• 9:07Speaker 04

  Okay.

• 9:08Speaker 03

  There's any, any type of defined benefit plan. And now this, this was, it, there was a big change that took place in, in 1978. It was the section 401K of the tax code was created. Of course, we know what 401K became a household name after that. And after 1978, their IRS made some clarifying, clarifying regulations in 1981. But since then, really since the early eighties, 401K plans have just taken off. And they've dramatically replaced the

• 9:45Speaker 04

  Pension plans.

• 9:45Speaker 03

  The pension plans. And, and what that did is it shifted the burden of responsibility from the employer to the employee. Now it was up to the employee to be responsible for their savings and not the employer. There's goods and bads that come, that come about from that. And there's, I think there's lengthy debate that can still happen. And it's still happening today. We see it in the United States where somehow now the employer is somehow responsible for healthcare. Like, like, how have we gotten here? Like, I, I get it that we do it and, you know, you and I as running our businesses are glad that we can offer these benefits. But what, why has that shift, why has that burden been shifted to the employer? And now it's become a huge burden.

• 10:29Speaker 04

  Huge burden. And it's, and it's not stopping. I mean, it's, it's

• 10:33Speaker 03

  And as employers, we don't have a whole lot of control over those costs. That's a government issue and the government has done very little to try to address the costs. They've done other things, even Obamacare was a drastic change, but it didn't address the costs. All it did was basically address the, the uninsurable situation where it just guaranteed insurance, which we were paying for anyway.

• 10:55Speaker 04

  One might argue that, I mean, some, some insurance brokers, insurance people might argue that Obamacare added more burden onto employers.

• 11:05Speaker 03

  Yeah.

• 11:05Speaker 04

  Cost.

• 11:06Speaker 03

  Absolutely. Yeah.

• 11:07Speaker 04

  Cause they're passing that on to you as a business owner so they can insure other people that otherwise would not be insured.

• 11:13Speaker 03

  That's right. And they've made it a requirement to, to provide benefits. Like you, if you're going to have a business now, you, if you have at least a certain number of employees, you have to provide this service. And it's like, why is this the private employer's job? You know, this is, this is insanity. And now I, I get the other argument is, well, we can't trust the government to do it. The government's not going to fumble that. Look at all the mess that they're doing. Yeah. I get that, but we got to figure out something. Cause it's just an undue burden on the employer. So

• 11:43Speaker 04

  And it's not stopping is what, like for me as a forecaster, like I forecast budgets and whatever. When I look at that as a business owner, that's not stopping.

• 11:51Speaker 03

  Right.

• 11:51Speaker 04

  It just keeps creeping up.

• 11:53Speaker 03

  Right.

• 11:53Speaker 04

  10 to 15% a year.

• 11:55Speaker 03

  So this was the world that employers were living in back in the, in the, in the early 1900s, all the way up until the eighties, where you had about half or 40% or almost half of the employers or people's retirement was their employer pension. That means the employer was funding and, and, and, and creating that retirement plan for their employees beyond what, beyond their work, after retirement and for the rest of their life. Now, the problem with that, that, that was seen at that time, back in the seventies, was the same problem that I see employers going through now with health insurance and health costs.

• 12:36Speaker 03

  It's like, there's no end in sight of these double digit year after year increases in our premium. And so the same thing was happening with the, with the pension plans. These employers were going, how are we going to do this? And they started to fail. And we have even sent, since seen a pretty substantial loss in pensions failing. There is a, there's an insurance program that pensions have to contribute to. So if you're an employer and you have a pension, you've got to contribute to an insurance plan. It's a, it's a, it's a government sponsored, but it's, it's run like a private insurance company. It's the PBGC. That's the Pension Benefit Guarantee Corporation.

• 13:21Speaker 04

  It's like the FDIC of pensions?

• 13:23Speaker 03

  Exactly. It's like FDIC for pensions. And every, and premiums go into that. And then when a pension is starting to fail, they take over just like the FDIC would. And they could give us your assets and now we're going to do that. That has grown to about $6.4 billion in pension benefits to almost a million retirees are dependent on the PBGC's payments for that. And pensions are seeing the same problem that social security is seeing. People are living longer than we ever anticipated.

• 13:56Speaker 04

  Yeah.

• 13:56Speaker 03

  And, and retirement ages are, are going, um, uh, because people are living longer that

• 14:04Speaker 04

  They don't want to retire early.

• 14:05Speaker 03

  They don't, yes. And they also have this drain on the people that are working. So the, the people are working that are funded, are funding social security now. Whatever percentage it is, large percent is funded by workers because the people are not dying. The people that are on it and receiving pensions continue to live longer and longer. And our life expectancy continues to go up. That's one of the biggest issues. And the life expectancy has not kept up or the, the amount of, of, of, of how long people live is not correlated with when people are retiring. So people are, are, are still expecting and still wanting to retire in their sixties, but they're living substantially longer.

• 14:48Speaker 03

  And so social security benefit age, for example, has not increased at the rate as it should. I know it's not politically great, but like, there should be some compensation for the fact that you're going to be living longer, which means you're going to be working longer, but that shift in mentality hasn't happened. And you can imagine this now $6.4 billion in pension, nearly a million people in America that are, that are receiving pension from the insurance program, from their failed employer's pension. Uh, it, that's a big burden. You know, it's a big, that's a big problem. So pensions have dropped down from 40% in the seventies down to 10 to 15% now. And most of those are government pensions.

• 15:28Speaker 03

  There's, I think, less than 10% of private sector employers have a pension now. It's, it's vast majority of it is a government or state or local governments that are, are offering pensions. Um, so

• 15:44Speaker 04

  And the risk, the risk, it, it makes sense what you just described in my head because, I mean, businesses do go belly up. Depends if it's, you know, maybe the second generation comes in and just, just messes things up and the business does not survive. So passing that on into a 401K or putting the burden on the employee, in my head, I'm like, okay, that makes sense. Because when, to have a pension, you have to have some type of a longevity plan. And businesses change hands, businesses just die, businesses just sometimes stop growing. So it, it makes sense. You know, and I'm happy with 401K. I mean, it's, it gives you some type of, uh, an ability to be part of the stock market.

• 16:29Speaker 03

  Yes. Yeah. You can, you got your own skin in the game. You have control over that. You know, with a pension, you don't have a lot of control over, you know, lump sum payouts, for example. Uh, and over, over the death benefit. Whereas when it's your money, it's yours. That's, that's the good side of this move in the seventies to go away from pensions and towards 401Ks. And also, the data shows that there is a vast increase in the total amount of money that people are saving. Versus if we would have just stayed with the pension programs, we have a vast majority. Some studies show a huge difference, up to nine times more assets

• 17:11Speaker 03

  in retirement plans than what would be there in the, in pensions, going back to the 1975 pension level. And if you accounted for growth and stock market growth, we have about nine times more money saved than we would have if we just stuck with the pension. So that, that sounds like fantastic.

• 17:30Speaker 04

  Yeah.

• 17:30Speaker 03

  However, that's like everything, there's another side to the story.

• 17:34Speaker 04

  That's right.

• 17:34Speaker 03

  And that is, if you look at the average account size of, or, or the average account size of a, of a person's retirement versus the median account size, we got a big problem. So the median, the median value of a 401K is about $125,000. The average is 400,000. So more, almost three times as much.

• 18:01Speaker 04

  Wow.

• 18:01Speaker 03

  You know what, why that is and what you, you know, you gotta know the difference between the median and average. So the median is if you take the far extremes on the, on the highest and the lowest, and you just cut it right in the middle. You just go right to the middle point. That's your median. Your average is you take it all into account.

• 18:20Speaker 04

  And then you average them out.

• 18:21Speaker 03

  And then you average it out. So the fact that we have such a discrepancy between the median and the average tells us that there are huge amounts, there are massive 401Ks and IRAs out there. And then there's a ton of very, very small 401Ks. So if you have an average of $100, $125,000, let's say in a 401K, that doesn't mean that the average person has

• 18:49Speaker 04

  Yeah.

• 18:49Speaker 03

  $150,000 in their 401K. What it, what it could mean is you have a, a handful that have hundreds of millions of dollars. And then you have millions of 401Ks that don't have hardly anything in it. And so what the 401K plans have done in shifting that burden to the person is it's benefited the savers. It's benefited those people who are naturally good at saving. But it has not benefited those people who are not naturally good at saving. Cause before the employer was taking it, that's, those people who are not naturally good at saving are just dependent on what's forced on them. And for most of them, it's social security and that's it.

• 19:31Speaker 04

  I, I, I feel, in my experience, managing younger people coming into the bank or now the restaurant and other business ventures is the education piece about the 401K that sometimes does not take place.

• 19:45Speaker 03

  Yeah.

• 19:45Speaker 04

  Okay. And, and I don't know if employers fail to do that or do that on purpose because they don't want to contribute towards the matching, whatever. But there's an education piece where the younger

• 19:59Speaker 04

  A portion of our labor force does not take advantage of basically free money.

• 20:05Speaker 03

  Yes. I, I, there, there are, aren't, I don't know what the percentage is of the, the free money part, the, the free, let's call it a match. More and more companies are recognizing to attract talent. They add a match to their 401K and on top of the match, they add a vesting schedule.

• 20:22Speaker 04

  Yes.

• 20:22Speaker 03

  Cause they say, listen, we're going to give you this, but this is, this money that we're adding to your 401K is only good over, vested over 30 years, right? So we want to retain you.

• 20:31Speaker 04

  Correct.

• 20:32Speaker 03

  We don't want you leaving, so we're going to do this as an incentive. So those are, those employers that are highly focused on their talent can do that. But you have a lot of these companies that aren't, there's no match.

• 20:43Speaker 04

  It's a requirement that they are, it's a checkbox for a lot of companies where the, hey, you are required to have some type of a plan. If you have a certain number of employees and it's a checkbox at that point.

• 20:56Speaker 03

  Yeah. Yeah. It's like, it, now it's just required.

• 20:58Speaker 04

  Yes.

• 20:58Speaker 03

  You know, like especially with.

• 21:00Speaker 04

  Meeting my requirements.

• 21:01Speaker 03

  Yeah.

• 21:01Speaker 04

  And, and that's it.

• 21:02Speaker 03

  It's like if you're.

• 21:03Speaker 04

  Ask me for more than that.

• 21:04Speaker 03

  If you're a healthcare provider and you want to attract, you know, nurses and doctors and surgeons and you don't have a 401K plan.

• 21:12Speaker 04

  Yeah, good luck.

• 21:12Speaker 03

  Yeah, it's good luck, you know? Even though they know it's like, well, you know, I'm still going to be making a ton of money. It's like, now it's just expected.

• 21:20Speaker 04

  Yeah.

• 21:20Speaker 03

  That that's, that that's the case. But I agree, what you said, Sammy is like, there is an educational piece that people just don't really understand the benefits of tax deduction and tax deferral. They also don't understand that free money concept, even with a vesting schedule, they don't understand that, that employer is giving you free money. But I also think that there's a, there is an intent, unintentional blindness that people don't want to address it because nearly half of Americans are pay, living paycheck to paycheck.

• 21:52Speaker 04

  Yeah, we talked about this briefly yesterday, the statistic that we always bring up, which is the average family, American family does not have the ability to pay for $400 a, as a sudden expense.

• 22:06Speaker 03

  Right.

• 22:06Speaker 04

  Or an emergency expense.

• 22:08Speaker 03

  Right.

• 22:08Speaker 04

  And that's, that's, and, and, and now it's even worse for a lot of the population, given the gas prices. We're spending almost three to $400 on average

• 22:18Speaker 04

  on the top of whatever we spend at the gas pump. That's money that's taken away from your wallet that typically you'll spend it as going out to eat or at your grocery. Now the quality of the groceries you're buying might be lesser and lesser. So you're buying less healthy things for certain families. That's, that's, that's a problem and, and we, we touched on this yesterday. Hopefully something changes. I don't know if it's the mid

• 22:44Speaker 04

  the elections or just the wars that are taking place, or just some of the supply and demand that's taking place, but something's got to give.

• 22:52Speaker 03

  Yeah. I mean, there, this has been a struggle. Inflation and the cost of goods and services has been a struggle since the COVID.

• 22:59Speaker 04

  Yeah.

• 23:00Speaker 03

  And, and we're still dealing with that, those repercussions.

• 23:03Speaker 04

  Correct.

• 23:03Speaker 03

  It's not, no presidency has the control or the power to be able to reverse that. And I've been in awe of what our central bankers have been able to do. I was very skeptical of our central bank's ability to bring down inflation at the rate that they did. It was phenomenal. I mean, incredible. I think Jerome Powell deserves an enormous amount of credit for navigating us through that. This completely though, shades everybody's opinion on inflation because again, I always struggle with knowing how to describe this, but when you have an increase in prices, that increase never goes away. We don't live in a deflationary period. The inflation rate slows down and the amount of the price of goods and services

• 23:48Speaker 03

  is still going up, it's just not going up as much. And so with, in a very short period of time, it's all on our minds of how much we were paying for those eggs and that gallon of milk and that gallon of gasoline.

• 23:59Speaker 04

  Yes.

• 23:59Speaker 03

  And it's like, it's going to take years for it to catch up before we're like, okay, now this is normal. This is a normal price.

• 24:07Speaker 04

  I, I'm, I'm trying to get used to the no normal. I went to Von's last night, pick up some groceries. I bought that French baguette where you make the sandwiches.

• 24:16Speaker 03

  Yeah, yeah.

• 24:16Speaker 04

  It's now to $2.99, but I can assure you the size of that baguette is a lot less.

• 24:20Speaker 03

  Shrinkflation.

• 24:22Speaker 04

  Than, than, with, with a higher price.

• 24:24Speaker 03

  Yep. Yep.

• 24:25Speaker 04

  And that's what we're facing today.

• 24:26Speaker 03

  Yep. Yeah. And it's, everybody's feeling it. Business owners are feeling it, individuals and families are certainly feeling it. And unfortunately there's no easy quick fix. There's no, there's no silver bullet in all of this. That's why we like to try to give tips that are practical. And we've got more of these coming when we come up after the break. You're not going to want to miss it. We're money wise.

• 24:51Speaker 03

  Thanks for tuning in. We're money wise. We're your hosts. I'm Jared. That's Sammy. Got some good listener questions here.

• 24:57Speaker 04

  Yes, we do.

• 24:58Speaker 03

  Keep them coming our way. 661-396-1000.

• 25:01Speaker 04

  I'm very intrigued with the last one we were seeing.

• 25:04Speaker 03

  I know. I know. It's really cool.

• 25:05Speaker 04

  Ready for that one or you want to go?

• 25:06Speaker 03

  Let's, let's go to the, um, let's, let's go, let's go in order.

• 25:10Speaker 04

  Okay.

• 25:11Speaker 03

  Or actually the, there's a gold question, isn't there?

• 25:15Speaker 04

  There is two gold questions and I think we can tie both of them together.

• 25:18Speaker 03

  Okay.

• 25:19Speaker 04

  I've heard horror stories of people losing dollars in the market. And I need my husband making over a hundred thousand dollars a year, lost a hundred fifty thousand dollars. Yikes. And his friends at work lost big dollars also. What are other alternative investing rentals, buying gold? And the second question to, just to tie it, gold, does it make sense to purchase gold from Costco?

• 25:43Speaker 03

  All right, let's talk about gold a little bit. I'll get up on my platform, just a tiny, tiny bit. Cause I, I, it, I just, you know, I just really don't like when I feel like there's a, a, a large percentage of the population that's getting taken advantage of. And I think this is a place where a lot of people get taken advantage of because it's so heavily marketed. It's on every radio station. It's on every, you know, TV ad, online, internet, social media. People have been, been pushing gold as a safe haven.

• 26:17Speaker 04

  Yeah.

• 26:17Speaker 03

  As a place to go to.

• 26:19Speaker 04

  Inflation type of tool.

• 26:20Speaker 03

  You name it, anti-inflation, they, but which I have a problem with. It is not an anti-inflation tool. It, it is not shown to, to, to correlate in any significant way to inflation. So stop that. The other argument out there, and whether it's implied or not, I think they're trying to imply the people that are selling gold is that it's this safe haven and then in some sort of economic apocalypse.

• 26:50Speaker 04

  Yes.

• 26:50Speaker 03

  That this, this is where people are going to go back to the gold standard where we have a currency that's linked to a precious metal. That ship has sailed, folks. That ship has sailed and it is, I, I've yet to see any cohesive argument towards taking that, okay, if you believe that the world could get to a position to where the financial infrastructure and economics have completely fallen apart and now we're trading in gold. Help me understand how this gold is going to now be valuable, more valuable than ammunition and toilet paper and drinking water.

• 27:29Speaker 04

  Yeah.

• 27:30Speaker 03

  It's like, it's insanity to me and I, it's like, why? So you're saying we're going to get to some sort of, some sort of

• 27:40Speaker 03

  financial despair and state in the world that now we're gonna, we're gonna go back to like the stone age of like people minting their own gold coins, chipping off their little bullion and trading that to somebody else so that then they can then get what they need? Food and water and shelter? Bullets, you know, like?

• 27:59Speaker 04

  Whatever.

• 27:59Speaker 03

  If we are in that scenario, your gold is worthless. If you are really worried about that, now there's some sensible ways and we're advocates. I was raised this way in my, in, in the church that I was brought up in. Very self-reliance was a high value, high priority. Every family was required to have at least a year's supply of food. A year, you need to support your family for a full year with food and, and you need to have water treatment.

• 28:28Speaker 04

  Do you, what do you build a cave in house or?

• 28:31Speaker 03

  It's not as much space as you would think. And obviously if you're going to do, we, what we would do and what I think that a lot of organizations still push for is freeze dried food, you know, it's, it's packaged and sealed. And I am still living off of, I still have food from my year's supply from my young family. Rice that is now over, over 10, 15 years old. It's in cans and it's sealed. I just had some last weekend, cracked it open and we're, we're eating the rice, the sugar is still flour. So you're like, you're, you're sort of basic ingredients. And I think that there's some wisdom in that. I don't know that a year is necessary, but certainly three months.

• 29:11Speaker 04

  I want to be your neighbor.

• 29:12Speaker 03

  I got you covered.

• 29:13Speaker 04

  Steven and I, we're going to move next door because you're the doomsday prepper. We want to be next to you.

• 29:18Speaker 03

  I got you.

• 29:18Speaker 04

  Apocalypse hits.

• 29:19Speaker 03

  I got you covered. My, my kids, we call it, they would call it apocalypse rice. It's almost like Minute Rice. I think it's really good rice, but it tastes like Minute Rice. And they're like, oh, now we like it, like we prefer the apocalypse rice over whatever store bought rice. But I think that there's some wisdom in having, being prepared for some major catastrophic event. In California, especially because of the chances of an earthquake. We have a major earthquake here on the San Andreas that's going to run right in our backyard.

• 29:47Speaker 04

  The big one.

• 29:48Speaker 03

  The big one is going to shut down services for a while. Are you, you, we all should be prepared for that. You need a go bag. Everybody needs that go bag, but they also need, I think three months is reasonable, very reasonable. And it's doable. Costco sells those buckets, you know?

• 30:03Speaker 04

  Correct. And so I'm, I'm, I'm getting on this, on your bandwagon here. Because frankly, I've been thinking about it. Now I think I'm a smart person, so what am I going to do with my gold in that case? I mean, I'm going to have to go to Jared and buy from Jared. And Jared was like, yeah, your gold is worthless to me. I don't need it.

• 30:19Speaker 03

  Yeah.

• 30:20Speaker 04

  I will exchange it for you. You have some fresh fruits. I'll give you this.

• 30:23Speaker 03

  Exactly.

• 30:23Speaker 04

  Armageddon rice I have.

• 30:25Speaker 03

  Yeah. You got some beef? I'll, I'll trade you for some beef.

• 30:28Speaker 04

  Correct.

• 30:29Speaker 03

  Like what is good is gold. Like, so there's going to be a new monetary system? This is the same argument that I have for crypto and cryptocurrencies. It's like, okay, well, tell me this world that we live in, that all of a sudden now we're all abiding by these, you know, this currency.

• 30:42Speaker 04

  Can you answer this for me then? I mean, let's say, I mean, let's follow this, this analysis here just for a second. And gold is, you know, secure and that's anti-inflation and what, what have you. It's, it's, do we have enough of it in the world?

• 30:56Speaker 03

  No, no, there's not enough in it. Like that's the thing is like, there's a, there's, that's why the, you know, one of the main reasons the US got off the gold standard. Like the writing was on the wall.

• 31:06Speaker 04

  Yeah.

• 31:06Speaker 03

  You know, that we, you can't continue, you know, going down this road.

• 31:09Speaker 04

  I think people, to your point, people get rage baited into social media, other things. I mean, hearing in, in, in the news that Netherlands came to America and took its gold away. And that's a sign of, you know, things are going into the wrong direction.

• 31:25Speaker 03

  Yeah, right.

• 31:28Speaker 03

  It's so here's my take on gold and let's address gold and Costco buying gold. I don't see, I don't see the value personally in owning physical gold. I get how some people like that. I think there's a psychological, for better or for worse, there's some psychological benefit that people feel by having the physical gold in their safe, buried in their backyard, wherever it is. However, and I think Costco is a reasonable place for that to happen. You have to remember, anybody that's going to sell you gold is going to mark it up because they're not only looking at the spot price, they're looking at future contracts and they

• 32:06Speaker 04

  Not like hot dogs?

• 32:07Speaker 03

  It's just like hot dogs. They've got to make their little money. Costco keeps that reasonable. I think I saw somewhere it's under 4%, which a lot of people can get that money back by how they're buying at Costco, what card they're using, for example, and their, and their, their member benefits. So you can get it really close to cost. However, it doesn't take into account your, your storage costs. And a big one that a lot of people don't think about is that you have to pay a collectible tax on that investment because it's a precious metal. You don't get the benefits of a stock or a bond where you have a, a long-term capital gains where some people it's zero. You don't pay any capital gains if you hold it over a year, depending on what your income tax bracket and your short-term capital gains are capped.

• 32:52Speaker 03

  Whereas gold, it's not. You pay a 28% capital gains on, on gold when you sell it. That's a third, Sammy. You give up a third of your, you give up a third of all of what you own.

• 33:03Speaker 04

  Just, just.

• 33:04Speaker 03

  Just to, just to have that. And that's insanity to me.

• 33:08Speaker 04

  Yeah.

• 33:09Speaker 03

  Now, if, however, now let me explain at Money Wise and the Money Wise philosophy and strategy that we believe in is, is a very academic approach, which involves a strong emphasis on allocation. And I define allocation as the allotment of money towards certain asset classes. Gold and precious metal is an asset class. And that asset class is what we call in our world, alternatives, the alternative world. And an alternative world is the investments that do not correlate one-to-one to the stock or the bond market. Sort of, it sort of acts on its own. That is a huge benefit for, for portfolios.

• 33:52Speaker 03

  They benefit really greatly by having a percentage, and I mean a fairly small percentage, under 20%. Sometimes, usually it's between 5 and 10% in an average portfolio that you have in alternatives. So that would be like, you know, real estate, gold, precious metals. And, and that is not in your portfolio because you think it's going to triple in value. It goes in your portfolio because of how it reacts to the other investments inside your portfolio. And when you get those other investments and those different parts and those different sectors within your portfolio, counterbalancing each other, it gives you a lot more predictable,

• 34:33Speaker 03

  predictability in the long-term future of how that portfolio is going to turn out. And in those cases, you can use ETFs or even mutual funds for, for that gold portion of your portfolio, which you can hold very inexpensively. You can hold these ETFs, the internal expenses on some of these are very, very low and.

• 34:54Speaker 04

  It gives you exposure to that.

• 34:55Speaker 03

  Gives you exposure to that.

• 34:56Speaker 04

  Segment.

• 34:56Speaker 03

  Yes.

• 34:57Speaker 04

  Of the assets.

• 34:58Speaker 03

  Correct. You don't have to worry about the storage fees. You don't have to worry about.

• 35:02Speaker 04

  You can benefit from the growth if it takes, if it takes place.

• 35:05Speaker 03

  Yes.

• 35:06Speaker 04

  But you're also diversified, so you can manage your risk.

• 35:09Speaker 03

  Yes. And, and, and people will say, well, it's a piece of paper. It's, it's just a digital form of the gold. It's like, no, these are, these are just like your stock or your bonds. It's linked to an asset. Now, you can argue what that asset and that value of that asset is and it value, you know, it's traded very, very quickly. Gold is the same way and gold ETFs are the same way. They have to own, they have to physically have that gold. When we're talking about gold mutual funds or gold ETFs, there has to be a storage facility somewhere that is where it's linked to true gold. So it'd be just as if you were owning it there, but they're, they're handling all that at a much reduced cost because they're doing economies of scale.

• 35:49Speaker 03

  So it's built into the, the, the, uh, the rate, the fee.

• 35:55Speaker 04

  So this person talked about losing money. And I'll, I'll talk from my own experience. When I was very, very young banker, I invested in my 401K and I chose the designation, what I've picked is the stock of the company I was working for. Unfortunately, 2008 happened. I was working for a bank. A lot of the banks just took a turn.

• 36:15Speaker 03

  Yeah.

• 36:15Speaker 04

  Right?

• 36:16Speaker 03

  Right.

• 36:16Speaker 04

  And then I made a choice. I was like, okay, if my next employer, I am not going to do 401K. I'm just going to take my cash and I'm going to invest it in real estate.

• 36:25Speaker 03

  Yeah.

• 36:25Speaker 04

  So guess what I did? I missed on two opportunities.

• 36:28Speaker 03

  Hmm, yes.

• 36:30Speaker 04

  I concentrated everything on real estate. It's not, it's not, it hasn't been a bad investment, but I missed the opportunity on the stock market that has been growing since the 2008 at a rate of 12, sometimes 20%.

• 36:42Speaker 03

  Yes.

• 36:43Speaker 04

  Right?

• 36:43Speaker 03

  Right.

• 36:44Speaker 04

  And, and it took me a while to catch up. So that's, you always talk about this. Don't try to time the market. It's time in the market.

• 36:52Speaker 03

  Yes.

• 36:53Speaker 04

  And it happened to me personally.

• 36:54Speaker 03

  Yeah.

• 36:54Speaker 04

  Because I made a choice that was not a good choice because I missed on some years.

• 37:01Speaker 03

  Well, you had, you still had the greatest, the most important trait, which is you recognize the importance of continuing to sock, sock money away. At least you were doing that.

• 37:10Speaker 04

  Yes.

• 37:11Speaker 03

  Like even if somebody is just putting their money and they're putting it in gold, I wouldn't agree with that, but at least you're saving.

• 37:15Speaker 04

  Correct.

• 37:16Speaker 03

  And you're putting it over a long time.

• 37:17Speaker 04

  I did. I've always been a good saver and I've done that. I've just missed like the time.

• 37:22Speaker 03

  Could have been more.

• 37:23Speaker 04

  Could have been more.

• 37:24Speaker 03

  Yeah. Yeah. Um, we got another, uh, great listener question that kind of is talking about this, this sort of, um, same thing, um, about the, uh, the money lost in the nineties. Did you see that?

• 37:39Speaker 04

  Yeah, that's the one. That's, that's talking about the husband and wife.

• 37:43Speaker 03

  Oh, yeah.

• 37:43Speaker 04

  Yeah.

• 37:44Speaker 03

  Yeah. You already read that?

• 37:45Speaker 04

  Yes.

• 37:46Speaker 03

  Okay. Yeah. So we, we addressed the gold part of this. I want to address the, the reduction. This is a common, like your story, this story that our listener said, saying that they've heard horror stories of people losing money in the market. In the nineties, my husband, who's making over a hundred thousand dollars a year, lost a hundred and fifty thousand dollars. Yikes. You know, like, that's big money.

• 38:08Speaker 04

  So that's, that's just like, like my scenario. I was 26 years old and I lost a hundred thousand dollars that I had saved in my 401K.

• 38:16Speaker 03

  And that.

• 38:17Speaker 04

  Because I invested heavily in the company I was working for and their stock went from $50 or $55 over to $4.50.

• 38:28Speaker 03

  Oh geez. Yeah. Yeah. And that, that, that's, there's one issue there. Like if, if you are overly concentrated in your employer's stock, that's a very risky thing because not only is it your paycheck, but it's also your future paycheck that you're relying on for them. And, and so you want, if you're diversified in your 401K though, I've heard these horror stories where somebody says in the nineties, especially dot com bubble, like markets were lost 50%, you know? And if somebody was over concentrated, which a lot of people were in dot com companies that were worthless, they lost sometimes 90, 100% of what they, what they put into it. And whereas if you were, if you're diversified, you don't want to freak out. And let me give you some reasons why.

• 39:13Speaker 04

  Yes.

• 39:14Speaker 03

  If you're, if you're, if you're diversified, take the dot com bust that happened from 2000, 2002, we lost roughly 50% of the market from peak to trough. It lasted two and a half years, Sammy. It fell for two and a half years. From the time of, of the very bottom until it recovery was just four and a half years. So we're talking about a seven, roughly a seven-year period before. If you just remained invested, you were back. You're back where you were. And then if you just hung on, we all knew what those years did after that. We had huge gains in the market, leading up to the great financial crisis and the great recession in 2008.

• 39:53Speaker 04

  Yes.

• 39:54Speaker 03

  So, uh, so you, you would have enormous gains during that time. Now then you go fast forward to the great financial crisis. We had markets lose even more than during the dot com bubble, almost 57% is what the stock market lost. It lasted 17 months. 517 days is how long that lasted. From the time of the bottom until it recovered was just over four years. So we're talking about just a five and a half year period during that time. Like that is nothing. I know it's not pain, I know it's not fun and it's painful to see that, but you have to remember, coming back to what you said, it's time in the market, not trying to time it. If you have time in the market, you could ride out these crises that we have and that we're going to have. I guarantee you, we're going to have more.

• 40:39Speaker 04

  Yeah, we run in cycles. There's no if or buts about that, especially our economic system. It just runs in cycles.

• 40:45Speaker 03

  Right. Yeah, that's right. So you gotta, gotta accept that already. And, and in some ways, it's very beneficial for the markets to correct themselves. We're seeing it right now. I think there's enormous opportunity in the bond market. We've had a huge drop in, in, uh, uh, bond prices as the yield has gone up. The yield has gone up. That's hurt bondholders. That's hurt a lot of people. But where are we now? We're now where we're at 30-year-high interest rates on, on the, on the treasury and as well as muni bonds are looking very attractive now. Now, because we've got, you know, 30-year-high interest rates.

• 41:27Speaker 04

  Yeah.

• 41:27Speaker 03

  That's a great time to lend. Now is a great time to lend. So you're towards that later end of your retirement years where you're putting maybe most of your money into, into fixed income and not into stock? Phew, get ready. You're doing great. Like things are on sale. A great, this is the great relationship between bonds and stocks is they go up and down inverse from each other. So when the stock market is down, we said this, we've said this on all of these financial crises that we had, we said it on the air, hey, guess what's on sale? It's like the only thing people don't want to buy when it's on sale because they're, they're, they're listening to the noise and they're not recognizing. You've got great companies out there that are, that are cheap. They are below what if they were to sell off all of their assets and the cash they have in the bank, it's cheaper than that.

• 42:12Speaker 04

  Correct.

• 42:13Speaker 03

  And these are companies that have been around for a hundred years, you know, selling toothpaste and soap, like things that people are always going to buy. And those kinds of deals happen all the time. And so there's oper, it's like a good part of the, of our economy, the, this cycle that we go through. There's, there's opportunity when that happens.

• 42:35Speaker 03

  Okay.

• 42:35Speaker 04

  Very good conversation. We have, we'll just go in orders or in order.

• 42:40Speaker 03

  Great.

• 42:40Speaker 04

  Hey, Money Wise, Money Wise guys, my wife and I have a trust and we recently bought a rental here in town. My question, do we need to update our trust every time we buy or sell a property? And should the rental be titled in the trust or in an LLC? It gets tricky.

• 42:59Speaker 03

  It does get tricky. And generally, I'm not going to give legal advice or tax advice. But I would say that if you buy property, you're, something definitely needs to happen, whether it, the trust owns it, or the LLC, or the trust owns the LLC. There needs to be a, there needs to be an amendment, or there needs to be an adjustment. Paperwork needs to be done, because the alternative is you're just going to own that in joint tenancy, or you're going to own it, you know, as a sole proprietor. It doesn't, it doesn't put a beneficiary designation on that property. And it doesn't give whoever's going to be in charge of managing that, whether it's selling

• 43:43Speaker 03

  it or collecting the rents when you're gone, it's that you, the only way that you can do that is by having it, having a trust set up.

• 43:52Speaker 04

  And, and you can add to the trust. When you buy a property, you can add to the trust. And I, and it's a fairly easy process. I mean, you can do it on your own. You can hire somebody or go to the title company to do that for you, but it's a pretty easy process.

• 44:06Speaker 03

  It's easy process.

• 44:07Speaker 04

  Especially if you don't have debt against that property.

• 44:09Speaker 03

  Right.

• 44:09Speaker 04

  So you don't have to let your lender know that, hey, I'm doing this change. I'm buying this property under my name, and then I'm, you know.

• 44:17Speaker 03

  Putting it in the name of the trust.

• 44:19Speaker 04

  Vesting the title into the trust. You can just walk into the records office with your change of vesting, and you record it. You pay $45, I believe, and then you're done.

• 44:31Speaker 03

  Yeah. Now, the LLC sometimes makes sense, because an LLC gives you a layer of protection from lawsuits, so that it's not, you know, you can protect your own personal assets.

• 44:42Speaker 04

  And you can vest that LLC as well in your trust.

• 44:44Speaker 03

  Correct. Yes, absolutely.

• 44:45Speaker 04

  So you can do the vesting in LLC to create whatever you call the liability protection layer, and then you can eventually vest that in the trust. So it's part of your estate planning and state execution. In case, God forbid, something happens to you.

• 45:02Speaker 03

  Yeah.

• 45:02Speaker 04

  And again, we're not attorneys, we're not CPAs.

• 45:04Speaker 03

  Yeah. Good. All right, next question. I think this one, or maybe you're not going to answer the one about cash payments, Zelle and.

• 45:13Speaker 04

  We answered that yesterday, I believe, Stephen, correct?

• 45:17Speaker 03

  Oh, good. Okay. Let's get to the, the next one then.

• 45:22Speaker 04

  Are you talking about this letter?

• 45:24Speaker 03

  Oh, yeah.

• 45:25Speaker 04

  Yeah. All right. I received a letter from the IRS stating that the credit match for retirement savings for lower income earners was changed to an actual match up to up $2,000 to go directly into a retirement savings plan. Before it was a tax return credit, but now it's an actual match. How do I understand this? And how does it work? How does the IRS put money directly into a retirement savings plan? Or is this a scam? I'll send a picture of the letter.

• 45:52Speaker 03

  Yeah.

• 45:52Speaker 04

  Good question.

• 45:53Speaker 03

  And they did send a picture. So listener, thank you for sending this. As far as I can tell, this is not a scam, at least what you received. Now, that doesn't, I didn't, I didn't read it carefully enough to really make sure you, you'll want to. I do this. When I get any notice from the IRS, I'm always, especially if it's off, I, I will, I will search, I will do an internet search.

• 46:15Speaker 04

  That's the right thing to do, especially in this fraud environment we live in today.

• 46:18Speaker 03

  Yes, because they're getting much smarter, because IRS will never call you. This is how the IRS will communicate with you. It's going to be over mail. For better or for worse, that's what it is. But sometimes, it's like a phishing scam. It's like an old school phishing scam where they send you something, and then you call the number, and it's just some, some scammer in Nigeria that's going to walk you through and get your information.

• 46:38Speaker 04

  Going to send you a trillion dollars.

• 46:39Speaker 03

  Yeah. Well, this is not a scam. The, the photo actually matches the IRS CP32U, or three, CP321J notice. This is an IRS, legitimate IRS.

• 46:54Speaker 04

  It matches their website, too. I think there's, it exists on their website.

• 46:57Speaker 03

  Yeah, and the phone number is also a giveaway. Like, it needs to be a legitimate IRS phone number. This is the new savers match. It begins in 2027, so we got a few more months before this is actually going to be implemented. The IRS has a whole official page describing this exact notice. And think of this as essentially, it's a new program that the federal government is acting like, it's essentially incentivizing people to save, and they are, they are adding a match to your, to your 401K or your IRA. This is something that actually they've been doing. The difference is, unlike the current savers credit, which reduces your income tax bill, this money is supposed to go directly into the retirement account. So that's, that's

• 47:41Speaker 03

  a real plus. I am a big advocate of these types. Anything we can do to incentivize people to save, it saves the government money, saves taxpayers' money, and it benefits us, the individual gets a more financial security. So.

• 47:54Speaker 04

  Can you receive this under your 401K plan?

• 47:57Speaker 03

  Yes.

• 47:57Speaker 04

  Or is this like a separate, you have to open an IRA or something?

• 48:00Speaker 03

  Yeah, you have to have something that's open that you can direct the money, because that's part of this question. How are they going to know? What will be part of your tax return? Where you will say, here's my, here's my account number, here's the custodian of my 401K or my IRA, and that's so that they know where to send the money. So the government's actually going to send the money to your retirement account.

• 48:19Speaker 04

  And you just do that through your filing of the taxes?

• 48:21Speaker 03

  Yes.

• 48:22Speaker 04

  And there's a form that you attach to the filing of your taxes?

• 48:25Speaker 03

  Correct. Yep, correct. And it's only for qualifying lower to moderate income workers who are actually putting money into retirement accounts. So it's not like free money. You have to be actually contributing to the retirement account to receive the federal match. It's up to 50% of the first $2,000 that they contribute. So the maximum could be $1,000 per person per year. But I would still, just like the Trump accounts, take it. It's a thousand bucks. It's free money. Take it. Like, that's, that's your money. Do it. It would be worth it. In this case, go to your, your point about, you know, take your free money. This is, now the government is offering a match. If you meet those requirements, those income requirements, that's free money. Take it.

• 49:04Speaker 04

  And, and the income requirement, is there a certain threshold that you have to meet or stay below?

• 49:09Speaker 03

  Yeah. Yeah, there is. It is the, I don't have the exact numbers, but you have to meet the federal guidelines for, for low income, essentially, low income or moderate income. And I don't have those exact numbers. So I think it looks, actually, I do, here it goes, your actual percentage depends on your income eligibility phase out at $35,500 for single filers, $53,000 for head of households, and $71,000 for married couples filing jointly. So, you know, it impacts a lot of people.

• 49:41Speaker 04

  That's right.

• 49:42Speaker 03

  Gosh, good stuff. We still have other comments and questions that we didn't have time to get to, but please keep them coming our way, 661-396-1000. We will be back tomorrow. We will address these things, as we want to remind you also.

• 49:57Speaker 02

  Securities offered through LPL Financial, member FINRA, SIPC. Investment advisory services offered through LPL Financial. LPL Financial and Money Wise Wealth Management are independently owned and operated.