Announcer: Would you like an opinion on a financial matter you're dealing with? Whether it's about retirement, investments, taxes, or 401(k)s, Scott Hanson and Pat McClain would like to help you by answering your call. To join Allworth's Money Matters, call now at 833-99-WORTH. That's 833-99-WORTH.

Scott: Welcome to Allworth's Money Matters. Scott Hanson.

Pat: Pat McLean.

Scott: Thank you for taking part of our program today, both myself and my co-host. We're both financial advisors. We've been broadcasting our program for almost 30 years.

Pat: It's taking calls from people like yourself. Been on Radio for a long time.

Scott: And then how long have we been on the podcast? Ten years or so? I remember I had a friend of mine that had this one podcast we're first getting going. And like anyone can set up a podcast, it takes next to no one.

Pat: Yeah, you can do it on your cell phone.

Scott: You probably can. Anyway, it's not a big deal. But he was part of this community where they would all subscribe to one another's podcasts so it looked like you had subscribers. I thought no one's actually listening to any of yours. How many people actually listen to the show? Anyone's just some, you know, nobody. Yeah, numbers look good. I'm not sure he still does the podcast. I haven't asked him.

Pat: Oh, yes.

Scott: Well, a good friend of mine, but...

Pat: You don't listen to his podcast?

Scott: I tried.

Pat: Did you? I don't listen to our podcast.

Scott: I can't listen to my own podcast.

Pat: I do listen to a lot of podcasts, a lot of podcasts.

Scott: Good for you. That's good.

Pat: Don't you?

Scott: I listen to quite a few podcasts. I don't listen to much radio anymore.

Pat: No, no. Anyway, Scott, before we move on, I came across this article in "The Wall Street Journal," and it just reminded me of how industries change. And this is the old pump and dump scheme with penny stocks using high profile personalities in financial services like Bill Ackman, who runs Pershing Square, which is a great, you know, I don't know how his investments are, but he's well known in the industry, or Kathy Wood, who ran ARC, right? So these people have been using their names and likenesses on social media to get people to buy particular stocks and saying, "Look, this is what Bill Ackman's buying today. You need to buy this." And Bill Ackman has a whole team on it that actually does nothing but actually searches social media trying to get his picture and things off of these pump and dump schemes.

The idea behind a pump and dump scheme is you and a couple of your criminal-minded friends...

Scott: Yes, it would be, yes.

Pat: ...get together and buy some little small company, and it's a publicly traded company and it's worth half a million dollars, and you buy all the shares.

Scott: And then that pushes the price up.

Pat: And then you change your story. One, it's going to be environmentally and then it's going to be socially-based and it's going to have great governance. We're going to recycle, we can turn...

Scott: It's getting some of the Biden administration IRA money.

Pat: Yeah, it's getting all, you know, the story is sculpted. It has nothing to do with reality.

Scott: Save the planet.

Pat: And then they pump it and they're pumping it. And this is what they used to use boiler rooms. If you've seen the movie "Boiler Room" or "The Wolf of Wall Street," those were pump and dump schemes.

Scott: Pump up a crappy company.

Pat: Pump it up. And then what happens is when they thought it was near a high, the insiders would dump and then it was a way of stealing your money.

Scott: Average Joe would be left with the crappy company.

Pat: Now they're using social media here. So Ackman's Pershing Square Capital has found more than 90 different ads impersonating him. Ninety, right, 90 ads impersonating him. And Meta, Facebook and the other social media platforms have whole teams that are trying to actually chase down and pull these ads off, either sponsored ads or non-sponsored ads. Right? Sponsored ads means they're paying for it. Just fascinating. So if you see on your social media a, you know, advertisement or even a pump of Bill Ackman or I see Warren Buffett all the time on social media, like this is Warren Buffett's favorite stock. I don't think Warren Buffett's probably ever told anyone he had a favorite stock. I don't think he has.

Scott: I don't think he'd used companies that way.

Pat: Yes, yes.

Scott: Might have a favorite management team.

Pat: That's right. And you might have his thesis that he lives by, but a favorite stock. So anyway, stay away from anything that makes up things.

Scott: I'll go further than that. If you think you're going to outsmart Wall Street by picking individual stocks, you haven't been at it long enough or you haven't actually ran the numbers.

Pat: Or you will one or two of your picks, but not all of them or consistently. You might have a great year and beat the market, but over a 3, 5, 10-year period, you're not going to. Just flat out.

Scott: Matter of fact, in studies, we're not going to get into the nitty gritty of the studies because it gets a little boring on the radio, but if you look at funds that were like five-star funds, top performers the last five years, and the subsequent five years, there's almost no correlation whatsoever to what's going to be the best the next five years.

Pat: Yes, yes. Almost a negative correlation.

Scott: Right. And it just shows you how hard it is to outsmart Wall Street.

Pat: So don't try it.

Scott: Yeah. My point is you just shouldn't be reading those ads to begin with.

Pat: That's right. And obviously don't ever.

Scott: I thought I was reading a fake ad from the who's the governor of South Dakota, North Dakota with the dental ads. Did you not see that?

Pat: No.

Scott: It's the governor of the state.

Pat: What kind of ads were they?

Scott: Dental implants or something.

Pat: She has dental ads.

Scott: She got paid. A paid endorser. I saw that and I thought it was one of those deep fakes. I thought it was something like this. I try not to get into politics on the show, but every once in a while someone does something so stupid politically, you can't help it.

Pat: You think it's stupid. It may not universally people think it's stupid. You think it's stupid.

Scott: Well, you got a good point. Maybe it was a brilliant move. Here we're talking about her. I don't remember her name, but we're talking about her.

Pat: But it might have been brilliant because they wrote her a check for $3 million and she was going to get elected or not elected anyway. So maybe brilliant. Listen, free market. All right. Listen, not a... Look, Donald Trump's selling gold tennis shoes. Have at it. That's capitalism. Is it going to help you running for...

Scott: I don't care. I saw those. They're like $400 sneakers. Whatever. I thought it was hilarious. I actually clicked on it. Like, what are these things that he's actually selling?

Pat: Whether you like Trump or not, look, that's capitalism. He can do whatever he wants. You might think it's stupid. He might think it's brilliant. I don't know. None of my business. Do whatever they want. Just don't bother me.

Scott: Is that your rule there? Just leave me alone. And everyone's going to send me a thank you note for my taxes that I contribute. Just once. Just once. Mr. McClain, certainly appreciate it. Gavin knows since he sends you... The governor of California.

Pat: Wouldn't that be something every once in a while?

Scott: Every once in a while, the county supervisor, hey, thanks for those property taxes. Glad you choose to live in this county.

Pat: Wow.

Scott: What?

Pat: If I was running for public office, I'd start sending those things.

Scott: Everyone? His handwritten notes. Look at this. Who's that? I don't know. He's running for county supervisor.

Pat: I run for county, hey, I'm county supervisor. Just a note of thanks.

Scott: Well, if you're a politician, you just send them a check, don't you? That's what it is. All right. Let's go to the calls. If you want to be part of the program, the way our calls work, by the way, is if you want to be part of our show, we set time in our studio during the week. We'll set a couple hour block, schedule a time with you, we'll take your call. That's how it works because for years, 20 some years, we did the program live at the radio station and the only way we can continue doing this for many, many more years is to have the schedule work a little more closely with our personal schedule so we don't have to keep working on the weekends. So we set time in the studio to take your call.

Pat: And it's easy. We will call you.

Scott: You can make up a different name if you'd like, but anything that related to finance. So maybe you're trying to figure out you have the right kind of investment allocation. Should you be making some tweaks to that?

Pat: How do I pay less in taxes?

Scott: Trying to figure out you're trying to buy a retirement home. What's the best way to make that move?

Pat: Is my portfolio the right thing?

Scott: All of that. Should I worry about estate taxes with the change in tax law potentially coming up?

Pat: It's easy. If you want to call 833-99-Worth or send us an email at questions at moneymatters.com. So that's 833-99-Worth or questions at moneymatters.com.

Scott: We will schedule a time where we can take your call and your question like we are doing now talking with Lisa. Lisa, you're with Allworth's Money Matters.

Lisa: Hello.

Scott: Hi, Lisa.

Lisa: Hi, Scott. Hi, Pat.

Pat: Hi, Lisa.

Lisa: How are you?

Pat: Good. How can we help?

Lisa: Well, I am a retired teacher of 36 years and my husband and I, we've worked hard all of our lives to secure our retirement and to make good investments. But I took a big hit in the fall of 2021, the year that I retired, and I just don't want that to happen again. So we have some monies to invest for 2024 and we wanted some advice on what's the best way to invest that.

Scott: What's hit? I'm confused.

Pat: What, you took a hit in the fall of 2021?

Lisa: So I lost the monies from all of my investments except for one.

Scott: But they all came back pretty close anyway.

Lisa: No, I had a Viva account that we were pulling out of for health insurance that I built up during my career. And it took a hit and it no longer pays for our health insurance. So that's coming out of our pocket now.

Pat: And did you liquidate? Did you change the allocation? When the values fell, did you change the allocation when they were down or did you stay with your allocation? How did you react to the market turmoil?

Lisa: With that account, I had no control over it. It was controlled under the school corporation. But that's what I paid my health insurance out of.

Scott: That's really, all right. So let's dig into that. I don't know what a Viva is.

Lisa: It is a, they don't do it anymore, but they did it when I first started teaching. It is an account that the school corporation set up for us and they put money into the account on a bi-weekly basis.

Scott: And it's now empty? Zero? It's bust?

Lisa: Oh yeah. I'm at zero now.

Scott: Okay.

Pat: How much was in it before?

Scott: There's your financial hit.

Pat: How much was in it before it fell?

Lisa: When I retired, there was $56,000 in it and that was going to pay our health insurance through Medicare.

Pat: And what year did you retire?

Lisa: In 2021.

Scott: And how old are you today?

Lisa: Sixty-four.

Pat: And it fell $56,000 in one year? It went from there to zero?

Lisa: I was pulling money out of it on a monthly basis though.

Pat: How much?

Lisa: Sixteen hundred dollars.

Pat: Okay. All right.

Lisa: To pay for my husband and myself.

Scott: It was designed to last until she turned 65 and it's not.

Pat: It didn't. It ran out a little bit of money. Okay.

Scott: And that's the hit you're talking about. Got it.

Pat: Okay. So what's your question for us? And by the way, just out of curiosity, Lisa, what grade did you teach? Because you sound like you have tons of energy.

Lisa: I taught almost everything across the board from first grade all the way into high school.

Scott: Wow. Thank you.

Lisa: Ended my career in seventh grade social studies, which I love.

Scott: Okay.

Pat: All right. So your question for us is how do you invest?

Lisa: Yes. We have some monies to invest for 2024 and we wanted to know the best way to invest them to secure these funds for our retirement. We have some other investments as well.

Pat: So you're both retired now, correct?

Lisa: No. My husband's a self-employed farmer, so he's not retired yet, but will be soon. He's hoping. He's hoping he'll be retired soon.

Scott: And where did this money that you want to invest, where did that come from?

Lisa: Right now we have some monies in our savings account, in our checking account, and our savings account. And hopefully we're going to, we signed a lease for a solar farm and so we're hoping some monies will come from that as well.

Scott: From property you have?

Lisa: Yes.

Scott: Okay. Thank you.

Pat: And how much is your pension?

Lisa: Oh, honey, how much is my pension? One thousand eight hundred something.

Pat: Okay. So of this money you have to invest, what percentage is it of your investable assets? Is it like half or a third or?

Scott: Because we can't answer a question in a vacuum. Where should I invest money in 2024? I have no idea unless we can do it in conjunction with your other assets and what it is you're trying to accomplish. So your husband's still working, at some point in time he's going to retire, so you want to make sure that you've got money. My guess is that you've got enough money so that when he fully retires, you've got enough income coming in to maintain your lifestyle. Is that fair assumption?

Lisa: That's a fair assumption, yes. I have some other investments, like I have a 403(b). It's a fixed annuity. And we have $46,000 in that. I have an Allworth Fidelity rollover IRA that is mutual funds, index funds, stocks, bonds.

Pat: And what's the value of that?

Lisa: Seventy-two thousand. I'm giving you an estimate.

Pat: Okay.

Lisa: We both have Roth IRAs, combined $73,000.

Pat: Okay.

Lisa: I just started another fixed annuity with my bank, $100,000 at 5.75% fixed.

Scott: Okay. Oh no. How long ago did you put it in the bank?

Lisa: How long ago?

Scott: Yeah.

Lisa: Just the beginning of the year.

Pat: Okay. And how much...

Lisa: It's locked up for five years.

Pat: Okay.

Scott: Is it 5.75 for five years or 5.75 is the first year and something different the second year?

Lisa: It's 5.75 for the five years.

Pat: Okay. And so how much and what other assets are there?

Lisa: We have a couple of CDs, one's worth $140,000. Then we have our simply max checking with over $100,000 and our high-yield savings account with $130,000. We also have another annuity that's locked up for five years.

Pat: And how much is in that?

Lisa: Two hundred thousand. So we're looking at something that's going to not, that we're not going to lose money on.

Pat: Oh, you know something?

Lisa: It's not important. It's not important to us right now that we risk it to gain a lot. We just want a safe...

Pat: I'm going to, I'm going to, and so when your husband retires, is he going to, do you own this farm? Are you going to lease it out or are you converting this to the solar lease?

Lisa: We own the farm. About three-fourths of it will be in a solar farm, but they haven't started construction yet, so we're just on a lease right now.

Pat: Okay. And how much, and will they buy that farm from you or are they going to lease it from you?

Lisa: No, they'll lease it.

Pat: And what will the value of the lease be on an annual basis? I assume it's a triple net, which means you're not going to have any costs associated with it. They're going to pay taxes and insurance on it.

Lisa: Right, about $200,000.

Pat: A 200K annual income. And can you and your husband live comfortably on $250,000 a year?

Lisa: Oh, yeah.

Pat: Is that like when you...

Lisa: We're very conservative and we live in a small community, so yeah, we should.

Pat: Okay, so what you just said to me is that, so when I threw that $250,000 out, your pension's approximately $20,000 a year. This $200,000 is the annual income from a solar farm, and I'm going to throw some Social Security on there and just round it up. So it's going to be about $250,000, $260,000 gross between you and your husband. Will you be able to live beyond your wildest dreams with that kind of money? Like, is that more than enough money?

Lisa: Yeah.

Pat: Okay, so your idea about not having any fluctuation in your portfolio is flawed. I'm telling you, the problem that you actually have, if you're going to worry about anything at all, and how old are you, Lisa?

Scott: Sixty-four.

Lisa: Sorry, my husband's 64 as well.

Pat: Okay, you should worry about inflation. That's what I would worry about, right?

Lisa: We've talked about that, yeah.

Pat: Yeah, but you're not doing anything about it. You can talk all you want. You're not doing a thing about it. So I go through and add up your assets right here. So you have $470,000, $570,000, $625,000 in fixed, and you've got approximately $150,000 in things that have market fluctuation. You mentioned a Roth rollover and an IRA that you have with...

Scott: But they might be in fixed as well.

Pat: And that could be fixed. You don't have any... The danger you have is you're so far on the side of conservative worrying about the month-to-month, year-to-year fluctuations of the portfolio...

Scott: You're not letting it grow.

Pat: You've exposed yourself to inflation, and you shouldn't worry about that because you're not going to touch this money maybe ever. If this lease, solar lease, comes in, you may not touch this money ever. So you should be worried about that and not the month-to-month. How long have you and your husband owned this farmland?

Lisa: Oh, how long?

Scott: Forever.

Pat: How long?

Lisa: It's been in the family. So we inherited some of it. We bought some of it ourselves.

Pat: Do you ever think about how much it fluctuates in value over year-to-year?

Lisa: It goes up and up and up and up.

Pat: It never goes down.

Lisa: No, it hasn't.

Pat: It didn't go down during the '80s.

Scott: Or the financial crisis.

Pat: Or the financial crisis. It goes up and down all the time.

Lisa: We've lost here and there, finding it some.

Pat: I understand, but the value of the property goes up and down. It's an asset. It goes up and down based on market conditions. Whether you know it or not, that's what it does. I'm saying that you should allow more of your portfolio to be invested in equities and to learn to live with the volatility. But if you don't, you're fine too.

Scott: So just keep doing more of what you're doing.

Lisa: Do I hear you saying that we should buy more land?

Pat: No, no, no, no. You should buy more stocks. But if you don't, just buy bank CDs or government bonds or bond portfolio where there's little fluctuation in value. I think that you should have more risk in your portfolio. I think you should have more stocks in your portfolio. A balanced portfolio. Everything you have is...

Scott: You're not going to convince her in this conversation.

Pat: Absolutely not. Absolutely not. But you're fine regardless of what you do because of that income that you've got coming from that solar. So appreciate the call. And by the way, you mentioned an Allworth account with us. Appreciate you being a client.

Scott: If that's actual, I don't know. We're in California talking with Dave. Dave, you're with Allworth's Money Matters.

Dave: Hi, Scott and Pat.

Scott: Hey, Dave.

Dave: I'm looking at retiring within the next year. I want your opinion on my plan and allocations from now until I start buying Social Security.

Scott: Fire away.

Dave: I have what I call the Scott and Pat Vital Statistics ready to go.

Pat: Okay. I assumed you did. I assumed for whatever reason, I assumed you did. I don't know why, but you sounded very confident on the phone. So fire away.

Dave: It's kind of like having your blood work done before you go to the doctor.

Scott: Yes, yes.

Dave: All right. I'm 64 years old, married for 40 years, three children, grown, married and all doing well. We live in the Sacramento area. We intend to stay here in California. I'm an engineering manager. I bet you couldn't have guessed that.

Pat: No.

Dave: Income of 175. Wife does not work outside the house. House is worth 1.5 with a mortgage of 400,000. Interest is 2.75%. I have no other debt and no pension income. Total investments outside the house is worth 1.7. There's 1.2 in the 401(k). No Roth. Of that, it's allocated 730 in the S&P and 470 in the money market, which is earning 5.2%. Post-tax money, 500,000. Of that, 360 is in a money market, earning 4.7 and 140K in equities. My monthly expenses are $9,000 a month. So those are my vital statistics. Am I missing any?

Pat: Did you say you were 63 or 64?

Dave: I'm 64.

Pat: Sixty-four.

Scott: And what were your Social Security and you're going to retire when you're 65?

Dave: Well, that's what I'm looking at. So my Social Security, through your website, for my wife and I, will be $5,500 a month. And so my plan for the next two years is to use my after-tax money market to live on until I start drawing Social Security at age 67. During 65, 66, do Roth conversions to maximize the 12% bracket. And then at 67, just start growing down the 401(k). So yeah, that's my plan. And I know you're going to ask why do you have so much money in the money market? Mostly because I got burned with bonds in '21 and '22. And I've just been shy ever since then. And the rates have been pretty good. So I guess what I would like is your opinion on my plan and how you would change allocations.

Pat: To $9,000 a month.

Scott: Yeah, I mean, if you think you take Social Security, it's 5,500, right, with the two of you. If you looked at, say, a 4% withdrawal, that's about six grand a month.

Pat: Yep. You're fine financially. And you said you were going to draw down the savings and do Roth conversions at the same time in order to take advantage of the lower marginal tax rate you're in at the time. And then kick Social Security until you're 67?

Dave: That's correct. So my thought, you know, so the 1.7, if I brought down a couple hundred thousand dollars just living expenses, assuming it maybe doesn't do much in the next couple of years. Yeah. So yeah, I guess the question is, you know, I think I feel pretty confident I'll have enough money. I don't think I'll run out of money. But I know I'm pretty conservative with how much cash I have right now.

Scott: Yeah, that's for sure.

Pat: Thumbprint, yeah. Scott?

Scott: I mean, I'd probably like to see you... I mean, if your goal was to 9,000, you weren't pulling a full 4% off those accounts, I'd probably feel a little bit better. It's always inflation that I'm concerned about. It's not the next few years, right? It's like what happens when milk's 10 bucks for half a gallon or that sort of thing, which it slowly erodes.

Pat: There will be a time.

Scott: Yeah. Social Security will keep up with that. I mean, because one option is you start Social Security as soon as you retire.

Pat: That's the one I'm questioning.

Scott: You need to run the numbers.

Pat: Yeah, that's the one I'm questioning.

Scott: I mean, really, run some numbers and do some different what-if scenarios because...

Pat: You might want to push the equities a little bit higher and start Social Security as soon as you retire.

Scott: That's what I'm saying, yeah.

Pat: And then still do the Roth conversion in there.

Dave: Oh, so do kind of the same thing. So I was really looking at that in between years before I started drawing Social Security to really try to...

Pat: We understand.

Dave: ...take advantage of the lower tax. But do you think that may be offset by just...

Pat: Yeah, but then, right? That's why we actually use financial planning tools.

Scott: Yeah, sometimes it's really obvious, the answer.

Pat: That's why we use financial planning tools is you run these what-if scenarios. And then I think, why not? Why all Roth conversion? Why not take a distribution from some of that and live on it, too?

Scott: Probably a Roth conversion because if you're going to take the distribution, live on it, you just assume put it in a Roth and pull the money out of the savings.

Pat: That's right.

Scott: Which is what Dave's plan on doing.

Pat: Yeah, you do have plenty of cash. Yeah, I don't...

Scott: I would run the numbers. The odds are, I like where you're going. With your portfolio, when you say equities, is it just an S&P 500? Is it a total market index? What is it?

Dave: Yeah, the 730 is 100% S&P, in the 401(k).

Pat: Yeah, I think you got to push a little bit more diversity into that.

Scott: Yeah, for sure.

Pat: You've got no mid-cap or small-cap exposure?

Scott: Or foreign?

Pat: Yeah.

Scott: And then on your fixed income, it's 100% cash. There's no other floating rate or anything.

Dave: It's pretty simple to figure out when you have two accounts.

Pat: No, I understand. I understand. But you're an engineer, right?

Dave: Yes.

Pat: Yeah, it's not like, well, we just throw a couple 2 by 4s up there. It'll be fine.

Scott:: That looks like it could use a steel beam.

Pat: That's the big bolt.

Scott: Use the big bolt for that one and the small bolt for that one.

Pat: It looks like it could use a steel beam over there in that corner. Get one of those.

Dave: I'm an electrical engineer.

Pat: Oh, okay. 220, 221, whatever it takes, right?

Scott: Dave, you're at a point, like I hate to say it, pay for a financial advisor to do a good quality financial plan with these what-if scenarios. I think it'd be worth your while.

Pat: Yeah, and you can tell what's good or bad. And you don't have enough diversity in these portfolios, just flat out.

Scott: Yeah, I would agree with Pat on that. Yeah, but I think retirement's definitely here for you.

Pat: And I said diversity. I meant diversification. Because apparently...

Scott: And when we say equities, we're talking about stocks.

Pat: So Scott, I was thinking about it this morning. I was listening to a podcast and they were talking about diversity, equity, and inclusion. And our industry went through this ESG thing, which is environmental social governance. And I felt bad because like four years ago, I ran into some friends of my son's who had just graduated and went to work for these asset management firms. And they're like, "Oh, yeah, we're working on ESG."

Scott: How'd that work out?

Pat: And I go, it will never... Like the old guy sitting there, I'm like, it will never... I go, "It's not going to last." And they're like, "Oh, no, no, everyone's doing it." And I said to them, "I'm just telling you guys right now, I'm glad you got a job, but don't get too hung up on this environmental social governance." And they're like, "Why?" And I'm like, "Because it won't last." And they're like, "How could it not last?" And I said, "Because you're asking about moral equivalencies for everyone different. What is environmental to you may not be environmental to me. What's social to you may not be social to me. What's governance?" And I said, "At the end of the day, everyone wants to say that. But the minute it gets in the way of the returns, everyone's like..."

Scott: So what's happened in that space? Last year, a lot of money flew out. Right? Because the returns were completely subpar.

Pat: Yes. And then it was actually in the...

Scott: And to your point on the ESG, look, you could... No matter where you are, you're looking to say, well, I don't really agree with that anyway.

Pat: Oh, Scott, I sat in the Catholic Diocese. I sat in the Catholic Diocese where we wrote a request for proposal for a foundation in the Catholic Diocese that had to follow the bishop's mandates on social justice. Right? So it had to follow the bishop's mandate on social justice.

Scott: Which bishop?

Pat: Well, it's the bishop. It's the Conference of Bishops, whatever that means. Right? So it's like, what constitutes a dangerous weapon or what constitutes... Anyway, it was such a pain in the butt trying to actually pick the investment for it because you'd be in this... Is Disney or is that or when or here or there? And you're just like, okay. But ESG. So when I talk about diversity, I meant diversified.

Scott: And equity is... And inclusion means... What's in the portfolio? Just to make sure. It's the RDEI. The RDEI.

Pat: And listen, all the best for the rest of that stuff.

Scott: What do you mean all the best?

Pat: You mean we're not getting in the middle of all that.

Scott: That's right. That's what you mean. You fight that battle. It's not in this program. But I do like the RDEI. Diversify, own equities and include your own portfolio.

Pat: Thank you. There we go.

Scott: We're continuing with our callers. Talking with Jan. Jan, you're with Allworth's Money Matters.

Jan: Hi, Scott and Pat.

Pat: Hi, Jan.

Jan: Are you ready?

Scott: We're ready. Yeah, we are.

Pat: All ready.

Scott: The only thing we're thinking about right now is Jan.

Jan: All right. And her two sons.

Pat: Okay. Let's go. I saw a note here. Navigate two sons on the opposite end of the financial spectrum. So we get notes on each one of these calls because they're pre-screened. And all it says is, help me navigate two sons on the opposite end of the financial spectrum.

Scott: But we don't know what that means.

Pat: So we don't know what that means. So you're going to have to fill us in.

Jan: Well, you've really taught me about this. One, we have a son who never has worried about money. And he is 49. And his older brother, who was born upwardly mobile, is 55.

Scott: Okay.

Pat: He was born upwardly... He came out withan ascot on. He came out with an ascot on.

Scott: He was dressed like the little guy in the Monopoly. He literally did have a [inaudible 00:34:10.398].

Jan: No, he was the first grandchild and he just adored my parents. He was born in Orange County. And when he was nine, he needed a three-piece suit because he was the MC for Cinco de Mayo program. Anyway.

Scott: So he's doing fine financially. His career's done phenomenally well. And he's got plenty of money. Is that right?

Jan: And stability.

Pat: Okay.

Jan: So anyway, there are three households. I only have two children. But there are three households that we have in our estate because our second son has not lived with his wife for around 13 years. But they're still married and it's all a mystery. And he had quite a bit of trouble. We'll just leave it at that. He was incarcerated for a while.

Scott: Oh, okay.

Jan: And that certainly...

Pat: So he lives in this house that you own?

Jan: No, no, nothing like that. Our kids didn't want to live with us when they were kids.

Pat: So you said you had three households. I didn't know what that meant, the third household.

Jan: Oh, I didn't mean houses. I meant families.

Scott: Okay, got it. Got it. Your oldest son, your second son and his wife who seems like an ex-wife.

Jan: His wife and child.

Scott: Okay. And how old's the child?

Jan: Thank God, 17.

Pat: Okay. So what's your question for us?

Jan: So our question is, at one time our oldest son was going to be our executor. But things changed and with our younger son, he will inherit from us, but he will probably, he may always have a fiduciary. We've already hired a fiduciary for him.

Pat: A trustee.

Jan: Yes.

Pat: Yeah. Right. Are we sure this is a trustee, not a fiduciary, correct? Let's differentiate between the two.

Jan: It is a fiduciary. I think it's a fiduciary company that I have a brother who's an attorney and he has clients who are very happy with them.

Scott: Yeah, what's your issue there, Pat?

Pat: Well, a trustee is a fiduciary, but a fiduciary isn't necessarily a trustee.

Jan: It's not the trustee. No. This is separate.

Pat: Do you have a trust that spells out how the money will be distributed to your youngest son?

Jan: Yes, we do. Yes.

Pat: And you have shown that to a person and they said at your death they will distribute the money to your youngest son according to these...

Scott: Acting as a fiduciary.

Pat: Acting as a fiduciary.

Jan: Right.

Pat: Okay, perfect. All right.

Scott: So what's your question for us?

Jan: Well, our oldest son at one time was going to be the trustee and we have not ever changed that, but we realized that his interest in relation, particularly in relation to our home, but these two men aren't, they are not really friends. And it's not that they can't stand each other, but they live on different ends.

Scott: Yeah, and you're thinking, why would I, I don't want to stick my oldest son with this responsibility.

Pat: And your older son doesn't really probably want to interact with your, his younger brother at this level. So, so how do you, so what's your question for us?

Scott: Name an independent.

Jan: Yeah, we have, we have an independent trustee, a separate one, you know, for the whole trust. But the issue is that if something happened with our house, it's our house, which is probably worth about somewhere between a million and a million and a half. Our older son would probably want to gut it, rebuild it. I mean, and that is just craziness because what we want is things just to be divided up as they are.

Pat: And what's the total size of the estate?

Jan: Oh, I just knew you were going to ask me that.

Pat: Three million, four million?

Jan: It's probably less than three million. It could be, it depends.

Scott: You could dictate that the house must be sold.

Pat: The house must be sold. That's all you have to do. The house must be sold. Right? The house must be sold within three months date of second death.

Scott: Maybe a little more time than that.

Pat: Six months, date of second death, right? Whatever the number is. And the house is sold and the trustee splits up the money.

Jan: Perfect.

Pat: Yeah, look, look, it's an asset. It's an asset. And people get tied up over these things. But it's, you know, when no one lives there anymore, it's an asset. If your son wants the house, he can buy it from the estate.

Jan: Yeah, no, no, he doesn't want it. He's in the business and he always thinks of maximizing.

Pat: Okay, well, good. He could take all the money that he nares from you and maximize it any way he wants. But you do not want that messed up. So in your trust itself, you say that this house must be sold. Must be sold. You can even name the name of three real estate companies.

Scott: Must use one of these.

Pat: Must use one of these so that your son doesn't actually get involved in the sale of the property. Like you can name all these things in advance. Name three. This is the first one, second one, third one in this order. You know, Coldwell Banker or CBRE, whatever. And then it's sold and the trustee distributes the money. That easy. All right?

Jan: That sounds great. That would really, that particular naming the realtors would really make him mad because he's a realtor. You know, he's in San Diego.

Scott: I've seen family. Look, I, family where there's a real estate agent, the family didn't use that agent. Other members of the family got angry, quit speaking to one another.

Jan: Yeah, no.

Scott: You don't want that.

Jan: Well, our extended family is way too big to have them bother about that.

Scott: All right. Yep. I like the idea of listing it all. It makes it clean. Yeah, list it all.

Pat: And then the trustee says, "Well, this is what the attorney did." And he blames everything on the attorney. And that's easy. Everyone believes the attorney did something wrong.

Scott: And it's easy. They're easy to blame. It's easy. Yeah. Blame the attorneys.

Pat: Poor attorneys. I hope my daughter doesn't listen to this show. She's in law school.

Scott: It's always the attorney's fault.

Pat: I'm sure you've heard that. Really.

Scott: Those damned attorneys.

Pat: I know. You know, it's taken over a year to clean up this stuff.

Scott: Those attorneys. Well, maybe, maybe you guys aren't actually answering the, maybe you guys aren't answering the mail or the phone calls. Maybe someone's slowing it down on purpose. And we're talking with Nancy. Nancy, you're with Allworth's Money Matters.

Nancy: Hi. My question is regarding what my husband and I should do because, because he's 67 now and he's not retired. He's working full-time for a startup. And we just bought a house last year.

Scott: And how old are you?

Nancy: I'm 53.

Pat: And he's 67. He's working full-time for a startup.

Nancy: Yes.

Pat: Does he put in a lot of hours?

Nancy: Yes.

Pat: I can't imagine being 67 and working full-time for a startup. I got to tell you. I have done... Scott, I... What are you, 61? I have done... Scott and I have done a few. Holy smokes. My gosh. Okay. What's your question for us?

Nancy: He has a 401(k). And he also has two pensions from the jobs that he had in the UK. And he has not started collecting any of them yet. And he has not yet started collecting Social Security either. So my question is, what would be the best way for us to kind of manage all of these income sources going forward?

Scott: Is he getting paid right now?

Nancy: When the money gets... When the company gets money, then he gets paid.

Scott: So that would be no. Okay. So he's sweat equity. And what's coming in the family now? How are you making your expenditures? How are you living?

Pat: What are you living on?

Scott: How are you eating, paying for energy and stuff?

Nancy: Most of it is coming out of savings right now.

Pat: And, Nancy, do you work outside of the home?

Nancy: I do not.

Pat: Okay. When you say... So I assume that anytime they get a capital infusion into this startup, they say, "Here, what do you need to get by? Here's some money, right? Just hang with us." Is that... Would that be a fair statement?

Nancy: Yeah.

Pat: Okay. How much money does he have in his 401(k)s?

Nancy: He has about like just over a million dollars.

Pat: Okay. And what would his pension amounts be?

Nancy: His pensions... One of them is not a very large pension. So that might be like a couple of hundred dollars a month.

Pat: Okay. And the other one?

Nancy: And the other one is probably closer to like $1,000 a month.

Scott: And what do you owe on the mortgage?

Nancy: Where do we owe? We owe about 500.

Pat: And what's the value of the home?

Nancy: It was recently valued at 775.

Scott: And what do you have in the bank, savings, savings equivalents?

Nancy: My husband has about, I'd maybe like $35,000. And I have like a little under 10 because...

Scott: So you guys are cash-strapped right now.

Nancy: A little bit.

Pat: Yeah. He should start Social Security now.

Scott: Well, I don't know, Pat.

Pat: Why? He's 67.

Scott: Let's assume the startup doesn't go well and this is his last job.

Nancy: Yeah, that's what I'm kind of afraid of.

Pat: You're moving.

Scott: Yeah, that's why...

Pat: Has he done a startup before?

Nancy: Yes and no. He's worked for a startup before, but then he left that startup for another job, with a larger company, an established company.

Pat: Did the startup he left hit? Did it do well?

Nancy: You know, I don't know. I didn't follow it.

Scott: Is he loving what he's doing in the startup?

Nancy: I think he is enjoying it. I mean, it challenges him.

Pat: Well, things are tight.

Scott: My concern is if he started Social Security and his pensions now, there's really not a lot of... I mean, it'd be better for him to go a couple more years, particularly with your age difference. I mean, if he waits till 70, it makes quite a bit of difference.

Nancy: Well, 70 is a couple of years off.

Pat: Right, yeah. But what are they living on now?

Scott: Yeah, what are you living on?

Nancy: Whenever the startup gets an infusion of cash from their investors, then they pay people.

Pat: So like, what was your income in the year 2023, approximately, 50 grand, 100 grand, 200 grand?

Nancy: No, it was about 225.

Pat: Oh, okay. All right. So what's your question for us? Don't do anything. Just keep doing what you're doing.

Nancy: So don't start collecting anything yet?

Pat: No. No, no, no, no, no. You want to defer this stuff as long as you can. I was imagining him living off 50 or 60 thousand dollars a year, but if they paid him 225, as long as that cash flow even continues at something, you should defer everything.

Scott: It's just to be totally transparent, there's really not enough saved, particularly with a $500,000 mortgage still. There's not enough saved even with Social Security and pensions.

Nancy: That's true.

Pat: If this doesn't hit, the reality of this doesn't hit, there's probably a good chance that you shouldn't be living in that home.

Scott: Unless he can go get a job making a couple hundred grand somewhere else.

Pat: That's right. And I know that's not what you wanted to hear.

Nancy: No.

Pat: But it might hit. You might get in your private jet and fly up to Sacramento and visit with us. Who knows?

Nancy: Well, I guess one thing that's a little comforting is that between the two pensions, the two pensions can cover the mortgage.

Scott: That's 1,200 bucks a month.

Nancy: No, it's like 3,000.

Scott: You said one pension was a thousand a month, the other one was a couple hundred a month.

Pat: You mean with Social Security and the pensions?

Nancy: Actually, no, I'm not sure.

Pat: Okay. Well, if he's got that income right now, then you should not be worried about taking any money from any of these accounts or starting any of these pensions.

Scott: I would not.

Pat: The small one sounds like a deferred, they actually both sounds like deferred vested pensions. One thing that we should make...

Scott: Well, they're in the United Kingdom, who knows how they're structured.

Pat: That's a good point. Is the election he takes once he goes to take them, whether they're joint and survivor or not, which means are you named as a beneficiary of that pension? But you don't need to make that decision until you actually go to make that election.

Scott: She may or may not have the decision based upon a UK pension.

Pat: Correct. And whether you were married at the time that the pension was...

Scott: And who knows whatever their laws are.

Pat: Wouldn't even begin to guess. But I wouldn't change a thing right now.

Scott: I would definitely not start Social Security.

Pat: I agree. He's making 200, maybe 220.

Scott: If the pensions, if there's no survivor benefits, then I might make an argument it would make sense to take them now. There's a big age difference here.

Pat: Yeah, it's 14 years.

Scott: Yeah. So support them well and hope they'll start up just great. That's your bet. Interesting situation. Normally you don't see people at this stage in their life with...

Pat: Sixty-seven.

Scott: Good for him. It probably makes them feel youthful, I guess.

Pat: I don't want to feel that useful. Do a start up, 67. Would you have the energy? Do you think you would? You might.

Scott: I don't think I have the energy now at 57.

Pat: Okay.

Scott: So if necessity called on it, I would.

Pat: Oh, that's right. That's fair. I'm just thinking the same. If I had to. Oh, yeah, correct. You dig deep.

Scott: If everything was taken from me, you dig deep. Yeah, then I probably... Yeah, then I would. You dig deep. Yeah. Now, Pat, before we took these calls, we mentioned that we have time in the studio. If any of these calls triggered, "Hey, maybe I should ask those guys my own question," again, the simplest way to do that, send us an email, questions@moneymatters.com. Again, that's questions@moneymatters.com and we'll take your...

Pat: And we'll get you on the air at your convenience.

Scott: And our convenience.

Pat: Oh, that's correct. And both of ours. Mr. Hand.

Scott: What?

Pat: Fast Times at Ridgemont High when he brought in the pizza and Mr. Hand said, "You're wasting my time." And Jeff Spicoli said, "If we're both here, isn't it our time?"

Scott: We're wasting our time.

Pat: Right? You're about our age. If you're my age, in the 60s.

Scott: Oh, yeah, yeah, yeah, I remember. I actually watched it about five years ago. It was depressing.

Pat: Was it?

Scott: Yes. It has eight minutes of humor. Otherwise, the story is kind of depressing. A young girl gets pregnant, some guy with a one-night thing and the whole thing. She has an abortion and the whole thing was kind of depressing. We're way off-topic. Thanks for being part of Allworth's Money Matters. Scott Hanson and Pat McClain. We'll see you next week.

Announcer: This program has been brought to you by Allworth Financial, a registered investment advisory firm. Any ideas presented during this program are not intended to provide specific financial advice. You should consult your own financial advisor, tax consultant or estate planning attorney to conduct your own due diligence.