Man: 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." I'm Scott Hanson.

Pat: I'm Pat McClain. Thanks for joining us. I'm glad you're taking time to listen to our fantastic podcast.

Scott: What's wrong with you?

Pat: Huh?

Scott: What's wrong with you? Let them decide if this is a good podcast or not.

Pat: Yes. That's fair enough.

Scott: Right? It's very Trumpian to say fantastic.

Pat: It's the best. It's incredible.

Scott: No one's ever seen a podcast like this ever in the history of mankind. There's never been two people that are as entertaining as the two of us.

Pat: We...

Scott: Trumpian.

Pat: It's very Trumpian. We were at a...My oldest...

Scott: This is a financial show. We'll get on to the finance. Go ahead.

Pat: I was back in Denver. My oldest got engaged.

Scott: Wow. Congratulations.

Pat: Yes. Very nice young lady. Data scientist. She does puzzles with my wife. I've never seen anyone get through a puzzle faster than this young lady. She's a data scientist.

Scott: I haven't done a puzzle...In 1991, I had chicken pox. That's the last time I did a puzzle. My wife enjoys doing them. I can't stand them.

Pat: I don't like them either.

Scott: No joy whatsoever.

Pat: But when I was going to the Trumpian, we had a little party, because it's a big thing now when you get engaged. There's...

Scott: They invite everybody, right? Were you hiding around the corner or something, spying on them?

Pat: No. They had a photographer and a videographer, and then they met, and they went for a walk in the park. And they were supposed to...and then they filmed it. The whole...It's a big thing. I was talking to the photographer. He says he does four of these a week. He says it's his bread and butter filming these.

Scott: How often do they get a no?

Pat: I didn't ask that question. But then anyway, then they come by the house, my son's house, and it was a big surprise. But when we were setting it up, I was filling up the ice chest, and I said, "This looks like pretty good ice." My son said, "I know. It's the greatest ice ever." He said, "There's no ice better than this ice. In fact, the Democrats' ice is so bad, it's water." I just...

Scott: He would strike me as a conservative young man.

Pat: Which son?

Scott: Your oldest.

Pat: He is conservative.

Scott: Yeah, I would think, just knowing him.

Pat: I've got two liberals and two conservatives, and one very...my daughter's very, very liberal. She's a schoolteacher and is in law school.

Scott: You know, it's funny. I mean, it's such a highly charged political environment right now. And I mean, I have a lot of people in my life, I just don't talk politics. A lot of people I care deeply about in my life, I love dearly, we just don't always have the same viewpoints. And I'm like, that's fine. I'm okay with that, like that doesn't need to be part of our relationship.

Pat: That's right. Leave it alone.

Scott: Whatever. Yeah. Anyway, why are we talking about that anyway?

Pat: It was just the Trumpian, where it's like the best show ever. You're going to enjoy it. You may or may not.

Scott: Well, anyway, congratulations on Connor's engagement to this nice young lady.

Pat: Thank you.

Scott: I'm assuming she's a young lady. Can't be too presumptuous.

Pat: Whatever.

Scott: Yeah. Okay. All right. Maybe we should take some calls here and get right to it. If you want to be part of our program, love to take your call. You can send us an email at questions@moneymatters.com or you can call us at 833-999...I'm sorry 833-99-WORTH. It's two 9s, not three 9s. 833-99-WORTH to join the program. Let's go to Montana and talk with Julie. Julie, you're with "Allworth's Money Matters."

Julie: Hello.

Scott: Hi.

Julie: How are you guys today?

Scott: We're great. How are you doing, Julie?

Julie: Oh, good. Thank you.

Scott: How can we be of help?

Julie: Okay. I was asking, I was wondering if we should sell our stocks and put them into CDs right now since the market is so up and down.

Pat: When you say stocks, what does that mean?

Julie: Stocks in the stock market.

Pat: Are they individual stocks or are they mutual funds?

Julie: Yeah, mostly individual stocks like Microsoft, stuff like that.

Pat: And how long have you owned them?

Julie: Quite a while, probably since 2000, I'd say right in there, maybe 2000.

Pat: What's the account value?

Julie: Right now, it's about $70,000, but it's dropped like $4,000 since Friday.

Pat: And so, how many different stocks do you have in the portfolio? You mentioned Microsoft.

Julie: There are probably about six different ones.

Pat: And what are they?

Julie: I can't remember...

Pat: Are they all tech?

Julie: ...all of them. Pardon?

Pat: Are they all tech stocks?

Julie: No, probably just different ones. We have a broker and he kind of...AT&T, Lowe's, Cisco, Warner Brothers.

Scott: And do you have much in retirement savings outside of this account?

Julie: Yeah, probably about $170,000.

Pat: And what are you living on?

Julie: We ranch.

Pat: Are you retired?

Julie: No. No. Not retired yet. Not retired, probably won't with ranching, but my husband's 58, I'm 60, so...

Pat: And where did you say that $170,000 was, the $170,000 was?

Julie: That's for retirement and it's in an RIA account.

Pat: And how's that invested?

Julie: Some annuities, some stocks, just kind of diverse.

Pat: Is it with the same financial advisor?

Julie: Yeah.

Pat: He's making it a lot harder than it really needs to be.

Julie: I see. Okay.

Pat: It's not that complicated. And how often does he trade in these stocks?

Julie: That I'm not sure, I guess.

Pat: Well, let's answer this question. So, let's assume this is a diversified portfolio, which it's hard to see how you could get...

Scott: And technically, in order to diversify away from any one particular company, you need somewhere between 15 and 20 different individual security stocks. Then that'll diversify you away from the risk of one particular company, and then you just have the stock market risk.

Pat: Yes.

Scott: But right now, you've got double risk because you're overexposed into a handful of companies, and you've got stock market risk.

Pat: But she said she had an annuity in the IRA as well. Is that an annuity a fixed annuity or is it an equity index annuity, do you know?

Julie: I think there's some in both, like the fixed and high risk, low risk.

Scott: So, are you concerned that this $70,000 is going to be worth $65,000 next year? I mean...

Julie: Yeah, or less. I mean, it started out...I guess in the last 11 months, it's come up $18,000. So, I was thinking I don't want it to drop back down there if we could take it out. Because there is a bank close to us that we could get CD for like 5.35% right now.

Pat: Yeah, but so, right now this is fairly common in the marketplace where people are saying, hey, the yields are high on these bank accounts, why don't we just go there?

Scott: A couple of years ago, there was this, there is no alternative kind of concept because interest rates were so low, people were like, well, you got to invest in the stock market because you don't want to earn nothing on your money. Now you're like, I'm going to go earn 5% at the bank, maybe I should take the money out. Here's how I try to view things. Like, if you said you needed the $70,000, you're going to buy a new tractor next year, said you're in the ranching business, you needed a new tractor. A year from now, we would say 100% sell today, get the money out of the market today so it's available so that when you go to buy that tractor next year, you have the cash. But it sounds like these dollars aren't set aside for some tractor, they're really for your long-term retirement. So, you probably aren't going to spend these dollars for several more years. Is that fair?

Julie: Right.

Scott: So, then that's what is called a risk premium, and you will get, over the long term, a higher return in a well-diversified portfolio of stocks, equities than you would in a fixed account at a bank CD.

Julie: I see.

Scott: Over the long-term. Where it ends up next year, I don't know. So, right now, the Dow Jones Industrial Average, that index, is roughly $40,000. Okay, $40,000. And you said you started investing in the year 2000. It was $10,000 back then, the year 2000. The Dow hit $10,000. When I began in this business, in this industry, in July of 1990, the Dow Jones Industrial Average was roughly $2,600. So, it went from $2,600 to $10,000 by the year 2000. Today, it's at $40,000. I don't know what it's going to be next week, next month, next year, but I'm fairly confident that if we go out 5, 10, 15 years from now, we're going to see returns somewhat similar to what we've seen historically.

Julie: I see.

Scott: Stocks have done about 7 percentage points above that of the rate of inflation. But the cost of that excess return over what you're putting in the bank, the money you would be depositing in a bank, is the volatility of the risk. That is the cost. The cost...

Pat: That's how you got the 18 grand in the last year.

Scott: That's how you've got it, right, is because of that volatility. So, unless you think you're going to need this money sometime in the next five-plus years, then stay in equities. And we don't know. I was thinking I would say God only knows, but I'm hoping God isn't worried about our U.S. stock market.

Julie: Right. I'm sure he's not.

Pat: You don't pray for an up day in the market today? I'm hoping. Our CFO would joke like that. Just pray that the S&P closes high this quarter.

Scott: So, I think you're okay. I think you're okay. The one thing that is interesting about this portfolio is that the names that you have mentioned so far, Microsoft, AT%T, Lowe's, Cisco, Warner Brothers, is they're all large-cap stocks. And it doesn't appear, you know, if the rest of your IRA looks that way, you're making it much more difficult than you need to be. You can buy the total market because you're missing out on mid-caps and small caps in this. And the use of an annuity inside there is probably...I don't understand why they would use a fixed annuity in there or even an index annuity. Well, actually, I do know. It'sa commission. You get paid a commission. I assume that this is a...actually, I couldn't even name the firm. It's a...should I name the firm?

Pat: I don't know what you're talking about. What firm?

Scott: The firm she's using. It's a small...it's someone in the local community that is managing the money. Is that correct?

Julie: Right. It's at our Wells Fargo Bank.

Scott: Okay. Well, there is the answer to that. Go get yourself a real financial advisor.

Pat: Watch out, you're going to get a cease and desist letter from Wells Fargo.

Scott: No, that's not...Look, Wells Fargo has many divisions in it. They have a wealth management division that is...it's good. It's a good division.

Pat: Yeah, there are great advisors.

Scott: There are great advisors in their wealth management. And then they have...

Pat: And then they have the bank brokers.

Scott: And they have the bank brokers.

Pat: The branch brokers.

Scott: Yeah.

Pat: It's a different construct.

Scott: And Wells Fargo is a big company. That was not fair for me to say that about Wells Fargo. I think what you need to do is go get a fiduciary, a fiduciary to manage your money.

Pat: Someone who does not get paid any commissions for buying and selling stuff. And the fact that you're doing individual stocks is perplexing. Twenty years ago, this was kind of more common, but it's really rare today.

Julie: I see.

Scott: And they're charging a fee. I'm guessing they're charging a fee on that percentage. That portion of the portfolio, with the exception of the index, is to do that. Ma'am, go find yourself another advisor.

Julie: Okay.

Scott: And how big is the town you live in?

Julie: Well, the town I live in is not very big. But 45 minutes away, it gets bigger.

Scott: And what town is that?

Julie: Spearfish, South Dakota.

Scott: Okay. Go to Spearfish.

Julie: Okay.

Pat: That's the big town close by?

Scott: Spearfish.

Pat: Is it big enough to have a Costco?

Julie: No.

Pat: Okay.

Julie: We have a Sam's that's 90 miles away.

Pat: Okay. You are a rancher. You are a rancher. I think what you need to do is go get better advice.

Julie: Okay.

Pat: All righty?

Scott: But I wouldn't sell. I wouldn't sell. And it may go down much further in the next week or two or three or four or two months. I mean, that's what the markets do. They go up and they go down. But they go up more than they go down.

Pat: Yes.

Julie: Okay.

Scott: Yeah. All right. Thanks Julie, appreciate the call.

Julie: Thank you.

Scott: Thanks, Julie. And what was the name of the little town?

Pat: Spearfish. You know you live in the boonies when the big town near you is Spearfish, 45 minutes away.

Scott: Yeah. I have no idea where Spearfish is.

Pat: Eastern Montana.

Scott: My family's from South Dakota. There's a Hanson County, South Dakota.

Pat: You're throwing the weight around. You running the city council there in Hanson, South Dakota, Scott.

Scott: My family was a bunch of drunkards.

Pat: Oh, no. How did they get it? Or are they running moonshine?

Scott: There are no accomplished people in my lineage.

Pat: No. It's like these people that believe in reincarnation and everyone's a prince or queen. Some of you are like, no, they weren't. Statistically speaking, you weren't related to any of that in your previous life.

Scott: You know what's a challenge, Pat? If you have made a good income, you've been a good saver, you've accumulated some dollars, you have a lot of options when it comes to hiring an advisor.

Pat: Correct.

Scott: If you don't have any money, then...

Pat: It doesn't matter.

Scott: I mean, you can pay a fee for a plan or hire someone on an hourly basis, I suppose. The challenge is kind of the middle America that doesn't have a ton of savings, but they've saved and maybe their income needs aren't that large compared to where they live. They're not in this example. $240,000 to invest. Right. And it might be a fairly decent amount where they live, but it's hard to get a quality advisor on accounts that size.

Pat: Yes.

Scott: It's a challenge the...

Pat: Yeah. Unless you go to Spearfish, South Dakota.

Scott: There's got to be a...

Pat: Well, to your point, in all sincerity, an independent advisor who lives in Spearfish, his income needs aren't the same either. He's not having to pay rent in San Francisco or New York or whatever. Or hers.

Scott: And firms like...I guarantee you, I would bet, I can't guarantee it, I would bet there's an Edward Jones office in Spearfish, South Dakota, just statistically, and they have moved over away from a commission model...

Pat: That's right.

Scott: ...a fee-based model. Right? And the banks have been slower to do that. And the reason is because the banks have a tendency to actually...in the bank brokerage world where the person sits in the bank, they have a tendency to have a higher turnover in that environment, a higher turnover of actually the advisors. And therefore, if someone can monetize someone's portfolio to their benefit...

Scott: That's one of the challenges with that model.

Pat: That's one of the challenges.

Scott: Yeah. All right. Let's talk now with Charles. Charles, you're with "Allworth's Money Matters."

Charles: Hello, gentlemen. I wanted your opinion on whether you think it's beneficial for a married couple to combine finances.

Pat: Okay. How long have you been married?

Charles: I just celebrated 10 years back in November.

Scott: All right. Why are you keeping things separate?

Charles: You know, when we met, we had already had our own careers, used to paying our own bills, our own separate bank accounts. We're a little bit older, and we just kind of fell into it haphazardly where very arbitrarily, well, you pay these bills and I'll take care of that. In some ways, it's nice because we divide responsibilities of who keeps track of what. But we're kind of at a point now where I've been doing some reading and talking to other couples who've been married longer that it's actually with the two of you kind of rowing in the same direction and planning now kind of for retirement there are benefits to just combining until it's just one thing now.

Pat: Do you file your taxes together?

Charles: Oh, yeah.

Pat: Okay. And do you have children from a previous marriage?

Charles: Neither one of us, no.

Pat: And do you have children now?

Charles: Correct, two.

Pat: Oh, you do? You're responsible for one of them, and then she's responsible for the other one. And the kids are like, why does my brother always dress so nice?

Scott: Don't ask me, ask your mom. I mean, it's highly unusual, Charles, 10 years of marriage with kids, first marriage, to keep things separate. And I mean, I guess if it's working for both of you and it's not causing any issues and it works, like, I don't see a real problem with it, as long as you guys do your planning together and stuff.

Pat: And the planning says, how much money is going to the 401(k)? What do we need for our college education? Do we have a retirement? Do we have any other financial goals? Do I have the right amount of term life insurance on myself? Right. Is that taking place between...are those conversations taking place between the two of you?

Charles: Yes, we're both maxing out our retirement plans, putting into 529. I think we could be doing better, though, if we were, you know, kind of knew exactly how much cash was coming in. For example, my wife built up $100,000 just cash savings. I said, well, I think we could be doing something better with it with cash. But it is kind of our plan to sit down with financial advisors.

Scott: I mean, what normally happens, just like other household chores, that one spouse ends up doing more than the other, right? It usually happens in finances that one spouse takes on the responsibility of managing the household finances, paying the bills, figuring out where to put the money.

Scott: I'm married to an accountant.

Pat: We know who does the bills in your family.

Scott: That's right. But I manage the portfolio.

Pat: Well, you are in the industry.

Scott: Well, it made it a lot easier that way. Yeah, it's highly unusual to not see it managed through a single household. It's not unusual to see it before children. That I will give you.

Pat: Or a second marriage.

Scott: Or a second marriage, but you don't have any of that. And I would...

Pat: And it's not your money and her money. Because you live in California, community property state. Like, you each own half of each other, 50% of it. That $100,000 that your wife saved up, $50,000 of it is yours.

Scott: Yeah, and it would actually allow you. So, I assume that you're making either non-deductible or deductible IRA contributions and then converting them to Roths?

Charles: Not yet.

Scott: Okay, so this is where this is where this would actually...I would make the argument that you should be doing it together. Because planning would have told you that there's all this money in cash and it was accumulating up over time. And it would have provided an opportunity to allow some sort of a tax benefit.

Pat: I mean, it's not mine and yours, it's ours.

Scott: And so, I would...you know, if you sat down and said, okay, let's look at this quarterly basis. Oh, who's going to take this responsibility and this responsibility? It's going to allow for better financial planning to take place, quite frankly. There's no question about that. Because you noticed that and it wasn't bothering her, correct, the $100,000 in cash?

Charles: Right.

Scott: Right?

Charles: Right.

Scott: And so, you know, we all have different views of the world and you're going to allow two people to look at it. And you would have said, "Well, you know, when we get to $40,000, should we be thinking...?" And then, like, you're in tax planning, like, "Well, should we put more in the 529 or should we make an after-tax contribution to a non-deductible IRA and then convert it to a Roth IRA?" I would combine them together. It's going to get better financial planning outcomes out of it, as long as it doesn't ruin the relationship.

Charles: Right. She's more hesitant...

Scott: So, she's more hesitant.

Charles: ...than I am. Yeah.

Scott: I'm not a psychologist or a licensed therapist, but I have seen many. Yeah. That's your call. From a financial planning standpoint, it will make it easier. But if...

Charles: That's why I was calling to get your opinion, to maybe play this back so...

Scott: I've got to tell you...

Pat: I mean, you know, look, we all do things in our marriages to make accommodations for one another in a variety of ways, right? And if your wife feels strongly about it, maybe what you do is say, "Hey, why don't we...once a quarter or every six months, let's have a session where we look at all of our finances and look at what our goals are and what things that we need to do to accomplish those goals."

Scott: Yeah. Are our dollars being utilized the most efficient way possible? And that might be a compromise.

Pat: And maybe there's part of her fear that you're going to start controlling her spending.

Charles: I thought of that, but that's absolutely counter to my personality and history.

Pat: Yeah, but there's probably something in her background, something that she feels like she's losing some control.

Charles: Yeah. That's possible.

Scott: I'm not a licensed therapist, but I'm going to tell a story. I'm going to tell a story. I'm gonna tell a story. Pretty personal story. I've been married for 37 years now. I got married quite young. I thought so anyway. So, my wife is an accountant. She has a degree in accounting. She's been a practice, not a CPA, but an accountant. I mean, look, she does it great. Well, about 20 years ago, I would take money out of the ATM and sometimes I would forget to tell her. I just wouldn't give her the receipt. And so, she took the ATM card out of my wallet and said, "You cannot have an ATM. You're not responsible enough to tell me when the money out, and telling me is it the same as giving me a receipt. You need to give me a receipt and you need to give it to me within 24 hours."

So, as you can imagine, I mean, there's control issues going on here. So, she took it away. And anytime I needed money, cash, I would ask her, and she would actually have it next to my keys within three day a couple hundred dollars sitting on the counter and that went on like that for four or five years. And then one time I asked for money, and she said to me, "Do you know how hard it is to get that money out of the machine?" And I said, "I appreciate your plight, but it can't be any harder getting it out of the machine than it is getting it into the machine." And I said, "I spend a good amount of my day trying to get money into that machine. So, if taking it out has become too much of a burden," you can hear some sarcasm in here, "then maybe I'm just going to take over that responsibility myself." So, I ended up having to go back to the bank and getting my own ATM card. But there was a control issue and it exists to this day, which is fine. It works great. Anyway, I don't know why I told that story.

Pat: But I think you can accomplish all of your financial objectives and still have your account separate if it's that meaningful to your wife.

Scott: That's right. I wouldn't mess with that. All right. Appreciate the call.

Charles: All right. Well, thank you.

Pat: And call us for any counselling anytime, Charles.

Scott: Yeah. We'll give you parental counselling next. I'm so good at that one.

Pat: What did you tell me years ago? You told me years ago, if I realized that the input didn't matter as much, I wouldn't have tried so hard.

Scott: Yeah.

Pat: Right?

Scott: You look at young couples, their first kid, all this stuff, and then their teenage years and they're crazy anyway.

Pat: It didn't matter, that's what you said

Scott: Well, it may have mattered some. I must have been having a bad day. It does matter.

Pat: It does matter. It does matter. Hey, Pat. I want to talk about the subject, "IRS finalizes inherited IRA and other required minimum distribution regulations."

Scott: There's a teaser. Don't turn off...

Pat: I think the Wall Street Journal was, "Heirs finally get an answer from IRS about money in inherited retirement accounts."

Scott: Finally. Finally. But let's talk a little bit about this exciting topic. It's super important. And the reason is this idea that this tax deferral that is always good because it's preached that tax deferral was always good. Always, always, always.

Pat: That's right.

Scott: But it's not. It's not always good. The reason is because of rules like this.

Pat: Yes, so one of the things you might have heard us say over the years, ideally, we get to retirement with a diversified tax strategy and our portfolio was diversified with different tax techniques in addition to being diversified in an investment. So as an example, we're at retirement time. We have some money in a traditional IRA or 401(k). We have some money in a Roth. We have some money in a brokerage account, different types of investments there. Maybe we have a rental property. Highly diversified tax strategy. So, if we need income from somewhere, there's a variety of different buckets to pull from.

Scott: And the idea behind the different buckets is it gives you more control over your marginal tax rate. It's the amount of tax you pay on the last dollar you earn.

Pat: And then there's also when assuming we're not going to spend all the money in our lifetime, which many of us, if we're good savers, we don't spend it all in our lifetime and we leave some to our heirs. It's the taxation after death and how these accounts are treated. And for years, 401(k)s, IRAs, you were able to, they call these stretch the distributions out over a beneficiary's life expectancy. So, what that means...

Scott: Which is the beneficiary's life expectancy.

Pat: The beneficiary. As an example, my mother-in-law passed away 13 years ago at age 65 suddenly, it was terrible. Passed away at 65 and my wife inherited a small IRA and she was able to spread that, with that account still in existence today 13, 14 years later. Maybe it's 15 years now. And she has to take out a distribution based upon what her life expectancy was and the year that her mother passed away.

Scott: Valerie's life expectancy.

Pat: Yes, and because the requirement of distributions are small, that account has continued to grow over the years. We have to take a little bit out each year.

Scott: Because the distribution is...

Pat: A couple percent, 2% or 3%.

Scott: Yeah, if that.

Pat: Because her life expectancy was long.

Scott: Quite long.

Pat: Rules changed a few years ago. Where it's now, if you're a beneficiary of a retirement account, or you pass away leaving an account, that account cannot be stretched over your kids' life expectancies like my wife was able to do 15 years ago. Now they must be distributed within 10 years regardless of age, and this applies to 401(k)s, IRAs, 403(b)s, even Roth accounts must be distributed. Because the planning technique, a lot of people were excited about it, is saying, hey, what if I convert some of my retirement account today, my 401(k) to a Roth, it's going to be the best thing I could leave for my kids. Now I'm going to get this essentially tax-free account that's going to go for the life expectancy.

Scott: You go for 20, 30 years or more.

Pat: Not anymore, 10 years. So, what's really important about this is it would cause you to think differently about taking money and converting it to a Roth early on or withdrawing it altogether. And the reason behind that is if your children are in a lower marginal rate than you, right, then you want them to inherit as much money as you can in an IRA.

Scott: Yeah.

Pat: But if they're in a higher marginal tax rate than you, then maybe it's better to convert more money now into a Roth IRA and/or just take the money out, but most likely convert to a Roth IRA knowing, right, knowing that they're going to be forced into this distribution over a relatively short period of time as compared to what would happen in the past. So not only do you think about, you know, am I going to need this money or spend this money in my lifetime, but how do we make it as tax efficient as possible to go downstream?

Scott: And the rules around these, they get more cumbersome. These are the changes from the Secure Act that was passed a few years ago. The IRS issued final regulations. It was 260 pages of final regulations to make some clarifications on the Secure Act that dealt with inherited IRAs. I mean, can they make it more complicated?

Pat: Well, it's been two years. You got to turn out something if you've been working on it for two years. You had someone that worked for you on a project for two years and they handed you a three-page bullet-point explanation. You'd say, eh, maybe more than...He handed you 260 pages, you're like...

Scott: You can't even read it all.

Pat: You're like, work well done.

Scott: You think that's how it works over there in the...?

Pat: I have no opinion.

Scott: I think you do.

Pat: I'm not going to say anything.

Scott: I think you have a strong opinion there. But I think the reason we bring this up, for many Americans, the retirement plan, your 401(k) and IRA is your largest retirement asset.

Pat: And many people, the largest asset, period.

Scott: Yeah.

Pat: Larger than their home, their value of their home, larger than...

Scott: It's not uncommon, someone gets to retirement and they've got 2 million bucks in their 401(k). They've got a couple hundred thousand outside of that and a home. That's it.

Pat: Not uncommon at all.

Scott: It could be a very nice retirement. But it's important to as you were planning, estate planning particularly, of what does this mean during our own lifetime on our requirement of distributions and then what's it going to mean to our heirs when we pass away? And it doesn't matter what your trust says, unless your trust is listed as the beneficiary. Because if you have your kids listed as the beneficiary or your spouse listed as the beneficiary, it'll supersede whatever you might have in a will or a trust.

Pat: Correct.

Scott: And where it gets even more complicated are second marriages. Right?

Pat: Very complicated.

Scott: Whether that happens midlife...

Pat: Late in life.

Scott: ...or late in life, and you list a spouse and not the kids because you want to make sure the spouse is taken care of and the kids can be at times disinherited.

Pat: But it's really important to look at each one of the beneficiaries differently based upon their incomes.

Scott: So, you're saying in a perfect situation, you look at your three kids, one is making $400,000 a year...

Pat: Working for some big tech startup.

Scott: Not a startup. Someone's done well.

Pat: Okay.

Scott: One is stay-at-home parent. Two ends of extreme. Taxes are very different. In a perfect world, you would design your estate such that net of taxes, they would all be equalized.

Pat: That's right.

Scott: Okay. That's going to be in a perfect world. But what's going to happen is you have three kids, you're going to have each as a third as beneficiary.

Pat: Understand, but Scott, there are ways around that. I mean, there are ways around that. But let's not let perfect be the enemy of good. Give this some thought. Yeah. And discuss it with your financial advisor. Yeah.

Scott: Hey, before we go, I want to let everyone know we have...where's my little sheet here? We've got a great financial planning workshop. This is a live in-person financial planning workshop on the five must-knows of financial planning. So, in this workshop, you're going to learn sound investment management strategies, some great tax planning strategies, and some other strategies that are really kind of critical for helping the planning and also retiring well. These are going to be located in the Sacramento and Cincinnati areas, so if you're in the Sacramento or Cincinnati areas, that's where they're going to be the week of August 14th. And for complete details to find out where they are to register, they're free, but you need to register, simply go to allworthfinancial.com/workshops. Again, allworthfinancial.com/workshops. It's been fun being here with you. This is Scott Hanson.

Pat: I'm Pat McLean. Thanks for joining us.

Man: 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.