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-W-O-R-T-H.

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

Pat: Pat McClain. Glad you're with us today as we are doing our...

Scott: Our podcast, radio show?

Pat: Yes, sir.

Scott: Slash, slash.

Pat: My co-host and myself are both financial advisors, certified financial planner, chartered financial consultant. We've been doing this program for 28 years? Been a long time. I'm glad to be continuing to do it. And we love taking your questions, answering your calls, things you bring to us. And we always talk about what's going on in the news and that sort of thing in the world. And so, Scott and I were talking before the program about what has happened in Maui and how terrible...

Scott: Which is unbelievable.

Pat: Your heart breaks for... Especially the...

Scott: And we're on the West Coast. So, if you're in the West Coast and you have... Most families have been to Hawaii at some point in time, right? And a lot of professionals, it's just like the place to go, and Maui particularly. And there's direct flights... We're in the Sacramento region. There's...

Pat: Southwest flies direct to Maui. So, it's relatively inexpensive.

Scott: Pretty easy to get there. Yeah. And there's inexpensive options on...

Pat: That's correct.

Scott: ...many parts of Hawaii. So, a lot of people on the West Coast...

Pat: You're not staying at the Four Seasons. But I've been to Lahaina a couple times, a beautiful little town. It reminds me a lot of the small towns in Northern California on the ocean, just kind of the makeup, kind of chill, old town... But you know, we're no stranger to fires here in Northern California, especially Scott and I both live in the first foothills of the Sierra Nevadas. So, if you saw anything last year about the Caldor fire that whipped through the Sierra Nevadas and up into the Tahoe region... But it brought up a conversation Scott and I were talking about.

Scott: Which incidentally, I was driving home from Lake Tahoe last weekend, and I took an extended route because there was a crash on the main highway. I mean, I could not believe the size of that fire that ripped through Northern California last year because I was so many miles away from the normal highway. It was just phenomenal how large it was.

Pat: Yeah, miles and miles and miles wide.

Scott: But most of the California forests, as other parts of forests that are burned, have not burned in the last 100 years. You go the last several hundred years, pretty much all of it is burned, right? So, there's still danger out there. So, whether it's here or...I mean Hawaii...who would've expected...?

Pat: Well, if you read the book...there's a book called "The Big Burn," and then Ken Burns did a series on "The Big Burn" and it's the history of forest fires in the United States and actually why we got to where we're at today. A fascinating book.

Scott: We're not here to talk about climate change or to solve...

Pat: That's right. That's right. We're here to talk about the economic impacts. And so, for the average consumer, if you're in one of those zones, I saw it last year, my insurance premiums on my home, my fire insurance went up by three times. And I went and shopped it and I ended up with State Farm. And they were the least expensive. Now, State Farm quit writing insurance in the state of California on homeowner's insurance. They still kept policies in place, but they quit. Was talking to a farmer, number of agencies, I won't say the names of the insurance companies, where they've stopped doing it, but...

Scott: And it's not just fire-prone areas, hurricane areas, just homeowners insurance in general, these companies are like, "Whoa, we've got quite a bit of losses, is this a business we want to be in?" And as the marketplace shrinks, the prices will go up. But don't be afraid to shop your coverage and don't be afraid to actually ask the insurance company, especially if you have a above average-priced home in your area, to send someone over from the insurance company to actually assess the property itself, to make sure that you've got full coverage on it.

Pat: Yeah. And take a higher deductible if you can.

Scott: That's right.

Pat: If you have a mortgage, sometimes the mortgage companies will limit the size of the deductible. But if you don't have a mortgage, take a $5,000, $10,000, $15,000, whatever amount of deductible that you think that you can self-insure.

Scott: I personally have a $50,000 deductible. And the reason I have a large deductible is when...this was... If anyone's had a claim on their house, you know what happens to your homeowner's insurance, right? It goes up quite dramatically. So, I had a small water leak, did some damage. I think it was a hose from the dishwasher or something, damaged the wood floors, so I ended up having replacing the wood floors or whatever. It really wasn't that expensive of a repair, relative. But my insurance premiums went up to the point where, like, within three years, I pay...I could have paid out of pocket for whatever the...I forget the dollar amount. So, the deductible does what for you? You self-insure the first bit of the claim. I'm not gonna...I don't wanna claim against my homeowner's insurance, right?

Pat: You're using it for catastrophic.

Scott: Catastrophic. Whether it's something...my house itself burns or whatever or there's a liability.

Pat: That's right.

Scott: Which we should also have umbrella insurance.

Pat: Let's talk a little bit about that because that's exciting stuff.

Scott: Well, it's important.

Pat: Absolutely. It's important.

Scott: Depending upon...your umbrella policy should coincide with your net worth, which means the higher your net worth.. Your net worth's a million bucks, you should have at least a million dollars of umbrella and policy.

Pat: If your net worth is $10 million, 10 million, after $10 million, you could start to scale down a little bit because the likelihood of you receiving claims greater than that start to diminish depending upon what your occupation is. But don't be afraid to shop your insurance. Don't be afraid to actually go out and get quotes. In fact, like I said, I did it last year. I normally shop mine every four to five years unless there's a significant increase in the rates.

Scott: I've had the same agency for 20 years.

Pat: Do they shop it?

Scott: They shop...well, supposedly.

Pat: That's what...

Scott: Supposedly, supposedly. Yes. Yes. Supposedly. Supposedly.

Pat: Anyway. Yeah. But let's pray for...

Scott: But it's not gonna...

Pat: ...the people in Hawaii.

Scott: Oh, man.

Pat: It's still... They're not all rich people either.

Scott: No, no. Not at all.

Pat: I mean, they're not rich people. There are some rich people...

Scott: And Lahaina, most are hardworking people that are...they survive off the tourists that come for the t-shirt shops and the restaurants that once were there, Longhi's and Kimo's, and...

Pat: What are they?

Scott: Longhi's? Certainly, you've been to Longhi's in Lahaina. Been there forever.

Pat: I have not.

Scott: Kimo's on the water there.

Pat: We pack lunches when we travel. I have not been.

Scott: We do not pack lunches. No, we don't. We spent Thanksgiving at Kimo's one year with our family.

Pat: Oh, very nice.

Scott: Wasn't a fancy restaurant. None of these are fancy restaurants.

Pat: Yeah, they're Hawaiian. Anyway, let's... Wanna take some calls?

Scott: Yeah. If you wanna join our program, questions at moneymatters.com will get you on the program. Or you can send an email to questions@moneymatters.com. Let's start off in Iowa with Dan. Dan, you're with Allworth's "Money Matters."

Dan: Hi, how are you doing?

Scott: Good. How you doing? The one time... I hear about Iowa because...didn't you guys just have the big political fair, whatever it was, last weekend?

Dan: Yeah. Well, the Iowa State Fair and we have a million-plus visitors per...

Scott: How many?

Dan: ...in the 10 days and...

Scott: How many?

Dan: ...all political figures show up all the time.

Scott: How many visitors?

Dan: Oh, a million, two is an average year for us. It's impressive. It's a once-in-a-lifetime thing. So, you haven't been there, you gotta get there once.

Pat: California State Fair just finished, and they had 600,000 that attended over their run.

Dan: Yeah. No, this is a big deal for our small state of three million-plus people.

Pat: Yeah. That is a big deal.

Scott: What can we do for you?

Dan: Yeah. We have an extra $250,000 that we're gonna have to invest in the next three to six months from three house flips that we should close on in 30 to 120 days. We have rental real estate, have had for 45-plus years, and we have about 700,000 in a very highly mixed, and I would term probably for our age, somewhat aggressive group of stocks. No mutual funds.

Scott: Are you taking...?

Dan: [crosstalk 00:09:32.218] a conservative S&P.

Scott: You take any income from that account?

Dan: Nothing. No. We have three pensions, two social securities, and one state pension. And essentially we live on that. We have maybe $2,000 we take from that to do funding of our vehicle expenses, leases, and purchases. And that's about it. We don't travel. I have no desire to relocate at this point in time to any other state.

Pat: And how are you managing...?

Dan: We're just looking if we should expand on the portfolio or do some more real estate.

Pat: How are you managing the equities?

Dan: Well, honestly, it's self-managed at this point in time. We probably don't do as good a job as we should because at one point in time, in late 2020, we're probably close to $850,000. We dropped down to about $550,000 and now we've recovered to about $700,000. We don't buy and sell per se. We've sold very little. We mostly just buy.

Scott: And is that bad? I mean, no one likes seeing a decline but I mean, every asset class goes through its cycles, right, just like your real estate over the years.

Dan: Yeah, absolutely. We've had real estate investments for over 50 years and market investments for almost 50 years.

Scott: And why individual equities versus index funds or ETFs?

Dan: Well, we were into mutual funds, and we have some index funds inside of that group. So, of that $700,000, probably $150,000 is indexed funds, and there are probably another $100,000 in ETFs, and the rest are individual stocks.

Scott: And how many rentals do you own?

Dan: There are 13 houses with 20 doors.

Scott: And how much is that? If you were to sell all of it today, how much would that sell for?

Dan: Yeah. On a bad day, probably $1.8 million, on a good day, probably $2.2 million. Our housing price, cost, whatever you wanna call it, in Iowa's way lower than East Coast, South Coast, West Coast.

Scott: Right. And this $250,000...

Pat: Any debt on these properties?

Dan: Well, the three that we're selling, we have construction debt. So, that $250,000 would be net of all debt on those three we're selling.

Scott: And you can't do a tax-free exchange on these?

Dan: Well, we've talked about that. We've looked at 1031s, and then, of course, you have a timing matter. But then I discovered there's another product called a 721, which we can just 1031 into a 721, which invests in a portfolio of certain things and then we don't...then we get away from the timing thing.

Scott: Yes. I'm going to caution you. So, this is where you actually do a tax-free exchange into an equity portfolio, and you choose a trustee. This is how it was described to you. And that way, you don't have to pay any gains. Is that how it was described to you?

Dan: Well, it's what I read. So, I read first on the IRS website, and then I've done some other researching. And no one's called me on this because I have made no contact on...any attempts on any options to look at 721s with any company.

Scott: All right. Well...

Dan: It would be a back...not a back door, it would be a last resort method to avoid taxes. Let me say it like that.

Scott: Okay. How old are you, Dan?

Dan: Oh, wow. I just had a birthday yesterday so I'm 39. That's not true. I'm 73.

Scott: And you married?

Dan: Yep. Married 51, 52 years.

Scott: Nice. How old is your spouse then?

Dan: Will be 73 in October.

Pat: Well, I don't know if the 721 will work for you. I don't know, and I'm gonna defer you to a tax... Here's my view of this. I don't see any reason in the world... And by the way, you are not overweighted in equities. I would make the argument that you're underweighted in equities.

Dan: I feel like that sometimes.

Pat: Well, you're living off your... Let's just say, because you're not living off any of this income, so...

Dan: No.

Pat: Do you have children?

Dan: Three boys with families.

Scott: And is the plan for the kids to inherit the money when you guys pass?

Dan: Well, if they behave, yes. If they don't, I'll just give it to a church.

Pat: So, here's how... I'll tell you how I look at it myself with my own portfolio, and I look at it with client's portfolios. If you have real estate in your portfolio and it's debt free, which means it's not levered, and it produces income, which these all do, you can look at that as a fixed income side of the portfolio with chance of capital appreciation, right?

Dan: Well, it's ironic you say that because back 50 years ago, when we first started on this pathway, that's exactly what I did. I've never bought a bond in my life and I figured this was my bond portfolio with appreciation options. And then my wife deferred. What did she do? So, she was a public school teacher, and we did a tax-sheltered annuity. But not into the annuity, we did into mutual funds.

Scott: And so, how much do you have in retirement accounts? Is that $700,000, is that inclusive of...?

Dan: Yeah. So, no, that $700,000 is retirement accounts. We've converted about 75% of that to Roth so far.

Pat: And how old are you?

Scott: 73.

Dan: 73.

Pat: Okay. So, here's the way you can look at it. And by the way, there is a difference...

Scott: I'm assuming you still have cash reserves somewhere?

Dan: Yeah. We have in the middle five figures.

Pat: So, you know, you can view real estate, if it's not levered, very similar to that of the bond. Obviously, it takes a lot more work.

Dan: Yeah, for sure.

Pat: Bonds very rarely call you and tell you something's broken or that you need to write a check into it, or that it's empty and it won't be paying any sort of interest payment for months and months. But in a general scope, you can actually view it as that way. So, if we put your...you said your real estate was valued between, your investible real estate, not your primary residence was...

Scott: Couple million dollars.

Pat: Was $1.8 million to $2.2 million. So, we're gonna take the median. So, $2 million and $700,000 in equities. If you put the $250,000 into equities, you would still be considered a relatively conservative portfolio with a third equities and two-thirds [inaudible 00:16:04]. And just because you're 73, I know I've read things, you take 100 minus your age, there's all kinds of different rules of thumb. And as you get older, you're supposed to have less in equities. But look, I look at your situation, odds are these are dollars you're not gonna spend in your lifetime.

Dan: Probably not.

Pat: Right? Probably not. So, your time horizon is very long. So, you can afford to be in things that fluctuate in value, whether that's real estate or stock, right? You can afford it. So, I mean, if it were me, from an investment stand, I'd put it in stocks, I would put it...

Scott: It's funny, I was driving the other day, and there's this person in our industry, he's a bit of a coach to financial advisors, and he's a little theatrical in the way he talks. I remember, I heard a talk, he talked about how he... I love equities. His whole thing goes, "I love equities." And I was driving the other day, and I thought to myself, "I don't really love investments per se, but I do..." There's something about owning companies. It's so passive and the returns over a long period of time are so great.

Like, I started in the industry in 1990, the Dow Jones Industrial Average was roughly $2,600. It's $34,000 or whatever it is today, right? A multiple increase. I suspect over the next 30 years, we're gonna see something similar. And if something happens over the next 30 years where we don't have rising stock prices, meaning our companies in the United States are not increasing the values, well, we've got all kinds of other problems. I mean, frankly. But I would expect over a 30-year period, your equities will outperform your real estate.

Dan: Yeah. I think that's historically accurate for sure. And I was thinking about maybe doing something in [inaudible 00:17:46.842]. I think they call it the Dividend Aristocrat group.

Scott: Yeah. I'm not familiar with them.

Dan: The high-paying dividend.

Pat: You don't need that.

Scott: Don't do that. Don't do that.

Pat: You don't need that.

Scott: No, no, no. Don't play that game.

Dan: Okay. So, go for more growth?

Pat: Yeah. I would buy the...

Scott: You don't need the income.

Pat: You want something that's tax-efficient. That's what you want.

Dan: Okay. We can do more index.

Pat: Well, you could do even direct index...

Scott: Or direct index maybe.

Pat: ...which would actually even be better for you, which is even more tax eff-...

Dan: So, [00:18:14.530] direct index?

Pat: Direct index, and is even more tax efficient than indexing. And it allows you more control, especially...

Scott: Particularly, you mentioned about giving... If you give money now, you can cherry-pick which stocks have done the best, give those, and you can turn around the next day and repurpose 'em in your portfolio, which is why you wanna use direct indexing.

Scott: Even in your situation, that's what I would do.

Pat: And I think a bigger issue here... Well, finish back then.

Scott: I was looking at some real estate when the broker just said to me, he said, "Well, I would never buy a stock. Stocks are too dangerous." And I said, "An asset is an asset, right?" And because you're in real estate, you think real estate's the greatest. Look, I'm in the equity markets, we deal with it, but it's an asset. It doesn't...

And by the way, the asset doesn't know you own it. So, don't fall in love with any sort of a story around an asset. But what we do know is that fixed income and real estate, as long as it's not levered, has a tendency to be a little bit more stable over time in a well-diversified real estate portfolio than equities. But over the long-term, equities, you would expect to give you a higher rate of return. What's the cost of the higher rate of return?

Pat: Fluctuation. Your $850,000 account goes down to five-something and now it's only at $700,000.

Scott: But you don't care because this money isn't invested for you, it's invested for your kids if they treat you well, or a charity, is what you said.

Dan: Sure. Well, and our equity...I'm sorry, our real estate's not 100% paid for. We're probably 20% leverage left on that. But our rates are...

Scott: The rates are probably so low.

Dan: ...3.5 to 4.756, then I don't wanna pay [inaudible 00:19:52.231].

Pat: That's right. That's right.

Scott: No. You'd be foolish to because you could put your money in treasury bills.

Dan: [inaudible 00:19:56.258] down to the road of like three to five years and we're done.

Pat: That's right. That's right.

Scott: You can put your money in treasury bills and have an arbitrage off that.

Pat: So, go equities and...

Scott: I think though, Dan, the one thing for you and your wife to consider really is you've got what, 3 million bucks saved up, not counting your primary residence. You're not spending any of this stuff now, barely any of it. You're not gonna spend it in your lifetime. I think at this point in your life it's like, what are these dollars for?

And we can grow the $3 million to $6 million to $7 million, $8 million so you pass away and your kids get a big windfall. Or you can say, "Hey, what should our strategy be the next several years?" Whether it's gifting some to your kids a little bit now to see how they deal with it, or it's involved in some nonprofit, or your church or...something along those lines. Just something to consider. So, appreciate the call. Let's continue on now in New Jersey, talking with Barbara. And Barbara, you're with Allworth's "Money Matters."

Barbara: Thank you so much for taking my call. It's a pleasure to speak to the dynamic duo over there.

Scott: Oh, the dynamic duo. Thank you.

Barbara: Scott and Pat.

Scott: We've been doing this long enough... We used to be called The Boys, but that's been a long time ago.

Barbara: Oh, that's wonderful. Well, thank you so much for taking my call. I appreciate it. I'm calling from Northern New Jersey, a bedroom community of Manhattan. My husband is 73, I am 67. I just feel like this whole retirement picture has just been...you know, one thing I planned for and then when I finally get to that age, it seems like all the rules have changed. And I was just looking for some clarity, if I possibly could.

Scott: Yeah. Well, people's views of retirement has changed too dramatically, even in the last 20 years.

Barbara: Absolutely. Absolutely. You know, both my husband and I worked for non-profits. And we kind of did it because we were thinking, you know what, we really loved what we did, and we were guaranteed a pension and a lot of things like that. And then all of a sudden, the pension went to the PBGC. It kind of went belly up and... Which is fine. We both started taking it at 65. And it has been, I have to tell you, it's been in our checking account the first of the month...

Scott: Oh, yeah. It'll continue.

Barbara: You know, it kind of made me nervous though, because when they told us, you know, we all had to watch this little film, and all of a sudden you see Bear Stearns go bouncing across the screen and then you see Lehman Brothers and then you see Eastern Airlines, and it's like, I don't wanna be a member of this club, but all of a sudden we are. So...

Scott: But the pension benefit guarantee corporations, all companies, so the video was...the companies that were unhealthy that blew up.

Barbara: Correct.

Scott: The majority of companies out there are healthy and they contribute premiums to the PBGC as well, right? So, it's funded through premiums paid by companies that have pensions.

Pat: And where this is a really big issue is if your pension is a high dollar amount and you retire earlier. And so, we saw this a lot with airline pilots. In fact, actually, later on in the show, we're actually gonna interview someone...

Scott: That's right.

Pat: ...an airline pilot. So, were your pensions discounted when they went to the PBGC, the Pension Benefit Guarantee Corporation?

Scott: No. [crosstalk 00:23:10.563].

Pat: I doubt it too.

Barbara: Actually, I was right at the top, but I did not get anything taken away from mine...

Pat: Perfect.

Barbara: ...because I had been with the company about 30 years. My husband was lower so he was only there 10. But like I said, they've been very good about it.

Pat: Perfect.

Barbara: But it's something you kind of don't...you just kind of...at least I didn't really think about that. So, it was like, "Okay, well this is great."

Scott: I would feel better about having a pension coming from PBGC than many companies out there. I certainly would.

Barbara: You're probably right.

Scott: No, seriously. I wouldn't worry about it. Yes. I wouldn't worry about it. I mean, yes. I mean, the government pension depositors at the Silicon Valley Bank, they were happy as heck when the FDIC walked in there and said, "Hey, you're all good."

Barbara: You're right.

Scott: Anyway, what's your question for us?

Barbara: You're right. Well, anyway, so we've been pretty frugal people, and all of a sudden now, my husband turned 73, born in 1950, he's taking his RMD, Social Security. He's got his little pension as I have my pension, have not taken Social Security yet. We have this surplus now of money, and I'm really not sure what to do with it.

Every time you wanna do one thing, it's almost like you set off a whole chain of other events. And it's sort of like some people are saying, "Well, you know, just put it in tax-free bonds, you're not gonna mess up your IRMAA, you're not gonna mess up this or that. You won't get taxed twice on it." We have, you know, a healthy portfolio of stocks, basically, tech stocks that I kind of have done, you know, with some of the Apples and the Amazons, and even now the Nvidias of the world, which have been healthy. But again, we don't really need this money, and I don't really know what to do with the RMDs. Every time we kind of get...you know, we have to take it out...

Scott: Do you guys have children?

Barbara: We don't have children. Wonderful nieces and nephews and couple charities that we're looking into.

Pat: How much investible assets do you have in your IRAs or brokerage accounts?

Barbara: The IRAs, let's see. There's the 403(b)s and then there's also traditional IRAs. When the rules came out, we never converted. We probably should have. I have probably about $2 million and my husband probably has about $2.5 million. And then we have brokerage accounts of about $7 million.

Scott: You guys did pretty well, but you're obviously frugal savers.

Barbara: Very frugal.

Scott: You worked for nonprofits, so you were...your pay wasn't... You probably could have earned more in the private sector. And you guys have been great savers.

Barbara: Both of us worked for hospitals, and I had to do a lot of the finances. So, I had to learn a lot about financial products and things, and I kind of applied some of it to ourselves. You're right. But we were very frugal as well.

Scott: Barbara, we're taking a quick break. We'll be right back.

Man: Can't get enough of Allworth's "Money Matters?" Visit allworthfinancial.com/radio to listen to the "Money Matters" podcast.

Scott: Scott Hanson and Pat McClain. Allworth's "Money Matters" back with you. We're talking with Barbara. And so, Barbara and her husband out of Northern.

Pat: Let's just assume most people have already been listening.

Scott: Okay. Or go and listen to the podcast.

Pat: Most people listen to the podcast.

Scott: All right, go listen. So, $4.5 million in IRAs and $7 million in brokerage accounts. And I assume your will or your trust is up to date.

Barbara: Yes, yes, it is. But again, I'm looking for charities right now because I just never thought we would have as much as this is, I'm not sure really what to do with some of it. So, I really am looking for some charities as well.

Scott: So, your RMD should go to charity.

Barbara: Okay.

Scott: So, if you're charitably inclined... And this could be a really wonderful season for you guys. You've got more assets than you thought you were gonna have when you were young. You're probably young and broke like most people when they get together, right? Now, you've got...

Barbara: Very much so.

Scott: Here you are in retirement, you've got more cashflow than you know what to do with, required minimum distributions, you're not spending those things. You've got some charitable inclinations. Can I share a story?

Pat: Yeah.

Scott: This is almost carbon copy of clients that I actually work with today. Worked for a university, both of them worked for governmental agencies, don't spend much money, go on vacations. And they're like, "Oh, it was the most beautiful vacation. We stayed in The Bahamas, but we stayed in one of these metal old shipping containers that had been converted into a room." Like, all right. Right? And plenty of monies, most of it theirs, and some of it inherited.

And we sat down and had this conversation, which is...and no children as well, almost carbon copy. And about six years ago, we sat down and said, "Look, let's recognize that this money will never be spent and that actually spending it will probably make you uncomfortable because it is going to require you to live a lifestyle in order to make a significant dent in here that you probably would not wear well." You're not gonna drive...

Barbara: That's so true.

Scott: Right? You're not gonna drive around in a Mercedes-Benz AMG, right? Your husband isn't gonna come home with a red lifted pickup truck.

Barbara: I doubt that.

Scott: Right?

Barbara: I doubt that.

Scott: So, the conversation, we sat down...and you might need an advisor to kind of...a more seasoned advisor to walk you through this, which was, look, the money... We're past the idea of actually just accumulating the money. Now we have to decide where this money is going to go, and is it going to support your morals and values in the places it goes? And you have a choice. You could either make some of these gifts along the way while you're alive, or you can wait till you pass away and then it all goes and you don't have...you're not there to witness what happens and to take part in.

Pat: Or it goes to your nieces and nephews or whoever's named in your trust, and may or may not improve their life.

Barbara: That's true too. And I like the idea of the warm hand. I know you had mentioned that before.

Pat: Warm hand...better from a warm hand than a cold heart. You need to design a giving strategy. The RMDs is the easiest. You were worried about the RMDs. Pick your favorite charity and just have the RMDs go there. The rest of the portfolio needs a giving strategy.

Scott: Yeah. And you might choose to move someone to a donor-advised fund today where...think of it like...it's like a foundation without having all the IRS filings and the public seeing exactly what you have. They're really simple to set up. I've got one. Pat, you've got one.

Pat: Many of my clients have them. They're easy to use. And that's where you take the highly appreciated assets in your brokerage account and you would move those over, and then you can roll 'em out to charities as you wish.

Scott: This could be really a blessing for you.

Pat: This is past the guys on the radio.

Scott: Don't set up a family foundation, by the way, because then it's public, then everyone's after your money, everyone knows exactly what's in there...

Pat: I'd set on non-profits. We would get lists of all the...

Scott: Oh, yeah. You don't wanna do that.

Pat: ...family foundations in our geography.

Scott: Don't do that.

Pat: Don't do that. You want it to be... So, a donor-advised fund. There has to be kind of a strategy or, you know, like this... You can make a real difference. Like, my wife and I have been heavily involved in a organization in Folsom, California, right, a part of our community, that they take...they're mostly women that are either homeless or have been homeless with kids. It's a two-year program, in-house.

They take these families, and these women are, for the most part, rehabilitated. And then they've got this support structure that when they graduate from the program, there's six other women in the community that come alongside them and are their support. And so, my wife and I made a decision years ago, like, "Let's get deeper involved in this and have a significant impact." And it's something we've really enjoyed, as an example.

Barbara: That's great. That's right.

Pat: My clients have set up education programs in Africa for young women. That was their thing, right? And you don't have to set it up. Look, if you have...if you look out in the world and you say, "There is a need..." There is a qualified bonafide charity out there that is already in that space, I promise you."

Scott: And there's good charities and they are not-so-good charities.

Pat: That's where...

Scott: The homework is taken there too. And there's a lot of people with huge hearts, but they're not always effective, right?

Pat: Yes.

Barbara: True.

Pat: So, you've gotta kind of view the charities that you're giving to... You're gonna ask, "Okay, show me your returns." And they're like, "What are my returns?" You're like, "For every dollar..." Like Scott, this charity that helps these women, you know how many they graduate every year, what their budget is, I assume.

Scott: Yeah, right? And, you know... I'm gonna get really personal. For me, my wife and I adopted two girls from the foster system six and a half years ago.

Barbara: I remember you talking about that. That's wonderful.

Scott: These girls would be with their mother. She had a program like this. Now, I love my girls, don't get me... But you want to stop at... Correct. You would prefer that... You love your girls but you would have preferred that they'd be with their mother.

Pat: That's correct. That's touching.

Scott: That truly is. So, you have done all the hard work. You've gotta finish the last bit of the journey which is, where did these dollars go?

Barbara: Right.

Scott: And this could be a really fun season for you guys.

Barbara: It really can be. And I appreciate...I really appreciate your insight. I knew the dynamic duo would have an answer for me. So, thank you.

Scott: Thanks, Barbara.

Barbara: Thank you so much.

Scott: And by the way, it's not easy, Barbara.

Barbara: No, it's not.

Pat: No, it's not easy.

Scott: Giving away money is not easy.

Pat: I know.

Scott: Giving away money is easy. Giving away money effectively is not easy.

Barbara: That's very true. That's very true. Because, you know, if you look at the 990 sometimes about what these charitable people make and things, and sometimes it's, you know, like they kind of miss the mission with the money. I don't know.

Pat: Oh, many nonprofits turn into for-profit of employee, and you're not interested in that.

Scott: But you might wanna just start with somewhere in your local community, like similar with... My wife and I are involved in something that's near and dear to... Something you've got a connection with that lines up with your values, and that sort of thing. I think it could be a great season for yourself.

Pat: And great job, great service.

Scott: Glad you called, Barbara. Money's a funny thing, isn't it, Pat? It's a funny thing.

Pat: Oh, my wife and I go back and forth about giving.

Scott: I've never met anyone who has enough. Well, maybe Barbara does. But most people... And she got to this point because she's concerned about the future and that sort of thing. It's just a funny thing. And then some people choose to go buy a... I saw a Rolls-Royce SUV in Tahoe last weekend, and I thought...which is a very strange place if anyone's been in Tahoe. It is so down to earth. You could be at a... I mean, people wear shorts and flip-flops and nobody cares what anyone looks like, and doesn't matter.

Pat: Rolls-Royce SUV.

Scott: A Rolls-Royce SUV.

Pat: What are you, in Beverly Hills?

Scott: Well, I don't know, half a million bucks or something. I mean that's one way you can spend your dollars.

Pat: Oh, they're gonna go off...

Scott: Maybe it was Zuckerberg. I don't know.

Pat: They're gonna go off-road.

Scott: And the skis on the top.

Pat: They go off... Was it lifted?

Scott: I don't know. I just remember thinking, "What in the world?" And I thought to myself, "I hope I don't see too many cars like this in the future, in this part of the world."

Pat: But anyway, hey, we've got a fun guest joining us right now, Carl Peterson. And just a little background. Allworth...we've got a division of Allworth called RAA that works with pilots. We've got about, I don't know, 3,000 pilots as clients, maybe 4,000 pilots, something like that.

Scott: Carl would probably know.

Pat: A lot of retired clients, a lot of existing clients. And Carl is our director of business development within our Delta Airlines program for RAA. And he's been part of our organization for, I don't know, seven or eight years. And he's currently a captain for A330, Airbus 330 for Delta. But he's also a securities license because he's also in the business... He was an FS-16 fighter pilot back in the day with the U.S. Air Force. Flew 35 combat sorties over during Operation Desert Storm days. And Carl, thanks for taking some time to join us today.

Carl: Oh, you bet. Thank you, you guys. This is great to be here.

Scott: So, you started out as a pilot but... Wanted to have you on here because you've been in a career that has gone through some ups and downs and you've had to navigate your retirement in the great times and the bad times.

Carl: Yeah, yeah, exactly. Well said, Scott. Yeah. I've been here 32 years at Delta, eight years in the Air Force, prior to that. It's always been volatile. Ever since deregulation started in like '70s, it really sort of took off. We had great pensions then eventually the bankruptcies, the 9/11s, you know, COVID, different things always seemed to affect the airline industry just like anything else.

Scott: Who would've thought COVID would be...like some global pandemic would ground all the airlines?

Carl: Exactly. I remember we were flying, you know, like across the North Atlantic... I fly international mostly. And well, it's going great, great contract, life is good. What could possibly happen, you know? And COVID happened. But anyways, we adapt very quickly. [crosstalk 00:37:11.008].

Pat: Can I ask you a question, Carl?

Carl: Yeah. Uh-huh.

Pat: Carl, when I fly internationally, I've only heard one pilot come on and just...he was amazed by the fact that we could start the day in Amsterdam and finish it in San Francisco.

Scott: The pilot?

Pat: The pilot. Still was?

Scott: Yes, still.

Scott: I love that kind of attitude. That's the kind of guy you want flying, so excited about it.

Pat: Like he had never seen it before. And I'm always amazed by...like, people they're complaining about air travel and then I say, "Well, you know, 100 years ago, it would've taken us three years to get to Amsterdam." You know that, right?

Carl: And Scott, and Pat, I am that kind of guy. I just flew from Paris back to Seattle a couple of days ago. And I actually said we've been flying back and forth across North Atlantic for a few days and we're actually leaving on time, getting there on time, happens a lot. We do it a lot. But I did say, "Isn't that amazing the moving parts we have here? The flight attendants are doing an incredible job. The mechanics."

We had a couple, you know, minor things, folks coming on from different jets, connecting with different jets, and we're watching all this. And all these...I mean, we're talking thousands of little pieces all happening, and then the engine's starting and, you know, we're pushing down, going down the end of the runway there and taking off. I did say something to the effect before the takeoff, that this is amazing, that we do this day in and day out, thousands of flights with all the major airlines, safely. And it's rather something to behold, and you guys are absolutely right.

Pat: It's mind-boggling to me.

Carl: It's fantastic. It happens...

Pat: So, your flights [crosstalk 00:38:36.551] 20 minutes and people complaining, you're like, "Relax, pal." Listen, the...

Carl: [crosstalk 00:38:41.494].

Pat: ...pilot wants to get this...

Carl: A little late due to the weather. And there's nothing we can do about the weather, but we do the best.

Pat: So, Carl, how did you get involved in the financial planning industry as a pilot?

Carl: Oh, that's a good question, Pat. Okay, very good. So, I'm part of the... Now, there's been several furloughs throughout the airline industry. I mean, going back to the '80s with the brand of Eastern, then Delta, American, United. We've all had our furloughs. So, I was one of the first furlough groups in the mid-'90s. So, I get furloughed by Deltas. Now, [crosstalk 00:39:12.520].

Scott: Was this as a result of 9/11?

Carl: Nope, this was prior to 9/11. This was '94, '96.

Scott: Oh, '90s.

Carl: Negotiations with the union, probably surplus pilots for a little while there. But yeah, my mom was always like, "Now, how can you be furloughed? You were an F-16 guy from Desert Storm." I go, "Mom, they don't care. They furloughed the bottom 500 guys, and I'm number 497 from the bottom."

Scott: And it's all union, right, 100%.

Carl: Yeah, it is.

Scott: It's all seniority.

Carl: And the union was fantastic. I did a lot of support during that time. I did a lot of volunteer work with the union that led to part of what I'm about to tell you. But I do remember going into collecting the...collect unemployment in the office there in Salt Lake City, Utah, and go in and they have you take aptitude tests, and I go, "Man, I haven't done this stuff since high school. Let's see what comes out. I'm sure it'll come out pilot, you know?"

And the guy comes, he goes, "You come across as a financial planner?" I go, "No, no, no, no. I'm a airline pilot for Delta and I was Air Force prior to that. So, isn't there a column for pilot? I need to go find a flying job." He goes, "No, you're strong for financial planning. You have a strong..." I'm like, "Hmm. Yeah, I've always been into this. I'm very interested." He goes, "Yeah, I really work on a Series 65 and I've never heard the word, you know?" So, I proceeded to finish up my master's in systems management, get my Series 65. Worked out great.

Scott: And the Series 65 is for fee-based investment advisors, correct?

Carl: Exactly. Yeah. Yeah. And then...

Scott: Commission brokers.

Carl: Exactly. Like we are. And it all led to AFS, to RAA, to Allworth. And making a long story short, I'm very glad to be here. Very glad on that day, that was 25 years ago. So, yeah, very nice that I'm here talking to you guys now, and I love it day in and day out. I just talked to some clients today.

Scott: So, when you're in the cockpit with other pilots, and they're old and they're young, right, but if you're flying internationally, it's probably mostly older pilots, is my guess.

Carl: Yeah. But we're starting to get a lot of young ones with the new hires, but you're right. Typically, it's a little bit over my crowd, but we're starting to get a lot of young pilots now. Yeah.

Scott: And what do they...? Are they good savers? What do they worry about? Because you're in an industry where, like, stuff comes out of the blue, right? 9/11, boom, COVID, boom, right? Who knows what's gonna be next? Do people...? Do they become different types of savers because they understand the history of the industry you're in, or do they just hope for the best? I hope pilots never hope for the best, by the way.

Carl: Nobody hopes for the best. Well said, Scott. What I find is some of it's different generational, maybe a boomer and a millennial might look at things different, but it's almost how you've been affected, and it's definitely behavioral. What I find is I go through this process with them and I bring on board some of our strengths and what we have to offer going through all the different planning aspects. I go, "Really?" I start to, you know, mention peace of mind. What I think I can offer you here with Allworth is peace of mind.

And they start to realize, "Well, I feel bad, you know, I'm a pilot and I should be able to do this too." And I say this day in and day out, I go, "Isn't pilot enough? I mean, oh, my gosh, you guys, you've worked your butt off to get to where you are." We maintain currency. We go to the simulators every nine months to a year. It's very intense. The training is incredibly good, very thorough. And you have a really high-quality group of pilots at all these major airlines. And it's really something neat to behold. But at the same time, I always tell them, "I expect nothing on you with financial planning." Because we used to have a defined benefit and you had...you could relax, that was taken care of.

Scott: Yeah. There was the pension. I mean, the ideal was you retire from there as a captain and you have a massive pension, right? Couple of hundred thousand a year.

Carl: [inaudible 00:42:53.982] over the last 10, and all that. Different airlines had different things, but yeah [crosstalk 00:42:58.298].

Pat: Well, that was part of the deregulation, which actually caused the bankruptcies because of the pension. Like, if you go back and look at the history of the industries that were deregulated, you look at the telecom...

Scott: It used to be pretty expensive to fly relatively.

Pat: Yeah. Oh, yes. You'd go to the telecom and then...

Carl: Actually come down.

Pat: ...airlines under the Reagan administration, if I recall, were deregulated.

Carl: A lot of them in 2005. Yeah. 2007, we...

Pat: How often do you... Like, you're obviously high-energy guy. Being around Carl, you would say, "Okay, well..."

Carl: This is true. This is true.

Pat: I don't know how the guy...

Scott: He's got two jobs.

Pat: Yeah. I don't know how he could sit in a cockpit. How many hours a month do you fly, and how many hours a month do you actually work as a financial advisor?

Carl: I'm a regular guy. So, I fly 80 hours a month. And sometimes a little bit less, if I have vacation, a little bit more, you know. But I'm not a big... I don't go on and pick up extra time because I love working here with Allworth RAA. So, I do a lot of work here too. So, then I would say RAA, probably 30 to 40 hours a week.

Pat: Got it.

Carl: And I do that mostly from home, but I do from the cockpit. I just brought on two of my co-pilots are coming on board next week that I just flew with over a six-day period. And it's... Making a long story short, sometimes it'll take a decade to bring on a client. Sometimes.. We just went to Oshkosh. We had a booth there. It was a fantastic, and very lucky to be part of those air shows. And I just signed up a guy from there too. So, we get some exposure in the cockpit, LinkedIn, it's everywhere.

Scott: Well, I think it's interesting, Carl. Actually, early this morning, I was...I write a column every two weeks for a publication called "Investment News." And this morning I was talking about something...

Carl: Yeah, I love it.

Scott: ...something to the effect of doing... And if you're outside the industry, it's not really...you wouldn't get much out of it. But I was writing something today and I was just talking about the value we bring, because there's two other advisors, the value we bring to people's lives. And I think people look at this industry, and some of those guys are paid pretty well. And that is true. It's not an easy business, number one. But the cost... And there was something in my article, something like the mistakes we keep people from and the cost of bad advice or poor choices is astronomical...

Carl: It's huge.

Scott: ...completely compared to what you pay for an advisor.

Carl: And the guy that I just flew with, I just signed him up. And I went, "You know, the big point is when your car breaks down, do you go really...?" I mean, maybe I used to work on my cars, but nowadays I wanna take it to an expert. If my AC goes out, I want an expert. If I need financial planning, I want an expert.

And I sort of express it because really, it's so complicated now. There's so many different moving parts. Why not have a group like this where we do this, the estate planning, the retirement planning, the investment plan, the tax planning? And the keyword I always think to all those things is what word stood out? Planning. I go, "Whether I'm flying with a 35-year-old FO co-pilot or a 62-year-old, planning is the key to all this, into retirement with us."

Pat: And so, when Carl mentions RAA, that's a division of Allworth that Carl's...

Carl: Yeah, the airline division of Allworth.

Pat: Yeah, that works with pilots. And we actually look for people like Carl that are pilots, that have a natural affinity for financial advice, and as long as they're qualified. And he gives great advice to his clients. So...

Scott: You know, it's interesting thinking about what I've discovered with your industry, Carl, is that you work...so you work for Delta Airlines, and the union...you've got seniority with Delta. So, you've been there, how many years you say with Delta?

Carl: Thirty-two.

Scott: Thirty-two years.

Carl: The other day.

Scott: So, there was no way you would go...you would leave Delta and go work for United?

Carl: No.

Scott: Because you would start at the bottom of the pool.

Carl: I love United. And it's a system. There might be points where people... At the beginning, there are some folks, right now with the pilot shortage, it's a whole nother subject, can bump around from an airline to another that first year or two because you're giving up a little bit of seniority. But once you get about, you know...

Scott: It's not like that in most professions. Most professions, you...

Carl: No. You could jump over to... Yeah, exactly.

Scott: I mean, you're a highly skilled professional, right, as a pilot. At most highly skilled professions, you can...if you're not happy with your employer, you just go to another employer. And if you're not happy with them, you...

Carl: Yeah, it's a unique industry. It very is. And you're saying that well. And so, you make the best of it. And I go, "That's where I think we come in." I go, "The one thing you do have with these different airlines is a great 401(k) and investment planning done by Allworth." And I go, "Let's..." You know, so I bring in American, Delta, United, FedEx, Spirit...

Pat: All right. And Carl, I have a couple questions about being a pilot. So, we've talked about the financial...

Scott: By the way, my son's in United Airlines Flight Program in Phoenix here, in part because you talked him into it.

Carl: Yeah, I talked to him earlier, Scott, you know, last year. And I remember hearing that. So, he updated me once since we talked, but congratulations on it.

Scott: He doesn't call me much either, so don't...

Pat: I have a couple questions. Have you ever had to...had police...when you land, police hit the gate in order to escort someone off the plane? Have you ever been a pilot then?

Carl: Yes. Yes, I have.

Pat: And how many times?

Carl: Oh, not many.

Scott: We're gonna talk about financial stuff...

Carl: You can kind of [crosstalk 00:48:21.950].

Scott: ...and here you're talking to Carl about...

Pat: This is what people are interested in.

Carl: Yeah, they are. And it's very, very rare. And it tends to be medical. I mean, it's usually not escorted because they wanna be, it's like something medically happens. So, we either divert, land quickly, have everybody [crosstalk 00:48:39.458].

Pat: But law enforcement. Not medical, law enforcement. Have you had that...?

Carl: Yeah. I've had where somebody's had a little bit too much to drink is where we... I've had a couple people let go early through the flight.

Pat: And then another question. So, I know this is a financial, but these are questions that...Scott, people really want...

Carl: [crosstalk 00:48:57.431].

Pat: ...they really wanna know. We're talking to a guy that's pretty open about it. He's been a pilot for 32 years. He's probably seen everything. What's the worst part about being a pilot? Is it waiting for the plane to take off? Is it the airport? What's the worst part?

Carl: There's nothing really bad. You can tell I'm a mentor of a lot of pilots, and I write the new hire letters all the time, get folks on. So, I'm a pro-pilot kind of guy. There's nothing bad. Maybe commuting sometimes. I live in Tucson, I commute to Seattle. I go...maybe some of the stress of commuting is hard, but at the end of the day, you have the jumpsuit, which I worked a lot on the jumpsuit committee without, but to make sure it works the way it does now. And we have a very good system with Delta and American United. We all have big...

Pat: Where you get taxi...

Carl: I would say that's a little bit of a stressor. But other than that, we really...

Pat: You're allowed to deadhead on someone else's...another area to get to where you...

Carl: I get a lot...

Pat: And then the last question. We only have a couple of minutes. Actually, we're out of time. We're out of time, Carl.

Carl: I know I can talk you guys forever.

Pat: All right. We're gonna have to get back at... We're just gonna do a podcast on what it's like to be a pilot.

Scott: Well, I think we do have a...

Pat: We do have a podcast for pilots.

Scott: I don't know, are you on that one, Carl, the pilot one?

Carl: I've done one of those. This is my third one. So [crosstalk 00:50:13.045].

Scott: Well, you're getting better. Keep at it, Carl. A little more practice.

Pat: We appreciate you being on the program. Thanks for being part of the Allworth team.

Scott: Yeah, we appreciate it. Thanks.

Carl: You guys are fantastic. Looking forward to seeing you again.

Scott: Thanks, Carl.

Carl: Thank you very much.

Scott: All right. Hey, we're out time. Wanted to let everyone know that we've got a social security workshop, a live social security workshop, that's the five steps to unlocking social security, and essentially in two major markets, in the Sacramento area on Saturday, August 26th, and the Cincinnati area on Thursday, August 24th. And for more information, go to allworth.com/workshops. We're out of time. We'll see you next week. This has been Allworth's "Money Matters."

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.