How Smart Investors Protect Wealth in a Noisy World
Markets are up, Nvidia is booming, and Taylor and Travis are engaged — but what does any of that mean for your financial plan? On this week’s Best of Simply Money podcast, Bob and Brian cut through the noise to show why successful investors don’t chase fads or panic over headlines. From maximizing cash yields to making smart decisions about Roth conversions, inheritances, and even prenups, Bob and Brian explain how discipline and planning — not hype — are what protect and grow wealth.
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Bob: Tonight, the second quarter GDP number is out and the impact one company, one company alone can have on an entire stock market. You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James.
Well, Brian, we got the second quarter GDP number out before the open today. Wow, what a revision upward, 3.3% growth in the second quarter versus the estimates at just 3%. That's a 10% beat. Andy Stout will dig through all the numbers for us and tell us what happened, but I'm just seeing a sharp almost 30% drop in imports during the second quarter. Can't imagine why that happened, but that lifted U.S. GDP growth by almost 5% points for the quarter, you know, over the first quarter.
Brian: Yeah, so obviously good headlines. Enjoy some happy news while you're drinking your coffee today. So, that's a good robust rebound following about a half a percent contraction in Q1. Now, as I recall, the last time we had a revision, it was downward. It was a little negative. And that might have been employment numbers. But anyway, I have a feeling we will not be hearing from the president as passionately about this revision as we did the last revision.
Bob: You took the words out of my mouth. And I know we joke around about this all the time, but I doubt anyone in the U.S. Commerce Department is going to get fired today because the numbers were good. Let's just leave that right there. All right. Think of the stock market like a small lake or a lake, a small pebble. A smaller company barely makes any ripples, but when a giant boulder, say, a massive company like NVIDIA drops into that lake, it can send waves across the entire surface, good or bad. NVIDIA released its second quarter earnings report after the bell last night, and obviously, the entire financial world was all ears. Brian, walk us through the numbers.
Brian: Well, so we like catalysts in the stock market. And AI has been this most recent catalyst for this latest bull market we're in over these last couple of years, and NVIDIA is the face of it. NVIDIA is not a new company, by the way. They make video cards. My kids were into video games way back when and I used to field-dress computers and they were just a video card company. Who would have known they've become what they are now?
So, reason in the headlines this morning, Bob, is sales in the July quarter hit $46.7 billion. That's up 56% from a year ago. And that's about in line with analyst estimates, because as we all know, all that matters is, "Were the analysts, right?" The results are irrelevant. But anyway, revenue from their data center segment, which is really what we're talking about here, not video games, that includes sales of their most powerful chips, which they use to train and refine these AI models, also up 56% to $41 billion, but slightly lower than the $41.3 billion analysts had expected. So, analysts were wrong in that case. I think that's their fault, not NVIDIA's fault.
Bob: Well, I'm one of those geeks that likes to, you know, get under the hood and look at what actually happened here. And I'm intrigued by this H20 chip story. Because back in April of 2025, April of this year, the U.S. Commerce Department banned exports of that H20 chip, you know, NVIDIA's flagship, you know, highly advanced chip to China. They banned sales of it, citing national security concerns. But then in July, the ban was reversed. So, as I listen to this earnings report, you know, the second quarter, there were very few, if any, of these H20 chips sold to China. So, you know, the bullish case on NVIDIA is it's game on now heading into the third and fourth quarter because now, we can sell these chips to China. But President Trump and the U.S. Commerce Department says, "That's fine, but you're going to give us 15% of the revenue." So, it's all part of this behind-the-scenes stuff with China, you know, the ongoing saga of trade negotiations, military negotiations, all that. NVIDIA, which makes up about eight and a half percent of the S&P 500, is flat in the middle of all of this, and that's why it's so interesting to follow. It's a huge company and has huge impact on AI, you know, international negotiations, everything.
Brian: Yeah. And the impact on AI, what you're really saying, Bob, what that really means is has huge impact on just about every industry under the sun, because everybody, every industry, every company is, at least, mildly curious about whether they can be using AI to make things more efficient, to save money here and there. And NVIDIA is in the position they are because they have just this enormous lead. They do control about 80% to 90% of the AI chip market.
And if we think we want to think about the competitors, right, if this is such a great thing, if AI is such a great thing, then who else is going to step in here and take advantage of the profits that are apparently there to be made? We heard that earlier, earlier this year with DeepSeek. Remember when DeepSeek hit the headlines earlier this year, and was supposedly a much more efficient way of doing the same thing, getting better results with, I don't know, maybe 20% of the cost or something like that? Well, it turned out as they peeled back the layers, a lot of that was not exactly on the up and up. And China had their hands in it and all that. DeepSeek is still an entity. It is still doing its thing out there. There are applications for it, but it's not what we thought it was going to be when those headlines came out in in January. So, at this point, yeah, NVIDIA is the lead here of this biggest industry here.
So, now we're also seeing the benefits of FOMO, fear of missing out, pushing the stock up. People see a stock like NVIDIA, they think, "Well, everybody else has it." And I keep hearing about, you know, people have, "So and so made a bunch of money in NVIDIA. I don't want to be the one left out." And the herd tends to push the stock up just a little bit higher. So, if you find yourself susceptible to that, remember, there's a good chance you already own it. NVIDIA makes up about 8% of the S&P 500. We've been talking about the difference between cap weighted and equal weighted. S&P 500 is cap weighted. The bigger the company, the bigger it makes up of the index. NVIDIA is about 8%. So, you may already own it. Don't kick yourself too hard.
Bob: Well, most people probably do already own it. If you're in any kind of S&P 500 index fund or growth mutual fund or growth ETF, I mean, you own a sliver of this, and quite frankly, a pretty big sliver. So, you're already participating. And I think, to Brian's point, this is now not the time to back up the truck and overweight your whole portfolio to NVIDIA just because you hear about it in the news every other day. All right. You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. Let's shift gears. Packed a good old Cracker Barrel.
Brian: Do we have to, Bob.
Bob: We talked about Cracker Barrel earlier this week, the logo change, and all that. Cracker Barrel has now officially scrapped its new minimalist logo and is reinstating the beloved, old timer mascot following widespread backlash among the masses. Brian, what's going on here?
Brian: Well, so what's going on here is everything is political these days. We can't really avoid that. And somehow, a change to a logo, removing an old man from a picture is, apparently, something that we get really wound up about. But in any case, it's a marketing decision. And there's good reason for this. The leadership of the company has been making changes recently because customer traffic was down about... This goes back four or five years ago. Customer traffic was down about 16% in 2020 compared to 2019. That's not good, right? We want customers to come in the store, not to stop coming to the store. So, they started changing things around. They started changing the menu. There were new items to order from. And this was just the latest iteration of something they started five years ago.
And the stock had actually been on a decent run in response to the same store. Sales were up for a few years. So, you wouldn't think... A logo just seems kind of natural. Let's modernize this this a little bit, so it doesn't look like the 1990s anymore. And, you know, really not a big deal. Let's clean it up, make it a little simpler. One of the headlines I saw was, "You know what? This logo with this cartoon of this little, old man on it doesn't look good on a smartphone. It's too busy, so we need to simplify." Well, that makes logical sense. But sure enough, that was enough to really hunk a lot of people off about changing things that work and aren't broken and all that kind of thing. So, they have now backed off of it. I'm reminded, Bob, of, do you remember the new Coke Classic fiasco?
Bob: Yeah, absolutely.
Brian: This is not unlike that, right? So, this is... Coke, at least... To me, Coke was still worse. Coke actually changed their formula because they assumed, "People will follow us because we are Coke, not because of the way it tastes." And they were very, very, very wrong. And if anybody who studied marketing in college has been taken through that whole case study of how terrible of an idea that was. That lasted about 11 weeks before Coke relented and decided to go ahead and put Coke Classic back on the market. Now, there were two, and then they eventually they just quit making new Coke.
This lasted what? A couple of days before Cracker Bell back down. And again, this had nothing to do with the product that they put on people's table. That's not it. It's just a logo. But that's the environment that we're in right now. So, what this has done a little bit is sent some alarm bells through the marketing industry, the graphic design industry, the logo design-type industry. What can we get away with? How do we improve things without really spooking the herd somehow? So, it's going to be really interesting to see how that plays out in that industry.
Bob: I think it'll play out fine. I mean, look, this whole Uncle Herschel-themed, you know, you mentioned 1990s, I'll say 1790s-themed, you know, logo with the actual barrel and Uncle Herschel, I think this is just a key lesson in the heart. Brian, to me, it's marketing 101. The hardest customer to get back is the one you already had and lost because you didn't listen to them. And I think that's simply what happened here. You get a bunch of young fired up marketing people that want to change the world and do some revolutionary things.
And to your point, you know, the regular Cracker Barrel crowd is aging there, you know. And I'll put myself in that category. I don't go there all the time, but I'm rapidly entering into that age category that frequents Cracker Barrels on road trips, you know, across America. We're all going to be dead in 20 to 25 years. And you brought this up earlier in the week. You've got to do some things to make your brand in your stores and your product relevant to bring in the next generation of customers. I'm all about that. But you also got to listen to the people that are coming in the door now, paying the bills now. And to me, there's a way to do both. Don't alienate your current customers while growing your customer base. Where am I wrong here?
Brian: So, I don't think you're wrong. That's not really the case. But I think it's just really hard, right? I mean, who would have thought that something this simple would really cause the backlash? I would have thought it was... There's Uncle Herschel. Now, we all know who Uncle Herschel is. Here's what's going to happen, Bob, their sales are going to spike. Coke had that happen, too. When Coke Classic came back, people were reminded how much they liked it and they kind of felt like they won the battle and they went and bought more Coke. So, despite it being an embarrassing story for Coke, in the long run, they made money. And I would bet that now that we all know who Uncle Herschel is, I'll bet the next thing you're going to see is the return of that Uncle Herschel breakfast meal that hasn't been on the menu in a while, I don't think. They're going to capitalize on this. They'll figure out how to market it.
But I don't blame them for trying, because whatever happened to Fuddruckers, whatever happened to Bennigan's. All these restaurants that don't exist anymore, they can't stand pat, the road to restaurant success is paved with failures of restaurants who didn't all keep things up to date. I don't blame them for trying. Maybe a bit of a misstep here. And we know there are always forces out there who want to politicize absolutely anything they possibly can. That's our new reality. So, they're all going to have to tap dance through that.
Bob: Yeah, I agree. I think they should hire Brian James as their new chief marketing officer to get him through this. I mean, we saw the stock pop 2.5%. To me, this is kind of traded like a meme stock. You know, to your point that you brought up earlier in the week, a lot of political stuff, you know, all the memes go out and social media. This is a short-term thing. Cracker Barrel will be fine. They'll put a few healthier items on the menu and everything will be great. As we told you the other day, don't put all your eggs in one basket. That's the Allworth advice here. And hopefully, nobody backed up the truck and bought Cracker Barrel or shorted Cracker Barrel on any of this news. Coming up next, we take a look at why some investors are acting like it's 2021, not 2025. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. And Joe Strecker, our producer, that's my kind of bumper music right there. I love it. All right. A million dollar inheritance, a business sale on the horizon, and a listener wondering if they have enough umbrella insurance. Your questions, our answers coming up in the Ask the Advisor segment at 6:43. All right, Brian, we've talked for more than two years about the advantage of parking your safe money in a high-yield savings account. It's been practically a no brainer now. But did you know, according to bank rate, one in five people still aren't earning any interest on their cash? This is shocking and somewhat disappointing.
Brian: You know, there are not a lot of things in a financial planning engagement when we sit down with our clients and kind of put all the puzzle pieces together, there's not a lot of things that are black and white, right? Most things are pretty complicated decisions and we try to help them, you know, make the right one by looking at the pros and cons of each one. This ain't one of them, right? If you are still sitting on a passbook savings account at one of our esteemed, large, brick and mortar banks here in this town and you're earning a 10% or a tenth of a percent or a quarter percent or something, that's on you. So, why would not people not do this?
There's a separate bank rate survey out here. Consumers stick with the same bank account for decades, even if better rates are available elsewhere. That's been true for a long time because it can be a hassle to move. You got to change your automatic payments and your direct deposit and all that kind of stuff. But at the same time, it has never been more painful of a missed opportunity than it is right now. You should be getting, even as we're sitting here right now staring a rate cut in the face, you should still be getting 3% to 4%. And I think it'll still be in that range here in September when we get this most likely rate cut. We'll see. But in any case, that is something to look into. That is one of the things that when I run across a client in this situation, I tell him this is something you go do today. Give up on the brick and mortar. You don't need unison mode in that branch at the end of the street. Go find more online, FDIC insured bank. Get yourself a better interest rate.
Bob: Brian, I have had two conversations, two meetings about this exact topic with existing clients this week. And we had two entirely different results depending on which bank they're dealing with. Case number one, clients said to me, "Hey, I've got money at bank A. They've been paying me 4.5%, but that rate expires at the end of August." And I told him, "Go back to the bank, see what they're going to pay you beginning in September. If they keep it at 4.5% or close to it, stick with it, leave it in there." They called and the bank said, "Yep, we'll leave it right there at about 4.5% for the next year." I said, "Wonderful." Bank B said, "No, we're going to drop it down to 0.8%," which is shocking to me because the bank is...
Brian: We're going to triple dog dare you to move it to any other bank that you want.
Bob: Yeah, they're basically saying, "Please take this money and move it elsewhere." And that's exactly what we did. So, my point here is, it pays to, number one, pay attention, and shop around a little bit. Because to your point, Brian, you should be getting close to, if not a little bit above 4% on FDIC-insured cash. And if you're not getting it, shop around, and make sure you do, because it does make a difference.
Brian: Yeah. And I would say, yes, we are probably entering, the market looks like it thinks we're entering a rate-declining environment. But that doesn't mean this opportunity goes away overnight. There will still be better opportunities. You might be thinking of the past, you know, really, 15 years, where the money market rates were slightly higher than the past book rates, but none of them were worth even sniffing around. Well, that era ended about three or four years ago, and we're still in it, so take advantage when you still can.
Bob: You're listening to "Simply Money", presented by Allworth Financial, Bob Sponseller along with Brian James. Brian, let's talk about I bonds a little bit. I mean, I remember back in '21 and '22 when inflation spiked, I bonds were the hottest thing in town. We had clients move into them. We actually advocated for these things and things have changed a little bit since then.
Brian: OMG, Bob, I bonds are so 2021. You are so behind the times if we're going to talk about these. Now, the reason we got excited about it, I stands for inflation, the interest rate on these. These are government savings bonds, no different really than your EE bonds and H bonds and all that other stuff that we haven't talked about in a very long time. But because I bonds return was calculated off of inflation, they got really pretty. They were 7%, 8%, sometimes even close to 10% for a very brief period of time there. And so, for retirees who were used to earning nothing in their savings accounts, but really wanted it guaranteed, it was really like striking gold.
Treasury Direct is the government's website for this that most people hadn't heard of until this happened in 2021. That site even crashed because so many people wanted to jump into it. But those same I bonds, if you hung on to them... And I remember, we were never locking in I bonds for 9% for 30 years or anything like that. That wasn't a thing. The shine has kind of worn off. Those same I bonds, if you've left them alone, are now around 2.86%, and that's what you're getting until, at least, the end of October. And they'll recalculate the rate at that point. So, what do we do if we have these things, Bob?
Bob: Well, I think it depends on everybody's individual situation and what percentage of their portfolio they have in these things. I'm always in the keep it simple camp wherever possible. So, if you've got, I don't know, a small amount, $10,000, $15,000, $20,000 sitting in these things at 2.86% or whatever it is, and they mature in October, just leave the money there, let it mature, but then be prepared to do something else with that money. I mean, others would say, "Hey, move it, pay the penalty, get a higher rate of return." What are your thoughts?
Brian: Well, a thing to remember, too, I don't think this is as agonizing of a decision as these were never life changing. The 9% was eye popping. But remember, that stuff works. You can only buy $10,000 worth of them.
Bob: Exactly.
Brian: You could get up to $15,000 if you creatively overpaid your taxes and used your tax refund to buy more. This is not life changing money. We're talking, at the best, 900 bucks, 1,000 bucks of extra income for a very small period of time. So, don't agonize too much about this stuff. It was a fun thing while it lasted, but it was never going to change your life. So, focus more on your bigger picture, what do you need your assets to do, and what's the appropriate level of risk so you can either grow it or preserve the capital depending on what you want.
Bob: Yeah. And what we're really talking about here is if you cash out of those things within the five-year holding period, you lose the last three months of interest. That's why I say, you know, in most cases for these small dollar amounts, just let it go. But pay attention because you got to move this money somewhere else, you know, because rates are too low.
All right. Did you hear, Brian, Travis and Taylor are engaged?
Brian: What?
Bob: Did you know that?
Brian: Yeah, I heard it once or twice or a thousand times.
Bob: All right. When millions meet marriage, love is just the beginning. The financial planning, that's where things can get interesting. And we'll talk about it next. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. So, the news is officially out, Taylor Swift and Travis Kelsey are engaged.
Brian: Oh, my God. Oh, my God. Oh, my God. Oh, my God. Oh, my God, Bob.
Bob: Oh, stop. Please stop. Make it stop. I'm going to do that all day. But while everyone's focused on the $650,000 ring, the proposal, maybe where they're registered, we are financial nerds, so, of course, our first thought is, how are these two going to handle the money? Show me the money. It's a real world example of what happens when two financially independent people, each with significant wealth, even though Taylor's the billionaire in this situation, decide to get married. Brian, let's run through the list. Maybe people will pay attention now because we're talking about Taylor and Travis.
Brian: Who cares about any of that stuff? Bob, what is her dress going to look like? Let's talk about the things that matter. I know this is what you think about on your ride home every day, no. So, we all would prefer to believe that love is enough to put a marriage together. But this is going to be a really interesting situation. Whenever these types of unions happen, there tends to be great stories for us financial planners to talk about. We often hear... This will be a unique one, because obviously, these are two pretty powerful people, some of the most powerful we've kind of really ever seen getting together. But plenty of crazy stories regarding estate planning and things like that from celebrities who did not do any planning.
So, anyway, when you come to a marriage with significant assets in a significant situation, complicated situation on both sides, first of all, you need to know what that is. What do you own versus what does your new spouse own? What do you owe? What are the income streams? Do you already have any trust, estate plans, or other existing obligations that are going to dictate things? Or maybe, and this is the whopper, Bob, maybe there's kids from a previous marriage. And the reason that can be a little bit scary is because a lot of times, we might assume that if I pass away, I get hit by a bus, which we don't assume that often enough anyway, we don't plan ahead, but if we assume that if that happens, then magically, my kids are going to get everything. I've seen situations where people have effectively, accidentally disinherited their kids by just knee jerk naming their new spouse as their beneficiary. Well, that effectively disinherits their kids. That new spouse may decide, you know, that, "Oh, these kids should get some of the money from their parent," but they don't have to. That's a major assumption. So, this is where trusts and prenuptial agreements and all those kinds of things come in.
Bob: All right. Speaking of the prenup, the financial plan no one wants to talk about, have you ever helped clients or advised clients to set up a prenup? I've got a couple of stories, but I want to know, have you ever been involved in this and what's been the result?
Brian: I have. There have been several situations where I've said, "Hey, you really ought to look at this and figure out." And it's more about describing, "Here's your situation. If you do nothing, here's what's going to happen. If that's what you want, cool, go get it. If that doesn't make any sense, then go talk to a lawyer today."
Bob: All right. Well, I've got two situations I can draw on. One ended up in an absolute disaster, and the other one was successful. And in both cases, because, you know, I was dealing with widow clients and I had known them and I'd known their husbands who passed away for years and years and years. And I knew as soon as the widow talked to me about her new boyfriend, soon to be husband, yada, yada, yada, I knew that there were potential problems here. I could just tell. And I advised, "Get a prenup, get a prenup, get a prenup." One of them listened to me, and one of them didn't. And the one that didn't ended up... I mean, she started this relationship with about $3.5 million to $4 million dollars. And Brian, I am not joking here, this woman today is borderline homeless, penniless, because she allowed a predatory relationship to come in, and just strip her of everything. And both of these second marriages ended up in divorce and ugly divorces, by the way. The second one did listen, did get a prenup, did protect her assets, and she's in great shape. So, this stuff is really important on the front-end to talk about and make sure your family and frankly, yourself are protected in these second marriage situations or first marriages in the case of, you know, Taylor Swift and you know, Travis, whatever.
Brian: You should have cited it. I can't get the names. Now, these are real situations. This is where it does go wrong. And quite frankly, if your potential new spouse is not willing to have this discussion, that's a bit of a red flag for me. We all need to support each other and understand the stresses that will come in a situation like this. And if we can lay it all out in advance, you're going to be better.
Bob: Or if your new husband or potential new husband has no money and has massive credit card bills, that's a small red flag as well. So, let me continue.
Brian: Let me throw that story out. I have a great story for that. And this is just kind of a cautionary tale. Had a situation, this is probably four or five years ago, where a client came in in tears because her husband had died. First of all, he was a client of mine, too. And that was out of the blue. He was on the younger end. But she found out, unfortunately, that he had run up $80,000 worth of credit card debt betting the ponies. This stuff does happen. It is real life situations. And she was starting to get calls from the credit card companies. She had no obligation to pay those debts. She did not know they exist. Her name was not on those accounts. Just because she's married to a person with debt does not make that her debt. However, that doesn't stop the credit card company from chasing after you to try to get you to write a check for it, because most people assume, "Well, this is debt and it's got my name and address on it or my husband's name, therefore, it must be mine." So, anyway, lots of things to be concerned about there. Now, we have wandered well away from what Travis and Taylor are going to be worried about. I'm pretty sure that that's not really going to be a problem for them.
Bob: Well, I mean, they're both in a situation where they don't need the other person's money. So, I mean, what we deal with every day here in Cincinnati in the real world is people that actually need their money to survive. So, I think the key here is communication and transparency. And if you are going to go into either a first or a second marriage, you got to understand what the roles are going to be from a financial standpoint, how you're going to communicate, how you're going to commingle assets, if at all, and just make sure everybody's walking into this with eyes wide open so there are no, you know, horrible surprises down the road. Because it can get very ugly, especially in the second marriage situations where there's a lot of money on the line. And let's face it, Brian, people want to get married for a whole variety of reasons, and sometimes they don't think about money.
Brian: That's exactly right. Got to make sure we understand all the moving parts. And it's about more than just love.
Bob: All right. Here's the Allworth advice, when two financially successful people get married, the smartest thing they can do is plan like a team, because love without clarity is a risk no millionaire should take.
All right. Sandy just inherited a million dollar account. Marty's thinking about selling his business. And Jim and Lisa want to pass wealth to their kids. What do they all have in common? Big financial questions that we're going to attempt to have answers to next. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. Do you have a financial question you'd like for us to answer? There is a red button you can click while you're listening to the show right on the iHeart app. Simply, record your question and it will miraculously come straight to us. All right. We're going to lead things off with Sandy and Westwood. Brian Sandy says we've just inherited a million dollar brokerage account from my father. How do we figure out what to keep versus what to sell without triggering a massive tax bill?
Brian: Hi, Sandy and Westwood. You just reminded me that I haven't been over to that cool brewery over there in that new, little downtown area of Westwood. I need to get back over there. But anyway, to your question, you inherited a million dollar brokerage account. I want to make sure we're using the right words because these things get thrown around all the time. I am interpreting inherited to mean, your father passed away and you inherited this as a process of settling his estate. Sometimes people say they inherited something. What they really mean is, "This was given to me while my parent was still alive." And there is an extreme, important difference between these two.
So, if you're worried about a massive tax bill, we assume we're talking about some kind of taxable account. This is not an IRA. It's not a 401(k). Not kind of tax sheltered account. It's a taxable account. If that is indeed the case, then I have good news for you. You probably don't have much of a bill at all. At least not as much as you think you might. Because when you inherit a taxable account in this manner, again, inherit, not gift, then that means the investments that are held in there, it's as if you bought them on the day that your father passed away. So, if he bought this stuff 30, 40 years ago, and it's got some kind of ridiculous gains in it, well, congratulations, that all gets wiped out for tax purposes and it becomes as if you bought it on that day.
Now, let's talk about the other side. If you are indeed talking about a during-life gift while he's still alive, he handed it to you, now, you've inherited his cost basis. So, if that is the case, if he's still with us, or was at the time of the gift, then you will be obligated to pay taxes on the gain between what he paid for it and whatever you sell it for. Now, the gift itself is not taxable. As soon as that lands in your lap, you're not going to pay any taxes on that. But if you do exercise and sell, then you'll be worried about capital gains. So, I hope it's the former, not the latter.
Let's move on to Marty and Terrace Park. Marty is going to be selling a business in a couple of years and he's wondering when, knowing that that's on the horizon, when should he start setting up structures, Bob? Donor Advice Fund, Family Foundation? Should that be now? Should we wait? What do you think?
Bob: I think the discussions and the plannings should start now, Marty. And I'm assuming, if you already have a business, you probably have a good CPA. I would sit down with him or her right now, and I would also get a good fiduciary financial advisor to map out your retirement and tax strategy, investment planning. And then in a perfect world, which is what I love to see all the time, we are partnering with the CPA. We're comparing ideas. We are collaborating and we're coming up with a well-thought out strategy in advance.
Couple things to make you aware of. And I've lived through this myself. So, depending on whether you're dealing with an S corporation or a C corporation, what kind of corporation you have, there are different tax laws that dictate what you can do in terms of avoiding capital gains taxes ahead of time prior to selling the company. So, that's why you want to get with your CPA right now. Let him or her know what's on your mind here. You brought up things like donor advice funds, family foundations, charitable remainder trust, or another option, all good things, but start getting your ducks in a row before you even think about listing that business. Because the structures make a big difference in your tax treatment that you ultimately get when it's time to pull the trigger. Hope that helps. Get a CPA and a good fiduciary financial advisor. And I think with the two-year runway, you should be in great shape if you start to do a little planning now.
All right. Jim and Lisa and Mason say we want to transfer wealth to our kids gradually, but we're worried about spoiling them. Are there strategies that let us provide support now, but still keep them motivated? Brian, what say you?
Brian: Yeah. So, it sounds like Jim and Lisa, you've built a pretty solid situation for yourselves. You didn't kind of lead off your question with any worries about stressing about, "How are we going to make ends meet?" Those kinds of things. You're already talking about transferring wealth. We don't know how old these kids are or frankly, how old Jim and Lisa are, but we know they've apparently got enough that they want to start thinking about what their kids, they're not worried about themselves anymore. How do we transition this to the next level?
What I would say, I'm going to start by saying, because I've done this, and it has been great for our family, if your kids are mature enough and old enough to handle it, and especially if they've noticed that maybe they're fortunate in what they have and what your family's lifestyle is, then I would say this, that could be a really, really good time to pull back the curtain on the vault, show them what's in there, and then more importantly, remind them how it got there. I think that is a great way. If they've perceived that life is just easy because by the time they were old enough to pay attention, you might have gotten your careers to a point where maybe you could kind of slow down a little bit, versus when you were in your early 20s and really kind of in the middle of the grind. But remind them what those times are like and that they're going to start there, too.
But in terms of mechanical things, one of my favorite things to do nowadays is I really love the 529 approach. And I know, our brains go to college. You might be thinking, "I don't want to tie it all down for college. I want flexibility." Remember, in 2024, a new rule went into place that said that up to $35,000 inside of 529, if it's not used for college, can then become annual contributions to a Roth IRA for those kids. So, that will necessarily require that it transfer to your kids gradually, but you can get tax-free growth. And this gets you around the income requirement. You don't have to have an income requirement to fund a Roth, so fund it now. Maybe they're not even old enough to have any income, but you're pre-funding their Roth IRA contributions well into the future. So, that's a fantastic way. And plus they can't touch it until they're 59 and a half. So, you're not teeing them up for an easy life as soon as they get out there on their own. It's a great opportunity.
Bob: You're no fun, Brian.
Brian: I do my best, Bob. Let's see how much damage you can do for Sam in Florence who says he's got about $2 million in IRAs, and he's wondering about partial Roth conversions. That's something that can bump him into a higher tax bracket, but is that worth it?
Bob: Well, I'm going to give Sam our favorite answer, it depends. Meaning, Sam, I think you got to use some good planning and software and maybe a good fiduciary advisor to help you look into the future a little bit. Here's what I mean, depending on what you plan to spend, you and your wife plan to spend in retirement, what your various sources of income are, what your asset base is, you mentioned the $2 million in IRAs. What other stuff do you have? Factor in Social Security? Do you have any existing Roth accounts or taxable brokerage accounts? My point here, look at crafting an income strategy.
At first blush, I hate seeing people pay extra taxes in a high bracket just to avoid taxes later. But if we can get it... In some cases, it makes sense. But again, run the numbers. Look at what your taxes are likely to be today and in the future when those RMDs start, and hopefully, you can come up with a good strategy to kind of do both. Get some money in that Roth bucket and do it at a lower tax bracket.
All right. Think life slows down after age 65. For one famous investor, that's exactly when things took off. And we'll explain what made the difference and what it could mean for the rest of us. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. Well, legendary investor Warren Buffett turns 95 years of age on Saturday, and much of his wisdom is unmatched. And as we honor the Oracle of Omaha, there's another nugget of wisdom we want to talk about. He didn't stop working at 65 like many people want to or plan to or especially to. Brian, Warren Buffett's story is absolutely fascinating. Talk about what this man has done post-age 65.
Brian: Yeah, that's really the headline here, isn't it? So, in August of 1995, Warren Buffett turned 65. So, I feel like I've been around the block a time or two. I'm sneaking up on 30 years in this industry, but we're talking about when I was in college, that's when he turned 65. And again, like you said, that's when most people just think they're going to hang it up. At that time, his stake in Berkshire Hathaway was valued about $12 billion. And if you translate that today, that's $25 billion. Now, those were solid dollars then, and they're solid dollars now. However, what's absolutely staggering is what happened next. About 95% of his wealth that he's got now was created after he turned 65. So, fast forward to today, that Berkshire stake has ballooned to about $140 billion. That translates to about 30 times growth in the company's stock. That alone is 99% of his net worth, just that particular stake, which didn't occur again till after 1995.
Bob: So, Brian, is the Allworth advice therefore to never stop working, never retire, just keep working, keep piling up money, keep finding investments that will double every three years? Is that what we're telling people to do?
Brian: Until you are cold in the grave, right? Rise and grind, even out of a coffin is what we call that. No, of course not. This is all Warren Buffett knows how to do. Obviously, he's well known as being a pretty strong family man as well. So, he certainly had his impact felt in a lot of different places. This was just him. But the point of all of this is, most people, a lot of people don't know when they have enough. And that he was never about having enough. He gave it all away not long ago, and then reinvented it all again. And he's already told his grandchildren they're not going to get much out of it because that was never his goal. But I have conversations a lot, and I'm sure you do, with people who we realize could have retired a couple of years ago, maybe earlier than that, because they never sat down and looked at the forest for the trees because they were just so fixated on whatever I have is not enough and it's all going to go poof tomorrow. That is rarely the case. Anybody who's listening to this show has gone and sought out educational, financial information, and is probably in better shape than they've allowed themselves to be. And some of you are listening right now going, "Yeah, that could be me. I want to retire now, but I've never taken the time to look." Well, do it.
Bob: Yeah, having that purpose is the key. And in the case of Warren Buffett, I mean, obviously, the man has a gift for creating wealth. But as importantly, it's what he's done with the wealth that has mattered. Since 2006, he's donated over $60 billion worth of Berkshire stock to charities like the Gates Foundation and his own family foundations. He saw that as his purpose. Create wealth, but use that wealth to benefit others. And I guess, the message we're trying to send today, you never need to feel like you're done doing that. Find your purpose, and just keep following through on that, whatever it is, for as long as you can. You've been listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
Well, Brian, we got the second quarter GDP number out before the open today. Wow, what a revision upward, 3.3% growth in the second quarter versus the estimates at just 3%. That's a 10% beat. Andy Stout will dig through all the numbers for us and tell us what happened, but I'm just seeing a sharp almost 30% drop in imports during the second quarter. Can't imagine why that happened, but that lifted U.S. GDP growth by almost 5% points for the quarter, you know, over the first quarter.
Brian: Yeah, so obviously good headlines. Enjoy some happy news while you're drinking your coffee today. So, that's a good robust rebound following about a half a percent contraction in Q1. Now, as I recall, the last time we had a revision, it was downward. It was a little negative. And that might have been employment numbers. But anyway, I have a feeling we will not be hearing from the president as passionately about this revision as we did the last revision.
Bob: You took the words out of my mouth. And I know we joke around about this all the time, but I doubt anyone in the U.S. Commerce Department is going to get fired today because the numbers were good. Let's just leave that right there. All right. Think of the stock market like a small lake or a lake, a small pebble. A smaller company barely makes any ripples, but when a giant boulder, say, a massive company like NVIDIA drops into that lake, it can send waves across the entire surface, good or bad. NVIDIA released its second quarter earnings report after the bell last night, and obviously, the entire financial world was all ears. Brian, walk us through the numbers.
Brian: Well, so we like catalysts in the stock market. And AI has been this most recent catalyst for this latest bull market we're in over these last couple of years, and NVIDIA is the face of it. NVIDIA is not a new company, by the way. They make video cards. My kids were into video games way back when and I used to field-dress computers and they were just a video card company. Who would have known they've become what they are now?
So, reason in the headlines this morning, Bob, is sales in the July quarter hit $46.7 billion. That's up 56% from a year ago. And that's about in line with analyst estimates, because as we all know, all that matters is, "Were the analysts, right?" The results are irrelevant. But anyway, revenue from their data center segment, which is really what we're talking about here, not video games, that includes sales of their most powerful chips, which they use to train and refine these AI models, also up 56% to $41 billion, but slightly lower than the $41.3 billion analysts had expected. So, analysts were wrong in that case. I think that's their fault, not NVIDIA's fault.
Bob: Well, I'm one of those geeks that likes to, you know, get under the hood and look at what actually happened here. And I'm intrigued by this H20 chip story. Because back in April of 2025, April of this year, the U.S. Commerce Department banned exports of that H20 chip, you know, NVIDIA's flagship, you know, highly advanced chip to China. They banned sales of it, citing national security concerns. But then in July, the ban was reversed. So, as I listen to this earnings report, you know, the second quarter, there were very few, if any, of these H20 chips sold to China. So, you know, the bullish case on NVIDIA is it's game on now heading into the third and fourth quarter because now, we can sell these chips to China. But President Trump and the U.S. Commerce Department says, "That's fine, but you're going to give us 15% of the revenue." So, it's all part of this behind-the-scenes stuff with China, you know, the ongoing saga of trade negotiations, military negotiations, all that. NVIDIA, which makes up about eight and a half percent of the S&P 500, is flat in the middle of all of this, and that's why it's so interesting to follow. It's a huge company and has huge impact on AI, you know, international negotiations, everything.
Brian: Yeah. And the impact on AI, what you're really saying, Bob, what that really means is has huge impact on just about every industry under the sun, because everybody, every industry, every company is, at least, mildly curious about whether they can be using AI to make things more efficient, to save money here and there. And NVIDIA is in the position they are because they have just this enormous lead. They do control about 80% to 90% of the AI chip market.
And if we think we want to think about the competitors, right, if this is such a great thing, if AI is such a great thing, then who else is going to step in here and take advantage of the profits that are apparently there to be made? We heard that earlier, earlier this year with DeepSeek. Remember when DeepSeek hit the headlines earlier this year, and was supposedly a much more efficient way of doing the same thing, getting better results with, I don't know, maybe 20% of the cost or something like that? Well, it turned out as they peeled back the layers, a lot of that was not exactly on the up and up. And China had their hands in it and all that. DeepSeek is still an entity. It is still doing its thing out there. There are applications for it, but it's not what we thought it was going to be when those headlines came out in in January. So, at this point, yeah, NVIDIA is the lead here of this biggest industry here.
So, now we're also seeing the benefits of FOMO, fear of missing out, pushing the stock up. People see a stock like NVIDIA, they think, "Well, everybody else has it." And I keep hearing about, you know, people have, "So and so made a bunch of money in NVIDIA. I don't want to be the one left out." And the herd tends to push the stock up just a little bit higher. So, if you find yourself susceptible to that, remember, there's a good chance you already own it. NVIDIA makes up about 8% of the S&P 500. We've been talking about the difference between cap weighted and equal weighted. S&P 500 is cap weighted. The bigger the company, the bigger it makes up of the index. NVIDIA is about 8%. So, you may already own it. Don't kick yourself too hard.
Bob: Well, most people probably do already own it. If you're in any kind of S&P 500 index fund or growth mutual fund or growth ETF, I mean, you own a sliver of this, and quite frankly, a pretty big sliver. So, you're already participating. And I think, to Brian's point, this is now not the time to back up the truck and overweight your whole portfolio to NVIDIA just because you hear about it in the news every other day. All right. You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. Let's shift gears. Packed a good old Cracker Barrel.
Brian: Do we have to, Bob.
Bob: We talked about Cracker Barrel earlier this week, the logo change, and all that. Cracker Barrel has now officially scrapped its new minimalist logo and is reinstating the beloved, old timer mascot following widespread backlash among the masses. Brian, what's going on here?
Brian: Well, so what's going on here is everything is political these days. We can't really avoid that. And somehow, a change to a logo, removing an old man from a picture is, apparently, something that we get really wound up about. But in any case, it's a marketing decision. And there's good reason for this. The leadership of the company has been making changes recently because customer traffic was down about... This goes back four or five years ago. Customer traffic was down about 16% in 2020 compared to 2019. That's not good, right? We want customers to come in the store, not to stop coming to the store. So, they started changing things around. They started changing the menu. There were new items to order from. And this was just the latest iteration of something they started five years ago.
And the stock had actually been on a decent run in response to the same store. Sales were up for a few years. So, you wouldn't think... A logo just seems kind of natural. Let's modernize this this a little bit, so it doesn't look like the 1990s anymore. And, you know, really not a big deal. Let's clean it up, make it a little simpler. One of the headlines I saw was, "You know what? This logo with this cartoon of this little, old man on it doesn't look good on a smartphone. It's too busy, so we need to simplify." Well, that makes logical sense. But sure enough, that was enough to really hunk a lot of people off about changing things that work and aren't broken and all that kind of thing. So, they have now backed off of it. I'm reminded, Bob, of, do you remember the new Coke Classic fiasco?
Bob: Yeah, absolutely.
Brian: This is not unlike that, right? So, this is... Coke, at least... To me, Coke was still worse. Coke actually changed their formula because they assumed, "People will follow us because we are Coke, not because of the way it tastes." And they were very, very, very wrong. And if anybody who studied marketing in college has been taken through that whole case study of how terrible of an idea that was. That lasted about 11 weeks before Coke relented and decided to go ahead and put Coke Classic back on the market. Now, there were two, and then they eventually they just quit making new Coke.
This lasted what? A couple of days before Cracker Bell back down. And again, this had nothing to do with the product that they put on people's table. That's not it. It's just a logo. But that's the environment that we're in right now. So, what this has done a little bit is sent some alarm bells through the marketing industry, the graphic design industry, the logo design-type industry. What can we get away with? How do we improve things without really spooking the herd somehow? So, it's going to be really interesting to see how that plays out in that industry.
Bob: I think it'll play out fine. I mean, look, this whole Uncle Herschel-themed, you know, you mentioned 1990s, I'll say 1790s-themed, you know, logo with the actual barrel and Uncle Herschel, I think this is just a key lesson in the heart. Brian, to me, it's marketing 101. The hardest customer to get back is the one you already had and lost because you didn't listen to them. And I think that's simply what happened here. You get a bunch of young fired up marketing people that want to change the world and do some revolutionary things.
And to your point, you know, the regular Cracker Barrel crowd is aging there, you know. And I'll put myself in that category. I don't go there all the time, but I'm rapidly entering into that age category that frequents Cracker Barrels on road trips, you know, across America. We're all going to be dead in 20 to 25 years. And you brought this up earlier in the week. You've got to do some things to make your brand in your stores and your product relevant to bring in the next generation of customers. I'm all about that. But you also got to listen to the people that are coming in the door now, paying the bills now. And to me, there's a way to do both. Don't alienate your current customers while growing your customer base. Where am I wrong here?
Brian: So, I don't think you're wrong. That's not really the case. But I think it's just really hard, right? I mean, who would have thought that something this simple would really cause the backlash? I would have thought it was... There's Uncle Herschel. Now, we all know who Uncle Herschel is. Here's what's going to happen, Bob, their sales are going to spike. Coke had that happen, too. When Coke Classic came back, people were reminded how much they liked it and they kind of felt like they won the battle and they went and bought more Coke. So, despite it being an embarrassing story for Coke, in the long run, they made money. And I would bet that now that we all know who Uncle Herschel is, I'll bet the next thing you're going to see is the return of that Uncle Herschel breakfast meal that hasn't been on the menu in a while, I don't think. They're going to capitalize on this. They'll figure out how to market it.
But I don't blame them for trying, because whatever happened to Fuddruckers, whatever happened to Bennigan's. All these restaurants that don't exist anymore, they can't stand pat, the road to restaurant success is paved with failures of restaurants who didn't all keep things up to date. I don't blame them for trying. Maybe a bit of a misstep here. And we know there are always forces out there who want to politicize absolutely anything they possibly can. That's our new reality. So, they're all going to have to tap dance through that.
Bob: Yeah, I agree. I think they should hire Brian James as their new chief marketing officer to get him through this. I mean, we saw the stock pop 2.5%. To me, this is kind of traded like a meme stock. You know, to your point that you brought up earlier in the week, a lot of political stuff, you know, all the memes go out and social media. This is a short-term thing. Cracker Barrel will be fine. They'll put a few healthier items on the menu and everything will be great. As we told you the other day, don't put all your eggs in one basket. That's the Allworth advice here. And hopefully, nobody backed up the truck and bought Cracker Barrel or shorted Cracker Barrel on any of this news. Coming up next, we take a look at why some investors are acting like it's 2021, not 2025. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. And Joe Strecker, our producer, that's my kind of bumper music right there. I love it. All right. A million dollar inheritance, a business sale on the horizon, and a listener wondering if they have enough umbrella insurance. Your questions, our answers coming up in the Ask the Advisor segment at 6:43. All right, Brian, we've talked for more than two years about the advantage of parking your safe money in a high-yield savings account. It's been practically a no brainer now. But did you know, according to bank rate, one in five people still aren't earning any interest on their cash? This is shocking and somewhat disappointing.
Brian: You know, there are not a lot of things in a financial planning engagement when we sit down with our clients and kind of put all the puzzle pieces together, there's not a lot of things that are black and white, right? Most things are pretty complicated decisions and we try to help them, you know, make the right one by looking at the pros and cons of each one. This ain't one of them, right? If you are still sitting on a passbook savings account at one of our esteemed, large, brick and mortar banks here in this town and you're earning a 10% or a tenth of a percent or a quarter percent or something, that's on you. So, why would not people not do this?
There's a separate bank rate survey out here. Consumers stick with the same bank account for decades, even if better rates are available elsewhere. That's been true for a long time because it can be a hassle to move. You got to change your automatic payments and your direct deposit and all that kind of stuff. But at the same time, it has never been more painful of a missed opportunity than it is right now. You should be getting, even as we're sitting here right now staring a rate cut in the face, you should still be getting 3% to 4%. And I think it'll still be in that range here in September when we get this most likely rate cut. We'll see. But in any case, that is something to look into. That is one of the things that when I run across a client in this situation, I tell him this is something you go do today. Give up on the brick and mortar. You don't need unison mode in that branch at the end of the street. Go find more online, FDIC insured bank. Get yourself a better interest rate.
Bob: Brian, I have had two conversations, two meetings about this exact topic with existing clients this week. And we had two entirely different results depending on which bank they're dealing with. Case number one, clients said to me, "Hey, I've got money at bank A. They've been paying me 4.5%, but that rate expires at the end of August." And I told him, "Go back to the bank, see what they're going to pay you beginning in September. If they keep it at 4.5% or close to it, stick with it, leave it in there." They called and the bank said, "Yep, we'll leave it right there at about 4.5% for the next year." I said, "Wonderful." Bank B said, "No, we're going to drop it down to 0.8%," which is shocking to me because the bank is...
Brian: We're going to triple dog dare you to move it to any other bank that you want.
Bob: Yeah, they're basically saying, "Please take this money and move it elsewhere." And that's exactly what we did. So, my point here is, it pays to, number one, pay attention, and shop around a little bit. Because to your point, Brian, you should be getting close to, if not a little bit above 4% on FDIC-insured cash. And if you're not getting it, shop around, and make sure you do, because it does make a difference.
Brian: Yeah. And I would say, yes, we are probably entering, the market looks like it thinks we're entering a rate-declining environment. But that doesn't mean this opportunity goes away overnight. There will still be better opportunities. You might be thinking of the past, you know, really, 15 years, where the money market rates were slightly higher than the past book rates, but none of them were worth even sniffing around. Well, that era ended about three or four years ago, and we're still in it, so take advantage when you still can.
Bob: You're listening to "Simply Money", presented by Allworth Financial, Bob Sponseller along with Brian James. Brian, let's talk about I bonds a little bit. I mean, I remember back in '21 and '22 when inflation spiked, I bonds were the hottest thing in town. We had clients move into them. We actually advocated for these things and things have changed a little bit since then.
Brian: OMG, Bob, I bonds are so 2021. You are so behind the times if we're going to talk about these. Now, the reason we got excited about it, I stands for inflation, the interest rate on these. These are government savings bonds, no different really than your EE bonds and H bonds and all that other stuff that we haven't talked about in a very long time. But because I bonds return was calculated off of inflation, they got really pretty. They were 7%, 8%, sometimes even close to 10% for a very brief period of time there. And so, for retirees who were used to earning nothing in their savings accounts, but really wanted it guaranteed, it was really like striking gold.
Treasury Direct is the government's website for this that most people hadn't heard of until this happened in 2021. That site even crashed because so many people wanted to jump into it. But those same I bonds, if you hung on to them... And I remember, we were never locking in I bonds for 9% for 30 years or anything like that. That wasn't a thing. The shine has kind of worn off. Those same I bonds, if you've left them alone, are now around 2.86%, and that's what you're getting until, at least, the end of October. And they'll recalculate the rate at that point. So, what do we do if we have these things, Bob?
Bob: Well, I think it depends on everybody's individual situation and what percentage of their portfolio they have in these things. I'm always in the keep it simple camp wherever possible. So, if you've got, I don't know, a small amount, $10,000, $15,000, $20,000 sitting in these things at 2.86% or whatever it is, and they mature in October, just leave the money there, let it mature, but then be prepared to do something else with that money. I mean, others would say, "Hey, move it, pay the penalty, get a higher rate of return." What are your thoughts?
Brian: Well, a thing to remember, too, I don't think this is as agonizing of a decision as these were never life changing. The 9% was eye popping. But remember, that stuff works. You can only buy $10,000 worth of them.
Bob: Exactly.
Brian: You could get up to $15,000 if you creatively overpaid your taxes and used your tax refund to buy more. This is not life changing money. We're talking, at the best, 900 bucks, 1,000 bucks of extra income for a very small period of time. So, don't agonize too much about this stuff. It was a fun thing while it lasted, but it was never going to change your life. So, focus more on your bigger picture, what do you need your assets to do, and what's the appropriate level of risk so you can either grow it or preserve the capital depending on what you want.
Bob: Yeah. And what we're really talking about here is if you cash out of those things within the five-year holding period, you lose the last three months of interest. That's why I say, you know, in most cases for these small dollar amounts, just let it go. But pay attention because you got to move this money somewhere else, you know, because rates are too low.
All right. Did you hear, Brian, Travis and Taylor are engaged?
Brian: What?
Bob: Did you know that?
Brian: Yeah, I heard it once or twice or a thousand times.
Bob: All right. When millions meet marriage, love is just the beginning. The financial planning, that's where things can get interesting. And we'll talk about it next. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. So, the news is officially out, Taylor Swift and Travis Kelsey are engaged.
Brian: Oh, my God. Oh, my God. Oh, my God. Oh, my God. Oh, my God, Bob.
Bob: Oh, stop. Please stop. Make it stop. I'm going to do that all day. But while everyone's focused on the $650,000 ring, the proposal, maybe where they're registered, we are financial nerds, so, of course, our first thought is, how are these two going to handle the money? Show me the money. It's a real world example of what happens when two financially independent people, each with significant wealth, even though Taylor's the billionaire in this situation, decide to get married. Brian, let's run through the list. Maybe people will pay attention now because we're talking about Taylor and Travis.
Brian: Who cares about any of that stuff? Bob, what is her dress going to look like? Let's talk about the things that matter. I know this is what you think about on your ride home every day, no. So, we all would prefer to believe that love is enough to put a marriage together. But this is going to be a really interesting situation. Whenever these types of unions happen, there tends to be great stories for us financial planners to talk about. We often hear... This will be a unique one, because obviously, these are two pretty powerful people, some of the most powerful we've kind of really ever seen getting together. But plenty of crazy stories regarding estate planning and things like that from celebrities who did not do any planning.
So, anyway, when you come to a marriage with significant assets in a significant situation, complicated situation on both sides, first of all, you need to know what that is. What do you own versus what does your new spouse own? What do you owe? What are the income streams? Do you already have any trust, estate plans, or other existing obligations that are going to dictate things? Or maybe, and this is the whopper, Bob, maybe there's kids from a previous marriage. And the reason that can be a little bit scary is because a lot of times, we might assume that if I pass away, I get hit by a bus, which we don't assume that often enough anyway, we don't plan ahead, but if we assume that if that happens, then magically, my kids are going to get everything. I've seen situations where people have effectively, accidentally disinherited their kids by just knee jerk naming their new spouse as their beneficiary. Well, that effectively disinherits their kids. That new spouse may decide, you know, that, "Oh, these kids should get some of the money from their parent," but they don't have to. That's a major assumption. So, this is where trusts and prenuptial agreements and all those kinds of things come in.
Bob: All right. Speaking of the prenup, the financial plan no one wants to talk about, have you ever helped clients or advised clients to set up a prenup? I've got a couple of stories, but I want to know, have you ever been involved in this and what's been the result?
Brian: I have. There have been several situations where I've said, "Hey, you really ought to look at this and figure out." And it's more about describing, "Here's your situation. If you do nothing, here's what's going to happen. If that's what you want, cool, go get it. If that doesn't make any sense, then go talk to a lawyer today."
Bob: All right. Well, I've got two situations I can draw on. One ended up in an absolute disaster, and the other one was successful. And in both cases, because, you know, I was dealing with widow clients and I had known them and I'd known their husbands who passed away for years and years and years. And I knew as soon as the widow talked to me about her new boyfriend, soon to be husband, yada, yada, yada, I knew that there were potential problems here. I could just tell. And I advised, "Get a prenup, get a prenup, get a prenup." One of them listened to me, and one of them didn't. And the one that didn't ended up... I mean, she started this relationship with about $3.5 million to $4 million dollars. And Brian, I am not joking here, this woman today is borderline homeless, penniless, because she allowed a predatory relationship to come in, and just strip her of everything. And both of these second marriages ended up in divorce and ugly divorces, by the way. The second one did listen, did get a prenup, did protect her assets, and she's in great shape. So, this stuff is really important on the front-end to talk about and make sure your family and frankly, yourself are protected in these second marriage situations or first marriages in the case of, you know, Taylor Swift and you know, Travis, whatever.
Brian: You should have cited it. I can't get the names. Now, these are real situations. This is where it does go wrong. And quite frankly, if your potential new spouse is not willing to have this discussion, that's a bit of a red flag for me. We all need to support each other and understand the stresses that will come in a situation like this. And if we can lay it all out in advance, you're going to be better.
Bob: Or if your new husband or potential new husband has no money and has massive credit card bills, that's a small red flag as well. So, let me continue.
Brian: Let me throw that story out. I have a great story for that. And this is just kind of a cautionary tale. Had a situation, this is probably four or five years ago, where a client came in in tears because her husband had died. First of all, he was a client of mine, too. And that was out of the blue. He was on the younger end. But she found out, unfortunately, that he had run up $80,000 worth of credit card debt betting the ponies. This stuff does happen. It is real life situations. And she was starting to get calls from the credit card companies. She had no obligation to pay those debts. She did not know they exist. Her name was not on those accounts. Just because she's married to a person with debt does not make that her debt. However, that doesn't stop the credit card company from chasing after you to try to get you to write a check for it, because most people assume, "Well, this is debt and it's got my name and address on it or my husband's name, therefore, it must be mine." So, anyway, lots of things to be concerned about there. Now, we have wandered well away from what Travis and Taylor are going to be worried about. I'm pretty sure that that's not really going to be a problem for them.
Bob: Well, I mean, they're both in a situation where they don't need the other person's money. So, I mean, what we deal with every day here in Cincinnati in the real world is people that actually need their money to survive. So, I think the key here is communication and transparency. And if you are going to go into either a first or a second marriage, you got to understand what the roles are going to be from a financial standpoint, how you're going to communicate, how you're going to commingle assets, if at all, and just make sure everybody's walking into this with eyes wide open so there are no, you know, horrible surprises down the road. Because it can get very ugly, especially in the second marriage situations where there's a lot of money on the line. And let's face it, Brian, people want to get married for a whole variety of reasons, and sometimes they don't think about money.
Brian: That's exactly right. Got to make sure we understand all the moving parts. And it's about more than just love.
Bob: All right. Here's the Allworth advice, when two financially successful people get married, the smartest thing they can do is plan like a team, because love without clarity is a risk no millionaire should take.
All right. Sandy just inherited a million dollar account. Marty's thinking about selling his business. And Jim and Lisa want to pass wealth to their kids. What do they all have in common? Big financial questions that we're going to attempt to have answers to next. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. Do you have a financial question you'd like for us to answer? There is a red button you can click while you're listening to the show right on the iHeart app. Simply, record your question and it will miraculously come straight to us. All right. We're going to lead things off with Sandy and Westwood. Brian Sandy says we've just inherited a million dollar brokerage account from my father. How do we figure out what to keep versus what to sell without triggering a massive tax bill?
Brian: Hi, Sandy and Westwood. You just reminded me that I haven't been over to that cool brewery over there in that new, little downtown area of Westwood. I need to get back over there. But anyway, to your question, you inherited a million dollar brokerage account. I want to make sure we're using the right words because these things get thrown around all the time. I am interpreting inherited to mean, your father passed away and you inherited this as a process of settling his estate. Sometimes people say they inherited something. What they really mean is, "This was given to me while my parent was still alive." And there is an extreme, important difference between these two.
So, if you're worried about a massive tax bill, we assume we're talking about some kind of taxable account. This is not an IRA. It's not a 401(k). Not kind of tax sheltered account. It's a taxable account. If that is indeed the case, then I have good news for you. You probably don't have much of a bill at all. At least not as much as you think you might. Because when you inherit a taxable account in this manner, again, inherit, not gift, then that means the investments that are held in there, it's as if you bought them on the day that your father passed away. So, if he bought this stuff 30, 40 years ago, and it's got some kind of ridiculous gains in it, well, congratulations, that all gets wiped out for tax purposes and it becomes as if you bought it on that day.
Now, let's talk about the other side. If you are indeed talking about a during-life gift while he's still alive, he handed it to you, now, you've inherited his cost basis. So, if that is the case, if he's still with us, or was at the time of the gift, then you will be obligated to pay taxes on the gain between what he paid for it and whatever you sell it for. Now, the gift itself is not taxable. As soon as that lands in your lap, you're not going to pay any taxes on that. But if you do exercise and sell, then you'll be worried about capital gains. So, I hope it's the former, not the latter.
Let's move on to Marty and Terrace Park. Marty is going to be selling a business in a couple of years and he's wondering when, knowing that that's on the horizon, when should he start setting up structures, Bob? Donor Advice Fund, Family Foundation? Should that be now? Should we wait? What do you think?
Bob: I think the discussions and the plannings should start now, Marty. And I'm assuming, if you already have a business, you probably have a good CPA. I would sit down with him or her right now, and I would also get a good fiduciary financial advisor to map out your retirement and tax strategy, investment planning. And then in a perfect world, which is what I love to see all the time, we are partnering with the CPA. We're comparing ideas. We are collaborating and we're coming up with a well-thought out strategy in advance.
Couple things to make you aware of. And I've lived through this myself. So, depending on whether you're dealing with an S corporation or a C corporation, what kind of corporation you have, there are different tax laws that dictate what you can do in terms of avoiding capital gains taxes ahead of time prior to selling the company. So, that's why you want to get with your CPA right now. Let him or her know what's on your mind here. You brought up things like donor advice funds, family foundations, charitable remainder trust, or another option, all good things, but start getting your ducks in a row before you even think about listing that business. Because the structures make a big difference in your tax treatment that you ultimately get when it's time to pull the trigger. Hope that helps. Get a CPA and a good fiduciary financial advisor. And I think with the two-year runway, you should be in great shape if you start to do a little planning now.
All right. Jim and Lisa and Mason say we want to transfer wealth to our kids gradually, but we're worried about spoiling them. Are there strategies that let us provide support now, but still keep them motivated? Brian, what say you?
Brian: Yeah. So, it sounds like Jim and Lisa, you've built a pretty solid situation for yourselves. You didn't kind of lead off your question with any worries about stressing about, "How are we going to make ends meet?" Those kinds of things. You're already talking about transferring wealth. We don't know how old these kids are or frankly, how old Jim and Lisa are, but we know they've apparently got enough that they want to start thinking about what their kids, they're not worried about themselves anymore. How do we transition this to the next level?
What I would say, I'm going to start by saying, because I've done this, and it has been great for our family, if your kids are mature enough and old enough to handle it, and especially if they've noticed that maybe they're fortunate in what they have and what your family's lifestyle is, then I would say this, that could be a really, really good time to pull back the curtain on the vault, show them what's in there, and then more importantly, remind them how it got there. I think that is a great way. If they've perceived that life is just easy because by the time they were old enough to pay attention, you might have gotten your careers to a point where maybe you could kind of slow down a little bit, versus when you were in your early 20s and really kind of in the middle of the grind. But remind them what those times are like and that they're going to start there, too.
But in terms of mechanical things, one of my favorite things to do nowadays is I really love the 529 approach. And I know, our brains go to college. You might be thinking, "I don't want to tie it all down for college. I want flexibility." Remember, in 2024, a new rule went into place that said that up to $35,000 inside of 529, if it's not used for college, can then become annual contributions to a Roth IRA for those kids. So, that will necessarily require that it transfer to your kids gradually, but you can get tax-free growth. And this gets you around the income requirement. You don't have to have an income requirement to fund a Roth, so fund it now. Maybe they're not even old enough to have any income, but you're pre-funding their Roth IRA contributions well into the future. So, that's a fantastic way. And plus they can't touch it until they're 59 and a half. So, you're not teeing them up for an easy life as soon as they get out there on their own. It's a great opportunity.
Bob: You're no fun, Brian.
Brian: I do my best, Bob. Let's see how much damage you can do for Sam in Florence who says he's got about $2 million in IRAs, and he's wondering about partial Roth conversions. That's something that can bump him into a higher tax bracket, but is that worth it?
Bob: Well, I'm going to give Sam our favorite answer, it depends. Meaning, Sam, I think you got to use some good planning and software and maybe a good fiduciary advisor to help you look into the future a little bit. Here's what I mean, depending on what you plan to spend, you and your wife plan to spend in retirement, what your various sources of income are, what your asset base is, you mentioned the $2 million in IRAs. What other stuff do you have? Factor in Social Security? Do you have any existing Roth accounts or taxable brokerage accounts? My point here, look at crafting an income strategy.
At first blush, I hate seeing people pay extra taxes in a high bracket just to avoid taxes later. But if we can get it... In some cases, it makes sense. But again, run the numbers. Look at what your taxes are likely to be today and in the future when those RMDs start, and hopefully, you can come up with a good strategy to kind of do both. Get some money in that Roth bucket and do it at a lower tax bracket.
All right. Think life slows down after age 65. For one famous investor, that's exactly when things took off. And we'll explain what made the difference and what it could mean for the rest of us. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. Well, legendary investor Warren Buffett turns 95 years of age on Saturday, and much of his wisdom is unmatched. And as we honor the Oracle of Omaha, there's another nugget of wisdom we want to talk about. He didn't stop working at 65 like many people want to or plan to or especially to. Brian, Warren Buffett's story is absolutely fascinating. Talk about what this man has done post-age 65.
Brian: Yeah, that's really the headline here, isn't it? So, in August of 1995, Warren Buffett turned 65. So, I feel like I've been around the block a time or two. I'm sneaking up on 30 years in this industry, but we're talking about when I was in college, that's when he turned 65. And again, like you said, that's when most people just think they're going to hang it up. At that time, his stake in Berkshire Hathaway was valued about $12 billion. And if you translate that today, that's $25 billion. Now, those were solid dollars then, and they're solid dollars now. However, what's absolutely staggering is what happened next. About 95% of his wealth that he's got now was created after he turned 65. So, fast forward to today, that Berkshire stake has ballooned to about $140 billion. That translates to about 30 times growth in the company's stock. That alone is 99% of his net worth, just that particular stake, which didn't occur again till after 1995.
Bob: So, Brian, is the Allworth advice therefore to never stop working, never retire, just keep working, keep piling up money, keep finding investments that will double every three years? Is that what we're telling people to do?
Brian: Until you are cold in the grave, right? Rise and grind, even out of a coffin is what we call that. No, of course not. This is all Warren Buffett knows how to do. Obviously, he's well known as being a pretty strong family man as well. So, he certainly had his impact felt in a lot of different places. This was just him. But the point of all of this is, most people, a lot of people don't know when they have enough. And that he was never about having enough. He gave it all away not long ago, and then reinvented it all again. And he's already told his grandchildren they're not going to get much out of it because that was never his goal. But I have conversations a lot, and I'm sure you do, with people who we realize could have retired a couple of years ago, maybe earlier than that, because they never sat down and looked at the forest for the trees because they were just so fixated on whatever I have is not enough and it's all going to go poof tomorrow. That is rarely the case. Anybody who's listening to this show has gone and sought out educational, financial information, and is probably in better shape than they've allowed themselves to be. And some of you are listening right now going, "Yeah, that could be me. I want to retire now, but I've never taken the time to look." Well, do it.
Bob: Yeah, having that purpose is the key. And in the case of Warren Buffett, I mean, obviously, the man has a gift for creating wealth. But as importantly, it's what he's done with the wealth that has mattered. Since 2006, he's donated over $60 billion worth of Berkshire stock to charities like the Gates Foundation and his own family foundations. He saw that as his purpose. Create wealth, but use that wealth to benefit others. And I guess, the message we're trying to send today, you never need to feel like you're done doing that. Find your purpose, and just keep following through on that, whatever it is, for as long as you can. You've been listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.