- AI vs. Every Market Boom 0:00
- The Cost of Bad Timing 13:16
- Housing Trends 2026 20:40
- Stock, Taxes & Retirement Q&A 28:52
- First-Generation Millionaire Mistakes 35:46
Is AI the Next Investing Revolution—or the Next Dot-Com Bubble?
On this episode of Simply Money presented by Allworth Financial, Bob and Brian explore whether artificial intelligence is truly the next great investing revolution or just the latest market obsession, drawing lessons from railroads, oil, automobiles, and the dot-com boom. They also discuss why timing matters in major financial decisions, strategies for unwinding concentrated stock positions, opportunities created by low-income years, the latest trends in the Cincinnati housing market, and the most common mistakes first-generation millionaires make.
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Bob: Tonight, will AI dominate the stock market forever, or is it simply just having its moment in the sun? You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James.
Well, if you were alive in the 1850s and somebody came along and said there was a technology coming down the pike that would completely reshape America, create enormous wealth, revolutionize commerce, and connect the entire country together, what would that be, Brian?
Brian: Oh, you want to talk history this morning? That's my jam. Let's do this, Bob.
Bob: I'm putting this on a tee for you, Brian.
Brian: Yeah. A three-hour radio segment here coming up. Let's do it. So, 1850s, what are we talking about the 1850s? Well, back then, it was networking, kind of sort of, it was a railroad. So, if you were an investor back then, you would have been convinced that railroads were the exotic future, right? I can look at this piece of metal rail sitting here right in front of me. This runs thousands of miles across the country. This is the kind of thing, as you know well, Bob, I would have geeked out over if we were standing there with our cowboy hats on in the 1850s in some dusty prairie somewhere. You know, but this was...
Bob: I still love trains, Brian. If I see a train coming, I don't care where I am. I always stop and watch it. I love those things, but go ahead.
Brian: When you retire, will you have like a train set, and will you wear like overalls and the little...
Bob: Maybe
Brian: ..thing on your hat to turn it on and off? Okay, I just wonder. And that's what I'm picturing, anyway. But anyway, but, yeah, this was the top of technology, just literally. You know, we take it for granted now. I can order something online and it'll be on my porch. If it's not on my porch by 3, I'm mad at Amazon. But now, this was literally just the ability to buy something and have it appear on your doorstep months later. That was the top of technology back then. It was just the railroad. But it wasn't a fad, it wasn't a hype, but it actually changed everything, right? We've all heard the stories about the march westward from the East Coast and how the West was settled and all that kind of stuff. That's exactly what people are saying about AI right now, that this can really be that kind of a big of a game changer.
So, then what are other old stories that we've kind of taken for granted at this point? Well, steel and oil. Andrew Carnegie, U.S. steel, Industrial Revolution. Just a little bit north of us up in Middletown, it was the old, what was known as AK Steel, way back in the day, Armco. And I used to live up there. Our first house, Bob, was up there. And getting to know some of the people who were a little more elderly, this was 25 years ago, but grew up during the heyday of Armco. They would talk about being sitting in the little diner whose name I'm going to forget right there on Central. And they would talk about Rolls Royces pulling up, and it would be Rockefellers and Carnegies, and people coming to, you know, to do business deals right in little old Middletown. So, another great story there. Standard oil, you know, energy became the dominant story back then. Every generation thought their dominant industry would reign forever. And none of them did. That's how it works. But they all had their moment in the sun.
Bob: Yeah, and then we move forward to the automobile age. Ford literally changed transportation. General Motors became a giant. We could talk for hours and hours about the whole city of Detroit. You know, their rise to literally, you know, absolute prominence in the United States, and then a rather precipitous decline here in recent decades. We had the roads expanding, the nationwide highway system, which led to suburban explosion. The economy reorganized itself literally around cars. And that really hasn't changed. Once again, investors believe that the winners would dominate indefinitely, meaning buy these car companies and just ride them forever, become rich, nothing will ever go down.
And then the same thing happened after World War II. The onset of these massive consumer goods companies, television arrived. Household brands became investment darlings, think soap opera, P&G, on and on and on. And then it was the conglomerates. Then Energy in the 1970s, Japanese companies, Brian, in the 1980s. I can remember I was in high school then when Honda came on the scene, and everybody was worried that the same U.S. automobile companies that just dominated the whole market and everything were going to literally disappear. Obviously, that didn't happen. But man, for a few years when Honda Civic showed up, there was a lot of fear about that actually happening. Point here is, every decade has a story. Every decade has a winner. Every decade that investors convinced that things had fundamentally changed forever and it would never change.
Brian: Yeah. And I think that this is... I always like to take my clients and have them step way back and look at the biggest of big pictures. We just got done talking about generational types of things, what industries dominated each generation, what were the hot buzzwords, and all that kind of stuff. But the thing that occurs to me, what never stops, is ensuing generations. A new crowd of people is born every couple of decades wanting to make their mark, needing to make their mark. And then so things continue to move forward. And that's why I really don't have any fear that the market can ever just go away and go poof, and that we'll enter a world where the dollar doesn't matter anymore.
Things will change drastically, of course. But again, as we've just gotten done talking about, that's not different. Constant change is the constant. That's just something we have to get used to. So, where we left off here now, we're talking about technology. Then came technology as also as did Brian James, the advisor. The late 90s, the first dot-com boom. And people thought the internet would transform everything. And then the really funny part is, hey, they were right. It really kind of hit.
Bob: Hey, Brian, if you want to poke some fun at me, listen to this story. The year that I started off in this industry, 1991, it was literally within a couple of months when financial advisors did everything on pieces of paper and handed it into this financial planning expert. That there was only one piece of software. And this one lady in our office entered all of our financial planning data. And she was the only one that had the keys to the kingdom, so to speak, in the form of a PC, and then spit out a financial plan for us. Within months, there was a PC on every desk. The internet went live for everybody. And I remember sitting there at my desk while I was trying to get started in this business, just mesmerized by the fact that I had a computer monitor on my screen with the scrolling ads going across. I'm like, the world has changed. I mean, I just would just sit and stare at it for hours while I probably should have been doing something else. But my point is I started off in this...
Brian: It's their pretty lights.
Bob: ...industry when the internet actually went live in many industries, including the one you and I work with today.
Brian: So, I started about 10 years after you did. In my very first job, I didn't even have a computer or anything. I had a phone, a phone book, and a notepad on my desk. That's how it was back then. If I needed to place a trade or deal with an account, I had to write it down on paper and go walk it across the room. So, back to the point, the computers did change everything, right? So, the internet did change everything. It certainly wasn't a fad. And so, now, we've got, some of those names have come and gone, right? AOL is not a thing anymore. Yahoo is really just a brand name at this point. However, Amazon survived, Google emerged, and became much more than a search engine. Internet absolutely transformed commerce, but lots of these internet stocks disappeared, right? We talk about those all the time in terms of their relevance.
Bob: Yeah, Brian, I want to mention a couple of them because I knew...
Brian: Go ahead.
Bob: ...this was going to be a history segment and you got to give me a little space.
Brian: You saw me coming.
Bob: Well, I knew that I could not show up tonight in front of Professor James without having done a little bit of history. So, indulge me here. Couple of companies I want to throw out, eToys. Do you remember that, eToys?
Brian: I do. Lots of these are Netflix documentaries now.
Bob: One of the hottest ever internet IPOs. The market value of that company exceeded most combined of all the brick and mortar toy retailers. Brian, the company actually went bankrupt by 2001. You want to talk about a quick turn here. Hottest IPO ever, completely bankrupt a year and a half later. Here's one I know you remember, Global Crossing. Remember that? We just got done talking about technology and telecom. That was a big, massive telecom infrastructure company. Peak market value at about $47 billion. It was one of the largest bankruptcies of its time, Brian. You remember that one?
Brian: I do, very much so.
Bob: Everybody wanted to talk about that company. Again, completely filed for bankruptcy in 2002. And then getting more diversified, if we want to talk about, well, I'm not just going to pick one company, let's just diversify in a sector. Brian, remember the company CMGI?
Brian: I have a personal history with that company. Let me tell you a quick CMGI story before you say why and what happened to that one.
Bob: Nope, you take it and run. Yeah, go ahead.
Brian: So, that's one of the things that actually made me become an advisor. So, I was working for a guy who was running a hedge fund, and he would goof around with little play stocks every now and then, and he was talking about that company. And I took my little $1,000 and I threw it in there, and I sold it, I think, 6 months later for $2,000, and I doubled my money, Bob. That's a 100% return right there. And I declared myself Warren Buffett, walked away with my $2,000. Had I held onto that for another couple of years, my $1,000 would have been worth a quarter million dollars. Had I held onto it a couple more years after that, it would have been worth nothing. Tell them why, Bob.
Bob: Well, because the stock rose from under $2 a share to over $160 a share. That's split adjusted, obviously, but that's the valuation that thing just rocketed to. And then as you just pointed out, it lost over 99% of its value after that, and that is a so-called diversified, you know, call it a venture style holding company investing in a broad variety of internet stocks, almost lost 100% of its value. And that's the danger of putting all your chips in one sector, even if it's "diversified".
Brian: Yeah, I believe CMGI is not the dustbin of history quite. I think they're now whatever is left, the pens and paper or whatever, now owned by Yahoo. I could be wrong about that. Anyway, that's a perfect example. They were one of the leaders of the concept of advertising on the internet. That's where they were. This was before Google, right? So, they were one of the first to get out there.
But now, let's bring this back to the present. So, we're talking about AI. So, the big names of AI, NVIDIA, Microsoft, and Meta, otherwise known as Facebook, the semiconductor companies who make the hardware that runs it, the software companies. Every earnings call has AI somewhere in it, not even for the AI companies themselves, for any company out there. It's almost expected. If you're a CEO of a company, then you better be talking to your shareholders about how you are going to use AI because the drum has been beating about how much it can save a company's money. And that, of course, widens profit margins, which is music to a shareholder's ears. And that's justified.
I can speak to it from here. We are more productive using different tools out there that save us time. So, costs are coming down. That's a lot of the reason you're seeing the market doing what it's doing right now, despite the scary headlines. New products are coming out based on it. Now, so let's look at the history here. Two things can be true simultaneously. As I just got done saying, AI is and will probably continue to transform the economy as different companies find different ways to take advantage of it.
But as we just got done talking about CMGI, nobody ever heard of it, but they were at the forefront of internet advertising, which eventually became dominated by Google. The companies leading today may not be the companies leading 20 years from now. So, think about that. Railroad changed America. Most investors today couldn't name the dominant railroad stocks of the 1880s. The internet changed the world, but most of the hottest internet stocks from 1999, as Bob just got done saying, pretty much no longer exist. Those old railroad companies are jokes now on "The Simpsons" spoken by Mr. Burns.
Bob: Webvan.
Brian: Because that's the way we think of them now, Ken. Yeah, and Webvan is another good one. But, yeah, so the mistake we can make as investors is that assuming that the winners of today are going to stay the winners tomorrow, that doesn't happen. Different companies come along and they build on the original ideas and they can win the game. And then that can happen three, four more times.
Bob: Here's the Allworth advice, every market era has a superstar sector. The winners always change, diversification never does. Coming up next, why timing is everything, and the hidden cost of getting it wrong. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. If you can't listen to "Simply Money" live every night, subscribe and get our daily podcast. Just search "Simply Money" on the iHeart app or wherever you find your favorite podcast. If one stock has made you wealthy, it could also be putting your entire wealth at risk. In other words, how do you unwind that huge, concentrated stock position without getting crushed by taxes? We'll try to explain all of that straight ahead.
Well, we do spend a lot of time talking about financial decisions on this show, what to invest in, when to retire, whether to claim Social Security now or at full retirement age or at age 70, how much risk to take in your portfolio. But tonight, we want to focus on something different. Because in many cases it's not the decision itself that determines the outcome, it does come down to timing.
Brian: Yep. So, let's talk about that current situation, Bob. If you're somebody retired in 2023, well, it's been pretty smooth sailing ever since. We've had our hiccups of course in the last couple of years, but you have had significant benefits from the stock market. But if you retired in early '22 or maybe in '21, well, you might've gone back to the workforce. Because 2022, as I often say, was one of the five worst stock market years we have ever had. Even though it doesn't come along with a scary headline, but it was one of the worst performance years we've ever had. We were down from day one of that year. We went wire to wire under water that year.
Bob: Well, stocks and bonds went down by roughly the same amount in the same year. That rarely happens. And that even was a gut punch to folks that were fairly, "conservatively" invested. Right, Brian?
Brian: We preach diversification all the time, of course. And that was a year where it just didn't help much. That doesn't mean it's permanently broken, but that was a year where just really nothing we tried worked. That was a crumble it up and throw it away year. However, if you walked away and you abandoned the capitalist philosophies of stocks and bonds and all those kinds of pooled assets to buy profits, then you missed out on '23, '24, '25, and thus far '26, which filled in the hole that was created in '22, and then some by a long margin.
So, the people who did hang it up in '22 might have gone back to the workforce. So, if you tried to retire during that crisis, you may still be working. And hopefully, you didn't change your investments. You may have changed your schedule by going back to work. But if you didn't panic, then by now, you should have back whatever you lost. And hopefully, you can move forward on those decisions. However, if you retired and panicked and went to cash, you probably have committed kind of a life changing a bit of an error. I'll just go ahead and call it that. And it's probably going to push out that retirement a long time. I know there aren't many of you, but I know there aren't none of you listening to this.
Bob: All right. Speaking of big decisions, let's get into what some of those big decisions are. And let's start with Social Security. This is one of the biggest financial decisions many retirees will ever make. The difference between claiming at 62 versus waiting until 70 can be enormous in terms of lifetime income benefits. For married couples, the stakes get even higher when we're talking about, you know, survivor Social Security benefits and all that. You know, it's literally the difference of hundreds of thousands of dollars over a lifetime. Yet, Brian, people continue to frequently make this big decision emotionally.
You know, they come in and say, "Well, I paid into the system. I want the money now," or, "I think the whole system is going to go away. I want to get what I can get now." And they don't run the numbers. They don't plan ahead. They don't look at various ways to generate a retirement income. Again, same decision for everybody. We're all going to have to make that decision. But very different outcomes, very different results because of a timing decision.
Brian: Yeah. So, the discussion that comes up there often is, how much am I sacrificing if I take it early versus later? And I always say that there are a lot more 55-year-olds who talk about waiting until 70 than there are 65-year-olds. Because we get to a point where I just want somebody else to help pay my bills. I've got this resource that I've never tapped into. And I want to leave my investments alone. Or if it's a rougher time of the market, well, I either want to let them keep running if it's a good time, or I want to tap into Social Security and let it go if don't have to continue to spend my nest egg down. So, that can be a really big debate for anybody. And it's just a math decision. It's mathematical. So, you can do the math and figure out what leaves you in the better situation.
So, let's talk about another situation, that one stock that made you rich. Well, how do you treat it once it's time to start tapping into the nest egg? This could be, you know, locally, a lot of times it's Procter & Gamble. You know, nationally, it's Apple, or some people more recently have gotten into NVIDIA. And those are stocks that if you took a big bet on them... And that's not something I would recommend doing. And I haven't done it myself. I'm much more of a slow and steady wins the race kind of a person. But if you did that, then you have more money than you ever thought you would have. It's been incredibly good to you.
And now, if you've ridden that wave, it probably represents 30%, 40%, 50% of your portfolio. So, the problem becomes, "I know I have too much. When do I reduce it?" Because two fears, "What if the train keeps going and I stepped off early? Or that IRS is going to come get me, so therefore I can't ever sell?" When people start thinking that way, then I say, "Well, then yeah, you have this big asset. But if you're ruling out selling it, either because of fears of missing out, or because of the tax man coming, then I can't consider it a financial asset if you're not willing to do anything. It's just an expensive work of art that doesn't generate any income for you. We just sit around and look at it, and we've got to cover the needs elsewhere."
Bob: And I think this problem really exasperates itself for people that actually work at these companies and have skin in the game and have a loyalty to these companies. And I'm thinking about Procter & Gamble. And I could tell you stories upon stories, Brian, of General Electric employees back in the early 2000s. I can remember people that had, executives that just had a ton of stock options in this company. And I'd be like, "Hey, you want to take a little bit off the table here?" And like you said, they were waiting for that perfect moment, don't want to write the tax bill, the company's doing great. They're a big part of the reason it's doing great. And boy, did a lot of people get left holding the bag here when that stock went down precipitously? That's where we got to come in and help people remove some of the emotion and just make a wise decision because as the saying goes, you only need to get rich once. You don't want to go back and have to do it twice.
Here's the Allworth advice, don't focus on perfect timing. Focus on reorganizing the financial decisions where timing matters most and make your move before the window closes or before you have to make that decision. Coming up next, a check in on the local housing market and what that means, whether you're buying, selling, or maybe just wanting to stay put. 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, joined tonight by our good friend, Michelle Sloan, owner of RE/MAX Time. We always count on Michelle for up to date, expert real estate advice. Michelle, I know you want to talk tonight about just five real estate trends actually happening right now in Cincinnati and the northern suburbs in 2026. What's going on right now? And this is hot off the press, actual trends of the real estate sector here in Cincinnati.
Michelle: Well, we've definitely seen an increase in inventory over the last couple of years. So, that's great news for buyers. The one challenge for buyers is that the interest rates are at 6.5%. So, they are much higher than a lot of people are comfortable with. So, we are seeing an increase in inventory, buyers having more choices, and so, less bidding wars overall. Unless it's a ranch home under $400,000 in very good condition. That property right now is the hottest property in all of Cincinnati. I have personally five buyers, all in about the 60 to 70 age range, who are looking for their ranch home, a downsized situation with three bedrooms, two and a half baths, and good move-in ready conditions. So, if you have something like that, you are sitting on a pile of gold.
Brian: That raises an interesting question. Maybe they are, maybe I just don't know. But how come builders don't seem to be responding to that? I live up in the northern suburbs, and everything I see is two stories and not what you just described. And, yes, there are retirement communities out there for the 55-plus set that are purpose-built for that. But some people, even though they're that age, they don't want to live in a community like that. They want to live in more of a traditional neighborhood. Why aren't builders building ranches more often for that reason? Have you seen any of that? Am I just missing it?
Michelle: Well, the ranch homes, and this is the reality of building a ranch versus a two-story home, is that you can put more two-story homes on a piece of land. Because a ranch takes up more space width-wise than going up straight up and down with the two-story. Does that make sense?
Brian: That makes a lot of sense.
Michelle: A builder wants to make money.
Brian: Yeah, go figure.
Michelle: And so, by making money, you can put more two-story homes on land than you can ranch-style homes. And so, you can do a small ranch, and those are great. I think a lot of people who are downsizing, they don't want to give up everything. So, a small ranch on a typical suburban lot is going to maybe be a two-bedroom, two-bath. And so, that's going to be smaller. Then if you want the basement, then the prices start to inflate. And we do see in the northern suburbs, some of the homes are within the price range that you can build. You have to ask for it. You have to know what you're looking for.
And I always advise, if you are looking at new construction, take an experienced real estate agent with you. Because, you know, for example, with my 20 years of experience, I have worked with builders for a long time, and a lot of different kinds of builders. So, I know the questions that you need to ask in order to get what you want. And so, you know, builders are a little bit flexible today. There was a time when, you know, you get what you get and you can't make any changes. But there are some ways to get a little bit more, but you have to ask for it. They're not just going to give it to you.
Bob: All right, Michelle, speaking of asking for it, I'm going to get very specific here. I know you do a lot of business out in those northern suburbs, the Mason area. My wife and I raised our kids out in Mason. We lived out there for over 20 years, so I'm pretty familiar with the area. Right behind where that brand new, beautiful Dorothy lane market went in on Mesa Montgomery road, correct me if I'm wrong, but there's some new construction going on right behind there, you know, new home construction. Are some of those, going back to your point...
Michelle: Beautiful homes.
Bob: ...on the built, the builders make more money going vertically rather than horizontally, as you just mentioned. Aren't some of those homes suitable for these people that want the living space on the first floor? Are some of those two-story townhouse looking kind of homes, do they maybe have elevators in them, or are there things that you can do to have more room without having that ranch and still have all, you know, the master bath, the kitchen, every master bedroom on the first floor is. Is any of that starting to go on?
Brian: Or slides. Are they building slides from the second floor rather than the first floor?
Michelle: I have definitely seen some elevators, but you're not going to find that in a $400,000 home. And the homes, just so that you know, there's a lot of ranch-style properties being built behind Dorothy lane and Mason right now. And you can expect to pay $1 million or more for a small ranch behind Dorothy lane market right now. So, unfortunately, that's not really affordable for a lot of people. And in Mason, it's a prime area, you know, schools, location, etc. So, many things going on in Mason. The same exact house that you can build was pretty much any builder in Mason, if you just go 10 miles, North East West, wherever, you're going to be able to build that exact same home for about $100,000 less. So, in Mason, you're going to have higher prices because of the location. Location, location, location. So, just understand it depends on where you want to be.
Brian: Right. So, that elevator question, that was intriguing. I remember like 15, 20 years ago, everybody knew where the house was that had an elevator in it because it was just an exotic, crazy thing you never heard of. But now, it's not common, as you say, but it's a little more common than it was because there are people out there who, A, need it, and B, can afford it. So, you do hear about it more and more these days. But I'm wondering, and I'll put you on the spot a little bit, you might not know the answer, but that's another thing I got to maintain, right? I got to deal with... You know, I'm already trying to maintain a lawn and keep all this other stuff, but if I have an elevator in my house, doesn't that have to be, like, inspected by somebody, or can I just let it go for 20 years? Mention how the practicality works?
Michelle: I would do my...
Bob: Brian, Brian, before she even answers this, you're not going to buy a house with an elevator. You're too cheap to have any of that stuff maintained. I love your slide thing. Just stick a good, old slide up there and just put a hose on it, and you and your wife can have a wonderful time sliding.
Brian: Well, you can get down, but you can't get back up.
Brian: That's what my catapult is for. I've got that all covered.
Bob: Michelle, please humor us and answer that question.
Michelle: I will do my best, but I really don't have any knowledge because the only... There have been a couple of really custom, high-end builders who will put elevators in their homes. But again, it's over a million bucks. And, you know, I personally don't work in that price point very often. While I love it and would love to, yeah, we don't see it often enough to really make a difference.
Brian: I'm sorry to put you on the spot. It just made me think of the practicality of it, you know.
Michelle: You're fine. It's fine.
Brian: Got a plumber, I got an electrician, and now, I got an elevator guy.
Michelle: There you go.
Bob: All right. Hey, let's give Michelle a well-deserved break here. Thanks as always for joining us tonight, Michelle. 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's a red button you could click while you're listening to the show if you're listening on the iHeart app. Simply record your question there and it will come straight to us. All right, Brian, get ready for Chris in Fort right. He says, "I'm 59 years old. I got a little under a million dollars in my company stock because I never sold any of my RSU, restricted stock units, over the last 20 years. If I diversify now, the tax bill could exceed $150,000. Is there a smarter unwinding strategy, rather than just ripping the Band-Aid off and writing that huge check to the IRS?" Brian?
Brian: Well, Chris, the first thing I want to say is congratulations for being in that spot. It must have been a good career if you work for a company that did that well over time. So, that's a good thing. It's a good thing, but it's still a problem, a good problem to have, but still remains a problem. So, great example of where taxes and investment risks kind of start to fight each other though. So, you know, as I was saying just a little bit ago, the mistake a lot of people make is focusing only on that tax bill. Yeah, you're going to sell $900,000 of highly appreciated company stock, and that's probably going to generate a 6 figure tax bill. But that's not going away. There's not going to be a tax amnesty anytime soon that will get you out of that. That's coming no matter what.
The bigger risk, may be having half or more of your net worth tied to a single company right before retirement. So, you know, there are ample stories out there, think Enron, General Electric, as Bob just got done mentioning, that went through it, has now kind of come back, but it did definitely change a lot of people's retirement plans. So, the answer isn't automatically rip that Band-Aid off, but it doesn't, do nothing either. Here's what you might consider, create a multi-year diversification plan. Instead of selling all at once, you can spread sales over three to five years. As we're sitting here, you know, depending on the time of year that you're in, we can potentially get in... You know, if you do this in December, you can get into three tax years over about a 13 month period if you think about it.
Second, try to do that in years with lower income. If you're going to retire 60, 62, the years between retirement and Social Security and before Required Minimum Distributions can be ideal windows to sell those appreciated shares at lower tax rates. Another idea, if you're charitable inclined anyway, don't write checks anymore, start giving the stock directly. Don't sell, send the shares in kind. Charities you support very well know how to do this. They're going to send you a piece of paper with numbers and instructions on how to get that done.
There are also such things as exchange funds or concentrated stock strategies that you can use to avoid those taxes, but diversify as well. So, it's just going to take some learning. It's good that you've identified the problem, but you definitely want to do a little more research to see what you can possibly do about it. Talk to your advisor, your CPA. Next we have a married couple, two people asking us a question at the same time, Mark and Susan in Oxford. And they're saying, "We're living off cash and brokerage assets. How do we determine the optimal order to draw from taxable IRA and Roth accounts?" What do you think, Bob?
Bob: All right. First of all, Mark and Susan, a big shout out and love and honor to my fellow Miami Redskins, AKA Red Hawks fans up there in Oxford. Great to visit with you a little bit tonight. Let's help you out with your retirement income strategy. Brian, this points out, I think something that a lot of people forget about and don't consider when looking at some of these brokerage assets and embedded long-term capital gains. I'm looking at the tax table right now for 2026. For married filing jointly couples. If you have taxable income of up to $98,900 this year... So, remember that's taxable income. That's after you take the standard deduction, which is over 30 grand. You're talking about $130,000 of gross income. You can sell some of these appreciated stocks and your long-term capital gain rate is zero.
A lot of people forget that and don't even consider that when crafting an income strategy. But when you look at that possibility... And this is what we do all the time, we look at what your Social Security income is, pension income is, what all your sources or buckets or piles of money, as you like to say, Brian. You want to manage that marginal and effective tax rate accordingly. And sometimes we take a little bit of money from different piles and keep this thing as tax efficient as possible. So, Mark and Susan, that requires sitting down with a good fiduciary advisor and a CPA and looking at what all the possibilities are out there. And hopefully, you'll have a nice secure and tax efficient retirement income. We got time for one more, Brian. Ben in Kenwood, he says, "Our income fluctuates dramatically because of bonuses and stock compensation. How can we take advantage of low income years before they disappear?"
Brian: For high earners, Ben, low income years are often the most valuable years you're ever going to have from a tax standpoint. So, lots of people only think tax planning really one year at a time. I got to deal with taxes next year. How am I going to minimize this coming April what I end up owing? But the wealthy people often think about it over decades. So, let's say your income is normally maybe $500,000 to $800,000 because of bonuses, RSU, stock options. Then all of a sudden, you have a year where compensation drops, you change jobs, retire early, or maybe take a sabbatical, whatever reason, you're just not making that level of income. That temporary dip will create a rare opportunity to actually intentionally recognize some income at a lower tax rate.
Don't spike the football. It's not a victory to have a low bracket. Use those lower brackets for things such as Roth conversions. If you've accumulated a lot of pre-tax money in traditional IRAs, 401(k)s, and so forth, then pull the trigger, get those conversions done. You might be able to do it. You don't have to be retired to do this. You may very well be able to do it while you're working with what's called an in-service Roth conversion or an in-plan conversion. Meaning it doesn't leave the 401(k). You just fill out some forms, pay some taxes, and now you got Roth from that day forward. So, that can also be ideal for realizing capital gains if you have assets outside that have appreciated. So, lots of opportunities. Look for those, when those low fluctuating years, that's when you want to pull the trigger on those.
Bob: Coming up next, Brian has his advice for those first generation millionaires out there. What mistakes can he help you avoid that we've seen happen time and time again? We want to help you get out in front of that before you make those same mistakes. You're listening "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. All right, we run into first generation millionaires all the time, Brian, whether they're people that earn the money themselves or did it the old-fashioned way, inherited the money. What are some of the mistakes that we want to help these people avoid, people that have really started to deal with large amounts of money, high net worth for the first time, and didn't see it coming?
Brian: Yes, so this actually was a question from the "Simply Money" mailbag from Dan in Milford who's got this situation. And I thought it was an interesting topic, so we figured we'd give it our own segment here. So, the first thing I'd say that mistakes that are made is confusing income with wealth. First generation millionaires often are that way because they earn a lot and they're the first in their family to be in that position. And they sometimes continue to think like high earners instead of wealth owners. This turns into taking excessive business risks because that's what got them there in the first place. Maybe keeping too much wealth concentrated in their company stock or their business, measuring success solely by your annual income rather than the overall net worth preservation. If it's just my salary, that means I'm not paying attention to my balance sheet. I'm not paying attention to taxes. I just know that I've earned more than my family ever has and I've earned more than I did last year. So, think wealth, not income.
Another big one is delaying estate planning. It takes a lot of time. Making that much money in whatever career or business is very, very, very time consuming, so the longer term tasks get pushed aside. Outdated wills, no trust in place, bad beneficiary designations that are not well thought out. Family confusion about where everything is and what it is and no succession plan. That business that is going great guns and making tons of money for you and your family right now, what happens if you can't get out of bed one day? Can it still become what you had dreamed of without you being involved? So, we got to make sure we're paying attention to those things, too.
Here's the big one though. Never teaching your own kids about money. You're going to be busy building whatever you're building, working at whatever you're working when your kids are young. You're doing the best you can to be involved in their day-to-day lives, getting them back and forth to practices. A lot of times people in this situation get so busy, they never talk to their kids about budgeting or investing, philanthropy, tax planning, any of those kinds of things because they're just trying to get everything done on a day-to-day basis. There is a window of time where your children will be most open to understanding this information from you, but eventually, that window closes. They're going to conclude that the world works the way they think it does, and they will make decisions accordingly. Bob, it looks like you got something you want to say.
Bob: No, you just went through a big, long list, and everything on that list are really important. Is there one or two things that stand out to you? Things that you see most common when you have people come into the office and actually talk to you about this topic.
Brian: Well, I think probably the biggest thing that would have fixed it is not having a professional team earlier on. When you're building that business, you're just getting started, maybe you don't feel like you need an attorney or a CPA because you can find all this information on the internet. Well, that business, that career is going to get away from you in a good way eventually, but you're going to wish you had that team in place. Because very frequently during the planning process, I run across opportunities of something they should have done 10 years ago, and I don't have the heart to tell them what it cost them missing out on it. So, build that team.
Bob: Thanks for listening tonight. You've been listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
Well, if you were alive in the 1850s and somebody came along and said there was a technology coming down the pike that would completely reshape America, create enormous wealth, revolutionize commerce, and connect the entire country together, what would that be, Brian?
Brian: Oh, you want to talk history this morning? That's my jam. Let's do this, Bob.
Bob: I'm putting this on a tee for you, Brian.
Brian: Yeah. A three-hour radio segment here coming up. Let's do it. So, 1850s, what are we talking about the 1850s? Well, back then, it was networking, kind of sort of, it was a railroad. So, if you were an investor back then, you would have been convinced that railroads were the exotic future, right? I can look at this piece of metal rail sitting here right in front of me. This runs thousands of miles across the country. This is the kind of thing, as you know well, Bob, I would have geeked out over if we were standing there with our cowboy hats on in the 1850s in some dusty prairie somewhere. You know, but this was...
Bob: I still love trains, Brian. If I see a train coming, I don't care where I am. I always stop and watch it. I love those things, but go ahead.
Brian: When you retire, will you have like a train set, and will you wear like overalls and the little...
Bob: Maybe
Brian: ..thing on your hat to turn it on and off? Okay, I just wonder. And that's what I'm picturing, anyway. But anyway, but, yeah, this was the top of technology, just literally. You know, we take it for granted now. I can order something online and it'll be on my porch. If it's not on my porch by 3, I'm mad at Amazon. But now, this was literally just the ability to buy something and have it appear on your doorstep months later. That was the top of technology back then. It was just the railroad. But it wasn't a fad, it wasn't a hype, but it actually changed everything, right? We've all heard the stories about the march westward from the East Coast and how the West was settled and all that kind of stuff. That's exactly what people are saying about AI right now, that this can really be that kind of a big of a game changer.
So, then what are other old stories that we've kind of taken for granted at this point? Well, steel and oil. Andrew Carnegie, U.S. steel, Industrial Revolution. Just a little bit north of us up in Middletown, it was the old, what was known as AK Steel, way back in the day, Armco. And I used to live up there. Our first house, Bob, was up there. And getting to know some of the people who were a little more elderly, this was 25 years ago, but grew up during the heyday of Armco. They would talk about being sitting in the little diner whose name I'm going to forget right there on Central. And they would talk about Rolls Royces pulling up, and it would be Rockefellers and Carnegies, and people coming to, you know, to do business deals right in little old Middletown. So, another great story there. Standard oil, you know, energy became the dominant story back then. Every generation thought their dominant industry would reign forever. And none of them did. That's how it works. But they all had their moment in the sun.
Bob: Yeah, and then we move forward to the automobile age. Ford literally changed transportation. General Motors became a giant. We could talk for hours and hours about the whole city of Detroit. You know, their rise to literally, you know, absolute prominence in the United States, and then a rather precipitous decline here in recent decades. We had the roads expanding, the nationwide highway system, which led to suburban explosion. The economy reorganized itself literally around cars. And that really hasn't changed. Once again, investors believe that the winners would dominate indefinitely, meaning buy these car companies and just ride them forever, become rich, nothing will ever go down.
And then the same thing happened after World War II. The onset of these massive consumer goods companies, television arrived. Household brands became investment darlings, think soap opera, P&G, on and on and on. And then it was the conglomerates. Then Energy in the 1970s, Japanese companies, Brian, in the 1980s. I can remember I was in high school then when Honda came on the scene, and everybody was worried that the same U.S. automobile companies that just dominated the whole market and everything were going to literally disappear. Obviously, that didn't happen. But man, for a few years when Honda Civic showed up, there was a lot of fear about that actually happening. Point here is, every decade has a story. Every decade has a winner. Every decade that investors convinced that things had fundamentally changed forever and it would never change.
Brian: Yeah. And I think that this is... I always like to take my clients and have them step way back and look at the biggest of big pictures. We just got done talking about generational types of things, what industries dominated each generation, what were the hot buzzwords, and all that kind of stuff. But the thing that occurs to me, what never stops, is ensuing generations. A new crowd of people is born every couple of decades wanting to make their mark, needing to make their mark. And then so things continue to move forward. And that's why I really don't have any fear that the market can ever just go away and go poof, and that we'll enter a world where the dollar doesn't matter anymore.
Things will change drastically, of course. But again, as we've just gotten done talking about, that's not different. Constant change is the constant. That's just something we have to get used to. So, where we left off here now, we're talking about technology. Then came technology as also as did Brian James, the advisor. The late 90s, the first dot-com boom. And people thought the internet would transform everything. And then the really funny part is, hey, they were right. It really kind of hit.
Bob: Hey, Brian, if you want to poke some fun at me, listen to this story. The year that I started off in this industry, 1991, it was literally within a couple of months when financial advisors did everything on pieces of paper and handed it into this financial planning expert. That there was only one piece of software. And this one lady in our office entered all of our financial planning data. And she was the only one that had the keys to the kingdom, so to speak, in the form of a PC, and then spit out a financial plan for us. Within months, there was a PC on every desk. The internet went live for everybody. And I remember sitting there at my desk while I was trying to get started in this business, just mesmerized by the fact that I had a computer monitor on my screen with the scrolling ads going across. I'm like, the world has changed. I mean, I just would just sit and stare at it for hours while I probably should have been doing something else. But my point is I started off in this...
Brian: It's their pretty lights.
Bob: ...industry when the internet actually went live in many industries, including the one you and I work with today.
Brian: So, I started about 10 years after you did. In my very first job, I didn't even have a computer or anything. I had a phone, a phone book, and a notepad on my desk. That's how it was back then. If I needed to place a trade or deal with an account, I had to write it down on paper and go walk it across the room. So, back to the point, the computers did change everything, right? So, the internet did change everything. It certainly wasn't a fad. And so, now, we've got, some of those names have come and gone, right? AOL is not a thing anymore. Yahoo is really just a brand name at this point. However, Amazon survived, Google emerged, and became much more than a search engine. Internet absolutely transformed commerce, but lots of these internet stocks disappeared, right? We talk about those all the time in terms of their relevance.
Bob: Yeah, Brian, I want to mention a couple of them because I knew...
Brian: Go ahead.
Bob: ...this was going to be a history segment and you got to give me a little space.
Brian: You saw me coming.
Bob: Well, I knew that I could not show up tonight in front of Professor James without having done a little bit of history. So, indulge me here. Couple of companies I want to throw out, eToys. Do you remember that, eToys?
Brian: I do. Lots of these are Netflix documentaries now.
Bob: One of the hottest ever internet IPOs. The market value of that company exceeded most combined of all the brick and mortar toy retailers. Brian, the company actually went bankrupt by 2001. You want to talk about a quick turn here. Hottest IPO ever, completely bankrupt a year and a half later. Here's one I know you remember, Global Crossing. Remember that? We just got done talking about technology and telecom. That was a big, massive telecom infrastructure company. Peak market value at about $47 billion. It was one of the largest bankruptcies of its time, Brian. You remember that one?
Brian: I do, very much so.
Bob: Everybody wanted to talk about that company. Again, completely filed for bankruptcy in 2002. And then getting more diversified, if we want to talk about, well, I'm not just going to pick one company, let's just diversify in a sector. Brian, remember the company CMGI?
Brian: I have a personal history with that company. Let me tell you a quick CMGI story before you say why and what happened to that one.
Bob: Nope, you take it and run. Yeah, go ahead.
Brian: So, that's one of the things that actually made me become an advisor. So, I was working for a guy who was running a hedge fund, and he would goof around with little play stocks every now and then, and he was talking about that company. And I took my little $1,000 and I threw it in there, and I sold it, I think, 6 months later for $2,000, and I doubled my money, Bob. That's a 100% return right there. And I declared myself Warren Buffett, walked away with my $2,000. Had I held onto that for another couple of years, my $1,000 would have been worth a quarter million dollars. Had I held onto it a couple more years after that, it would have been worth nothing. Tell them why, Bob.
Bob: Well, because the stock rose from under $2 a share to over $160 a share. That's split adjusted, obviously, but that's the valuation that thing just rocketed to. And then as you just pointed out, it lost over 99% of its value after that, and that is a so-called diversified, you know, call it a venture style holding company investing in a broad variety of internet stocks, almost lost 100% of its value. And that's the danger of putting all your chips in one sector, even if it's "diversified".
Brian: Yeah, I believe CMGI is not the dustbin of history quite. I think they're now whatever is left, the pens and paper or whatever, now owned by Yahoo. I could be wrong about that. Anyway, that's a perfect example. They were one of the leaders of the concept of advertising on the internet. That's where they were. This was before Google, right? So, they were one of the first to get out there.
But now, let's bring this back to the present. So, we're talking about AI. So, the big names of AI, NVIDIA, Microsoft, and Meta, otherwise known as Facebook, the semiconductor companies who make the hardware that runs it, the software companies. Every earnings call has AI somewhere in it, not even for the AI companies themselves, for any company out there. It's almost expected. If you're a CEO of a company, then you better be talking to your shareholders about how you are going to use AI because the drum has been beating about how much it can save a company's money. And that, of course, widens profit margins, which is music to a shareholder's ears. And that's justified.
I can speak to it from here. We are more productive using different tools out there that save us time. So, costs are coming down. That's a lot of the reason you're seeing the market doing what it's doing right now, despite the scary headlines. New products are coming out based on it. Now, so let's look at the history here. Two things can be true simultaneously. As I just got done saying, AI is and will probably continue to transform the economy as different companies find different ways to take advantage of it.
But as we just got done talking about CMGI, nobody ever heard of it, but they were at the forefront of internet advertising, which eventually became dominated by Google. The companies leading today may not be the companies leading 20 years from now. So, think about that. Railroad changed America. Most investors today couldn't name the dominant railroad stocks of the 1880s. The internet changed the world, but most of the hottest internet stocks from 1999, as Bob just got done saying, pretty much no longer exist. Those old railroad companies are jokes now on "The Simpsons" spoken by Mr. Burns.
Bob: Webvan.
Brian: Because that's the way we think of them now, Ken. Yeah, and Webvan is another good one. But, yeah, so the mistake we can make as investors is that assuming that the winners of today are going to stay the winners tomorrow, that doesn't happen. Different companies come along and they build on the original ideas and they can win the game. And then that can happen three, four more times.
Bob: Here's the Allworth advice, every market era has a superstar sector. The winners always change, diversification never does. Coming up next, why timing is everything, and the hidden cost of getting it wrong. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. If you can't listen to "Simply Money" live every night, subscribe and get our daily podcast. Just search "Simply Money" on the iHeart app or wherever you find your favorite podcast. If one stock has made you wealthy, it could also be putting your entire wealth at risk. In other words, how do you unwind that huge, concentrated stock position without getting crushed by taxes? We'll try to explain all of that straight ahead.
Well, we do spend a lot of time talking about financial decisions on this show, what to invest in, when to retire, whether to claim Social Security now or at full retirement age or at age 70, how much risk to take in your portfolio. But tonight, we want to focus on something different. Because in many cases it's not the decision itself that determines the outcome, it does come down to timing.
Brian: Yep. So, let's talk about that current situation, Bob. If you're somebody retired in 2023, well, it's been pretty smooth sailing ever since. We've had our hiccups of course in the last couple of years, but you have had significant benefits from the stock market. But if you retired in early '22 or maybe in '21, well, you might've gone back to the workforce. Because 2022, as I often say, was one of the five worst stock market years we have ever had. Even though it doesn't come along with a scary headline, but it was one of the worst performance years we've ever had. We were down from day one of that year. We went wire to wire under water that year.
Bob: Well, stocks and bonds went down by roughly the same amount in the same year. That rarely happens. And that even was a gut punch to folks that were fairly, "conservatively" invested. Right, Brian?
Brian: We preach diversification all the time, of course. And that was a year where it just didn't help much. That doesn't mean it's permanently broken, but that was a year where just really nothing we tried worked. That was a crumble it up and throw it away year. However, if you walked away and you abandoned the capitalist philosophies of stocks and bonds and all those kinds of pooled assets to buy profits, then you missed out on '23, '24, '25, and thus far '26, which filled in the hole that was created in '22, and then some by a long margin.
So, the people who did hang it up in '22 might have gone back to the workforce. So, if you tried to retire during that crisis, you may still be working. And hopefully, you didn't change your investments. You may have changed your schedule by going back to work. But if you didn't panic, then by now, you should have back whatever you lost. And hopefully, you can move forward on those decisions. However, if you retired and panicked and went to cash, you probably have committed kind of a life changing a bit of an error. I'll just go ahead and call it that. And it's probably going to push out that retirement a long time. I know there aren't many of you, but I know there aren't none of you listening to this.
Bob: All right. Speaking of big decisions, let's get into what some of those big decisions are. And let's start with Social Security. This is one of the biggest financial decisions many retirees will ever make. The difference between claiming at 62 versus waiting until 70 can be enormous in terms of lifetime income benefits. For married couples, the stakes get even higher when we're talking about, you know, survivor Social Security benefits and all that. You know, it's literally the difference of hundreds of thousands of dollars over a lifetime. Yet, Brian, people continue to frequently make this big decision emotionally.
You know, they come in and say, "Well, I paid into the system. I want the money now," or, "I think the whole system is going to go away. I want to get what I can get now." And they don't run the numbers. They don't plan ahead. They don't look at various ways to generate a retirement income. Again, same decision for everybody. We're all going to have to make that decision. But very different outcomes, very different results because of a timing decision.
Brian: Yeah. So, the discussion that comes up there often is, how much am I sacrificing if I take it early versus later? And I always say that there are a lot more 55-year-olds who talk about waiting until 70 than there are 65-year-olds. Because we get to a point where I just want somebody else to help pay my bills. I've got this resource that I've never tapped into. And I want to leave my investments alone. Or if it's a rougher time of the market, well, I either want to let them keep running if it's a good time, or I want to tap into Social Security and let it go if don't have to continue to spend my nest egg down. So, that can be a really big debate for anybody. And it's just a math decision. It's mathematical. So, you can do the math and figure out what leaves you in the better situation.
So, let's talk about another situation, that one stock that made you rich. Well, how do you treat it once it's time to start tapping into the nest egg? This could be, you know, locally, a lot of times it's Procter & Gamble. You know, nationally, it's Apple, or some people more recently have gotten into NVIDIA. And those are stocks that if you took a big bet on them... And that's not something I would recommend doing. And I haven't done it myself. I'm much more of a slow and steady wins the race kind of a person. But if you did that, then you have more money than you ever thought you would have. It's been incredibly good to you.
And now, if you've ridden that wave, it probably represents 30%, 40%, 50% of your portfolio. So, the problem becomes, "I know I have too much. When do I reduce it?" Because two fears, "What if the train keeps going and I stepped off early? Or that IRS is going to come get me, so therefore I can't ever sell?" When people start thinking that way, then I say, "Well, then yeah, you have this big asset. But if you're ruling out selling it, either because of fears of missing out, or because of the tax man coming, then I can't consider it a financial asset if you're not willing to do anything. It's just an expensive work of art that doesn't generate any income for you. We just sit around and look at it, and we've got to cover the needs elsewhere."
Bob: And I think this problem really exasperates itself for people that actually work at these companies and have skin in the game and have a loyalty to these companies. And I'm thinking about Procter & Gamble. And I could tell you stories upon stories, Brian, of General Electric employees back in the early 2000s. I can remember people that had, executives that just had a ton of stock options in this company. And I'd be like, "Hey, you want to take a little bit off the table here?" And like you said, they were waiting for that perfect moment, don't want to write the tax bill, the company's doing great. They're a big part of the reason it's doing great. And boy, did a lot of people get left holding the bag here when that stock went down precipitously? That's where we got to come in and help people remove some of the emotion and just make a wise decision because as the saying goes, you only need to get rich once. You don't want to go back and have to do it twice.
Here's the Allworth advice, don't focus on perfect timing. Focus on reorganizing the financial decisions where timing matters most and make your move before the window closes or before you have to make that decision. Coming up next, a check in on the local housing market and what that means, whether you're buying, selling, or maybe just wanting to stay put. 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, joined tonight by our good friend, Michelle Sloan, owner of RE/MAX Time. We always count on Michelle for up to date, expert real estate advice. Michelle, I know you want to talk tonight about just five real estate trends actually happening right now in Cincinnati and the northern suburbs in 2026. What's going on right now? And this is hot off the press, actual trends of the real estate sector here in Cincinnati.
Michelle: Well, we've definitely seen an increase in inventory over the last couple of years. So, that's great news for buyers. The one challenge for buyers is that the interest rates are at 6.5%. So, they are much higher than a lot of people are comfortable with. So, we are seeing an increase in inventory, buyers having more choices, and so, less bidding wars overall. Unless it's a ranch home under $400,000 in very good condition. That property right now is the hottest property in all of Cincinnati. I have personally five buyers, all in about the 60 to 70 age range, who are looking for their ranch home, a downsized situation with three bedrooms, two and a half baths, and good move-in ready conditions. So, if you have something like that, you are sitting on a pile of gold.
Brian: That raises an interesting question. Maybe they are, maybe I just don't know. But how come builders don't seem to be responding to that? I live up in the northern suburbs, and everything I see is two stories and not what you just described. And, yes, there are retirement communities out there for the 55-plus set that are purpose-built for that. But some people, even though they're that age, they don't want to live in a community like that. They want to live in more of a traditional neighborhood. Why aren't builders building ranches more often for that reason? Have you seen any of that? Am I just missing it?
Michelle: Well, the ranch homes, and this is the reality of building a ranch versus a two-story home, is that you can put more two-story homes on a piece of land. Because a ranch takes up more space width-wise than going up straight up and down with the two-story. Does that make sense?
Brian: That makes a lot of sense.
Michelle: A builder wants to make money.
Brian: Yeah, go figure.
Michelle: And so, by making money, you can put more two-story homes on land than you can ranch-style homes. And so, you can do a small ranch, and those are great. I think a lot of people who are downsizing, they don't want to give up everything. So, a small ranch on a typical suburban lot is going to maybe be a two-bedroom, two-bath. And so, that's going to be smaller. Then if you want the basement, then the prices start to inflate. And we do see in the northern suburbs, some of the homes are within the price range that you can build. You have to ask for it. You have to know what you're looking for.
And I always advise, if you are looking at new construction, take an experienced real estate agent with you. Because, you know, for example, with my 20 years of experience, I have worked with builders for a long time, and a lot of different kinds of builders. So, I know the questions that you need to ask in order to get what you want. And so, you know, builders are a little bit flexible today. There was a time when, you know, you get what you get and you can't make any changes. But there are some ways to get a little bit more, but you have to ask for it. They're not just going to give it to you.
Bob: All right, Michelle, speaking of asking for it, I'm going to get very specific here. I know you do a lot of business out in those northern suburbs, the Mason area. My wife and I raised our kids out in Mason. We lived out there for over 20 years, so I'm pretty familiar with the area. Right behind where that brand new, beautiful Dorothy lane market went in on Mesa Montgomery road, correct me if I'm wrong, but there's some new construction going on right behind there, you know, new home construction. Are some of those, going back to your point...
Michelle: Beautiful homes.
Bob: ...on the built, the builders make more money going vertically rather than horizontally, as you just mentioned. Aren't some of those homes suitable for these people that want the living space on the first floor? Are some of those two-story townhouse looking kind of homes, do they maybe have elevators in them, or are there things that you can do to have more room without having that ranch and still have all, you know, the master bath, the kitchen, every master bedroom on the first floor is. Is any of that starting to go on?
Brian: Or slides. Are they building slides from the second floor rather than the first floor?
Michelle: I have definitely seen some elevators, but you're not going to find that in a $400,000 home. And the homes, just so that you know, there's a lot of ranch-style properties being built behind Dorothy lane and Mason right now. And you can expect to pay $1 million or more for a small ranch behind Dorothy lane market right now. So, unfortunately, that's not really affordable for a lot of people. And in Mason, it's a prime area, you know, schools, location, etc. So, many things going on in Mason. The same exact house that you can build was pretty much any builder in Mason, if you just go 10 miles, North East West, wherever, you're going to be able to build that exact same home for about $100,000 less. So, in Mason, you're going to have higher prices because of the location. Location, location, location. So, just understand it depends on where you want to be.
Brian: Right. So, that elevator question, that was intriguing. I remember like 15, 20 years ago, everybody knew where the house was that had an elevator in it because it was just an exotic, crazy thing you never heard of. But now, it's not common, as you say, but it's a little more common than it was because there are people out there who, A, need it, and B, can afford it. So, you do hear about it more and more these days. But I'm wondering, and I'll put you on the spot a little bit, you might not know the answer, but that's another thing I got to maintain, right? I got to deal with... You know, I'm already trying to maintain a lawn and keep all this other stuff, but if I have an elevator in my house, doesn't that have to be, like, inspected by somebody, or can I just let it go for 20 years? Mention how the practicality works?
Michelle: I would do my...
Bob: Brian, Brian, before she even answers this, you're not going to buy a house with an elevator. You're too cheap to have any of that stuff maintained. I love your slide thing. Just stick a good, old slide up there and just put a hose on it, and you and your wife can have a wonderful time sliding.
Brian: Well, you can get down, but you can't get back up.
Brian: That's what my catapult is for. I've got that all covered.
Bob: Michelle, please humor us and answer that question.
Michelle: I will do my best, but I really don't have any knowledge because the only... There have been a couple of really custom, high-end builders who will put elevators in their homes. But again, it's over a million bucks. And, you know, I personally don't work in that price point very often. While I love it and would love to, yeah, we don't see it often enough to really make a difference.
Brian: I'm sorry to put you on the spot. It just made me think of the practicality of it, you know.
Michelle: You're fine. It's fine.
Brian: Got a plumber, I got an electrician, and now, I got an elevator guy.
Michelle: There you go.
Bob: All right. Hey, let's give Michelle a well-deserved break here. Thanks as always for joining us tonight, Michelle. 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's a red button you could click while you're listening to the show if you're listening on the iHeart app. Simply record your question there and it will come straight to us. All right, Brian, get ready for Chris in Fort right. He says, "I'm 59 years old. I got a little under a million dollars in my company stock because I never sold any of my RSU, restricted stock units, over the last 20 years. If I diversify now, the tax bill could exceed $150,000. Is there a smarter unwinding strategy, rather than just ripping the Band-Aid off and writing that huge check to the IRS?" Brian?
Brian: Well, Chris, the first thing I want to say is congratulations for being in that spot. It must have been a good career if you work for a company that did that well over time. So, that's a good thing. It's a good thing, but it's still a problem, a good problem to have, but still remains a problem. So, great example of where taxes and investment risks kind of start to fight each other though. So, you know, as I was saying just a little bit ago, the mistake a lot of people make is focusing only on that tax bill. Yeah, you're going to sell $900,000 of highly appreciated company stock, and that's probably going to generate a 6 figure tax bill. But that's not going away. There's not going to be a tax amnesty anytime soon that will get you out of that. That's coming no matter what.
The bigger risk, may be having half or more of your net worth tied to a single company right before retirement. So, you know, there are ample stories out there, think Enron, General Electric, as Bob just got done mentioning, that went through it, has now kind of come back, but it did definitely change a lot of people's retirement plans. So, the answer isn't automatically rip that Band-Aid off, but it doesn't, do nothing either. Here's what you might consider, create a multi-year diversification plan. Instead of selling all at once, you can spread sales over three to five years. As we're sitting here, you know, depending on the time of year that you're in, we can potentially get in... You know, if you do this in December, you can get into three tax years over about a 13 month period if you think about it.
Second, try to do that in years with lower income. If you're going to retire 60, 62, the years between retirement and Social Security and before Required Minimum Distributions can be ideal windows to sell those appreciated shares at lower tax rates. Another idea, if you're charitable inclined anyway, don't write checks anymore, start giving the stock directly. Don't sell, send the shares in kind. Charities you support very well know how to do this. They're going to send you a piece of paper with numbers and instructions on how to get that done.
There are also such things as exchange funds or concentrated stock strategies that you can use to avoid those taxes, but diversify as well. So, it's just going to take some learning. It's good that you've identified the problem, but you definitely want to do a little more research to see what you can possibly do about it. Talk to your advisor, your CPA. Next we have a married couple, two people asking us a question at the same time, Mark and Susan in Oxford. And they're saying, "We're living off cash and brokerage assets. How do we determine the optimal order to draw from taxable IRA and Roth accounts?" What do you think, Bob?
Bob: All right. First of all, Mark and Susan, a big shout out and love and honor to my fellow Miami Redskins, AKA Red Hawks fans up there in Oxford. Great to visit with you a little bit tonight. Let's help you out with your retirement income strategy. Brian, this points out, I think something that a lot of people forget about and don't consider when looking at some of these brokerage assets and embedded long-term capital gains. I'm looking at the tax table right now for 2026. For married filing jointly couples. If you have taxable income of up to $98,900 this year... So, remember that's taxable income. That's after you take the standard deduction, which is over 30 grand. You're talking about $130,000 of gross income. You can sell some of these appreciated stocks and your long-term capital gain rate is zero.
A lot of people forget that and don't even consider that when crafting an income strategy. But when you look at that possibility... And this is what we do all the time, we look at what your Social Security income is, pension income is, what all your sources or buckets or piles of money, as you like to say, Brian. You want to manage that marginal and effective tax rate accordingly. And sometimes we take a little bit of money from different piles and keep this thing as tax efficient as possible. So, Mark and Susan, that requires sitting down with a good fiduciary advisor and a CPA and looking at what all the possibilities are out there. And hopefully, you'll have a nice secure and tax efficient retirement income. We got time for one more, Brian. Ben in Kenwood, he says, "Our income fluctuates dramatically because of bonuses and stock compensation. How can we take advantage of low income years before they disappear?"
Brian: For high earners, Ben, low income years are often the most valuable years you're ever going to have from a tax standpoint. So, lots of people only think tax planning really one year at a time. I got to deal with taxes next year. How am I going to minimize this coming April what I end up owing? But the wealthy people often think about it over decades. So, let's say your income is normally maybe $500,000 to $800,000 because of bonuses, RSU, stock options. Then all of a sudden, you have a year where compensation drops, you change jobs, retire early, or maybe take a sabbatical, whatever reason, you're just not making that level of income. That temporary dip will create a rare opportunity to actually intentionally recognize some income at a lower tax rate.
Don't spike the football. It's not a victory to have a low bracket. Use those lower brackets for things such as Roth conversions. If you've accumulated a lot of pre-tax money in traditional IRAs, 401(k)s, and so forth, then pull the trigger, get those conversions done. You might be able to do it. You don't have to be retired to do this. You may very well be able to do it while you're working with what's called an in-service Roth conversion or an in-plan conversion. Meaning it doesn't leave the 401(k). You just fill out some forms, pay some taxes, and now you got Roth from that day forward. So, that can also be ideal for realizing capital gains if you have assets outside that have appreciated. So, lots of opportunities. Look for those, when those low fluctuating years, that's when you want to pull the trigger on those.
Bob: Coming up next, Brian has his advice for those first generation millionaires out there. What mistakes can he help you avoid that we've seen happen time and time again? We want to help you get out in front of that before you make those same mistakes. You're listening "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. All right, we run into first generation millionaires all the time, Brian, whether they're people that earn the money themselves or did it the old-fashioned way, inherited the money. What are some of the mistakes that we want to help these people avoid, people that have really started to deal with large amounts of money, high net worth for the first time, and didn't see it coming?
Brian: Yes, so this actually was a question from the "Simply Money" mailbag from Dan in Milford who's got this situation. And I thought it was an interesting topic, so we figured we'd give it our own segment here. So, the first thing I'd say that mistakes that are made is confusing income with wealth. First generation millionaires often are that way because they earn a lot and they're the first in their family to be in that position. And they sometimes continue to think like high earners instead of wealth owners. This turns into taking excessive business risks because that's what got them there in the first place. Maybe keeping too much wealth concentrated in their company stock or their business, measuring success solely by your annual income rather than the overall net worth preservation. If it's just my salary, that means I'm not paying attention to my balance sheet. I'm not paying attention to taxes. I just know that I've earned more than my family ever has and I've earned more than I did last year. So, think wealth, not income.
Another big one is delaying estate planning. It takes a lot of time. Making that much money in whatever career or business is very, very, very time consuming, so the longer term tasks get pushed aside. Outdated wills, no trust in place, bad beneficiary designations that are not well thought out. Family confusion about where everything is and what it is and no succession plan. That business that is going great guns and making tons of money for you and your family right now, what happens if you can't get out of bed one day? Can it still become what you had dreamed of without you being involved? So, we got to make sure we're paying attention to those things, too.
Here's the big one though. Never teaching your own kids about money. You're going to be busy building whatever you're building, working at whatever you're working when your kids are young. You're doing the best you can to be involved in their day-to-day lives, getting them back and forth to practices. A lot of times people in this situation get so busy, they never talk to their kids about budgeting or investing, philanthropy, tax planning, any of those kinds of things because they're just trying to get everything done on a day-to-day basis. There is a window of time where your children will be most open to understanding this information from you, but eventually, that window closes. They're going to conclude that the world works the way they think it does, and they will make decisions accordingly. Bob, it looks like you got something you want to say.
Bob: No, you just went through a big, long list, and everything on that list are really important. Is there one or two things that stand out to you? Things that you see most common when you have people come into the office and actually talk to you about this topic.
Brian: Well, I think probably the biggest thing that would have fixed it is not having a professional team earlier on. When you're building that business, you're just getting started, maybe you don't feel like you need an attorney or a CPA because you can find all this information on the internet. Well, that business, that career is going to get away from you in a good way eventually, but you're going to wish you had that team in place. Because very frequently during the planning process, I run across opportunities of something they should have done 10 years ago, and I don't have the heart to tell them what it cost them missing out on it. So, build that team.
Bob: Thanks for listening tonight. You've been listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.