Latest / HPK Provident Advisors: The Weekly Bull / Markets, Inflation, And Planning Clarity

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Markets, Inflation, And Planning Clarity · HPK Provident Advisors: The Weekly Bull

• 0:06
  SPEAKER_01: Welcome to Friday Live.
• 0:07
  SPEAKER_01: Every Friday, some of the partners at HBK Provident Advisors gets together and discusses what we see going on in the markets, the economy, and then covering some financial planning topics.
• 0:17
  SPEAKER_01: So with us today is Brian Peluso.
• 0:20
  SPEAKER_01: Brian, good to have you.
• 0:22
  SPEAKER_00: Always a pleasure.
• 0:23
  SPEAKER_00: Love it.
• 0:24
  SPEAKER_01: So uh how's the week going so far?
• 0:27
  SPEAKER_01: Tax season killing.
• 0:29
  SPEAKER_00: Yeah, it's uh tax season.
• 0:31
  SPEAKER_00: So a lot of a lot of folks looking for their forms um um as quickly as possible.
• 0:39
  SPEAKER_00: So uh a lot of people verifying that they have all the forms that they need, that they um uh that they got the correct forms.
• 0:48
  SPEAKER_00: Are there other forms?
• 0:50
  SPEAKER_00: Which way did they come?
• 0:51
  SPEAKER_00: Were they uh online?
• 0:53
  SPEAKER_00: Do I download them um uh electronically or are they coming in the mail?
• 0:59
  SPEAKER_00: All of those good things.
• 1:02
  SPEAKER_01: Well, not to do a spoiler alert, but we do have a discussion on our blog post from Thursday about big mix-ups going on in the IRS in terms of leadership.
• 1:13
  SPEAKER_00: Yeah, well, uh it's true.
• 1:15
  SPEAKER_00: There there has been some changes in the uh leadership of the IRS, but um uh they can't get uh tax forms directly to um our valued clients.
• 1:28
  SPEAKER_00: We need to get those investment tax forms to them in some capacity, and then they get them to the IRS.
• 1:34
  SPEAKER_01: And other big news this week, I'm officially no longer a white belt in Goju Ru Karate.
• 1:41
  SPEAKER_01: I am now officially a yellow belt.
• 1:43
  SPEAKER_00: I did not know.
• 1:44
  SPEAKER_00: That is fantastic.
• 1:46
  SPEAKER_00: How long did it take between the transition from white to yellow?
• 1:49
  SPEAKER_01: Um I've been a member for almost three months, and I kind of took a month hiatus from it.
• 1:56
  SPEAKER_01: Um, so about two months.
• 1:58
  SPEAKER_01: I think I came to the conclusion it might be more of a time thing than a skill level.
• 2:04
  SPEAKER_01: Maybe I'm a little over overconfident in my ability, but uh it's been fun and it's a great workout, and they're really uh deep rooted in the history of this style of karate.
• 2:17
  SPEAKER_01: It it goes back to Okinawa, where it was used as a defense mechanism because they're kind of the middle ground between China and Japan.
• 2:25
  SPEAKER_01: So like all the trading went through them, and then at some point China came to the conclusion well, why don't we just make the money off that?
• 2:34
  SPEAKER_01: So they tried to invade, and their style of karate defended themselves from the invasion.
• 2:40
  SPEAKER_01: So pretty interesting.
• 2:43
  SPEAKER_00: Well, you know, um history doesn't repeat, maybe, but it certainly does rhyme, does it not?
• 2:49
  SPEAKER_01: So like we have we have a weapons wall there.
• 2:53
  SPEAKER_01: I'm not allowed to use any of those yet, but a lot of them are like very like practical things in in their daily lives back then, like like pitchforks and like farm equipment.
• 3:05
  unknown: Oh, very cool, practical.
• 3:07
  SPEAKER_01: Yeah, yeah.
• 3:08
  SPEAKER_01: So we'll get to the we'll get to the important stuff now.
• 3:10
  SPEAKER_01: Enough about my my karate.
• 3:12
  SPEAKER_01: I think that's important.
• 3:13
  SPEAKER_00: I think that's important.
• 3:14
  SPEAKER_00: We got a new ticker up top there.
• 3:16
  SPEAKER_00: Ooh, so everybody can see our uh website, our phone number.
• 3:20
  SPEAKER_00: Um so um, and and we'll refer to that on occasion, but that's uh the easiest way to get a hold of us if you don't work with us currently uh write on the website uh andor just call our office line directly.
• 3:35
  SPEAKER_00: So we'll put that up on occasion.
• 3:38
  SPEAKER_00: All right, Mike, what do we got for this week?
• 3:43
  SPEAKER_01: We're up about a half a percent today.
• 3:46
  SPEAKER_01: Um I think a lot of it has to do with the Supreme Court ruling um against the global tariffs.
• 3:53
  SPEAKER_01: So maybe the market's seeing that as potential relief on the inflation front.
• 3:59
  SPEAKER_01: Um, but essentially the the market cap weight index has been flat for the year.
• 4:04
  SPEAKER_01: We're kind of trading at the lower end of this ascending triangle and potential double top formation.
• 4:10
  SPEAKER_01: So if that does break to the downside, I mean we're looking at 6,500, potentially even 6,300 could be a 6,350 from the ascending triangle price projection.
• 4:23
  SPEAKER_01: So some potential downside, but I mean it could break either way here.
• 4:27
  SPEAKER_01: We're getting into the narrower range, so it's probably coming in the coming week or two in one direction or the other.
• 4:35
  SPEAKER_01: Um although the market cap is essentially flat for the year, um, that's been primarily dragged down by tech.
• 4:43
  SPEAKER_01: Software specifically has really gotten sold off.
• 4:46
  SPEAKER_01: Um just fear that AI can make what some of these software companies obsolete.
• 4:53
  SPEAKER_01: Now, I think that is a possibility in certain areas of that space, but I don't really see it as a broad sector concern, maybe more company specific.
• 5:04
  SPEAKER_01: I think, I think the big ones will be fine.
• 5:06
  SPEAKER_01: I mean, they're run by great leadership and constantly evolving, and they're well aware of what's out there.
• 5:14
  SPEAKER_01: So I don't have uh as big of a concern.
• 5:16
  SPEAKER_01: But good news for investors, it's been a better year for the diversified portfolio.
• 5:21
  SPEAKER_01: You can find relative outperformance in international markets.
• 5:25
  SPEAKER_01: That's largely due to the dollar being low.
• 5:29
  SPEAKER_01: Um, value sector, small caps, bonds are doing okay.
• 5:33
  SPEAKER_01: Municipals are doing better than taxable bonds this year.
• 5:36
  SPEAKER_01: So you're seeing some different uh areas of relative strength.
• 5:40
  SPEAKER_01: The the 10 year is kind of flirting with breaking down here, but it's still technically in an uptrend from October, so it hasn't definitively broken down.
• 5:50
  SPEAKER_01: We're about we're at about 408 on that metric right now.
• 5:54
  SPEAKER_01: Um the dollar also kind of range bound.
• 5:59
  SPEAKER_01: Um, it really needs to break 96-ish level to really break down further.
• 6:05
  SPEAKER_01: Um, and if that does, it should be a further, a further trade for international markets, commodities.
• 6:12
  SPEAKER_01: You've seen like the precious metals really benefit from that.
• 6:16
  SPEAKER_01: Um, but yeah, the equal weight's doing good this year.
• 6:18
  SPEAKER_01: That's uh the SP if you put the same allocation in the 500 companies, unlike the market cap weight index.
• 6:25
  SPEAKER_01: So going into uh what's going on in the economy, we got uh the preliminary fourth quarter breed of GDP came in lower than consensus at 1.4%.
• 6:37
  SPEAKER_01: Annualized, it's about 2.2%.
• 6:39
  SPEAKER_01: Um so we really saw the the tailwinds in that being uh spending from the consumer, investments by corporations, and then on the flip side, it was offset by lower government spending, probably partially due to the brief government shutdown, um, and then as well as lower exports.
• 7:02
  SPEAKER_01: So just something to keep an eye on is a preliminary read.
• 7:05
  SPEAKER_01: Uh the prices came in higher in that component.
• 7:08
  SPEAKER_01: Um, we did get the Fed's in preferred inflation measure today, the PCE deflator.
• 7:14
  SPEAKER_01: So both came in relatively hot, both the headline and the core, coming in at four tenths of the month, which is double.
• 7:20
  SPEAKER_01: This is December's reading, by the way, not January.
• 7:23
  SPEAKER_01: Um so that was double November.
• 7:26
  SPEAKER_01: So not necessarily a good thing.
• 7:28
  SPEAKER_01: Um on an annualized basis, we're sitting at 2.9% for the headline and 3% for the core.
• 7:35
  SPEAKER_01: So we did get the Fed minutes this week, and they were a little surprising to me.
• 7:42
  SPEAKER_01: They said that if inflation remains sticky and high, the case for rate hikes might be on the table in the future, in the near future.
• 7:53
  SPEAKER_01: Um so that that surprised me because I'm I'm more concerned about the labor market right now than the inflation picture.
• 8:00
  SPEAKER_01: Yeah, I think inflation is gonna stay sticky around the current levels, and maybe if some of these tariffs do go into effect, we'll see those one-time price hikes.
• 8:10
  SPEAKER_01: Um, but the labor market's been weak.
• 8:12
  SPEAKER_01: We're with the revisions, we're at like 15,000 uh on an average monthly basis.
• 8:18
  SPEAKER_01: As I discussed my skepticism about the 130 non-farm payrolls in January, I see that being revised lower.
• 8:25
  SPEAKER_01: Um, but yeah, I'm definitely more concerned about the labor market.
• 8:29
  SPEAKER_01: So I question why they would have that change of uh opinion and tone in the report.
• 8:36
  SPEAKER_01: And my personal theory is they don't want to see the dollar continue to decline.
• 8:44
  SPEAKER_01: Just the theory, but that's what I'm going with.
• 8:50
  SPEAKER_00: Uh well, you would know.
• 8:51
  SPEAKER_00: You would certainly know.
• 8:53
  SPEAKER_00: Uh so you know, expand a little bit on the if you would, Mike, on the difference between the uh, and it's it's gotten a lot more press, but between the cap weighted SP 500 and the equal weighted that you were referencing.
• 9:09
  SPEAKER_01: Yeah, so the cap weighted is really driven by the I mean the Mag 7 has a huge exposure in that index.
• 9:17
  SPEAKER_01: Um, I don't know what the current weight of the Mag 7 is, but it's probably around 30%.
• 9:22
  SPEAKER_01: Um, so those those bigger companies really drive the index performance.
• 9:27
  SPEAKER_01: Whereas the 500th company doesn't really have much of an effect.
• 9:32
  SPEAKER_01: But in the equal weight, that gets the same weight as the biggest companies in America.
• 9:38
  SPEAKER_00: Yeah, and occasionally I see misconception on that.
• 9:41
  SPEAKER_00: You know, people will say the SP's up X, right?
• 9:44
  SPEAKER_00: 5, 10, 13, whatever it is.
• 9:47
  SPEAKER_00: And there is, in my observation, an unsaid belief that all 500 companies are.
• 9:54
  SPEAKER_00: I'm gonna make up a number here.
• 9:56
  SPEAKER_00: Let's say the SP 500 is up 10% at some point in time.
• 10:00
  SPEAKER_00: There is an unsaid, as I had mentioned, an unsaid belief that all 500 companies are up 10%.
• 10:07
  SPEAKER_00: And that's just not true.
• 10:09
  SPEAKER_01: No.
• 10:09
  SPEAKER_01: And yeah, the makeup of the two indexes, whether it's market cap or equal weight, is much different sector-wise.
• 10:16
  SPEAKER_01: Like I said, tech, consumer discretionary, uh, com services make up a a good amount of the market cap.
• 10:25
  SPEAKER_01: Whereas the in the equal weight, you have like the say like more exposure in some of the cyclical areas, financials, um, even like energy materials, where energy and materials in the market cap way to index are probably only 3% each.
• 10:46
  SPEAKER_00: And then, you know, the follow-on to that is, hey, the SP is up 10%.
• 10:50
  SPEAKER_00: Why am I not up 10%?
• 10:51
  SPEAKER_00: Well, it's very quite possible that the uh and it has been for the last few years, actually, uh, the SP is up 10% because of seven companies.
• 11:02
  SPEAKER_00: And if you don't just own those seven companies, um, if you're in an index of some sort, which is often, you know, maybe you have the S P 500 ETF, you say, well, you know, I'm up 10 I'm up 10%.
• 11:15
  SPEAKER_00: And then you have another portfolio that has some individual holdings in it.
• 11:17
  SPEAKER_00: So why is that up 10%?
• 11:20
  SPEAKER_00: Um, and it's because, you know, not every company in the S P 500 is getting exactly 10% because the SP index is up 10%.
• 11:29
  SPEAKER_00: And so there's a little bit of a misconception around that.
• 11:31
  SPEAKER_00: It's very at times the SP return can be very uh fairly concentrated.
• 11:37
  SPEAKER_00: Um concentrated meaning the performance that you see and you think you should be getting is driven by very, very few companies.
• 11:45
  SPEAKER_00: Um, and whether that performance continues and pulls up all the SP performance or not is um is you know very difficult to say, obviously.
• 11:57
  SPEAKER_00: And so that's where the financial planning comes in.
• 11:59
  SPEAKER_00: That's where understanding what um pots of money that you have, you know, make sure that you have short-term money and short-term investments, which probably aren't going to get uh you know the return of the SP 500.
• 12:14
  SPEAKER_00: Kind of midterm money, say two to five, two to seven, you know, depending on what it is, and then your long-term money.
• 12:19
  SPEAKER_00: Um so that you know, that that whole concept really reduces a lot of frustration of, well, why aren't I getting 10%?
• 12:27
  SPEAKER_00: Well, in my example, you know, um, obviously, as Mike had alluded to, the mic, you know, SP's not up 10% right now, but I'm making an example using easy numbers.
• 12:37
  SPEAKER_00: You know, why isn't this pot of money up 10%?
• 12:40
  SPEAKER_00: Well, because you've expressed that you're probably going to use those monies, that accounts, in the next year.
• 12:46
  SPEAKER_00: So you can't look at it and say, well, that needs to be up 10%.
• 12:49
  SPEAKER_00: And then in the, you know, conversely, you got long-term money.
• 12:53
  SPEAKER_00: Let's go kind of the opposite example.
• 12:55
  SPEAKER_00: The S B, the market is down 10, 12.
• 12:59
  SPEAKER_00: Let's go down 10%, right?
• 13:01
  SPEAKER_00: Well, if you got the long-term money, then you can say, hey, that's long-term.
• 13:04
  SPEAKER_00: I don't really plan on tapping into that for many, many years into the future.
• 13:08
  SPEAKER_00: So, hey, you know, one bad year does not make um, you know, the final conclusion on whether that pot of money, my long-term money, is doing what it's supposed to do.
• 13:20
  SPEAKER_00: So uh that's really where the financial planning comes in and uh understanding what you have, what types of accounts you have, and and clarifying uh through discussions with us and sitting down with the stakeholders, one of my least favorite words uh corporate America, by the way.
• 13:36
  SPEAKER_00: The stakeholder's a stakeholder now, right?
• 13:38
  SPEAKER_00: Yeah, exactly.
• 13:39
  SPEAKER_00: Uh so the stakeholders in your accounts could be spouse, could be children, could be charities.
• 13:44
  SPEAKER_00: Uh understanding amongst them um, you know, what the purpose of each part of your plan is.
• 13:52
  SPEAKER_00: So um, you know, uh just alluding to the fact that there is confusion around the SP 500 because um, you know, not all boats rise in a rising tide, but all the boats are reported with the same number.
• 14:08
  SPEAKER_00: The SP is up 10%.
• 14:10
  SPEAKER_00: That doesn't mean everything, every individual stock in there is up 10%.
• 14:14
  SPEAKER_01: Right, yeah, that's a really good point.
• 14:15
  SPEAKER_01: And in years where the Mag 7 is really driving performance, it's it's tough to beat the market cap weighted index because to do so, it means you gotta be most likely overweight those companies.
• 14:26
  SPEAKER_01: And I don't really want 8% in any of those names, which is taking on too much concentration risk.
• 14:33
  SPEAKER_01: You have a year like this year where it's the opposite and there being a drag on your portfolio.
• 14:37
  SPEAKER_01: So we try to we try to kind of be on average in the middle of those two returns in any given year.
• 14:45
  SPEAKER_00: Very fair, very fair.
• 14:47
  SPEAKER_00: So what else we got, Mike?
• 14:48
  SPEAKER_01: What do we uh let's get into the some of the blog posts.
• 14:51
  SPEAKER_01: So you're uh you're continuing on your Tax Tuesday campaign.
• 14:55
  SPEAKER_01: So what do we got this week?
• 14:57
  SPEAKER_00: Yeah, so um so just to re-emphasize for people that don't uh watch uh Friday Live uh on a regular basis as you should.
• 15:07
  SPEAKER_00: Uh what we do on Friday is we re uh talk about the social posts that we put out during the week.
• 15:13
  SPEAKER_00: So Monday's Market Monday, Tuesday is Tax Tuesday, Wednesday's wealth building Wednesday.
• 15:18
  SPEAKER_00: So that's just different concepts on how to build your long-term uh wealth.
• 15:23
  SPEAKER_00: Uh Thursday is think ahead Thursday.
• 15:25
  SPEAKER_00: So those are just things that may or may not be applicable to you, but you want to think about.
• 15:29
  SPEAKER_00: So, well, yeah, that's interesting.
• 15:32
  SPEAKER_00: Maybe I don't need that right now.
• 15:33
  SPEAKER_00: Maybe that's not uh important to me right now, but maybe it will be.
• 15:37
  SPEAKER_00: So it's kind of informational.
• 15:38
  SPEAKER_00: Then Friday we wrap it all together.
• 15:40
  SPEAKER_00: So Text Tuesday this week was uh IRA 401k withdrawals uh prior to the age of 59 and a half.
• 15:49
  SPEAKER_00: Because what happens is for the most part, a good general statement is that if you take money out of a traditional IRA or traditional 401k, traditional meaning you get a tax break on the way in, it grows tax protected, and you pay taxes on the way out.
• 16:05
  SPEAKER_00: Um and the Roth IRA, where you don't get a tax break on the way in, it's gross tax protected.
• 16:11
  SPEAKER_00: And if you follow the rules, you take it out tax-free.
• 16:15
  SPEAKER_00: But in each of those types of accounts, I'm gonna focus a little more on the traditional, that's where more of the money is right now in the traditional 401ks and IRAs.
• 16:24
  SPEAKER_00: But there is a tax rule that disincentivizes you from taking your money out.
• 16:28
  SPEAKER_00: These are retirement accounts.
• 16:30
  SPEAKER_00: So prior to 59 and a half in general, if you take money out of a traditional IRA, traditional 401k, you're gonna pay taxes on it.
• 16:37
  SPEAKER_00: You're gonna pay taxes on a traditional anyway, uh, whether you're prior to 59 and a half or after.
• 16:43
  SPEAKER_00: But prior to 59 and a half, there's a 10% penalty.
• 16:47
  SPEAKER_00: So that is the general rule.
• 16:50
  SPEAKER_00: Uh, but there are exceptions to that.
• 16:53
  SPEAKER_00: Uh, there are a few things that you can consider um that if, and you really want to be very thoughtful about this, uh, about taking money out of these types of retirement accounts prior to the age of 59 and a half, but there are some exceptions.
• 17:09
  SPEAKER_00: Uh unreimbursed medical expenses, it's uh over 7.5%.
• 17:15
  SPEAKER_00: Um there are some education provisions.
• 17:18
  SPEAKER_00: You can take a certain amount of money out for qualified higher education.
• 17:22
  SPEAKER_00: You got to keep really good records on that.
• 17:24
  SPEAKER_00: If you say, hey, I took money out of my 401k, for example, at the age of 52 because my kids are going to college, you got to keep really good records on that so that when you do your taxes, the money that comes out is gonna be taxable.
• 17:37
  SPEAKER_00: But if you're using it for qualified higher education, you might be able to not have to pay that 10% penalty.
• 17:44
  SPEAKER_00: Uh, first-time home buyers, there's another provision on that, up to um up to$10,000.
• 17:53
  SPEAKER_00: And, you know, a really interesting one, and this would be for anybody who has the dream of uh retiring early, and you might actually be able to do it, is the age 55 rule.
• 18:06
  SPEAKER_00: Uh now, this is only for uh employer-sponsored plans.
• 18:11
  SPEAKER_00: So, what I'm about to tell you, be very clear, this is not for your individual retirement account.
• 18:16
  SPEAKER_00: Okay, so just understand what I'm talking about is retire, uh employer-sponsored plans.
• 18:21
  SPEAKER_00: This is your 401k at work, your 403B, things along those lines.
• 18:26
  SPEAKER_00: If you retire uh or separate from service, so you leave that company where you have this 401k uh in the year you turn 55 or older, and you leave it in that 401k.
• 18:39
  SPEAKER_00: So picture yourself, hey, I'm going on to a new job.
• 18:41
  SPEAKER_00: I turned 55 this year, going on to a new job, or maybe I want to retire.
• 18:45
  SPEAKER_00: And you leave that money in that 401k.
• 18:48
  SPEAKER_00: It is possible.
• 18:49
  SPEAKER_00: And we don't give tax or legal advice, and you'll want to work with your tax preparer on this, you'll want to talk to your qualified financial professional, and you would want to uh talk to um the plan provider, not the HR company of the company you just left, but who is actually uh holding that 401k and talk to them just to verify all these things.
• 19:12
  SPEAKER_00: But you're 55 or older, you separate from service, you leave that 401k, 403B where it's at.
• 19:19
  SPEAKER_00: Uh, it is possible that you may be able to take money out.
• 19:24
  SPEAKER_00: Of course, it's taxable when you take it out, but you might be able to avoid that 10% penalty.
• 19:28
  SPEAKER_00: So we have worked on cases where folks said, you know what, I put myself in a great spot.
• 19:32
  SPEAKER_00: I want to retire early.
• 19:34
  SPEAKER_00: Um and, you know, how do I start getting income from my savings?
• 19:39
  SPEAKER_00: I've transitioned from my income comes from my intellectual and physical abilities to my income is coming from my savings.
• 19:49
  SPEAKER_00: Uh, how do I do that uh in the most efficient way?
• 19:52
  SPEAKER_00: And for folks like that, sometimes the answer is, you know what, leave it in that 401k.
• 19:58
  SPEAKER_00: Uh and tap into it.
• 19:59
  SPEAKER_00: Of course, you're gonna pay taxes, you're gonna pay taxes on it now, later, whatever.
• 20:03
  SPEAKER_00: Uh, but you might be able to avoid that 10% penalty.
• 20:05
  SPEAKER_00: So that's that's something to think about.
• 20:07
  SPEAKER_00: Uh, we've worked on some cases where folks were downsized unexpectedly uh after the age of uh uh 55, and they say, geez, what am I gonna do?
• 20:18
  SPEAKER_00: You know, I got to look for a new job.
• 20:19
  SPEAKER_00: Uh well, in those situations, very specific situations, this is not a broad blanket recommendation, but in those specific situations, what we did was say, hey, leave it in the old 401k.
• 20:32
  SPEAKER_00: Of course, you left that company, you were downsized, you were not happy about that, you don't like them, leave that money there.
• 20:38
  SPEAKER_00: And if you need to, in this gap period between you find your your next role and your next source of income through some other job, uh, maybe leave it there.
• 20:47
  SPEAKER_00: If you need to tap into it, don't love the idea of tapping into it.
• 20:51
  SPEAKER_00: I mean, if you're 55 years old, you might have a 40-year time frame.
• 20:54
  SPEAKER_00: Don't love the idea of tapping into it.
• 20:56
  SPEAKER_00: But if you need to, you might be able to do that after the age of 59 and a half and separation of service without the 10% penalty.
• 21:03
  SPEAKER_00: So that was the one point I wanted to expand on.
• 21:06
  SPEAKER_00: That's a there's in our practice, we see a lot of confusion about that.
• 21:10
  SPEAKER_00: Actually, number one, we see a lot of people that don't even know that.
• 21:14
  SPEAKER_00: And number two, some confusion about that.
• 21:15
  SPEAKER_00: So I wanted to expand on that one.
• 21:17
  SPEAKER_00: The other points that you see unreimbursed medical expenses, first-time home uh homeowners, qualified education expenses, and that kind of thing.
• 21:25
  SPEAKER_00: They they those are kind of the things that if you do a Google search, you'll find those right away, right?
• 21:30
  SPEAKER_00: So, hey, how do I get money out of my 401k, uh my 403B, whatever it is, without the 10% penalty?
• 21:36
  SPEAKER_00: Those are the first ones that'll come up.
• 21:38
  SPEAKER_00: Uh, final point on that, Mike, uh, is uh you will talk to people.
• 21:43
  SPEAKER_00: So if you don't work with us, you don't work with a professional right now, he separates service after the age of 55.
• 21:48
  SPEAKER_00: And after the age of 55, you leave that money there.
• 21:51
  SPEAKER_00: You will talk to a lot of financial professionals.
• 21:53
  SPEAKER_00: Oh, no, no, no, you move it into an IRA.
• 21:56
  SPEAKER_00: Uh, which oftentimes is a great suggestion if You don't plan on using that money till after 59 and a half when the 10% penalty goes away.
• 22:04
  SPEAKER_00: That's a great idea.
• 22:06
  SPEAKER_00: If you have no need, no possibility, current assumptions, no possibility that you're going to use that, yeah, maybe an IRA is a good idea.
• 22:14
  SPEAKER_00: You want to look at all your options.
• 22:16
  SPEAKER_00: But uh for those folks that say, geez, I, you know, I might need that money.
• 22:21
  SPEAKER_00: I I was I was plowing money into my 401k, I got a big account, but I I might need that in a couple of years.
• 22:27
  SPEAKER_00: Uh I might need that to pay for medical expenses because now I don't have uh my employer health plan.
• 22:34
  SPEAKER_00: Uh I might need that because I I I want to retire at 55, 56, whatever it is.
• 22:39
  SPEAKER_00: And you know, I got to bridge um, you know, the gap of not having an income from work.
• 22:45
  SPEAKER_00: Um, so you'll you will talk to a lot of people.
• 22:47
  SPEAKER_00: Their default is oh, take it out of the old plan.
• 22:49
  SPEAKER_00: You didn't like them, you were downsized, you want to be you know, be rid of them, you don't want to be associated with them anymore.
• 22:54
  SPEAKER_00: Get it into an IRA.
• 22:56
  SPEAKER_00: Stop and think about it, is all I'm saying.
• 22:58
  SPEAKER_01: So and correct me if I'm wrong, but Roth IRAs have some of the same uh like exemptions with the uh with the the limitation that it has to be there for five years to be able to access the growth of it.
• 23:15
  SPEAKER_00: That yeah, you know, we we we should probably cover that on one whole Friday live and then take up uh the whole time on that because there are there's actually multiple five-year rules in the uh in the Roth IRAs.
• 23:27
  SPEAKER_00: You gotta have the account open for five years.
• 23:30
  SPEAKER_00: Um, so depending on your age.
• 23:33
  SPEAKER_00: Now, one thing you should understand about the Roth IRAs is uh any money that you put in, right?
• 23:38
  SPEAKER_00: So you say, hey, I love the Roth IRA, and we'll put, you know, uh$7,000 to$7,500 into it.
• 23:45
  SPEAKER_00: Um, that money that you put into your Roth IRA is always tax and penalty free.
• 23:52
  SPEAKER_00: The question becomes uh the growth.
• 23:56
  SPEAKER_00: So, in that very simple example, now you got to have it open for five years, but uh, well, not even on that.
• 24:02
  SPEAKER_00: Any money you put into the Roth IRA, uh, the your original contribution, that's tax and penalty free.
• 24:08
  SPEAKER_00: It's already been taxed, right?
• 24:09
  SPEAKER_00: You don't get a tax break on the way in.
• 24:11
  SPEAKER_00: The question becomes you got to break down the growth.
• 24:15
  SPEAKER_00: So um, you know, there's a couple things to consider uh with the Roth.
• 24:19
  SPEAKER_00: What money are you looking at?
• 24:21
  SPEAKER_00: Uh are you looking at the money that you originally put in, or are you looking at the growth of that dividends, interest, growth of the investments, that kind of thing.
• 24:31
  SPEAKER_00: So you got to separate that out first.
• 24:33
  SPEAKER_00: If you're looking to tap into your Roth IRA prior to 59 and a half, you gotta first say, well, am I tapping into the original amount?
• 24:40
  SPEAKER_00: Uh what about am I starting to take out an amount that all gets into the earnings of it?
• 24:46
  SPEAKER_00: So um, and then you know, then it gets even more uh convoluted for a lot of people when you do a conversion.
• 24:55
  SPEAKER_00: So there's additional rules on the conversion.
• 24:59
  SPEAKER_00: Uh so if you convert from a traditional 401k, for example, or traditional IRA into a Roth, um, and then you want to take money out, you got to look at and say, well, was this money I put in as a contribution?
• 25:13
  SPEAKER_00: Was it money I put into this Roth as a conversion, or is this money that is growth from all of that?
• 25:19
  SPEAKER_00: And so those are your three buckets you gotta look at, and then you gotta understand the uh different time frames.
• 25:24
  SPEAKER_00: Well, you know what, we should probably do uh you know a Friday live on that because it's super confusing to many people.
• 25:31
  SPEAKER_01: Yeah, we can do that, and then uh yeah, that's the look ahead post came out on Tuesday, a little delay with our compliance, and then Wednesday post was talking about um senior care.
• 25:44
  SPEAKER_01: So pretty much like the the component with that is um 30 30 percent of um people age 65 or older will need long-term care at some point.
• 25:58
  SPEAKER_01: Uh oh, 70%.
• 26:00
  SPEAKER_00: Sorry, yeah, it's a big number.
• 26:02
  SPEAKER_01: Yeah, um, and then the average cost with that is I think 110 for a shared nursing homeroom and about 70 for assisted living.
• 26:12
  SPEAKER_01: So it's a big expense, it's not really covered by healthcare.
• 26:16
  SPEAKER_01: Um so there's different products out there that can cover that, but um, they you do you have to pay for them.
• 26:23
  SPEAKER_01: They're they're not cheap.
• 26:25
  SPEAKER_01: Um and then you have to, I guess, as we just recently found out, you have to also qualify medically.
• 26:33
  SPEAKER_01: And they have a lot of different components for that.
• 26:35
  SPEAKER_00: Well, this is a big one, and we get this question all the time.
• 26:38
  SPEAKER_00: I had this conversation last night.
• 26:40
  SPEAKER_00: Um so yeah, a lot of people will need care at some point in their life.
• 26:45
  SPEAKER_00: And uh again, a very long topic that I'll try to simplify and you want to think about things.
• 26:51
  SPEAKER_00: Um when people talk the these days, when you talk about long-term care, it's not necessarily, hey, I'm going into a home where I get all my health care, I get all my meals, and I get all of my um recreational activities.
• 27:06
  SPEAKER_00: There there are so many different levels.
• 27:08
  SPEAKER_00: There's in-home health care, there's part-time, there's full-time.
• 27:11
  SPEAKER_00: Um, you know, there are rehab facilities.
• 27:14
  SPEAKER_00: You know, if you're if you're going through a medical procedure, it might be a rehab facility that looks exactly like long-term care facility where you go in and you know, you get your meals and your medical care, but that's only a short-term thing.
• 27:26
  SPEAKER_00: And then there's true long-term care, which is I need to be in a facility where I have um a medical staff uh around 24-7.
• 27:36
  SPEAKER_00: Uh, I've got a room there, and you know, I do I uh all my meals are there and that kind of thing.
• 27:42
  SPEAKER_00: So uh the first thing is to understand what care looks like for the elderly.
• 27:48
  SPEAKER_00: And there are different costs for that.
• 27:50
  SPEAKER_00: Uh obviously, for in-home care, it's gonna be a little bit less expensive because it's not 24-7.
• 27:57
  SPEAKER_00: There's, you know, not bringing in all your meals, not doing all your recreational stuff.
• 28:01
  SPEAKER_00: So it could be less expensive, but it's still super expensive.
• 28:04
  SPEAKER_00: And then there are different levels of that, you know, is that part-time a couple of days a week?
• 28:07
  SPEAKER_00: Is that every day?
• 28:08
  SPEAKER_00: Is that you know, five days a week?
• 28:10
  SPEAKER_00: Somebody comes in for an hour and that kind of thing.
• 28:13
  SPEAKER_00: Um the the point of all that is uh of it is is to think about it.
• 28:17
  SPEAKER_00: And this is one of the hardest things uh from a financial planning perspective, because you don't truly know.
• 28:22
  SPEAKER_00: Uh, we don't know the future at all, but this is one of the hardest things to sit back and say, oh, yeah, you know, it's hard to look at something.
• 28:30
  SPEAKER_00: You are absolutely gonna need a full-on long-term care facility at the age of 91.
• 28:37
  SPEAKER_00: I mean it's impossible.
• 28:38
  SPEAKER_01: And then you also have to know how long you're staying there.
• 28:41
  SPEAKER_00: Yeah, well, that's the other thing, right?
• 28:43
  SPEAKER_00: And yeah, you're at the you know, on January 2nd of uh you're when you turn 91, on January 2nd, you're gonna go in and you're gonna be there for nine months.
• 28:52
  SPEAKER_00: Who knows?
• 28:53
  SPEAKER_00: Uh so what do you do?
• 28:55
  SPEAKER_00: Uh and there's also a great misconception.
• 28:58
  SPEAKER_00: Um, I get this question all the time.
• 29:01
  SPEAKER_00: Hey, you know, how do I reposition my assets so I don't have to pay for long-term care at all?
• 29:06
  unknown: Ooh.
• 29:07
  SPEAKER_00: Yeah, that's uh there are things to be done.
• 29:10
  SPEAKER_00: That's really more of a legal process, and you really need to work with a qualified uh senior care attorney on that.
• 29:17
  SPEAKER_00: How to structure things, that's more about structuring things, and that's really for the attorneys to work on.
• 29:22
  SPEAKER_00: We, of course, partner with those folks and make assets are in the right, make sure assets are in the right structure and that kind of thing.
• 29:27
  SPEAKER_00: But that's really a legal process.
• 29:29
  SPEAKER_00: You know, it's kind of like a state planning.
• 29:31
  SPEAKER_00: Estate planning is a legal process that involves money.
• 29:33
  SPEAKER_00: It's not a money process that involves uh legal guidance, it's a legal process.
• 29:38
  SPEAKER_00: Uh, positioning things properly, if you were really going down that path, of having the highest uh possibility of the lowest cost of potential future long-term care.
• 29:51
  SPEAKER_00: Um, you know, you really want to work with a qualified attorney on that.
• 29:54
  SPEAKER_00: But you know, but but it's a great question.
• 29:57
  SPEAKER_00: What do I do?
• 29:58
  SPEAKER_00: Uh well, there's a couple of different options.
• 29:59
  SPEAKER_00: Maybe you're self-funded, maybe you got plenty of money.
• 30:02
  SPEAKER_00: Um and your goal is hey, I'm gonna spend my last dollar on my last day.
• 30:08
  SPEAKER_00: Uh, I'm not giving it to beneficiaries or charities.
• 30:11
  SPEAKER_00: This is uh money for me.
• 30:13
  SPEAKER_00: You it might be self-funded and you're taking your chances, right?
• 30:16
  SPEAKER_00: Um it's kind of like any other insurance.
• 30:20
  SPEAKER_00: You know, you can avoid um when it comes to insurance, it's ART, you can avoid it, you can retain it, you can transfer it.
• 30:28
  SPEAKER_00: So avoid it is um uh when it comes to insurance, if you're avoiding something like I don't want to pay for car insurance, well then don't drive.
• 30:37
  SPEAKER_00: So you're avoiding it.
• 30:39
  SPEAKER_00: Uh you can retain it.
• 30:40
  SPEAKER_00: You can say, well, you know what?
• 30:43
  SPEAKER_00: It's a possibility in my life, but I'm not gonna have insurance cover that uh because I think I can cover it on my own.
• 30:49
  SPEAKER_00: Now, the car insurance example on that one's a bad one because you're required to have car insurance, but you get the idea.
• 30:55
  SPEAKER_00: You could say, hey, this is a possibility.
• 30:57
  SPEAKER_00: It is a possibility that um, you know, uh, I'll give you a good example.
• 31:03
  SPEAKER_00: I get uh advertisements all the time that says, hey, your water line between your house and the street is your responsibility.
• 31:10
  SPEAKER_00: So you can get some insurance and pay a few bucks every month that if something happens to that water line between your house and the street, that we'll come in and cover it.
• 31:18
  SPEAKER_00: Or you can say, you know what, that is a possibility that'll happen.
• 31:20
  SPEAKER_00: I don't have to have insurance on that.
• 31:22
  SPEAKER_00: If that happens, I'll pay for it out of the top pocket.
• 31:24
  SPEAKER_00: That's retaining it.
• 31:25
  SPEAKER_00: Transferring it is using insurance.
• 31:28
  SPEAKER_00: You you transfer that risk.
• 31:29
  SPEAKER_00: You say, well, you know, the water line might bust between my house and if it does, I'm gonna pay a few bucks.
• 31:35
  SPEAKER_00: I'm transferring that risk to an insurance company that says if that does happen, they're gonna come in and take care of it.
• 31:40
  SPEAKER_00: Long-term care to transfer the cost of long-term care is super expensive.
• 31:46
  SPEAKER_00: Uh, so you can do that.
• 31:47
  SPEAKER_00: There are policies that say, hey, if you need any type of this care, we'll pay for it.
• 31:51
  SPEAKER_00: And they are very expensive.
• 31:53
  SPEAKER_00: Um, it's hard to avoid, right?
• 31:55
  SPEAKER_00: You can't say, I'm gonna avoid a long-term care event.
• 31:58
  SPEAKER_00: I'm gonna avoid having anybody have to come into my house and help me out.
• 32:01
  SPEAKER_00: I'm gonna avoid going into a facility.
• 32:04
  SPEAKER_00: You can't really avoid it.
• 32:06
  SPEAKER_00: Uh, but you can retain it and say, hey, if that happens, I'm gonna pay for it out of pocket.
• 32:10
  SPEAKER_00: Uh it's a big question, it's a very personal question.
• 32:13
  SPEAKER_00: There are there is not one answer for, you know, if somebody comes to me and says, What do the rest of your clients do?
• 32:19
  SPEAKER_00: Every one of them are doing something a little bit different uh in that in that regard.
• 32:24
  SPEAKER_00: There are plenty of people that come to me and say, hey, I've taken care of my family for a long time.
• 32:29
  SPEAKER_00: And so when it comes time, they're gonna take care of me.
• 32:31
  SPEAKER_00: That's up to you.
• 32:32
  SPEAKER_00: That's your choice.
• 32:33
  SPEAKER_00: Uh, it's a huge question.
• 32:34
  SPEAKER_00: There is no single answer.
• 32:36
  SPEAKER_00: And I'm sure some people tuned in on this and said, I want to hear about that post specifically.
• 32:41
  SPEAKER_00: But this is a really a financial planning question.
• 32:44
  SPEAKER_00: If you want to get down the go down the road of how do I reposition my assets um such that I have minimal cost, and I'll explain that in a little bit.
• 32:54
  SPEAKER_00: Uh, how do I uh reposition my assets a very minimal cost on that?
• 32:58
  SPEAKER_00: Then you really got to get you know they we're gonna get a senior care attorney involved and start restructuring things, and there's a cost of that.
• 33:05
  SPEAKER_01: Yeah, and usually uh usually when a client has that discussion with us about the repositioning, it's not there's a look back period, and it's they usually bring that up when they're starting to think that they're gonna need it in the immediate future.
• 33:18
  SPEAKER_01: Well, honestly, with the look back period, it's too late at that point.
• 33:22
  SPEAKER_00: That's absolutely right.
• 33:23
  SPEAKER_00: These are things you really need to, and not everybody has the resources to do it.
• 33:29
  SPEAKER_00: You know, not everybody says, uh, hey, you know, there's a possibility I'm gonna go into a long-term care facility for three years at$110,000 for a year or a year.
• 33:39
  SPEAKER_00: Well, maybe there's not enough there.
• 33:41
  SPEAKER_00: You know, maybe it's well, you know, you've got to live your life, you still got to pay bills, and you still got to buy groceries and you still gotta buy gas to get around.
• 33:48
  SPEAKER_00: You want to have fun a little bit.
• 33:50
  SPEAKER_00: You know, there is not enough just to park this and say, forget about it.
• 33:53
  SPEAKER_00: This is my long-term care bucket.
• 33:55
  SPEAKER_00: If I need it, I'll tap into it.
• 33:57
  SPEAKER_00: So it's it's it's not for everybody, unfortunately.
• 34:00
  SPEAKER_00: What is the concept of I don't have to pay for long-term care?
• 34:03
  SPEAKER_00: Medicare does not pay for long-term care.
• 34:05
  SPEAKER_00: Uh, Medicare might step in if you're in a rehab facility because of a medical uh incident.
• 34:12
  SPEAKER_00: Uh, but you can't just say, you know what, I really can't take care of myself.
• 34:16
  SPEAKER_00: Um, you know, it's dangerous to be by myself in the home.
• 34:19
  SPEAKER_00: So I'm going to check myself into this beautiful place that has, you know, a bocce and shuffleboard, and and they're going to feed me three times a day, and they got really nice people.
• 34:28
  SPEAKER_00: Uh, Medicare doesn't pay for that part.
• 34:31
  SPEAKER_00: And uh so people say, well, you know, how can effectively how can I have the government pay for long-term care?
• 34:37
  SPEAKER_00: Medicaid does.
• 34:39
  SPEAKER_00: And uh you really need to prove in a very detailed and elaborate way that you don't have any money.
• 34:46
  SPEAKER_00: You don't have access to any money.
• 34:48
  SPEAKER_00: You don't have to prove you don't have any money, you have to prove that you effectively don't have access to it.
• 34:52
  SPEAKER_00: And that gets pretty complicated.
• 34:54
  SPEAKER_00: So, man, Mike, we got into a bunch of topics that I am uh I I am passionate about, that we talked to our clients about a little time.
• 35:03
  SPEAKER_00: Well, you know, it's uh, you know, and I hate to no, I I I the fact of the matter is these are all personal, personal decisions.
• 35:13
  SPEAKER_00: Uh, you know, if you're sitting in a room with 10 friends and and you're saying, what are you gonna do about the possibility of having to pay for long-term care?
• 35:21
  SPEAKER_00: Uh you're gonna come away with 25 different answers, and none of them will be right for you.
• 35:28
  SPEAKER_00: Uh, so you really need to sit down with qualified professionals that would include a financial professional, that may include a legal professional.
• 35:35
  SPEAKER_00: And you always want to wrap in your tax preparer on these things because there could be tax consequences as to the repositioning and how you access that money in the future.
• 35:45
  SPEAKER_00: That's too much, I know.
• 35:46
  SPEAKER_01: But we won't spend much time on the last blog post, but as I mentioned it earlier, we should touch on it.
• 35:54
  SPEAKER_01: It's just some changes going on with the IRS, uh, some leadership changes through the government spending initiative.
• 36:01
  SPEAKER_01: They cut the workforce by I think about 25%.
• 36:04
  SPEAKER_01: And that's a year that we're going to be implementing uh new tax changes.
• 36:08
  SPEAKER_01: So there might be some delays there.
• 36:11
  SPEAKER_01: Um besides that, it's uh mentions it talks a little bit about the tax refund likely being bigger this year due to the tax bill change.
• 36:22
  SPEAKER_01: Um so historically, that's been about$3,000 per family.
• 36:27
  SPEAKER_01: Now we're looking at potentially$4,000.
• 36:29
  SPEAKER_01: So, yeah, a potential tailwind for uh consumer spending.
• 36:34
  SPEAKER_01: But um you got anything to add on that?
• 36:38
  SPEAKER_01: No, no, no.
• 36:39
  SPEAKER_00: No, Frank Bizignano came over, took uh took over the Social Security Administration.
• 36:44
  SPEAKER_00: Uh he was running PfISER very successfully for a very long time.
• 36:48
  SPEAKER_00: I do not dislike the idea of having somebody from corporate America come in and say, hey, let's understand the structure uh of these service companies.
• 36:59
  SPEAKER_00: Well, not a lot of people call the IRS a service company, but uh so you know he's over has oversight of Social Security looking at the structure of the IRS.
• 37:10
  SPEAKER_00: I don't dislike that idea, but I do recognize that uh, you know, any of those changes, which will be like likely for the future, you know, when you come in and make changes that couldn't be short-term disruptions for hopefully long-term gain.
• 37:25
  SPEAKER_01: All right, well, so next week, uh a little lighter on the economic front, I'll be looking at consumer confidence, uh weekly jobless claims, and then the producer price index, the people kind of what prices pay for things.
• 37:40
  SPEAKER_01: Um, that'll come out Friday.
• 37:42
  SPEAKER_01: I think maybe the biggest market mover might be the biggest semiconductor chip company reporting earnings on Wednesday.
• 37:49
  SPEAKER_01: So that could really be a make or break for the tech trade.
• 37:53
  SPEAKER_01: Uh so we'll be paying close attention to that, what it means for AI spending.
• 37:58
  SPEAKER_01: Um, and then we'll have our normal thematic blog posts come out throughout the week.
• 38:02
  SPEAKER_01: And then uh as always, Friday we'll be back on talking about what we saw going on, whether we broke this uh ascending triangle up or down.
• 38:12
  SPEAKER_01: You can go to our website that Brian's pulling up now, uh hbkprovident.com.
• 38:17
  SPEAKER_01: It has our blog posts, not all of our social posts.
• 38:20
  SPEAKER_01: Um, there's a contact us tab if you have any specific questions.
• 38:24
  SPEAKER_01: We covered a lot of different areas today that may pertain to your particular situation, or you might just be curious on that or getting a deeper dive into some of those topics, whether it's talking about the market, some of the blog posts, long-term care planning, income needs, uh our numbers listed there.
• 38:44
  SPEAKER_01: You can also just fill out a question directly on there.
• 38:49
  SPEAKER_01: Got anything else to add, Mr.
• 38:51
  SPEAKER_01: Peluso?
• 38:52
  SPEAKER_00: No, I got lots to add, but we we run over our time for the immediate purpose.
• 38:57
  SPEAKER_01: All right, so everyone have a good weekend.
• 38:59
  SPEAKER_01: We're gonna flip on the disclosures, and we will be back on next Friday around 1230 Eastern time.
• 39:06
  SPEAKER_00: Securities offered through LPL Financial LLC, member FINRA and SIPC.org.
• 39:12
  SPEAKER_00: Advisory services offered through LPL Financial LLC, a registered investment advisor.
• 39:17
  SPEAKER_00: Brian Peluso, Michael Kutch, and David Harper are registered representatives of LPL Financial LLC.
• 39:23
  SPEAKER_00: Content discussed is for informational purposes only and not intended as an offer or solicitation to buy or sell any security or investment strategy.
• 39:32
  SPEAKER_00: Any opinions expressed are those of the authors and do not necessarily reflect the views of LPL Financial or its affiliates.
• 39:39
  SPEAKER_00: All investments involve risk, including the possible loss of principal.
• 39:43
  SPEAKER_00: This communication may include links or references to third-party websites.
• 39:47
  SPEAKER_00: These links are provided as a convenience only.
• 39:49
  SPEAKER_00: LPL Financial and its representatives are not responsible for the accuracy or content of such sites.
• 39:55
  SPEAKER_00: Brian, Mike, and David and HBK Provident Advisors may only transact business in states where they are properly registered or exempt from registration.
• 40:04
  SPEAKER_00: Please contact us directly for information regarding licensing and registration status.
• 40:09
  SPEAKER_00: Past performance is not indicative of future results.
• 40:13
  SPEAKER_00: You should consult with your financial advisor, tax professional, and or attorney regarding your specific situation before making any investment decisions.