Latest / HPK Provident Advisors: The Weekly Bull / How To Stay Calm When Markets Run Hot

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How To Stay Calm When Markets Run Hot · HPK Provident Advisors: The Weekly Bull

• 0:04
  SPEAKER_01: Welcome to Friday Live.
• 0:06
  SPEAKER_01: Every Friday, the partners of HPK Providant get together and discuss what we're seeing going on in the markets, the economy, and tying in some of our financial planning blog posts for the week.
• 0:14
  SPEAKER_01: So good to have Mr.
• 0:15
  SPEAKER_01: Brian Peluso back on the week.
• 0:17
  SPEAKER_00: I'm back.
• 0:19
  SPEAKER_00: I am doing great.
• 0:21
  SPEAKER_00: Are you celebrating all-time highs today?
• 0:23
  SPEAKER_00: Uh way, I I always celebrate all-time highs.
• 0:27
  SPEAKER_00: Um, you know, hey, I you know, kind of like I encourage our clients and you know to put a book good plan together and and not look uh you know look at the details too much every day.
• 0:41
  SPEAKER_00: That'll make you crazy, whether it's good or bad.
• 0:43
  SPEAKER_00: Looking at it every day, you know, on the uh all-time highs gives you oh potentially uh uh unrealistic uh expectations.
• 0:55
  SPEAKER_00: Um you know, when we find the lows, it gives you uh uh unnecessary fear.
• 1:01
  SPEAKER_00: So I'm an advocate of put the plan together and uh let's monitor it on a regular basis.
• 1:06
  SPEAKER_00: Of course, we've got Mike looking at our portfolios every year.
• 1:09
  SPEAKER_01: Yeah, I'll do the I'll do the tactical trading while you're you're concentrating on the long term there.
• 1:14
  SPEAKER_01: It's easy for me to say.
• 1:18
  SPEAKER_00: So uh no, not necessarily celebrated Friday.
• 1:22
  SPEAKER_00: I can't say this though.
• 1:23
  SPEAKER_00: Uh evidently in western Pennsylvania, we're not gonna have rain again in for a week, is what they're predicting.
• 1:29
  SPEAKER_00: Uh we've been kind of celebrating when we don't have rain for an hour over the last couple weeks.
• 1:35
  SPEAKER_00: And so uh no rain for a week.
• 1:38
  SPEAKER_00: I just don't know what I'm gonna do with myself quite a bit.
• 1:40
  SPEAKER_01: Maybe time to cut the grass.
• 1:43
  SPEAKER_00: Yeah, before everybody in the neighborhood started to complain.
• 1:46
  SPEAKER_00: Yes, it might be.
• 1:48
  SPEAKER_01: I'm still acclimating.
• 1:49
  SPEAKER_01: I'm I'm out in Reno, Nevada, and I'm still acclimating the weather is a little volatile out here.
• 1:54
  SPEAKER_01: We've had a couple mornings this week where we're down as low as 35.
• 1:57
  SPEAKER_01: I think it snowed on Wednesday for about an hour.
• 2:00
  SPEAKER_01: Oh, that's fantastic.
• 2:02
  unknown: I love that.
• 2:03
  SPEAKER_01: Yeah, so always got to check the weather before we go out in the morning.
• 2:07
  SPEAKER_00: Yeah, but when you do go out, it's beautiful.
• 2:09
  SPEAKER_00: I know it is.
• 2:15
  SPEAKER_00: That is ideal.
• 2:16
  SPEAKER_00: I've always wondered about that.
• 2:17
  SPEAKER_00: Uh, you know, the folks that are on the west coast that work in our business, of course, you know, the markets start open at 9:30 and close at 4.
• 2:25
  SPEAKER_00: So that's what 6:30 to 1 o'clock for you.
• 2:27
  SPEAKER_00: It seems like a pretty good schedule.
• 2:29
  SPEAKER_01: Yeah, it's it's kind of nice.
• 2:30
  SPEAKER_01: You get uh have the opportunity to do different activities in the afternoon.
• 2:34
  SPEAKER_01: Not that I've done a whole lot of that, but you know, at least it uh get on the schedule, get a workout in, maybe some mountain biking.
• 2:42
  SPEAKER_01: Oh man.
• 2:43
  SPEAKER_01: So it's been good.
• 2:45
  SPEAKER_00: I am jealous.
• 2:46
  SPEAKER_00: Of course, what we do here on Friday live, every Friday, 12:30 p.m.
• 2:49
  SPEAKER_00: Eastern Standard Time on Facebook.
• 2:51
  SPEAKER_00: Uh, one of the partners, two of the partners, three of the partners, three partners and HPK Provenant Advisors.
• 2:57
  SPEAKER_00: Uh we jump on and talk about uh what's going on in the markets and a little bit about financial planning, just to give you some ideas, things to think about.
• 3:05
  SPEAKER_00: Uh we put the social media posts out Monday, Tuesday, Wednesday, Thursday.
• 3:10
  SPEAKER_00: Um, and then we recap them and talk about a whole bunch of other things on Fridays.
• 3:16
  SPEAKER_00: Um so now we start out the week every week with uh Mike's Market Monday.
• 3:23
  SPEAKER_01: So even though the market was closed this Monday.
• 3:25
  SPEAKER_01: So they still went out.
• 3:29
  SPEAKER_00: Yeah, it was uh I do love Memorial Day.
• 3:32
  SPEAKER_00: Um I I spent a lot of time being uh thoughtful, thankful, and reflective on Memorial Day.
• 3:41
  SPEAKER_00: And I I did the same this year.
• 3:43
  SPEAKER_00: Of course, we've got uh July 4th coming up, uh right around the corner, about only about a month away at this point.
• 3:49
  SPEAKER_00: 250th anniversary, super exciting.
• 3:52
  SPEAKER_00: And don't forget about Juneteenth.
• 3:54
  SPEAKER_00: Juneteenth.
• 3:55
  SPEAKER_00: Oh, well, yeah, that's right.
• 3:56
  SPEAKER_00: So we've only got that in a couple weeks.
• 3:59
  SPEAKER_00: So Monday is the first, and that'll be what about uh two and two and a half weeks from Monday.
• 4:08
  SPEAKER_00: Yeah.
• 4:08
  SPEAKER_01: Yeah, what is that the 17th?
• 4:10
  SPEAKER_01: I think we have a we have a Fed meeting on the 17th, which should be interesting.
• 4:14
  SPEAKER_01: It'll be the first time the new Fed chair um comes out and we hear from him.
• 4:19
  SPEAKER_01: We we've been seeing the Fed members be coming a little more hawkish, meaning maybe going on the side of interest rates versus interest rate hikes instead of cuts, which you know I think is appropriate.
• 4:32
  SPEAKER_01: Um I don't think at this meeting we're gonna get any action, but and with uh the economic data has been relatively stable, and we'll get into that a little bit, but inflation is too high.
• 4:43
  SPEAKER_01: We got the core PCE this week coming in at 3.3 and headlines at 3.8, which is you know almost twice the Fed's target.
• 4:52
  SPEAKER_01: And I although we have some optimism on the 60-day ceasefire and peace talks, which the market seems to be believing, um, I think uh, you know, there's still not a lot of activity going through the Strait of Remous.
• 5:08
  SPEAKER_01: And I think the oil refineries are starting to, you know, deplete their inventory.
• 5:15
  SPEAKER_01: So unfortunately, I think that might uh lead to some higher energy prices in the near term and hence higher inflation ratings.
• 5:23
  SPEAKER_01: You know, I'm I'm not one to normally pay attention to gas prices, but I filled up for$125 a couple days ago.
• 5:32
  SPEAKER_01: Well, you got that big truck, so we also have five five dollar and thirty cents of regular gas prices out here.
• 5:44
  SPEAKER_00: Yes.
• 5:46
  SPEAKER_00: Uh I uh hey, I kind of feel like and you know this would be uh uh this would be a whole other episode.
• 5:54
  SPEAKER_00: I I kind of think there is a plan for uh short-term sacrifice of higher gas prices for a long-term gain of something.
• 6:02
  SPEAKER_01: Um that's way beyond the scope of a uh Yeah, it might be might be an overall play to just get more countries dependent on US energy.
• 6:12
  SPEAKER_01: I know uh I think I saw that Venezuela's our biggest importer of oil now.
• 6:21
  SPEAKER_01: Wouldn't doubt it.
• 6:22
  SPEAKER_01: Yeah.
• 6:23
  SPEAKER_01: Uh well outside of that, uh, we did get the second preliminary read of GDP.
• 6:30
  SPEAKER_01: Um, came in at 2.6% on an annualized basis.
• 6:34
  SPEAKER_01: It was a little lower on the quarterly reading, but um overall that's above trend growth.
• 6:39
  SPEAKER_01: Uh personal spending continues to be strong at about 0.5% on the month.
• 6:44
  SPEAKER_01: Where we are seeing some divergence is the personal income component did not keep up.
• 6:49
  SPEAKER_01: It was essentially flat on the month.
• 6:50
  SPEAKER_01: So that's a little alarming if that trend continues.
• 6:53
  SPEAKER_01: You can only spend beyond your means for so long before you know racking up the credit card debt.
• 6:58
  SPEAKER_01: And we do have uh one debt metric for the consumer that we'll get to in a little bit.
• 7:04
  SPEAKER_01: Um, but yeah, markets continue to make all-time highs.
• 7:10
  SPEAKER_01: We are now on our ninth week of gains for the SP 500.
• 7:15
  SPEAKER_01: Um, we did get uh so we moved higher on the week with the discussion that we might be close to a trade deal.
• 7:22
  SPEAKER_01: We've been through this routine many, many times.
• 7:24
  SPEAKER_01: So I am I'm still a little more on the skeptical side, but that would be great if we got some progress there.
• 7:31
  SPEAKER_01: Um now we're good compared to the 200 day in terms of stretch valuation.
• 7:38
  SPEAKER_01: In terms of the 50 day, we're about 8.6% above that.
• 7:41
  SPEAKER_01: Typically, when you get above 7%, it means that rubber bands getting a little stretched and you could see a potential pullback.
• 7:48
  SPEAKER_01: Um, RSI is kind of signaling the same thing.
• 7:51
  SPEAKER_01: We're making new all-time highs on price, but momentum's not essentially keeping up.
• 7:56
  SPEAKER_01: So sometimes that flags some underlying weakness.
• 7:59
  SPEAKER_01: Um, but I think this week we got a little bit of uh added exuberance in the AI trade.
• 8:06
  SPEAKER_01: Um, equipment uh upgrade, which caused now a trillion dollar company to jump 20% on the day.
• 8:17
  SPEAKER_01: And then um we've seen some even some software stocks, which have been really a weak area, start to join the party.
• 8:25
  SPEAKER_01: Um, so we'll just have to keep an eye on that.
• 8:28
  SPEAKER_01: Interest rates have come down on the week, uh, so that's supportive for equities.
• 8:32
  SPEAKER_01: And crude oils actually uh let me get to that chart.
• 8:36
  SPEAKER_01: We're at the low end of about a three-month range.
• 8:40
  SPEAKER_01: Uh, we're trading at around 88 a barrel.
• 8:43
  SPEAKER_01: So that is that I mean, I guess the oil market's believing the potential for trade talks.
• 8:50
  SPEAKER_01: Um I have I have too many tickers on here, my apologies.
• 8:54
  SPEAKER_01: But yeah, as you can see, we're essentially at the lowest level since the beginning of March.
• 8:59
  SPEAKER_01: So things seem to be moving in the the right direction.
• 9:04
  SPEAKER_01: Um we had such a good earnings season, but still with that, I mean, nine weeks of gains, it it things typically don't go straight up.
• 9:12
  SPEAKER_01: You have you tend to have periods of pullbacks, consolidations.
• 9:16
  SPEAKER_01: Um, so I think that would be healthy to have this trend continue in general.
• 9:23
  SPEAKER_01: How about you, Brian?
• 9:25
  SPEAKER_01: Clients happy?
• 9:28
  SPEAKER_00: Uh well, hey, you know, it depends.
• 9:32
  SPEAKER_00: Uh are clients happy with their accounts, uh, yeah, at this point.
• 9:37
  SPEAKER_00: Uh there are the rare few that um uh that were worried about what was going on at the beginning of the year, yeah.
• 9:44
  SPEAKER_00: Beginning of the year, it was not good.
• 9:45
  SPEAKER_00: March statements come out, uh, did not look good.
• 9:48
  SPEAKER_00: And uh we've talked about this before.
• 9:50
  SPEAKER_00: There's a certain subset of people who say, it's coming, it's coming.
• 9:54
  SPEAKER_00: I don't know what that is.
• 9:56
  SPEAKER_00: Um, but um, you know, uh they thought whatever it is was coming by the end of March, and and it didn't.
• 10:05
  SPEAKER_00: So for those folks that uh wanted to pull back and said, Well, this is the great reckoning that I've been waiting for, uh, that didn't pan out very well.
• 10:12
  SPEAKER_00: So there's a few folks that um pulled back a little bit, uh, or a lot of it in some cases.
• 10:19
  SPEAKER_00: Um uh but are folks happy with their accounts?
• 10:23
  SPEAKER_00: I I would say, you know, for the great part they are.
• 10:27
  SPEAKER_01: Um pretty good years so far.
• 10:30
  SPEAKER_01: I mean, fixed income hasn't done a whole lot, but equities have certainly done that.
• 10:35
  SPEAKER_01: It's been pretty broad, international.
• 10:37
  SPEAKER_01: Um, you know, not just the Mag 7 participating in the party.
• 10:41
  SPEAKER_01: We've had some different rotations throughout the year where one group does better than the other, but overall everything's uh doing pretty well.
• 10:50
  SPEAKER_00: So, I mean, Mike, would you you know kind of speak to the breadth of the market because uh, you know, everybody's so focused on AI and how much AI spending um and potential spending is being baked into um you know capital expenditure, right?
• 11:07
  SPEAKER_00: Business investing into their future, they invest into their future, they hope that they make profits uh from that into the future.
• 11:15
  SPEAKER_00: I mean, how is this pretty fairly broad, or I mean, is this really AI driven?
• 11:20
  SPEAKER_01: I mean, I would say from a stand I mean, it it's it's really AI driven, even the companies that aren't in technology and doing very well, um, it's still AI related for the most part.
• 11:37
  SPEAKER_01: Like you see, like companies like Caterpillar having tremendous runs um because of that infrastructure build-out.
• 11:44
  SPEAKER_01: But overall, um, I'd say from the standpoint of the entire year, it's been a broad rally, but it's been to start the year, it was all the catch up trade, the non-technology doing really well.
• 11:58
  SPEAKER_01: And then you start to hear those rhetorics about oh, tech's over, you know, it had its run.
• 12:03
  SPEAKER_01: Then we had that pullback and what outperformed tech.
• 12:07
  SPEAKER_01: And surprisingly, semis, which really didn't have that big of a drawdown.
• 12:13
  SPEAKER_01: I mean, you'd had certain companies like the the big AI players pull back quite a bit, but like from a broad semiconductor standpoint, they were doing pretty well, but then they continue to lead out on the way up.
• 12:26
  SPEAKER_01: Um, I think they're up 38% from the lows, which is or actually, I think it was much higher than that.
• 12:32
  SPEAKER_01: Might have been like 80% from the lows.
• 12:34
  SPEAKER_01: Um, so yeah, we've we've had these rolling periods of where one group outperforms, but overall, yeah, it's been a pretty broad rally if you just look at um what sectors are doing year to date.
• 12:47
  SPEAKER_01: Um it's all, I mean, every everything's essentially participating.
• 12:51
  SPEAKER_01: You have periods where even defenses are doing well, which is a little alarming signal for the market, but then you have the catch-up trade in other areas.
• 12:59
  SPEAKER_01: So overall, it's been good.
• 13:02
  SPEAKER_00: Well, you know, the AI is fascinating.
• 13:05
  SPEAKER_00: Uh yesterday, our uh local technology provider um hosted an AI summit for all of their clients.
• 13:14
  SPEAKER_00: Uh it's fascinating to me the capabilities.
• 13:17
  SPEAKER_00: Uh it's fascinating to me how it will change um who does what type of work and you know what AI does for them.
• 13:26
  SPEAKER_00: And to me, uh I'm a little bit of a little bit of a slow adopter, I guess, but to uh to me, um, I mean, this is a transformative period.
• 13:37
  SPEAKER_00: Um I think we're enjoying it in my information, you know, we're enjoying, and even coming up like caterpillar, like why does caterpillar get into it?
• 13:46
  SPEAKER_00: Well, there's a lot of digging, there's a lot of equipment these for these data centers and that kind of thing.
• 13:51
  SPEAKER_00: So you start to see this ripple effect.
• 13:53
  SPEAKER_00: Uh sunflowers don't grow grow to the sun, though.
• 13:56
  SPEAKER_00: Uh, but this is a transformative period.
• 13:59
  SPEAKER_00: It's it's it's interesting.
• 14:00
  SPEAKER_00: It's something that we study not only from uh Mike studies, but more so uh from the market's perspective.
• 14:06
  SPEAKER_00: Well, you know, I study it looking at you know, where can we where can we incorporate these things to benefit our clients, whether it's from uh services that we provide, efficiencies that we provide, efficiencies in our practice so that we have more time to spend uh talking with clients about their hopes, dreams, and fears and that kind of thing.
• 14:29
  SPEAKER_00: So um uh but there's no doubt there is a big transformation going on.
• 14:34
  SPEAKER_00: It's real.
• 14:35
  SPEAKER_01: It's crazy.
• 14:36
  SPEAKER_01: Some some of my best performing stocks over the past year have probably been industrials.
• 14:44
  SPEAKER_00: And and now would that be as they're incorporating and uh what they need to do for the you know, AI?
• 14:51
  SPEAKER_01: Yeah, yeah, it's all AI related, built out, I mean, for the most part.
• 14:55
  SPEAKER_01: Um, and then like a material stock, uh steel manufacturer picked up in the recent dip, we're up 40% on it.
• 15:03
  SPEAKER_01: Um, so you you are seeing strength across the board.
• 15:07
  SPEAKER_01: Um, now obviously with this big AI revolution, you hear a lot of bubble talks.
• 15:12
  SPEAKER_01: We've been hearing that for the last month.
• 15:15
  SPEAKER_01: Um but you know, we're not getting that stretched valuation-wise.
• 15:19
  SPEAKER_01: As a broad market, yeah, we're a little elevated, but you look at companies like the Mag 7, like their earnings are outpacing stock price, even.
• 15:28
  SPEAKER_01: So and and if it's any indication of like looking at this versus like the dot-com bubble, you start to see those like big IPO names come out.
• 15:39
  SPEAKER_01: Um, when that happened in like '99, you still had a year or two left on the runway.
• 15:44
  SPEAKER_01: So we're starting to have those come out now.
• 15:47
  SPEAKER_01: So maybe there's still some room.
• 15:49
  SPEAKER_01: Maybe we're only in the the seventh, sixth, seventh inning of this AI trade.
• 15:54
  SPEAKER_01: But we'll remain tactical.
• 15:56
  SPEAKER_01: We uh when things get a little overheated, we take some risk off the table.
• 15:59
  SPEAKER_01: We did that about a week ago in the retirement accounts, kind of took off some of our tactical position.
• 16:05
  SPEAKER_01: Um, so we're we're ready for a little pullback.
• 16:07
  SPEAKER_01: I think uh at this point the market strength looks really strong.
• 16:11
  SPEAKER_01: So I think it'll be shallow more in the you know two to five percent range than a correction bear market.
• 16:16
  SPEAKER_01: But you know, midterm years, things tend to get a little crazy.
• 16:20
  SPEAKER_01: It's gonna be interesting.
• 16:22
  SPEAKER_01: Yeah.
• 16:24
  SPEAKER_01: All right.
• 16:24
  SPEAKER_01: Well, should we get to some of our blog posts for the week?
• 16:27
  SPEAKER_01: Yeah, let's do it.
• 16:29
  SPEAKER_00: Let's do it.
• 16:30
  SPEAKER_01: Tuesday we had an RMD calculator come out.
• 16:32
  SPEAKER_01: So if you're above the age of 73 and curious how recent years gains are gonna affect your required amount that you need to take out this year, this isn't a handy little calculator you can look at.
• 16:46
  SPEAKER_01: You type in uh the balance at the end of the year, your age, and it'll give you a rough estimate.
• 16:51
  SPEAKER_01: Now you'll want to make sure that um, you know, that's all cleaned up at the end of the year.
• 16:56
  SPEAKER_01: But if you just want a rough um kind of estimate of how much you need to take out, it's a good little tool.
• 17:03
  SPEAKER_00: And it is a good tool.
• 17:05
  SPEAKER_00: Um RDs are a huge topic, uh, huge topic for us in our business, uh, on our, you know, in what we do uh uh from the planning, uh in its most basic sense for you know, for most folks before born before 1960, you must start taking required minimum distributions.
• 17:29
  SPEAKER_00: Think about those words individually.
• 17:31
  SPEAKER_00: They are required.
• 17:32
  SPEAKER_00: If you don't take them out, it's a big penalty.
• 17:34
  SPEAKER_00: Um minimum, uh say meaning it is required you take out at least this much out of your IRA, and then a distribution obviously coming out of your IRA.
• 17:45
  SPEAKER_00: So for uh you know, folks before born before 1960, you required minimum distribution age of 73.
• 17:52
  SPEAKER_00: And that's the year that the IRS looks at the year prior year end value.
• 17:58
  SPEAKER_00: So if you're turning 73 this year, the IRS is looking at the December 31st, 2025 uh value of your uh traditional IRA, and um they want a percentage of that to come out.
• 18:12
  SPEAKER_00: They want to get they want it out so they can tax it.
• 18:15
  SPEAKER_00: Uh if you're turning 73 this year, for example, uh on a percentage basis, that's 3.77%.
• 18:22
  SPEAKER_00: So if your you know year-end value of your IRA, December 31st, 2025, multiply that by 3.77.
• 18:31
  SPEAKER_00: And uh you need to take that out by the end of the year.
• 18:34
  SPEAKER_00: Not to get unnecessarily detailed, but in the first year of your RD, you actually have until April 15th of the following year.
• 18:41
  SPEAKER_00: But we'd like to just say, let's get it out by the end of the year.
• 18:45
  SPEAKER_00: Typically, by the rules, in the first year of your required minimum distribution, you have until April 15th of the next year.
• 18:51
  SPEAKER_00: That's only in the first year.
• 18:52
  SPEAKER_00: Every other year, it's got to be done by December 31st.
• 18:56
  SPEAKER_00: Uh, you know, and we we see a lot of folks, uh, a lot of people we're working with that are around that age that, you know, they grew up in the area where era where you had the traditional 401k, you get a deduction on the way in, it's tax protected, but then the taxes are due on the way out.
• 19:11
  SPEAKER_00: Uh becomes a planning challenge.
• 19:13
  SPEAKER_00: Some of those required minimum distributions are big numbers.
• 19:17
  SPEAKER_00: Uh, so it's really ideal if we can start you know planning for folks prior to that required minimum distribution and make some adjustments very hard to avoid uh the taxation of it.
• 19:29
  SPEAKER_00: There are some strategies that we can do.
• 19:30
  SPEAKER_01: Yeah, you gotta you gotta pay it at some point.
• 19:33
  SPEAKER_01: But yeah, that's a great point.
• 19:34
  SPEAKER_01: This this uh little calculator is obviously for the people in that required minimum distribution age, but it makes you think about say you're 50 years old, maybe you want to do some Roth conversion so you don't have such a tax burden when you're in retirement.
• 19:51
  SPEAKER_00: Yeah, another Roth, hey, it's uh there's a little bit of uh there's some projections.
• 19:57
  SPEAKER_00: Uh well, I I'm being euphemistic.
• 20:00
  SPEAKER_00: There's some guesswork in there.
• 20:00
  SPEAKER_00: You know, what are the tax rates going to be in the future?
• 20:03
  SPEAKER_00: Um, you know, what tax bracket are you gonna be in in the future, and that kind of thing.
• 20:08
  SPEAKER_00: But we do see that very often it makes sense to go ahead and take the tax hit now by converting some of that money from the traditional, paying the taxes on the money that you're taking out and getting it into a Roth.
• 20:19
  SPEAKER_00: Take it from a taxed later, make it taxed right now and move it into a never taxed, if you do it right, hold it for there's holding periods and that kind of thing.
• 20:30
  SPEAKER_00: But uh, you know, think about that.
• 20:32
  SPEAKER_00: Tax later, let's tax it now, put it into never-again tax bucket and let it grow.
• 20:37
  SPEAKER_00: Oftentimes that makes a lot of sense.
• 20:40
  SPEAKER_00: Uh, not always, not always.
• 20:42
  SPEAKER_00: Uh, and there are, you know, implications to increasing your taxable income in a year by taking money out of a traditional.
• 20:52
  SPEAKER_00: But uh, you know, I I gotta tell you, Mike, I mean, we see more people that find the required minimum distribution to just be a hassle, a tax hassle in their life than, oh, well, hey, now it's you know, time for me to take some money out, and that'll be good.
• 21:07
  SPEAKER_00: I'll go off and spend it.
• 21:08
  SPEAKER_00: Uh, because you know, you got these required minimum distributions, you're 73 years old, you know, you're taking Medicare, that additional income could have effects on Medicare premiums, uh, you know, the your tax brackets, you know, there could be a whole bunch of other effects beside, well, I guess it's now it's time to take a few dollars out.
• 21:27
  SPEAKER_00: So we can get ahead of that, make some of those projections.
• 21:31
  SPEAKER_00: Um, take some money out now, the traditional IRA becomes smaller because you pay taxes on it earlier, got it into a never tax account, hopefully.
• 21:42
  SPEAKER_00: And then by the time you get to be 73, uh that traditional IRA is smaller, not the pot of your retirement money overall, but that traditional IRA is a little bit smaller.
• 21:53
  SPEAKER_00: RD is a little bit smaller, uh, a little bit more palatable on the tax situation.
• 21:58
  SPEAKER_00: Uh, but yeah, it's great.
• 22:00
  SPEAKER_00: Great to go in the and do these projections and say, hey, if you know I'm 50 years old and my traditional IRA grows X percent per year.
• 22:08
  SPEAKER_00: Uh well, if you're 50 years old right now, uh your required minimum distribution will be the age of 75 because those born 1960 and later, uh, your R and D age is 75, not 73.
• 22:23
  SPEAKER_00: So you run that out.
• 22:25
  SPEAKER_00: You know, you got a big IRA right now, run it out for 15 years at 6%.
• 22:30
  SPEAKER_00: That thing could be pretty big.
• 22:32
  SPEAKER_01: And um when did when did that change roll out to 75?
• 22:37
  SPEAKER_00: Oh, that was uh what was it, the tax?
• 22:41
  SPEAKER_00: No, no, it was prior to OB3.
• 22:43
  SPEAKER_00: I think it was the Tax Act 2019.
• 22:46
  SPEAKER_00: Don't quote me on that.
• 22:47
  SPEAKER_00: Don't quote me on that one.
• 22:49
  SPEAKER_00: I don't I I I read a whole lot of the summary of legislation.
• 22:54
  SPEAKER_00: I don't read the legislation itself.
• 22:56
  SPEAKER_00: But yeah, if you're born 1960 or later, um your required uh minimum distribution is 75.
• 23:03
  SPEAKER_01: Okay.
• 23:04
  SPEAKER_01: I mean, the traditional IRA makes sense on paper, you know, you get the tax deduction when you're earning money, and then in retirement, when your income's generally lower, uh you take out the money and it's it's less tax.
• 23:17
  SPEAKER_01: But um in theory.
• 23:20
  SPEAKER_01: Yeah, in theory, exactly.
• 23:21
  SPEAKER_01: Yeah, I mean, you're we tend to deal with clients that you know these assets grow so much and their income's not much lower than when they're working.
• 23:32
  SPEAKER_00: Uh, you know, it's uh it it is fascinating to me how many folks that uh we work with that say, wow, I'm actually have more money coming through my household in my retirement than when I did uh when I was working.
• 23:45
  SPEAKER_00: You know, these are folks that are working, um, you know, consistent pay, they've got good wage and whatnot, but they're just great, great savers.
• 23:57
  SPEAKER_00: And, you know, compounding over time, you know, they wake up and retire and say, I'm no longer taking, you know, making money from my physical and intellectual capital.
• 24:07
  SPEAKER_00: I'm gonna start uh, you know, paying my bills on the accounts that I have built up, um, as opposed to the intellectual or the intellectual and physical capital.
• 24:19
  SPEAKER_00: And so your capital being your accounts, that's how you're gonna pay your bills.
• 24:23
  SPEAKER_00: And you know, a lot of those folks have done such a great job that you got, you know, Social Security, uh, you know, they got maybe some other sources of income, maybe they got some rental income, you know, they paid those off, and now it's just income to them, the rent that they're getting.
• 24:40
  SPEAKER_00: Um, and then you got these RDs.
• 24:42
  SPEAKER_00: There are a lot of people say, Oh my gosh, I'm making more money now than one when I was and that's awesome.
• 24:49
  SPEAKER_00: But what does everybody say?
• 24:50
  SPEAKER_00: Uh, you know, wow, make more that's awesome.
• 24:52
  SPEAKER_00: And I'm paying more taxes.
• 24:53
  SPEAKER_00: I can't take that making me insane.
• 24:56
  SPEAKER_01: And then the unfortunate thing is the tax rate's probably gonna go up over the next 10 years, given the I I would think I mean I I I would think I you know, I've been wrong about that because tax rates are are are great, relative terms.
• 25:11
  SPEAKER_00: The percentage of your uh uh uh the everybody across the board, I don't care what income bracket you're in, the percentage of what you're paying in taxes is relatively low to many historical periods.
• 25:22
  SPEAKER_00: Uh that's hard to see because nobody likes to stroke the check of the IRS.
• 25:27
  SPEAKER_00: But uh that's true.
• 25:28
  SPEAKER_00: Um and so this is a a pretty good tax landscape from a retirement perspective.
• 25:38
  SPEAKER_00: Then you add on to that the additional deductions that everybody over 65 is getting.
• 25:44
  SPEAKER_00: Of course, you know, married filing jointly.
• 25:46
  SPEAKER_00: If you if you are, you've got that deduction.
• 25:48
  SPEAKER_00: Then you got the standard over uh 65 deduction, which has always been there.
• 25:52
  SPEAKER_00: Then there's an additional six thousand dollars per person in that household, married filing jointly per couple.
• 25:58
  SPEAKER_00: Um, an additional six thousand dollars of deductions you're getting from OB3, the one big beautiful bill.
• 26:04
  SPEAKER_00: Um, so you know, this is an interesting scenario for those people in that time frame to think about those Roth conversions because there's additional deductions.
• 26:14
  SPEAKER_00: Year 65 now, you're getting those additional deductions.
• 26:17
  SPEAKER_00: Well, you know, it really kind of points to a further analysis of what maybe now is the time to take tax later, tax it now, get it into never taxed again type of account.
• 26:31
  SPEAKER_01: Yeah.
• 26:32
  SPEAKER_01: And if we hear about how how your particular situation um would look, whether you're one of our current clients or just someone um interested in maybe starting with us, um, we have great financial planning software, and Brian does a great job of illustrating those and really breaking it down and showing the different tweaks and how that would affect your long-term outcome.
• 26:55
  SPEAKER_01: So um if you're curious about that, our numbers at the top, we'd be happy to uh take a look at that for you.
• 27:02
  SPEAKER_00: So we should move on.
• 27:03
  SPEAKER_00: I'll tell you what, you know, it's a big topic.
• 27:08
  SPEAKER_01: Uh well, we won't get into the the car payments too much, just you know, with how expensive cars are, high interest rates, you know, obviously that's becoming more of a burden for the consumer.
• 27:19
  SPEAKER_01: Um, but just another component that goes into your your overall um planning for the future.
• 27:25
  SPEAKER_01: The one on Thursday, I think these things are awesome.
• 27:29
  SPEAKER_01: The 530A accounts, aka the Trump accounts.
• 27:34
  SPEAKER_01: Um, you want to go into that at all, Brian?
• 27:37
  SPEAKER_00: Yeah, so Mike, if you yeah, let's go ahead and pull up that web.
• 27:40
  SPEAKER_00: There's a website, uh, and there's an app for this as well.
• 27:44
  SPEAKER_00: So, Mike, if you could pop that up.
• 27:45
  SPEAKER_00: There we go.
• 27:46
  SPEAKER_00: Um actually, let's get the Trump, uh, let's see here.
• 27:52
  SPEAKER_00: Uh let's get the uh Trump account up itself.
• 27:57
  SPEAKER_00: Fumbled around a little bit.
• 27:59
  SPEAKER_00: Uh all right, share.
• 28:01
  SPEAKER_00: I'm gonna share that.
• 28:03
  SPEAKER_00: So if you go on to uh trumpaccounts.org.
• 28:08
  SPEAKER_00: Uh there it is.
• 28:09
  SPEAKER_00: There we go.
• 28:10
  SPEAKER_00: Trumpaccounts.org.
• 28:11
  SPEAKER_00: These you you can't, first of all, recognize you can't put money in these until July.
• 28:16
  SPEAKER_00: Uh, you can open the account.
• 28:18
  SPEAKER_00: I believe it's IRS Form 4547.
• 28:22
  SPEAKER_00: Uh is that right?
• 28:23
  SPEAKER_00: 4547.
• 28:25
  SPEAKER_00: Yes, 4547.
• 28:26
  SPEAKER_00: You fill out the form 4547, you can open an account.
• 28:30
  SPEAKER_00: What has gotten the biggest news is that newborns uh born between 2025 and 2028, a newborn gets$1,000 put into this account.
• 28:40
  SPEAKER_00: But what gets overlooked is children under 18, uh you can, and I'll define who you is, you can put up to$5,000 per year into this Trump account.
• 28:53
  SPEAKER_00: So it doesn't have to just be for a newborn.
• 28:56
  SPEAKER_00: This is for everybody under the age of 18.
• 28:58
  SPEAKER_00: Um, so you know, details on this are it's brandy new.
• 29:03
  SPEAKER_00: So details on, I'm gonna summarize it very quickly.
• 29:06
  SPEAKER_00: You know, so parents, uh, grandparents, friends, family uh can put money into these accounts for somebody under the age of 18.
• 29:14
  SPEAKER_00: You open this 538 Trump account using Form 4547, and you can start putting money into an account.
• 29:23
  SPEAKER_00: Uh by the way, if the child is working, um, they can open a separate IRA or Roth IRA.
• 29:30
  SPEAKER_00: I love the Roth IRA in this regard.
• 29:32
  SPEAKER_00: So that that would be separate.
• 29:34
  SPEAKER_00: So their contribution limits on Roth IRA because they're working, right?
• 29:38
  SPEAKER_00: To put money in an IRA, you got to have money from work.
• 29:40
  SPEAKER_00: Uh, but if they're working and they have their own Roth IRA, you or somebody or they, your grandparents, or friends, family, or whatever, can still do this 530 Acount.
• 29:51
  SPEAKER_00: Um, I have said a million times, I've showed uh you know, many people, uh, younger folks, uh the calculations on this, but in very simple terms, I do believe, and I've seen a lot of the numbers or run a lot of the numbers, the money that a young person saves between X, the day they're born, and the age of 30 will change their life.
• 30:12
  SPEAKER_00: Uh, and that's simply because of the uh of compounding interest and compounding gains and things along those lines.
• 30:20
  SPEAKER_00: So to have these young folks start out, and if you are fortunate that you have cash flow uh to help your children out for the future, this is a great consideration.
• 30:30
  SPEAKER_00: Now, there are a lot of restrictions on these things.
• 30:33
  SPEAKER_00: You can't invest into everything that you want.
• 30:36
  SPEAKER_00: Uh, you've got to go do it through this Trump account concept.
• 30:39
  SPEAKER_00: And then so the uh investment options are somewhat limited, but they're not terrible.
• 30:45
  SPEAKER_00: Haven't seen them all.
• 30:47
  SPEAKER_00: Um and you a young person really could sock away a lot of money.
• 30:52
  SPEAKER_00: And if you were in a f in a position where you have a little bit of cash flow to help your kids out, there's several different ways to do this.
• 30:58
  SPEAKER_00: This is one of the most restrictive, quite honestly, in the sense that you're it is from what I'm reading, very, very difficult to access that money at all before their age of 18.
• 31:08
  SPEAKER_00: And once they reach the age of 18, it kind of acts like a traditional IRA in the sense that if you take money out of the Trump account that has built up, you know, it goes into the child's name, parent or grandparent or whoever is the custodian of the account until they turn 18, then it becomes a child's account, as I understand it.
• 31:29
  SPEAKER_00: Um, and then it kind of acts like a traditional IRA.
• 31:33
  SPEAKER_00: There are penalties to take it out until you're 59 and a half.
• 31:37
  SPEAKER_00: And then at some point in time, there would be required minimum distributions on that account.
• 31:42
  SPEAKER_00: Uh, there is a Roth conversion option on these types of accounts.
• 31:46
  SPEAKER_00: Maybe you pay the taxes now while the child is young in a very low tax bracket, get it into a Roth.
• 31:52
  SPEAKER_00: Um, this is all new.
• 31:53
  SPEAKER_00: But what is not new is save as much as you can, as often as you can, as early as you can.
• 32:00
  SPEAKER_00: And this is a uh really interesting way to do that.
• 32:04
  SPEAKER_00: So a new, let's say a newborn gets a thousand, mom and dad add five thousand.
• 32:08
  SPEAKER_00: Uh you know, on day two of your life, you got six thousand dollars in an account.
• 32:12
  SPEAKER_00: You start compounding that out until they're at the age of 60.
• 32:16
  SPEAKER_00: Beautiful.
• 32:17
  SPEAKER_00: Fantastic.
• 32:18
  SPEAKER_00: So uh more to come on this.
• 32:21
  SPEAKER_01: And now, now, Brian, the thousand dollars from the government to the child born between the year specified, does that automatically happen, or you need to enroll in order to get access to the state.
• 32:33
  SPEAKER_00: You need to enroll.
• 32:34
  SPEAKER_00: You need to enroll.
• 32:35
  SPEAKER_00: That's uh so if you go on to that this account, uh uh right here, you can see on this website you fill out where it says fill out form 4547.
• 32:46
  SPEAKER_00: Uh, you can do that now.
• 32:48
  SPEAKER_00: That, by the way, that link takes you to an IRS site where you fill that out.
• 32:53
  SPEAKER_00: Uh, it's helpful to have an IRS account already established.
• 32:57
  SPEAKER_00: Um, but that link will take you to the IRS site.
• 33:00
  SPEAKER_00: Uh, you sign, you sign up for it.
• 33:03
  SPEAKER_00: And um I candidly don't know if it just magically shows up in in your account or if you need to submit a birth certificate or thing.
• 33:12
  SPEAKER_00: More to come on that, but um, I'm comfortable saying that.
• 33:16
  SPEAKER_01: And it looks like if you're doing additional contributions, um, contributions commencing after July 4th of this year.
• 33:22
  SPEAKER_00: That's right.
• 33:23
  SPEAKER_00: After July 4th.
• 33:25
  SPEAKER_00: After July 4th.
• 33:27
  SPEAKER_00: So uh, hey, more to come on this.
• 33:29
  SPEAKER_00: Uh, I I think it's a fantastic idea.
• 33:31
  SPEAKER_00: You know, interestingly.
• 33:33
  SPEAKER_01: I mean, Social Security's underfunded, so maybe this is a solution that kind of makes that transition for the young generation.
• 33:41
  SPEAKER_00: I think that's a uh Mike, I think that's a very perceptive way to look at uh how the government is viewing these accounts.
• 33:51
  SPEAKER_00: Of course, they advertise it and say, hey, we're just doing something nice for the kids, right?
• 33:55
  SPEAKER_00: Um, you put you you can you know put money in in a tax-friendly way and you can't access it.
• 34:01
  SPEAKER_00: From what I understand, many of the investments are US-based investments, so everybody's dumping these monies in that and monies and uh this money in these accounts, and you can buy ETFs and mutual funds that invest primarily in U.S.
• 34:15
  SPEAKER_00: companies.
• 34:16
  SPEAKER_00: Uh, so you can kind of see uh America first.
• 34:21
  SPEAKER_00: Well, America First.
• 34:22
  SPEAKER_00: Uh, I could also see um, you know, 30 years from now, you got a newborn that's 30 years old, still not paying attention to Uncle FICA, right?
• 34:31
  SPEAKER_00: They don't know who FICA is on their uh on their paycheck.
• 34:34
  SPEAKER_00: Well, that's how you pay into Social Security.
• 34:36
  SPEAKER_00: They don't know.
• 34:37
  SPEAKER_00: They're 30 years old, they're still not paying attention to Uncle FICA on their paycheck.
• 34:41
  SPEAKER_00: They don't know what that's about.
• 34:43
  SPEAKER_00: Um, maybe they do, you know, 60, 70 years from now, a child born today, maybe they say, hey, we're not gonna pay you as much in Social Security because you had this Trump account.
• 34:53
  SPEAKER_00: You had a chance.
• 34:54
  SPEAKER_00: I don't know.
• 34:55
  SPEAKER_00: That's an interesting way to look at it, though.
• 34:57
  SPEAKER_00: It's possible.
• 34:58
  SPEAKER_00: Well thing, time will tell.
• 35:01
  SPEAKER_00: That's all I got.
• 35:02
  SPEAKER_00: This has been a lot, but uh, we'll be back next Friday, 12:30 p.m.
• 35:05
  SPEAKER_00: Eastern.
• 35:06
  SPEAKER_01: Yeah, and we get a lot of data next week.
• 35:07
  SPEAKER_01: We'll have ISM manufacturing and services, ATP weekly numbers, job openings, and then non-farm payrolls and unemployment rate on Friday.
• 35:16
  SPEAKER_01: So we'll be back to cover all that.
• 35:19
  SPEAKER_01: And it should uh we'll see if it's a market-moving data set.
• 35:24
  SPEAKER_00: Well, let's hope so.
• 35:25
  SPEAKER_00: Well, thanks everybody for tuning in.
• 35:26
  SPEAKER_00: Uh uh, check out the website, uh more details on a lot of these things.
• 35:31
  SPEAKER_00: Uh, give us a call if you'd like to run some analysis for if you have any and any questions, but we certainly appreciate tuning in.
• 35:39
  SPEAKER_01: All right, we'll see you next week.
• 35:40
  SPEAKER_00: Look forward to it.org.
• 35:46
  SPEAKER_00: Advisory service is offered through LPL Financial LLC, a registered investment advisor.
• 35:52
  SPEAKER_00: Brian Peluso, Michael Kutch, and David Harper are registered representatives of LPL Financial LLC.
• 35:58
  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.
• 36:07
  SPEAKER_00: Any opinions expressed are those of the authors and do not necessarily reflect the views of LPL Financial or its affiliates.
• 36:13
  SPEAKER_00: All investments involve risk, including the possible loss of principal.
• 36:18
  SPEAKER_00: This communication may include links or references to third-party websites.
• 36:21
  SPEAKER_00: These links are provided as a convenience only.
• 36:24
  SPEAKER_00: LPL Financial and its representatives are not responsible for the accuracy or content of such sites.
• 36:29
  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.
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• 36:44
  SPEAKER_00: Past performance is not indicative of future results.
• 36:48
  SPEAKER_00: You should consult with your financial advisor, tax professional, and or attorney regarding your specific situation before making any investment decision.