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Money Monday with Brian James · Brian Thomas

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Speaker 1: 806-055-KRC-D Talk Station. It's Monday, which means it's time for
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Speaker 1: Brian James Mall with Financial giving out some Money Monday
0:08
Speaker 1: tips and thinking in anticipation of retirement, which ultimately we'll
0:12
Speaker 1: get to in talking with Brian this morning about seniors
0:14
Speaker 1: taking Social Security early. I guess they're worried about the
0:17
Speaker 1: impending cuts to Social Security, which are scheduled to happen
0:21
Speaker 1: within the next several years unless Congress actually does something
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Speaker 1: to solve the problem we have. Brian James, welcome back, man.
0:27
Speaker 1: Appreciate all our financial learning. You have to talk with
0:29
Speaker 1: my listeners and me this morning.
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Speaker 2: Good morning, Mr. Thomas.
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Speaker 3: And as always, I appreciate being handed the microphone to
0:35
Speaker 3: force people to listen to me for just.
0:36
Speaker 2: A little while.
0:37
Speaker 1: Hey, people pay to listen to you. That's what a
0:42
Speaker 1: financial planner is.
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Speaker 2: I know, right? It's mind-blowing.
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Speaker 1: Somebody's got to be the adult in the room.
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Speaker 2: No, no, no, no. You need to stick with your plan.
0:48
Speaker 3: Yeah.
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Speaker 1: Yes, that's the majority of my job. You just kind
0:52
Speaker 1: of summed it up right there. Listen, I've listened to you.
0:55
Speaker 1: I'm having a conversation with you like my listeners are
0:57
Speaker 1: listening to it.
0:58
Speaker 2: I understand. I get it.
0:59
Speaker 1: That's why I have a financial planner because I probably
1:01
Speaker 1: lack discipline. Anyway, this Trump-Xi Jinping summit, I guess the
1:07
Speaker 1: first state visit he has made Xi Jinping here to
1:10
Speaker 1: the United States since 2015. So there's only been two
1:13
Speaker 1: of them in over 11 years. I presume the U.S.
1:16
Speaker 1: and China maintain constant communications and discussions over these very
1:20
Speaker 1: important topics. So is his being here for this meeting
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Speaker 1: in person, it's a symbolic gesture? Does it suggest that, well,
1:27
Speaker 1: there's going to be some cooperation between the U.S. and
1:30
Speaker 1: China on these important issues that they talked about?
1:34
Speaker 2: Oh, for sure.
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Speaker 3: And obviously, the United States and China are not the
1:37
Speaker 3: best of friends, but sort of let's call let's say frenemies,
1:41
Speaker 3: I think is the best way to phrase that. There's
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Speaker 3: plenty of countries we don't we don't interact with with
1:46
Speaker 3: pretty much at all.
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Speaker 2: Right.
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Speaker 3: Inexplicably, we engage with North Korea in the first Trump administration,
1:51
Speaker 3: got nothing out of it and haven't talked about it
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Speaker 3: ever since.
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Speaker 2: And nobody really cares about that. But now, yeah, we definitely.
1:56
Speaker 1: Got a bomb. They got a bomb after all.
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Speaker 2: Well, that's true. And you know what? They haven't used
2:02
Speaker 2: it yet either. So anyway. That's progress.
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Speaker 3: You know, they made something new that they haven't pulled
2:07
Speaker 3: the trigger on. So I suppose that's progress if we
2:10
Speaker 3: prevented them from using something that they weren't thinking about
2:13
Speaker 3: in the first place. But anyway, that's our new form
2:15
Speaker 3: of diplomacy. But yeah, as far as China goes, yeah,
2:19
Speaker 3: this is something we do need to get along with
2:21
Speaker 3: China one way or another. Doesn't mean we need to
2:23
Speaker 3: be best of friends. Doesn't mean we need.
2:24
Speaker 2: To sell them arms. That's a whole other topic.
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Speaker 1: That's a brand new headline that we saw overnight. I
2:30
Speaker 1: don't understand that one, honestly.
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Speaker 3: All I can think is anything that's not nailed down,
2:37
Speaker 3: let's see what somebody will pay us for it. Sometimes
2:39
Speaker 3: this administration scares me to death with the monetization of
2:43
Speaker 3: absolutely everything we can possibly monetize.
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Speaker 1: Yeah, I'm with you on that. But maybe if they
2:47
Speaker 1: buy our missiles and our arms, we can have some
2:50
Speaker 1: say over what's in them and what they're used for.
2:52
Speaker 1: And maybe we can control them and monitor them like
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Speaker 1: they do with, I don't know, the Wi-Fi systems that
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Speaker 1: we bought from China.
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Speaker 2: Yeah. There's something to be in that, right? Okay. Yeah.
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Speaker 3: Hopefully there's a backdoor in there somewhere, you know, tit
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Speaker 3: for tat, what goes around comes around.
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Speaker 2: Stop it from hitting its target. That would be nice,
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Speaker 2: wouldn't it? Yeah.
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Speaker 3: So more to come on that. That was a very
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Speaker 3: recent headline as to that comment being made. But anyway,
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Speaker 3: I think the more important headlines coming out of this
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Speaker 3: summit here, China did agree to import at least 10
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Speaker 3: million metric tons of U.S. coal annually in 27 and 28.
3:26
Speaker 3: So we sold some more stuff.
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Speaker 2: That's good.
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Speaker 3: Both sides agreed to lower tariffs on $ 30 billion worth
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Speaker 3: of goods, and that covers U.S. exports to China of
3:35
Speaker 3: agricultural products, seafood, timber, medical devices. And then coming our direction, U.S.
3:40
Speaker 3: imports from China of small appliances, toys, holiday decorations. There's
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Speaker 3: a big difference in what's going one way versus all
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Speaker 3: the plastic junk coming our way.
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Speaker 2: But whatever.
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Speaker 3: The tariffs were agreed to be lowered, so at least
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Speaker 3: we got along a little bit. And somewhat importantly– Yes,
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Speaker 3: that's right.
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Speaker 2: It's the holidays, right?
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Speaker 3: It's time for plastic garbage on container ships. But more importantly,
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Speaker 3: the two sides did come together, and there's now a
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Speaker 3: communication to discuss handling these AI-related incidents, because obviously we're
4:10
Speaker 3: going to plow forward on this, and we're going to
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Speaker 3: learn by making mistakes, I think is pretty much what's
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Speaker 3: already put in place here. China and the United States
4:17
Speaker 3: have agreed that, you know what, we should probably chat
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Speaker 3: about this from time to time.
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Speaker 2: That makes sense. I understand that.
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Speaker 1: I mean, we've got the quote-unquote hotlines for nuclear activity
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Speaker 1: between warring or otherwise enemy countries like we had during
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Speaker 1: the Soviet Union days. But, you know, insofar as this
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Speaker 1: liability is concerned, I made the point earlier today, I
4:37
Speaker 1: am just worried as I can be all day long
4:40
Speaker 1: with these AI, artificial intelligence principles like Bill Gates. Oh,
4:43
Speaker 1: my God, we're all going to die. A billion people
4:45
Speaker 1: are going to die. Humanity is going to be eradicated. Please,
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Speaker 1: elected officials... Save us from ourselves. We need legislation. We
4:53
Speaker 1: need some sort of legal roadblocks or whatever put into this.
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Speaker 1: I don't think our elected officials are in a position
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Speaker 1: to even deal with this legislatively. But as I turn over,
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Speaker 1: I look at the liability market. Civil liability is alive
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Speaker 1: and well. TikTok just paid Alabama $ 100 million. They have
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Speaker 1: thousands of lawsuits that have been filed by parents who
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Speaker 1: say that these social media apps have corrupted their children.
5:17
Speaker 1: And lo and behold, in addition to just paying cash settlement,
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Speaker 1: they also are changing the platform to give people controls
5:25
Speaker 1: and protections to shield their children from the dangers. They
5:28
Speaker 1: have default settings in there that don't allow perverts out
5:31
Speaker 1: in the world to have access to their children. So
5:33
Speaker 1: that's progress. They made a product. Apparently it's defective because
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Speaker 1: it impacts our children. So they've changed the product to
5:41
Speaker 1: deal with the allegations and wrote a big fat check.
5:43
Speaker 1: That's how liability works. If they're subjected to it, then
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Speaker 1: they'll change their tune.
5:48
Speaker 2: That's right.
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Speaker 3: And to me, it also it's a big indicator of
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Speaker 3: where our priorities are. And I'm not saying this is
5:54
Speaker 3: a bad thing, but we very much want to sell
5:56
Speaker 3: things for more than we pay to make them. Right.
5:58
Speaker 2: That's business. That's capitalism.
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Speaker 3: That's pretty much how the world turns nowadays. We are
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Speaker 3: very much more concerned with that than we are. And
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Speaker 3: I say that because. The evidence of that is that
6:10
Speaker 3: we don't put the rules in place beforehand. We don't
6:12
Speaker 3: spend a lot of time thinking about what might happen.
6:15
Speaker 3: We basically say, let's fix it when it's a problem.
6:17
Speaker 3: And that's the cycle we go through. Again, neither good
6:19
Speaker 3: nor bad. I mean, that's how we create economic activity.
6:21
Speaker 3: But that is the decision that we make. Let the
6:23
Speaker 3: bad things happen. We will clean them up on the
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Speaker 3: back end versus the opposite, which is let's not do
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Speaker 3: anything at all. There's probably a happy medium in there somewhere. Okay.
6:31
Speaker 1: I'm sure, you know, we have Dave Hatter on every
6:33
Speaker 1: Friday at 630 for his, you know, the Tech Friday
6:36
Speaker 1: with Dave Hatter. And he has been every single week
6:38
Speaker 1: for years now talking about Internet of Things devices and
6:41
Speaker 1: how they are designed to get the product as immediately
6:43
Speaker 1: as they can into the market so they can engage
6:45
Speaker 1: in capitalism, right? But there are all kinds of failures
6:48
Speaker 1: in the back doorways that people can hack in. We
6:50
Speaker 1: have compromised systems as a consequence of these Internet of
6:53
Speaker 1: Things devices. So that's something else. So it's put it
6:56
Speaker 1: out there. get it out there. And as soon as
6:59
Speaker 1: someone figures out a problem, then fix it. This is,
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Speaker 1: I mean, it's just the way the technology works because
7:05
Speaker 1: it changes and it evolves so rapidly.
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Speaker 3: Yeah. And, you know, I compare that to the pharmaceutical industry, right? So,
7:11
Speaker 3: you know, it takes, well, I don't know, 10, 15,
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Speaker 3: 20 years for an idea to become a drug that's
7:16
Speaker 3: available on the market because of all the careful testing
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Speaker 3: that we do.
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Speaker 2: Obviously, that's probably a good thing, but.
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Speaker 1: Unless COVID comes along and they have emergency use authorizations
7:26
Speaker 1: to get vaccines onto the market that maybe aren't battle-tested, right?
7:30
Speaker 2: Sorry. Yes, those are the downsides.
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Speaker 3: But imagine if we did that for every single drug
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Speaker 3: that came out there.
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Speaker 2: Think of this.
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Speaker 3: Let's learn about the side effects of drugs as we go,
7:41
Speaker 3: and we'll fix it on the back end after enough
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Speaker 3: people have been impacted. We don't do that with other products,
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Speaker 3: but we definitely do it with medical.
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Speaker 1: I realize that, but going back to my point, Do
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Speaker 1: you think that the pharmaceutical companies would have been able
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Speaker 1: to put the COVID vaccine out there in the absence
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Speaker 1: of emergency use authorization?
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Speaker 2: I think not.
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Speaker 1: We found out a lot of problems associated with that
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Speaker 1: shot that they would have been held liable for. So
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Speaker 1: take that part out and just have them be liable
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Speaker 1: for anything they do by way of problems caused, death,
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Speaker 1: whatever the harm is, and they're responsible for it. They
8:13
Speaker 1: still would be very, very cautious about just throwing any
8:15
Speaker 1: random drug out on the market.
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Speaker 2: Right, yeah.
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Speaker 3: To me, what's indicative of what we're talking about here
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Speaker 3: is how quickly they did. The medical companies or the
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Speaker 3: pharmaceutical companies.
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Speaker 2: Agreed to it. Cool, we're not going to be liable
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Speaker 2: for this. That's great. Let's crank it out and throw
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Speaker 2: it out there and see what happens.
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Speaker 3: But if it's Viagra or something that is not– uh
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Speaker 3: you know not mandated by the federal government then we
8:36
Speaker 3: have to take 10 15 20 years to get that
8:38
Speaker 3: rolled out there again i'm not saying that's a bad
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Speaker 3: thing it's just very interesting that's the one industry where
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Speaker 3: we really hold feet to the fire over get the
8:45
Speaker 3: testing done get it right phase one phase two phase
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Speaker 3: three trials and all that stuff versus the other things
8:50
Speaker 3: where now we maybe we're realizing that social media kind
8:53
Speaker 3: of needs to be treated the same way because of
8:56
Speaker 3: the way it apparently affects our minds even though it's
8:58
Speaker 3: just a device in our hands.
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Speaker 1: No doubt about it. Brian James, we've got to talk
9:01
Speaker 1: about the price of oil in the next segment. Plus,
9:03
Speaker 1: we're also going to be talking about rate hikes going
9:05
Speaker 1: up again. Is another rate hike possible?
9:07
Speaker 2: Is it right?
9:08
Speaker 1: Plus, again, seniors taking Social Security early because they're.
9:11
Speaker 2: Fearing the impending cuts.
9:13
Speaker 1: More with Allworth Financial's Brian James.
9:15
Speaker 2: Don't go away.
9:16
Speaker 1: 55KRC.
9:16
Speaker 3: Ladies and talk station.
9:20
Speaker 1: 818 at 55KRC, the talk station. Money Monday. Brian James
9:24
Speaker 1: on the phone talking about money tips here. And real
9:26
Speaker 1: quick on the Xi Jinping-Trump summit meeting. Um, you pointed
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Speaker 1: it out, $ 30 billion worth of, uh, tariff reductions. That's a,
9:34
Speaker 1: I view that as a positive, but, and you also
9:37
Speaker 1: mentioned the sale of coal. I guess China didn't get
9:39
Speaker 1: the memo that we're not supposed to burn coal anymore.
9:41
Speaker 2: Ha ha ha ha ha. Anyway, they, I doubt we
9:44
Speaker 2: sent them that memo. Yeah, I know we did.
9:46
Speaker 1: And in the Eastern Kentucky, uh, coal, coal miners are
9:48
Speaker 1: very happy about that probably. And China has continued to
9:51
Speaker 1: build coal plants at a very rapid pace all throughout
9:53
Speaker 1: this whole existential threat to the world that people have
9:55
Speaker 1: been fed. In terms of Al Gore's message, we're all
9:58
Speaker 1: going to die if we exhale. Anyway, don't have to
10:01
Speaker 1: entertain my comments, they're mine. But no country or institution
10:05
Speaker 1: can be allowed to impose tolls on international waterways. That's
10:09
Speaker 1: a quote that apparently U.S. and China agreed on. So
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Speaker 1: I view that as a step, at least lip service
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Speaker 1: to to a step in the right direction with regard
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Speaker 1: to the Strait of Hormuz, among other straits. But does
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Speaker 1: that suggest China is no longer going to help the
10:21
Speaker 1: Iranians in any way, shape, or form? Does it signal
10:23
Speaker 1: that maybe the Chinese would be interested in opening up
10:25
Speaker 1: the strait, thus freeing us from the onerous problems we
10:28
Speaker 1: face with the price of oil right now? Because oil
10:33
Speaker 1: is going up again, I understand.
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Speaker 3: Yeah, I think that comment is much more of an
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Speaker 3: attention getter apparently than dropping billions of bombs on the
10:42
Speaker 3: country of Iran because we're still in that situation and
10:45
Speaker 3: have been since the late first quarter.
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Speaker 2: So China, yes, making that comment.
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Speaker 3: Basically, Iran has to be hearing that, OK, our erstwhile
10:53
Speaker 3: partner in this seems to be disagreeing with what we
10:56
Speaker 3: are planning to do. And I'm a little disappointed it
10:59
Speaker 3: does apparently have to be China to kind of introduce some.
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Speaker 2: Reality to all of this, which is this just can't
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Speaker 2: go forward.
11:06
Speaker 3: But I don't think the United States is going to
11:07
Speaker 3: have a ton of credibility right now with Iran in
11:09
Speaker 3: saying what they should or should not do. So I'm
11:12
Speaker 3: glad there is a voice out there that supports what
11:15
Speaker 3: ultimately needs to and will happen. The world as a whole,
11:18
Speaker 3: no matter what team, what side you're on, the world
11:20
Speaker 3: as a whole is not going to function.
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Speaker 2: Very well if we can't move oil through that part.
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Speaker 3: Of the world.
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Speaker 1: True. But, you know, China's been one of the few,
11:26
Speaker 1: if only lifelines to the Iranians. They have been buying
11:29
Speaker 1: up whatever oil the Iranians can get out, even though
11:31
Speaker 1: I understand that they're running out of oil to sell
11:33
Speaker 1: to the Chinese. But, I mean, if they want the
11:37
Speaker 1: Strait open and they're serious about that statement, then we
11:40
Speaker 1: need to get the situation concluded. And that means the
11:42
Speaker 1: Iranians have to allow the Strait to be opened up.
11:45
Speaker 1: And we seem to be a stalemate on that right now.
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Speaker 1: It's the only leverage the Iranians have to our blockading
11:50
Speaker 1: their ports and preventing them from engaging in commerce worldwide.
11:54
Speaker 2: So. For sure, for sure.
11:57
Speaker 3: But something needs to bring them to the table with
11:59
Speaker 3: a willingness to actually think about it. And again, bombs
12:02
Speaker 3: on their heads didn't do it.
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Speaker 2: We're still in the situation that we are.
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Speaker 3: Perhaps this minor pivot back to some sort of whatever
12:09
Speaker 3: diplomacy is now might urge them to the table. But again,
12:12
Speaker 3: it had to come from somewhere else to get that done.
12:15
Speaker 3: But that's a step in the right direction of two
12:17
Speaker 3: entities that don't really get along coming together to say, hey,
12:20
Speaker 3: maybe we need to set this aside just for a minute,
12:22
Speaker 3: fix the immediate problem.
12:23
Speaker 2: Then we can go back to arguing about normal things. True.
12:26
Speaker 2: War is bad.
12:26
Speaker 1: And I know, obviously, the price of oil, profound impact
12:34
Speaker 1: on the economy.
12:34
Speaker 2: We all know that. It's just a given.
12:36
Speaker 1: So the price of oil going up, of course, diesel's
12:38
Speaker 1: through the roof and creating inflationary pressures across the board.
12:43
Speaker 1: Is this going to lead to another rake hike, Brian James?
12:46
Speaker 1: Because I know people who want to buy a house
12:48
Speaker 1: would not like to hear that.
12:50
Speaker 2: Yeah.
12:51
Speaker 3: And the reality is we are in a rising rate environment.
12:54
Speaker 2: That's just the way it is.
12:55
Speaker 3: And there are a number of indicators out there that
12:58
Speaker 3: would say that the economy probably can absorb more rate hikes.
13:01
Speaker 3: You know, nobody wants to hear that. You know, one
13:04
Speaker 3: individual person's wallet may not do so well with those
13:07
Speaker 3: rate hikes. But the economy overall isn't built of one
13:10
Speaker 3: wallet on top of another. It's basically a much larger
13:15
Speaker 3: animal that needs to be tamed at some point. And
13:19
Speaker 3: so that's why we have to look at making these
13:22
Speaker 3: sacrifices now. How do we slow things down to slow inflation?
13:25
Speaker 3: And how much of that can we take before it
13:26
Speaker 3: really causes pain? The Fed is firmly focused on inflation.
13:30
Speaker 3: That's the number one goal. Nearly all of them, including
13:33
Speaker 3: the four members who spoke at the meeting last week,
13:35
Speaker 3: they all signaled that additional tightening may still be needed
13:39
Speaker 3: even after September's hike. Markets are paying attention to that.
13:42
Speaker 3: Now the chance of another October hike is about 64%,
13:44
Speaker 3: two out of three. Silver lining, though, for investors, the
13:49
Speaker 3: bonds that are coming out have the most compelling starting
13:52
Speaker 3: yields we've seen in a very long time. That's historically
13:55
Speaker 3: been a strong guide to longer-term bond returns. Remember, we're
13:59
Speaker 3: going back to 2004, 2007 for the kind of interest
14:02
Speaker 3: rate environment that we're in right now. Not that we're
14:05
Speaker 3: rooting for bonds necessarily, but again, silver lining for investors.
14:08
Speaker 3: If you've got that balanced portfolio out there, then hopefully
14:10
Speaker 3: you've got something on that fixed income side. You do
14:12
Speaker 3: have something that's going to benefit from this. Do we
14:14
Speaker 3: all want lower mortgage rates?
14:15
Speaker 2: Absolutely.
14:16
Speaker 3: But at the same time, we also have to be
14:18
Speaker 3: seeking lower inflation, which is another role, you know, the
14:21
Speaker 3: pretty important.
14:22
Speaker 2: Job the Fed has.
14:22
Speaker 3: So that's the sacrifice that's going to have to be
14:24
Speaker 3: made in order to get us there.
14:26
Speaker 1: Well, does this not increase our borrowing costs, our deficit
14:29
Speaker 1: costs when the bond.
14:30
Speaker 2: Rates goes up, Brian? Of course it does. It does.
14:33
Speaker 2: But that's what I was saying.
14:35
Speaker 3: The indicators we're seeing from the economy are that it
14:38
Speaker 3: can absorb higher interest rates.
14:40
Speaker 2: I'm not saying this is a good thing. It's going
14:41
Speaker 2: to hurt.
14:41
Speaker 3: No matter what, it's going to hurt. It's going to
14:43
Speaker 3: cost more to just do our... That's already been happening.
14:46
Speaker 3: And the point is that there's probably a little more
14:48
Speaker 3: coming before we can actually see the other side of this,
14:50
Speaker 3: because the efforts we have made so far simply have
14:53
Speaker 3: not had that much of an impact on inflation.
14:55
Speaker 2: We've been stuck.
14:55
Speaker 3: At 3% for, what, four or five years now, something
14:59
Speaker 3: like that.
15:00
Speaker 1: Well, and In my lifetime, I remember multiple times when
15:03
Speaker 1: the bond rates have gone up and inflation has been
15:06
Speaker 1: a pesky problem. We all seem to have survived it
15:08
Speaker 1: in the past, Brian. I think that's one of the
15:10
Speaker 1: things a lot of people lose sight of. Like, oh,
15:11
Speaker 1: my God, this is terrible. This has never happened before.
15:14
Speaker 1: I can't believe 7% mortgage rates.
15:16
Speaker 2: Well, you know.
15:17
Speaker 1: They were a hell of a lot bigger than that
15:19
Speaker 1: in the early 90s, and they were way, way bigger
15:21
Speaker 1: than that in the 1970s during stagflation. You were paying
15:24
Speaker 1: double digits to buy a house.
15:26
Speaker 3: And the average is in the 6% to 7% range
15:29
Speaker 3: if you look over the long term. So all we've
15:32
Speaker 3: done is return to the mean. We were spoiled with
15:34
Speaker 3: our 2% and 3% mortgages. We'll probably never see those again.
15:37
Speaker 3: And arguably, maybe we never should because of what has
15:40
Speaker 3: resulted from it. So yeah, you're right. We will get
15:42
Speaker 3: back there. This too shall pass and so on and
15:45
Speaker 3: so forth.
15:47
Speaker 1: Thank you for allowing me that point, Brian James. Need
15:49
Speaker 1: to make it. And the historical rates, you're right. This
15:53
Speaker 1: is kind of what it's always been. 825 right now.
15:56
Speaker 1: Don't go away because a lot of people are starting
15:58
Speaker 1: to take Social Security early, fearing the inevitable or the
16:00
Speaker 1: impending cuts that are coming. 22% clip. Can you survive that?
16:04
Speaker 1: Brian James on whether that's a good idea. Don't go away.
16:08
Speaker 2: 55KRC. The Talk Station.
16:12
Speaker 1: It's 828 at 55KRC. The Talk Station. Brian Thomas with
16:15
Speaker 1: Brian James from Allworth Financial. He's a financial planner. I
16:18
Speaker 1: always like to think about retirement. We're talking with Brian James,
16:20
Speaker 1: and retirement may not come with as big a Social
16:23
Speaker 1: Security check as you might anticipate, unless you haven't gotten
16:25
Speaker 1: the word. It's been spread widely for a long time.
16:28
Speaker 1: We're running headlong into a problem with Social Security, and
16:31
Speaker 1: they're expecting to have to reduce your monthly payment by,
16:34
Speaker 1: is it 22%, Brian James, within the next several years?
16:38
Speaker 3: It depends on the report you look at, but I've
16:42
Speaker 3: done this for 30 years, and that report comes out
16:44
Speaker 3: a couple times a year, and it has always been
16:46
Speaker 3: in the range of about 20% to 25%, depending on
16:51
Speaker 3: whose math we're using. The point is, Brian, that the
16:53
Speaker 3: math don't math anymore, speaking of the math. And there's
16:56
Speaker 3: not enough flowing in to support what needs to come out. Now,
16:59
Speaker 3: the interesting thing is we are about to, in November,
17:03
Speaker 3: elect some of the people who will look us in
17:05
Speaker 3: the eyes and decide what exactly we're going to do
17:08
Speaker 3: about this.
17:08
Speaker 2: If anything.
17:09
Speaker 3: The Senate term, of course, is six years.
17:12
Speaker 2: Six years from now, it'll be 2032.
17:15
Speaker 3: That's the year that they say that we're going to
17:18
Speaker 3: have to see a change in Social Security.
17:19
Speaker 1: Timing and some of the things they've been suggested means
17:22
Speaker 1: testing social security. So if you've been a prudent saver
17:25
Speaker 1: throughout your life, you put a big bankroll together in
17:26
Speaker 1: the form of a 401k or maybe Roth IRA, whatever
17:29
Speaker 1: it happens to be, then you might have too much
17:31
Speaker 1: money in the hearts and minds of some people, meaning
17:33
Speaker 1: you're not deserving of a social security check. I find
17:35
Speaker 1: flaw with that logic since we all paid into it
17:37
Speaker 1: with the expectation we're going to get something back anyway,
17:39
Speaker 1: but also maybe changing the retirement age or, um, Maybe
17:43
Speaker 1: just taxing people past the, what is it, cap of
17:47
Speaker 1: $ 185, 000 annually. So if you continue to tax earnings beyond that,
17:50
Speaker 1: they can sort of soften the blow at least for
17:53
Speaker 1: a little while.
17:54
Speaker 2: Yes.
17:55
Speaker 3: So there's a million ways that we can actually fix
17:58
Speaker 3: this problem. Every single solution has to do with put
18:00
Speaker 3: more money into the system and take out less. But
18:03
Speaker 3: there's a million ways that can happen. Like you just said,
18:05
Speaker 3: we can remove the cap on earnings. We can just
18:08
Speaker 3: increase taxes across the board. Or we can lower benefits
18:11
Speaker 3: on current recipients. We can lower benefits on future recipients.
18:14
Speaker 3: We can knock out that 8% increase that never really
18:17
Speaker 3: made mathematical sense to begin with. You know, there's a
18:20
Speaker 3: lot of ways that that can actually happen. But, you know,
18:23
Speaker 3: the topic today is that a lot of people are filing,
18:27
Speaker 3: you know, early. And the reason I have this conversation
18:30
Speaker 3: all the time, I think I'm intimately aware of this
18:32
Speaker 3: because of the questions I get from my clients. And
18:34
Speaker 3: I will tell you, the underlying theme among most people is.
18:37
Speaker 3: is I want to take it because it's not going
18:39
Speaker 3: to be there tomorrow, which is not mathematically true. There
18:41
Speaker 3: will be FICA taxes in 2032. There will be money
18:44
Speaker 3: flowing into the system. You're not going to get a
18:46
Speaker 3: tax cut in 2032. It just won't support what your
18:49
Speaker 3: Social Security report says because we won't have as many
18:52
Speaker 3: workers as we do right now. That's what's changing over time.
18:56
Speaker 3: But I have concluded that most people look at that
18:58
Speaker 3: and it's really just I want the money.
19:01
Speaker 2: I don't necessarily need it.
19:02
Speaker 3: Again, I'm speaking of people with nest eggs and financial plans,
19:05
Speaker 3: and they have options. The people who are thinking of
19:07
Speaker 3: filing early, it really boils down to, I just want
19:09
Speaker 3: the money because it's there. Yeah, I paid into it,
19:11
Speaker 3: and I'm going to use the excuse of it's going away, which, again,
19:14
Speaker 3: it's not. But I'll use that as an excuse to
19:16
Speaker 3: go ahead and turn on my spigot. Most people, though,
19:19
Speaker 3: are in a situation where they could be sacrificing more
19:22
Speaker 3: than they're thinking just because they've convinced themselves that it's
19:25
Speaker 3: either now or zero, and that's just not how it works.
19:27
Speaker 2: Okay.
19:28
Speaker 1: So if you're going to face a 22% cut in
19:31
Speaker 1: a few years, in 2032, if you start taking it now,
19:34
Speaker 1: because I guess the retirement age is 67, so you
19:39
Speaker 1: get a full benefit at 67. But if you wait
19:41
Speaker 1: until 70, you get more monthly than you would. So
19:44
Speaker 1: I guess what's the difference? I guess everybody has to
19:47
Speaker 1: contemplate their end of life. Well, if I die at 84,
19:50
Speaker 1: means if i take it at 70 i get 15
19:52
Speaker 1: years worth but if i start at 62 i'm gonna
19:55
Speaker 1: get an extra eight years even though i'm getting less
19:57
Speaker 1: money on a monthly basis has anybody ever crunched the
19:59
Speaker 1: numbers and find out which is worse assuming a set
20:02
Speaker 1: death date brian Yeah, me.
20:05
Speaker 3: All day, every day, because it's different for every single client.
20:08
Speaker 3: Everybody's puzzle pieces are shaped differently, but they do fit together.
20:12
Speaker 2: A couple of things in what you said there.
20:13
Speaker 3: Yes, the full retirement age is 67, but it's not
20:17
Speaker 3: only then and thereafter that you get an increase, right?
20:20
Speaker 3: The earliest you can file is 62. The latest for
20:23
Speaker 3: which there's any benefit in waiting is 70. It doesn't
20:25
Speaker 3: go up anymore after age 70. In between, every single year,
20:28
Speaker 3: it goes up by 8%. Now, mathematically, literally the way
20:31
Speaker 3: that works is it goes up by 1 12th of 8%
20:34
Speaker 3: every single month. Or put differently, if you push it
20:37
Speaker 3: six months, you'll get a 4% increase over the year before.
20:40
Speaker 3: So obviously, more money is good. We all want that.
20:43
Speaker 3: But at the same time, there's also moving parts to this.
20:45
Speaker 3: So if I'm going to file before full retirement age,
20:49
Speaker 3: and this is where a lot of people stop thinking
20:51
Speaker 3: about it because they run into something called the earnings test.
20:53
Speaker 2: Some people say, you know what.
20:54
Speaker 3: I like my job, don't want to retire, but I'm
20:56
Speaker 3: going to turn on that social security spigot because gosh
20:59
Speaker 3: darn it, it's not going to be there. It's going away, right, Brian? Well,
21:02
Speaker 3: what they learn quickly is that if they earn more
21:05
Speaker 3: than $ 24, 000, then they're going to start getting their Social
21:09
Speaker 3: Security withheld $ 1 for every $ 2 over the limit. So
21:13
Speaker 3: in other words, you get a reduction if you file
21:15
Speaker 3: early and you're still earning a substantial amount of income.
21:17
Speaker 3: So that takes away a lot of the benefit. And
21:20
Speaker 3: that ends most conversations right there in terms of people
21:23
Speaker 3: wanting to file early.
21:24
Speaker 2: That's a good point.
21:25
Speaker 1: Plus, I guess if you're– it would throw you in
21:28
Speaker 1: a different tax bracket potentially too, getting that extra earnings,
21:31
Speaker 1: wouldn't it?
21:32
Speaker 2: Oh, absolutely.
21:33
Speaker 3: And Social Security isn't as painful in terms of income
21:36
Speaker 3: taxes as other forms of income. So this is where
21:39
Speaker 3: people worry all the time about, well, what if they
21:42
Speaker 3: start means testing it?
21:43
Speaker 2: They kind of already are.
21:44
Speaker 3: Because depending on your level of income, you're either getting.
21:49
Speaker 2: Taxed on 50% of your Social Security or you're getting
21:52
Speaker 2: taxed on 85%. I always want to qualify that statement.
21:55
Speaker 3: I'm not saying there is 50% taxes on Social Security.
21:58
Speaker 2: That's not it.
21:59
Speaker 3: What I'm saying is that half of your social security
22:01
Speaker 3: is taxed as income, the other half is free. Or
22:04
Speaker 3: if you're at a higher level of income, that's 85%.
22:07
Speaker 3: So we already do tax people a little more based
22:10
Speaker 3: off the level of overall income that you have. But
22:12
Speaker 3: to your point, Brian Thomas, it is still taxable income.
22:15
Speaker 3: So if you're taking your social security and you're taking
22:18
Speaker 3: distributions out of your pre-tax IRAs and 401ks, maybe even
22:21
Speaker 3: got a side job to keep yourself entertained during retirement,
22:24
Speaker 3: all of it is taxable income. So you're still stacking
22:27
Speaker 3: up taxes and it's still a decision to make. There
22:30
Speaker 3: is a fine line between.
22:32
Speaker 2: The type of assets that you have.
22:34
Speaker 3: If I can give somebody a rule of thumb out
22:36
Speaker 3: there for people who are just starting to think about this,
22:39
Speaker 3: here's when filing now can make sense, So Social Security
22:44
Speaker 3: reduces how much has to come out of your IRA.
22:46
Speaker 3: If your other alternative is I got to take something
22:48
Speaker 3: out of my traditional IRA, then now I can spread
22:51
Speaker 3: it out, and that's going to preserve my account, and
22:53
Speaker 3: it's going to lower those immediately 100% taxable withdrawals. I
22:57
Speaker 3: can turn on Social Security.
22:58
Speaker 2: That's a good thing. But if somebody wants to wait,
23:02
Speaker 2: it can.
23:02
Speaker 3: Still be better the years after retirement but before Social
23:06
Speaker 3: Security and RMDs, which is age 73 or 75, that
23:10
Speaker 3: can be the best window you'll ever have to do
23:12
Speaker 3: some tax planning.
23:13
Speaker 2: So people who have mostly.
23:15
Speaker 3: Pre-tax dollars, right? You worked for a company. You've got
23:18
Speaker 3: a 401k roller you've never paid taxes on. They have
23:21
Speaker 3: a different set of decisions and different sets of things
23:23
Speaker 3: to think about than somebody who maybe inherited their wealth
23:26
Speaker 3: or sold a business, and now all those dollars are
23:29
Speaker 3: unsheltered from taxes.
23:30
Speaker 2: Those are two very different groups, and it definitely affects
23:33
Speaker 2: the Social Security decision.
23:34
Speaker 1: Well, that's probably why you need a financial planner to
23:36
Speaker 1: help walk through this and make smart, prudent decisions. Brian James,
23:39
Speaker 1: thank you for helping us do that every Monday here
23:41
Speaker 1: on The Morning Show with Money Monday. We'll do it
23:42
Speaker 1: again next Monday, and I hope you have a fantastic week,
23:44
Speaker 1: my friend.