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There are fewer and fewer jobs available for US workers · The Financial Exchange Show

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Speaker 1: and Paul Lane.
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Speaker 2: Chuck, Paul, and Tucker with you here today, and as
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Speaker 2: we kick things off, we got some new economic data.
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Speaker 3: They came out at ten a m.
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Speaker 2: Eastern time, none other than the Jolt's Job Openings Report.
1:26
Speaker 2: And basically, if you're not familiar with this report, each
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Speaker 2: month it comes out actually in a two month delay,
1:32
Speaker 2: so this is data for the month of July that
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Speaker 2: we're getting here, but basically details how many job openings
1:39
Speaker 2: are there, what are we seeing in terms of movement
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Speaker 2: as far as quits, hires, layoffs, some different industry breakdowns.
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Speaker 2: And so this came out at ten am and what
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Speaker 2: it showed was a further decline in the number of
1:53
Speaker 2: job openings from about seven point three five million down
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Speaker 2: to seven point one eight million. And effectively, we're continuing
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Speaker 2: based on this to see a labor market that is
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Speaker 2: showing signs of weakening. And now, for the first time
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Speaker 2: since twenty seventeen, we have a labor market where again
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Speaker 2: two different reports, So take this for what it is,
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Speaker 2: but the ratio of people unemployed to the number of
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Speaker 2: jobs available, we now have fewer jobs available than there
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Speaker 2: are people unemployed for the first time since twenty seventeen.
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Speaker 2: So it's been almost eight years since that was the case,
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Speaker 2: So I think that that's pretty notable. When we look
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Speaker 2: at this, I'm obviously excluding the pandemic just because that
2:44
Speaker 2: was not a regular job market then, so I'm kind
2:48
Speaker 2: of taking twenty twenty off the table just because, well,
2:52
Speaker 2: for obvious reasons. But this is what we are seeing
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Speaker 2: right now is again kind of a content continued tightening
3:02
Speaker 2: in the labor continued loosening in the labor market as
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Speaker 2: far as demand, and if you are someone who is
3:08
Speaker 2: hunting for a job, it's not a great sign at
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Speaker 2: this point.
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Speaker 1: Paul.
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Speaker 4: Yeah, you also saw the quits rate, which is used
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Speaker 4: to track just mobility in the labor market. This really
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Speaker 4: peaked at i believe, around three percent in the heyday
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Speaker 4: of twenty one and twenty two, where the labor market
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Speaker 4: was really robust. That's now down to two percent. And
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Speaker 4: maybe listeners are saying, oh, three to two percent shift,
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Speaker 4: that's not that big of a deal. It is a
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Speaker 4: pretty sizable scale to go from the peak of three
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Speaker 4: percent where there was a tremendous amount of mobility in
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Speaker 4: the labor market to now sort of the continuing anecdotes
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Speaker 4: that we've heard is that it is a very low
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Speaker 4: fire environment, but a low higher environment on the labor market,
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Speaker 4: and that quits rate reflecting that data here. So more
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Speaker 4: of the same in terms of what we've seen from
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Speaker 4: labor reports over the last couple months. Obviously, get the
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Speaker 4: jobs report this Friday, which we'll we'll break down on
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Speaker 4: the show, but it continues to be a pretty tepid
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Speaker 4: labor market at the moment here.
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Speaker 2: And I think, you know, getting at that the quits
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Speaker 2: rate that you mentioned there, the big thing you have
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Speaker 2: to think about on this. That's a monthly rate that
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Speaker 2: they are talking about there, So in terms of the difference,
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Speaker 2: and again this is not you know, there's some people
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Speaker 2: that quit multiple jobs in a year, so I know,
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Speaker 2: I'm you know, kind of averaging and just looking at
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Speaker 2: this in the big picture. If you've got a quits
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Speaker 2: rate of two percent a month, it generally means that
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Speaker 2: about one in four employees is quitting a job in
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Speaker 2: any given year. Quits rate of three percent means that
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Speaker 2: one in three is quitting in any given year. That's
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Speaker 2: a huge acceleration and a huge difference, and it gets
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Speaker 2: at you know, hey, during that twenty twenty one and
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Speaker 2: twenty two period, Hey, because labor demand was so high.
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Speaker 2: I mean again, at one point, we had two job
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Speaker 2: openings for every person who was unemployed, meaning that every
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Speaker 2: unemployed person could work jobs and we'd finally fill them all.
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Speaker 2: And we've just never seen anything like that because there
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Speaker 2: were so many openings and so few people out of
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Speaker 2: work at the peak. If you look at the historical
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Speaker 2: norms that we have here, the norm kind of before
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Speaker 2: twenty eighteen was generally, hey, you maybe had you know,
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Speaker 2: somewhere in the range of two thirds of a job
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Speaker 2: available per you know, per person who's unemployed. That was
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Speaker 2: kind of considered the norm based on looking at you know,
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Speaker 2: the two thousand and six, two thousand and seven data
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Speaker 2: and then also looking you know, kind of twenty fourteen
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Speaker 2: to twenty sixteen, I think those are you know, relatively
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Speaker 2: normal imbalanced labor markets. On the other hand, you look
5:45
Speaker 2: at it, you say, Okay, back in you know, August
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Speaker 2: of nine, for every you know, seven people that were unemployed,
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Speaker 2: there was one job posted. So you know, there's clearly
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Speaker 2: a difference and things have evolved there. But I think
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Speaker 2: that this clearly states, hey, there's there's no material improvement
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Speaker 2: happening in the labor market and in fact, maybe a
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Speaker 2: little bit of worsening based on this data. The one
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Speaker 2: thing that I will point out this is data that
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Speaker 2: is a month old right now, it's from July, and
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Speaker 2: we do get more real time data sets that come out. Indeed,
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Speaker 2: the big job site they have a daily tracker for
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Speaker 2: their job postings. It operates on about a ten day delay,
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Speaker 2: so they don't you know, we don't have yesterday's data,
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Speaker 2: but through August twenty second, which is what they have published, now,
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Speaker 2: we've actually seen a little bit of an uptick in
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Speaker 2: job openings since where do we bottom July eleventh, so
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Speaker 2: kind of over that period. So I do think and look,
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Speaker 2: there's a really strong correlation between the Indeed data and
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Speaker 2: what we get from the jolts report. So I do
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Speaker 2: think it's it's very likely that we see the Joltz
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Speaker 2: data start to show a little bit of improvement in
6:58
Speaker 2: the next month or so. Is it a big shift
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Speaker 2: that we've seen. No, we're talking about maybe a one
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Speaker 2: or two percent move up in the number of openings.
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Speaker 2: And so if you you know, say, okay, it's a
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Speaker 2: one to one ratio, which it's not, but it's it's
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Speaker 2: pretty darn close quite honestly, Hey, that means job opening
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Speaker 2: should probably bounce back up into the seven point three
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Speaker 2: million range in the next month or two. I think
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Speaker 2: that's what you would expect to see, all else being equal.
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Speaker 2: So I think what I continue to say on the
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Speaker 2: on the jobs data, there's clearly a worsening in terms of,
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Speaker 2: you know, the overall both supply of labor available and
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Speaker 2: demand for it, but you're just not seeing it any
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Speaker 2: real shift in terms of there's no increase in layoffs.
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Speaker 2: There's no increase or decrease in quits, right, there's no
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Speaker 2: increase or decrease in hires. Everything's just kind of treading
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Speaker 2: water for the last year or so. But the rate
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Speaker 2: of the demand for labor has slowed and so is
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Speaker 2: the supply, and so things are still kind of in
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Speaker 2: balance the way they've been.
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Speaker 3: For the last year now.
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Speaker 2: So overall labor, I don't think it's a you know,
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Speaker 2: disaster here what we're seeing in the labor market. I
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Speaker 2: don't think it's particularly robust or good. It's just very
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Speaker 2: slow the same way that it's been for the last year,
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Speaker 2: and we have not seen a material change, you know,
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Speaker 2: beyond that. I think aside from the headline hiring rates slowing,
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Speaker 2: and that really I think just gets at the fact
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Speaker 2: that there's not as much demand for labor and supply
8:29
Speaker 2: has dropped off as well, combination of retirements and deportations.
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Speaker 2: I think that's what we're seeing here. Anything else on
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Speaker 2: the Jolt data that you want to touch.
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Speaker 4: On, No, I think we hit all the major points.
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Speaker 4: We'll see what comes out on Friday for that job's report.
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Speaker 2: All right, let's take a quick break then, and when
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Speaker 2: we return, we're gonna talk about bonds. Yeah, we're gonna
8:51
Speaker 2: talk about bonds right after this.
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Speaker 2: So if something happened yesterday in the bond market, quite honestly,
9:56
Speaker 2: like there wasn't any one particular trigger, but worldwide, we
10:01
Speaker 2: saw yields moving up. Whether you're looking at US treasuries,
10:05
Speaker 2: whether you're looking at UK gilts, Japanese government bonds, you
10:09
Speaker 2: name it. We saw yields moving up pretty much across
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Speaker 2: the board. So before anyone is like, oh, like the
10:14
Speaker 2: US has too much debt, no, this was, you know,
10:17
Speaker 2: for whatever reason, investors are saying, no, we don't like
10:20
Speaker 2: bonds today.
10:21
Speaker 3: And so you.
10:22
Speaker 2: Had the thirty year US treasury getting pretty close to
10:27
Speaker 2: five percent again today on that weaker than expected Jolts report.
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Speaker 3: You've got it.
10:33
Speaker 2: Giving most of that back, or rather taking most of
10:35
Speaker 2: that back. Is the thirty year yield is back down
10:38
Speaker 2: around four point nine percent. But overall, you continue to
10:41
Speaker 2: look at the picture for long term bonds, and it's
10:46
Speaker 2: just tough to find a case where you're like, hey,
10:49
Speaker 2: here's how yields are really gonna move down for any
10:51
Speaker 2: extended period of time.
10:54
Speaker 4: It is hard to make the case within bonds and
10:56
Speaker 4: interest rates. It's always I'm always tentative on making an
11:00
Speaker 4: assertive decision one way or another, because yields can really
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Speaker 4: surprise you in terms of the directions that they go.
11:06
Speaker 4: What about making the argument that you know, economics slow
11:09
Speaker 4: down and some sort of recessionary pressure over the course
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Speaker 4: of the next year or two.
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Speaker 1: I don't know.
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Speaker 4: Maybe the debt load has gotten to a point where
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Speaker 4: it's too much to really quell that that force of
11:22
Speaker 4: nature of rates coming down from an economic slowdown, But
11:26
Speaker 4: to me that that still looms. But I would agree
11:29
Speaker 4: in general, we have really shifted in terms of bond
11:33
Speaker 4: market sentiment from a period of time from call it
11:36
Speaker 4: posts Great Financial Crisis to twenty twenty one where there
11:41
Speaker 4: wasn't much term premium that would be paid to long
11:44
Speaker 4: term bondholders. And what I mean by that is if
11:46
Speaker 4: you were to go out long on the curve buying
11:48
Speaker 4: a ten year or a thirty year US treasury there
11:52
Speaker 4: was not much in terms of additional premium that you
11:54
Speaker 4: would be given from an interest rate perspective to buy
11:57
Speaker 4: out for long term bombs. That dynamic has definitely reverse
12:01
Speaker 4: since twenty twenty two, and all the inflationary pressure that
12:04
Speaker 4: we have seen over the last few years or so,
12:07
Speaker 4: it is much more now a dynamic where as reflected
12:11
Speaker 4: by where the thirty year is trading right now, that
12:14
Speaker 4: investors are asking to be paid a higher rate of
12:16
Speaker 4: interest for going out over the longer term. And that
12:19
Speaker 4: reflects all of the uncertainty that we talk about with
12:21
Speaker 4: fiscal deffer deficits, debt issuance and just uncertainty be out
12:26
Speaker 4: about inflation in general.
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Speaker 2: Yeah, I think the you know, the the tough part
12:30
Speaker 2: that I look at is, you know, even if you
12:34
Speaker 2: have a recession in the US, which is by no
12:36
Speaker 2: means guaranteed, you've already got some of that priced into
12:41
Speaker 2: the long end of the curve simply because of all
12:44
Speaker 2: the signals that have come out in the last month
12:46
Speaker 2: or two about hey, the Fed's you know, likely going
12:47
Speaker 2: to start a cutting cycle in things along those lines.
12:50
Speaker 2: And so if you have that priced into a certain extent,
12:54
Speaker 2: it's not necessarily a given that the tenure treasury falls
12:58
Speaker 2: too much even in a recession from here where it's
13:01
Speaker 2: you know, currently at around four point two percent, and
13:05
Speaker 2: so I think it's one where it's kind of you know, okay,
13:08
Speaker 2: maybe you have a little bit of juice there, but
13:10
Speaker 2: then the other side is okay. In a recession, typically
13:13
Speaker 2: what happens is you have to borrow more because you've
13:17
Speaker 2: got less coming in in terms of tax revenue, You've
13:19
Speaker 2: got more outlays because of UH programs like unemployment and
13:24
Speaker 2: things along those lines. And so there's a case where hey,
13:29
Speaker 2: your your annual deficit could move from six to seven
13:32
Speaker 2: percent a year up to you know, nine to eleven
13:35
Speaker 2: percent a year, and that means you've got to borrow
13:38
Speaker 2: a whole lot more. And do you have enough money
13:41
Speaker 2: out there to cover all of that supply of new issuance? Yeah,
13:45
Speaker 2: you will, but at what what like what yield does
13:47
Speaker 2: it end up demanding in order to do so? I
13:51
Speaker 2: don't know what the answer is to that question, but
13:53
Speaker 2: I know that these are things that you have to
13:56
Speaker 2: ask the questions about now because you're not running two
13:59
Speaker 2: to three percent deficits like you used to in the US,
14:02
Speaker 2: you know, for the nineties and two thousands and even
14:05
Speaker 2: you know, parts of actually we never got there in
14:07
Speaker 2: the twenty tens with.
14:08
Speaker 4: He's referring to percentage of GDP on the deficits.
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Speaker 2: Yeah, so I just kind of look at it, and
14:15
Speaker 2: the math's a little bit tougher. It doesn't mean that
14:17
Speaker 2: it doesn't end up mathing eventually, but it's just it's
14:21
Speaker 2: a it's a tougher putt to get there, and a
14:23
Speaker 2: question if you go into recession, Hey, if there's that
14:25
Speaker 2: much more issuance, how do you deal with it?
14:30
Speaker 3: Ultimately?
14:31
Speaker 2: I come back to hey, for short term moves in
14:36
Speaker 2: the bond market, you can't ascribe, you know, hey, investors
14:41
Speaker 2: you know don't want you know, there aren't enough investors
14:43
Speaker 2: to buy up all that debt. That that's just not
14:46
Speaker 2: the case. And if you want the you know the
14:49
Speaker 2: example of this. Okay, so last year actually beginning of
14:54
Speaker 2: this year. Actually, no, let's go back to twenty twenty three,
14:57
Speaker 2: late twenty three. The ten year touches five percent in
15:00
Speaker 2: late October, and investor's scream, oh, there's too much debt,
15:04
Speaker 2: Like this is what's happening, Like this is why no
15:07
Speaker 2: one's gonna be able to you know, no one's gonna
15:09
Speaker 2: be able to buy all this debt. Yields are gonna
15:11
Speaker 2: keep moving up. Almost a year later, the tenure treasury
15:15
Speaker 2: touched three point six percent on September fifteenth of twenty four,
15:20
Speaker 2: almost a year ago. Now, Paul, did the US debt
15:24
Speaker 2: picture get a lot better between October of twenty three
15:29
Speaker 2: and September of twenty four.
15:30
Speaker 1: No, No, it's got a lot worse.
15:33
Speaker 2: Okay, because that's what happens every year, continues to get worse.
15:37
Speaker 2: So the idea that the moves that you see in
15:40
Speaker 2: yields are directly tied to hey, here's how much debt's
15:45
Speaker 2: outstanding is pure poppycock. It's just not an actual thing. Now,
15:51
Speaker 2: you could say, longer term trends that you see can
15:55
Speaker 2: certainly be indicative of that as one part of the puzzle.
16:00
Speaker 2: But even there, it's just one piece of the puzzle.
16:01
Speaker 2: It's not the whole thing in terms of you know,
16:04
Speaker 2: supply and demand for bonds of any kind, anything else
16:08
Speaker 2: that we want to go through when it comes to
16:12
Speaker 2: US treasuries.
16:13
Speaker 3: No, we've hit it.
16:14
Speaker 2: Actually, there is one other thing that I do want
16:16
Speaker 2: to touch on there, which is the impact on equity
16:20
Speaker 2: markets and potential impact on equity markets. We saw this
16:23
Speaker 2: back in twenty twenty two where it was one of
16:26
Speaker 2: those rare years where stock sold off and bond sold off,
16:30
Speaker 2: and really it was stock sold off because bonds sold
16:32
Speaker 2: off because yields had to move up because of the
16:35
Speaker 2: high inflation that we were seeing. When we look at
16:40
Speaker 2: equities today, yeah, you see some fluctuations that, you know,
16:44
Speaker 2: maybe you could tie equity performance to what we're seeing
16:47
Speaker 2: in bonds. But generally with moves that are this small,
16:50
Speaker 2: it's not really a huge thing. I mean, quite honestly,
16:52
Speaker 2: you take a look at the Tenure Treasury and just
16:56
Speaker 2: where it's been for the last basically six months now,
17:01
Speaker 2: I mean dating back to really five months from March.
17:04
Speaker 2: Aside from the Liberation Day move under four percent, the
17:09
Speaker 2: Tenure Treasury's been between four point one and four point
17:12
Speaker 2: five percent for this entire time. It hasn't really moved
17:15
Speaker 2: a whole lot, right, So these little wiggles that we
17:18
Speaker 2: see in bonds, I don't think have any meaningful impact
17:22
Speaker 2: on equities. If we do see, hey, the ten years
17:27
Speaker 2: got to go down to you know, three five because
17:29
Speaker 2: of recession. Usually a recession is bad enough that even
17:33
Speaker 2: that drop in long term borrowing costs doesn't save equities
17:35
Speaker 2: in the short term.
17:36
Speaker 3: Sure.
17:37
Speaker 2: The other piece, Hey, let's say that inflation you know,
17:41
Speaker 2: comes back in force and or hey there's no recession
17:45
Speaker 2: in maybe the US economy reaccelerates. Okay, Now investors say, hey,
17:49
Speaker 2: we don't four to two isn't enough for us to
17:51
Speaker 2: get you know, a ten year Now we want five two?
17:54
Speaker 2: Does that hurt equities if you see you know, a
17:57
Speaker 2: larger move up in long term yields, potentially, because that
18:00
Speaker 2: affects the cost of capital for companies and affects, you know,
18:03
Speaker 2: the overall strength of the economy. That's that's a case
18:06
Speaker 2: where a move that's you know, that size could have
18:09
Speaker 2: an impact on equities. But we just haven't seen that yet.
18:12
Speaker 2: So I don't think that you can talk about anything
18:14
Speaker 2: from you know, the last few months and say that
18:17
Speaker 2: there's been any meaningful impact on stocks, because yields have
18:20
Speaker 2: been in about.
18:21
Speaker 3: A half a percent range for a while now.
18:24
Speaker 4: Yeah, it's an interesting position that you have if you're
18:26
Speaker 4: a bondholder of long term bonds, where usually you're buying
18:30
Speaker 4: those in your portfolio as a means of safety to
18:33
Speaker 4: protect your you know, fixed income assets from volatility, but
18:38
Speaker 4: it's typically to move non correlated with the stock market
18:41
Speaker 4: or benefit you when the stock market goes down. You
18:44
Speaker 4: do have some factors in place here where interest rates
18:46
Speaker 4: on the longer end of the code could rise and
18:48
Speaker 4: you could see a stock market sell off. And then,
18:51
Speaker 4: just like in twenty twenty two for many bondholders that
18:53
Speaker 4: will remember it vividly, where stocks were down eighteen percent
18:56
Speaker 4: and the bond market was down fifteen percent, it just
18:59
Speaker 4: put the bond in a tougher position than they've been.
19:02
Speaker 4: But interest rate conditions can always change, of course.
19:05
Speaker 3: Just take a quick break here.
19:07
Speaker 2: When we return, we'll do a little bit of Wall
19:11
Speaker 2: Street Watch, and then we are going to be joined
19:14
Speaker 2: by the one and only Todd Lutsky from Cushing and
19:16
Speaker 2: Dolan for Ask Todd, get your estate planning questions ready
19:21
Speaker 2: for Todd because he joins us after this.
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Speaker 1: Street Watch, a complete look at what's moving market so
19:51
Speaker 1: far today right here on the Financial Exchange Radio Network.
19:55
Speaker 5: Markets are mixed territory with text seeing a bounce back
19:58
Speaker 5: on the heels of meat of a ajor win for alphabets.
20:02
Speaker 3: Google.
20:02
Speaker 5: Wall Street's also sifting through weaker than expected job openings
20:06
Speaker 5: in labor turnover data. Right now, the Dow is down
20:10
Speaker 5: by nearly three tenths of one percent, or one hundred
20:12
Speaker 5: and twenty points lower, SMP five hundred is up four
20:16
Speaker 5: tenths of one percent, and the Nasdaq is up just
20:19
Speaker 5: over one percent higher two hundred and thirty points. Russell
20:22
Speaker 5: two thousand is edging higher. Ten year Treasureel down five
20:26
Speaker 5: basis points at four point two two six percent, and
20:29
Speaker 5: Crude oiled down two and a half percent today, trading
20:32
Speaker 5: just below sixty four dollars a barrel. Alphabet jumping over
20:36
Speaker 5: seven percent higher after a federal judge ruled that the
20:39
Speaker 5: tech giant is allowed to keep its Chrome browser, dodging
20:43
Speaker 5: significant antitrust penalties. However, Google won't be able to sign
20:47
Speaker 5: exclusive search deals and also has to share its data
20:50
Speaker 5: according to the ruling. Apple stock is also gaining three
20:53
Speaker 5: percent in reaction to the alphabet ruling, with Apple receiving
20:57
Speaker 5: Google's payments of twenty billion dollar dollar to keep Google
21:01
Speaker 5: as the default search engine on its devices. Meanwhile, Macy's
21:05
Speaker 5: beat second quarter earnings expectations after the department store chain
21:09
Speaker 5: saw its same store sales grow for the first time
21:12
Speaker 5: since twenty twenty two. That stock is surging by nineteen percent,
21:16
Speaker 5: Sticking with retail, where Dollar Tree shares are falling nine percent.
21:21
Speaker 5: Despite the discount retailer beating second quarter earnings and revenue expectations,
21:25
Speaker 5: Dollar Tree also upped its annual outlook. Elsewhere, cybersecurity company
21:31
Speaker 5: z Scaler b quarterly Street forecasts on the top and
21:34
Speaker 5: bottom lines and also offered an optimistic guidance for the
21:37
Speaker 5: current quarter. That stock down by three percent and Salesforce
21:41
Speaker 5: will report their second quarter earnings after today's closing belt.
21:46
Speaker 5: I'm Tucker Silvan. That is Wall Street Watch.
21:50
Speaker 1: This is Asked Todd on the Financial Exchange Radio Network.
21:54
Speaker 1: If you have an existing estate plan or in the
21:56
Speaker 1: market for one, Tod Letskey is here to answer your
21:58
Speaker 1: questions and help you play for later life. Ask Todd
22:01
Speaker 1: is presented by Cushing and Dolan, serving Massachusetts and New
22:05
Speaker 1: England for more than thirty five years, helping families with
22:08
Speaker 1: a state and tax planning, Medicaid planning, and probate law.
22:11
Speaker 1: Visit Cushingdolan, Dot com Now here's Todd Lutsky.
22:17
Speaker 2: Todd Lutsky from Cushigan. Dolan joins us now for ask Todd.
22:21
Speaker 2: We got the phone lines open for your estate planning questions.
22:25
Speaker 2: Eight eight eight to zero five two two six three
22:29
Speaker 2: is the number again, that is eight eight eight to
22:33
Speaker 2: zero five two two six three. We can normally get
22:37
Speaker 2: through two to three calls, so make sure that you
22:39
Speaker 2: get calling early in offense so you can get in
22:41
Speaker 2: line to ask Todd your estate planning questions. That phone
22:45
Speaker 2: number is eight eight eight two zero five two two
22:48
Speaker 2: six three. One more time it is eight eight eight
22:52
Speaker 2: to zero five two two six three. Mister Lutsky, How
22:56
Speaker 2: are you doing today?
22:57
Speaker 6: I am never better? And how about yourself?
23:00
Speaker 3: Doing well? Yeah? But I was looking at the news.
23:05
Speaker 2: Are about the twenty twenty eight Olympics in Los Angeles?
23:08
Speaker 3: Oh? Yeah? Are we doing those? We are?
23:10
Speaker 2: Did you see that Aladdin was banned from them?
23:14
Speaker 3: No?
23:15
Speaker 2: Banned from the Olympics Performance enhancing rugs Ah, I know
23:20
Speaker 2: it's a real problem, ye, kind of sad. Let's talk
23:22
Speaker 2: a little bit about IRA beneficiaries and kind of guidance
23:28
Speaker 2: as it relates to you know, estate planning and those Bennies,
23:32
Speaker 2: what's kind of been the long term conventional wisdom about
23:37
Speaker 2: how you name IRA beneficiaries for you know, to coordinate
23:41
Speaker 2: with your state plan.
23:43
Speaker 6: Yeah, so IRA is probably one of the more complicated
23:48
Speaker 6: assets in a state planning. Remember a state planning, we
23:50
Speaker 6: plan for all your assets. But with an IRA, it's
23:54
Speaker 6: just an added level of complexity because there's an income
23:57
Speaker 6: tax component associated with the estate tax components. So many
24:00
Speaker 6: people think that, oh, well it's an IRA. It's not
24:03
Speaker 6: you know, it's not going to be a state taxable
24:05
Speaker 6: it's income taxbile, Well, it's both. So even roths right,
24:08
Speaker 6: they're not income taxable, but they're still included in your
24:11
Speaker 6: state for a state tax purposes, so you kind of
24:13
Speaker 6: have to deal with them. And so, you know, I
24:16
Speaker 6: think your question is what's the common sort of approach
24:20
Speaker 6: to naming beneficiaries? And by the way, there you could
24:23
Speaker 6: do like an eight hour seminar and IRA beneficiary designations.
24:26
Speaker 3: But let's not do that right now.
24:28
Speaker 6: Let's not do that now. So so you know, common
24:31
Speaker 6: approach would be surviving spouse generally should be the primary beneficiary,
24:40
Speaker 6: and then the contingent beneficiary can be you know, children.
24:45
Speaker 6: It's an option if you have children, or you might
24:50
Speaker 6: name your estate planning trust, whether it be your revocable
24:55
Speaker 6: family trust or your irrevocable trust if you've done perhaps
25:00
Speaker 6: medicaid planning, so you could name a trust a beneficiary
25:04
Speaker 6: after you die. So, in other words, iras cannot go
25:08
Speaker 6: into the trust while you're living without creating an adverse
25:14
Speaker 6: income tax consequence. Right, let's face it. If I'm going
25:17
Speaker 6: to take the IRA and put it in a trust,
25:20
Speaker 6: it's an individual retirement account, which means it has to
25:23
Speaker 6: be owned in your name. So in order to put
25:26
Speaker 6: it into a trust, you would have to take the
25:28
Speaker 6: assets out of it, which of course is a income
25:32
Speaker 6: taxable event, and then put whatever's left after you pay
25:36
Speaker 6: the tax into your trust. So we don't do that. However,
25:39
Speaker 6: at death it can get there. So if you're naming
25:43
Speaker 6: your children the beneficiaries, that's okay, after your spouse. But
25:49
Speaker 6: if you do that, you don't have any control over it,
25:52
Speaker 6: no ability to protect it from future creditors, divorces how
25:55
Speaker 6: they get it when they get it. But if you
25:58
Speaker 6: name the trust the contingent beneficiary after the spouse, then
26:03
Speaker 6: you give yourself a chance to say, all right, these
26:06
Speaker 6: assets will now be held in a trust protected from
26:10
Speaker 6: future divorces of the kids, perhaps getting to a generation
26:14
Speaker 6: below without a generation skipping tax applying. So there's benefits
26:20
Speaker 6: to naming your trust as the beneficiary. That's the consensus generally.
26:24
Speaker 2: Talking with Todd Lotski from the law firm of Cushing
26:27
Speaker 2: and Dolan, we do have room on the phone lines
26:29
Speaker 2: for you to ask your estate planning questions to Todd.
26:32
Speaker 3: Right now live on air.
26:35
Speaker 2: Number here is eight eight eight two zero five two
26:39
Speaker 2: two six three.
26:40
Speaker 3: Again.
26:40
Speaker 2: We can usually only get through two to three of
26:42
Speaker 2: these in any given show, so make sure that you
26:45
Speaker 2: get your your call place that you can chat with
26:47
Speaker 2: Todd right now. Again, eight eight eight two zero five
26:52
Speaker 2: two two sixty three is the number to call. We're
26:55
Speaker 2: gonna take a quick break here, but when we return,
26:57
Speaker 2: we are going to get to your questions for Todd.
27:00
Speaker 3: Again.
27:00
Speaker 2: That number is eight eight eight to zero five two
27:04
Speaker 2: two six three.
27:06
Speaker 1: Ask Todd with Todd Lutsky every Wednesday at ten thirty
27:10
Speaker 1: only here on the Financial Exchange Radio Network. You're listening
27:16
Speaker 1: to Ask Todd with Todd Lutsky on the Financial Exchange
27:19
Speaker 1: Radio Network.
27:32
Speaker 2: Still chatting with Todd Lutsky from the law firms Chris Kindlin.
27:35
Speaker 2: We do still have room on the phone lines at
27:38
Speaker 2: eight eight eight to zero five two two six three.
27:42
Speaker 2: You got questions for Todd about your estate plan. This
27:44
Speaker 2: is your chance to ask them again. That number is
27:48
Speaker 2: eight eight eight two zero five two two six three.
27:52
Speaker 2: One more time it's eight eight eight two zero five
27:55
Speaker 2: two two six three Todd. We were talking beneficiaries for
27:59
Speaker 2: iras previously. Is there anything that people can do as
28:03
Speaker 2: far as beneficiary designations that may be able to help
28:06
Speaker 2: them from a qualifying from medicaid perspective or is that
28:10
Speaker 2: kind of off the table.
28:12
Speaker 3: There's nothing that you can really do there.
28:14
Speaker 6: I think for the longest time the answer was there
28:17
Speaker 6: was really nothing you could really do there, you know,
28:20
Speaker 6: because again the idea of medicaid planning is to set
28:24
Speaker 6: up irrevocable trusts and take as many of your assets
28:28
Speaker 6: as you can now well you're healthy, and put them
28:32
Speaker 6: in there, and after five years of them being in there,
28:35
Speaker 6: they'd be protected from the nursing home. That's kind of
28:37
Speaker 6: the objective. But with an IRA, as we just explained,
28:42
Speaker 6: I can't take that money and put it in there.
28:44
Speaker 6: So you're right, for the longest time, it was like,
28:46
Speaker 6: what do I do? Not a lot? However, now and
28:51
Speaker 6: I say now, meaning the Secure Act, remember came out
28:54
Speaker 6: in I want to say, Round two of the Secure
28:57
Speaker 6: Act came out in twenty twenty two ish, and that
29:01
Speaker 6: kind of changed the game. That changed the rules a little. Now,
29:05
Speaker 6: you know, if you have attained age seventy three, which
29:10
Speaker 6: I believe is the required beginning date, they call it
29:12
Speaker 6: the RBD. It's the required beginning date to take money
29:16
Speaker 6: from your IRA. So even though you might retire at
29:20
Speaker 6: sixty five, you don't have to take any money at
29:23
Speaker 6: that age, but when you reach seventy three, you must
29:26
Speaker 6: start taking minimum distributions. So if you reach that age,
29:32
Speaker 6: you can name the estate the beneficiary. Now that sounds
29:38
Speaker 6: like a bad deal, but naming the estate the beneficiary
29:42
Speaker 6: will force it through probate, which is only one asset,
29:45
Speaker 6: one item, so it doesn't really matter, okay. And then
29:48
Speaker 6: it goes into a testamentary trust, so you always have
29:50
Speaker 6: to do this coupled with a testamentary trust. And then
29:53
Speaker 6: by putting it in that testamentary trust, what's going to
29:56
Speaker 6: happen is it's going to be available for your surviving spouse.
29:59
Speaker 6: This is if you die and never go to a
30:01
Speaker 6: nursing home, which again is our goal right when we
30:03
Speaker 6: do our planning, then that money would be held for
30:07
Speaker 6: the benefit of the surviving spouse, who if that spouse
30:11
Speaker 6: gets sick the next day or any time thereafter, it's
30:15
Speaker 6: immediately protected from the nursing home for the kids. So
30:18
Speaker 6: there's no five year waiting period. So it's really a
30:21
Speaker 6: home run to do it. But there's a lot of
30:24
Speaker 6: rules to understand when you're doing this, and that's what
30:27
Speaker 6: this new guide for this month is all about. And
30:29
Speaker 6: so it's you know, why name your estate and IRA
30:33
Speaker 6: a beneficiary, right, that's the guide and it explains the
30:38
Speaker 6: benefits of doing that from an income tax perspective and
30:43
Speaker 6: estate tax perspective. It also shelters it from future estate taxes,
30:47
Speaker 6: how it protects it from a nursing home, and again
30:50
Speaker 6: most importantly, how it doesn't create any adverse income tax
30:55
Speaker 6: consequences to the surviving spouse.
30:57
Speaker 3: So that is.
30:58
Speaker 6: Really you know, the game chain when it comes to
31:01
Speaker 6: doing these naming the estate the beneficiary of an IRA.
31:06
Speaker 6: In that regard, you can also do this for life insurance,
31:09
Speaker 6: so and couple it with a testamentary trust so those
31:13
Speaker 6: are the things that are in there. Call and get
31:15
Speaker 6: the guide. It's brand new for the month. It'll give
31:17
Speaker 6: you some new ideas on estate planning for these tough
31:20
Speaker 6: to plan for assets eight six six eight four eight
31:25
Speaker 6: five six nine nine or Legal Exchange show dot com.
31:28
Speaker 6: You can download it there again eight six six eight
31:32
Speaker 6: four eight five six nine nine or Legal Exchange Show
31:36
Speaker 6: dot com.
31:37
Speaker 2: Top I get a question from Michelle in May and Michelle,
31:41
Speaker 2: you're on with Todd Lutsky.
31:42
Speaker 3: What's your question?
31:46
Speaker 7: My significant others for one K she's eight years older
31:53
Speaker 7: than me upon his death? Do I have to spend
31:57
Speaker 7: that within ten years?
31:58
Speaker 6: So you're you said, I think you beeped out on
32:01
Speaker 6: this part. Just let me confirm you said you are
32:03
Speaker 6: a significant other not married, correct, So that makes a
32:08
Speaker 6: great difference, right, if you're not married, it changes the
32:12
Speaker 6: game a lot. But let me ask you this. How
32:15
Speaker 6: old is your significant other eighty eighty? How old are you?
32:21
Speaker 7: Seventy two?
32:22
Speaker 6: Seventy two? So this is why when I explain this,
32:25
Speaker 6: the age is going to matter. Right. So in this case,
32:29
Speaker 6: first of all, do you know he's naming you as
32:32
Speaker 6: a beneficiary?
32:34
Speaker 7: Yeah?
32:34
Speaker 6: Okay, because that would be the first got to get
32:36
Speaker 6: over that hurdle. So if he names you as a beneficiary,
32:41
Speaker 6: there's rules that say, if it's going to a child,
32:48
Speaker 6: it must come out over ten years. And that's what
32:51
Speaker 6: you're asking me. Well, Todd, I'm not a child, I'm
32:53
Speaker 6: a significant other. Well, there happens to be another rule.
32:56
Speaker 6: That's the general rule. So most of the time, when
32:59
Speaker 6: you're not naming a spouse, most of the time the
33:04
Speaker 6: assets need to be paid out over ten years. So
33:06
Speaker 6: forget your life expectancy anymore. If you were a spouse,
33:12
Speaker 6: interestingly enough, in your situation, if he died tomorrow, you
33:16
Speaker 6: would be able to delay taking minimum distributions until you
33:23
Speaker 6: reach seventy three. Granted it's only one year, but you
33:26
Speaker 6: could delay for that year and then you could take
33:30
Speaker 6: it out over your life expectancy, which would be what
33:33
Speaker 6: longer than his because he's eighty, So that's a win
33:38
Speaker 6: and likely longer than ten years. So that's a win.
33:43
Speaker 6: You know, from an income tax perspective for everybody else listening,
33:46
Speaker 6: why that matters is the faster you take money out
33:49
Speaker 6: of an IRA, the higher the income tax bracket you
33:54
Speaker 6: could be in. Right, So think about a lot of
33:56
Speaker 6: children who have to take it out over ten years.
33:59
Speaker 6: What if there's a million dollars sitting in an IRA
34:01
Speaker 6: and you're an only child, right, Well, you could be
34:05
Speaker 6: fifty when your parent dies. You might be making a
34:08
Speaker 6: couple hundred thousand dollars a year. Well, now I'm gonna
34:11
Speaker 6: have to pull another one hundred thousand dollars a year
34:13
Speaker 6: plus out, pushing me into an even higher income tax bracket.
34:17
Speaker 6: I don't know where you are in this situation, Michelle,
34:20
Speaker 6: but that's the idea for everybody else. Now back to you. Okay,
34:25
Speaker 6: well I'm not married, so I don't get that bonus.
34:28
Speaker 6: What do I get? There happens to be one other exception. Well,
34:32
Speaker 6: there's about four exceptions to the ten year rule. One
34:37
Speaker 6: of the exceptions is if you happen to be a
34:40
Speaker 6: minor child or a disabled child, then you can take
34:44
Speaker 6: it out or over your lifetime. You don't have to
34:47
Speaker 6: wait ten years or the spouse. We said that was one,
34:51
Speaker 6: and here's the final one that you might fit into.
34:54
Speaker 6: If you are the designated beneficiary and you are less
35:00
Speaker 6: than ten years or less than younger than the participant,
35:06
Speaker 6: so you are you're within that ten year window. Okay,
35:10
Speaker 6: so you then would have the ability to take it
35:14
Speaker 6: out over your life expectancy. So that's really a home
35:18
Speaker 6: run for you. So you could take it out because
35:21
Speaker 6: you're within that ten year window. You can take it
35:24
Speaker 6: out over your life expectancy. That's good, But remember you
35:27
Speaker 6: might need to do some planning for him because you
35:28
Speaker 6: never know. Not being married, you have no rights if
35:33
Speaker 6: he got sick and went to the nursing home. You know,
35:36
Speaker 6: there's not being a spouse, you don't get to avail
35:39
Speaker 6: yourself of any of the spousal rights in terms of
35:43
Speaker 6: protecting these assets from the cost of long term care.
35:45
Speaker 6: Long winded answer, I know, but folks, when you're dealing
35:48
Speaker 6: with an IRA, that's what happens. Iras have problems.
35:52
Speaker 2: Todd any final thoughts on beneficiaries and estate planning, just
35:55
Speaker 2: that you want to mention here.
35:57
Speaker 3: Yeah, I know.
35:57
Speaker 6: We were talking about iras a lot and trying to
36:00
Speaker 6: do last minute planning protecting assets from the nursing home.
36:04
Speaker 6: Think about it also with a life insurance policy, Folks,
36:07
Speaker 6: If you have a life insurance policy and you're trying
36:09
Speaker 6: to protect it from the nursing home, likely if you're
36:12
Speaker 6: making premium payments, you're not going to be able to
36:14
Speaker 6: put that into an irrevocable trust while you're living, and
36:18
Speaker 6: so when you die, if you're married, you can name
36:21
Speaker 6: the estate the beneficiary, just like we were talking about
36:24
Speaker 6: doing with an IRA, and that way it would flow
36:27
Speaker 6: into this testamentary trust and again be sheltered from a
36:33
Speaker 6: state taxes, be available for the surviving spouse to enjoy
36:39
Speaker 6: those dollars from that life insurance policy. And again, because
36:43
Speaker 6: it flowed through probate to get to this item, to
36:47
Speaker 6: get to this trust, the surviving spouse can get sick
36:51
Speaker 6: the next day and there's no five year waiting period
36:54
Speaker 6: and those assets in there would be not only protected,
36:56
Speaker 6: they'd be protected from the nursing home for the kids.
36:59
Speaker 6: So that's a thought.
37:00
Speaker 3: Mister Lutsky, thank you so much for joining us today.
37:02
Speaker 6: Always a pleasure.
37:03
Speaker 3: Thank you.
37:05
Speaker 1: This has been asked ond on the Financial Exchange Radio Network.
37:08
Speaker 1: Askedd with Todd Lutsky has been presented by Cushing and Dolan,
37:12
Speaker 1: serving Massachusetts and New England for more than thirty years,
37:14
Speaker 1: helping families with the state and tax planning, Medicaid planning
37:17
Speaker 1: and probate law. Call eight hundred three nine three four
37:20
Speaker 1: thousand and one or visit Cushingdolan dot com. The views
37:24
Speaker 1: expressed in this segment are solely those of Cushing and Dolan.
37:26
Speaker 1: Armstrong Advisory does not provide any legal or tax advice.
37:28
Speaker 1: Please consult with your illegal or tax advisor on such matters.
37:31
Speaker 1: Cushing and Armstrong do not endorse each other and are
37:33
Speaker 1: not affiliated.
37:34
Speaker 2: Still a bunch two get to As we head towards
37:37
Speaker 2: hour two, we'll be talking about the penalty ruling that
37:40
Speaker 2: was made in the Google anti trust case, or at
37:44
Speaker 2: least in one of the Google anti trust cases. Also,
37:47
Speaker 2: we'll talk a little bit about what we're seeing in
37:49
Speaker 2: terms of projections for holiday shopping spending. We'll talk a
37:54
Speaker 2: little bit about what's going on with car sales as
37:57
Speaker 2: well as the automotive market kind of starting to show
38:00
Speaker 2: signs not of trouble, but just you know, losing out
38:03
Speaker 2: on a little bit of growth that they were hoping
38:05
Speaker 2: to see. And then also how did Hollywood miss the
38:08
Speaker 2: mark this summer? Why the twenty twenty five box office
38:11
Speaker 2: was a little bit disappointing. We'll cover all that and
38:14
Speaker 2: more an hour two