More Than Money S4 Ep29

And good evening.

You've got More Than Money.

You've got Gene Dickinson, your host, your personal financial advisor at your service.

And honored to be so.

If you're a loyal viewer of More Than Money, you know exactly how this process unfolds.

We answer your questions, your emails, the concerns that you've sent to us.

And we do that right here every single week, which makes us arguably the most relevant financial show on television today, because the relevance is 100% focused on you.

Too many shows, financial and otherwise, have their hidden agendas.

They're behind the scenes, what they're trying to push, what they're trying to encourage.

And the reality is that we're here for one very, very simple reason - to serve you, to serve your best interest, to get you from point A to point B in your financial life.

It could be about a retirement question, Social Security perhaps.

it could be an estate planning question.

Do you need a trust, perhaps?

It could be an income tax question.

Is a Roth conversion going to be a good idea for you?

It could be a business question.

Should I use a franchise perhaps, or start from scratch?

All of those are reasonable generic topics.

Generic, unfortunately, as most of you have found throughout your educational career is... ..boring.

We don't do generic on More Than Money.

We do very specific answers to very specific questions, questions that are on the top of your mind.

And with any luck at all, any luck at all, when we give you our answers, you'll get some peace of mind.

So those two things connected.

Often we'll see if we can do it every single time this week, as we turn to our financial correspondent, Megan.

Where do we start this week?

- Hi, Gene.

Our first email tonight says, My wife and I love your show.

We value the great advice that you provide.

We're trying to provide some guidance to our son and would love to get your input.

Our son is 41 and works as his father's caretaker, who has been paying him under the table rather than through a 1099.

He's hoping to get this changed for this year's taxes.

Other than a $20,000 emergency fund invested in a money market, our son has no IRA retirement account, as he has no earned income.

He has some extra cash he wants to invest and is thinking about gold.

My wife and I are not familiar with gold as an investment and would like to hear your thoughts on whether this would be a good move or a bad move.

Until he gets a steady job, he needs to have liquidity should he need the money.

Thank you for your help.

- Well, you're very kind.

Your words are very kind.

Your question is an interesting one.

Let's start with the last part first.

Should this young man invest in gold?

No.

Now, moving along.

Wouldn't it be nice if that's as simple as it needed to be?

For lots of folks, the word gold has some magic connotation.

It is exciting, it's glamorous, it's glitter filled.

It's all that kind of stuff.

William Devane says it's the best thing in the world, etc.

The reality is none of that is particularly true from an investment standpoint.

You may be very drawn to gold from a personal standpoint, from a jewelry standpoint, from a bling standpoint.

But as an investment, it is an OK investment.

It carries substantial risk.

And for someone, as your son is, just really getting their feet wet in the world of investments, not the place to start.

Absolutely not the place to start.

Just as if you're just starting to learn to play the game of golf, you would not head down to Augusta and try the Masters.

That would not be the place to start.

Maybe, maybe someday to finish.

But bottom line for us is that you must be much more fundamental.

So, is gold the right answer?

The answer is no.

Is there a general guideline that he might follow?

The answer is yes.

If he's using an investment account that allows him to break this money up into a number of pieces, not putting all his eggs in one basket, I think that makes a great deal of sense.

I think it also makes sense that he start to get a handle on truly what his time frames are.

If this is predominantly retirement intended money, long-term money for someone who's 41, 25 or 30 years' kind of money, then a diversified portfolio, several pieces using either mutual funds or exchange traded funds.

My personal opinion - exchange traded funds probably the better way to go.

A little less expensive and yet very broad based.

You can find ETFs in many different flavors.

And if you had three or four flavors of mutual funds, perhaps one in stocks, one perhaps in commodities, one perhaps in real estate, that would be a very, very good place to start, as a balancing act to his current 20,000 or so that he has saved in his money market.

Having money safe at hand and liquid in his circumstance, considering he has little or no other resources, is perfectly appropriate.

Makes absolutely perfect sense.

Shifting gears, he is being employed, kind of.

He is getting cash, but he is not gaining some of the advantages of being employed that he might wish to gain.

Qualifying for Social Security, qualifying to put money into an IRA, etc.

You might explore... You might explore the fact that there are a number...

I started to say many.

I don't know that there are many.

But there are a number of home health care agencies that are now contacting family members, like your son, who are caring for other family members, like his dad, and putting them on the payroll.

Coming out from under the radar, so to speak, and into the light, making it a legitimate occupation.

Training, backup, Social Security contributions, benefits, so lots of advantages.

So I would encourage your son to explore that, explore the opportunity of shifting from a almost invisible occupation into one that that is completely above board, gives him all the benefits.

Admittedly, it may increase the cost to his father, but the trade-off of being able to keep his son and benefit his son, I would think would be a pretty high priority for him, I hope, starting with no adding exchange traded funds and making this employment more legitimate, so to speak.

I think we've...

I hope we've helped a little bit.

If you have questions as you're watching our show...

I got questions.

It's similar to that but different.

Send us your emails.

Gene@AskMTM.com.

Gene@AskMTM.com.

That allows you to come right into our More Than Money world headquarters and we guarantee every single email gets a response, even the silly ones, even the hard ones.

We can't put every email on TV.

Not enough time.

But we respond to every single question, just as we're about to respond to this one.

Megan.

- Our next question.

It says, Hi, Gene.

I love your show.

On Tuesday night, you were answering a question from an older couple about other investments in times of inflation.

You mentioned something called a structured bond.

Can you explain this more?

I've never heard of it.

Thank you.

- Well, to be fair, I may never have heard of it either.

We have talked about a number of topics, and it sounds to me, it appears to me that I may have presented these topics in such a way that two of them ended up being mixed together.

The two topics that you may be conflating - what a fascinating word - I actually used it correctly there for a moment - are bonds and structured notes.

Bonds are typically, in times of inflation, most attractive if they fall into the category of inflation-responsive bonds.

The government issues those, called tips.

They also issue a form of inflation-responsive bonds called an I bond.

Bonds can be very easily obtained.

It's all done direct with the Treasury online.

The I bond parameters are a little limited.

An individual can buy up to $10,000 per year, a married couple up to $20,000 per year.

And, yes, there are some restrictions, but the rates of return are pretty impressive, and inflation responsive.

Tips can be acquired in any denomination, any amount of money you wish to invest.

The parameters are quite different.

They are not nearly as responsive to inflation.

So you've got to do a little bit of homework to find out whether a bond, in this case an I bond or a tips bond, would be appropriate to you, or whether a structured note might be important to you.

I'm going to make sure that I give you a better definition of structured note here in a moment.

But before I drift too far away from the topic of bonds, bonds are a scenario, any scenario, where you are lending money to an institution.

You can have a bond issued by the federal government.

You are lending money to the federal government.

You could have a Pennsylvania municipal bond... ..he tried to say... that is tax free.

You're lending money to the state of Pennsylvania.

There are bonds that we don't call bonds.

We call them certificates of deposit - CDs.

And if we had this conversation even a year or two ago, we would have dismissed them out of hand because the interest rates were so dreadfully low.

They are not currently.

And of course, it depends on when you're seeing our show.

Our shows are evergreen, which means they're broadcast coast to coast and from border to border at different time frames, different time segments and different times of the year, and perhaps even different years.

And particularly if you're finding this on YouTube or you're finding this on our morethanmoneyonline.com website, it could be out of date, but currently interest rates on short term CDs - over 5%.

So if FDIC insurance has you attracted, and if over 5% does it for you, problem solved.

We're done.

Easily obtained, completely safe.

FDIC insured.

And short term, we're talking six months to a year.

You're not talking about needing to tie up your money for a long period of time.

If, on the other hand, you are interested in tying up your money for a longer period of time, there are tax deferred annuities that are currently at the five-year mark offering between 5.25 and 5.5% Again, very attractive rates that might fit your needs.

Now I mentioned structured notes.

We're going to circle back again.

Guarantees come in lots of flavors.

I bonds, guaranteed by the government.

Municipal bonds, guaranteed perhaps by the state of Pennsylvania.

FDIC insured CDs.

Indeed, structured notes are guaranteed by the bank issuing the note.

That's the guarantee.

So if you're getting a structured note, perhaps one that assures you that they're going to invest properly... ..in a particular index, if that the index should drop, say, the stock market, the S&P 500 should drop, that you're protected.

You can be protected down, goodness, down to -50%.

You might even be protected more if you wish, but you'll be looking at a very significant rate of return, at least in theory, potentially.

So, bottom line, you have an opportunity of a very good investment that...keeping in mind not guaranteed by the government, not guaranteed by the state, not guaranteed by the FDIC.

Guaranteed by the bank.

Depending on the bank, that might be a really, really powerful guarantee.

Or not.

You've got to decide.

If you'd like more information, make sure you send us another email.

Megan, back to you.

- Our next question has a lot of detail in it.

It says, I watch your PBS show and I find your demeanor and suggestions very trustworthy.

Because of that, I have a question.

My wife and I are retired, 76 and 69, and have $150,000 in capital.

Our income is about 42,000 annually with 36,000 of it from Social Security.

We are just breaking even with expenses now.

We rent.

We have no long-term liabilities.

We live in Philadelphia and do not have a car.

We would like to know if you think the following apportionment of investments is sound and if it should be changed to maximize what capital we have.

We have 60,000 in a US Treasury bond at 4.125%.

That matures in late 2027.

30,000 in VWINX, a blue chip Vanguard mutual fund, which pays about 5% each year.

30,000 in NYSE securities paying about 4% in dividends.

Only speculative.

Holding is Ford at 10,000 book value and now off 3,000.

$10,000 I bond at 6.89%.

And the rest, $30,000 in money market funds at 4%.

What changes would you recommend we make?

Thank you in advance for your help.

- Thank you for your kind words and thank you for the detail of your email.

Now, if we take a look at the headline that I've constructed here - so you think you're an investment pro.

Do you, fella?

The reality is often it's my job to come on air and correct people, correct people who have done things that they thought were the right thing.

They thought they were doing the wise thing.

As it turned out, they were not.

This is not one of those times.

This gentleman has constructed a very appropriate mix, if you will.

In our world, we call it an allocation structure, or a portfolio allocation, where you're taking different pieces that don't seem to be the same, because they're not, that may not appear initially to be connected, but they are, that may actually, in some cases, look like they're in opposite directions, because they are.

And when you mix them, you end up with a very, very reasonable result.

This gentleman Is not an investment pro, please.

He's just done a great job.

He's done a very, very, very good job of balancing risk and reward, income and growth.

He has put together a portfolio that fits for himself and his wife.

My hat's off to you, sir.

Again, it is often my job, sometimes reluctantly, but it is often my duty to, at least with great clarity, correct people, allow them to see the errors of their ways.

This is not necessary here because you have not erred.

You have put yourself in a very, very good position.

I very much appreciated your email, not just for the kind words, but for the thoughtfulness that you have clearly put in to creating this investment structure.

Admittedly, you have a relatively modest sum to work with.

You are making the most of it.

And again, my hat is off to you.

And I use this as maybe an incentive for some of the rest of you out there who are saying, "Gosh, I would really like to have somebody "get a second opinion, look at how I've chosen my investments, "but I'm a little nervous."

Don't be nervous.

Perhaps you'll have the same result and you'll get an attaboy.

Perhaps there are things to be improved.

And isn't that the idea?

Wouldn't that be a benefit to you?

So my respect to this gentleman and my encouragement to all of you.

Don't hesitate.

Second opinions don't have to be painful.

Megan, quite wonderful.

Quite wonderful indeed.

Let's see if we have another wonderful question that we can answer.

- Our next question asks, Can you recommend a gold IRA?

I have an inherited IRA that I'd like to roll over into a gold IRA.

Thank you for your help.

- No.

The whole gold IRA... it's in my world as a professional advisor It's almost insulting.

Because it is a marketing ploy.

It is employed by companies who want you to buy their gold.

And when I say their gold, almost inevitably it will be gold coins.

And almost inevitably you will be paying way more for the coins than they're actually worth.

And the term gold IRA, if you go through the IRS code, if you go through any of the regulations that govern IRAs, you will not find the term gold IRA.

It does not exist.

It doesn't need to exist.

It doesn't need to exist.

IRAs are not one type of investment.

An IRA is an umbrella account that allows you to invest in a remarkably broad and diverse menu of investment options, including gold coins, silver coins, including gold and silver bullion, if you wish, including real estate, including...

..I bonds... My apologies...

Including tips, including CDs, including structured notes, things that we just talked about moments ago.

All of those are available under an IRA and thousands of additional options.

Gold happens to be one of them.

Why do these companies want you to believe there is a gold IRA?

It is a control issue.

Simply put, if you call up any major financial institutions, say you would absolutely insist on having a gold IRA, they will turn you away because they don't exist.

But if you call up one of these companies who are graciously offering you the opportunity to have a gold IRA, they will welcome you with open arms.

And then they are prayerful that you never are able to leave, because you will be unable to find a gold IRA anywhere else.

Now, is investing in gold using an inherited IRA a bad idea?

No, not necessarily.

If you're going through one of these companies that does millions and millions and millions of dollars of advertising on TV and radio on a daily basis, it's likely a bad idea.

You're likely not getting a good investment.

The cost structure is not likely to your advantage.

But is gold potentially a decent investment?

The answer is potentially, sure, and it's available through an ETF structure that's very inexpensive, very reliable, very liquid and not overpriced.

And it's available inside an IRA, not a gold IRA, an IRA.

So that if in the future you want to add something different to it, maybe balance some gold with some stocks or with some bonds, some real estate, some whatever, you can absolutely do that all within one IRA.

That not 11.

One IRA!

Again, a little snarky on my part.

My apologies not to you.

It's not your fault.

You're asking what you thought was a pretty reasonable question.

But in our world, in the professional world, it's not a pleasant topic, simply because we've seen too many people hurt, and we're not in the business of seeing people hurt.

Megan, can we help our next emailer?

- I surely hope so.

That's always the goal.

This one says, I have about $100,000 in a fund I bought in the '90s at $20 to $30 per share.

For the past several years, it's been hovering around $80 to $100 per share and going nowhere.

I'm in my 70s and I don't need it.

I'm wondering, Should I sit tight?

Should I get out?

I'd like some growth.

But are there capital gain issues?

Thank you for your help.

- Oh, very good.

30 years, and roughly speaking, from $20 to $80...

So roughly speaking, we're looking at somewhere in the $25,000 range as a cost basis, $75,000 of capital gains.

So if this gentleman decides to get out in some way, shape or form, liquidate, the tax on 75,000 - in the arena of 15,000.

Uh, my heart hurts.

That just doesn't seem like that's the direction I want to go.

If you wish to avoid that, you have a number of options.

The first is do nothing.

Now, admittedly, and, Megs, if I got this wrong, make sure you talk over me.

I think he said he was 70 years old.

So if that is the case, he's very young.

So the first option is to simply leave it as is.

And when he passes away, his beneficiaries will inherit it and they will owe no tax whatsoever, because of a stepped up basis.

But that's a long way off.

Wouldn't be my first choice.

Second choice is the potential of saying there are a number of nonprofits that I'd really like to support.

Could be my church, it could be Folds of Honor.

It could be Laughing At My Nightmare.

It could be PBS39.

There are lots of options where you can contribute shares of your funds, where you don't liquidate them, you contribute $10,000 worth of shares.

Now, for you, that's $7,500 of capital gains.

For a nonprofit, it's zero.

They pay nothing.

So you need to look carefully at your philanthropic activities, the organizations you're already supporting.

And maybe you can find a way to get from point A to point B without paying any capital gains tax at all.

And the nonprofits benefit.

You benefit.

The only person that we're kind of cutting out - the IRS.

And I'm OK with that.

Cutting out the IRS?

Let me think.

Oh, no, I'm pretty much OK with that.

So that's the second option you can look at.

A third option you can look at - there may be someone in your life, it could be a child, it could be a grandchild, could be a parent.

I mean, you're 70.

Your mom, your dad could still be with us.

Both of them could still be with us.

I'm not sure about your grandparents.

Whatever.

Bottom line is, there may be someone in your life that you care about that maybe you'd like to help.

Perhaps it's a grandchild in college.

Their tax bracket is very low.

If you gift a portion of these funds to that person, the fund shares - not selling - gifting the shares and allow that person to sell those funds...

They may very well be in the 0% tax bracket.

How cool would that be?

You may even find that there's someone that you've been supporting right along.

Maybe it's to the tune of - I'm picking a number - 10,000 bucks a year.

So over the next ten years or so, you could be gifting them shares.

They sell them.

They pay zero tax.

You didn't have to sell and pay lots of money in tax.

And the overall effect is that we've saved 25...

I'm sorry, $15,000 of taxes.

That's a lot of money.

That's way better than a sharp stick in the eye.

So there's at least three different ways there that you can avoid paying the capital gains tax.

Allow it to stay in your estate, gift it to nonprofits in pieces or in total, and gifting it to somebody that you care about that you wish to support in any way, shape or form that's in a lower tax bracket, that would pay a lower capital gains.

I hope I helped.

Speaking of helping, I hope you learned something from tonight's show.

I hope tonight's show had at least a couple of ideas that you went, "I'm not sure I knew that.

I think that's useful for me."

If that isn't the case, if you're saying, "Gosh, I think I knew most of that, "It really didn't apply to me," We want our answers to apply to you.

We want our answers to be the most relevant answers they can possibly be to you.

And how do we do that?

You send us an email.

It's pretty simple.

They all come to me.

They go through my organization.

We have wonderful financial advisors who will reach out to you very, very quickly and get you the information you need.

There's absolutely no cost.

So hopefully you'll be part of a future More Than Money show where we answer your question right here.

Even if you're not, we hope you'll return next week when we're back in the studio to answer more of your questions right here on More Than Money.

Goodnight.