Hosts: Judi Sanborn, CFP®, AIF® and Nancy Hecht, CFP®, AIF®
It is an Ask the Expert weekend on News 965 and I want you to know it is Central Florida’s oldest and largest independent firm of certified financial planning professionals is the Certified Financial Group in Altamonte Springs. With us today we have two of the certified financial planning professionals with the Certified Financial Group. We have with us Judi Sanborn and Nancy Hecht. Hi.
Good morning. Happy New Year. Since I haven’t sat in here since the year new year.
Yeah I haven’t seen you either. It was nice to look up and see that smiling face.
And Nancy you too.
Well good morning.
How are you?
Good. Nancy, Judi in case anybody may be new to this program what do you take calls about?
We take calls about 401(k)s, your pensions, retirement planning, your stocks, bonds, life insurance, long-term care insurance. I need to get Joe’s mantra he does that thing well. Also retirement issues and concerns that you have questions about right now. That’s what we’ll take your calls about.
<Inaudible> here is the telephone number 844-220-0965, 844-220-0965. Or you can send us a short text on your mobile device that number is 21232, 21232. Of course if you want your voice to become part of the program you can go to the News 965 app and use the open mic. Yeah it is a new year for you Judi.
And it is a time — Happy Valentines Day weekend for you.
It’s Happy Valentines Day, it’s happy Presidents day, it’s a pretty big weekend.
Yeah it’s a big weekend for celebrations.
You know before we get going and this will lead into probably the celebrations is it me or is Saturday a bad day for driving in Florida. Or are people more crazy around the wheel in Orlando on Saturday.
I think it is that we have a lot of visitors that are unfamiliar with our roads. So consequently they don’t know where they are going and all the construction on I-4 and do you know this probably an old statistic, but at one point I heard that 10,000 people a day move into the state of Florida. I always add to that and they all drive cars.
Yeah. Yeah I’ll tell you the worst is in Broward County.
It is crazy.
Yeah I thought traffic there was much much worse than it is here. Especially when you see a big old Cadillac.
Everything is relative so this is just a quick aside and then we should get to what we are here for.
Wait a minute because I just heard Nancy talking to you when she said she’s going down to <Inaudible>.
I beg to differ I think I drive is the worst in Florida.
Well now that’s true, that’s true. But we have a <Inaudible> tonight. So that will be a nice celebration.
So speaking of Valentines Day is there any question this weekend, does money kill romance?
Right. The answer is no. It shouldn’t. So the way that you visit about it has a lot to do with whether it’s going to kill romance or not. But financially disagreements are the number one predictor of divorce. That’s significant. So that tells me you should be visiting about money. We always think marriage is about love, which of course that is a very major component of it, but marriage is a business partnership as well.
Oh definitely, definitely.
So if you don’t talk about money at the beginning of a relationship, a serious relationship, and understand what your values are and how they may differ. Then you marry and you find out one person is a spender and the other person is a obsessive saver you are going to have some significant issues. So I have some myths that can be a little bit dispelled and one of them is what we are just talking about, and talking about money kills romance. I thought this was interesting. When you choose a life partner it could be the most important financial decision in your life.
I can see that, I could see that. I mean you bring with you all the baggage of your childhood and whatever your parents and your family went through and the lessons that you’ve learned.
Versus what the other person is coming to the table with.
As a matter of fact this morning on Fox they had a couple that they were interviewing and one of the neat things they did was they spent from each others checking accounts for 30 days. They only spent from the other ones checking account.
They were — did weird things like hand cuffed each other to each other for 24 hours —
Oh my goodness that’s kind of <Background Noise>
Nancy made a good point. Sometimes I ask people when I first meet them to tell me what they learned about money growing up in their families. Because that can tell us as financial planners a lot about their view of money. Because everybody has an emotional relationship with their money.
It’s not purely objective. For a couple to understand what they learned in their families growing up, as Nancy indicated, that’s going to bring all of that to the relationship. So that is very important. Now here is a couple of myths I think people should really be aware of. One is, and this has happened recently with a client of mine, you are legally required to put your spouses name on the deed of a home, and you are not legally required to do that. My husband is an estate planning attorney and we — I was telling him what I was going to talk about and he, being an analytical person told me there is difference between the deed to the property, the mortgage and the note.
So if you come together to buy a property at the beginning, then yes you are required to be on the mortgage, but one person might be on the note. The bank would require you to have both of you on the note. However, if you own a home, you are single say, you own a home, you get married and you decide that you are going to put your spouse on the deed but your name is still only on the note. It is very important to be aware that one: You cannot do anything with that property without that person who is on the deed’s permission, and you are the only one who is going to be financially liable for the note. So lets say in simple terms the scenario I just described is one spouse is responsible for the debt, but both of them own the property equally.
And I had a situation where a client wanted to add her daughter to her deed, and she did not realize that she would no longer be able to do anything without her daughters permission with the property. She exposed the property to lawsuits if her daughter were to get sued, now her daughter owns part of the property. So if you are thinking about adding your children perhaps for the purpose of passing it on, bypassing probate, then there are other ways to do that and you should seek legal advice in order to do that properly and not just necessarily add somebody to the deed of your property.
So a transfer on death designation in that case would have been better to have the daughter as a successor owner as opposed to a current joint owner?
Correct. And there is a lady bird deed that an attorney can draw for you that does not make that person a joint owner, so they have no responsibility or rights to the property while you are living. But when you pass away it passes directly to them and bypasses probate.
Judi Sanborn and Nancy Heck are in the studio live right now and are available for your phone call at 844-220-0965, lets talk to Steve in Duran. Hi Steve.
Good morning. What is your question.
Here is my question. I’m 75 years old, I have four children, I bought some biotech stock about 10 years ago, very cheap, less than a penny a share. Now that — they made a major discovery, the stock now is in double digits and my wife and I don’t need the money. I want to transfer, if I can, to my children, because I don’t need the capital gains. Can I just transfer lets say 100,000 shares to each one of my children? That’s my question.
Okay well you can do that. My first question would be Steve 100,000 shares would that put you over the gift tax threshold or not?
Oh yeah. Oh yeah. Definitely. Yeah. Yeah. Yes.
What is your thought process. You want them to eventually have this for their future, you want them to be able to use the value of this stock now anyway they wish? What are you thinking?
Or are you just trying to get it out of your estate.
I just want to see if I can get it out of my estate because — I mean this thing has gone from like 2/10 of a cent to almost $10 a share.
Okay. Alright Steve —
It’s just one of those <Inaudible> deals that happened and I got this money and my wife and I don’t need it, we are on the — kind of on the downside of life.
Oh my goodness you are only 75. Yeah you have at least 15 years left if not more.
Well lets put it this way we are in a position right now, debt free, nice steady income and this just came out of the blue. We had no idea this was going to happen, one of the major pharmaceutical companies came in and bought this company and here was this blue bird.
Okay so if you take the stock that you own currently and you re-title it transfer on death afforded to each one of your kids, and they receive when you pass they will get the step-up in basis.
So they will inherit it at what the higher market value is, versus the pennies that you paid for it now, that there is a capital gain situation that if you just gift it to them that they would be subject to. If they inherit it they get the step-up. So that’s why I was asking what’s your thought process about giving them the stocks now.
Well I also have nine grandchildren can I do that to each one of them as well?
Well you can but I think you should consult with legal counsel for that because there is a generation skipping law. When you gift property, the property doesn’t get the step-up in cost basis.
So if there isn’t a need for you to do it right now then I think Nancy’s suggestion is a good one because when you — when somebody inherits property then they get what Nancy was referring to as a step-up in the cost basis. So you bought it for 2/10 whatever you said a penny a share, lets say, and when you pass away perhaps it is worth $10 or more. Then your children when they inherit that their cost basis would be that $10 a share. So if it appreciated after they inherited it to $12 a share, their gain would only be that $2. Does that make sense.
Yeah. Okay. Okay. Yeah. I think I need to sit down with somebody.
And see what the best way to accomplish what you are trying to accomplish might be.
So you want to find a qualified estate planning attorney Steve.
If you need a referral to one then please feel free to call our office, we are closed on Monday because of the holiday but feel free to call Tuesday.
What’s the telephone number?
<Inaudible> I just go to the website because everything is there.
Yes and if you go to financialgroup.com you can get — request <Inaudible> about us and all our services.
And you can make an appointment through the website if you’d like to do that as opposed to making a phone call.
Judi Sanborn and Nancy Heck are in the studio. You can call them right now at 844-220-0965, or text at 21232.
This is On the Money brought to you by the Certified Financial Group in Altamont Springs. In the study Judi Sanborn and Nancy Heck, both certified financial planning professionals. The disclaimer says it doesn’t reflect the opinion but you know it should.
<Inaudible>. Hey listen I was just on the website there and I was looking at financialgroup.com and this weeks must read and it was a refreshing thing to see. Especially after — Nancy I must admit I went and looked at my 401(k) and my value is down about six figures.
So I appreciate you saying that your value is down.
I was going to say I lost almost $100,000.
I know. If you have not sold anything, you have not lost anything. A lot of people had 401(k) contributions built in <?> yesterday and if the value of what you have, is quality and it is down, then you were able to buy more shares then you did last quarter, or last month. Accumulating shares is the name of the game. The more shares you have, the more dividend paying items you will have when you retire.
Yes. The beauty of a 401(k) plan or any systematic investment program is that when the market is down as it has been, you are buying in at a lower price. So that benefits you when the market comes back. Which inevitably it will, believe it or not. We always forget. But Kurt had reference our website, this weeks must read and it is The Three Reasons to Not Sell After a Market Downturn. So we tend to sort of panic when we see the market down as much as it is. But if we were going to sell and we could have known that this was going to happen, obviously, that’s the ideal. You would have wanted to sell before, but to sell now unless it is absolutely necessary is — you have not actually experienced a loss if you don’t sell. I have a statistic that I think is really important, I don’t particularly like using statistics. But the <Inaudible> reason we won’t know this until hindsight. But the current bull market may have ended in May of 2015, and it began on March 9, 2009. So if it ended in May of 2015 that means it has lasted approximately six years. The average bull market period since 1929 has lasted two and a half years. So this is a pretty protracted bull market and it was due, it was due for a correction. The possibility we’ll go into a bear market, we don’t know that yet. Market is down 11% in the last 12 months and theoretically the definition is down 20%. That hasn’t happened yet, maybe some asset classes I think may be down about 20%. So we were due, number one, I know that doesn’t make anybody feel a whole lot better. The longer the bull market than the bigger the correction is going to be <Inaudible>.
Well and if it goes back to normal on a two to three year cycle then we are not looking that far down the road before things turn around.
Judi Sanborn and Nancy Heck are available for your phone calls right now. They’ll take your calls about your 401(k), your IRAs, rollovers, stocks, bonds, mutual funds, anything regarding your pocketbook issues at 844-220-0965. Or text us at 21232.
It’s an Ask the Experts weekend on News 965 WDBO. My name is Kurk and I’m happy to be with Judi Sanborn who is a certified financial planning professional, yes she is, with the Certified Financial Group and so is my good friend Nancy Heck, author of the Hecked Affect and A Man is Not A Plan. She is also here —
I think Judi is more professional than me though.
No. But she makes good reading.
Nancy, speaking of Nancy Heck, Nancy and your colleagues in East <Inaudible> you two are having of your famous Social Security boot camp planning strategies coming up.
Yes we are. It is this week on Thursday, the 18th from 11:30 until 1:00. We still have room for a few more people, so yes it is In the daytime 11:30 in the morning until 1:00 in the afternoon. They could go to our website financialgroup.com and click on seminars and make a reservation. Or they can call and leave a message for Tiffany Mogley at 407-869-9800.
And Judi this is just one of the many workshops that you all put on.
It is. It is. The upcoming workshop Gary Abley and Jodi Murphy who is an estate planning attorney are going to be doing Countdown to Retirement on Tuesday, March 8th from 6:00pm to 8:00pm. Gary again actually is hosting two more seminars. One is Financial Basics for Life, Strategies for Success and that’s going to be on Saturday, May 14th from 11:00 to 1:00. Then the next one is When Can You Retire?, Know Your Number on June 25th which is a Saturday from 11:00am to 1:00pm.
We actually also have a couple of other events. We have our annual shredding event —
That is coming up on April 16th. So the day after tax day. And our spring concert that we sponsor every year which is going to be on May 7th. There is a lot going on the first half of the year.
And for the Shred-a-thon we have a massive truck and people can dump their stuff in themselves, watch it get shredded. But everybody is limited to two banker box size containers of shredable stuff.
A nice way to get rid of your old stuff.
We’ll let you know when that gets closer. Do we know who is going to be in the spring concert this year?
It is a tribute to Billy Joel and Elton John.
That will be fun.
Always a fun time.
Yeah. The kids are going fast.
Go to the website financialgroup.com. Financialgroup.com you can find out more about the workshops as well. Which is a great way to come on our and meet these super nice people from the Certified Financial Group, 25 plus years these guys have been doing this stuff here on the radio, 30 plus years here in Orlando.
And we are only 50 years old, so I don’t really understand that.
I figured that out. <Inaudible> Joe Burt, he looks like he never aged <Inaudible>.
We were all child geniuses.
So if you’d like to speak with these child geniuses and psychologist as well because just in a minute we are going to talk about some of the biggest psychological traps. Here is the telephone number to call 844-220-0965. If you’d like to talk about your 401(k), an IRA, perhaps, or a rollover if you are leaving your job what you can do with it, long-term health care which is very important these days.
Real estate, anything financial actually.
844-220-0965 or text us — send us a short text from your mobile device at 21232, 21232. What are some of the biggest psychological traps for investors?
Well one of them is hindsight is not foresight, kind of like that <?>. Hindsight tends to make us over confident in our foresight. When I actually meet with my clients we have a very good program that evaluates the mutual funds and exchange-traded funds that we hold in our portfolios. I try to remind them and I also use it to remind myself that the evaluation that’s being done is based on historical.
Nobody knows what is going to happen in the future. So that is something else. If somebody comes to you and says that they have something that is guaranteed to return some really unusual rate of return I think you should be very skeptical because the best of investment professionals, the ones that are actually manage the mutual funds and exchange-traded funds don’t know. That’s the bottom line. We don’t know what the future is, we don’t really know. We think can’t base things on hindsight if you will.
Just one of the many <Background Noise>.
We had a text as well —
We’ll get to that in just a second but first lets talk to Jordan here on the cell. Hi Jordan.
Hi. I would like to <Inaudible> I would like to talk about what is the best option for me for maybe mid-term to long-term financial investing, something safe, something that’s not, that I wouldn’t have to worry about shares and have to worry about what’s going on in the world, something that is more steady.
Okay well first of all you are 19, that’s what he said. Alright. I absolutely commend you for even thinking about this at 19 years old. So that’s very commendable. Are you working? In school? What are you doing?
Right now I’m working for my granddads business, at the same time I’m going to school for mechanical engineering.
Okay and does your family business have any type of a retirement program that you could participate in?
Um, no, no most of my parents they are <Inaudible> they don’t have very much belief in investments and stuff like that.
Okay well if just for our other listeners if you are a young person and you are employed and your company provides any type of a retirement program in which you could participate, then we always encourage you that’s the first step is to participate to the extent you can. Now if you have some extra money that you might want to invest there is Roth IRAs that you could choose to invest in, and I always recommend and Nancy can add to this that I encourage people to go to Vanguard, it is a low cost option, and choose one mutual fund that incorporates both stocks and bonds, and you are very young. You could afford to be aggressive. Now you did say perhaps something that was stable, so I would want to know what your definition of stable is.
Stable as in I don’t expect any income obviously, I do not expect — I don’t expect to — if I were to invest my money not to want to retrieve it in just a couple of years but stable as in it increases steadily without having to rely on basically other options of <Inaudible>.
Alright so Jordan you just said two years, my rule of thumb is if you are looking at having money work for you 24 months or two years or less than you are really talking about saving and you are not talking about investing. So if you are looking to try and build up what I call, lets call it the sock account, some type of emergency money, then that’s savings. You have to either look at a savings account or a money market account. Anything that you can afford to work for you longer than two years, and because you are working and you can do some type of traditional or Roth IRA, the biggest asset you have right now is time. 19 years old if you save $3,000, $5,000 a year and <Inaudible> retirement account you are going to be worlds ahead of anybody.
So Judi had mentioned Vanguard if you are looking for something that is somewhat conservative and I know we hate mentioning specific funds, but they have a consumer staple fund that is really nice. So you can look into that for anything that you can afford to allow to work for you for more than two years.
You will also — to add to what you have to your advantage is you have your human capital and that is your ability to work and command and income, and that’s huge.
You mentioned time. That’s one thing —
Yeah he’s 19, I mean — <Background Noise> looking at this right now.
Kudos to his dad actually.
His dad, his dad is one smart guy. I got to — that’s all I’m going to tell you. His dad —
You must know who his dad is.
No his dad put him up to this, I know that.
Oh you think so.
Yeah his dad wants him to get some knowledge, I can tell you that.
But kudos to his father.
Jordan feel free to call our office if you want a little bit more information. <Inaudible> complimentary consultation for everybody.
There you go Jordan. There you go Jordan. But Judi time. Tell how much if he put away x amount of dollars a month he could be a millionaire by the time he retires.
Before he retires.
Yeah before he retires.
Okay. Want to be a millionaire Jordan? Listen to your pop and Judi and Nancy. Alright.
Thank you for the call.
That was excellent.
9:47 and Dave Wall is in the news center coming up in three minutes he’ll tell us all about tonights GOP debate and there is some stuff going on in the democratic side too as well. I think the tie in Nevada, I don’t know we’ll find out more about that coming up. That’s unusual. Lets see the telephone is 844-220-0965. If you’d like to talk with Judi Sanborn or Nancy Heck from the Certified Financial Group. How would somebody get a hold of you for one of those complimentary consultations?
They can call the office 407-869-9800. You can go to the website financialgroup.com. There is a opportunity to click for a complimentary consultation and that sends an e-mail to our office and one of the financial planners will respond to you.
My income is going to increase substantially and there will be a lump sum, I’m not sure how to handle this. How does somebody handle a lump sum.
It sounds like a signing bonus or something for a new job.
Well I think that is hard to answer without knowing a lot more about this person’s circumstances. So I would encourage you to call our office and we are happy to just visit with you on the phone about that if you would like. But there are lots of options depending on what your particular situation is at this point.
I mean lump sums like we had the whole big lottery thing, coming into “sudden wealth” could be <Inaudible> for a lot of people.
Lets talk to Vicky.
You are with Judi Sanborn and Nancy Heck, go ahead.
Thanks for taking my call. I just got divorced I’m going to be getting a QDRO with about maybe $400,000 and I don’t know where to put it and what to do and I’m in my 50s and may need retirement money down the road.
Okay. Well you may be for our listeners a QDRO is a qualified domestic relations order which is created by virtue. As you’ve indicated you’ve gone through a divorce and I assume your husband had a 401(k) plan.
401(k), 403b and some other things.
Some type of retirement program. So they’ve created basically an IRA for you so that you can —
Um I have to get an IRA I guess.
Right, right. Correct.
You are going to roll that into an IRA which will preserve the tax deferred nature of that, and help you plan as to how you want to invest it for your future retirement.
I encourage you to contact us if you would like to and one of us can meet with you and talk with you about what your options are and what our recommendations are, or at least contact a financial professional.
Vicky it is necessary that you do a little bit of planning. You can open up an IRA and just have the QDRO money transferred into it and let it sit in the money market, so it is not invested, it’s just in cash. So you are moving it per the legal transaction; however, you are not tying yourself to any decisions until you can do some planning for yourself first.
What is the telephone number for the Certified Financial Group 407-869-9800. Okay thanks for the call Vicky. When we come back we’ll talk to Patrick about rolling over a 401(k) and more. Alright not a lot of time left in On the Money today. So lets get right to it. Patrick is on the line, he wants to talk to Judi and Nancy. Good morning Patrick.
Good morning you guys, how you all doing.
Thank you for having me on the show. So I had a couple of quick questions. I am getting ready to leave my primary job right now, I started a small mechanic shop and I am trying to figure out what to do with the 401(k) that is there now. I have read a couple of options about small business people having SEP-IRAs and such like that. But I didn’t know if there was one that was particularly better than the other for any reason.
I think you are asking two questions it sounds like. What to do with your former employer 401(k), and then what options you might have for your new business?
Well first of all with your former employer 401(k) you can roll it over into your own IRA so that you preserve the tax deferred nature of that money. For your new business I really encourage you to either come in and visit with one of us or at least go to a financial professional or to your CPA, accountant who may be helping you organize your business. Because — and they can tell you what your best options are for the type of business that you are opening.
Patrick hang on you are going — we’ll finish this private conversation off the air. Hang on. Real quick question from the text board. I like the idea of investing in ETFs, but concerned about the liquidity and the risky investment product as a whole. Your thoughts?
Well first of all for the listening audience ETFs are exchange-traded funds as simply as I can help you understand that they act as a — or they are like a mutual fund in that they hold a collection of stocks or bonds, and they are most often passive. Meaning that they follow an index. So no one is actively managing them. Whereas there are passive mutual funds and actively managed mutual funds. Exchange-traded funds trade like a stock whereas a mutual fund doesn’t get value until the end of the day. So it is really a matter of what you are trying to accomplish. People like exchange traded funds often times because they do trade throughout the day and one of the questions was a concern about true liquidity. So I think that would depend on what type of an exchange-traded fund you choose. There are some bond exchange-traded funds and that’s probably what you read about, that have some — they don’t really have limited liquidity but the way that they value their holdings can often times not be accurate. That’s the best way I can tell you that. So if you would like to call the office and visit further we’d be happy to discuss it further with you. 407-869-9800.