Hosts: Aaron Bert, CFP®, AIF® and Joe Bert, CFP®, AIF®
Well Happy Fourth of July weekend here on news 96.5 WDBO. It is an Ask the Experts weekend and this is On the Money brought to you by Orlando’s oldest and largest — Independent. Firm of certified financial planning professionals that being the Certified Financial Group in Altamonte Springs. Yeah we are live in the studio this independence day weekend with Joe Bert the Oracle of Orlando and his brother Aaron Bert is in the studio.
Good morning.
As well today.
Back in the saddle.
Two of the 12 certified financial planning pros. The rest of them have the weekend off I would imagine. So how are you guys doing?
Good, good to be here. Thank you.
Nice to see you both.
Nice to be seen.
In case anybody is knew to the program Joe what do you all take cares about.
Well Aaron and I are here this morning to take any questions that might be on your mind regarding your personal finances. As we say in our ad unfortunately our educational system doesn’t prepare us for these life after we stop getting a paycheck. However do we turn that money that we’ve accumulated over our lifetime hopefully into an income for our lifetime. What do we need to do now so that we don’t look back five or ten years from now and say gee I wish I would have known, or I’m sorry somebody didn’t tell me that. That’s what we do day in and day out, as fee planners at Certified Financial Group, we advise our clients as to what strategies they need to implement, what changes they should make. So we are here to answer questions that might be on your mind about your personal finances. Often times it revolves around questions that you might have about stocks and bonds and mutual funds and real estate, long-term health care, IRAs, annuities, reverse mortgages, life insurance, all that and more. So Aaron and I are here to take your calls but as Kirk said we are here live in Orlando. So just pick up the phone and dial —
844-220-0965. We <Inaudible> live, live, live because some people choose to record their shows and go out of town and not be here.
But we are here live.
You guys are troopers, you are always here lives.
Troopers.
I can’t remember the last time you recorded a program.
Nothing better to do on a Saturday morning than be here with you.
As good as it gets.
844-220-0965. 844-220-0965. Or you can text us from your mobile device, that texting number is 21232, 21232. Or if you want your voice to become part of the program you could use the open mic feature. You’ll find that on the news 965 app. I think I had a text here, lets see maybe hold on. Here it is. Can you answer a question about a roof?
Oh no.
That’s us.
No.
I just spent enough money on roofs lately, <Background Noise>
Going on now during the show.
What we are going to talk about this week are some ways to become financially independent. Also some surprises that may sink your Social Security check. So <Inaudible> Social Security you might want to get a heads up on that. Listen it’s independence day weekend and I can’t stress how happy I am to see you Joe Burt and Aaron Burt in the studio with me this weekend. 40 years you guys have been doing this in Orlando.
Yep. Operating our 40th year, how about that.
You haven’t aged a bit though Joe right.
I can show you some pictures and change your mind.
844-220-0965. So I could think of a cool way to become financially independent and that’s to win the lotto.
Yes.
But chances of that happening are like what?
Depending on which lotto you’re playing. The odds are different on each one.
The financial independence I guess we’re going to talk about.
Ways to become financially independent.
There you go.
Well financial independence really starts with what your definition of financial independence is. For most people they don’t really have a concept of what that really means. To me financial independence means not necessarily having to work but knowing that you could stop working if you wanted to, or being able to buy the things that you want when you want without having to borrow — or having a plan basically in order to live the life that you want to live. So first step to financial independence is to visualize what that really means to you. Then come up with a plan to do it. That’s one of the things that we do day in and day out when clients come to visit us and they don’t really know what that means to them. So we sit down and have a long conversation to plan out with financial independence. Usually that revolves around retirement, but it may revolve around other things. What are some other things it may revolve around?
Well you talk about retirement it means a lot of things to a lot of different people, and when we do planning we get very granular as they say with our clients. We want to know what it is you want to do, and often times this is the first time that couples have sat down and talked about what that means when those paychecks stop and what they want to do with those remaining years. What does travel mean? What does vacations mean? They want to buy a beach house, a house in the mountains. They want to see their grandkids more, they want to get involved charitably. They want to downsize, they want to upsize. They want to do the things that they’ve always dreamed out, and never really put it on. So what we do is we start beginning to quantify those things. What is it going to take to do that and do you have the resources to do it? One of the real tragedies in life is having the ability to do that and not realize you have the ability to do that and you wake up one day 89 years old in a nursing home and say gee I could have done those things that I want to do and then never did them.
Yeah that’s one of the questions we always ask our clients when we are doing our interviews is what do you want to do? So you told us you have children and they are going to go to college. But then at the end we say well what do you want to do? So yeah you want to travel, you want to go around the world, you always wanted to take an around the world cruise. Or do you want to get an RV and travel the west? I mean what it is that you — and their eyes kind of light up and you know I never really thought about that. Or one of the spouses then speaks up and says I’ve always wanted to do this, or always wanted to do that. So part of our job is to put that stuff on paper. So that’s part of becoming financial independent and visualizing those things, getting them on paper and starting to play around there.
You mentioned that people come and talk to you, that’s probably part of that free consultation. But what questions do you hear most or most often from people when they come and talk to you?
I think the bottom line question is am I going to be okay? Will I be okay? What that means will I have enough money to last me my lifetime to allow me to enjoy and maintain the lifestyle that I want to do, and to do the things that you want to do, above and beyond what you’re currently doing? Right, or even just maintain your lifestyle. Some people just want I’m happy where I am and happy with my home, I’m happy with the lifestyle I have, dining out when I do, taking a vacation, I just want to maintain that. The question they want to know is I’m going to be okay? The toughest plans that Aaron and I work on are clients that are five to six years in retirement and come to see us for the first time and never have done any planning. What happens is they do what I call back of the envelope financial planning. They have calculated what they’ll get from Social Security and maybe a pension and they figure out what their weekly or monthly bills are and I’m going to be okay. Then the wheels are coming off five or six years in retirement it’s because they really haven’t done the number crunching. In fact, what the problem is today is you discovered this article I think this week Aaron, we’re trying to post this somewhere if we haven’t done it already, on these new online calculators.
<Inaudible> Money Magazine talking about the faultiness. Actually they — it was not only Money Magazine they also did one in the Wall Street Journal about the faultiness of the online calculators for financial planning that are out there, and how bad the tools really are because they are so general. They are meant to kind of give you a broad overview but there are so many different variables that go into financial planning that if you click the wrong button or make the wrong assumption and then you project it out 30 years, it makes a huge difference. So that’s why it’s important to work with somebody who knows how to pull the levers and make the correct assumptions.
Somebody who will sit down with you and look at you face-to-face and get really granular and kind of probe on these questions. As Aaron said these calculators are fine, the problem is when you are projecting 10, 15, 20 years down the road I like to use an analogy, it’s like shooting a rifle. If you are 10 feet away from your target, chances are you’re going to hit it. But if you are 100 yards, 200 yards, 300 yards and you are off by just a little bit you can miss it by a mile. That’s what financial planning is. It’s looking down the road and the more detail and granularity you get, and there’s that word again, but it’s important, in doing the analysis the more likelihood that you will know exactly what you need to do and where you are. That’s what we do day in and day out. We charge a fee for that, and the fee is a function of complexity which is time and so on and so forth. We’ll say what that fee is in a complimentary consultation. If you want to ask me a question I can talk to you.
Joe Burt and Aaron Burt are with Certified Financial Group let me give you their number. You could talk to them right now. 844-220-0965, 844-220-0965. 9:15 Dave Wall is coming up in five minutes. One of the big stories today Hillary Clinton has an appointment with the FBI Investigators this weekend. The terrorism in Bangladesh. We are on high alert this weekend because well obviously it’s independence day. Speaking of independence day we are talking about financial independence with Joe and Aaron. When you talk to people initially Joe and Aaron what do people bring you for that first meeting. I’m picturing maybe a box and it is filled with just about everything.
Well we would send them a letter outlining the things that we want them to gather. People always end up showing up with either a binder or stuff in envelopes. Or we’ve had people that have shown up with nothing, which is okay because then at the end of the day we’ll do the interview and then we’ll — if they want to move forward we’ll send them home with homework that they need to gather and send back to us in order to do the type of analysis that needed to be done. But people bring everything from debt statements to tax returns, to financial account statements to powers of attorney and wills and I mean anything you could think of basically we have seen. So there is nothing that you should — anything having to do with your financial life or how you want to live in retirement you need to bring to that type of first meeting.
There is nothing we haven’t seen, and nothing we haven’t heard over all these years. I think some people unfortunately are somewhat intimated by seeing a planner for the first time. Some people are perhaps a little embarrassed. But there is really nothing to be afraid of. We’re not going to belittle you. There’s nothing to be embarrassed about because it is what it is, we’re just here to help you. It’s like going to the doctor for the very first time and taking your clothes off. Doctors got to see what’s going on.
We need <?> your clothes off when you come to our office.
Not yet.
Oh gee.
Do you know why the doctor always made you turn your head and cough?
No we don’t want to go there.
Because he didn’t want you to cough in his face.
I never figured that out, I thought there was a connection there.
That makes sense.
You mentioned <Background Noise>. I thought there was a connection between the throat and the <Inaudible> I didn’t know.
But the doctor told me that.
844-220-0965. Call us at 844-220-0965. Alright you mentioned kids. Kids. I bet you
<Background Noise>
I bet you a paycheck that people come in and they are so concerned about their kids that they almost forget their own planning for themselves.
Yeah they have some folks that have this attitude that got to take care of the kids, and you do, but you wan to do it to your detriment. Because when you get old who is going to take care of you. What you don’t want to do is be a burden to your kids. So what we want to do is prioritize. That doesn’t mena that you throw your kids out in the street, by the same token you can get carried away with some of the things I think that folks do. That’s one of the things we do when we do planning. We ask — we talked about weddings.
Weddings and college and <Background Noise> cars, and
Bachelor parties and
Dinner.
<Background Noise> a lot of stuff.
Did you pay for your daughters wedding?
Of course. Yes.
Okay just curious.
No I did. Yep.
I didn’t know if that custom still goes on.
It depends, it all depends. Depends on circumstances.
I didn’t mean to put you on the stop.
No it’s okay. It’s fine. I was happy to be able to do it.
So part of that when they come into that initial consultation though and they bring in all these statements and then this is when we start answering questions about the things that are really kind of itching them. Because most people have a itch that needs to be scratched when they come to see us, and they have a <Inaudible> point and that’s something they want to discuss. Then we get into all the other things that we do and then a light bulb goes off well maybe I do need a little bit more in depth analysis of what we do. So one of the other items that we send people home with is what we call our blue form. Which is our — it’s our lifestyle form kind of what is what we call it. That basically is their expenses. It’s not a budget, but it — but we need to know what kind of lifestyle people have. So some people spend more on dining out or golf or whatever it is that they want to do, so that’s something that needs to be tackled and that’s usually in a homework item that we send people with.
The most common thing is we hear is when people bring that back said I didn’t realize we were spending this much money. When you get it on paper and you see what it is, it kind of opens your eyes. Then you have some discretionary expenses and things that you cut back on, some things you can’t cut back on like the mortgage payment and insurance. But it really is an eye opener for many people and it forces you to start to think about this stuff. The earlier you get started the more options you have, the more flexibility you have. But once again it’s never too late.
And is it me or are groceries going up in price too?
Oh yeah. The government reports that inflation is benign, it’s not moving at all. But just go to the grocery store.
The prescriptions are going up.
Prescriptions. Yep.
Goodness gracious.
Alright stick around. Here is the number if you want to talk to Aaron or Joe from the Certified Financial Group it’s 844-220-0965. 844-220-0965. We’re planning tomorrow —
Today.
It’s an Ask the Experts weekend on WDBO and this is On the Money brought to you by the Certified Financial Group and we are live this independence day weekend, kind of talking about your financial independence with the Oracle of Orlando Joe Burt is live in the studio along with Aaron Burt is with us as well. The telephone number to join us if you want to talk about your 401(k) or an IRA or a rollover, stocks, bonds, mutual funds, long-term health care, any pocket book issue. The number to call is 844-220-0965, 844-220-0965. Or text us at 21232. Got an interesting text here Joe. I heard a good way to protect my money is invest it in nice cars since they hold their value so well. Do you think this is a good strategy.
<Inaudible> cut it off there. The short answer is no. First of all in order to do that, in order to revalue on it. First of all you have to pick the right model and the right year, and then put it up on blocks.
Yes.
Put it away for 25-30 years and hope you picked the right — like an old Corvette,
Or a Ferrari.
Mustang.
<Background Noise> yes and most people don’t have the ability to do that. Unless you are Jay Leno probably not a good idea.
Well if you can pick what’s going to be hot in 10 years.
Well yeah of course. Of course that’s speculation. Nothing wrong with that. Be sure it’s insured, don’t be driving it around because the first time it’s dinged and it ends up on CarFax you can kiss your value goodbye.
That’s true.
Along with other things.
Lets flip the gears here. This is from the popularity of the <Inaudible> auctions and stuff.
Oh yeah sure.
<Background Noise>. Lets shift gears here.
A week ago the big news of course was Brexit.
Right.
The financial world was concerned about people are scrambling around. The news hit on Friday and markets plummeted and unfortunately many people, not our clients fortunately, but many people just on their own said man this is the signal, this is the time to get out because the world is coming to an end financially and I’m going to cash out now, and they cashed out on Friday when things were down terribly, and this week was the best week in 2016 for the markets. So if you made that move unfortunately you’ve suffered. This is why we see time and time again is that folks that get involved with their own portfolios they make these financial decisions and believe they can fly the plane through the storm, are often times end up hitting the mountain. I hate to say it but we see it regularly, people doing this for their 401(k)s, with their own investment portfolio. Believe they think they know — and we have to understand about investing. Investing isn’t speculating. I think his is where people get confused and we have access to <Inaudible> on our phones, on computers to make instantaneous decisions, often times emotional decisions. And we zig when we should have zagged. So the secret once again to long-term financial success we believe in investing, a well diversified with quality and the longer you will win and try to strip the emotions out. We are much — we are as much financial managers as we are emotional managers. Behavioral managers if you will, trying to keep people from jumping off the ledge at the wrong time. That’s what we did successfully this week and our clients fortunately reaped the benefits of that.
Those first two days Friday and the following Monday, -871 points.
And this week was the best week we’ve had in ongoing ’16. <Inaudible> recovery.
I am so glad I listen to you.
Well I’m glad you do to.
Joe Burt and Aaron Burt from the Certified Financial Group two of the 12 certified financial planning professionals with the Certified Financial Group. The phone lines are open right now if you’ve ever wanted to get through the number is 844-220-0965. Or text us at 21232, 21232. Anymore tips to become financially independent?
Yeah I got a whole bunch more of if we want to go through them. So the other ones — we talked about budgeting or lifestyle actually. So budgeting like I said is an important one that people actually need to go through the process and write down what their lifestyle actually is. We have people that come to the office and they put their own budget on a piece of paper. Then we hand them ours and they are like oh I didn’t think of that, or oh yeah. So they then get a visualization of things that they missed, or items that they didn’t think of that they need to include. So we actually — like I said we have our blue form. We can make that available for anyone who wants it to get an idea so they could start doing this on their own. If you want to e-mail our office at plan@financialgroup.com. Or go to our website and go through our online form and just say I want the blue form. You can give us an e-mail address we’ll shoot that to you via e-mail or we can send that to you in the mail. So if you are interested in getting our blue budgeting form that’s something that we have. Other ways for financial independence obviously is spend less than you earn, so this goes past the planning phase and how you can start accumulating wealth. So once you factor in your budgeting, you know how much income you have. And if you are spending more than what you’re making that obviously is not going to work for long-term financial success. So other things we need to think about building a safety net. Whether — if you are younger and you have children and you need to make sure that you have insurance to cover that, life insurance, or home owners insurance or automobile insurance. And having a savings account so that if you get laid off or heaven forbid you need to use your insurance that you could afford to pay your deductible, because if you can’t pay your deductible your insurance isn’t going to do you any good.
Some good advice.
I imagine you passed that onto your children too as well Joe.
I try.
Yeah. Alright, now stick around now. More is coming up with the Oracle of Orlando, Joe Burt, and Aaron Burt also from the Certified Financial Group. Listen, Carrie’s on the line. I’m going to ask Carrie to hang on. She’s had a question about her 401k. Her company is merging with another company and I think they’re merging 401(k)s or something of that nature and she wants to know what she’s got to do with that 401k. So, Carrie you’ve come to the right place. We’ll take your call next here on News 96.5 WDBO. Welcome back, it’s an Ask the Expert weekend on WDBO and this is On the Money brought to you by the Certified Financial Group, Orlando’s oldest and largest —
Independent —
Firm of certified financial planning professionals. 40 years and he hasn’t aged a bit folks. Just a few gray hairs on the sides of his scalp there. Hello, lightly receding, but he hasn’t aged a bit. He’s Dorian Gray. Okay folks, Joe, tell everybody what you take calls about.
Well, once again, Aaron and I are here to take questions that you might have regarding your personal finances. We’ll talk about your 401k, your IRA, mutual funds, real estate, long-term health care annuities, life insurance, reverse mortgages, all that and more. We are here. So, we’ve got a couple of calls, but there is a line or two open, so if you have any questions about anything that’s bugging you about your personal finances, want some information about what we do and how we do it, simply pick up the phone and dial.
844-220-0965. 844-220-0965. Or text us at 21232. We’ll get to them shortly. This is Carrie. Good morning, Carrie, how are you.
Good morning, hi, thanks for taking my call.
Good morning, Carrie. Thanks for calling. How can we help you?
Well, as I was explaining, my company recently merged with two other companies. They had us already do something with our 401k, which is either leave it, but I opted to roll it over into an IRA that I had with Fidelity already. Now then, the next step is I had a pension with my current company and they’re going to have us do something with the pension coming up here August/September.
Okay.
I just want some advice of what to do with my pension. I’m not real comfortable about rolling it into the same IRA. I don’t want all my eggs in the same basket, per se, so I’m looking for some options.
Okay let’s — I understand what you’re saying. The pension could and should be rolled over to an IRA to avoid the taxes, but let’s talk about this same basket idea you have. Now, you rolled this to an IRA at Fidelity Investments. Did you go to the office? Did you do it online? How’d you do it?
Well, I went into the office and talked to one of the people at Fidelity and he suggested that I roll it into the IRA and I already had — I had an existing IRA and a Roth IRA already set up. That’s where my 401k was established as well.
At Fidelity.
Yeah, at Fidelity. So, I just rolled over the one from my current company into the IRA and then my new company kind of started another 401k for me as well.
Sure. Now, I’m going to clarify something with you. It’s like when you went to Fidelity, it’s like walking into a supermarket, okay? Are you saying that you don’t want to shop in that supermarket or you don’t want to continue buying the same grocery item that you’ve bought in that supermarket?
The latter of the two. The same grocery item. I’m okay with Fidelity.
There you go.
<Background Noise> all my money in the same IRA, but is that okay to do?
Okay. Well, now we’re getting down to the point. Okay, so now you’re in the supermarket, which is Fidelity, and you’ve bought some things, you’ve got them in your grocery cart so to speak, and these are the investments that you currently have. The good news is that Fidelity, you’ve got the whole supermarket, so when you go back to the Fidelity office, you will talk about diversifying even more, in other words adding some more ingredients to your shopping cart. But, you can still shop in the same store as opposed to going down the street and going to Edward Jones or Merrill Lynch, or whomever, you can stay in the same supermarket. Fidelity is a huge supermarket for you to shop in. Now, the question is are you comfortable with the information that you’re getting from the guy that’s pulling the shopping cart?
For the most part, yes.
Okay, well that’s good. So, to answer your question, you can and should roll that pension over to your — to an IRA, and it can be the same IRA account because the IRA account can hold — that’s your shopping cart and you can put anything you want in that shopping cart that you can buy at the Fidelity supermarket. So, you don’t need to open a separate IRA.
Okay. Well, that’s kind of my question. Is there a maximum that you can have in an IRA?
No, there’s no maximum that you can have in the IRA. The IRA is basically like Joe says, it’s a holding — it’s an account type, and what’s in that account type — you can have one account and within that account you can have thousands of investments if you like.
Oh, okay.
It just really depends on what type of investments you want to have within that account. Now, each account is going to have a different strategy depending on who you’re hiring to manage it for you and things like that, but that’s a little bit — I think — above and beyond where we’re going with this conversation. So, the key is is that you’re happy with the service that you’re getting, that you’re happy with the information that you’re getting, and then more importantly do you have a plan for how much you need to accumulate and how long you need to continue to work so that eventually you can reach that financial independence that we were talking about earlier in the show? So —
Yeah, unfortunately no. I don’t have a plan. I’m <Inaudible> retirement.
Sure, well that would be the first step, whether you do that with the guy at Fidelity, or you want to come in our office and do that, or approach any other certified financial planning to sit down with you and start that road map for you so that you can get some of those questions answered. I’m sure you don’t want to work forever.
Right.
And you probably need to know how much money you need to accumulate so that one day when you want to finally not, you can bring home a paycheck.
To continue with my analogy here, Carrie, this is — so you’re putting ingredients in the shopping cart, but you have no idea when you leave the store what it is you’re baking, so that’s where the planning comes in. You’ve got to have a recipe. You’ve got to have the recipe and that’s what the plan is and that’s, unfortunately, what most people do is they start putting stuff in a shopping cart and they wake up one day leaving the grocery store, and they’ve got all these ingredients, I don’t know how they’re going to come together, and I hope they work. So, that’s where planning is so critical, and unfortunately most people don’t do it because they don’t know how to find the certified financial planner or they’ve gone to some advisor and they ended up buying some annuity and they think they’re set for life. And this is what we do day in and day out. So, we encourage you to come by our office, give us a call. There’s many certified financial planners in town, but deal with somebody that’s going to do this for a fee, not for somebody that just wants to sell you something. That is, in fact, the key. Go to our website, financialgroup.com, you can learn about what we do and how we do it.
Thank you Carrie. Let’s talk to Missy and then we’ll go to Jon in Melbourne.
Missy.
Hi, Missy.
Hi.
Hi, Missy. Missy, you won’t be offended if you knew that’s my cat’s name, would you?
No, not at all.
Great name. How can we help you?
I just have a question. I’m leaving my employment after 10 plus years and I have around just under 60,000 in my 401, and I don’t know if I should leave it with the company to handle it or transfer it over to Fidelity, or Vanguard, or something.
Well, since you have over $5,000, you have some choices. So, the first option you have, obviously, is to leave it at your current employer and have the funds continue to be managed there, or leave them in the investments that they’re currently in.
Okay.
Typically, we discourage that because many people as they work through life switch jobs and the last thing you want to do is have five 401(k)s at five different employers that when the time comes, you then have to work to consolidate all of those into one account so that you can start taking money out of them in some sort of systematic fashion. So, your option really is — so should you roll it into your next employer’s account, which is an option? So, your current employer has a 401k as well or you’re getting another job.
I don’t have a job lined up. I’m actually moving out of state.
Oh, okay. Okay. Yeah, so then if you’re — if you get another job, then you can always roll it into your new employer’s plan, or like you said you can roll it into an IRA either at Fidelity or at Vanguard, or at some other custodian that you seem to like. Chances are, it really depends on the cost and the type of investments that you have in your 401k, so it’s really hard to say one way or the other what you should do, but normally you want to take it with you just because it makes it easier down the road to manage it.
How old are you, Missy? Miss, how old are you?
47.
There’s a provision that people don’t understand between 55 and 59 and a half. If you quit your employer and you have a 401k, you may want to consider leaving it there because you have some flexibility in terms of how — eliminating the 10% early withdrawal penalty. So, that’s one of the things that we look at when you do planning; are you in that twilight zone and maybe it makes sense to leave your 401k there.
Okay.
Yeah, go ahead.
And I have one other question. Like, I listen to you lots of Saturdays in a row and unfortunately I’m leaving the state. But, if I were to find a financial planner, how do I do that out of state, not knowing anyone? I would feel comfortable going to your office, but obviously I’m moving. What would you suggest?
Well, at the risk of sounding self-serving, we have clients all over the country that we’ve never met and sometimes the relationship starts on a telephone and then we do a webcast or a Skype kind of thing. Or the relationship starts in our office and then folks move and then we maintain the relationship. Or you can go to financialplannerscfp.org.
<Inaudible> certified financial planners board that’s standard that you can find a CFP <?> is on their website as well.
Okay.
So, there are different ways. I would work with a certified financial planner. You want to make sure they have the credentials because they go through the rigorous testing, and keep up with the ethics, and continuing education. So, that’s the direction that you would want to go. But, like Joe said we do work with clients all over the country, so if you do feel comfortable with us before you leave town, why don’t you — you can come by our office and we’ll be happy to meet with you.
Okay, that sounds great.
Alright Missy, good luck to you. Thanks for the call.
Thank you.
It’s 9:46 on WDBO. Coming up in four minutes we’ll go back to the News Room and check in with Dave Wall. Security is very tight at Daytona this weekend, tonight, for the big race. Of course there was some terrorism over the weekend in Bangladesh and it is some — it’s Ramadan, isn’t it? And they’re — ISIS is encouraging followers to attack. So the United States is on high alert. So, if you see something take your face out of your cell phone or whatever and keep alert.
See something, say something.
There you go. Joe Burt, Aaron Burt here to take your phone call at 844-220-0965. Let’s talk to Jon in Melbourne, I believe about preferred stocks.
Good morning, Jon, thanks for calling.
Good morning, how you gentlemen doing today?
Great, how are you?
Good, my question is is preferred stocks as part of a portfolio for people close to retirement, looking at moving around some of my money that I have into mutual funds and <Inaudible> stocks and looking at preferred stocks because of the higher dividend rates.
Well, for —
What percentage would you look at maybe having of that in a portfolio?
I think it’s part of a portfolio. It’s an equity, certainly, but it also has somewhat of a flavor of fixed income because if it’s a — let me back up. For our listeners that might not be familiar with what a preferred stock is, stock comes in basically two flavors; common stock and preferred stock. As a common stock holder, you are on the bottom of the totem pole in terms of if the company has financial troubles, if the company is liquidated, whether or not you’re going to get your money back and whether or not there’s a dividend being paid. A preferred stock holder — you move up the totem pole, which means that if there’s a dividend to be paid, you are first in line to get that dividend based on whatever the dividend rate is, and sometimes stock — preferred stock — is what’s called cumulative preferred, which means that if they miss the dividend, you will get your dividends that haven’t been paid before the common stock holders can even get anything. So, you have a little bit more security. Then there’s also what’s called convertible preferred, which a convertible can be converted to common stock, which you would do if the company was doing really well and you want to be a real owner as opposed to a semi-owner with preferred stock. So, I’m sorry to go into that, but I think some of our listeners might be familiar with what preferred stock is. Now, that being said, I think it is an element that could, and should, be added to a portfolio. I would not do it on an individual stock purchase basis because unfortunately most people don’t have the time or the ability to really analyze the companies and know the inner workings of the company that a well managed mutual fund does that spends tens of millions of dollars of doing the due diligence that neither you nor I have the time to do. But, I think adding it to a portfolio is appropriate, but I wouldn’t go whole hog in it.
Back with the Certified Financial Group. Joe Burt is in the studio, Aaron Burt is in the studio, and they’re both certified financial planners with the Certified Financial Group and are available through phone call right now at 844-220-0965. Let’s talk to Michael in Orlando about self-directed IRAs. Good morning, Michael.
Good morning, how are you today?
Good, how are you?
I’m great. Today’s my birthday, yahooey.
Happy birthday.
Happy birthday, how can we help you?
I’ve heard a lot about — I’m beginning to invest in real estate and I’ve heard a lot about self-directed IRAs and this way you can defer taxes and become your own bank. And I’ve got some information off the net, but I’d rather talk to someone who’s very knowledgeable about something like this and I can’t seem to find anybody, which is kind of weird.
What is it that you want to know?
Well, how do you do this? What do you need to do and how do you do it? Are there any minimums to start with and then basically I need to be educated on the process.
Okay, the bottom line is is the IRA is the purchaser of the real estate. Okay, so in order to purchase the real estate, you need to have enough capital within that IRA account to even begin the process. So, you need to — so, whether you’re going to fund it annually with your contributions or roll over money from a 401k into an IRA, you’ve got to have the capital within there. Now, when you do that, there’s pros and cons to having real estate in your IRA. First of all, you can’t use it for your own personal use. It’s got to be investment. So, if you — so, you can’t buy the beach property and consider it an investment. It’s got to be legitimate. But, there are some negatives to it as well. As you probably know if you’re considering real estate, there’s benefits to owning real estate. First of all, you get appreciation, right?
Right.
You can write off the interest and you can get some leverage in there, which you can’t do very well within the IRA. When you go to sell the property, you get capital gains where you lose that in an IRA because everything that comes out of the IRA is as ordinary income. So, there’s pros and cons to it. Everybody that’s trying to talk about putting real estate in an IRA thinks that they want to sell you real estate and that’s the way to do it <?>. So, you’ve got to look at your own situation. It can be done, but you’ve got to be sure that you cross the T’s and dot the I’s appropriately, otherwise the thing will blow up and you’ll end up being paying a lot of taxes on it. So, be very, very careful. That’s my word of caution to you.
So, on the text board, what are the most commonly missed items on a budget?
Ah, budgeting, yes. Like we mentioned earlier, coming up with a lifestyle and then developing your budget, and like I offered earlier and I’m going to bring it up again for those that may have missed it, we have what we call our blue form, which is our lifestyle budget form. If you’re interested in getting that, you can see what items are on it so you can get a comprehensive view of things that you may spend money on. Send us an e-mail, plan@financialgroup.com, or visit our website and put on there blue form. And we can either e-mail that to you or send that to you in the mail.
And the website is?
The website is financialgroup.com. Again, financialgroup.com. But, to go back to the question. How many missed items. Usually are the items that you pay annually, but — things you don’t pay monthly. Things like gifting, or anniversaries, or termite bombs —
Car repairs.
Yeah, car maintenance is one that people forget about, or car tags. So, auto tag fees. Those are things that you have to pay every year. So, those annual things that you pay every year —
Date night.
Well, hopefully you go on a date night more than once a year there. Or maybe not. I don’t know.
You don’t know.
No.
But you know, those types of things. So, the monthly things are easy; electric, and water, and the <Inaudible> and all that, but it’s those annual type budget <Inaudible>
Here’s a text. I’m 48 with no savings. Is it too late?
It’s never too late. Start putting your money into an IRA. Use a company 401k plan and put in as much as you possibly can.
Okay, real quick, what’s your opinion of laddering bonds?
I think it’s appropriate. Laddering means that you’re buying the different maturities and you’re hoping that interest rates go up so you don’t get stuck with a bunch of low yielding bonds.
Okay, we’re just about out of town here.
Alright, well then hold on, hold on, hold on, hold on.
What?
July 2nd was when the Continental Congress voted in favor of independence, so today is kind of independence day if you think about it. They didn’t actually sign the Declaration of Independence until July 4th. So, July 2nd, which is today, is the day that they actually voted for independence.
Today is the nation’s birthday?
Yes — well, we celebrate on the 4th.
John Adams always argued that today should be — today’s the independence day for the nation.
Start celebrating right now.
And July 4th did not become a federal holiday until 1941.
Okay.
I didn’t know that.
Happy birthday.
We baked you a birthday cake, if you get a tummy ache and you moan and groan and woe, don’t forget we told you so. Happy birthday. Happy birthday.
The information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy and it should not be regarding as a complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but is limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the options presented. Certified Advisory Corps is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered, or is excluded, or exempted from registration requirements.
