Investing When You're Nervous About the Stock Market

It's time for Wise Money with Corhorn Financial Group, with Financial Advisors Kevin

Corhorn, Mike Bernard and Josh Gregory.

Welcome to another episode of the Wise Money Show with Corhorn Financial Group, where

every week we're helping you take your next Wise Step in your financial life.

Thanks for being here friends.

My name is Mike Bernard.

I'm your host.

I'm your certified financial planners on the program, and with me in the KFT Studios,

my business partners and fellow CFP's Kevin Corhorn and Josh Gregory.

We're answering questions from fans of the show starting with how to invest if you're

soon to retire, but are very nervous about the market.

Should you file some expert suggestions of mixing both the S&P 500 and treasuries or

is there better strategy?

What role does your financial plan play in guiding this decision?

We're going to hit that question and many others on this hour of the Wise Money Show.

Are you nervous about the market?

Josh, Kevin?

Nope.

Nope.

Always.

We're at a complete opposite end of the spectrum.

I don't know.

I'm always expectations do play with your emotions, and so I have always been one that I want

to lower my expectations, so I'm not disappointed or I'm at least prepared, and the market

at any time can see a 15 to 20 percent decline, even though everything is going just fine.

And so, yeah.

Yeah.

So if you know that's coming, then why be afraid of it?

No, I need to psych myself up or down, Josh.

All right.

If you have a question for the program, this is all listener questions today.

You know, we get really topical in the show, but today is just listener questions, and

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Jumping into a big one here, and it's, it's weighted.

It's worth a little bit longer than I know, I know she wanted, but it deals with how to

invest when you're approaching retirement.

And I mean, approaching retirement, like it's, you're retiring right now.

But you add in one other element, and that is, I'm deathly afraid of the market, deathly

afraid.

So, do you need to be in the market or not?

Here's the question from Marquita, I think I'm pronouncing that right.

I'm scared to death of losing money in the market and paying outrageous fees.

I'll be 65 in June, I'm going to retire in December this year, I've been with the company

for a long time.

And then here's, I'm shortening the question just a little bit, so hang with me.

But I'm getting a pension collecting and collecting my deceased husband's so security, so about

a thousand dollars a month, until I turn 67, when I turn 67, my social security will be

much higher than that, nearly, nearly triple.

I've got an investment portfolio of around 560 grand, and you know, it's low risk, and

I'm getting about 4% return, now I'm getting only two and a half percent.

And so here's the crux of the question.

And oh, she says, I've got about $4,500 a month in income, and I can live on that.

So question is, where should I put my money?

I am super conservative, again, she said, deathly afraid of the market, or deathly afraid

of losing money, super conservative, but would like to see some growth without risk.

And account that at least can be inflation would be ideal for me.

I've been watching a lot of videos, some Warren Buffett stuff, he's big on S&P 500 and

treasuries for people my age, I know the S&P 500 still stock market.

What would you suggest?

And I have condensed it, she provided a lot of detail, thank you very much.

But deathly afraid of losing money, enough income, enough fixed income, not connected

to her investments for her to live.

And she hasn't really been taking a lot of risk, but she wants growth without risk.

We all do.

So guys, how do you even wait into that question?

Lots of layers to it, what do you think?

And to me, I would want to begin by helping her take inventory of just what's going well

in her financial life, what are her positions of strength.

Because sometimes, you know, when you start just zeroing in, I've got to make an investment

decision here, then anyone with a good thesis, a good idea might persuade you to shift

one way or another.

You know, even she said, yeah, there's Warren Buffett videos out there that are not produced

by Warren Buffett, but taking his words and slicing and dicing them and coming up with

a certain story.

You know, and it's probably coming to wise money at some point, but I, so Napoleon Hill,

I'm big fan of Napoleon Hill and they have, they have AIs that they fed Napoleon Hill stuff

and they basically tell this AI, hey, sound like Napoleon Hill and create some videos, stuff

that Napoleon Hill never said, but he would have said maybe if he was alive today.

And these, these channels, they get tons of views and people think, oh, that's Napoleon

Hill saying that.

No, it's not.

Yeah.

There's some for Charlie Munger and Warren Buffett.

Victor Davis Hanson.

Yep.

It's out there for sure, but that's, that's kind of the point.

Like, who, who will be the voice that you're going to listen to?

And are you going to have any conclusions based on a plan and a reality that, that you

are truly facing because your situation is unique.

And one of the things that I heard that is so strong in your financial life right now

is the $4,500 per month that you can live off of.

That right there is a game changer.

That opens up lots of possibilities for you.

Maybe some patience with investments and things like that.

Maybe it has an influence on how much risk you need to take all of that, but just pausing

and recognizing you have the income that you need to live.

Yep.

Not many people can say that, you know, from guaranteed streams of income, but here's

the other thing.

Yes.

Yeah.

So I, I, I love that approach.

Josh.

That's wise.

But what does that income that covers her expenses?

How is that reality connected to her investment choices?

It has to be.

It has to be connected.

And I'm not sure, Marquita, if it is right now.

I think you're feeling like I need to do something with this money and I need to have

some growth, possibly because the S&P 500 has been on a tear.

The stock market has been fantastic.

There's been some bouts of risk, but in the near term, we all investors have amnesia.

We don't realize, oh, well, wait a second, just a few, you know, a couple of years ago,

things were extremely risky, but that won't happen again, right?

And so is it possible?

Some of this is driven by, I don't want to miss out.

The market has had double digit return for the past three years.

So I should be doing something better with this money, even though based on your income

and what you shared about your spending habits, you really don't need that money to be

at risk.

Yeah.

I like Josh was idea there about taking an inventory and saying what, what, what's going

well and what's not going well.

And I think the problem is, as I look at this, it's, it's helpful to have a thing

thinking partner because if you were working with a certified financial planner, they

really all they're doing is gently holding up the mirror to you so you can see.

And I would, I look at this and like, man, Marquita, as I read your question, I feel burdened.

And I think, oh, I don't like that.

I mean, I don't want financial resources to own me.

I don't want them to own my mind and be all that I'm thinking about.

And I want my finances to be a blessing, not a source of frustration in my life.

And so what Marquita, what you need is clarity and confidence.

And I don't know what an outrageous fee, yeah, I want to touch on that too, but I can

tell you this, you can get financial planning done for free.

And who better than those people to tell you the value of their service?

And so I, in other words, if I'm going to charge you nothing for my advice, then I'm declaring

the value of my advice in the, in the same act because I actually think if, if you go

to someone, because you're looking for some help with this, if you go to someone where

you're nervous about fees, I don't know, you know, then it's very likely you'll get

the hidden fee, which is likely going to be worse and way more cumbersome and inflexible

and bad for you.

Yeah, right?

So and it is a little bit confusing because people say, Hey, I can do this all by myself

and it doesn't cost me anything.

And I can't tell you how many people I've worked with that were doing it all by themselves

and the cost to them was incredible.

Time, stress, worry, missed opportunities, I mean, just go on down the line.

So this is where you say, Hey, Marquita, I would, I would encourage you to find where

can you get clarity and confidence and you're a good judge of value.

Find out what does it cost?

What's the person selling?

Is the person selling a product or a process?

You need a process that can walk you through this?

And I'm telling you, I, as I looked at this and I'm, I'm not going to prescribe.

I'm not going to play doctor here on the radio, but the A word did come into my mind.

Ah, angry.

Okay.

I am actually, I am going to ask you to play doctor.

We're going to, so that's just sort of waiting in and giving some context, giving some

initial thoughts, but want to answer the question, nervous about the market.

That financial profile, how do you invest those dollars?

It's the very first thing you need to do and then what are some potential strategies?

We've got that and more coming up here on The Wise Money Show with Corhorn Financial

Group.

This is Wise Money with Corhorn Financial Group.

If you are deathly afraid of losing money, no one likes to lose money.

Trust me.

And, and, and yeah, if you are, if it's gripping you, if it's, if the fear is just significant,

should you invest in the stock market?

Does that mean you're actually an investor or really does it mean you're a saver and

what do you do if you're on the doorstep of retirement need that money to be working

for you?

We're helping with that right now.

This is The Wise Money Show with Corhorn Financial Group.

Thanks for being here.

My name is Mike Bernard with me in the KFG Studios Kevin Corhorn and Josh Gregory, stay

up to date on all Wise Money content and find us online, WiseMoneyShow.com.

And then all our social media wherever you're at, we are there as well, search the Wise

Money Show.

A fan of the show, Marquita, reached out, said she's about to retire.

She got enough income, $4,500 a month of, of non investment income.

Wow.

That's fantastic.

Single widow and, and so that's great.

And she said that covers my bills.

I've got 560 grand to invest.

I am very afraid, deathly afraid, her onwards of losing money.

I'm feeling like I need to get some growth, but I don't want risk.

So should I be half in the market, half in treasuries.

The very first thing, Marquita, that you need.

So here is the advice that you need.

You need to build a five-factor retirement plan.

Most people think that we just did a show about this last week.

Most people think, I know what my investment decisions are, my investment decisions, right?

Don't I need to make an investment decision here?

You've already sort of teed it up.

You're explaining your investment decision in light of your retirement situation.

You need to look at your retirement goal and determine how much return do I need?

How much, what do these dollars need to do for me?

And then that will tell you, well, then how much risk does it take to achieve that?

That has to then guide your decision.

Based on the fact that you're saying you got $4,500 of income, that's how much you spend.

Your income does have a cost of living adjustment to it.

It's very possible.

You do not need this money to work very hard for you.

And as long as you can manage the motions against the emotions of fear of missing out,

then you can structure a more conservative approach, more conservative portfolio.

That really doesn't reach the, well, I'm getting growth with no risk because that's

what everyone wants and it's not possible.

But maybe, but I think that financial plan will lead you to the right investment choices.

You know what?

You're hitting on exactly the point that we make with so many clients and that is there's

more than one risk tolerance that we need to pay attention to.

One is, yes, the emotional side of, hey, can I handle the ups and downs of my investments?

That's purely emotional.

It's what does it do to you inside?

Is it affecting your quality of life or your sleeping or anything like that because you

see investments bouncing around?

What you're talking about though is there's also a quantifiable amount of risk that you

need to take in order for your goals to be achievable.

Yep.

And then also what is the strength that you have?

What is the financial risk that you can take based on your financial reality as well?

It's the combination of these different measures of risk that help you arrive at where should

I structure my portfolio?

Because what if you found the opposite that, hey, I actually need to take a little bit

of risk and get some growth on these investments because my retirement forecast is showing that

out there in the future some costs start to get a little bit out of control.

And my $4,500 per month no longer covers the expenses that I fully expect to see.

If that was the case, then taking too little risk may be a major mistake for you.

You may safely become poor because you're not getting enough growth early on in retirement.

So you first need to look at that retirement plan.

That will then lead you to what choices or excuse me, what risk spectrum you should be

on and you need to be honest with yourself so many times.

So Kevin, right, there's there are sabers, there's investors and there's traders and we'll

go on the opposite orders.

Are very comfortable buying something at 9.31 and selling it by 10 am, buying it back at 11.30,

selling it at a loss at 12.30, buying it at 3.15 and selling it at 3.45.

That's traders.

And so when you hear someone talk about a stock tip or a hot stock or Jim Kramer or someone

on TV, that's traders.

If you hear that as an investor and you think I need to be a trader, that's identity crisis.

Okay.

Investor is a long term.

I want to this long term money.

I want to put it in the right vehicles for the long term and I don't want to disrupt

the power of compounding.

So I know it's going to be volatile.

It's going to go up and down in the short term, but I'm looking at the horizon.

I'm going to fix my eyes and site on the horizon and I'm not going to worry about those

short term durations because I need the money in the long term.

That's long term investors.

There's though are very, very nervous and concerned about those short term durations.

And it's typical for a saver to look at an investor performance when it's going well

and say, see, I should be doing this.

I need to invest all of a sudden, then to see that expected volatility.

We've shared that the stock market from a high point to a low point on average each year

drops about 14, 15%.

They see that and they immediately say, nope, see, I shouldn't have done this in the

first place, even though those are just normal gyrations, we did a Disney trip as a family

over Christmas.

And I took a different approach this time.

I said, I'm going to go on every ride that the kids want me to go on versus I'm not a roller

coaster person.

I do.

I don't like it.

Even even Disney.

I some of you are laughing right now.

Disney roller coasters.

Are you serious?

Okay.

For me, yes.

But I said, listen, I'm going to do it.

So if they want me to go on this, I mean, so Carrington wanted to go on rock and roller

coaster.

No one else wanted to go on it.

I will go on it with you.

Now, the picture, I am clenched.

My eyes are shut.

Guys, they wanted me to go on this Hollywood tower of terror.

It's just that they drop.

It's a straight drop.

The reason I don't like roller coasters is I don't like heights and I don't like that

immediate drop.

That's all this ride is or the sensation of being afraid.

Let me tell you.

So I had identity crisis in this moment while I was on that ride.

I am clutching my 15 year old daughter's hand saying, saying, make a stop, make a stop,

make a stop.

I'm not kidding.

That's not like I was trying to be funny.

Sometimes I try to be funny.

No, no, no.

That was just that was in me.

Oh, my God.

I was having an identity crisis in saying, get me off of this thing.

We had six drops, by the way, that one.

You don't want that to be you because if you are facing that in retirement, the, the

the quote unquote cost, the emotions, the fear, the potential reaction in emotions, I

would have paid any amount of money to get me off that ride after one drop.

Okay.

If you have that experience with your money in retirement, you're likely to make a

mistake.

No, no, no.

No, you're lame.

Yeah.

Don't need.

And there are, I mean, as I'm thinking, we could spend the rest of the show talking about

different approaches to solve this.

But I think especially if you can think, if you are a saver and you're having an identity

crisis because you want the results of that an investor would get, but you want the

safety that a saver would have, you're going, you're just going to be miserable.

And some people are happier being miserable than they are ever happier being happy.

And so I would say to, what, to thine own self be true, know who you are, know what it

is.

I, I look at this and I'm like, well, maybe you're just a fixed income person.

Yeah.

You're aware of what kind of compound annual growth rate you're going to need for these

dollars to not lose their purchasing power over the next 30 years.

All right.

So all that banter, then, you know, build your five factor plan.

Now that what is that going to reveal to you?

We don't know.

I don't know based on what you're saying.

I do not think a half treasury, half S and P is the right fit for you.

Half of your money being subject to the ups and downs of the market on, it's not enough

diversification and, and that's not, that's not the right risk manager.

I, I, I feel that way.

My guess is your financial plan is going to suggest maybe all fixed income or mostly

fixed income in, in which case right now, treasuries probably are a great idea when

you look at risk and reward and all that sort of stuff.

If any dowels, if you do need more growth than that, I would look at hedging strategies.

I would look at hedging strategies.

You don't need to, to lock the money up and big fees and all that sort of stuff.

You can, you can find some investments or your, your CFP can help you where there's defined

downside protection with a limited upside and we're not talking limited upside, like two

percent.

Now, you know, maybe near an average return of the stock market over the long term, but

where a lot of the downside is protected away.

So a combination of that, but, but that's just speculating based on what I think you're

planning and also speculating that I just don't think half S&P 500, half treasuries is

enough diversification.

But you said the answer in there too.

You said your certified financial planner will help you.

This is not a road to walk alone and even though, you know, having lost a spouse along

the way, you may feel kind of vulnerable and it's the deathly afraid that I would want

you to be solving first and having the right coach beside you helps alleviate that

pretty quickly.

That's right.

All right.

Next question is coming in.

What do we think about AFLAC?

Is it something you need or should you pass on it?

We got that more coming up here on the wise money show with Gorehorn Financial Group.

This is Wise Money with Gorehorn Financial Group.

Do, should you have AFLAC?

Is it offered through your employer?

How do you make a wise decision?

How is that decision connected to the rest of your financial life, your financial goals?

What do we think?

Haven't talked about this one in a while.

I got a great question from family show we're hitting that right now.

This is the Wise Money Show with Gorehorn Financial Group.

Thanks for being here.

My name is Mike Bernard with me in the KFG Studios, Kevin Korhorn and Josh Gregory.

Every episode of the Wise Money Show is on podcast.

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Subscribe to it there.

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Rate the program there as well.

It's helpful feedback for us and helps others that are looking for content about taking

their next wise step to help some find us so we appreciate that.

Corporal Daniel, fan of the show.

We're a fan of you as well.

This one's been hanging fire for a long time.

I hope you didn't lose heart in us.

We actually intended to get to this question.

What, guys, a half dozen times and it's just such a good one.

Thank you for your service.

We appreciate you, Corporal Daniel.

Can I say it?

Ura?

Ura?

Korhorn Financial Group and Kevin.

LOL.

Kevin, did I say that right?

Nope.

Okay.

The question today is, what's your opinion on using additional insurance like AFLAC?

I feel like you and Dave Ramsey would not recommend it whatsoever.

Okay.

Do you even call it insurance?

Well, I would call it voluntary supplemental insurance.

Okay.

So, I mean, it's going to cover stuff.

What is it?

What is it good for?

It's good for unexpected accidents, hospital stays, cancer or critical illness, short-term

income gaps.

So, as you're listening to this, what does that tell you?

Because most places that offer AFLAC, where lots of folks sign up for it, there's the

story, the lore or the legend of the guy that had the problem and he got cash from AFLAC.

And so they're like, okay, I got to have that.

And this is where, again, one of the six areas of financial planning is risk protection

planning, when you're thinking about your risk management, that I wouldn't even look

at that one.

I'd look at your present financial position.

Absolutely.

Because your present financial position, you want your financial shock absorber or whatever

Josh calls that cash reserves, you want an operating system for your cash.

So you've got your immediate spending, your delayed spending, and your emergency savings.

And you want all three of those fully funded.

Well, once you fully funded those, you don't need or hopefully you shouldn't need something

like AFLAC.

Now, you can't think of AFLAC as a substitute for health insurance.

Right.

So if you say, well, I've got a fully funded three bank account system, I'm good to go

and I don't have health insurance because I just got my house in order with my cash

reserves.

No, no, no, no, always, always have health insurance.

Well, but it's not disability insurance either, right?

It's not disability income.

It's this weird thing that sits in the middle where if you have certain medical conditions

and maybe that's going to require some out of pocket expenses, okay, you get some cash

for that.

If you're not able to work, you get a little bit of cash for that, but it doesn't replace

your income.

So additional insurance, I view it as like a catastrophic bingo card.

Like what, you know, I've never played catastrophic bingo.

You shouldn't tell me more.

It's not good.

But you get this bingo card with with with AFLAC and it's like, Oh, you know, did you did

you fall and break your leg?

Oh, yep.

There you go.

Here's a few bucks.

Here's here's some dollar amount.

Right.

And I almost feel like you're just like bedding or hoping that you have some calamity.

So you can collect.

But if you have a certain calamity that's not on your board, sorry, you know, or the

calamity cost way more than what the payout is anyway.

You know, you're going to get $5,000 for that certain type of accident, but your costs

that you've racked up are $15,000.

Is it actually protecting the way that you think that it should?

Right.

This is where I would play the Jedi mind trick on myself because the trick is you think,

well, wait a minute.

If I have this, I can go out and get hurt and I don't have any problems because AFLAC

has covered me.

Well, you might you might make different decisions if you structure things a little differently.

Because I was just talking with Joshua in our insurance agency and he was talking about

this, this client that was getting non-renewed because they'd used their car insurance several

times recently.

And what a lot of times what people say is when, when something bad happens, they say that's

what I have insurance for.

And if that is your approach, that can work, but it can't work more times than you, I'm

not saying this right, but you know what I'm saying.

If you buy Amazon, if you buy something from Amazon every day and every day you return

it, they're going to they're going to kick you off the platform or they're going to

start charging or they're not going to let you return things.

And so insurance is sort of the same way.

Joshua, what are you going to say?

Well, I was just going to say that to me, AFLAC reveals someone's insurance philosophy.

They've never even thought that they have a philosophy.

Our philosophy is that insurance should be catastrophic protection or protection from

the things that you can't bounce back from if they occur.

You are injured and you're not going to work again for some long period of time.

Not hey, I'm off work for six weeks while I recover from that broken leg.

No, you're off for six years because this was major trauma that your body went through.

You can't work.

That's hard for a finance, a family's finances to be able to absorb the death of a spouse

or your own passing.

Think like major car accident where your car is totaled and now you need a $15,000 spend

to be able to put wheels back in place, major home accident or some sort of issue with

the house.

You need a new roof or whatever.

Those are the things that a lot of people, you have an emergency fund to be able to handle

the smaller things.

These big items that are more unpredictable, you're hoping they never occurred to you.

Those are where you transfer that risk to an insurance company by spending a few bucks

on premiums, letting them have the risk.

Don't transfer the little risk because you're paying such high premiums.

It doesn't feel like it.

It's just a small little policy, right?

No, you're paying a lot to get a little and those little benefits are things that you

really should be able to handle in your financial life by having the right emergency fund

in place.

Right.

Circling back to the client that was getting non-renew with her auto, what I suggested

was, hey, if they had a $2,500 or $5,000 deductible, their behavior towards what they fix and

take care of themselves versus what they have the insurance company fix would be totally

different.

People might say, well, wait a minute, I'm not saving that much, but I can tell you this,

what it does is it does something to your psychology to say, hey, listen, insurance isn't

going to be my first dollar of protection.

Because if it is and I have a super low deductible, I'm betting on the catastrophic.

Well, if you're a betting person, you will win betting that you're not going to suffer

the catastrophic.

Okay.

So let me ask you this.

You know, they say we're in a K-shaped economy and the K-shaped, meaning there's sort

of the have and the have not, it's either going all right or you're really struggling and

by the way, guys, that is deeply rooted in 200 year old economic theory about what happens

when you print a bunch of money, asset prices go up.

Yes, prices go up, eventually wages go up, but asset prices go up and so there's no

question.

There is a large segment of the population that it's struggling, you're struggling and

I get it.

The economy is super challenging right now.

So let me ask you this, before you've got that financial foundation in place, does your

opinion change on Aflac?

I wouldn't want it to hold you back from building that foundation and I don't want you to

think that it replaces the need to build that foundation because you were talking about

the challenge or excuse me, the yeah, you got a three bank account system to build that

cash reserve, get the insurances in place and then you won't need Aflac.

Sometimes people say that's hard.

I want the easy button, Aflac, but the Aflac doesn't, doesn't mean you don't need those

things.

Right.

Because you say, hey, while I'm building my foundation and getting on my feet, I'm going

to pay for Aflac because that will cover me in the event of, well, the problem is the

money that you're spending on Aflac slows down your building of the foundation.

So this is where you have to think about your, as Joshua said, your philosophy of risk

management because it, I would just be, I want you to be totally aware because Aflac

is a tool.

So do not hear us say Aflac is good or Aflac is bad.

It is a tool and the question is, what job does this tool need to do for you?

Yeah.

I, I like Nick Sabin though and they, they've got him on, I mean, they want him over.

So it's, it can be convincing, but I think they about, they've outused the duck.

Big checks will win the big checks are winners these days, Mike.

Yeah.

Okay.

So where you're at, yeah, I'd say overall, throw us in the same camp as Dave Ramsey,

not a huge fan of, of Aflac and instead, a fan of the right habits in your financial

life.

You got to manage risk and that doesn't mean people haven't used Aflac and, and received

some serious financial help, but make, play the long game.

So great question.

We've got more of that coming up here on the wise money show with Corhorn Financial Group.

This is Wise Money with Corhorn Financial Group.

Thanks for being here.

This is the Wise Money Show with Corhorn Financial Group.

My name is Mike Bernard with me and the KFG studio is Kevin Corhorn and Josh Gregory.

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Next question, I already answered, came on the YouTube channel and I try to answer a

lot of them.

Our team tries to do that or we'll put them in a queue for an upcoming show or video,

but I answered this one.

It's just so good, though.

It's so good I wanted to get Josh and Kevin's take in the 22% tax bracket and plan on

doing Roth conversions this year in 2026, we're likely to remain in the same tax bracket

and retirement due to pensions and Social Security.

We're married, finally and jointly, this is approximately 10 year age difference with

the older spouse currently retired at age 65.

Would it be preferred to convert the traditional IRA of the younger spouse or the older spouse

highlight pros and cons of each?

Yeah.

What do you think?

What's your default?

I don't know if I would have a default.

I'd have a question for them.

Oh boy.

Do you have a default?

Whose fault?

Your fault.

Yes, fault.

So I think what I would, yeah, I have a default.

Younger.

Oh no, come on, dude.

Really?

Yeah, it's got to be the older person.

That's our muscle right here in this.

You know, I married a woman that was three years younger than me and the older I get

the more I think, I don't know, this guy is pretty smart.

Maturity wise, though.

I am way younger.

All right.

Maturity wise.

I'm still in seventh grade.

Yeah.

So you're leaning towards the older because of RMDs and trying to neutralize some of the tax

obligations.

Is that why?

Yes.

Okay.

Here's the thing.

With a 10 year age difference, I don't know if you can go wrong because the converting

the older will likely be inherited by the younger.

And so it actually, yeah, either way, the all dollars are flowing to the younger most

likely.

Go ahead, John.

Here's my question because it is RMD related as well.

My first question would be, I'd want to understand what are their patterns with charitable

giving?

Yes.

Are they in the habit of giving a certain amount to their local church or some charitable

organization or whatever?

Every single year, they're doing the certain amount.

If that was the case, then I like the idea of leaving some of the money in traditional

accounts in the name of the older spouse because they're getting close to a magic age

where all of a sudden, those, the distributions that they pull out of their IRA and they

add it to their tax return, they pay taxes on it, could go directly to those charities

and be completely eliminated as an income source for them.

And what I'm talking about are qualified charitable distributions.

And this is such a powerful tool.

It's a way for you to reduce your income while still supporting those charitable organizations.

You give money directly from the IRA to that organization and it never gets counted on

your tax return.

You don't pay tax on it.

But if in the meantime, you're pulling money from that IRA and moving it to the Roth,

you're paying tax on them.

Now when, unfortunately, you're just a few years away, how old 65 right now?

So what, five and a half years away from being able to do those contributions tax-free?

The converting for the younger spouse, you've got more time for those dollars to grow

compound tax-free.

But as I mentioned, I was thinking that too, but you already hit on it.

Whether you do it in the older spouse's name or not, most likely, whatever dollars you

convert into the Roth are going to be some of the last dollars that you tap into.

It's often kind of conventional wisdom.

And so there's a very good chance that any leftovers in the older spouse's name are going

to flow down to that younger spouse anyway.

And so the timeline, in my opinion, remains the same.

It does.

And you could make a case.

It's the same pool of dollars.

It's just what, and you're right about your question, Joshua, what kind of flexibility

do you want to build into your financial life?

And certainly Roth conversions build flexibility into your financial life.

But, and I would be aggressive because the question is, how much qualified money will

there be that has never had taxes paid on it when there's just one spouse remaining?

And then also, who will the beneficiaries of these dollars be?

And where do we think they're going to be tax wise?

But you would assume that if there are children in the mix, that they're going to be in their

mid 40s or 50s when mom and dad are leaving this earth, and they're going to be in a high

tech situation.

Have you modeled it out?

That'd be another question.

Have you modeled this out, multi-year tax projection, where you can see, does it really

make a difference, and then done some trade-offs to say, well, what if older spouse passes

away?

I mean, you know, there's widow penalty.

I've seen that phrase come up more and more.

What that actually means, Kevin, will you just keep your phone and silent?

I can't believe that.

That happened.

No, I think it's a lot bigger penalty than you think, because you're saying it's, it's

no, no, no, I'm saying that.

You're saying it's a widow one?

I'm saying it's a big one.

Yeah.

Ultimately, what it means is the difference between single tax brackets and tax rates versus

merrier.

The rates are the same.

The tax brackets are about half, and therefore, you creep up to Irma much faster.

You've got the same nest egg, the same dollars for RMD, but so you got to be aware of that.

I would model it out, do that multi-year tax projection, and look to see if there's

a material difference, and I don't know if you can go wrong.

Personally.

Yeah.

We're debating two good scenarios here, and you said it well that, you know, you want to,

where I think Kevin said, go heavy, like be aggressive on the amount that you're converting

right up until that 22% tax bracket, because you say it's not going to change.

The thing that will make it change is when one of you passes away.

Yeah, and this, and if you, so most people haven't spent the last 32 years thinking

about these things, but we have, I have, and what I would want people to think about,

because when we're talking with folks, and a lot of times folks that are getting close

to retirement, start looking for a financial planner to work with, now we want you to work

with a financial planner much sooner than when you're on the verge of retirement.

But when you get on the verge of retirement, and then we're talking and saying, hey, so

what we probably need to do, as it relates to your tax planning, is to determine how much

income you should have.

And they look at you like you have a third eye in the middle of your forehead, like what

do you mean?

Like, that is set.

I don't have any influence over that.

I've got, I'm going to have this money that comes from Social Security, this money from

my pension, and then when I get to a certain age, I have to start taking money out.

And that's, that is my income and how it goes.

And that's not the case.

There are a number of levers that you can move to influence your income.

So I would start by declaring, this is what my income should be.

Now how do I get there?

All right.

We've got time for one more quick question.

Now I'm going to ask you guys, which tax rule do you think catches people off guard the

most and why it's tax season?

What tax rule catches the most people off guard and why?

I would say things like child tax credits going away.

You know, like how often do people, their oldest, oldest child turns 17 and all of a sudden

there's a major hit to their tax return.

Their refund drops significantly or they go from refund mode to now owing because it

just sort of snuck up on them.

And as a dad who, I forget sometimes that I've got an 18 year old, when did that happen?

I don't even remember what grade they are in school anymore.

Yeah, I'm just kidding.

Yeah, just kidding.

Do you know what school they go to?

Yes, I do know that.

That's good.

Although I do lose my way a lot driving to the middle school for whatever reason.

I've gotten lost so many times I'm driving there.

That's a great one because you lose a child tax rate at age 17.

That makes no sense.

I was going to say taxation is so security because we've talked about this a lot.

The formula has never changed.

Well, they, they brought it up in the 80s.

They changed it in the 90s, but then there's no impact with inflation.

And so one year, it is so security taxable.

The answer is no.

And yes, at the exact same time, just depends.

Well, what other income do you have?

So unbeknownst to you, it can never be taxable.

Then all of a sudden you take a little bit more out or you have a capital gain

and all of a sudden the majority of it is taxable.

And you didn't withhold for it.

I, that catches a lot of people by surprise.

I was not thinking child tax credit, Josh, you, you get the award.

That's, that's a great one.

So all right.

That is all the time we have for today.

I mean, you have to Josh, I agree.

Kevin Cohorn, all of us at Kitchie have a great weekend.

We'll see you next Saturday for the wise money show with Cohorn Financial Group.

I can't say, Ura.

I think that's, that's, that's the best I can do.

I don't think I can say it on the radio.

Yeah, can you, can you do it?

I don't say it right, dude.

So.

So.