Retirement advisor, Jason Biance, walks us through many of the questions he might go over with his clients. We discuss different investment vehicles such as 401Ks, ROTHs, Traditional IRAs, annuities, and brokerage accounts. We talk about how bonds are falling out of favor and if dividend stocks can fill the void. We talk about how to chart a plan for your financial success, keep diversified, rebalance as you age, and minimize the tax burden.
Retirement advisor, Jason Biance, walks us through many of the questions he might go over with his clients. We discuss different investment vehicles such as 401Ks, ROTHs, Traditional IRAs, annuities, and brokerage accounts. We talk about how bonds are falling out of favor and if dividend stocks can fill the void. We talk about how to chart a plan for your financial success, keep diversified, rebalance as you age, and minimize the tax burden.
Welcome to the Greed Geek podcast with your host Jason Byrne
What is up everybody?! Welcome to episode 6 of the Greed Geek podcast today we're going to discuss how to best build up that nest egg how to manage your wealth as you approach retirement and how to keep that inevitable tax burden under control my guest today is Jason Biance who along with his brother Justin is the chief investment officer at his namesake J. Biance Financial. Jason earned his B.S. from the University of Florida. He completed his Masters of Finance degree from the University of North Florida, and his company J. Biance Financial is a wealth management and retirement planning firm with four offices around the Southeastern United States. Jason, welcome to the show! Thank you for having me. So to start off why don't you just tell us a little bit about how you got started uh with your company and what you do for a living. yeah i would say it really kind of started back in high school. I wanted to ask you, did you have Miss Campbell as a math teacher? I did, yes! Yeah she was fantastic and I think i was in calc class or something like that i was at home and i turned on some music and i did my homework and then like two hours went by and i was like i just need to do math and listen to music because it was it was kind of timeless and so i went into finance and uh and i worked for a company for eight years as a risk analyst um unfortunately i i worked previously i worked for about a year for a mortgage company uh just doing loans and that was right at the peak i started there in june of six and i left and um september about seven so i started as an analyst right when the the crash was was really getting going um and then unfortunately you know it was terrible for for a lot of people but for a young hungry um you know analyst it provided a lot of opportunity and i got to sit at a lot of tables i had no business sitting at and i got to learn a lot about institutional investing and so i did that for eight years i hold three different positions there and then um my brother floated the idea to me uh golfing back in 2013 why don't we uh start a firm together he was doing wealth management in st augustine and we started our first office here in sebring which uh which i'm at great and and so today uh you know you your clients are mainly a little bit on the older end of the equation is that right they are they are like 90 to 93 of our clients are 55 and older okay so when you first meet with your your clients i know you go through a pretty intensive kind of consultation with them to understand them really well what are some of the things that you ask them about yeah um it's a lot of it you know at first is um and i think it's important in our business because you know we're we're going to be walking with them through retirement so we really want to get to know them and we want to see if we're a good fit um because i think it's a relationship just like anything else and some things aren't a good fit and um but the the kind of blocking and tackling is five areas investment income tax health care and legacy so all of our questions revolve around kind of where are you in those areas in investment in income you know what's your timeline what are your goals what does retirement look like for you um obviously you know at the end we we go through risk assessment and risk tolerance type you know questionnaires and and we have a a modeler that we use and and whatnot so it's really um just just getting to know them you know we always tell our advisors we've got five advisors and we always say um you you should almost not say anything in the first meeting everything should be a question you know what i mean every this is just data gathering um you know we will be we will be sharing things in the next meeting you know keep it all about them yeah i think i think that's you know a lot of people ask me for advice and it's like well advice is gonna be different for every person you have to understand that what it looks like for me isn't what it looks like for you um you know you may be trying to go to 65 i mean you're trying to retire at 50. you know i might be able to stomach the market ups and downs where you might you know get too seasick and want to bail out like so we have to understand what those goals are right it is it'd almost be like we i mean everything that if you if you uh see anything with our firm it's all about construction you know um our we have blueprints and walkthroughs and that sort of thing and i think it's the same it's like somebody said hey i want to build um my own house what should i do you know there's some general things i can tell them right about square feet and you want to use this type of plumbing whatever but all of the real specifics of it is going to come from their desires their specific situation their finances and you know all that kind of stuff and yeah absolutely especially like you know i have a couple of younger clients i have a gentleman that wants to retire at age 50. and he's a he's a very successful entrepreneur in a lot of different things it's it's one of those neat relationships where i learn a lot from him about business you know about boots on the ground business far outside the market um and uh and anyway so he he's he's very different than all my other clients you know because he's young and he has a lot very high cash flow um and that sort of thing and so um so anyway yeah it is it's it's a tailor you know it's tailored yeah so so what are what are some of the kind of balance that you would have uh you know percentage-wise um we're talking before the show about bonds and do bonds even play a role anymore and the you know i used to hear an adage that you should do like 100 minus your age and that's how much you should be in stocks and the rest should be in bonds but that doesn't really seem to be the case anymore yeah we're just in a whole new world um and yeah bonds um you know they're fixed income they're meant to look differently we we call those you know the way that we categorize everything is based on asset allocation right so however you're gonna whatever your portfolio is gonna do the number one driver is what is in your portfolio what assets are in there is it stocks is it bonds is it you know uh mutual funds is it uh real estate is it you know whatever it may be and we categorize them simply in like a house analogy roof of investments wall investments and foundation investments and so bonds are really your wall investments okay you can also because they're fixed income you can also put real estate in there okay they're less volatile than the overall market they typically have more yield right in that regard and so they're not as correlated to the to the roof and your roof is your you know index funds and stocks and equities and all that kind of stuff and then your foundation is your annuities cash value life insurance tips cds anything that has some type of contractual guarantee you've shifted the risk to someone else you know what what happened is those wall investments and like bonds um it's just it's gotten squeezed it's gotten really really squeezed um for my clients right an alternative for that is alternatives unfortunately for the average investor there's just not a lot of access to alternatives because a lot of times they're not as liquid a lot of them are closed in funds reit type things you know and that's how you're able to both diversify and kind of replace that yield that we lost in bonds right um for the average investor i would say you you just have to look at the whatever you're replacing those bonds with if you know they're not earning you that much hey um i want to diversify my portfolio i want to lower my risk but i don't want to use as much bonds right you have to look at different asset classes and then and then you just have to look at how that affects the risk of the overall portfolio because your overall risk adjusted return is something that's very very important to us right especially in the distribution phase for our clients in the accumulation phase i i would say you know let's say who your listeners here if they're south of 50 they're younger than 50 they're not so worried about risk right they're just i want this thing i'm i'm swinging for the fences i don't want this you know uh so it's just a different game you know in that regard but um but yeah that's a that's a real challenge especially for retirees you know um you used to be able to get three four percent in a cd at the bank right since that's not the case it has forced a lot more dollars into the overall market on top of the other dollars that were forced into the market because of low rates because money chases return you know and so uh it's a dangerous game for for older people you know but there are a lot of dividend-paying stocks that have a long history of not only keeping but raising their dividends like it's in in some of the companies you know oil companies financials maybe five percent yeah yeah yeah higher in some cases and those are those are great diversifiers utilities and and and high you know your aristocrat dividend payers and uh preferred stocks right which act kind of like a bond in a lot of ways and and stuff so yeah those are again great alternatives and then you just have to see right um adding those in as more of a bond right because then your your equity portfolio you know gets gets uh inflated a little bit you just have to if you're worried about risk right if you're in that season and that's who i always want to remember who am i talking to because they're just two very different worlds but is there a reason to to hold to not to hold those versus bonds i mean given again like you said earlier bonds are going to pay you know two percent at best probably right now right so why would i not want to hold on to those stocks and obviously don't want to put all your eggs in one basket but um why not right if they're going to pay that high dividend depending on who you're talking to i would agree right and those are the two phases of investing that i think you always want to make real clear is accumulation phase and distribution phase and the accumulation phase yeah if i had bonds or whatever i might as well just be over there in the dividend paying stocks on the distribution phase i have to have to see if we have market downturns or upcreases in interest rates or whatever it may be will this new portfolio right be drawdown be worse or better than how they were with those bonds in there because it's all about risk adjusted return over here so that's why i agree with you for the accumulation hey i might as well because i'm i'm just chasing yield you know kind of and another you know non-just growth stock you know i want some you know some cash flow first for somebody earlier in their investment let's you know say the under 50 or even under 40 demographic um you know how do you how do you how would you advise like value versus growth um yeah i mean there's a lot of literature on it you know it depends on what you're looking at are you talking small cap growth i mean small cap growth i think and then you know value over time though value does well in a lot of markets well for example like you know i i held at t i just actually sold it but i held it for years and it paid me a dividend but the price didn't go anywhere right i would be much better off with your microsoft's you know with your googles um i mean obviously there's some risk there and and they've been punished a little bit lately but over time it seems like those are the winners in that in that kind of phase of your life right in that phase yeah i would say your growth yeah your growth is going to be there now i wouldn't boil down value just to like the um was it the character of kind of like a t you know what i mean value can also be um really great stocks that are just you know the earnings per share just really low you know what i mean it's just it's it there's inefficiencies in its pricing you know not necessarily a good dividend payer but just there's inefficiencies in its pricing and so um there's a lot of opportunity there and you look at you know some of these um uh for i would say younger investor if you like these things you know the the motley fools of the world the prudent speculators of the world like that's what they're after they're after value not necessarily just dividend payers but you and they have a lot of research behind them you know and and whatnot um now in the end i hate to say it the data is just the odds are stacked against you for stock picking with the majority of your portfolio you know what i mean it's just it's it's it's i hate to say it but but i i you know that's something i'd be really really cautious of people about you know with investing right so that's a that's a good leeway lead into maybe the conversation about individual stocks versus mutual funds versus etfs and and and how you might want to think about what you holding your portfolio how much you hold right yeah um i think i think those are all really good tools um i think mutual funds um are the gasoline vehicles of investment world you know what i mean like i i think eventually they're just not going to be there they'll be there for nostalgia or whatnot there's a handful of amazing funds out there don't get me wrong but i think you have to make a hard argument for most if i'm looking at a mutual fund or an etf you know i could probably show you an etf that can do just about the same you know what i mean now there are like i said exceptions this is not an absolute statement you know uh there's there's mutual funds out there and those guys are wizards you know so let's talk about the difference for folks who might not understand the difference between a mutual fund and etf yeah so a mutual fund is is offered like let's just say um let's just say jay buys financial like we we get big and we we start our own mutual fund and people give us money to go invest and we're gonna go a mutual fund is like a basket of investments and we're gonna go buy stocks and bonds and reits and we're going to invest in this way um and then you know uh but the thing is is if you buy a mutual fund from me if you want to go sell it you can't just go out on the open market and sell it you've got to come back to me you've got to redeem it and it has to be done at the end of the day and it typically has an additional charge that you're not getting around anymore so that's one thing when you see these commission free trades it's typically not with mutual funds it's with stocks and you're also usually paying a higher percentage fee overall right you are you are and and that's another it's a very good point jason is like you have to understand explicit fees and implicit fees explicit fees they're going to show you and yes those are higher but also the implicit fees which are buried in the prospectus are higher too right and and there's more trading costs there can also be tax inefficiencies with a mutual fund i don't think we need to get into all that because it really i think uh more so affects a different demographic but yeah i'm not saying all mutual funds are bad by any means i'm not saying that i'm saying that i think um there's a handful that are great etfs are the 2.0 and and just to explain an etf it's another basket it just tries to mimic an already kind of set group like the s&p 500 index fund just tries to mimic the s&p 500 those 500 companies it's not going to own all of those companies no index fund owns every single s&p 500 company but it's going to own the majority of and it's going to act like it that index fund is not at etf is not trying to say you know i think it's going to be you know this company ibm's going to come back you know whoever you know it's it's it's it's uh it's trying to track with some exceptions they're all arc funds for
and that's where it kind of gets gray and real nuanced you know but in general you know um etfs can be traded intraday they're lower cost you know that sort of thing and and they have a good track track record when you look at the historical data yeah a lot of the etfs are right managed by algorithms rather than people again not all like the ARC funds with Cathie Wood famously not but yeah a lot of them are algorithm and therefore usually the fees are going to be you know a lot lower like a tenth of the the fees and like you said you can you can get into and out of it anytime you want during the day uh also another good point is is um uh minimum investments right a lot of mutual funds have have really high minimum investments and and some aren't offering any more you know right in the closed inside yeah you might have to put in twenty five hundred or five thousand or whatever where it needs to be you really wanna be in the institutional class i think that's a good point to make there so if anyone listening to this has a a brokerage statement bring it out okay and you're at morgan stanley raymond james edward jones and look at that if your mutual funds look at it and at the end there's typically a letter all right b c i y are the main ones if it says a b or c at the end it meant it means that there was a load fee or a sales commission at the front end of that you didn't get the the lowest cost share you want the i's and the y's those are the institutional class but typically you have to have a million dollar minimum investment but that's where you know and that's where like you know with with my clients because we have an institutional money manager that we're partnered with my client might come in with call you know quarter million half a million dollars or whatnot they don't have a million just to invest in that one mutual fund but it's okay because we're able to to access those funds those are if you're in the mutual fund world you really want to be looking at i'm not saying every single abc is bad i'm just saying it comes with an additional charge and there's probably another class that is managed by the same guys right um that doesn't have that charge so so my my general advice for for people who are starting out who ask me i say start out with um you know s p 500 etf and then maybe after that add like a total market etf um and and get your get your base there and then if you want to you can start adding some sector etfs or even adding individual individual stocks do you do you kind of agree with that as a starting point i think it yeah it's a general i i would say i would caution to say that should be the basis for every person needs their own investment policy statement and this sounds real technical but you need a plan in place because you're most people are going to get emotional about it you know and and you and and i think that unfortunately i want to caution people there's this over in investors over the last especially 10 years um that they can produ predict future events right um well and that's good i want i want people involved it's just the idea that more than 50 percent of your portfolio should not be in some type of index it that's that's a very hard argument i i i would argue there's little to no data that says anyone should be doing that let alone an individual investor i mean you look at um dalbar right dalbar always puts out this research the best money managers in the world don't 80 90 of them don't beat their benchmarks right so what are they not doing they're not creating alpha they're not doing better than you would have done in the overall market of just getting an index fund so when i hear a lot of individual investors that are taking a lot of their money and going into brand new markets with large percentages their portfolio and they're doing well i hear right there's been a lot of that's great but it's it's not a game that that has shown the statistics that you can you can repeat over the long term so you see i'm saying you really the majority of your money you really want to just be riding the wave and then with that minority share what is a minority share 1 to 49 right what how much of that you control depends on the person i think that's what you were talking about but i i would actually take a step back and say how much of all this time that i spend on these things right if i'm if i'm managing a minority percent which of my portfolio let's call it 30 right i've got 70 percent in an s p 500 fund and with 30 i'm buying sector etfs and i'm buying individual stocks whatever time i put into that that time we i think you want to define what is that time for me right is it leisure and i think that this is leisure for a lot of people it's like golfing like but when i go golfing i don't bring people that i want to be my client i go out with my friends and my family right it's it's leisure it takes my time it takes my money but yeah it was my leisure that you know so if that 30 is your leisure then then look at it like that if it's a business and you're saying i'm trying to create some extra income for me and my family to to pay for things or to remodel the bathroom or whatever then that might you need to look at it like a business right or is my retirement savings right this is this my long game this is what's gonna provide for myself and my wife uh my husband whoever it is um and and down the road we're gonna be okay because i'm worried about social security yeah so i i think what i hear you saying is if you're gonna invest 10 or 20 hours a week into this you got to think about is that time am i really by beating the market if i do at all by a couple percentage points is that really going to give me as much return as if i would do something to educate myself or start a side business and then put that money back into the index fund i think that's what you're saying somewhat yes i am you're right i'm saying that i'm also saying let's say that it's it's net positive you put all this time into it and you create alpha right my next question is how long have you created alpha 4 and is your system repeatable was it not just a timing thing right you were in a new industry that had a lot of growth right because if you look at the best investors in the world they're not traders right they're long-term diversifying investors you look at the david swensons of the world and the warren buffett's of the world and the ray dalio's do you have your shining star um stock pickers you do you absolutely do it's a it's a small percentage it's an even smaller percentage of the individual investor and i would like you know the the ideas i would say you know not necessary yes you could put those those um hours in somewhere else but you know maybe you don't want to because it's fun for you because it's leisure you know what i mean that that thing over here and that's where i think you wanted to define you know like 15 to 20 hours a week yeah i only created three percent of alpha i created 40 of alpha but it wasn't about the money i enjoy it you know what i mean that's and and but i think that it is a um that's a fickle leisure time right when i make bad decisions in golf it was a bad day i'll just go have an extra drink afterwards you know what i mean make a bad decision with with large sums of money it's tough yeah and and that goes back to like under having those rules for yourself and knowing how much of it you're going to put into that that pool versus you know how you know that 80 or 70 you're going to leave in the index fund yeah yeah define define your your your things and and that's where i think it's always whenever you're looking at any of these things look at it and then take try to try to take that macro view try to take as high level view look okay what is this money to me with that leisure there's also a lot of different classes like how risky people are i mean there's traders who are going to be super in and out of stocks and that's that's risky but if i if i go out of me like hey i think that you know amazon web services cloud computing is going to eat the world i'm going to buy amazon and i'm going to buy and hold amazon for years that's probably not that risky and that's probably not going to require that active i just believe that amazon's going to outperform the general market yeah yeah and and when you've come into we're we're moving to almost like an oligarchy right just a couple like i i saw this thing in some uh you know business journal and it was basically you know google amazon netflix and they had everything they built you houses they fed you food you know what i mean it was only five people that did lit they pushed out everybody out of every market right yeah and they were just the five so i think with some of those big ones you can say yeah you can just ride that wave right there they have so much market share so much innovation so much cash you look at like apple i mean it's insane right so they are outliers right because it goes against the ethos of diversification but they make up the largest percentages of the s p 500 you know so i think you always have to have exceptions as with any data right very rarely is anything absolute you always have outliers you always have anomalies those sort you know kind of things yeah um so before we were talking about you know i think people thinking about retirement and and maybe the the difference in generations um a lot of in our parents generation may have had um pensions to rely on um they have social security in our generation we may not have those things or they may not be there to the same extent what is your thoughts about that um i mean is social security going to be there do you think when we're when we're ready for that age that's a that's a trillion dollar question right uh the congressional budget office puts out reports that's one of the main things i look at um and you can just you don't have to read the whole time report you can do people you know do summaries of them um it doesn't look good you know um so the thing here's what i would say without being a fear monger i would say more so than ever younger people need to have a very defined discipline plan for uh saving for retirement uh because the the odds are against you um in terms of that uh and here's the thing that has to be you have to why one thing i don't want listeners of this to discourage trading and just i don't i'm not trying to do that i'm just trying to put it in its rightful place right and i and i want it to um be part of a bit a bigger picture you know what i mean because yeah and we people aren't gonna have pensions and and we we look at things in tax buckets that's that's one of the main ways that i look at money how does the irs look at money most people generate and accumulate their wealth in a tax deferred bucket in a 401k an ira whatever it may be then you have after-tax money okay i put into my 401k or whatever and then i had additional savings and i invested that that's that's non-qualified money or taxable money okay after tax money if i make gains on that i got to pay taxes on the gains but i already paid taxes on the principal and then you have tax-free money and that's that's the the holy grail of investments right the roth account um you can say uh cash value life insurance can be in here if it's structured properly you can say muni bonds in certain circumstances can be in here um and so that those are the kind of tax buckets and so that's one of the first things is am i contributing to all my tax buckets right right am i building you know not only just a portfolio but am i a tax divers diversified portfolio yeah i mean that's the scary thing to me when i hear when i when i talk to my friends and i ask them you know what are you doing and they're like well nothing yet you know i'm still young or whatever i'm like no no no you you have to do this now um so when they're getting started um you know the first thing you have to do if you're if your employer has matching take advantage of that full matching right that should be do you agree that should be the first thing you you go into yeah and um i would say yes and i would add one thing on to it is um max out there matching and then a lot of times you can um say i want this to increase by half a percent every six months or a year right my percentage contribution can increase so it's like set it forget it and then so then it's just going to keep increasing and you're going to keep not missing it and then so that that's the yeah so that's kind of one of those um yes absolute things but i would even take a step back before that in terms of investing i would say number one you need to get your your your cash flow management in order because nothing will happen really unless you get some influx of cash you sell a piece of real estate per uh a family member passes away you sell a business other than that the majority of people that that get money to invest it's from excess savings well you know there's only a couple variables there it's how much i'm bringing in versus how much is going out i need to have a really really good understanding on what is going out and and the wealthiest people that walk through our doors whether it's north carolina or florida it's the people that really understand cash flow management right they they they are do not pay for debt they don't pay for that they haven't paid for debt for decades right they have they have positive pass cash flow right passive income coming in and so it's really just blocking and tackling a lot i would say you know um don't have any debt get debt free have a savings the the the uh the basics of that is three to six months of expenses what's three and six months if you don't know what three to six months of your expenses are to a really good degree we need three grand a month we need five grand a month we need eight grand a month whatever it is you need to know that what's your savings rate what are you always already putting away and where is that savings going is it going to my kids education am i putting them through private school do i want a paper for college you know then what about us i i talk to a lot of people our age right uh my sister's age a little bit older um and they're just like we've been so focused on our kids you know and we haven't done anything you know and so by the same thing i say is start have an emergency fund the other thing i think is really really big for people to consider in this stage is before and again this is all before we get to investing because i think it's all about planning and mitigating risk is if you're a two-person household um are you both insured uh in case one of you passes away and and that's a really important thing because the nice thing about it is you can buy cheap term you can insure your husband and your wife for for not a lot of money on a monthly basis and that really protects you you know that's that's one thing to consider you know another thing to consider is do we have estate documents if we have kids if we both pass away i know a lot of young couples like i do not want my kids being raised by your parent you know what i mean you want to talk through these things you don't want the courts deciding these things yeah i mean so those are a lot of like planning blocking and tackling you can do as a younger person and then we say okay jason um i'm properly insured uh we've got a good savings rate we're not we don't own anyone uh anything and i'm not talking about mortgage right mortgage is a little bit different it's hard not to have that debt right yeah but still i would look at it i would i would say are you are you house poor you know i see a lot of people that are house poor you know i mean a house is a house you know i would much rather see that other hundred grand going to an investment property you know talk about diversifying a portfolio investing in actual real estate outside of your primary residence i think that's something i see a lot of like you know oh i'm diversified but all of their equity is in the market in this pie chart and i would say that's not diversified
okay yeah great that's great so you you get your insurance in order you make sure you understand like budgeting your debt paid down then you build up your rainy day fund now you understand like how much you know you need for six months max of expenses a lot of people though maybe have done those things and they have just tens and thousands or even hundreds of thousands maybe in some cases sitting in savings doing nothing right i see that a lot you know it's funny i actually had a guy um he was he might have been your class a couple years older than me and he reached out and then i had a buddy who who is a friend of mine and reach out and they both were a little bit tail between the legs like i've got six figures sitting in a savings account back yeah you know and and and i would not recommend that no because you're losing money every year to inflation you are and and these are the years your accumulation years you need growth you know especially if um social security is going to play less of a role in the income that you and all these things now it all still needs it's all still right measured growth and and you know kind of the diversifying that we talked about but yeah you need to be exposed to the market and one of the things i would say is you know like you said i think it's a great advice max out your 401k and if you can set it to automatically increase and the other thing that is is you want to um consider roth as a younger person which is another type of retirement savings account um because the roth is um i mean if you if i could put a hundred thousand dollars in a roth every year i would put a hundred thousand dollars in a roth every year why now i would need to consider taxes right i don't wanna i shouldn't make that general statement but i like the idea of paying taxes today and never paying taxes again i like that idea especially when you look at you know the federal government some people listening might not understand the difference between a traditional ira and a roth ira so can you explain that a little bit yeah it goes back to those tax buckets tax deferred taxable tax free tax deferred means it's not going to hit my income statement i'm going to get to put that away in my 401k it's tax deferred and then all those growth during those years i never have to pay taxes on any of that growth and then when i turn typically pa you have to be older than 55 or 59 and a half i take that money out now i have to pay the government taxes it's my my ordinary income the roth is kind of reverse instead of it not i actually pay taxes on my income today and that i put it into the roth today and from that point forward as much as it grows as long as i um adhere to the parameters i have to have it open for five years i have to have earned income i have to be older than 59 and a half when i access it but when i grab it it's all tax free income to me i don't have to pay the irs now there's an argument that people say oh well you want to defer taxes until later on down the road you'll be in a lower income tax bracket yeah right and i think that there's there's there's merit to that right but you you that's running under one huge assumption that tax rates are going to look like they do now right that they're holding that variable constant i i i don't see a world where that holds true right for two reasons one historically speaking we're at a very low tax rate environment historically speaking and we're printing money like water our our debt is going through the roof no one cares about being a fiscal hawk anymore inflation we're flirting with it like crazy the fed's actually encouraging it right now the fed actually increased there um and so that begs the the argument that tax rates are going to be higher in the future and so when i look at a 401k that's a tax-deferred account i'm not paying taxes now i'm not going to pay taxes over the years i'll pay taxes later it's almost like having a variable rate mortgage on a piece of real estate you own right yeah and then all of a sudden you go to sell the real estate and the government says no no no no the rate on this it's not it's not 20 it's 25 you don't get as much now well especially when you're starting young with that roth because that money's going to compound and compound to compound so that growth of your of your savings then is going to be a lot bigger than what you put in and pay taxes on initially right could i i would say could i there's a lot of math in there and what's funny is i have this is like the um what's the word like whenever you know like whenever people get together they always talk about that one problem whenever you get wealth managers or analysts just get these together this is that this is that did you the craziest algorithm i actually talked to a guy his name was jason graham a really bright guy and he had made this excel spreadsheet i can't even tell you how many hours he must have spent on it to to make the argument for the roth okay and that's what it was but yeah i mean um the the roth if the other thing that i would say younger people should be aware of with the roth is and i should know this off top my head but i think this year if you and your spouse married finally jointly make 186 or 192 something like that um if you make more than that you can't you can't contribute to a roth you made too much or the phase out starts and then you then you so um while you're younger and you're earning less you have this opportunity to put money into this account and later on if you're successful and you your income grows you may not be able to contribute to it anymore the other thing that could change is they could change the um the rules of the roth the government because the gov the roth doesn't work in the government's favor i don't think right time value money i want my dollar today you know what i mean like that that they said yeah well well we're gonna push it to later on but we can change it we get to change how much we get it's not you know it's not like we're deciding on that right now and so that's a game i don't like playing i'm you know now i think you should max out your 401k i don't want people to think that i'm not saying that i'm not saying tax deferred is dead i'm saying diversify your tax buckets money have money in all of them yeah but if but again if your employer is matching it you want to do that because you instantly double your money to begin with the right it's free money there's there's no money in that yeah oh yeah yeah you know and and then so there's other vehicles that people can look at like annuities and i don't know i'm sure you know a lot of different ones that i don't know is is there any other vehicles that people should be looking at or staying away from yeah it depends on age right again you know who are we talking to with the accumulation phase um annuities i i don't right now the way that a lot of them are built because annuities are a contract with a life insurance company and um truth be told if you if you lift up the hood and look under them they're investing the majority of that long-term bonds um and then they're taking 15 to 20 percent they're trading options and that's where they're getting their alpha you're based on an index yada yada the day of the old school annuity right the old school new that looked a lot like a pension right i put in a sum of money then it pays me for the rest of my life um they're still around they're still income annuities and immediate annuities um right now they're they're they're not as attractive in my my opinion because they're based on bonds and that you know and they're not really for anyone in um the uh the accumulation stage i wouldn't say you know um but someone older yes um now the thing with older people is they just have to be very careful because the vast majority of duties are better for the guys selling them than the person you know purchasing them they're i think there's only i would say five percent of annuities in that regard that are good life insurance i think is a really creative vehicle um that that people should look at and um and i've got some i don't know if you want to go through that yet but i've got some books that i would recommend you know people that want to learn just about investing and different you know thought processes um if you want a different approach to retirement savings um it's called new rules for retirement new rules for retirement savings okay it's by a guy named martin ruby and it it talks about it it's a tax play it's it's a really interesting way um to look at how wealthy people um view taxes and and what they're doing and how you can be doing something similar okay yeah so all right so we we we got to cover you get your budget in order um you maxed out your employer matching uh you you then you work on maxing out you know whatever additional ira or raw and roth both you can do now you're left if you're doing well with your budgeting you're left with you know the savings account um that you know you don't want to leave in savings should you let's say somebody has a 50 000 sitting in savings that is above their rainy day fund should they go down and deposit that 50 000 into an investment account or should they space that out over time or what do you recommend yeah unfortunately that it just depends on their situation you know what i mean it it the there is there there's two schools of thought trump you know if you think that this is money i don't need and i'm just investing you know put it on red and let it go time in the market right if you look at the data um time in the market is is the biggest driver of positive returns not timing the market so it's all about just being in the market for the longest period of time to catch that overall wave it's not about oh no no it's i don't know if i want to go you know or go in go out because when you're trading you have to get it right twice and not only do you have to get it right you got to get it right twice on every other decision you make for the rest of the times that you trade right you got to get it right twice with investing true investing you got to get it right once you've got to get it right once you make your money when you buy and if i'm buying now and i'm going to be in it for 10 20 years i'm buying at an incredible so you don't think it matters uh i mean versus cost averaging per say okay i'm going to put in you know one you know this part this month and next month and next month so you get kind of the benefit of cost averaging are you saying if you're in it for the long term that doesn't really matter that much it cannot i'm not saying it's an absolute again um and there there's if you want to man what was that paper
the Wharton school put out a really good paper on this I wish I could remember the
i'm not gonna be able to remember his name but anyway um the idea is the dollar cost averaging is better because over the over the long term you're not trying to time the market and you're getting in at different points and then your average cost basis is better than what you would have gotten if you would have just thrown it in last tuesday or whatever um that is the one school of thought and like i said the time in the market is the other school of thought is um the days if you just miss out on like you know five percent or the top five days of it of any you know year um you miss out on the majority of that year's returns you see i'm saying so yeah if this money you know if this money is truly long-term right i i don't need it for anything with you know then i would say you want to consider you know you want to consider both options you want to consider it up because it also depends on the person you know it also depends on because i think that that is very very important in all of this Behavioral Economics Daniel Kahneman just absolutely played the way in this regard um is you you when we're talking about younger investors we're talking about people that have probably not been in this very long right and even if you've been in it a couple of years this has been a very unique market and you have to you have to kind of be mindful of how are people going to react when things don't go well right you know you always want to look on the worst day of your portfolio um and and see how that affected you your decision making all that kind of stuff because you know another to your point another 2007 is going to happen right we're going to have this this bleak downturn where the market may drop 50 and and a lot of people at that moment freaked out and and sold at the exact wrong point in time right right and and and the flip side of that coin there's a lot of people back in april uh that were looking for a chance to to dump some money and they did it i had a guy an attorney a friend and he was and and god bless him i i was like great job man he had a figure sitting on the sideline he dumped it in in early april and he paid off i think he told me 60 or 80 grand of his mortgage he passed around november good for you man it's gonna be a nasty tax bill but good for you you know uh um uh taxes are fine for doing something good right you don't get taxed for for nothing um but uh but yeah uh but yeah i i mean it's um i do think yeah there will always be another correction um the the the thing that i worry about with the gamestop revolution and the bitcoin revolution and everything like that is um you need to treat this like cocaine you know what i mean it is incredibly addictive like and and and and i would actually argue that's probably a bad analogy because cocaine only has like some you know medicinal good things i think investing has a lot of really good things but it's gambling it you know if things can go up in unless you're investing long term a very structured um investment policy you're rebalancing and repositioning as needed you know consistently rebalancing or at least reviewing to rebalance every quarter or whatnot um and you got to be void of emotion you know what i mean um because uh we i think we irrational exuberance um uh man i'm blank on his name too i can't remember anybody's name uh irrational exuberance a great book um professor at princeton uh but anyway i think that there's been a lot of that over uh the last couple years unless last 10 years if you invested if you you know were really aggressive hey i'm going to invest in marijuana stocks i'm investing bitcoin i'm investing tesla i'm investing all these tech stocks boy you are riding cloud9 and i think that's great you made a lot of money and things are going well and and it's the the market free markets are working for the little guy i like that i really really do um i would just be cautious you know what i mean i would just be cautious and look at the data of am i diversified properly and are have these been kind of timing things or might you know and then also long term you know what is my me and my family's goals you know like i is it just grow this account as much as possible then it's it's kind of simple or you know we've we've got this influx um that i'm sorry outflow that we're going to need because we want to send little susie to a really expensive art school down in over in orlando rolling you know what i mean or whatever well then we need to be mindful of what what is this money you know what i mean is it retirement savings is it a business i'm trying to make money on to to just you know help us out financially is it my leisure what is it you know and then i think it'll do you know give you good direction of how you should be approach investing this money you know yeah realizing we're not all superman we're not always going to beat the market year after year having those rules for yourself and sticking to those rules keeping emotion out of it and mitigating your risk right yeah it's easier said than done right i mean it's human nature it's tough i mean i invested i used to trade options about you know 10 years ago and i was in my mid-20s i was an analyst i thought i knew everything i just you know and and it was i just i finally came to realize like i'm working against all the data all the data says don't do what i'm doing you know what i mean um it was it was uh you know it was that and so um yeah with the majority you know i think i think if you're in a good index and then with a minority um you're investing it and and you know spending some time on it and understanding it like you said having you know um an investment policy statement having some discipline as long as all that other stuff is in order that we talked about have fun with it you know uh you mitigate your risk right you know you're only dealing with a minority percentage of your portfolio this isn't going to affect you and your family you know your ability to to pay your bills and that sort of thing because all of those things are taken care of you know in that regard and then i think another big thing of is um you know what is the end goal of this right is the end goal so that i create alpha i feel like that is the idea of any type of person that is really taking an active approach and they're investing they're trying to create alpha i can do better than the overall market right than just sticking it in an s p 500 fund and you and you very well may be able to do that and i would say if you consistently do that then what are you doing for 40 hours a week what's your job because if you're not really like enjoying that and you're good and you enjoy this maybe you should be putting more you know what i mean like maybe that those types of things or is um or is it you know i'm not really i'm okay at it i've got some wins i've got some losses or whatever it's fun right um but my business is kind of suffering and yes we're in the pandemic and that sort of thing but putting resources and time into that you know all that kind of stuff yeah i think it's important to to know that but i also think it's important that we communicate to the folks who who haven't got started maybe a lot of this stuff is way over their head like you don't need to do that there are very easy things that you only have to maybe pay attention to once or twice a year and that's it you know you go down and rebalance with your advisor once once a year let it ride until you're ready to retire like you don't have to be active yeah you'll do just fine with these indexes with a device diverse portfolio yeah i think it's a great point jason and and and somebody might say okay well how do i do that you know all right i really like everything you guys you know and i'm not i'm not a trader um it's going to one of these brokerage houses you know going to a charles schwab a fidelity an e-trade a scottrade or robin hood whoever and opening up account you know obviously we talked about um you know should i be opening up a non-qualified account or i should be opening up a roth account or a traditional ira account those are just incisions you're going to need to figure out before and then i would say just from my personal opinion um that they're they're kind of almost like a commodity to a certain extent i don't i my custodian my clients assets are with fidelity on the institutional side um but and that is you know as a retail person that's just going to open up a small account they might like the tools that um robin hood or or scott tray you know these different brokerage houses have different tools and they also most of them are free commission trades for stocks etfs most of them are but you just want to read the fine print you know uh kind of what tools and things that they offer what's their app look like you know that's the beauty of the internet you can walk through what they all look like and and have them sell you you know and and you can easily start there yeah so that's a question a lot of people ask is like which one should i choose and i think the message is it doesn't really matter i mean their apps might be a little different you might like one over the other you know but for the most part they're the same the difference for me i chose fidelity personally because we have a local fidelity office and i love to go down there for a checkup once a year sit with somebody have them look through these things say hey am i still on track what do i need to do how should i rebalance um that that is invaluable to me and and maybe that leads me to a question like when should somebody go see you or somebody in your business yeah um i would say typically i would say for for someone that and i don't want to say in my business because um there may be a a morgan stanley or a raymond james or an edward jones guy that's doing what i'm you know a financial advisor and they say no no the young people need to come see me and i would say yes i would say blocking and tackling the things that i talked about and putting a plan together is really really important but a lot of that you can do on your own as a younger person because um you know once the plan is in place it's more about the day-to-day just cash flow management you know uh especially like if we're talking about a person that's just gonna you know they don't want to trade you know they just want to invest and they just want it's it's um it's a somewhat set it and forget it thing you know what i mean as long as you the client are doing the other things with cash flow management you know protecting yourself having your state documents in order gotta forbid something to happen to you or your wife your husband or whatever um you know yeah i mean um but what we are is we we're retirement specialists so i'm there to make sure when you finally say you're going to retire when you finally pass away and your spouse passes away you don't run out of money and that that's where um getting the plan in place ahead of time i think i would say 50 is a good time you know a lot of people when they're younger than 50 we say um hey here's some tips here's some tools come back and see us later you know when you're when you're later i do have some younger clients um like i said the example that i gave and there it's when it's really high income earners you know i mean when you have people that have a hundred to five hundred thousand dollars of free cash flow at the end of the year um they need help investing that right because if you generated that much free cash flow you don't have a ton of time on your hands right you did something to generate that and so that's where i come in for younger clients my younger clients are just the ones that have really high cash flows cool last question i have for you um is so so uh you in these i have a brokerage account which is the the money that i invest that's not in my retirement account so it's not any way tax deferred it's not a roth i've already paid taxes on it and i also pay taxes on the gains the the challenge that i have and i don't know if there's any way around this um is when i do want to rebalance it's so hard to rebalance because i have to pay the tax bill like if i want to if i want to get out of some tech stocks and put some more into utilities right now because the way the market's playing i i feel like i can't because if i sell that microsoft i'm gonna have to pay a huge tax bill on it on those gains yeah you bring up a great point jason um it's it's tough it's tough with non-qualified investing yeah and i think it's something that you that is really something good for your listeners to be mindful of um for that brokerage account that non-qualified outside of a retirement account um is you know uh when you have those uh and especially like in a year like last year you know like let's say you were part of the tesla ascent and you sold you know late in the year that's to hit your you know if you bought it and sold it the same year it's a short-term capital gain that's going to hit your ordinary income it's not going to hit your capital gains rates because it's not long term so then that's even another nuance is whatever i'm selling going to hit my ordinary income or is it gonna hit my capital gains i've still got to pay the irs either way but you're right it's a it is a a tough um uh balancing act um and then you know with my clients you know we're always looking you know in terms of taxes of course a lot um but you know because in terms of their taxes if their um income goes up too much their medicare gets more expensive and they're more of their social security is now taxed and you know there's just like this this cascading of tax things that happen i don't think younger people have as much to worry about but yeah that is a predicament of a younger person and i worry about some people not realizing even especially the short-term gains right if they're new to it and they sell it like cool i made ten thousand dollars well did you because you're going to have to pay 30 you know 25 30 percent of that back to the tax man yeah yeah so short term is anything under a year correct me wrong and long term is is your gains if you've held it for more than year correct? yeah yeah. yeah and so that's that's a huge what is what is this the swing? so the the short term is ordinary whatever your ordinary income tax rate is in in the the long term is what's the capital gains rate? 0 15 or 20. most people are going to fall into 15 15 tax bracket yeah so you have to make a very low income and if you had a big capital gain you know what I mean like to be in zero most people are going to be in the 15 and then it goes all the way up to four something I don't know if I thought my head but yeah yeah you so most people um they're they're going to be in the 15 category yeah be aware that. i lied. one last question. i want to ask uh in a similar vein anything you can tell us about tax-loss harvesting that might benefit people
so just to excuse me i'd fight in a uh end of a cold um yeah tax loss harvesting is uh you you would have had an opportunity of it it's basically um selling losers um uh to to offset some of your gains so you know at the end of the year um at the end of the year if you have a lot of money in a brokerage account or non-qualified account it was a good year for you you kind of get that like i don't want to go speak to my accountant or i don't want to do my if you do your own you know turbo tax i don't want to go see um you might oh well if i've got some kind of laggards i could sell those and then i can kind of i don't have to owe uncle sam as much and it is it's it's it's great planning i do it for my clients you know um that is one of what you're talking about is a um you know a biggie more money more problems right you have a lot of non-qualified money you got problems you got tax problems and you need to be nuanced and i think that's a great point that you bring up tax loss harvesting um is a way uh to make the tax laws and the timing of the buying and selling of things work in your favor a little bit more and i think that's probably the the best thing that a lot of uh investors and young people and anyone in general can do is just understanding the environment around you so that you can kind of see those things a little bit better oh if i do this wow that really you know that really helps me and it's the way to make an opportunity out of the market right now the nasdaq has been especially been pretty punished and we're seeing a lot of red but we can make some opportunity out of that by canceling out some of that that gains and for example if you had facebook right and you lost quite a bit in facebook where you can sell facebook immediately turn around and buy amazon that probably is similarly punished you get to write off your loss in that facebook stock while you've just moved it into something very similar at the same level so when it does come back up you enjoy the game the the gains from that but you know you've saved a little bit on the tax dollars yeah absolutely absolutely um i will say um if i i think uh and of course i'm biased but my brother justin is my business partner and he just released his second book and i think it does a really good job um obviously like i said you know 90 to 93 of our clients are are older um but i i think it's got an incredible amount of information that's good for everyone um and so it's um it's called design to last renovate your financial house and have confidence in retirement uh but if you just go to retirementdesignshow.com so it's a it's a retirementdesignshow.com um and you can put in your information and get a copy of his book um i think what i like about it and like i said it is it gives you a good lay of the land uh of in terms of planning in terms of where investing fits in how taxes fits in how you know risking like i said uh you may read some of this some if you have some younger listeners and they get the book and be like oh well you know this is talking about you know legacy and leaving things onto my grandchildren all that kind of stuff doesn't apply so there's some of that too but but i think it's a really really good like i said lay the land for for someone who wants to just learn more about investing sounds good hey i appreciate your time uh Jason Biance from J. Biance Financial thank you for joining me yes thank you jason you take care everybody uh remember start early be diversified and stay greedy we'll see you next time. don't forget to subscribe! Follow Greed Geek on Twitter and Facebook at greedgeek and follow on Twitch at greedgeektv