Larry Fink, Ray Lucia, Federal Reserve discussed on The Ray Lucia Show
Welcome back, folks. The Ray Lucia show conferencing, again bring the no I was just alluding to the. Sorry. I gotta get my my I'm gonna pull that up again on my phone every go, so so this study that was done by why Gan and irons, Robert a y Gan PHD in Robert irons PHD when does a bond first withdrawal sequence extend portfolio along jeopardy. And what they determined is literally ninety percent of the time spending the bonds I worked in the ten percent that it didn't it actually still did better just wasn't statistically significant. And interestingly enough when they had done this study it came out in two thousand eight so the work was done through two thousand seven had they actually still been doing this study since then they would have learned that it worked even better than they thought it was going to work back in two thousand eight. Because they thought that valuations were somewhat high stock market and so forth. The study wasn't two thousand eight. That's when it that was when it was published in the journal of financial planning. I'd love to see what the you have the next ten years in and see what what? Well. Yeah. The stock market went crazy. So it would have been foolish to drain stocks. I mean, you don't need to do this study from two thousand nine to two thousand nineteen the market did like seventeen percent. Remember, we've talked about that before when you go through these so-called fifteen year cycles that one started what would appear to be a darn good fifteen year cycle that I don't believe personally is going to end in some recession. Now, really I hate to agree with Larry think from black rock, but here's what he had to say about that very topic. Stocks could have a melt up from here. Black rocks. Larry think says this I believe was on CNBC early this morning here. As obviously smart guy. They're the largest global equity manager in the world quote. We have a risk of a melt up not a melt down here. This fight where the markets are inequities. We have not seen money being put to work. That I found quite interesting. He goes on. In stock market terms. Melt up is considered a big move in the markets that comes from investors trying to get in on a momentum's shift. It can also be a sign of a late stage bull market. The is shares exchange traded fund with tracks. Global stocks is up more than fifteen percent this year, the SNP rallied nearly sixteen percent through the most recent close. So we've obviously seen a tremendous shift says the last quarter of last year. Well, last quarter of last year. You have the big dip. You're going to have a comeback. Stocks benefited this year from apparent progress and U S China trade talks and a recalibration of global monetary policy expectations. The Federal Reserve slash down its rate projections to reflect no rate hikes in twenty nineteen. Remember, the Federal Reserve pretty much is the one that rains on the parade with rate hikes, the US central Bank also indicated that it will and its balance sheet reduction process earlier than expected. Meanwhile, the that's the European Central Bank pushed back plans for future rate hikes as well. Adt also announced last month that it will issue cheap loans to banks in the region. Sound familiar? Yeah. Although we know what that can lead to. Well, we know what it can lead to. And it may be short term gain for long term pain. We haven't experienced long term pain, but there's not one politician on either side of the aisle that seems to care about that today. I mean, I no money to the banks. Well, yeah, I are Kudlow talk last night or the night before whenever it was that we're going to grow our way out of it. I highly doubt that, but that's for another discussion or talking about the markets and the resiliency of the stock market, and whether or not this party can continue to go on according to the largest money management firm, literally global equities manager in the world. Larry thank says. Yes to that. One means nothing to me. No, I heard that. I heard that in one thousand nine hundred nine I heard it in early two thousand I heard it in in mid two thousand six you didn't hear Larry Fink. Why may I am to have to look I may have covered all that. You may have read acted all of those. Yeah. From two thousand seven okay, we've got to get to the strategy. Okay. Good. This is this is one that. I like okay now, obviously, the stock market has gone up a lot in the last ten years if you have a 4._0._1._K plan, and you were purchasing company stock and now you're on the precipice of retirement, you need to know about the n you a strategy net unrealized appreciation. So let's kinda use an example, let's say that you have invested one hundred thousand dollars in your company stock over your lifetime in the 4._0._1._K. So you put one hundred thousand of your own money into that stock and that one hundred thousand in company stock is now worth five hundred thousand dollars. You're getting ready to do an IRA rollover because you've got a million five. Five in your total IRA stop before you do the rollover you need to consider. And you a now if you have a million five, and if you're going into retirement, and if you can do a lump sum distribution of the million five, you can send five hundred thousand to your brokerage account taxable brokerage account and the other million in pretax dollars to your rollover IRA. Now, here's the kicker the five hundred thousand in company stock is reportable to the extent of its basis only for tax purposes, what is the basis the basis is the amount of money you contributed into. To the company's stock. That's the basis the gain of four hundred thousand is not reportable as part of the taxable distribution if it's done correctly. Okay. Now, where do you sit after the to roll over? Remember a million went your IRA roll over five hundred thousand of stock went to your brokerage account, you pay tax on just the one hundred thousand dollar basis, you still have a four hundred thousand dollar gain in that stock that gain will be taxed, and this is so key that game will be taxed as you sell off bits and pieces of that stock at capital gains tax rates. And it will not have to be taxed for purposes of the three point eight percent Medicare surtax because it's considered a retirement plan distribution any future game would be. But the initial gain on that hundred thousand will not be so what why is this so important, well, the ordinary income tax rates compared to the capital gains tax rates at least under current law are significantly disparate. I mean, there's a big difference in what the rates may be. And in fact, the rate could be as low as zero percent. Let's let's say, for example that you're retired. You postpone taking your social security, and you're going to live off of your own portfolio. Or let's say that you are taking social security. And you're gonna live off of your portfolio. You may be able to cash that gain in in the zero percent tax rate, therefore not paying any tax on your social security, but prefers strategy might be to delay taking the social security and just live off of the gain. Because any gain that hits you in the fifty excuse me twelve percent income tax bracket, which takes up to about one hundred grand, by the way. If you're if you're married is taxed at zero. So think about this for a minute you live, you postpone your social security, you take that hundred grand of gain each year for the next five years. And then you start up your social security, and you know, what you've paid on four hundred thousand dollars of what would be taxable earnings zero. Well, many zero and I believe that started in your 4._0._1._K. Yes. It did. Which would have come out as ordinary income tax rates. Yes. So you kinda went from ordinary income tax to capital gains in this example, and capital gains being zero at.