Joey Loss 00:00
Two and five Americans would not be able to afford a $400 surprise expense, and one in five Americans have no emergency savings whatsoever.

Adam Van Wie 00:09
Yeah, that's really scary. I mean, you've got to, got to have that. It should be the number one priority for all households to put away that, that basic emergency fund, it really is that buffer between you and poverty. And I know that sounds strong, but I really believe that

Joey Loss 00:39
Welcome back to Wealth Unplugged with me, Joey Loss and I'm here with my good friend and business partner, Adam van Wie, always a treat to be here. We were going to record a market podcast, and decided that we're not too happy with how much of our vocabulary involves the word. Jerome Powell, so we're going to spend a little bit of time talking about what's going on, but then we're going to move on to the more interesting topic of the six priorities of savings, like, what is the right order for families to be saving? I think this is particularly directed at families in accumulation. It's not really a particular age family, just any family with kids under the age of college. I think this is kind of a helpful framework. We'll dig into those details. But I guess to kick it off, Adam, what has changed, if anything, in the last month regarding the market?

Adam Van Wie 01:26
Yeah, the biggest thing, and you said it, Jerome Powell, finally came around to our way of thinking, and looks like he's going to cut rates at the next meeting in September. This is, in my opinion, slightly overdue. I don't think it's disastrous that he hasn't but I certainly think that we can afford a rate cut, and should do one, at least to get things started. And the market's pretty happy about that. So that's really the big news that's been driving most of the headlines and the narratives, and I think I'm just glad to see it at this point.

Joey Loss 01:59
Yeah, I agree. I just feel like we've been talking about it forever, almost to the point now where it's like he basically said he's going to do it. And I'm like, but are you like, is there a chance to just, you know, what's going to dominate we have until what September 17 is that when it happens? Yeah, I believe

Adam Van Wie 02:17
so. And there was some good news on that front this morning too. The PC report came out showed inflation was right on forecast. I mean, the actually, every number in that report, I think, hit its forecast target. It was pretty remarkable.

Joey Loss 02:30
Can you remind listeners like who may not have caught the other episodes, what were the factors that held us where we've been for higher rates for

Adam Van Wie 02:37
longer? Yeah, yeah. I think the Fed was looking at it and saying, Okay, we've got these tariffs going in. That's that's a lot of uncertainty. It could be inflationary. The thing about tariffs, though, there are one time price adjustment, adjustment inflation is really caused by monetary like too much money in the system. That's a totally different animal. Yes, it can cause prices to go up. Usually that happens, and then demand goes down, and then the prices come down after the fact. But who knows? It's just there's a lot of uncertainty around it. You still got this, this housing market that has a lot of uncertainty, and so I think from Powell and the Feds thinking they wanted to keep as much dry powder as possible, in case things started to fall off a cliff, then they could do a bunch of rate rate cuts and try and be the hero and save the day. Not, not a terrible thought, but it was just getting to a point where the housing markets in such bad shape, then cut rates, because that's going to help. So it was almost like they were shooting themselves in the foot by not not acting.

Joey Loss 03:45
Yeah, it just feels like you know, we can avoid potentially a whole problem altogether, if we just loosen it up a little bit and see what happens.

Adam Van Wie 03:52
Yes, I agree, and I think they finally agree with that statement after this last meeting. It was there were Paul has always been pretty clear for a Fed chairman about his intentions, and I think this last speech was pretty clear that he intends to

Joey Loss 04:07
cut. Yeah, I think so. And then real quick, like what the market seems like, it's just been flirting with all time highs. Do you see any any changes? Are people rotating, or is the story the same

Adam Van Wie 04:18
a little bit, but it's on a day to day, week to week basis. You do see some rotation, but overall, the trends that were in place in the first half of the year are still more or less in tax. You're still seeing out performance in international, although that's on a year to date basis. If you look at the last quarter, the US actually outperformed International, but year to date, international still leading the way. You're seeing gold still rallying. You're seeing a lot of the things that have been in place all year are still in place.

Joey Loss 04:50
Yeah, yeah, it does feel. It feels remarkably good given just what we've been through this year.

Adam Van Wie 04:56
Yeah. I mean, everyone's up. I. This year and but it hasn't been a straight line to get there, obviously. But yeah, it's overall. The actual numbers look pretty strong.

Joey Loss 05:08
I've like, scoured accounts looking for opportunities to tax loss harvest, and there's literally, it's hard to find a fund that's down.

Adam Van Wie 05:15
That's one of those things. You're disappointed that you can't get the tax loss, but then you're like, Well, I guess I did a good job for my clients.

Joey Loss 05:23
Yeah, I guess so, always better to make money than save money, yeah? Well, in this case,

Adam Van Wie 05:29
yeah. Well, we are going to talk about savings today, and that is an important piece. You can't really make any money until you save some. That's the first piece. That's a

Joey Loss 05:36
good point, yeah? So just to bridge into this topic, you know, savings numbers every every year, there's somebody that does a report, whether it's Investopedia or empower, and it's just shocking how how little savings people have. And we've talked a lot back to the market, about these two narratives that are taking place right now. You've done such a good job describing it. You've got one group that has money, has houses and everything feels great. Their house is appreciated. You know, maybe it's plateauing now, but the last five years. I mean, it's hard to find a better time to have been a homeowner than the last five years and or stock owner. I mean, the same story. Everything's just blown up. If you own assets, you're king. And if you don't own anything, you feel much poorer than you did a few years ago, if you've just gotten nominal raises every year, because everything's more expensive than your wage growth.

Adam Van Wie 06:25
Yeah, on a real basis, you are poorer than you were, even if you do have more income.

Joey Loss 06:31
Yeah. And so when I see these numbers, you know, it's, it's, it's upsetting. And I was thinking, you know, it'd be good to do a fundamental walkthrough of what is the triage order. If you have six or seven different things that you can do for yourself, as far as savings, if you've got a little bit of cash flow, how do you pick which of these things to save into? What are those things? Firstly, secondly, what's the best order to tackle them? What are the benefits? And then just kind of go from there. So to start off, I open with the emergency fund, because when I looked at the data, empower just did a recent study and said the median emergency savings for Americans is between five and $600

Adam Van Wie 07:13
Wow, yeah. And this is, of course, after you buy your billion dollar Powerball ticket, right then start thinking about saving Right,

Joey Loss 07:21
exactly? And it's worth noting that this is the median, so any sort of help that might be given by, like, a few people that have, you know, a million dollars in cash, that they're not in this because it's a median.

Adam Van Wie 07:32
Yeah, and you see these things all the time that the average American can't afford a $400 emergency, or can't, can't can't come up with the $400 for that and that. I think those two things kind of say that that's actually correct. We just don't have a lot of savings. But the savings fund, the emergency fund, the cash on hand, is so important because that is the buffer between you and credit card debt. And credit card debt is the absolute worst type of debt that you can have. It's the costliest, it's the hardest to pay off. It never goes away, and it's become so normalized in American society that people just assume that you have some credit card debt. Everybody's got some. Why not get on board? Have join the party. But really, it's the worst possible type of debt that you can have. And the reason that I say that your savings is the buffer. If you have $10,000 in a savings account, even a couple $1,000 let's start smaller. And you need your tires on your car. You pop one, you go to the store, they're like, these things are done. That's going to be one to two grand these days, you have a you have a choice. You can either pay for it out of your cash flow, which most people can't afford, you can put it on a credit card, which most people end up doing, or if you have that emergency fund, you can pay cash for it, avoid that going on a credit card, and save yourself so much money and interest. So that's why it's the buffer between you and credit

Joey Loss 09:03
card debt. Yeah. I mean, in the average credit card interest rates, what? Like 23%

Adam Van Wie 09:08
it's up there. Yeah. I don't know exactly the number, but it's in the I believe it is in the low 20s.

Joey Loss 09:14
And you know, just for context, we've had two amazing years in the s, p, noteworthy over the last 100 years. And guess what? They return 23% return 23% you'd have to be fully risk on with that money to even match that. And that's an anomaly in itself.

Adam Van Wie 09:30
Yeah, you're not, you're probably not going to see that again more than once over the next five years, most likely. Yep.

Joey Loss 09:39
And so to your point, $400 surprise was exactly what Empower found. They said two in five Americans would not be able to afford a $400 surprise expense, and one in five Americans have no emergency savings whatsoever.

Adam Van Wie 09:52
Yeah, that's really scary. I mean, you've got to, got to have that. It's, it should be the number one priority for all. How. Households to put away that, that basic emergency fund, it really is that buffer between you and poverty. I mean, it's it can be, and I know that sounds strong, but I really believe that

Joey Loss 10:12
Investopedia did a study by generation to see how much savings there were. And so Gen Z has $400 which, honestly, for a young group, that that's not bad, that's not bad, if you're no millennials, very disappointed in all of you. $300 we're below Gen Z, wow, but yeah, but Adam, you guys aren't looking too good either. Gen x5 100,

Adam Van Wie 10:38
okay, but we're beating you guys, yeah, okay, which is what? Well, I really care.

Joey Loss 10:46
And then boomers, this is age 61 and up 2000 which still just shockingly low, 61 years old.

Adam Van Wie 10:53
Well, that's bad for Gen X, really, because Gen Y and Gen Z have time to recover and grow those savings Gen X the tail end, or the front end of my generation is already retiring, so I'm at the tail end of it. I was born right at the end of the Gen X span, and so I've still got many years left to work. But a lot of us are retiring, and if you only have $500 saved, you're going to be working a lot longer into your your golden years than you probably want to

Joey Loss 11:23
Yeah. I mean, this is particularly, like, emergency savings. There's the numbers do get bigger, thankfully for, yeah, for like, retirement savings and things like that, but honestly, not as big as you might hope they would. So, so anyway, rule of thumb, what should people look to save in their emergency fund. I think we probably similar ideas. But where are you on that?

Adam Van Wie 11:44
Yeah, I'm usually in the camp of three to six months, depending of expenses, depending on the situation. Generally, if there's if it's a couple and both are working, I can go on the lower side towards three, because the odds of two people getting fired at the same time and being unemployed for a while are lower than if you're a single person and you are dependent on your job for putting food on the table and that job goes away, you're in big trouble. So in that case, I would say six months. Yeah,

Joey Loss 12:19
I agree. I think you know, if you have a situation where, like, income is very lopsided, you'd probably want to lean towards that six months too. Yes, that is true. But if the incomes are pretty even, both people are pretty happy at work, three months is probably fine. For some of you with high risk tolerances, you might be thinking like, gosh, six months expenses and cash. It feels like so much money not to have in the market. And you know, my argument is like, we've seen people with great jobs lose their job because corporate America does layoffs. It's just something that happens. And having that six months can be the difference between you getting time to kind of find your bearings, get a clear head, and make a really good next job decision, or feeling like you're on fire and you have to just take the first job that you get. And that's a big difference, both financially and in quality of life. So that's what that's about.

Adam Van Wie 13:10
Yeah, it's, it's really a it's like a lifeboat. And when you really, really need it, I know it's, it's hard to sit there and watch it earn 4% or whatever if you put in a high yield savings when the market is having 23% years. But the fact is, during one of those 23% years, if you lose your job, there's no more valuable money than the money you've put in that savings account. It's the lifesaver, really,

Joey Loss 13:38
yeah. And honestly, I'm a financial planner, and I've had to touch mine more than I expect. Just like, stuff happens. You know, we had, like, home issues. We found termites in our house last year, took care of that. You know, that's five grand right away, and we were working. So it wasn't like income stopped. It was just like, man, do I want to put this on the card or just be done with it and use my emergency fund and start putting money back.

Adam Van Wie 13:59
I mean, I think that's a great example, though. That's exactly why I said it's the buffer. Yeah, you then shift from making your priority your retirement savings, to replenishing your emergency fund. If should you need to tap it. And that's fine to tap it, there's no problem with that. You just need to then pay yourself back and get it built back up.

Joey Loss 14:19
Yep. Okay, so three to six months emergency fund ranked number one, number two, Max, the 401 K, employer match, if you have one, yep.

Adam Van Wie 14:29
So I don't like using the term Max when we're talking about the match, because I think people confuse that with the actual maxing out your 401, K, but you do if your employer matches half a percent up to 6% you had a bare minimum, you need to put in 6% of your salary to that 401 k, because otherwise you're leaving money on the table. And that's just that's you can't have an opportunity to get 3% more money than you would have otherwise and pass it up. That's just it. Doesn't make sense ever on any level.

Joey Loss 15:03
Yep, I totally agree. You're just not going to match that return. It's just not going to happen.

Adam Van Wie 15:09
No, no. It's that's, you can't it's a, it's a, basically a 50% return for doing nothing more than than saving for yourself.

Joey Loss 15:18
And those matching contributions in like a traditional 401, K, Safe Harbor are almost always 100% vested, whereas profit sharing, there's other parts of four, 1k that may not be but that money really is yours. The second you get it, you either get it or you don't, because you put in enough to earn the match. So that that's something that we you know, when we do initial plans, we honestly catch probably more of that than you might expect, people thinking they might be getting the match and but we see there's a little bit more room, and that's an easy switch. So number three, Roth IRA,

Adam Van Wie 15:51
if eligible. Yeah, that's a big if. And you might actually be able to do a Roth 401, K, they're becoming more and more common, yep. And so then that kind of negates the importance of a Roth IRA. But if you don't have that option getting that Roth money for retirement, there's just no better money that you can have than a Roth IRA, especially if you can contribute while you're young and not making a lot of money, and have it grow over time that is going to be worth so much to you in retirement.

Joey Loss 16:24
The reason I carved out the Roth IRA specifically, and didn't just say 401, k, is because if you're eligible for one so as a married couple, if you have modified adjusted gross income under about, like 220,000 you could still contribute directly to a Roth IRA up to 7000 a year if you're under age 58,000, if you're over 50 per person. The reason I carve that out is just because the fees tend to be lower. You tend to have, like, the whole universe of investments available to you, as opposed to, sometimes less than perfect funds in a 401, K. But you're right, like, if you if you make too much, or for some reason, you just don't want the extra account. Roth 401 k is the next best thing.

Adam Van Wie 17:06
Yeah, I'm a proponent of either way. Not everyone can contribute to a Roth IRA. If you are fortunate enough to have a Roth 401, K, you're automatically eligible for it. It's a really cool feature that they've added to a lot of plans now. So I just wanted to mention that Sure.

Joey Loss 17:26
And then the next step I put in there is max out the rest of your 401. K so to your original point of, first satisfy the match, then look at the Roth opportunity, then look back at the rest of the contribution limit. So if you're under 50, right now, you can contribute up to 23,500 as an employee of a 401, K plan. If you're over 50, that rises to, I think 30,000 it's an extra 7500 That's right. And then there's certain age points in the last tax law that go above that for specific years over 50, but there's a lot of money that you can still weigh in there. And I would say one of the goals we see so commonly with financial planning clients over time is we're trying to get them to that point where they feel confident and comfortable contributing that maximum every year and doing that for 20 years is just so powerful for retirement.

Adam Van Wie 18:23
Definitely, I am living proof of it. I started doing that at a pretty young age. It was actually I started in 2008 and I remember why I started, because I had just for the first time ever, my 401 K had gotten to $100,000 I was so excited. And then 2008 came. And for those of you that remember 2008 it was not the best year in the market. Basically the market dropped in half. And so did my 401, K, and I was devastated. I had $50,000 and I called my dad, who was already a CFP and working in the business, and said, What do I do? Need to do something. And he said, yeah, if you want to do something, you need to max out your 401. K, well, things are bad. You won't regret it. And so I did. I was we had a young family. My wife had stopped working. We had just had our kid, first kid, and so we're a single income. And it really hurt to because at that time, I think you could go up to like 17 or 18,000 per year, and but I did it. I maxed it out that year, and I just kept doing it every year since then. And I can't even tell you how much that has paid off in the long run. It really, really has, has, I mean it just like you think if you do that much, and then over time, you see that market growth on that money, it's going to be, it's going to be incredible.

Joey Loss 19:46
Yeah. I mean, you pick the best, like, 10 year period to do it, of a 15 year really, but yeah. I mean, regardless of what's happening in the market, it's such a powerful thing. And from a like living in your cash flow perspective. Effective. One of the things we noticed is, once people up it, they never really think about it, because it just doesn't even hit your checking account. It just becomes this thing you do. You turn it on once, and you know, 40 years later, there's a couple million bucks in there. If you've maxed it out two spouses over the whole time.

Adam Van Wie 20:16
It's true. It really is you. I mean, there's almost no way you won't get a million dollars if you, if you do that and continue it, you start at a young age, do it for your career, you will definitely be a millionaire in your 401 k, which is the most common way to become a millionaire, by the way.

Joey Loss 20:31
Interesting. So next number five, fund a taxable account.

Adam Van Wie 20:38
Yeah, that's, that's the next piece. So if you still have extra cash flow and you don't you don't want to just put it in a savings account, or or or spend it if you want to do more investing, the taxable account is the way to go. And honestly, I I was not always as big of a fan of the taxable account until I got into this business. Now I'm actually a huge fan of the taxable account. In fact, I try and get all of my clients to have all three kinds of money going into retirement. When I say three, I'm talking about traditional 401, k or IRA Roth, 401, k or IRA and then a taxable account. And it's so great in retirement, because then you can do a bunch of tax planning and save a bunch of money in retirement. And it is, is really a cool tool. So I highly recommend the taxable account when you are able to have enough free cash flow to start funding one.

Joey Loss 21:37
Yeah, I love the taxable account for same reasons. I mean, it's just, it's, it represents flexibility. I can't remember the last plan conversation we had where I didn't point at that and say, that's your flexibility between now and retirement and even afterwards, but, but definitely between now and then. You know, you've got these three buckets. You've got the cash you keep and spend. That's your operating money. You've got the cash you put away for retirement, it's retirement money, and then you've got this in between bucket, which is your taxable account, and that's really like, hey, Home project, new home in the future, future, college expenses, future other things. There's definitely some other vehicles for saving for specific goals, like college and things like that, that are helpful. But even those don't cover 100% of the costs associated with them. Who's there to catch up the extra expenses, the taxable account. The

Adam Van Wie 22:26
other great thing that it can do is it can be a bridge between Retirement and Social Security claiming at age 70, which maximizes your benefit. And so a lot of people wonder, Well, how am I gonna What am I going to live off of if I retire at 65 and I don't claim Social Security that money if you, if you have enough in a taxable account, you can actually use it to fund your way to age 70, and then you maximize that Social Security benefit for the rest of your life. And that when you put that in a financial plan, it almost always looks really strong because you've maximized your your future income.

Joey Loss 23:06
Yeah, I mean, just when you reach age 60, you have people are always like, Oh, my taxes go away, right? Or like, I'm gonna have no taxes. Hardly, nothing, right? Nothing breaks my heart more than seeing zero on a tax return, and someone's got a big IRA or these other accounts out there, because you've got all these load tax brackets that we could be filling up. And to your point, if you've got these three buckets set up for you, you're like at a restaurant, just picking your tax bill every year, to some degree, and you can make it exactly what you want with good planning. But if you just have one of these buckets, you know, unless it's all Roth, then you're never paying taxes. But nobody gets away with that, and you probably paid a bunch earlier, if that's what's what's happened. So having these three buckets, it's just a good way to go, and the taxable is kind of a slept on bucket, and in the scheme of things, compared to the others.

Adam Van Wie 23:58
Yeah, it's funny. I there's so many people out there don't even know that you can do that. They think that savings means especially retirement savings means 401, K, an IRA, that's it. Yeah. They don't even, they aren't even aware that there's another option,

Joey Loss 24:11
yep. So number six, 529, prepaid plan, obviously, this is for people with kids. Only 14% of Americans currently have some kind of 529, plan, and there's 16 point 8 million accounts versus three 50 million Americans at this point something like that.

Adam Van Wie 24:35
Yeah, they're pretty highly specialized, so that doesn't surprise me too much. Not everyone has kids. Not everyone has kids that are going to go to college. Not everyone even wants to fund their kids college. So So I think that number is actually maybe even a bit higher than what I would have expected.

Joey Loss 24:53
Yeah, I think that's fair. What is the beauty of a 529, when used properly?

Adam Van Wie 25:00
The beauty of the 529 is that you basically have a Roth IRA that's good for good for student related expenses. And so you can put money in when your kids are very young. It's after tax money, and then it grows. In fact, I've been funding one for my kids since they were born, and they both doubled and in value and all that money. If we use it for college or, you know, it's not only college that you can use it for. In my case, that's what we're going to use it for. But if we pull it out and use it for college expenses, we never get taxed on that growth. So we put in, you know, $1,000 and it's grown to 2000 that means that that $1,000 will never get taxed.

Joey Loss 25:42
Yeah, I mean, it's awesome. And the big thing I'm gonna put a couple asterisks, asterisk on it is you really don't want to over fund it. I mean, it's it's gotten better over the years, they've loosened up the rules how it can be used, what you can do with excess funding. But you don't want to over fund it, because money that doesn't end up going to education at some point. If you want to pull it out, or you need it in an emergency, which is probably more common, you're going to get taxed ordinary income, which is brutal on the gains, and you're going to pay a penalty on top of that. And so you really don't want to be in that situation. It's an awesome tool. If you don't overuse it, of course, you can reassign beneficiaries. So let's say you fund the heck out of a first account for the first child, but you've got three kids. If the first one doesn't use all of it, you can reassign the beneficiary, no pain, no penalty, no taxes. It's just redirected to the next person. If at the end of the last child there's money left. You know they can keep it and you can assign it to their kids someday, but now you're talking about it sounds like in that situation, there's really not a concern about not having enough cash elsewhere. So one thing that I want to point out for young families, it's pretty common for right after the first kid is born, for them to come in and talk to us and say, We want to start saving for their college, but then we look at these other items up the list, there's really not much of an emergency fund, and there's definitely not a taxable account creating flexibility for them, or they're not maximizing the 401, K match and the cheesy saying, everybody says you can borrow for education, but you can't borrow for retirement. And so there's good reason for that, because you can't. And so as we figure out what is the right thing to do, I just want to encourage young families like build yourself a runway first. You got to put your own oxygen mask on before you put on the kids. And you can always turn around later and super fund one of these accounts if cash flow changes and your situation has gotten way better. But the thing you don't want to do is have a bunch of money locked up in this 529, and something happens, and you need cash, and now you got to go pay the worst type of taxes and penalties to get to

Adam Van Wie 27:51
it. Yeah, that's such a huge, huge and common mistake that we see, and it comes from a good place. You want to do what's right for your kids and you want to support them, but honestly, you you can't rob your retirement to pay for your kids. And that is a that is such a common mistake, and that leads more often than not. What that leads to is working a lot longer than what you would have liked to and that is not, not a great solution for you. It might be, your kids will be happy, probably, but you're going to be you're going to be very unhappy with that decision.

Joey Loss 28:27
Yeah. And you can always, I mean, look like, do you want them to have to take student loans? Probably not. If you're listening to this, you're probably thoughtful about financial planning in general and thinking about the future. But you can always, on the back end. Help, right? Like, let's say you didn't save enough because you were working on other things are more important to the whole family at the time, but then they have to take some student loans, and you're still working. You can help at that point. Just pay them off. Help them pay them off, you know? So you maintain flexibility in the years when you really need it. But back to the original point, you know, if all these other things are covered, you're flush, you're figuring out what to do. 529 is, if you have kids, not a bad idea for that sixth run.

Adam Van Wie 29:05
Yeah. And you can throw the Florida Prepaid plan in there as well as as another option for funding school. It's a really nice plan that we're fortunate to have here in Florida.

Joey Loss 29:15
Yeah. The other big benefit to a prepaid plan over a 529 is, let's say you live in Texas or Florida, but you might move in the future, but you really like schools in Texas and Florida, because they have great schools. If you get a prepaid plan for one of your kids and you move to anywhere else, you maintain eligibility for in state tuition by having that plan in that child's name, huge,

Adam Van Wie 29:41
huge, yep, huge. So you're looking at a Delta of like $20,000 a year between in state and out of state tuition in some cases, yeah. I mean,

Joey Loss 29:52
if you're like the van wees and Adam sitting here with his Seminole jersey on, or Seminole polo, and you know your family bleeds. Is FSU, and you think you might end up somewhere else for some period of time, really, not a bad way to hedge your bet.

Adam Van Wie 30:07
No, it really is. And it's a it's a good, it's a great plan, really. And you lock in tuition at the at the rate at the time you buy the plan. So yeah, even better, yep.

Joey Loss 30:17
And then lastly, you know people, people may agree or disagree with this, but if you're this far down the list, it's going to be on the menu a kid's lift off account. This is something that's become more of a discussion over the last few years, especially with this two part economy we've talked about. If you look at political movements in various cities where there's a lot of population with significant student loan debt, you'll see that the student loan burden is a big deal. People not being able to buy homes is a big deal. It's really affecting the way younger generations view the world, and as a result, I think a lot of parents are thinking like, how do I how do I help my kids avoid student loans? That's the 529 question, and the number two right after that, how do I help them be prepared to start a life if they're doing everything that they possibly can to be good, contributing people and still can't do it. You know, on their own, this lift off account has become a discussion topic around helping the next generation with that.

Adam Van Wie 31:14
I mean, it's not a bad idea if you have the means to do it and you want to help your kids out. Just my personal opinion is that there you border, you're bordering on, on, on setting them up too much at this point, and everyone should struggle a little bit, but like it's but if you have the means and you want to do it there, it is not a bad idea. It is super expensive to do anything these days. And obviously, we all want our kids to have opportunities, even more opportunities than what we've had. So yeah, if it's, if that's something you're interested in, I don't, I think it's, I think it's great if you can afford it.

Joey Loss 31:55
Yeah, this is, this is definitely the one in the whole list where it's, like, a values based thing, like just speaking as an advisor, just like watching people watch their kids grow, I think I've kind of got a conservative stance as far as, like, I don't want to lock money up in a kid's account. That's like a UTMA, if it doesn't feel like it's part of the college goal. Like, I don't really want a bunch of money just transferring into their name at age 21 or 25 depending on where you live, because that might be what they use to hurt themselves, you know. And there's just so much available if their lifestyle isn't at the point you want it to be at. Do you really want it legally bound to change to their name at that time? And

Adam Van Wie 32:36
you also, yeah, it's a tough one. I think you have to take it on a kid by kid basis too. Some are going to be able to handle that. Some are not. So it's all about having that those discussions with your kids ahead of time too, and saying this money is earmarked for this, and yes, it will be in your name, but, but you're not going to touch it until you're buying a house. That's that's something that I do with my kids. They both have small UTMA accounts, and I just wanted to teach them about investing, really. So we put a small amount of money in every every Christmas, and then I make them go through the process of picking where they want it invested. And so it's, it's fun because they, they try and beat each other and see who gets the best returns every year. So far, my son is is vastly outperformed my daughter thanks to his love of video gaming.

Joey Loss 33:22
Yeah, so I guess he owns a video

Adam Van Wie 33:26
no, he bought, he actually bought back in the day when Fortnite was really popular. He wanted to invest in Fortnite, but you couldn't. So it because it was a privately held company, but there was one of the arc Kathy Woods arc funds had a big stake in the in the company that created Fortnite, and so he bought that. And it just so happened to be that year that she killed it before she got absolutely decimated the next year. So he, he just made all kinds of money that year. I remember

Joey Loss 33:56
looking at Fortnite profits at one point and just being shocked because I had roommates in my 20s who just wouldn't stop playing one roommate in particular. And I looked it up like, God, how much like Is this normal? And based on the money, it had to be the most normal hobby for 20 year olds. I mean, it was insane. It was

Adam Van Wie 34:15
crazy. My son's friends were spending hundreds of dollars a year buying outfits for their video game characters, and it's just insane.

Joey Loss 34:22
Yeah, so, so lift off accounts optional. The vehicle to do it is probably if you're going to commit it and you're okay with the your child having it in their name at some point and earmarking it for their future, UTMA UGMA is probably the way to go. But again, if you're unsure about whether you want that money in their name, just go back to the taxable account. I mean, you can always make elections with what to do with that money at any point. There's no retirement age requirements, anything like that. If the time comes they want to buy a house, did you maybe pay a little bit more in cap gains taxes because you had to sell some holdings while you were in your prime earning years to give it to them? Yeah, maybe. But. But you also held complete control of it the whole time, and got to elect when to give it to them.

Adam Van Wie 35:05
We have one client that has grandkids, and so she has about seven taxable accounts with Tods transfer on deaths to each of her grandkids, and then every birthday she puts 100 bucks in. We buy something, and it always has to do with what the kids are interested in. So it's a, yeah, she wanted to keep control. She didn't want to give them the money, but she wanted to start teaching them about investing and show them that what what long term investing and wealth building looks like. So it's, it's been, it's a very simple thing to do little bit of paperwork to open the account, and then put the Tod on it, and then you're set and you you maintain complete control, regardless of the age of the kid or grandkid.

Joey Loss 35:48
Yeah, cool. Well, you know, I'm putting a little shout out at the end of this to this is all great if everybody lives long, healthy lives, but the sad truth is, things happen, and so this only goes so far, if there's no estate plan to make sure that the people you care about are you know, they get the money in the way that they need it and can use it for what they need to use it for. And so I'm gonna do an episode here shortly, probably a solo, just talking through what makes a good estate plan. How do estate plans work and why? Basically, every family needs one, and they don't have to be insanely complex or expensive, but I'll talk about how you can make sure everything that you're working on here accomplishes its mission no matter what.

Adam Van Wie 36:33
Yeah, a very underrated part of what we do is working on estate plans. It's not something anyone likes to talk about or think about. But the fact is that there's nothing more important should something happen to you or your one, one of your immediate family members, than having an estate plan in place. And it can be the difference between you deciding where your assets going and the state that you live in deciding where your assets are going. And you do not want that. You do not want the state or a judge deciding where the money that you've saved over your lifetime is going,

Joey Loss 37:04
Yeah, or deciding who takes care of your kids. That's

Adam Van Wie 37:09
even more important. That's scarier.

Joey Loss 37:12
Cool. Well, Adam, thanks. Always a pleasure. I think we'll do a lot more of these, just because there's so many basics that we deal with on a day to day basis that we just it's good for us to get it out and put it out there and see if it's helpful to people. It seems like, typically, it is.

Adam Van Wie 37:27
Yeah, let us know. Give us some feedback on whether or not you enjoyed this topic.

Joey Loss 37:32
Yeah, awesome. All right, Adam, until next time. Bye.

Joey Loss 37:40
Thanks for joining us. If you enjoyed the podcast, please consider sharing it with your friends or family. This is the best way to spread the word, and we want to keep churning out great content for you guys. Show Notes and episode transcripts are available on our website at strivus wealth.com/podcast special. Thanks to bode Lee Sins for the intro outro music and to the podcast man for producing this show. Until next time.

Disclaimer 38:06
The Wealth Unplugged podcast is sponsored by Strivus Wealth Partners, Joey and Adams SEC registered investment advisory offering Financial Planning and Investment Management services to clients across the United States, The opinions voiced in this episode are for general informational purposes only. Nothing any host or guest says on the podcast is meant to serve as advice or recommendations for any individual security to determine which investments may be appropriate for you consult your financial advisor prior to investing. This information is not intended to substitute for individualized tax insurance or estate planning advice. Please consult your tax advisor, insurance agent or estate advisor regarding your specific situation.