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Episode #623 - Year-End Planning: The Basics of Charitable Giving

Roger: Welcome to the show dedicated to helping you not just survive retirement, but to have the confidence to lean in and rock it. Gotta have some intentionality to create that great life. That's the output that we all want, right?

ROGER INTRODUCES A CHRISTMAS EVE EPISODE FOCUSED ON CHARITABLE GIVING, LISTENER STORIES, ANSWERING QUESTIONS, AND REFLECTING ON INTENTIONAL RETIREMENT LIVING.

Roger: Well, today on the show, we're gonna talk about the basics of charitable giving. We'll have some fun today because It's Christmas Eve 2025. Good time to just have some fun. Going to talk about charitable giving and the event that you want to try to get this in before the end of the year. In addition to that, we're going to have a rocking retirement in the Wild Story, a listener talking about how they're making a great life.

In our retirement life lab, we are going to talk about the words that you can retire when you retire. A lot of words. Catch words. When I created this list, I found I use a lot of them. So maybe I need to fix that before we get started, though. Oh, by the way, we're gonna answer some of your questions too. Before we get started, a couple quick announcements. Number one, next month, January, we're going to have our annual retirement plan live case study. And we're gonna chat over the month with Lucy and Henry, find out what their goals are, what resources they have, and at the end, we'll have a live hangout and see whether their plan is feasible. In their case, they want to retire in their 40s. This is like a fire type of thing. Financially independent, retire early. So we're going to talk about some of the issues related to that, and hopefully this will help you on your journey. So that's number one. Number two is the important numbers sheet is here. The important number sheet is here. I feel like Steve Martin, remember with the. In the jerk with the phone book. The phone book's here. The phone book's here. Looking for his name. Well, in this case, the 2026 important numbers resource is now available in our resource center. This has the 26 numbers for federal income taxes, deductions, IRMAA limits, estate tax contribution limits. It's a great resource. I don't know how many times a year I refer to this when I'm doing planning to understand where all the brackets are because it gets confusing. Well, that resource is now available in our resource center@roger whitney.com. Now, that's the third announcement. We revamped the entire free resource center. It's actually a very small portion of the Rock Retirement Club that you get for free, where we have a lot of resources where you can get replays of all the retirement plan live sessions we've had. You can get resources that will update as we get new ones. You'll be able to watch replays of everything. You'll have an archive of our weekly email with all the links to the resources we mention because sometimes you're driving around and you might not be able to write it down. You can just go to the free resource center, go to that week's email and find those links. And then we have some fun things planned once we get this launched. So you can go to rogerwhitney.com, click on free Resources and you'll have to sign up because it's a little bit of the clubhouse that's just for you, the listener. So you can check that out and get the 2026 important number worksheet.

ROGER WALKS THROUGH THE BASICS OF CHARITABLE GIVING, INCLUDING QUALIFIED CHARITIES, DOCUMENTATION REQUIREMENTS, AND HOW DEDUCTIONS WORK WITH STANDARD VERSUS ITEMIZED RETURNS.

Roger: All right, announcements out of the way. Let's get to charitable giving. This isn't meant to be a month-long theme on charitable giving. I just want to highlight some things in the event that you're considering this because you still have a week or so to make a charitable contribution. So let's talk about, let's just go through some basics. So giving to charity. This is giving to a qualified 501C3. That's the designation that a charitable organization gets in order to get a deduction. Now it's a little harder to use that deduction if you are using the standard deduction within your taxes. So if you're filing married, your standard deduction is 30,000 for 2025. If you're filing single, it's 15,000. So if you're using the standard deduction and you give money to charity, you're not really going to get the benefit, tax wise, of the contribution to charity. You're really only going to get that if you're itemizing. So that's something to be aware of. Now you must have proper documentation of receipt of gifts, acknowledgment letters, et cetera. If anything's over $250, back a second to that charitable giving and the standard deduction. So this is one reason why you might batch your charitable contribution. So let's use an example. Let's say you normally use the standard deduction when filing taxes, but you're charitably inclined to you give $10,000 a year to charity. In order to maximize from a tax perspective, it could be beneficial to batch your charitable giving, let's say four or five years into one year. So you give $50,000 in one year, which will allow you to itemize to get the maximum tax benefit of the charitable deduction rather than just do $10,000 each year. So you want to be just thoughtful of that. Don't let that tail wag the dog in this case, because the whole point of charitable giving is to bless the world and help make the world a better place by supporting organizations that you believe in. But it's also, you don't want to have an unforced error if you could have maximized the deduction as well. So what about the things that you give to charity? So how much of a tax benefit can it have in an individual year if you are itemizing? Well, if you're giving cash contributions, you're writing a check, you're sending an ACH payment or whatever, those can go up to 60% of your adjusted gross income. If you're giving appreciated property like a stock that's appreciated, et cetera, and you've held it over one year, you can get a deduction up to 30% of your adjusted gross income. If it's been held less than a year, you're going to get essentially the purchase cost as the deduction. Now what happens if you give a very significant amount in any one year and you go over the limit of the cash contribution or the property contribution? Well, you can carry those over. So if you have an unused charitable deduction, you gave a million dollars to something and you used it for offset of, adjusted gross income, but then you still had more that you couldn't use because of these limits, while you can carry over that charitable deduction and use it up within five years. So what types of things can you contribute and how are they valued? Well, cash is deductible at face value. Publicly traded securities are deducted at fair market value if held over a year. This is how you can transfer money and avoid a capital gains tax held at less than a year. It's your cost basis. Non cash property over $5,000 requires an appraisal to justify the amount that you're using as the deduction. And vehicles, boats, planes, etc, their actual sale value. So you know, nominally. So you want to follow these rules if you're giving more than just simply, you know, cash contributions.

ROGER WALKS THROUGH THE BASICS OF CHARITABLE GIVING, INCLUDING QUALIFIED CHARITIES, DOCUMENTATION REQUIREMENTS, AND HOW DEDUCTIONS WORK WITH STANDARD VERSUS ITEMIZED RETURNS.

Roger: Now, timing. We are here on December 24. Deductions are taken in the year of the contribution, not the pledge. So credit card donations, they're deductible when they're charged to your credit card, not when you pay the credit card, check donations, deductible when mailed or delivered. So we're here at the house, you know, the 24th. So if you're going to mail a contribution, you want to note that and perhaps have proof that it was mailed before the end of the year. Stock transfers and deductibles, or when the charity receives the account. So if you're trying to manage, it's going to be a little hard because the custodians, the Schwab's and the Fidelities and the Merrills of the world, they're very busy at the year end. But if you're trying to move money from your account or a stock from your account to a charitable account, you better get a move in because they might not be able to get it done. If you're contributing to a donor advised fund, which is a healthy way of batching charitable contributions. We've talked about that before and we'll have a link to that in our noodle. It's an immediate deduction for when the money goes to the DAF, they call it. And so you just want to make sure time-wise you're hitting it. So you can take the deduction in the year that you're focused on. So just a real brief summary because we're here at the end of the year. It's part of an end of year checklist that should at least bring to the top of mind in this last month or two. All right, with that said, let's move on to our rocking retirement in the wild.

ROCKIN’ RETIREMENT IN THE WILD: A LISTENER SHARES HOW, AT 67, HE BACKPACKED 121 MILES THROUGH MAINE’S 100-MILE WILDERNESS, RECONNECTING WITH LONGTIME FRIENDS AND STAYING PHYSICALLY ENGAGED IN RETIREMENT.

Roger: So in this segment we highlight a listener who's shared a bit of their journey of not just talking about creating a great retirement. The outcome of that is the point of all this retirement planning stuff. But they're actually not just talking about it, they're being about it. And today we're going to hear from Jerry. Jerry's a long time listener to the podcast and he had a possible share for this segment.

He says, I am 67 years old, retired for four years this past August. I backpacked with two college friends through the 100 mile wilderness section of the Appalachian Trail in Maine. We hiked 121 miles over 11 days. An outfitter resupplied us at the midpoint to keep our backpacks approximately 30 pounds. That's, that's a reasonable backpack. Maine is wild and beautiful. The remoteness and distant views were amazing. It was a challenging but very enjoyable experience. And then Jerry gives some background. He says, we started backpacking during spring, spring break 1981 and did week-long trips for most of the next 15 years. Then family time and work became major priorities. We resumed backpacking sections of the Appalachian Trail about 10 years ago. We are fortunate to be in good health. The trips give us time to reconnect, provide motivation for daily physical activity leading up to them. We are currently planning a backpacking trip to Wyoming, the Wind River Mountains, for July of 2026. It will be some of the trails we hiked during our 1986 trip. I love that part of it, Jerry, that you're going back to trails that you hiked, I guess, in college or in early adulthood. That's a really cool way to sort of come back together. A lot of great things there, Jerry. You're outside, you're doing this with friends. You're 67 years old, and you're still doing. I mean, that's hard things. That's 121 miles over 11 days. It gets you outdoors. It gives you a focusing principle to be active even prior to the trip. So I want to give you a big huzzah for rocking retirement in the wild. When we. We had other stories, but when we hear stories like this that are big, I mean, this is like a. This is a really active dude, this Jerry guy, and he's physically able to do these things, and they're exciting to hear. I love hearing this. I just read an article, in Michael Easter's newsletter, Jerry, about a lady who is 80 that just finished the Appalachian Trail. I think. I don't know if she did it all in one swoop or not, but I think her name was Betty. Huzzah, Betty.

ROGER REFLECTS ON WHY ROCKING RETIREMENT DOESN’T HAVE TO BE IMPRESSIVE—ONLY MEANINGFUL TO THE PERSON LIVING IT.

Roger: We hear these, and they're these big, impressive things. That's an impressive story at a cocktail party. But I just want to reflect back that rocking retirement doesn't have to be, an impressive story at a cocktail party. It just has to be something that is meaningful. You. For you, of you leaning into life in whatever way that makes sense. It could be finishing a book series. It could be anything. So don't feel like we have to go take on the Appalachian Trail necessarily, if it's your jam, like Jerry. Well, God bless you.

RETIREMENT LIFE LAB: ROGER EXPLORES THE IDEA OF “RETIRING” CORPORATE JARGON IN RETIREMENT AND HOW SIMPLIFYING LANGUAGE CAN HELP US RECONNECT AND SPEAK MORE HUMAN AGAIN.

Roger: All right, before we get to some of your questions, I was in a team meeting the other day, and someone used a phrase. I forget what it was. And I'm like, that's such a corporate phrase. And I'm like, you know what? There are a lot of words, especially if you're in the corporate world, that we can retire once we retire. So, I mean, think of this sentence. We need to interface with the cross functional teams, to synergize our efforts, ideate on innovative solutions and then operationalize these learnings to really move the needle on our Q4 deliverables. What the heck does that mean? I have no doubt that that exact sentence has been said in a corporate environment. Translation. Let's meet to think about how to work together and do some useful stuff. I mean this is like corporate speak. I used to be on an advisory board for a public corporation and we would go meet with senior management. So we'd be in this boardroom and when the corporate executives came in and presented or we were having an active discussion, they literally had their own language. And we would have to stop them, myself and other advisors to say what the heck did you just say? Because they're using all of these crazy terms that anybody outside of that corporation would have no clue what you were saying. So I made a list of words that you may use every day that you are welcome to retire when you retire. The first one I've been hearing a lot lately is interface. Yeah, interfaced with, you know, so and so at this company. Or yeah, let me go interface with them and I'll come back to you. Interface. I think we can retire. We have a chat, which is my term. We talked, we discussed, we interacted. But come on, Interface. I think we can retire that one, even if you're in the corporate world. Well, let's not interface with people, let's have conversation. The second one now some of these I, I, I'm taking, I say a lot myself so it's a little reflective. I got to work on that bandwidth. I don't have the bandwidth for that right now, Sarah. Bandwidth, that's, I get that. That's really like a wave thing. Like that's like bandwidth over the Internet. I don't have the bandwidth for that right now. synergize. I think we can definitely get rid of that one. Synergize. We're going to Synergies. We're going to merge. Tanya and I merged. And now we have all these synergies that we're working through. Come on, let's take that offline. We could probably retire that one when we're retired. I guess if you're in a corporate meeting and you're you and someone else are talking about something and it's, like, distracting, it's not really relevant to this subject of the group. Say hey, let's take that offline, John. I guess that makes sense. But if you're in the car with your kids and you and your wife are talking about something that really isn't something the kids need to hear. It's like, well, Mary, let's take that offline. I think we could probably retire that when we retire. Ideate. I've used this one a number of times. Let's ideate. Let's get together and I think brainstorm. I use that. I love mind maps. Let's ideate. operationalize. That's definitely a corporate term. That actually was. Next week I'm going to reveal my word for 2026. I'm really excited about this word. But one year, my word was operationalized for the whole year. And it was important because we were trying to build processes. But I don't think we need to operationalize life in retirement. Move the needle is another one. Let's move the needle on that, value add. If it's adding to your life, I think we could still use that. I got a value add. Is this adding value to your life rather than the bottom line? And then we can get into the acronyms sometime. I almost did an episode on the KPIs of retirement. The key performance indicators. What are the KPIs of your retirement plan? Which is basically what are you tracking to know whether you're online? And it's probably useful, but come on, KPIs. I think we can retire if you're, you're coming from the corporate world and you're trying to talk to your spouse and you're using language like KPIs operationalize in explaining it to him. There might. That might be why they're not so engaged. Right. KPIs, the ROI, the return on investment. Probably could retire that one for the most part asap as soon as possible. Yeah, I can see that in the business world. But maybe we can retire that one. Pto, definitely that one. Tbd. To be determined. Cya. Hopefully that's retired. And hopefully we didn't have to use that one too much. Cover your butt and then ooo. Out of office. We use that one internally.

LISTENERS ARE INVITED TO SHARE THE WORDS AND PHRASES THEY ARE MOST LOOKING FORWARD TO LEAVING BEHIND.

Roger: We have a board where we can see where everybody's out of office. What words do you look forward to retiring when you retire? When we send our noodle email is our weekly email where we give you a recap of the show. I would love for you to reply and let me know the words that you want to retire. And maybe we'll, we'll, we'll put all those together and we'll share that because I'm sure there are a lot more that you're ready to be done with. So. So we can speak human again. Wouldn't that be nice? All right, with that said, let's get on to answering your questions.

LISTENER QUESTIONS

Roger: Now it's time to answer your questions. If you have a question for the show, you can go to askroger Me M. I don't know why I'm giggling. I use a lot of these words. Agile might be one of those words you can retire. Huddle, that might be another word I'm sure Tanya would like if I retired Huddle. Standard of care, that's another phrase that maybe we should retire. I'd be human. It's all about human. All right, if you have a question for the show, go to askroger.me. If you leave an audio question, those are like the fast pass, we go to those first as best we can to answer questions because we love to hear your voice. So I encourage you to leave an audio question and to demonstrate that we have a recent audio question from Don. So let's hear from Don and what's on his mind.

DON ASKS WHY MOST PEOPLE ENTER RETIREMENT WITH RELATIVELY LITTLE SAVINGS AND WHAT THAT REALITY MEANS FOR FINANCIAL AND SOCIAL STABILITY.

Don: Hello Roger and everybody on your team that makes this podcast possible. First, a quick thanks for everything that you guys do. Listening to the podcast has given me so much information and is really going to make a difference in my retirement going forward. So I appreciate that. I do listen to like three other financial podcasts that I do like, but I will tell you that I think yours is the best. I think you cover more than just the numbers and more than just the stats, but you talk about real life and very good information and thought poking, thought provoking discussions. So my question isn't really about something for myself. My question is I was doing some research because I'm hoping to retire next year and I'll be pulling the plug a little bit earlier at the age of 55. so it's a little scary, but I just wanted to ask, look into seeing like, well, where are other people stacking up? And when I got into doing this research, the numbers were quite alarming. Listening to your podcast, you would think everybody in my age or somewhere between 55 and 65 has got, you know, to, to over 2 million, over $2 million, saved up for retirement. And that seems like a great nest e But the reality is that the majority of the people don't have nearly that. I think the average might be somewhere for a 65 year old. 65 years old to be a half a million. But that's because us higher savers have dragged that number up. The median where most people are is somewhere around $185,000 total retirement savings. Now, they may have more money because of their net worth, maybe higher for their property values or other things like that, their retirement savings. The majority of the people are around 180,000, maybe. And the other thing is, I read this one article that basically said if you've saved over $2 million by the age of 65, that puts you in the top 2%. It just seems a little strange. Just curious about your thoughts on that. And, I appreciate everything you do. Have a great day.

Roger: Don, my thoughts on that. You're. Well, the numbers are correct, and I didn't look at your numbers, but I'm sure you read an article and most of the studies say similar. So 180,000 at age 85. So that is essentially what the vast majority of people have, a small nest egg. Plus Social Security is essentially it. And if they have any equity in their home, the vast majority of people entering or in retirement are in that situation where it doesn't take much to tip over whatever financial stability they have. One healthcare event, one major home repair, one bad market investment, bad market fraud, et cetera. It doesn't take much to deplete whatever they have. And then they're left with Social Security. And, if they have a home, any equity they have in their home. That is the reality of many people in retirement. Now. What do I think about that? I think it's a huge issue as a society, and I think it's extremely sad on a personal level that the vast majority of people are entering retirement for whatever reason. I don't even want to go backwards at the moment, just for whatever reason, with such instability financially, it's a scary place to live. And many of us in our journeys, I know some friends right now that are younger, that are trying to start businesses or doing transitions where they're struggling. It is stressful. And that stress can come out in health. It can come out in broken relationships. It's just. It's a very difficult place to live. I know of one lady who is all alone. Her husband's passed, one of her son's passed. Her other son is busy and barely making it by and doesn't have time. And we had a call the other day. She's like 78, and she couldn't get her garage door down. And she lives by herself in a house. And, you know, we were gonna try to find a handyman to come over and do it because it was, you know, it's hours away, and she got it enabled to come over. She is drowning. And there are many people like that that still have money, but they're drowning because what. The second part of that that we need to think about, Don. Not just the financial part of the desert of resources, financially, there's also a desert of social capital. And in this instance, I'm talking about social capital in the traditional sense, which is the people. Your social capital is your network, the people that are around you, that are the barista that you get coffee from, the people in your book study, your church or any organization, your friends, your family. Just as worrisome on the financial side, the people that are in this very precarious state generally have very little social capital of people to help them when they need help. That is the reality for a lot of people in their 60s, 70s, and 80s, is the financial end of it and the support end of it. A former employee advisor at a firm that I ran volunteered every week for Meals on Wheels. So, every Friday, he would drive around. He had a route, sort of like a postman, except he brought food to elderly people that were homebound. And many times he would say that he was like, the only person that they saw week by week. On Friday, when Bill came by with the food from Meals on Wheels, and I don't know the particulars, but having that person come in just to do a home check, just to say what's going on here, to be able to look around and see if there's an issue there.

Yeah, Don, so what do you do about that? I don't know. I mean, you have social policy, and I guess there are things that you can do there as a safety net. This makes it even more imperative in my mind, Don, this is just me, you know how I feel for Don and Roger and those that probably, you know. Well, I know from surveying, you know, the vast majority, people that listen to the show or in the club that for whatever reason, have wealth of what and are financially secure, we can go to social programs, but ultimately it's going to come down to people like us being good stewards of our money, having a plan of record so we feel confident and comfortable with our security so that we can use part of our passions to go help the world, help our neighbors in whatever way we can. And for some of us, that might be financially, through charitable giving to organizations that are actually working on the problem, not just building bureaucracy. It might be financial support to things that you feel are bringing Good to the world to help. Now, obviously we're talking about people in their 60s and 70s with no money. But there's a lot of other areas of people that need help all across the world, plenty of people that need help. But maybe, you know, if a portion of us are focused on this, we can do that with charitable giving. That's the point. And we can't give charitably or comfortably unless we know we have a plan that is feasible or resilient. So we know we have some excess funds to give, you know, other than faith. So that's why having a plan so we can have that clarity and feel comfortable allows us to show up not just for our life to rock retirement, but to show up to help others. And for some of us, it might be like Bill, who didn't give money, but he gave his time to go love on people on his route to bring them food, and was the actual tool the charity used to build some social connection in the desert for people where there is none. So we got to get our own house in place first. I'm glad that you recognize this, Don, because this is something that maybe you should think about. And what is it? Once you get solidly retired in your journey, what is it you can do? And it doesn't have to be grand and big to be a positive contribution. Maybe these people or some other group of people that you feel could use support. That's my thoughts on this.

A LISTENER ASKS HOW TO GIVE INHERITANCE BEFORE DEATH WITHOUT TRIGGERING TAXES.

Roger: All right, let's go to our next audio question. We got two in a row. I'm loving the fast pass.

Listener: Hey, Roger, love the podcast. Been listening for a long time. lots of help. Thank you so much for what you're doing and all that you share every week. So this week you shared on giving, specifically you're talking about, like, giving to your children and the maximum amount you can give tax free. and so how to reduce your, estate as you retire and as you head towards the inevitable end. So that was very good. I really appreciated it. very helpful. I've also heard that you can give your inheritance ahead of time and exceed that nineteen thousand dollar tax limit. Could you talk about how to do that? I've looked online and really can't find out how to do that. Do you simply document that and send that in with the form you mentioned to your tax preparer? How do you do that? How do you give your inheritance before you die? Thanks for your help, Roger. God bless you. Bye.

Roger: Great question, Don. So how do you give your inheritance away early? And not have to worry about taxes. So we have that annual gift exemption, which for 2026, because I have the important numbers worksheet, you can get that. We'll have a link to it, or link to the resource center in our noodle, which you can sign up for at rogerwhitney.com. $19,000 is the annual gift exclusion exemption. Excuse me, but what happens if you want to give more than that? You want to give Sally $200,000 to buy a house or what have you? Well, each of us, Don, has what's called a lifetime exemption, which is the amount of money that we can give away without any tax related to. And it's a. It's a lifetime. So if you give 200,000 today, that would. You know, that minus the annual exclusion would count against your lifetime cap. And this number has floated around for a little bit, and right now it's $15,000. So, Don, if you wanted to give a million dollars to Betty, whoever Betty is, you could give a million dollars, and there wouldn't be any tax consequence, but you'd want to file form 709, which basically tells the IRS that, Hey, I gave this much money, and you need to account that against my lifetime exemption of 15 million. So form 709, you would file with your normal. With your normal taxes each year. and that's basically telling the irs, hey, this is being used against that. And then you would have less and less as you gave more money. So that's the easiest way to do it. You just. You have to try. I would track it yourself, make sure you file the form, and that's you telling the IRS that you're using that exemption to give more than that annual exclusion of $19,000. Now, two things there. One is, if you're married, each of you have that 15 million. So you'd have 30 million total. Important. And then gifts to spouses back and forth are unlimited and doesn't need to be tracked. It's just as much as you want to be able to do. Also, direct payments for educational expenses or medical providers don't count towards any limits. You can pay somebody's medical bills if you're in. I actually had. I know someone that did this. If you're in the doctor's office and you see someone who. They were, you know, they were negotiating the bill, they were struggling financially, and this person said that they paid the medical bill for that person. You do that, and you pay it directly to the medical provider. Nobody has to track anything. It's a simple way of, you know, blessing somebody else and not having to deal with any forms or anything. So you, as long as it's going to the provider, education and medical providers, no limit, you can do as much as you want.

JAMES ASKS WHETHER USING HIGH-YIELD CORPORATE BONDS AS THE FOUNDATION FOR RETIREMENT INCOME IS A SAFE STRATEGY.

Roger: Our next question comes from, who is this person? Where is their name in this question? It doesn't have a name. Oh, wait. James. Hey, James. Related to income strategies in retirement. He said, I'm 60 years old, about two years away from retirement. An investment advisor I'm considering working with is promoting the use of high yield corporate bonds as the foundation for income, with the goal of averaging 7% through various ETFs. This would be about 80% of my portfolio. He feels that because we don't have heirs, we don't need to worry about growth at all and should only focus on living off of interest. He is not getting a big commission from what he is recommending. He's charging 60 basis points or 0.6% to manage the money and even feels I could probably do this myself. I'm a teacher and I've been considering taking 50% of the funds for an annuity through TIAA. But he feels this strategy is much better. Does this seem like a reasonable and safe approach?

No, it doesn't, James. Doesn't at all. I would not do that. Now, I don't know the particulars of your situation in terms of what kind of growth you need and what other resources you have. I don't have any of that. But I would not say that putting 80% of your portfolio in high yield bonds in order to live off the interest is a reasonable strategy. I would not do that. I would not do that. I would not do that. Why? So high yield bonds pay a higher interest rate than you will see in treasury bonds or normal corporate bonds because they're higher risk. So let's. High yield bonds, why are they high yield? Because they are what we used to call junk bonds. So they, these used to be junk bonds. We didn't know what a high yield bond was. And then they got rebranded to high yield bonds. Makes it a little bit more attractive. So let's, let's say you have two brothers, you have Tom and you have Billy, and they want to borrow $100,000 for whatever reason and you have the money to lend. Let's just assume that, all right? Tom, he has a steady job, he has a solid family. You know, he doesn't really like debt. He doesn't have credit card debt. And every time Tom has borrowed your shovel, he's brought it back and in the same condition. So if you were to lend $100,000 to Tom, but you wanted to be smart because you could put that in the bank and earned interest, you would say, hey, Tom, I'll lend you the $100,000 for one year, but I'm going to charge 3% interest because that's what my money market is paying me. So I'm fine giving it to you rather than my money market. I just, you know, don't want to miss the interest. So you just pay me 103,000 at the end of one year. Because, you know Tom, he always brings the shovel back in, clean and imperfect condition. That's basically a treasury bond or a really high quality corporate bond. Now, let's say Billy wants to borrow $100,000. Billy has had multiple jobs and always has a new idea. And you've bailed him out once or twice. And he doesn't have a stable family. You know, he has credit card debt because he's talked about it. He's a lot less stable than Tom financially. He's not settled in the world. He doesn't have an emergency fund, et cetera. And Billy needs this money, and this money is going to make him solid in his mind. And then Billy's borrowed a shovel from time to time, and sometimes he doesn't bring it back for a year, sometimes he doesn't bring it back at all. And when he does bring it back, it's been sitting out in the rain and it's got mud on it, et cetera, and you're like, oh, man, I gotta lend money to Billy. I'm worried about when I'm going to get it back. And whether I'm going to get it back is somewhat of a risk. So in this case, if, assuming you're willing to lend Billy money in the first place, you know, okay, Billy, I'm going to lend you money, but I'm going to need a high yield in order to do it because I'm taking a lot of risk. You're not going to get it back to me or it's going to be late or whatever. So, Billy, rather than charge 3%, you're gonna charge 10%. You feel like, okay, if I can get 110,000 back in that year, I'll make an extra $7,000. I might not sleep as well. As long as Billy's fine and I'll keep checking on him, I'll get my money back. That is essentially what we're talking about here, James. So if you invest 80% of your portfolio in high yield bonds, think of it like a portfolio of a hundred or a thousand different billies, you're going to get a higher yield than normal. But they have. Because all these corporate bond companies, when they go to borrow money, they get rated by their ability to pay the money back or how much risk is being taken. That's how the bond gets priced. So at some level these are all billies, and you diversify the risk by lending to a hundred billies rather than just one. But there's still risk there. And this having high yield bonds, tactically, so in an optimization standpoint, can have some benefits in stable economic environments. When interest rates are going down, they can be, they can be a buffer to that from a price perspective because of this yield spread, et cetera. But where these can be really disastrous, James, is when we're not in calm waters, but we're entering or in a storm economically, the storm would be a recession where people are being laid off, companies aren't selling as much and they're feeling financial stress. And some of those companies fail. It's the economic equivalent of a forest fire. And these things happen and they're very healthy because they kill off the weak growth and funnel redistribute resources to the healthy growth. Well, in the economy that's the same thing. And in this forest analogy, now that, I'm switching, Billy is the weak growth and he is probably going to go bankrupt or not be able to pay you back much sooner than Tom, because Tom has an emergency fund, he hasn't used debt, he has a stable job, blah, blah, blah. So when we go through economic stress in the economy, what happens with high yield bonds is the price of them act much more like stocks. They go down, they're very volatile, and the yield can be impacted too. If you have a certain percentage of them going bankrupt. Now. What, what percentage? If you have a very diversified portfolio, it's probably pretty small. But if you have your portfolio going down of high yield bonds because all those companies are getting downgraded, they're thinking, oh, these are riskier, these are riskier, these are riskier, then the value of that portfolio is going to go down significantly and then some of them will default within these ETFs that you're considering, that will smooth itself out because absent economic disaster, it does. But it's a risky proposition. So this is not reasonable at all. James, I would go back to process. You're considering taking 50% of your funds through an annuity through your teacher system. Look very hard at doing that, because that will be like lending to Tom. Yeah, the yield's not going to be near as sexy, near as cool, but it's going to be stable. And it has regulatory or, financial guarantees for the rest of your life, and then you can figure out what to do with the rest. So in the context of your question, no, this is not reasonable.

SMART SPRINT

Roger: All right, now let's move on to our smart sprint so we can get to our eggnog. On your marks, get set. And we're off to set a little baby step we can set in the next seven days, or we can do in the next seven days to not just rock retirement, but rock life. All right, next seven days it is. The holidays. Christmas is tomorrow. We got New Year's coming up. I'm challenging you to think of a word for 2026. I've done a word every year for at least a decade now. Some are more meaningful for others. Sometimes I set one and I'm like, oh, I was probably wrong on that one. Or I know Nicole gave up on a word one year because her life changed in ways that she hadn't really anticipated, and that word was no longer relevant. So we can hold these somewhat loosely. Next week, I'm going to reveal my word, and my word is essentially, and why would you create a word? That's a good question. Why have a word? Think of a word that is a focusing point for the season that you anticipate for yourself next year. That could be the season of life that you're entering. It could be something you're working on internally to be able to show up to life better. It could be something that you, A, virtue or a value you need to really lean into to help support a season you're going into. But just think of a word that can be a focal point to help keep you centered as the storms of life and everything go on. And if you're so inspired, share your word in this week's Noodle. And then when I share mine next week, we can share some of yours and maybe the one sentence, why behind it.

CLOSING THOUGHTS

Roger: When I think back at this episode, you know, what are a couple lessons? Two things that come to mind for me. One is related to the first question around the state of retirement preparedness that most people are in and the idea of charitable planning. I think it is upon each of us individually to make some positive contribution to those around us. And if they're focused on people that are really struggling in retirement. I think this is, yeah, we can, we can go to the collective government to help with programs. That's definitely important. But I think it's always going to come down to you and I and local organizations and it doesn't have to be about money. I know people that go to an Alzheimer's or memory care facility once a week and they've done it for years. It'd be wheels on wheels. I think it's going to come down to us feeling sound in our retirement so we can show up for our neighbor or the people down the street. That's lesson number one for me and I feel like I need to work on that personally more so I will be on that journey with you. And then number two, the number two lesson is related to the last question on this idea of high yield bonds. Don't let the math get in the way. This is not a good strategy taking risk for extra return. I mean we all want extra return. I would love higher returns but not at the expense of the resiliency of my life and my plan. So we all want to optimize but we never want to put that ahead of having a solid plan that can weather a storm because we, we want to be able to show up consistently, not just in good weather. So let's not over complicate this elegant simplicity and at times it's going to feel like we're sticking the muds because somebody else is getting a higher return, maybe for years, but they don't even understand the risk that they're taking. So I think let's keep it elegantly simple and think about how we can help our fellow humans have a Merry Christmas.

The opinions voiced in this podcast are for general information only and not intended to provide specific advice or recommendations for any, any individual. All performance references are historical and do not guarantee future results. All indices are unmanaged and cannot be invested in directly. Make sure you consult your legal, tax or financial advisor before making any decisions.