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The Smart Take:
You may have acquired stock and seen it significantly rise in value over time. Now you’re not sure what to do: let it ride or sell, pay taxes, and reinvest in a better portfolio.
Astute investors know concentrated stock holdings are suboptimal and expose a portfolio to diversifiable risks. But simply selling regardless of tax consequences is also short-sighted. So how do they best fit into your portfolio and financial plan?
Hear Kevin discuss how to think through this complex decision. He will evaluate the costs and expected benefits of making a partial or full transition and discuss how Separately Managed Accounts or SMAs can be used as a tax-smart tool to better optimize your investments in light of concentrated or low-cost basis stock positions.
Even if you do not have concentrated or low-cost basis stock positions, the insights you’ll get on optimizing your portfolio and drivers of its results make it worth a listen.
Reminder: Investment returns are not guaranteed. There are costs to invest. Expectations discussed are just estimates and are probability-based (range-based) and are from Blackrock, Research Affiliates, and Vanguard per data available on their websites.
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The Host:
Kevin Kroskey – About – Contact
Intro: Welcome to Retire Smarter with Kevin Kroskey. Find answers to your toughest questions, and get educated about the financial world. It’s time to retire smarter.
Walter Storholt: Well, hey there. Welcome to another episode of Retire Smarter. Walter Storholt here, alongside Kevin Kroskey, President and Wealth Advisor at True Wealth Design, serving you all throughout Northeast Ohio, Southwest Florida, and the greater Pittsburgh area as well. You can find the team online at truewealthdesign.com, where you can schedule a 15-minute call with an experienced financial advisor with the True Wealth team. Just click on the, “Are we right for you?” button in order to do that. Kevin, great to be with you this week. How are you, my friend?
Kevin Kroskey: Walter, it is always my pleasure. I’m good. And I was curious, I believe you were on vacation out to Colorado if I recall correctly.
Walter Storholt: That’s right. That’s right. Made it back. Didn’t fall off any mountain ledges or anything like that. Was able to safely complete a couple of hikes, and it was our first time ever being out, really, in that region of the country. I guess I’ve done Nevada, California, Oregon, and Washington, but far west I’d gotten, other than the far west coast, had been Iowa. I’d never really done that corridor in the middle, well, I guess the flyover states. Is that what people call that area?
Kevin Kroskey: No disrespect to those states.
Walter Storholt: No, not at all. Because, I mean, Colorado was awesome. I mean, we had a great time. We stayed mostly in the central part of the state. We did four really long arduous hikes. The weather was absolute phenomenal. I mean, trading the heat and humidity of the south for dry, 70-degree weather every day, was just absolutely amazing to do that in August. I was a big fan, it was a great trip.
Kevin Kroskey: That’s awesome.
Walter Storholt: Yeah.
Kevin Kroskey: I’m curious, were you in Denver as well?
Walter Storholt: Well, we flew into Denver, but we really didn’t spend any time in Denver. So we went straight to the middle of the state. We were staying in one of those ski resort-type areas in the mountains. Of course, there was no snow being that it was in the summer, but they were still open and had lots of activities, and things like that to do. Mostly a lot of hiking is what we did. We did a little whitewater rafting on our last day, which was definitely a highlight of the trip, and just so much fun. Did a little bit of horseback riding, which Connie really liked.
There was a good amount of things to certainly do, and we packed every day. And there were a few days where we’d get back to the hotel at like four o’clock in the afternoon, and we were so wiped out from the hike, we would pass out. And then wake up at nine o’clock, and be like, “Okay. Now we’re full of energy again because we just took a four-hour nap, but it’s like 9:00 PM.” And it was a sleepy resort little town, so it was like, not much to go out and do, but we found things to do. It was a lot of fun.
Kevin Kroskey: That’s great. I’m glad you had a good trip.
Walter Storholt: Yeah, it was a really good trip. So I’d highly recommend it, if you haven’t been to Colorado, go check it out. Definitely a great outdoor place. Glad to hear that you are doing well, also, and we’ve got a great conversation on tap today. We’re following up a little bit with Episode 79, our previous episode about aligning your investments with your values.
Kevin Kroskey: Yeah, you got it. I think I mentioned in that one, we were going to ferret out a little bit more about these, call it separately managed accounts or SMAs. The aligning your investments with your values, basically we talked through some of the pros and cons, and then how to do it. And there was two solutions, broadly speaking, one more of a package product, and then two more of a customized solution, which I was calling separately managed account, or SMA. And these SMAs have a lot of other benefits, as well. And we use them, or at least the thinking behind them, in several other cases. There are some tax benefits too, and I’m sure most people are aware that there’s likely going to be some tax changes this year, which some of these benefits could become even more. I thought we’d at least take a few minutes today and talk about it a little bit more. And it’s probably something that I see a lot of people that come in, that start working with us, and here’s usually the situation that we find. Usually, there’s some sort of, we’ll call it a legacy holding, or concentrated stock position. Maybe it’s something that, they worked for a public corporation and were granted stock awards over time, or had stock options, and basically built up a fair amount of wealth, over-concentrated wealth, in a single stock. Or, we have several clients where they did inherit some money, and if you go back, not all that long ago, basically the estate tax exemption, if your state was a little bit more than, I think it was $650,000, and this was literally just probably 12, 13 years ago, you started having a taxable estate. It was quite common that you would have this sort of trust planning, where some securities would go into what they call a Bypass trust. And basically, they could be there, but they don’t get a second step-up in cost basis at death when the surviving spouse passes.
Candidly, that doesn’t matter all that much, but basically, they were inherited eventually by our clients. But some of these positions were inherited, or last stepped up, from a cost basis perspective in the…I have one client with early 90s. The markets did quite well through the 90s and the tech boom. Didn’t do a whole lot here domestically through the 2000s, but have been on another tear over the last decade or so. And these things, if you look at it, I mean, we’re talking thousands of percent gains. If we take a step back for a moment, if you think about just a traditional IRA, if you pull money out of your IRA, so you pull $10,000 out, well, by and large, that whole $10,000 is going to be taxable as ordinary income on your tax return. If you are investing outside of an IRA in, what I’ll just call, a taxable account. These are the accounts where you get a 1099 every January, showing any sort of income that you have to pick up on your tax return. Well, here you have your cost basis.
So, say if we put $1,000 into buying a stock or a mutual fund, and say it grew to $10,000 over many, many years, well, our gain is $9,000. The $10,000 minus the $1,000 we put in, assuming that there’s not been any sort of distributions reinvested over time, and the tax rates also a little bit different, versus the IRA. Here we’re paying capital gains tax rates, which are less than the ordinary income tax rates that IRAs are subject to. That’s what, I guess, the setup and some things to keep in mind here. But when you have those inherited positions, literally, I mean, I’m just thinking through my mind in some of the client situations that we’ve dealt with over the years, there’s could be several hundreds of thousands of dollars in a single holding, that has virtually…I don’t want to say zero cost basis, but for all intent and purposes, it’s close to zero. If I go back to that $10,000 example, maybe it is only a $500 cost basis, and so it’s virtually all gain.
And so from a planning standpoint, and from a retirement planning, investment planning standpoint, what do you do with those? Do you just hold them? Do you sell them? What do you think, Walter?
Walter Storholt: I think you get a lot of options, obviously. I mean, it sounds like one of the benefits of the SMA is customization?
Kevin Kroskey: Completely. Every case is different. It depends, is always pretty much the right answer for everything, but I’ll just talk through some of these high levels. So even before we talk about the SMA, let’s just talk about completely selling out of it, and then reinvesting. So one of the basic principles here is what we’ll call, the wiggle factor. We’ve talked about this in the past, Walter. When I say wiggle factor, do you remember what I’m talking about?
Walter Storholt: Remind me, the wiggle factor.
Kevin Kroskey: Standard deviation.
Walter Storholt: That’s right.
Kevin Kroskey: The volatility of an investment, or investment portfolio. Individual stocks have more volatility or more of a wiggle factor. They move up and down a lot more than a basket of stocks that are diversified, and you see this all the time. An individual stock, for example, may have on average, say, a 30% standard deviation, or wiggle factor. Whereas if you look at the entire basket of stocks, say in the S&P 500, it’s closer to 20% or so. It varies a little bit over time. There’s periods of time that are less volatile, or more volatile, but if you take a good long swath of time, that’s pretty common what you’ll see. It’s maybe 30%, maybe even 40%, volatility for an individual stock, and maybe 20% or so for say, the S&P 500.
If we’re talking about a basket of smaller stocks, then the wiggle factor will be a little bit higher. There’s just a little bit more volatility, a little bit more risk that’s there. That’s one important variable that’s going to come into this. If we have perfect foresight over this individual stock, we have concentrated stock position that we’ve earned through our work at this company, or that we inherited, or what have you, the standard deviation of that stock, the wiggle factor of that stock, matters. If we do have perfect foresight, that we just know that, hey, that stock is going to do better than the market, then all this becomes moot. But I don’t know about you, Walter, the crystal balls tend not to work that well, and so we come back to playing probabilities, or putting odds in our favor. And that’s what, exactly, this is about.
And when you relate it to retirement planning, too, it’s one of those things where if you have an over-concentration of risk, then you could have some bad outcomes, and have to make some undesirable changes to your lifestyle. Work longer, spend less, hopefully not un-retiring go back to work, but these are all linked. When you have more volatility, let’s say that we have these holdings, and let’s just say that we’re going to get the same expected return. We’re talking about transitioning. Or do we hold it, or do we sell it, pay the tax bite and then move on? You with me?
Walter Storholt: I am with you so far.
Kevin Kroskey: All right. So, here’s the example that I have. Let’s say that the portfolio, the initial value, is 1.5 million, and our cost basis is $500,000. We have a million-dollar gain from our initial investment. Kudos to us, that’s fantastic. We will assume our tax rate is 25% in all these scenarios, so that’s fairly consistent with what capital gains would be taxed at when you factor in federal, and if you’re in a state that’s taxable, like Ohio. Let’s just say that we can expect 9% on these investments, purely hypothetical. And that’s both true for our current holdings, or what we’ll call our legacy holdings, and it’s also true for the portfolio that we’re going to transition over to.
The key difference is that wiggle factor. The individual stocks, maybe we just have a few of them, maybe it’s just a handful or so, but the volatility for that portfolio, for our legacy portfolio, is 30%. A 30% wiggle factor, and going over into the new portfolio, our transition portfolio, it’s just 20%. More consistent with, say, S&P 500. So if you think about it, we stay, we keep invested the whole 1.5 million. Let’s say that we don’t need the money or anything like that. And we’re just going to let it roll, and we’re going to let it roll for 25 years. Or, in the transition portfolio, we’re going to go ahead and sell all of those legacy stocks. We’re going to take the tax hit, and we’re going to pay the taxes on that million-dollar gain at a 25% tax rate. So that means that we have $1.25 million to reinvest in this new, better diversified portfolio. That has the same exact expected return, but less of a wiggle factor. Okay. Let me check in again. Walter, are you with me now?
Walter Storholt: Yes. So, can you explain? Why would we then have less of the wiggle factor? Just because of the way it’s going to be invested in that new portfolio?
Kevin Kroskey: For the simple reason that you’re going to have more stocks in there, for sure. I mean, the S&P 500 is a good example, but let’s just say that we went down to the shore, Walter, and we are selling umbrellas on the beach, for the sun. Well, a good diversifier to that might be to sell umbrellas when it’s raining, because your umbrella sales for the sun at the beach are probably going to tank that day, but maybe people need some umbrellas for the rain. It’s a natural. Those sales will not be correlated, they’ll move in a dissimilar fashion, so you’ll get a smoother path for your sales overall.
Now, if you expand that to having, say 500 stocks, in say, the S&P 500, that becomes much more pronounced. And as a quick aside here, I mean, we went through this. I think this may be where you created and pulled out the egghead alert, but we went through two concepts of standard deviation and terminal wealth dispersion, previously. Those are definitely applying, and answer the question that you just asked in a more detailed fashion. But just for now, hopefully, what I explained does a fair enough job.
Walter Storholt: I’m pretty sure terminal wealth dispersion was the birth of the egghead alert. Yeah, I think you’re right about that.
Kevin Kroskey: All right. I know people are just like, “Yes, I have to go back and listen to that one, for sure.” But I think the thing that you have to keep in mind here is, we’re investing less money in this new portfolio because we took the tax hit. We’re expecting the same return, but our wiggle factor is less. So now we can use that information, just those few variables that I mentioned, to go ahead and do some statistical modeling to figure out what is most likely to produce a larger value over time. And again, if exactly what stocks are going to do, or the portfolio’s going to do, if those stocks…hey, these stocks that I have, I mean, they’re going to do better than 9%. I know they’re going to do better than 9%. Well, hold on to them. Just, I would say that you don’t know that, and you should be a little bit more humble, and we’ve talked about a whole slew of other reasons why you can’t really know that, forward-looking.
You do want to diversify, you do want to manage risk. But here we’re just introducing this third variable of, well, we have to pay a tax hit to get out of these legacy positions, doesn’t make sense. And if you go through and you do this simulation, again, 9% expected return, investing 1.5 million versus 1.25 million after you pay the taxes, but having the difference between a 30% wiggle factor or standard deviation, and a more diversified 20%, if you look at what you can expect on average. And when I say that, if you just think of that normal bell-shape curve that we’ve all at least been exposed to overtime, and we’ve talked about on a few times through the episodes, you’re just talking about the middle of that curve, the 50th percentile. And what you find is if you pay the taxes and reinvest lower amount of money, but with a lower volatility, then on average, you’ll actually expect to have a higher value in, literally, just one year. One single year.
Walter Storholt: Just one year?
Kevin Kroskey: Just one, on average. Just because there’s so much more variation, or volatility, or wiggle factor in your current concentrated portfolio. Now there’s certainly, and again, we’re talking about on average, there’s a fairly wide dispersion. A 30% wiggle factor is quite a bit. The way to, I won’t go through the math, you can go back and listen to the standard deviation episode if you’d like to. But on average is what we’re talking about. So if you go out further in time than one year, and I have the numbers here for 25 years, but 25 years later, and this is looking at the amount of money that you have. Again, in that current portfolio, 1.5 million in the new portfolio, the transition portfolio, you have 1.25 million that’s been invested because you paid the taxes. After 25 years, which one is going to produce. What’s the wealth that’s created, at that 9% expected return, with the volatility that I mentioned? It’s a little bit more than 4 million under your current portfolio, and it’s about 5.6 million on average, 50th percentile, under the new, more diversified, more reliable portfolio.
Walter Storholt: Just a small difference. Just a very small difference, right?
Kevin Kroskey: Yeah. I mean, we’re talking about 25 years, and this is, in this example, you actually are paying taxes after 25 years, which candidly, you can argue. Say, well, like in today’s law, I mean, this may change, it’s talked about being changed. But if you have capital gains, if you invest that stock, whether it’s whatever stock it may be, Disney, Apple, you name it. It’s usually some of these ones that have been around for a while, and that people just identify with, or what have you. But if you hold onto that all the way until death, the capital gains go away, they’re stepped up at death. And so your beneficiaries inherit them free of any capital gains, and so that’s current law that very well could change. It’s actually a proposal under the Biden tax plan that it will be changing. We’ll see what actually happens. But I have another example. I won’t go through in painstaking detail like I just did on the last one, but that transition portfolio where you do pay the taxes still wins. It just doesn’t win by as much as the example that I just gave.
Walter Storholt: But part of the goal here is the predictability, the consistency, of switching to this transition portfolio, this other portfolio because it’s all about the mission of those dollars. And you’re talking about this being, really, with the intents and purposes of being a legacy. And that’s what sort of helps change the dynamic, and changes that understanding of, what’s the purpose of these dollars and of this portfolio?
Kevin Kroskey: Well, I mean, you always want to know what the purpose of the money is, for sure. You don’t want to put the cart before the horse. I would say that the example that I just gave is a little bit more on the investment side, and on the mathematical side about, how do we actually optimize and make a smart decision in an uncertain environment? We don’t know what stock, or what strategy, or what portfolio, is going to do the best in the future. But if assuming that we can come up with some reasonable… And another question you may be asking is, well, how do we formulate these expected returns? And that’s a whole other question. In my example, I just simplified it and just stated that they are the same. And we’ve talked about this, at least building expected returns, for baskets of stocks. But if you’re doing it for individual stocks, good luck. It’s way, way more uncertainty.
But that’s the whole point that I think you should be taking away from this if you do have these legacy holdings, one way or the other, or this concentrated holding. And sometimes, generally, we find it, somebody has a tax issue that we have to workaround. It may not be that we’re going to transition out of it and just sell it completely, maybe we’re going to build around it, which I’ll talk about here in a moment, but. And that’s really where the SMA comes in. But when we’re looking to do somebody’s retirement plan and make sure that whatever their purpose for their money is, we want to make sure that that money is aligned to support that. And we want to make the most out of what they have.
And so it’s one of those things, nobody likes paying taxes, and sometimes you can use a little Jedi mind trick here that helps. In the example that I gave, we said that, hey, you’re paying a 25% tax on the gain, so on the million dollars. Well, you get to keep 75% of the gain, is another way to look at it. It’s just the opposite side of the same coin. Or, if you look at it overall, it’s 1.5 million that you have initially, but you get to go ahead and reinvest 1.25 million free of any tax. So these are different things, I guess, that we have to work with, but we’ve had several, I mean, I can think of probably 10 clients where they have meaningful legacy positions that we’ve had to work around, and some of them are easy. Some of it just, hey, it’s a third rate investment, it’s high cost, it’s tax-inefficient. This thing just makes sense to sell.
It’s a little bit tougher, I think when the gain gets larger, and there is a pretty big tax hit. But even if we back up, I mean, the example that we just gave, you have a $500,000 investment, it’s tripled in value to 1.5 million. You have a million-dollar gain. That’s a pretty big increase rate there, and the example that I gave still, the probabilities are in your favor to actually do a full transition, take the tax hit, and then reinvest in a better diversified portfolio. And hopefully, you can actually take it so that, not only are you expecting a similar return, but perhaps you can engineer it so you can expect a higher return. And that wasn’t in the numbers that I shared.
But rather than going for a full transition, let’s just say that the separately managed account, let’s say somebody has this legacy holding, and it’s something that we need to workaround. But they have enough money, or at least a fair amount money elsewhere, that is liquid, that we can build around. So in a case like that, let’s just say it’s, somebody has Disney stock, and they inherited this back in the 70s or whatever, and it’s basically all gains today. So they’re looking at this and they say, “Well, Disney, hey, who doesn’t like Mickey, right? Do I really want to sell Disney?” And we’ll try to get that emotion out of it, but you look at it, and same sort of thing, do I want to sell this and take the hit? And it depends, too.
Candidly, if they’re older in age, and maybe don’t have that many investing years left, nobody has that certainty, but maybe you do want to hold onto it and try to get that step up, or at least you’re leaning that direction. But, even if you have, say a few hundred thousand dollars, say in Disney stock that you inherited, but you have maybe a couple million dollars elsewhere that you can build around it. Well, maybe then we don’t go for the full transition, but we start looking at it and saying, “Well, hey, if Disney is here, and then in this separately managed account environment,” we can do this. Say Disney’s here, it has these characteristics, maybe we have a few other legacy holdings that are there as well. Basically, what we would then do, is use that information about the characteristics of those stocks and try to build out a better portfolio around them, where we can go ahead and hopefully increase our expected return, where we can lower our wiggle factor, our volatility, and we can avoid the tax hit.
And that’s really where, if you’re not going to completely sell and go into that transition portfolio in that prior example, that’s really where the separately managed account, or some version of it, come into play. It’s not just selling and reinvesting day one, it’s probably pruning maybe some of it, or if you do have enough assets that are liquid, where you can invest around those legacy positions. And those legacy positions become the foundation, or the pillars, of your investment plan, but then we just build around them to, hopefully, get some of those benefits of higher expected returns, better diversification, and a lower wiggle factor.
Walter Storholt: So, these SMAs really just give you so much more flexibility with what to do with the plan. Versus just throwing money into mutual funds, where you then lose a lot of that flexible ability, and the ability to shape and morph, and make some of these tax decisions, and movements. You maintain that when you have an SMA, and have a little bit more brainpower, I guess, going behind not just the investment decisions, but then how things are put in, taken out, shifted, transitioned, moved around. That’s where a lot of the benefit of the SMAs lies?
Kevin Kroskey: Completely.
Walter Storholt: Got it.
Kevin Kroskey: I mean, it’s pure customization. So, there’s, we like to use mutual funds and ETFs, we use them a lot. I’m not saying that they’re not good strategies or good products to use, the SMA is really another tool in the tool belt. And just as a refresher, we talked about it last time, but the SMA, rather than, say the S&P 500, rather than buying an S&P 500 ETF, or index mutual fund, you would just go out and buy those 500 stocks directly and not in that mutual fund wrapper. So, here what we’re saying is, well, maybe you have five of your legacy holdings are in the S&P 500. Rather than going out and buying that ETF, or mutual fund, S&P 500 index, we’re going to use the SMA and we’re going to buy the other 496 stocks. And in fact, we may not just buy the other 496 stocks, but we may underweight certain industries that those legacy holdings are in.
Certainly, we’re not going to buy them and add more to it, because we’re already over-concentrated, but we could go ahead and craft, essentially, it’s like our own mutual fund, if you will. But we’re just buying the individual stocks directly with the goal, and with the intention, to engineer it, to get those higher expected returns, to go ahead and manage the diversification, lower that wiggle factor, and do it in a very tax-aware fashion. And when we talked about it last time, in the whole ESG impact investing, aligning your investments with your values, you can also express those sorts of beliefs and wishes through the SMA. I mean, if you wanted to go ahead and completely exclude anything that would be related to. A common one is environmentally conscious investments or anything that is energy, maybe is not really falling under that for certain people. You can just go ahead and add these exclusions, whether it’s a legacy holding as I explained, or whether it’s something that’s a personal belief or value, you can do all of that through the SMA.
But the big, core concept is, really, you’re just buying the stocks outright and not in that package product, but you’re still doing it with the eye to go ahead and keep your costs low, maintain adequate diversification, lower that wiggle factor, and engineer your overall portfolio for the optimal return that you can, for how much risk that you want to take. That’s it, in a nutshell. There’s all kinds of different applications of this, but hopefully, the way that I explained it gives you an idea. It’s usually those positions where, we call them legacy holdings, somebody’s owned something for a long time. It’s grown, that’s great, but now what do you do with it? And maybe you go ahead and transition it all right away, sometimes we do that because it makes sense. It’s a third-rate investment today, it’s high cost, it’s tax inefficient, and so on and so forth.
But other times when you have something, we have a new client that has a lot of Berkshire Hathaway stock. It’s actually the most concentrated one out of our entire client base, it’s quite a large sum of money. Berkshire Hathaway, Warren Buffett, it’s a good investment, has been for quite some time. But there’s, we’re using that as the foundation of the investment plan, and then we’re diversifying around it because there’s plenty of other liquidity that the client has. We’ve had several of these cases recently, I guess it’s one of the reasons why it’s top of mind, but hopefully, I did a decent job explaining the pros and cons to it. I’m not saying that everybody should go out and use a separately managed account, but when you do have those characteristics, whether it is like an ESG impact investing, more values-based investing, or whether you have this legacy position where there’s a high tax cost to get out of it, that’s really where an SMA could be used smartly, to go ahead and get the portfolio closer to where it needs to be. And still optimize, whether it’s a values-based investing decision or your own personal tax management.
Walter Storholt: This has been very helpful, actually. I really enjoyed the conversation, Kevin. I thought you were going to start trying to get me to do math when you were throwing out 1.5 million, 500K cost basis, million gain, 25% taxes, 9% expected investments, one year versus 25-year returns. I was just waiting for that math question to come.
Kevin Kroskey: Oh, man.
Walter Storholt: I was so prepped over here with the calculator, ready, just, you’ve got me on edge, man. How to get me and psych me out, so.
Kevin Kroskey: I know. I was thinking about, how do I tell this story without all these numbers? And Walter, I just couldn’t figure out how to do it.
Walter Storholt: Sometimes you need the numbers. Know what I mean? No, but I tracked pretty well, actually, as you were laying it all out. I was just ready for some curve ball of like, “Now if you took the factorial of the square root of that result, Walter, what would that be?”
Kevin Kroskey: I’m just disappointed you didn’t remember the statistical term for wiggle factor.
Walter Storholt: Well, now, why. I was so stressed about the number question that I wasn’t ready for the simplicity of wiggle factor. Actually, in fact, if you had just said standard deviation, I probably could have given you a textbook definition right off the bat. Wiggle factor, my brain wasn’t ready for that 180 of technical term, versus just a fun, little side term. So, you got me spun up on this one, but it was fantastic. Yeah. If you liked today’s conversation, and maybe this is your first time tuning into Retire Smarter, well, good news, there’s 80 other awesome episodes that you can go back and listen to. Especially the previous one, an extension of today’s conversation, but in a different way, you might enjoy that one. Lots of other great topics that Kevin has dove into over the past couple of years, as well. Go back, consume it all. It’s good stuff.
Kevin Kroskey: Hey, Walter?
Walter Storholt: Yeah.
Kevin Kroskey: One other thing I want to, let me interject briefly before we wrap up.
Walter Storholt: Please.
Kevin Kroskey: And this is an important point, I should have made it sooner. But whenever you’re working with somebody, particularly a new client, if you go to a lot of places, basically they just sell everything and you just start investing. It’s very rigid. What we talked about, in really analyzing what we can expect both from a return standpoint, from a diversification and volatility standpoint, and considering the tax benefits, candidly, it’s what we’ve always done from day one. We’ve done it, we’ve certainly done it. I think I’ve learned a lot over time, and have been able to do it better, but it just makes sense, hopefully, you can see that. Whenever, if you’re going into a financial advisor, if they say, “Okay. We’re just going to sell everything and reinvest,” that could be the right answer. But if you have these legacy positions, if you have a concentrated stock position, and you have tax implications to it, you really need to be a lot more thoughtful behind that.
I mean, I made a pretty good case early on about, hey, it could just make sense just to transition, but that’s, it depends, is definitely the mantra there. And as with anything, you really need to do the work before you come to the conclusion. So just, I don’t want to say buyer beware, but if you’re looking for an advisor and you have some of these legacy positions, if you have some of these low-cost basis inherited positions, or a lot of company stock that you’ve accumulated over the years, you really need somebody that’s going to be able to think through that thoughtfully, and in a mathematical way. To go ahead and figure out what’s the best thing to do to tie that back to your plan, and your values, and make sure you make the most out of what you have.
Walter Storholt: I don’t think in the couple of years that I’ve now known you, Kevin, that you’ve ever done anything that didn’t have a lot of thought and reason behind it. That goes for our episodes here on the show, and the way that you do your planning, and the way that you talk about it and describe it. So, I love it. You always want to make sure that there is a why behind everything that you decide, and you do, and you talk about. And I have to pick on you, and I hope you don’t mind, I’m going to share this with the audience, it’s just especially appropriate, given what you’ve just talked about, thoughtfulness and everything. This episode, believe it or not, folks, was the one that Kevin said maybe he’s been least prepared for, in the entire existence of Retire Smarter.
I find that hard to believe, based on how well prepared the numbers and the examples were, but there you have it. That just is a good example of how thoughtful, and how much time and attention you put into the things that you. And I know that your team embraces this too, Kevin, and just what you guys do. And so, I think that’s pretty cool because that’s rare in today’s world. It’s easy to just, hey, here’s your situation, implement it. But you really want to make sure that all the due diligence is done in the background. And I think that should be celebrated in today’s world a little bit, so.
Kevin Kroskey: Well, thank you, Walter.
Walter Storholt: Good on you, my friend, and thank you for the help on the show today. If you’ve got any questions, as you listen to this program, or any other episodes, want to find out a little bit more about what true customized planning looks like, want to find out if the True Wealth team is right for you, you can go to truewealthdesign.com. You’re going to see a little orange button at the top of the page, another one if you scroll all the way to the bottom of the page. It’s going to say, “Are we right for you?” That’s where you can click and schedule your 15-minute call with an experienced financial advisor on the True Wealth team. It’s pretty easy to do, it’s truewealthdesign.com, and we’ll link to it in the description of today’s show as well. You can also give a call, if you prefer, 855, T-W-D, plan. That’s 855-893-7526. 80 episodes of Retire Smarter, now in the books, Kevin. Congrats. I don’t know if that’s technically a milestone, we probably should have celebrated at 75 if we wanted a mini-milestone, but 80’s a nice round number, at least. So, there we go.
Kevin Kroskey: Yeah. It’s great. My wife just asked me the other day, actually last night over dinner, she’s like, “How many people listen to this thing?” And I told her, “I think we’ve had more than 50,000 downloads,” and her eyes. She’s like, “Who the hell would want to listen to you that much?”
Walter Storholt: I’m married to a celebrity. This is amazing.
Kevin Kroskey: I think she was, well, she was surprised.
Walter Storholt: Yeah. She wasn’t so much impressed, as she was just surprised.
Kevin Kroskey: Yeah. She was surprised. And we’ve had a lot of people that have reached out to. Candidly, I’ve been surprised. I started at us with the idea that we were going to talk, I was going to be able to reach our clients and keep them educated, and maybe we would meet some new people. And it’s been both of those and more, so it’s been interesting. People listen, they get to hear your personality, they feel like they get to know you. And we’ve met some really nice people, that have become great clients through it. And I think it’s a really good way to kick the tires too. If you go into a place, and it’s just tough. We’ve talked about this, how difficult it is to hire any professional, including a financial advisor. But, through a podcast like this, or you really get to know somebody and see what they know, and you got a…trustworthy and competent, and people tend to do business with people that they like, so I think it’s a good way to really kick the tires. And I appreciate your help in doing this, Walter.
Walter Storholt: Absolutely. It’s always fun when we get together, and hey, we’ll do it again in two weeks. So, everybody come back and join us for the next episode of Retire Smarter. For Kevin Kroskey, I’m Walter Storholt. Take care, we’ll talk to you next time.
Disclaimer: Information provided is for informational purposes only, and does not constitute investment, tax, or legal advice. Information is obtained from sources that are deemed to be reliable, but their accurateness and completeness cannot be guaranteed. All performance reference is historical and not an indication of future results. Benchmark indices are hypothetical and do not include any investment fees.
