Cash isn't always king, financial advisor says

all right joining us once again is winnie son financial advisor but also managing partner of sun group wealth partners winnie great to have you back here look a lot of chatter uh still even though it's a new week about what happened on friday at the federal reserve symposium what do you think is the biggest headline um and if it's not inflation but i also want you to address inflation as well yes absolutely though the bank headline is absolutely inflation so all ears are watching and seeing what's going to happen and actually this is really interesting because if you haven't been following the talk now is that we're reaching much higher inflation rates much sooner than we expected now that chairman jerome powell is still saying you know don't worry we think this is going to settle we think it's gonna you know resolve back but we're looking at numbers now of inflation over five percent so that's significant because generally we're looking at inflation of about two to three percent that means things are getting a lot more expensive and you're probably seeing this at the supermarket already as well as at the pump so how do we adjust at home for those of us at home how do we prepare for you know this drastic increase well there's a lot that you can do and there's a lot that you can't do one of the things that you can do is to really take a look at your portfolio um what we're really worried about this i want to kind of put this in perspective right this is like if you have children at school and if they're underperforming let's say your daughter comes home with a c or a d now temporarily that's not a good thing but in the long run if she can pick it up she'll be okay now if inflation continues long term this is a problem right if she continues to get poor grades what are we gonna do so some of the things i would recommend you do right now is to take a look at your portfolio and make sure that you have a good portion of your portfolio includes dividend earning um for like stocks or mutual funds or etfs to balance out a lot of people are holding a lot more in tech right and growthy names make sure you have one both elements in your portfolio as well as making sure you have some consumer staples because these are areas where people when they're limited on budget are still going to go ahead and spend money so take a look at your portfolio but make sure that your money is working really hard and the other thing i would say is either tighten your spending or boost your income and better yet if you can do both okay hey what we've talked about this next one a couple times but you know the phrase cash is king right mm-hmm i mean how is that not possible there are some you know online articles out there saying maybe not so fast maybe this could actually hurt you in the long run can you explain yeah mike you know thank you so much for asking this because a lot it's actually a trending topic a lot of people are saying what do you mean cash isn't king well typically cash is king if you're looking to like number one fund your emergency fund or you're looking to maybe buy a new house and buy real estate but right now especially because interest rates are at a historical low and we're also talking about increasing inflation so having too much cash in your portfolio or in your investment account or your retirement account is a big problem and actually unfortunately we're seeing actually record levels of just cash and retirement plans for a lot of employees so you don't want too much because if that money isn't earning at least like five to six percent in the short term and long term and inflation does in fact let's say trickle down longer than 2022 then you just want to make sure that your money can keep up otherwise by the time you retire you're gonna have some shortfall and you definitely don't want that upon retirement that makes sense you talk about retirement accounts um 401k roth 401k roth ira kind of a silly question but what really is the difference here between these and what's best you can use me as an example what's best for me you know so my great question i think you know a lot of people are still confused about this it's interesting because 75 percent of companies we know surveyed actually have something called a roth 401k mike you might have one at work i have one at work but very few employees and that are saying only about 25 of employees actually utilize these type of accounts and i think it's because they don't understand how they work typical 401k works like this your money goes in pre-tax and then when you retire at 59.5 or beyond then you pay taxes on your withdrawals at that point counts towards income a roth 401k is actually the reverse where basically up front you don't get a deduction but once you reach 59.5 and beyond that entire sum that you've accumulated in this 401k plan grows 100 tax-free so whether it be a traditional 401k or roth 401k both company counts but if you have the roth 401k i would definitely take a look especially for you mike i i will tell you i put almost all my money into my row at 401k for this reason i'd rather when i'm reaching like 60 70 80 all that money i know is mine that's all of it yeah anyway no taxes and you have a lot of time to save because you're still young so if you're a little bit older and you're closer to retirement then you might want to reconsider talk to your accountant talk to your financial advisor and maybe go the traditional 401k route okay hey open enrollment time for a lot of employees out there you know the standard dental medical you know other benefits that maybe we don't know about uh they're kind of like hidden gems out there hitting little secrets yes in fact this year i would take a look at a couple different things okay so typically open enrollment health medical typical uh dental typical things but this year what i want you to look at is i want to make sure that you go through each of your selections make sure while you're doing this update your beneficiaries on your life insurance and things like that also this year i want you to seek out a legal plan now a lot of companies offer this a lot of employees think well why do i need a legal plan i don't need an attorney but actually this is the best year to do it if you have a legal plan to work this will help you set up a living trust a will health care directives usually at a very small cost compared to having it done outside on the private sector the other thing i want you to talk look at is obviously flexible spending make sure you put enough money in there often has some tax benefits for medical expenses right the other thing is to look and ask if your company offers a corporate 529 plan or seeing more companies offer a college savings plan in the workplace and if you don't have one this is a good chance for you to ask your company hey do you think we're going to have one of these in the future like we're setting these up for a lot of companies right now and the great thing is it's totally flexible and then you'll have a place at work where you can save for your child's education i'm going to email my hr department right after this interview so that's that's a great point um hey warren buffett's 91 this week happy birthday lauren happy birthday warren but i mean what's one thing that stands out the most to you about warren buffett i mean he's a legend when it comes to well he's a legend and i think the thing that stands out most is warren has always been sort of that really smart buy and hold investor and i think if we can learn anything from him is that you know this market is one where we're buying good quality companies that we believe in long term and holding even today that that definitely that investment truth definitely works if you have a good diversified portfolio why and hold well whitney you're a great financial advisor and uh you know your managing partner there at sun group wealth partners and i always appreciate your advice and having this conversation thanks winnie thank you my friend take care

Channel: KTVU FOX 2 San Francisco

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Id: Ejy_GOeeqjI

Length: 7min 26sec (446 seconds)

Published: Thu Sep 23 2021