So which is best, taxable, tax deferred, or tax free? If you see an article where somebody's telling you that this is what's best, it's not that easy. It is the Rubik's Cube because it requires your personality, your desires on accumulating things, your desires on distributing things, your desire on living. All of those things impact it.

Welcome to the Up Your Average podcast, where Keith and Doug give no nonsense advice to level up your life. So buckle up and listen closely to Up Your Average.

Doug, good morning. What's up? It's a new time to be doing things. I move I've got a big screen here, so I had to look sideways to see you. So that was what was going on.

What's going on in the street world today?

A lot of chilling. Caroline is at school, wrapping up teacher day, and then all the kids are home. It's nice to have them under one roof.

What have you been to Gatlinburg?

Oh, goodness. Like, as a kid, we'd beg my dad to stop through Gatlinburg. Go kart tracks, you know, bunch of great food. It We never did anything mountainous there, but I hear that's good as well.

Yeah. We did a high school trip. Buddies and I, we went there and did our thing there, and it was pretty remote back then. It is Myrtle Beach and all that today.

Oh, it's like, it's all lit up. I that's what I remember. Like, and that would have been in the eighties. I remember rolling through there and just lights and and shops. I think you could buy a Christmas ornament every, like, 100 feet.

Yeah. That. And we took our RV to Florida a couple times for space shuttle launches.

Did we stop through Gatlinburg?

The boys didn't.

The girls did. Okay. I didn't I was gonna say.

We got a hotel room, but we parked the RV out on the street in front of the hotel, and we just put the slide out out that morning, and we're just chilling out for a little bit before we took off, and it got stuck out in Soho. We we had RV life going on out there back then, but I was there a couple days this week for a wedding and just a wonderful time. So I I I put the Christmas theme here. We got some presents out here. I I found I dug in the archives.

I don't know if y'all have ever seen this before. This is the Indianapolis Star and the news. I don't even know if the news exists before, but they had in 12/25/1997, the Christmas edition, and as they were holding up the picture of baby Jesus, I don't think we knew. I think I just went out and got the newspaper, and brought it in and was looking at that picture, oh, little Kristen Tyner is baby Jesus. How did that happen?

The church we were going to did a Christmas show, and they needed a baby for the thing. And Kristen was A baby. November, and so she was the appropriate size for what they needed. And I think Man,

she is famous.

Kristen Tyner, Kristen Aklamazian, she is Indianapolis internet famous now. So there you go.

Let me see that real quick.

That's the Christmas season right there.

Here's the other best part about this besides baby Jesus. Right on the right on the front page, where the spirit of the Lord is, there is liberty. Second Corinthians three seventeen. Think that's I think that's still there. That's freaking awesome.

Yeah. Liberty's a big deal. Liberty. Liberty. Liberty.

Should send that to Kristen. That's really cool. This should be her Christmas present.

I might I might do that. She she doesn't have one yet, so we'll. No, Tani's got her squared away. Well, I sent the topic I sent out, which is best, taxable, tax deferred, or tax free?

I'm getting this question a lot, are you? Or did you just come up with this?

Came up with this.

Well, question is hot.

Well, I learned to take

Hot in my world. That's pretty pathetic.

Was like, If we need to get you out, we'll get you down to Gatlinburg. I learned, I can't remember the professor, I think his name was Pinkston at Murray State, maybe not, it might have been during my graduate school work. But when somebody asks you a question, and if you're doing an essay answer, the way to get a good grade on the essay is you start every answer with, It depends. Then you can give the answer whatever you want the answer to be. So which is best, taxable, tax deferred, or tax free?

It just depends. It just depends on I put a list of things here, and then we can chat through the list. What your current and future tax rates are going to be. Right. It depends on what your current and your future income is going to be.

It depends on your time horizon. Right. It depends on the strategy for that asset.

The investment itself. Right.

It depends on what kind of access you want. The more that you use government surrounded ideas with your investments, the more they're going to be restricted. And also, your state goals are part of it. And then the final thing that I kind of wanted to zoom in on and talk about during the Christmas season was your giving thoughts. Okay.

Like how are you going to ultimately distribute these assets? Because whether it's taxable, tax deferred, or tax free, that's going to really drive the giving of this thing. So that's the direction I thought we might go, is talking about giving. And I gave us a little visual here that I'll pop up if I can find where it's at here somewhere.

Oh, we're continuing our theme.

Oh, yeah. We're bringing the Williams' back in. We're going to we're gonna go to Paul and Bridget, in case you forgot our friends. And Paul and Bridget are 70 years old as of this. We picked 70 today for a variety of reasons on the giving, and I did it color coordinated for you.

So I gave you a hypothetical net worth of the Williams, and it's dated today. And if it's red, that's a taxable asset. If it's orangish, because I couldn't get yellow to work, that's tax deferred, and green would be your tax free assets. And so when we're talking about giving and we're looking at the asset type, that's going to affect what we do with the giving on it, like the direction and who might benefit from it. So those of you that are watching, you might maybe I'll talk you through this before Doug and I talk through it very much.

So I've got Bridget in this first column, Paul in the second column, joint assets, then total. And then generally speaking, if it's this reddish pink color, that's the taxable asset, meaning that you're gonna pay taxes every year with whatever happens on that.

Are they both 70? I forget.

Yes.

Okay.

Yep. Today they are. Remember what the original term Generally, your mutual funds are gonna be taxable. You can get some tax free mutual funds, but generally, they're gonna be taxable. Stocks, I gave you the benefit of the doubt.

I call them tax deferred. If you hold them longer term, they could be tax deferred, or they could be taxable. If you bought something today and sold it a week from now because you got a quick pop, that's gonna be short term gains, and it's gonna give you some some possibilities. Municipal bonds,

those are bonds issued by state or local government. I'm impressed that they have some muni bonds.

Well

Not very many people have muni bonds these days.

Oh, and you gotta kind of believe in your local government. Right? And you gotta generally be long term oriented. You gotta kind of take the interest rate risk on that, but your interest on those are tax free. Yeah.

And then you've got regular bonds. It could be corporate or just federal government bonds. There's some tax advantages to federal bonds, and then certificates of deposit are going to be taxable. They could be tax deferred a little bit. I think if you buy a one year CD and it pays the interest at maturity, you've deferred that interest till next year.

So that's your intermediate assets. Then the retirement assets, you've got traditional IRAs, Roth IRAs, again, those are tax free, and any money you pull out of those are coming out tax free. And then annuities and 401Ks. The annuity would be partially tax deferred and partially just a return of principal, depending on how you invested that thing. Your initial investment that you put in an after tax wouldn't be subject to tax, but the accumulation would be tax deferred.

Your four zero one k is gonna work very similarly to your IRAs. And then your fixed assets, your house, another real estate, that's going to be tax deferred, maybe tax free, depending on what kind of appreciation And you get on then business interests are going to be generally a combination of all of those things, I think. You're going get a variety of benefits from a business interest. Personal property, it's generally going be tax deferred or just tax losses. You're going buy a chair, and it's not gonna be worth anything six years from now or whatever.

And then your valuables are gonna be taxed differently. They're gonna have a completely different tax deferred way, but if you had some silver or gold or such sitting in your safe at home or hidden in a closet somewhere. And then down below, a lot of times people forget about life insurance benefits, and then there's a thing called a donor advised fund, which fits into our charitable giving or our giving thoughts for today. And then if you've got a long term care policy, the monthly benefits generally going to be tax free, which also that will influence how you give things away too. So we can just jump into this and just let's just pick a let's just pick your local church, and let's let you pick Bridget or Paul, since they're both 70, and they're going into 2026, and they want to give their church $50,000 going into 2026.

Where would you focus their attention initially, Doug?

Well, I'd ask them, are you making any money? Where, where, what do your taxes look like? That's what I'd want to know.

Let me figure out how we did this. There it is. I see it. Uh-huh. Okay.

Nice. Good work. Paul and Bridget's cash flow. Okay. And I highlighted in yellow when they're gonna have to start taking required minimum distributions.

Yeah. And I estimated based on the increasing interest that they have to take out of that, you can see between 73 and 79, the amount they're going to take out if the principal stays the same, is going grow by close to 50%. So it's going to give them an increase in cash flow over time.

So a married couple with total known income of $72,000 their bracket's what, Caleb? What would they be? 72,000 Pretty low. Pretty low. And, you know, there's some advantages of being 70 today that Caleb has highlighted in one of our podcasts where you get some bonus deductions today.

And so there's some really great stuff for Paul and Bridget. And so their tax situation really opens the door for them to use whatever asset they want, and it's not

going to hit them too hard. Because they're in that 12% bracket, if they're going to give $50,000 away, an advantage to doing what's called a qualified charitable distribution is you would they would probably still get their standard deduction, but also they'd be able to reduce that income even more. Yeah. And if they did that, that may create other opportunities for them.

Oh, yeah. Yeah. Some conversions or, you know?

Yeah. And why the question, you know, starting with which is best taxable, tax deferred, or tax free becomes kind of critical, is it really depends on your situation and what's really important to you. And so that was a charitable direction there. Let's just chat about Paul and Bridget have three or four kids, they have four, I believe, and they wanted to give some of that money in 2026 to their kids. And in 2026, you'll be able to give $19,000 a child per spouse, so you could literally give $38,000 to each of your children if you wanted to, or you could even do twice as much if they happen to be married.

So look into these assets and they want to help out those kids. Any of those jump off the page at you, things they might consider giving to them?

Well, what was the George Bush meme? It's all over Facebook whenever someone's spending more money than they should. George Bush, he's talking about the hurricane relief efforts and he says, just send your cash.

Have you

ever seen this? Just send your cash. I love those. And so, cash is always good, and it looks like they're well, I think they're pretty conservative, but I would wanna talk with them about that and say, hey. How do you how are you thinking about the risk exposure to your net worth?

And are there any areas that you think are either too aggressive or too conservative? And if there if something's out of balance, that's where I would start.

Yeah. Oh, giving to the kids? Yeah. Yeah. And and I think as a 70 year old, when we're thinking about giving, I would start thinking about my life expectancy.

Had Stephen Covey start with the end in mind and work my way backwards because in reality, that in ten years, I'm basically going to be And my life expectancy at 80 is going to drop off pretty dramatically at that point. And if you had your kids when you were 30, when we start this 70, they're going to be 40, and ten years from now, they're going to be 50. And generally speaking, between 40 and 50 is going to be one of those kind of highest stress moments for your kids. So if you're thinking of giving to the kids, I would think about how we want our resources to influence their lifestyle.

Yeah, I've seen grandparents do something really cool is when they give to pay for college, and they'll just give directly to their own, their kid's five twenty nine, or they'll write a check to the university. That's a pretty good gift.

Speaking of that, if you live in Indiana and you give to the five twenty nine plan, you get a 20% tax credit. And so you could gift into the five twenty nine for those kids and get some of that aid for by the state of Indiana. If you don't live in the state of Indiana, but say your kids do, you could give the kids the money for them to fund it, and they could take that tax credit. The same lines of that, what Connie and I are doing in 2025 is all five of our kids are finished with their college education. But the 05/29 rules, I think it's if you've had that account open for fifteen years, is that correct, And you, the money's been in there five years?

Is that the number? Okay, that's right. So five and fifteen. So we began gifting to our kids five twenty nine accounts again, because after that five year and fifteen year time horizon, they can use that to convert it to a Roth IRA. So there's some strategic giving to the kids to help them with their own retirement, or maybe that money that they would otherwise be putting in retirement, they can use it for some of their current cash flow things.

All right. Let's look at other gifting ideas here. Let's say you had personal possessions, like our friend Mike made these. You got one of it.

That's a really nice, man.

It's a beautiful thing. It's Mike Hamilton. I thought he had a name for his business, but this is Hackleberry that he's spun this thing or turned this for us. And I put some ideas for gifting dogs

in Okay, I can

grab one. But one of the things when you have personal possessions, I would say that you'd ask the kids, do they want this stuff sooner than later so that you can get to them the stuff that they really want

to Some people put stickers on them. They do. Yeah, I like that idea.

Yeah. And it just depends whether you want it now or not. And it's okay to say, mom, dad, uncle Bill, I don't want your stuff.

It's okay.

Yeah. Because there's a lot of stuff floating out there. The way you know there's a lot of stuff out there is when you're driving down the interstate and you see the storage facilities out there. There is plenty of stuff. And so as you're thinking about gifting stuff, maybe, and I'm not going give this away, Mike, but maybe there's stuff that you could gift people to give well today.

So that's another charity. What'd you draw? What are we going to figure out how to gift today?

Okay. We are going to figure out how to gift real estate. Real estate. Yeah. Yeah.

Yeah. The gift of real estate. This this is that's a good gift.

Maybe. What do you think about that? And again, take into account your 70 years old husband and wife, probably been, I didn't tell you how long they've been in the house. Yeah. Let's say they've been in the house twenty five years.

Yeah. Yeah. That's a long time. There's a lot of there's a lot of stuff in there to take to goodwill. Yeah.

So so if they had a home and see, they've got other other real estate. What's the other real estate, Keith?

It's a rental property that they bought in. We're gonna say in Gatlinburg because that's what was at the top of mind today.

Yeah. Okay. So Gatlinburg piece of real estate. If the kids enjoyed it and they love it and they're building family memories there, that might be a great asset to gift, that might be a great asset to hang on and depending on when they bought it, there could be a huge gain there. And it might be one that takes advantage of a step up and doesn't go to the spouse but goes to the kids.

The idea of putting gifting even to a spouse, maybe so, maybe the real estate doesn't go to the kids, but it goes to a spouse. We showed it here in joint name, but possibly if one of the spouses appear to be healthier than another, it might make it worthwhile putting it in the less healthy spouses. There's called a gift in anticipation of death, which is a real squirrelly thing. The definition of it's not very clear. But I would say you probably, inside of a year, you might have some tax challenges with doing that.

But there's signs that maybe somebody's healthier than somebody else, and so if you had an appreciated asset like real estate, and you wanted to just put it in the spouse's name, maybe gift it to the spouse, and there's no tax implications on that. And then if they did happen to die before the other spouse, it would get the step up on first. Ordinarily, the cost basis is split between the two spouses. If something's held in joint name, you'll see the one half of the asset go to the date of death value and the other stay at the original cost basis.

Yeah. Real estate's just like any other asset. It can go up, It can go down. But if it is a piece of real estate that is the purpose, what was the purpose? If it was income generation and it's fulfilled that purpose, but you don't need the income anymore, maybe it's just time to sell it and do something different.

Could be. And maybe even sell out that principal residence, because that's going to force you at 70 while you're generally healthy to make some decisions that will preempt your kids from making, or loved ones. And it also, say you moved into a new build, maybe a little smaller house, it'll give you something that's less maintenance required during that next decade, and that's probably going be a big deal during your seventies. All right, I'll draw one. I drew savings and checking and things of that nature.

That would be, if you were wanting to do a gift to the kids between now and the end of the year, that'd be really quick, easy money. You could just write a check to them to cash it, and it's an easy gift. Anything you want to add to that as a gift?

Not necessarily. Or you could use that checking or savings and buy them something unusual that they'd really like.

I think what I would encourage you all that if you were given to charity, I probably wouldn't use that if I've got mutual funds or stocks with appreciation in those. We can help you navigate that, and you could easily move those down into your donor advised fund down there. And if you're not familiar with what that is, give us a call, we can help you kind of consider whether that makes sense for you.

Yeah, and your bracket might be lower than the kids' too. So I mean, all of that's something to take into consideration. So I drew travel. Is this the gift of travel? Yeah.

Yeah, that's a big deal. That is a really big deal. And the gift of travel, especially with multi generations, there's a lot of lessons to be learned there. And if Gen two has a couple kids who have their driver's license, have having, I guess it'd be gen three drive gen one, to that destination in gen one's own car, that is, that's a good time. And so the gift of travel is just wonderful.

We have clients who this has been the way that they have been enriching their family relationships. They'll go out to Montana for a week, mom and dad pay for the whole thing. You know, that type of travel is just unbelievable and creates such great long lasting memories and friendships.

Yes. And with this example of the Williams that we've shown you, they appear to have plenty of wealth to last their lifetime. And so being bashful with that wealth, when you can maybe convert some of this capital to long term memories for multi generations, don't let that slide Because past I know for us, in the last decade, the Tyners have used Christmas time cruises, and I don't know how many we've done, probably four. And what it allows us to do is sit on a cruise ship at a dinner table and have wonderful conversations every night.

And I was going to say, like, may not have $20 to spend on a travel or some of these things could get real expensive, but you could probably swing a family dinner at Texas Roadhouse, And that would be an awesome memory.

And if you're going to do that going into 2026, now is the time to go buy those gift Keith

is a pro at that. Extra 25 on the 100.

Yeah. Something almost 30. I forget who it was. I was like, that'd be Yeah. You're you are you're a pro at I'm a big fan of 1930 comes in.

And they they've got their gift card.

That's right. Yeah.

No. We're gonna do it. I drew annuities. If they you have half $1,000,000 in annuities here. If you weren't gonna leave that money to your children, if you thought you were gonna leave some money to some charities, you could leave that to your donor advised fund if you want, because the gains on it are going to be taxed to your heirs.

And so there's no real reason to leave that money to your family

if Taxed at ordinary income.

Right.

Yeah.

So if you're wanting some money and you're going to not to buy a fund or charities, the annuity would be a good place.

I like that idea. All right. Oh, this is my favorite kind of stock, Keith. You've, you've got appreciated stock. That's my favorite stock.

It's appreciated stock. What what a great gift. This is a a good gift to give to charity because you can gift a larger amount and not have to worry about the capital gains. So that's an awesome one to gift to a charity. It's also a decent one to inherit at death, again, because the price would step up to the date of death.

So appreciated stock, that's one of my favorite topics.

Well, and we're pretty far away from the 2,000, 2,008 markets. And there's I think it's Form 85, 82 that has your tax loss carry forward on it, and that I don't think carries forward past death. So if you do have any gains or losses that are carrying forward, you may want to make sure you've looked at those before you actually give those to charity.

Yeah, good call. Yeah. Business.

Business. Give the gift of business. Business is a great asset to have, even if you haven't thought about it. Like starting a business, it's never too late to start a business, because with a business you get some tax advantage benefits of buying things. You're buying things with pre tax assets.

And so on the giving side of a business, it is a good gift to give to people, but you'll want to step into that with your attorney and navigate that. But also, if you haven't thought of starting a business, today's a good day to start a business. And if you've got some of that capital like the Williams do on their balance sheet, maybe they could start a retirement business for themselves and see how that creates some more tax advantaged benefits for them. Okay, two more.

Valuables. Oh, this is a good one. Okay, so the valuables, what did we say were the valuables that the Williams have? They had some silver,

they had some gold, I

don't know. Yeah, grandpa's old shotguns. They may have had

a Saban Howard sculpture. Had a sculpture.

This this is the best valuable to, have your your sticker on or just, you know, the dug on the on the bottom of the Saban Howard statue or just give it right now would be my advice. If there's something valuable that one of your kids wants, it's probably a good time just to give that right now. The gold, one of my friends used an interesting strategy where he had a bar of gold, and he pretty much waited until it was like really, really high. And then he handed that off to the charity, and that's something for them to deal with now.

There you go. So I

thought that was a

pretty good one. Well, and a strategy with Baseball cards, whatever. Yeah, a strategy with either of those is maybe not give it to those loved ones, depending on what your perspective is, but maybe, and we've recommended this to others, to have it diversified by having them keep it in safekeeping for the rest of your lifetime. If it's something, depending on what the motive We put an up your average out there about gold and what the motives are and the history of that, and an advantage of moving it to multiple locations is that it's not as risky having it all in your house if you have a substantial amount of it.

But if you go to sell it, what's the tax rate on gold? And we discovered that earlier. 28% or something like that?

The income, is that what it is?

I think it's 28. Yeah. Okay. So it's just a little different animal.

Yeah. It's not as beneficial as, say, stocks would be or other capital gains. But if you have it split and held in different locations, that diversifies the risk a little bit, and depending on what your objective is with it. Libby sent me an article I didn't have time to read yesterday, but the article was that some place, somebody got a million dollars worth of gold stolen out of their house. And so if you do have these valuables, our encouragement to you is, A, let your family know, B, let nobody else know, and C, make sure they're securely stored.

Because with the value of those assets going up like they have lately, there is a lot more risk involved with having them in your house.

And if you're thinking about buying some of that stuff, a great way to buy it is just through an ETF.

Unless unless you watch our video and and you think the world's coming to Then

then buy nails, ammo, duct tape, and beer and cigarettes. Yeah.

Have to allow it. But It it is all necessary because So you can get squirrelling. So I I don't even know how that Costco thing works.

I was like, I don't know either. It's fascinating. There's a Costco. And

I Yeah. I know. I said, do you do you just walk out with it in your hand? Like, do you like, do you just walk by everybody with gold in

your hand? With a jumbo set of pretzels.

Exactly. The final one is stuff. Oh, is the worst category. Stuff is the gift. It's Christmas vacation.

It's the gift that keeps on giving, Clark. Yeah. I can't encourage you enough this winter to get rid of stuff. I just can't tell you what stuff will mean to your loved ones if you've accumulated it and didn't help disperse it.

Well, you wrote the book, what was the I forget the name of your book, Keith, The Survivor's Guide. And and you had a chapter called Stuff, Stuff, and More Stuff, I believe.

Right.

So what what do you do with the Stuff, Stuff,

and More Stuff? Well, you have to realize that it doesn't love you.

Okay.

That's a good starting point, that your And stuff doesn't love then this is a hack that's happened since we wrote the book. If you open your phone up, down here on the corner is a camera, and you know what you could do? Mike, I'm not gonna get rid of this, but I just took a picture of this bowl, and if I were gonna get rid of this bowl, I could now have the picture of it to help me with my sentimental challenges. And so if you're afraid to get rid of something because you want to still remember it, my guess is the picture will be in your presence as much as the thing will if you've got so much stuff that it's hidden somewhere in a box, an attic or a closet somewhere. This winter is a really good time to get rid of some of that stuff.

Yeah. It's a good call. And some of that stuff could really benefit other people. Absolutely. Like, you know, one of our friends had a collection of musical instruments, and he gave some stuff to one of my sons, and it made a big difference in my son's high school playing career.

That's really cool. Yeah. Sounds like a cool person,

He's cool. He's cool.

So which is best, taxable, tax deferred, or tax free? If you see an article where somebody's telling you that that this is what's best, it's not that easy. It is the Rubik's Cube because it requires your personality, your desires on accumulating things, your desires on distributing things, your desire on living, all of those things impact it. And there is no perfect answer. The Rubik's cube, you can get it to work out, but with your stuff and the gifting and things like that, I don't think there's an easy answer.

I think it's just best to call one of your Kimball financial advisors and tell them what you're thinking about doing. And it's a real subjective answer, I think. I mean, you can zero in on what might make the most sense. But at the end of the day, it's gonna just be a ballpark gray answer, I think.

I think it's also worth just diversifying your tax situation. So if you just, if you have IRAs or traditional IRAs, maybe you start doing Roths now. Or if you have a Roth and you have a traditional, maybe you start up an individual or joint stock account. And so you just start building these tax diversifiers, and that'll help you when you want to pull money someday or gift money someday.

Exactly. And we didn't really even go we didn't have time to go into the complexities on just the gifting side of things, But there's other taxable events that will get into that decade of the seventies that will make it really important to think through these questions, maybe do it a few years in advance. Maybe Paul and Bridget should have called us a couple of years ago. Well, in the days ahead, I know that all of us at Gimbal wanna wish you and your family a Merry Christmas. And Doug, I'm thankful for you.

I hope your family has a great holiday Yeah.

Thank you, Keith. Merry Christmas, everybody.