Expert Tips on Asset Allocation and Getting Higher Yield

Financial planner Gary Schatsky joins MoneyWatch editors to discuss asset allocation, getting a higher yield on your cash and more.

Expert Tips on Asset Allocation and Getting Higher Yield Ask the Experts Jill: I want to invest in something “safe” notice that I did that “” like it’s safe. Gary: Absolutely. Jill: For those of you listening I just made the, you know quotation marks around safe. Gary, what’s your advice? Gary: Well probably first of all A the safest investment just about anyone can make is paying down debt. People don’t view paying down debt as an investment but right now obviously A the rates have returned or staggering if you can take 10 or 12 or 15% debt and pay it down that’s the rate of return that you receive and it’s a safest that you can imagine because guess what you’re not going to have to pay anyone that money. It’s not very sexy, people don’t think about paying down debt and kind of brag to their neighbors about it but its probably the best investment and the safest investment anyone can make. Jill: Okay and Jack for 10,000 that I’m going to need within 5 years that doesn’t mean in 5 years I will say with them? Jack: Gold Jill: Stop it. Jack: No I’m going to be— Jill: He’s being sarcastic. Jack: I’m going to be— I’m sexy to and I’m going to say but maybe a little surprising and say 10 year CD and only a 10 year CD of course that gives you the right to get out of it with a small penalty. We got a higher rate if in 5 years you wanted to break that contract. You usually for some of them you could pay only 2 months interest which is a good deal. You can get about 3-1/2% a year minus that 2 month penalty. Jill: And that when that you’re thinking about is that the one through ally that saving? Jack: We believe that’s the ally one. We’ve written about this a lot in our blog our roth has. Jill: Yeah, I’m going to find that I’m going to try but— Jack: Scroll down and well find out. Jill: Hold on here we go. Gary: I think they can charge more than 3 months. I don’t know if you research this. Jack: I thought there are 6 months, I think there are 6 months from this. Jill: I think – well the one the 5 years CD for ally was a 3 month penalty and he also has, he’s got some great blog post. He has best CDs where to find them and he has the whole kind of background about that and yes, he also talks about where to stash your cash so in that article he does talk about the ally bank, he talks about that’s a 5-year CD and yelids 2.69 has a 60 day simple interest early withdrawal penalty so only 60 days, not bad. I however am very boring, even more boring than you. I don’t. I always, because when I was in the client business and clients did say to me I won’t need it for 5 years, inevitably 5 months later they would say where is that 10 grand again, I really need that so I’m going to give you the experience of my life which is always error if someone says they’re going to need the cash. They’re always going to need it sooner than they say that they’re going to need it so would just be very boring and be in a higher yielding money market savings account and not worry about it. I don’t really care about earning an extra $8. I really don’t I could care less and I agree I think paying them, that is wonderful but if you need to access to that cash because you have a payment. Gary: If it’s the line of credit you have the access. Jill: Unless Gary: As long as they all shut the line of credit. Jill: No they would never do that Gary, who would do that. Alright we got some questions. By the way I’m reading from a piece of paper if you send us an email I will read that as well. Megan does this so we have paper and kill trees. Okay. Where’s the best place for your money given the current state of uncertainty 9 in the economy are the more illiquid investment vehicle such as non performing housing loan funds. Let me do that again, none performing housing loan funds, the ones that are going to blow up maybe because this whole foreclosure fiasco, is that a good idea Gary is that a good place for your money? Gary: Well unfortunately it depends tends to be you know the kind of the key answer for most people know you have an illiquid investment, you have an uncertain market place, your risk tolerance would have to be incredibly high as would your lack of need for liquidity so certainly for most people it’s not a place I would be looking. Jill: Okay and Jack do you think that there’s any reason why someone should reach a little bit on the risk level to go to something like that. Jack: Yes if they have an enormous amount of money? Jill: Right. Jack: And they are very well diversified across some risky, some not so risky assets. I mean I head a— and also frankly I think it needs professional help or they have to be real good at this. I do hear the guy runs double tree, double line, double line capital talking pretty smart bond investor and he’s buying these housing loans for 16 cents on the dollar. He thinks they’re worth about 30 cents a dollar. Jill: Okay. Jack: So in his case great but for most people, no, it stays alright. Gary: Yeah I mean if you have a team together and you know what you’re doing I think this is an excellent opportunity but the way they’re getting package for the public is you’re adding fees upon fees upon fees you have all kinds of over rides you have a lack of liquidity, you have all sorts of concerns and it’s a completely different scenario. Jill: Okay I got some more for you. Here we go Henry wants to know is what is your opinion on the safe place to put my money that’s currently in a money market account or accruing 1/2% interest? My first reaction is which money market is there only ½% anyway Henry is 53 year’s old and it’s 10% of his investment assets. Check this out the remaining 80% which is 401k and IRA are 85% in stocks. What do you got on that one Jack? Jack: It’s a little on high side for somebody 53. Jill: A little. I’m having like a nervous breakdown right now. Jack: Well remember it’s a 401k so you know he’s probably not thinking about touching it for. Jill: Oh my god. Gary: Jack I’m sorry my friend, you know I normally don’t take you on. Look in a perfect world people should actually have the more conservative part of their portfolio in the retirement account. Jill: Okay, can you please explain that because I understand that other people. Gary: I was just breathing. I wrote it in stock. When in your retirement account if you lose money you eat it. You don’t even get the benefit of a tax deduction and if you make money sure it’s tax deferred you don’t have to pay tax right away but when you take it out you pay tax on all of it. You don’t even get the lower capital gains treatment. Now I say in a perfect world. In a perfect world when you’re allocating your assets your shelters will be in the conservative investments that’s the 401k, the 403b, the IRA and your other assets might be in equities so that you can take advantage of the dis-treatment of gains and losses that the tax code affords. Look view taxes as your friend. It can mitigate your losses. It can make them less painful and it can make your gains a little less taxing so in this scenario it seems like 80 somewhat % of his assets are in the retirement accounts so we don’t really have all the flexibility to play it but both the aggregate amount of money he has in equities kind of would be of concern to me and also the fact that it’s all in retirement accounts and none of it is outside. Jack: So when we do 70/30 apply 60/40. Jill: Okay I must be the biggest wimp in the universe but the guy is 53 years old, he probably got his butt handed to him and I’m sure he didn’t buy 85% of his stocks at the bottom right so let’s assume that he’s basically had this the entire way up and down so I can imagine, I would probably you know maybe most 6040 I would see if we could get some dividend producing stuff in that retirement account, you know and try to take advantage of the taxes that way. Gary: I mean you certainly would want to reduce it but here’s you know I think one of the big mistakes that people do are look at each individual accounts separately. Who cares what your 401k allocation is. Who cares what your IRA allocation is, we care about what your entire life’s allocation is because it’s all your portfolio so you know the inclination is oh let’s diversify account A and incidentally we’ll diversify B but you had to look at A and B and C and put them all together and make sure in totality their diverse. : And this is different for couples because often you know you are restricted wanting to do so your wife has a 401k with a lot flexibility, she can find some good funds. You have one index fund in yours so you’re maybe equity guy she buys the bond funds, absolutely right. Jill: Especially if you’re married to someone who’s really in a really sweet pension fund that has a nice guarantee to have. Oh god why didn’t I do that had I known. Alright so we agree holistic approach look at all of your accounts. It seems to me Henry you got a little bit too much on the line there, chill out buddy you don’t have to make it all back in one minute. Okay so Michelle wants to know I have money invested in Ever Jones, it doesn’t seem to grow any interest. Well Michelle this is such a funny question because we know nothing about Michelle. We don’t know what she’s talking about do we? We don’t know whether she’s talking about her money market makes no money or funds are not growing. Jack: I think one she’s making one mistake that a lot of that surprisingly a lot of people make. They think in Edward Jones account is a kind of investment or a fidelity account is a kind of investment. All it is, is the place that allows you to make investments so you could buy within that Ever Jones account anything so you need to use that to create the diversified portfolio we’ve all been talking about here. Also the 4 account bothers me a little bit. She says she has 4 accounts. I’m not sure why she does. Jill: But she may have 4 funds in one account. Jack: I see yeah. Jack: I mean we don’t know but here’s a great lesson now, most people don’t know what the heck they have, let’s be honest. I mean some people great the engineer walk in. They got the spreadsheets. They got those— Gary: The engineers have it down perfect handwriting as well. Jill: You know what the best of engineers. They have it all documented but they cannot make a decision. It’s so much fun to have that guy as a client. It’s like yeah you did all this analysis well I guess you don’t need me. You’ll say well I have done all the analysis but haven’t traded in 8 years. So analysis paralysis so I think that there is especially now is the end of the quarter just came coming into the 4th quarter, you gather up all your documents. How about opening your statements and figuring out what the heck you have and if you don’t know what you have you’re working with a broker at Edward Jones. Call up the guy or the gal and say I need to come in. I know you probably went over with this with me a million times but I need it again and don’t be afraid to ask right. Gary: Right I mean look at the risk of kind of encouraging activities with stock brokers. The key again is to look at the entire picture. You can’t look at one even in this case 4 accounts at one brokerage account and start maing decisions about your whole world without looking at all of it. So when you’re gathering your documents together you have to gather together everything you have all of your debt, all of your assets, all of your retirement accounts and look at it all at one time. Jack: I wonder if we could give people a baseline to start with and so that they can ask their adviser. Okay tell me why I should change from let’s say 50% in a broad market stock index fund. 50% in a bond index fund. I’m not saying that’s the perfect portfolio but let’s start there and then say okay why are we diverting from that, why am I paying an active manager, how’s he going to beat that, why am I putting more in stocks, why am I putting more in bonds. Jill: I think it does a basic question when you work with a broker and adviser fee based fee only well a commission doesn’t even matter but ask questions because you’re paying that person something, right? Gary: Absolutely right. Jack: I think people though. They don’t know what question to ask. Jill: We’re going to put together the and I think I actually have this. The 10 questions you must ask your financial adviser. I’ll ask you that Gary later. Gary: That’s good. Jill: We’ve done that so let’s get on to the next one MJ, Michael Jackson potential. Jack: Wow smooth fantastic. Jill: I’ve been reading about tips. Jack: Nah. Jill: Nah. Jack: That’s not Michael Jackson. Gary: A little late, a little late Michael. Jill: Treasury insured protected securities. It’s, do you consider them a good investment for people who are risk averse Gary? Gary: Well the tips basically you’re protecting you against inflation because you’re getting a fixed rate of return plus the rate of inflation, parenthetically the fix rate of return is miniscule and the inflation currently is even less so the rate of return is incredibly low but is very protective against rising interest rate environments. Jill: Right. Gary: At the current time, I don’t particularly like that because the yields on them have plummeted because so many people have rushed to it because we’ve had the simultaneous fear that inflation is going to be rampant tomorrow and the next day deflation is going to be rampant so we don’t know what we’re doing but we’re running you out and buying protecting against both inflation and deflation. Jill: At the same time right so treasury inflation protected securities by the way if you do want to buy them and there is actually an exchange trade to fund tip. Gary: Yeah. There are good no load funds, vanguard has a good tips fund. Jill: Right, but the reality is that you know you are really paying up for protection. Gary: Right now you’re paying up more than you ever have since tips rolled out which was I don’t know 10, 12, 15 years ago. Jill: So I don’t know not one of my favorites. Gary: It’s a very expensive insurance policy. Jill: I would say. Jack: You know one thing that this brings up though people think of risk in terms of stocks. Things that can go down and there are other risks out there one of them is inflation that one finally people becoming aware of it but sometimes people go into the safe investment of bonds or a bank account or something not realizing that the long term risk is actually frankly it’s a guarantee that they will lose money to inflation. Gary: Absolutely you know people who have often come to me and say well you know I want a lock up this 25 year bond. It’s paying let’s imagine right now that the current environment is paying 4-1/2% that’s staggering, that’s tremendous and I said do you know if interest rates go up 1% to lose 20% of your value. Jill: Well people don’t realize they can get clocked on bonds. Gary: Yeah but then what’s the response you hear. The response you hear is oh no, no, no I won’t lose anything as long as I hold it to maturity. Jill: Right. Gary: Well I mean that’s one of the great lies of all time. Jill: Yup. Gary: If everyone else is earning 5-1/2% for the next 20 years and you’re earning 4-1/2 guess what that means. It means we’ve lost about 20%. Jill: Well in what- well and you’re probably paying a premium. You’re paying over yes you will not lose it if you bought it at 100 but if you paid 108 you’re going to lose that 8 bucks that’s a deal, sorry. Good question from Jennifer P. She’s got 30,000 dollars that she would like to give better than 1% return imagine that. Gary: She sets the bar nicely. Jack: Exactly. Gary: When expectations are low you can meet them. Jill: But so we were just talking about tips we don’t like tips but with 30 grand let’s assume that Jennifer has a little bit of time because she’s talking about investment. She didn’t say that you know she’s got some money to invest and she would like to be on the lower risk side but a better return than 1%. Gary: Well look you know I would like to kind of expand the question a little because I think you can only look at it. There are money market funds as exclusively investments but to the question of how do you raise it, raise the rate of return with very little risk. Look there are money market funds that are paying 1/2%, discover bank you know, it has a 1/2% money market fund. They’re top quality short term bond fund vanguard short term investment grade, it’s yielding to unchanged%. It has some very modest volatility of rates rise so there are many choices there but if someone has a chunk of money and they’re not using it one of the first questions they should ask around the same time that they’re asking how should I invest it is should I be looking at other tax saving opportunities whether it would be funding or Roth IRA or a regular IRA or increasing my 401k or doing any of those sets of things because increasing your financial position and helping your financial picture is not only about rates of return, it’s not only about tax savings. It’s about looking at all the issues simultaneously. Jack: Yeah she’s got a child and she lives in New York plus in 529. Gary: Fantastic. Jack: She just saved on state taxes. Jill: And she doesn’t have to pick a very risky investment within the 529s. You can pick to fix account inside the 529 so a lot of things we know about you it’s funny we got a question from Robin are bonds are iBonds a good investment so I Bonds would you like to use it. They’re the successor to the double A. Gary: Yeah I mean there are, it’s the same sort of a play on inflation and for the right people you know beauty of the ibonds is the ability to buy it in the small increments and the ability to buy in small increments has it’s own advantage. Some people save when they wouldn’t have saved if they couldn’t buy it in small increments but normally they’ll be looking probably elsewhere but by elsewhere it doesn’t mean you should freeze and put the money back in your pocket and ended up spending it but truly try to find another alternative. Jill: Interesting, I love these accounts. The hey Roland, put this up if you wouldn’t mind this is the not a commercial for ING but you know ING was really revolutionary in starting this online savings account the orange savings account so we have a question here from a moneywatch user who didn’t leave his name but here she actually has several investing questions for us. I’m in ING savings account for my emergency fund what do you think? What do you think? Gary: It sounds good to me. Jill: Me too. Jack: Very liquid not bad. Jill: Easy I’m playing the market with the capital M which I like with mostly ETFs thoughts. Jill: In the right allocation Gary: With the right pick and if their ET, look ETFs, ETFs can mean anything. They started out by being merely index funds, competing with the SMP 500 index. Now an ETF could be a wise decision or you could be investing in relation toothpick manufacturing. Jack: With three times the leverage. Jack: I just felt that. Gary: You did. Jill: Oh good an LT or something yeah that’s good. I agree I think that the first part of the ETF revolution was amazing. It really was. It was cool because in exchange traded fund here you are you’ve got a way to trade intro day instead of the sort of the boring old mutual fund price to 4 o’clock and which usually which most peope— Gary: You watch your excitement in your investment. Jill: A little bit. I like opportunity but I think that ETFs were cheap. They were good for me and for clients when I was working with clients, it was good because if they had a big chunk of money you’re reporting money to work with, it was an efficient way to invest, right but I agree. There are all thee weird permutations now at ETF. You got to be careful you can’t just be buying two times the NASDAQ and think that nothing is going to happen. Gary: Right. Jack: I will say that it— because this is Money Watch.com the words playing the market do raise a red flag for us generally we advice against that and— Jill: Oh you know what you’re a kill joy. You absolutely are. You know what I would say to that is that if your playing the market with some small percent of your portfolio I can live with that right. Jack: Yeah, yeah absolutely and from a behavioral sentence great because when you feel you have to do something you do something with that any losses will be minimal and you protect the bulk of your portfolio. Jill: I used to like to say that the amount would be 5% of your investable assets is what you can quote on quote play with. Anything more than that you’re going to start feeling it when it moves against you so, I think you feel like anyway don’t you? Jack: You feel it. Gary: Like I often say the pain of loss is much greater than the joy of the game. Jill: Now that’s for sure to me. Okay the other thing is that this guy gal is living job after 6 years, are you choking over there Gary. Gary: I just said that he’s losing the job. Jill: Take my water there you go. Gary: Thank you. Jill: Okay. Leaving my job 401k is a handsome sum every 6 years how much could it be. I would love to cash out and dump it in the market but the most cost effects about the option is to roll it over right, should I do it traditional IRA or Roth IRA? Gary: Well we’re mixing all of our various terms a little bit. First of all you can cash out by rolling it over if you just merely take the money out you have to pay taxes and if you’re under 59-1/2 there aren’t other exceptions you also pay 10% penalty on top of that. If he wanted to play the market or invest in the market you could roll it over to an IRA and do that. I mean you could do it in the self directed IRA. Now the secondary question is should they do what’s called converted to a Roth IRA and that’s something which is particularly attracted this year but it depends on a lot of different factors not we’re not going to be able to cover all of them but what is your current tax bracket and what’s the expectation of your rate of your earnings going forward and it’s possible he or she could do a little bit of each like it would roll to a traditional IRA and converts some of it to a roth. Now as you know a roth IRA, the interesting thing about it is that it grows completely tax free for the rest of your life. I mean it doesn’t get any better really than that but the problem with converting is that you have to pay tax on it when you convert and you can’t pay the tax from that rollover 401k with out paying a penalty so basically it’s a cash flow issue. You got to have some cash on hand. Yeah the key on the roth conversion and one of the key when roth conversions make sense where that you have to have as you say Jack ever so correctly. Jill: Oh my god why don’t you guys go make out. Gary: No we do, you know— Jack: He’s being sarcastic you know. Jill: Uh-huh I know. Gary: I’m sure you actually know what you’re doing? The key is to have the cash outside in order to pay the tax so otherwise Roth IRAs are a heck of a lot less track. Jill: I hate to do this, I just want to say the Suzy things here a good guess, Suzy in our chat room thinks you’re a good guest? Gary: Love Suzy. Jack: Do you know her last name is? Jill: Yeah you know who Suzy is, it’s our Suzy so anyway just you have a Suzy. Gary: It’s not the Suzy you’re thinking of? Jill: No, it’s not that Suzie. Gary: Yeah she cancelled the show I was going to be on with her for another time. Jill: Interesting, okay so most importantly you leave a job, you get your couple of big options one is you rolled over to where your new plan is. The second is you’re moving into an IRA rollover second set of choice is do I convert it or not. We are on the numbers. Gary: Or keep it where it is. Jill: Keep it where it is, right. If you got a great plan it’s sitting in the vanguard funds. Gary: You got half a dozen great plans in the country. Jill: Yeah. Gary: If you’re one of those. Jill: Yeah you’re lucky exactly. Jack: I have to do this. Jill: Do it. Jack: In my previous job and I have frozen I haven’t done it yet, I got to do it. You guys have inspired me. Jill: Really? This is really exciting. Gary: That’s why we’re here Jack. Jack: But I’m still, it’s IRA or the CBS plan. Gary: No the Cobblers, what is that? Cobblers shoes thing. Jill: Yeah kids have no shoes or something like that alright. I don’t think we should discuss CBS plan here. Okay Preston says I’m loaded up on blue chips stocks and I have a balanced portfolio that out performs but somewhat follows the Dow Jones industrial average. Okay, hang on one second. There is no way that he’s got blue chip stocks and a balance portfolio that track, like is he saying his stock portion. Gary: His balance them on all the Dow, the blue chip. Jill: Okay I’ve got 30 stocks. Gary: Right. Jill: And so that so we’re not sure about that, okay. Preston wants to know for windfall of cash came my direction say 30% value of the current portfolios. Got a million bucks. You got 300 grand, okay. We’re the best places to invest given that I think stocks are setting themselves up for a beating next year. Jack: That’s easy as soon as they take the beating you buy stocks. Jill: Right just let and tell us when that’s going to happen. Gary: Yeah but we think it’s going to be a beating. He has his entire portfolio in blue chips docs. Jill: So what’s up? Gary: I mean if its in blue chip stocks she doesn’t have a heck of a lot of foreign exposure except for those blue chips who are investing overseas Jill: Right Gary: Coca Cola. Jill: Right. Gary: And he has no bonds. I mean I can plug a few just a few problems there. Jill: Yeah and if you really think that stocks are going to plunge then sell some of your stocks? Gary: Exactly. Jill: And by the way why not pay your capital gains at 15% right now, thank you very much. Gary: It should be beautiful. Jill: Right. Gary: By the way if he has a big capital gains over the last 5 years we should touch base with him after the show. Jill: Alright Preston what a snow Gary want to talk. Okay finally from Elizabeth. I’m 57 years old. I have no debt, own my own home outright. I have no children. I have approximately $400,000 in a 401k which I plan to rollover into a Roth IRA in the next couple of months. I also have $400,000 in cash, doesn’t she sound gorgeous. I’m in love with this woman. Gary: Who I was going to say? Jill: So here is where she stands so she’s got 400 grand in her 401k, 400 in cash. I don’t know if she’s. Gary: She’s working. Jill: I’m not sure that’s the only thing it’s not. Gary: What is this kind of stock you know step away from the ledge. Jill: Yeah. Gary: Roth conversions as you know you don’t have to do it all and why won’t you want to do it all because if you happen to find yourself not in the top tax bracket which I’m betting she’s not. If you’re doing it all you will be in the top tax bracket so you will actually, she could run the risk of paying tax on the Roth conversion at a higher rate and she would ever pay tax on if she delayed it. So that being said doesn’t mean do nothing so take a look at your taxes, take a look at your marginal tax bracket this year we have a unique opportunity where you have the choice to either pay the tax this year with the amount that you convert from an IRA to a Roth add it to this year’s income or you have the ability to take what you converted this year and spread it equally over 2011 and 2012. So if she took let us say $50,000. 25,000would be added to 2011 and 25,000 would be added 2012 giving you the ability to take out more money without dramatically increasing your tax bracket. So this is a you know kind of a need sort of reaction, you have to look at your tax redone, project out what your income is rarely and there are exceptions but rarely what I do with full conversion like that. Look some of my clients were particularly well healed. I know they’re going to retire in the top bracket. They have millions and millions of dollars for them I might do a ton of Roth conversion at a tax bracket that will now seem to be hopefully tax rates will be going higher, sorry about that. Jill: Wow. Gary: Yeah but I work around it. I plan around it but for that person converting it they’ll see how we make a lot of sense. Jill: Right so do you think it’s reasonable for Elizabeth to talk to her tax repairer to do those kinds of calculations. Let’s say she’s just on her own doing her own stuff. Gary: If she’s on her own you need to get advice whether its an impartial advise or who understand tax whether its’ your tax advisor whether it’s a broker who understands taxes should be one out there. Jill: Here’s a couple or three. Jack: One thing I’m throwing there just in general the over you are probably the less advantage you’re going to get from the Roth conversion right? Gary: That might be a good generality Suzie. Jill: Like roar. Jack: that’s basically the harshes thing he could say to anybody, yeah. Jill: Well I think he’s saying that if you were going to never tap that money and you’re planning to leave that money to your kids it wouldn’t matter anyway right for that roth? Gary: Yeah but you could be all like I have people who are in their 70s where Roth’s make sense if you know the tax brackets are going to be similar you have the cash to pay it, you know if you live a day it’s a day that you were able to take advantage of it but you’re right you’re absolutely right that is one of the factors. Jack: Thank you Gary. Gary: You’re on it. Jill: By the way you’re now digging yourself out of a pretty big hole. I think you’re buying next time. Okay now the other thing about Elizabeth is it she says she’s got a quarter for 401k in emerging markets fund and from what I see and what I don’t see I your elsewhere I get the impression that I should move out of that fund. Should she move, let’s say she’s got a quarter of her 401k of that 400,000 dollars is in an emerging markets fund. Gary: Wow. Jill: Now, I don’t know what else she has. There’s problems that we don’t know so we don’t know whether it’s a quarter. We don’t know if it’s a 100 grand in emerging markets and you know another 300 in bonds. Gary: Um-hmm. Jill: Right but lets assume that she’s got 25% in emerging markets, 25% US markets and 50% in bonds, let’s just pretend she’s 50.50 how do you like that allocation Jack, do you like having you know— Jack: I think— Sherry pointed it out. We like to be holistic about this so we’re talking roughly 12-1/2% of her total assets or an emerging markets. I would probably be inclined to rebalance that lower, I think it’s a little steep but I think most but you know lots of people listening to this. I think most people probably have too little in emerging markets. Jill: Right. Jack: So can we push a Elizabeth down to 10 to 7% I think that’s probably where I would go most people need to nudge up from zero to 5. Gary: Yeah that’s true, but lets have two other pieces, one that I alluded to that her retirement account should be a little more conservative and let me add yet another reason why emerging markets are falling stocks if you can should not be in the retirement account. This is foreign taxes that are being paid on it and if you pay those foreign taxes outside of your retirement account you get what’s called the foreign tax credit meaning the IRS gives it back to you but if you pay those taxes in your retirement account good bye. Jill: Right. Gary: You never see it. The IRS doesn’t give it to you and you know last take when I might believe in higher taxes but I also believe in you getting all the taxes back you’re entitled to. Jill: Use the code your advantage. Gary: Code is your friend. Jill: And everything legally but use it to your advantage. Jack: So this woman is in a perfect position to do that she got $400,000 in cash outside accounts. Gary: That’s my point. Jill: Yeah. They’re so sweet together aren’t they just. Okay you know a few minutes ago someone just said