Biden’s Tax Plan & Your Portfolio Algorithm

by Mike Lester

Mar 3, 2021

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Speaker 1 (00:02):

Welcome to the Retirement Wealth Podcast. Our goal is to help those retired or soon to be retired investors, make more informed financial decisions and live an enjoyable retirement. Our host, Mike Lester, is the Founder and CEO of Talon Wealth Management. Mike is an Investment Advisor Representative of Retirement Wealth Advisors, Inc., and SEC Registered Investment Advisor. Thanks for joining us today, and let’s get started.

Speaker 2 (00:31):

There have been a lot of calls from listeners wondering what the next four years might mean for them tax-wise. And we’ll have to wait and see on some of the proposals, but we do know what now, President Joe Biden said during the campaign.

Joe Biden (00:44):

People say, “Well, Joe. How are you going to do all this?” Well, guess what? First thing I’d do is, going to repeal this Trump tax cut. I’m glad to see you’re doing well already and I’m good, but guess what? If you elect me then I could have you your taxes are going to be raised, not cut.

Speaker 2 (00:58):

How soon do you think things like this are going to happen?

Mike Lester (01:02):

Technically, they could happen fairly quickly. Certainly we’re hoping that they won’t. Most likely, they would take until maybe 2022, but there’s always a possibility, [Kristen 00:01:11]. I mean, we don’t want to overlook the possibility that they could actually change tax laws later this year, but make them retroactive all the way back to January 1st of 2021 which is concerning to a lot of people. When tax laws change that quickly, things happen like the number one phone call that we probably get with regards to taxes right now outside of just that we’re getting into tax season would be, how is this going to affect me? And Hey Mike, should I convert my IRA or my 401(k) or my TSP account? Should I convert any of this money that I haven’t paid taxes on yet? Should I convert it into a Roth account? So-

Speaker 2 (01:48):

Roth conversions have been talked about a lot lately.

Mike Lester (01:50):

That is it, it’s a hot topic. You’re going to hear a lot of certainly advertising around that you’re going to hear a lot of advisors talking about it because they’re trying to get people in the office. We’re not opposed to having people in the office or having that phone call with individuals, Kristen, but you’re not always a good candidate for a Roth conversion. It’s not right for everybody and you just want to be careful there. It’s certainly worth finding out about, it’s certainly worth finding out what the tax consequences are going to be in your situation, if you look at doing a Roth conversion, but there’s a lot of factors that go in, certainly your income in the year that you want to do conversions, certainly your age. Certainly when are you going to need the money after you do the conversion? Because once you convert, there’s a limit on that. And I just think we got to be careful about a lot of things. So if you have questions about the Roth conversions, certainly give us a call, but we’re very focused on these changes that Biden’s looking at doing. Just look at all of the changes the executive orders [crosstalk 00:02:42].

Speaker 2 (02:42):

And actions. See what was it, 20 something or-

Mike Lester (02:45):

It’s like 30 something in the first three days, right? I mean, most of them were Covid related and I think we could probably get behind that, right? There’s a good reason, fiscally I don’t know that we can get behind it. He’s doing a lot of stuff. They’re printing money. I heard a number and I didn’t check to see if it was accurate, but I could almost believe it that we printed 26% of the money that’s historically been printed in 2020. Can you believe that number?

Speaker 2 (03:13):

Since the beginning of printing money?

Mike Lester (03:15):

Yes. Of all the money that’s ever been printed, we printed 26% of it. Now, if that doesn’t create problems down the road, I don’t know what does, and now Biden’s looking at printing more so I don’t know where-

Speaker 2 (03:27):

It doesn’t work like that though. You can’t just print money to make things go away.

Mike Lester (03:30):

Well there’s nothing backing it up. So eventually that bill comes due and Kristen, this has been a problem since before Biden’s, since before Trump, since even before Obama, but something that we got to take a look at and be very, very cognizant of or aware of and how this is likely to affect our personal economy moving forward, particularly if we’re retired or very close to it. So again, all of these changes, aren’t super sexy when it comes to what we’re likely to… I mean, we all know it’s got to be paid for, at some point in time, right? The question is how is it going to paid for? Well, the reason that government’s able to do that to us is they reserve the right to raise our taxes, right? So anytime that they’re printing money, they go, well hey, listen, eventually when the economy’s better, we’ll just raise taxes on everybody and we just heard Biden talking about it.

Mike Lester (04:16):

So what I would encourage anybody that’s listening, if you’re not quite sure how changes in taxes are likely to affect you moving forward, we should sit down or we should set up a Zoom meeting or a phone call and have that conversation. What we’re capable of doing is doing an analysis of your portfolio. That portfolio is just your stuff. We talk about it on the radio, but it’s things like your 401(k), your IRA, your trust account, your income and retirement, piecing all of that together for you. And just showing you what happens if, or when you retire? What happens if you’re already retired and you want to stay that way? How do you need to have things structured? We can do that through financial planning and analysis.

Speaker 2 (04:54):

A complete financial plan is what Mike’s talking about there, it’s a $1,500 value. Set that up at So how are your investments doing so far in 2021? Mo Haghbin, COO of Invesco Investment Solutions, weighed in on MarketWatch as to why our allocations should be reassessed as the global economic recovery continues.

Mo Haghbin (05:18):

This economic recovery is unlike economic recoveries of the past. While technology and healthcare and momentum and growth have been leading the charge, historically we’ve seen factors such as size and value actually lead the way in recoveries, both sentiment and economic activities improving. We see this across housing, consumer confidence. If this trend continues, we believe equities are positioned well for 2021. And the more cyclical parts of the equity market should do well as they have in the past recoveries that we’ve examined.

Speaker 2 (05:54):

I wonder if these talking hands when it comes to money-

Mike Lester (05:58):

[crosstalk 00:05:58] Where the heck is he? Is he in like a massage?

Speaker 2 (06:01):

That’s what I was going to say. Did they think if there’s this cute music behind it, we just go, Oh, okay?

Mike Lester (06:05):

What is going on? It’s very tantric or something. I don’t know what was going on.

Speaker 2 (06:10):

I would like a Swedish now that you brought that up. There was a lot of stress back here, but anyway, okay. So according to the tantric asset allocation guy here, it sounds like as long as our advisor is handling our portfolio, we should be on track for 2021.

Mike Lester (06:25):

Well, certainly it’s going to depend on the advisor. Not all advisors are created equal, but there’s plenty of great advisors out there. I think that it should call to everybody’s attention that just hanging in there. But I don’t think makes sense that it shouldn’t make sense to people who are either retired or close to it. Not all investments too good all the time. And there are a lot of people that are getting closer to retirement or they’re currently retired that frankly are in the wrong investment options. I do agree with him. I think that equities are likely to do well equities, meaning stocks, but certain sectors are likely to do better than others. And you need to understand what types of stocks you own and then what sectors you’re in. It just makes sense to try to benefit from some of the stuff that’s going on.

Mike Lester (07:06):

We know that Biden is going to spend a lot of money or propose spending a lot of money. We know certain sectors are likely to do better than others. Why wouldn’t you want more information about your portfolio and how it’s likely to react and try to get better position? And so, yeah, a good financial advisor should be doing that for individuals, but Kristen, I don’t know that that corresponds to a lot of the conversations that we’re having in the office week after week. Certainly we’re meeting with our clients and helping them week after week, but we’re also meeting with individuals that are working with other financial advisors or frankly don’t have a financial advisor. But the ones that have financial advisors time and time again, I keep hearing, well, my advisor tells me to just hang in there or I keep hearing, I don’t feel like my return in 2020 is as high as it should have been. Or I hear that my advisor is charging me a fee, but I don’t hear from them. They don’t reallocate my portfolio, they don’t make changes so I’m not exactly sure why I’m paying the fee. I don’t see the value there. And those are all legitimate concerns. It doesn’t mean you have a bad advisor if you have some of those concerns, but I do recommend to people that they at least compare what’s out there and just find out how your portfolio is likely to do and what the best situation for you is going to be. Time and time again, we do analysis of portfolios and we find out that people are in target date funds, Kristen, we talk about it. These are the ones that have a date on them, a 20, 30 fund or something. Well, that’s not a great place in my opinion to be a target date fund right now because-

Speaker 2 (08:30):

I know it’s not in your opinion, but it’s easy for us to say, “Okay, I want to, in 20 years do this and 10 years do that.”

Mike Lester (08:35):

It’s easy, but it doesn’t make sense when every year it just gets more and more conservative and moves equity or stock positions to bond positions. If you’re doing that in a good market and you’re getting more conservative, when you’d like it to be or you should be getting maybe more aggressive or maintaining your current allocation of the portfolio, moving away from equities when they’re likely to do well is a bad idea. Certainly moving away from equities when they’re likely to do poorly is a good idea, but moving to bonds right now, probably isn’t a very good idea given where interest rates are.

Mike Lester (09:05):

And I realize that not everybody understands the relationship between bonds and interest rates or stocks and bonds and how all of this is likely to work together. But if we can provide value by showing individuals how to get a higher average rate of return, net of the fee, they would pay us to manage their portfolio, but also how to take less risk getting those returns, then they may want to work with us. And I think that’s what any financial advisors should be doing or the value they should be providing for their client.

Speaker 2 (09:31):

Set that up virtually by going to, an [AVT’s TV 00:09:36] flashback who didn’t dream about the possibility of having a self-driving kit car. Be [Micheal McMiden 00:09:43], have your watch that you just talk into. Well guess what, we do that part now.

Mike Lester (09:47):

I saw a kit car reference here just recently. The older kids and I are watching Cobra Kai. Have you been watching it?

Speaker 2 (09:54):

I have not, but I know it’s a big deal especially with kids.

Mike Lester (09:57):

Yeah, it’s not the greatest. I don’t think it’s going to get any Academy Awards or anything, but it’s entertainment, right? It’s family fun. It keeps them off the computers, but they didn’t make a reference to Michael Mike talking into his watch.

Speaker 2 (10:08):

Well, it’s gotten bigger than that. I mean, we’ve got the Apple watch we talk into, but we don’t have the self-driving car completely done yet. Elon Musk, his team of geniuses, they introduced Tesla autopilot and they continue to work on a fully self-driving car. And even though that’s not complete, they’ve now released in car video games. I was reading on one popular technology website, they had a strong opinion that, hey, Tesla, maybe you should focus on just finishing the self-driving car first and then maybe look at video games. I mean, true. But I took a step back from this and started thinking about the financial world and technology. Is it moving so fast that it isn’t truly helping investors in the best way? Or is it pretty on pace?

Mike Lester (10:54):

Well, I think it’s helping people in different ways. There’s some technology that’s getting more and more popular where individuals can literally just invest from their cell phone, opening an account on their cell phone, fund an investment account on their cell phone and clearly it’s younger people typically that are doing this. There are some companies out there that specialize in it and they’re doing quite well. Those companies are growing quickly. For me personally, I don’t know that I’m a little older and are what, going on 48 now. So been around long enough to know better, right? And know a little bit about this business, but not so long, I’m going to retire anytime soon. I don’t foresee our clients that are typically individuals that are retired are pretty close to it. Not wanting a more personal relationship with their financial advisor.

Mike Lester (11:34):

I realize some kids have… They feel like they have a pretty personal relationship with their phones and stuff like that. I don’t feel that way and I don’t think most of our clients feel that way. But when it comes to technology, it’s certainly very helpful to us and we embrace it. Anything that can help our clients. We want to make sure that we’re using it. And for us technology allows us to be more efficient in portfolios, allows us to reduce expenses in portfolios. We all know that over time, technology makes it cheaper to do things, whether it was building cars back in the day and now it’s cheaper to manage portfolios. It doesn’t take as much manpower. And it’s a little sad because real people are losing jobs. As technology gets more and more efficient, but having to pay fewer people means cutting costs that that gets passed along to our clients. And so there’s efficiency there.

Mike Lester (12:24):

And then how do we use it as far as monitoring portfolios? Well, we can track portfolios constantly. Technology allows us to do that. You couldn’t do that as effectively back in the early 2000s or the time before smartphones where in the ’90s or the ’80s, you didn’t know your portfolio is being tracked all the time. You just had to hope your advisor or stockbroker was watching it. We mentioned monitoring, signaling, right? So we can set it up to where if an account or a client wants a specific thing to happen or an account as a certain thing that we’ll get a signal and it automatically will pop up. It could be as easy as it palming up on my cell phone. That’s something that a client wanted to have happen or they wanted us to act upon is now happening. And so all of that’s great.

Mike Lester (13:07):

Now just an example of how it works and tracking and how it would be beneficial of clients. I’ll give you a simple version of what’s called an algorithm. And so as technology gets better and better, we’re able to use mathematics and science and build algorithms that are designed to show us what markets are likely to do moving forward. Are they likely to go up moving forward or are they likely to go down moving forward? Notice I don’t say, they’re going to go up or go down because nobody really knows that. You can’t time markets, but you can be smarter when it comes to investing. So one of the things on a simple algorithm you would want to track would be called relative strength of markets. Are stocks overbought or are stocks oversold? If they’re overbought, they’re more likely to go down than to go up. If they’re oversold, they’re more likely to go up than to go down. And I think that’s pretty common sense, but unless you can track that or be aware of it, it’s not very useful.

Mike Lester (13:57):

Another thing that we would look at is moving averages. So for example, if I look at the S&P 500, if I was to attract the 50-day moving average and the 200-day moving average, what I know historically, is if the 50-day moving average goes under the 200-day moving average and the S&P 500, that’s typically bad for markets. It’s not always bad but historically it’s bad. Or if the 200-day moving average goes under the 50-day moving average, that’s historically good. Markets don’t always crash, if the 50-day moving average goes under the 200-day moving average, but we’ve never had a crash without it happening. So that’s pretty important data. And I don’t expect our clients to know about moving averages right now but that’s our job. [crosstalk 00:14:37]

Speaker 2 (14:37):

They have a day job or they’re interested in other stuff.

Mike Lester (14:38):

Right. Or [inaudible 00:14:40] strength, they have a day job. And another part of that algorithm might be also tracking what’s called convergence divergence or MACD. Again, it’s a couple of lines and when one goes under the other, it’s bad or when it goes the other way, it’s good. But if you’re tracking these things, one thing we know historically is when they all go negative or they’re all showing, it’s potentially bad. More often than not, markets crash. They don’t always crash, but that’s valuable data. And we want to track it. Our clients are retired or very close to it. They don’t want us to tell them to hang in there. They want us to take action. And if markets are likely to crash and we pull them out, if markets crashed, we saved them a bunch of money. If markets don’t crash, then they’re going to miss out on a portion of gains. But if you look at who our clients are, they’re more willing to give up a portion of games than they are to take big losses.

Mike Lester (15:24):

So technology is very, very important and helpful. I don’t get way way into the weeds on this stuff with clients, Kristen. I explain to them that it exists and I explain to them how it works. But the most important thing that they need to know, is that we have the ability through technology to continually track these things and then to be aware of them so we can take action when they happen and-

Speaker 2 (15:44):

And that you’re watching that technology.

Mike Lester (15:46):

Exactly. And [crosstalk 00:15:48]

Speaker 2 (15:47):

And your team. I mean, not like you’re up all day and all night doing that. There’s a team of people.

Mike Lester (15:51):

We’ve got a large team of people, right. But all of that being said, I have found over time that a lot of people don’t have that type of active management in their portfolio or that type of a relationship with their financial advisor and certainly people in 401(k)’s or any sort of retirement account through your employer aren’t going to have that available to them.

Speaker 2 (16:10):

To me, it sounds like you’re saying technology should be a part of things, but not the only thing.

Mike Lester (16:14):

Certainly, technology can help people be more efficient, but there are other components that you just can’t measure. We’ve just been through it with Covid. Algorithms didn’t have a way to pick up Covid because it had never happened before, right? So I do believe that there should be a human element. Certainly companies that are trying to get around the financial advisor and say, “Hey, you don’t need one. What are you paying that guy a fee for, that woman a fee for?” Are trying to get around it. But I think every investor just needs to find what they’re personally the most comfortable with. And I’d say so, people working with us like the idea of technology, but they also want someone to talk to.

Speaker 1 (16:49):

If you would like to have a comprehensive financial plan and an analysis of your current portfolio, go ahead and visit our website at and we can do that for you complimentary.

Speaker 1 (17:05):

Thanks so much for joining us on today’s show. Be sure to subscribe to our podcast. Visit our website at for more free retirement planning and investment resources. Thanks for tuning into today’s show. And we’ll see you next time on the Retirement Wealth podcast. Exposure to ideas and financial vehicles discussed should not be considered investment advice or recommendation to buy or sell any financial vehicle. This information should not be considered tax or legal advice. Individuals should consult with professionals specializing in the fields of tax, legal, accounting or investments regarding the applicability of this information to their situation. Past performance is not a guarantee of future results. Investments may fluctuate and when redeemed, maybe worth more or less than originally invested.


Mike Lester

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Biden’s Tax Plan & Your Portfolio Algorithm