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Smart Investing with Brent & Chase WilseyAuthor: Brent & Chase Wilsey
Smart Investing is the radio show where Brent and Chase try to make investing easier to understand. They demonstrate long-term investment strategies to help you find good value investments. Language: en Contact email: Get it Feed URL: Get it iTunes ID: Get it |
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August 15th, 2025 | 401(k) Withdrawals, Mixed Inflation News, $37 T Debt, Charitable Giving Changes, Intel Corp (INTC), UnitedHealth Group Incorporated (UNH), Nexstar Media Group, Inc. (NXST) & (BLMN)
Episode 368
Friday, 15 August, 2025
Unfortunately, more Americans are using their 401(k)’s for financial emergencies I’m sure some will disagree with me based on the headlines arguing they were so happy that they had their 401(k) to tap for whatever their financial emergency was. In my opinion, people are thinking short term and not thinking about the long-term crisis when they retire in 20 or 30 years and then might be living at the poverty level because their 401(k) was not large enough to generate a decent income and social security was far less than they thought. I also want people to understand based on how fast medical technology is moving, in 20 to 30 years you may be spending more time in retirement than the 20 years or so that you were thinking. The numbers are frightening when I look at them and I have wished many times that the 401(k) would eliminate the ability to access funds before retirement like the old pension plans from companies. According to Vanguard, 2024 saw a record of 4.8% of workers that took a hardship distribution for a financial emergency. This was more than double the 2% level in 2019. Even more frightening was nearly 33% of people decided to take and cash in their 401(k) when they changed jobs in spite of the fact of paying taxes and penalties as opposed to rolling that retirement over to an IRA rollover or their new 401K plan. Congress in their infinite wisdom has made it easier to qualify for withdrawals from 401(k)’s for emergencies. I believe the Congress that set up the 401K in 1978 under The Revenue Act of 1978 did not envision the raiding of 401(k)’s for emergencies. I’m pretty confident in 1978 Congress felt this would be a great retirement plan for all Americans, not an emergency fund of to pay off debt. I highly recommend before people take any money out of the 401(k), they talk to a real financial professional to understand the taxes and penalties they are paying. It’s not just the taxes and penalties, and one should also figure out the future value of what that account could have grown to and how that withdrawal could devastate their retirement! Inflation report shows some positives and some negatives The July Consumer Price Index, also known as CPI, showed an annual increase of 2.7%, which was in line with June’s reading and below the expectation of 2.8%. The headline number was helped by energy, which showed an annual decline of 1.6%, largely thanks to a decline of 9.5% for gasoline. Energy services on the other hand were not as favorable considering an increase of 5.5% for electricity and 13.8% for utility (piped) gas service. I do wonder if the power demand for these large data centers is starting to put a strain on the grid and I worry this could become even more problematic. As for core CPI, which excludes food and energy, it was up 3.1% from a year ago and was slightly above the forecast of 3%. This was a slight increase from the 2.9% level in June and the highest annual increase since February. Surprisingly, shelter continues to be a large reason for the elevated inflation rate as it was still up 3.7% compared to last year. In terms of tariffs showing up in the report, it still appeared to be subdued. Furniture was up 7.6% compared to last year, but other areas that I would anticipate seeing pressure like apparel and new vehicles saw little change. New vehicle prices were up just 0.4% compared to last year and apparel prices were actually lower by 0.2%. I did see an economist point out the fact that core goods inflation on an annual basis registered the largest growth in over two years, but at 1.2% I wouldn’t say that is putting strain on the economy. These tariffs will likely put continued pressure on inflation, but if other areas like shelter continue to see less inflation that could counteract that pressure and keep overall inflation in a manageable situation. Based on the slowing labor market and these manageable levels of inflation I do believe the Fed should cut in September. What does the national debt surpassing $37 trillion mean for you? On Tuesday, August 12th, the United States national debt passed $37 trillion for the first time ever. The debt is growing at about $6 billion per day, but that appears to be better than last year. In July 2024, the national debt passed $35 trillion and then in November 2024 it surpassed $36 trillion. Looking for some positives here, it did take nine months for the debt to grow another $1 trillion to the $37 trillion mark. At the end of the second quarter, debt to GDP stood at 119.4%, which is manageable but should not go much higher. Hopefully we can have a slowdown in debt expansion or maybe even a reversal and still have the GDP increase. The reason having a high national debt is a negative is it takes investment out of the private sector to fund our national debt, which can slow down the growth in our economy. A large national debt can also cause interest rates to increase as the need for more debt often means offering higher interest rates to attract buyers. It is also important to know that even when the Federal Reserve cuts interest rates, that generally has a larger impact on the short end of the curve, which includes instruments like treasury bills. Your long-term debt, such as 5–10-year notes are not controlled by what the Federal Reserve does and instead is based on supply and demand. It would not be a wise move for the government to only issue short-term debt for a lower rate because if rates were to increase in the future for whatever reason, that could cause our national debt to grow out of control and potentially cause a financial collapse. Also, keep in mind that generally mortgage rates align with the rates for longer term debt and now with some car loans being six or seven years, the interest rates for those loans will probably not drop because they are now longer-term loans not the old 3-to-4-year loans they used to be. We are not in trouble yet, but we are getting close to the edge and we need to grow the economy and still reduce the national debt so our country can continue to prosper and grow. Financial Planning: Changes Coming to Charitable Giving The One Big Beautiful Bill Act, signed on July 4, 2025, delivers some new changes coming to how charitable giving may be deducted. For the first time since the pandemic-era CARES Act, those who claim the standard deduction will be able to deduct cash donations up to $1,000 for single filers and $2,000 for joint filers. This will act as an above-the-line deduction in addition to the standard deduction. For itemizers, however, the law imposes a new 0.5% of AGI floor, meaning only contributions above that threshold will count toward deductions, potentially reducing benefits for those making smaller annual gifts. For example, a tax filer with an AGI of $200,000 receives no tax benefit on the first $1,000 (.5%) of donations. Also, itemizers are not able to take advantage of the $1,000 to $2,000 above-the-line charitable deduction that standard deduction filers can. In addition, high earners who are in the 37% tax bracket will only receive a 35% deduction on charitable donations. All of these changes go into effect in 2026, so those claiming the standard deduction may want to wait until then while itemizers and high earners may want to make donations before the end of the year. Companies Discussed: Intel Corporation (INTC), UnitedHealth Group Incorporated (UNH), Nexstar Media Group, Inc. (NXST) & Bloomin’ Brands, Inc. (BLMN)
