Simply Money

Episode Transcript

(00:06):
Tonight here we throw this out thereon the show. Almost every night we
would say you need a financial plan, But what does a proper financial plan
actually look like. We're going tobreak it down for you tonight. You're
listening to Simply moneycauseent of by allWorth Financial, I mean you Wagner along
with Steve Ruby. This is thebread and butter stuff of what we do
all day, every day with theinvestors that we work with. Right,

(00:28):
we talk about the fact that youneed a financial plan, but we would
say there's actually seven major components ofthat plan. You check all these boxes
and you're probably in pretty good shape. Yeah, So we're going to go
through that list today, starting withretirement income needs. The way that we
come up with that number for thefolks that we work with anyways, is
we back out we look at yourincome, your your gross income, and

(00:51):
then we back out expenses such astaxes, your savings that you're currently putting
into retirement accounts and savings accounts,and those costs that will go away once
you retire, such as commuting costs. There's others to figure out kind of
that starting point for what you aregoing to need to replace when you make
a transition into retirement. Now,I will say that this is just a

(01:15):
starting point because oftentimes when someone transitionsinto retirement, we're entering what I call
our go go years of retirement whereyou want to get out and do things
and maybe travel. There's oftentimes addedexpenses that fall off the longer you get
into retirement and you enter your slowgoo years of retirement where you start to

(01:36):
slow down. So you know,like that go go and slogo that makes
a lot of sense, and wellthere's also no go that's where you just
yell at kids to get off yourlawn and you're not doing anything anymore.
Don't do that. Don't do thatpart. You know, it's when we
talk about this though, you knowwhat you need to be able to cover.
First of all, we're making anassumption right that you are currently covering

(01:57):
with your current income what you need. But then I also think you're making
a great point and there's a lotof research out there that I've seen that
because most people actually assume that you'regoing to spend less when you're retired than
when you're working. I guess ifyou're eating lunch at Jeff Rubies every day
with your colleagues, maybe, Butwhen I think about it, when Monday

(02:20):
through Friday, when I'm working,I spend very little money. On the
weekends, when I have more freetime, that's when I spend money.
And when you're all of your timeis essentially that free time, you're going
to spend more. You're going totravel more or golf more if you play
golf or spend time with the grandkids, and the grandkids aren't cheap, right,
So I like that you kind ofbreak it down into the phases of
retirement because it's not like when youretire for the next thirty years, you're

(02:44):
going to be spending exactly the sameamount every year. That's not at all
what you're going to deal with.Yeah, not even close. So the
next thing that we talk about infinancial planning is your your debt management.
So a key point to consider isdebt is it's a shackle. It can
hinder your ability to experience joy whenyou constantly have debt looming over your head.

(03:08):
So in a perfect world, aswe transition into retirement we simply have
none. We plan accordingly to makesure that our mortgage is paid off.
For example, Once we make thattransition into retirement. Now, I'm not
saying that you have to be debtfree when you retire, because financial planning
is it's fluid, it's different.It meets you where you are, based

(03:31):
on your financial situation, your needs, your goals. Maybe it's just not
an option, But in a perfectworld, we plan accordingly up until retirement
to be debt free. Once wemake that transition, money not going out
is the same as money coming in. If you pay off that mortgage,
right, you're essentially giving yourself araise. There are certain circumstances where,

(03:53):
hey, if you do get toretirement and you do have a mortgage,
it might make more sense to refinanceand you know, lower those pa and
stretched out over a longer amount oftime. But most of the time,
we would say, as a generalrule, regardless of how old you are
when you are thinking about retirement,a plan to pay off any debt that
you have before retirement is just goingto be a really great one and it's

(04:15):
going to be a lot less stressfuland you're probably going to have a lot
more peace of mind right when itcomes to retirement. Another component of this,
we would say, like the sevenpersonal decision points that you have to
make when you're thinking about retiring istax planning. Last week met with an
investor and this guy was a doit yourself for right. He and his
wife had been doing it by themselvesfor years. They had a pension,

(04:39):
they had, you know, somemoney in a wroth account and some money
in a traditional for one k.And this is where I really think that
they you know, while he hadbeen going it alone on the savings part,
what he needed help with was okay, now we're out, you know,
planning distributions. And for many people, when you think about taxes,
you think about a right tax preparation. No, we're talking about tax planning,

(05:03):
working with someone that can help youpull money out of your accounts in
a certain order. And I'm tellingyou, you get it right, you're
saving money. You get it wrong, and you're paying hundreds, if not
thousands of dollars to the government thatyou don't need. You that's absolutely unnecessary
tax planning. The way that Italk about it is that it is finding

(05:23):
ways to poke Uncle Sam in theeye with a stick. Sign me up
for that. That's what we're lookingat doing here. And you know,
a self directed investor, maybe theyhave a great process for how they build
their investment portfolios. They've been doingit for a while, they're comfortable with
it. But when you make thattransition into retirement, tax planning becomes that
much more important because it is away to save money in retirement. So

(05:46):
there's conversations around ROTH conversions. Forexample, let's say you have a lot
of pre tax money. You havea million dollar four oh one K by
the time you're seventy five taking requiredminimum distributions, maybe it's worth two many
Now you're taking massive distributions because UncleSam is forcing you to via required minimum
distributions. But if we plan accordingly, we can pay some of those taxes

(06:09):
now so that we can subject thosedollars to tax free gains and create a
pool of money via ROTH that isnot subject to to required minimum distributions.
Yeah, there's qualified charitable distributions.That's where you give your RMD directly to
charity. There's gifting to children,there's tax sasce harvesting that there's a lot
of moving parts when it comes totax planning, and it's you know,

(06:30):
the financial planning dork in me getsa lot of joy out of finding these
ways to help folks I work withsave money through efficient tax planning. Yeah,
pays to work with a money nerd, right, I mean some of
these things can make a huge difference. You're listening to money, of course,
I did. I've been waiting tocall you that for a long time.
You're listening to simply money presented Iall Worth Financial Imami Wagner along with

(06:53):
Steve Ruby, our resident money nerdin a really good way, right,
Because you work hard to save theinvestor, you work with money. When
it comes to taxes, well,and this can be a really nuanced I
mean, I don't know that theaverage person is going to know how to
take full advantage of tax loss harvesting, for example. So we're talking about
the moving parts that it comes to. Hey, there's seven major things.

(07:15):
We talk about a financial plan,and we think that having a financial plan
is critical to manage your money,to manage your stress around your money.
And we're just talking through the componentsof those as whether you're twenty two,
thirty two, sixty two, seventytwo, it doesn't matter. If you
have all these things covered, you'regoing to be in great shape. And
one of those is, of coursefiguring out how much you're going to need
to spend in retirement right, payingdown debt so that you're in a better

(07:38):
place. We're talking about tax planning. So three things. Now we're coming
to number four, and I wantto point this out. This is number
four in our list investment management.The reason why I'm saying this is number
four in our list is because alot of people when you think about working
with an advisor, you think aboutinvesting, what you what you zero in

(07:59):
on is returns, right, howmuch? What kind of returns can you
get me? I'm going to jumpfrom advisor to advisor to try to get
the best returns. We would saythat's really not even the largest part of
what you think about when we thinkabout an investment plan. There's a lot
of different methodologies for building portfolios,but at the end of the day,
the markets are rather efficient. Sowhen when when casting a large net using

(08:24):
low cost ETFs and making sure thatyou have the right exposure to different asset
classes, your stocks, your bonds, we can narrow that down much further,
but I think it's important to highlightthat that investment management is essentially the
building block to your fund, thebuilding blocks to your financial plan, your
financial plan is the blueprint. Obviously, the more building blocks you have,

(08:46):
the more robust blueprint blueprint you canhave. But we want to make sure
that at the end of the day, your money lasts longer than you do
and you're living the life that youhave prepared to live. We want you
to enjoy yourself in retirement. Managementis an important piece of your overall financial
plan, but again it's not numberone on the list because when we build
a financial plan, and when certifiedfinancial planners and other advisors build financial plans,

(09:11):
we use that to determine the riskyou need to take so you meet
your goals that you can afford totake based on your financial situation, and
then questionnaires and getting to know youa little bit can highlight the level of
risk that you're comfortable taking. Obviouslyan important part of the financial plan,
but it's not the only thing,because at the end of the day,
the goal really is to make surethat your net worth is protected while continuing

(09:31):
to grow year over year. Iwas going to say, if you ask
most people whether their major goals arewhen it comes to money, if you're
just going to boil it down,it's to grow your money and then protect
it right, and that risk managementpart is a big part of that protection,
and that looks like a number ofthings. Right. We walk people
through a risk management a risk tolerancequestionnaire to say, Okay, how much

(09:52):
risk can you take and still sleepat night? That's one part of it.
Another part of it is the insurancepart of it. Right, if
you are still working and you stillhave kids at home, what kind of
life insurance do you need? Formost people, that looks like term insurance,
but there's definitely exceptions to that.You know, if you're coaching a
kid's basketball team, if you havetrampoline or a pool in your yard,

(10:13):
do you have an umbrella policy?Right? This can be incredibly cheap and
give you, you know, amillion dollars worth of coverage if something were
to go really sideways, right,really haywire, you have that additional protections.
So these are critical conversations and Iwould say these are foundational right to
financial planning to make sure that notonly if you're being smart and putting money

(10:35):
into that flooral one k, buthow do you best protect the money as
you grow it and protect your familyat the same time. And if we're
focusing on the long term, alsolooking at long term care. When do
we do that, When is itappropriate? Is it something that you even
need. These are questions that areanswered through the financial planning process, which
we're talking about today, estate planningand legacy planning. Honestly, a bit

(10:56):
of a bummer conversation, but it'snobody's favorite. Yeah, it's extremely important.
I mean, this is something thatit doesn't matter what age you are.
You need to prepare your state ina way that avoids probate. That's
the goal at the end of theday, because probate is a public process
where people have insight into the moneymovement that's happening. That's not something that

(11:20):
I want to have happen if Iwere to pass prematurely, So you know,
having a will, having power ofattorney, set up, maybe a
trust if you need one in thatsituation. It's typically for those that have
minor children, for those that havechildren from previous marriages. At the end
of the day, it's an extremelyimportant conversation that you need to be having

(11:41):
at any stage in your life.And then also looking at distribution and income
sources. Right this is critical inretirement, in working up to retirement,
making sure that you give yourself optionsby having money and kind of different buckets,
different tax treatments. You know,some of that money in wrath accounts,
some of that in traditional tax deferredaccounts, and then we would say
even broke accounts. Right. Giveyou some flexibility so that when you need

(12:01):
to buy a car in retirement,you've got some flexibility as to where that
money comes from, making you paymaybe less taxes to get that money out.
Here's the all Worth advice. Thepeople who live well right throughout their
retirement and leading up to it usuallydo so because they took initiative and worked
with an expert to create a comprehensiveplan. You can do this on your
own. You just have to knowhow to handle all of these things.

(12:24):
Coming up next, a lesson oncapital gains tax is how to ensure you
don't get nailed with them. You'relistening to simply money presented by all Worth
Financial here in fifty five KRC theTax station from the UKARC. All Worth
Financial a registered investment advisory firm.Any ideas presented during this program are not
intended to provide specific financial advice.You should consult your own financial advisor,

(12:48):
tax consultant or a state planning attorneyto conduct your own due diligence. You're
listening to Simply Money, presented byall Worth Financial. You're along with Steve
Ruby. If you miss our showone night, you don't have to miss
a thing. We've got a dailypodcast for you. Just search Simply Money.
It's right there on the iHeart appor wherever you get your podcasts and

(13:11):
coming up. Everybody's favorite game ofa little retirement factor fiction ary. Even
if it's not your favorite, Ibet you're gonna learn a little something.
It's my favorite, it's Steve Ruby'sfavorite, so it doesn't matter about anyone
else. Right, you love it, so we all love it. One
thing we can also all love iswhen you check your portfolio and you see

(13:31):
some big games gains in there.The problem is then you realize Uncle Sam
has to get his cut. InOne of those ways that he takes that
cut is capital gains taxes. Thisis one of those things. It's like
a very double edged short. Right. If you don't understand how this works,
you can really penalize yourself. Andif you do understand how this works,
you can really use capital gains taxesto your advantage. Yeah, so

(13:52):
capital gains taxes refer to profits thatyou make from buying an asset at one
price and selling it at a higherprice. This is not inside of an
IRA or a four toh one K. Those are tax deferred retirement savings vehicles.
This would be like an after taxbrokerage account. For example. All
capital gains, like any profits thatyou experienced, they're going to be subject

(14:13):
to taxes. Now capital gains taxes. Let's say if you bought a stock
at ten dollars and it was worthtwenty dollars and you sold it at that
price just one share, you haveten dollars of capital gains taxes. Long
term capital gains exist when you've heldthat position for more than one year.

(14:33):
Short term capital gains if it wasless than a year. In short term
is what you need to understand thedifference, because if you've held that asset
for less than a year, you'regoing to pay your regular tax rate.
Right if you're in the twenty fiveincome taxes, Yes, your regular income
tax level. So if you're inthe twenty five percent tax bracket, you're

(14:54):
going to pay twenty five percent oftwo fifty out of that ten dollars in
profit is going to Uncle Sam.But if you hold that asset and then
decide to sell it after a year, and this is the key, then
that money is tax at long termcapital gains, which and this is listen
like a thumbnail kind of rule,but often it can be almost half of

(15:16):
what you would pay an irregular incometax rate. Right, these brackets for
long term capital gains are much lower. In fact, there's a threshold where
you can sell that and not paya dime in taxes if you were below
a certain income level exactly. Sothe highest tax rate possible, and this
is for twenty twenty four. Theseare the numbers that just came out for

(15:37):
long term capital gains at this pointis twenty percent. So this is a
big deal because if you have anexpense and you are looking at taking a
distribution from your accounts, you havea taxable kount of a lot of times
in this area in Cincinnati, theseassets come from Procter and Gamble shares that

(15:58):
were maybe inherited from some in yourfamily and now you have them in a
taxable brokerage account. They have acost basis that was received at the date
of death for who you inherited thataccount from which establishes that tax basis to
calculate the capital gains. If you'remaking a decision on where to pull from,
and you have shares that are longterm capital gains, then you can

(16:22):
leverage that to perhaps save money andtaxes through that distribution. Yeah, and
I think where this really can makea ton of sense. And I would
say, you know, everyone andwe call them taxable accounts, and it's
a terrible word because it's like,oh, no one wants to pay taxes.
But if we call them a brokerageaccount, and I don't know,
it sounds really like a hyphalutant.But at the same time, we would
say, hey, this is areally good thing to have because it does

(16:45):
give you some flexibility, especially ifyou hold onto these assets for longer than
a year. When you get toretirement. If you have to buy a
car, right say, and youdecide you're going to buy a forty thousand
dollars car, well, if you'repulling that money out of a tax deferred
account, so you're really out ofyourself because you've got one hundred thousand dollars
in a traditional four oh one k, well you're going to have to take
more than forty thousand dollars out becauseyou're gonna have to pay taxes on that

(17:08):
money. If you have an IRAaccount, right, you've already paid the
taxes on that money. But ifyou have a brokerage account, you're going
to pay less in taxes on thatmoney. So it just gives you a
lot of flexibility. And I wouldsay, you know, when we talk
about four to one k's, wetalk about iras, that's money that you're
penalized if you touch that money beforeyou're fifty nine and a half. Right,

(17:30):
this brokerage account, you've got akid that's getting married, you're helping
pay for college, anything like that. You know, we would say,
hey, if at all possible,you hold the assets and that for at
least a year to take advantage ofthose capital gains. But all kinds of
flexibility with these kinds of accounts,And so I say, that's why you've
really got to understand how capital gainstaxes work, because they can really work
to your advantage. And it's notjust these types of accounts either, So

(17:52):
not to add a level of confusionhere, but anything that's a capital asset
is subject to the tax that couldbe Yeah, it could be your house,
it could be real estate, cryptocurrency, even jewelry coin collections. There's
capital gains taxes when you make asale on this, So those capital gain
rates again, we want to highlightfor twenty twenty four the long term.

(18:15):
Remember your short term is your shortterm gains are based on your ordinary income.
Long term capital gains rates for twentytwenty four is anywhere between zero,
fifteen, or twenty percent. Thehigher your income goes, the more capital
gains long term capital gains taxes thatyou pay. The rate for twenty percent
is anybody making above you ready forthis half million dollars five hundred and fifty

(18:40):
one thousand dollars, who has alot of money? Well with that example,
those do Those people are like inthe what thirty nine or thirty seven
percentile, you know, regular ordinaryincome tax brackets, so they're literally paying
half at that twenty percent. Soyou can see where this is a huge
advantage. One thing I want tomention because you mentioned realist state. You

(19:00):
know, I don't want people toget like indigestion being like, oh,
we're going to sell a house andwe're going to make a profit on it.
What are we going to have topay. There is a bit of
a difference when it comes to realestate where you're living in that house.
And this is if you're a couple, if you make less than five hundred
thousand dollars on that you don't haveto pay any capital gains tax on the
sale of your house. If you'remarried filing joint if you're married filing jointly,

(19:22):
if you're an individual, then it'sa two hundred and fifty thousand dollars
gain. I mean, if you'remaking that much money on the sale of
a house, you're in pretty goodshape. But I just want you to
know, you know, there aresome exemptions when it comes to the real
estate. You also have to havelived in the house for two of the
previous five years in order for thatto come to fruition. So I think
it's just a really good concept tobe able to understand, maybe a little

(19:45):
more advanced concept, But when youreally want to make sure that you are
making every dollar account, understanding howcapital gains works can go a long way.
Here's the all Worth advice. There'salways ways to legally minimize that tax
burden. So working with a qualifiedtax professional or under standing these things yourself
can really help you do that comingup next. If you're disciplined while you're
working, why you might want tocontinue that into retirement. We'll explain.

(20:07):
You're listening Disimply Money presented by allWorth Financial here in fifty five KRC the
talk station. Maybe sometimes you haven'tgotten them see an iHeartRadio station. You're
listening to Simply Money present by allWorth Financial. I mean Wagner along with
Steve Ruby. When you're working,I think you have to have some level

(20:32):
of discipline in your days. Imean, I know Steve. The way
that I run mine is I havemaybe twenty seconds of margin between each thing
that I need to do. Right, you have to be incredibly disciplined just
to juggle all the balls and getall the things done. And I think
for many of us it's like,gosh, you can't look. You can't
wait until you retire when you feellike you don't have to live life that
way. And it does give youall kinds of freedom and inflexibility. But

(20:55):
I would say that I have seensome people take it too far right and
they're completely undisciplined in retirement, andthat can actually be a really bad thing
for you as well. Yeah,that type of thing can lead to complacency
and retirement, which can ultimately shortenyour retirement. When you think about it,
this is where you hear horror storiesabout people making that transition retirement.

(21:17):
They're bored, they're not doing anything, they just sit around, they waste
away. That's a terrible thought.That's scary. That's scary for a lot
of folks. Why do people losetheir discipline? I mean, ultimately,
it's kind of human nature. Whenyou're no longer tied to that schedule where
you're going to work every day andjust like you talking about, you know,
you have twenty seconds in between yournext thing that you have to do

(21:37):
during the work day. It canbe a little bit alluring just to I
don't know, sleep in, takeit easy. But is that healthy at
the end of the day. Well, I think that's what when we look
at maybe a year into retirement,the retirees who have done it really well,
they continue to maintain some kind ofstructure in their lives. Now.
It doesn't have to be the crazy, hectic, go go go life that

(22:00):
you had maybe when you were working. But I think about some friends of
mine who had been you know,had been married before and divorced, but
had been dating for a really longtime. And the man was getting ready
to retire, and he'd had areally really structured, really demanding job.
He worked out every day his Imean he really like every minute was very
well managed. So he couldn't waituntil he retired. And when he did

(22:23):
well, he quit working out andhe started drinking a lot, and then
he you know, wouldn't show upto things on time, and he was
really all over the place, andit ended up ending that relationship that they
had had, which was a greatrelationship for years. And it was because
he went from like when you watcha pendulum swing from one end of that
to the very opposite one. Aftera few years of retirement, he did

(22:47):
kind of get it back together,but he lost a relationship that really mattered
to him. And that might beextreme example of this, but I think
you do have to maintain kind ofsome level of normalcy. Yeah, I
mean, there's a dangerous ripple effectthat you're kind of talking about here if
you're not maintaining some level of discipline, not having hobbies, not sticking to
some kind of a schedule. Youknow, I'm going to work out on
Monday, Wednesday, Friday, forexample, you know, keeping active,

(23:11):
going for walks, that type ofthing. Health is a big issue for
those making that transition to retirement becauseif you come, if you become complacent,
you adopt poor habits. That that'swhere that ripple effect can come in
and that that can affect relationships forexample, well it can affect relationships,
but also money. Right, whenyou talk about health declining, it means
more money out of your pocket onhealthcare costs. And so I think that

(23:33):
maintaining right, eating well, notdrinking a lot more than you did before.
You know, the regular exercise thatyou're talking about Monday, Wednesday,
Friday or walks or whatever, thatcan go a long way to pushing off
some costs in retirement that maybe youwould have if you weren't so disciplined.
Yeah, it's a great point.And you know, when it comes to
relationships obviously, when when when we'rein the office or we're doing our job

(23:56):
for years, it's it's camaraderie.You have relationships, you have people that
you've grown close to at work.When you retire and they're still working,
what do you do. You needto make sure that you have a full
schedule to some capacity here because youknow, the people that you've grown close

(24:17):
to and that you've been close withfor all these years, they're going to
the office still, you need tofind a way to fill your time.
It all ties together here back todiscipline. So when you're just sitting around
and you're sleeping in, you're notworking out, that can cause some real
problems. I'm really close to myaunt who retired maybe two or three years
ago now, and she'd worked superhard for you know, years and years

(24:38):
and years. She was really excitedand ready to retire. But even with
that, she found that transition tobe a lot more difficult than she thought.
It took her several months just todevelop a routine, right, walking
her dog at certain times of theday, spending these days with grandkids,
getting regular time together, you know, socially, to have some lunches and

(25:02):
some happy hours with people that sheused to work with. But at first,
even though she was really excited aboutit, it was a bit disappointing
because it was like, gosh,what do I do with all this time?
When you're used to a nine tofive or whatever, your workday looks
like really hectic schedule. It canbe a really difficult transition, and going
from go go go to no goat all can be really difficult. So

(25:22):
I'd say, you know, giveyourself a few months when you retire to
come up with, you know,a really good routine that works for you.
But some level of discipline has tobe part of that. And also
just a good attitude. Right.I've seen people who you know, thought
retirement was going to be great andthey were really disappointed and they became you
know, cynical and unhappy and frankly, they weren't fun to be around.

(25:44):
Well, that doesn't sound like agreat retirement at all, doesn't Now,
do not sign me up for thatkind of retirement. We've had segments on
this in the past where we've hadconversations around making sure that you have a
system in place. You have hobbies, you have a social network, a
port network that can keep you busyand keep you active. Steve Sprovac great
example of that. You know,I gave him a hard time on the

(26:07):
air together, but we all did. Yeah. I mean, he had
his ducks and row, he flieshis airplane, He has grandchildren that he
visits all the time in Michigan.And Arizona, but he has his home
base here where he's staying busy workingon a car. So having some kind
of structure when you're no longer busyevery single day with work, getting your
hobbies in order so that you aregoing to continue that and stay busy when

(26:30):
you actually make the transition retirement,it's extremely important. You know what I
think is really difficult about this.For most of us, the kind of
discipline that we have during our worklives is kind of predetermined for us by
our work. Right, how manymeetings we have a day or whatever that
work looks like. You just kindof fall into a natural rhythm that makes
it easier, right to be efficientin that work. When you retire,

(26:53):
when you transition to not that kindof schedule anymore, that kind of routine
is on you, and I thinkthat can be difficult because it was always
kind of decided for you while youwere working. So figuring out, okay,
here's four or five things that arereally important for me in retirement.
Getting regular workouts, Okay, whatdoes that look like? Does that well,
you know, you schedule thirty minutewalks once a day or something like

(27:15):
that. Okay, social life andthen you're reaching out to maybe kids or
grandkids or you know, friends tomake sure that you've got that kind of
interaction. But it's the onus ison you, and that's going to feel
a lot different, I think,than when you were working. Here's the
all Worth advice. You know,attitude is everything, So having an attitude
of gratitude and writing it out throughretirement, having some discipline, having a

(27:38):
plan can go a long way.Coming up next, put your thinking caps
on. We're playing Retirement Factor Fiction. You're listening to Simply Money, presented
by all Worth Financial. Here infifty five KRC the talk station. I
have to choose between groceries for mykids or gas for my car. Talk
about it here fifty five KRC thetalk station. You're listening to Simply My

(28:03):
Name, presented by all Worth Financial. I'm Amy Wagner along with Steve Ruby.
If you've got a financial question youlike us to help you figure out,
there's a red button you can clickon while you're listening to the show.
It's right there on the iHeart app. Record your question. It's coming
straight to us. We love tohelp you figure it out and straight ahead
generic versus name brand. The kindsof things that make sense to save on

(28:25):
by buying generic, and the kindsof things that are worth paying the extra
money and buying the brand name.We'll get into that for now, though,
it's time to play a little retirementfactor fiction. Here's the first one
for you, Steve fact or fiction. An investment bucket strategy is a sound
one. I'll say, sure,Fact, that's fine. So this is
where you have different buckets to pullfrom, and perhaps different investment strategies for

(28:49):
those different buckets. So what Imean by that is your short term,
your intermediate, your long term investments. If we work backwards roth, that's
kind of the last money you're evergoing to spend. Taking a much more
aggressive approach with those dollars as faras the investments are concerned, is usually
fine, as long as you're notgoing to have some kind of an emotional
reaction and sell when the markets aredown. Your intermediate investments iras, for

(29:12):
example, maybe a brokerage account.This is stuff that you're pulling from potentially
but might not need to take bigdistributions from because you have a short term
bucket, which is your cash,your CDs, your treasuries, something that's
way more protected, but also moreliquid. It gives you options to choose
from as far as where to pullfrom to make tax efficient efficient decisions,

(29:34):
but also gives you the ability witha larger pool of low risk, low
reward assets to protect against downturns foryour higher risk assets. I'm a very
visual person. You can tell mea concept, but I can picture it.
I'm going to get it that muchbetter. And I think that's one
of the reasons why I like thebucket strategy is you're literally you can picture

(29:56):
different buckets of money that have differentof tax treatments, different sort of goals
for them. If you're helping yourkids save for college, if you're helping
to pay for a wedding, ifyou've got a big vacation coming up,
Okay, that's going to have that'sgoing to go into a different bucket than
if you're fifteen years away from retirementand you're saving money in your four oh
one K, right, So it'sjust kind of bucketing off that money for

(30:19):
different uses, you know, thinkingabout your retirement, and that way I
think can give you a lot moreflexibility. Here's another one for you.
Fact or fiction annuities are perfect forpeople who want guaranteed income. Okay,
so I'll give it to you theway that this question is phrased. Sure,
it can be. Fact. I'mnot terrified of annuities. I don't

(30:41):
hate annuities. They can be perfectwho want guaranteed income, but buyer beware.
That's the key. There are situationswhere you can be over sold on
annuity solutions that have all kinds ofriders that you don't necessarily need. There
can be massive commissions. You canbe tied up in that solution, which
is an awful thing to find yourselfin if you don't have portfolio assets to

(31:06):
support that, to pull from tokeep up with inflation. So it can
be because of that guaranteed income.That's the key. There is no other
way to get guaranteed income unless youhave a pension, social Security, or
you purchase an annuity because it isa hybrid insurance, hybrid investment product.
I think of this sweet man whoused to come to all of these workshops

(31:29):
that we had several years ago.He would literally, if we had one
in March, he'd be there inMarch. If we had one it May,
he'd be there in May. Andhe would raise his hand at the
end and we would have a Qand a session and he would always ask
the same question, I've worked reallyhard for this money, I have saved
it. Where can I put itwhere I'm not going to lose any of
it? And it's going to havegames like it doesn't exist? And he

(31:52):
would come back two months later itdoesn't exist. But for someone like him,
an annuity where he puts that moneyin, he knows it is safe,
it's not going anywhere. He's goingto get a set predetermined amount every
month. If you were like him, if you identify with that, that
can make a lot of sense.The problem with annuities is you often don't
get to take advantage of the fullupside of the markets, right, and

(32:15):
so you're kind of locking in thatguaranteed money, but you're also maybe missing
out on some options which for somepeople can make you sleep better at night.
And that's just fine. So Ithink that can be a fact.
It really though, depends on yourself. And I would say, listen,
fully understand that annuity right before youbuy it, and know that you are
buying an annuity. You're not investingin it. It's a product that you're

(32:37):
buying. Here's the next fact orfiction. Taking a lump sum pension payment
is usually a better decision than takingmonthly or even yearly payments. This one
has too many variables. It reallydoes, because that lump sum payment.
You know, let's say longevity isnot on your side. You know something
that you don't want to know.You have a time frame, you know,

(32:59):
a doctor's any bad news. Whywould you innuitize when when that money
will go away when you're gone.In that situation, you take a lump
sum and that money stays with yourfamily, part of your legacy. You
can put beneficiaries on it when youroll it to an IRA. You know
situations where longevity is on your side. You already have portfolio assets. Let's
say you're married, you have aspouse, they're younger than you, and

(33:22):
you want to innuitize and leave asurvivor benefit that could be very lucrative if
you live for a long time andthen they live for a long time as
well. That's more money that youmay you may never get back if you
had rolled into an IRA. Sothis one has a lot of variables.
This is one where you need tosit down with a fiduciary financial planner and
crunch the numbers as they pertain toyour individual current situation. If you are

(33:45):
at home right now, get up, walk to the nearest mirror and look
at yourself. And this is alike you got to look at yourself for
real and ask yourself, Okay,if I was to get a lump sum,
would I be responsible with that moneyor would I blow it? And
I think this is a kind ofknow yourself situation because we've seen, you

(34:05):
know, many people take that lumpsum payout and then I don't know,
that's a lot of money. We'vealways wanted to go to Europe and we
kind of need a new car,and we were going to get a used
car, but now we got thismoney, it's a brand new one,
and all of a sudden, thatmoney that's supposed to last you right for
X number of years is starting todwindle. And that can be a terrible
thing. If you're looking at yourselfin the mirror and you're saying, actually,

(34:27):
I know I'm pretty responsible with money. And you run the numbers and
you're going to take that money outand reinvestment, reinvest it yourself, you
might actually come out ahead. SoI really think this is a kind of
know yourself situation, and if youcan't be super responsible with that money,
monthly payouts where you know that checkthat has to last for a month and
then beyond that you got to waitfor the next one to come in can

(34:49):
be a really good thing. Here'sone that I think we get pretty often
fact or fiction. With the futureof social security being so uncertain, should
I put together a financial plan thatdoesn't even and include it? Fiction?
But if you want to sure,that's the short of that, because when
you build a financial plan, youcan put in whatever variables you want.
We can remove an income source andretirement such as Social Security. But the

(35:13):
way that it is now in twentythirty three, if Congress doesn't step up
to the plate and work together asone team, then you know, we
won't get into that. But ifthat were to happen, then social Security
benefits would be reduced, they wouldn'tgo away, you would get a lower
amount. Yeah, about seventy fivepercent, right, is generally seventy to
seventy five percent of that promise.So you know, I think the probably

(35:34):
most responsible thing is to run thatnumber because no one wants to just you
know, definitely, you know,think Congress is going to come through.
One never knows what's going to happenin Washington. So I like running the
numbers with a seventy five percent,But beyond that, you don't have to
run numbers with zero. If youlike that and you feel better about it
and your plan still works well.English for you coming up next, when
buying generic is the way to goand when it isn't. You're listening to

(35:58):
simply Money, presented by all WorthFinancial here and fIF five KRC the talk
station. I think we need totake care of the planet, but you
are not taking away my grill fiftyfive KRC where it's still okay to tell
us what do you think You're listeningto? Simply money for somebody all with
Financial? I mean you Wagner alongwith Steve Ruby. Steve, do you

(36:20):
do the grocery shopping ever? Inyour eye? Not even close? No,
not a chance. We've taught sproand I have talked about this.
If I get sent to the grocerystore, I come back with really stupid
things that are not part of thebudget. Like there was a heavily discounted
old bag of snow crab and Iwas like, oh, I got to
get that, No, that's notsomething that we needed. So this is

(36:43):
something that we need to defer tomy wife to make good decisions on,
because I'll buy the things that Iwant because I'm hungry. For those of
you who are the ones who goto the grocery store, not Steve Ruby,
listen up. You know it's especiallywith inflation over the past few years.
I think it forced some people tolook at generic brands that maybe never
did before. And I know wemade the switch on several things. I

(37:05):
started shopping at Aldies a lot,and it's all generic brand stuff, and
my kids don't notice the difference.But there are some things we would say
that you would notice the difference on. So if you were going to switch
to generic, here's a few thingsto switch on. Cereal, I went
to the grocery store last week.The box of cereal of it my kid
normally my kids normally eat, waslike six dollars for a box of cereal.

(37:28):
I might even just pull the bagout of the generic one and put
it in the normal box so thatthey don't know the difference, because if
the box looks the same, ittastes the same. They're not going to
notice the difference. So that's onething that you can save on spices and
seasonings. I'm telling you you willnot notice any difference on these, and
spices can be incredibly expensive after youknow that you're lying to them. I

(37:51):
am just making smart decisions for them. Okay, someday, someday I will
do the big reveal and say thesehave not actually been and fruity pebbles and
you're going to say you've been eatingthe generic brand. Yes, and that's
what you've grown used to. Sohere's a good way to save money moving
forward. When they head off tocollege, there will be a big reveal.
Until then, I'm going to savemoney and they'll never know the difference.

(38:13):
And you know, unless they listento the show, which let's face
it, they're probably not going todo that. Baking supply is also a
good thing to save money on incrediblyexpensive and if you really like to bake,
you're not going to notice any differencethere when we want to when we
would say brand name is better toiletpaper. Funny story about this When I
was in college. My sophomore year, we got a house off campus and

(38:37):
everyone kind of took turns right buyingthe milk and the toilet paper and kind
of the main supplies that everyone woulduse. Well, when the Aldie toilet
paper, we didn't know all thesethen. But when it came to my
turn to buy toilet paper, Iwas like, I don't have much money,
I'm buying the generic. Nobody inthe house spoke to me for a
week. They were so it waslike, no, no, no,

(38:58):
no, you do not. Youdo not save money on the toilet paper.
You can buy the generic milk,but not the toilet paper. Well,
other things would be batteries, namebrand major electronics, and pet food
actually because it can actually be waymore healthy for your animals. Yeah,
so I think knowing when to buythe generic and when not to can make
a huge difference. Thanks for listening. You've been listening to Simply Money,

(39:19):
presented by all Worth Financial here onfifty five KRC, the talk station.
That's another President