Simply Money

Episode Transcript

(00:04):
Tonight, we're talking investment strategies thatsound really cool, but do they pay
off. We're taking a deep divetonight to give you some answers. You're
listening Disimply Money, presented by allWorth Financial Ammi Wagner along with Steve Ruby.
If you follow the financial news inany way, shape or form,
you are going to be very familiarwith what we're talking about tonight because the

(00:25):
headlines cover these kinds of things allthe time. Sell in May and go
away. You've got the Halloween Indicator, one has to do with Santa,
all different kinds of things and here'sthe here's the deal. You'll come across
this headline. It'll make this boldprediction about what's going to happen with the
stock market, with your investments,with your four one K based on some

(00:47):
fun little phrase that sounds like itcould have come from TikTok or Instagram or
social media somewhere. And really manyof these things have been around for a
really long time. But today we'regoing to dig deeper into say, hey,
what are these little investing strategies.They're not even really strategies. I'm
using air quotes right now. Whatare they really and is there any merit

(01:08):
whatsoever to following any of these spoileralert No. First of all, good
way to start. Yeah, andyou know you call them strategies. I
call them mistakes. Yes, Andwe're going to dig into some of these
and explain why. But you know, bottom line, I'm going to come
out swinging a little bit today.Go ahead. It's a fool's errand to
try to time the market. Andthese strategies again in quotations, are just

(01:34):
that, a fool's Errand so youhad mentioned sell and may go away.
This is based on the thought thatthe markets worst six months in the year
are typically from May through October.Come on, yeah, well and not
just October first, but they're actuallymaking the prediction you shouldn't come back in
until October thirty first, which isthe Halloween indicator. Now, a little

(02:00):
bit of sort of background, somehistorical perspective on this. Back in the
day, I mean, you know, fifty sixty, seventy eighty years ago,
on Wall Street, everyone lives inthe city, Everyone goes to work
on Wall Street every day. Theymake their trades busy, busy, busy.
When summer comes along, you know, New York can get really hot
growth sticky, So everyone goes tothe Hampton's. Literally, all these people

(02:23):
who make all this money on WallStreet they just take off. Yes,
all the big wigs on Wall Streettake off for the Hamptons, and trading
slows down, business flows straight slowsdown. This was decades ago that this
was the case. I mean sincethen, you've got computers doing trading,
You've got so much, so muchas digitalized, and you know, people

(02:46):
going on vacations and coming back.Not everyone is heading to the Hamptons for
six months or whatever the heck theywere saying. This doesn't apply even in
theory, to the way that thingsused to be. But also numbers don't
apply anymore, right, numbers don'tbear this out whatsoever. Yeah, so
the original Halloween indicator again selling onApril thirtieth, buying back in around Halloween.

(03:08):
It actually waited until April thirtieth toget out of stocks. And since
its creation, let's keep in mind, the Dow Jones and Industrial average has
returned five point three percent on averagebetween what what was called the winter months.
It's backwards because it's really the summermonths. All these big wigs are
going to the Hamptons five point threepercent sitting on the sidelines. What a

(03:31):
waste of time? What a badidea? Well, and I also think
you can skew these numbers a lotof different ways when you're trying to prove
these strategies. Right, if you'reonly looking at the doll Jones industrial average,
you're looking at thirty stocks, Iwould say that's not a diversified portfolio
anyway. But yeah, and they'resaying, listen, you know, even
in the summer months, when youcan on average you're getting the doll's getting

(03:54):
less than two percent one point eightpercent, you know, should you go
to cash? While if you lookat what you could get, you know,
from a really really conservative investment oflike a tea bon or a tea
bill versus what you could get eveninvested in a lower these lower months,
which isn't necessarily true, you're stillgoing to make more money in the market.

(04:15):
I mean, this kind of stuffmakes me really want to pull my
hair out because it makes investing soundso complicated. Warren Buffett is a very
smart investor. What he's made somuch money doing these things, and he
is a long term investor. Youbring a strategy like this up in front
of him, and he's going tolaugh you out of the room. It
makes zero sense trying to time themarket based on holidays, based on the

(04:41):
weather. I mean, it justmakes zero sense. That's why I came
out swinging. That's that's the buffetand me, I guess because time and
timing the market is a very frustratingthing. It's something that folks that we
work with try to do all thetime because emotions take over and these headlines
and they learn about these really citingnew cutting ads strategies that show them how

(05:02):
to save money by timing the market, and it is just not the reality
of the situation. When I saidfive point three percent, that's the average
of the Dow Jones over a longperiod of time, and that one point
eight percent is between April thirtieth andOctober thirty first, yeah, but if
we compare it to tea bills,that is below that level. So your

(05:23):
tea bills are your risk free rateof return according to economists. But the
safest investment, right, many saythe safest investment. Yeah, but it's
also a way to safely lose moneywhen they're not keeping up with inflation over
the long term. That hasn't beenthe norm lately with inflation spiking and interest
rates going up, so tea billsaren't paying more right now. But these

(05:45):
these are fool's errands. You're listeningto simply money presented by all Worth Financial.
I mean, you Wagner along withSteve Ruby, who is coming out
swinging tonight against these ridiculous sort ofinvestment and they're sort of broaches investment strategies.
You'll read about them in the headlinesall the time. We think they
are absolutely insane. The best strategyfor anyone is figuring out what your individual

(06:08):
sort of personalized financial plan is andthen just sticking with it. But here's
another one that's called the sector rotationstrategy. And this is instead of saying,
okay, we think that things aregoing to be slower in the summer,
we're not going to pull out ofthe stock market. We're going to
switch to more conservative investments, youknow, less stocks, less growth stocks,

(06:30):
that kind of thing. And again, this is another variation on market
timing. You're not coming out ofthe market, but you're changing your investment
strategy based on a certain time ofyear. Doesn't pan out. Yeah,
on paper, it sounds a littlebetter than just selling to cash and sitting
on the sidelines, because at leastyou're still invested, but when you dig
a little bit deeper, this approach, the sector rotation strategy, was championed

(06:55):
by a guy named Sam Stovell,chief investment strategist of c FRA Research.
And you know, he talked aboutthis in a book that he wrote,
No surprise there. You know,you write a book, you get people
riled up about a new idea,and you sell more books. It was
called the Seven Rules of Wall Street. And in July of twenty eighteen,
he also created an exchange traded fundto attempt to follow this strategy. Isn't

(07:23):
it interesting though, that actually hisETF lagged behind the broader market. Very
interesting. So he's essentially saying,buy my book, read what I'm writing,
listen to what I'm talking about,because I have figured out, like
the corner on the market here,I figured out how to work the system.
And then he actually puts an investmentvehicle out there that tracks exactly what

(07:46):
he said, and it lags theactual market. Overall. I love when
people do things like this because it'sso much fun for me to get to
point out you know, gosh,that seemed like a great theory on paper,
and it just doesn't pan out asa smart long term investment strategy.
It actually gets my heart rate up, my blood pump, and my you
know, I feel it. Ifeel anxiety for the people that bite and

(08:09):
take these these approaches to heart andactually say, all right, this makes
sense. I see that the marketsare sometimes down during this period of time
when the data shines light on itin a particular way, and here's a
solution that I can capitalize on tonot only protect my money but earn even
more. You know, you canmanipulate data to try to paint that picture,

(08:30):
and do quite well at painting thatpicture, but then when when we
look at it over time, itjust doesn't work. Right. Just look
at your four oh one k,right, I mean, is that the
kind of thing that's going to work. No. If you're looking at people's
four one ks who are jumping inand jumping out time and time again,
it shows that the long term investorsare the ones that come out it had

(08:50):
We cannot turn a blind eye tothe fact that this is a major political
year, right We've got a presidentialelection coming up later this year, and
there are lots of people who feelvery very strongly about your candidate, your
political party, about politics. Andthe problem is that's fine. You can
feel however you want about this election, the candidates, your political stance.

(09:13):
But when you bring your money alongon that ride, things tend to go
south. So there's another sort ofstrategy, and I'm not saying this one
applies to this year because it's actuallytalking about sitting out midterm summers, so
one summer in every four during amidterm year, which is not what we
have this year. It's saying,if you pull out of the market during

(09:33):
this time, you're going to comeout better. We will also, though,
and you know it's coming. Stevestart to get calls the closer we
get to November of people saying,if the person who is not my candidate
gets into that oval office, Ithink we've got to get out of the
markets, right. And there's allkinds of research. I love having Andy
Staler, chief Investment Officer, ritedown the hall from US. I mean,

(09:54):
he's in charge of close to twentybillion dollars making sure that we make
smart investments, and he provide allkinds of historical analysis which says it doesn't
matter which party is in that office. What matters is time in the market,
not timing the market based on politics. Yeah. You know, he's
created a chart that I pull upevery great once in a while because money

(10:15):
is green, it's not red orblue. But he looks at market performance
in the year that a Democrat winsversus a year that a Republican wins in
the four years following. Yeah,and it's flipped. I'm not even gonna
get into which one. But inthe year that one wins, it goes
up. In the following flour itgoes up, but not as much.
Yeah, and that's the bottom.Essentially, it's a wash. It's a

(10:37):
wash. Yeah. The markets arelike walking up the stairs or playing with
the yo yo. Believe it ornot, both sides, no matter where
you fall in the political spectrum,want the markets to grow. Yeah.
Several years ago, I remember hearingfrom someone who was looking really closely at
presidential candidates and saying, Okay,if this person gets into office, these
are the kinds of companies, thekinds of sector sectors that are going to

(10:58):
do really well based on this person'spolicy. And so they try to set
up investment vehicles that sort of followedthat in invested in companies that they thought
would do better. Total bust.I mean, you just can't predict these
things. It can sound brilliant,brilliant on paper, and then in practice

(11:18):
it just never pans out. Anythingcould happen. Someone doesn't about phase.
Oh wait, someone made a promiseon the campaign trail and now they're going
back on it. That's never happenedbefore. Please please make smarter decisions with
your money when it comes to dowith politics, when it comes to do
with any of these so called investmentstrategies, see them for what they are.

(11:41):
They are simply timing the market insheep's clothing. Here's the all Worth
advice. Never rely on investing strategiesthat involved trying to time the market over
the long term. You are simplygoing to fail every single time. Coming
up next, what are you gonnado with all those savings once you retire?
The answer might be more complicated thenyou think. It might actually be

(12:01):
harder to spend it than you're eventhinking. We'll explain that next. You're
listening to Simply Money, presented byall Worth Financial here on fifty five KRC
the talk station Mindy me Wagner alaw with Steve Ruby. If you can't
listen to our show every single night, you do not have to miss a
thing. We've got a daily podcastfor you. Just search simply Money right

(12:22):
there on the iHeart app or whereveryou get your podcast. Coming up at
six forty three. A little factor fiction when it comes to your retirement
and money to make sure you knowthe truth of the matter. Well,
there is an issue. It's beenincredibly complicated over the last few years.
It has to do with inheriting anIRA and the irs, and Secure Act

(12:45):
two point zero kind of came outand seemed to clarify it to the point
that it is once again as clearas mud. And we now have an
update which essentially says they're just gonnapunt until next year. Not surprising on
this, Yeah, I mean backin twenty nineteen Secure Acts one point zero,
most beneficiaries at that point could nolonger stretch distributions from an IRA.

(13:09):
To be clear, this is nota spouse Like if a spouse inherrots and
IRA, the rules are different.This is if your children or someone else
outside of that spousal relationship in heroit's the IRA you used to be able
to stretch it out over the courseof your of your lifetime. A spousal
IRA, you can put that intoyour own individual retirement account and not make
it a beneficiary IRA, So thatwould have been a viewpoint. You can

(13:33):
still do that for spousal but everybodyelse you can no longer stretch it over
the course of your life. Itis over a period of ten years only,
and you have to drain that accountso Uncle Sam can get those tax
dollars. And as they push backthe age for rmds to seventy three and
then if year is seventy five,it just became more and more convoluted.

(13:54):
And I think you know, asCPAs are processing people's returns, they're asking
more and more questions. The IRSis saying, listen, we get everyone
is not on the same page.So if this is something that you have
been stressed out about in this year, right twenty twenty four, they have
now kicked the can until twenty twentyfive. No penalties this year if you
do not get this exactly right.So I would say just be in communication

(14:18):
with your CPA and hopefully your financialplanner and maybe maybe by this time next
year, we'll know a little more. We see this all the time.
Right, It's like something comes downfrom Washington and then on Main Street.
Right, the practical application of itjust becomes a lot more difficult, and
they say, Okay, we'll giveyou another year or two before we get
this all figured out. So boughta little bit of time there. If

(14:39):
this is something that applies to you, This is something that we see all
of the time, and I thinkit might surprise you when you hear about
it. But for those who havejust been saving and investing and planning for
retirement, right, just the smartlong term savers for years and years and
years, decades, they get tothe point where they flip the switch and
now they're drawing down on that money. And it's really interesting to see how

(15:03):
many actually struggle after they've been savingall this time with spending that money.
Yeah, I see it all thetime. A recent paper titled Understanding under
Spending in Retirement. I like thatname. It rolls off the tongue.
Yeah. It looks at pre retireesand retirees asking them what they thought a
safe withdrawal rate was. And bottomline is is most people don't know.

(15:26):
It leads them to not spend whatthey can spend, which is surprising,
but some people are. It isa scary transition to step away from a
paycheck that you know will be there, that will be systematic, that will
continue to happen as long as youwork, too, pulling from these portfolio
assets that you've spent an entire lifetimesaving. So it is scary the thought

(15:48):
of running out of money. I'msure most of us know somebody that didn't
plan appropriately sure for retirement and ranout of money when they were too young.
So there's a lot of reasons behindwhy people might underst spend, but
the fact that people are underspending thatmuch is what is surprising. Yeah.
In fact, research shows, andthis is from a New York Life Morning
consult research project, sixteen percent ofretirees withdrawal from their portfolios on a regular

(16:15):
systematic basis right, less than twentypercent, less than one and five and
thirty percent about one and three don'tpull any money at all from their savings
accounts and investment portfolios. Years ago, I remember Nathan Backgrack, one of
our founders, saying, you don'tretire off of a lump stop with money.
You retire off of a stream ofincome from that money. But the

(16:36):
whole point of accumulating that lump sumis that you'll have money that you can
live off of your essentially setting yourselfup to give yourself your own paycheck in
retirement. And it amazes me howmany people come through these doors and we
will look at them and say,you can afford what you're asking for.
Several weeks ago, so a couplecame in. They'd been looking for a

(16:56):
home for I mean months and months, couldn't find anything. Finally found something,
they loved it. It was biggerthan they needed and it was more
expensive than they had planned on paying. Here's the deal. Looking at their
financial plan, they absolutely could haveafforded probably double the house of what they
were buying. It was so difficultfor them to wrap their heads around it.

(17:18):
And they actually had no children,so it wasn't like they were,
you know, trying to have moneythat they could you know, pass on
to their children. Their thing wasthat they were gonna, you know,
that money was going to go tothe Cincinnati Zoo. Well that's great,
And I made the point, Okay, it's either Fiona's habitat that becomes really
nice in a few years, oryou live in a really nice house.
Yes, this is the choice thatyou're making. As much as I love

(17:40):
Fiona, buy the nice house,right, But for many people it is
just that mental switch. It becomesreally, really difficult to do. You
know, back in the eighties,there was this theory that you could pull
four percent, draw down four percentevery year and still hopefully not start to
pull from that nest egg, right, that initial money that you put in.

(18:00):
Things have changed since then. Ithink it's become a more individualized number,
but I think four percent is stillkind of a ballpark to start thinking
about. The four percent rule inthis day and age, is four percent
withdrawal rate from a moderately conservative portfolio. We're talking like a sixty percent stock
forty percent bond portfolio, and youcan pull four percent for about thirty to

(18:21):
forty years. And that's not justthe earnings. That's from principle as well.
It is a good starting point.But one of the great things about
sitting down with a fiduciary financial plannerand building out that financial plan initially it's
to understand, hey, can thiswork? Can I retire when I want
to retire? What do I needto do to make that happen. Are

(18:41):
there gaps that I need to closeto make that happen? But on the
flip side, something very fun happenssometimes when we build financial plans, and
it's blowing expectations out of the water. Look, you've done better than you
thought you have. You have nodebt, you have incredible fixed income from
SoC security or a pension, andthat's a key for a lot of people.

(19:03):
Take a look at this. Youcan spend X dollars in retirement and
never run out of money. Thattype of thing can be an eye opening
exercise for a lot of folks tosee that maybe they're better off than they
thought they were. And I thinkyou do have options, you just don't
know what they are until you buildthat plan. I'm always surprised by how
many people will sort of do itthemselves. Feel like they have enough money,
but they have zero plan for spending, or for inflation, or for

(19:26):
medical expenses in retirement, and sothey're not sure if the numbers will work
out. Here's the all Worth advice. If you have maybe more money than
you think you will ever spend inretirement, you can still put that money
to good use. The key ishaving a plan for it coming up an
next. He is absolutely meticulous,in fact, one of the most meticulous
we've ever seen when it comes tomoney. But did he just commit financial

(19:48):
infidelity? We're going to talk tohim next. You're listening to Simply when
he presented by all Worth Financial hereon fifty five KRC the talk station.
You're listening to Simply Money for that, I'm all Worth Financial. I Meeany
Wagner along with Steve Ruby. Researchout there shows at about a third of
all couples have some sort of financialinfidelity going on, whether it's a credit

(20:12):
card someone doesn't know about, somepurchases right, it can run the spectrum.
But tonight our good friend Alriddick fromGame Time Budgeting, the man who
was more meticulous about money than anyoneI have ever met in my life,
claims it maybe he could be guiltyof financial infidelity. Tell me, mister

(20:32):
Riddick, what'd you do with thatfifty cents? Because I don't believe it
was any more than that. Myfriends, so you too may recall that
my wife and I we pay oursales a monthly allowance which is considered our
fun money for the month. Yeah, so our agreement is that neither spouse
can comment on how the other spouseuses that money. So recently I noticed

(20:56):
that my wife's automatic transfer from thejoint account to her personal account it had
not been made. So, sincethat's her personal money, I didn't say
anything because technically it was none ofmy business right then, and then I
thought to myself, I said,you know, it might be kind of

(21:17):
intriguing just to see how long itwould take her to notice she was missing
her allowance. Now, to mysurprise, it took thirty six days.
So then I began to wonder,because I was withholding the truth, right,
did I commit financial infidelity? I'mgonna I was about yeah, ten

(21:45):
yard penalty that I think that qualifies. You totally used your wife as a
research you know, you were like, I am going to see if she
really So let's take a little moredeeply into it. Is it that she
just didn't have the money or marchfor anything that month? Did she have

(22:06):
plenty in her account already and justdidn't miss it? Like what's going on
here? Yeah? So so yes, and yes, she didn't really have
anything that she wanted to purchase.Plus I think that she has quite a
bit of money in her account.In addition to that, I kind of
think that both of our allowances arecount on the high end. But you
know, that's the story for anothertime, right. But the funny thing

(22:30):
that happened, and I'll never forgetthis day. So I'm sitting in her
office because she works at home,so she has a desk facing one wall,
and when I decide to work athome, I have a desk face
in the other wall. So allof a sudden, I hear her say,
she said, my money is gettingkind of low, right. Then

(22:51):
the next minute she says, waita minute, I didn't get my allowans
this month. And then she said, hold up, I didn't get it
last month either, because keep inmind thirty six days, right. So
I turned around and I just burstout laughing because I was like, oh
my gosh, I couldnot believe ittook you this long to figure out you
did not get your money. Soof course we had a good laugh about

(23:14):
it. But she laughing Did shelaugh at you when you knew that she
was two months behind? What wasshe laughing? Well, she she said,
I can't believe you didn't tell me. And then I said, well,
the agreement, like I said earlier, is that we can't say anything
about how each other spends that money, So technically it was none of my
business technical literal interpretation of the rules. I would have been like, okay,

(23:38):
when we both worked from home,my desk is in this room and
your desk is outside in the yardfor a few days, mister riddick.
But first of all, was theresome kind of a glitch? What happened
that she wasn't getting her money?So this is what we assume happened,
Like at the end of every year, when we were talking about our plans
for the next twelve months, weset up various transfers that occur every month,

(24:02):
so we don't have to think aboutit, right, So I'm assuming
and she assumes this as well.When she set up her automatic transfer to
her personal account, she must haveselected a date that ended too early,
or maybe she just selected just dothis for two months and that's it.
So of course, you know,we did laugh about it, but I

(24:23):
just thought it was hilarious because Iconducted my own little experiment. You know,
any other emotions outside of humor thatyour wife felt after you explained that
she was kind of an experiment.You know, she did not get upset
with me, because, good foryou, She's been with me for so

(24:45):
long. She understands how I amand how intrigued I am by different financial
situations. So she was cool withit. And even the other day,
matter of fact, was yesterday,she was just walking around the house and
then all of a sudden she said, ah, So I was like,
I thought she needed me to dosomething. Then she said, I'm counting
my money just so you know.I was like, okay, that's good.

(25:06):
I'm going to meet your wife someday. Such a good sport you're listening
to. Simply money presented my ownworth financial I Memi Wagner along with Stee
Ruby as one of our favorite people, our good friend already from Game Time
Budgeting, joins us tonight, jokingthat he realized that his wife's sort of
fun money was not put into heraccounts, as they have kind of set
that up, and he sort ofhad a little experiment to see how long

(25:30):
it took her to realize that.You know, I want to back up
from this a little bit more,because there is no one that I have
ever met who is more intentional withtheir money. Than you and your wife
talk briefly about the fact that youdo annual meetings with financial goals, you
do monthly meetings, and that youreally make sure that every single dime,

(25:51):
every single penny that's coming into thathome is put to good use. Yes,
ma'am. So this is something thatwe've been doing. Heck, I've
been married now twenty one year,so going on twenty two as soon as
my next anniversary hits. But everyyear we sit down and we talk about
some of the goals that we havefor the next year, and then we

(26:11):
just start planning how to make thosegoals happen. Because, as you two
both know, it takes money toget anything done these days, right,
So once we set like what thatbig goal is and attach a dollar value
to it, then we just startstashing money in different areas to make sure

(26:32):
that we can pay for some ofthese things. Well really everything in cash
by the time the do date rollsaround, so to speak. So as
an example, I think I mayhave mentioned in another show that because we're
having a big birthday this year,we wanted to spend more money. So
of course I started planning a longtime ago because when my wife tells me

(26:53):
she wants to do something big,I already know that that's gonna be a
lot of dollars, right exactly,So I just started funneling more money to
the vacation account. So now theladiest thing is that she wants to remodel
the bathroom. So once I figureout what her vision is, then of
course we'll figure out how to makethe money match the vision. But in

(27:15):
addition to those like annual year endreviews, we also just plan how the
money will behave every month. Andbecause we've been married for so long and
we realize what we enjoy as acouple, you know, we kind of
do the same things over and over. Like most people. You know,
we love to travel, we lovegoing to shows, we like going to
plays, we like outdoor jazz concertsand things of that nature. So we

(27:38):
just always make sure that we stayahead of any events that may be coming
through town so that we can goahead and build it into the budget instead
of waiting till like a week beforea specific event and then trying to find
the money. Because typically nothing reallyworks out well when you are in a
crisis mode with money, that itmakes a lot of sense. So as

(28:02):
a result of this experiment, wereyou able to successfully lower your wife's allowance?
No, I was not. Yeah, that wasn't even a thought.
That not even d But you knowwhat I did learn. Remember back in
the day when we had the conversationabout my wife wanted to increase her allowance,
that experiment let me know that shedidn't really need the extra money,

(28:23):
She just wanted it because it wouldbe nice. So I'm like, hey,
whatever works for you. You know, we learned so much from you
in the way that you and yourwife budget. And I'm telling you,
if anyone is ever behind the eightball like you live, and you give
your money a job the way thatyou guys have, and then you can

(28:44):
get yourself out of any situation.We always appreciate your insights. My friend,
you're listening to Simply Money presented myall Worth Financial. Here in fifty
five KRC. The talk station you'relistening to Simply Money is all Worth Financial,
I mean Wagner along with Steve Rebe. If you've got a financial questions
keeping you up at night, there'sa red button you can click on while

(29:07):
you're listening to the show. It'sright there on the iHeart opera cord your
question and it's coming straight to us, and straight ahead. We're gonna arm
you with some negotiating power. Thenext time you go car shopping, maybe
something you haven't thought about before.Time to play fact or fiction. And
there's really no play about the factthat people all the time hear something about

(29:30):
money and it's an absolute myth andthey make a bad decision based on it.
So this is something that we're reallypassionate about, is separating fact from
fiction. So you know better,I'm gonna go with the first one here,
fact or fiction, mister Ruby.A Wroth conversion and a backdoor Roth
conversion same thing fiction. A Rothconversion, you can take any amount of

(29:51):
money that you have in a traditionalor a pre tax IRA or four one
K and convert that to Roth.It doesn't matter what your income is.
There's no ca apps on what you'reearning to make this happen. Well,
let me correct that it does matterwhat your income is, because the higher
your income, the more taxes you'regoing to pay on that conversion. But
nothing, there's no rules stopping itfrom doing it. A Roth backdoor conversion

(30:12):
is when you make too much moneyto make a roth IRA contribution, So
you contribute to a traditional ira onan after tax basis, funnel that money
through into the roth ira. Sortof confusing, but that's capped at what
the IRS limits are for a contributionin that year. There are income limits
for putting money into a roth ira. I have a friend who is a

(30:36):
brilliant and be well compensated for herbrilliancy right, and so several years ago
we were talking about because you know, I'm so cool when I go out,
we're talking about how we invest ourmoney planning for retirement, and she
made the comment that she and herhusband couldn't put money into a roth ira
because they make above the income limit. And I said, well, you
can backdoor roth and she said thatis not a thing, and I said,

(30:57):
actually it is. And it's funnybecause she works for a large financial
services firm, she wasn't aware thatthis was a strategy, and it's essentially
kind of a something that happens onpaper. But you put the money into
a traditional ira, then you immediatelypay the taxes on that and convert it
into a wroth ira. This canbe done. A wroth conversion happens at

(31:17):
any point, not just when thatmoney goes into an IRA. But this
is traditional IRA money, money thatyou haven't paid taxes on yet, and
it's a strategy that can make alot of sense, But the timing of
these two things would look very different. There are important caveats as well,
so you speak to a financial planneror a CPA before you pull the trigger
on anything like this. Factor fiction. I'm going to give you one.

(31:40):
I can do it. If you'rechoosing to get deferred compensation, you want
to invest it as conservatively as possible. I think fiction. I'm going to
agree with you. I think fictionon this because for many people, this
is sort of another version of afour to one K. It is a
retirement vehicle that you're using. Soif your years of way from retiring,
you don't necessarily want that money tobe conservative. Now, let's talk about

(32:05):
what deferred compensation looks like. It'soften for highly compensated vehicles. People like
executives in companies and they can say, listen, I don't need all of
this money. Now. You keepthis money back, you invest it,
and I will take it likely asa lump sum upon retirement. Right,
it's money that's going to come tome later. Often though, you don't

(32:25):
have a ton of choices, andsometimes your choice is more company stock.
Yeah, sometimes your choices you getkicked in the teeth with taxes when you
retire, because sometimes it's just alump sum payout of these dollars that have
been tax deferred. Sometimes it's athree year payout, sometimes it's a five
year payout. But the benefit thereis that you have more tax deferred money

(32:47):
growing. It's not counting as towardsyour income when you receive it into that
account. So yeah, I meanyou invest with it based on the time
horizon until you'll need it, notthe fact that it's different compensation any It
is an investment vehicle for retirement,just like a foural on and K.
So if your four one K iseighty percent stock, that's what this should

(33:08):
be. Right. Just because itis a different way of saving doesn't mean
you invest it differently. Let megive you the next one fact or fiction.
In general, social security this isan easy one. Surely make up
about forty percent of someone's income.Sure fact. Yeah, I mean,
soci security isn't meant to replace allof your income. Social Security is a

(33:28):
safety net, a security blanket forthose that don't have anything else. So
you do not want to count onsocial Security to float you through retirement.
You want to expect it to besome kind of a cash flow on the
side. Almost. I want togive you another one quickly, fact or
fiction. Owning one hundred stocks makesa portfolio diversified. Oh, I don't

(33:52):
like this one. It depends.I mean, there's arguments out there that
you can create a diversified portfolio withliterally twenty to thirty stocks. There's plenty
of people that feel that that isthe reality. But if you have one
hundred tech stocks, are you diversified? The answer is not at You need

(34:13):
to be spread out across multiple differentsectors, different sized companies, domestic,
international. You could do that withtwenty five or thirty stocks, but with
one hundred, depending on where they'reinvested. Yeah, this one, I'm
sure fiction depending on XYS. Ithurts my brain to think about choosing one
hundred different stocks and making sure thatI've got emerging markets in small caps and

(34:37):
large cap growth stocks and large capThere's so much to take into account to
be truly diversified. I would notrecommend trying this one. Coming up next,
we're breaking down a situation into cardealership where you actually have the leverage
what you need to know. You'relistening to Simply Money, presented by all
Worth Financial here in fifty five KRC, the talk station. You're listening to

(35:04):
Simply Money because of my all WorthFinancial, I mean wagon along with Steve
Ruby. One of the things Iwill never forget about when we were going
through the pandemic is car lots.I don't know if you bought any cars
during that time or drove by lots, Steve, but you get used to
like the norm of like all theballoons outside and all the cars in the
parking lot, and because you couldn'tget chips into cars because there were all

(35:28):
kinds of supply chain issues, itwould be like four cars for sale on
a lot and twenty people trying tomake offers on them at the same time.
It was really creepy. It wasbizarre. We're coming out of that
time and getting to a more normalplace again where there's actually inventory on lots,
thank goodness. So now new andused car prices are kind of starting

(35:51):
to come back down, and nowwe're getting to a place where you might
actually have some leverage and negotiating atleast on maybe some of these cars.
On some of them, it dependsreally based on how long that car has
been sitting on the lot. That'sthe bottom line. When a dealership first
gets a car, there's no reasonat all for them to lower prices if
customers are immediately interested. But thelonger that car has been sitting there,

(36:14):
and that's a luxury that some peopleare seeing. Now it's not like COVID
anymore, when supply chains are completelydisrupted. There are vehicles on lots for
longer periods of time, and whenthose have been sitting there for a while,
that gives you a little bit morenegotiating power to try to get a
better price on that vehicle. Someof the research shows, especially if that
vehicle has been there for at leasta couple of months, right, sixty

(36:37):
days or more, then all ofa sudden that they're looking at that,
Gosh, this car has been sittinghere for a while, like, are
we going to be able to moveit? Yeah? How do you know?
Right? How do you know thatthat car has been sitting there?
So one of the things that we'veall sort of been conditioned to do is
look at that Carfax report, right, that's incredibly important. One of the
things listed on that carfax report shouldbe the date that that vehicle was listed

(37:00):
for sale. Look at that carfax. If it has been more than
sixty days, voila, you likelyhave some leverage. They want to get
that car off the lot. It'sbeen sitting there for a while. You
can likely make a lower offer onthat car. Yeah, you can.
Also you have the ability to lookat some of the inventory details directly at
a dealership. If the vehicle's listedon the dealer's Auto Trader inventory for more

(37:22):
than a month or two, thenit's likely that it's slowly going to be
dropping in price, and at thatpoint also giving you an opportunity to have
some negotiating power. What I don'tknow, I think about like the real
estate industry, and not right nowbecause there's not a lot of inventory out
there, but in historically, youknow, if a house has been on
the market for ninety days, onehundred and twenty days, they'll pull it

(37:44):
off the market and relist it aweek later, and it's like that clock
resets. Yeah, because I thinkoftentimes if you're looking at a home,
you're like, something must be wrongwith that home. It's been on the
house, you know, it's beenthe market for several several months. I
don't know if there's a way thatcar dealers can do this with the inventory
listed on their website, which iswhy I'm saying check that for sure for
starters, but also go to thatCarfax report because it should be on there

(38:06):
as well. Yeah. I mean, there's actually a term for this within
the industry. It's called aged inventory, and that's what you're looking for,
whether it's Carfax or directly, youknow, looking at some of the paperwork
at the dealership when when was thatlist? When was a vehicle listed for
sale? Things like that. Ifyou can identify the aged inventory, then

(38:27):
that's going to give you the opportunityto negotiate that. I love negotiating for
cars. I think I do too. Oh, It's one of my favorite
things and really out of the gatein college, I absolutely loved it.
Here's another tactic for you. Thanksfor listening tonight. You've been listening to
Simply Money, presented by all WorthFinancial here on fifty five KRC, the talk station