Simply Money

Episode Transcript

(00:09):
You're listening to Simply Money, becauseI I all Worth Financial on Amy Wagner
along with Steve Ruby. When wecome to talking about your four one K,
we talk a lot about Wall Street, but there's also what's happening on
Main Street, and sometimes they're notthe exact same thing, right, The
economy and the stock market not thesame thing, Although I think it can
be incredibly confusing sometimes when you hearhow other media talks about that. So

(00:34):
joining us tonight with his perspective righton how we can understand the difference between
the two is a Paula Lapascu.He's a vice president of Dimensional Fund Advisors.
More importantly, though he's known asthe secretary of explaining stuff. You
will learn something by listening to him. Apaula, let's get to this.
This can be incredibly confusing when wetalk about Wall Street versus Main Street,

(00:57):
the economy versus the stock market.It yeah, and and it's true because
so many people feel that at timesthe markets and the economy are disconnected.
You know, why is the marketgoing up and down when the economy is
good or bad? So there's definitelythere are times when when there's that feeling
among investors. Uh And, andto begin with, let's try to define

(01:19):
these two terms, the markets andthe economy, because they are certainly related,
they have to do with business,yet they're not the same. So
what's the difference between the markets andthe economy and why should you expect times
they will behave differently? Uh So, when it comes to the economy,
uh Amy and Steve, the economyis basically what is going on at the

(01:42):
moment with the the economic output ofthe country. What we know is the
GDP, what is the inflation rate, what is the unemployment rate, what's
the consumer confidence? All of theseare reflected into what is going on at
the moment right now in the economy. Now, the economy is really pertaining

(02:07):
to the conditions at the moment,and I want to reinforce that because these
conditions change from year to year,they change from month to month, and
they're different than what the stock marketis because the stock market, as opposed
to economy, is not about rightnow about the current conditions, but rather,

(02:29):
the stock market is about ownership incompanies. That's what the stock market
is all about. It allows youand I to buy ownership in different companies,
companies that we did not start Idid not start Microsoft, and yet
I am allowed to go buy ownershipin Microsoft, which entitles me to part

(02:50):
of the profits that the company makes. That's why you buy ownership at any
company. And if you think inthose terms, the stock market is not
really about just what's at the moment, but also what do I expect to
get as a business owner for yearsand years and years down the road.
And the value of a company,which is what the stock market reflects,

(03:15):
is based on the expectations that investorshave of earnings for that company for years
and years and years down the road. So the reason that the markets and
the economy are not the same isbecause, in a way, if you
want to think like an analogy,the economy is about your paycheck today.

(03:36):
It impacts your paycheck today. Thestock market is your paycheck from the future.
That's the big difference is the timehorizon. The economy is about right
now, the stock market's about thefuture. And I have just a great
memory of being a kid and mydad giving me a black and white studio,

(03:58):
and not a studio, but spendinglarger with some trays, and I
used to print black and white picturesand recently my daughter sorted the same thing
and shoot black and white film,and it was interesting because it created this
analogy in my mind that the economyis a snapshot, it's a frame on
a film, whereas the stock marketit's a much longer, longer running movie.

(04:20):
And this is one of the many, many, many scenes, many
frames in the lifetime of a company. And how long can this last?
Well, you have companies like ExxonExon. If you go on their website,
it lists cash payments made to investorsgoing back to nineteen eleven, over
one hundred and ten years. That'show long this movie lasts for a company.

(04:45):
So what the market's really trying todo is assess the prospects of a
company looking forward. And in thatrespect, that's why we often say that
that stock markets are forward looking.In other words, it is looking ahead
of what they expect and and andthe analogy that I like is that if

(05:06):
it's a if it's a sunny dayand the sky is bluinggether the sunshining,
But then you see clouds on thehorizon and you know the rain is coming.
What are you going to grab anumbrella before the rain gets there?
That's what I mean. By forwardlooking, and that's exactly what the markets
do. The markets are forward looking. Uh. If we are in a

(05:27):
good economic situation, but the marketbelieves that there are some rainy conditions on
the horizon, it's going to getan umbrella and adjust prices before those conditions
happen. Uh. And the oppositeis also true, And this is where
we hear a lot about markets beingdisconnected from reality. We can have a
very bad economic situation, but becausethe markets are forward looking in those years,

(05:53):
the markets might go up. AndI'll give you three recession examples.
In nineteen eighty, which is aterrible economic year for the country, we
had a very deep recession that year. The SMP five hundred was up over
thirty percent in that deep economic recession, not because the markets are crazy or
disconnected from reality, but rather becausethe markets were forward looking and we're seeing

(06:17):
the better days ahead and pricing thatin before they even came. The second
example is the very bad recession wehad during the Great Financial Crisis. Two
thousand and nine was considered to beone of the worst economic years since the
Great Depression, and yet in twothousand and nine, that terrible economic year,

(06:38):
the SMP five hundred was up twentysix percent, more than twice the
long term average. Not that marketsare crazy, but what the markets were
seeing was the light at the endof the tunnel, and they're pricing that
in before it came in. Inother words, it was a cloudy day,
it was a lot of rain,but they saw the sunshine and they

(06:59):
grabbed some sunblock before the sun came. And then in twenty twenty, the
last recession we had on record,once again, terrible economic here, everybody
was stuck at home. The marketswere up eighteen percent, not because they're
disconnected from reality, but because theyare forward looking. So be careful with
that assessment that the economy doesn't lookgood. Quite often it's the markets looking

(07:24):
ahead, and if the economy doesn'tlook good at the moment, it's quite
possible that those conditions were priced inway before. Might be one of the
reasons why in twenty eighteen, nottwenty eighteen, but in twenty one,
the markets twenty two. So themarkets went down, and it could be
the reason that they're anticipating in marketdownturn. It never came because things look

(07:46):
pretty good. But again it's notsomething that would react on because the economy
are looking good or bad, thosethings are already priced in because the markets
are forward looking. Should be requiredlistening for people that say to themselves,
this time is different because we act. Again, we've recently talked about fear

(08:09):
and greed, and it's easy tolook at news scaring you into thinking that
the economy is going to tank,but really should should anybody actually act on
that information at all? I thinkthe markets are acting on that every single
second. But there are forming expectationsabout earnings of companies not over the next

(08:33):
year or two, but five,ten, fifteen, twenty thirty years down
the road. Because again, ifyou're going to own a piece of a
company for the next one hundred yearx, like it's been the case,
well the market's not looking just totry to get an assessment over the next
year or two, but really muchlonger time horizon. And Steve this idea
of being different this time, areyou getting I mean, it's been a

(08:56):
perennial question. You know, it'sdifferent this time, and you know,
if you don't mind, it's beeninteresting because I've been getting this question from
my family. Oh yeah, andthey well, it's different this time,
And initially I kind of said,well, perhaps we've seen something like this
in the past, and then Ikind of listened to myself, what am
I talking about? I me,you know, I'm fifty five years old.

(09:16):
I've never been in a pandemic,stuck at home. I've never been
in this high inflation, with thewar in Europe with another one in the
Middle East, that those are prettyunique situations. And the more I thought
about it, I have to acknowledgeto myself that it is different this time.
Without a doubt, it's different thistime. I've never had this particular

(09:37):
confluence of events happening at the sametime, so I would say it is
different this time. And what Iwanted to know is that by being different
this time, does it mean thatthe old rules are gone, that everything
that I knew about investing is nolonger valid. And that was a question
that I pondered, and then itgot me thinking of speaking of the pandemic.

(10:01):
I watched at Netflix show Queen's Gambit, and you know, may I
don't know if you guys watched it, but one of the things that came
out of that is that I startpicking up chess. I'm not good at
it, but I'm persevering, andwhat I realized is that in all the
games that I played, I havenever ended up two games in exactly the

(10:22):
same position. Every single game endsup in a different situation. And that's
kind of one that got me thinking, this is different the same way that
every single game of chess ends upin a different position. And yetting chess,
there's a fundamental premise that stays thesame. You have a chessboard or

(10:43):
sixty four square sixteen piece on eachside, and that doesn't change. And
what I wanted to understand is whatis the chessboard of investing that fundamental premise
that stays the same even as theseconditions might be different, this confluence of
events might be different. And whatI really thought about that and it really

(11:03):
spent a lot of time, andin my opinion, the chessboard of investing,
the fundamental premise that stays the sameeven as different periods are different in
circumstances is the fact that in thestock market, we are buying ownership in
companies that operate in free markets,and these companies will find a way to

(11:28):
make money irrespective of the state ofthe world. If there's a pandemic and
you don't have customers. Well,a lot of the hotel chains laid off
people. If you couldn't sell spirits, you brew hand sanitize it because that's
what's sold. And at any momentin time, companies will try to find

(11:48):
a way to navigate those times.And to me, that is the chesst
of investing free markets, capitalism andthe fact that companies have that desire to
make money. And I have nodoubt that when the CEOs of companies go
to work, one of their primaryconcerns, if not the primary concern,
is how do I keep this companyviable and how do I make money?

(12:11):
And it's not going to work atevery day, it's not going to work
at for every company. But asa market, as a system, that's
what gives me confidence. So isit different this time? Absolutely. The
one thing that stays the same isfree markets drive companies to have self interest.
And it's not about Gordon Getko andthe greed is good. It's much

(12:31):
more fundamental. That is that thatcompanies adapt and that's that's companies evolved and
they're resilient, and I think thatis the true chess part of investing the
resilience of individuals. The resilience ofthe companies, which ultimately drive the resilience
of the stock market. Only ApolloLpescu could use a chess board to make

(12:54):
us understand the markets better. Weappreciate your insights always. You're listening to
Simply Money presented by all Worth Financialhere on fifty five KRC, the talk
station. You're listening to Simply Moneypresented by all Worth Financially meeting you Wagner
along with Steve Ruby. Great perspectivefrom Apallo la Pasco on the difference between

(13:18):
Wall Street and Main Street. Reallyimportant differences there. If you were listening
and you thought, oh, Iknow someone who needs to hear this,
please share them. Share with themthat we have a daily podcast. All
you have to do is search SimplyMoney. It's right there on the iHeart
app or wherever you get your podcasts. And coming up at six forty three,
we've got a retirement factor fiction popquiz. How well will you do?

(13:43):
All right? So let's talk aboutinflation, not the kind though necessarily
that you find at the store,unless we're talking about standing in line at
the pharmacy. We say all thetime on the show that healthcare costs,
that the price of inflation for healthcare, the rate of inflation far outpaces regular
inflation. But now let's drill downon prescription costs. Yeah, so findings

(14:05):
published by a good RX, whichis a drug savings company. It shows
a list of prices for prescription drugsand they've climbed about thirty seven percent since
twenty fourteen. Thirty seven percent.That could be a significant burden on those
of us that have lots of prescriptions. Well, and it used to be
the case that even if you hadseveral prescriptions, you didn't have to worry

(14:28):
about it. Most of that theburden of that was carried by your insurance.
But what we're starting to see nowis, because these costs are getting
so high, what's your insurance companygetting to take it on the chin?
Absolutely not, They are passing italong to you. Yeah, it's frustrating
to my wife has a prescription thatshe needs to get filled. Our insurance
doesn't. Well, they cover forthe generic, but she had an allergic

(14:52):
reaction to the generic, and everytime it gets called to the pharmacy,
the insurance company says, try thegeneric, Try the generic. To the
point where it's this battle between us, the insurance company and the pharmacy.
And that's just an example of howthey're trying to pass that cost savings or
that expense that is onto the consumer. Yeah, I mean this is crazy.

(15:15):
Just above half of medications are coveredby insurance, right, that's a
huge percentage that's not. And thosethat are covered by medicare often have an
insurance restriction. Right, there's priorauthorization and sort of what you're talking about,
Steve, all these sort of loopholesand all these hurdles that you have
to jump over in order to getcoverage. In fact, insurance deductibles has

(15:37):
nearly doubled over the past decade,going from nine hundred and seventeen dollars to
about sixteen hundred dollars. And sothis is why we preach this all the
time. You can be the healthiestperson in the world in your thirties,
forties, fifties, early sixties andthink, okay, well I've got everything
I need for retirement. We'll say, okay, well have you baked in
additional costs for health care? No? So healthy, I don't need it.

(15:58):
I don't have any prescriptions. Andthis is why it's so critical.
Right, one diagnosis, one specialistthat you're told one fall, one broken
hip, whatever it is, andall of a sudden you're tossed into this
world that is incredibly expensive and you'vegot to prepare for it financially. Yeah,
that's exactly what we're talking about prescriptioncoverage right now, because you need

(16:19):
to account for different expenses and retirementwith different inflation rates. And this is
a perfect example of what that lookslike in our pocketbooks today, and it's
just going to get worse in thefuture as you get older and you have
more medical needs. You know,in the world of investing, the tortoise
wins the race, right, butso often many your food and embedding on
the hair. It just sounds moreexciting, it's sexier. And in our

(16:41):
world, one example of that lookslike investing in passive funds versus active funds.
Right. Passive funds nothing sexy aboutthem. You know, often they
just follow a benchmark like the Sand P five hundred. There's no one
actively managing them. And then onthe flip side, you know, actively
managed funds, you're going to paymore. There's higher cost because you are
paying some really supposedly smart muckety mockwith eighty seven degrees, lots of initials

(17:07):
behind their name to constantly be buyingand selling and buying and selling and trying
to do research and figure out whatthe next big thing is. And that
can sound great for you. Theproblem is the research shows you're paying extra
and you're getting no benefit. Yeah, I mean, there's plenty of problems
that exists, and what we're talkingabout here mostly is your front loaded a

(17:30):
shares of actively managed mutual funds andbuyer beware. There are different types of
advisors that exist in this world.You know, we advocate for fiduciaries,
those with letters after their names likeCFP, SAF hey, some others.
There are advisory in quotation firms outthere that still share that still sell these

(17:52):
actively managed front loaded mutual funds thatcould come with expenses as high as six
percent commission, and research goes toshow time and time again that very rarely
do these actively managed mutual funds actuallyoutperform the market. Now keep in mind,
if you're working, you know,just an example, some of these
companies could be American Funds still sella lot of these. I see American

(18:14):
funds all the time. Yeah,Ed Jones still sells a lot of these
these These are the high commission productsthat the sales rep that sold this product
to you receives that commission. Soif you give ten thousand dollars, then
you're automatically at a loss for thecommission that you're paying towards that product that's

(18:36):
maybe not even going to beat themarkets over the long run, probably not
going to beat the markets over thelong run. Well, first of all,
let me ask you this, howmany investors come into your office one
of these funds and even understand thatif they thought they invested ten thousand dollars
actually invested ninety four hundred. Imean, there's not a lot of transparency
around these. First of all,no, there's not, So you're paying
more for something that offers less.Also, mutual funds shoes with taxes,

(19:00):
and this is one that's a littlefrustrating to people that hold these things.
They don't realize why, even thoughthey haven't realized any gains, they're being
forced to pay taxes. That's becausethe dividends and capital gains earned within the
mutual funds pay out during the yearto the individuals that hold them. Unlike
exchange traded funds with low expense ratios, that cast a large net and actively

(19:22):
or passively mirror an index but stillget the job done. There's a lot
of confusion around some of these investmentsand a lot of expenses that are unnecessary.
Yeah, well, and you referto this earlier, but I mean,
year after year research is done onthese actively managed funds versus passive funds
and which ones come out ahead.Most actively managed funds have underperformed their benchmark

(19:45):
consistently for more than twenty years now, right, So it's easy to think
I'm going to jump into this andthey're going to get it right. They
rarely do, and you're paying morefor it. Here's the all Worth advice
for the majority of investors patients.Discipline and consistency is going to get you
where you want to go. Soboring here is not bad. Coming up
next to Simply Money scam tracker firedup and ready to go. The new

(20:06):
ways criminals are trying to rip youoff. It has to do with Amazon
Prime days. You're listening to SimplyMoney presented by all Worth Financial. Here
in fifty five KRC the talk station. You're listening to Simply Money presented by
all Worth Financial. Amami Wagner alogis Steve Ruby. Have you marked your
calendar? Are you so excited becausewe have more Amazon Prime Days coming up

(20:30):
next week. Used to be avery special thing that happened once a year.
Now I feel like they happen quiteoften. But there are of course
scammers that are trying to get toyou during Amazon Prime Days. And joining
us tonight with what you need toknow in order to protect yourself so that
you are not a victim of thesescams is of course our good friend Josiale
erlik with us and Sunny Better BusinessBureau. We always say this, Joe

(20:52):
Siale. Wherever people are and they'respending money, that's where scammers are going
to be. You've got that rightnow, talking Amazon Prime Day, and
that is arguably the largest sale inthis country. Now. Amazon sells most
of its own products as well asproducts of name brand companies, but many
of their listings are from third partysellers, most of whom are reputable,

(21:17):
let's hone in on the word most. Some of them sell fake merchandise or
advertise unbelievable deals that will only resultin you getting scammed. So if you're
planning to take advantage of Prime Daydeals, here's some tips to make sure
that you have a positive experience.First, only click on the Amazon Prime

(21:37):
box now. That will limit yourexposure to phony online ads and provide you
a level of protection. Don't clickon products that don't have reviews. Just
about everything for sale is going tohave reviews, good or bad, So
if there aren't any reviews, considerthat your first warning that the company may
not be on the up and up. Now, when you do your research,

(22:02):
don't just research the product. Researchthe seller. Google their name along
with the word scam and see ifpeople had issues with either the product,
or the company or the person sellingit. Now, if the ad contains
bad spelling, poor descriptions of theproduct, or poor grammar, that's another
warning sign you should be dealing witha fraudster. And if the price seems

(22:25):
to be too good to be true, it's probably your biggest clue that it's
a scam. Do some comparison shoppingfor the same item, and if there's
a big difference in price, youcould be dealing with someone who is not
legitimate. It's easy to see alow price and think, you know it's
Amazon Prime Day, it must bea really sweet deal. Now, is
the time for me to hop onboard and buy the thing that I've been

(22:48):
waiting to buy. But what you'retelling us here is that we need to
be a little bit more diligent,a little bit more cautious when it comes
to something that we see that mightbe too good to be true. And
an easy way to check into thatis by doing a quick Google search of
the seller combined with scam. Ireally like that idea. That's great.
Now, now I've also heard ofsomething here called Amazon impersonation scams. Can

(23:12):
tell us a little bit about that. Figured, Yes, since we're talking
Amazon, let's just carry this conversationonto the impersonation scams. Now. According
to the FTC, Amazon is themost impersonated business, with about one in
three people reporting a scammer pretended tobe from Amazon in order to scam them.

(23:33):
Now, the end goal, ofcourse, is to get your credit
card or your banking information and anyother personal information they can get from you.
In twenty twenty two, people lostmore than twenty seven million dollars to
these Amazon impersonation scams. Now,one scam we see frequently is the Amazon
shipping scam, which seems to increaseafter Prime Day, so keep track of

(23:56):
what you ordered and when it's expectedto be delivered. In this particular scam,
they try to bait you by sendinga fake problem delivery. Notice,
you might get a text that there'ssomething wrong with the address, or they
attempt a delivery but they couldn't forsome reason. And of course they want
you to click on a link orcall in number to straighten out the matter.
Don't do it. First check thetracking number you were provided at point

(24:21):
of sale for any packages that you'reexpecting. If there really is a problem,
you're going to find out from thislegitimate website. And if there's no
problem, just delete the text.And by the way, this shipping scam
isn't limited to Amazon. It's avery common scam. I got a couple
of these last week. They're justfrom scammers just fishing to see if they

(24:41):
get a bite and see if theycan get your bank account information and then
you're on the hook for whatever.Yeah, you know, I've got these
too before, Josille, And Iknow often they'll hit around the holidays because
you're ordering so much it's kind ofhard to keep track of it all.
Really smart then that they would focuson Amazon Prime days as well, because

(25:02):
people are likely ordering more than theynormally would like. My daughter is heading
off to college for the first time, so we are waiting for the Amazon
Prime Days to buy some stuff forher dorm room. I imagine we'll have
several packages coming in. If youdon't track those closely, you get one
of these text messages, you couldeasily fall victim. Right, Amazon Prime
Days is a shopping holiday, andpeople spend a lot more than they expect,

(25:26):
buy a lot more. Keep thosetracking numbers that you get at point
of sale handy and pay attention.You know this product is going to be
delivered on Tuesday, this product isgoing to be delivered next week, whatever.
Don't respond to those texts. Thosetracking numbers are vital information for you
now. In another scenario, youreceive an email or text or even a

(25:49):
phone call to confirm the details ofa fake Amazon purchase. Don't fall for
that one. Instead, contact AmazonCustomer Service directly, either through the Amazon
App or the website to verify ifthere really is an issue with a purchase.
Another common tactic is to threaten tosuspend your Prime account unless you resolve

(26:10):
some fake issue quickly. Of course, all with the goal of getting your
personal financial information. There's also beena big rise in Amazon membership renewal scams,
which again is just another ploy toget your credit card or your bank
account information. So when it comesto you know, obviously these are timely
conversations because of Amazon Prime Day,which seems to be on the up and

(26:33):
up, we get a lot ofthese throughout the year. But what other
scams are you looking at that thatwe should be mindful of, aware of,
and what do we do about.There is a couple of travel scams
I wanted to alert your listeners too. There is a new online passport renewal
system, so of course anything new. Scammers are taking advantage of people by
creating bogus websites to allegedly help yourenew your passport for a fee. If

(26:57):
you've ever gotten a passport before,you know that it asks for all kinds
of personal information, information you don'twant in the hands of a scammer.
The fact is you can easily renewyour passport by completing the free download available
at Travel dot State dot gov andfollowing their simple instructions. For a straight

(27:19):
renewal, you just fill out theapplication, attach your little picture, and
close a check and drop it inthe mail to the passport processing center.
You don't have to pay for anyprocessing fees to a third party. You
only need to provide for the renewalitself, payable to the US Department of
State. If you're short on time, you can expedite your passport renewal for

(27:41):
an extra fee, but it stillmay take several weeks justice quickly. I
want to get to something else,the international driver's permit scam? Is this
the new kind of permit that we'reall going to have to get in the
next couple years, because I thinkthere's so much different information out about there's
so much confusion. I can seepeople easily falling for this one. We've
got about a lesson a minute left. Can you tell us about this one?

(28:04):
International drivers Permit. Foreign countries oftenrequire you to have this if you
are going to be driving in yourcountry. OK, this has been in
place for a long time. Theonly place you can get this is Triple
A. Yes, that's right,American Automobile Association. You can apply in
person at a Triple A office orby mail, and if you're planning on

(28:25):
renting a car, check to seeif they require an IDP. Even if
the country doesn't require it, therental car agency may require it before renting
you a car. Again, neverapply for an international driver's permit online from
any website other than Triple A.Great advice as always from our good friend
joseille Erlik at the Better Business Bureau. It's the summer mind Sray. People

(28:48):
are shopping on Amazon Prime Day.You are traveling, You've got to protect
yourself. Make sure you spread theword to friends and family as well.
You're listening to Simply Money presented byall Worth Financial here on fifty five KRC
the talk station. You're listening toSimply Money presented by all Worth Financial and
Memi Wagner a long wisdy Vrub.Do you have a financial question you just

(29:10):
can't figure out on your own.It can make a big difference in your
long term planning. Well, there'sa red button you can click on while
you're listening to the show. It'sright there on the iHeart app. Record
your question. It's coming straight tous. We'll help you figure it out
and straight ahead. If you havea vacation anytime soon, you're leaving to
go out of town for a fewdays, what can you do to save
money at home while you're gone.Some of these things you may have never

(29:33):
thought of before. Okay, timeto play everybody's favorite gay retirement fact or
fiction. Now, some of theseare going to test your knowledge if you've
been listening to shows recently. Theseare major, major money information that we
have discussed recently, So let's getto it. Factor fiction here, it
makes better sense to contribute to aROTH ira instead of a traditional ira the

(29:56):
younger you are, I mean,in fact, generally speaking, I guess,
because one of the benefits of ROTHis the tax free gain potential.
Remember, when you make ROTH contributions, you're doing so with after tax money.
It is not a deductible contribution,but the dollars that you earn inside
of that account will grow tax freefor the rest of your life. As

(30:18):
soon as you hit fifty nine anda half years old, and as long
as the account's been open for fiveyears, that's when you actually realize the
tax free gains. So generally speaking, obviously, the longer time horizon you
have, the more tax free gainpotential you will put your money in.
Agreed and in a couple of caveatshere. First of all, the younger
you are likely the lower the taxbracket you're in, you know, if

(30:41):
you're first starting to work, sothat means you're lowing in a or you're
locking any super low tax rate,and then those gains are going to grow.
There are limitation income limitations on ROTHIRA rays. They're pretty high,
you know, one hundred and fiftyplus for an individual, even higher than
that for a couple. So ifyou just graduate and you are making,
you know, bringing home a prettypretty good salary, and there's there's ways

(31:03):
to get around that. Right backto a ROTH conversions, but just understand
there are a few rules there.Here's the next one factor fiction. You
could lose some of your company matchif you max out your four one K
two early in the year. FactI see this happen to people one time
and then like never again. Soit's something that you may be penalized on

(31:25):
of sorts. Because remember that youneed to be contributing to your four to
one K in order to get companymatch, unless there's a feature in your
four to one K plan called atrue up. Because what happens when you
hit the limit is your contributions willshut off. If your contributions shut off,
then you're not getting a match unlessthere's a true up feature. Then
your company comes in and they makeyou whole by making a lump sum contribution

(31:48):
of the match into your four toone K plan. So I say this
happens once because people get all excitedthey're finally making enough money or their you
know, their debt has fallen offto a point where they can save more
for retirement. They hit the limitand then they realize, oh, man,
I missed it on company match.Don't let this happen to you.
Check to make sure you have atrue up. If you don't, then
you need to spread your contributions outequally throughout the year. All right,

(32:12):
next one factor fiction. There arestrategies that you can use in retirement to
lower your tax burden. Absolutely fact. This is a great part of financial
planning. Tax planning, picking upa stick, jamming at and Uncle Sam's
eye is a way to keep moremoney in your own pocket. Just a
couple of examples could be qualified charitabledistributions. For example, if you are
of URMD age technically over the ageof seventy and a half, you can

(32:36):
start doing these. You can giveup to one hundred and five thousand dollars
of required minimum distributions. Now thatmeans you have to have a pretty big
four to one K or IRA toreach that level, but you're able to
give your required minimum distributions directly toa charity of your choice, and then
you don't have to pay taxes onthose distributions. Other opportunities could be opening

(32:57):
a donor advice fund, donating highlyappreciated stock. We see a lot of
that in this region with Procter andGamble. For example, Let's say you
inherited some shares in many years havegone by, and those shares have a
low cost basis, and you couldput yourself in a position where you simply
don't have to pay the taxes onthose distributions. This is where I think

(33:17):
that as financial advisors we really reallyprovide value right to the investors that we're
working with. You could have savedand invested well for years, but once
that money is not coming in anymorein the form of a paycheck into that
four oh one K, you've gotto switch. You're thinking right that the
amount of money that you have,it becomes incredibly important to protect it.
And one of the great ways thatyou can protect it is to keep more

(33:38):
in your pocket and give less toUncle Sam. And I think this is
where if you've never worked with afiduciary financial advisor before and you're getting ready
to retire, find someone that youcan trust, sit down across from them
and ask them specifically about tax planningstrategies. If you get someone who truly
understands this, we're talking about thedifference of tens of thousands of dollars that

(34:00):
you can keep in your pocket overthe course of your lifetime. So this
is incredibly important to get it right. Here's another one fact or fiction.
The beneficial beneficiaries you list on yourretirement accounts supersede the beneficiaries you named in
your will. This is absolutely fatand this is surprising to a lot of
people. I think it's like,well, wait a second, Like that
was an old four O one K. You know, I had put the

(34:22):
beneficiary years ago in we happened toget divorced and I'm remarried. But I've
readone this will, and my mynew spouse is in this will, so
that should supersede it. Right?No, And that's why again, one
of the conversations that your financial advisorshould be having with you pretty consistently is
have you updated these things right?It's incredibly important to keep track of them.

(34:43):
And no, you do not wantany surprises. I took on a
new household recently. You know somebodythat was divorced and they had children,
and you know they came from abig brokerage firm that was offering advisory services.
But this advisor never talked to themabout the important and so about the
updating beneficiaries. And there's a situationwhere all those beneficiaries were minor children,

(35:06):
in which case the courts would likelyappoint his ex spouse as the custodian of
the assets of something happened to him, so his money would flow through to
his children, but his ex wouldhave been the one to oversee it.
So we talked about building an estateplan that involved a trust and that would
solve for that. So you needto be particularly careful with with your estate
planning beneficiaries and making sure that youunderstand that your beneficiaries do supersede the world.

(35:30):
Important to understand. Coming up nextwill help you save money at home
when you aren't even there. You'relistening to simply money presented by all Worth
Financial here on fifty five KRC,the talk station you listening too, Simply
Money, presented by all Worth Financiallymedi Wagner along with Steve Ruby. You
know where is time where we're payingmore for everything thanks to inflation. Many

(35:52):
of us are getting out there andtraveling again. It all adds up.
Have you ever thought about the costthat you are a crew when you are
at the beach, in the mountains, at that national park at home?
Because today we're going to talk aboutways that you can save money when you're
not even there. If you're askingme, yes, I have thought about
it, and I do leverage someof these things. Programming the thermostat,

(36:15):
for example, if you have aprogrammable or smart thermostat, a lot of
them have a vacation mode, whichcan create a situation where where the degrees
of temperature go up or down alittle bit based on when it needs to
actually be on. And this typeof thing. If we're talking three degrees
for twenty four hours a day,you can save thirty percent on your energy

(36:37):
costs. Yeah, I mean,or if the weather is forecasted to be
kind of mild when you're gone,just turn off the thermostat altogether. Turn
off the ad. Also, there'scertain appliances and electronics that make a lot
of sense to unplugged. This issomething I don't really think about. Your
cable box, if you have one, coffee maker, your microwave, your
printer, your TV, your toaster, those kinds of things are just kind

(37:00):
of energy vampires. They suck evenif you're not using them, they are
sucking up energy. There are actuallya lot of them, make a lot
of sense just to unplug them evenwhen you're home if you're not using them.
Yeah, phone charger is an easyone because they keep using energy.
Energy vampires as somebody would call them. This is stuff where you're not using
the energy, but it's still beingexpended, which means you're paying for it.

(37:21):
This is one that I haven't done, and that's turning off or turning
down the water heater, which canactually account for about twenty five percent of
home energy consumption. So I haveheard situations where folks will actually turn their
water heater off when they're going tobe out of town knowing that they're not
going to be using hot water.And some water heaters actually have a vacation
setting. So check yours and seeif it has that also lights on timers,

(37:44):
so it looks like someone's home.But you don't keep your lights on
all day. You know, thatcan be a good thing. And some
of this too is cost saving,some of it is safety, right,
how do you make your home looklike someone is actively there. I also
want to say this, I knowthat a number of local police departments,
if you reach out to them,give them your address and the dates that
you're going to be gone, they'llsay, okay, when we're patrolling the

(38:05):
area, we will come by andmake sure that everything looks okay at your
house. So there's just like anotherlayer of coverage. If something looks off,
they'll reach off to reach out toyou. That's helpful. That's another
thing I haven't thought of so simpleones. I mean closing your window cover.
It's a way to save money,especially if you have the you know,
south facing windows where the sun isgoing to be shining into your house
in the summertime. That's that's anopportunity to just save a little bit.

(38:30):
Energy efficiency is it's low hanging fruitin a way to save some money on
your bills. So if you're goingto be out of town, you're not
using those you don't need to usethat energy. Then you know these are
just some quick and easy tips tohelp you save a little bit. Yeah,
good things to think through. Thanksfor listening tonight. You've been listening
to Simply Money, presented by allWorth Financial. Here in fifty five KRC,
the talk station