Simply Money

Episode Transcript

Speaker 1 (00:00):
Keeping you informed. Dad's up to date now now more
than ever, I.

Speaker 2 (00:05):
Like staying up to date on things.

Speaker 1 (00:06):
Fifty five krs the talk station.

Speaker 3 (00:14):
Tonight we have the inflation report that could steal the
deal for the first interest rate cut we have seen
in more than four years. You're listening to Simply Money,
presented by all Worth Financial Immi Wagner along with Steve Ruby.

Speaker 2 (00:27):
Gosh, this feels like such a distant memory.

Speaker 3 (00:31):
March of twenty twenty, the start of the pandemics impact
on the world.

Speaker 2 (00:35):
Some ways, it feels like yesterday. It's also amazing.

Speaker 3 (00:38):
To think that this was actually the last time the
Federal Reserve, our nation central bank actually lowered interest rates.
In fact, they did it twice that twice that month,
following to emergency meetings two weeks apart. Remember it was
so crazy, it was like, what can we do? We're
going into a global pandemic. Fast forward to now, maybe
we're getting close to rate cuts again. Joining us tonight

(00:58):
as he does every Monday, A Chief investment Officer, Andy Stout, Gosh, Andy,
that feels like forever ago. And since then, what we've
had I think eleven interest rate hikes.

Speaker 4 (01:11):
Yeah, we have interest rate levels now at you know,
their highest level in many years. Because of everything the
FED was doing, and this the other parts of the
government the federal government was doing besides the Federal Reserve
in terms of trying to keep the economy afloat. It
ultimately resulted in this inflationary spiral. And now we're sitting

(01:31):
here with rates right around five and a half percent.
And I'm saying rates. That's the interest rates the FED controls.
Other rates, like your mortgage rates, those are going to
be higher, right But unfortunately other rates like the money
banks want to pay you, like on your saving account,
it's going to be lower. So you know, that's something
to keep in mind there, you.

Speaker 3 (01:51):
Know, any the Federal Reserve has been keeping a close
eye on all kinds of economic data. And it's interesting
because Wall Street had been predicted several probably rate cuts
already this year that we haven't seen because just the
data hasn't bared that out. But we've got some recent
data outs, including the PCE, which is kind of the

(02:11):
core inflation report that they keep a close eye on,
that maybe shows we might be teetering on the verge
of finally looking at that pivot between you know, we
were hiking and now we're staying put to actually cutting rates.

Speaker 4 (02:25):
Yeah, if you look at the PCE, which is different
than the CPI report, and we don't need to get
into the financial word soup here or alphabet soup I
should say, but the CPI is your consumer price index.
That's what you normally hear in the news in terms
of inflation. That's what got up to nine percent, you know,

(02:45):
back in twenty twenty two in June of that year.
But what the Fed likes to look at is PCE
personal consumption expenditures. The reason they like that is it
includes more categories. It includes like mediccare spending by consumers
and other healthcare spending. It also allows for you know,

(03:06):
better capture of consumers switching from one serial brand to
another because it's less expensive, and that one is the
one that they're looking to get to two percent. And
right now, the core PCE, which excludes food and energy prices,
that's at two point six percent, so it's not too
far off. And if you look at the monthly changes
in the PCE over the past few months, it's certainly

(03:29):
moving in the right direction. So basically since January, what
we've seen on the PCE reports was these are monthly
ratings a point five point three point three, then it
gets better point one point two, So you're seeing it
move down and that's giving the Fed confidence that inflation
is on a path to two percent. That doesn't mean

(03:51):
the Fed is going to do anything this week. When
it meets, they'll probably just telegraph and say, yeah, there's
a good chance we'll cut in September. But it's certainly
makes the likelihood that there is a rate cut in
September pretty much a certainty. At least at this point
in time. It's it's one hundred percent certain that the

(04:13):
markets will see a rate cut from the Fed.

Speaker 3 (04:17):
Annie. Do you think the markets are being realistic right
now about how many rate cuts and what we might
see over the next year. So, I know they kind
of got aggressive toward the end of last year, you know,
predicting seven cuts that we haven't seen quite yet this year. Like,
do you think it's like the markets are behaving rationally
right now?

Speaker 4 (04:39):
Not two rationally? It seems like they've gotten the rate
cuts wrong many times here.

Speaker 2 (04:45):
Yeah, it does seem like that, doesn't it.

Speaker 4 (04:48):
Yeah, if you go back to last year, we have
four cuts priced in at the beginning of twenty twenty
three that nothing happened last year from that perspective, and
this year, basically at the very beginning of January there
were seven rate cuts priced then with the first one occurring,
it was either Marcher or April, someone right out there.
And obviously nothing has happened yet. So now when you
look at where the market's pricing in rate cuts, and

(05:12):
we can see this is by where interest rates are
right now, it has basically two to three rate cuts
this year, with a third one for sure happening by
January of next year. And the market's been consistently wrong.
I think a lot of it will really depend on
how inflation reacts to the environment, but also what's going

(05:33):
on with the job market. Remember, the FED has what's
called a dual mandate, where two big responsibilities of stable
prices i e. Stable inflation, which we arguably haven't seen
in quite some time. Also full employment, which you could
say we have seen recently, but there are cracks forming
in it, and we can see the cracks. One example
is the unemployment rate rising from roughly three and a

(05:55):
half percent now it's up to four point one percent.
So that suggests you're seeing some weakening of the labor market,
and there's other evidence that suggests the job market's weakening,
like the number of people filing for unemployment benefits on
an ongoing basis that has been rising. You can look
at the number of job openings that are out there

(06:16):
that's been falling. So when you look at all this together,
you see some cracks forming the labor market. The Fed's
keenly aware of this. So what we have noticed here
of the past month or two is the Fed starting
to talk about what's called a balance of risks. So
now they're not just worried about the inflation, they're also
starting to worry about the employment market. And that worry

(06:38):
does argue for rate cuts, So they want to lower
rates to keep the job market from essentially falling off
a cliff.

Speaker 3 (06:46):
Yeah, it's kind of taking your attention from sort of
Wall Street to mainstream what's happening with the average investor
and consumer right now? That was interesting Earlier today you
kind of mentioned not only what we're seeing in the
labor market but also savings rates together.

Speaker 2 (07:00):
That maybe paints a picture that some of us are getting, I.

Speaker 3 (07:03):
Don't know, maybe a little uneasy when it comes to
our financial picture.

Speaker 2 (07:06):
Can you talk about that?

Speaker 4 (07:09):
Yeah, absolutely, So when you think about where we're at
just from a broad picture and the overall economy, it's
pretty healthy. But I want to talk about it from
like the savings rate perspective. We saw that it just
fallowed to three point four percent from the data from
last week, and that's the lowest level we've had since
twenty twenty two, by the way. So look at this

(07:31):
combination and you have a savings rate falling, mean people
are you know, obviously not putting as much in their bank.
We're also seeing the unemployment rate move slowly higher, those
people collecting unemployment benefits on ongoing basis move higher. What
those two things suggest is that there's risk for people
earning more money in the future, so that future income

(07:52):
is at risk, so people are saving less, future income
is at risk. We're also seeing delinquency rates on credit
cards move high. These the signals that consumers are really
already feeling some financial stress. And when we put it
all together, it certainly suggests that spending, which is the
biggest driver of the economy, may pull back. It may

(08:14):
be forced to pull back actually in the coming months,
So not only are I'm talking about the savings right
in general, but the savings from everything from the Federal Reserve.
With the government doled out all the money. As you know,
COVID kicked in. You know, that's all gone, that's been depleted,
that's not out there anymore. So I want to say
the consumers quite yet running on fumes, but there's certainly

(08:37):
a decent amount of stress out there building.

Speaker 2 (08:39):
Well in just some perspective.

Speaker 3 (08:40):
Any rate, during the pandemic, we saw record high savings rates.

Speaker 2 (08:44):
I mean into the low.

Speaker 3 (08:45):
Thirty percent, meaning thirty percent of what you were taking
home you were saving at that time. And to your
point in neither were stimulus money that we had in
our accounts.

Speaker 2 (08:52):
There weren't no ways to spend money. We kept saying
during that time, hey, this is going to go back down.
But you know, the.

Speaker 3 (08:57):
Average is pretting me closer to four or five six percent,
not around three.

Speaker 2 (09:01):
So this is I think this is something to keep
an eye on.

Speaker 3 (09:04):
You're listening to simply money presented by all Way with
Financial and Memi Wagner along with Andy Stout, as we
talk about the numbers that the Federal Reserve is looking
at as they decide what to do now, and some
of this economic data coming in which is pointing very
closely that we will likely have a cut maybe in September.

Speaker 2 (09:21):
And Andy, I also want to talk about people's four.

Speaker 3 (09:23):
One case because many of us we took a hit
last week when it came to tech stocks. We're in
the middle of earning season right now, several major tech
companies reporting earnings this week.

Speaker 2 (09:33):
Should we be worried?

Speaker 4 (09:35):
Well, it's interesting how quickly Wall Streets turned on tech
stocks with the AI boom that's been going on, and
what the takeaway has been, at least from what we
saw last week with you know, Google's parent Alphabet and
that that stock fell six percent, and a lot of
it had to do with the Alphabet thinking about thirteen

(09:59):
point ti two billion and capital expenditures, which is money
they're reinvesting in themselves. That was about a billion more.
I mean we're just talking billions like it's nothing, by
the way, but that was about a billion more, right,
a billion more than what analysts were expecting. Now, despite
that sinking more money into you know, spending on themselves,
which is really just mostly not mostly, but it's a

(10:21):
good chunk of it's AI. What we're seeing as far
as Googles or alphabets excuse me, income statement, is that
where their revenue, where they're making their money that really
hasn't changed much. It's coming from their search engines, coming
from advertising. They're not getting money from AI. And Wall
Street's starting to wonder, is this like the early two

(10:44):
thousands internet craze where people were anybody could make up
some crazy reason to have an Internet website and you'll
make money off it. And the just the stock source
people are wondering, is that what AI is? When are
we going to make money off of this? And right
now they're not seeing it. I think it's probably a
little too early to expect any money from AI. I mean,
you obviously have to spend money to make money, as

(11:05):
they say, but we'll see how it plays out. And
so this week to your point, and we have Apple
releasing their earnings, so that's going to be scrutinized pretty
closely Meta which is Facebook, and they have their own
AI as well, and so it's when you look at that,
it's going to be really really interesting to see if
these companies are indeed going to be able to make

(11:29):
some money in Microsoft by the way too, when Microsoft's
probably been their reporting earnings as well. They're the ones
with the chat GPT investment.

Speaker 3 (11:37):
Keep a close eye on that. Okay, coming up, do
you trust your partner with money? Are you keeping any secrets?
What couple said when they were asked point blank. You're
listening to Simply Money presented by all Worth Financial here
in fifty five KRC the talk station.

Speaker 1 (11:52):
It's kind of hard to keep cool.

Speaker 2 (11:54):
We know that there's other people running in the country.

Speaker 1 (11:56):
And the topics are so heated. How do we repair
the damage? Fund out you did, but your call is
always welcome.

Speaker 5 (12:02):
Get out and vote otherwise going to get work.

Speaker 1 (12:05):
Fifty five krs.

Speaker 5 (12:07):
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, tax consultant,
or a state planning attorney to conduct your own due diligence.

Speaker 3 (12:27):
Opening to Simply Money presented by all Worth Financial, I
mean you Wagner along with Steve Ruby. If you can't
listen to our show every night, you don't have to
miss any of our money advice. We've got a daily
podcast for you just search simply money. It's right there
on the iHeart app or wherever you turn to to
get your podcasts stradaheaded six forty three. We're showing you
all the ways that you can screw up your retirement savings,

(12:49):
a little bit of what not to do. You know,
we have couples sitting across from us at the table
in our office all day long, and I think the
question for many is how old are you communicate about money?

Speaker 2 (13:01):
Do you really trust each other? Many say they do.
Let's take a look at this.

Speaker 6 (13:07):
So money couples, Money and couples study done by a
Mayor Price Financial say that nine and ten American investors
that are in committed relationships do overwhelmingly trust their spouses
or their partners when it comes to money sharing, similar
goals for retirement.

Speaker 1 (13:24):
What about that other one intent?

Speaker 2 (13:27):
Well, you know.

Speaker 3 (13:27):
And the interesting thing is too, this stat does not
line up with people who admit they have committed some
sort of financial infidelity, which is like one in three, right,
So it's like, oh, I trust them. Meanwhile, I have
an account they don't know about. Yeah, And you know
what they will say is while I trust them very

(13:47):
much in making decisions for money. What they do also
say is we're not always on the same page when
it comes to money. One in four said they and
their partner don't always come to an agreement on what
they need for retirement or what retirement is going to
look like.

Speaker 2 (14:03):
And so I think I'm a huge proponent of this.
You know that, Steve, But.

Speaker 3 (14:06):
It's having these money conversations often. And I also want
to make this suggestion if you guys are in very
different places when it comes to all money decisions, right,
Like he comes home and he's.

Speaker 2 (14:17):
Bought something and you're like, why would you buy that?

Speaker 3 (14:20):
Or on the flip side, you plan this vacation and
he's like, that's way too much money, right, and you
just feel like we can't get on the same page.

Speaker 2 (14:28):
One exercise that I like.

Speaker 3 (14:29):
To take people through is like, Hey, let's figure out
what our shared values are, Like, what's the most important
thing to you as a couple. Is it adventure? Is
its security and retirement? Is it your family? Is it
educating your children? Okay, then let's put all of our
financial goals like through that lens and any decision that
we need to make. Does that trip make sense? Does

(14:49):
this thing that I bought make sense. Does it take
us closer to that or farther away from that? I
think if you can just agree on what's most important
to you, it can help you make more informed money
decisions and get on the same page.

Speaker 6 (15:04):
Yeah, the value thing is important there. How are you
going to spend your time in retirement? Do you value experiences, travel,
spending time with family, being charitably inclined or do you
want to have things? I think that's a big one.
I'm more of a travel get out and see the world,
have those experiences, support family where I can things like that.

(15:24):
Are you on the same page as your spouse? Funny enough,
it kind of seems sometimes like we are not only
financial planners, but but almost marriage counselors. Absolutely, sitting down
with a fiduciary financial planner can really be eye opening
for couples that have not had these conversations. When we
start to ask questions and dig into the financial situation,

(15:45):
needs and goals so that we can provide advice. Sometimes
we shine light on things that people didn't really realize
that they weren't on the same wavelength about. And it
can be eye opening. But it's also a valuable exercise
because being on the same page can help of a
lot of stress to and through retirement when it comes
to your money.

Speaker 3 (16:04):
Something else so that I find that's really interesting about
couples is if they sense that it's going to be
a difficult conversation, if they sense that maybe the other
person isn't exactly on the same page, they will avoid
the conversation altogether because I don't even want to go there, right,
It's kind of like, well, I don't want to create
any tension around this, so we're just not going to
talk about it, which fast forward down the road five years,

(16:26):
ten years, twenty years, whatever it is. Not talking about
it only creates larger gaps in bigger problems. So I
would say, hey, if you're someone who kind of senses
that you're not on the same page about money and
planning for retirement and what your goals look like, rather
than putting off that conversation because you think it might
be a difficult one, go ahead and have it. Start

(16:48):
having it more often so that talking about money doesn't
feel overwhelming, And I wouldn't start the conversation with like,
you do this thing with money and it drives me crazy,
and I think it's totally going to.

Speaker 2 (16:58):
Derail our plans. Right, No, don't start there.

Speaker 3 (17:01):
I think it's starting with like, let's get on the
same page about what we want to accomplish, and then
let's step back from there and figure out individually what
we're doing to either get us closer to.

Speaker 2 (17:11):
That or maybe farther away from it.

Speaker 6 (17:14):
You sound like a marriage counsulor right there. I feel
as opposed to you are. You don't want to accuse,
You want to make sure you're opening up the conversation
about what you observe. By the way, the study that
we're talking about from Ameroric Prize, it talked to fifteen
hundred American couples with at least one hundred thousand dollars
in investable assets between the ages of forty five and seventy,

(17:35):
many of which have either retired in the last decade
or planned to do so in the next ten years.
So these are people just like many of the listeners
today in that age range. In that timeframe. Now, remember
it was nine out of ten say they fully trusted
their partner. Of those who say they didn't trust their partner,
half said they had a secret account with at least

(17:56):
ten thousand dollars in it. One in four of those folk,
so they had at least fifty thousand dollars hidden from
their partner.

Speaker 2 (18:04):
Those numbers do surprise me.

Speaker 3 (18:08):
People often uncover something that you know, maybe everyone didn't
know about, but ten thousand dollars or fifty thousand dollars
that you're keeping secrets. I was talking to women recently
who was ending up. She was going to be separated
from her husband. But she talked about the fact that
money had always been an issue in their marriage and
that something had happened, you know, twenty plus years ago

(18:28):
where she realized they very much weren't on the same page.

Speaker 2 (18:30):
So they operated.

Speaker 3 (18:32):
They just decided, Hey, the best thing for our marriage
is to keep our finances completely separate. They figured that
out early on in their marriage, and that's kind of
how they were. So if there was an account with
fifty thousand dollars, she didn't know about it. The problem
was there was a credit card that had a ton
of debt on it. Her name also on that credit card.
She had no idea, right, So these kinds of like, oh,

(18:55):
it's just a tiny little thing, and you know, I
know people who spend more than their spouse knows, right,
there's more coming from Amazon, and then they're aware of it.
Kind of starts in many times is a really harmless place,
but it can really grow out of control.

Speaker 6 (19:10):
Yeah, sure can. I mean telltale signs of financial infidelity.
It's it's hiding purchases, intentionally getting cash back without telling
your spouse, having that secret savings account, stashing bills, opening
secret credit cards, new accounts, playing some kind of a
dollar for dollar game, keeping up with your spouse. There's
plenty of ways to practice financial infidelity, and you know

(19:35):
reasons for it. Anxiety, secret hoarding or spending can fulfill
a deep emotional need. I've seen that arguments.

Speaker 2 (19:42):
An addiction, right that you don't you don't want to share.

Speaker 6 (19:46):
Yeah, I mean it's a form of deception and a
coping mechanism almost, And these are not things that you
want to have in a marriage. So being open and communicating,
like you had mentioned, is very very important.

Speaker 2 (19:57):
We when you were kind of joking about couple's therapy.

Speaker 3 (19:59):
But some these things, if they're deep rooted, you know,
shame along with some sort of terrible spending patterns can
be things that actually you need to seek there before.
But it can have a real life impact when it
comes to your money.

Speaker 2 (20:11):
Here's the all Worth advice.

Speaker 3 (20:12):
If you cannot get on the same page with your
partner when it comes to money, maybe this is the
time when you need a little couple's counseling. We would
say a qualified financial professional who can act as a
referee and help both of you get on that same
page can be invaluable. Coming up next, the one mistake
that can really cost your loved ones literally. If you're
listening to Simply Money, presented by all Worth Financial here

(20:34):
in fifty five KRC the talk station.

Speaker 1 (20:38):
Hey, We're we're going to put my coffee. Mornings can
be tough on your brain. Yo, you're holding it brother,
Let our brains get you up. This feed Ryan Thomas
tomorrow five to nine am.

Speaker 7 (20:50):
On fifty five KRC, the talk station ARC and iHeart
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Speaker 3 (21:06):
You're listening to Simply Money, presented by all Worth Financial.
Enemy Wagner along with de Ruby. One of the most
underrated parts of financial planning is one that many people
don't want to touch. Right estate planning. It's never fun.
It's never exciting to think about what's going to happen
after you're gone.

Speaker 2 (21:23):
But I think it is also a labor of love.

Speaker 3 (21:26):
Because when you think through these things, it makes it
much more.

Speaker 2 (21:30):
Easy for the people who you leave behind.

Speaker 3 (21:34):
And I think on an emotional level, but also on
a practical level. Right, if you don't kind of get
some help right when when making these decisions, you can
actually cost.

Speaker 2 (21:43):
That loved one a lot of money.

Speaker 6 (21:46):
Yeah, we've seen mistakes in the real world that people
have made that have cost them a lot. Real world
scenario number one of force decades pass in that time,
maybe you create a solid financial plan. In that plan,
you have an IRA and old four oh one K,
big pile of money, but you never updated the beneficiary.

(22:07):
If you don't update the beneficiary in that account and
something happens to you, remember that the beneficiary supersedes anything
in your will. So I have actually heard of scenarios
where people have left significant piles of money to X spouses.

Speaker 3 (22:24):
Yeah, you'd think you've done all the estate planning in
the world, right, and you forget about those old accounts.
People don't check beneficiaries all the time. It's funny It's
one of the first things when we take on new
investors right to work with, we look at the beneficiaries.
We have them go back and look at those because
it is incredibly important that it reflects your current situation.

(22:44):
I mean, that's a I mean, I guess the good
thing in that situation is you're already gone, but you're
going to have a really angry current spouse who thought
they had X dollars coming and now your ex is
like swimming in the money that they thought they were
going to.

Speaker 6 (22:57):
Filate your money. Yeah, you wanted to go to your
current spouse.

Speaker 3 (23:02):
Not the best situation. Here's another scenario we've seen. Maybe
you've guide a lot of money in a brokerage account
and then a lot of money in a tax to
a retirement account. One of those accounts, because they're equal,
you're going to leave to your your child, say your daughter.
But the other one you want to leave to charity,
charity that's very near and near to your heart. Which

(23:23):
account you choose actually makes a huge difference when it
comes to what happens to your child and paying taxes.

Speaker 6 (23:30):
Yeah, so the child, let's say that you leave them
the qualified money, the IRA or the four toh one k.

Speaker 2 (23:37):
The retirement account. The retirement account.

Speaker 6 (23:38):
Yeah, yeah, the retirement account, and they're earning a pretty
decent money at this point in their life. What happens
when they inherit those pre tax dollars is that tax
obligation obligation becomes theirs. If you leave money in a
taxable brokerage account to a charity of some kinds, then
it's going to receive a step up and basis your

(24:00):
child could have received. But it's a moot point anyways,
because that charity is not going to have to pay
taxes either way, whether it's the qualified account or the
tax taxable account.

Speaker 3 (24:09):
Essentially you got it wrong if you had left the
brokerage account to your child. Right, the equities or whatever's
in that account, they receive at the cost basis, so
the cost of whatever those investments were at the time
that you died. So even if they decide to sell
them the next day, right, they're not going to have
this huge tax bill for it. If you give them

(24:30):
an IRA, it's like dumped on top of the income
that they already have.

Speaker 2 (24:34):
It could bump them up to another tax bracket.

Speaker 3 (24:36):
So, yeah, they're getting a lot of money, but they're
going to have to pay a heckle a lot of
it back.

Speaker 2 (24:40):
To Uncle Zam in taxes.

Speaker 3 (24:42):
So the way that you distribute these different kinds of
accounts actually makes a big difference.

Speaker 2 (24:48):
By the way, charities don't ever have to pay taxes
on that money.

Speaker 6 (24:51):
Yeah, and I love One of the great parts about
the work that we do is getting to know folks
and hearing about their families. And a lot of people
are very proud of what their children do. I have.
I have folks that have children that are doctors, lawyers, judges.
They have high paying, powerful jobs. And if your child
is one of them, let's say they live in New York,
they're an attorney, they could lose up to half of

(25:13):
that IRA to taxes if you left that to them
instead of the taxable brokerage account. So this is a
real world example of why sitting down and actually having
that estate planning conversation is so important. This is one
of the things for the folks that I work with.
I tell them that because many people they put these
conversations off they're dreary, their topics that they don't want

(25:33):
to think about because it has to do with death
and none of that is particularly fun. But I'll tell
them I'm going to keep bugging about it until they
get it done or they tell me to shut up.

Speaker 1 (25:41):
Yeah, And I'm mean it's part.

Speaker 2 (25:42):
Of your job, right.

Speaker 3 (25:43):
I Mean, when we talk about financial plans, it's not
just hey, what's your money invested in? It is have
you planned for what happens after you're gone?

Speaker 7 (25:50):
Right?

Speaker 3 (25:50):
You've done all of this hard work to accumulate this money.
We want to make sure that after you're here, it's
going to where you want it to go and making
the impact that you want it to make. I mentioned
stepped up basis speaking of real world scenarios that we
see all the time. You know, here in Cincinnati, lots
of people feel very very strongly about our hometown teams,
meaning your Procter and Gamble, your Kroger. And we often

(26:14):
get people whether it's you know, mom and dad or
grandpa and Grandpa worked at Procter and Gamble, or they
just love the company and feel very strongly about it.
But they love these shares of this company stock and
they often pass it down. Great thing to understand the
tax implications of that stock when it comes to you.

Speaker 6 (26:33):
Yeah, and the tax obligations are essentially none when it's
passed you in a taxable account because because of that
stepped up basis resetting what's going to calculate the tax
event when it's sold. Now, keep in mind, if you
sit on those shares for a long time and they
gain value, then you're going to owe taxes on what
has on the gains in that account. But that step
up and basis is it's actually one of the nice

(26:54):
things that the IRS does for us as investors, giving
us that opportunity to not or our loved ones with
a huge tax hit for certain vehicles like a taxable
account holding shares of for example, Procter and Gamble.

Speaker 3 (27:09):
Every once in a while we get to say, Washington,
did this thing that makes sense that is actually very
beneficial for you. Right, It's nice when we can say that,
not often but a while we can say that speaking.

Speaker 2 (27:19):
Of this stepped up basis.

Speaker 3 (27:21):
Something else that happens quite often is when someone passes away,
leaving real estate, leaving property. You know, maybe it's your
parents leaving their house behind. We all love the stories
and our parents love to tell the stories of you know,
this house is worth you know two hundred and fifty
thousand dollars now, but we paid eighty thousand dollars for

(27:41):
it back in the day. So if they pass away
and you go to sell the house, gosh, that would
be a lot of gains between.

Speaker 2 (27:48):
That eighty thousand dollars that they originally paid.

Speaker 3 (27:50):
But that's not what you're looking at, because again, this
property is you receive it at a stepped up basis.

Speaker 2 (27:56):
So whatever the market.

Speaker 3 (27:58):
Value of that home is on the day that you
inherit that money, on the day that they pass away,
if you decide to sell it a month later, that's
what you're going to be looking at.

Speaker 2 (28:08):
So this is another.

Speaker 3 (28:09):
Place where some lulls that are in effect now make
a lot of sense for you.

Speaker 6 (28:15):
Yeah, and this can be obviously very very beneficial for
families who purchased a home a long time ago, didn't
pay much for it, and then you received the step
up basis when you inherit that property. A lot of
people think that they're going to have to pay massive
tax hits on property that they inherit, but it's just
not the case.

Speaker 3 (28:32):
Someone was just telling me, they know this family whose
great grandparents bought this house in Santa Barbara California, Yes,
years ago on the beach, and they just got it
for a song, like it wasn't like the cool place that.

Speaker 2 (28:46):
It is today.

Speaker 3 (28:47):
And it's still in the family. They've added on to
it as much as they can. I mean, all this
property is worth. You know, they paid a few hundred
thousand dollars for it's worth millions and millions of dollars
when they pass away, right, and it's at some point
if they decided to sell it outside of the family,
don't make.

Speaker 2 (29:01):
So much money on it.

Speaker 3 (29:02):
Can you imagine if they had to pay the taxes
on what was originally the cost of that home. You know,
thankfully that is not the way these laws are set up,
and this is how it can work in your benefit.

Speaker 2 (29:13):
Here's the all Worth advice. Number one. Make sure you
have an estate plan, but.

Speaker 3 (29:18):
Also make sure that it bakes in the tax implications
so that your loved ones aren't left shelling out tons
of money to Uncle Sam or you're not bumping them
up into a higher tax bracket.

Speaker 2 (29:28):
Coming up next, keeping you from screwing up your retirement savings.

Speaker 3 (29:33):
What you need to know you're listening to simply money
present of my all Worth financial Here on fifty five KRC,
the talk station.

Speaker 1 (29:39):
You know they're saying, what in the world they're chanting
and it's allowed to happen in America. What's happening in
our world? Time exactly, whether it's here. We're at a
critical point right now in our nation.

Speaker 4 (29:53):
We're over there, Ran and Russia, China, the new access
of evil.

Speaker 1 (29:57):
Israel has a right to defend itself.

Speaker 7 (29:59):
What the world, what's happening at the border is terrible,
happens here?

Speaker 1 (30:03):
Rise of anti Semitic behavior fifty five KRC the talk station. Hey,
if you're listening to me right now, I have one
violence recently where someone is going to get seriously hurt.

Speaker 7 (30:15):
Fifty five KRC where it's still okay to tell us
what you think.

Speaker 2 (30:24):
You're listening to.

Speaker 3 (30:25):
Simply Money Presented I all Worth Financial anemywig and you're
a long with Steve Ruby. If you've got a financial
question it's keeping you up at night, you'd like us
to help you get it figured out. There's a red
button you can click on while you're listening to the show.
It's right there on the iHeart app. Record your question.
It's coming straight to us and straight ahead.

Speaker 2 (30:42):
You love your family, members.

Speaker 3 (30:44):
Right, you love your close friends, But what happens when
they come to.

Speaker 2 (30:48):
You and ask for financial help, maybe in the form
of co signing for a loan. We've got a warning.

Speaker 3 (30:53):
Before you ever even consider that that's coming up in
a few minutes. You may have heard the phrase the
road to house paved with good intentions. Right, Well, the
road to financial hell is paved exactly the same way.
Maybe you're making some decisions or not making some decisions
when it comes to your money. You think you're doing okay,
and actually you're putting yourself in a really bad place.

Speaker 1 (31:16):
Yeah.

Speaker 6 (31:16):
Unfortunately, I've seen situations where people just don't even bother
to save because they read some kind of loud article
that said, hey, you're going to need millions of dollars
to retire, so why even bother. That's what happens in
that situation. There's no way I can save up millions
of dollars, so I'm not even gonna save. Why do
you need to believe that ridiculous article. You probably don't
need millions of dollars to save. You probably don't need

(31:39):
to save millions of dollars to retire. That is because
it depends on your individual financial situation, needs and goals.
Not saving is a massive mistake, and I have seen
it over the span of my career.

Speaker 2 (31:51):
Absolutely well. It's like how do you eat an elephant?

Speaker 8 (31:53):
Right?

Speaker 3 (31:53):
It can seem overwhelming, but it's one bite at a time.
You have to get started. I meet so many people
who say, well, yeah, I.

Speaker 2 (31:59):
Know, I know, I know it's important.

Speaker 3 (32:01):
I'm going to start like next year or after this
next big thing, or you know. I have a dear friend.
She owns her own business, her husband owns his own business.
Neither of them obviously have four to one case through work.
They're self employed, and so their retirement plan initially was
to just keep working.

Speaker 2 (32:18):
Well that's great, but we also know that things can change.

Speaker 3 (32:20):
Maybe you're not as passionate about that job anymore, or
someone gets sick.

Speaker 2 (32:24):
Or you want to travel or whatever.

Speaker 3 (32:27):
You've left yourself in an absolute corner with no options,
and so we kind of started to talk through that.

Speaker 2 (32:33):
And it's funny.

Speaker 3 (32:33):
It's like once she started to taste what it was
like to have this sort of financial empowerment and understand
money and save them. Now she's got four sisters. Her
four sisters call her for money advice, just a year ago,
she wasn't saving a dime. Now she's got money in
a health savings account, she's got you know, set by
a ray setup. They've got all these things set up

(32:54):
that they're putting money into, and it feels good to
know that their move in the right direction. So I
sometimes think it can seem overwhelming at first, but man,
once you get started, it can be incredibly overpopped empowerful
over time.

Speaker 6 (33:08):
It's a little different than when you give this analogy
of eating an elephant one bite at a time. Eventually,
when you're saving, compounding interest as your best friend. So
it's almost like you're taking gigantic bites of the elephant
the more time that goes by, because your money will
make money, and that money will make.

Speaker 2 (33:22):
More money for it, the bigger the bites get.

Speaker 6 (33:25):
Exactly so Warren Buffett, I think it was him that
said that the first one hundred thousand dollars is the hardest.
Once you get to that point, that's where your money
really starts to snowball and you notice it.

Speaker 3 (33:36):
Another thing that we see people doing is just underestimating
how much you're going to need. If you think that
social security right is the answer to your retirement, then
you are completely getting it wrong. The program was never
set up to say, Okay, you work all your life
and when you get to sixty two or sixty five
or sixty seven, you never work another day and your
social security is going to completely then let you continue

(33:58):
that lifestyle into retirement.

Speaker 2 (34:00):
Nope, not the goal.

Speaker 3 (34:01):
The goal of this was to keep you off the streets,
right from living on the streets in your later years,
and so it's only set up to replace forty percent
of what you were making when you were working. Now,
when you think about what you want your retirement to
look like, if you want forty percent of what you
were doing before, maybe it's a good plan. Most of us, oh,
thank you don't want to go from being able to

(34:22):
eat out once or twice a week to eating off
of ramen noodles when we're in retirement, right, that's not
the goal. Social security then cannot be your only solution
for retirement.

Speaker 6 (34:31):
And not automating your savings is another massive mistake that
we see, especially for those that have access to a
four to one K where you can automatically pull directly
from your paycheck. If you're getting free money via company
match and you're not doing it. That's an awful thing.
For those that have an automatic increase program in there
four to one K, maybe that's something you look at

(34:52):
because as your income rises each year, even if it's
only two to a half three percent, you can put
in another percent into your four to one K. You're
not even going to feel it. The money that's not
there is harder to spend because those in your forum okay,
and it starts to grow for you. So not automating
your savings is a big mistake.

Speaker 3 (35:09):
Also over complicating it, right, you're thinking about, gosh, we
need all this money when we get to retirement, and
so there's got to be all these different ways to
do it.

Speaker 2 (35:18):
And we would say, really, there's there's one.

Speaker 3 (35:20):
It's being a smart long term investor, right, figuring out
what your plan is and sticking to it.

Speaker 2 (35:26):
Now.

Speaker 3 (35:27):
I realize that we're part of the financial media, but
I think we're sort of fall into a separate bucket
than a lot of other financial media outlets. And the
fact that they want it to sound so complicated and
like you need there's patterns and you should get in
the market and out of the market, or this is
the investment that you need to be in this year
because this is going to be the next big thing.
We don't feel that way, and we feel like over

(35:49):
complicating it often puts you behind where you would have
been if you just kind of set that strategy based
on your individual needs and then let it ride.

Speaker 6 (35:59):
Yeah, flip side of that. Another huge mistake that people
make is being fearful of the markets to the point
where they sit in cash because they feel it's safer. However,
cash is a guaranteed way to slowly lose purchasing power.
Think about how much your first vehicle cost, how much
it used to cost to go out to dinner, how
much you used to fill up your ga, how much
it used to cost to fill up your gas. Take

(36:20):
things get more expensive about every twenty twenty two years.
The value of the dollar gets chopped in half. So
if you're just sitting in cash, letting that do nothing,
then that is a huge mistake.

Speaker 2 (36:31):
Holding too much of your company stock.

Speaker 3 (36:33):
As much as you love that company right, your blood,
sweat and tears go into it. Understand that your retirement
right is often coming from your current paycheck is coming
from there, so your current livelihood and now you're putting
much of your retirement on that company, and we've seen
it happen just far too often companies that seem rock solid.
Something comes from left field and it can make a

(36:54):
huge difference. So do not put all of your eggs
into that basket that can just go south really quickly.
Coming up next, we've got another way that you can
screw up your retirement savings. Even though you may think
you're doing the honorable thing, the kind thing for the
people you love. You're listening to simply Money, presented by
all Worth Financial here on fifty five KRC, the talk station.

Speaker 1 (37:15):
Joining the conversation is one thing. Thank you for taking
my call, taking my calling and my call.

Speaker 7 (37:20):
But when doing so gets difficult, there's the talk back
feature on the iHeartRadio app.

Speaker 1 (37:26):
Oh cool, how's that work? Just tap record and send
all within the apple maybe and looking to me for
just the quick segond. We the people will always find
a way because everyone's voice gounce. We are still going
to make that attempt. We're going to get out there
and be heard at fifty five KRC.

Speaker 6 (37:43):
Dot com Man when addressing the problem of rectile dysfunction,
you want the right treatment for your specific medical situation.

Speaker 1 (37:50):
Because every case is different and finding the welcome to here.

Speaker 3 (37:53):
Why do we keep letting thousands of people come over
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Speaker 2 (37:56):
My family's safety is at risk.

Speaker 1 (37:58):
Fifty five KRC the talk station.

Speaker 3 (38:05):
You'll need to you simply money, does somebody all worth financial?
I mean Wagner alone with Steve Ruby. You know you
love your people, right, your your children, your nieces, your nephews,
your brother in law, your best friend.

Speaker 2 (38:18):
You love your people.

Speaker 3 (38:19):
But what happens if they need help with something financially,
Say they're taking out a loan and they're asking you
to co sign on it. First of all, we want
you to understand what you are signing yourself up for,
and we would say also why, we would say not
a great idea.

Speaker 6 (38:36):
Yeah, I've come across people that believe when they're co
signing alone that you're just really giving your blessing.

Speaker 5 (38:41):
But that is not the case.

Speaker 2 (38:43):
This is a person I like Steve Ruby. He's a
great co host.

Speaker 3 (38:47):
So yeah, he wants me to co sign this loan.
I'm just gonna say, don't even ask.

Speaker 2 (38:53):
Don't even ask.

Speaker 6 (38:53):
Absolutely not, no, you shouldn't. I mean, because the risk
falls on you. That's the bottom line. And that that's
what people don't realize when when you co sign alone,
you are now entirely responsible for those payments if the
person you co sign with doesn't make them, and not
half of it.

Speaker 3 (39:11):
Not like okay, if they come into an issue, they
pay half, you pay half.

Speaker 8 (39:15):
No no, no no.

Speaker 3 (39:16):
If they default on that loan, it's coming to you,
and you're going to owe every penny of what's owed.
And understand this when it gets to the point, right,
many times where that person is not able to pay it,
they're shamed, there's guilt, there's.

Speaker 2 (39:30):
All kinds of feelings.

Speaker 3 (39:31):
They probably aren't going to come to you and be like, hey,
just so you know, you might want to start saving
up your money because you're going to oh all, they don't.
So then you find out about it, right, you're kind
of backed into a corner and it becomes a terrible,
you know, terrible situation. By the way, you likely co
sign for that loan because you cared about that relationship.

Speaker 2 (39:51):
Now that relationship it's going south.

Speaker 6 (39:54):
Oh yeah, I can have a major impact in doing so.
This is also affecting your credit. Remember that when you
co sign a loan, it goes on your credit report.
So you're utilizing a higher percentage of your available credit.
It can ding your credit score, raise interest rates in
the future of any loans that you apply for moving forwards,
limit your options for borrowing money, because this is essentially

(40:15):
your loan just as much as the co signer, and.

Speaker 3 (40:18):
A single missed payment, depending on how that loan is structured,
might mean that the entire amount is due. So again
you think maybe you've co signed on this loan and
you're saying like, hey, I think this is a good person,
and then you find out that they're defaulting, and then
you find out that the entire amount is not only
owed by you, but it's not months from now. It

(40:40):
is all of it, one lump sum do immediately. Now,
you put yourself in a situation where how are you
going to dig yourself out of this hole? I mean,
unless you have like a huge emergency fund, you're in trouble.

Speaker 6 (40:51):
So obviously there's ways who can help, whether it's financial
coaching or maybe a gift. If people coming in with
a question about what they should do, sign a loan
or give a gift, I'm always going to say give
a gift because you can put more strand in a
relationship by saying yes than saying no when it comes
to co signing alone.

Speaker 3 (41:06):
Absolutely, Thanks for listening tonight. You've been listening to Simply Money,
presented by all Worth Financial here in fifty five krs
the Talk Station.

Speaker 8 (41:13):
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