Simply Money

Episode Transcript

Speaker 1 (00:06):
Tonight, Well me me today the day you don't want
to check your four olin K. Did the Federal Reserve
mess up the timing of an interest rate cut? We
get a lot to get to. You're listening to Simply
Money presented my all Worth Financial along with Steve Ruby. Okay,
there is just a lot to talk about tonight. Markets
all over the place, so much data. Those also beginning

(00:27):
to question the Federal Reserve, our nation Central Bank and
are they on the right path here, We're going to
get to all of it. We've got all with its
chief investment Officer, Andy Stout joining us right now. Andy,
I'm just going to let you start where you want
to start, because there's a lot to talk about.

Speaker 2 (00:44):
Well, I think the thing to talk about is the market, right, Yeah.

Speaker 1 (00:52):
Let's start there.

Speaker 3 (00:53):
I agree, it's.

Speaker 2 (00:55):
Been a tad volatile over the past couple of days.
Early Friday and today have been you know, quite the
roller coaster ride. I mean, I guess roller coaster if
it's only going down at least as of the past
couple of days. Now, the thing I want to point out,
though I use that roller coaster analogy quite intentionally, is

(01:18):
that markets are they go in cycles. Like roller coasters,
there's going to be ups and there's going to be downs.
I mean, we've been in a pretty strong up for
a while, and those downs they come quick and they
can be scary, kind of like a roller coaster. But
what happens over the long run is those cycles you
tend to move higher and higher over time. So market

(01:39):
cycles do work in your favor. The thing that we
all need to realize is that you know, if we
make a decision to, you know, jump out of the
roller coaster at the bottom, well we're on the way down,
you're going to miss that ride back up, and that's
what you definitely want to make sure you stay invested for.

Speaker 4 (01:59):
So let's talk about some specifics here, starting with the
Fed's policies. For example, I think a lot of people
under the impression that there's a level of the FED
being out of sync with the current economic climate, maybe
keeping interest rates high for too long, causing economy to
slow down much quicker than desired. Can you shine some
light on that in your perspective, Andy, Yeah.

Speaker 2 (02:21):
So there's been a few reasons for the volatility pickup,
and I would say there's three primary causes, one being
what you just mentioned regarding the Federal Reserve. So the
Federal Reserve met last week and what they did was nothing.
They left interest rates where they were at the five

(02:42):
point two five to five point five percent range, and
that was expected by pretty much everyone. They did open
the door for a September cut, though, so that is
a good thing for the markets. You know where we're
at right now amidst this volatility in terms of the
Fed being behind the curve, we had a job's report

(03:06):
come out that was anything but good when you look
at the details, it was pretty poor across the board. Now,
the Federal Reserve wants there to be full employment and
they want stable inflation. You could argue we've had full employment,
but now we've seen the unemployment rate start to move
higher and higher. I mean, we were at about three

(03:27):
and a half percent not too long ago, and now
we've seen the unemployment rate tick up to four point
three percent. So you're seeing a weakening of the job market.
And there's other job related data that suggests things are
getting worse for employees. Specifically, we've seen the number of
jobless claims, which are people collecting unemployment benefits, that's starting

(03:48):
to move higher and higher. We're seeing the number of
job openings come down or seeing quit rate come down.
That's basically the percent of people who are just quitting
their job with nowhere to go because they have the
confidence that they can find another job. So it shows
that they don't have as much confidence with a quick
rate continuing to drop. So these are all indications of

(04:08):
the job market starting to falter. And when you look
at where we're at right now at a four point
three percent unemployment rate, you know that's certainly not a
good thing by any stretch of the imagination. And what's
driven that was basically a large influx of people into
a labor force. Specifically, four hundred and twenty thousand people

(04:30):
entered the labor force in July, and when you look
at the increase in employment and the increase in unemployment,
the number of unemployed people jumped a staggering three hundred
and fifty two thousand. So the reason for the increase
in the unmployment rate was that, and that's causing a
lot of concern that the US economy could be really

(04:52):
close to a recession. So we're watching a lot of
a lot of indicators whether or not to determine you
know your INNY session or close to one. Yet.

Speaker 1 (05:02):
I think it's so easy to kind of Monday morning
quarterback with the Federal Reserve has done. I think it's
so interesting because earlier last week, I don't know that
anyone was calling for a lot of rate cuts during
last week's meeting, and then it's like, gosh, the next
day or two, as more data comes out, then all
of a sudden, everyone's like, what's the FED doing? What's

(05:23):
your take on it?

Speaker 2 (05:25):
Yeah, I've seen some things this morning where it's like
people are calling for an emergency rate cut. The Fed
needs to cut like right now, and then cut by
one hundred and fifty basis points or one point five
percent in September, essentially bringing the interest rates down by
almost two percent over the course of the next two months.

(05:48):
That seems a bit aggressive. I mean, that's not going
to happen, you know, highly unlikely something like that would
happen that set. It doesn't mean that the Federal Reserve
isn't watched this fairly closely. And if you look at
you know, where we were prior to Wednesday, and even
after Wednesday, everything was fine, and then he started to
get some other data to come out. We had we

(06:09):
already talked about the JAWS report, with the unemployment rate
going a little bit higher or decent amount higher than expected.
Also the number of jobs that employers at it came
in well short of expectations. On top of that, last
week we got the what's called the ISM Manufacturing Survey,
and it showed a larger decline for the manufacturing industry
than what was expected. But then you know, we you know,

(06:31):
we got some other news that doesn't necessarily suggest the
Feds behind the curve. The economy part does, but there
are some other things driving this current rotation.

Speaker 1 (06:42):
And Andy starts joining us as he does every Monday,
and we always appreciate your take on things on Mondays.
But I think, especially today, we've come out of this
period where we have had no volatility, really no fluctuations
more than two percent that we've seen over more than
a year, and then all of a sudden, we come
into this place over the past couple of trading days

(07:02):
where we've seen major volatility, and I think it's really
jolting us as investors. You mentioned there was a few
things that you thought we're leading to the market volatility
that we're seeing right now, obviously the labor market. What
else do you think is going on here?

Speaker 2 (07:17):
All right, well, thanks Amy for picking up the clue
for that leading question as to what those other two
things were. The first is something that doesn't get a
lot of attention outside of financial process, but I think
it might be one of the bigger reasons we're seeing
this volatility. Now I'm trying, I'll try not to get
too much into the weeds, but essentially it's it's related

(07:40):
to what's called the yen carried trade. And Okay, this
sounds kind of weird, but it it's a it's a
real thing. This is where investors borrow in a cheap
currency like the Japanese end and invest in a currency
that yields more. What happened last week was the Bank
of Japan surprised many investors by actually raising rates and

(08:02):
signifying more rate hikes. Yes, I'm saying hikes, and we're
talking about cuts for the US Central Bank, but over
in Japan, they just hiked and that's caused about a
nine percent increase or almost ten percent increase in the yen,
and that's resulted in the Japanese stock market essentially losing
about eighteen percent in two days, lost twelve percent today.

(08:25):
That's its largest loss since Black Monday of nineteen eighty seven.
But anyways, this how this works is that because of
the move in the wrong direction, for those investors who
are levered by the way, what happens is they're forced
to sell their positions, and that liquidation causes essentially more

(08:48):
selling because they're selling into weakness. In many cases they're
buying into strength like US treasury, So they're pushing the
market in areas that they were it was already headed.
So what essentially happens, I mean the bottom line is
selling leads to more selling in a negative feedback loop.
So this unwinding of this trade because of losses results

(09:09):
in even more selling, and that's that might be the
biggest reason for the abruptness of the move in the
markets lately. So you have that the yen carry trade underwinding.
We're essentially maybe think about this way. Traders were caught
on the wrong side and they had to undo their positions,

(09:29):
and because they're levered, it just magnified everything.

Speaker 4 (09:33):
And that had to do all the Japanese bank increasing
interest rates.

Speaker 2 (09:37):
Yeah, they raised rates. They were at a range of
zero percent to zero point one percent, and they raised
to zero point twenty five percent, so not a big move,
but they also signaled future cut or future hikes in
there down the road this year. The other thing one
I really quickly mentioned is the technology earnings. While they've
come in pretty good from a beat ray and a

(09:58):
growth rate, Wall Street has turned their attention to is hey, Amazon, Apple, Alphabet, Meta, Microsoft,
show me what you're doing with AI. Show me how
you're making money with I AI. Show me the money.
They don't have anything to show. There's been They've invested
billions and billions of dollars, and the return on investment

(10:21):
has been pretty poor so far, and investors patients are
it's getting quite a bit well obviously you can see
it's getting stretched pretty cent with the the Nasdaq actually
in correction territory. Uh and after this morning's route, you know,
we have seen that that level violated even more so.

Speaker 4 (10:43):
So through all of this, there are some good news
for those of us with highly diversified portfolios. There's actually
some gains and other asset classes outside of of tech.

Speaker 2 (10:56):
Yeah, that's a really good point. I don't want to
just come out as you know, downer and say the
world's coming to an end, because it's not. Things will
get better. Things go through cycles. When you look at
other areas that have done well, you know, at least recently,
you've seen some dividend paying stocks hang in there pretty good.

(11:16):
We actually saw, you know, last week at least real
estate was up pretty good, as was consumer staple stocks
and utilities. Really anything that had a decent dividend performed
a little bit better. And also, bonds have been doing
pretty well. I mean, we talked about the problem with
bonds or investors struggling with bonds, and no one want
to have anything to do bonds, bonds, just use cash. Well,

(11:38):
bonds have done extraordinarily. While they're up about two and
a half percent last week, and if you look at
over the past year, they're now up almost eight percent.
Just the bond market in general. Then certain bonds do
better than other bonds, but on average, the aggregate bond
index is up almost eight percent. So that's a really

(12:00):
strong investment thesis to stay to keep your mind attuned to,
and that is to stay diversified, to have an investment
mix that is set for your personal time frame. Don't
just stick it in a eighty twenty or a twenty eighty.
Have an investment mix that's for you so you can
weather those ups and downs and avoid those costly emotional decisions.

Speaker 1 (12:24):
Great reminder, especially on days like today. Here's the all
Worth advice today. These are the days where you stick
with your long term plan and maybe even stick your
head in the stand right. Ignore the headlines, ignore the noise,
stick with what you know is right for you. Coming
up next, there's an article that claims that the S
and P. Five hundred is acting exactly like it did

(12:44):
right before the big financial crisis? Is the scare tactics?
Is it reality? We'll get into that next. You're listening
to Simply Money presented by all With Financial. Here on
fifty five KRZ the talk station. You're listening to Simple
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 do not have to miss a thing.

(13:06):
We have a daily podcast for you. Just search Simply Money.
It's right there on the iHeart app or wherever you
get your podcasts. Coming up at six forty three parts
of the financial planning process that those of you who
want to retire early. Often forget about will tell you
what they are. You know, we tell you time and
time again that a highly diversified portfolio is really what's key.

(13:27):
You can just cannot predict what's going to happen today
with the company that seems to be outperforming all of those.
And we've spoken a lot, Steve over the past year,
year and a half about this company in Nvidia, and
there's been tons of headlines about how it can't go wrong.
I can you check it today? Yeah.

Speaker 4 (13:44):
I think we've always tried to share both sides of
the story with that one, because technically it can go wrong.
There's all lots of things that can go wrong with
an individual security. In this case, the US Department of
Justice has actually opened up an anti trust probe to
investigate whether or not the chip giant allegedly abused its
market dominance and AI chips.

Speaker 1 (14:05):
Yeah, And essentially what they were saying is that in Vidia, Yeah,
I think maybe abusively at least what these allegations are,
when they were working with certain vendors, certain other companies,
they would say, oh, if you're going to get this
from another company, then we're going to charge you more
for this other product that you're buying for us, or
if you are getting chips from us, you know, then

(14:27):
we also expect you to buy these other components that
we think that you will need, and so kind of
sounds Again, these are just allegations, but the allegations are
sort of strong arming, right, because they are in a
position of power, and that's kind of what has made
in Vidia such a stock market darling, is the fact
that they seem to be so far ahead of other
companies in developing these these chips that go into that

(14:51):
are used for AI and everything else, you know, and
now the question is, okay, were they abusive from that
position of power. This is again very early, very early
on in these allegations, but again market's just responding to
the fact that these allegations are out there and that
this investigation has been opened. At the same time, and
Vidia has not reported earnings yet, right, They're kind of

(15:13):
the last of the last ones of these major tech stocks.
The other ones have not fared so well. I think
so also in participation and anticipation of what might come
from them. You know, you see kind of this pretty
big drop over the past few days, and I think
it's just a reminder of you have to be diversified.

Speaker 4 (15:35):
Yeah, having too much of one stock in your portfolio
can certainly throw your curveball, even derail your retirement. That's
why people say have say that you should have no
more than five or ten percent. We've been saying for
a long time that something can get in a video.
We don't know where this is going to take us,
but it's certainly a lot better than I guess like
a terminator situation.

Speaker 1 (15:57):
Anything, anything is better than a terminator situation. Glad you
pointed that out, Ai, Yeah, yeah, you know. One of
the things I think that is kind of the bedrock
of what we stand on here on the Simple When
You Radio show is the fact that we believe in
looking at history to tell us maybe where things could
go in the future. And I think most of the
time looking backwards can help us show like where we

(16:19):
might be moving in the future. But I also think
that sometimes looking backwards for some might be a bit
of an overreach, or might be sort of a fear factor.
And we have came across something recently, an article which
looks at the tech boom versus a dot com. And
we've talked about this many times and saying are there
similarities here? Should we be worried?

Speaker 3 (16:40):
Yeah?

Speaker 4 (16:40):
You might have caught this one on Baron's because it's loud.
It says, the stock market doesn't look like the dot
com bubble it is. It's something worse that is fear mongering.
I don't appreciate this. It's something that gets me worked up.
But when people purposely drive fear, so you click on
their article and you read it. But when you do
read it and you read all the way through, you

(17:01):
notice that maybe it's not as scary as it actually sounds.

Speaker 1 (17:04):
Yeah. So he's writing about the differences and the similarities
between then and now, and he kind of looks back
and says, listen, if you look back about the months
and the couple of years leading up to two thousand
and seven, the patterns that we're seeing in the stock
market today when it comes to these tech stocks look really,

(17:24):
really similar to what we saw in the dot com
boom leading up to two thousand and seven. So it's like, Okay,
we talk about history, we talk about history repeating itself.
Should we be worried? You know, should we run for
the hells? Well, you know, no one has a crystal
ball but I think to your point, there's a lot
of fear mongering going on in this article. I also

(17:44):
think what's interesting if you pay close attention to what
he's saying in this article. You know, the headline is scary.
The first few points are scary, and then it kind
of backs away from how strong his tone is about
the fact that this could be, you know, far worse
than what we saw seven oh eight.

Speaker 4 (18:01):
Yeah, it's funny, because scary you can cherry pick the
data a little bit when you're making comparisons. You know,
I didn't analyze whether or not he did that. I
read the article and saw that this is a fear
mongering headline that may create a situation where you act
on emotions and make bad decisions with your investments, for example,
selling when the markets are having periods of volatility, making
adjustments to your asset allocation on the short term rather

(18:23):
than focusing on your long term goals. Because once you
dive into the art, when you actually read it, after
you know he shares all of his data, he posits
the question is it really different this time?

Speaker 3 (18:33):
Who knows? Only time will give you the answer.

Speaker 4 (18:36):
You know, after all that, it's like, come on, really
all this fear mongering, followed by maybe it's not actually different,
because it's it's not. That's the only part that I
or you know, it's not. That's the part that I
agree with.

Speaker 2 (18:48):
You know.

Speaker 1 (18:48):
I think someone in the media over the past couple
of years came up with this term the Magnificent seven,
and I think as investors, when you hear terms like that,
it's like magnificent I don't want to miss out on that, right,
that greed kind of kicks in. And we have been
saying the whole time with it, like these magnificent seven stocks,
these tech stocks that seem like they can do no wrong,

(19:09):
we have just seen and if you want to look
at history, those are the kinds of history lessons that
you look at. Going all in a particular company or
a particular sector just never works out well. And so
I think if there's anything that you need to look
back at seven oh eight and say, what should we
learn from this, what should we take away from it
moving forward, is the fact that diversification is so important

(19:31):
because it can look like nothing can go wrong with
a particular company or a particular sector. Yet we've just
seen this time and time again. You don't know what
it is or where it's going to come from or
when it's going to come. But we have seen absolute
like goliaths just hit from out of left field.

Speaker 4 (19:49):
Yeah, so please don't read an article and then act
emotionally on it. Focus on the long term, Focus on
building your diversified investment allocation that can weather the markets
over a long period of time. Having too much of
your nest egg in one stock can certainly smooth out
that path towards retirement.

Speaker 1 (20:07):
Here's the all Worth advice right. Our takeaway to this article,
to this headline, to this way of thinking, don't panic,
don't make financial decisions based on emotion, regardless of what happens.
And we saw like a lot of greed, and now
I think we're starting to see a lot of fear here.
Coming up next, which financial marital approach leads to the
most happiness in a couple? Yours mine? Ours will get

(20:30):
into that next. You're listening to Simply Money presented by
all Worth Financial here on fifty five KRC the talk station.
You're listening to Simply Money percent of all Worth financially
Meani Wagner along with Steve Ruby. When it comes to
couples and money. Well, first of all, we know there
can be a lot of stress there. It can be

(20:52):
just a huge point of conflict and a lot of
marriages and relationships. And I think there's different ways to
approach money. There's yours, mine, ours, and we have seen
you know, through the year, Steve, you and I have
seen people anywhere on the spectrum. And I think the
question is what works best. While there's some new research
out that might not show necessarily what works best financially,

(21:15):
but what might lead to the highest level of happiness
when it comes to your money and your marriage.

Speaker 3 (21:20):
That's a good way to look at it.

Speaker 4 (21:21):
Because this data comes from a bank Rate survey conducted
last year, and it found that about six and ten
of married adults and or those living with a partner
and kept some kept some or all of their assets
and finances completely separate. That's separate planning all across the board. Now,
those that kept their money separate say they found it

(21:42):
best to divide the mortgage, car payment, netflix, whatever bills
are based on what you actually use. Couples who do
this say it's liberating and prevents fights over money, but
it doesn't necessarily mean that they are happy.

Speaker 1 (21:56):
Yeah. In fact, this is what the research shows. Couples
who keep their money sete separate and often cases are
less happy and their relationships than those who merge their finances. Right,
there's several studies that we've seen over the past five years.
I'm just going to give you my take right here
and right now. We can get into a little more
of this research. I really think the key is not

(22:17):
whether you keep your money separate or you put it
all together. I think the key is that you have
transparency that both of you right know what the other
person is doing with their money. Now, it doesn't have
to get down to the granular level of you spent
fifty dollars on Amazon and you need to tell me
what that was for. But you know, we have seen
also lots of research on financial infidelity and in hiding

(22:38):
accounts and hiding credit cards and hiding money that's never
going to don o well in a relationship. So I
think you can figure out whatever works for you. But
I still think the conversations have to happen pretty regularly
over what are our financial goals? What are we trying
to reach together? And I don't care whether your money
is in separate pots are all together in one. I

(22:59):
think you need one singular vision moving forward about what
you're trying to get you when it comes to your money.

Speaker 4 (23:06):
The key here is communication, yes, honesty, no financial infidelity,
which is a major driver towards ending marriages. So you know,
when we dive into the details of this study that Bankrank.

Speaker 3 (23:18):
Did, it was actually a two year experiment.

Speaker 4 (23:21):
It looked at two hundred and thirty newly ed to
engaged couples and at the onset, all participants had separate
bank accounts. That was the baseline the researchers that did
the study. They divided the couples into three groups. One
group was asked to keep separate accounts, the second group
was asked to merge money into joint accounts, and a
third could structure the accounts however they saw fit. Interestingly enough,

(23:44):
those that had their own decision to make typically kept
their accounts separate throughout the study. There was a series
of surveys over the longevity of this two years, looking
at three, six, nine, twelve, and twenty four months later,
and at the end of the two year period, couples
that merge your accounts felt like the relationship was better
compared to those that had separate accounts.

Speaker 1 (24:07):
Yeah, those joint accounts kind of helped the partners feel
like they really had shared goals that they were working
on together. You know, if you and your spouse sit
down and you say, Okay, our goal is that we
can retire at the age of sixty five with X
dollars in investments, and that we can help our daughter
with our marriage or you know, pay for her wedding
to this point, whatever those goals are, if you see

(24:30):
that the money together in your accounts is working and
growing toward those goals, I think that can be incredibly beneficial.
Now that's not to say that if you have separate
accounts you can't still see the same things. But I
think the steve goes back to what we were saying,
transparency communication. Maybe you keep separate spreadsheets, but once a
month you come together and you show, Okay, here's what
I'm doing with mine, here's what you're doing with yours. Now,

(24:50):
there's a lot of people that I've talked you through
the years that say I like to surprise him or
I like to surprise her. I don't want to have
to say, well, this is where that money went. To
it's a trip for their fiftieth birthday or for our
twentieth wedding anniversary, whatever that is. So I really have
seen it work both ways as long as everyone is
together on the same page.

Speaker 4 (25:10):
Well, the thing is is that joint accounts force your hand.
It forces open communication, which is what you started with
before we even dove into the study. You said, it's
all about having open lines of communication, and there are
platforms that can help with this whether or not you
have joint or separate accounts. Expense splitting platforms split wise
is one that we came across. The fault setting is

(25:31):
to split every bill in half, and ninety seven percent
of the couples that use it stick with it. So
this is having separate accounts, but forcing communication and that
communication and transparency can help track to make sure that
you guys have shared goals, shared values, shared expectations around money,
and that's what actually leads to happiness here.

Speaker 1 (25:52):
You know, it's interesting too coming into this profession. I
think I probably would have thought that most people that
have separate accounts have roughly the same kind of incomes
and they just keep it all separate. But actually what
I have found the most people who have success with
keeping separate accounts are because once the bread winner and

(26:12):
maybe the other one isn't the bread winner, but they
are very strongly active in home and taking care of
the kids and making sure the household is moving forward,
and there feels like there's kind of this discrepancy if
they're using the same account of that person who isn't
necessarily bringing in the paycheck, feeling like they're accountable to
the other person. And I've seen many times in situations

(26:33):
like that where the separate accounts kind of gives both
of them a feeling of autonomy beyond maybe what they
would normally have. So I would say go into this
with an open mind, but I also would safety for
anyone who is engaged, who is looking at taking a
relationship to the next level. These are the kinds of
conversations you have to have now. You do not want

(26:53):
to walk down that aisle and the next day one
of you look at the other one and says, Okay,
let's merge our money, and the other one says, oh,
absolutely not. Heck no, right, And then all of a sudden,
right off the bat, you've got you know money, and
you know difficult conversations and people are not on the
same page. So this is the kind of thing that
I think is critical to have conversations about once a

(27:14):
relationship turned serious.

Speaker 4 (27:16):
Yeah, and you bring up some good points because there
are there are reasons for keeping money separate. Yea provides autonomy.
That's that's exactly correct. You know, let's spouse a share
responsibility for managing money, leaving room for both to gain
financial knowledge on their own to share with each other.
But it really boils down to communication. That's it making

(27:37):
sure that you have a shared understanding of what's happening.
If you have separate accounts and you're using it to
hide what you're spending, that's a problem that's called financial infidelity.
And not having conversations about it unless it's like a
surprise vacation like you said, or a gift something like that,
that can certainly lead to problems. So it's just open conversations,

(27:59):
trans making sure that you're on the same page when
things are getting more and more serious.

Speaker 1 (28:04):
Yeah. So research shows right that couples who merge their
money tend to be happier over the long terms, that
tend to feel like they are more on the same page.
You know, sharing and working together towards those financial goals.
And then we would also say we've seen it work
well both ways. Again, it's transparency and communication. Here's the
all Worth advice. Money is just one of the biggest

(28:24):
sources of stress in a relationship. Just whatever you decide,
be transparent, open and communicate it well about it all.
Coming up next, the major parts of the financial planning
process that those who want to retire early may not
take into account right. Some major misses we have seen
will tell you what they are. You're listening to Simply
Money presented by all Worth Financial here in fifty five

(28:45):
krs the talk station. You're listening to Simply Money presented
by all Worth Financial. I mean Me Wagner along with
Steve Ruby. You have a financial question you need a
little help with. There's a button you can click them
while you're listening to the show. It's right there on
the iHeart app. Record your question. It's coming straight to

(29:05):
us and straight ahead. One type of insurance we would
say you may not have, but we highly recommend it.
We'll get into that in just a few minutes. You know,
for many retiring young, retiring early is a lifetime like
lifelong dream, but also that dream can't happen if you
don't have a proper financial plan in place. And see,

(29:27):
if we see this all the time, someone will come
in they say, I'm going to retire early. I've got
seven color coded spreadsheets that show that i can, and
this is ironclad. And then we look at it and
we're like, oh, you missed something.

Speaker 4 (29:40):
It's pretty easy to miss something when you're building your
own spreadsheet. I mean, there's lots of moving parts when
it comes to transitioning into retirement. You know most of
us only do it once, so you want to make
sure that you're not making some big mistakes. In no
particular order, I would say tax planning is a big one,
because you can voluntarily give Uncle Sam a lot more
taxes than you need to by not implementing proper tax

(30:04):
planning strategies. Now, keep in mind this is tax planning
and tax filing are two different things. Tax filing is
just filling out the paper, where tax planning could involve
deciding which accounts you pull from to generate your paycheck
now that you're no longer getting one through employment. A
lot of people that transition into retirement have pools of
money that include pre tax WROTH after tax. Different accounts

(30:27):
have different rules and some focus you need to focus
on the long term, such as your pre tax money
when you're seventy three, seventy five years old, depending on
how old you are now there's rmds. So taking advantage
of maybe doing some ROTH conversions after your income falls
off and you're now in a lower tax bracket, we
could start strategically moving some of your pre tax into

(30:50):
ROTH so that you can subject those dollars to tax
free gains and diversify the future tax liability.

Speaker 1 (30:57):
And I think this is a strategy in this kind
of way of thinking can get dicey for a lot
of di wires. Right if you have been kind of
just looking at that money, putting that money aside, maybe
maxing out the floor and k if you can, or
putting as much aside for that retirement, you feel like, Okay,
I've got this under control. But when that money quits
coming in, when you're no longer saving money and now

(31:18):
you're starting to spend that money down, I think this
is where tax strategies become incredibly important, because when you
only have a pot of money that is so big
and no more money going into it, how much you
can keep in your pocket becomes that much more important.
So I think tax planning is huge. I also see
people forgetting to plan for healthcare and coverage. Right if

(31:39):
all these years you've been working for a company and
they're offsetting ninety percent of the cost of healthcare, right,
And I think see if too many people also think, oh,
I've been paying into Medicare all these years, so once
I turn sixty five, it's like this magic time where
all of a sudden, all my healthcare is taken care of,
and then reality hits. And I also think one major

(32:00):
issue that I see with people in building their own
spreadsheets and planning for retirement or early retirement is you're
not planning for enough inflation when it comes to those healthcare.

Speaker 4 (32:09):
Costs, especially those healthcare costs. Healthcare inflates at a much
higher rate than everything else you're housing, utilities, groceries, gas.
Only exception would be if you're continuing to save somehow
for college for someone or for yourself. Even college expenses
typically inflate a little bit more quickly than your healthcare costs.
But even healthcare and tax planning go hand in hand

(32:31):
because if you realize too much income by doing a
Roth conversion, then you could kick yourself into a higher
tax bracket. You could find yourself paying IRMA taxes, which
means your Medicare Part B premium gets inflated by a
certain factor depending on how high you went. So planning
for healthcare coverage is a big one, not just the
inflation side of it. But are you going to use cobra?
Are you going to go to the exchange? Are you

(32:53):
going to work part time somewhere that offers you some
kind of a metal medical benefit. Are you going to
switch to a spouse's coverage. There are many options, and
it's easy to make a bad decision or a wrong
decision that can't necessarily be unwound if you didn't plan accordingly.

Speaker 1 (33:08):
Yeah, talking about planning for healthcare coverage, you set me
up beautifully to make my next point.

Speaker 3 (33:15):
I'm going to talk about hsas.

Speaker 1 (33:17):
No, No, you're not taking my thunder away from me.
This is where I think it becomes critical if a
high deductible health care plan makes sense to you to
try to maximize an HSA. This is a gift from
the federal government, unlike anything else that they give US
triple tax advantage, meaning the money goes into that account,
you don't pay taxes. It then grows if you invest

(33:38):
it tax free, and then if you take that money
out for qualified healthcare expenses and Stevie were just making
the point of how expensive healthcare is in retirement. That
money goes into the account, it grows, you pull it out,
and you never pay taxes on that money. There's really
nothing like it, And I think this becomes a huge
tool for planning, not only to retire, but if you

(33:59):
have your site said on retiring early, this can be
a critical component of that.

Speaker 4 (34:04):
Yeah, and they're wonderful. Triple tax advantages is really hard
to beat. There's also those that don't properly estimate expenses.
They think I'm going to need less money because I'm retired.
But what you don't realize necessarily is that you're entering
your go go years of retirement. A lot of us
make that transition to retirement and we're no longer working
full time. How are you going to spend your days?

(34:24):
How are you going to spend your weekends?

Speaker 3 (34:26):
What are you going to do?

Speaker 4 (34:26):
Are you going to start knocking items off your bucket
list and travel the world. If so, you may have
higher expenses entering into retirement, into your go go years,
and then you hit your slowgo years when you're older
and you're not doing quite as much, maybe your legs
don't carry as far as your back hurts, whatever that is,
and then you have your nog years, or you're not
doing a whole hike.

Speaker 3 (34:46):
Of a lot at all.

Speaker 4 (34:47):
So a lot of people will not properly estimate expenses,
especially tied to inflation.

Speaker 1 (34:53):
Here's the o Worth advice. If fiduciary advisor can help
catch the parts of financial planning that might fall through
the crack, then that is really key if you're planning
to retire early. Coming up next, we're talking about a
kind of insurance that can protect you on a day
on the day when it's raining or even storming, we'll explain.
You're listening to Simply Money presented by all Worth Financial
here in fifty five KRC the talk station. You're listening

(35:21):
to Simply Money prepend by all Worth Financial and Meani
Wagner along with Steve Ruby. See a lot of the
things that we preach on the show is investors being
sold insurance products they don't necessarily need. But today we're
kind of flipping that on its head and we're saying, hey,
there is a kind of insurance that you might really
need that could really help you, and you may not
have any of it.

Speaker 3 (35:41):
Yeah, this is one that I do recommend.

Speaker 1 (35:44):
Quite highly recommend.

Speaker 4 (35:45):
It's umbrella insurance. That's where it's extra insurance that provides
protection beyond existing limits for coverage from other policies. Oftentimes
you're able to get this just through your homeowners insurance policy,
but if you're not worth is high enough, you need
to go outside and purchase a separate policy. But what
it does is it protects your assets from lawsuits related
to you know, kind of freak accidents, acts of God,

(36:08):
things like somebody slipping on your icy driveway, a neighbor's
child injured in your backyard, a trampoline, a pool, a
swing set, even claims of defamation after an online post.
You know, hopefully we have self control and we're not
doing something like that, but if we do get dinged
with something like that and there's a you know, a
judgment against us, then this is an area where umbrella

(36:32):
policies could be leveraged. The most popular, I would say
is from serious car accidents. Now, it's important to realize that,
you know, the big question is how much do I need?
And typically it's as easy as understanding what your net
worth is and getting the amount of umbrella coverage that
covers a little bit above your net worth.

Speaker 1 (36:49):
Yeah, so if you do the calculation and your net
worth is a million dollars, well, then get a million
dollar umbrella insurance policy. And I think, oh, like that
sounds like it can be really expensive. It's really not.
The cost of umbrella insurance has gone up by about
seven percent over the past couple of years. But we're
talking about if you've get a million dollars in coverage,

(37:09):
it's about three hundred and thirty dollars a year, right,
And I think for that kind of piece of mind,
it can be really smart. My poor family, you know,
I just look at the world. I think through through
different lenses because of what I do. And over the
course of the past year, we've had neighbors get this
huge swinks that put in. We've had another set of
neighbors get this ginormous trampoline, and I just I really

(37:31):
want to just walk out and say, hey, that looks
like a lot of fun. Do you have umbrella insurance,
you know, and you mentioned a lot of reasons why
you would want that, and I'm going to throw another
one in. If you or your spouse coaches a team, right,
if someone gets hurt on that little peewee football practice
or whatever that is, that can come back on you.
So just so many reasons why having this kind of

(37:51):
coverage becomes really really critical. In Yes, your normal insurance
that you have should have some degree of coverage, but
this is just that extra layer of protection.

Speaker 4 (38:01):
Yeah, normally your homo homeowner's insurance is going to get
you what you need. I mean some of them cover one, two, three,
five million dollars. And you know, think of it this way,
you're essentially that premium that you pay for your umbrella
policy is pretty much keeping an attorney on retainer. That's
what you're doing here, because you're protecting your net worth
against some kind of off the wall situation that most

(38:23):
of us don't expect to happen, but if it does,
it can be extremely devastating to our net worth. If
you are found liable for something and the courts decide
that you are, then they can go after what you have.
And if you have that umbrella policy then that can
protect you and not ruin you financially.

Speaker 1 (38:41):
Which is a bedrock of a financial plan, is not
only be able to build those resources, but be able
to protect them once you have them. Thanks for listening.
You've listening to simply when you presented my all worth
financially here in fifty five KRC the talk station