Episode Transcript
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Speaker 1 (00:06):
Tonight, you can have all the money in the world,
but is that money in the right kinds of accounts
and steps to take once you receive and inherit at
ira and why the best place to retire might be well,
right here, you're listening to simply money presented by all
Worth Financial. I mean, you Wagner along with Steve Ruby, Gosh,
we talk about all the time diversification and it seems
(00:26):
like we're talking about you know, stocks versus bonds or
small cap large cap emerging markets. But diversification when it
comes to your money, applies to so many things, and
when you get it right, it can make a huge difference.
And tonight I want to drill down on talking about
diversification in where your money is invested. And I started
(00:48):
off by saying you could have all the money in
the world, and I see that off and I'm sure
you do too. Someone has a lot of money saved
in their four one K and that's great, it's great
that they spent all the contributing to that. The problem
is there's not diversification in the tax treatment of that
particular kind of accounts.
Speaker 2 (01:07):
Uh.
Speaker 1 (01:08):
And so every time you have to take a distribution,
every time you go to the well, you're going to
pay the same taxes on that money. How do you
plan differently and that money ended up in different kinds
of accounts, then you have a lot of options in verytime.
Speaker 3 (01:22):
Yeah, we could almost say that the new three legged
stool as opposed to pensions, social Security, four oh one
K could be it could be your pre tax, your
wroth and your after tax broke which account.
Speaker 1 (01:32):
Oh, we're going to go with that from now on.
Speaker 3 (01:34):
I like that. I just coined that right now. Thank you,
thank you, I appreciate it. So part of financial planning
is tax planning and diversifying your future tax liabilities. So
obviously we have a lot of different vehicles that we
can save, and not just the investments that like you
had mentioned stocks, bonds, cash, but we're talking about the
vehicles that those investments are held in. So the most
popular one, of course, is going to be your your
(01:55):
four O one K that this is who your employer,
this is what your employeer set you up with so
that you make deductions through your payroll. Oftentimes and historically
those are pre tax contributions. Now, remember what that means
is when you make that contribution, it is a deductible contribution.
You're deferring taxes until later on in life, but all
of the earnings that you experienced in that account will
(02:18):
be taxed when you take those distributions. It's a great
vehicle though, because not only the tax deferral, but because
there's oftentimes company match and you can put a lot
of money in these things.
Speaker 1 (02:29):
Yeah, say you come up with a million dollars right
in that four oh one k and you're like, great,
I've got a million dollars for retirement. No, and this
is the terrible conversation that we have to have. Uncle Sam,
of course still needs his piece.
Speaker 2 (02:43):
Of the pie.
Speaker 1 (02:44):
He's going to count you with hand out stretch when
you take those distributions. So that million dollars, well he's
going to take if you're in the twenty two tax packet,
two hundred twenty thousand dollars out of that right goes
directly to him. So you can see how quickly what
you thought you had amassed becomes far less, which is
why understanding these different buckets and in different times to
maybe pull from those buckets.
Speaker 2 (03:05):
Can make a huge difference.
Speaker 1 (03:06):
So, yeah, I think most of us are most familiar
with that traditional floral one K great place to save,
and if you have money to save for retirement, we
would say that's the number one place you go because
you need to get that company match.
Speaker 4 (03:18):
Right.
Speaker 1 (03:18):
If there's a company match, it doesn't make sense to
not get it. That's free money that you would be
walking away from. So you put the money into that
floural one k and get the company match. Now a
lot of us now have the option of putting money
in a wroth for a one k, and that can
make a lot of sense to have money in both
that traditional tax deferred flural one k and that wroth
(03:40):
for one k.
Speaker 3 (03:40):
Sure. Yeah, Now remember that there are distinctions because we're
also going to talk about iras in a moment. Your
traditional and your wroth iras that is totally separate from
your traditional and wroth forloral one case. The limits are
different when you can contribute, how much you can contribute,
everything is different there the traditional and wroth for one
k in twenty twenty four. If you are not turning
fifty year or younger than, the contribution limit is twenty
(04:02):
three thousand. If you're turning fifty this year or already
past fifty, then there's an additional seventy five hundred you
could put in. Now, remember the ROTH contributions within that
four to one K, they have those same limits. Oftentimes
your employer will still match. They'll give you pre tax
money though they're not paying the taxes on the contributions
that they make for you. It's not a deductible contribution,
(04:23):
but you're locking in the taxes now. So if you're younger,
if you're in a lower tax bracket, if you know
taxes are going to if you feel like taxes are
going to go up in the future, you can start
doing ROTH contributions in your four toh one K to
diversify the future tax liability. Because all the money that
you have growing in that four oh one K that's
designated as ROTH will grow tax free as soon as
you hit fifty nine and a half, and as long
(04:44):
as the money has been in there for five years,
you owe no taxes on those distributions. It's a beautiful thing.
Speaker 1 (04:51):
Yeah, that money is yours, free and clear, And you know,
I think the frustrating thing for so many of us,
going back to that three legged stool that used to
exist right with that pench and with your own retirement
savings and then with Social Security, so the government taking
part of that is it's now all on you.
Speaker 2 (05:07):
In my generation, jen.
Speaker 1 (05:09):
Ax is really the first one to kind of cross
the threshold getting close to retirement where it is all
on us. And by the way, the four to one
k as we've just kind of wrapped our brains around that.
Then we've kind of thrown this other thing it at
everyone and said, okay, there's also a wroth for oh
one k. Right, and not that long ago many of
us that even have a wroth option within our four
(05:31):
one k. By the way, recently, and not to make
your head spin, but Congress passed the Secure Act two
point zero, which made it where you don't have to
take required minimum distributions on that wroth for oh one k,
making it an even better vehicle for you to save in.
But man, if you're getting frustrated right now, don't get
(05:51):
frustrated with Steve and I.
Speaker 2 (05:52):
This is all the government. We're just trying to tell you.
Speaker 1 (05:55):
What's the most beneficial way to take advantage of what
is available to you.
Speaker 3 (06:00):
Yeah, and sitting down with a financial planner and doing
some tax planning, maybe folding in a CPA into the
conversation can help you determine how much pre tax versus
how much WROTH you should be saving your four to
one K, because you can do the WROTH contributions up
to a certain tax bucket. When that's filled, then you
switch over to pre tax so that you're not paying
a higher marginal tax on those contributions. Today, now when
(06:22):
we talk about the iras and the wroth irays, we
still have traditional iras, we still have WROTH irays. Again,
those are totally separate from your four to one ks,
whether that's pre tax and or WROTH. And this is
the individual retirement account that's not tied to any employer.
So if you are not eligible for a workplace retirement plan,
but you have earned income, then you can put money
(06:44):
into a traditional iray, get that deduction, get that tax reduction,
but then those dollars are taxable in the future. On
the flip side, the WROTH, you don't get the deduction,
but they grow tax free. Now the limits are much lower,
and there are income limits, and that once you hit
the levels, you're not able to actually contribute to the
to the ROTH or the traditional IRA.
Speaker 1 (07:04):
You're listening to simply money presented by all Worth Financial
Meini Wagner along with Steve ruby As we tackle a
kind of difficult concept to understand, but if you get
this right, you can give yourself so much more flexibility
in retirement. We're talking about diversification, specifically the kinds of
accounts that you have saved that money in. We're talking
(07:26):
about traditional for one case, versus RATH for a one case. Steve,
you were just talking about traditional iras versus Roth iras.
I'm going to throw another one out there, a health
savings account.
Speaker 2 (07:36):
If you were going to prioritize.
Speaker 1 (07:38):
How to save and where to put your dollars, right,
we would say those first dollars go into the traditional
four to oh one K to get that company match right,
you want to get that company match. Beyond that, a
health savings account is triple tax advantage. There's nothing else
like it. It is a gift from the federal government.
I'm going to ask you how many gifts is a
(07:59):
federal govern giving and that this is not a rare
kind of gifts.
Speaker 3 (08:03):
The answer is too But that HSA is in a
step up and basis on time.
Speaker 2 (08:08):
There you go, there you go.
Speaker 1 (08:09):
Yeah, the only gifts that you get so triple tax
advantage means the money goes into the account tax free.
You can invest it, it can grow tax free. You
can take those distributions for qualified healthcare expenses again tax free.
And I've said this many many times on the show.
But if you can pay those out of pocket healthcare
expenses as you go, let that money be invested in
(08:30):
that health savings account and grow. Think about the flexibility
that you have in retirement with that account, which, by
the way, the latest Fidelity statistics show the average individual
retiring at the age of sixty five right now will
have out of pocket healthcare costs of one hundred and
sixty five thousand dollars. Savings account will will come in handy,
(08:52):
and it's going to look far different than if you
get to retirement and you have a major medical bill
in the only money that you have as in a
tax deferred account, so you're going to have to pull
that money out and pay taxes on it at the
same time.
Speaker 3 (09:06):
So oftentimes, when I'm meeting with somebody that the question
comes up, where should I save my next dollar? This
is somebody that's still in the accumulation phase of retirement planning.
They have a four to one k, they have an IRA,
they have an HSA. To kind of summarize what you said, yes,
one hundred percent agree that you need to do what
you need to contribute into your workplace retirement plan to
(09:27):
get that free money via the company match anything. On
top of that, you're filling up your HSA, so you're
diversifying not only your future tax liability but accounts that
you can pull from to pay for medical expenses in retirement.
Then we come back to the four to one k,
hit the max there. Then we go to the IRA's
hit the max there. Now that this is obviously there
(09:47):
are people that can afford to do that, and if
you can, you're in a great position. You don't want
to get it wrong because you know the next one
up would be your your your taxable brokerage account.
Speaker 1 (09:58):
And I think that taxable account people off right away,
right because the word taxable and I hate that we
call it that, but essentially it's taxed differently. And there's
a few reasons why you would want one of these
taxable brokerage accounts. First of all, the flexibility in them
is there's no age when you can or cannot take
the distributions without a penalty. You can simply take them
at any point without a penalty, So it's not you
(10:20):
have to wait till fifty nine and a half. You
can access that money at any time. If that money
has been in that account invested for over a year,
you have long term capital gains taxes that you pay
on that. For most of us, that tax rate is
about half what our normal tax.
Speaker 2 (10:37):
Rate would be. So lots of flexibility with that account.
Speaker 1 (10:40):
So you need some money five years from now or
ten years from now, but maybe before you retire. That's
a great place to have that money. And again it
gives you an additional option when you get to retirement
as well.
Speaker 3 (10:55):
Yeah, there's flexibility. You can pull the money out when
you want long term capital gains for positions held more
than a year, short term for those not you can
use losses to offset future gains up to three thousand
dollars against ordinary income. And I touched on one of
the nice things that Uncle Sam does for us. That's
the step up and basis. So if you have highly
appreciated positions, I see this in town a lot with
Procter and Gamble. For example, families that have been sitting
(11:17):
on Procter and gamble shares for years. When you pass
and that becomes part of your state and it goes
on to your loved ones, there's a step up and
basis that resets the number that's used to calculate the
taxes ode when that position is sold. So it's kind
of the last thing in line for savings unless we
get creative and talk about using overfunded whole life insurance policies,
which I don't do too often, but that is something
(11:38):
that people with a lot of wealth might look at exploring.
But there is kind of a hierarchy that we walk
folks through that we work with, and other fiduciary financial
advisors should be doing it as well well.
Speaker 1 (11:48):
And I think one thing that we're missing in this
conversation is perhaps where we should have started, which is
a well funded emergency fund, right which is just in cash,
nothing sexy about it. It's not necessarily making a lot
of money, but that money on the sidelines can help
you a ton. And speaking of flexibility and retirement, say
you're starting to take distributions out of whatever that four
(12:09):
one K that IRA and markets are down, that well
funded emergency fund gives you the flexibility to turn spickt
off of those distributions, so you're not locking in those losses.
You're pulling that money out of an emergency fund, and
then you're not lucking in those losses. So this can
be confusing, but when we talk about diversification, this is
(12:30):
a critical part of getting it right.
Speaker 2 (12:32):
Man.
Speaker 1 (12:32):
You get it right, and you're going to give yourself
some really good peace of mind and some great sleep
and retirement because you'll have all kinds of options.
Speaker 2 (12:40):
Here's the all Worth advice.
Speaker 1 (12:41):
This is why hiring a qualified financial planner is really
just a good idea. They know which levers to pull
at which time in order to maximize your dollars. Coming
up next, mortgage rates, the return of meme stocks, and
we've got much more. You're listening to Simply Money, presented
by all Worth Financial here in fifty five KRC, the
talk station.
Speaker 2 (13:07):
You Simply Money, percent of.
Speaker 1 (13:08):
By all Worth Financial, Enemy Wagner along with Steve Ruby.
If you can't listen to our show every night, you
don't have to miss the thing.
Speaker 2 (13:14):
We have a daily podcast for you.
Speaker 1 (13:16):
Just search Simply Money on the iheartop or wherever you
get your podcasts.
Speaker 2 (13:20):
Coming up at six p forty three.
Speaker 1 (13:21):
We've got the important steps to take if you have
inherited an IRA. You know, we've been talking about the
housing market and maybe the silver linings of well, everyone's
looking forward to the Federal Reserve meeting next week, our
nation central Bank lowering interest rates on the Fed Funds rate.
But it's kind of like dominoes that fall right once
(13:42):
they lower the amount that banks charge each other to
loan money overnight. That's what that Fed Funds rate is.
Other rates start to come down, one of them likely
being mortgage rates. Now, this has been a tough pill
to swallow for a lot of people who have been
wanting to move. Over the past couple of years. You
went from being able to lock in, you know, a
thirty year mortgage at a sub three percent rates at
(14:05):
historically low rates, to north of eight percent. And now
we're finally seeing these mortgage rates starting to fall.
Speaker 3 (14:12):
Yeah, thirty year fell to its lowest level since February
of twenty twenty three. Obviously this is because of the
meeting with the Federal Reserve next week. I keep in mind,
as rates fall, the things that benefit us the most
are they're going to go down faster that that's your
high yield savings account, your CD rates. This is a
little bit more of a trickle, but still trending in
the right direction. The average contract rate for a thirty
(14:34):
year fixed mortgage that's sold between seven and eight hundred
thousand dollars was six point twenty nine percent or less,
and that's down from six point four to three the
previous week. So obviously with a larger loan, that is
going to make a difference on your interest payments. But
so far it's really not moving the needle. We're at
(14:55):
a nineteen month low, but home buying activity it's not
picked up yet, and that's because people are in anticipating
that is, the FED does what they're going to do,
and that's decrease rates. Finally, Uh, these mortgage interest rates
that they're going to fall, and I think that's when
activity is going to pick up well.
Speaker 1 (15:09):
And I also wonder the real estate market is very
seasonal and in the fall and heading into the winter,
you know, people don't usually put their homes on the
market if they can wait until the following spring, where
home buying season really really rams up. So it'll be
interesting to see how the market rebounds by next spring.
Whether it does, we'll certainly keep an eye on that
for you. Okay, it is time for us to talk
(15:30):
about everyone's favorite investor, and I say that with all
the sarcasm in the world. We're talking about the craziness
of meme stocks and the fact that Roaring Kitty has
roared back into the financial headlines once again.
Speaker 3 (15:44):
It's just so strange saying Roaring Kitty, that's this guy.
Speaker 2 (15:47):
Explain who we're talking about here.
Speaker 3 (15:50):
His name SOPs in my mind right now, Keith Keith,
because it's just Roaring Kitty.
Speaker 4 (15:54):
Yeah.
Speaker 1 (15:55):
Yeah, he has a normal name, yeah, and in a
somewhat normal job. But the reason why everyone knows him
is because in the midst of the pandemic, when people
went on that Reddit forum, the Wall Street forum and said,
let's stick it to the people who on Wall Street
who are shorting companies like GameStop, this kind of birth
(16:18):
of this mean stock craze was born, and Roaring Kitty,
as the online name went, was the one at the
forefront of that. And the crazy thing was Roaring Kitty
then went really silent for a few years, you know,
and kind of the meme stock thing, I don't know,
made headlines every once in a while. But then it
was like he popped his head up earlier this summer
and apparently again in what makes me crazy is do
(16:43):
we need more evidence that this is not a good
way to invest because every time this guy pops his
head up and I say pops his head up, he
just posts a meme yes on his social media and
people actually make trades with their money.
Speaker 2 (16:59):
Yep, based on his pictures on social media.
Speaker 3 (17:02):
He found a lot of success in doing this. I'm
talking tens of millions of dollars that we know of,
maybe more that he cashed in on by capturing the
opportunity that they identified to put the short squeeze on
these hedge funds that were shorting stock that they should
have been storting shorting like AMC. You know, people weren't
able to go to the movie. Game stop is kind
(17:25):
of a thing of the past. It's a brick and
mortar location that gives you really awful deals on when
you're trying to sell them video games and you just
download stuff anyways, So there was some some opportunity that
he identified and he made a lot of money. Sure,
there were people that got in with him early because
they saw this stuff on Wall Street bets. But there's
a lot of people that lost their shirts on I
would say bets that this is close to gambling because
(17:48):
they were, yeah, they were doing options strategies on these
meme stocks. And what happened recently is one little post
online with a picture from the movie Toy Story two
is leeing people to believe that retail that mister Kitty
is going to be going all in on the on
the food retailer Chewy. Now I don't know why the
(18:10):
correlation is there, but that's that's the thought process for
the masses that follow this.
Speaker 1 (18:15):
Okay, so Chewy is yeah, pet food, yeah, and pet supplies.
And I'm not sure how someone looks at a picture
on someone's social media from Toy Story two and then
extrapolates from that, oh, we should invest or he is
going to invest in Chewy. So let's all go in
or out based on that. The reason why we talk
(18:36):
about this is you probably are smart enough to not
do this, but maybe your children are on social media
and they are exposed to these things, and you know,
they use words like yolo, you only live once, and
you know, go all in on these things, and these
are a regular part of our kids and our grandkilled
grandchildren's vocabulary, and so it could make sense. It would
(18:59):
be terrible if it did, But for a twenty one,
twenty two year old just out of college who is
so used to being on all of the social media
to jump in on one of these, you know, I'm
not going to put my money in a highly diversified
S and P five hundred fund in my four oh
one k Instead, I'm going to open a Robinhood account
and I'm next week.
Speaker 3 (19:17):
Yeah, that's what they think is going to happen. They
go on, they have a Yolo bet and they cross
their fingers that it's going to pay off, even though
it's like ten thousand and one odds that they even
see the types of returns that rorin Kitty has.
Speaker 1 (19:29):
Yeah, by the way, there was an ETF that's focused
on memestocks that has actually now closed down because the
returns were just abysmal. So for those who went all
in on memestocks, please please not an investment.
Speaker 2 (19:42):
It's a gamble. Here's the all worth advice.
Speaker 1 (19:44):
Investing in stocks that are artificially inflated by people on
social media is a ridiculous move to make it's certainly
not an investment. Coming up next, thieves are now stealing
money despite victims having two factor authentication. We've got two
concrete things so that you can do to protect yourself.
You're listening to Simply Money presented by all Worth Financial
(20:04):
here in fifty five KRC the talk station.
Speaker 5 (20:11):
You're listening to Simply Money present by all Worth Financial.
I mean you Wagner, along with Steve Ruby. If you
listen to our show at all, you know that we
are huge proponents of taking every step that you possibly
can to protect yourself, your data, your privacy, and one
of the things that we say is you've got to
use that two factor authentication. While joining us tonight, our
(20:33):
tech expert Dave Hatter from Interest it all right, Dave,
this is not what we want to hear. We tell
people to use two factor authentication and then sometimes it's.
Speaker 2 (20:43):
Not even enough.
Speaker 4 (20:45):
Well, Amy, you know, the advice from anyone out there
that knows anything about this is still used to factor
slash multi factor authentication. Okay, but you're right, sometimes it's
not enough. You know that point for both of you
to get out to the listeners really is it still
raises the bar substantially, and it makes it much more
difficult for the bad guys. But they're smart, and they're devious,
(21:06):
and they want to steal your money, so they're increasingly
figuring out ways to get around it. And there are
other technologies down there that can, you know, basically augment
your defensive posture and make it more difficult. But yeah,
I would strongly recommend to anyone that's hearing this turn
on multi factor authentication or two factory authentication anywhere and
everywhere you can, because again, it really raises the difficulty
(21:29):
bar for the bad folks, and in many cases they're
just going to move on to the softest target where
they can get money the fastest.
Speaker 5 (21:35):
Stir by telling us what happened in the specific circumstance
where two factor authentication was not enough.
Speaker 4 (21:42):
Well, honestly, I mean that's a good question. So the
headline on this story was Maryland woman loses seventeen thousand
and simcard swap scam despite two factory authentication, And I'll
be honest, I don't think the reporting on this really
adequately addresses what happened here because the problem, based on
what I've seen, is not really multi factor authentication it's
the fact that they pulled a SIM card swap on
(22:03):
her and there's really nothing It really has nothing to
do with two factor authentication per se, based on what
I've seen on the reporting, So SIM swapping and this
is an increasing crime. People need to be aware of this.
As crazy as this sounds, Okay, it's also sometimes called
sim jacking. So if you see sim swap or simjacking,
basically what it boils down to is someone is swapping
(22:26):
your phone number to another phone and then potentially able
to defeat you know, whatever passwords you have. You know,
all the stuff we talk about all the time, strong
unique passwords, password managers, multi factor authentication. If all of
that is set up to go to your phone and
now your phone is essentially in my hands because I
SIM swapped you, well you've got a huge problem. So
(22:48):
here's how this works. And again, while this is not
something that's often targeted to the average person, it's increasingly
being targeted average people because the bad guys know, if
I can take over your phone quote, unquot vote, I
potentially have access to everything about you. It happened to
Jack Dorsey, the former CEO of Twitter some time ago.
So let's say, for example, because of all the data
(23:10):
breaches that are out there, and because people will always say, well,
I have nothing to hide, I don't care that all
these apps are sucking up all my information, etc. I'm
able to get my hands on an enormous amount of
information about you, like all of the answers to your
security questions and so forth. I know your mother's maiden name.
I know all that stuff. And now, especially thanks to
deep fake voice cloning, I can call Verizon because I
(23:32):
know your phone number, I know your email address, I
know what high school you went to, and all that stuff.
I'm going to need to impersonate you. I'm going to
call Verizon, and I'm going to sound like a woman
when I call, and I'm going to say, hey, I
lost my phone. I want you to switch my phone
number to a new phone. Or in this case, apparently
the criminals walked into a Verizon store and they impersonated
(23:52):
the victim and they had her phone number switched to
a new phone. I would bet you every one of
your listeners either has done this or knows someone that's
lost a phone or something. I've had to do it
myself and had the phone number transported to a different device. Well,
guess what now all of the two factor authentication codes,
all of the email password resets are going to the
(24:14):
phone the bad guys have. Does this make sense so far?
Speaker 3 (24:17):
It does? Every time we have you on, I'm scared.
Speaker 4 (24:22):
Well I'm sorry, Steve, but I appreciate you guys, you know,
trying to help get the word out there, because you
know this. This woman lost seventeen thousand dollars because they
were able to raid her bank accounts once they got
into her phone. And this is a tricky problem to
solve because if I can impersonate you, and if the
people at your Sayator carrier aren't skeptical enough, they may
(24:43):
go ahead and do this transfer. And while there are
some defenses against this, and I'll get to two specifically
here in a minute, this is a tricky problem to
solve because again, if I can impersonate you and I'm
credible and confident and a good con man, they may
switch the phone over. So this isn't really a knock
on Verizon or any carrier. It's bad guys are smart
(25:04):
and they want to steal your money, and they know
how to do these things. So here are two concrete
steps you can take that, while it will not completely
bulletproof you against this, again raising the bar trying to
get the bad guys to move on to a softer target.
One is contact your cellultar carrier and see if they
have the option to set up an additional PIN or
(25:26):
passphrase or something. It's required to swap your phone number
that way, even if someone happens to know all this
other information, ideally they are not going to know that pin,
passphrase or whatever, and your cellutar carrier is not going
to switch the phone number to a different phone and
allow them to basically destroy your life.
Speaker 3 (25:48):
Just to be clear that it's the two factor authentication
wasn't necessarily the problem here. It's still adding to the
benefit of additional security. What this article didn't really go
into depth about was the fact that this is actually
simcard swapping. So these additional pieces of advice from you
are to add even more security above and beyond multi
(26:11):
factor authentication.
Speaker 4 (26:13):
That's a perfect analysis, Steve, Again, I don't think the
article really addresses what really happened here. It's not the
fact that the two factor authentication or MFA failed, it's
the simswapper, at which point than all the codes and
everything the hackers needed to get into her accounts. We're
going to a different phone.
Speaker 3 (26:28):
So code, yes, this piece of advice.
Speaker 4 (26:33):
Correct, set that up with your carrier. And then the
second piece is again MFA two FA turn it on.
But there are additional mechanisms you can use to make
that more difficult. For example, an authenticator app. Microsoft makes one,
Aufe makes one. Rather than you get the code via
text to your phone, there is an app you install
(26:54):
on your phone. It syncs up with these sites. The
codes go to the app, they're encrypted, and you you
then have to have physical possession on my phone. Sim
swapping my phone number to another phone will not allow
you to get those codes because they're sent an encrypted
form to the app on my physical device. So it's
another layer of friction for the bad guys. Really raises
(27:16):
the bar for MFA in general. In in fact, I don't
use the one time pass codes via text. I only
do it via authenticator apps. And so someone literally has
to physically steal my phone, unlock the phone, unlock the
authenticator app to get the codes. Does that make sense?
Speaker 1 (27:31):
Yeah?
Speaker 5 (27:32):
You take it up several levels, and you know, to me,
always the frustrating thing, Dave, is the onus.
Speaker 2 (27:38):
Is on us.
Speaker 5 (27:39):
Yes, Like it's not going to be as convenient when
you have to rely on authenticators and multi factor authentication
and you know, seven different screens to get into one
account to check things or whatever it is, but it's
necessary now in order to protect yourself.
Speaker 4 (27:58):
Well, you're exactly right, Amy, and this is why I'm
always crazy about privacy and people who say I have
nothing to hind and they don't care that these apps
are sucking up all their data and it's being sold.
You really hit the nail right on the head. The
onus is always on the consumer. When these companies get
breached or sell your data as someone that's breached or whatever.
You're the one that suffers as a result. You're the
one that has seventeen thousand dollars stolen out of your
(28:19):
bank account. There's no consequences for them other than a
black eye and some free credit monitoring for you in
most cases. So yes, if you want to avoid these
kind of scams, first off awareness knowing that it's a
thing that you have to care about, and then be
you know, deciding how much friction you want to inject
in your life. Now you guys know at tenfoil hat
all the way. I'm going to make it as difficult
(28:40):
as possible for these people to steal my money as
I possibly can. And again there's nothing fool proof. But
if you continue to add these different layers, create the
pin with your carrier, use an authenticator app instead of
the text based authentication, it is going to be so
much more difficult for them to hack you. And again,
most cases are just going to move on, right, They
just want your money.
Speaker 5 (29:01):
Create friction, and then it makes it so much less
likely that you are going to be the target. Let
them move on to someone else's. Great advice, as always
from Dave Hatter, our tech expert. You're listening to Simply
Money presented by all Worth Financial here in fifty five
KRC the talk station. You're listening to Simply Money presented
(29:22):
by all Worth Financial.
Speaker 1 (29:23):
I mean you Wagner along with STEVEE. But you have
a financial question you want us to answer. 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.
We're Cincinnati ranks on the list of top cities to retire.
You know, this is something we see all the time.
A loved one passes away and you inherit an ira.
(29:45):
So what does that mean? What are the taxes that
you owe? What are the implications? How long do you
have before you need to pull the money from that account?
The answer to those questions has always been as clear
as mud. Thanks to the irs I ME, it's been
all over the place.
Speaker 3 (30:01):
It's been a frustrating couple of years when it comes
to the guidance surrounding what to do with an inherited ira.
The old rules were pretty simple. You inherit an ira
if it was before the year twenty twenty, and you
could extend the withdrawals from that ira over your life
expectancy taking required minimum distributions every year. So remember your
(30:24):
rmds that exists, so Uncle Sam can squeeze some tax
money out of you while you're still alive. Typically at
this point in time, anyways, that they're going to be
seventy three years old for rm ds. A few years
down the line they're getting kicked up to seventy five.
But with the inherited ira that the rule was pretty
cut and dry. There was a number in IRS tax
tables that you divide against the balance and the clothes
(30:46):
in the previous year, and that would determine how much
he had to take. Now, Secure Act in twenty nineteen
change some of these rules that just kind of threw
mud in your face where you had two options. Take
the lumps, which you know, if it's a very small account,
sure whatever, you pay taxes on it. If it was
a larger amount, then they said that the account must
(31:07):
be depleted within ten years after the individual's death. And
what wasn't clear was were you able to wait until
year ten to do it all or did you have
to take those r and ds every single year?
Speaker 1 (31:19):
And the IRS was like, we're gonna sit here and
wait a while and let you all fumble around and
try to figure this out on your own. And you know,
we were checking back in with CPAs, and CPAs were
scratching their heads, and you know, it's just been super frustrating.
And now the IRS has kind.
Speaker 2 (31:38):
Of clarified those rules.
Speaker 1 (31:40):
It also said we're going to give you a little
more time because we do realize we have been not
transparent whatsoever about what the best way to do with this.
Speaker 3 (31:49):
Yeah, after the initial tax law change. Most tax experts
were under the impression that you could wait until year
ten just simply you could build that. I mean, in
certain states it could create a bit of a tax
bomb because if it was a larger inherited IRA, then
you're in a situation where that's growing, growing, growing, growing,
and then year ten you got to take it all
and you got to eat the taxes at that time.
(32:11):
For certain people, that made a lot of sense if
you were knocking on the door to retirement. Let's say
you're five years out from retirement and you earn a
lot of money, and you don't want to do distributions
while you're in a higher tax bracket, so you just
sit on that inherited IRA and you let it go,
and then the first five years of retirement you do
distributions from the inherited DIRA to fulfill your cash flow needs.
(32:31):
That was great. That was very user friendly once accountants
settled on the IRS's guidance to figure, Okay, this is
what they mean, but it wasn't.
Speaker 2 (32:42):
Yeah, it wasn't.
Speaker 1 (32:44):
And to confuse the matter even more, it depends on
what your relationship was with that person who passed away,
and you inherited the IRA from. If you're a spouse,
the rules that we're talking about don't apply. The ten
year rule doesn't apply to you as a spouse. If
you and hat and IRA, you continue to have the
option of rolling that money into a new or existing
(33:04):
account and postponing those withdrawals until you reach the age
at which you should take r and ds.
Speaker 2 (33:10):
Again, clear as mud.
Speaker 3 (33:12):
Yeah, I mean to play it safe. The current guidance
that after clarification would be if it's a non spousal
inherited IRA, because again, if it's a spouse, you can
just move it into your own and take it based
on your own life expectancy. But a nonspousal inherited IRA,
I'm typically recommending that you take distributions each year over
(33:32):
the course of the ten years to keep Uncle Sam happy.
For people that weren't doing that, the penalty for not
doing the rm ds was removed between the years twenty
twenty one and twenty twenty four, again because the guidance
that the IRS put out was clear as mud, and
accountants were literally literally giving the advice just sit on
it and wait, so you know, play it safe. Make
(33:55):
sure you're doing those distributions spread out over the course
of ten years to keep Uncle Sam happy.
Speaker 1 (34:02):
And the problem with this is we are sitting on
the verge of the great wealth transfer, which is, you know,
baby boomers passing away and a lot of these iras
being inherited by other people. So important to understand the
tax implications of that and to get it right.
Speaker 2 (34:17):
Here's the all Worth advice.
Speaker 1 (34:19):
We recommend hiring a qualified financial advisor and a tax
advisor who is willing to talk to you talk to
each other when you inherit that IRA coming up next,
a new retirement ranking doesn't surprise us in the least,
but if you're thinking about moving in retirement, you're going
to want to stay tuned. You're listening to Simply Money
presented by all Worth Financial here in fifty five KRC
(34:39):
the talk station. You're listening to Simply Money presented by
all Worth Financial. I mean you Wagner along with Steve Ruby.
I don't know if you've ever done this, but I
am guilty of it. Every time I go on vacation.
After I've been there for three or four days, I'm like, oh, I.
Speaker 2 (34:56):
Love the weather, this is so beautiful. I start looking
at realists date in that area. What would be like
to retire here? Literally everywhere?
Speaker 1 (35:04):
Do no matter where I could be vacationing in Sheboygan,
I'd be looking at that.
Speaker 2 (35:08):
I don't know.
Speaker 1 (35:09):
So for those of you who've ever thought, planned, daydreamed
about maybe where you want to retire, before you start
packing those bags and those boxes, we have some new
interesting research you might want to listen up to.
Speaker 3 (35:21):
Yeah, while at Hub put out an article the best
and worst places to retire, and they ranked the top ten.
I think it comes a little surprised that half of
the top ten are in Florida. There's the Orlando, Miami, Tampa,
Fort Lauderdale, Saint.
Speaker 1 (35:37):
Petersburg, all places I've thought about in the past, sure,
except Miami.
Speaker 3 (35:41):
Except Miami number seven on the list. How about this
you ready, Cincinnati, Ohio?
Speaker 1 (35:47):
I love this. And this is not just like a
list of ten cities. It's one hundred and eighty two
US cities. They looked at, you know, a dozen different metrics,
looking at affordability, the number of activities, quality of.
Speaker 2 (36:00):
Life, and healthcare.
Speaker 1 (36:00):
And I think back to Steve Sprovac, who used to
do the show with us, who retired and he's actually
from New Jersey, moved to this area and said, I'll
never leave. He said, first of all, quality of life
is fantastic. Cost of living is super low. I've got
major sports teams, parks, arts, all these things at my
fingertips that I would be able to enjoy in a
(36:21):
much larger city, sure, at a much lower cost. And
I think the word is starting to get out.
Speaker 3 (36:27):
Once upon a time I lived in the shadow of
Manhattan in North Jersey and I worked in the city.
Speaker 1 (36:32):
Yeah, and before we had was your quality of living there?
Speaker 3 (36:36):
Oh? I was broke when I lived there. You know,
I was in my early twenties, so it was I
had fun at the time. But as I continued to
grow as a person, got married to my now wife,
and it was time to have children, it was like, okay,
I am moving back to Ohio.
Speaker 1 (36:55):
Well, any as you think about what it was like, then,
would you ever then dream about retiring there?
Speaker 3 (37:00):
No, not a chance, even if I had a billion dollars,
I'm not sure that I would want that level of
congestion and and uh, you know, just being swamped with
with people at all times. Whereas it was kind of
funny because when when we came back my in laws.
They showered us with all kinds of cultural experiences like
(37:22):
here's here's tickets stay. Yeah, you know, there's this thing
going on at the Art Museum. There's there's a play
going on later. There's Shakespeare in the Park. There's all
this stuff that like some of it I didn't really
care about all that much, but it was like, sure, thanks,
appreciate it. What we'll go, Uh, you know, here's the
ballet have fun. Like yeah, because New York that's the
center of all of that. But but Cincinnati it has it,
(37:47):
you know, it's it's a really cool city. I'm from
Cleveland originally I live here because my wife is from here.
But this is a great place to raise a family.
Speaker 1 (37:53):
Yeah.
Speaker 3 (37:53):
And obviously I've helped thousands of people retire over the
years and and and a lot of them are very
happy stick and around and so my evidence is anecdotal,
but this research actually putting Cincinnati on the top ten
is pretty cool to see.
Speaker 1 (38:07):
Well, and also on that list for what's important for
retired people, you know, minimizing taxes and expenses, we've got
that around Terry. We're talking about the cost of living,
but as well as good opportunities for those who have
retired to continue to get paid work for extra income
or because you're you know, missing that social life that
you had when you were working. So just so many
(38:27):
opportunities around here. So the next time you go on
vacation and you start to daydream about what it would
be like to live there in retirement, think about how
good you have it also when you get home.
Speaker 2 (38:38):
Thanks for listening tonight.
Speaker 1 (38:39):
You've been listening to Simply Money, presented by all Worth
Financial here on fifty five krs the talk station
Tonight, you can have all the money in the world,
but is that money in the right kinds of accounts
and steps to take once you receive and inherit at
ira and why the best place to retire might be well,
right here, you're listening to simply money presented by all
Worth Financial. I mean, you Wagner along with Steve Ruby, Gosh,
we talk about all the time diversification and it seems
(00:26):
like we're talking about you know, stocks versus bonds or
small cap large cap emerging markets. But diversification when it
comes to your money, applies to so many things, and
when you get it right, it can make a huge difference.
And tonight I want to drill down on talking about
diversification in where your money is invested. And I started
(00:48):
off by saying you could have all the money in
the world, and I see that off and I'm sure
you do too. Someone has a lot of money saved
in their four one K and that's great, it's great
that they spent all the contributing to that. The problem
is there's not diversification in the tax treatment of that
particular kind of accounts.
Speaker 2 (01:07):
Uh.
Speaker 1 (01:08):
And so every time you have to take a distribution,
every time you go to the well, you're going to
pay the same taxes on that money. How do you
plan differently and that money ended up in different kinds
of accounts, then you have a lot of options in verytime.
Speaker 3 (01:22):
Yeah, we could almost say that the new three legged
stool as opposed to pensions, social Security, four oh one
K could be it could be your pre tax, your
wroth and your after tax broke which account.
Speaker 1 (01:32):
Oh, we're going to go with that from now on.
Speaker 3 (01:34):
I like that. I just coined that right now. Thank you,
thank you, I appreciate it. So part of financial planning
is tax planning and diversifying your future tax liabilities. So
obviously we have a lot of different vehicles that we
can save, and not just the investments that like you
had mentioned stocks, bonds, cash, but we're talking about the
vehicles that those investments are held in. So the most
popular one, of course, is going to be your your
(01:55):
four O one K that this is who your employer,
this is what your employeer set you up with so
that you make deductions through your payroll. Oftentimes and historically
those are pre tax contributions. Now, remember what that means
is when you make that contribution, it is a deductible contribution.
You're deferring taxes until later on in life, but all
of the earnings that you experienced in that account will
(02:18):
be taxed when you take those distributions. It's a great
vehicle though, because not only the tax deferral, but because
there's oftentimes company match and you can put a lot
of money in these things.
Speaker 1 (02:29):
Yeah, say you come up with a million dollars right
in that four oh one k and you're like, great,
I've got a million dollars for retirement. No, and this
is the terrible conversation that we have to have. Uncle Sam,
of course still needs his piece.
Speaker 2 (02:43):
Of the pie.
Speaker 1 (02:44):
He's going to count you with hand out stretch when
you take those distributions. So that million dollars, well he's
going to take if you're in the twenty two tax packet,
two hundred twenty thousand dollars out of that right goes
directly to him. So you can see how quickly what
you thought you had amassed becomes far less, which is
why understanding these different buckets and in different times to
maybe pull from those buckets.
Speaker 2 (03:05):
Can make a huge difference.
Speaker 1 (03:06):
So, yeah, I think most of us are most familiar
with that traditional floral one K great place to save,
and if you have money to save for retirement, we
would say that's the number one place you go because
you need to get that company match.
Speaker 4 (03:18):
Right.
Speaker 1 (03:18):
If there's a company match, it doesn't make sense to
not get it. That's free money that you would be
walking away from. So you put the money into that
floural one k and get the company match. Now a
lot of us now have the option of putting money
in a wroth for a one k, and that can
make a lot of sense to have money in both
that traditional tax deferred flural one k and that wroth
(03:40):
for one k.
Speaker 3 (03:40):
Sure. Yeah, Now remember that there are distinctions because we're
also going to talk about iras in a moment. Your
traditional and your wroth iras that is totally separate from
your traditional and wroth forloral one case. The limits are
different when you can contribute, how much you can contribute,
everything is different there the traditional and wroth for one
k in twenty twenty four. If you are not turning
fifty year or younger than, the contribution limit is twenty
(04:02):
three thousand. If you're turning fifty this year or already
past fifty, then there's an additional seventy five hundred you
could put in. Now, remember the ROTH contributions within that
four to one K, they have those same limits. Oftentimes
your employer will still match. They'll give you pre tax
money though they're not paying the taxes on the contributions
that they make for you. It's not a deductible contribution,
(04:23):
but you're locking in the taxes now. So if you're younger,
if you're in a lower tax bracket, if you know
taxes are going to if you feel like taxes are
going to go up in the future, you can start
doing ROTH contributions in your four toh one K to
diversify the future tax liability. Because all the money that
you have growing in that four oh one K that's
designated as ROTH will grow tax free as soon as
you hit fifty nine and a half, and as long
(04:44):
as the money has been in there for five years,
you owe no taxes on those distributions. It's a beautiful thing.
Speaker 1 (04:51):
Yeah, that money is yours, free and clear, And you know,
I think the frustrating thing for so many of us,
going back to that three legged stool that used to
exist right with that pench and with your own retirement
savings and then with Social Security, so the government taking
part of that is it's now all on you.
Speaker 2 (05:07):
In my generation, jen.
Speaker 1 (05:09):
Ax is really the first one to kind of cross
the threshold getting close to retirement where it is all
on us. And by the way, the four to one
k as we've just kind of wrapped our brains around that.
Then we've kind of thrown this other thing it at
everyone and said, okay, there's also a wroth for oh
one k. Right, and not that long ago many of
us that even have a wroth option within our four
(05:31):
one k. By the way, recently, and not to make
your head spin, but Congress passed the Secure Act two
point zero, which made it where you don't have to
take required minimum distributions on that wroth for oh one k,
making it an even better vehicle for you to save in.
But man, if you're getting frustrated right now, don't get
(05:51):
frustrated with Steve and I.
Speaker 2 (05:52):
This is all the government. We're just trying to tell you.
Speaker 1 (05:55):
What's the most beneficial way to take advantage of what
is available to you.
Speaker 3 (06:00):
Yeah, and sitting down with a financial planner and doing
some tax planning, maybe folding in a CPA into the
conversation can help you determine how much pre tax versus
how much WROTH you should be saving your four to
one K, because you can do the WROTH contributions up
to a certain tax bucket. When that's filled, then you
switch over to pre tax so that you're not paying
a higher marginal tax on those contributions. Today, now when
(06:22):
we talk about the iras and the wroth irays, we
still have traditional iras, we still have WROTH irays. Again,
those are totally separate from your four to one ks,
whether that's pre tax and or WROTH. And this is
the individual retirement account that's not tied to any employer.
So if you are not eligible for a workplace retirement plan,
but you have earned income, then you can put money
(06:44):
into a traditional iray, get that deduction, get that tax reduction,
but then those dollars are taxable in the future. On
the flip side, the WROTH, you don't get the deduction,
but they grow tax free. Now the limits are much lower,
and there are income limits, and that once you hit
the levels, you're not able to actually contribute to the
to the ROTH or the traditional IRA.
Speaker 1 (07:04):
You're listening to simply money presented by all Worth Financial
Meini Wagner along with Steve ruby As we tackle a
kind of difficult concept to understand, but if you get
this right, you can give yourself so much more flexibility
in retirement. We're talking about diversification, specifically the kinds of
accounts that you have saved that money in. We're talking
(07:26):
about traditional for one case, versus RATH for a one case. Steve,
you were just talking about traditional iras versus Roth iras.
I'm going to throw another one out there, a health
savings account.
Speaker 2 (07:36):
If you were going to prioritize.
Speaker 1 (07:38):
How to save and where to put your dollars, right,
we would say those first dollars go into the traditional
four to oh one K to get that company match right,
you want to get that company match. Beyond that, a
health savings account is triple tax advantage. There's nothing else
like it. It is a gift from the federal government.
I'm going to ask you how many gifts is a
(07:59):
federal govern giving and that this is not a rare
kind of gifts.
Speaker 3 (08:03):
The answer is too But that HSA is in a
step up and basis on time.
Speaker 2 (08:08):
There you go, there you go.
Speaker 1 (08:09):
Yeah, the only gifts that you get so triple tax
advantage means the money goes into the account tax free.
You can invest it, it can grow tax free. You
can take those distributions for qualified healthcare expenses again tax free.
And I've said this many many times on the show.
But if you can pay those out of pocket healthcare
expenses as you go, let that money be invested in
(08:30):
that health savings account and grow. Think about the flexibility
that you have in retirement with that account, which, by
the way, the latest Fidelity statistics show the average individual
retiring at the age of sixty five right now will
have out of pocket healthcare costs of one hundred and
sixty five thousand dollars. Savings account will will come in handy,
(08:52):
and it's going to look far different than if you
get to retirement and you have a major medical bill
in the only money that you have as in a
tax deferred account, so you're going to have to pull
that money out and pay taxes on it at the
same time.
Speaker 3 (09:06):
So oftentimes, when I'm meeting with somebody that the question
comes up, where should I save my next dollar? This
is somebody that's still in the accumulation phase of retirement planning.
They have a four to one k, they have an IRA,
they have an HSA. To kind of summarize what you said, yes,
one hundred percent agree that you need to do what
you need to contribute into your workplace retirement plan to
(09:27):
get that free money via the company match anything. On
top of that, you're filling up your HSA, so you're
diversifying not only your future tax liability but accounts that
you can pull from to pay for medical expenses in retirement.
Then we come back to the four to one k,
hit the max there. Then we go to the IRA's
hit the max there. Now that this is obviously there
(09:47):
are people that can afford to do that, and if
you can, you're in a great position. You don't want
to get it wrong because you know the next one
up would be your your your taxable brokerage account.
Speaker 1 (09:58):
And I think that taxable account people off right away,
right because the word taxable and I hate that we
call it that, but essentially it's taxed differently. And there's
a few reasons why you would want one of these
taxable brokerage accounts. First of all, the flexibility in them
is there's no age when you can or cannot take
the distributions without a penalty. You can simply take them
at any point without a penalty, So it's not you
(10:20):
have to wait till fifty nine and a half. You
can access that money at any time. If that money
has been in that account invested for over a year,
you have long term capital gains taxes that you pay
on that. For most of us, that tax rate is
about half what our normal tax.
Speaker 2 (10:37):
Rate would be. So lots of flexibility with that account.
Speaker 1 (10:40):
So you need some money five years from now or
ten years from now, but maybe before you retire. That's
a great place to have that money. And again it
gives you an additional option when you get to retirement
as well.
Speaker 3 (10:55):
Yeah, there's flexibility. You can pull the money out when
you want long term capital gains for positions held more
than a year, short term for those not you can
use losses to offset future gains up to three thousand
dollars against ordinary income. And I touched on one of
the nice things that Uncle Sam does for us. That's
the step up and basis. So if you have highly
appreciated positions, I see this in town a lot with
Procter and Gamble. For example, families that have been sitting
(11:17):
on Procter and gamble shares for years. When you pass
and that becomes part of your state and it goes
on to your loved ones, there's a step up and
basis that resets the number that's used to calculate the
taxes ode when that position is sold. So it's kind
of the last thing in line for savings unless we
get creative and talk about using overfunded whole life insurance policies,
which I don't do too often, but that is something
(11:38):
that people with a lot of wealth might look at exploring.
But there is kind of a hierarchy that we walk
folks through that we work with, and other fiduciary financial
advisors should be doing it as well well.
Speaker 1 (11:48):
And I think one thing that we're missing in this
conversation is perhaps where we should have started, which is
a well funded emergency fund, right which is just in cash,
nothing sexy about it. It's not necessarily making a lot
of money, but that money on the sidelines can help
you a ton. And speaking of flexibility and retirement, say
you're starting to take distributions out of whatever that four
(12:09):
one K that IRA and markets are down, that well
funded emergency fund gives you the flexibility to turn spickt
off of those distributions, so you're not locking in those losses.
You're pulling that money out of an emergency fund, and
then you're not lucking in those losses. So this can
be confusing, but when we talk about diversification, this is
(12:30):
a critical part of getting it right.
Speaker 2 (12:32):
Man.
Speaker 1 (12:32):
You get it right, and you're going to give yourself
some really good peace of mind and some great sleep
and retirement because you'll have all kinds of options.
Speaker 2 (12:40):
Here's the all Worth advice.
Speaker 1 (12:41):
This is why hiring a qualified financial planner is really
just a good idea. They know which levers to pull
at which time in order to maximize your dollars. Coming
up next, mortgage rates, the return of meme stocks, and
we've got much more. You're listening to Simply Money, presented
by all Worth Financial here in fifty five KRC, the
talk station.
Speaker 2 (13:07):
You Simply Money, percent of.
Speaker 1 (13:08):
By all Worth Financial, Enemy Wagner along with Steve Ruby.
If you can't listen to our show every night, you
don't have to miss the thing.
Speaker 2 (13:14):
We have a daily podcast for you.
Speaker 1 (13:16):
Just search Simply Money on the iheartop or wherever you
get your podcasts.
Speaker 2 (13:20):
Coming up at six p forty three.
Speaker 1 (13:21):
We've got the important steps to take if you have
inherited an IRA. You know, we've been talking about the
housing market and maybe the silver linings of well, everyone's
looking forward to the Federal Reserve meeting next week, our
nation central Bank lowering interest rates on the Fed Funds rate.
But it's kind of like dominoes that fall right once
(13:42):
they lower the amount that banks charge each other to
loan money overnight. That's what that Fed Funds rate is.
Other rates start to come down, one of them likely
being mortgage rates. Now, this has been a tough pill
to swallow for a lot of people who have been
wanting to move. Over the past couple of years. You
went from being able to lock in, you know, a
thirty year mortgage at a sub three percent rates at
(14:05):
historically low rates, to north of eight percent. And now
we're finally seeing these mortgage rates starting to fall.
Speaker 3 (14:12):
Yeah, thirty year fell to its lowest level since February
of twenty twenty three. Obviously this is because of the
meeting with the Federal Reserve next week. I keep in mind,
as rates fall, the things that benefit us the most
are they're going to go down faster that that's your
high yield savings account, your CD rates. This is a
little bit more of a trickle, but still trending in
the right direction. The average contract rate for a thirty
(14:34):
year fixed mortgage that's sold between seven and eight hundred
thousand dollars was six point twenty nine percent or less,
and that's down from six point four to three the
previous week. So obviously with a larger loan, that is
going to make a difference on your interest payments. But
so far it's really not moving the needle. We're at
(14:55):
a nineteen month low, but home buying activity it's not
picked up yet, and that's because people are in anticipating
that is, the FED does what they're going to do,
and that's decrease rates. Finally, Uh, these mortgage interest rates
that they're going to fall, and I think that's when
activity is going to pick up well.
Speaker 1 (15:09):
And I also wonder the real estate market is very
seasonal and in the fall and heading into the winter,
you know, people don't usually put their homes on the
market if they can wait until the following spring, where
home buying season really really rams up. So it'll be
interesting to see how the market rebounds by next spring.
Whether it does, we'll certainly keep an eye on that
for you. Okay, it is time for us to talk
(15:30):
about everyone's favorite investor, and I say that with all
the sarcasm in the world. We're talking about the craziness
of meme stocks and the fact that Roaring Kitty has
roared back into the financial headlines once again.
Speaker 3 (15:44):
It's just so strange saying Roaring Kitty, that's this guy.
Speaker 2 (15:47):
Explain who we're talking about here.
Speaker 3 (15:50):
His name SOPs in my mind right now, Keith Keith,
because it's just Roaring Kitty.
Speaker 4 (15:54):
Yeah.
Speaker 1 (15:55):
Yeah, he has a normal name, yeah, and in a
somewhat normal job. But the reason why everyone knows him
is because in the midst of the pandemic, when people
went on that Reddit forum, the Wall Street forum and said,
let's stick it to the people who on Wall Street
who are shorting companies like GameStop, this kind of birth
(16:18):
of this mean stock craze was born, and Roaring Kitty,
as the online name went, was the one at the
forefront of that. And the crazy thing was Roaring Kitty
then went really silent for a few years, you know,
and kind of the meme stock thing, I don't know,
made headlines every once in a while. But then it
was like he popped his head up earlier this summer
and apparently again in what makes me crazy is do
(16:43):
we need more evidence that this is not a good
way to invest because every time this guy pops his
head up and I say pops his head up, he
just posts a meme yes on his social media and
people actually make trades with their money.
Speaker 2 (16:59):
Yep, based on his pictures on social media.
Speaker 3 (17:02):
He found a lot of success in doing this. I'm
talking tens of millions of dollars that we know of,
maybe more that he cashed in on by capturing the
opportunity that they identified to put the short squeeze on
these hedge funds that were shorting stock that they should
have been storting shorting like AMC. You know, people weren't
able to go to the movie. Game stop is kind
(17:25):
of a thing of the past. It's a brick and
mortar location that gives you really awful deals on when
you're trying to sell them video games and you just
download stuff anyways, So there was some some opportunity that
he identified and he made a lot of money. Sure,
there were people that got in with him early because
they saw this stuff on Wall Street bets. But there's
a lot of people that lost their shirts on I
would say bets that this is close to gambling because
(17:48):
they were, yeah, they were doing options strategies on these
meme stocks. And what happened recently is one little post
online with a picture from the movie Toy Story two
is leeing people to believe that retail that mister Kitty
is going to be going all in on the on
the food retailer Chewy. Now I don't know why the
(18:10):
correlation is there, but that's that's the thought process for
the masses that follow this.
Speaker 1 (18:15):
Okay, so Chewy is yeah, pet food, yeah, and pet supplies.
And I'm not sure how someone looks at a picture
on someone's social media from Toy Story two and then
extrapolates from that, oh, we should invest or he is
going to invest in Chewy. So let's all go in
or out based on that. The reason why we talk
(18:36):
about this is you probably are smart enough to not
do this, but maybe your children are on social media
and they are exposed to these things, and you know,
they use words like yolo, you only live once, and
you know, go all in on these things, and these
are a regular part of our kids and our grandkilled
grandchildren's vocabulary, and so it could make sense. It would
(18:59):
be terrible if it did, But for a twenty one,
twenty two year old just out of college who is
so used to being on all of the social media
to jump in on one of these, you know, I'm
not going to put my money in a highly diversified
S and P five hundred fund in my four oh
one k Instead, I'm going to open a Robinhood account
and I'm next week.
Speaker 3 (19:17):
Yeah, that's what they think is going to happen. They
go on, they have a Yolo bet and they cross
their fingers that it's going to pay off, even though
it's like ten thousand and one odds that they even
see the types of returns that rorin Kitty has.
Speaker 1 (19:29):
Yeah, by the way, there was an ETF that's focused
on memestocks that has actually now closed down because the
returns were just abysmal. So for those who went all
in on memestocks, please please not an investment.
Speaker 2 (19:42):
It's a gamble. Here's the all worth advice.
Speaker 1 (19:44):
Investing in stocks that are artificially inflated by people on
social media is a ridiculous move to make it's certainly
not an investment. Coming up next, thieves are now stealing
money despite victims having two factor authentication. We've got two
concrete things so that you can do to protect yourself.
You're listening to Simply Money presented by all Worth Financial
(20:04):
here in fifty five KRC the talk station.
Speaker 5 (20:11):
You're listening to Simply Money present by all Worth Financial.
I mean you Wagner, along with Steve Ruby. If you
listen to our show at all, you know that we
are huge proponents of taking every step that you possibly
can to protect yourself, your data, your privacy, and one
of the things that we say is you've got to
use that two factor authentication. While joining us tonight, our
(20:33):
tech expert Dave Hatter from Interest it all right, Dave,
this is not what we want to hear. We tell
people to use two factor authentication and then sometimes it's.
Speaker 2 (20:43):
Not even enough.
Speaker 4 (20:45):
Well, Amy, you know, the advice from anyone out there
that knows anything about this is still used to factor
slash multi factor authentication. Okay, but you're right, sometimes it's
not enough. You know that point for both of you
to get out to the listeners really is it still
raises the bar substantially, and it makes it much more
difficult for the bad guys. But they're smart, and they're devious,
(21:06):
and they want to steal your money, so they're increasingly
figuring out ways to get around it. And there are
other technologies down there that can, you know, basically augment
your defensive posture and make it more difficult. But yeah,
I would strongly recommend to anyone that's hearing this turn
on multi factor authentication or two factory authentication anywhere and
everywhere you can, because again, it really raises the difficulty
(21:29):
bar for the bad folks, and in many cases they're
just going to move on to the softest target where
they can get money the fastest.
Speaker 5 (21:35):
Stir by telling us what happened in the specific circumstance
where two factor authentication was not enough.
Speaker 4 (21:42):
Well, honestly, I mean that's a good question. So the
headline on this story was Maryland woman loses seventeen thousand
and simcard swap scam despite two factory authentication, And I'll
be honest, I don't think the reporting on this really
adequately addresses what happened here because the problem, based on
what I've seen, is not really multi factor authentication it's
the fact that they pulled a SIM card swap on
(22:03):
her and there's really nothing It really has nothing to
do with two factor authentication per se, based on what
I've seen on the reporting, So SIM swapping and this
is an increasing crime. People need to be aware of this.
As crazy as this sounds, Okay, it's also sometimes called
sim jacking. So if you see sim swap or simjacking,
basically what it boils down to is someone is swapping
(22:26):
your phone number to another phone and then potentially able
to defeat you know, whatever passwords you have. You know,
all the stuff we talk about all the time, strong
unique passwords, password managers, multi factor authentication. If all of
that is set up to go to your phone and
now your phone is essentially in my hands because I
SIM swapped you, well you've got a huge problem. So
(22:48):
here's how this works. And again, while this is not
something that's often targeted to the average person, it's increasingly
being targeted average people because the bad guys know, if
I can take over your phone quote, unquot vote, I
potentially have access to everything about you. It happened to
Jack Dorsey, the former CEO of Twitter some time ago.
So let's say, for example, because of all the data
(23:10):
breaches that are out there, and because people will always say, well,
I have nothing to hide, I don't care that all
these apps are sucking up all my information, etc. I'm
able to get my hands on an enormous amount of
information about you, like all of the answers to your
security questions and so forth. I know your mother's maiden name.
I know all that stuff. And now, especially thanks to
deep fake voice cloning, I can call Verizon because I
(23:32):
know your phone number, I know your email address, I
know what high school you went to, and all that stuff.
I'm going to need to impersonate you. I'm going to
call Verizon, and I'm going to sound like a woman
when I call, and I'm going to say, hey, I
lost my phone. I want you to switch my phone
number to a new phone. Or in this case, apparently
the criminals walked into a Verizon store and they impersonated
(23:52):
the victim and they had her phone number switched to
a new phone. I would bet you every one of
your listeners either has done this or knows someone that's
lost a phone or something. I've had to do it
myself and had the phone number transported to a different device. Well,
guess what now all of the two factor authentication codes,
all of the email password resets are going to the
(24:14):
phone the bad guys have. Does this make sense so far?
Speaker 3 (24:17):
It does? Every time we have you on, I'm scared.
Speaker 4 (24:22):
Well I'm sorry, Steve, but I appreciate you guys, you know,
trying to help get the word out there, because you
know this. This woman lost seventeen thousand dollars because they
were able to raid her bank accounts once they got
into her phone. And this is a tricky problem to
solve because if I can impersonate you, and if the
people at your Sayator carrier aren't skeptical enough, they may
(24:43):
go ahead and do this transfer. And while there are
some defenses against this, and I'll get to two specifically
here in a minute, this is a tricky problem to
solve because again, if I can impersonate you and I'm
credible and confident and a good con man, they may
switch the phone over. So this isn't really a knock
on Verizon or any carrier. It's bad guys are smart
(25:04):
and they want to steal your money, and they know
how to do these things. So here are two concrete
steps you can take that, while it will not completely
bulletproof you against this, again raising the bar trying to
get the bad guys to move on to a softer target.
One is contact your cellultar carrier and see if they
have the option to set up an additional PIN or
(25:26):
passphrase or something. It's required to swap your phone number
that way, even if someone happens to know all this
other information, ideally they are not going to know that pin,
passphrase or whatever, and your cellutar carrier is not going
to switch the phone number to a different phone and
allow them to basically destroy your life.
Speaker 3 (25:48):
Just to be clear that it's the two factor authentication
wasn't necessarily the problem here. It's still adding to the
benefit of additional security. What this article didn't really go
into depth about was the fact that this is actually
simcard swapping. So these additional pieces of advice from you
are to add even more security above and beyond multi
(26:11):
factor authentication.
Speaker 4 (26:13):
That's a perfect analysis, Steve, Again, I don't think the
article really addresses what really happened here. It's not the
fact that the two factor authentication or MFA failed, it's
the simswapper, at which point than all the codes and
everything the hackers needed to get into her accounts. We're
going to a different phone.
Speaker 3 (26:28):
So code, yes, this piece of advice.
Speaker 4 (26:33):
Correct, set that up with your carrier. And then the
second piece is again MFA two FA turn it on.
But there are additional mechanisms you can use to make
that more difficult. For example, an authenticator app. Microsoft makes one,
Aufe makes one. Rather than you get the code via
text to your phone, there is an app you install
(26:54):
on your phone. It syncs up with these sites. The
codes go to the app, they're encrypted, and you you
then have to have physical possession on my phone. Sim
swapping my phone number to another phone will not allow
you to get those codes because they're sent an encrypted
form to the app on my physical device. So it's
another layer of friction for the bad guys. Really raises
(27:16):
the bar for MFA in general. In in fact, I don't
use the one time pass codes via text. I only
do it via authenticator apps. And so someone literally has
to physically steal my phone, unlock the phone, unlock the
authenticator app to get the codes. Does that make sense?
Speaker 1 (27:31):
Yeah?
Speaker 5 (27:32):
You take it up several levels, and you know, to me,
always the frustrating thing, Dave, is the onus.
Speaker 2 (27:38):
Is on us.
Speaker 5 (27:39):
Yes, Like it's not going to be as convenient when
you have to rely on authenticators and multi factor authentication
and you know, seven different screens to get into one
account to check things or whatever it is, but it's
necessary now in order to protect yourself.
Speaker 4 (27:58):
Well, you're exactly right, Amy, and this is why I'm
always crazy about privacy and people who say I have
nothing to hind and they don't care that these apps
are sucking up all their data and it's being sold.
You really hit the nail right on the head. The
onus is always on the consumer. When these companies get
breached or sell your data as someone that's breached or whatever.
You're the one that suffers as a result. You're the
one that has seventeen thousand dollars stolen out of your
(28:19):
bank account. There's no consequences for them other than a
black eye and some free credit monitoring for you in
most cases. So yes, if you want to avoid these
kind of scams, first off awareness knowing that it's a
thing that you have to care about, and then be
you know, deciding how much friction you want to inject
in your life. Now you guys know at tenfoil hat
all the way. I'm going to make it as difficult
(28:40):
as possible for these people to steal my money as
I possibly can. And again there's nothing fool proof. But
if you continue to add these different layers, create the
pin with your carrier, use an authenticator app instead of
the text based authentication, it is going to be so
much more difficult for them to hack you. And again,
most cases are just going to move on, right, They
just want your money.
Speaker 5 (29:01):
Create friction, and then it makes it so much less
likely that you are going to be the target. Let
them move on to someone else's. Great advice, as always
from Dave Hatter, our tech expert. You're listening to Simply
Money presented by all Worth Financial here in fifty five
KRC the talk station. You're listening to Simply Money presented
(29:22):
by all Worth Financial.
Speaker 1 (29:23):
I mean you Wagner along with STEVEE. But you have
a financial question you want us to answer. 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.
We're Cincinnati ranks on the list of top cities to retire.
You know, this is something we see all the time.
A loved one passes away and you inherit an ira.
(29:45):
So what does that mean? What are the taxes that
you owe? What are the implications? How long do you
have before you need to pull the money from that account?
The answer to those questions has always been as clear
as mud. Thanks to the irs I ME, it's been
all over the place.
Speaker 3 (30:01):
It's been a frustrating couple of years when it comes
to the guidance surrounding what to do with an inherited ira.
The old rules were pretty simple. You inherit an ira
if it was before the year twenty twenty, and you
could extend the withdrawals from that ira over your life
expectancy taking required minimum distributions every year. So remember your
(30:24):
rmds that exists, so Uncle Sam can squeeze some tax
money out of you while you're still alive. Typically at
this point in time, anyways, that they're going to be
seventy three years old for rm ds. A few years
down the line they're getting kicked up to seventy five.
But with the inherited ira that the rule was pretty
cut and dry. There was a number in IRS tax
tables that you divide against the balance and the clothes
(30:46):
in the previous year, and that would determine how much
he had to take. Now, Secure Act in twenty nineteen
change some of these rules that just kind of threw
mud in your face where you had two options. Take
the lumps, which you know, if it's a very small account,
sure whatever, you pay taxes on it. If it was
a larger amount, then they said that the account must
(31:07):
be depleted within ten years after the individual's death. And
what wasn't clear was were you able to wait until
year ten to do it all or did you have
to take those r and ds every single year?
Speaker 1 (31:19):
And the IRS was like, we're gonna sit here and
wait a while and let you all fumble around and
try to figure this out on your own. And you know,
we were checking back in with CPAs, and CPAs were
scratching their heads, and you know, it's just been super frustrating.
And now the IRS has kind.
Speaker 2 (31:38):
Of clarified those rules.
Speaker 1 (31:40):
It also said we're going to give you a little
more time because we do realize we have been not
transparent whatsoever about what the best way to do with this.
Speaker 3 (31:49):
Yeah, after the initial tax law change. Most tax experts
were under the impression that you could wait until year
ten just simply you could build that. I mean, in
certain states it could create a bit of a tax
bomb because if it was a larger inherited IRA, then
you're in a situation where that's growing, growing, growing, growing,
and then year ten you got to take it all
and you got to eat the taxes at that time.
(32:11):
For certain people, that made a lot of sense if
you were knocking on the door to retirement. Let's say
you're five years out from retirement and you earn a
lot of money, and you don't want to do distributions
while you're in a higher tax bracket, so you just
sit on that inherited IRA and you let it go,
and then the first five years of retirement you do
distributions from the inherited DIRA to fulfill your cash flow needs.
(32:31):
That was great. That was very user friendly once accountants
settled on the IRS's guidance to figure, Okay, this is
what they mean, but it wasn't.
Speaker 2 (32:42):
Yeah, it wasn't.
Speaker 1 (32:44):
And to confuse the matter even more, it depends on
what your relationship was with that person who passed away,
and you inherited the IRA from. If you're a spouse,
the rules that we're talking about don't apply. The ten
year rule doesn't apply to you as a spouse. If
you and hat and IRA, you continue to have the
option of rolling that money into a new or existing
(33:04):
account and postponing those withdrawals until you reach the age
at which you should take r and ds.
Speaker 2 (33:10):
Again, clear as mud.
Speaker 3 (33:12):
Yeah, I mean to play it safe. The current guidance
that after clarification would be if it's a non spousal
inherited IRA, because again, if it's a spouse, you can
just move it into your own and take it based
on your own life expectancy. But a nonspousal inherited IRA,
I'm typically recommending that you take distributions each year over
(33:32):
the course of the ten years to keep Uncle Sam happy.
For people that weren't doing that, the penalty for not
doing the rm ds was removed between the years twenty
twenty one and twenty twenty four, again because the guidance
that the IRS put out was clear as mud, and
accountants were literally literally giving the advice just sit on
it and wait, so you know, play it safe. Make
(33:55):
sure you're doing those distributions spread out over the course
of ten years to keep Uncle Sam happy.
Speaker 1 (34:02):
And the problem with this is we are sitting on
the verge of the great wealth transfer, which is, you know,
baby boomers passing away and a lot of these iras
being inherited by other people. So important to understand the
tax implications of that and to get it right.
Speaker 2 (34:17):
Here's the all Worth advice.
Speaker 1 (34:19):
We recommend hiring a qualified financial advisor and a tax
advisor who is willing to talk to you talk to
each other when you inherit that IRA coming up next,
a new retirement ranking doesn't surprise us in the least,
but if you're thinking about moving in retirement, you're going
to want to stay tuned. You're listening to Simply Money
presented by all Worth Financial here in fifty five KRC
(34:39):
the talk station. You're listening to Simply Money presented by
all Worth Financial. I mean you Wagner along with Steve Ruby.
I don't know if you've ever done this, but I
am guilty of it. Every time I go on vacation.
After I've been there for three or four days, I'm like, oh, I.
Speaker 2 (34:56):
Love the weather, this is so beautiful. I start looking
at realists date in that area. What would be like
to retire here? Literally everywhere?
Speaker 1 (35:04):
Do no matter where I could be vacationing in Sheboygan,
I'd be looking at that.
Speaker 2 (35:08):
I don't know.
Speaker 1 (35:09):
So for those of you who've ever thought, planned, daydreamed
about maybe where you want to retire, before you start
packing those bags and those boxes, we have some new
interesting research you might want to listen up to.
Speaker 3 (35:21):
Yeah, while at Hub put out an article the best
and worst places to retire, and they ranked the top ten.
I think it comes a little surprised that half of
the top ten are in Florida. There's the Orlando, Miami, Tampa,
Fort Lauderdale, Saint.
Speaker 1 (35:37):
Petersburg, all places I've thought about in the past, sure,
except Miami.
Speaker 3 (35:41):
Except Miami number seven on the list. How about this
you ready, Cincinnati, Ohio?
Speaker 1 (35:47):
I love this. And this is not just like a
list of ten cities. It's one hundred and eighty two
US cities. They looked at, you know, a dozen different metrics,
looking at affordability, the number of activities, quality of.
Speaker 2 (36:00):
Life, and healthcare.
Speaker 1 (36:00):
And I think back to Steve Sprovac, who used to
do the show with us, who retired and he's actually
from New Jersey, moved to this area and said, I'll
never leave. He said, first of all, quality of life
is fantastic. Cost of living is super low. I've got
major sports teams, parks, arts, all these things at my
fingertips that I would be able to enjoy in a
(36:21):
much larger city, sure, at a much lower cost. And
I think the word is starting to get out.
Speaker 3 (36:27):
Once upon a time I lived in the shadow of
Manhattan in North Jersey and I worked in the city.
Speaker 1 (36:32):
Yeah, and before we had was your quality of living there?
Speaker 3 (36:36):
Oh? I was broke when I lived there. You know,
I was in my early twenties, so it was I
had fun at the time. But as I continued to
grow as a person, got married to my now wife,
and it was time to have children, it was like, okay,
I am moving back to Ohio.
Speaker 1 (36:55):
Well, any as you think about what it was like, then,
would you ever then dream about retiring there?
Speaker 3 (37:00):
No, not a chance, even if I had a billion dollars,
I'm not sure that I would want that level of
congestion and and uh, you know, just being swamped with
with people at all times. Whereas it was kind of
funny because when when we came back my in laws.
They showered us with all kinds of cultural experiences like
(37:22):
here's here's tickets stay. Yeah, you know, there's this thing
going on at the Art Museum. There's there's a play
going on later. There's Shakespeare in the Park. There's all
this stuff that like some of it I didn't really
care about all that much, but it was like, sure, thanks,
appreciate it. What we'll go, Uh, you know, here's the
ballet have fun. Like yeah, because New York that's the
center of all of that. But but Cincinnati it has it,
(37:47):
you know, it's it's a really cool city. I'm from
Cleveland originally I live here because my wife is from here.
But this is a great place to raise a family.
Speaker 1 (37:53):
Yeah.
Speaker 3 (37:53):
And obviously I've helped thousands of people retire over the
years and and and a lot of them are very
happy stick and around and so my evidence is anecdotal,
but this research actually putting Cincinnati on the top ten
is pretty cool to see.
Speaker 1 (38:07):
Well, and also on that list for what's important for
retired people, you know, minimizing taxes and expenses, we've got
that around Terry. We're talking about the cost of living,
but as well as good opportunities for those who have
retired to continue to get paid work for extra income
or because you're you know, missing that social life that
you had when you were working. So just so many
(38:27):
opportunities around here. So the next time you go on
vacation and you start to daydream about what it would
be like to live there in retirement, think about how
good you have it also when you get home.
Speaker 2 (38:38):
Thanks for listening tonight.
Speaker 1 (38:39):
You've been listening to Simply Money, presented by all Worth
Financial here on fifty five krs the talk station
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