Simply Money

Episode Transcript

Speaker 1 (00:06):
Tonight, did the FED screw up and maybe cut interest
rates too fast too soon? You're listening to Simply Money
presented by all Worth Financial Immi Wagner along with Bob Spawnseller.
It's Monday morning and we're going to Monday morning quarterback
the Federal Reserve, our nation central bank? Right, did they
do what they needed to do? I would not want

(00:26):
this job. I'm just going to say that right now.
This is a tough job. And there's so much data
that continues to come in and sometimes it points us
in different directions.

Speaker 2 (00:35):
Yeah, Friday was pretty interesting. And while the rest of
us were preparing for Snowmageddon two point zero, you know,
business is shutting down and us getting the snow shovels
out the Fed, you know, the news about interest rates
and inflation was hot and heavy, and the markets moved
and they moved down. So let's just kind of summarize

(00:56):
what happened. The jobs report came out on Friday. Non
farm payrolls increased by two hundred and fifty six thousand jobs,
which far exceeded expectations, and the unemployment rate fell back
down to four point one percent. But the big news
was that the very widely viewed University of Michigan consumer

(01:18):
Sentiment survey came out and said consumers expect inflation to
jump to three point three percent, and that's a one
half percent increase from just one month ago. That's what
moved the markets, the inflation expectation.

Speaker 1 (01:35):
There's a lot going on right now, and you know,
just talking to clients in my office and people over
the weekend, I think it's really interesting that after President
Trump was elected, it took all of a couple of
hours the next morning after that election for these big
companies to sort of digest the news. And Andy Suder,

(01:55):
chief investment officer, was saying, hey, these big companies feel
like despite the fact that immigration tough immigration law could
be bad for inflation, despite the fact that tariffs could
also lead to inflation. You know, these companies sort of,
as they digested it, looked at the fact that a
lot of the deregulation that would likely come from a
Trump administration means kind of a net positive to them.

(02:17):
You know, it felt like a still a very pro
business kind of an environment. Nothing has really changed since then,
yet markets are it's like almost these companies are starting
to say, well, wait a second, maybe not. We don't know, right,
could tariffs be a bigger deal? I don't know.

Speaker 2 (02:34):
People always like to get out in front and predict
what's going to happen. And to your point, deregulation good,
tariffs bad.

Speaker 1 (02:43):
Yeah.

Speaker 2 (02:44):
So I could totally see companies hiring people in December
expecting a growing economy and less regulation. But the consumer
sentiment survey, now we've got twenty four percent of all
consumers saying I'm sorry. Yeah, over a third of consumers

(03:05):
mentioning tariffs.

Speaker 3 (03:07):
Yeah. Yeah, that's up.

Speaker 2 (03:07):
From twenty four percent in December, and it's up from
less than two percent prior to the election. So you
could read this as consumers are expecting inflation, businesses are
expecting deregulation. Who knows what's really going to happen. Yeah.

Speaker 1 (03:22):
I want to go back to that job's report first
of all, because you know those numbers. It's like, well,
why could this be bad news?

Speaker 2 (03:29):
Right?

Speaker 1 (03:30):
Less people on unemployment, more companies hiring, this is a
good thing. Keep in mind, the FED has a dual
mandate to keep people working and to keep inflation in check.
You know, the interesting thing is, in the past couple
of years, right when the Fed has been laser focused
on bringing down inflation. The expectation was the tightening of

(03:51):
the job market, right, and so I think there's maybe
some lingering thoughts out there of wait a second, if
the job market is really still doing so well, has
inflation really been completely tackled?

Speaker 2 (04:04):
You know?

Speaker 1 (04:05):
It can It continues to sit out there and be
incredibly sticky. We said, the closer we get to two percent,
which is the Fed's goal for inflation, the more difficult
it's going to be to kind of get across that
finish line. I think that's exactly what we're seeing playing
out right now.

Speaker 3 (04:21):
Agree.

Speaker 2 (04:21):
And again, the biggest number from this sentiment survey, and
who knows, it could change again in thirty days, but
the five to ten year estimate on inflation from the
consumer surveyed said three point three percent. Yeah, over the
next five to ten years. Now, if that trend continues,
inflation is not over and we will see impact.

Speaker 1 (04:43):
But yeah, I mean, essentially what that research is saying is, Okay,
you say FED says two percents the goal. We do
not see that happening. As consumers. In fact, we expect
to be paying three point three percent more next year
and the year after that and the year after that,
and that's kind of what we're projecting inflation. And you know,
I think that it makes sense on main street when

(05:05):
you are concerned about inflation. What's going to happen, Well,
people are going to buy less or you know, spend less,
and they're going to worry about their jobs. And then
you know, people are spending less, then it becomes the
cycle of then companies laying off because there's not as
much profit coming in. So you know, by I think
to your point, when you look at these two major

(05:26):
pieces of data they came in which one moved the markets,
You've got one saying, okay, the job market is still strong,
and another one saying, hey, this is how consumers are feeling. Well.
Consumers are three quarters of the American economy are spending.

Speaker 2 (05:39):
You took the words out of my mouth. The consumer wins.
It's three quarters of the economy. And right now the
consumers are spending, are saying we expect flight inflation to stay.

Speaker 4 (05:50):
Hi.

Speaker 2 (05:51):
I don't think consumers believe the Fed. You know, way
back when when they said inflation was transitory, remember that word.

Speaker 1 (05:57):
I do remember that kind of a joke now.

Speaker 2 (06:00):
And they still don't believe that inflation is over, so
we'll see. I think another key data point, a key
thing to remember is that fourth quarter earning season starts
in earnest this week, with several of the big banks
coming out and reporting fourth corner earnings and more importantly,
expectations for the first and maybe second corner of twenty

(06:22):
twenty five, We're going to know a lot more by
maybe Friday than we know today about the direction maybe
of the stock market here in the short term.

Speaker 1 (06:32):
You're listening to simply Money presented by all Worth Financial,
I mean me Wagner along with Bob Spawnseller. If you're
been paying close attention to your four one K, what
the heck's been going on lately all over the place, Well,
Friday definitely not the best day for the markets, and
that's because a couple pieces of information came in one
about the job market. Maybe that wasn't moving the needle

(06:52):
as much as this sort of Michigan consumer sentiment study
that we look at, which just kind of takes the
pulse of all of us. It's how do we feel
on main Street about our money, where things are going
in the future, And people kind of had a pessimistic
outlook on the economy, you know, and I think going
back to December, because a lot of us were incredibly

(07:14):
busy with the holidays and shopping and getting ready and
all of that, you may not have been paying super
close attention to the Federal Reserve at that point either.
But they did not raise interest rates and they didn't
lower interest rates, and that was kind of they did.
That was kind of the expectation. But what kind of
came out as the big news was the dot plot, right,

(07:37):
and this is where the voting members of the Federal
Reserve say, here's where we think things are going to
go in twenty twenty five. Well, you've got all of
these big companies thinking, Okay, we're going to see interest
rates being lowered continue to lower in twenty twenty five,
which is going to then make it easier for us
to borrow money and make money. And then all of
a sudden, wait a second, what if we don't get

(07:59):
that because plut only said we're going to lower interest
rates twice next year, and that's not the expectation. So
I just think there's a lot going on kind of
behind the scenes. They're bubbling beneath the surface. Of the
American economy right now, and I think the expectation then
should probably be volatility.

Speaker 3 (08:19):
Yeah.

Speaker 2 (08:19):
Going into the November and December FED meetings, remember we
were expecting everybody was expecting four to five rate cuts
in twenty twenty five. The big news in December was
they signaled, hey, maybe two rate cuts in twenty twenty five.
Market started selling off a little bit. And I'm telling
you right now now after this Friday news, I you know,

(08:42):
and I'm not an expert, I'm not an economist, but
I bet the expectation right now is maybe zero rate
cuts in twenty twenty five. But again, we will see
what happens. And it's important to not overreact to this
short term quote unquote news because things can and do
change quickly.

Speaker 1 (09:01):
And I think the message to is the same that
you got to control what you can control. You cannot
control any of the things that we're talking about, None
of us can. I mean, we can't control how everyone
around us is feeling about the economy. We cannot control
how sticky inflation is, or what the job market is doing,
or what the Federal Reserve is going to do next year.
But you can look at the current rate environment right,

(09:23):
and say, Okay, what can I take advantage of and
what do I maybe need to do as the result
of this. If you have any high interest credit cards
at just pay that off, right, Those rates are probably
going to come down. But if to your point, Bob,
if we don't have any interest rate cuts this year,
we may not see credit card rates coming down at all.
So just get that paid off, you know, And maybe CDs.

(09:46):
I think there's been some safety and kind of CDs
and money markets over the past few years. You could
have never imagined getting five percent having your money out
of the market before the past couple of years. I mean, gosh,
before that. I think about my savings account. I think
that I think the rate was like point zero zero
zero zero six. You know, you made a penny every
year if you had ten thousand dollars in that account. Right,

(10:10):
It got a lot better for consumers during that time.
Maybe we've started to see kind of rates falling. Maybe
we fall and then it stops holds there for a
little while.

Speaker 3 (10:21):
Yeah.

Speaker 2 (10:21):
The important thing is again time horizon, when do you
need your money and what does it need to do
for you when? And again pulling.

Speaker 3 (10:28):
It back way to the macro level.

Speaker 2 (10:31):
We really don't concern ourselves with the consumer sentiment. Remember,
when we invest in the stock market, we are investing
in capitalism, the ability of publicly traded companies to grow
earnings at an increasing rate.

Speaker 1 (10:44):
Corporate greed yep right, and those companies are always going
to find ways to make money around whatever the current
environment is. I think that's an excellent point. Here's the
all Worth Advice. Markets tend to get volatile when companies
see news they don't like the reaction though. Is you
usually short term so please stick with your long term plan.
Coming up next, the impact that those devastating wildfires in

(11:07):
California could actually have on you, plus the most popular
retirement investment. Does it make sense for you? 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 by all Worth Financial. I mean you Wagner aalog
with Bob's bondsell or. If you can't listen to our

(11:28):
show every night, you don't have to miss a thing.
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 straight ahead. It's six forty three, everyone's
favorite retirement factor fiction with a focus on taxes. Some
of these are things that we have actually seen people
get caught off guard abouts. So you're gonna want to

(11:49):
know these, Okay, our hearts go out to the people
in California. You cannot turn on your TV, watch football
over the weekend where they weren't talking about it, pick
up your phone. It is absolutely devastating what the start
of one fire and high winds and dry conditions have
done out there.

Speaker 2 (12:10):
It is shocking, and I'm still in shock when I
turn on the news and look at these aerial photos
of entire neighborhoods that are just gone fascinated as though
a nuclear bomb went off.

Speaker 3 (12:22):
I mean, it is sad, it is horrible. I'm speechless.

Speaker 1 (12:26):
Yeah, And so, first of all, our hearts, our prayers,
our thoughts are certainly going out to those people. But
if you fast forward several months to where we are
then rebuilding in looking at what the future looks like,
a lot of these insurance companies are going to have
some pretty major claims. You know, we've seen figures of

(12:47):
billions and billions, hundreds of billions of dollars in some
cases of what it would take to rebuild. That will
not only fall to people in California who have been
impacted by these wildfires, but that will likely spread to
consumers even here in the Midwest.

Speaker 2 (13:02):
Yeah, it's going to take a while for all of
this to sort itself out. And the sad thing about
this entire event is how quickly people have been to
politicize the whole thing on both sides of the aisle,
and we just need to, you know, obviously stay away
from that. But getting back to practical advice, I've read,
I've read numbers of fifty to two hundred billion dollars

(13:24):
you know, in losses. I mean that that is a
game changer for the property and casually insurance industry. I've
seen a couple companies, for example, all State and Chubb
have very high exposure to this event. Other companies like
State Farm decided to cut back on insuring homes out
in California I think thirty sixty ninety days ago. And

(13:47):
it's because, you know, these insurance companies have to go
in and submit proposed price increases to the state insurance Commissioner.
And I think in the case of State Farm, they
did not get the price increase they were so they said, hey,
we're we're going to move off of this block of business.

Speaker 1 (14:03):
Yeah.

Speaker 3 (14:04):
So I think the thing.

Speaker 2 (14:05):
To be, you know, for all of us to understand is,
I think there's going to be a ripple effect across
the whole P and C platform, even for people in Cincinnati,
the Midwest, you know that will not suffer a fire
or a hurricane exposure like what happened in Florida. I
think we just need to be checking our property and
casually insurance bills here over the next thirty sixty ninety days,

(14:29):
and if we see a big jump, it's probably a
good idea to start shopping around.

Speaker 1 (14:33):
Yeah. I think it's always a good idea shop around.
I think this is one thing that many of us
set it and forget it. You know, you love your
insurance guy. You're the same person for years. You know,
you just renew that policy every time it comes up.
It's important to understand first of all what's covered, right,
the coverage that's within that policy, but then also what
you're paying and shopping around to look at are there
better options for you? And I think we will likely

(14:57):
see premiums starting to head a little bit farther north
over the next few months, so now's a great time
to just check around see what your options are.

Speaker 2 (15:05):
And as these words literally come out of my mouth,
I feel like, well, you know this is a financial show.
You know we're here to give financial advice, so let
me give a second piece of advice. Instead of trying
to take advantage of this event, Let's let's check our
insurance rates.

Speaker 3 (15:18):
But let's also, if we have.

Speaker 2 (15:20):
The means to do it, get online and support your
favorite charity and let's try to help some of these
people too.

Speaker 1 (15:26):
Well, that's an excellent point. And also I've seen a
lot of you know, people putting gofundmes out there and
things like that that are not legit, So yes, find
a reputable organization and give money to them. With AI,
these scammers are able to create what looks like heart
wrenching I mean sometimes they're even making up people's stories

(15:49):
and making up these videos of fires that are not
even real. So if you are going to donate, please,
please please make sure you're doing that to a reputable
organization with boots on the ground there that's actually making
a difference. Okay, I want to pivot now to something
called target date funds. This may be something that you're
already familiar with because it might be what you're invested
in with your four oh one K. These are incredibly popular,

(16:13):
but I'm not necessarily the biggest fan of them, and
I think we're seeing that they're becoming more and more popular.

Speaker 2 (16:20):
Yeah, as of twenty twenty three, about thirty percent of
all assets in the average four oh one K plan
are held in these target date funds. And you know,
obviously that's the largest share of any asset class. You know,
they're held in four to one K plans, but the
estimate is by twenty twenty seven that number is expected
to jump to almost two thirds will be in target

(16:43):
date funds.

Speaker 3 (16:44):
I'm I see things from both sides of the table.

Speaker 2 (16:47):
I used to advise four or five very large four
to one K plans where I would literally be the
guy that stands up in front of the employees every
year and try to provide some education.

Speaker 3 (16:57):
So for the folks that have zero.

Speaker 2 (17:00):
Experience investing whatsoever, and you're trying to explain investing to
them in ten minutes so that they'll participate. I think
these target date funds work well.

Speaker 1 (17:11):
They're better than nothing.

Speaker 2 (17:12):
They're better than nothing, and it allows people to participate.
And I, in my opinion, is the reason a lot
of these target date funds are becoming so prevalent is
a lot of plans have put an auto and roll
feature on their plan to get people involved. However, if
you're fortunate enough to have a financial advisor, it's important

(17:33):
to sit down with that advisor and say, all right,
does my allocation my four to one K plan actually
align with my personal risk tolerance, not what somebody says
my risk tolerance should be based on my age and
quote unquote target date of retirement.

Speaker 1 (17:50):
You know, for most of us who aren't lucky enough
anymore to have a pension, your four one K is
the kind of the number one vehicle that's going to
get you to retirement, that's going to allow you to
have the life that you want in retirement. And I
just think at some point you're going to look at
that statement, if you haven't already, and realize, like, this
is real money, like all of that, Like I've been
putting money into this four one K and it is

(18:11):
real dollars. And at that point I would say find
an advisor or figure out a way to make sure
that what you're investing in in that four one K
is actually the best thing for you. I have seen
a lot of these target date funds get incredibly conservative
when someone's in their fifties and sixties, and maybe they
don't need to be that conservative, right, so they would

(18:32):
be missing out on potential growth from the market during
that time. So I think it's better than nothing. For
twenty year olds and thirty year olds who are first
starting to save, it can make a lot of sense.
But at some point, when it becomes real money, you
need to take real control of your four o one K.

Speaker 2 (18:47):
Well, great point, and I've seen this in action because
if people are if people won't even select a target
date fund. Yeah, oftentimes the default option is just a
stable value fund. So now to your point, Amy, You're
back to earning you know, one to two percent on
your money, and with a little bit of education and guidance,

(19:08):
you could get a fully diversified portfolio that will work
well for you over time.

Speaker 1 (19:12):
Yeah, you know. I mean, I've got kids who are
in college now, they'll be starting their first jobs in
a few years. Obviously I will help them. I will
be very hands on with what they're investing in. But
for most, hey this is the first time investing a
target date fund is absolutely fine for them. I just think,
at some point, when you get to your forties fifties,
you know a target date fund, and that one size

(19:32):
fits all approach everyone's retirement. And listen you think, I
think of all the retirements I've seen, they all look
vastly different. You have vastly different goals. And so to
take just one sort of investment and say this works
for everyone, it doesn't. Don't. I don't believe in it
for that, but I do think just to start out,
it can be an excellent option. Here's the all Worth advice.
Remember you want to build a financial plan unique to

(19:54):
you and your needs and goals. Coming up next, the
number of phishing attacks has just exploded. We've got some
helpful advice on how to protect yourself. You're listening to
Simply Money presented by all Worth Financial here on fifty
five krs the talk station. You're listening to Simply Money
presented by all Worth Financial and Amy Wagner along with

(20:16):
Bob Sponseller. A new year, a new opportunity for scammers
to come at you, and we have some eye opening
statistics about a huge increase in the number of people
who have fallen victim to phishing attacks. Joining us tonight
with a little perspective on this and what we need
to be doing to be vigilant is of course our

(20:37):
tech expert Dave Hatter from intrust It. Dave, these numbers
are incredible.

Speaker 4 (20:43):
Yeah, it's not shocking to me, Amy, because especially around
the end of the year, you're going to see a
giant increase in various forms of phishing. And i'd direct
to remind folks. You know, phishing is the traditional term
for messages send via email, but the criminals have branched
out right. They'll send you texts that's called smishing. They'll
call you on the phone, that's called fishing. They're in

(21:05):
social media now with these sort of scammy attacks. So
you know, fishing to me is kind of an umbrella
term that catches all of this. And you always see
a gigantic rise in fishing near the holidays because more
people are shopping online, more people are expecting packages. There's
just more activity, and of course you know they go
where the people are and they want to steal your
money and your data or both when possible. So it's

(21:28):
not entirely surprising to me to see this giant surge
towards the end of twenty twenty four.

Speaker 2 (21:34):
So, Dave, if you could just peel back the curtain
here from your anecdotal research and what you've observed, what's
been the most popular attack on people that has worked.
What are people falling for in the fourth quarter of
twenty twenty four that's new and maybe we haven't seen
before as much.

Speaker 4 (21:54):
Yeah, that's a good question, Bob. You know, again, a
lot of the same old stuff. Your package can't get
delivered click this link, and a lot of this is
based around credential theft, and you know, to make that
in the most layman terms possible, they just want to
steal your user name and password because they know people
continue to use bad practices of having the same user

(22:14):
name and password across multiple accounts. Most of the time,
when you get these phishing attacks, again, regardless of whether
it's on social media or text or whatever, you're going
to end up clicking a link that takes you to
some sort of log in page. It'll look exactly like
the Microsoft login screen or the Google login screen or whatever.
Sort of spoofing they're trying to use. And then once
they have your credentials, that obviously would lead them to

(22:38):
potentially your UPS account or wherever they start it from.
And they know that those that use your name password
is often shared, so it's it's a lot of that
sort of stuff. The FBI has a lot of statistics,
you know. Every year they put out a cyber crime
report at the Internet Crimecomplaint CENTERIC three dot gov. That's
a great site because it's got tips to help you

(22:59):
avoid this stuff, plus metrics about the kinds of attacks
that they're working. But this most recent report a couple
of things I really want to hammer on it here
back to your you know, what's working and what's new, Bob,
is they will often right before they launch some sort
of phishing attack, set up a new bogus domain because
that makes it more difficult for any sort of security

(23:19):
tools you might already have in place to be aware
of it. Right and until they become aware that something's malicious,
there's generally no way to block it unless you've got
some advanced AI tools. So that's one of the tricks.
And then the other thing is increase in business email compromise.
So that's a form of attack usually revolves around phishing
and spoofing. Spoofing meaning you know it's something bogus is

(23:40):
sent and you know they're trying to get into your
business email, work around in there, and then figure out
how to get money, in many cases through fraudulent invoices.
That's that sort of thing. And I can tell you know,
at Intrust we fight this all the time. We see
this constantly, you know, attempts to take over people's business
email accounts because they know if they can lurk around

(24:00):
and there long enough, they'll eventually find a way to money. Again,
fraudulent invoice is the most common thing we see, but
I've seen all kinds of wild stuff out there in
the real world where you know, these people are very
smart and very creative and very devious, and you know
this is one of the key ways they get into
your organization through some sort of sophisticated vision.

Speaker 1 (24:20):
You know, Dave, you and I we've been doing these
segments for a long time, and I think back to
their early years when we would do these. You would
kind of warn me about something and then a few
months later I'd be like, oh, that happened, you know,
and now it's like the warning is out and it's
the next day that these stats show that the average

(24:40):
person sees at least one of these phishing attacks or
attempts a week. And I actually think that's a pretty
conservative number because just based on what comes across in
my email and my phone, it's multiple times a week
now that I'm being targeted.

Speaker 4 (24:58):
Yeah, I you know, actually, Amy, if you don't have
advanced protections in place to attempt to block this stuff,
you know, there's all kinds of AI based email filtering
out there. Microsoft has some pretty powerful tools built into
Microsoft three sixty five, and there are third party tools
we like like avanon you. If you don't have access
to those kind of tools, you're going to be exposed

(25:19):
to even more of it because they're really good. Stuff
is going to eliminate a lot of this before it
ever gets delivered to somebody's inbox. But that's just email, right.
They continue to migrate their tax to text. You know,
I get more and more text based fishing all the time.
All your packets couldn't get delivered click here or you
know some kind of ridiculous thing like that. More people
use text so it makes sense that they're going to

(25:41):
use that. And also it's more difficult on a mobile device. Typically,
like you know, in a full blown computer, when you
get a phishing email, you can put your mouse over
the link and see where it goes, and if it
doesn't go to where it says it goes on the screen,
that's a strong red flag. It's much more difficult to
do that on a mobile phone, which you know, which
is with AX or an email or whatever. So it

(26:02):
makes it easier for them to fool you, to social
engineer you into clicking these things in mobile devices. I
think that's why we're seeing more there. So you know,
there are technological ways to reduce some of this, but
again these folks are continuously changing their metha. There are
attack tactics. For example, now a big thing is they'll
send you a QR code because it's it's really hard

(26:24):
to know what a QR code does when just looking
at it. These advanced solutions can't really scan it and
tell what it does. And you know, ask yourself a question,
why would your HR department quote unquote send you a
QR code and email to your work email account where
you've got to get your phone out and scan it.
It doesn't even make sense. Yeah, but they know that
the average person isn't thinking of these things and that

(26:45):
it's difficult again to know what a QR code does.
So that's one of the new tactics there, Bob, is
these You know, if you get a QR code mail
to you, I would be incredibly skeptical of scanning it.

Speaker 3 (26:56):
All right, Well, Dave, that's great advice.

Speaker 2 (26:59):
And you know, I'm just thinking about the listeners that
we have that listen to this show. We've got a
lot of folks that no longer work, they're retired, you know,
they're you know, like me, advanced in age. They don't
have these advanced AI tools and things on their phone
and their computer.

Speaker 3 (27:16):
What would be the top one or two.

Speaker 2 (27:18):
Things that you would say to the average seventy five
year old out there that's retired and they're just trying
to navigate through life. What would be the top one
or two tips that you would give folks like that
to protect themselves.

Speaker 4 (27:33):
Yeah, And I hate that we even have to have
this conversation because you know, my parents fit into that bracket,
as do my wife's parents, and you know, we see
lots of scams directed at older people, in romance scams,
et cetera, all using these technologies. The two biggest things
you can do is be skeptical, you know, break out
your tinfoil hat, and just assume that anything you get,

(27:56):
especially if there's any urgency to it, could be fake.
Probably is fake. At this point. Again, it's it's so
easy and it's so inexpensive for the bad guys to
ramp these attacks up and send them out in mass.
So be highly skeptical, especially if there's any sort of
urgency or some sort of catastrophe that's going to be
follow you if you don't act. And then second, stop,

(28:17):
take a breath, you know, call your nerdy friend or
just go out of band. That's what we nerds like
to call the idea that rather than clicking the links,
calling the phone numbers. I mean, there's whole boiler rooms
in India of people waiting to take your call that
are part of the con Right, be skeptical, take a breath,
and then go out of band. If you get a
message from the irs, so the Hambleton County sheriff or

(28:38):
your bank or whatever, quote.

Speaker 1 (28:40):
Uncoll call them directly. Right, more than responding, Yeah, I
think that's right. Great perspective, as always from our tech
expert Dave Hatter from interests It. Scammers are coming for you.
They're coming for your loved ones and certainly you know
parents or any elderly So make sure that not only
are you heeding these words, but that you're also spreading

(29:01):
the word. 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 presented by all Worth Financial.
I me Me Wagner along with Bob Sponsalar. Do you
have a financial question keeping you up at night or
you're determined to tackle it in twenty twenty five, Well,
there's a red button you can click on while you're

(29:22):
listening to the show. It's right there on the iHeart app.
Record your question. It's coming straight to us and straight ahead.
How you can save a couple hundred bucks by the
end of the month. And here's a little Well Bob
and I are both doing this, so we're going to
get into that in just a few minutes. Okay, but
for now, it is time to play retirement fact or
fiction with a focus on taxes. Bob, you are new

(29:46):
in the co host seat, so you're also in the
hot seat today. We're just going to rapid fire these
right at you factor fiction, dividends from all stocks are
tax free if you reinvest them.

Speaker 2 (29:57):
That is fiction, and it tends to be a pretty
confus using point to talk about for some people. So,
you know, dividends are taxed at different rates depending on
whether they're qualified dividends or non qualified dividends. So qualified
dividends are taxed at capital gain rates, but they are
still taxed. If the dividends occur in an IRA or

(30:18):
qualified plan account or four to one K account, they
are tax deferred, just like everything else.

Speaker 1 (30:23):
Yeah, I mean that's a great important distinction. What kind
of an account? All right? Do you have those capital gains?
Are those dividends coming from? Is it a retirement account
or a taxable account? That's going to make a huge
difference for you, all right, fact or fiction. Speaking of
capital gains, you owe taxes on capital gains only when
you sell an investment.

Speaker 3 (30:42):
This is also fiction.

Speaker 2 (30:44):
And this gets down to one of the topics that
we cover often, the difference between mutual funds and exchange
traded funds and One of the big attractions to exchange
traded funds is you have much more tax control over
your investment, whereas in these mutual there are declared capital
gains that happen in the fourth quarter every year, and

(31:05):
whether you sold anything or not, you get to mutually
participate in the capital gains exposure of those mutual funds,
and that.

Speaker 1 (31:13):
Can be really confusing for a lot of investors. They
are like, wait a second, I didn't touch my investments
this year. Why are you Why are you handing me
this tax bill and telling me I have to pay
capital gains on it. Well, that's why, because mutual funds
do participate in what you as those dividends right as
there get reinvested, that you do get tax on those.

Speaker 3 (31:33):
Yeah.

Speaker 2 (31:33):
I can remember back in nineteen ninety nine to two
thousand and one the tech bubble and people were piling
into these tech mutual funds and then, as we all know,
the Nasdaq, you know, plummeted by seventy five percent. People
were still getting handed tax bills even though their account
value dropped by fifty percent. So obviously I got some
phone calls like, you know, Bob, what the pitch is

(31:55):
happening here, and everybody got a very quick edgetion on
capital gain distribution.

Speaker 1 (32:02):
And how this works. Yeah, it's important to know. And
you know, you also make an excellent point. People might
not pay attention to it until things go south, and
then when things go south and you're getting this taxable
at the same time, all of a sudden, it doesn't
feel right, but it is actually right. So it's important
to understand how this works, all right, fact or fiction.
Long term capital gains are actually taxed at a lower

(32:24):
rate than short term capital gains.

Speaker 2 (32:26):
That is true, and that's one of the big benefits
of holding things longer term. Yeah, you know, depending on
whether it aligns with your financial plan.

Speaker 3 (32:36):
But that is true.

Speaker 1 (32:38):
So short term capital gains is usually about is your
income right taxit ordinary rate? Taxed ordinary rate. Long term
capital gains in some cases can be even half of
what that rate is, depending on where you are well.

Speaker 2 (32:52):
And sometimes it can be zero depending on what your
total taxable income is. Ye, and that number keeps creeping up. Yes,
I think it's for married filing jointly couple, you know,
for taxable income of under ninety six thousand and change.

Speaker 3 (33:06):
Yeah, I think.

Speaker 2 (33:08):
You're still at Zeroeah, so opportunity to do some tax
planning there.

Speaker 1 (33:12):
Yes, right, And you bring up an excellent point about
tax planning versus tax preparation, especially for those who are
getting close to retirement or in retirement, holding on to
as much money as possible not paying it to Uncle
Sam becomes incredibly important. So tax planning really critical at
that point. You touched on this before. But factor fiction,

(33:32):
ETFs are more tax efficient than mutual funds.

Speaker 3 (33:36):
That is true generally.

Speaker 2 (33:38):
Yeah, there are more and more active ETFs now that
are managed just like mutual funds. Those can have tax distributions,
but by and large, you know, the vast majority of
ETFs are way more tax efficient than mutual funds. Yeah,
and that's why we've seen the industry just evolve tremendously

(33:59):
over the last.

Speaker 3 (34:00):
End of fifteen years.

Speaker 2 (34:02):
Mutual funds are starting to phase out, ETFs are still exploding.

Speaker 1 (34:05):
Yeah. I was reading something recently that kind of said
ETFs are sort of mutual fund two point zero, you know,
like to your point, they're out, not as many people
are investing in that. Most people exchange traded funds for
the tax efficiency and also the lower costs. There's usually
lower costs with ETFs.

Speaker 2 (34:21):
It's been one of the great evolutions of our industry.
The benefit benefit everybody.

Speaker 1 (34:26):
All right, one more for you here quickly. Factor fiction
stock donations to a charity are deductible at their original
purchase price.

Speaker 3 (34:33):
That is false.

Speaker 2 (34:35):
They're actually deductible at the current fair market value.

Speaker 3 (34:39):
And amy.

Speaker 2 (34:40):
This is a topic. I know you see it with
your clients. I see it with my clients all the time.
I continue to be amazed at how many people don't
understand how this works. We've got, you know, especially wealthier
folks that have had mutual funds and stocks that have
appreciated for years and years and years. They're still writing
personal checks to their church and chosen charities, and we

(35:02):
have to coach them on, Hey, let's give away your
appreciated stock. You not only avoid the capital gains taxes,
but you get the full the full tax deduction based
on the fair market value of what you're giving away.
It's a double whammy in your favor. Yes, certainly something
everybody should become aware of and discuss with your advisor

(35:24):
if you had not done so already.

Speaker 1 (35:25):
Yeah, that's true. It's a game changer, all right. Coming up,
next to the easy technique. Well maybe easy for some
to save money. By the time we get to February,
you're listening to Simply Money presented by all Worth Financial.
Here on fifty five krs the talk station, you're listening
to Simply Money presented by all Worth Financial and Mami
Wagner along with Bob Spawnseller. You know you're getting the

(35:49):
bills maybe from the holidays right now, and credit card
bills are a lot. If you're looking to save some money,
I'm gonna throw something out there. How about you try
dry January. Okay, I'm doing that right. I know I'm
doing this not necessarily to save money, although I will
tell you that is a really really nice side effect
of this. So my husband, well I'm doing it. My

(36:09):
husband's not. But we went to see a movie on
Friday night and there's this really cute little restaurant at
the front of our neighborhood and we were coming back
in it was like ten o'clock and he said, well,
you know, if you were drinking, I would say, let's
stop in there for a drink. But since you're not,
you know, drinking wine or anything, right now, let's go
on home. I'm like, well, yeah, that's fine, and that
probably saved us twenty five bucks.

Speaker 3 (36:28):
You know, so date night got cut short.

Speaker 1 (36:31):
So what you're saying, Yeah, it did get cut a
little bit short.

Speaker 2 (36:33):
But man, she should have made him take you to
Graters or something.

Speaker 1 (36:38):
It's still January. I was, I was, I ate too
much in December. But listen, two and ten people are
actually participating in dry January in my world, and I
don't maybe it's just all of my friends. It feels
like half the people I know are doing this, and
I think it's for a number of reasons, to be healthy,
to reset the holidays. I feel like I just consume
more and drink more. But then also, man, it does

(37:02):
save you money.

Speaker 3 (37:03):
It saves a lot of money.

Speaker 2 (37:04):
And I'll just share my own personal story. I never
drank much my entire life until COVID and then somebody
introduced me to bourbon and I liked it, and long
story short, over the last four years or so, I
consumed more than I should have, more often than I
should have, and I decided in November to just stop drinking. Yeah,

(37:28):
and you know, I know you want to talk about
the financial benefits of this as well as the health benefits.
I'm shocked at how much money I was spending on
bourbon and alcohol, and I'm not spending that money anymore,
and I feel better and my bank accounts better. It's
been a good thing for me all the way around.

Speaker 1 (37:47):
Interestingly, the US Department of Health and Human Services actually
has an alcohol spending calculator, And I think it's like
perspective right when when I tell people who don't budget, like, hey,
let's just look at what you're spending. Oftentimes the looking
and be like, wait, I'm spending that much onto eating out,
No way, I don't want to spend muschining it. I
think that for many people using this calculator of how

(38:10):
often you eat out, how often you go to happy hours,
how often you pick up a bottle of bourbon, a
bottle of wine, whatever that looks like for you, and
you extrapolate that out over the next year, you will
probably be eye opening.

Speaker 2 (38:23):
It's a huge difference, and I'm interested to what you
think about this, But drinking out versus drinking at home,
when compared to eating out versus eating at home, there's
a huge difference, huge markup on alcohol. You know, drinking
in a restaurant or bar, and if you can control that,

(38:44):
you know, just one drink or no drinks versus four
or five drinks, one beer at the Bengals game versus six,
your bank account will thank you save.

Speaker 1 (38:54):
A lot of money. Thanks for listening. Tune in tomorrow.
We're talking about moves to make if you need to
unwed a heavy stock concentration. You've been listening to Simply Money,
presented by all Worth Financial here on fifty five KR.
See the talk station