Episode Transcript
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Speaker 1 (00:06):
Tonight, does it feel like so much is going on
out there in the world that you just cannot control?
So how do you protect your wealth, your money in
what feels like really uncertain times. You're listening to Simply Money,
presented by all Worth Financial, I mean Me Wagner along
with Bob Spawnseller. Tonight, we got a lot to get
to market risks, policy shifts, and some retirement strategies for you.
(00:30):
Let's start with policy shifts, because we've got some major
ones hitting the headlines it feels like on the daily
right now, Bob.
Speaker 2 (00:40):
Well, President Trump says that he will likely impose tariffs
of twenty five percent or more on imports of cars, semiconductors,
and pharmaceutical products.
Speaker 3 (00:50):
He gave a bit of a.
Speaker 2 (00:52):
Speech which tends to turn into a rant sometimes to
reporters down at mar A Lago last week. And the
thing to remember is a lot of this stuff is
on hold until early April. But as we've talked about
at nauseum on this show, to a large extent, this
is how the president likes to negotiate policy and get
(01:14):
people talking and get certain people very fired up and upset.
And I you know, Amy, my opinion is pay way
less attention to what President Trump actually says, and pay
more attention to what he actually does. And I think
there's a lot of things that may or may not
happen between now and early April as negotiations continue.
Speaker 1 (01:36):
I think it's a really good reminder of what Andy Stout,
our chief investment officer, said. We started having these conversations
over tariffs several weeks ago, right, why would President Trump
be doing this? And he said, listen, there's three things
he's probably taking into account here. One is the negotiating tool.
We know this man is a brilliant business person, a
(01:56):
brilliant negotiator. You know, he could be using the these
tariffs to fuel people to come to the table to
negotiate over things that they weren't ready to negotiate over before.
We saw exactly that happen right at the eleventh hour
with both Canada and Mexico. They were like, we're not
going to commit to doing anything on the border until
we were ticking down to the final minutes of the
(02:18):
tariffs in those countries impacting those countries, and suddenly now
they're negotiating. So that's one reason, right negotiation tactic one
of them is too, just kind of balancing the tables
when there's unfair trade practice that's coming at us from
other countries. And then I think the third and this
is what remains to be seen because this could have
a longer term impact. It would be, hey, we actually
(02:40):
need to fill the coffers, right, if we are going
to look at keeping taxes low, we need to increase
revenue somewhere. I don't know if that's what he's doing.
It could be. It remains to be seen, But I
like your point, Bob, of this is a president that
uses different tactics I think than what we're used to,
or maybe we are a little bit used to them
(03:01):
because we've been through one of his administrations before. But yeah,
he does talk often. I'm not going to say a
big game, but he talks a lot in order to
bring people up to the table, not necessarily that he's
going to follow through on those things.
Speaker 2 (03:17):
Yeah, And if you've ever been for those that have
ever been into a negotiation before, I mean a common
tactic is you know, your first salvo here is you
ask for something you probably know you're not going to get.
You know, that's far at the end of one extreme,
and you hope that the other party moves closer to
(03:37):
your position and you end up settling somewhere in the middle.
And I'll throw out one example, and I'm not taking
sides here. I just want to make the point that
President Trump did not invent tariffs. I mean, tariffs have
been in existence for decades, and there's many countries that
tariff the you know what out of the United States,
(03:57):
you know, to keep our products from being sold into
their country. Today, And I'll give you one example. You know, pharmaceuticals.
Eighty percent of all of the pharmaceuticals that are consumed
by American citizens right now are produced in China.
Speaker 1 (04:15):
Yeah.
Speaker 2 (04:16):
Now, I don't care if you're a Republican, Democrat, liberal conservative.
Speaker 3 (04:21):
That's a matter of public safety.
Speaker 2 (04:23):
Yeah, you know, we can't be relying on eighty percent
of our pharmaceuticals are antibiotics. I meant, I didn't mean
all PHARMACU, I meant antibiotics.
Speaker 3 (04:34):
You got to level the playing field.
Speaker 2 (04:36):
We got to have some of that stuff manufactured here,
just in case we get into some type of conflict
with China and they say, yep, we're just not going
to send that stuff.
Speaker 3 (04:46):
Over to you anymore.
Speaker 2 (04:47):
I mean there goes you're a maxicilin penicilin. You know,
that's a potential problem. I think that's one example of
what the President's trying to mitigate here.
Speaker 1 (04:57):
Yeah, that's a very unfair trade practice. You know. I
remember years ago when my mom had been diagnosed with
stage four breast cancer and in this situation, you are
doing everything you can right to prolong their lives. And
the doctors came to us with a medication that was
going to be an insane amount out of pocket and
(05:19):
you don't even blink. But I remember a year or
two later reading that in other countries, and I think
it was the UK, same drug was hundreds thousands of
dollars less on an annual basis, right, And so that
is not fair at all. And so yeah, we are
not red, We're not blue. We are simply down the
(05:42):
middle green here making sense of of these tariffs. What
the talk is, what we think might actually happen. Pharmaceuticals
is a great place to show, hey, we probably haven't
been getting a fair shake here. You know. You hear
people going to Canada to try to get prescriptions filled
in things like that. There is a reason for that.
Speaker 2 (06:01):
Well, and on the pharmaceutical side, and I don't want
to go down that rabbit hole.
Speaker 3 (06:05):
But you know, it's not just the tariff part.
Speaker 2 (06:08):
It's reimbursements from insurance companies, So that has a part
to play in all of this as well. So it's
a very that the global economy is a very complex
conundrum of moving pieces. And so again the headline news
only tells you a little bit of the story, and
(06:28):
we got to kind of stay tuned and watch, you know,
what reality ends up being here as negotiations continue.
Speaker 1 (06:35):
One of the things that President Trump also said was listen, like,
we're continuing to analyze this. We're continuing to look at
these trade policies until April first, and then we'll make
a decision on April second. He moves quickly, you know,
we'll get all the data in by the next day.
We will make a decision about what we're going to
do moving forward. We had ed Think one of the
founders of Simply Money on the show recently talking about
(06:58):
the fact that, hey, he feels it no wins a
global trade war. You know, I think the question is
are we there And the answer is no. We could
be moving in that direction, but we have to see. Ultimately,
I think where our president lands. You're listening to Simply
Money presented by all Worth Financial Imami Wagner along with
Bob Sponseller, is we're talking about the things that are
(07:18):
going on out there in the world that could have
a huge impact to you at home. One of the things,
and this might be something that isn't necessarily I don't know,
maybe you have realized this. Packaged foodstocks aren't selling. Nobody's
buying them. It doesn't look like investor appetite is there
for these goods. Why I think many of us aren't
(07:41):
buying them when we go to the grocery store anymore.
I think there's a couple of reasons. You know, when
things get more expensive, there's been lots of research. That's
when we start to look at the generic labels. Right,
So when you have brands like Nabisco, General Mills, Canagra,
right that you know, maybe you always bought I don't
even know, Jurido's, and then all of a sudden, you know,
because that's what your kids eat, all of a sudden,
(08:02):
you're buying the generic Doritos.
Speaker 2 (08:04):
Right.
Speaker 1 (08:04):
It's having a big impact on these companies.
Speaker 2 (08:09):
Yeah, and I don't know the bottom line reason for
this decline. But you know when you mentioned things like
General Miles, Conagrad Dorito's, what does all the stuff that
they make? What is it loaded with process sugar?
Speaker 3 (08:23):
So I think.
Speaker 2 (08:25):
Consumers might be starting to pivot toward less sugar heavy products,
more organic, less processed foods. I mean from a health standpoint,
that's a good thing.
Speaker 1 (08:36):
Amy.
Speaker 2 (08:37):
So I think the point here is trends change, consumer
habits change, and that's why a diversified portfolio will insulate
you from some of these big shock you know, in
terms of stock movements like we had earlier this week
with General Mills and Conagora after their investor presentation.
Speaker 1 (08:58):
Yeah, yeah, I think there's a couple of facts going
on we had on both of them, right. You know,
when there's not as much money to go around, you
start buying generic brands and not those labels that maybe
you've always bought. And I think, yes, people are trying
to make healthier decisions. I recently went to my dear
friend Gentry had a party on a Friday night for
a bunch of girls. You're gonna laugh, You're gonna be like,
(09:19):
of course, this is the kind of party that Amy
goes to. It was a healthy eating party and she
had a she had a tasting station for snacks that
were whole ingredients, better for you. This is what we
did with our Friday night. It was actually really eye
opening though, and I just wonder if maybe other people
aren't seeking out those things too the bottom of mine.
Speaker 2 (09:41):
Please please do not invite my wife for one of
those parties, because she's already all in on that stuff.
Speaker 3 (09:47):
Yep.
Speaker 2 (09:48):
I mean I go to the pantry every so often.
I just I don't want to eat a bag, but
I'd like.
Speaker 3 (09:52):
A handful of you shit nothing for you there, It's
not there.
Speaker 2 (09:58):
She doesn't buy it. Bob, you don't need to be
eating that stuff, So please don't invite Carrie to that
party or I will be stuck eating avocados for the
rest of my life.
Speaker 1 (10:09):
Well, it might be too late, Carrie's invite my already
be in the mail. But you know, I think, obviously
we are not a health show here, We're a money show.
But it just goes to show the companies that we're
talking about, right, your General Mills, your Cnagard. These are
companies that have been around forever. They have been strong,
healthy companies and then our habits shift a little bit
(10:30):
and all of a sudden it has a huge impact
on their bottom line. It could happen in any industry,
any sector, but as an investor, to your point earlier,
that's why you have to be diversified.
Speaker 2 (10:42):
Yeah, yeah, for sure, you want to get into some
of the housing updates.
Speaker 3 (10:47):
Two mortgages.
Speaker 1 (10:48):
Yeah, so let's talk about that.
Speaker 2 (10:50):
Home sales in twenty twenty four were there lowest in
thirty years. That's some headline news there for you. And
I think part of the reason why, and we've talked
about this many times on the show, the level of
interest rates.
Speaker 3 (11:04):
People are just staying put. They're not moving.
Speaker 2 (11:07):
The folks that have those mortgages in the high twos,
low threes, they're not moving because they've got cheap money.
And I think you know, in places like Florida and
some of these places that have had hurricanes and that
you're starting to see the market top out a little bit.
So there's people that are trying to cash in and
(11:28):
sell their home and they're not moving. Nearly seventy three
thousand homes were pulled from their listing late last year
just because they weren't selling at the price they wanted
to sell it for. So to me, this is just
a healthy market adjustment. You know, things change, things need
to adjust, You need to reach price equilibrium. No need
(11:51):
to panic here.
Speaker 1 (11:52):
When you were talking about seventy three thousand homes pulled
off the market because they just weren't moving, it's mind
boggling to me to think that just a few years
ago we were in this pandemic where like a houseman
on the market and boom, it's sold within an hour,
and it had seventy five different offers on it and
it was twenty thousand dollars above exactly. It was crazy.
(12:13):
And so I don't know what the new normal is
going to look like for the real estate industry, but
I think we're moving closer to what is normal. Our
sub four percent mortgage rate's ever going to be the norm? Again,
probably not. I mean from all the data I see,
from all the experts I talked to, five to six
percent will probably be the new norm. But we haven't.
(12:34):
Our brains haven't adjusted to that quite yet. If you
are going to buy or sell this year, I think
you got to understand people are reticent to make that change.
They're staying longer because it's really hard to leave a
three and a quarter mortgage rate behind. But I think
at some points people are going to say, Okay, we're
going to move and they'll make adjustments accordingly. Coming up next,
(12:58):
stock valuations right reaching levels we have not seen since
the dot com bubble. Should that worry you, We're going
to talk about that next. You're listening to Simply Money
presented by all Worth Financial here on fifty five KRC,
the talk station. You're listening to Simply Money presented by
all Worth Financial. I mean you Wagner along with Bob Sponseller.
(13:20):
Coming up at six forty three. We've got some mistakes
you need to avoid with one of the most popular
investment choices out there. We'll get to those in just
a minute. You know, there's a lot of people hoping
to get a lot of money back from the IRS
this year, looking for a tax refund. So far this year,
the IRS is reporting the average refund is up north
(13:43):
of two thousand dollars. It's up thirty four percent from
this time last year.
Speaker 2 (13:48):
Yeah, and I think the reason for the jump in
the average refund is that the standard deduction has really climbed,
you know, oh, it's thirty thousand dollars for a married
couple for this year, I think twenty nine to four
and twenty twenty four. So a lot of people are
just adjusting to that they don't itemize anymore based on
current tax law, and they probably over withheld a little bit.
(14:11):
So that's the reason for the you know, the bigger refund.
The IRS is saying if you E file and use
direct deposit, you should get your refund within three weeks.
And this is just a reminder. You know, a refund
means that the IRS is just giving you back your
own money. So I think a key point here, Amy
is this is probably a good time to look at
(14:33):
your withholdings going into twenty twenty five and take into
account what the standard deduction actually is, and maybe you
can withhold a little bit less from your paycheck and
keep a little more money in your pocket every month.
Speaker 1 (14:45):
I think a lot of tax refunds versus owing for
people is like a mental math thing. I was recently
having this conversation with someone who was like, we were
talking about how much they should withhold, and he was like, listen,
I want to get money back. I don't want to
owe money. And I was like, well, I understand that,
but do you understand it's just the government holding He
(15:06):
was like, I one hundred percent understand what is happening here,
and I still want the money back. I do not
want to owe money, and so I just think it's
from a behavioral finance standpoint, so interesting how our brains
work on these things. But it's really important to understand.
If you can get as close to zero as possible,
not owing, not getting money back, that's where you're truly winning,
(15:27):
because you retain control over your money. And I think
that's the ultimate goal here. So many headlines that I
have seen over the past couple of years, and of
course many of these pointing to doom and gloom, a
lot of them looking at the tech sector specifically. Right
these large cap you know, growth companies that have just
been going gangbusters and saying, ooh, is this dot com
(15:51):
all over again?
Speaker 2 (15:54):
Yeah, And I don't think we're in a bubble situation,
but you know, price value on these big cap tech
stocks are a bit high, and I think the most
recent quarter of the earnings reports that have come out
over the last couple of weeks have illustrated that meaning
and I'll give you one example, Google.
Speaker 3 (16:14):
They came out with a great earnings report.
Speaker 2 (16:16):
They beat on earnings, they had a slight miss, if
you will, on revenue, and this stock promptly drops over
seven percent and overnight trading. So a lot of these
stocks are you know, the industry term is priced to perfection.
You know, sometimes things get a little ahead of themselves
from a price standpoint. And if these companies don't just report,
(16:39):
you know, kick Fanny numbers, there's going to be a
little adjustment, and I think that's healthy. You know, again,
just like housing, everything has to move back in line
with what reality is. And that happens to stocks as well,
even good quality stocks.
Speaker 1 (16:55):
There are so many different ways that you can evaluate
a company, evaluate their their current stock, right price to earnings.
Are they overvalued? Are they undervalued? And I would say
the average investor doesn't necessarily care about those things. They
don't know about those things. There is a stat that
(17:15):
I have been keeping an eye on for years now,
and it's the percentage of Americans who own some kind
of stock. If you look at the you know, post
two thousand and eight, we went way down. We were
sub fifty percent of Americans having any kind of money
in the stock market. People got spooked right they saw
(17:37):
the statements. They lost forty percent, fifty percent, whatever it was,
and they said, get me out of this. I'm never
coming back. What I like to keep an eye on
is have we come back? Have we come back? Right now?
Sixty one percent of Americans own stock. In twenty thirteen
it was fifty percent, So more people are starting to
(17:59):
understand for me to grow my wealth, this is where
it's at. I have to pay the price of the
admission is going to be some volatility, but I will
also get to participate in the upside. So this statistic,
I think is trending in the right direction.
Speaker 3 (18:15):
I agree, Amy, I think that's a great trend.
Speaker 2 (18:17):
And yeah, another data point coming out from last week
the American Association of Individual Investors, I think is a
very reputable.
Speaker 3 (18:28):
Organization that does a lot of great research, and they.
Speaker 2 (18:31):
Showed the percentage of respondents who expected stocks to fall
over the next six months had climbed to more than
forty seven percent. To me, that's wonderful news because when
that sentiment is right around at.
Speaker 3 (18:44):
The fifty to fifty level, that's where to me, we
have a healthy market. And you know, the market over.
Speaker 2 (18:50):
Time always climbs and eclipses this wall of worry. You know,
if you got half the people think it it's going
to go down, half the people think it it's going
to go up, that means there's not too many people
are speculating in either direction. And you know, to me
another sign of health.
Speaker 1 (19:07):
I think it's always interesting how you can have two
different people look at the same set of data and
come away with a far different way of looking at it.
You know, should we run for the hills because of
XYZ or should we stay? And I don't think that
the answer is necessarily in the data. It's the historical
perspective of regardless of where stocks are currently, you know,
current valuations, how companies are doing. You know, having a
(19:31):
long term plan time in the market, that's where you're
going to win. Here's the all Worth advice. The market
maybe expensive right now, it doesn't mean though it's time
to exit. Stick to a disciplined, well diversified strategy that's
going to align with your specific money goals. Coming up next,
we're going to explain why it's so important to have
as much detail as possible in your estate planning. Documents.
(19:54):
You're listening to Simply Money, presented by all Worth Financial.
Here in fifty five KRC. The talk station you're listening
to you Simply when You've presented by all Worth Financial.
I'm Amy Wagner. For those who have never thought about
estate planning, I understand it can be low on your
list of things to do. It's not necessarily fun to
(20:16):
think about what can happen after you're gone. But I
call this an act of love for the ones that
you're leaving behind. And there's lots of ways you can
approach it. Some of them you may have never thought
about before, but someone else has. And that's our estate
planning expert from the law firm of Wood and Lamping,
Mark Rekman. Mark. You've been doing this for a long time.
I'm sure you've seen it just about everything. So let's
(20:39):
talk what are options. And we're looking at dividing up
our stuff.
Speaker 4 (20:44):
So there are several amiens. And when we're talking about stuff,
we're talking about your personal possessions. We're talking about furniture, art,
household goods, your car, your clothes. I'm not talking about
money like securities or cash or real estate. I'm talking
about the things you have in your house, and that
(21:05):
is always tricky because there's so much of it, and
because it's a moving target. Your personal possessions change over time.
And so the answer is that lawyers don't normally itemize
those things in your will. They're just there's too much
of it and there's too much opportunity for change. There
are exceptions if you have a rare piece, you know,
(21:27):
for example, I did a will not so long ago
for a family that had a grand piano. I mean,
this thing was worth I don't know, seventy five thousand dollars.
And when you're talking about something of that kind that
you will, you would go ahead and put that in
a will. But I'm really talking about most smaller items
are not itemized like that. So typically what the state
(21:50):
lawyers will do is we will offer some alternatives. What
we often do is put a paragraph in the will
that says the executor gets to decide who gets what,
and then the executor can use one of several methods.
Probably the most common one is that the executor has
discretion to decide who to give it to. And this
(22:14):
is by far the most popular. It's simple, it's effective,
and in essence it puts the executor in charge, and
that works well if the executor is a FANNIE member,
a child, maybe the oldest, or maybe the wisest or
the fairest or whatever. And by the way, one of
the great things you can do is you can give
that person a handwritten list that's not in the will.
(22:36):
In other words, that you make a list of the
important things that you want to go and you give
it to the executor separately, and say, when I die,
you have discretion, and here's who I here's I want
you to use this list as a guideline. And that's
by far the most popular way. Some people in their will,
(22:57):
they'll insist that everything be sold and the money gets
divided up equally or according to whatever percentage you.
Speaker 1 (23:04):
Want, which is nice. But I'm a sentimental person as well,
and there's certain things that I don't necessarily want sold.
So how do you deal with that stuff?
Speaker 4 (23:14):
Oh yeah, oh yeah, you know. I have a metal
pot that sits next to my heart. That was my
great grandmother's. Back in the days when people wash their
clothes on the stove top on a wood stove, these big,
big metal urns and they would put them on top
of the stove and boil the water, and how you
got your whites clean. And that piece sits next to
(23:36):
my fireplace and I keep my firewood in it, and
you know I would break my heart to lose it.
So you're right. So one other choice, a third alternative,
is to give these things away while you're alive. You know,
I love this one because it simplifies your life. If
you get to be older and you're downsizing, it gives
you a way to reduce the amount of stuff. It
(24:01):
sort of comes naturally. It also means you have the
joy of watching other people enjoy these items so that
you can see them in use in the next generation.
Speaker 1 (24:11):
You know, Mark, there's one thing that I've seen people
do and I kind of want to get your take
on this too, And it's, hey, uh, we're going to
take turns going into our parents' house. Maybe the oldest
goes first, I don't know, maybe you draw straws, but
and then we each get a turn at taking what
we want. It can work. I've also seen you got
(24:34):
the one thing that was the only thing I cared about.
Speaker 4 (24:38):
Yeah, and that can create some hard feelings. And that's
that's why you've got to have somebody in charge like
your executor. After if there's something that is that important
for the kids, then you might address it in the will.
But still amy, you know, that does happen. And let
me tell you, if you've got kids who don't get along, Yeah,
(24:58):
this is where the friction and usually hits. And it's
it's consistently odd to me why people would care so
much about a particular item. But it isn't about that item.
It's about some other conflict in the family. And there's
nothing a lawyer can do about that.
Speaker 1 (25:15):
Yeah, yeah, what are other options?
Speaker 4 (25:19):
By the way, another variation on the plan you just
mentioned is you have a lottery or or you take turns,
or you hand you pick straws, and that each person
picks an item, so that I pick, and then my
brother picks, and then my sister picks, and then you
rotate over and over again, so that you go through
that way. And finally, I have seen family who will
(25:40):
do bids. They'll have sort of an auction kind of thing.
They can do it with real money, although that's not
usually the case. You usually do it with you know,
chips or monopoly money or points that says, you know,
to hear you have one hundred thousand dollars of monopoly
money to spend, and everybody spends it, and then you
how much of your monopoly money you want for each item. Now,
(26:03):
of course, this requires everyone to be together, It requires
them to work together cooperatively. And last, but not least,
I have seen people who have put color coded stickers
on big pieces that says yellow, still alive while they're
still alive, and there stickers stay on them around their house.
Speaker 3 (26:25):
It is.
Speaker 4 (26:26):
It struck me as odd, but it was very effective.
Speaker 1 (26:30):
Great, Like your color is yellow, and anything that has
the yellow sticker on it, that's what you get. Your
sister's blue, that's hers.
Speaker 4 (26:38):
It works. It's it's weird, but it works.
Speaker 1 (26:42):
How often, mark do you have to then handle disputes
in these situations? I mean, I think even families who
get along really, really well, when there's grief involved, timbers
can flare.
Speaker 4 (26:57):
They can, and it's it's misplaced grief, of course. And
the answer is not the vast, vast majority. I mean,
I've been doing this for forty years now. The vast
majority of people get along fine and they work it out,
and yeah, there might be a little hurt feelings here,
or there, and they talk it out the vast majority.
But I'd say less than five percent of the cases
(27:20):
do I have open conflict. I've got a lot less
than five percent have I seen open conflict over the
division of personal property?
Speaker 1 (27:29):
Good to know, so much to think through. And that's
why I say again and again it is really an
act of love when you provide some guidelines before you're gone,
so that when you're no longer here, it's not left
for your loved ones to figure it out amongst themselves.
So I just think there's great insights into at least
thinking through which option that Mark's just talked about feels
(27:53):
the best for you and your loved ones. Great insights
as always from our estate planning expert from the law
firm of Wood and Lamping, Mark Grekman. 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 Memi Wagner along with
(28:14):
Bob spaon CLAR Do 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 for all of you
who love your four legged animals at home. Is pet
insurance worth it? We're going to break down the costs
in a few minutes. I used to think some of
(28:36):
my neighbors who paid for their dog to have their
ACL muscle Repit was like insane what they paid. And
I love my dog so much I can't even tell
you how much I probably spend. So this is going
to be a good discussion coming up in just a
few minutes. But now I want to focus on something,
and this is something I am seeing more and more often.
When someone comes into my office for the first time
(28:57):
and they decide that they want to partner with us
and work with us here at all, I'll say, hey,
can you give me your statement of how your floural
one K, your four h three be, your thrift savings plan,
whatever it is, how it's currently invested. In Many times,
what they'll bring to me shows that they have gone
all in on a target date fund. Target date fund,
meaning listen, you've got that whole menu of options that
(29:19):
you can choose from within that four oh one K
and the target date is I'm targeting twenty thirty five
to retire, so this is where my money is going
to go.
Speaker 2 (29:29):
Yeah, and there's somebody who used to be an advisor
to several large four oh one K plans. I am
a fan of target date funds, and here's why. It
does give people a chance that have no interest, time
inclination in doing any of this themselves at least a
chance to get a well diversified portfolio that's based on
(29:50):
their retirement date. I think these things can be a
great fit for younger people that have a long time horizon,
because if you punch in a twenty sixty five or
twenty seventy fund, you're going to get all stocks and
you're going to have a thirty to forty year runway,
and that's where you should be anyway. So I like that.
(30:10):
The problem I have with this one size fits all
approach is the closer you get to retirement five ten
years away from retirement, your prescribed target date fund will
automatically move your allocation more and more out of stocks
and more and more into bonds and fixed income type investments,
(30:30):
and that may or may not be the right allocation
for you. Heading into retirement because again, most people are
going to be retired for thirty to thirty five years.
Speaker 3 (30:42):
Yeah, So if you just set it.
Speaker 2 (30:43):
And forget it and you end up with only a
twenty to thirty percent allocation to stocks, your return is
going to be way lower than what you're going to
need to do to beat inflation and protect your purchasing
power over time.
Speaker 3 (30:56):
Yeah.
Speaker 1 (30:57):
I think when you look at a number of these
target date funds next to each other and say they're
target twenty thirty five, right, and you're looking at four
or five different ones, the glide path that you're referring
to right from more stock heavy to more fixed income
heavy as you get closer to retirement can vary wildly.
And I think a lot of people don't have any idea.
(31:18):
At some point in your working career, if you are
regularly putting money into your four oh one K, many
of you have already gotten here and you know what
I'm talking about. You're going to check that statement and
you're going to think, Wow, that's real money. That's real
money that I've finally gotten saved there. And I think
when you have that moment of like, wow, this has grown,
this is compounded it's probably time to switch from the
(31:41):
one size fits all approach to is what are my
unique goals and needs and retirement and how do I
get myself there. For instance, if you're someone who maybe
has a pension and is going to get a high
social security benefit, you may not use as much of
your four O one K. It might make more sense
for that to be a lot more aggressive, because maybe
(32:01):
from a legacy planning standpoint, your kids are going to
be the ones that inherit it. So so dialing back,
you know, significantly in stock exposure when you get close
to retirement doesn't make a ton of sense. Here's another
mistake I see people making a target date fund is
supposed to be all in one solution, right, and then
if you hold different things outside of it, then you
(32:23):
could be overweight in certain asset classes in certain sectors.
It can just get a little tricky.
Speaker 2 (32:31):
I used to see this all the time, Amy when
I would go in and do the annual update meetings
for four oh one K participants, and this is invariably
what would happen. They would say, Yeah, Bob, you're right,
I need a diversified portfolio. I'll put forty percent of
my money in a target date fund and then I'm
going to take fifty to sixty percent. And what do
they do? They buy the funds that had the highest
(32:54):
return over the last one to two years.
Speaker 3 (32:57):
Well, what does that do?
Speaker 2 (32:58):
It chases last year winners and without realizing it, it
places that investor in a higher risk profile than they.
Speaker 3 (33:07):
Ever imagine they might be in.
Speaker 2 (33:09):
And then some of those people, when I come back
a year later, are very disappointed in the return of
that because they allowed it to get too aggressive and
too volatile. And you know, you talked about being too conservative.
You know, I've found other people are way too aggressive
because they're they're just picking yesterday's winners.
Speaker 1 (33:28):
And they don't know they don't either not even don't
know any better. Yeah. Yeah, So it's figuring out, Okay,
what's truly my risk tolerance? Where should I be in
then making sure that your investments truly reflect that. Couple
of other things I see is ignoring fees, right, what
are the fees associated with them? I think another good
thing to think about here is when you kind of
(33:48):
look sometimes at how the sausage is made. Sometimes these
companies that offer these target date funds are shoving investments
in there that maybe you wouldn't be super interested in
standing alone, but they're kind of shoved in here hoping
that you wouldn't necessarily pay attention to them. Again, fine,
when you're in your twenties, I think that's it's a
great way to start to build wealth. But once it
(34:09):
becomes real money to you, you need a real plan.
Speaker 2 (34:13):
Amy this is this is a really important point because again,
as somebody who used to do this for a year,
you know, these fund companies, the actively managed fund companies,
depending on the allocation of the funds that they put
into those target date you know products, those fees can
be high, those internal operating expenses can be high. And
that's a profit center for these mutual fund companies.
Speaker 3 (34:37):
Make no mistake about it.
Speaker 2 (34:39):
If they can get you into a one size fits
all thing, you're at their mercy in terms of the
allocation of how this thing's divided into their various funds.
And to your point, these fees can get a little
bit out of control and people are you know, completely
ignorant of that.
Speaker 1 (34:57):
Here's the all worth advice. Do not assume that your
target date fun is a set it and forget it solution.
Make sure that it truly aligns with your actual risk tolerance,
your retirement goals, and overall investment strategy. Coming up next,
Americans are spending more on our pets than ever before.
Does it make sense to shell out money for pet
insurance or is this an unnecessary cost? We're gonna break
(35:19):
it all down next. You're listening to Simply Money presented
by all Worth Financial. Here on fifty five KRC the
talk station. You're listening to Simply Money presented by all
Worth Financial. I met me Wagner along with Bob's spond seller.
More people own pets than ever before. I hadn't had
(35:40):
a pet since I was a little girl, and a
few years ago, I don't know the kids getting dump
on my husband's They found this breathe that they thought
was super cute on TikTok no less and we got
this dog and I was not on board. I'm telling you, Bob,
I was like, this is just one more responsibility I
don't need any more. I love this dog so much
(36:01):
now I would cut off my arm for this dog, right,
I mean, you just love your pets so much, and
from a financial standpoint, though, they can also be a
huge suck. On your resources.
Speaker 3 (36:14):
I'm in the same boat, Amy, I'm always one. I was.
Speaker 2 (36:17):
I've always been one of these people that would just
kind of scoff and laugh at people that treat their
pets like another human being member. But I'll tell you what,
my little eight year old female bulldog, Winnie, I would
forego a medical procedure on myself before I'd let little Winny,
you know, suffer. So I'm right there with you. So
(36:40):
and we're not alone, Amy, Owning a pet is more
popular than ever. From nineteen ninety six to twenty twenty four,
the number of dog owning households in the United States
nearly doubled, while cat owning households increase by fifty six percent.
So that leads me to a quick Amy, why would
anyone purpose ever own a cat?
Speaker 1 (37:02):
I don't know. I'm not there yet. If you love cats,
nothing against that. I'm just not there yet. But here's
the deal. These costs, right, the pet expenditures in the
US stored sixty six percent last year. Most of what
we were spending more on was food, But the average
pet owner is spending fourteen hundred, fifteen hundred dollars a
(37:25):
year per pet. For those of you who have multiple
pets running around your house, when should you consider pet insurance?
I think this is a question of and I think listen,
we talk about your emergency fund all the time. If
you have a pet, your emergency fund might need a
little more money in it. Because if you have ever
been to the vet and got like that nauseous feeling
(37:46):
in the pit of your stomach when they tell you
how much the bill is for like one shot or
whatever it is, it can be crazy. If you can't
afford a surprise vet bill two thousand dollars to ten
thousand dollars, it might make sense to go ahead and
get pet insurance.
Speaker 2 (38:02):
Yeah, and even aside from the emergency medical visit, just
the normal cost of owning a pet is more than
most people realize. Dogs on average cost between thirty to
seventy dollars a month, cats fifteen to forty dollars a month.
And then exotic pets, I know you've been thinking about,
you know, getting a Komodo dragon in those those can
(38:22):
get to be really expensive. So you got to factor
that in to your overall you know, financial plan.
Speaker 1 (38:28):
Hey maybe, well you made the point about Winny right,
you would forego something for yourself in order for that.
Speaker 3 (38:33):
Absolutely.
Speaker 1 (38:34):
I mean I used to be kind of judgy about
this when I knew people who would spend you know,
so much money on their kids or on their pets
when it came to, you know, these kinds of expenses,
and now I think, hey, if you're a pet owner,
you just have to understand this is a cost associated
with it, and so you need to go into it
with eyes wide open and plan for it. Thanks for listening.
(38:54):
You've been listening to Simply Money, presented by all Worth
Financial here in fifty five KRC, the talk station
Tonight, does it feel like so much is going on
out there in the world that you just cannot control?
So how do you protect your wealth, your money in
what feels like really uncertain times. You're listening to Simply Money,
presented by all Worth Financial, I mean Me Wagner along
with Bob Spawnseller. Tonight, we got a lot to get
to market risks, policy shifts, and some retirement strategies for you.
(00:30):
Let's start with policy shifts, because we've got some major
ones hitting the headlines it feels like on the daily
right now, Bob.
Speaker 2 (00:40):
Well, President Trump says that he will likely impose tariffs
of twenty five percent or more on imports of cars, semiconductors,
and pharmaceutical products.
Speaker 3 (00:50):
He gave a bit of a.
Speaker 2 (00:52):
Speech which tends to turn into a rant sometimes to
reporters down at mar A Lago last week. And the
thing to remember is a lot of this stuff is
on hold until early April. But as we've talked about
at nauseum on this show, to a large extent, this
is how the president likes to negotiate policy and get
(01:14):
people talking and get certain people very fired up and upset.
And I you know, Amy, my opinion is pay way
less attention to what President Trump actually says, and pay
more attention to what he actually does. And I think
there's a lot of things that may or may not
happen between now and early April as negotiations continue.
Speaker 1 (01:36):
I think it's a really good reminder of what Andy Stout,
our chief investment officer, said. We started having these conversations
over tariffs several weeks ago, right, why would President Trump
be doing this? And he said, listen, there's three things
he's probably taking into account here. One is the negotiating tool.
We know this man is a brilliant business person, a
(01:56):
brilliant negotiator. You know, he could be using the these
tariffs to fuel people to come to the table to
negotiate over things that they weren't ready to negotiate over before.
We saw exactly that happen right at the eleventh hour
with both Canada and Mexico. They were like, we're not
going to commit to doing anything on the border until
we were ticking down to the final minutes of the
(02:18):
tariffs in those countries impacting those countries, and suddenly now
they're negotiating. So that's one reason, right negotiation tactic one
of them is too, just kind of balancing the tables
when there's unfair trade practice that's coming at us from
other countries. And then I think the third and this
is what remains to be seen because this could have
a longer term impact. It would be, hey, we actually
(02:40):
need to fill the coffers, right, if we are going
to look at keeping taxes low, we need to increase
revenue somewhere. I don't know if that's what he's doing.
It could be. It remains to be seen, But I
like your point, Bob, of this is a president that
uses different tactics I think than what we're used to,
or maybe we are a little bit used to them
(03:01):
because we've been through one of his administrations before. But yeah,
he does talk often. I'm not going to say a
big game, but he talks a lot in order to
bring people up to the table, not necessarily that he's
going to follow through on those things.
Speaker 2 (03:17):
Yeah, And if you've ever been for those that have
ever been into a negotiation before, I mean a common
tactic is you know, your first salvo here is you
ask for something you probably know you're not going to get.
You know, that's far at the end of one extreme,
and you hope that the other party moves closer to
(03:37):
your position and you end up settling somewhere in the middle.
And I'll throw out one example, and I'm not taking
sides here. I just want to make the point that
President Trump did not invent tariffs. I mean, tariffs have
been in existence for decades, and there's many countries that
tariff the you know what out of the United States,
(03:57):
you know, to keep our products from being sold into
their country. Today, And I'll give you one example. You know, pharmaceuticals.
Eighty percent of all of the pharmaceuticals that are consumed
by American citizens right now are produced in China.
Speaker 1 (04:15):
Yeah.
Speaker 2 (04:16):
Now, I don't care if you're a Republican, Democrat, liberal conservative.
Speaker 3 (04:21):
That's a matter of public safety.
Speaker 2 (04:23):
Yeah, you know, we can't be relying on eighty percent
of our pharmaceuticals are antibiotics. I meant, I didn't mean
all PHARMACU, I meant antibiotics.
Speaker 3 (04:34):
You got to level the playing field.
Speaker 2 (04:36):
We got to have some of that stuff manufactured here,
just in case we get into some type of conflict
with China and they say, yep, we're just not going
to send that stuff.
Speaker 3 (04:46):
Over to you anymore.
Speaker 2 (04:47):
I mean there goes you're a maxicilin penicilin. You know,
that's a potential problem. I think that's one example of
what the President's trying to mitigate here.
Speaker 1 (04:57):
Yeah, that's a very unfair trade practice. You know. I
remember years ago when my mom had been diagnosed with
stage four breast cancer and in this situation, you are
doing everything you can right to prolong their lives. And
the doctors came to us with a medication that was
going to be an insane amount out of pocket and
(05:19):
you don't even blink. But I remember a year or
two later reading that in other countries, and I think
it was the UK, same drug was hundreds thousands of
dollars less on an annual basis, right, And so that
is not fair at all. And so yeah, we are
not red, We're not blue. We are simply down the
(05:42):
middle green here making sense of of these tariffs. What
the talk is, what we think might actually happen. Pharmaceuticals
is a great place to show, hey, we probably haven't
been getting a fair shake here. You know. You hear
people going to Canada to try to get prescriptions filled
in things like that. There is a reason for that.
Speaker 2 (06:01):
Well, and on the pharmaceutical side, and I don't want
to go down that rabbit hole.
Speaker 3 (06:05):
But you know, it's not just the tariff part.
Speaker 2 (06:08):
It's reimbursements from insurance companies, So that has a part
to play in all of this as well. So it's
a very that the global economy is a very complex
conundrum of moving pieces. And so again the headline news
only tells you a little bit of the story, and
(06:28):
we got to kind of stay tuned and watch, you know,
what reality ends up being here as negotiations continue.
Speaker 1 (06:35):
One of the things that President Trump also said was listen, like,
we're continuing to analyze this. We're continuing to look at
these trade policies until April first, and then we'll make
a decision on April second. He moves quickly, you know,
we'll get all the data in by the next day.
We will make a decision about what we're going to
do moving forward. We had ed Think one of the
founders of Simply Money on the show recently talking about
(06:58):
the fact that, hey, he feels it no wins a
global trade war. You know, I think the question is
are we there And the answer is no. We could
be moving in that direction, but we have to see. Ultimately,
I think where our president lands. You're listening to Simply
Money presented by all Worth Financial Imami Wagner along with
Bob Sponseller, is we're talking about the things that are
(07:18):
going on out there in the world that could have
a huge impact to you at home. One of the things,
and this might be something that isn't necessarily I don't know,
maybe you have realized this. Packaged foodstocks aren't selling. Nobody's
buying them. It doesn't look like investor appetite is there
for these goods. Why I think many of us aren't
(07:41):
buying them when we go to the grocery store anymore.
I think there's a couple of reasons. You know, when
things get more expensive, there's been lots of research. That's
when we start to look at the generic labels. Right,
So when you have brands like Nabisco, General Mills, Canagra,
right that you know, maybe you always bought I don't
even know, Jurido's, and then all of a sudden, you know,
because that's what your kids eat, all of a sudden,
(08:02):
you're buying the generic Doritos.
Speaker 2 (08:04):
Right.
Speaker 1 (08:04):
It's having a big impact on these companies.
Speaker 2 (08:09):
Yeah, and I don't know the bottom line reason for
this decline. But you know when you mentioned things like
General Miles, Conagrad Dorito's, what does all the stuff that
they make? What is it loaded with process sugar?
Speaker 3 (08:23):
So I think.
Speaker 2 (08:25):
Consumers might be starting to pivot toward less sugar heavy products,
more organic, less processed foods. I mean from a health standpoint,
that's a good thing.
Speaker 1 (08:36):
Amy.
Speaker 2 (08:37):
So I think the point here is trends change, consumer
habits change, and that's why a diversified portfolio will insulate
you from some of these big shock you know, in
terms of stock movements like we had earlier this week
with General Mills and Conagora after their investor presentation.
Speaker 1 (08:58):
Yeah, yeah, I think there's a couple of facts going
on we had on both of them, right. You know,
when there's not as much money to go around, you
start buying generic brands and not those labels that maybe
you've always bought. And I think, yes, people are trying
to make healthier decisions. I recently went to my dear
friend Gentry had a party on a Friday night for
a bunch of girls. You're gonna laugh, You're gonna be like,
(09:19):
of course, this is the kind of party that Amy
goes to. It was a healthy eating party and she
had a she had a tasting station for snacks that
were whole ingredients, better for you. This is what we
did with our Friday night. It was actually really eye
opening though, and I just wonder if maybe other people
aren't seeking out those things too the bottom of mine.
Speaker 2 (09:41):
Please please do not invite my wife for one of
those parties, because she's already all in on that stuff.
Speaker 3 (09:47):
Yep.
Speaker 2 (09:48):
I mean I go to the pantry every so often.
I just I don't want to eat a bag, but
I'd like.
Speaker 3 (09:52):
A handful of you shit nothing for you there, It's
not there.
Speaker 2 (09:58):
She doesn't buy it. Bob, you don't need to be
eating that stuff, So please don't invite Carrie to that
party or I will be stuck eating avocados for the
rest of my life.
Speaker 1 (10:09):
Well, it might be too late, Carrie's invite my already
be in the mail. But you know, I think, obviously
we are not a health show here, We're a money show.
But it just goes to show the companies that we're
talking about, right, your General Mills, your Cnagard. These are
companies that have been around forever. They have been strong,
healthy companies and then our habits shift a little bit
(10:30):
and all of a sudden it has a huge impact
on their bottom line. It could happen in any industry,
any sector, but as an investor, to your point earlier,
that's why you have to be diversified.
Speaker 2 (10:42):
Yeah, yeah, for sure, you want to get into some
of the housing updates.
Speaker 3 (10:47):
Two mortgages.
Speaker 1 (10:48):
Yeah, so let's talk about that.
Speaker 2 (10:50):
Home sales in twenty twenty four were there lowest in
thirty years. That's some headline news there for you. And
I think part of the reason why, and we've talked
about this many times on the show, the level of
interest rates.
Speaker 3 (11:04):
People are just staying put. They're not moving.
Speaker 2 (11:07):
The folks that have those mortgages in the high twos,
low threes, they're not moving because they've got cheap money.
And I think you know, in places like Florida and
some of these places that have had hurricanes and that
you're starting to see the market top out a little bit.
So there's people that are trying to cash in and
(11:28):
sell their home and they're not moving. Nearly seventy three
thousand homes were pulled from their listing late last year
just because they weren't selling at the price they wanted
to sell it for. So to me, this is just
a healthy market adjustment. You know, things change, things need
to adjust, You need to reach price equilibrium. No need
(11:51):
to panic here.
Speaker 1 (11:52):
When you were talking about seventy three thousand homes pulled
off the market because they just weren't moving, it's mind
boggling to me to think that just a few years
ago we were in this pandemic where like a houseman
on the market and boom, it's sold within an hour,
and it had seventy five different offers on it and
it was twenty thousand dollars above exactly. It was crazy.
(12:13):
And so I don't know what the new normal is
going to look like for the real estate industry, but
I think we're moving closer to what is normal. Our
sub four percent mortgage rate's ever going to be the norm? Again,
probably not. I mean from all the data I see,
from all the experts I talked to, five to six
percent will probably be the new norm. But we haven't.
(12:34):
Our brains haven't adjusted to that quite yet. If you
are going to buy or sell this year, I think
you got to understand people are reticent to make that change.
They're staying longer because it's really hard to leave a
three and a quarter mortgage rate behind. But I think
at some points people are going to say, Okay, we're
going to move and they'll make adjustments accordingly. Coming up next,
(12:58):
stock valuations right reaching levels we have not seen since
the dot com bubble. Should that worry you, We're going
to talk about that next. You're listening to Simply Money
presented by all Worth Financial here on fifty five KRC,
the talk station. You're listening to Simply Money presented by
all Worth Financial. I mean you Wagner along with Bob Sponseller.
(13:20):
Coming up at six forty three. We've got some mistakes
you need to avoid with one of the most popular
investment choices out there. We'll get to those in just
a minute. You know, there's a lot of people hoping
to get a lot of money back from the IRS
this year, looking for a tax refund. So far this year,
the IRS is reporting the average refund is up north
(13:43):
of two thousand dollars. It's up thirty four percent from
this time last year.
Speaker 2 (13:48):
Yeah, and I think the reason for the jump in
the average refund is that the standard deduction has really climbed,
you know, oh, it's thirty thousand dollars for a married
couple for this year, I think twenty nine to four
and twenty twenty four. So a lot of people are
just adjusting to that they don't itemize anymore based on
current tax law, and they probably over withheld a little bit.
(14:11):
So that's the reason for the you know, the bigger refund.
The IRS is saying if you E file and use
direct deposit, you should get your refund within three weeks.
And this is just a reminder. You know, a refund
means that the IRS is just giving you back your
own money. So I think a key point here, Amy
is this is probably a good time to look at
(14:33):
your withholdings going into twenty twenty five and take into
account what the standard deduction actually is, and maybe you
can withhold a little bit less from your paycheck and
keep a little more money in your pocket every month.
Speaker 1 (14:45):
I think a lot of tax refunds versus owing for
people is like a mental math thing. I was recently
having this conversation with someone who was like, we were
talking about how much they should withhold, and he was like, listen,
I want to get money back. I don't want to
owe money. And I was like, well, I understand that,
but do you understand it's just the government holding He
(15:06):
was like, I one hundred percent understand what is happening here,
and I still want the money back. I do not
want to owe money, and so I just think it's
from a behavioral finance standpoint, so interesting how our brains
work on these things. But it's really important to understand.
If you can get as close to zero as possible,
not owing, not getting money back, that's where you're truly winning,
(15:27):
because you retain control over your money. And I think
that's the ultimate goal here. So many headlines that I
have seen over the past couple of years, and of
course many of these pointing to doom and gloom, a
lot of them looking at the tech sector specifically. Right
these large cap you know, growth companies that have just
been going gangbusters and saying, ooh, is this dot com
(15:51):
all over again?
Speaker 2 (15:54):
Yeah, And I don't think we're in a bubble situation,
but you know, price value on these big cap tech
stocks are a bit high, and I think the most
recent quarter of the earnings reports that have come out
over the last couple of weeks have illustrated that meaning
and I'll give you one example, Google.
Speaker 3 (16:14):
They came out with a great earnings report.
Speaker 2 (16:16):
They beat on earnings, they had a slight miss, if
you will, on revenue, and this stock promptly drops over
seven percent and overnight trading. So a lot of these
stocks are you know, the industry term is priced to perfection.
You know, sometimes things get a little ahead of themselves
from a price standpoint. And if these companies don't just report,
(16:39):
you know, kick Fanny numbers, there's going to be a
little adjustment, and I think that's healthy. You know, again,
just like housing, everything has to move back in line
with what reality is. And that happens to stocks as well,
even good quality stocks.
Speaker 1 (16:55):
There are so many different ways that you can evaluate
a company, evaluate their their current stock, right price to earnings.
Are they overvalued? Are they undervalued? And I would say
the average investor doesn't necessarily care about those things. They
don't know about those things. There is a stat that
(17:15):
I have been keeping an eye on for years now,
and it's the percentage of Americans who own some kind
of stock. If you look at the you know, post
two thousand and eight, we went way down. We were
sub fifty percent of Americans having any kind of money
in the stock market. People got spooked right they saw
(17:37):
the statements. They lost forty percent, fifty percent, whatever it was,
and they said, get me out of this. I'm never
coming back. What I like to keep an eye on
is have we come back? Have we come back? Right now?
Sixty one percent of Americans own stock. In twenty thirteen
it was fifty percent, So more people are starting to
(17:59):
understand for me to grow my wealth, this is where
it's at. I have to pay the price of the
admission is going to be some volatility, but I will
also get to participate in the upside. So this statistic,
I think is trending in the right direction.
Speaker 3 (18:15):
I agree, Amy, I think that's a great trend.
Speaker 2 (18:17):
And yeah, another data point coming out from last week
the American Association of Individual Investors, I think is a
very reputable.
Speaker 3 (18:28):
Organization that does a lot of great research, and they.
Speaker 2 (18:31):
Showed the percentage of respondents who expected stocks to fall
over the next six months had climbed to more than
forty seven percent. To me, that's wonderful news because when
that sentiment is right around at.
Speaker 3 (18:44):
The fifty to fifty level, that's where to me, we
have a healthy market. And you know, the market over.
Speaker 2 (18:50):
Time always climbs and eclipses this wall of worry. You know,
if you got half the people think it it's going
to go down, half the people think it it's going
to go up, that means there's not too many people
are speculating in either direction. And you know, to me
another sign of health.
Speaker 1 (19:07):
I think it's always interesting how you can have two
different people look at the same set of data and
come away with a far different way of looking at it.
You know, should we run for the hills because of
XYZ or should we stay? And I don't think that
the answer is necessarily in the data. It's the historical
perspective of regardless of where stocks are currently, you know,
current valuations, how companies are doing. You know, having a
(19:31):
long term plan time in the market, that's where you're
going to win. Here's the all Worth advice. The market
maybe expensive right now, it doesn't mean though it's time
to exit. Stick to a disciplined, well diversified strategy that's
going to align with your specific money goals. Coming up next,
we're going to explain why it's so important to have
as much detail as possible in your estate planning. Documents.
(19:54):
You're listening to Simply Money, presented by all Worth Financial.
Here in fifty five KRC. The talk station you're listening
to you Simply when You've presented by all Worth Financial.
I'm Amy Wagner. For those who have never thought about
estate planning, I understand it can be low on your
list of things to do. It's not necessarily fun to
(20:16):
think about what can happen after you're gone. But I
call this an act of love for the ones that
you're leaving behind. And there's lots of ways you can
approach it. Some of them you may have never thought
about before, but someone else has. And that's our estate
planning expert from the law firm of Wood and Lamping,
Mark Rekman. Mark. You've been doing this for a long time.
I'm sure you've seen it just about everything. So let's
(20:39):
talk what are options. And we're looking at dividing up
our stuff.
Speaker 4 (20:44):
So there are several amiens. And when we're talking about stuff,
we're talking about your personal possessions. We're talking about furniture, art,
household goods, your car, your clothes. I'm not talking about
money like securities or cash or real estate. I'm talking
about the things you have in your house, and that
(21:05):
is always tricky because there's so much of it, and
because it's a moving target. Your personal possessions change over time.
And so the answer is that lawyers don't normally itemize
those things in your will. They're just there's too much
of it and there's too much opportunity for change. There
are exceptions if you have a rare piece, you know,
(21:27):
for example, I did a will not so long ago
for a family that had a grand piano. I mean,
this thing was worth I don't know, seventy five thousand dollars.
And when you're talking about something of that kind that
you will, you would go ahead and put that in
a will. But I'm really talking about most smaller items
are not itemized like that. So typically what the state
(21:50):
lawyers will do is we will offer some alternatives. What
we often do is put a paragraph in the will
that says the executor gets to decide who gets what,
and then the executor can use one of several methods.
Probably the most common one is that the executor has
discretion to decide who to give it to. And this
(22:14):
is by far the most popular. It's simple, it's effective,
and in essence it puts the executor in charge, and
that works well if the executor is a FANNIE member,
a child, maybe the oldest, or maybe the wisest or
the fairest or whatever. And by the way, one of
the great things you can do is you can give
that person a handwritten list that's not in the will.
(22:36):
In other words, that you make a list of the
important things that you want to go and you give
it to the executor separately, and say, when I die,
you have discretion, and here's who I here's I want
you to use this list as a guideline. And that's
by far the most popular way. Some people in their will,
(22:57):
they'll insist that everything be sold and the money gets
divided up equally or according to whatever percentage you.
Speaker 1 (23:04):
Want, which is nice. But I'm a sentimental person as well,
and there's certain things that I don't necessarily want sold.
So how do you deal with that stuff?
Speaker 4 (23:14):
Oh yeah, oh yeah, you know. I have a metal
pot that sits next to my heart. That was my
great grandmother's. Back in the days when people wash their
clothes on the stove top on a wood stove, these big,
big metal urns and they would put them on top
of the stove and boil the water, and how you
got your whites clean. And that piece sits next to
(23:36):
my fireplace and I keep my firewood in it, and
you know I would break my heart to lose it.
So you're right. So one other choice, a third alternative,
is to give these things away while you're alive. You know,
I love this one because it simplifies your life. If
you get to be older and you're downsizing, it gives
you a way to reduce the amount of stuff. It
(24:01):
sort of comes naturally. It also means you have the
joy of watching other people enjoy these items so that
you can see them in use in the next generation.
Speaker 1 (24:11):
You know, Mark, there's one thing that I've seen people
do and I kind of want to get your take
on this too, And it's, hey, uh, we're going to
take turns going into our parents' house. Maybe the oldest
goes first, I don't know, maybe you draw straws, but
and then we each get a turn at taking what
we want. It can work. I've also seen you got
(24:34):
the one thing that was the only thing I cared about.
Speaker 4 (24:38):
Yeah, and that can create some hard feelings. And that's
that's why you've got to have somebody in charge like
your executor. After if there's something that is that important
for the kids, then you might address it in the will.
But still amy, you know, that does happen. And let
me tell you, if you've got kids who don't get along, Yeah,
(24:58):
this is where the friction and usually hits. And it's
it's consistently odd to me why people would care so
much about a particular item. But it isn't about that item.
It's about some other conflict in the family. And there's
nothing a lawyer can do about that.
Speaker 1 (25:15):
Yeah, yeah, what are other options?
Speaker 4 (25:19):
By the way, another variation on the plan you just
mentioned is you have a lottery or or you take turns,
or you hand you pick straws, and that each person
picks an item, so that I pick, and then my
brother picks, and then my sister picks, and then you
rotate over and over again, so that you go through
that way. And finally, I have seen family who will
(25:40):
do bids. They'll have sort of an auction kind of thing.
They can do it with real money, although that's not
usually the case. You usually do it with you know,
chips or monopoly money or points that says, you know,
to hear you have one hundred thousand dollars of monopoly
money to spend, and everybody spends it, and then you
how much of your monopoly money you want for each item. Now,
(26:03):
of course, this requires everyone to be together, It requires
them to work together cooperatively. And last, but not least,
I have seen people who have put color coded stickers
on big pieces that says yellow, still alive while they're
still alive, and there stickers stay on them around their house.
Speaker 3 (26:25):
It is.
Speaker 4 (26:26):
It struck me as odd, but it was very effective.
Speaker 1 (26:30):
Great, Like your color is yellow, and anything that has
the yellow sticker on it, that's what you get. Your
sister's blue, that's hers.
Speaker 4 (26:38):
It works. It's it's weird, but it works.
Speaker 1 (26:42):
How often, mark do you have to then handle disputes
in these situations? I mean, I think even families who
get along really, really well, when there's grief involved, timbers
can flare.
Speaker 4 (26:57):
They can, and it's it's misplaced grief, of course. And
the answer is not the vast, vast majority. I mean,
I've been doing this for forty years now. The vast
majority of people get along fine and they work it out,
and yeah, there might be a little hurt feelings here,
or there, and they talk it out the vast majority.
But I'd say less than five percent of the cases
(27:20):
do I have open conflict. I've got a lot less
than five percent have I seen open conflict over the
division of personal property?
Speaker 1 (27:29):
Good to know, so much to think through. And that's
why I say again and again it is really an
act of love when you provide some guidelines before you're gone,
so that when you're no longer here, it's not left
for your loved ones to figure it out amongst themselves.
So I just think there's great insights into at least
thinking through which option that Mark's just talked about feels
(27:53):
the best for you and your loved ones. Great insights
as always from our estate planning expert from the law
firm of Wood and Lamping, Mark Grekman. 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 Memi Wagner along with
(28:14):
Bob spaon CLAR Do 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 for all of you
who love your four legged animals at home. Is pet
insurance worth it? We're going to break down the costs
in a few minutes. I used to think some of
(28:36):
my neighbors who paid for their dog to have their
ACL muscle Repit was like insane what they paid. And
I love my dog so much I can't even tell
you how much I probably spend. So this is going
to be a good discussion coming up in just a
few minutes. But now I want to focus on something,
and this is something I am seeing more and more often.
When someone comes into my office for the first time
(28:57):
and they decide that they want to partner with us
and work with us here at all, I'll say, hey,
can you give me your statement of how your floural
one K, your four h three be, your thrift savings plan,
whatever it is, how it's currently invested. In Many times,
what they'll bring to me shows that they have gone
all in on a target date fund. Target date fund,
meaning listen, you've got that whole menu of options that
(29:19):
you can choose from within that four oh one K
and the target date is I'm targeting twenty thirty five
to retire, so this is where my money is going
to go.
Speaker 2 (29:29):
Yeah, and there's somebody who used to be an advisor
to several large four oh one K plans. I am
a fan of target date funds, and here's why. It
does give people a chance that have no interest, time
inclination in doing any of this themselves at least a
chance to get a well diversified portfolio that's based on
(29:50):
their retirement date. I think these things can be a
great fit for younger people that have a long time horizon,
because if you punch in a twenty sixty five or
twenty seventy fund, you're going to get all stocks and
you're going to have a thirty to forty year runway,
and that's where you should be anyway. So I like that.
(30:10):
The problem I have with this one size fits all
approach is the closer you get to retirement five ten
years away from retirement, your prescribed target date fund will
automatically move your allocation more and more out of stocks
and more and more into bonds and fixed income type investments,
(30:30):
and that may or may not be the right allocation
for you. Heading into retirement because again, most people are
going to be retired for thirty to thirty five years.
Speaker 3 (30:42):
Yeah, So if you just set it.
Speaker 2 (30:43):
And forget it and you end up with only a
twenty to thirty percent allocation to stocks, your return is
going to be way lower than what you're going to
need to do to beat inflation and protect your purchasing
power over time.
Speaker 3 (30:56):
Yeah.
Speaker 1 (30:57):
I think when you look at a number of these
target date funds next to each other and say they're
target twenty thirty five, right, and you're looking at four
or five different ones, the glide path that you're referring
to right from more stock heavy to more fixed income
heavy as you get closer to retirement can vary wildly.
And I think a lot of people don't have any idea.
(31:18):
At some point in your working career, if you are
regularly putting money into your four oh one K, many
of you have already gotten here and you know what
I'm talking about. You're going to check that statement and
you're going to think, Wow, that's real money. That's real
money that I've finally gotten saved there. And I think
when you have that moment of like, wow, this has grown,
this is compounded it's probably time to switch from the
(31:41):
one size fits all approach to is what are my
unique goals and needs and retirement and how do I
get myself there. For instance, if you're someone who maybe
has a pension and is going to get a high
social security benefit, you may not use as much of
your four O one K. It might make more sense
for that to be a lot more aggressive, because maybe
(32:01):
from a legacy planning standpoint, your kids are going to
be the ones that inherit it. So so dialing back,
you know, significantly in stock exposure when you get close
to retirement doesn't make a ton of sense. Here's another
mistake I see people making a target date fund is
supposed to be all in one solution, right, and then
if you hold different things outside of it, then you
(32:23):
could be overweight in certain asset classes in certain sectors.
It can just get a little tricky.
Speaker 2 (32:31):
I used to see this all the time, Amy when
I would go in and do the annual update meetings
for four oh one K participants, and this is invariably
what would happen. They would say, Yeah, Bob, you're right,
I need a diversified portfolio. I'll put forty percent of
my money in a target date fund and then I'm
going to take fifty to sixty percent. And what do
they do? They buy the funds that had the highest
(32:54):
return over the last one to two years.
Speaker 3 (32:57):
Well, what does that do?
Speaker 2 (32:58):
It chases last year winners and without realizing it, it
places that investor in a higher risk profile than they.
Speaker 3 (33:07):
Ever imagine they might be in.
Speaker 2 (33:09):
And then some of those people, when I come back
a year later, are very disappointed in the return of
that because they allowed it to get too aggressive and
too volatile. And you know, you talked about being too conservative.
You know, I've found other people are way too aggressive
because they're they're just picking yesterday's winners.
Speaker 1 (33:28):
And they don't know they don't either not even don't
know any better. Yeah. Yeah, So it's figuring out, Okay,
what's truly my risk tolerance? Where should I be in
then making sure that your investments truly reflect that. Couple
of other things I see is ignoring fees, right, what
are the fees associated with them? I think another good
thing to think about here is when you kind of
(33:48):
look sometimes at how the sausage is made. Sometimes these
companies that offer these target date funds are shoving investments
in there that maybe you wouldn't be super interested in
standing alone, but they're kind of shoved in here hoping
that you wouldn't necessarily pay attention to them. Again, fine,
when you're in your twenties, I think that's it's a
great way to start to build wealth. But once it
(34:09):
becomes real money to you, you need a real plan.
Speaker 2 (34:13):
Amy this is this is a really important point because again,
as somebody who used to do this for a year,
you know, these fund companies, the actively managed fund companies,
depending on the allocation of the funds that they put
into those target date you know products, those fees can
be high, those internal operating expenses can be high. And
that's a profit center for these mutual fund companies.
Speaker 3 (34:37):
Make no mistake about it.
Speaker 2 (34:39):
If they can get you into a one size fits
all thing, you're at their mercy in terms of the
allocation of how this thing's divided into their various funds.
And to your point, these fees can get a little
bit out of control and people are you know, completely
ignorant of that.
Speaker 1 (34:57):
Here's the all worth advice. Do not assume that your
target date fun is a set it and forget it solution.
Make sure that it truly aligns with your actual risk tolerance,
your retirement goals, and overall investment strategy. Coming up next,
Americans are spending more on our pets than ever before.
Does it make sense to shell out money for pet
insurance or is this an unnecessary cost? We're gonna break
(35:19):
it all down next. You're listening to Simply Money presented
by all Worth Financial. Here on fifty five KRC the
talk station. You're listening to Simply Money presented by all
Worth Financial. I met me Wagner along with Bob's spond seller.
More people own pets than ever before. I hadn't had
(35:40):
a pet since I was a little girl, and a
few years ago, I don't know the kids getting dump
on my husband's They found this breathe that they thought
was super cute on TikTok no less and we got
this dog and I was not on board. I'm telling you, Bob,
I was like, this is just one more responsibility I
don't need any more. I love this dog so much
(36:01):
now I would cut off my arm for this dog, right,
I mean, you just love your pets so much, and
from a financial standpoint, though, they can also be a
huge suck. On your resources.
Speaker 3 (36:14):
I'm in the same boat, Amy, I'm always one. I was.
Speaker 2 (36:17):
I've always been one of these people that would just
kind of scoff and laugh at people that treat their
pets like another human being member. But I'll tell you what,
my little eight year old female bulldog, Winnie, I would
forego a medical procedure on myself before I'd let little Winny,
you know, suffer. So I'm right there with you. So
(36:40):
and we're not alone, Amy, Owning a pet is more
popular than ever. From nineteen ninety six to twenty twenty four,
the number of dog owning households in the United States
nearly doubled, while cat owning households increase by fifty six percent.
So that leads me to a quick Amy, why would
anyone purpose ever own a cat?
Speaker 1 (37:02):
I don't know. I'm not there yet. If you love cats,
nothing against that. I'm just not there yet. But here's
the deal. These costs, right, the pet expenditures in the
US stored sixty six percent last year. Most of what
we were spending more on was food, But the average
pet owner is spending fourteen hundred, fifteen hundred dollars a
(37:25):
year per pet. For those of you who have multiple
pets running around your house, when should you consider pet insurance?
I think this is a question of and I think listen,
we talk about your emergency fund all the time. If
you have a pet, your emergency fund might need a
little more money in it. Because if you have ever
been to the vet and got like that nauseous feeling
(37:46):
in the pit of your stomach when they tell you
how much the bill is for like one shot or
whatever it is, it can be crazy. If you can't
afford a surprise vet bill two thousand dollars to ten
thousand dollars, it might make sense to go ahead and
get pet insurance.
Speaker 2 (38:02):
Yeah, and even aside from the emergency medical visit, just
the normal cost of owning a pet is more than
most people realize. Dogs on average cost between thirty to
seventy dollars a month, cats fifteen to forty dollars a month.
And then exotic pets, I know you've been thinking about,
you know, getting a Komodo dragon in those those can
(38:22):
get to be really expensive. So you got to factor
that in to your overall you know, financial plan.
Speaker 1 (38:28):
Hey maybe, well you made the point about Winny right,
you would forego something for yourself in order for that.
Speaker 3 (38:33):
Absolutely.
Speaker 1 (38:34):
I mean I used to be kind of judgy about
this when I knew people who would spend you know,
so much money on their kids or on their pets
when it came to, you know, these kinds of expenses,
and now I think, hey, if you're a pet owner,
you just have to understand this is a cost associated
with it, and so you need to go into it
with eyes wide open and plan for it. Thanks for listening.
(38:54):
You've been listening to Simply Money, presented by all Worth
Financial here in fifty five KRC, the talk station
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