Episode Transcript
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Speaker 1 (00:06):
Tonight's the myth of market timing and how it can
lead to some horrible long term outcomes. You're listening to
Simply Money, presented by all Worth Financial, Imm Wagner along
with Bob Sponsor or Bob. If we have said it
once on the show, we have said it a million times.
Speaker 2 (00:22):
It is time in the market that is.
Speaker 1 (00:26):
Often the answer for smart long term investors not timing
the market.
Speaker 2 (00:31):
Yet human behavior leads us to.
Speaker 1 (00:34):
Should I pull it out? Should I put more in?
Pretty often.
Speaker 3 (00:39):
And unfortunately a lot of these emotional decisions are driven
by media headlines that we talk about all the time.
We talked about it earlier this week, and yeah, the
biggest thing to check is our own behavior. And then
I would add a second thing, know when you need
the money and make sure your long term money he
(01:00):
stays invested long term so that you don't subject yourself
to poor decision making during volatile investment periods.
Speaker 2 (01:09):
And it's interesting because it goes both ways.
Speaker 1 (01:11):
Right, many times you're talking about the headlines, and that's
the fear end of thing. There are two emotions that
I see time and time again that drive terrible, terrible
decisions for investors.
Speaker 2 (01:22):
One of those is fear. We're starting to see some
of those headlines.
Speaker 1 (01:25):
Now, the dreaded R word out there right, recession, you know,
And these headlines are clickbait. Often they're trying to scare you,
but often they can scare an investor into making a
bad decision. I've seen the flip side too, Bob where
and maybe it's not the headlines, or maybe it is.
Speaker 2 (01:40):
Maybe it's headlines about Navidia, and you know, this is a.
Speaker 1 (01:44):
Company that's continuing to climb, and then someone wants to
go all in. I have had ninety year old investors saying, hey,
I've had great returns over the past year or two.
I think I'm way too conservative right now. Put me
one hundred percent in the market, right, that's greed and
on the flip side, that can have a terrible outcome.
Speaker 3 (02:06):
I experience both of these emotions with the same client
within ten days. Recently, No, so we did our annual
review with his client. He's been a great client for
thirty years. Love this guy. We have a great relationship
and I know what his risk tolerance is and isn't
because we've worked together for so long. So he comes in,
(02:27):
you know, a month ago after two big years in
the market, and he says, Bob, I think we should
get a little more aggressive. I think we should put
a little more money in the stock market. And I said,
I don't think we should do that. And you know,
I talked about some of the uncertainty, short term, terrorist recession,
all the stuff we talk about, and I said, I
(02:48):
don't think you want to experience what could happen if
things get volatile. Two days ago, I get an email
from this guy, same guy. Hey, I need you to
call me. I think this market's going in the tank.
We might need to go all cash. You know what
do you think? I need you to talk me off
the This is the same talk me off the ledge.
(03:10):
This is the same client within less than two weeks,
wanting to get.
Speaker 4 (03:14):
More aggressive and then go to cash.
Speaker 3 (03:17):
So and I I can only I can only surmise
that he's been watching too much cable news.
Speaker 1 (03:27):
Yes, exactly in our brains are wired for this when
it comes to losses. I can tell you personally. If
I am walking down the street and I come across
a twenty dollars bill right lying on the sidewalk, Great,
that's awesome.
Speaker 2 (03:43):
There's no one around. I just made twenty bucks.
Speaker 1 (03:46):
On the flip side, if I put twenty bucks into
my pocket and I go to one of my son's
basketball games and somehow I lose it and I get home,
that lost twenty bucks is going to bother me for
the next three years, right.
Speaker 2 (03:58):
And that is called loss aversion.
Speaker 1 (04:01):
It is a psychological term, and it means we remember
the losses way more strongly, way more vividly than we
do the gains. And so that means often when it
comes to investing our money, which let's face it, we've
worked really, really hard for this money for a long
amount of time. When you're checking that for one K
(04:22):
and you see it down and you start thinking, gosh,
that's down ten thousand dollars, how long did it take
me to get that much money in here? You can
have then the knee jerk reaction of let me curl
up in the fetal position around this money, pulling that
money out, getting more conservative. That is market timing.
Speaker 3 (04:41):
Yeah, and that loss aversion feeling. I'm guilty of it myself. Amy,
You know, we're all here in me the baseball coach
and me. I hate to lose like you. I hate
to lose, and you buy something thinking it's going to
go up and it goes down. You're upset and that
you know your your ego kicks in all those things.
And to your point, the worst thing you can do
(05:02):
then is let an emotional decision take home, and then
a temporary loss becomes a permanent loss, and then you're
beating yourself even more. Six you know, twelve twenty four
months down the.
Speaker 1 (05:14):
Road you're listening to simply when you presented by all
Worth Financial I Memi Wagner along with Bob spaondseller, it
is time. We have seen some market volatility over the
past few weeks. There's been some crazy headlines out. It
is time to understand market timing in the impact of it.
Speaker 2 (05:31):
We've got some great all Worth data for.
Speaker 1 (05:34):
Those of you who are starting to get a little nervous,
I want you to take this in.
Speaker 2 (05:39):
Listen to this.
Speaker 1 (05:40):
Our internal data shows that after a market drop of
twenty percent, right, and this is part of a normal
market cycle, right, every four to six years, we're going
to see at least a twenty percent pullback. Typically over
the next six months markets have rebounded six percent. We're
talking about after they've gone down twenty percent. Here's the
deal over the next year back up to nineteen percent,
(06:03):
so you are almost even at this point, and over
the next three years on average, markets are up close
to forty six percent. Bub When someone comes to me,
like you mentioned your client, I'm getting nervous or whatever,
I want to take my money out, the first question
that I ask is, Okay, when are we going to
put it back in? When's the right time to put
it back in? Are you going to put it in
(06:25):
next week if markets are back positive.
Speaker 2 (06:29):
Are you going to put it in right?
Speaker 1 (06:30):
Because what we see is you can get into your
head so much after you've pulled money out and you
never put that money into the market, or you.
Speaker 2 (06:38):
Just miss so many good days. And I think one.
Speaker 1 (06:41):
Important part of this equation is often the best days
in the market come on the heels of the worst
days in the market, and there are no headlines that
are pointing to the fact that this day's going to
be a good one.
Speaker 3 (06:51):
Right exactly, And when you pull your money out, you
got to be right twice. Yes, you pull it out,
then you got to be right on when you pull
it back in. And that that's where people have a
hard time doing it, because the best time to put
money in the market or put it back into the market.
And when there is when there's blood in the streets,
everybody's predicting everything's going to go to hell in a handbasket,
(07:14):
and that's exactly the time you should be putting money
in the market. But emotionally, that's usually the height of
the fear factor for people, and that's why it's just
dangerous to do this. Amy, can you share the all
worth data on the historical volatility of the meme.
Speaker 4 (07:30):
Coin that you bought me for my birthday? Do we
have data on that?
Speaker 1 (07:34):
It's only going up from here? Bob, It's only going up.
That's why I think it's been a fantastic investment. We've
got a lot of figured.
Speaker 4 (07:42):
That's what I figured. Can't thank you enough.
Speaker 1 (07:44):
To your point, there is new historical data on some
of these insane trends like the meme coin that I
jokingly told you this week I was buying you for
your birthday. And there's all kinds of stuff like that,
right that they're going to be talking about in the headlines,
speaking to that greed, right, it's the fomo.
Speaker 2 (07:59):
Which is also a thing that we see.
Speaker 1 (08:01):
All the time in investing which is wait, someone else
is making money on something I should probably jump in.
Speaker 2 (08:08):
I've never heard about meme coins before. This is something
I should jump into.
Speaker 1 (08:11):
Okay, A little bit of analysis the sec right is like, hey,
this is a collectible on the lines of a beanie
baby or a baseball card. Not to say you can't
make money off of those things, but you shouldn't be
following the herd. And you know, I just think from
a behavioral finance perspective, a lot of the decisions we
(08:32):
make that can it's.
Speaker 2 (08:34):
Kind of a fork in the road and you look
back sometimes and you're like.
Speaker 1 (08:36):
Why did I do that? That was a terrible decision
when it came to my money. Well, a lot of
that is based on trying to time the market, trying
to make some crazy return that isn't isn't really feasible.
There's someone who I just like professionally run into usually
once a year, once every couple of years, and I'm
fully entertained by this person because he's always telling me
(08:58):
the next big thing that he's in in. This is
not someone who buys into diversification whatsoever. So he is
going all in on pot stocks, and then he's going
all in on crypto exchanges, and then he's going all
in on Nvidia.
Speaker 2 (09:12):
Sometimes he wins, and that keeps him fueled.
Speaker 1 (09:15):
But I guarantee you, Bob, if you look back over
what he could have done just putting all of that
money into a well diversified fund and letting it ride,
he'd be so much farther ahead.
Speaker 2 (09:28):
And also smooth out right. The insane volatility of this
is way up, this is way down. I'm out, I'm in.
It's enough to make my head spin.
Speaker 3 (09:37):
Have you asked this gentleman how much of that money
that he is putting in all these things, how much
of that money is he depending on to fund his retirement?
Speaker 1 (09:46):
We have not had that conversation because I just really
like to hear what he's in.
Speaker 2 (09:50):
Now.
Speaker 4 (09:51):
You probably don't want to get into that con.
Speaker 1 (09:53):
Well, he's not my client, and so I will often
kind of bring up, hey.
Speaker 2 (09:57):
Don't you think you want to just be a little.
Speaker 1 (09:59):
More diversified, Like looks at me, like, why would I
want to do that? But I do think it is
incredibly important to understand how this market timing works. And
you know, one of the things that I love that
we do on the show is just to provide some
historical perspective. We have a fantastic investment team that does
a ton of research, and what they've showed us is
(10:20):
if you're going to invest money in the market and
let it ride, or if you're going to miss the
best five days, ten days, potentially twenty days in the market. Right,
that doesn't sound bad five days, ten days, twenty days.
We've done the analysis. The difference is in some cases
hundreds of thousands of dollars and missed growth because you
(10:44):
try to time the market.
Speaker 3 (10:46):
Yeah, and if you tie that back to the whole
discussion of investment behavior. Vanguard comes out with a study
and they update it every year, and I've been fascinated
by this fact for over twenty five years now.
Speaker 4 (11:00):
The answer never changes.
Speaker 2 (11:02):
Yeah, it doesn't.
Speaker 4 (11:03):
The difference, the.
Speaker 3 (11:05):
Difference between what average investors get through working with a good, solid,
fiduciary investment advisor versus doing this on their own is
about a three percent difference every single year. Three percent
every single year. And the dirty little secret here is
it's not because we're better stock pickers. It's because we
(11:27):
keep people from making stupid decisions with their money. That's
the value of having a good financial advisor. On top
of all the tax alpha and tax strategies. That's the
value add three percent, and I guarantee we charge way
less than that to do the work that.
Speaker 4 (11:44):
We do so and on top of that, you.
Speaker 3 (11:46):
Know, as of twenty twenty four, this number never changes either.
Only thirteen percent of all actively managed fund managers beat
their index thirteen percent.
Speaker 4 (11:59):
Yeah, so there's a.
Speaker 3 (11:59):
Lot of people getting paid, you know, the one percent
plus per year to lose you money.
Speaker 4 (12:05):
It's insane, but yet people still do it well.
Speaker 1 (12:08):
And these are people with degrees in finance and economic
policy that have studied these things. And if they can't
get it right right on market timing, maybe the average
person should not try to.
Speaker 2 (12:19):
Do it either. Here's the all Worth advice.
Speaker 1 (12:21):
Other than trying to outsmart the market, focus on your
bigger financial goals and bigger picture. After all, time in
the market is more important than trying.
Speaker 2 (12:30):
To time the market.
Speaker 1 (12:32):
Every time, we've talked about the Labor Department's fight to
expand the fiducia rule. This is something we have been
for for a long time. We have an update for you.
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
(12:53):
Meani Wagner along with Bob spaonseller.
Speaker 2 (12:55):
Straight ahead. It's six forty three.
Speaker 1 (12:57):
One big question is it best to pay more in
taxes now or later? We'll get to that if you
have listened to the show, I don't know for more
than a day, probably, Bob, you have heard that.
Speaker 2 (13:08):
Word fiduciary before.
Speaker 1 (13:11):
It is something that we have been for decades now
as a firm. We feel very strongly about it. We
also feel like everyone in our industry who is going
to give you advice about your money should also be
a fiduciary. Interestingly, though, Bob, not everyone in the industry
feels that they should be held to that standard.
Speaker 3 (13:30):
Yeah, and I hate all these and I know we
got to be compliant here, so I'm I'm going.
Speaker 4 (13:34):
To be careful because I don't we're going to bleeve
you out. Yeah, just bleep me out. But look, let's
cut through all the crap here.
Speaker 3 (13:41):
There's a difference between fiduciary, which means we always must
make a recommendation that is in your best interest period.
End of story. Versus in the other side of the industry.
You know, the recommendation has to be suitable, which basically
means means it could pass muster if you're in front
(14:02):
of a quarter or get sued or whatever. That is
not that's not the standard that we want to be
operating under. And what and I've lived over the course
of my career, I've been with firms that are on
both sides of that house, so I know exactly how
it works. And the number one thing that a prospective
client needs to ask their advisor is how do you
(14:24):
get paid?
Speaker 4 (14:25):
How do you get compensated?
Speaker 3 (14:26):
Because I think everybody can understand the whole concept of
human incentive. We are all human beings, We're all incentivized
to do certain things based on financial considerations.
Speaker 1 (14:40):
Nathan Backgrach used to say, and I love this line.
It makes so much sense. We are all coin operated machines.
Speaker 3 (14:47):
Yeah, yeah, yeah, So hopefully that makes some sense to
people listening.
Speaker 4 (14:54):
It's real simple, are you going to.
Speaker 3 (14:55):
Act in one hundred percent my best interest and show
me specifically how you're going to get paid. And if
you can answer those two questions, I think that's somebody
you ought to be dealing with and if somebody is
avoiding that conversation or unable to able or unwilling to
disclose the information, don't walk away.
Speaker 2 (15:17):
Run away, Yeah, run out that door.
Speaker 1 (15:19):
The problem is, and I mentioned some and I'm not
saying just even bad actors in our industry, but some
people who are motivated otherwise, they often come from the
insurance industry. Nothing against them, right, Insurance products are a
very necessary part of our lives. But sometimes they're going
to push something on you that is a commission product
and you may not know that, and that's where maybe
there could be a non commission product that would be
(15:42):
better suited for you, But they're also recommending something because
they're going to make a commission off of it. So
while this Department of Labor rule, right, Labor Department rule.
Speaker 2 (15:52):
Has been coming down the pike, they've been pushing back.
Speaker 1 (15:54):
The insurance industry has been pushing back pretty mightily making
an argument against this. And the update here is that
it's tied up in the court system. You know, the
Labor Department. We don't know if they're going to continue
to fight it. Where it stands right now is a
two month freeze and the proceedings.
Speaker 2 (16:13):
We've seen this come down to party lines before. We
will see how it plays out.
Speaker 1 (16:18):
You know, I think it's just important to ask two things, Bob.
You mentioned one of them, how are you paid? And secondly,
is are you a fiduciary in every recommendation that you
are making to me?
Speaker 5 (16:28):
Right?
Speaker 1 (16:28):
You've got to be clear on those things first and foremost.
All right, pivoting now to football, one of Bob's favorite topics.
You know, I think most of us, who if you
love your team, whatever your hometown team is, at some point,
you've probably jumped online and gotten on their team website,
whatever that looks like. What you may not know is
that if you've done that over the past few years,
(16:50):
they may have been gathering data about you, information about you,
and they didn't tell you.
Speaker 3 (16:57):
A combination of websites and apps for all thirty two
teams in the NFL collected detailed data from consumers without
directly informing them that their data could be used for
targeted advertising or you know, selling their information, all that
kind of stuff that we try to avoid and don't like.
Information collected by a third party, you know, ad tech vendor,
(17:22):
online behavioral data, you know, service they confirm this. This
stuff's being sold in amy. What was the number one
offender in the NFL, the Cleveland Browns app Just one
more reason to hate Cleveland and hate the Browns. I
love it.
Speaker 2 (17:39):
It's funny.
Speaker 1 (17:39):
When I was looking at this research too, I was like, yes,
the Browns are the worst ones in here. This makes
perfect sense. Yeah, So this is in twenty twenty three.
Their app asked consumers, right, so you're going to the ballpark,
you're jumping on there.
Speaker 2 (17:52):
It asked them to enable their location services so that
they could get.
Speaker 1 (17:57):
Better information on I don't know where the nearest beer
booth is. Problem is, at the same time, it wasn't
warning them, and there should have been a full disclosure here. Hey,
we're going to sell your information to advertisers. We're going
to tell them exactly where you are so that they can,
you know, spoon feed you advertisements. Not cool. All of
these NFL teams have then had to update their privacy
(18:18):
practices and had to say, listen, we're going to disclose
to you. If we're giving this information out quickly, I
want to get to our all worth advice in the
Cincinnati Inquirer, we've got a preview of what you'll find
online and in your paper on Sunday. First question from
FKA and DK in Westchester. I'm fifty nine, my waife
is fifty seven. I want to claim Social Security? Can
(18:38):
she still claim off my benefits before I claim it?
Speaker 4 (18:43):
Yeah, the answer is no.
Speaker 3 (18:44):
That used to be the case, and now you have
to take You have to wait to take the spousal
benefit on your spouse's earned benefit until you actually claim.
So what we often see, and you know, spouses make
different amounts of money. This could apply to the wife
or the husband, it doesn't matter. But for the younger
spouse or what have you. What happens a lot of
(19:06):
times is they'll take their their own benefit and then
when the higher earning, higher benefit spouse goes on claim,
you know, you're guaranteed to get one half of that
person's earned benefit as a spousal benefit. So you're going
to get an automatic jump up or a raise to
that spousal benefit when your husband or wife claims. So
(19:27):
that's usually the strategy that we see employed here.
Speaker 1 (19:30):
Yeah, they can't claim until you've claimed on a spousal benefit, right,
and they're going to come out ahead by waiting until
their full retirement age to get the maximum benefit. Coming
up next, reasons why social Security at sixty two could
be a bad idea for you. You're listening to Simply
Money presented by all Worth Financial here in fifty five
KRC the talk station.
Speaker 2 (19:55):
You're listening to.
Speaker 1 (19:56):
Simply Money presented by all Worth Financial. I mean you Wagner,
along with Bob Sponsor. When are you going to claim
Social Security? How do you get the maximum amounts out
of the system.
Speaker 2 (20:06):
Twenty five percent of all.
Speaker 1 (20:07):
Workers plan to retire before age sixty four? Does that
mean you're claiming when you retire? Joining us tonight is
our estate planning expert, Mark Rekman from the law firm
of Wood and Lamping. You know, Mark, we're having these conversations.
You might be having them with some of your clients too.
And what I find is that many people think they
want to claim Social Security early, and they have a
(20:29):
great reason in their head why, and once we talk
it through, it's really not such a great reason.
Speaker 5 (20:35):
I agree, And I was surprised to read recently that
close to three quarters of current retirees actually retired before
they were sixty five, and that may be a product
of the pandemic. It may be a product of many things.
But I was surprised that that number was so high, and.
Speaker 1 (20:49):
I think for a lot of people mark it becomes okay, Well,
if I'm retiring, you know before sixty four, you know
my full retirement age is likely sixty seven for most people,
how do I bridge that gap?
Speaker 2 (21:01):
I think a lot of people just.
Speaker 1 (21:02):
Want to push that button or pull the lever on
social Security. It may not be the best thing to
do as far as hey, if you're thinking you might
live a long life, the longer you put off claiming,
the more money you're going to.
Speaker 2 (21:16):
Get out of the system.
Speaker 5 (21:18):
Well, and to your point, Amy, there are plenty of
good reasons to start early, but there are also plenty
of bad reasons.
Speaker 2 (21:24):
Let's talk about the bad ones first and foremost.
Speaker 5 (21:27):
Well, one of the things that I hear from people,
and you guys probably hear more of this than I do,
but one of the things I hear from people is
they're worried that social Security is going to run out.
And you think it from Yeah, there are alarmists out
there in the media who like to pump up the
attention to this issue. But when you read from well
(21:48):
informed sources, you'll find out that while Social Security is
in fact in some financial trouble, it is unlikely that
the program won't provide the benefits they've promise for future retirees.
It's funded through taxes that are continually collected from current workers,
as well as a trust fund, and I understand that
(22:09):
the trust fund is projected to run out in twenty
thirty four, and if that does happen, Social Security will
still be able to pay retirees something in the neighborhood
of seventy seven percent of the promised benefits. However, it
seems very unlikely that the government would cut benefits. They're
not going to let that go into effect. They're not
(22:30):
going to cut benefits at all. In my mind, it
would be.
Speaker 1 (22:33):
A really unpopular thing to do to voters, right and
I think right now is just kind.
Speaker 2 (22:37):
Of the political hot potato of whatever decision they.
Speaker 1 (22:40):
Make to make sure that the system remains solvent is
going to anger some part of the voting population. But
you pull it off the table all together, and everyone's upset,
and no politician wants that. And make Mark, I think
you make a great point here, and this is a
conversation I've had several times recently someone who's close to retirement,
(23:01):
and we'll do the projections and they'll be better off
by waiting till full retirement age.
Speaker 3 (23:06):
Right.
Speaker 1 (23:06):
We can actually run the numbers and scenarios for them
to say, Okay, you're going to come out ahead if
you wait until sixty seven. And then they'll say, yeah,
but there's not going to be any money there for me.
And I said, listen, you got to go with the
facts that you know. And you know, we don't know
what's going to happen down the road, so you need
to be able to stand on your own two feet.
Speaker 2 (23:25):
As far as not necessarily rely on this.
Speaker 1 (23:28):
But I also, you know, don't want you to make
a decision on social security based on what may or
may not happen down the road.
Speaker 2 (23:34):
Bob, I'm sure you're having similar conversations too.
Speaker 3 (23:38):
Yeah, I'm just listening to both of you make some
very good points. I think the thing that jumps out
to me when we look at studies on social security,
believe it or not, nine out of ten future retirees
don't even understand how to maximize their Social Security benefits.
So it just screams of having someone again a fiduciary
(23:58):
advisor sit down with them and actually show them where
their income is going to come from in retirement, because
the natural response is, hey, I can get a check
next month or next year, sign me up, give me
the money, and people don't look at the tax implications,
they don't look at the long term viability of.
Speaker 4 (24:18):
Their financial plan.
Speaker 3 (24:19):
And what we find, and I know you do this
all the time, Amy, once we actually sit down and
run different scenarios and show people different options, they walk
out with a lot more confidence in what they're doing,
regardless of which claiming strategy they ultimately decide to take.
Speaker 5 (24:40):
What I find is that many of the pre retirees,
people who were looking at early retirement, they think that
if they take early retirements, they know they're going to
get a reduced benefits. But they think when they reach
full retirement age, which is you said, Amy, at sixty
seven right now, they think their benefits are going to
go back to what they would have been if they
had waited. That's not true. No, if you take early benefits,
(25:03):
you get a haircut. We'll talk a little bit more
about that in a minute. You take a haircut, that
haircut stays with you for the rest of the rest
of your.
Speaker 1 (25:11):
Payoff, and that's an important distinction and just goes to
that kind of so much information misinformation out there about
how this program works, and you don't want to make
a decision and then later find out, Oh, I wish
I had known that then, but now I'm locked into
this benefit, and by the way, I'm locked into it
for the rest of my life. There's not a lot
you can do about it at that point. You know.
Speaker 2 (25:32):
I've also had someone say, hey, I want to claim on.
Speaker 1 (25:36):
The very day that I turned sixty two because both
of my parents died in their sixties. Okay, you know,
this person sitting in front of me is someone who
eats well, works out every day, and so we say, well,
what happened with your parents heart disease? Well, one it
was morbidly obese and the other one smoked. Okay, probably,
Then you know, you're betting against yourself based on what
(25:58):
happened to your parents. But those lifestyle choices that they've made,
You've made very different lifestyle choices. So lots of people
kind of want to bet against themselves.
Speaker 2 (26:06):
It's called longevity literacy. You don't know how long you're
going to live.
Speaker 1 (26:11):
But you're also not making informed decisions about your money
because you think, well, I'm not going to make it
to seventy, but what if you do right?
Speaker 3 (26:20):
And that's an example, yeah, sorry, that's an example, Amy,
of making an emotional decision based on some assumptions and
not knowing the repercussions. And then, to Mark's point, you
make that decision at sixty two, it's irrevocable, there's no
going back, there's no adjusting later.
Speaker 5 (26:40):
And you know that doesn't mean that there aren't a
good reason. There are good reasons to apply early. If
you've got a diagnosed health problem, you know, that cuts
the other way to your point, Amy, if you're healthy,
that's one thing. If you are not healthy, you know,
you've got a heart disease or you've got some other
serious illness, that is a reason to start early. But
that's part of the process. That's part of the thought process.
Speaker 1 (27:03):
One of the conversations I was even having this week
is you know, hey, if you can put off claiming
Social Security, you don't even have to get the same income,
you know, but put it off as long as you
can by maybe working part time.
Speaker 2 (27:17):
That's also an option for you.
Speaker 5 (27:19):
Well, and one of the things that we run into
on the legal side is that when sometimes people want
to apply for soci Security benefits because they need the
money right now, and that's a good reason, but there
are other alternatives to look at that might be better choices.
If you need the money, then you need to apply.
(27:40):
But if you can apply for Social Security disability benefits,
for example, and qualify for monthly payments on disability basis,
it won't affect your retirement later on. There are ways
that you can live off savings without claiming Social Security
and postpone your Social Security application. You can reduce expenses,
(28:03):
you know, changing your budget, perhaps finding less expensive ways
to live for a couple of years to postpone that payout.
Speaker 1 (28:11):
Think the key is understanding right, understanding how the program works,
and making an individual decision based on what's best for you.
Great insights as always from our state planning expert, Mark
Grekman from the law firm of Wood and Lamping. You're
listening to Simply Money presented by all Worth Financial here
on fifty five KRC the talk station. You're listening to
(28:35):
Simply Money presented by all Worth Financial I Memi Wagner
along with Bob sponseller, Do you have a financial question
you need a little help with. Maybe it's keeping you
up at night, or you and your spouse aren't on
the same page about it.
Speaker 2 (28:46):
Well, there's a red button you can click on while
you're listening to the show.
Speaker 1 (28:49):
It's right there on the iHeart Opera cord. Your question,
it's coming straight to us. Will help you figure it out.
And straight ahead, Retiring without a plan is not such
a great thing. We're going to talk about one of
the very real consequences of that coming up in just
a few minutes. Okay, many, many people who land in
my office, especially those getting close to retirement, have realized this.
(29:12):
For many years. As you're working, you're focusing on just
building those assets, right, you're in the accumulation phase. And
maybe you've done it by turning and also turned a
blind eye to taxes. And we would say, hey, uh ah,
these things have to go hand in hand. You want
to maximize your investments, but you also want to be
super tax efficient and how you're saving and investing in
(29:36):
the difference I've seen could be the could be tens
of thousands, hundreds of thousands of dollars.
Speaker 4 (29:42):
Yeah, and we just mentioned this topic.
Speaker 3 (29:43):
I mean mean this is this comes down to the
difference between reactive tax preparation, you know, just pumping the
numbers into a piece of software versus doing some proactive
tax planning, you know, in between, in conjunction with your
financial advisor and your CPA.
Speaker 4 (30:02):
So let's get into a.
Speaker 3 (30:03):
Couple reasons why you want to make you might want
to pay more tax I mean, this is counterintuitive. Why
would I want to pay more taxes now and less later.
The first topic we should probably talk about is roth
iras or wroth conversions. So, you know, particularly for lower
income people, and you know, you think understandably, so your
(30:25):
income is going to rise over your lifetime and you're
going to be in a higher tax bracket later. Paying
those taxes now and getting into a roth ira roth
FLO and K where you're done paying taxes for the
rest of your life once it's in.
Speaker 4 (30:39):
There could be a real powerful game changer.
Speaker 1 (30:44):
You know, I'm probably in more of my peak earning
years right farther along in my career, not in my
twenties anymore, and I'm still putting, you know, my my
floural and K contributions into a wroth. Why well, because
I love that tax free growth, I'll pay taxes on
it now and then watch it grow and grow and grow.
Because it's invested in, it'll compound through the years before
(31:06):
I get to retirement. And so that might be one
really good reason why to you know, pay taxes now now.
I think it's also important to know tax wise where
you stand in your tax bracket. Maybe it's a year
where you're kind of teetering between two. Then maybe you
do tax deferred contributions that year, you know, in order
to lower your adjustable growth income.
Speaker 2 (31:29):
So there's there's different strategies that you can.
Speaker 1 (31:31):
Employ here, but you got to know what they are
in order to do them.
Speaker 4 (31:36):
Yeah.
Speaker 3 (31:36):
A couple of other ones that come to mind to
me are and I think this has overlooked a lot,
is believe it or not. In twenty twenty five, for
married filing joint you know, couples, if your taxable income
is anywhere between zero and ninety six seven hundred dollars,
your long term capital gain rate and your qualified dividend
(31:58):
rate is zero yep. So we talk a lot about
you know, gradually getting out of concentrated stock positions where
you've got you know, appreciated stocks with embedded capital gains.
This is a time where you can kind of slice
a little bit of that gain off, pay nothing in taxes,
and get that money, you know, redeployed, you know, in
(32:20):
a more diversified portfolio. The other one that I see
more often than not is now with the standard deduction
again for married couples above thirty thousand dollars a year. Now,
I'm seeing more and more people that are charitable givers
lumping two or three years worth of charitable giving into
(32:41):
one year so that they can itemize, or using things
like a donor advice fund that we've talked about to
lump some and get you know, those high deductions and
warehouse you're charitable giving in a year where you could
take advantage of itemizing in an otherwise low income year.
Speaker 1 (33:03):
The more diversified the tax treatment of your investments, the
more options you give yourself later in life. I mean,
several people in my office recently who were in their
thirties and I was saying, hey, listen, let's get money
into a WROTH, Let's get money into a health savings account, right,
I mean, talk about taxes, the tax efficiency of that
(33:24):
vehicle triple tax advantage.
Speaker 2 (33:26):
Right, if you use correctly, you'll never pay taxes on
that money.
Speaker 1 (33:28):
That is a gift from Uncle Sam that he doesn't
give in any other way, shape or form. But then also,
you know taxable brokerage accounts, you know, you were talking
about the long term capital gains rate, you know, lower
than being your regular your ordinary income rate, you know.
So I'm having that conversation with people now, like, hey, listen,
First of all, this gives you the option to retire
(33:49):
before fifty nine and a half and not pay that
ten percent penalty. So that's one reason why you might
want to have one of these accounts. But for my
clients who have these accounts, it's one of the first
places where we look when we get to retirement because again,
we can be really tax efficient, especially if we can
get that income down in what kind of taxes they're
going to pay as they're taking distributions from these accounts.
Speaker 2 (34:10):
So lots of strategies here.
Speaker 3 (34:13):
Yeah, it's always nice to have multiple pots of money
that are treated differently from a tax standpoint, and that's
where we can customize, truly customize ahead of time a
retirement income strategy that is the most tax efficient in
the short term and the long term.
Speaker 2 (34:31):
Here's the all Worth advice.
Speaker 1 (34:32):
The decision to pay more or less than taxes should
be based on your strategic long term plan. Coming up next,
reason why retirement planning right beyond the money part of
it is so critically important.
Speaker 2 (34:45):
We'll get to that.
Speaker 1 (34:46):
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 and presented by all Worth Financial. I'm
Ami Wagner along with Bob Sponseller. We spent a lot
of time talking and thinking about retirement, and often that
is from a financial perspective, but when my clients get
(35:09):
really close to retirement, I also shift the conversation into hey, guys,
have you thought about what your life will look like
in retirement?
Speaker 2 (35:18):
What's your plan for your days? And every once in
a while, I'll have someone in my office who looks.
Speaker 1 (35:23):
At me like I have no idea and I have
concerns about those kinds of people.
Speaker 3 (35:28):
Yeah, and in particular I don't know about you, Amy.
I rarely talk to my clients about if and how
much alcohol, If and how much they drink and how
much alcohol they consume. But we came across an interesting
study that I do find valid, and it was a
study done in Aging and Mental Health magazine, and I
(35:50):
found some of the findings to be interesting.
Speaker 4 (35:53):
They actually studied.
Speaker 3 (35:54):
Almost twenty eight thousand men and women age fifty and
older and they followed those folks for fourteen years, So
that's a pretty long term study that most people never
take the time to do. And first of all, they
found that retirees showed more signs of depression than the
folks who are still working. And it comes back to
(36:16):
your point of what are you going to do if
you're retired? Do you have that you know planned out?
And then they get into the whole topic of alcohol.
And I don't know where they find this data, but
they're claiming baby boom baby boomers have the higher highest
alcohol use of any prior generation. And those again are
(36:36):
folks born between nineteen forty six and nineteen sixty four.
So Amy, why are all the baby boomers drinking too much?
Speaker 1 (36:46):
I don't know why it's coming down to boomers here,
but I have seen this play out in real life.
Speaker 2 (36:51):
Family friend, who.
Speaker 1 (36:54):
Much of his life was wrapped up in work, right,
worked really long hours, always on a schedule. A lot
of his good friends, his close buddies, were at work,
and while he was really excited about retiring in his
early sixties, he really didn't give a lot of thought
to this. And when he first retired, he was absolutely lost.
Speaker 2 (37:18):
I mean, you know, I mean, the.
Speaker 1 (37:19):
Structure of his day, the social life, all of it
gone overnight, and he kind of turned to drinking. I
mean he'd have several drinks by noon every day and
you know, just kind of sit around watching TV and drinking,
and he really got to an unhealthy place. Now, I'm
happy to say, over time he figured it out.
Speaker 2 (37:39):
He realized that alcohol was a crutch right trying to
get through this transition.
Speaker 1 (37:43):
Time, he figured out a schedule that involved meeting up
with the buddies for lunch and into play golf and
for other things. He put working out as part of
his schedule, and he held alcohol for the weekends and
things like that.
Speaker 2 (38:00):
He digged himself into good shape.
Speaker 1 (38:01):
But listen, I don't think you can underestimate that the social.
Speaker 2 (38:06):
Emotional impact of retirement.
Speaker 1 (38:08):
And if you haven't thought through what your days are
going to look like, I'm not saying you're going to
turn to alcohol, but I have seen it happen and
I think it's important to.
Speaker 2 (38:15):
Understand the risks associated with that.
Speaker 1 (38:19):
So you know, it's not just a money conversation, right,
It's a conversation about how are you going to live
those days out?
Speaker 2 (38:25):
What that's what's that going to look like? Thanks for listening.
Speaker 1 (38:27):
You've been listening to Simply Money presentab by all Worth
Financial here on fifty five KRC, the talk station
Tonight's the myth of market timing and how it can
lead to some horrible long term outcomes. You're listening to
Simply Money, presented by all Worth Financial, Imm Wagner along
with Bob Sponsor or Bob. If we have said it
once on the show, we have said it a million times.
Speaker 2 (00:22):
It is time in the market that is.
Speaker 1 (00:26):
Often the answer for smart long term investors not timing
the market.
Speaker 2 (00:31):
Yet human behavior leads us to.
Speaker 1 (00:34):
Should I pull it out? Should I put more in?
Pretty often.
Speaker 3 (00:39):
And unfortunately a lot of these emotional decisions are driven
by media headlines that we talk about all the time.
We talked about it earlier this week, and yeah, the
biggest thing to check is our own behavior. And then
I would add a second thing, know when you need
the money and make sure your long term money he
(01:00):
stays invested long term so that you don't subject yourself
to poor decision making during volatile investment periods.
Speaker 2 (01:09):
And it's interesting because it goes both ways.
Speaker 1 (01:11):
Right, many times you're talking about the headlines, and that's
the fear end of thing. There are two emotions that
I see time and time again that drive terrible, terrible
decisions for investors.
Speaker 2 (01:22):
One of those is fear. We're starting to see some
of those headlines.
Speaker 1 (01:25):
Now, the dreaded R word out there right, recession, you know,
And these headlines are clickbait. Often they're trying to scare you,
but often they can scare an investor into making a
bad decision. I've seen the flip side too, Bob where
and maybe it's not the headlines, or maybe it is.
Speaker 2 (01:40):
Maybe it's headlines about Navidia, and you know, this is a.
Speaker 1 (01:44):
Company that's continuing to climb, and then someone wants to
go all in. I have had ninety year old investors saying, hey,
I've had great returns over the past year or two.
I think I'm way too conservative right now. Put me
one hundred percent in the market, right, that's greed and
on the flip side, that can have a terrible outcome.
Speaker 3 (02:06):
I experience both of these emotions with the same client
within ten days. Recently, No, so we did our annual
review with his client. He's been a great client for
thirty years. Love this guy. We have a great relationship
and I know what his risk tolerance is and isn't
because we've worked together for so long. So he comes in,
(02:27):
you know, a month ago after two big years in
the market, and he says, Bob, I think we should
get a little more aggressive. I think we should put
a little more money in the stock market. And I said,
I don't think we should do that. And you know,
I talked about some of the uncertainty, short term, terrorist recession,
all the stuff we talk about, and I said, I
(02:48):
don't think you want to experience what could happen if
things get volatile. Two days ago, I get an email
from this guy, same guy. Hey, I need you to
call me. I think this market's going in the tank.
We might need to go all cash. You know what
do you think? I need you to talk me off
the This is the same talk me off the ledge.
(03:10):
This is the same client within less than two weeks,
wanting to get.
Speaker 4 (03:14):
More aggressive and then go to cash.
Speaker 3 (03:17):
So and I I can only I can only surmise
that he's been watching too much cable news.
Speaker 1 (03:27):
Yes, exactly in our brains are wired for this when
it comes to losses. I can tell you personally. If
I am walking down the street and I come across
a twenty dollars bill right lying on the sidewalk, Great,
that's awesome.
Speaker 2 (03:43):
There's no one around. I just made twenty bucks.
Speaker 1 (03:46):
On the flip side, if I put twenty bucks into
my pocket and I go to one of my son's
basketball games and somehow I lose it and I get home,
that lost twenty bucks is going to bother me for
the next three years, right.
Speaker 2 (03:58):
And that is called loss aversion.
Speaker 1 (04:01):
It is a psychological term, and it means we remember
the losses way more strongly, way more vividly than we
do the gains. And so that means often when it
comes to investing our money, which let's face it, we've
worked really, really hard for this money for a long
amount of time. When you're checking that for one K
(04:22):
and you see it down and you start thinking, gosh,
that's down ten thousand dollars, how long did it take
me to get that much money in here? You can
have then the knee jerk reaction of let me curl
up in the fetal position around this money, pulling that
money out, getting more conservative. That is market timing.
Speaker 3 (04:41):
Yeah, and that loss aversion feeling. I'm guilty of it myself. Amy,
You know, we're all here in me the baseball coach
and me. I hate to lose like you. I hate
to lose, and you buy something thinking it's going to
go up and it goes down. You're upset and that
you know your your ego kicks in all those things.
And to your point, the worst thing you can do
(05:02):
then is let an emotional decision take home, and then
a temporary loss becomes a permanent loss, and then you're
beating yourself even more. Six you know, twelve twenty four
months down the.
Speaker 1 (05:14):
Road you're listening to simply when you presented by all
Worth Financial I Memi Wagner along with Bob spaondseller, it
is time. We have seen some market volatility over the
past few weeks. There's been some crazy headlines out. It
is time to understand market timing in the impact of it.
Speaker 2 (05:31):
We've got some great all Worth data for.
Speaker 1 (05:34):
Those of you who are starting to get a little nervous,
I want you to take this in.
Speaker 2 (05:39):
Listen to this.
Speaker 1 (05:40):
Our internal data shows that after a market drop of
twenty percent, right, and this is part of a normal
market cycle, right, every four to six years, we're going
to see at least a twenty percent pullback. Typically over
the next six months markets have rebounded six percent. We're
talking about after they've gone down twenty percent. Here's the
deal over the next year back up to nineteen percent,
(06:03):
so you are almost even at this point, and over
the next three years on average, markets are up close
to forty six percent. Bub When someone comes to me,
like you mentioned your client, I'm getting nervous or whatever,
I want to take my money out, the first question
that I ask is, Okay, when are we going to
put it back in? When's the right time to put
it back in? Are you going to put it in
(06:25):
next week if markets are back positive.
Speaker 2 (06:29):
Are you going to put it in right?
Speaker 1 (06:30):
Because what we see is you can get into your
head so much after you've pulled money out and you
never put that money into the market, or you.
Speaker 2 (06:38):
Just miss so many good days. And I think one.
Speaker 1 (06:41):
Important part of this equation is often the best days
in the market come on the heels of the worst
days in the market, and there are no headlines that
are pointing to the fact that this day's going to
be a good one.
Speaker 3 (06:51):
Right exactly, And when you pull your money out, you
got to be right twice. Yes, you pull it out,
then you got to be right on when you pull
it back in. And that that's where people have a
hard time doing it, because the best time to put
money in the market or put it back into the market.
And when there is when there's blood in the streets,
everybody's predicting everything's going to go to hell in a handbasket,
(07:14):
and that's exactly the time you should be putting money
in the market. But emotionally, that's usually the height of
the fear factor for people, and that's why it's just
dangerous to do this. Amy, can you share the all
worth data on the historical volatility of the meme.
Speaker 4 (07:30):
Coin that you bought me for my birthday? Do we
have data on that?
Speaker 1 (07:34):
It's only going up from here? Bob, It's only going up.
That's why I think it's been a fantastic investment. We've
got a lot of figured.
Speaker 4 (07:42):
That's what I figured. Can't thank you enough.
Speaker 1 (07:44):
To your point, there is new historical data on some
of these insane trends like the meme coin that I
jokingly told you this week I was buying you for
your birthday. And there's all kinds of stuff like that,
right that they're going to be talking about in the headlines,
speaking to that greed, right, it's the fomo.
Speaker 2 (07:59):
Which is also a thing that we see.
Speaker 1 (08:01):
All the time in investing which is wait, someone else
is making money on something I should probably jump in.
Speaker 2 (08:08):
I've never heard about meme coins before. This is something
I should jump into.
Speaker 1 (08:11):
Okay, A little bit of analysis the sec right is like, hey,
this is a collectible on the lines of a beanie
baby or a baseball card. Not to say you can't
make money off of those things, but you shouldn't be
following the herd. And you know, I just think from
a behavioral finance perspective, a lot of the decisions we
(08:32):
make that can it's.
Speaker 2 (08:34):
Kind of a fork in the road and you look
back sometimes and you're like.
Speaker 1 (08:36):
Why did I do that? That was a terrible decision
when it came to my money. Well, a lot of
that is based on trying to time the market, trying
to make some crazy return that isn't isn't really feasible.
There's someone who I just like professionally run into usually
once a year, once every couple of years, and I'm
fully entertained by this person because he's always telling me
(08:58):
the next big thing that he's in in. This is
not someone who buys into diversification whatsoever. So he is
going all in on pot stocks, and then he's going
all in on crypto exchanges, and then he's going all
in on Nvidia.
Speaker 2 (09:12):
Sometimes he wins, and that keeps him fueled.
Speaker 1 (09:15):
But I guarantee you, Bob, if you look back over
what he could have done just putting all of that
money into a well diversified fund and letting it ride,
he'd be so much farther ahead.
Speaker 2 (09:28):
And also smooth out right. The insane volatility of this
is way up, this is way down. I'm out, I'm in.
It's enough to make my head spin.
Speaker 3 (09:37):
Have you asked this gentleman how much of that money
that he is putting in all these things, how much
of that money is he depending on to fund his retirement?
Speaker 1 (09:46):
We have not had that conversation because I just really
like to hear what he's in.
Speaker 2 (09:50):
Now.
Speaker 4 (09:51):
You probably don't want to get into that con.
Speaker 1 (09:53):
Well, he's not my client, and so I will often
kind of bring up, hey.
Speaker 2 (09:57):
Don't you think you want to just be a little.
Speaker 1 (09:59):
More diversified, Like looks at me, like, why would I
want to do that? But I do think it is
incredibly important to understand how this market timing works. And
you know, one of the things that I love that
we do on the show is just to provide some
historical perspective. We have a fantastic investment team that does
a ton of research, and what they've showed us is
(10:20):
if you're going to invest money in the market and
let it ride, or if you're going to miss the
best five days, ten days, potentially twenty days in the market. Right,
that doesn't sound bad five days, ten days, twenty days.
We've done the analysis. The difference is in some cases
hundreds of thousands of dollars and missed growth because you
(10:44):
try to time the market.
Speaker 3 (10:46):
Yeah, and if you tie that back to the whole
discussion of investment behavior. Vanguard comes out with a study
and they update it every year, and I've been fascinated
by this fact for over twenty five years now.
Speaker 4 (11:00):
The answer never changes.
Speaker 2 (11:02):
Yeah, it doesn't.
Speaker 4 (11:03):
The difference, the.
Speaker 3 (11:05):
Difference between what average investors get through working with a good, solid,
fiduciary investment advisor versus doing this on their own is
about a three percent difference every single year. Three percent
every single year. And the dirty little secret here is
it's not because we're better stock pickers. It's because we
(11:27):
keep people from making stupid decisions with their money. That's
the value of having a good financial advisor. On top
of all the tax alpha and tax strategies. That's the
value add three percent, and I guarantee we charge way
less than that to do the work that.
Speaker 4 (11:44):
We do so and on top of that, you.
Speaker 3 (11:46):
Know, as of twenty twenty four, this number never changes either.
Only thirteen percent of all actively managed fund managers beat
their index thirteen percent.
Speaker 4 (11:59):
Yeah, so there's a.
Speaker 3 (11:59):
Lot of people getting paid, you know, the one percent
plus per year to lose you money.
Speaker 4 (12:05):
It's insane, but yet people still do it well.
Speaker 1 (12:08):
And these are people with degrees in finance and economic
policy that have studied these things. And if they can't
get it right right on market timing, maybe the average
person should not try to.
Speaker 2 (12:19):
Do it either. Here's the all Worth advice.
Speaker 1 (12:21):
Other than trying to outsmart the market, focus on your
bigger financial goals and bigger picture. After all, time in
the market is more important than trying.
Speaker 2 (12:30):
To time the market.
Speaker 1 (12:32):
Every time, we've talked about the Labor Department's fight to
expand the fiducia rule. This is something we have been
for for a long time. We have an update for you.
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
(12:53):
Meani Wagner along with Bob spaonseller.
Speaker 2 (12:55):
Straight ahead. It's six forty three.
Speaker 1 (12:57):
One big question is it best to pay more in
taxes now or later? We'll get to that if you
have listened to the show, I don't know for more
than a day, probably, Bob, you have heard that.
Speaker 2 (13:08):
Word fiduciary before.
Speaker 1 (13:11):
It is something that we have been for decades now
as a firm. We feel very strongly about it. We
also feel like everyone in our industry who is going
to give you advice about your money should also be
a fiduciary. Interestingly, though, Bob, not everyone in the industry
feels that they should be held to that standard.
Speaker 3 (13:30):
Yeah, and I hate all these and I know we
got to be compliant here, so I'm I'm going.
Speaker 4 (13:34):
To be careful because I don't we're going to bleeve
you out. Yeah, just bleep me out. But look, let's
cut through all the crap here.
Speaker 3 (13:41):
There's a difference between fiduciary, which means we always must
make a recommendation that is in your best interest period.
End of story. Versus in the other side of the industry.
You know, the recommendation has to be suitable, which basically
means means it could pass muster if you're in front
(14:02):
of a quarter or get sued or whatever. That is
not that's not the standard that we want to be
operating under. And what and I've lived over the course
of my career, I've been with firms that are on
both sides of that house, so I know exactly how
it works. And the number one thing that a prospective
client needs to ask their advisor is how do you
(14:24):
get paid?
Speaker 4 (14:25):
How do you get compensated?
Speaker 3 (14:26):
Because I think everybody can understand the whole concept of
human incentive. We are all human beings, We're all incentivized
to do certain things based on financial considerations.
Speaker 1 (14:40):
Nathan Backgrach used to say, and I love this line.
It makes so much sense. We are all coin operated machines.
Speaker 3 (14:47):
Yeah, yeah, yeah, So hopefully that makes some sense to
people listening.
Speaker 4 (14:54):
It's real simple, are you going to.
Speaker 3 (14:55):
Act in one hundred percent my best interest and show
me specifically how you're going to get paid. And if
you can answer those two questions, I think that's somebody
you ought to be dealing with and if somebody is
avoiding that conversation or unable to able or unwilling to
disclose the information, don't walk away.
Speaker 2 (15:17):
Run away, Yeah, run out that door.
Speaker 1 (15:19):
The problem is, and I mentioned some and I'm not
saying just even bad actors in our industry, but some
people who are motivated otherwise, they often come from the
insurance industry. Nothing against them, right, Insurance products are a
very necessary part of our lives. But sometimes they're going
to push something on you that is a commission product
and you may not know that, and that's where maybe
there could be a non commission product that would be
(15:42):
better suited for you, But they're also recommending something because
they're going to make a commission off of it. So
while this Department of Labor rule, right, Labor Department rule.
Speaker 2 (15:52):
Has been coming down the pike, they've been pushing back.
Speaker 1 (15:54):
The insurance industry has been pushing back pretty mightily making
an argument against this. And the update here is that
it's tied up in the court system. You know, the
Labor Department. We don't know if they're going to continue
to fight it. Where it stands right now is a
two month freeze and the proceedings.
Speaker 2 (16:13):
We've seen this come down to party lines before. We
will see how it plays out.
Speaker 1 (16:18):
You know, I think it's just important to ask two things, Bob.
You mentioned one of them, how are you paid? And secondly,
is are you a fiduciary in every recommendation that you
are making to me?
Speaker 5 (16:28):
Right?
Speaker 1 (16:28):
You've got to be clear on those things first and foremost.
All right, pivoting now to football, one of Bob's favorite topics.
You know, I think most of us, who if you
love your team, whatever your hometown team is, at some point,
you've probably jumped online and gotten on their team website,
whatever that looks like. What you may not know is
that if you've done that over the past few years,
(16:50):
they may have been gathering data about you, information about you,
and they didn't tell you.
Speaker 3 (16:57):
A combination of websites and apps for all thirty two
teams in the NFL collected detailed data from consumers without
directly informing them that their data could be used for
targeted advertising or you know, selling their information, all that
kind of stuff that we try to avoid and don't like.
Information collected by a third party, you know, ad tech vendor,
(17:22):
online behavioral data, you know, service they confirm this. This
stuff's being sold in amy. What was the number one
offender in the NFL, the Cleveland Browns app Just one
more reason to hate Cleveland and hate the Browns. I
love it.
Speaker 2 (17:39):
It's funny.
Speaker 1 (17:39):
When I was looking at this research too, I was like, yes,
the Browns are the worst ones in here. This makes
perfect sense. Yeah, So this is in twenty twenty three.
Their app asked consumers, right, so you're going to the ballpark,
you're jumping on there.
Speaker 2 (17:52):
It asked them to enable their location services so that
they could get.
Speaker 1 (17:57):
Better information on I don't know where the nearest beer
booth is. Problem is, at the same time, it wasn't
warning them, and there should have been a full disclosure here. Hey,
we're going to sell your information to advertisers. We're going
to tell them exactly where you are so that they can,
you know, spoon feed you advertisements. Not cool. All of
these NFL teams have then had to update their privacy
(18:18):
practices and had to say, listen, we're going to disclose
to you. If we're giving this information out quickly, I
want to get to our all worth advice in the
Cincinnati Inquirer, we've got a preview of what you'll find
online and in your paper on Sunday. First question from
FKA and DK in Westchester. I'm fifty nine, my waife
is fifty seven. I want to claim Social Security? Can
(18:38):
she still claim off my benefits before I claim it?
Speaker 4 (18:43):
Yeah, the answer is no.
Speaker 3 (18:44):
That used to be the case, and now you have
to take You have to wait to take the spousal
benefit on your spouse's earned benefit until you actually claim.
So what we often see, and you know, spouses make
different amounts of money. This could apply to the wife
or the husband, it doesn't matter. But for the younger
spouse or what have you. What happens a lot of
(19:06):
times is they'll take their their own benefit and then
when the higher earning, higher benefit spouse goes on claim,
you know, you're guaranteed to get one half of that
person's earned benefit as a spousal benefit. So you're going
to get an automatic jump up or a raise to
that spousal benefit when your husband or wife claims. So
(19:27):
that's usually the strategy that we see employed here.
Speaker 1 (19:30):
Yeah, they can't claim until you've claimed on a spousal benefit, right,
and they're going to come out ahead by waiting until
their full retirement age to get the maximum benefit. Coming
up next, reasons why social Security at sixty two could
be a bad idea for you. You're listening to Simply
Money presented by all Worth Financial here in fifty five
KRC the talk station.
Speaker 2 (19:55):
You're listening to.
Speaker 1 (19:56):
Simply Money presented by all Worth Financial. I mean you Wagner,
along with Bob Sponsor. When are you going to claim
Social Security? How do you get the maximum amounts out
of the system.
Speaker 2 (20:06):
Twenty five percent of all.
Speaker 1 (20:07):
Workers plan to retire before age sixty four? Does that
mean you're claiming when you retire? Joining us tonight is
our estate planning expert, Mark Rekman from the law firm
of Wood and Lamping. You know, Mark, we're having these conversations.
You might be having them with some of your clients too.
And what I find is that many people think they
want to claim Social Security early, and they have a
(20:29):
great reason in their head why, and once we talk
it through, it's really not such a great reason.
Speaker 5 (20:35):
I agree, And I was surprised to read recently that
close to three quarters of current retirees actually retired before
they were sixty five, and that may be a product
of the pandemic. It may be a product of many things.
But I was surprised that that number was so high, and.
Speaker 1 (20:49):
I think for a lot of people mark it becomes okay, Well,
if I'm retiring, you know before sixty four, you know
my full retirement age is likely sixty seven for most people,
how do I bridge that gap?
Speaker 2 (21:01):
I think a lot of people just.
Speaker 1 (21:02):
Want to push that button or pull the lever on
social Security. It may not be the best thing to
do as far as hey, if you're thinking you might
live a long life, the longer you put off claiming,
the more money you're going to.
Speaker 2 (21:16):
Get out of the system.
Speaker 5 (21:18):
Well, and to your point, Amy, there are plenty of
good reasons to start early, but there are also plenty
of bad reasons.
Speaker 2 (21:24):
Let's talk about the bad ones first and foremost.
Speaker 5 (21:27):
Well, one of the things that I hear from people,
and you guys probably hear more of this than I do,
but one of the things I hear from people is
they're worried that social Security is going to run out.
And you think it from Yeah, there are alarmists out
there in the media who like to pump up the
attention to this issue. But when you read from well
(21:48):
informed sources, you'll find out that while Social Security is
in fact in some financial trouble, it is unlikely that
the program won't provide the benefits they've promise for future retirees.
It's funded through taxes that are continually collected from current workers,
as well as a trust fund, and I understand that
(22:09):
the trust fund is projected to run out in twenty
thirty four, and if that does happen, Social Security will
still be able to pay retirees something in the neighborhood
of seventy seven percent of the promised benefits. However, it
seems very unlikely that the government would cut benefits. They're
not going to let that go into effect. They're not
(22:30):
going to cut benefits at all. In my mind, it
would be.
Speaker 1 (22:33):
A really unpopular thing to do to voters, right and
I think right now is just kind.
Speaker 2 (22:37):
Of the political hot potato of whatever decision they.
Speaker 1 (22:40):
Make to make sure that the system remains solvent is
going to anger some part of the voting population. But
you pull it off the table all together, and everyone's upset,
and no politician wants that. And make Mark, I think
you make a great point here, and this is a
conversation I've had several times recently someone who's close to retirement,
(23:01):
and we'll do the projections and they'll be better off
by waiting till full retirement age.
Speaker 3 (23:06):
Right.
Speaker 1 (23:06):
We can actually run the numbers and scenarios for them
to say, Okay, you're going to come out ahead if
you wait until sixty seven. And then they'll say, yeah,
but there's not going to be any money there for me.
And I said, listen, you got to go with the
facts that you know. And you know, we don't know
what's going to happen down the road, so you need
to be able to stand on your own two feet.
Speaker 2 (23:25):
As far as not necessarily rely on this.
Speaker 1 (23:28):
But I also, you know, don't want you to make
a decision on social security based on what may or
may not happen down the road.
Speaker 2 (23:34):
Bob, I'm sure you're having similar conversations too.
Speaker 3 (23:38):
Yeah, I'm just listening to both of you make some
very good points. I think the thing that jumps out
to me when we look at studies on social security,
believe it or not, nine out of ten future retirees
don't even understand how to maximize their Social Security benefits.
So it just screams of having someone again a fiduciary
(23:58):
advisor sit down with them and actually show them where
their income is going to come from in retirement, because
the natural response is, hey, I can get a check
next month or next year, sign me up, give me
the money, and people don't look at the tax implications,
they don't look at the long term viability of.
Speaker 4 (24:18):
Their financial plan.
Speaker 3 (24:19):
And what we find, and I know you do this
all the time, Amy, once we actually sit down and
run different scenarios and show people different options, they walk
out with a lot more confidence in what they're doing,
regardless of which claiming strategy they ultimately decide to take.
Speaker 5 (24:40):
What I find is that many of the pre retirees,
people who were looking at early retirement, they think that
if they take early retirements, they know they're going to
get a reduced benefits. But they think when they reach
full retirement age, which is you said, Amy, at sixty
seven right now, they think their benefits are going to
go back to what they would have been if they
had waited. That's not true. No, if you take early benefits,
(25:03):
you get a haircut. We'll talk a little bit more
about that in a minute. You take a haircut, that
haircut stays with you for the rest of the rest
of your.
Speaker 1 (25:11):
Payoff, and that's an important distinction and just goes to
that kind of so much information misinformation out there about
how this program works, and you don't want to make
a decision and then later find out, Oh, I wish
I had known that then, but now I'm locked into
this benefit, and by the way, I'm locked into it
for the rest of my life. There's not a lot
you can do about it at that point. You know.
Speaker 2 (25:32):
I've also had someone say, hey, I want to claim on.
Speaker 1 (25:36):
The very day that I turned sixty two because both
of my parents died in their sixties. Okay, you know,
this person sitting in front of me is someone who
eats well, works out every day, and so we say, well,
what happened with your parents heart disease? Well, one it
was morbidly obese and the other one smoked. Okay, probably,
Then you know, you're betting against yourself based on what
(25:58):
happened to your parents. But those lifestyle choices that they've made,
You've made very different lifestyle choices. So lots of people
kind of want to bet against themselves.
Speaker 2 (26:06):
It's called longevity literacy. You don't know how long you're
going to live.
Speaker 1 (26:11):
But you're also not making informed decisions about your money
because you think, well, I'm not going to make it
to seventy, but what if you do right?
Speaker 3 (26:20):
And that's an example, yeah, sorry, that's an example, Amy,
of making an emotional decision based on some assumptions and
not knowing the repercussions. And then, to Mark's point, you
make that decision at sixty two, it's irrevocable, there's no
going back, there's no adjusting later.
Speaker 5 (26:40):
And you know that doesn't mean that there aren't a
good reason. There are good reasons to apply early. If
you've got a diagnosed health problem, you know, that cuts
the other way to your point, Amy, if you're healthy,
that's one thing. If you are not healthy, you know,
you've got a heart disease or you've got some other
serious illness, that is a reason to start early. But
that's part of the process. That's part of the thought process.
Speaker 1 (27:03):
One of the conversations I was even having this week
is you know, hey, if you can put off claiming
Social Security, you don't even have to get the same income,
you know, but put it off as long as you
can by maybe working part time.
Speaker 2 (27:17):
That's also an option for you.
Speaker 5 (27:19):
Well, and one of the things that we run into
on the legal side is that when sometimes people want
to apply for soci Security benefits because they need the
money right now, and that's a good reason, but there
are other alternatives to look at that might be better choices.
If you need the money, then you need to apply.
(27:40):
But if you can apply for Social Security disability benefits,
for example, and qualify for monthly payments on disability basis,
it won't affect your retirement later on. There are ways
that you can live off savings without claiming Social Security
and postpone your Social Security application. You can reduce expenses,
(28:03):
you know, changing your budget, perhaps finding less expensive ways
to live for a couple of years to postpone that payout.
Speaker 1 (28:11):
Think the key is understanding right, understanding how the program works,
and making an individual decision based on what's best for you.
Great insights as always from our state planning expert, Mark
Grekman from the law firm of Wood and Lamping. You're
listening to Simply Money presented by all Worth Financial here
on fifty five KRC the talk station. You're listening to
(28:35):
Simply Money presented by all Worth Financial I Memi Wagner
along with Bob sponseller, Do you have a financial question
you need a little help with. Maybe it's keeping you
up at night, or you and your spouse aren't on
the same page about it.
Speaker 2 (28:46):
Well, there's a red button you can click on while
you're listening to the show.
Speaker 1 (28:49):
It's right there on the iHeart Opera cord. Your question,
it's coming straight to us. Will help you figure it out.
And straight ahead, Retiring without a plan is not such
a great thing. We're going to talk about one of
the very real consequences of that coming up in just
a few minutes. Okay, many, many people who land in
my office, especially those getting close to retirement, have realized this.
(29:12):
For many years. As you're working, you're focusing on just
building those assets, right, you're in the accumulation phase. And
maybe you've done it by turning and also turned a
blind eye to taxes. And we would say, hey, uh ah,
these things have to go hand in hand. You want
to maximize your investments, but you also want to be
super tax efficient and how you're saving and investing in
(29:36):
the difference I've seen could be the could be tens
of thousands, hundreds of thousands of dollars.
Speaker 4 (29:42):
Yeah, and we just mentioned this topic.
Speaker 3 (29:43):
I mean mean this is this comes down to the
difference between reactive tax preparation, you know, just pumping the
numbers into a piece of software versus doing some proactive
tax planning, you know, in between, in conjunction with your
financial advisor and your CPA.
Speaker 4 (30:02):
So let's get into a.
Speaker 3 (30:03):
Couple reasons why you want to make you might want
to pay more tax I mean, this is counterintuitive. Why
would I want to pay more taxes now and less later.
The first topic we should probably talk about is roth
iras or wroth conversions. So, you know, particularly for lower
income people, and you know, you think understandably, so your
(30:25):
income is going to rise over your lifetime and you're
going to be in a higher tax bracket later. Paying
those taxes now and getting into a roth ira roth
FLO and K where you're done paying taxes for the
rest of your life once it's in.
Speaker 4 (30:39):
There could be a real powerful game changer.
Speaker 1 (30:44):
You know, I'm probably in more of my peak earning
years right farther along in my career, not in my
twenties anymore, and I'm still putting, you know, my my
floural and K contributions into a wroth. Why well, because
I love that tax free growth, I'll pay taxes on
it now and then watch it grow and grow and grow.
Because it's invested in, it'll compound through the years before
(31:06):
I get to retirement. And so that might be one
really good reason why to you know, pay taxes now now.
I think it's also important to know tax wise where
you stand in your tax bracket. Maybe it's a year
where you're kind of teetering between two. Then maybe you
do tax deferred contributions that year, you know, in order
to lower your adjustable growth income.
Speaker 2 (31:29):
So there's there's different strategies that you can.
Speaker 1 (31:31):
Employ here, but you got to know what they are
in order to do them.
Speaker 4 (31:36):
Yeah.
Speaker 3 (31:36):
A couple of other ones that come to mind to
me are and I think this has overlooked a lot,
is believe it or not. In twenty twenty five, for
married filing joint you know, couples, if your taxable income
is anywhere between zero and ninety six seven hundred dollars,
your long term capital gain rate and your qualified dividend
(31:58):
rate is zero yep. So we talk a lot about
you know, gradually getting out of concentrated stock positions where
you've got you know, appreciated stocks with embedded capital gains.
This is a time where you can kind of slice
a little bit of that gain off, pay nothing in taxes,
and get that money, you know, redeployed, you know, in
(32:20):
a more diversified portfolio. The other one that I see
more often than not is now with the standard deduction
again for married couples above thirty thousand dollars a year. Now,
I'm seeing more and more people that are charitable givers
lumping two or three years worth of charitable giving into
(32:41):
one year so that they can itemize, or using things
like a donor advice fund that we've talked about to
lump some and get you know, those high deductions and
warehouse you're charitable giving in a year where you could
take advantage of itemizing in an otherwise low income year.
Speaker 1 (33:03):
The more diversified the tax treatment of your investments, the
more options you give yourself later in life. I mean,
several people in my office recently who were in their
thirties and I was saying, hey, listen, let's get money
into a WROTH, Let's get money into a health savings account, right,
I mean, talk about taxes, the tax efficiency of that
(33:24):
vehicle triple tax advantage.
Speaker 2 (33:26):
Right, if you use correctly, you'll never pay taxes on
that money.
Speaker 1 (33:28):
That is a gift from Uncle Sam that he doesn't
give in any other way, shape or form. But then also,
you know taxable brokerage accounts, you know, you were talking
about the long term capital gains rate, you know, lower
than being your regular your ordinary income rate, you know.
So I'm having that conversation with people now, like, hey, listen,
First of all, this gives you the option to retire
(33:49):
before fifty nine and a half and not pay that
ten percent penalty. So that's one reason why you might
want to have one of these accounts. But for my
clients who have these accounts, it's one of the first
places where we look when we get to retirement because again,
we can be really tax efficient, especially if we can
get that income down in what kind of taxes they're
going to pay as they're taking distributions from these accounts.
Speaker 2 (34:10):
So lots of strategies here.
Speaker 3 (34:13):
Yeah, it's always nice to have multiple pots of money
that are treated differently from a tax standpoint, and that's
where we can customize, truly customize ahead of time a
retirement income strategy that is the most tax efficient in
the short term and the long term.
Speaker 2 (34:31):
Here's the all Worth advice.
Speaker 1 (34:32):
The decision to pay more or less than taxes should
be based on your strategic long term plan. Coming up next,
reason why retirement planning right beyond the money part of
it is so critically important.
Speaker 2 (34:45):
We'll get to that.
Speaker 1 (34:46):
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 and presented by all Worth Financial. I'm
Ami Wagner along with Bob Sponseller. We spent a lot
of time talking and thinking about retirement, and often that
is from a financial perspective, but when my clients get
(35:09):
really close to retirement, I also shift the conversation into hey, guys,
have you thought about what your life will look like
in retirement?
Speaker 2 (35:18):
What's your plan for your days? And every once in
a while, I'll have someone in my office who looks.
Speaker 1 (35:23):
At me like I have no idea and I have
concerns about those kinds of people.
Speaker 3 (35:28):
Yeah, and in particular I don't know about you, Amy.
I rarely talk to my clients about if and how
much alcohol, If and how much they drink and how
much alcohol they consume. But we came across an interesting
study that I do find valid, and it was a
study done in Aging and Mental Health magazine, and I
(35:50):
found some of the findings to be interesting.
Speaker 4 (35:53):
They actually studied.
Speaker 3 (35:54):
Almost twenty eight thousand men and women age fifty and
older and they followed those folks for fourteen years, So
that's a pretty long term study that most people never
take the time to do. And first of all, they
found that retirees showed more signs of depression than the
folks who are still working. And it comes back to
(36:16):
your point of what are you going to do if
you're retired? Do you have that you know planned out?
And then they get into the whole topic of alcohol.
And I don't know where they find this data, but
they're claiming baby boom baby boomers have the higher highest
alcohol use of any prior generation. And those again are
(36:36):
folks born between nineteen forty six and nineteen sixty four.
So Amy, why are all the baby boomers drinking too much?
Speaker 1 (36:46):
I don't know why it's coming down to boomers here,
but I have seen this play out in real life.
Speaker 2 (36:51):
Family friend, who.
Speaker 1 (36:54):
Much of his life was wrapped up in work, right,
worked really long hours, always on a schedule. A lot
of his good friends, his close buddies, were at work,
and while he was really excited about retiring in his
early sixties, he really didn't give a lot of thought
to this. And when he first retired, he was absolutely lost.
Speaker 2 (37:18):
I mean, you know, I mean, the.
Speaker 1 (37:19):
Structure of his day, the social life, all of it
gone overnight, and he kind of turned to drinking. I
mean he'd have several drinks by noon every day and
you know, just kind of sit around watching TV and drinking,
and he really got to an unhealthy place. Now, I'm
happy to say, over time he figured it out.
Speaker 2 (37:39):
He realized that alcohol was a crutch right trying to
get through this transition.
Speaker 1 (37:43):
Time, he figured out a schedule that involved meeting up
with the buddies for lunch and into play golf and
for other things. He put working out as part of
his schedule, and he held alcohol for the weekends and
things like that.
Speaker 2 (38:00):
He digged himself into good shape.
Speaker 1 (38:01):
But listen, I don't think you can underestimate that the social.
Speaker 2 (38:06):
Emotional impact of retirement.
Speaker 1 (38:08):
And if you haven't thought through what your days are
going to look like, I'm not saying you're going to
turn to alcohol, but I have seen it happen and
I think it's important to.
Speaker 2 (38:15):
Understand the risks associated with that.
Speaker 1 (38:19):
So you know, it's not just a money conversation, right,
It's a conversation about how are you going to live
those days out?
Speaker 2 (38:25):
What that's what's that going to look like? Thanks for listening.
Speaker 1 (38:27):
You've been listening to Simply Money presentab by all Worth
Financial here on fifty five KRC, the talk station
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