Simply Money

Episode Transcript

(00:00):
To continue onward fifty five KRC thetalk station tonight. How do you manage
your risk during turbulent times? You'relistening to Simply Money Somebody all worth Financial?
I Meani Wagner along with Steve Ruby, the definition of the word risk

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in the dictionary. A situation involvingexposure to danger doesn't sound like the best
thing. Don't sign me up forthat, right. But what you have
to understand about your money and riskwhen it comes to investing is there's sort
of a Goldilocks point that's different forall of us. You're going to have
to take on some risk for yourmoney to grow, but then you also

(00:43):
have to figure out how much youcan take on and still be able to
sleep at night. Yeah, Soanybody can have a high risk tolerance when
the markets are doing well. We'reall brilliant when our four oh one k's
are going up, up, up, and we all sleep incredibly well at
night. Yeah, very easy todeal with those green numbers where you just
see compounding interests building your portfolio.But what I would say is that the

(01:07):
best time to really assess your risktolerance is when the markets are getting kicked
in the teeth. If we thinkback to March twenty twenty from COVID for
example, and unemployment sword, whenthe world was hit with an unprecedented level
of uncertainty. You know, whetherwondering whether or not COVID nineteen was was
going to be the end of theeconomy as we know it. Think back

(01:30):
to that point in time when thingswere truly scary, and think about what
your risk tolerance was at that point. I think that's a fantastic example,
and I'm glad it's not so farin the rear view mirror that people have
forgotten about it, because I thinkyou can say I can handle anything.
We work with a lot of investorsfor years, right, and they become

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you know, we're huge proponents ofempowering them and educating them. Right.
They understand if you've worked with anyonefrom allways, any amount of time,
you know, we say, youknow you're a long term investor, You
stay in the market, you don'tget emotional, you don't try to time
the market. But that tested justabout everyone. And I will never forget
the scene in our office in thedays leading up to the time where we

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were all sent home. Every singleperson had headsets on and it was around
the clock talking to investors, literallytalking them off of ledges. For many
of them, we were able todo that. For the small percentage,
it just that I can't handle it. I'm going to call up in the
fetal position, take my money out. What happened to them? It was

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just a few short weeks later thatthe market started to rebound. Headlines hadn't
changed, nothing had changed, Theeconomy was still changed. People were still
working from home. You know,there were no vaccinations at the time.
Yet all of a sudden, forsome inexplicable reason, the market started to
rebound. And I think that waskind of the best example of why you

(02:58):
cannot time the market. But I'mtelling you it tested the metal of so
many people because it was tough.Without a doubt. Yeah, no matter
what your tolerance for risk was atthat point, it really did feel different
because it was an unknown that wehadn't seen in a hundred years. I'm
talking about a global pandemic. Sothinking back to that point in time to

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really understand what your tolerance for riskis is certainly valuable. Now, there's
different kinds of risk tolerances. It'sa spectrum. I mean, conservative risk
tolerance it's really focused on preserving yourcapital avoiding any kind of downside risk,
but with lower returns becomes less ofan opportunity to actually see gain. So
your conservative risk tolerance is for thosethat maybe don't need to take a lot

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of risk ideally, because one ofthe reasons why we invest is it's not
just to get rich really quick,it's to keep up with inflation. So
if you have the luxury of beingable to be conservative for the long term,
then more power to you. Butat the same time, you do
risk not keeping up with inflation.Now you're moderate. We would call that
or of a like a sixty fortytolerance. Sixty percent stock forty percent bond.

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Stock is really what helps keep upwith inflation, whereas your bond is
there to serve as a cushion ora pillow to support the downside risk of
having stocks. And then there's aggressive, you know, eighty twenty and beyond.
That's where if you're one hundred percentstock, you're driving down the fast
lane of the highway and you're bumpingcars on the way. You know,
this is for somebody that has amuch longer time horizon, has a need

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to take risk and afford it.But you need to think back, just
like we spoke about moments ago,to the worst of the worst, timing
like COVID for example, to determineare you really comfortable can you stomach the
losses that these higher risk tolerances cansee when something surprises us in the markets.
When it comes to your money,I think most of us agree it

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boils down to two things. Youwant to grow your money and you want
to protect your money. And forthose who are conservative, the focus becomes
more on protecting that money. Youfear the growth both because you realize that
the upside is also the downside.I think of this incredibly smart man.
He had this fantastic job in thetech sector, came to all of our

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workshops for years and years and years, and he would ask the same question
every few months. He would say, Okay, what can I invest in
where my money's going to grow?But I'm not going to lose any of
it. It's a fund the magicbeing that you can put in your backyard
to grove a money tree. Andwe would say, I am so sorry,
we've got nothing for you, andhe would come back a few months

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later. He knew he needed thegrowth but he also knew he couldn't stomach
the risk for that growth, andhe was an incredibly conservative conservative investor.
That's okay. If that's you,you have to know that about yourself.
But you also have to realize youhave to take on some amount of risk.
Unless you're just doing the backstroke througha pile of money and a pool

(05:54):
in your backyard, then don't takeon any risk. Keep that money in
the pool, you're good to go. Most of us, though, don't
live in that kind of a pool. It can be a little frustrating too
for somebody like that to hear froman advisor that you're taking an incredible amount
of risk by taking no risk.So let me elaborate on that. If
you're just sitting in cash because you'reterrified of losing principle, you're not going

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to lose principle. If you're sittingin cash, it's not going to go
down. But what will the valueof the dollar will purchasing power you clarify,
Yeah, it's called purchasing power riskor inflation risk. And you know,
you think about how much it usedto cost to buy a cheeseburger or
a car for that matter. That'snot the case anymore. Because of inflation,
about every twenty two years on average, the value of the dollar gets

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chopped in half. So if you'rejust sitting on the sidelines parked in cash,
you are guaranteed to lose the valueof your money. You're listening to
Simply Money presented by all Worth Financial. I Memi Wagner along with do you
Ruby As we talk about risk tolerance, how do you figure out what's your
goldilocks point where you can make enoughmoney to eat well but also not take

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on much risk that you can't sleepwell. Problem is, there is no
one size fits all to this right. It's going to be different for everyone.
And I think one of the thingsthat you have to think about when
you're determining this is what's a timehorizon for this money. You know,
if you are in your twenties orthirties and you're thinking about retirement and it's
decades out, gosh, yourrisktolerance canbe so much higher. But when you

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get closer and closer to retirement andyou're checking the amount and that accounts on
a monthly or weekly basis, becauseyou know in dollars and cents what that's
going to mean for your kind ofretirement and how long that money is going
to last, well, then itmaybe makes sense to get a little more
conservative. Now, the problem isyou get too conservative, and we know

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the people who are living longer andlonger, then your risk becomes outliving the
money that you've saved. So thisis something you really have to dig deeply
into when it comes to being asmart investor. There's also the behavioral finance
part of things. You know,just thinking about how you would behave in
hypothetical situations if the markets went downtwenty percent a given year and your investments

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dropped twenty percent as well, howwould you behave. Would you use that
as an opportunity to buy more shares, would you keep the money parked?
Would you sell everything and flee toproceed safety? You know, thinking about
timeframes obviously very important, but alsohow you would behave in certain situations as
well. We like to give historicalperspective a lot on the show. And

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you know, we know that theS and P five hundred on average is
up about ten percent of a year. That's great. That makes means investing
and long term investing is a reallysmart move. But there are also going
to be years when it's down tenpercent, There's gonna be years when it's
sound thirty percent. And if youcannot stomach those years, right, if
you cannot sleep at night, youhave to know. And that's why I

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think you know, some of thisis education so that you can truly understand
what the markets usually do and havethat historical perspective so that you've got kind
of a better, safer basis forhow you're making these decisions. Yeah,
and I've said this before. Whenit comes to really getting answers about the
level of risk that you need totake, that you can afford to take,

(09:09):
and that you're comfortable taking, sittingdown and talking to a fiduciary financial
planner is going to open your eyesbecause if you build out a financial plan
that balances the different financial goals thatyou have, such as saving for retirement,
paying down debt, I don't know, paying for a wedding for your
child, or college for your grandchildren. All these different goals come with different
time horizons, and different time horizonsgives us longer time horizons give us more

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of an opportunity to take risk.If you have something in a more near
term, then you're probably not goingto be taking a ton of risk with
those investments, but looking at sourcesof income and retirement, whether it's pensions,
social security, rental income, parttime work to understand how much risk
you can afford to take when youmap out your financial future. It can
be really eye opening because if atthe end of the day your plan works

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either way, it just leads toa situation where higher risk means you get
to spend more money, or retireearlier, or leave more money so you
loved ones when you're gone. Thanhaving that plan is really a It writes
a prescription for your money and howit should be invested. You mentioned behavioral
finance before. That's a huge partof this, something called loss aversion.

(10:16):
I've talked before about two thousand andeight. I remember being outside pushing my
daughter on the swing set and gettingthe four to one case statement in the
mail. I can tell you,Steve to this day, what the weather
was like, what I was wearing, what it smelled like. I mean,
I can just go back to thatmoment so easily because it is seared

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in my brain. Why because thepain of that loss when I opened up
that statement was palpable. I can'ttell you how many times I've checked my
four to one case statements since then, and they have been up. They
have been great. It was agood feeling. They're not seered in my
memory the way that loss was seared. We tend to remember losses far more

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easily, in a far more emotionalway than we do remember gains, and
I think you have to take thatinto consideration when you're figuring these things out.
Here's the all Worth advice. Knowingyour risk tolerance is going to help
you grow your money at the sametime, you're not necessarily losing sleep over
it coming up. Albert Einstein issaid to have called it the most powerful

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force in the universe. What itis and what it means to your money.
You're listening to Simply Money presented byall Worth Financial here in fifty five
KRC The Talk Station Ive KRC.All Worth Financial a registered investment advisory firm.
Any ideas presented during this program arenot intended to provide specific financial advice.
You should consult your own financial advisor, tax consultant, or a state

(11:50):
planning attorney to conduct your own duediligence. You're listening to Simply Money presented
by Financial I mean you Wagner alongwith Steve Ruby, if you can't listen
to Simply Money every night, We'vegot a daily podcast where you just search
simply Money on the iheartopp or whereveryou get your podcasts for one k's,

(12:11):
rmds IRA's We are going to askthe advisor about all of those straight ahead.
At six forty three, Albert Einsteincalled it the most powerful force in
the universe. What are we talkingabout the concept of compounding interest, which
is truly the real key to financialindependence and getting your money to grow.
It's your money makes money, andthe money your money makes makes more money.

(12:35):
Exact thing it exactly. We cameacross a guy that did some math,
and you found out that if youtook a penny and doubled it every
day for thirty days, you endup with about five and a half million
dollars one penny. It seem possible. It doesn't until you put it out
on a spreadsheet, which any Stout, chief investment officer of all Worth Financial,

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he did question. He put itout a spreadshet and it showed the
avalanche that happens. So it's interestingbecause on day seven you only have one
dollar and twenty seven cents. Youstarted with a penny day seven one dollar
and twenty seven cents by day fifteen, one hundred and sixty three dollars and

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eighty four cents day thirty five millionplus. So that that's the that's compounding
interest right there for you. Becauseit's like an avalanche or a snowball at
the top of a hill. Itstarts very tiny, but as it continues
to go down that hill, itwill grow to monumental sizes given enough time.
And for those who've been investing foryears, you start to get this

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right in your twenties and early thirties. You're putting money into that flooral one
k. You're checking the statement andyou're like, okay, well, I
mean there is some money in there. And then all of a sudden you
get to the point where you checkthat statement you think, wow, so
really starting to grow. And thenit just continues and continues to gain momentum.
And that's what we always say,and there's example after example of the

(14:00):
earlier you start, the better offyou are. The later you start,
the more you have to stock away, and you're probably still gonna end up
far behind where you would have ifyou would have started in near twenty So
I just love this example because Ithink it's eye opening. It's also a
very good argument as to why youwouldn't want to cash out an old small
four one K that might not looklike much today exactly, but that can

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turn into and it will turn intoso much more in the future if you
let it. For those of youwho love Costco, you love there are
dollar fifty hot dog and soft drinks, which my husband I don't have recently
discovered for the first time and he'sstill talking about it. So the hot
dogs, Yeah, he's like,how do I not know about this?
Yeo. I'm like, well,I don't know. You don't listen to
our show. We actually talk aboutthis quite often. And he's like,

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this is a really good hot dogand this is a really good bun.
I mean, he just is blownaway by it. So Costco does some
smart things, and sometimes they dosome things that we're going to tell you
about, but we don't necessarily thinkthey're smart investments. And one of those
is, well, they've gotten intome making money by selling gold bars at
Costco. Yeah. Wells Fargo didthe research and they pinned down the fact

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that Costco has made somewhere between onehundred and two hundred million dollars just selling
these gold bars. We started toa Costco not necessarily for the people who
are buying them exactly. Yeah,this actually started last year in October.
I believe that they were selling oneounce bars made of about twenty four carrot
gold priced at two thousand dollars perand they limited how much you could buy

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per household. And they are justthey're killing it. One hundred million dollars
just by selling this gold. Yeah. Well they're also selling other things.
Silver coins they've gotten into that marketin tubes of twenty five. They're non
refundable, so you get them home. You decided that was a bad investment
too late. One ounce Canada mapleleaf silver coins priced at about six eighty

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before selling out online earlier this month. You know, I don't know.
I do understand this concept of likegoing into Costco for toilet paper and coming
out one hundred and fifty dollars laterwith stuff you didn't necessarily need. But
I don't know if you just likewalk by this display and you're like,
yes, those silver maple leaf coinshave to be mine. This is a
great investment, but I guess itis, and you know it's funny.

(16:18):
I don't. I'm not a purchaserof precious metals. It's not part of
what I do or what I believein. But I was recently on the
website looking at gold because we've beentalking about gold a lot lately. It's
you know, historical highs, andI was like, gosh, there's all
these different coins and all these differentways that you can purchase these things.
Makes it feel kind of fun,you know, but not necessarily what we

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would say is your best investment.I mean gold, Gold actually comes with
a lot more volatility than I thinkpeople realize. Historically it serves as a
hedge against inflation. But the realitythe situation here is unless you have a
very diversified portfolio and use gold asplay money on the side, that you're
probably making a mistake. It's notgoing to keep up with inflation over the
long term like stock will. There'scharts and graphs that I show people that

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I work with that paint a pictureof that, and it can be very
eye opening because people will come intomy office and they'll have folders that look
like they cost one hundred and twentyfive dollars to make that came from some
marketing piece because a lot of thesecompanies that sell gold, they don't actually
own it. They just sell itand they make the commission off of it.
And that's that's what Costco's doing here. One hundred million dollars in commissions,
maybe up to two hundred million dollarsin commissions selling golds to its gold

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to its customers. That's a lotof money they're making. When we joke
all the time, wish we hada crystal ball, right, it would
tell us where the markets were goingto go. We don't need a crystal
ball to know that if there's anykind of volatility anywhere in the world,
you're going to start to see goldcommercials popping up everywhere, and that means
that people are going to start walkingthrough our door is asking about gold,

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and our take is always the same. Look at the historical graphs and you'll
see that the market outpaces gold everysingle day. Maybe not individual days,
but over the long term. Thereare two reasons why we would say these
are great reasons to buy gold.This is if you've messed up and you
need to say I'm sorry, oryou need to say I love you otherwise
doesn't belong in your portfolio. EverySunday, you're going to find our all

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Worth Advice in the Cincinnati Inquire,but we'd like to give you a preview
here on our show on Fridays.First question comes from Debbie and Carl and
Marymont. We're trying to figure outif we should retire at the same time
or if it makes more sense tospace out our retirements. Any thoughts either
way, And I wonder if theyspace them out, how they decide who
goes first. Yeah, I'm curiousto know Debbie and Carl's ages. You

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know, it's great that they havethe luxury being able to choose when they're
going to retire. Not everybody hasthat. But the reason why I ask
about ages is because healthcare is oneof the big choices here. Are Debbie
Carl are you over sixty five oryou under sixty five? Is there a
gap between your ages? Because ifone is eligible for Medicare and not the
other one, how are we goingto address the gap on insurance coverage?

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I think that's a big starter here. Also, outside of the money questions,
it's a matter of are you readyto spend all that time with each
other. This is a huge shift, right, Yeah, going from both
of you being in different sort ofworlds Monday through Friday nine to five to
both of you under the same roofmaybe looking at each other. So I

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would say, hey, maybe youknow, not just a financial aspect of
it, but maybe it makes moresense for one of you to go first,
one of you to adjust to retirement, and then let the other one
come into the picture later. AndI think this takes lots and lots of
conversations about how are we going tospend our time together and what are our
separate interests? Right? How arewe going to do things separately and spend
time with different friends and on differentinterests. So lots of conversations about this.

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So part of it, yes,is a financial issue. How do
you cover health insurance? How doyou cover those medical costs? And can
you check all the boxes of wehave enough money saved and we're very comfortable
with what we see for retirement.If you can check both of those boxes
and you're okay, then it becomeskind of an emotional decision about Okay,
do we both go with this sametime? Are we absolutely ready for this?

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But great question. Good luck figuringit out and let us know who
gets to go first if that's whatyou decide. Coming up next, we've
got a great lesson about how toovercome fomo, the fear of missing out.
You're listening to Simply Money presented byall Worth Financial here in fifty five
KRC, the talk station. Ifyou're gonna have to decide what are my
priorities? Is it? This isfifty five KARC an iHeartRadio station. You're

(20:30):
listening to simply Money presented a financialImani Wagner A long WHISTI Ruby. You
like to think it doesn't affect youfomo fear of missing out when it comes
to your money. But for anyonewho was on social media or pulled up
to one of their kids' soccer gamesand that other person had that brand new
car, how do they afford it? I think we are all impacted by

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that. Joining us tonight, ofcourse, is our good friend Al Riddick
with Game Time Budgeting. OW.I use you as an example all the
time of just the best way tolive, to assign jobs to every dollar
that comes into your household. Yougot to tell me that you have been
impacted by SOMA yes, I haveAmy, and you know I always have

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a story for you stor So.A couple of weeks ago, my wife
sent me an email and this emailcontained a coupon for by one get one
free at a restaurant that I frequentquite often. Now, the sad part
was she sent this email or likethe thirtieth of the month. However,

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the coupon expired in twenty four hours. So all of a sudden, Amy,
I started feeling a little bit ofanxiety or stress or pressure about the
urgency to use this coupon. Butthe funny part was I had just eaten
at this restaurant two days before,so luckily I took a split second just
to think about my situation. SoI posed two questions to myself. Do

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I really want I want this?At number two, do I really need
this? Because at the end ofthe day, that Bogo coupon is basically
fifty percent off of each dish.But I look at it this way,
I saved one hundred percent by notmaking the purchase. So at the end
of the day, Amy, Iturned fomo which is the fear of missing

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out, into jobo, which isthe joy of missing out. Oh I
love the phrase rephrasing it that wayand thinking about it that way. Several
years ago, when groupons were reallybig, I bought a couple of groupons
two favorite restaurants that we had,and then I would always realize, oh
my gosh, this is about toexpire, so you know, you pay

(22:41):
X amount of dollars for it,And so then we were trying to figure
out a way to juggle everyone's schedulesand get us into that restaurant, and
I realized, like, I'm notsaving any money on this that I think
there's a lot of kind of tipsand tricks and employees out there trying to
suck us in. That is sotrue, and they can form come in
the form of a number of differentways. Because when we think about social

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media, just as an example,since you alluded to that earlier, I
don't know about you, but sometimesi do scroll through one of these social
media apps and I'm always amazed atsome of the lives that people seem to
be living. I'm like, they'revacationing in these countries that you can hardly
pronounce, and then it looks likeeverybody just about it's taking a private jet

(23:26):
these days, and I'm like,I really don't think there's that many people
out here friends out I don't thinkof my friends taking private jets on social
media. But some of the thingsthat people do put on social media,
you almost just have to know thatall of this stuff cannot be real.
And unfortunately, when you routinely seethese types of images, I don't care

(23:51):
who you are, at some pointin your life, it's going to start
to impact the way that you mightthink about your life. And for some
people, you might begin to believethat your life is not as fulfilling as
some of the individuals that you're lookingat on social media. And I'm of
the opinion that what you're looking aton social medium, it's just video clips
of a person's life. However,you have not seen the movie, so

(24:15):
you have no idea of what theirlife is really like on a day to
day or week to week basis.Yeah, it's not a fair comparison if
you don't get to pull back thecurtain and see what's actually happening. Actually,
Steve Sprovac would share a funny storyabout this from time to time.
He said that growing up in hisneighborhood, there was a family whenever they
bought a new car, and youbetter believe they only bought new cars.
They would leave the sticker on itto show everyone in the neighborhood how much

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they paid for that vehicle. Evenbefore social media, that there was a
a form of fomo in a situationlike that. Absolutely, that is crazy.
But you know, when I heara story like that, my first
question is did you pay for itin cash or did you decide to make
payments? Because that's two different storiesthat you're trying to tell you. That

(25:00):
would have been a very funny questionfor him to ask them. Well,
I think you make a great pointhere, because we don't know the specifics
of how someone is affording something orif they can. I've joked for years
that with social media, if someone'sposting about a vacation or a new car
or whatever, the thing is thatthere should be some fine print there that

(25:21):
says here's my credit score and here'show much I paid for this, and
did I go into debt for it? Right? I think if you were
looking at someone social media and youwere like, oh, we've got a
six hundred credit score and they're goingtwenty thousand dollars worth of credit card debt
all of a sudden, that vacationdoesn't look so amazing. But we just
don't know those details about people.That is so true, and you just

(25:44):
reminded me of Selfit amy it Hopefullyit applies to the conversation that we're having.
I think it does well. Oneof the things that I used to
always say is daydreaming with money youdo have is better than living the dream
with money you don't. So alot of these individuals that might have the
low credit score, you can stillmake yourself appear as though you have money.

(26:07):
But the sad part is a lotof the people walking around that quote
unquote look rich, they're actually broke. And most of the people who I
have encountered in life that look brokeare actually people that are very, very
wealthy. So that's kind of alwaysintrigued into a guy like myself. Now
you have a success story about someonethat you have kind of been coaching,

(26:32):
and I think it speaks to thiswhole FOMO point, because if you are
gonna get serious about really getting yourfinancial house into order, in paying off
debt and just putting yourself in aplace where you can really be successful,
you absolutely have to tune out thingslike social media and the FOMO and other
people are doing this or going hereor buying this thing, so we need

(26:53):
to do that. Tell us aboutthis story. So there's a young lady
that hired me to be her financialfitness coach. So we connected about three
years ago, Amy, And atthe time, this young lady had about
sixty six thousand dollars in student loandebt. That's graduate school and undergrad right.
So, throughout a series of courseconversations and coaching sessions to give her

(27:19):
the right mindset, behaviors and systemswith her money, she just posted a
note on Facebook not too long agothat basically said she has now become debt
free. So she paid off sixtysix thousand dollars in thirty six months.
She's only thirty two years old bythe way, Amy, So when I

(27:41):
sit back and just think about therest of her life, I don't think
she can yet even begin to imaginethe impact that that one decision to be
intentionally focused with money for three years, how that's going to impact probably the
next fifty years of her Life's talkabout that she can now move, you

(28:03):
know, roll forward to other thingslike I don't know, maybe saving for
retirement. There's a little bit ofbias shining through there. Definitely. Yeah,
I think that's a great opportunity forher to step up to the plate
and maybe catch up or get ontrack. That's a great story. Oh,
definitely, this young lady. Luckily, not only was she being excuse
me able to pay down debt,she was also saving at the same time

(28:27):
for retirement because she does have avery nice corporate job, so she obviously
was taking advantage of all of thosebenefits. But I was just applauding the
fact that she was able to exertthat level of focused intensity at her age,
because I'm about to be fifty thisyear, and most of people her

(28:48):
age, you know, they're hangingout living what they called their best lives,
no matter what the cost. Butto be that young and that focused
on creating the financial future that shedesires, I just get excited every time
I think about it, because Ioften tell people Amy and Steve, I
don't know what it's like to behigh from a drug. Well, what

(29:11):
I can help a person achieve debtfreedom. That's like a natural high for
me. Well, and now thefact that she posted about it on social
media. There's the kind of abeautiful irony there. I mean, if
you're gonna get fomo, get fomoabout paying down your debt. So for
her to put that out there right, other people who are thirties should be
like, oh, okay, she'sa early thirty she's already paid off all

(29:33):
of her student loan dot sign meup for that? What did she do?
You know? I think sometimes wearen't real enough with social media when
it comes to money, and maybewe should be, and we'd all learned
something from that. So I'll thankyou for sharing that story. Great advice
about how to overcome fomo and ourlives. You're listening to Simply Money,
presented by all Worth Financial here onfifty five KRC. The talk station majority

(29:56):
rule only works if you're also consideringindividual rights, because you can't have five
wolves and one sheep voting on whatto have for supper. Talk about it
here fifty five KRC. The talkstation you're listening to simply my nay for
that I all Worth Financial, Imean you Wagner along with Steve Ruby straight

(30:17):
ahead, we've got the pros andcons of pet insurance. I got a
dog for the first time a fewyears ago. Eye opening. How expensive
they're so cute. It's so darnexpensive. Well, do you have a
financial question you want us to answer. There's a red button while you can.
You can click on while you're listeningto the show. It's right there
on the iHeart app. Record yourquestion. It's coming straight to us.

(30:38):
Our first question tonight from Kyle,who lives in Highlight Heights. Thanks for
taking my question. I'll turn fiftyfive next year and I might retire at
that point as well. I've heardI can take money out of my four
oh one K and not get penalized. Is this correct? Yeah, Kyle's
a good question, And what thatis is you're referring to the rule of
fifty five the year you separate fromyour employer. However that separation happened,

(31:00):
if you have a four to oneK workplace sponsored retirement plan, then you
are able to take distributions out ofthat four oh one K without having to
pay the typical ten percent early withdrawalpenalty set forth upon us by our friends
at the IRS. So keep inmind that there is a need to understand

(31:21):
the flexibility that may or made outexist in your four to one k.
Some four one ks can be alittle bit finicky, and they don't even
have partial distributions available. They mightonly have a lump sum available. In
a situation like that, we needto sit down and build out a plan
accordingly, because you may only getone distribution without a penalty if that four

(31:42):
to one K is particularly not flexible. So first right check with your HR
see if this is even an optionfor you. It's not an option in
every plan, in most plans itis. But a couple of other things.
I want to just make sure thatwe point out if you have previous
four to one K, please thisis not apply. It is only if
you separate from the place where youare currently working that particular for O one

(32:07):
K. Also, if you wereto leave that job when you were fifty
four and say well, I'm justgoing to wait until i'm fifty five,
Nope, doesn't count. You haveto leave that job when you're actually fifty
five years old the year you turnfifty five, so there is a little
bit of a loophole. You turnfifty five at the end of the year,
then that still counts. Next questioncomes from Frank in Burlington. Hello,

(32:30):
I'll be taking an RMD of aboutthirty thousand dollars this year. But
I won't need the money to liveon. I know I need to take
it. So what are my otheroptions? Yeah, a nice job,
Frank, that that's good. Goodto hear. You know, in that
situation, you certainly have some options. It really depends on your situation,
because if, for example, youare charitably inclined, then you could actually

(32:51):
do it's called a qualified charitable distributionand take money directly out of your retirement
account and ship it to that charity, in which case you do not have
to pay taxes on that distribution.It's a way to get around paying taxes.
Another one where if you want tokeep the money, you're still going
to pay taxes, but you canalways move that into a taxable brokerage account,

(33:14):
whether or not that's in your name, single or a joint with a
spouse or someone else, for example, if you don't need that money.
I do know a number of peoplewho say, listen, rather than waiting
until I'm no longer here and mychildren inherit the money, I'd love for
them to have the money now soI can see them enjoy it. So

(33:34):
you could gift this right to adultchildren, not tax consequences. What's the
amount that you can give per personsixteen seventeen thousand, seventeen thousand this year.
Yeah, yeah, I think it'sright around there. So yeah,
so you could give one to youknow, if they're married to each spouse
and maybe they go on a bigvacation, maybe they do something to the

(33:55):
house that they couldn't have done before, so you get to see them enjoy
it. I know lots of peopleis they have gotten into their seventies or
eighties, say yeah, I wantto be here and see my kids enjoy
this money. I don't want itto come after I'm gone. And that's
a great way to be able todo better. Better give it from a
warm heart than a cold hand.Very excellent, excellent point there. Next

(34:17):
question is from Judy in Corene Township. Hey, guys, longtime listener,
we have about one hundred thousand dollarsin an IRA. How do we know
if we should do a wroth conversionon any or all of that money?
You know, this depends on theother assets that you have right now,
because there are some major reasons rightnow to explore diving into a roth conversion.

(34:43):
Because in twenty twenty six, taxrates may go up, so looking
at the benefits of locking in thecurrent tax rate is something worth exploring.
But there's also things that we needto be careful with. Are you still
working, are you earning income?Are you going to be collecting Medicare soon?
There's a lot of questions that needto be answered because if we do

(35:04):
a conversion, we're kicking ourselves potentiallyinto a higher tax situation, and that
can affect Medicare premiums. It canhave a major effect if you don't do
it the right way. So theshort answer is sit down with a CFP,
a CPA or both to map outthe optimal strategy based on your situation.
And the word strategy is the importantthing here. I like having money

(35:28):
and wroth accounts or a bucket ofwroth money because I think it gives you
more flexibility and retirement. But yes, to your point, there's a number
of things that you have to thinkthrough. Obviously, you don't want it
to bump you up into a highertax bracket. Now you're paying more taxes
on that money. And another thingis you will have to of course,
it's a taxable event as you transitionthat money into a roth. You're going
to have to pay those taxes.If you're pulling money out of the actual

(35:51):
account that you are transferring or convertinginto a wrath, well then it doesn't
make as much sense. If you'vegot money on the sidelines that sitting there,
you can pay those taxes, Ithink then this can make a lot
more sign So just a number ofthings to think through there. Coming up
next is pet insurance a must.We'll tackle that question for you. You're
listening to Simply Money presented by allWorth Financial here in fifty five KRC,

(36:13):
the Talk station. As life changes, you're gonna have to decide what are
my priorities? So do financial priorities? Is it getting married or is it
being the life of the party andshowing up to every single thing whether we
like it or not? Enough timefor it. I'm exhausted, are sick
all those things? The Ramsey Show. You're gonna have to make that decision
if you learn that now before youget married. I'm telling you right now,

(36:36):
the rest of your life is canbe so much more peace week days,
but it is hard. There's notan easy way to do it.
On fifty five KRC, the talkstation men. This is Jeff for Try
State Men's Health. It's permanent asa temporary government program fifty five KR and
C where it's still okay to tellus what you think. This means you

(36:58):
simply money presented by All Financial andEmmie Wagner a love whisty ruby. For
years, for years I was antihaving a pet. I said, no
more living things than this house thatI have to take care of. Several
years, one of our kids talkedmy husband into getting a Kavapoo, super
cute dog, super expensive dog.And it was eye opening. Right first

(37:22):
of all, I totally fell inlove with him, and I can't imagine
not having him here. But it'skind of like getting a baby, right,
like the first time. You justneed all this stuff, and getting
this stuff to take care of adog isn't cheap. That's that's what my
wife and I did. We gota dog as a test run before we
had a baby. It's smart andthank you, thank you. We planned
accordingly and it worked and now wehave a kid. And you know what

(37:45):
you need to prepare for is ifyou don't know this, a dog costs
more than two thousand dollars annually.You know, that's vet care, that's
food, grooming, toys, boarding, pet insurance. Potentially, cats are
a little less expensive. If youhave cats, they just do their own
thing. They almost never need daycareanything like that. If you have a

(38:06):
dog and you rely on daycare,then that's an added about three thousand dollars
per year in expenses. Yikes.I mean that's a that's a pretty penny
on that. And listen, ifyou have an unexpected that bill. My
dog used to chew up socks.Luckily he didn't swallow socks, but I've
heard horror stories about dogs swallowing thingslike that. Unexpected you have to have

(38:29):
a surgery for something like that.It can be thousands of dollars four and
ten pad owners day. They can'tcover a surprise that bill of a thousand
dollars or less. So I thinkthe key here is to think what are
these costs? How can we affordthem? We talk about having an emergency
fund. Maybe you have a separatelittle pet emergency emergency fund. Yeah,

(38:50):
yeah, I don't know. I'venever purchased pet insurance, have you?
You know I have not. Itwas given to us though the we we
adopted a cat once upon a timefrom a small shelter. It was an
no kill shelter and it came withpet insurance for six months or something like
that. In this this pet,as soon as we got it, it

(39:12):
had a terrible infection and had togo back for a while and it was
under vet care and then it andthen it had a disease that unfortunately cats
don't typically live through. And inthis then and he didn't you know,
we lost him when he was asix month old kitten, great cat,
great kitten that is. And andthe expenses were through the roof. So
if you're adopting a cat from somewhere, it might be worth exploring a place

(39:36):
that offers some kind of insurance throughthat adoption agency, because that saved us
a lot of money. Well,and I think if you ask yourself,
okay, is it worth it?It might be the average cost for dogs
forty four dollars a month, catthirty dollars a month. Apparently Forbes rankedon
study is the fifth best city forpet owners. But I think if you
are looking to save on in thosepremiums and accidentally plan with a higher deductible

(40:00):
and listen, start when they're younger, you you know shop around look for
discounts. Could make sense. Here'sthe all Worth advice. There's nothing like
a pet's unconditional love. Just knowthere may be a price to pay for
it. Thanks for listening tonight.You've been listening to Simply Money and presented
by all Worth Financial. Here infifty five KRC, the talk station,
Let's take the illegal guns off thestreet.