Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:09):
You're listening to simply money presented byall words Creamy Wagner along with Steve Ruby.
If you could just put together afinancial plan, figure out what's best
for you long term, and staythe course, you'd be so far ahead.
So what gets in the way Youremotions time and time again, and
often those emotions are fear and greed. Joining us tonight with some incredible perspective
(00:33):
on how fear and greed can reallymess up anything when it comes to money
is our good friend of Paula Lepusco. He's actually a vice president a Dimensional
Fund Advisors, but more importantly,maybe for our purposes, he is known
as the Secretary of Explaining Staff Apollo. I love how you make things so
understandable. I listened to you talkand I'm like, well, duh,
(00:54):
But I think we have to goto fear and greed here because so many
times when someone walks into our officeand they've made a decision about their money
that wasn't to their benefit, itwas driven by one of these emotions.
Well, absolutely, And I thinkwe talked on on the previous segment that
that these emotions are what makes ushuman. And I don't think we should
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be ashamed of them. I thinkwe should embrace them and acknowledge them,
because again, this is a partof our human nature. I think the
question here is when it comes toinvesting, are these emotions good or bad
for your money? Uh? AndOver and over, what we've seen is
that that that both of these emotionsare not necessarily serving your best interest.
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And and I'm going to talk aboutmaybe how to kind of deal with them
and how to make the best outcomepossible for you as an investor. But
let me start with just a littlebit of of why these emotions are so
powerful. Uh. And I'll startwith fear because that is a primary uh
emotion that has helped us as aspecies survive. When you get chased by
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an animal and you're afraid we are, you gonna run quickly, and that's
going to save your life. SoI think fear is part of our natural
condition and it helped us along theway to get through where we are.
So I don't think that we shouldsay all these are bad. No,
no, no, They're absolutely realand they're fine to have. I wouldn't
be ashamed. I mean, I'msometimes afraid of things and I should be.
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And greed perhaps is also something thathelped us survive, because the people
who can actually gather more resources werethe ones to survive much more so than
the ones who didn't. Now,in the modern society, the way that
we work today, one of theproblems that I see is that the media,
and particularly this twenty four hour cyclethat we're in, whether it's social
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media or real media, whatever itis, it is feeding us just fuel
for these emotions and they become muchstronger than, in my opinion, ought
to be as an investor, Andif you think of the programs over the
past couple of decades, they havebeen getting much better at tapping those emotions
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because that what draws eyeballs and thatis what sells advertisements for companies. And
again I'm not here to demonize themedia, because everybody's on top of them.
I just I have to say,folks, when you're watching shows on
different investment programs, I think youhave to acknowledge that those are not investment
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advice. But they're trying to beentertainment, that's what they call it,
but it's not investment advice, andthe way they make money is by tapping
into these fundamental emotions. The fearand greed, and that's how they sell
advertising, because once you're hooked onfear or greed, you're much more likely
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to return to that show. Weseen this over and over and over again.
In fact, one of the morepopular show, Matt Money. Uh,
the executive producer was the same personwho did Jerry Springer. It's got
the same idea, now, yeah, yeah, it's got the same idea
that you're tapping different emotions. Uh. And and and why is it that
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those emotions are so bad for youas an investor? Well, think about
Lit's justly fear first, Uh,that that you're watching something and you're afraid.
And at that point, let's saythe market tanks and you're really afraid
that, oh, what's going tohappen to my money? I don't lose
anmal as everything in the market.Uh. And particularly when the market drops,
that's when we see a lot ofpeople are acting on that fear and
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selling. Most of the selling thatwe see investors do on their own without
an advisor is when the market's droppedat a low point. Uh. And
then once the market rebounds and thingslook good, when the markets are on
the way up, that's when peoplefeel comfortable buying. So think about this,
Amy and Steve. The fundamental premiseof investing is buy low, sell
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high. That's how you make moneyinvesting. What do emotions make us do?
What we sell at a low pointand then we buy high, which
is exactly the opposite of what weought to do. And this is coming.
I'm going to come back this.There's nothing wrong with having these emotions.
And the only way that I foundthat you can put a backstop to
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these is to have a financial advisor. To have a competent financial advisors like
Allworth who can actually coach you throughthose times and make sure that you don't
make those decisions that are ultimately goingto be detrimental with your money, because
those decisions are made typically by investorson emotions rather than data and evidence.
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And what I know that that youdo, because I've known you for for
a while, is the exactly theopposite. When the market drops, rather
than selling in panic at which whatemotions would want to do, you keep
your your your your level head,and that might be the time to buy
buy low. That's what you do. Uh, And then when things go
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up, you might want to trimthose gains and take chips off the table.
Uh. But do it through asystematic process. That's what advisors have.
They have a process that it's establishedahead of time where they remove the
emotions and uh and and they makesure they have the systematic program to buy
low and sell high uh and thatis called rebalancing. And rebalancing has a
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dual purpose of one, making surethat your portfolio doesn't get too risky.
On the other hand, he hasthe purpose of helping your portfolio recover after
a loss because once you buy high, once you buy low, that's gonna
you're not going to be too lighton on the asset class that that might
go up next. It's fascinating tome because when when investors get spooked by
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by by stock prices going down,and if you look at it as something
like a big sale, a MemorialDay sale, for example, when everything's
at a discount. That's when yougo into the store and you buy the
thing that you've been waiting to buy. It's the exact opposite that that fear
has on us when it comes toinvesting. We say, all right,
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well everything's on sale now, I'mgoing to sell and sit on the sidelines
instead of buying more. It's exactlyright, why would you want to go
at the great point? See whywould you want to go buy at full
price when there's a sale and youcan buy at a discount. But again,
it's the emotions, and I thinkthey're real, and without an advisor,
it's incredibly hard to navigate these emotionalwaters. And I know you've seen
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this over and over and over again. There are so many studies that have
confirmed and looked at the outcomes forinvestors when they let these emotions drive me
investment decisions. And it's one moreargument for having a really good financial advisor
who has, you know, aprogramming place to try to not only coach
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climb to these times, but tosome degree tyler, take advantage of these
times. What's your take on theother side of the coin? And instead
of fear, what about greed?Because right now we're reading noisy headlines.
You talk about media. If itbleeds it reads, people are going to
click, advertisers are going to makemore money. But at the same time,
media has no fiduciary standard to makesure that you're making good decisions with
your money. So we see stuffall the time about the magnificent seven AI
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crypto people think there are easy waysto get rich quick. What's your take
on greed? Oh? Absolutely,And I think there are a variety of
perspectives on greed. I mean,I think one of the simplest one is
that that people want to make surethat they keep up with their neighbors.
I mean, I think that thatthere's an element there that if my neighbor's
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making a lot of money, wellI better make a lot of money.
I don't want to miss out onthat. So there's that fear of missing
out, and I think the mediais tapping into that as well. And
you always hear about people make somuch money and look at the car that
I drive, and look at all, you know, my nice shoes,
whatever I have, And the realityis that that you want to know,
hey, am I missing out onthis? And that fear of missing out
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is real, and they could befed not by my only by the media,
but also by friends and family.I mean I know that years ago
when when I had a friend ofmine, we went for a hike and
he was telling me about all themoney that he made in a particular investment.
Like, in my mind, wow, that sounds really good. I
mean, if I didn't know anybetter, I'd be like, I want
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to jump upon that because I don'twant to miss out on this great opportunity.
So there is an element of thefear of missing out. And my
mind, I always think that thatwhen you have these phenomenal investments that you're
afraid of missing out the fomo isnormally is called. You also have to
look at the other side as well. These investments where you really make a
lot of money, they tend tobe pretty concentrated, whether it's one investment
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or something like a bitcoin that everybodytalks about, like, hey, this
isn't the way of the future.He makes so much money in that,
and you want to make sure you'renot missing out. On the other hand,
the fear of missing out should alsobe considered in the context of fear
of losing your shirt because make alot of money or lose a lot of
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money. And I think that thattoo many people are looking at the upside
potential without taking a step back andsaying, well, what if things don't
go according to plan? And andone of my my friends actually had another
friend had had the situation happen wherehe basically said, I'm gonna put some
numbers there, like the five millionbucks. I had made a lot of
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money into this, you know crypto, and I'm going to wait to get
to eight million, and when Iget to eight million, I'm going to
cash out and live happily ever after. And that was kind of the idea,
let's just wait for that magic number. And in my mind, you
know, what I wanted to askhim is, hey, how will your
life be different if you have eightmillion versus five million? Are you really
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going to spend on vastly different things? Are you are you going to consume
like something that you can't really doright now? Is your life going to
be significantly better if you add thethree million? And now, on the
other hand, what do you haveto also consider? What if instead of
adding the three million, I subtractwhat if I go from five to two?
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Will my life be different at thatpoint? And to me, doubt,
without a doubt, your life willbe very different. So whenever you're
afraid of missing out, also considerbeing afraid of losing your shirt and changing
your lifestyle. So so you're right, there is that that there. The
greed is also a powerful emotion,and it can come from the media because
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again, the media wants to todo it. And not only that they
want to sell you advertisement, butthere is an armada of marketers trying to
sell you the hot product of theday, and there's always something hot,
and these people put a lot ofmoney into marketing and selling you something because
typically on these hot products, thefees tend to be pretty high for them,
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and it absolutely makes sense to spendthe money in marketing. So again
it's it's it's absolutely human to havethese emotions. Nothing wrong. But my
suggestion is have an advisor who iscompetent, who is level headed and can
coach you through different times and evaluate. I mean, if you if you
have a great idea and you goto alt Worth and say, well what
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do you think about this? Youknow, I'm sure to look at it
and say, well, is thishow is this helping you achieve your goals?
How is this fitting into your financialplan? And if it does,
perhaps that's something that they'll say,yeah, maybe that's worth kind of looking
at and and maybe deciding how itfits in the big picture. But I
do think that you need an advisor. Absolutely, you need an advisor.
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We always say as advisors are numberone responsibility is to make sure that the
clients that we're working with, theinvestors that we're working with are not making
fightingial decisions that they cannot recover fromgreat perspective from Apollo Lapasco, our friend
of Dimensional Fund Advisors. You're listeningto Simply Money presented by all Worth Financial
here on fifty five KRC, thetalk station We Money presented by all Worth
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Financial. I anyway, and you'realong with Steve Ruby. If you were
listening at the start of the show, you heard really some game changing perspective
on fear and greed and how thatcan impact your money from our good friend
a Paulo Lapusca, who is justbrilliant. So if you were listening and
you were thinking someone I know couldreally benefit from what we talked about.
From what you're listening to, justthere's a daily podcast for you. Search
(13:41):
Simply Money on the iHeart app orwherever you get your podcasts. Share that
show. I think there's a lotof really great information there. When we
talk about financial plans, Steve,we talk about it sort of being a
roadmap, right. It's a placethat you're trying to get to. You
and if you were going to lookat the vehicle that gets most of us
there. I think we would sayit's the four to one K. It's
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like a Subaru, right, youcan count on it. It's reliable,
it's going to get you from oneplace to the other. Yeah, I
mean four to one K is they'vethey've taken over as the main vehicle for
savings because it used to fall inthe employer when there was the day of
the pension. Most of us getpensions anymore. It used to be the
three legged stool of pensions, socialSecurity and four to one K. But
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businesses remove that risk from themselves aspeople started living longer, and they pivoted
to us as the individual to makesure that we're making the best decisions that
we possibly can with our four toone K. Now, there's a recent
article that came out from MarketWatch thatdetailed five changes to a four to one
K that would make a big differencefor the better. So that this isn't
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anything to be nervous about. Butsome of these are some pretty interesting ideas.
For example, one is giving creditsfor long term care family caregivers.
That is, so if you're anindividual that needs to stop working to take
of an aging family member, forexample. Then you know somebody that falls
ill or is just getting older,and you are that caregiver working fewer hours.
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The idea here is that you're alsoable to earn credits towards Social Security
when you would normally stop earning thosecredits if you're not earning income. Yeah,
a lot of these suggestions I thinkmake a lot of sense. Some
of them I'm a little bit onthe fence about, and we can get
to that. Yeah, Yeah,I agree. This point about caregivers,
though, is a really fantastic onebecause this is a gut wrenching situation and
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decision for a lot of people.You just don't have a choice, right
Someone you love needs your help,and that either means that you have to
cut back on the hours that you'reworking or quit working entirely in order to
care for them. And then you'rebeing penalized financially on so many levels.
You're not earning credits towards Social Security, right. Obviously money is not going
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into the floor one k. There'sno company match. Another thing, another
possible situation that could be helpful here. There's a US representative, Chris Pappis,
New Hampshire Democrat and he actually hasa proposal that would allow you to
make up ketchup contribution. So wetalk about this, like, if you're
fifty or older, you can putadditional money into a four to one K.
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Well, what if you're a fortyfive but at the age of thirty
five you were forced to leave theworkforce to take care of someone. Now
you're getting back into the workforce andyou're way behind on that four oh one
K. I really actually like thisidea. I think if you can,
I'm sure there's some sort of paperworkthat would be involved in proving that that's
what you've been doing. But oncethat proof is there, I think allowing
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these people to make catchup contributions regardlessof age is it makes a lot of
sense. Yeah, and this isco sponsored. This bill that you're talking
about is co sponsored by Republicans.Yes, a bipartisan Yeah, New York
and Arizona, so bipartisan. That'snot something we see too often in this
same age. But we can allmake sense. Yeah, we can all
agree that if life threw you anunfair curve and you had to make the
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tough decision between taking care of afamily member and letting them be on their
own. Most of us are goingto step up to the plate and take
care of that family member if we'reable. So instead of penalizing, opening
the door to being able to savemore is a great opportunity that this would
would open up for people. Now. The second thing and we've we've we
had a segment about this not toolong ago, and it was the idea
of automating annuities within target date retirementfunds. It's a really interesting idea posited
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by black Rock. Where these targetdate retirement funds. Remember it's a date
like twenty fifty to twenty sixty five. It's more aggressive the younger you are,
the more it's more conservative the olderyou get. But there's a component
to these that they would then createannuity income, so cash flow. It's
essentially creating that that third leg thatwe're missing by filling in the blank for
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the pension. It's an interesting idea. I'm not sure how it would work
until we saw it in practice.I like options, right, I like
more option. I think the problemand what makes me nervous, I will
say about annuities in four One caseis that so many people gravitate towards that
guaranteed income component of these, notunderstanding that. While that's a great thing,
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and what's not clear is and Ithink these would be sort of lower
commission products, not typical annuities thatyou would buy from someone. So I
guess there could be an advantage tothese, but often there's a trade off
to that guaranteed income in the factthat if that money had been invested,
you likely would have made a lotmore off of that money. And so
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this is still an incredibly new productand incredibly new option. I'm never against
looking at more options in four onecase, as long as it first of
all, doesn't confuse the investor,and second of all, isn't a terrible
idea. And my understanding of thisis it's just a portion of what would
be in sort of this version oftarget date funds would get a little bit
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larger the closer you get to retirement, and then you would have the option
to exor size whether or not youactually rolled this money into an annuity.
And it seems like it's capped atthirty thirty percent of the amount that's actually
held in that particular target date retirementfund. So you're right, it is
an option, but you know,to expand on it. There's also the
idea of expanding guaranteed income options withinfour one K plans, which wouldn't just
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be the target date retirement fund whereyou could transition thirty percent of it to
an annuity. It's offering more annuitysolutions within the four one Okay, now,
again we're not totally against annuities.They do have a place, but
a situation where it's under the umbrellaof a workplace retirement plan is going to
create lower fees for everybody that hasaccess to them, which expands the possibility
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of creating that fixed income stream withouthaving to give up a significant portion of
your balance in a commission to asales rep. So it is a neat
solution that lowers the fees for everybodythat do want some fixed income in retirement,
something I think is a fantastic idea, and maybe a lot of people
would disagree with me on this.Not allowing pre retirement withdrawals, Essentially that
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money is locked up like a pension. You can't get to it, you
can't touch it. So many peopleare just so tempted by this money when
it's there. If it wasn't anoption, you would find a different way
to pay for the things that you'retrying to pull this money out of this
account for. So I think thatone is a great one. Here's the
all Worth advice these changes to fourone k is. I think many of
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them would be welcomed. In themeantime, though, do everything you can
to protect this big investment in vehicle. For most of us, it's an
incredibly important one. Next, whatto do when the inevitable happens? If
something that is so hard to thinkabout, but something you have to be
aware of. We'll get into thatnext. You're listening to Simply Money,
presented by all Worth Financial. Hereon fifty five KRC the talk station.
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You're listening to Simply Money persented byall Worth Financial. I Meani Wagner along
with Steve Ruby. If you everread any of Mitch Albums books Tuesdays with
Morey, no, Oh my gosh, so good, so good. Such
a great writer. He's a sportswriter, but he's written all these incredibly
thoughtful novels. In one of hisquotes is death ends of life, but
not a relationship. And I thinkfor many people who have lost someone that
(21:11):
you're close to, you feel verymuch that way. Right, that relationship
goes on, but as the resultof that death, unfortunately, there are
still some very real logistical things thathave to be dealt with. So for
anyone who has lost a partner orsomeone who's incredibly close to you, we
just kind of want to talk throughsome of the sort of maybe feels more
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tedious, but things that need tobe to be cared for. Yeah,
this is good information to have inyour back pocket because you never know what's
going to happen, when it's goingto happen, but it is inevitable.
So you know, as as somethinghappens, the world doesn't stand still around
you. Everything keeps moving forwards andit's this jarring moment, Like what am
I supposed to do now? Well, for first things first is contact your
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financial and legal professionals. If you'reat a point in your life where you
know you've you've saved and you're retiredand you're living off of retirement assets for
example, then you should have ateam that has, you know, on
your bench, an attorney, aCPA, a CFP, fiduciary financial planner,
and these individuals are going to beable to help you create a plan
of attack for the exact next stepsthat you need to take at this point.
(22:18):
I had a meeting this week withsomeone, a guy who had been
very much at the helm of allof the money decisions, all of the
saving and investing in the family,and I was making the point that I
would really like for his wife tocome in the next time. Right.
Several times throughout the conversation she comesup, as you know, when my
wife loves this, and she lovesthat, and she feels very strongly about
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this, So I'd like for herto be a part of the conversations.
Well, she really doesn't have anyinterest in this. She's never been a
part of it. She's not interestedin it. I said, I understand
that. And you're in excellent shapeand there's no reason to think something is
going to happen to you, butsomething always could. Yeah, and if
it does, how overwhelming for herto have to be leaning on a professional
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who knows the intimate workings of themoney in your family. But she doesn't
know me, right, And soI said, it's a gift to her
really to have her be part ofthis conversation now, so that when she's
reeling from this very emotional loss,at least she trusts the person that she's
picking up the phone and calling andsaying, Okay, help me figure out
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what's next. What do we needto do here, rather than picking up
the phone and calling a stranger Duringthat time, explaining that folks usually resonates
to the point where they end upbringing their spouse into the next meeting because
hope, So you are right,especially considering the fact that that women tend
to live longer than that. Yeah, statistically speaking, that's the case.
So let's say you're a man andyou've been the one that's been doing the
financial planning and your household. Forwhatever reason, you haven't folded your spouse
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into that conversation. It is somethingthat you need to do, especially if
they're younger than you, because chancesare they're going to last longer than you
do. And in that situation,like you just explain that it's uncomfortable.
You don't know the person that's beenrunning your financial your finances for potentially decades.
So you know, let's say thatyou've contacted your your financial advisor at
(24:07):
this point, your attorney, youryour your team, your CPA, yeah,
your team. You're going to needto procure the will and death certificates.
Now that there's there's certain people outthere that say you need two dozen
death certificates, maybe maybe ten orfifteen somewhere in the middle, because you're
going to need a lot of thesethings for every single financial institution that you
(24:29):
deal with, that that holds anyliabilities, that holds accounts, that holds
old pensions. You're going to haveto present these these copies to these places
in order to prove that something haschanged to the point where where now next
steps need to happen. You're listeningto simply money presented by all Worth Financial,
I mean me Wagner along with SteveRuby, as we tackle one of
the topics that no one likes tothink about, but it's inevidently going to
(24:52):
happen, and that is losing someonewho you care about it maybe specifically a
spouse, and what are those nextsteps we're big advocates for if you look
at your accounts right, your investmentaccounts, and there's a list a mile
long right that can feel really good, like, gosh, I've got you
know, several old four to onek's and semi rays that can be really
hard to keep up with. Right, and we say, hey, consolidate.
(25:15):
That makes life so much easier.So one of the things that you
have to think about if you've lostyour partner is reaching out to if they're
not retired yet, any current butalso past employers and the past employer's part
of this is really critical because ifthere's old four to one k's that haven't
been rolled over, that are sittingin old plans, you've got to keep
track of those. And we seeso many orphan four one k's out there
(25:38):
that no one ever claims because peoplelose track of them. Yeah, these
organizations aren't going to reach out toyou. They don't know that something changed
and that something happens, So it'sup to you to take charge with that.
That It is an argument as towhy when we're working with folks and
building financial plans and froduciary advisors acrossthe nation are that they're working with them
to consolidate accounts that they have spreadout all over the place rollover IRA one
(26:00):
roth IRA, maybe a joint brokerageaccount. You don't need to have stuff
spread out for diversification between firms becauseit makes it that much more difficult when
the inevitable happens. So that isa good point you bring up in life
where we can make things a littlebit easier in death. But you're going
to be reaching out to all thesecurrent and former employers to provide them with
whatever they need to open accounts nowin your name or make sure that that
(26:25):
pension cash flow now goes towards youwith this change. Another thing is,
you know, updating the ownership ofall assets. You're going to need that
death certificate again for that. Hopefullyyou are already the beneficiary, but often
you can't legally transfer those assets entirelyto your name without that, so it's
just kind of another step. Hopefully. Also, I would say, hopefully
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you were part of conversations with thisteam of people that you're working with now,
and hopefully you knew them already.But also one of the conversations that
is incredibly helpful if it's had before, is where all of the important documents
are. Account passwords. Great,but make sure that everyone in the family
knows where these things are hopefully storedtogether in a safe, secure place.
(27:08):
Yeah, and remember that the CPA, whoever or whoever's helping you with filing
your taxes, there's likely to beconversations around maybe maybe this is the last
time that you can file jointly atthis point. So realizing income in certain
situations, depending on the types ofassets that you're inheriting, could be a
benefit as opposed to a couple ofyears down the line when you're filing single
(27:30):
Really grim subjects but super important.You're going to have to update beneficiaries in
the accounts for the most part.Make sure that all of all of that
is in order as well. Here'sa big one. Do not make any
major financial decisions right now. I'veshared this story several times on the show,
but it's still hurt to my heartthat someone I care very deeply about
(27:52):
after losing a loved one was soldan annuity in years later realized after the
fact how much they pay and commissionhow much that money would have become had
it been invested in. Really sortof felt taken advantage of not at the
time, but as years passed inyou know, it's not just buying life
insurance products that you don't necessarily need. It's making major changes like huge moves
(28:18):
or big purchases, all of thosethings. Just give yourself several months to
let the dust settle. If there'ssomething that you're thinking about doing. Maybe
write it down, maybe think aboutit, but don't make any major decisions
that you're pulling the trigger on untilyou're absolutely sure that makes the best,
the most sense moving forward. Iactually felt a little burst of anger when
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you said that. My blood pressurerose. Yeah, so you took advantage
of an individual that was right therereeling from a terribly emotional situation and sold
them a commission product that they didn'tneed. Yeah, be careful, don't
don't make those big emotional decisions whenwhen emotions are high. Here's the all
Worth advice. Please give yourself somegrace after you lose your spouse or your
(28:59):
partner, someone close to you.Make sure you've got a team of individuals,
helpers, professionals who will help youthrough this time, and hopefully you
already have personal relationships with each ofthem. Coming up next, we're testing
your knowledge with a little retirement factor fiction. We want to make sure
you know the facts when it comesto your money. You're listening to Simply
Money presented by all Worth Financial herein fifty five KRC the talk station.
(29:26):
You're listening to Simply Money presented byall Worth Financial. I mean you Wagner
along with Steve Ruby. Do youhave a financial question you need a little
help with. There's a red buttonyou can click on while you're listening to
the show. It's right there onthe iHeart app. Record your question.
It's coming straight to us and straightahead. How to keep from making a
major purchase that you might regret makinglater If you're thinking about buying one of
(29:48):
these, Now we've got a littlewarning for you. We'll tell you what
that is coming up in just afew minutes. Time to play retirement fact
or fiction, because when it comesto your money, we want to make
sure you know only the facts.First one, Steve Ruby fact or fiction.
Social Security should make up about sixtypercent of your income in retirement fiction.
No, thank you. Even inthe first place, social Security was
designed to replace about forty percent ofyour income. So if you're in a
(30:11):
situation where social Security is making upsixty percent of your income, then you
probably don't have a ton of cashflow. You're probably not living or maintaining
this type of lifestyle that you generatedbased on your income pre retirement. Yeah.
Now, I have plenty of folksI work with that that do have
you know, significant portions of theirincome made up by socialcurity. It doesn't
(30:33):
mean it's impossible to retire in thatsituation, but you have to be living
oftentimes below your means. I thinkfor most people, when you think about
retirement, you want to continue withthe lifestyle that you're living in exactly.
And if retirement for you means allof a sudden, social Security is your
main source of income and you can'tafford it out once or twice a week
(30:55):
like you are now. You can'tafford any vacations to the beach or to
visit your grand kids. Okay,well then that's not the goal here.
So I think you have to figureout, Okay, what are some ways
that I can build up my savingsand my investments and order that social Security
is truly only making up forty percentof my income as it was intended to
do. This is an easy onefact or fiction for you. Your portfolio
(31:17):
allocation can change multiple times over yourlifetime. This is a fact, and
I would say, not only canit change, but it probably should change
for most of us. The youngeryou are, right when you're in your
twenties and you first start working,you first start putting money into that four
one K. I would say it'snot out of the realm of normalcy to
have one hundred percent of what you'reputting in there in stocks right in the
(31:38):
stock market, because you have along time horizon, you know, decades
to continue working. Think about howmany recessions you'll go through, how many
bear markets during that time, andif you've got the stomach for it,
I think that makes a lot ofsense. Now, as you get closer
to retirement and that money is realmoney and you need it, then you
start dialing back that stock expre posureand you start buying more bonds, and
(32:01):
so I think there's almost like asliding path that can happen during that time.
But I would expect that that assetallocation changes several times over the course
of your life as an investor.It should change several times over the course
of your life as an investor.Yeah, factor fiction investing in real estate
is a good hedgiginst inflation. Ohsure, I guess fact it can be.
(32:24):
I'm a little skeptical, you know, there are obviously challenges with liquidity
when it comes to real estate.There's a lot of people out there that
just think that real estate is away to get the job done. But
when you don't have a portfolio ofinvestment assets that you can pull from to
generate a diversified income stream and retirement, it can create its own challenges.
Yes, the value of property insome areas is going to continue to increase
(32:45):
almost no matter what's happening in themarkets. But again there's that lack of
liquidity, and if you are alandlord, there's always challenges with making sure
that there's somebody to fill in andactually pay the rent. There are lots
people out there that are going totell you that there's a number of different
investments that you can make that area great hedge against inflation. I mean,
(33:07):
look no further than gold, commercials, Right, there's lots of things
out there. People like the thoughtof real estate because you can touch it,
you can feel it, right,you know the use for it.
I hate this as anything but asmart part of your financial plan if that's
decided that it is a good fitfor you. I think back to two
thousand and seven, two thousand andeight, right, it was not a
(33:29):
hedge against inflation. At that time. You were losing value on that property
if you needed to liquidate it forsome reason at that time, which is
not an easy thing. It wasgoing to sit there, first of all,
for months, and you were losingvalue on it. There's no prediction
of what's going to happen in thefuture. Yes, you know, real
estate's a good investment right now.Who knows what it could be in the
future. I don't like it asa hedge against inflation or really any part
(33:52):
of a long term financial retirement plan. Yeah, this is a tough one
because if you have a diversified portfolioand you want to add in some additional
level of diversification. Sure, butthat's also why my answer is a little
bit more wishy washy than normal.Yeah, so I kind of hedge your
answer. I did hedge my answer. Thank you. I appreciate that I've
got one for you. Okay,after fiction, Steve Ruby has never made
(34:15):
a financial mistake. I want youto answer this one. Okay, this
comes up because this is an easyone. Say it, Amy, I
don't believe it. I'm almost goingto sit here in silence until you think
of something because there's no well,I can't sit here in silence because I
can't be silent for more than threeseconds. But I refuse to believe that
(34:36):
you have never made a mistake whenit comes to money in your life.
What I do believe is that yousaw mistakes made when you were growing up,
and you are more intentional than theaverage person about what you do with
your money. And I actually verymuch admire that. Oh thank you.
I don't want to get it turnedinto a really nice answer. I appreciate
it. Yeah, let's keep let'skeep talking about this for a while.
(34:58):
I really want you to say,though, to be something that you made
that you look back on and you'relike, Okay, that wasn't the base
on what you just said. We'reboth in agreement. Here fast no mistakes
ever, Nope, I learned fromthose before me, and here I am
today. Never made a financial mistake. We'll find when I admitted one,
like a year ago once. Whatwas it? If you forget it doesn't
matter. Fact. I'm throwing thefiction flag on this one, and it
(35:20):
is my it is my goal tounearth one over the course of time.
Nobody makes it through life without makingmoney mistakes. It would never show if
that was a thing coming up next, when money will not buy you happiness
but regret instead. Obviously, SteveRuby has never done any of these things,
but we'll talk about them next.You're listening to Simply Money presented my
(35:40):
all worth Financial here on fifty fiveKRC, the talk station. You're listening
to Simply Money present of my ownworth Financial. I mean you Wagner along
with Steve Ruby, they've bought somethingreally expensive, only to regret it later.
We're talking big purchases here, aboat, some land. At the
(36:01):
time, it made all the sensein the world, and then reality sets
in. Steve Ruby has already justset us up for the fact that he's
never made any bad financial decisions,but many of us have. And one
of the major forms this can takeis buying a book. I can't wait
to make this mistake you want tomake? This mistake is a mistake.
(36:22):
If I know what I'm getting into, that's the question that's philosophical. At
that point, I think, oh, yeah, I'm not answering because a
lot of people. Know a lotof people have the dream of purchasing a
boat when they transition into retirement andyou sailing off into the sunset. But
there's more to owning a boat thanjust purchasing it. There's costs that add
up very very quickly. It's supposedto give you joy and freedom, but
(36:44):
then you're almost obligated to use itall the time so you can get your
money's worth, and they lose valuevery very quickly. So is it a
mistake if I know, is ita mistake to buy a boat? If
I know what the challenges are?I guess if you go into this fully
eyes open. My husband owned aboo before we got married, and we
actually had a great time on it. It was at Norris Lake in Tennessee.
(37:05):
We would go down, we wouldtake our kids down. Then our
kids started getting older and more intosports and dancing and all the things,
and it became more and more difficultto get there. To your point about
all of the costs associated with it. Me being me, my kids call
me a fun sponge. I didthe math and was like, Okay,
what we're paying for a slip fee, what we're paying for gas for this
boat, what we're paying for youknow, ownership of it. Every time
(37:27):
we go down here and use thisboat. It's like two thousand dollars.
Yeah, I don't want to knowany more about that. Yeah, well
it's perspective. It is again,it's a mistake that I look forward to
making at some point in my life. And RV might be another one.
You know, you get all thecomforts of home, but you don't have
to worry about lodging. You're ableto just hit the road and get out
there. But it's one of thoseanother things where Amy could be a fun
(37:50):
sponge about, yeah, and shareall the hidden costs that exists. I
just think we can romanticize these thingsright hitting the open road and all the
national parks, and then you're actuallylike, oh, I really missed a
hotel in the fact that they makethe bed every day or clean the bathroom
or whatever, and all of asudden, it's like not the great thing
that you thought it was. Witha lot of these things, these major
purchases, test them first. Rentan RV, use it for a month.
(38:14):
If you love it, and youcan then great, think about it.
But test it first before you makethat commitment. That's really hard to
underest Test drive that fancy car thatmight be just a little bit out of
your price range, but you feellike you could stretch it because it's a
pipe dream and it's something that you'vewanted to have for quite some time.
Test drive that car. You don'thave to go out there and cash out
a four to one k to buyyourself a Maserati or whatever. Yeah right,
(38:37):
that's going to lose a lot ofthe value the second you roll it
off of that parking lot, timesharesor a big one your dream home.
For so many people, it's justthat transition into retirement feels like you need
to do something big, write somethingbig, and then a lot of times
you're like, well, how doI undo this big thing that I did?
And it can be a major mistake. Another thing is giving to your
(38:59):
adult children to the sacrifice of yourlong term financial health. So these are
major decisions that we've seen could endup being regrets. Don't make these.
Thanks for listening tonight. You've beenlistening to Simply Money, presented by all
Worth Financial here in fifty five KRC, the talk station
You're listening to simply money presented byall words Creamy Wagner along with Steve Ruby.
If you could just put together afinancial plan, figure out what's best
for you long term, and staythe course, you'd be so far ahead.
So what gets in the way Youremotions time and time again, and
often those emotions are fear and greed. Joining us tonight with some incredible perspective
(00:33):
on how fear and greed can reallymess up anything when it comes to money
is our good friend of Paula Lepusco. He's actually a vice president a Dimensional
Fund Advisors, but more importantly,maybe for our purposes, he is known
as the Secretary of Explaining Staff Apollo. I love how you make things so
understandable. I listened to you talkand I'm like, well, duh,
(00:54):
But I think we have to goto fear and greed here because so many
times when someone walks into our officeand they've made a decision about their money
that wasn't to their benefit, itwas driven by one of these emotions.
Well, absolutely, And I thinkwe talked on on the previous segment that
that these emotions are what makes ushuman. And I don't think we should
(01:17):
be ashamed of them. I thinkwe should embrace them and acknowledge them,
because again, this is a partof our human nature. I think the
question here is when it comes toinvesting, are these emotions good or bad
for your money? Uh? AndOver and over, what we've seen is
that that that both of these emotionsare not necessarily serving your best interest.
(01:41):
And and I'm going to talk aboutmaybe how to kind of deal with them
and how to make the best outcomepossible for you as an investor. But
let me start with just a littlebit of of why these emotions are so
powerful. Uh. And I'll startwith fear because that is a primary uh
emotion that has helped us as aspecies survive. When you get chased by
(02:05):
an animal and you're afraid we are, you gonna run quickly, and that's
going to save your life. SoI think fear is part of our natural
condition and it helped us along theway to get through where we are.
So I don't think that we shouldsay all these are bad. No,
no, no, They're absolutely realand they're fine to have. I wouldn't
be ashamed. I mean, I'msometimes afraid of things and I should be.
(02:29):
And greed perhaps is also something thathelped us survive, because the people
who can actually gather more resources werethe ones to survive much more so than
the ones who didn't. Now,in the modern society, the way that
we work today, one of theproblems that I see is that the media,
and particularly this twenty four hour cyclethat we're in, whether it's social
(02:52):
media or real media, whatever itis, it is feeding us just fuel
for these emotions and they become muchstronger than, in my opinion, ought
to be as an investor, Andif you think of the programs over the
past couple of decades, they havebeen getting much better at tapping those emotions
(03:15):
because that what draws eyeballs and thatis what sells advertisements for companies. And
again I'm not here to demonize themedia, because everybody's on top of them.
I just I have to say,folks, when you're watching shows on
different investment programs, I think youhave to acknowledge that those are not investment
(03:37):
advice. But they're trying to beentertainment, that's what they call it,
but it's not investment advice, andthe way they make money is by tapping
into these fundamental emotions. The fearand greed, and that's how they sell
advertising, because once you're hooked onfear or greed, you're much more likely
(03:58):
to return to that show. Weseen this over and over and over again.
In fact, one of the morepopular show, Matt Money. Uh,
the executive producer was the same personwho did Jerry Springer. It's got
the same idea, now, yeah, yeah, it's got the same idea
that you're tapping different emotions. Uh. And and and why is it that
(04:18):
those emotions are so bad for youas an investor? Well, think about
Lit's justly fear first, Uh,that that you're watching something and you're afraid.
And at that point, let's saythe market tanks and you're really afraid
that, oh, what's going tohappen to my money? I don't lose
anmal as everything in the market.Uh. And particularly when the market drops,
that's when we see a lot ofpeople are acting on that fear and
(04:42):
selling. Most of the selling thatwe see investors do on their own without
an advisor is when the market's droppedat a low point. Uh. And
then once the market rebounds and thingslook good, when the markets are on
the way up, that's when peoplefeel comfortable buying. So think about this,
Amy and Steve. The fundamental premiseof investing is buy low, sell
(05:06):
high. That's how you make moneyinvesting. What do emotions make us do?
What we sell at a low pointand then we buy high, which
is exactly the opposite of what weought to do. And this is coming.
I'm going to come back this.There's nothing wrong with having these emotions.
And the only way that I foundthat you can put a backstop to
(05:28):
these is to have a financial advisor. To have a competent financial advisors like
Allworth who can actually coach you throughthose times and make sure that you don't
make those decisions that are ultimately goingto be detrimental with your money, because
those decisions are made typically by investorson emotions rather than data and evidence.
(05:50):
And what I know that that youdo, because I've known you for for
a while, is the exactly theopposite. When the market drops, rather
than selling in panic at which whatemotions would want to do, you keep
your your your your level head,and that might be the time to buy
buy low. That's what you do. Uh, And then when things go
(06:12):
up, you might want to trimthose gains and take chips off the table.
Uh. But do it through asystematic process. That's what advisors have.
They have a process that it's establishedahead of time where they remove the
emotions and uh and and they makesure they have the systematic program to buy
low and sell high uh and thatis called rebalancing. And rebalancing has a
(06:32):
dual purpose of one, making surethat your portfolio doesn't get too risky.
On the other hand, he hasthe purpose of helping your portfolio recover after
a loss because once you buy high, once you buy low, that's gonna
you're not going to be too lighton on the asset class that that might
go up next. It's fascinating tome because when when investors get spooked by
(06:54):
by by stock prices going down,and if you look at it as something
like a big sale, a MemorialDay sale, for example, when everything's
at a discount. That's when yougo into the store and you buy the
thing that you've been waiting to buy. It's the exact opposite that that fear
has on us when it comes toinvesting. We say, all right,
(07:15):
well everything's on sale now, I'mgoing to sell and sit on the sidelines
instead of buying more. It's exactlyright, why would you want to go
at the great point? See whywould you want to go buy at full
price when there's a sale and youcan buy at a discount. But again,
it's the emotions, and I thinkthey're real, and without an advisor,
it's incredibly hard to navigate these emotionalwaters. And I know you've seen
(07:39):
this over and over and over again. There are so many studies that have
confirmed and looked at the outcomes forinvestors when they let these emotions drive me
investment decisions. And it's one moreargument for having a really good financial advisor
who has, you know, aprogramming place to try to not only coach
(07:59):
climb to these times, but tosome degree tyler, take advantage of these
times. What's your take on theother side of the coin? And instead
of fear, what about greed?Because right now we're reading noisy headlines.
You talk about media. If itbleeds it reads, people are going to
click, advertisers are going to makemore money. But at the same time,
media has no fiduciary standard to makesure that you're making good decisions with
your money. So we see stuffall the time about the magnificent seven AI
(08:24):
crypto people think there are easy waysto get rich quick. What's your take
on greed? Oh? Absolutely,And I think there are a variety of
perspectives on greed. I mean,I think one of the simplest one is
that that people want to make surethat they keep up with their neighbors.
I mean, I think that thatthere's an element there that if my neighbor's
(08:45):
making a lot of money, wellI better make a lot of money.
I don't want to miss out onthat. So there's that fear of missing
out, and I think the mediais tapping into that as well. And
you always hear about people make somuch money and look at the car that
I drive, and look at all, you know, my nice shoes,
whatever I have, And the realityis that that you want to know,
hey, am I missing out onthis? And that fear of missing out
(09:07):
is real, and they could befed not by my only by the media,
but also by friends and family.I mean I know that years ago
when when I had a friend ofmine, we went for a hike and
he was telling me about all themoney that he made in a particular investment.
Like, in my mind, wow, that sounds really good. I
mean, if I didn't know anybetter, I'd be like, I want
(09:28):
to jump upon that because I don'twant to miss out on this great opportunity.
So there is an element of thefear of missing out. And my
mind, I always think that thatwhen you have these phenomenal investments that you're
afraid of missing out the fomo isnormally is called. You also have to
look at the other side as well. These investments where you really make a
lot of money, they tend tobe pretty concentrated, whether it's one investment
(09:52):
or something like a bitcoin that everybodytalks about, like, hey, this
isn't the way of the future.He makes so much money in that,
and you want to make sure you'renot missing out. On the other hand,
the fear of missing out should alsobe considered in the context of fear
of losing your shirt because make alot of money or lose a lot of
(10:13):
money. And I think that thattoo many people are looking at the upside
potential without taking a step back andsaying, well, what if things don't
go according to plan? And andone of my my friends actually had another
friend had had the situation happen wherehe basically said, I'm gonna put some
numbers there, like the five millionbucks. I had made a lot of
(10:35):
money into this, you know crypto, and I'm going to wait to get
to eight million, and when Iget to eight million, I'm going to
cash out and live happily ever after. And that was kind of the idea,
let's just wait for that magic number. And in my mind, you
know, what I wanted to askhim is, hey, how will your
life be different if you have eightmillion versus five million? Are you really
(10:58):
going to spend on vastly different things? Are you are you going to consume
like something that you can't really doright now? Is your life going to
be significantly better if you add thethree million? And now, on the
other hand, what do you haveto also consider? What if instead of
adding the three million, I subtractwhat if I go from five to two?
(11:20):
Will my life be different at thatpoint? And to me, doubt,
without a doubt, your life willbe very different. So whenever you're
afraid of missing out, also considerbeing afraid of losing your shirt and changing
your lifestyle. So so you're right, there is that that there. The
greed is also a powerful emotion,and it can come from the media because
(11:43):
again, the media wants to todo it. And not only that they
want to sell you advertisement, butthere is an armada of marketers trying to
sell you the hot product of theday, and there's always something hot,
and these people put a lot ofmoney into marketing and selling you something because
typically on these hot products, thefees tend to be pretty high for them,
(12:05):
and it absolutely makes sense to spendthe money in marketing. So again
it's it's it's absolutely human to havethese emotions. Nothing wrong. But my
suggestion is have an advisor who iscompetent, who is level headed and can
coach you through different times and evaluate. I mean, if you if you
have a great idea and you goto alt Worth and say, well what
(12:28):
do you think about this? Youknow, I'm sure to look at it
and say, well, is thishow is this helping you achieve your goals?
How is this fitting into your financialplan? And if it does,
perhaps that's something that they'll say,yeah, maybe that's worth kind of looking
at and and maybe deciding how itfits in the big picture. But I
do think that you need an advisor. Absolutely, you need an advisor.
(12:50):
We always say as advisors are numberone responsibility is to make sure that the
clients that we're working with, theinvestors that we're working with are not making
fightingial decisions that they cannot recover fromgreat perspective from Apollo Lapasco, our friend
of Dimensional Fund Advisors. You're listeningto Simply Money presented by all Worth Financial
here on fifty five KRC, thetalk station We Money presented by all Worth
(13:18):
Financial. I anyway, and you'realong with Steve Ruby. If you were
listening at the start of the show, you heard really some game changing perspective
on fear and greed and how thatcan impact your money from our good friend
a Paulo Lapusca, who is justbrilliant. So if you were listening and
you were thinking someone I know couldreally benefit from what we talked about.
From what you're listening to, justthere's a daily podcast for you. Search
(13:41):
Simply Money on the iHeart app orwherever you get your podcasts. Share that
show. I think there's a lotof really great information there. When we
talk about financial plans, Steve,we talk about it sort of being a
roadmap, right. It's a placethat you're trying to get to. You
and if you were going to lookat the vehicle that gets most of us
there. I think we would sayit's the four to one K. It's
(14:03):
like a Subaru, right, youcan count on it. It's reliable,
it's going to get you from oneplace to the other. Yeah, I
mean four to one K is they'vethey've taken over as the main vehicle for
savings because it used to fall inthe employer when there was the day of
the pension. Most of us getpensions anymore. It used to be the
three legged stool of pensions, socialSecurity and four to one K. But
(14:24):
businesses remove that risk from themselves aspeople started living longer, and they pivoted
to us as the individual to makesure that we're making the best decisions that
we possibly can with our four toone K. Now, there's a recent
article that came out from MarketWatch thatdetailed five changes to a four to one
K that would make a big differencefor the better. So that this isn't
(14:46):
anything to be nervous about. Butsome of these are some pretty interesting ideas.
For example, one is giving creditsfor long term care family caregivers.
That is, so if you're anindividual that needs to stop working to take
of an aging family member, forexample. Then you know somebody that falls
ill or is just getting older,and you are that caregiver working fewer hours.
(15:09):
The idea here is that you're alsoable to earn credits towards Social Security
when you would normally stop earning thosecredits if you're not earning income. Yeah,
a lot of these suggestions I thinkmake a lot of sense. Some
of them I'm a little bit onthe fence about, and we can get
to that. Yeah, Yeah,I agree. This point about caregivers,
though, is a really fantastic onebecause this is a gut wrenching situation and
(15:31):
decision for a lot of people.You just don't have a choice, right
Someone you love needs your help,and that either means that you have to
cut back on the hours that you'reworking or quit working entirely in order to
care for them. And then you'rebeing penalized financially on so many levels.
You're not earning credits towards Social Security, right. Obviously money is not going
(15:54):
into the floor one k. There'sno company match. Another thing, another
possible situation that could be helpful here. There's a US representative, Chris Pappis,
New Hampshire Democrat and he actually hasa proposal that would allow you to
make up ketchup contribution. So wetalk about this, like, if you're
fifty or older, you can putadditional money into a four to one K.
(16:15):
Well, what if you're a fortyfive but at the age of thirty
five you were forced to leave theworkforce to take care of someone. Now
you're getting back into the workforce andyou're way behind on that four oh one
K. I really actually like thisidea. I think if you can,
I'm sure there's some sort of paperworkthat would be involved in proving that that's
what you've been doing. But oncethat proof is there, I think allowing
(16:37):
these people to make catchup contributions regardlessof age is it makes a lot of
sense. Yeah, and this isco sponsored. This bill that you're talking
about is co sponsored by Republicans.Yes, a bipartisan Yeah, New York
and Arizona, so bipartisan. That'snot something we see too often in this
same age. But we can allmake sense. Yeah, we can all
agree that if life threw you anunfair curve and you had to make the
(17:00):
tough decision between taking care of afamily member and letting them be on their
own. Most of us are goingto step up to the plate and take
care of that family member if we'reable. So instead of penalizing, opening
the door to being able to savemore is a great opportunity that this would
would open up for people. Now. The second thing and we've we've we
had a segment about this not toolong ago, and it was the idea
of automating annuities within target date retirementfunds. It's a really interesting idea posited
(17:26):
by black Rock. Where these targetdate retirement funds. Remember it's a date
like twenty fifty to twenty sixty five. It's more aggressive the younger you are,
the more it's more conservative the olderyou get. But there's a component
to these that they would then createannuity income, so cash flow. It's
essentially creating that that third leg thatwe're missing by filling in the blank for
(17:51):
the pension. It's an interesting idea. I'm not sure how it would work
until we saw it in practice.I like options, right, I like
more option. I think the problemand what makes me nervous, I will
say about annuities in four One caseis that so many people gravitate towards that
guaranteed income component of these, notunderstanding that. While that's a great thing,
(18:14):
and what's not clear is and Ithink these would be sort of lower
commission products, not typical annuities thatyou would buy from someone. So I
guess there could be an advantage tothese, but often there's a trade off
to that guaranteed income in the factthat if that money had been invested,
you likely would have made a lotmore off of that money. And so
(18:34):
this is still an incredibly new productand incredibly new option. I'm never against
looking at more options in four onecase, as long as it first of
all, doesn't confuse the investor,and second of all, isn't a terrible
idea. And my understanding of thisis it's just a portion of what would
be in sort of this version oftarget date funds would get a little bit
(18:56):
larger the closer you get to retirement, and then you would have the option
to exor size whether or not youactually rolled this money into an annuity.
And it seems like it's capped atthirty thirty percent of the amount that's actually
held in that particular target date retirementfund. So you're right, it is
an option, but you know,to expand on it. There's also the
idea of expanding guaranteed income options withinfour one K plans, which wouldn't just
(19:18):
be the target date retirement fund whereyou could transition thirty percent of it to
an annuity. It's offering more annuitysolutions within the four one Okay, now,
again we're not totally against annuities.They do have a place, but
a situation where it's under the umbrellaof a workplace retirement plan is going to
create lower fees for everybody that hasaccess to them, which expands the possibility
(19:41):
of creating that fixed income stream withouthaving to give up a significant portion of
your balance in a commission to asales rep. So it is a neat
solution that lowers the fees for everybodythat do want some fixed income in retirement,
something I think is a fantastic idea, and maybe a lot of people
would disagree with me on this.Not allowing pre retirement withdrawals, Essentially that
(20:04):
money is locked up like a pension. You can't get to it, you
can't touch it. So many peopleare just so tempted by this money when
it's there. If it wasn't anoption, you would find a different way
to pay for the things that you'retrying to pull this money out of this
account for. So I think thatone is a great one. Here's the
all Worth advice these changes to fourone k is. I think many of
(20:25):
them would be welcomed. In themeantime, though, do everything you can
to protect this big investment in vehicle. For most of us, it's an
incredibly important one. Next, whatto do when the inevitable happens? If
something that is so hard to thinkabout, but something you have to be
aware of. We'll get into thatnext. You're listening to Simply Money,
presented by all Worth Financial. Hereon fifty five KRC the talk station.
(20:49):
You're listening to Simply Money persented byall Worth Financial. I Meani Wagner along
with Steve Ruby. If you everread any of Mitch Albums books Tuesdays with
Morey, no, Oh my gosh, so good, so good. Such
a great writer. He's a sportswriter, but he's written all these incredibly
thoughtful novels. In one of hisquotes is death ends of life, but
not a relationship. And I thinkfor many people who have lost someone that
(21:11):
you're close to, you feel verymuch that way. Right, that relationship
goes on, but as the resultof that death, unfortunately, there are
still some very real logistical things thathave to be dealt with. So for
anyone who has lost a partner orsomeone who's incredibly close to you, we
just kind of want to talk throughsome of the sort of maybe feels more
(21:33):
tedious, but things that need tobe to be cared for. Yeah,
this is good information to have inyour back pocket because you never know what's
going to happen, when it's goingto happen, but it is inevitable.
So you know, as as somethinghappens, the world doesn't stand still around
you. Everything keeps moving forwards andit's this jarring moment, Like what am
I supposed to do now? Well, for first things first is contact your
(21:55):
financial and legal professionals. If you'reat a point in your life where you
know you've you've saved and you're retiredand you're living off of retirement assets for
example, then you should have ateam that has, you know, on
your bench, an attorney, aCPA, a CFP, fiduciary financial planner,
and these individuals are going to beable to help you create a plan
of attack for the exact next stepsthat you need to take at this point.
(22:18):
I had a meeting this week withsomeone, a guy who had been
very much at the helm of allof the money decisions, all of the
saving and investing in the family,and I was making the point that I
would really like for his wife tocome in the next time. Right.
Several times throughout the conversation she comesup, as you know, when my
wife loves this, and she lovesthat, and she feels very strongly about
(22:41):
this, So I'd like for herto be a part of the conversations.
Well, she really doesn't have anyinterest in this. She's never been a
part of it. She's not interestedin it. I said, I understand
that. And you're in excellent shapeand there's no reason to think something is
going to happen to you, butsomething always could. Yeah, and if
it does, how overwhelming for herto have to be leaning on a professional
(23:02):
who knows the intimate workings of themoney in your family. But she doesn't
know me, right, And soI said, it's a gift to her
really to have her be part ofthis conversation now, so that when she's
reeling from this very emotional loss,at least she trusts the person that she's
picking up the phone and calling andsaying, Okay, help me figure out
(23:22):
what's next. What do we needto do here, rather than picking up
the phone and calling a stranger Duringthat time, explaining that folks usually resonates
to the point where they end upbringing their spouse into the next meeting because
hope, So you are right,especially considering the fact that that women tend
to live longer than that. Yeah, statistically speaking, that's the case.
So let's say you're a man andyou've been the one that's been doing the
financial planning and your household. Forwhatever reason, you haven't folded your spouse
(23:47):
into that conversation. It is somethingthat you need to do, especially if
they're younger than you, because chancesare they're going to last longer than you
do. And in that situation,like you just explain that it's uncomfortable.
You don't know the person that's beenrunning your financial your finances for potentially decades.
So you know, let's say thatyou've contacted your your financial advisor at
(24:07):
this point, your attorney, youryour your team, your CPA, yeah,
your team. You're going to needto procure the will and death certificates.
Now that there's there's certain people outthere that say you need two dozen
death certificates, maybe maybe ten orfifteen somewhere in the middle, because you're
going to need a lot of thesethings for every single financial institution that you
(24:29):
deal with, that that holds anyliabilities, that holds accounts, that holds
old pensions. You're going to haveto present these these copies to these places
in order to prove that something haschanged to the point where where now next
steps need to happen. You're listeningto simply money presented by all Worth Financial,
I mean me Wagner along with SteveRuby, as we tackle one of
the topics that no one likes tothink about, but it's inevidently going to
(24:52):
happen, and that is losing someonewho you care about it maybe specifically a
spouse, and what are those nextsteps we're big advocates for if you look
at your accounts right, your investmentaccounts, and there's a list a mile
long right that can feel really good, like, gosh, I've got you
know, several old four to onek's and semi rays that can be really
hard to keep up with. Right, and we say, hey, consolidate.
(25:15):
That makes life so much easier.So one of the things that you
have to think about if you've lostyour partner is reaching out to if they're
not retired yet, any current butalso past employers and the past employer's part
of this is really critical because ifthere's old four to one k's that haven't
been rolled over, that are sittingin old plans, you've got to keep
track of those. And we seeso many orphan four one k's out there
(25:38):
that no one ever claims because peoplelose track of them. Yeah, these
organizations aren't going to reach out toyou. They don't know that something changed
and that something happens, So it'sup to you to take charge with that.
That It is an argument as towhy when we're working with folks and
building financial plans and froduciary advisors acrossthe nation are that they're working with them
to consolidate accounts that they have spreadout all over the place rollover IRA one
(26:00):
roth IRA, maybe a joint brokerageaccount. You don't need to have stuff
spread out for diversification between firms becauseit makes it that much more difficult when
the inevitable happens. So that isa good point you bring up in life
where we can make things a littlebit easier in death. But you're going
to be reaching out to all thesecurrent and former employers to provide them with
whatever they need to open accounts nowin your name or make sure that that
(26:25):
pension cash flow now goes towards youwith this change. Another thing is,
you know, updating the ownership ofall assets. You're going to need that
death certificate again for that. Hopefullyyou are already the beneficiary, but often
you can't legally transfer those assets entirelyto your name without that, so it's
just kind of another step. Hopefully. Also, I would say, hopefully
(26:47):
you were part of conversations with thisteam of people that you're working with now,
and hopefully you knew them already.But also one of the conversations that
is incredibly helpful if it's had before, is where all of the important documents
are. Account passwords. Great,but make sure that everyone in the family
knows where these things are hopefully storedtogether in a safe, secure place.
(27:08):
Yeah, and remember that the CPA, whoever or whoever's helping you with filing
your taxes, there's likely to beconversations around maybe maybe this is the last
time that you can file jointly atthis point. So realizing income in certain
situations, depending on the types ofassets that you're inheriting, could be a
benefit as opposed to a couple ofyears down the line when you're filing single
(27:30):
Really grim subjects but super important.You're going to have to update beneficiaries in
the accounts for the most part.Make sure that all of all of that
is in order as well. Here'sa big one. Do not make any
major financial decisions right now. I'veshared this story several times on the show,
but it's still hurt to my heartthat someone I care very deeply about
(27:52):
after losing a loved one was soldan annuity in years later realized after the
fact how much they pay and commissionhow much that money would have become had
it been invested in. Really sortof felt taken advantage of not at the
time, but as years passed inyou know, it's not just buying life
insurance products that you don't necessarily need. It's making major changes like huge moves
(28:18):
or big purchases, all of thosethings. Just give yourself several months to
let the dust settle. If there'ssomething that you're thinking about doing. Maybe
write it down, maybe think aboutit, but don't make any major decisions
that you're pulling the trigger on untilyou're absolutely sure that makes the best,
the most sense moving forward. Iactually felt a little burst of anger when
(28:38):
you said that. My blood pressurerose. Yeah, so you took advantage
of an individual that was right therereeling from a terribly emotional situation and sold
them a commission product that they didn'tneed. Yeah, be careful, don't
don't make those big emotional decisions whenwhen emotions are high. Here's the all
Worth advice. Please give yourself somegrace after you lose your spouse or your
(28:59):
partner, someone close to you.Make sure you've got a team of individuals,
helpers, professionals who will help youthrough this time, and hopefully you
already have personal relationships with each ofthem. Coming up next, we're testing
your knowledge with a little retirement factor fiction. We want to make sure
you know the facts when it comesto your money. You're listening to Simply
Money presented by all Worth Financial herein fifty five KRC the talk station.
(29:26):
You're listening to Simply Money presented byall Worth Financial. I mean you Wagner
along with Steve Ruby. Do youhave a financial question you need a little
help with. There's a red buttonyou can click on while you're listening to
the show. It's right there onthe iHeart app. Record your question.
It's coming straight to us and straightahead. How to keep from making a
major purchase that you might regret makinglater If you're thinking about buying one of
(29:48):
these, Now we've got a littlewarning for you. We'll tell you what
that is coming up in just afew minutes. Time to play retirement fact
or fiction, because when it comesto your money, we want to make
sure you know only the facts.First one, Steve Ruby fact or fiction.
Social Security should make up about sixtypercent of your income in retirement fiction.
No, thank you. Even inthe first place, social Security was
designed to replace about forty percent ofyour income. So if you're in a
(30:11):
situation where social Security is making upsixty percent of your income, then you
probably don't have a ton of cashflow. You're probably not living or maintaining
this type of lifestyle that you generatedbased on your income pre retirement. Yeah.
Now, I have plenty of folksI work with that that do have
you know, significant portions of theirincome made up by socialcurity. It doesn't
(30:33):
mean it's impossible to retire in thatsituation, but you have to be living
oftentimes below your means. I thinkfor most people, when you think about
retirement, you want to continue withthe lifestyle that you're living in exactly.
And if retirement for you means allof a sudden, social Security is your
main source of income and you can'tafford it out once or twice a week
(30:55):
like you are now. You can'tafford any vacations to the beach or to
visit your grand kids. Okay,well then that's not the goal here.
So I think you have to figureout, Okay, what are some ways
that I can build up my savingsand my investments and order that social Security
is truly only making up forty percentof my income as it was intended to
do. This is an easy onefact or fiction for you. Your portfolio
(31:17):
allocation can change multiple times over yourlifetime. This is a fact, and
I would say, not only canit change, but it probably should change
for most of us. The youngeryou are, right when you're in your
twenties and you first start working,you first start putting money into that four
one K. I would say it'snot out of the realm of normalcy to
have one hundred percent of what you'reputting in there in stocks right in the
(31:38):
stock market, because you have along time horizon, you know, decades
to continue working. Think about howmany recessions you'll go through, how many
bear markets during that time, andif you've got the stomach for it,
I think that makes a lot ofsense. Now, as you get closer
to retirement and that money is realmoney and you need it, then you
start dialing back that stock expre posureand you start buying more bonds, and
(32:01):
so I think there's almost like asliding path that can happen during that time.
But I would expect that that assetallocation changes several times over the course
of your life as an investor.It should change several times over the course
of your life as an investor.Yeah, factor fiction investing in real estate
is a good hedgiginst inflation. Ohsure, I guess fact it can be.
(32:24):
I'm a little skeptical, you know, there are obviously challenges with liquidity
when it comes to real estate.There's a lot of people out there that
just think that real estate is away to get the job done. But
when you don't have a portfolio ofinvestment assets that you can pull from to
generate a diversified income stream and retirement, it can create its own challenges.
Yes, the value of property insome areas is going to continue to increase
(32:45):
almost no matter what's happening in themarkets. But again there's that lack of
liquidity, and if you are alandlord, there's always challenges with making sure
that there's somebody to fill in andactually pay the rent. There are lots
people out there that are going totell you that there's a number of different
investments that you can make that area great hedge against inflation. I mean,
(33:07):
look no further than gold, commercials, Right, there's lots of things
out there. People like the thoughtof real estate because you can touch it,
you can feel it, right,you know the use for it.
I hate this as anything but asmart part of your financial plan if that's
decided that it is a good fitfor you. I think back to two
thousand and seven, two thousand andeight, right, it was not a
(33:29):
hedge against inflation. At that time. You were losing value on that property
if you needed to liquidate it forsome reason at that time, which is
not an easy thing. It wasgoing to sit there, first of all,
for months, and you were losingvalue on it. There's no prediction
of what's going to happen in thefuture. Yes, you know, real
estate's a good investment right now.Who knows what it could be in the
future. I don't like it asa hedge against inflation or really any part
(33:52):
of a long term financial retirement plan. Yeah, this is a tough one
because if you have a diversified portfolioand you want to add in some additional
level of diversification. Sure, butthat's also why my answer is a little
bit more wishy washy than normal.Yeah, so I kind of hedge your
answer. I did hedge my answer. Thank you. I appreciate that I've
got one for you. Okay,after fiction, Steve Ruby has never made
(34:15):
a financial mistake. I want youto answer this one. Okay, this
comes up because this is an easyone. Say it, Amy, I
don't believe it. I'm almost goingto sit here in silence until you think
of something because there's no well,I can't sit here in silence because I
can't be silent for more than threeseconds. But I refuse to believe that
(34:36):
you have never made a mistake whenit comes to money in your life.
What I do believe is that yousaw mistakes made when you were growing up,
and you are more intentional than theaverage person about what you do with
your money. And I actually verymuch admire that. Oh thank you.
I don't want to get it turnedinto a really nice answer. I appreciate
it. Yeah, let's keep let'skeep talking about this for a while.
(34:58):
I really want you to say,though, to be something that you made
that you look back on and you'relike, Okay, that wasn't the base
on what you just said. We'reboth in agreement. Here fast no mistakes
ever, Nope, I learned fromthose before me, and here I am
today. Never made a financial mistake. We'll find when I admitted one,
like a year ago once. Whatwas it? If you forget it doesn't
matter. Fact. I'm throwing thefiction flag on this one, and it
(35:20):
is my it is my goal tounearth one over the course of time.
Nobody makes it through life without makingmoney mistakes. It would never show if
that was a thing coming up next, when money will not buy you happiness
but regret instead. Obviously, SteveRuby has never done any of these things,
but we'll talk about them next.You're listening to Simply Money presented my
(35:40):
all worth Financial here on fifty fiveKRC, the talk station. You're listening
to Simply Money present of my ownworth Financial. I mean you Wagner along
with Steve Ruby, they've bought somethingreally expensive, only to regret it later.
We're talking big purchases here, aboat, some land. At the
(36:01):
time, it made all the sensein the world, and then reality sets
in. Steve Ruby has already justset us up for the fact that he's
never made any bad financial decisions,but many of us have. And one
of the major forms this can takeis buying a book. I can't wait
to make this mistake you want tomake? This mistake is a mistake.
(36:22):
If I know what I'm getting into, that's the question that's philosophical. At
that point, I think, oh, yeah, I'm not answering because a
lot of people. Know a lotof people have the dream of purchasing a
boat when they transition into retirement andyou sailing off into the sunset. But
there's more to owning a boat thanjust purchasing it. There's costs that add
up very very quickly. It's supposedto give you joy and freedom, but
(36:44):
then you're almost obligated to use itall the time so you can get your
money's worth, and they lose valuevery very quickly. So is it a
mistake if I know, is ita mistake to buy a boat? If
I know what the challenges are?I guess if you go into this fully
eyes open. My husband owned aboo before we got married, and we
actually had a great time on it. It was at Norris Lake in Tennessee.
(37:05):
We would go down, we wouldtake our kids down. Then our
kids started getting older and more intosports and dancing and all the things,
and it became more and more difficultto get there. To your point about
all of the costs associated with it. Me being me, my kids call
me a fun sponge. I didthe math and was like, Okay,
what we're paying for a slip fee, what we're paying for gas for this
boat, what we're paying for youknow, ownership of it. Every time
(37:27):
we go down here and use thisboat. It's like two thousand dollars.
Yeah, I don't want to knowany more about that. Yeah, well
it's perspective. It is again,it's a mistake that I look forward to
making at some point in my life. And RV might be another one.
You know, you get all thecomforts of home, but you don't have
to worry about lodging. You're ableto just hit the road and get out
there. But it's one of thoseanother things where Amy could be a fun
(37:50):
sponge about, yeah, and shareall the hidden costs that exists. I
just think we can romanticize these thingsright hitting the open road and all the
national parks, and then you're actuallylike, oh, I really missed a
hotel in the fact that they makethe bed every day or clean the bathroom
or whatever, and all of asudden, it's like not the great thing
that you thought it was. Witha lot of these things, these major
purchases, test them first. Rentan RV, use it for a month.
(38:14):
If you love it, and youcan then great, think about it.
But test it first before you makethat commitment. That's really hard to
underest Test drive that fancy car thatmight be just a little bit out of
your price range, but you feellike you could stretch it because it's a
pipe dream and it's something that you'vewanted to have for quite some time.
Test drive that car. You don'thave to go out there and cash out
a four to one k to buyyourself a Maserati or whatever. Yeah right,
(38:37):
that's going to lose a lot ofthe value the second you roll it
off of that parking lot, timesharesor a big one your dream home.
For so many people, it's justthat transition into retirement feels like you need
to do something big, write somethingbig, and then a lot of times
you're like, well, how doI undo this big thing that I did?
And it can be a major mistake. Another thing is giving to your
(38:59):
adult children to the sacrifice of yourlong term financial health. So these are
major decisions that we've seen could endup being regrets. Don't make these.
Thanks for listening tonight. You've beenlistening to Simply Money, presented by all
Worth Financial here in fifty five KRC, the talk station
Simply Money News
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