Simply Money

Episode Transcript

(00:04):
Tonight, how do you feel aboutAI and using it in your financial life?
And we are also talking about thenuances of the wrath four oh one
K. You're listening to Simply Moneypresented by all Worth Financial I Memi Wagner
along with Steve Ruby. You know, as each day passes, artificial intelligence
becomes more and more a part ofthe conversation and certainly a part of our

(00:24):
lives. I was just saying thisrecently. My daughter's getting ready to go
off to college. I can't evenimagine what college professors are dealing with now
that AI is out there. Howdo you know if someone actually wrote a
paper or write like, there's justit's so crazy what AI can do.
There is a great component of it, and I think for a lot of
industries and a lot of people,the question is how much of a role

(00:48):
am I comfortable with AI playing?And when it comes to your money,
I think it's about time to examinethat question for yourself. Yes, I
think AI can bring some great benefitsto know how you think about your money.
Should it be the be all andall answer? I don't think so,
And I think there's a lot ofpeople right there's new research out about

(01:08):
this that shows that many of youhave the same reservations that I do.
Yeah. Specifically, this is astudy from Northwestern Mutual and it's part of
their twenty twenty four Planning and Progressstudy. It explores US adults attitudes and
behaviors towards money, financial decision making, and really just broader impacts of long

(01:29):
term financial security. And this timethey honed in specifically on how comfortable people
are with AI and really how bigof a role it should play, And
some of the numbers are kind offascinating, I think. Yeah. So
this was how it was presented topeople who were taking this research. It
said, here's the term, here'sthe sentence that they looked at. I'm
excited about the potential of AI inthe financial services industry. And it was

(01:52):
like, how many of you agreethat you are really excited about this?
Six and ten were like, nah, not excited, right to surprise In
this older generations were less excited thanyounger ones. I mean, it's a
it's a change. It is ahuge, huge change. Uh, And
I completely understand why there's They're like, I don't know if I trust this.

(02:12):
It asked a number of questions,right, do you do you trust
AI in creating a finance a retirementplan? Do you want to trust more?
Yes? Right, a human beingor AI? Glad to see the
answer here was human beings. Notby much though, which is very surprising
to me because it said six andten preferred humans. So the other four
in ten, you know, it'sit's not well all the way said they

(02:34):
weren't sure. Two intent said theytrust them equally, you know, So
there's there's several options there. Ithink this is where we need to be
landing right now. First of all, this is brand new and there's not
enough information out there. And Iwill tell you in one of our recent
meetings here at all Worth, youknow, our CEO said we will be
at the forefront of harnessing AI forthe benefit of our clients. In there

(03:00):
are some programs that we have thatcan be great and help helping to determine
tax planning strategies, you know,things along those lines. We absolutely utilize
AI. But should you, asan investor use it as your be all,
end all decision making process. Doyou not need a financial advisor anymore?
Well, if you're listening, you'repibably like, well, she's got

(03:21):
a stake in this game. Maybe. But I actually recently had this conversation
with someone because my daughter's going intofinance in college, and the question was
like, well, aren't you worriedabout AI, and and in my response
was no, I'm not. Ithink investors will always need a human being
sitting in front of them, becausewhat I have seen time and time again

(03:45):
is that there's such a behavioral financecomponent exactly to our relationship with money.
AI is going to tell you maybewhat's best. They're going to remove all
emotion from it. And how oftendo human beings remove all emotion from your
decision? Never? Never? Yeah, that partnering with a financial advisor is
to protect you from yourself almost andprotect you from your own emotions mistakes that

(04:09):
you cannot recover from financially. Exactly. That's our job. And the fun
of it too is as a humanbeing, I'm totally comfortable sitting down with
folks I work with and just exploringoptions. You know, we look at
option A versus option B versus optionC and explore what type of financial impact
a certain decision may have on yourfinances. And it's really exciting to me
that when when somebody has a robustfinancial plan that provides them options. It

(04:33):
is okay sometimes to make the emotionaldecision and the nuance behind that, that
relationship that we build with clients andgetting to know them and understanding you know,
emotions versus fact, versus needs versuswishes, and it's it's really intricate,
and AI can't do that at thispoint. I'm not sure to what

(04:53):
capacity it's ever going to be ableto do that. Obviously there's bias from
me as well. A example,a very high level, easy example would
be, you know, here's yourfinancial plan. You're thinking about paying off
your home early because you're entering retirement. The numbers show us that. And
this is a real life example.I had this. You know, somebody
said, I really don't want togo into retirement with any debt at the

(05:15):
end of the plan, which youknow, we use ninety two and ninety
four for you know, the endof the plan in quotations because there's a
twenty five percent chance you lived thatlong. They had more money left over
by not paying their mortgage off andstaying invested, but it didn't move the
needle at all. They didn't needthat extra money. It wasn't a difference
maker. So they paid their mortgageand they felt better because mentally and emotionally,

(05:39):
so it's okay to do that,but to have somebody guide you through
that and make sure that you canafford to make that emotional decision, it's
very valuable. And the nuance justdoesn't exist with AI at this point.
Listening to simply Money presented by allWorth Financial, I mean me Wagner along
with Steve Ruby, as we talkabout AI, it is here, it's
not going anywhere, and it willhave an impact on your money and your
finances. And I think the questionis to what extent do you trust it?

(06:01):
Right? There's research out there thatsays, okay, we know it's
out there. People have different degreesof comfort right in using it. You
just had a great example. Youknow. Here's another one. When we
talk to people about debt and payingoff debt, there's sort of two options
for you. If you've accrued somekind of credit card debt. We say,
okay, well, your two optionsare the avalanche method, which is

(06:23):
you pay off the card with thehighest interest rate first. In mathematically,
that's how you're going to come outahead. There's also the snowball approach to
it, and that simply means youstart with the lowest amount first, you
pay that off, you feel goodabout it, right, You've got some
momentum going, and then you goto the next one. Right, AI

(06:43):
is going to tell you every dayof the week you need to go for
that avalanche method. Yes, numberswise, that makes the most sense.
But if that is completely daunting toyou and you keep trying, yes,
right, and it feels completely overwhelming. And yet if you had just kind
of entered with the smallest amount andthen you realize, like, I feel
really good about this, I'm goingto keep going. It divorces your emotions

(07:05):
from your money. And you know, we're in a political election year.
We're in a presidential election year.People are so emotional about politics. And
I can't tell you how many timessomeone has come to me and said,
I know we're going to have arecession regardless of who's in office or if
this person gets in office. Mymoney's coming out, right, AI,
What are they going to do whenthey are when it's presented with in a

(07:29):
situation like that, right, showa chart, yeah, and then not
talk about it. I don't know, Yeah, how helpful is that?
And I think, you know,we are just so emotional about so many
things in our life, and ourmoney is one of those. We've worked
so hard to save it and investit, and you know, oftentimes we
can get pulled in, you know, certain places because of how we feel

(07:49):
about things. A I cannot decipherany of that. Yeah, and it's
an interesting conversation that's going to continueto happen for years to come as AI
develops and gets more and more inkit. But you know, the same
study that we're talking about today,it also asks a question about how do
people feel about their financial advisors usingAI? And I think that the responses

(08:13):
are a little refreshing. You know, one or seven and ten said they
were totally comfortable having a financial advisor. You use AI to detect fraud for
example, that's very factual, fraudis happening or it isn't happening, and
using that technology to do a broadsweep, I think is an opportunity to
leverage that type of technology for thebetter Six and ten we're totally comfortable having

(08:35):
a financial advisor use AI to analyzedata to predict future trends. Sure you
know that you know AI can cantake that information together and make it a
little bit more easily digestible for thedecision makers, the human decision makers that
are actually building your portfolios and decidingwhich investments to use. In order to
do that. It is nice becauseyou had mentioned earlier that we do we

(08:56):
do as a firm use certain technologiesfor you know, if we get we
get somebody's tax return, we canrun it through some software and it can
give us some feedback about, youknow, whether or not it makes sense
to do roth conversions or maybe mockingup how qualified charitable distributions could help you
save money on taxes. Rather thansitting down and doing a pen to paper

(09:16):
and taking hours upon hours for analyzingone tax return, it can be done
in a matter of minutes for example. You know, I just think for
and I think of also advisors whoare in smaller offices that don't have support.
There is administrative tasks that are justthey bog you down. They take
up a lot of time. Ifyou're working with an advisor that's maybe in
a two or three person office,fantastic right. AI gives them more time

(09:41):
to work with you. And Ithink the face to face part is really
where the value is as an advisor, and you're not going to get that
value from AI. And I thinkthat support is great. I will say
that, you know, for ouroffice, right the size that we are,
we have Andy Stout down the halllooking at this these models and this
data and trying to make predictions aboutmaybe where the economy is going in the

(10:03):
future based on what we know.Now, Yes, AI can do that.
I'm going to put my money onAndy Stout the week. Yes,
yeah, our chief investment officer.He is so smart. And again,
I still think that even when you'relooking at that data, there's a human
component to analyzing it. When you'relooking at things like consumer sentiment and where
we're going, and when the economystarts to slow down, as we know

(10:28):
it does with economic cycles, whatis the human response to that, right?
And so I think that this canbe an excellent tool for financial advisors.
You know, we're obviously looking atthe best ways to use it for
our clients now, but I donot want to sit down across from a
computer when I'm making a major decisionabout how to fund my child's college tuition,
how to fund retirement, how tomake that transition and you know,

(10:50):
a lot of the conversations we havetoo, especially when someone's transitioning into retirement.
Yes, it is a financial decision, but it is also very much
a mental an emotional one, andoften the conversation is are you ready for
this? And what are your hobbies? And how are you going to plan
your time? Have you thought throughthese things? You know? And that's
as much a part of what wedo as the money component is. On

(11:13):
any date, you'd like to seea computer figure that out with a human
being hold their hands, yeah,right, the cold hands a hold.
Here's the all Worth advice, asthis studies author puts it, really the
expertise and personalization that financial advisors provide. It cannot be replicated or replaced by
AI, but it certainly can beenhanced, and there's no problem with looking

(11:33):
for issues that you can use itin that way. Coming up next,
is inflation really that bad? Youknow? For politicians are putting their fingers
at each other, But how doesit really compare to times of the past.
We're going to look at that.You're listening to simply Money presented by
all Worth Financial here in fifty fiveKRC. The talk station you're listening to

(11:54):
Simply Money, presented by all WorthFinancial. I mean you Wagner along with
Steve Reebe. If you can't listento our show every night, you do
not have to miss the thing.We have a daily podcast for you.
Just search Simply Money. It's rightthere on the iHeart app or wherever you
get your podcasts. Coming up atsix forty three, the investment option many
companies are now offering. Should youpull the trigger on it? Does it
make sense to you? We'll getinto that. Sometimes it makes me feel

(12:18):
better when things are not great,to say, well, it's always worse
somewhere else. It does in somesituations make me feel better. And let's
face it, like we have beenjust bombarded with the cost of inflation over
the past couple of years, whetherit is at the pump in certain circumstances
or certain times of the year,certainly the grocery store, the bills that

(12:39):
you're getting in your mailbox, andso tonight we're telling you that it could
always be worse if you lived somewherethat sure could be Argentina, specifically,
go Forbes and alysis found that thecountry's inflation rate is two hundred and seventy
six percent from some perspective, wegot to nine percent and now we're down

(13:01):
to three percent, and we're stillcomplaining and it's awful. That's awful.
And here two hundred and seventy sixpercent. I mean it gets to the
point where Argentinians that their diets arechanging. Demand for beef, which apparently
is a major staple in the country'sfood is falling, and they're they're moving
the less expensive options like chicken andpork. I mean that says a lot

(13:22):
because culture is oftentimes tied the diet, and if inflation is raging so heavily
that you literally have to change yourdiet and hence your culture, that's a
really big deal. It might notsound like it on the surface, but
if you really think about it,that's that's terrible. To change the way
that generations of people have eaten becauseyou can't afford to eat that way anymore.

(13:45):
That is yeah, I mean,that is next level beef and Argentina
has gotten six hundred percent more expensive. I know. That is awful.
And because of this, people areactually because of the peso, it has
lost so much value due to inflation. There they're turning to crypto. Oh,
I think this makes me so sad. It's like one terrible situation and

(14:07):
they're turning to another terrible situation totry to remedy it. And if you
look at just the global popularity ofcrypto right now, people in Argentina are
the number one adopters of crypto.By the way, US is number two.
We're not far behind here, butfor very different reasons. I don't
know what the answer is for peoplein Argentina. I don't think that it's

(14:30):
crypto. It's chicken, pork andcrypto. Yes, that's awful, a
lot of rice and beans. Idon't know. I don't know. It's
terrible, but it could be worse. It could be worse. All right.
We're in an election here right now. If you haven't figured that out
yet, you will soon because Novemberis right around the corner. And what
we always hear is a lot oftalk about the economy, right, who's
to blame? And with inflation beinghigher than we have seen in forty plus

(14:54):
years, you know we're on theback side of it, but we're still
not where that goal is. You'regoing to hear a lot of people blaming
the other part party, the othercandidate. Some people are going to be
pointing their fingers at the Federal Reserve, our nation central bank, because it
is their job to bring inflation down. And I don't care where you fall
politically, I just want you tounderstand that inflation is more nuanced than any

(15:16):
individual person or any individual office.Yeah, and first of all, just
looking at how inflation has been measured, it's always been kind of a controversial
topic from the nineteen twenties from theget go. Yeah, I mean it's
you know, some people call itan economic manipulator of sorts because it has

(15:37):
changed what it's looked at over theyears. Yeah, when in fact,
when they first started looking at it, they didn't look at things like cars
and gasoline and radios because people weren'tdidn't have cars, you know, And
now, of course those things area part of everyone's normal lives. So
yeah, I think that CPI hasbeen through a major transition as all of
our lives have transitioned. I meaninterestingly, though, when you go back

(15:58):
to the beginning of CPI, thereare certain things like steak and butter that
have always been a part of thiscalculation. In nineteen nineteen, it was
literally straw hats for real. Onehundred years ago, they were using the
price changes in straw hats to measureCPI have gone out of fashion a little

(16:18):
bit. Yet. Listen, ifyou are straw hat wear nothing against you.
That straw hat looks great, butpeople aren't wearing them enough that they
are part of how we gauged thehealth of our economy in which way inflation
is going. And I think theinteresting thing too is, you know,
you go back to nineteen thirteen andsteak that they were looking at at the
time cost about twenty two cents apound. That'd be great, yeah,

(16:40):
right, it converts to about sevendollars a day, which is actually a
bargain because it would have inflated,right that number to eight dollars in twenty
five cents. So if we hadkept on pace with inflation, you know,
I guess at that two percent goal, that's where we would be right
now. So you look at theseprices and they feel terrible, and they

(17:00):
are I mean for a lot ofhouses. I do not take away from
the fact that you are struggling.I mean, we've had research on the
show that people who make six figuresalaries are still struggling to make ends meet
because of this inflation, so youknow, not to discount that whatsoever,
but it really could be worse.Well, it's also changed over over time.
What we spend our money on haschanged. For example, from nineteen

(17:21):
thirty five to thirty nine, foodrepresented about thirty four percent of the average
household's expenses. Today it accounts forthirteen percent. I question that they're not
in my house. Yeah, Iguess that would depend on the size of
the house, number of children wehave. It's a very high generalization,
and that's part of the problem hereis you know, the data in and

(17:42):
of itself, what it used tolook at versus what it looks at now,
versus how much we spend on certainitems versus what we spent in the
past. It's very challenging. Yeah, it is tough to really get a
good bead on this, you know. And I think they exclude from CPI

(18:03):
things that are really volatile, likegas and food, and you can be
like, well, what the heck, like those are the things that I'm
actually paying for, and that wouldbe true. But the thing about this
is this is what the Federal Reserveis trying to get under control. And
as powerful as our nation's central bank, is they are not powerful enough to
dictate the price of gas. Right. There are extenuating global factors that have

(18:26):
that come into play here. Youknow, you look at just when Russia
and made of the Ukraine. Firstof all, the price of oil at
that change times change a ton,because you know, those pipelines out of
Russia are out of the Ukraine,and it's like, we never talked about
the Ukraine being the bread basket forthe rest of the world. How much
grain came out of there, howmuch oil came out of there. No

(18:47):
one was even thinking about that untilthere was this invasion and then those pipelines
were all broken. You know,we weren't getting the things out of there
that we did at the rate thatwe were before, and then the impact
of that was huge off the globalWell, yeah, it's a good point
because it's not just the data thatwe look at or that the FED looks
at and how that changes over time. There's also you know, black swan

(19:07):
events like like COVID shutting down globalsupply chains and not being able to get
chips for your cars, so therewas no vehicles that we could purchase,
and the prices skyrocketed, and thenyou know, Russia invades Ukraine and that
throws a curveball in areas that mostpeople didn't even think about. And then
there's you know, stimulus money cominginto people when COVID shut down our economy,

(19:30):
and and here we are, there'san influx of cash, you know,
which which increases inflation. So there'sa lot of nuanceers, a lot
of moving parts. It's not justthe policy of one side of the aisle
or another. There's a lot morein play here that affects inflation. So
when you are watching those debates,when you're voting, right, when you
hear the commercials and everyone throwing aroundthe word inflation, just understand, thank

(19:52):
goodness, the US economy and thisinflation issue is far bigger than any one
person or any one office, andit could be worse. It could be
worse. Here's the all Worth advice. Candidates are going to use inflation as
a political football. We say youneed to concern yourself with your own personal
inflation rate, and that means adjustingyour budget if necessary. Coming up next,
did you hear about this? Hackersjust stole ten billion passwords billions with

(20:15):
a b our tech expert is goingto weigh in how can you protect yourself?
You're listening to simply Money presented byall Worth Financial. Here in fifty
five KRC the talk station. You'relistening to simply Money presented by all Worth
Financial. I Meani Wagner along withSteve Ruby. Another day, another hack?

(20:37):
Right, Should you be concerned?We're talking about ten billion passwords stolen
by hackers. Joining us tonight withhis perspective on, first of all,
how concerned should we be? Shouldwe assume this information is already out there?
And what can we do to protectourselves? Is our tech expert Dave
Hatter from Intrust It. I hateto say it. I remember the first
time I was ever alerted that myinformation had been compromised by a hack.

(21:02):
It was like, oh, thisis terrible. Now, I'm like,
oh, whatever, it's Tuesday,you know. Yeah, It's sad that
that's where we're at, amy,but that's where we're at unfortunately. And
when you look at this, thisis the largest release of this sort of
information to date, almost ten billionrecords. It's been called and the press,
the rock you twenty twenty four league. You know, people say,

(21:25):
yeah, my data is already outthere. I get that, but understand,
the bad guys know most people don'thave strong, unique passwords on every
account. They know that people don'tuse MFA. So if they can get
their hands on a password of yoursthat's good somewhere, it's likely good somewhere
else. And they know this,so it makes it easy for them when
they have these things, to haveautomated processes that use brute force to try

(21:45):
to break the passwords, or usecredential stuffing attacks to just start attacking accounts
and just jam passwords into it.So it's a big deal because of the
sheer volume of the thing and becauseagain the bad guys know that people aren't
taking this kind of advice seriously thatwe give out here regularly, and you
know, that makes it easy forthem to hack your accounts, steal your

(22:06):
money, impersonate to you know,perpetrate identity theft, and all those other
Unfortunately, they ruin your life rightand you're way back about it happened again,
man, that's awful. Ten billionwith a B. You know,
maybe some of us need to bescared into taking action a little bit.
You know, you mentioned that someof us don't have complex passwords. Some

(22:30):
of us aren't using multi factor authentication. You know, what are criminals doing
specifically with the Rocky twenty twenty fourleague. Well, Steve, you're right,
and I hate to always be thedoomsday fear, uncertainty and doubt God,
but it seems to be, youknow, until this happens to someone,
it's the only way I ever seemto be able to put a in
in people. I mean, Iknow so many people expressed the cinnamon.

(22:53):
Amy just said that. Well,you know, this is like the fifth
data data breach notice I've gotten.And you know, my advice is when
you get one of those, takeit seriously. Do what they say,
set up the identity theft monitoring,change your passwords, all that stuff.
But you know, once the badguys have these kind of these files full
of passwords, folks have to understand. This isn't like some dude in his

(23:14):
mom's basement just casually going through thisfile and thinking, hey, here's someone
that has the email address Amy Wagnerat Allworthfinancial dot com. Let's see what
I can do with this today.You know, they're running automated tools to
try to crack these passwords. They'rerunning automated tools to essentially spray this stuff
out by the millions every minute.You know they're not. This is all

(23:36):
very sophisticated because if they can stealmoney, they will, and when they
can steal lard, even if theytake ten dollars from one hundred million people,
they've just made a lot of money. And they're usually in places where
they can't be touched. They're insome foreign country with no extradition policy.
The government probably turns a blind eyeto it at best, or is maybe
complicit in it. Look what theFBI is said about North Korea and how

(23:56):
they use this sort of cybercrime tofund their government. So when people say,
well, what can I do?I don't care. My data is
already out there. There are concretesteps you can take. First off,
to be aware that this is athing, and secondarily to take it seriously,
and then to realize that if youuse strong unique passwords, which is
relatively easy to do with a qualitypassword manager, and you turn on MFA

(24:18):
two factor authentication two step verification onall your accounts, you're going to be
much more secure than the average person, and they'll move on to a softer
target. You mentioned a quality passwordmanager. Is that something we should be
paying for. Is it worth thecost? I know you've done the research.
Yes, it's absolutely worth the cost. Now there are free tools out
there and quality tools. Folks cango to zd net or c net or

(24:42):
Tom's Guide and find editors and expertswho rate this kind of software. My
recommendation would be to use one password. In my opinion, it's the best
one out there because it has anadditional security feature that makes it a little
more secure than the others. It'llwork on your phone, it'll work on
your table, it'll work on yourpeace See. So basically, once you
create a strong, unique password forthe Password Manager, and that's a must.

(25:04):
And by the way, I wrotean article about this, I'll post
it on all my social media sopeople that want more information can just follow
the steps I've outlined. You canfind it on x, Twitter, LinkedIn,
et cetera. But once you havethe password Manager, it follows you
around. It allows you to createand manage strong passwords for all your accounts.
All you need to know is theone master password, and you need

(25:25):
to make sure you have multi factorauthentication turned on in that account. You'll
be asking more secure than most people. And once you get over the initial
friction, you'll actually wonder how youever live without it. It sounds like
having one password is a detriment,but this is software that you have one
password and it's got multi factor authenticationto give it that added level of security.
Correct, exactly right, And it'srelative. You know, it's not

(25:48):
free. It's relatively inexpensive versus theadditional productivity and security you'll get once you
get accustomed to it. I willadmit it's aggravating when you first start using
one of these tools, trying tofigure out, like how does it work
and how do I use it?But once you get over that initial frustration,
I promise you you'll not only bea lot more secure again, you'll
wonder how you ever live without it. I don't know any of my passwords.

(26:11):
They are all some crazy random string. I can easily change them.
I have access to them from allof my devices. All I need to
know is the master password. Nowit's very complex, good luck cracking it,
but that's it. I only needto know one. I have my
MFA turned on on that and allmy accounts. Frankly, you should turn
on MFA everywhere you can, andyou again, you're going to be so

(26:33):
much more secure than the average personthat unless you are being explicitly targeted for
some reason, they're just going tomove on to a software target who hasn't
done any of these things. Youknow, I listened to you, Dave,
and I think, oh, thisis just this is too much.
It is annoying, it is frustrating. If you are feeling this way,
that's okay, but you also wantedto have to understand this is where we

(26:56):
are and this is what is requiredin or to protect ourselves. And on
the other end of this, youdon't take these steps, and it is
a terribly difficult web to unwind,and it usually doesn't work out well for
you. Amy, You hit thenail right on the head. I agree
with everything you said. I understandpeople are frustrated with this stuff. I
understand people want less friction, notmore friction in their life. I totally

(27:19):
understand all those things. But youknow, just go look at the latest
cyber crime statistics from the FBI andsee, you know, people are losing
large amounts of money, They're havingtheir identity stolen, which then becomes extremely
difficult to unwind. And while there'snothing you can do that will make you
one hundred percent impervious to this stuff. There is a small set of simple

(27:40):
things, most of them cost nextto nothing. MFA is free. There
are free password quality free password managers. Again, I recommend one password,
but there are other good ones outthere. And for a relatively small amount
of money, you're basically creating avery large insurance policy for yourself. So
you're not going to have your moneystolen. You're not going to have to
go through the pain of trying tounwind a bunch of identity theft. It

(28:03):
really is relatively simple to substantially,probably exponentially raise the bar and just make
the bad guys move on to someoneelse who isn't doing these things. You've
got to make sure that you arenot the target rate ten billion passwords stolen.
Likely your information is out there.These steps are not easy, necessarily
to your point, Dave, They'renot frictionless, but they are necessary.

(28:26):
Great perspective, as always from ourtech expert, Dave Hatter from intrust It.
You're listening to Simply Money presented byall Worth Financial here on fifty five
KRC the talk station. You're listeningto Simply Money presented by all Worth financial
I med me Wagnerre along with SteveRuby. Hey, you have a financial
question you and your spouse just arenot on the same page about You cannot

(28:48):
figure it out, or maybe there'ssomething that's keeping you up at night.
There's a red button you can clickon while you're listening to the show.
It's right there on the iHeart app. Record your question and it's coming straight
to us. And ahead, whatlengths would you go to to pay for
your dog or your cat's medical costs? These stories are I opening. I

(29:08):
don't know. Maybe you would goto these lanes too. We'll get to
that in a few minutes. Butfirst we're talking about the four to one
K, and we talk about thefour O one K a lot of the
show. Why well, because formost of us is going to be the
number one vehicle that gets us fromthis working world into retirement someday. And
most of us want to be ableto get to the point where we don't
have to go to work and getout of bed every Monday morning, right,

(29:30):
And so as we do that,you really have to understand the foural
one K. And I think myissue with so many people is you will
spend so much time figuring out whereyou're going to go to dinner tonight or
this weekend, or you'll figure outspend so much time figuring out those vacation
plans. And then someone asks youa question about your four one K and
you're like, I don't know.I don't really know how it's invested.
I don't really know what my companymatches. Should I be putting money in

(29:52):
a Wroth war one K? IsWroth WARO one K even an option?
And we're here to tell you itis incredibly important to understand your four K
and all the options associated with it. Yeah, and specifically we're talking about
Wroth within a four to one Ktoday because I'll get people to come into
my office and they confuse wroth Irawith Wroth four oh one K. They
think they have a roth Ira,but really what they're doing is they're contributing

(30:14):
Wroth dollars into their four oh oneK, which can easily commingle with your
pre tax money. Oftentimes, youknow, when you're contributing Roth, your
employers putting in pre tax on thematch, so you do have commingled assets
inside of your four O one K. But there are some key differences here
Now remember when it is the fourtoh one K, there are limits on
how much you can contribute. Intwenty twenty four, it's much higher than

(30:37):
an IRA. We're talking twenty threethousand dollars. If you're under the age
of fifty this year, if youturn fifty this year, then you get
your catchup contributions. You can putup to thirty thou five hundred dollars in
a combination of pre tax and orWROTH contributions yourself. Now, remember your
pre tax contributions. This is traditionallyhow it's been done. When you make
that contribution, it is deductible.It removes it from your ro income.

(31:00):
You're not paying taxes on it now, but you are deferring and you're paying
taxes on it later. In doingso, all the gains that you experience
will be taxed as well. Now, your ROTH contributions are not deductible,
but the beauty of it is theywill grow tax free for the rest of
your life, and it converts totax free when you turn fifty nine and
a half and as long as themoney's been in the account for five years.
What I see really often is,and I think the WROTH four O

(31:22):
one K is a newer option withinthe four oh one k, right,
the traditional four oh one K.Most of us have kind of gotten used
to how that works. And soyou'll get close to retirement and you say
you have a million dollars accrued inthat four oh one K, and you
are so excited about that and allthe things you can do with that million
dollars. Well, what tax bracketare you in? If you're in the

(31:42):
twenty percent tax bracket, actually onlyeight hundred thousand dollars of that is yours.
Two hundred thousand of that when yougo to pull that money out,
belongs to the government. Or ifyou're not going to pull that money out
in the form of required minimum distributions, Uncle Sam is going to come call
in and say, Okay, thatmoney has been you haven't paid taxes on
that for long enough. Now youhave to. Yeah, so you're kind

(32:07):
of forced even if you don't needthat money at that time. So understanding
the differences between the two, andI also think another thing that confuses a
lot of people is with a wrothira, there are income limits. If
you make over a certain amount ofmoney, you can't put money into a
roth ira. You can put itinto a traditional IRA, and there are
some strategies there something called a backdoorwroth where you can move it into a

(32:30):
wrath. But generally, I thinkwhen people hear wroth, wor O and
K, they think, oh,well, I make too much to put
money into a wrath WORA one K. Absolutely not. There are no income
limits on the four oh one K, And just to be fully transparent,
I don't know if I'm in ahigher tax bracket now then I will be
in retirement. Probably am I'm stillputting money into a roth wor O one

(32:51):
K because the value of those gainson that investment growing into retirement in the
fact that I will have so muchflexibility when I get to retire with those
wroth dollars of well, if Ineed to buy a new car and that
car is forty thousand dollars, Itake out forty thousand dollars. At that
time, I take out the exactamount that I need for it. I
don't have to factor in how muchmore I need to take out because of

(33:13):
taxes. I'm not saying this isa one size fits all proposition is way
more nuanced than that. But Ithink if you've never looked at a WROTH
option within your four one K,and I see lots of people in my
office who just always always put moneyinto that traditional four on K. I
think this is something worth looking atand figuring out if it makes sense.
It's a conversation you really do needto be having with a produciary financial planner

(33:36):
or your CPA, because the abilityto diversify the future tax liability is a
major benefit of doing WROTH today.I'm in the same boat again. You
know, I am different than anylistener, so this is you know,
this isn't advice, but I doall WROTH. Technically, I could probably

(33:57):
benefit by doing some pretax today,but I'm young enough to have a large
enough runway so that I can experiencea lot of tax free gains by the
time I switch to pulling from theaccounts that I've accumulated. So it is
something that has nuanced though, becauseif you know, I will pivot that
eventually. If you're knocking on thedoor to retirement, you're a high earner.
Typically there's income thresholds that can,for example, impacts what you're going

(34:19):
to pay for your Medicare Part Bpremium. So if you're getting a few
years away from retirement, you're doingROTH, maybe switch to pre tax if
it's going to kick you below abouttwo hundred and ten thousand dollars in income,
because then you have planned accordingly soyou don't have to pay more for
medicare, for example. That's whywe want to make it clear that these
are generalities here. You need totalk to somebody about your own financial situation
before making a decision like this.And if you have children who are in

(34:40):
their twenties right there, just comeout like, please tell them about Roth
Warolon case because they are likely ina lower tax bracket. Now you mentioned
that long runway that you have,imagine the runway that your children have.
So make sure that they understand thatthis is a good option, likely for
them and definitely something to look into. Here's the all Worth advice. Knowing
which jaw should go in which accountat what time it's incredibly important. We

(35:02):
recommend you figure out a certified financialplanner that you can work with that can
help guide you. Coming up next, how much is too much when it
comes to paying for your pet.You're listening to simply money presented by all
Worth Financial here in fifty five KRC, the talk station you're listening to simply

(35:23):
Money Present of All Worth Financial ImamiWagner along with Steve Ruby. If you
have a pet in your house,how much would you pay if something happened
to that animal, if that doggot sick, if that cat got sick.
I think this is a if youdon't have a pet. I like
I for years did not have apet, and I would look at my
neighbors and my friends and I'd belike, you paid for that dog's torn

(35:45):
ACL. You paid for this organicsomething treatment for Xyz. And now I
have this dog that I love somuch, And I throw no judgment on
anyone because I have no idea howmuch I would pay if he needed something.
Yeah, I paid for ACL.You did that repair for their dog.
Yeah, It's it's an easy decisionreally when it comes down to it,

(36:09):
because there's such a member of thefamily. Yeah, you know,
some people are going to take itfarther than others. Though. A New
York Times recently asked readers to sharestories about some of their expensive vet bills
that they've come across, and there'syou know, hundreds of people responded,
and one woman in particular, sheactually donated blood plasma, took extra freelance
work to pay for her dog's ongoingexpenses. I get it, I get

(36:30):
it. You know, a Georgiawoman's dog and horse each had, you
know, huge medical emergencies, totallymore than thirteen thousand dollars. You know,
both animals would have died. Sothis is you're getting it from both
sides. Two members of the family, your horse, your dog, both
would have died if she didn't dothis. So she was completely content with

(36:50):
making sacrifices that she needed to tokeep these these perceived members of her family
alone. Yeah, let's talk aboutthe sacrifices. Though she maxed out a
credit card, she taps into herhusband's retirement account, she took out a
personal loan. Tough gosh. Youknow, I think where I land with
this is that an emergency fund iscritical if you have a pet that you

(37:12):
know you would go to the endsof the earth for that emergency fund becomes
part of that pet insurance. Ifyou know that you are someone like this.
I was just talking to someone recentlywho had some kind of deal worked
out with their vet where they paidthirty thirty five dollars a month and then
whatever care is needed, it wasavailable at that veterinarian's office, you know.
So it's kind of a form maybeof pet insurance. And I think

(37:36):
I completely understand these emotional bonds.I get it now, but you have
to think about it. Rather thanmaxing out credit cards, pulling money from
for ow and keys, taking outpersonal loans. Long after those animals are
gone, you're still paying these thingsoff, think about how financially you can.
Really hear, this is a toughone, but I, you know,
I you know, I've had petsand I've lost them over the years,
and I have a very trusted VETand I asked her what would you

(37:59):
do in this situation? And shewas she was very honest with me,
and I took that direction and bothtimes it was not paying the money.
Really Yeah, and that's tough,but you know, listening to a trusted
person that that you know, youbelieve their feedback was was the route that
I tell well, And I think, yes, when you trust them and
they say you can spend this moneynow and a month from now, the
results aren't going to be much different, right. I think that that that's

(38:22):
incredibly helpful. So, yeah,find someone that you can trust right,
we talk about a fiduciary. Findit making sure you're working with a fiduci
Well, here's the all Worth advice. If you plan on owning a pet
in the future or you own one, know what you're getting into as it
relates to costs. Make sure you'vegot a plan for that. Thanks for
listening. Tune in tomorrow we're lookingat how safe your financial apps are.
You've been listening to Simply Money presentof my all Worth financial here in fifty

(38:44):
five KRC the talk station