Simply Money

Episode Transcript

(00:07):
Tonight, I would argue, theremight be one thing that impacts your four
O one K and all of yourinvestments more than anything else. Are you
even paying attention to it? You'relistening to simply Money presented by all Worth
Financial. I mean me Wagner alongwith Andy Schaeffer, who's in for Steve
Ruby this week. What got aninteresting segment earlier this week looking at what
some global fund managers. These arepeople who are constantly have their fingers and

(00:30):
investments and are trying to figure outwhat the next sort of thing that might
be impacting them, and in formonths and months and months and months and
months. Every month it's the sameresponse inflation, inflation, inflation, inflation.
The exciting thing, at least forme, was that finally they said,
okay, when we look at thehorizon and we say, okay,
what do we think is going toimpact the stock market, we would say
maybe geopolitical events more than anything else. And I was like, oh my

(00:53):
gosh, finally finally we can maybepivot away from talking about inflation all the
time here. But I would say, even beyond what those global fund managers
say that we need to be worriedabout as investors. There's something else I
think that's even bigger, that playsa bigger role in this, and that
is corporate earnings. How healthy arethe companies that you are invested in.

(01:18):
Yeah, I mean think about it. You know what we're when we're investing
in stocks, that is ownership ina company. So ultimately, what you
want is to have a company tobe profitable. All the other noise aside.
If you invest in let's say Procterand Gamble for instance, at the
end of the day, it's abouthow that company does. Whether you know

(01:38):
how politics plays a role, howinflation plays a role, all that does,
I mean, it does have aneffect. But at the end of
the day, how that company isperforming. It's very important what their earnings
are because when your earnings are aredoing very well, that ultimately is going
to help the stock price of thecompany and ultimately raise the value of your
portfolio. You are invested in thesecompanies, right how well they do?

(02:05):
And it's so interesting. And AndyStouder, chief investment officer, was on
the show a couple months ago andI literally said to him afterwards, you
said the most profound thing you haveever said on our show, and that
is that the American economy is actuallybuilt on the back of corporate greed.
Corporate greed, we are invested incorporate greed. Now that sounds like a

(02:25):
negative thing, but what it comesdown to is are you going to bet
against the men and the women whoare tasked every day with making sure these
companies earn money. I don't thinkso. You have to look no further
than the pandemic. Right we weren'tgoing to bars anymore. We weren't ordering
margarita's when we were out and aboutbecause we weren't out and about anymore.

(02:50):
Okay, so then what did thoseliquor manufacturers, those people that made tequila
do. We needed hand sanitizer.We needed so much hand sanitizer. So
are literally in a boardroom somewhere atleast this is how we picture it,
saying no one's buying tequila right now, or people are purchasing less tequila right
now, what are we going todo. Let's use the tequila or whatever
it was to make hand sanitizer.They found the most amazing way to make

(03:15):
a profit. Like, what's thecurrent landscape with the product that we have,
How do we make that fit?How do we make money. When
I think about that example in andof itself, I'm not betting against any
of those people. Well here's agreat example of that specifically, Amy,
do you remember when we used tohave film for cameras and there was a
company called Kodak. I do rememberthis, It's a distant memory. Yeah.

(03:39):
Well they've changed their whole business modelnow and now they make chemicals,
right, so they don't even dofilm anymore. So they are still viable,
but they don't even do photography orfilm or anything like that anymore.
And I think what people need torealize is that, certainly we are a
capitalist society, and at the endof the day, the responsibility of the

(03:59):
company, particularly public companies, isto reward their shareholders. That number one
day that companies need to focus on. It's make sure that we make a
profit to reward our shareholders, andeverything else comes after that. Certainly they
want to do good in the community. Certainly they want to make sure that
they are treating their employees correctly,and they want to have a good environment

(04:19):
and a good culture and all thosetypes of things. But number one is
rewarding the shareholders. And to dothat, it's about making profits and so
when you are invested and you havea specific portfolio, remember that these companies
are doing their best in order tomake a profit, not only for the
leadership group within that company, butthey also want to expand their company,

(04:43):
to make their lives better for employees, but also for their investors. They
want to make sure that their investorsare happy. And that's why earning season
is very important to take a lookat, because ultimately that's really what drives
our economy and that's how the marketworks. When we talk about the impact
that earnings have on your flour oneK, I am not saying that you
listen in on earnings calls or thatyou pay attention to the weekly economic calendar

(05:08):
and that you are Okay, Teslais reporting today is the second that that
report comes through. I am goingto you will make yourself crazy. But
if you did happen to check yourflour ohn K yesterday, you might have
been like, what the heck isgoing on here? It didn't fall ten
percent, but it certainly dropped morethan you would normally expect to see in

(05:30):
a day. What's going on there? Okay, Well, we've been talking
about these tech companies who are alittle overweighted in the S and P five
hundred and just really kind of movingthe markets. Look no further than Nvidia
over the past year, the nightbefore their earnings call, in anticipation of
what might happen, we have seenmarkets move, right. So yesterday we
had some disappointing second quarter earnings fromTesla and Alphabet, and the markets went

(05:55):
down as the results of that.Now, most companies' earnings reports individually won't
necessarily sway the market. Certainly,some of these big tech companies have lately
well. On the other hand,those companies like Nvidia, Alphabet, and
Microsoft are the reasons that everybody isgame ten. We've had a good year

(06:15):
in the market, right right,So breathe a little bit and understand that,
yes, they they didn't meet analystexpectations, but they're still very profitable,
and so a two percent drop inthe market on one day doesn't really
make a significant difference in your overallportfolio. We've all enjoyed great growth so
far this year, and it's allabout volatility and navigating through that volatility.

(06:38):
So, yes, they came upa little shy of expectations. That doesn't
mean they're not profitable. So youknow, this is a long term play.
You can't get caught up every daytrading, every day volatility, because
do respond to some of that.But if you're not a trader and you're
an investor, it's about the longterm focus. This is just a blip

(06:59):
on the right or All those companiesare good companies, and certainly you might
probably don't even know that. Youprobably hold in Video, Microsoft, Alphabet
within your four o one ks,and so when you see your four to
one k drop a little bit,it largely had to do with those companies
missing earnings a little bit yesterday.But don't worry about it too much,
because those companies are great. They'rehere for the long run, and I'm

(07:19):
glad that I invest in all ofthose companies. So yesterday was just a
blip on the radar for me.Yeah, you know, it's crazy,
as we talk about, you know, the fact that stocks were down a
little bit yesterday, not a littlemore than a little bit. I mean,
two percent is more than you'd liketo see in one day. But
here's the headline that I saw thatI was like, oh my gosh,
are you kidding me? Wipe outWednesday on Wall Street? Now I love

(07:40):
some good alliteration, but I don'tknow that I would call that, oh
wipe out. And that's where Isay, like, hey, focusing on
corporate earnings, yes, as itlike overall, but focusing on individual companies
in the ebbs and flows of thatcould drive you crazy. You're listening to
simply money presented by all Worth financially, I mean you Wagner along with Andy
Schaeffer, as we say, hey, if there was one thing that we

(08:01):
think impacts your floralin k, yourinvestments, your ability to retire maybe more
than anything else, would be corporateearnings. It kind of is a measure
of the health of a company andwhere they think they're going in the future.
There's all kinds of analyists that makepredictions and oftentimes you'll hear you know,
was there an earnings miss or youknow, did they hit or were

(08:22):
they Markets often go up if analystsmake a prediction about a company's earnings and
they come out even better. Andthat's what we talk about earning season from
time to time, and we don'tnecessarily get into the nitty gritty of any
individual companies, but hey, wewould say on a day like yesterday when
there were a couple of individual companiesmoving the market right, Tesla and Alphabet

(08:43):
mostly. This is why we're hugeproponents of not necessarily investing in individual stocks.
You want to talk about volatility,you would have needed a drama meine
yesterday if that's what you were investedin. You know, that's why I
like indexes and I like to have, you know, that diversified approach to
a investing, because yeah, you'regoing to have the NVIDIAs in there for

(09:03):
the days that NVIDIAs are good,and then you're going to have other companies
and there for the days when Teslaand Alphabet aren't doing so well. Yeah,
there are hundreds of companies that reportearnings, and so you know,
when you have a few that are, you know, part of the Magnificent
seven, you know it's going tocreate headlines. But ultimately, very few
people have a portfolio of individual stocks. Most of us have four to one

(09:24):
KGE retirement accounts that consist of mutualfunds, exchange strate of funds that have
hundreds of different securities in them.So when you do have a drop like
this with particular securities, you haveProcter and Gambles that have you know,
you know, consumer goods and thingslike that. You might have some energy
stocks that are part of that.So don't worry about the drop with today's

(09:48):
technology and those types of things,because those companies are going to rebound just
fine. It's more of an overreactionto earnings reports. They're still going to
be okay, and so the brighterdays are going to be ahead. So
what do you do with this information? Right? What do you do with
earnings reports? You know, asan investor? First of all, I
think you got to keep in mindwhen you're reading headlines about them, that

(10:11):
they are headlines. They are clickbait. I just mentioned, oh, wipeout.
If you check your floor, okay, yeah, maybe it's down.
Was it wiped out? No?I mean that would be the We would
have much bigger things to talk abouttoday. You know, if something was
wiped out, they'll often use plummetswords like that, you know, and
the use points and the numbers.We say, hey, what the percentage

(10:33):
down? The percentage up? That'swhat matters. And interestingly, we have
been in this long period here ofrelatively no volatility. In fact, I
think until yesterday or recently, wehad in seen volatility of more than two
percent in year year and a half. You feel that more, right,
just behavioral finance says like ouch,that hurts more when you're not used to

(10:54):
that. But it doesn't mean youneed to do anything different with your investments
as the result of that. Well, you do want to keep an eye
on you know, what kind ofcompanies do you are you overweighted or underweighted
in So I have a few customersthat really enjoy being part of tech.
Well, they've enjoyed a lot ofthe growth that we've had this first part
of the year. Well, nowthey're feeling a little bit of the hurt

(11:16):
and they're understanding the importance of beingdiversified. I had a client the other
day that, you know, shewanted to buy some Nvidia, Microsoft,
and Alphabet This was just two daysago, and and I cautioned her against
that. And immediately when she boughtthose, all of those companies were down
five percent. And what I explained, you know, what I explained to
her was and I explained it onthe on the front end. And I

(11:39):
say, yeah, exhibit A.What I explained to her on the front
end is you already own a pieceof that. She said, Well,
my brother told me that I needto be invested in these companies and this
is really what I want to do. And I said, okay, well
this is going to be on you. I'm happy to do it. It's
a good long term play. Butdon't be surprised if you get a drop
any day now, and certainly ofcourse that it happens to me that day

(12:01):
was the next day. Yeah,and I think you know, one bad
earnings call. You know, wetalk about not necessarily paying attention to individual
companies, but our hometown team isProcter and Gamble. You've mentioned it several
times, you know, as we'vebeen talking. The reason why is because
we see a ton of clients walkthrough the doors of all Worth that you
know, have a lot of individualsstuck, and often it's Procter and Gamble.

(12:22):
We have seen Procter and Gamble misearnings in the past, right,
and then we've seen them rebound thequarter after. So even if there's a
company that you are invested in,or your four one K took a hit
because of Tesla or whatever, don'texpect that this is a trend that we're
going to see and you know,everything's going to you know, in the
toilet here. That's not the case. It's just you know one missed earnings
your four one K probably you knowfelt that as the result. But this

(12:46):
is not necessarily a trend that youneed to worry about future wipeouts or whatever
anyone's calling it in the headlines.Here's the all Worth Advice company earnings.
They are important to pay attention to, but no need to panic. If
you have a highly diversified portfolio andone company has a bad earnings call,
you will survive. You will befine. Coming up next, we're looking
at the amount of money workers leaveon the table when they leave their jobs.

(13:09):
Why you need to care. You'relistening to Simply Money, presented by
all Worth Financial. Here in fiftyfive KRC the talk station. You're listening
to Simply Money presented by all WorthFinancial. I mean you Wagner along with
Andy Schaeffer. If you miss ourshow one night, you don't have to
miss the thing we talk about.We have a daily podcast for you.

(13:31):
Search Simply Money on the iHeart appor wherever you get your podcast. And
coming up at six forty three.Okay, when we talk about lowering your
tax burden, what does that meanand why is it so important, especially
when you retire. We're going toget to that. Okay, So there
have been a couple of times inrecent weeks and we've talked about something called
the VIX, and this is kindof how investors feel about market volatility and

(13:56):
their expectation of it in the future. The cool thing is, I guess
the good thing is recently the VIXhas remained below its long term average of
twenty for some time. Right,we saw a little lake blip last week
in anticipation of President Biden sort ofwalking away from the race. And now
maybe the future's curve of the VIXsuggests that maybe we should expect more volatility

(14:20):
coming up closer to the election.I'm thinking this is like not even news
expect volatility around the election. Okay, Well, that's usually what happens,
you know, during the election cycle, and during an election year. Usually
the first part of the year isfairly calm. When you start getting into
the end of the summer early fall, things start to pick up. And

(14:41):
so one of the measurements that wetake a look at is the VIS and
that is an index that is shapedby the Chicago Board of Options to Exchange
and so What that tells us ishow much volatility is there. And the
more volatility suggests that there is alot more nervousness from investors in general.
And when there's low volatility that itsays, hey, we feel like we're

(15:01):
doing okay. I don't need tomake a lot of adjustments, and so
the VIX becomes a lot lower.Now for me, when the VIX is
low, that makes me nervous becausewhen people get a self a sense of
calm, that means that they're comfortablewith where they are, They're comfortable with
their portfolio, and maybe they mightbe concentrated in too many areas to where

(15:24):
it can be success accessible to alot more volatility there. So when we
look at the vics right now,things are calm, but be prepared that
it's going to probably become more volatilehere in the next couple months. What
I hear you saying is that whenpeople feel really good about the markets,
they tend to do stupid things withtheir investments. Don't be that person and
also expect, Yeah, we're goingto have volatility as we get closer to

(15:46):
this election. That's going to happen, you know, But you have to
think about your investing in the factthat it's long term. I saw a
number this week. And we've beentalking about investing schedules for a long time.
This is your four oh one K. You put money into it,
and hopefully your company has a companymatch. You may not get one hundred

(16:06):
percent of that money immediately. Andwe've talked about the importance of understanding that
investing schedule. But this is thefirst time I've actually seen this number,
Andy, and it shocked me thatas many as three and ten of us,
right when we leave a job,when we say take this job and
shove it to the boss, whenwe get fired, when we retire,
whatever it is, when we areseparating from a job, three out of

(16:27):
ten times that that happens, weare leaving money on the table because that
money has not yet vested. Thatis a lot higher than I would have
ever imagined. And I agree withyou, but I think that there's some
other things to consider. So usuallywith the best you have to understand your
vested funds are what you contribute toyour retirement plan. So let's say,

(16:48):
for instance, you have a match, and most people do. If you
start to have a match and youleave within a year and you leave,
you get your money back, butyou do not get the employer's money back,
and that's too incentivize you to remainwith the company. Now, certainly
it's not good to leave money onthe table. But on the other hand,
if you are in a terrible positionand you don't like where you're working,

(17:10):
I mean, I get it,you want to get out of there.
It's probably wasn't the right decision.But far more often I see people
that don't even realize that they areleaving money on the table. Maybe hang
in there for a little bit,Maybe see if things turn around, and
make sure that you get all themoney that you can, because you don't
know what the next step is goingto be in your career. This is
why I hound this all the time. We spend so much money planning our

(17:33):
vacations, yet we don't necessarily evenknow the features of our four to one
k you know. And I saythis not because I'm casting like shame on
anyone, because this happened to meonce years and years ago. It was
in my twenties. I knew nobetter. I just made a career hop
and then was like what happened tomy four? Like ky and I had
walked away from like twelve hundred dollarsand I you know, and then,

(17:56):
of course, now the way thatmy brain works now, I'm like,
what that money have been now,all these years later? And then you
fast forward to retirement and ouch,that hurts. Knowledge is power, Knowing
that you're making an informed decision onwhen is the best time to leave based
on vesting schedule and another number ofother things. You know. I think

(18:17):
about my aunt who retired a fewyears ago. She actually came to me
a few months before her retirement.She'd had that date figured out, and
she had just got an information thatthere was a little bit of money and
that four oh one k that wasn'tproperly vested. We ran the numbers for
her and I said, okay,you would be completely vested. That money
would be yours if you stayed.I can't remember two or three more months.

(18:37):
Is it worth it to you?She decided no. But at least
she decided that completely understanding that shewas leaving that money on the table,
not that she got to the otherside and got to retirement and was like,
where is that money and by thatpoint it was too late. That's
awesome. I love those examples becauseyou know, now that I think about
it, you know, I haveso many conversations with retiree, So think

(18:57):
about it this way. You knowa lot of retirees say, Okay,
if I just work through April,I'm going to get this bonus. And
is it worth it for me tocontinue to work another quarter to be able
to get this bonus? Or doI want to be out now? And
so those are the types of questionsthat you want to ask if you're going
to leave your employer, even ifit's not a retirement decision, if it's

(19:18):
just about changing jobs. You know, if I work a little bit more
here, how much work can Iget? Do I get another mountain?
Types of things, and maybe it'snot worth it to you, but at
least you have the information to makea correct decision. In informancy, here's
the all Worth advice. Know thatvesting schedule when it comes to your four
one K, because you could leaveserious money on the table if you leave
that job before you're fully vested.I mean it could be just maybe staying

(19:41):
another month. We would say thisis something you need to consider and completely
understand. Coming up next, we'regoing to to spell some harmful miss that
people have about debt. You're listeningto Simply Money, presented by all Worth
Financial here in fifty five KRC thetalk station. You're listening to you Simply
Money, you presented by all WorthFinancial. I mean you, Wagner,
you know, when it comes toyour money, we find that many people

(20:03):
make mistakes because you just have badinformation and a lot of myths and misinformation
is out there, particularly about debtand credit and what you should be doing
with it. So joining us tonightis our credit expert Britt Scarce to set
the record straight. Britt, I'massuming you see this pretty often. It's
just that people think something is oneway and it really isn't and it ends

(20:26):
up costing them absolutely. And youknow, there are a lot of gurus
that are out here given financial advicethat you know, will tell you all
you should avoid debt at all costsand so forth. And don't get me
wrong, I'm all for living adebt pre lifestyle, but I don't recommend

(20:47):
that you have absolutely no open youknow, accounts, and that you don't
establish credit because having some credit establishedand using it responsibly actually will help save
you more money, because you know, a lot of things are based on
things like credit scores, like yourauto insurance and your homeowner's insurance, and

(21:07):
you know your ability to function inthe financial world like renting apartments and turning
on utilities and that sort of thing, and you can deal with having open
accounts and not necessarily have yourself buriedand debt. You can do both.
I love that you started here,Britt, because you know, we do
workshops all the time, and Ilove it. I love being out there

(21:30):
talking to people. And I alsolove that I can be at Kroger and
someone who's going to be really openwith me about their money. And I
can't tell you how many times throughthe years someone has come up to me
and said, you would be soproud of me. We cut up all
of our credit cards and we're notusing them anymore. I'm like, oh,
actually, no, I am proudof you. Don't carry credit card

(21:52):
debt because that's an absolute game changer, but having that credit available to you
and how it affects your credit score, it's really important to understand that.
I don't think enough people really dounderstand that. What are some other myths
about credit and debt that you seepeople falling for well, some people think
that you know every type of debtbings your credit score, and it's not

(22:15):
necessarily the case that you you know, having a an open credit card,
you know, and using it responsiblyto you know, if you put a
tank of gas on there, oryou pay a subscription on a monthly basis
and pay it right off and donot pay any interest, that's actually helping
to build your credit and maintain agood credit score, which again saves you

(22:37):
money in all the different areas ofyour financial life. So just because you
open an account or let's say youhave a mortgage, you know that you're
you know, continuing to pay downthat showing you know, responsible pay history
is actually helping you build a solidcredit uh credit score and just credit history.

(23:00):
And once again, everything that youdo in your financial life is affected
by having something established on your creditreport. If you have zero credit,
are there ways to get say amortgage with manual underwriting and having absolutely no
established tradelines. Technically there are somecompanies and banks out there that can do
that, but it is much moredifficult if you simply establish one or two

(23:25):
trade lines on your credit report,use it responsibly, pay it off every
month. When you go to purchaseyour first home, you're going to already
have some credit history there. It'sgoing to be much easier for you to
qualify for a mortgage. You rereadywant to get to this one. Next.
Good debt versus bad debt? Lotsof confusion over this. Lay it
out for us. Yeah, Gooddebt is debt that you utilize for an

(23:48):
appreciating asset, something like a home. Most people nowadays, in today's society,
cannot save up three hundred thousand dollarsand pay cash for a house.
Some people can, that's not thenorm. So utilizing credit, utilizing your
credit and you know, and ifthat and getting into some debt on a

(24:11):
piece of real estate that appreciates overtime, that potentially has even tax benefits
and so forth that could potentially comewith it, that would be considered good
debt. Bad debt is consumer debtthat is just simply debt that is high
interest, you know, usually revolvingcredit cards, department store cards. You
know, even a even a carloan can could be considered somewhat good debt

(24:34):
if you're using it reasonably. Now, if you go and get yourself into
a you know, an eighty thousanddollars automobile that you don't necessarily, you
know, have to have that expensiveof a car to be able to get
to and from work and so forth. Obviously, you know, having some
debt on a car so that youcan you know, get to work and
earn an income. There's you knowthat that's okay, But it's usually the

(24:55):
consumer debt and the revolving debt thatyou want to avoid. I think for
a lot of people, debt canstart really small. You know, you
can't pay off the credit card thismonth, and it just sort of snowballs
from there and you can get toa point where it just feels impossible to
dig yourself out. One of thethings I love about you is you are
so transparent in the fact that therewas a time in your life in your

(25:18):
early years when you were just working, where you ended up taking out a
huge amount of debt and really kindof dug a ditch for yourself. I
think a huge myth for people isthat once you've gotten yourself into debt,
you can't get out. Set therecord straight here for us, absolutely,
you know it's not permanent. Youknow, any kind of situation that you

(25:41):
find yourself in You are not ruinedforever. You know, just because you
owe some people some money doesn't meanthat you're a bad person or that you're
going to be you know, ruinedfinancially forever. You do have to do
something. You do need to takeaction, you know, assess your situation.
You work with your creditors to eitheryou know, the debt down,
you know, through some sort ofa strategy, whether it be the avalanche

(26:04):
method or the debt snowball or somethingof that nature, or settling with your
creditors to be able to get things, uh, you know, paid in
full so that you can dig yourselfout of debt. And sometimes people,
you know, they get there's alot of shame and there's a lot of
just anxiety that comes with you know, accumulating a lot of debt. But

(26:26):
it is temporary. It is atemporary situation. You do need to seek
out some some guidance and some adviceand someone who can mentor you, uh
to to kind of keep you ontrack and keep you positive, because yeah,
dealing with creditors is not you know, when you're late on your on
your bills is not the most funthing. And it can certainly be demoralizing
at times, but know that it'sa temporary situation. You can get a

(26:48):
hold of, you know, yoursituation, and you can dig out of
it. You know, some people, you know, if if they uh,
some people think that a small amountof debt is insurmountable. And I
can tell you that, you know, ten thousand dollars sounds like a lot
of money to some people. Butyou know what, in the whole scheme
of things, you can dig outof and possibly even get creditors to settle

(27:14):
for pennies on the dollar sometimes andget you out of debt completely. So
it's just a matter of developing astrategy, you know, seeking some help
and some encouragement, someone that can, you know, a coach to a
debt coach or a financial advisor thatwill come alongside you and just help walk
you through this and keep you ontrack and keep you positive and keep you
motivated, and before you know it, you can dig out of a bad

(27:37):
situation. Grit. I know youhave, you know sons that are you
know, kind of just starting outon their own. They're in that age
group. I've got some kids comingup to be that age too. If
there was one or two pieces ofadvice or things about credit and debt that
you would say, hey, like, this is what you've got to know
and got to understand as you arestarting your lives as adults. What would

(27:59):
that advice that information be. Well, first off, when it comes to
establishing credit, you know, youdon't need fifteen lines of credit, Okay,
establish one or two trade lines,use them responsibly. Don't ever put
anything on a revolving account that youcan't pay off the following month if you
do need to. You know,if you do get a longer term debt

(28:21):
like a mortgage or an automobile alone, certainly do your best to you know,
make sure that all payments are madeon time, and certainly do your
best to pay them off as quicklyas possible. I'm also a big fan
of a large emergency fund, soyou know, number one, you know,
do not get yourself into a lotof debt. Focus on making sure

(28:42):
that you have six months with aliving expenses, especially before you have a
situation where you know you're starting ahousehold. Everything. Start yourself on the
right path, you know, tobegin with, you know, using using
good financial principles and disciplines early on, get yourself in because building wealth and

(29:02):
dealing with finances is kind of likea muscle, you know, it's kind
of you have kind of like afinancial muscle. And if you if you
keep yourself in good physical shape,life becomes so much easier because you know,
you don't get yourself into a lotof uncontrollable debt. And you know,
if you if you do your bestto have an emergency fund, you
say fifteen percent of your income andyour four one K and toward retirement,

(29:25):
and you keep yourself out of debt, you're going to be in really good
shape financially. Great advice as alwaysfrom our credit expert, Bred Scares.
You're listening to Simply Money, presentedbyall Worth Financial. Here in fifty five
KRC the talk station. You're listeningto Simply Money and percented by all Worth
Financial. I mean you Wagner alongwith any Shafer. You have a financial

(29:47):
question you can't figure out on yourown, There's a red button you can
click on while you're listening to theshow. It's right there on the iHeart
app. Record your question and it'scoming straight to us and straight ahead.
How to make sure you've got themoney you need for all all that travel
you want to do in retirement,We'll make sure you can figure out how
to plan for that. You know, Andy, I think for so many
people when we say their word taxes, well, first of all, you

(30:10):
cringe, and then you think aboutApril. You think about tax preparation.
You and I think about taxes differently. We think about tax planning. This
is year round strategies. These strategieswe say we work with clients in order
to try to keep more money intheir pockets and have to give less to
Uncle Sam. Nothing illegal, nothing, that is just understanding how the law

(30:33):
works and being able to navigate itthe best that you possibly can. Now,
I'm going to say this to you, and you let me know if
you disagree. In your working years, there are definitely tax strategies that you
can do that will move the needlea little bit right, that can make
a difference when you get your retirement, especially potentially in those first few years.

(30:55):
This could be a game changer tothe tune of thousands, tens of
thousands of dollars if you do thiscorrectly. Yeah. So, think about
the marginal tax rate in the UnitedStates, right, So the more you
make, the higher percentage of thetax that you're going to pay. So
when you're in your high earning years, you're going to pay, you know,
significant taxes. When you retire andyou no longer have an income,

(31:19):
that's the sweet spot before you startto have to take r mds. And
the current law is at the ageof seventy three. So when you retire,
the idea is, well, youno longer have this large income that's
coming in where your tax at ahigher marginal tax rate. So this is
the sweet spot. This is thetime to consider taking distributions from your IRA,
maybe doing some roth conversions, andwhat a rock conversion is is taking

(31:41):
money from your traditional IRA, movingit to a roth IRA to try to
to try to maximize the lower marginaltaxic rates when you do that, so
that you have the ability to haveflexibility later inquiment. Yeah, and I
think it's it can be trick tofigure this out because there's so many factors.

(32:02):
You know, you mentioned tax bracketsand where you're going to be,
you know, in in retirement versuswhere you are when you're working, you
know, and are you not goingto take Social Security maybe those first couple
of years, you know, allof those things. I think make a
difference here. And so there area lot of things to think through in
different maneuvers. And we talk aboutthe flexibility of kind of having your money

(32:23):
in sort of different tax treatments,you know, and that simply means,
you know the tax treatments of doyou have some money in a wrath,
do you have some money in ataxable brokerage account, do you have money
in a traditional account? In whichaccount? Then as you kind of transition
to not no more longer putting moneyinto those accounts, but pulling money out

(32:45):
in which sequence do you do that? And there's a lot to think through
there. As to your point,you get closer to the age where you
are taking required minimum distributions. Yeah, and so the other thing that you
want to consider when you take thoseDIBs is, you know, you know
what accounts am I taking it from? Do I take it from my taxable
account? Do I take it frommy retirement account? And traditionally, what

(33:07):
I usually do for my clients tosay, okay, when you are not
working anymore and you have a lowincome, let's take your regular recurring distributions
from your IRA. And so thatyou have a specific understanding of how much
that you're pulling out and how muchis going to be be taxable. So,
for instance, if you're going totake out three thousand dollars a month
from your IRA, you know that'sgoing to translate to thirty six thousand dollars

(33:29):
a year. And then for largerpurchases, then maybe you can take some
money from your non qualified accounts,your individual account, your joint account,
and so that's not going to addto your income. But you also have
to take into account capital gains tax, what is the cost of the security
that I bought versus when I sellit, and so all of those come

(33:50):
into play when you're trying to figureout your tax liability at the end of
the year. Yeah, there's alot of moving parts here. And I
think that's why so many times whensomeone who has kind of a diyre right
has managed your investments for years andyears on your own, and you've been
able to amass you know, enoughmoney that you know you can retire,
well, they still end up walkingin the door to our offices because they

(34:10):
know that this kind of tax strategycan really make a difference, and it
can be you know, I thinkit's hard for the average person to figure
out. There's a lot of movingparts here, but I'm telling you,
you get this right and you've gotmore money in your pocket. You get
it wrong, and Uncle Sam ismaking a lot more money off of you
than maybe Uncle Sam would need tootherwise. Here's the all Worth advice.

(34:30):
We recommend hiring a qualified financial proand a tax pro that can help you
navigate what can be some pretty confusingstuff but ultimately help you keep more money
in your pocket. Coming up next, how to ensure you've got the money
you need or want to travel andretirement. You're listening to Simply Money presented
by all Worth Financial here on fiftyfive KRC the talk station. You're listening

(34:54):
to Simply Money presented by all WorthFinancial. I Memi Wagner along with Andy
Schaeffer. When you think about retirement, what do you picture? I mean,
I don't think Andy, that mostpeople think. They picture like sitting
around their house watching TV all day. That from most people isn't what they
want. They picture traveling. Youknow, I hear people talking about European
you know, going to Europe oryou know, going on cruises or visiting

(35:16):
the grandkids who live across the country. And I think for many of us
that's part of the dream. Thequestion is how do you fund that dream?
How do you make sure that whenyou get to their point of retirement
that money is there and you don'thave to worry about it. Well,
I think a couple of things.You know, when you are looking at
your financial plan and you are budgetinghow much money do I need to live
on? You have to have certaindifferent inflation assumptions, you know, for

(35:38):
your general goods, And obviously overthe last couple of years inflation has been
really hot, but generally speaking you'relooking at about two and a half to
three percent when you're looking at yourfinancial plan, I think that you need
to set aside a separate goal fortravel. Yeah, travel typically has a
higher inflation rate than the costs ofmilk and eggs, So you want to

(35:58):
set a separate goal travel to makesure that you're reaching those goals. You
know, when we talk about thecost of energy, well, that's going
to translate to your travel as faras your flight is concerned, if you're
going to Europe or driving to HiltonHead or whatever it is. So I
think you need to set aside aseparate goal for travel and incorporate a little
bit higher inflation assumption when you dobudget for your travel. Yeah, you

(36:21):
know. I think one of thethings that Steve Ruby talks about, and
I love the way that he looksat this, is like your first years
of retirement are your go go years, and then they become your slogo years.
You're not retiring as much, ormaybe you were going to Europe before
and now you're going to Florida andthen it's your Nogo years. You know
you're in. Those later years canalso be more expensive, not necessarily because
you're traveling anymore, because healthcare costsgo up. So you know, I

(36:43):
think those who go into retirement expectingthat every year is going to be exactly
the same cost because you're looking atyour bills, your mortgage, your grocery
bills. You know it's really notgoing to be that way. And you
mentioned kind of planning for those goals. I will even take it a step
or two further with the clients thatI work with, because I have a
lot of people who say, youknow what, every three years, we
want to go to Europe. Everyother you know, every other year,

(37:07):
we still want to travel, butmaybe that looks like driving to Hilton Head,
like you mentioned driving to Florida orwhatever. So I say, okay,
how much you know, on averagedo you think it's going to cost
for the Florida trip? And webuild that into the plan. Okay,
then let's look at what we thinkthat Europe trip would be every three years,
so I will even have multiple travelgoals within a plan so that I
can really make sure this thing isair tight and that they don't get to

(37:30):
the year where they want to goto Europe and they're like, oh,
we just I don't know, wedon't have the money for it, you
know, well, And I thinkthat is a great point as far as
your go go years and things likethat. You know, with my clients
when they retire and they have theirhealth is all together, I always heard
them do more things. Yeah now, because tomorrow is never given to you.

(37:50):
And I think about my mother inlaw who recently retired from General Electric
and she's taking cruises, she's goingto Egypt, she's doing all these fun
things and this is the time timeto do it right. And so you
don't know what tomorrow gives you,and a lot of times you understand within
your financial plan that you're going tospend a little bit more in your late
sixties early seventies, but you alsoknow that in your eighties you're just not

(38:13):
doing as much. So when youretire, my advice to you, as
long as you can afford it,do all the things whatever makes you happy,
do more of those things. Yeah, the key is making sure you
can afford it, and that's whyyou build these goals right into your financial
plan. It makes so much sense. Thanks for listening tonight. You've been
listening to Simply Money, presented byall Worth Financial Here in fifty five KRZ,
the talk station