Simply Money

Episode Transcript

Speaker 1 (00:06):
Tonight, we are tackling conflicts of interest? What do they
mean to you? Five twenty nine plans maximizing retirement savings
during high earning years, and you are asking the advisor
you're listening to simply when you presented by all Worth Financial,
I me Me Wagner along with Steve Ruby. Okay, a
lot to get to tonight, so we're gonna get right
to it. We've talked a lot about the fiduciary standard,

(00:29):
and I think the weird thing, Steve, for so many
people is when we explain the fiduciary standard as being
that you are working with someone who is making a
recommendation to you about your money that's also in your
best interest, It's like, wait, what, Well, of course that's
what people would do, right. Well, Unfortunately, in our industry

(00:53):
to be totally transparent, that's not always the case.

Speaker 2 (00:56):
You would think it would be right. It should be
that when somebody giving you financial advice, they have your
best interests in mind, but unfortunately that's not the way
the world works. There are different types of advisory firms.
There could be good advisors that work for bad firms
and their hands are tied and they have to sling.
I would say certain products to hit certain sales goals,
and inherently that's a conflict in and of itself. If

(01:19):
there's some kind of better solution that could be offered,
but you and your company are getting paid more to
sell that goal, that's a conflict than that needs to
be disclosed. That's one of the reasons why you want
to work with a certified financial planner because they're fiduciaries
and they have to put a client's best interests out
of their own. So the fiduciary standard has been something
that's been on the table for quite some time. Obviously,
there are businesses and certain sectors within the financial industry

(01:44):
that push back against it, notably insurance. But there's a
new study now. It's the Government Accountability Office published report
that detailed findings of an investigation into the advice sector.
They looked at more than two thousand conflicts report and
firms disclosures statements, as well as actually placed undercover calls

(02:05):
to seventy five different financial professionals. And of course their
findings weren't surprising if.

Speaker 3 (02:10):
You ask me, yeah, no.

Speaker 1 (02:12):
In fact, what the investigators found was just a marketplace
right an area riddled with conflicts of interest, people making
recommendations of one product over another, not clear about why
they are making that recommendation, and when you peel back
the layers of that onion, the recommendation wasn't something that
was actually in the best interest of that person. You know,

(02:34):
I'm glad we're doing this research. You and I meet
with people all the time who come into our offices.
We've worked with someone else, right, and they sit down
and they say, well, this person explained that this was
the best thing for me. And then when you say, okay, well,
did you understand that this was a commission product that
you were actually purchasing.

Speaker 3 (02:51):
It wasn't an investment that you made.

Speaker 1 (02:53):
No, No, I don't think that's actually what happened here,
you know, And you're like, well, actually, here, if you
and they had no idea what it was that they
were buying, why they were buying it, and once we
actually look at it and hold it through that lens
of is this the best thing for you?

Speaker 3 (03:10):
It often isn't the case.

Speaker 1 (03:12):
And so I think it's incredibly frustrating because you should
be able to assume that if someone's giving you advice
on your money, they're giving.

Speaker 3 (03:19):
You advice that's in your best interest.

Speaker 1 (03:21):
When you go into a doctor's office, you're not second
get wait a second, how are you getting paid?

Speaker 3 (03:26):
You know? How is your entire office skiddy? Are you
making a commission if you're sending me to get an
MRI right now?

Speaker 2 (03:33):
Right?

Speaker 1 (03:33):
And so it seems like, well, if I'm hiring you
to work for me to help me make the best decisions,
I should, of course be able to assume that that's
exactly what you're doing. And it's incredibly troubling that not
everyone holds themselves to the same standard, which is why
there's also research out there. Steve, and I've seen this
many many times. If you look at different industries and

(03:56):
how much trust the public has in them, the financial
services sector always falls low on that list.

Speaker 3 (04:03):
And that's a shame, I.

Speaker 2 (04:05):
Mean, unfortunately rightfully. So I want to say, yeah, yes,
I'm in the financial services sector, but I'm a fiducier.
I'm a certified financial planner that works for a company
that expects us to act as fiduciaries. And that's it's
not always a case. You know, I was born and
raised in the financial sector in a big brokerage firm
where we sold our own products and solutions, and we

(04:26):
had sales goals and targets and numbers that we had
to hit to try to make a sale with every
single person that we talked to. That was the expectation. Yes,
I know that I helped some people along the way,
but after I became a certified financial planner at that company,
I left. I ran for the hills because it was
riddled with conflicts. I went to another advisory firm that
was part of a big bank, and in that you

(04:46):
are forced to sell that bank's products and solutions. And
this is this is one that everybody has heard of,
and you know, your time there is really eye opening
seeing how a lot of other advisors operate, especially some
of the folks that have been in the industry for
you know, thirty almost forty years. They still take some
of those practices from you know, the eighties and nineties

(05:06):
where there wasn't quite as much regulation or discussions about this,
and it's it's mind boggling how many advisors out there
are really just padding their own pocketbooks by slinging products
that folks don't necessarily need. Using the suitability standard, which
is I asked you enough questions that I found something
that I could stretch and argue that this product is suitable,

(05:29):
it would work in some situations for you. Therefore I
can sell it and get a bigger commission.

Speaker 1 (05:33):
You're listening to Simply Money, presented by all Worth Financial
Memi Wagner along with Steve Ruby, as we talk about
the fact that we work for an industry that has
a lot of conflicts of interest and you know it
bothers us.

Speaker 3 (05:47):
And that's why I say.

Speaker 1 (05:49):
Over and over on this show, you have to walk
into someone's office when you are getting ready to hire
a financial advisor, armed with enough education to ask the
right kinds of questions.

Speaker 3 (06:02):
You need to be asking how do you get paid?
Are you a fiduciary?

Speaker 1 (06:06):
Someone recently came into my office and they said, well,
this person they said they were fiduciary and they had
several products that had been sold to them. And I said, well, unfortunately,
sometimes people say they're a fiduciary because they are in
certain circumstances, and you have to then ask a follow
up question, are you a fiduciary? One hundred percent of
the time when you are making these recommendations to me?

Speaker 3 (06:29):
Right?

Speaker 1 (06:29):
And it seems so insane that you should have to
know these things to be able to advocate for yourself,
but unfortunately that's the reality here.

Speaker 2 (06:38):
Yeah, you can actually be a broker dealer and an
investment advisor employee under the same employer and act in
different capacities. You can take on you can take your
hat off and put on a different hat, and that's
your fiduciary and your nonfiduciary. It's really bizarre how some
of the stuff is regulated or not regulated. Now back
to the study here from the government account of the Office,

(07:00):
because something that I found very interesting within this was
that there was a lot of mutual funds that compensate
financial professionals, and these the majority they found, actually have
lower performance, lower returns over time. And I find that
to be and really troubling. Yes, yes, so the fund
managers that put these mutual funds together, they're not great

(07:23):
at their jobs, and they're essentially bribing firms and financial
advisors to sell their inferior products so they can get
a kickback. Really really mind boggling that this still exists. Obviously,
I am a huge advocate for the fiduciary standard.

Speaker 3 (07:35):
If you can't tell yeah.

Speaker 1 (07:36):
Well, and you know that's what I kind of appreciate
is you know we're with all Worth before that simply
money and simply money. We were fiduciaries before fiduciaries were cool.
No one was using this word twenty plus years ago
when Nathan Backcrack and Ed Fink came together and made
this firm, and they had this conversation at one point
of like, this is what's right for our clients.

Speaker 3 (07:56):
So this is what we're going to do. And so
it is in the.

Speaker 1 (07:59):
Da of every decision that we make. For instance, if
we're working with someone and they're getting close to retirement
and they have you know, some flour one ks and
some iras and some iras right that we're managing, it
might make sense for them to pull money out of
those accounts to pay off the remainder of their mortgage.
Right for a number of reasons, the peace of mind,

(08:21):
the fact that that money not going out essentially gives.

Speaker 3 (08:23):
Them a raise in retirement.

Speaker 1 (08:24):
Right, We're going to run the number of several ways, Well,
we could tell someone pull the money out of this
account that we manage and pay off your mortgage. That's
the best thing for you. We'll actually make less money
in the long run by you doing that.

Speaker 3 (08:38):
But that's the kind of advice you should be able
to count on. And I think the interesting thing.

Speaker 1 (08:44):
Is for people who are like, well, this is just bunkers, right,
what's up with this industry?

Speaker 3 (08:48):
And who's in charge here? That's also an interesting part
of this research. Right.

Speaker 1 (08:53):
You have the IRS and you have the Department of
Labor and they're kind of pointing the fingers at each other.

Speaker 3 (08:59):
Like, hey, you take this one. I actually don't want
this one on my hands. You take this one. And
so you know, it's like, wait a second.

Speaker 1 (09:07):
You can see how there can be a lot of
bad actors in an industry where it's.

Speaker 3 (09:11):
Not even clear who's running the show here, who's in charge?

Speaker 2 (09:16):
Yeah, I mean specifically that the study shows that the
IRS has as sole enforcement authority over firms advising iras
that are deemed fiduciaries under the tax code. And then
the IRS officials they respond and they come out and say, well,
they typically we rely on the Department of Labor to
refer prohibited transactions to them. So it's kind of a

(09:37):
back and forth who does what, who needs to be
keeping an eye on what, and how can they even
enforce it, you know.

Speaker 1 (09:43):
And I think this research, you know, brings to light
a number of things, and some of it, yes, the
government will need to figure out.

Speaker 3 (09:49):
But before they do that.

Speaker 1 (09:51):
And who knows when that will happen, I think the
question remains. Okay, as an investor, what do you need
to know? Well, first of all, you need to.

Speaker 3 (09:58):
Know who you're working with.

Speaker 1 (09:59):
You need to to know whether they are fiduciary one
hundred percent of the time. You know, I never make
a recommendation to someone that they don't understand. And if
I ever get the feeling that, you know, someone doesn't understand.

Speaker 3 (10:11):
If I'm talking talking about a.

Speaker 1 (10:13):
Buffer to ETF as a strategy for someone who might
be really afraid of the downside of the markets, and
I get that you've got that look in their eye,
I will make another appointment for them to come back
in for us to talk just about that, so that
I'm very clear that they understand what they're invested in.

Speaker 3 (10:31):
If you're not.

Speaker 1 (10:31):
Working with someone who's you know, just trust me, right,
pat on the back, how are your kids, how's the family? Right?

Speaker 3 (10:37):
They're trumming it up.

Speaker 1 (10:38):
But you leave there and you're like, what just happened.
I'm not even clear what I'm invested in or what
what does regummend and what exactly. Yes, if you have
that feeling in your gut, that's something just isn't right.

Speaker 3 (10:51):
Please go with your gut.

Speaker 2 (10:54):
All too often I do meet with folks who had
some kind of buyer's remorse from a bad experience ahead
with an advisor in quoteations sometime in the past, and
they didn't realize what they were getting into. They weren't
armed with the knowledge that they have a responsibility to
ask the right questions. How are you paid? Are you
a fiduciary at all times? That's what you need to know.

Speaker 1 (11:15):
I find a lot of people come into my office
and my number one job is to build trust with them,
rebuild trust in our industry because someone who came before
me has broken their trust. And unfortunately I see that
far too often. Here's the all Worth advice.

Speaker 3 (11:30):
Make sure you're working with someone who is a fiduciary.

Speaker 1 (11:33):
As a reminder, it means they are bound by law
to act in your best interest, regardless of what they need,
want to do, or how much money they could make
off of you. Coming up next, we're going to help
you take advantage of saving for retirement.

Speaker 3 (11:46):
If you're in your.

Speaker 1 (11:47):
Highest earning years, you're listening to Simply Money presented by
all Worth Financial.

Speaker 3 (11:51):
Here in fifty five KRC, the talk station.

Speaker 1 (11:58):
You're listening to Simply Money present of my all Weareth Financial,
I mean Wagner along with Steve Ruby. If you can't
listen to our show every night, you don't have to
miss the thing we talk about. We've got a daily
podcast for you, search Simply Money. It's on the Ihart
app or wherever you get your podcasts. Coming up at
six forty three, is there one type of maybe retirement
account you should prioritize over another. We are asking the
advisor that and much more that's coming up in just

(12:22):
a few minutes. You know, Steve, we talk about, hey,
that first paycheck right, putting as much money into that
four one k as you possibly can. I know that
we say that in theory, right, there's a perfection of
theory versus the mess of reality. I have been there,
and I remember I was making sixteen thousand dollars in
my first job out of college. There there was hardly

(12:43):
money to eat, much less to invest in a four
to one K. Many of us did have some leaner
years or we were first starting to work. Hopefully, though,
the longer you've been working, the more you've been able
to make the higher salary. So for those who maybe
feel like, hey, I'm maybe a little behind on saving
for retirement, but you're also in your peak earning years now,

(13:05):
you're in a place where there may be some opportunities.

Speaker 2 (13:08):
Yeah, I mean a lot of this conversation today is
going to be about what's called lifestyle creep. So lifestyle
creep is as you begin to earn more money, your
lifestyle adjusts and find ways finds ways to spend those
extra dollars rather than saving them. So it is very
important to have a level of discipline here when we

(13:28):
have newfound cash from a raise or a promotion, rather
than putting it towards always putting it towards something like
a bigger house, or a nicer car or dream vacations,
we need to understand that in order to maintain a
standard of living that we've grown used to, we have
to save some of that extra money or else it's
not going to work as we transition into retirement. If

(13:49):
we're not saving more as we begin earning more, then
we're not going to keep up with with what we've
grown used to. Now. I'm not saying don't enjoy life,
don't enjoy the fact that you have more income than
you've ever had. That there's a balance here, and that's
why I say, develop, you know, a level of discipline.

Speaker 1 (14:05):
Yeah, lifstail creep is a real thing. I mean, we
see it all the time. And I think for most
of us, if we would look back to our twenties,
we would say, Okay, maybe we eat it slightly nicer restaurants,
or drive a slightly nicer car, or you know, shop
for furniture or clothes at different stores, right, but within reason.

Speaker 3 (14:21):
And what I also find is you have a kid.
I have four. They're so stinking expensive.

Speaker 1 (14:28):
You know.

Speaker 3 (14:28):
It's like you get them through school.

Speaker 1 (14:30):
And I know many people who are kind of in
the place where maybe they started to have kids graduate
from college and go out on their own, and then
it's like, well, I've sacrificed all these years for these kids.
Now we have money, we're going to go on that
European trip, or we're going to write and it's like, oh,
what you have to do, especially if you feel like
you're behind, is keep that lifestyle creep and check in

(14:52):
as much as you want to. Then throw a party
when there is extra money. The party that you should
be throwing is in retirement, when you have an enough
to live the lifestyle that you want to. And if
that requires them sacrifice before you get there, then I say, unfortunately,
so be it.

Speaker 2 (15:08):
And I think this is important if you're younger, if
you have a longer time horizon, or maybe to educate
family members, younger family members, children, grandchildren. If you received
an annual or if you received a bump and pay
of five thousand dollars, or just sometime early in your career,
and you invested it in an account growing you know,
approximately ten percent per year. After thirty years, you would

(15:28):
have invested one hundred and fifty thousand dollars. But with
that growth and compounding interest and time on your side,
you would have earned seven hundred and sixty thousand dollars.
One hundred sixty thousand dollars yep, just by saving that
that that extra money. So you know, you you brought
up a point where one of your first jobs out
of college is sixteen thousand dollars a year. I imagine that

(15:50):
income rose after several years. And yeah, in a situation
like that, you could, rather than taking that extra you know,
five thousand dollars or just all the rays, take a
little part of it and put that in investments and
it can truly make a huge impact over the long run.

Speaker 3 (16:05):
It's funny.

Speaker 1 (16:06):
I hit a twenty six year old in my office
earlier this week, and it just became this like session
of like Amy talking to her twenty six year old self,
you know, and I was like, Man, as much money
as you can stalk away in that four one k.
You know, he is fantastic. And you know, for those
who maybe are behind when you hit that age of fifty,
there's ketchup contributions you can take advantage of. But you know,

(16:28):
you've got to be investing. And then also, if a
high deductible health care plan makes sense for you, please
please open a health savings account.

Speaker 3 (16:36):
You know, you think about, man.

Speaker 1 (16:37):
For someone who opens the health savings account in their
twenties and invest that money and let it grow and
pays for their medical expenses out of pocket, how much
money they would have in retirement to cover health care expenses.

Speaker 3 (16:53):
You know the difference would.

Speaker 1 (16:55):
Be astronomical and it's also astronomical when you get to
the age of retiring and you look at the reality
of what healthcare costs are going to be. Right for
many people, it's like eye opening, like I can never
stop working. This is a way for you to prepare
for that. And if you've gotten to your higher earning
years and you're just getting started, you got to double
down on this stuff.

Speaker 2 (17:15):
I mean, a lot of folks think that they need
to wait until they're transitioning into retirement to sit down
and meet with a certified financial planner that can build
out a plan for them. But arguably there's a lot
of value that can be brought when you're smack dab
in the middle of your highest earning years, because oftentimes
that means you have the most earning potential you've ever had.
You have conflicting financial priorities. A lot of us at

(17:37):
that point still have some debt that we're working towards,
whether it's a mortgage or maybe even student loans, car notes,
paying for college for children. Maybe we have aging parents
that were taking care of There's competing financial priorities that
get in the way of your own goals, whether it's
saving for health care for retirement or saving to live
in retirement, your day to day expenses, sitting down with

(17:58):
a financial planner that can help you map out what
those goals are, to make sure that if there are
gaps that need to be closed, you understand the way
that you can do so is incredibly valuable. You know. Unfortunately,
I have had people come into my office that are like, Hey,
I'm ready to retire, and then we sit down and
build a plan and it's like, how.

Speaker 1 (18:16):
Yeah, and I want to retire, by the way, in
five minutes from now, so how can we make this work?

Speaker 3 (18:21):
Yeah? Agreed?

Speaker 1 (18:22):
And I always say, hey, for someone who gives me
a few years, right, if you can come to me
in your mid fifties and we've got time to get
you in really good shape, that transition to retirement becomes
that much easier if you're in your higher earning years.
Maybe a backdoor Ira Roth, you know, a strategy can
make sense. A Roth conversion, something we've talked about earlier

(18:43):
this week, you know, that can make a lot of sense.
Things like that that you may not know strategies that
are available to you.

Speaker 3 (18:49):
You may not know that they're an option.

Speaker 1 (18:51):
But I think the closer you get to retirement, the
more that like.

Speaker 3 (18:54):
Should I do this or this can keep you up
at night.

Speaker 1 (18:58):
And this is where we'd say, this is where you
start working with the professional to make sure that yes,
you are on the right course, and that means assessing
and adjusting your saving strategy.

Speaker 3 (19:07):
I like for people to.

Speaker 1 (19:07):
Go into retirement with higher emergency funds and understanding of
your expenses. You know, can we get as many of
you as much of your debt paid off as we
possibly can.

Speaker 3 (19:18):
These are all things that should.

Speaker 1 (19:20):
Become priorities during your higher earning years, not necessarily just
spending more money because you have it. Here's the all
Worth advice man. Lifestyle creep is a real thing. I
have seen it many many times. Do your best to
avoid this temptation and invest those dollars. Your future self
will thank you. Come up next, the strategy to keep
you from breaking the bank.

Speaker 3 (19:41):
As your kids grow older. We're talking college costs.

Speaker 1 (19:45):
You're listening to Simply Money presented by all Worth Financial
here on fifty five KRC the talk station. You're listening
to Simply Money presented by all Worth Financial. I mean
you Wagner along with Steve Ruby.

Speaker 3 (20:00):
Okay, for many of you.

Speaker 1 (20:02):
It's like, Okay, I'm trying to save for retirement, but
also I kind of want to help my kids out
with college. How do we do both at the same time. Well,
there's a fancy little thing called a five twenty nine plan.

Speaker 3 (20:13):
Instink, we're going to take a deeper look into this.

Speaker 1 (20:16):
I actually love five twenty nines almost as much as
HSA is not quite. I appreciate though, that one feature
about the five twenty nine is the government keeps becoming
more or more flexible with how you can use these dollars.

Speaker 2 (20:30):
It's kind of remarkable actually that the flexibility has never
been where it is today. There's so many options for
five twenty nine, and there's more options than ever if
we don't actually use that money for college, which is
pretty cool. But remember a five twenty nine. It's a
college savings plan, and you know, oftentimes, depending on the
state you live in, when you make a contribution to it,

(20:51):
there can be state tax seductions. Those dollars then grow
tax free in the account, and that they can cover
tuition fees, books, supply as room and board for students
that are enrolled at college or university at least halftime.
So when you get these things started as soon as
a kiddo has a social Security number, or as you know,
as early as possible, then it really has an opportunity

(21:13):
for compounding interest to kick in so we can grow
some nice balances to help pay for some of those expenses.

Speaker 1 (21:19):
I'm going to tell you right now, your kids are
never going to be smarter or more determined to get
or you're going to be more determined to get them
a full ride for.

Speaker 3 (21:29):
College than the day that they're born.

Speaker 1 (21:30):
Right the day that they're born, you're like, this kid
is really smart, right, they're going to get a thirty
six on that act.

Speaker 3 (21:36):
They're going to get a four point zero. And then
they kind of grow up and they start goring to
school and you're like, maybe not on that full ride.

Speaker 1 (21:43):
Or you know, my son used to always talk about
getting a full ride for basketball.

Speaker 3 (21:47):
He loves basketball so much. He's a good little ball handler.

Speaker 1 (21:50):
He's also almost fifteen years old and he's five foot
four inches.

Speaker 3 (21:53):
Right. The point being.

Speaker 1 (21:57):
You know, so many times, you know, people will say, well,
I don't know if I want to put money into
a five to twenty nine because what if my kid
ends up getting a full ride to college or what
if they don't go to college, Well, likely your kid's
going to probably need some money for college, whether it
be laptop, room and board, whatever it is. Five twenty
nine is super flexible for all of these things. But

(22:18):
even if they don't end up going to college, there's
still a number of other things you.

Speaker 3 (22:23):
Can do with this money.

Speaker 2 (22:24):
Yeah, I mean even before college. Five twenty nine is
you can use up to ten thousand dollars per year
for K to twelve tuition kindergarten through senior year of
high school. For public if there's fees private religious schools,
whatever that might be that comes with some kind of tuition,
you can actually use five twenty nines to pay for that. Now,
you know certainly that the benefit of funneling it, funneling

(22:45):
your dollars through the five twenty nine to get the
state tax deduction and growing those dollars a little bit
tax free, even if you're using them in the short term,
that's a big benefit still.

Speaker 1 (22:54):
Yeah, And if your child is going into a career
path where they need some postgraduate educate, right, I'm a
mean a doctor, a lawyer, they need to get their MBA,
their masters, whatever that is. You can still put money
into that five twenty nine even after they've started college,
knowing that there's going to be additional expenses.

Speaker 3 (23:13):
And one of the other great features about a five
twenty nine is it's easy to transfer them.

Speaker 1 (23:17):
Right, So you set up a five twenty nine in
your your son's name and they don't end up going
to college, or you can move it to another child.

Speaker 3 (23:26):
Or even to yourself.

Speaker 1 (23:27):
Maybe you're at a place in your career where you're
not loving things and you're like, oh, if I could
go back to school and do this, it could be great.
Transfer those five twenty nine dollars to your name. You
can use them for continuing education, you know, any kind of.

Speaker 3 (23:41):
Changing your career. I've even heard someone.

Speaker 1 (23:44):
Successful use it for some kind of golf school, even
in a culinary school on a cruise ship. I mean,
I'm not saying I advocate for this.

Speaker 2 (23:53):
I told you that story. Could you tell me that?

Speaker 3 (23:57):
Yeah?

Speaker 2 (23:57):
I did tell you that story. Yeah, I came from
I'm an advisor that I used to work with that
heard it from somebody else. So I don't know how
legit that one really is. Yeah, but I could certainly.

Speaker 3 (24:07):
See somebody trying or in our industry.

Speaker 2 (24:10):
Yeah, it is folklore. I could see somebody pulling it
off because if it's considered some kind of an educational course,
it was literally a golf cruise excursion that they used
five twenty nine dollars. So again a little bit of
an industry lore there. But again there's there's flexibility like
never before with these accounts.

Speaker 1 (24:29):
We're probably gonna get a call from the IRS like
quit telling people that that is actually not a thing,
you know. I was also talking to someone else recently
who has four small children and you know, likely maybe
another one or two on the way, and they were
talking about five to twenty nine, and I was like, listen,
if you don't set up a five to twenty nine
for each of them and fully funded, it's okay because

(24:51):
you know, if you do have someone who's you know,
getting a little more of an academic scholarship or whatever,
you can easily transfer those funds back in fourth between
you know, your family members or even if you've got
a niece or a nephew or someone else.

Speaker 3 (25:06):
And there's also a special needs education.

Speaker 1 (25:08):
It can be used to cover any kind of education
expenses for someone who has special needs, you know, a
specialized program or service that might be necessary for their
education and personal development.

Speaker 3 (25:19):
Again, when these.

Speaker 1 (25:20):
First started, I can understand why people had some concerns
about five three nines because it was like of just
a very specific use in the government, and I don't
often get to say this has made some really smart
decisions about giving us more and more flexibility about how
we can use off those how we can use those dollars.

Speaker 2 (25:37):
Well, you know, honestly, these things didn't used to be
that great because if you didn't use the dollars for
continuing education for college, then they were essentially going to
be tax the earnings taxed, and a penalty literally a
penalty of ten percent for the money that you didn't
use for college. But now that we can use these

(25:59):
things via portability, again, there's more flexibility than ever because
if you have multiple children, and you know, somebody does
get a full ride, or one of them uses more
than another, you can just change beneficiaries and slide those
dollars into the other child's account into their five twenty nine. Also,
under the Secure Act, up to ten thousand dollars from

(26:19):
a five to twenty nine can be used to repay
a beneficiary student loans, which is a big deal. If
you have children that you know one of them did
need to get loans and the other one didn't use
all of it, then you can use those dollars to
pay the other one's student loans. So that the flexibility
is like never before you.

Speaker 3 (26:35):
Mentioned portability too.

Speaker 1 (26:36):
Secure Act two point zero allows that five to twenty
nine money, if it's never been used to then fund
or to be transitioned into an IRA in that person's name.
So initially earmarked for education, it can now be earmarked
for retirement. Now there are rules about how much and
win that money can be moved over and how long

(26:57):
it has to be in that account before you can access.

Speaker 3 (26:59):
It, but point being, there's just.

Speaker 1 (27:01):
A lot of flexibility, and for grandparents this can also
be a greatest state planning tool.

Speaker 2 (27:08):
And just to clarify, that is for wroth iras, so
that transition from the five twenty nine to an IRA
is specifically for a roth IRA. For that one, talk
to a CPA, talk to a certified financial planner to
help navigate it, because that's those rules are relatively new
here and people are trying to, you know, wait to
see where the cards fall with all that, and then
you bring up a good point for a state planning

(27:28):
because the grandparents looking to get rid of some money
so it's not part of their estate. They can actually
do five years worth of contributions in one year without
incurring any kind of gift taxes as they put contributions
into a five twenty nine for someone.

Speaker 1 (27:43):
And this is a rare thing at this point, but
we are starting to see it a little more employer contributions.
Some employers are offering five to twenty nine plan contribution
matches as part of their employee benefits packages.

Speaker 3 (27:56):
You know, I think it's so interesting. It used to be,
you know, someone made you a job offer and all
you cared about was the salary.

Speaker 1 (28:01):
Now I think these benefits package becomes so much more
important because if there's options like this within them, you
know it's definitely worth taking advantage of. Here's the all
Worth advice. If five twenty nine plan is a really
versatile and powerful tool that can help you meet a
variety of both educational and long term financial goals. Coming

(28:23):
up next, we are asking the advisor you've got lots
of questions and of course we've got answers. You're listening
to simply money presented by all Worth Financial. Here in
fifty five KRC, the talk station you're listening to Simply Money,
presented by all Worth Financial. I mean, you Wagner, along
with Steve Rieb you have a financial question.

Speaker 3 (28:44):
It's keeping you up at night.

Speaker 1 (28:46):
You and your spouse have very different ideas about the
best thing for you.

Speaker 3 (28:50):
We can help you figure that out.

Speaker 1 (28:52):
There's a red button you can click on while you're
listening to the show right there on the iHeart app cord.

Speaker 3 (28:57):
Your question it's coming straight to I.

Speaker 1 (29:00):
And speaking of those questions, it is now time to
ask the advisor. First question comes from KR who lives
in Dooon County.

Speaker 2 (29:08):
I'm fifty two and have about one million dollars saved,
and I'm wondering if I need umbrella insurance. Is it
actually a smart purchase or just another way for insurance
companies to make money? You know, great question. So, first
of all, insurance companies do make money off of these
because they're a business. But that doesn't mean you need
to be scared away from this one. I am certainly
an advocate for everybody having umbrella coverage up to their

(29:31):
net worth because it is extremely cheap and it's Essentially,
what you're doing is a premium is think of it
as paying for an attorney on retainer. That's what you're
doing here, because if something catastrophic and out of left field,
some kind of weird act of God happens that that
somebody could go after you and your net worth, and
you have that umbrella coverage, then you are protected. So

(29:52):
I do advocate for having umbrella coverage. Don't shy away
from it. Yes, the insurance company makes money off of it,
but who cares. It's very an expense. And if you
need it and you have it, great, If you need
it and you don't have it, that could completely derail
you and your family's financial future.

Speaker 1 (30:07):
Yeah, this is not insurance for a rainy day. This
is insurance for when the storm hits, right, a major storm.
And I will say to your point, you know a
million dollars worth of coverage, Well, yes, these insurance companies.

Speaker 3 (30:19):
Make money on it.

Speaker 1 (30:20):
It's a few hundred dollars that you would pay on
an annual basis. These are not expensive policies, but man,
they can save you if something goes really wrong.

Speaker 3 (30:29):
Coming up, next question from Annie and Fort Thomas. I
have a four to oh one K, HSA and an IRA.
Should I be prioritizing one over the other?

Speaker 1 (30:39):
This is a great question, and I really like this
one because it's really being strategic about where you put
your money. So I would say the first dollar that
you spend is should go into that FLOORA one K.

Speaker 3 (30:51):
If you have a company match, you.

Speaker 1 (30:53):
Want to put every dollar into that flour one K
to get that company match. Beyond that, I might argue
that a health savings account which is triple tax advantage
makes the most sense, and then maybe an IRA. All
of them great vehicles to save for retirement.

Speaker 3 (31:12):
How do you kind of address this?

Speaker 2 (31:15):
I mean, I have a savings hierarchy that I share
with folks. You know, the most important is again getting
that free money via the company match, then the HSA,
not spending it for the triple tax advantage, then back
to the four oh one K because the contribution limits
are higher, and then you know, we explore the IRA.
Whether that's roth or traditional just depends on the individual's
financial situation, needs and goals at that point.

Speaker 1 (31:36):
Yeah, but it's a great question and a great way
to think about how you can be really strategic about
your money.

Speaker 3 (31:41):
Next question from jan In Liberty Township.

Speaker 1 (31:45):
My husband and I are both sixty five and have
all of our savings in cash because we don't trust
the stock market.

Speaker 3 (31:50):
We hope to retire in a few years. I'm just
wondering if this is doable.

Speaker 2 (31:57):
Yeah, I know that one depends. If you don't need
that money at all, then yeah, it's doable. What I
mean by that is that if you have incredible fixed income.
Let's say you have a couple of pensions, you have
Social Security, livable of your means, maybe have rental income.
If that three hundred thousand dollars means nothing to you,
then then sure it's not a problem. But if it does,
you are guaranteed to slowly lose that that. That's how

(32:20):
that works. Inflation will eat those dollars alive. We've seen
it recently. Over the past several years, inflation has ticked up.
Everything's gotten more expensive. One of the reasons why we
invest isn't just to get rich quick. It's to make
sure that our dollars keep up with inflation. So if
you're uncomfortable with the markets and you really, you know,
lose sleep at night in a situation like this, maybe
sit down with a fiduciary advisor and talk about either

(32:42):
some very conservative strategies that aren't cash. You know, maybe
maybe look at like a buffer ETF strategy. You know,
I don't say this too often, but maybe even maybe
even a new annuity if you had to, you know,
some kind of an insurance solution that offers guarantees if
you're that afraid of the markets and you need that
money to keep up with inflation, because you probably do.

Speaker 1 (33:05):
Yeah, we often refer to inflation as this silent retirement killer,
and I can understand where, hey, you know, the markets
make me nervous. I've got several hundred thousand dollars. I'm
just going to keep it in cash. But you know,
if you're going to have years in retirement and you're
both sixty five, you could, you know, have two three
decades in retirement that three hundred thousand dollars if it's

(33:27):
not invested. You know, we see that the stock market
is really the one place where you can outpace inflation.
So I think going through a risk tolerance questionnaire making
sure that you have investments really suited to your own
needs makes a lot of sense here.

Speaker 3 (33:43):
But most of the time, I would say most people
need some stock market exposure. Next question from Sam and
Highland Heights.

Speaker 2 (33:51):
I'm fifty nine and want to retire in a few years.
Am I too old to open a roth ira?

Speaker 3 (33:58):
No, you're never too old to open a roth ira.

Speaker 1 (34:01):
In fact, this is around the time when a lot
of people start to think along these lines, Right, all
of a sudden, you start realizing that something on the
horizon in your seventies called required minimum distributions is coming
down the path, and that means Uncle Sam tells you
how much you have to take out of your accounts
and win. And so if you're getting close to retirement

(34:21):
and maybe years where you're going to make a little less,
opening a roth ira where you can maybe transition some
of those tax defer dollars into a wrath where you've
got then you've paid taxes on the money, you've got.

Speaker 3 (34:32):
More control over that money. That can make a lot
of sense.

Speaker 1 (34:35):
It's a smart tax planning strategy when you kind of
get near and in retirement.

Speaker 2 (34:40):
Yeah, this question kind of goes hand in hand with
Annie from Fort Thomas from a couple of minutes ago,
because it really just depends on where you're saving and
how much you've saved because it's never too late to
diversify that future tax liability, which is essentially what you're
doing when you do the ROTH contributions. Sure, it's not
going to have the same impact as if you were
twenty nine, because the the tax free growth is what's

(35:01):
really amazing about these things. But you know, sit down
and talk to a financial planner. Maybe when you transition
into retirement and you no longer earning what you are
earning now, we explore Roth conversions for example. So definitely
not too late, depending on your financial situation. Strongly encouraged.
In fact, here's the.

Speaker 3 (35:18):
Stat for you.

Speaker 1 (35:19):
Four and ten of you are leaving free money on
the table.

Speaker 3 (35:22):
We'll explain how you're doing that. Next.

Speaker 1 (35:25):
You're listening to Simply Money presented by all Worth Financial.
Here in fifty five KRC the talk station. You're listening
to Simply Money presented by all Worth Financial. I mean
you Wagner along with Steve Ruby. Let's face it, gift
cards are a pretty popular gift for a lot of people, and.

Speaker 3 (35:42):
I think, Steve, this is my theory.

Speaker 1 (35:44):
There's nothing scientific behind it, but people fall into two
different camps.

Speaker 3 (35:47):
With gift cards.

Speaker 1 (35:48):
Those who it's like they cannot wait to spend it,
and those who it goes in your wallet and drawer
and you completely forget about it.

Speaker 2 (35:57):
Oh yeah, that certainly happens. Use gift cards. Study from
bank raid it shows that the average per person is
two hundred and forty four dollars of unused gift cards
just hanging around, not doing anything, collecting dust and Funnier
on top of that is potentially people are even going
to places and spending dollars rather than those gift cards.

Speaker 3 (36:19):
Yeah, you forget about them.

Speaker 2 (36:20):
Yeah, I know.

Speaker 1 (36:21):
So I have children, teenagers, and they definitely fall in
the camp of the second they get the gift card,
it's spent. If it's Chipotle, an American Express gift card, Starbucks,
whatever it is, it's spent immediately.

Speaker 3 (36:34):
I used to be of the way of.

Speaker 1 (36:36):
Thinking of, you know, I'm going to wait a while
and then I'm going.

Speaker 3 (36:39):
To treat myself. Here's the problem.

Speaker 1 (36:42):
One, you can forget about it, but two, and I'm
telling you, I have been burned by this before.

Speaker 3 (36:46):
Got a SPA gift card.

Speaker 1 (36:48):
Was like, oh, I'm going to hold off on getting
that massage, and then the spa went out of business,
and it was like exactly. You know, you think about
restaurants and businesses all the time. Things go and unfortunately
it could be you know, two months after you were
given a gift card, so you know, knowing that it's
you know, you can't just indefinitely hold it for five

(37:09):
years and know that you can use it whenever you
want to. I actually think it makes a lot of
sense to spend these things as quickly as we get them.

Speaker 2 (37:16):
Well, businesses absolutely love the idea of selling gift cards.
It is a major financial incentive because stores such as
Walmart Starbucks have more than one billion dollars one billion
dollars of unused gift cards on their books.

Speaker 1 (37:34):
Well and in one in three of us admit I've
actually lost money due to an unused gift card, aiding
in some of those as hey, I just let the
gift card expire, which thankfully, I think there are more
recent protections out that make those gift cards need to
be you know, used, or the time that you can
use them stretch out over more time I'm losing a

(37:54):
gift card entirely, we're having that store go.

Speaker 3 (37:57):
Out of business before you use them.

Speaker 1 (37:59):
So you know, all of these things can happen so
I think it makes a lot of sense.

Speaker 3 (38:03):
And these are incredibly popular, and you know, I get it. Steve.

Speaker 1 (38:05):
It's like, hey, I know you well enough to know
like where you like to eat or the stores that
you like to shop in.

Speaker 3 (38:12):
But I may not know exactly what to get you.

Speaker 1 (38:15):
So go to the store yourself and treat yourself, pick
out something that's exactly what you want.

Speaker 3 (38:19):
I get that.

Speaker 2 (38:20):
Yeah, it makes sense, but you know, you got to
spend these things. If you don't, you could run an
issues or it's just cash. That's just pretty much you're
throwing it on the ground and forgetting about it.

Speaker 3 (38:29):
Yeah.

Speaker 1 (38:29):
And I think if you're giving gift cards as a gift,
also kind of know that person, right, Is it something
that will get used and they will appreciate.

Speaker 3 (38:37):
Thanks for listening tonight.

Speaker 1 (38:39):
You've been listening to Simply Money, presented by all Worth
Financial here in fifty five KRC, the talk station