Simply Money

Episode Transcript

Speaker 1 (00:06):
Tonight, a scathing report on annuity salespeople the long term
financial danger of too much job hopping, and you are
asking the advisor you're listening to simply Money, presented by
all Worth Financial and Meni Wagoner along with Steve Ruby.
If you listen to our show for any amount of time,
you've probably heard us talk before about the Labor Department
going after the insurance industry. Now the Labor Department is

(00:28):
simply saying, listen, we think if you're selling annuities, if
you're selling life insurance products, you should adopt the fiduciary standard,
meaning that whatever they're selling you and recommending to you
is in your best interest, not theirs. Now, to be
clear upfront, we think that's a good idea. We think
that whenever you go to someone in our industry and

(00:51):
I'm using our industry broadly right, you're looking for help
with investments and money in retirement planning, in some one
is making a recommendation to you, we think that it
should be yes, an your best interest.

Speaker 2 (01:05):
I don't think that's an unfair statement at all, and
unfortunately that's not the reality, you know. That's why you
say our industry broadly different types of advisors. There's different
types of companies that employ advisors, and you know, across
the board, not everybody serves as a fiduciary, and that's

(01:26):
a bad thing in my opinion. So yes, I agree
with the fiduciary standard. Now there's a new report Senator
Elizabeth Warren. She came out with the results of her
investigating investigation and it kind of paints a horrible picture
of the industry. Now, just to be clear, Warren is
a Democrat. Many Republicans oppose her. We can tell you
that if a Republican came out with a report, we

(01:47):
would still talk about it because at the end of
the day, our job is, of course to help you
from keeping mistakes, from making mistakes that you can't recover from.
And money is green, it's not red or blue. So
it doesn't matter which side of the aisle these reports
come from. You know, this report that that Senator Warren
came out with the highlights that estimate retirement savers stand

(02:07):
to lose about twenty percent of their retirement income to
conflicted advice.

Speaker 1 (02:13):
When we say conflicted advice, that simply means it's advice
that's given to you and you are receiving it thinking
this is the best thing for me, and it really isn't,
because actually the standard that the insurance agency holds this
off to you is suitability. And I think there's a
lot of ways that they can slice and dice different

(02:33):
recommendations to make them seem like they could be suitable
for you. But keep in mind, suitable is a lesser
standard than in your best interest. So losing up to
twenty percent of you know, your retirement income because someone
isn't giving you the best advice for you. Meanwhile, what
you may not be clear about is that advice for
you comes with a commission for them, a bonus trip, right,

(02:59):
all kinds of inser incentives. And we're going to get
to those incentives in just a minute, because I think
they are really I opening, but these kind of mingled
incentives can cost you up to five billion a year
in fixed index annuities alone.

Speaker 3 (03:13):
Yeah.

Speaker 2 (03:14):
I flew this weekend in an airplane and the guy
sitting next to me he worked for a major employer
in this country that still offers a pension. It's really
good benefits. They have a fantastic four one K. I'm
intimately knowledge. I've a lot of knowledge about this four
OMK because I have folks that work at this company,
and he was you know, he got talking about it
because I brought up, hey, you got a really good
benefits plane. That's awesome that you work for X company,

(03:34):
And yeah, you said it is. But you know, I
worked with this Trans America guy and he's been he's
been great. All the recommendations that he's made to me
about life insurance for retirement savings has been fantastic. And
oh my god, what.

Speaker 1 (03:47):
Yeah, this is.

Speaker 2 (03:49):
Somebody that's probably in his forties and he's been sold
insurance product after insurance product after insurance product, and to
the point where he thought that it was actually in
his best interest. But I can guarantee that it was
based on a suitability standard, and I can safely assume
that the sales rep, not the advisor, that this guy
works in sales rep is getting high commissions and probably

(04:13):
some off the wall incentives that that people may not
realize are actually happening.

Speaker 1 (04:18):
Heartbreaking. Right, You're sitting next to someone who you're like,
oh my gosh, you have a better start than most
when it comes to you know, benefits at work and
helping you plan for retirement, having a pension, and then
you see on the flip side that there's people out
there kind of circling I mean, like kind of like sharks, right,
help me, let me help you with that. In really, yeah,
a lot of times there are backdoor rewards and incentives,

(04:40):
and that's exactly what this report showed that this advice
is often not in the best interest. You know, they
hold themselves out as trusted advisors. I recently had someone
come into my office who had a couple of annuities
and we started talking through whether that was truly a
good fit for this person or not. In my opinion
was not. You know, it was definitely not in their

(05:02):
best interest. But she said, well, you know, this person
said they're fiduciary, and that makes me so angry because
what happens in the insurance industry in particular, is people
can hold themselves out as a fiduciary part of the time, right,
they can be making recommendations about, you know, how your
flooral one ke should be invested, right, that's the fiduciary

(05:23):
in them. At the same time, they're also recommending annuities
in whole life insurance policies and things like that. Products
that you don't need, and they're going to pocket a
lot of commission and a lot of incentives.

Speaker 2 (05:38):
Yeah, and to be clear, there are times where it
makes sense some of these strategies. We are leveraging a
fiduciary financial planner that has intimate knowledge about your entire
financial situation is the key here. Taking recommendations from somebody
that's finding a reason, a suitability based reason to sell
you a product for a commission and some kind of

(05:58):
an x luxury vacation that they might win is not
the way to go. And that's what this report found.
We're talking about week long escapes to some of the
most privileged locations Punta Cancoon, a luxury Danube river cruise,
an extra forty five hundred dollars bonus in addition to
commission for issuing three cases of a given product. I mean,

(06:21):
when you have these financial incentives, it drives the behavior
that may not put folks into the right solutions based
on their needs. It's finding that suitability factor, which is
really easy to do. It really is if you ask
enough questions, then you can prove to your leadership. Yeah,
in some situations this might be beneficial for them and

(06:43):
that's all they need.

Speaker 1 (06:44):
Well, think about it. You just happen to be the
person who's walking through the door at the time that
someone has just one more annuity, right, that they have
to sell someone and if they do, they're going to
get some fantastic trip for them in their spouse or
some piece of jewelry, some you know, amazing bonus. Are
they going to see you, Are they going to talk
through what your actual long term financial goals are and

(07:07):
make recommendations based on what you need, or are they
going to say, I think I could probably sell this
person this last annuity. We can make a case for suitability. Right,
I'm going to lean into this guaranteed income stream and
make it sound really really good and not saying again
annuities don't work in some cases. But you gotta question,

(07:27):
if that person sitting across from you is telling you
that you need an annuity, what kind of incentives, what
kind of commission they're getting. At the same time, you're
listening to Simply Money presented by all Worth Financial Ammi
Wagner along with Steve Ruby, as we look at new
research out of Senator Elizabeth Warren's office. Now, keep in mind,
we know, right she'sus political. Sometimes these things have angles,

(07:49):
but I think when you dig deeper into the research,
it does ring some vowels, it does sound off some
sirens about what's happening in this industry and unsuspecting people
walking in with money that you have worked really really
hard for right your your life savings, and in some
cases buying things that aren't a great fit for you.

Speaker 2 (08:12):
Could you imagine if your doctor or your dentist was
incentivized to offer you a particular solution based on a
vacation that they might win if.

Speaker 1 (08:22):
I can get two more people embraces, then I get
to go to the cancuon right that It would be crazy.

Speaker 2 (08:28):
Yeah, That's that's why we are so in favor of
a fiduciary standard, and candidly, it's why a lot of
insurance companies are against it, because they sell products that
may not be in the best interests at all times
for individuals, and they can find suitability standards so that
somebody can win, you know, a diamond incrusted NFL Super
Bowl ring, because that that was really in this report. Yeah,

(08:51):
that was one of the incentives. iPads things like that
stock options for selling these these these solutions that may
not be in the client's best interest. In fact, twenty
nine different annuity insurance companies they're offering their agents, you know,
secret perks in the form of these vacations or cash
bonuses to sell that insurance company's annuity or insurance products.

Speaker 3 (09:15):
Yeah.

Speaker 1 (09:15):
Now, no, as they looked at this research, one thing
that they find found was that some insurance companies are
starting to enlist third party organizations right to manage those
incentive programs and promote certain products to the sales agent.
So it's like an outside organization managing these things. But man,
you still think, kind of think their interests are probably
aligned with the people in that sales organization. And if

(09:37):
you're wondering where this labor law right where this Department
of Labor fiduciary standard stands right now. In July, there
was a federal judge in Texas that granted a stay
delaying this rule from taking effect while that court weighs
arguments on the legal merits of the regulation. Now, this
is kind of this is not the first time we've
seen the fiduciary standard come up. I came up under

(09:59):
President Oba administration and reach kind of a similar outcome
in the courts. What the insurance industry. And you have
to understand, this is a very very powerful and rich
lobby what they always argue against and for the life
of me, I don't even understand this argument. They say,
if you make us all go buy this standard of

(10:21):
giving interests or giving advice in people's best interest, it's
really going to hurt those on the lower earning end
of the spectrum. Explain that to me, I don't even
understand that, like those who are most vulnerable, those who
need the most help, it's going to hurt them. Why
because they can't because they're not buying high commission products.
I don't get it.

Speaker 2 (10:40):
Yeah, it's very frustrating to me. You know, I haven't
found a good reason. It's just a talking point in
my opinion, to argue against it in such a way.

Speaker 3 (10:50):
You know.

Speaker 2 (10:50):
Obviously Warren's report, the conclusion is that the insurance and
annuity industries that they're putting effort to obscure these pervasive
kickback and perks, and that's one of the reasons why
the DL needs to push through this fiduciary standard. You know,
this is stuff that's not front and center in most
people's minds. They have no idea that when they go

(11:11):
see a financial professional quotations that their own best interests
may not be front and center like they should be.

Speaker 1 (11:19):
I want to talk about what you need to know
here right, what you need to ask, And I would
say two questions. One, if you're sitting down across from
someone and it's the first time and you've never worked
with them before, even if you have been for years,
you need to say, are you a fiduciary? And then
you need to follow that with one hundred percent of
the time when you are making recommendations to me, are

(11:41):
you a fiduciary? And then the second question is how
do you get paid? How does your company get paid?
If I take these recommendations, explain to me who will
all be paid and how they will be paid? And
if that person isn't completely transparent with the answers, I
would walk right back out that door. Here's the all
Worth advice man. The next time you're speaking with a

(12:03):
perspective so called financial advisor, you've got to ask, how
do you get paid? Be very clear, be very direct,
wait for answers. Coming up next. An insane market timing strategy.
We are questioning and how too much job hopping can
hurt you in the long run. You're listening to Simply Money,
presented by all Worth Financial. Here in fifty five KRC

(12:25):
the talk station. You're listening to Simply Money presented by
all Worth Financial. I mean me 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. Just search Simply Money.
It's right there on the iHeart app or wherever you

(12:45):
get your podcasts. Coming up at six forty three, we're
answering your questions about roth IRA's annuities and more. It's
our Ask the Advisors segment. Okay, so right now, those
of the Jewish faith are in the midst of their
high holy days. It started last week and it concludes
on Saturday. And why are we talking about this and

(13:06):
a show about money. Well, there are always crazy stock
market predictions, and some of those apparently come along with
this particular time of the year.

Speaker 2 (13:16):
Yeah, this is old trading folklore that's commonly mentioned a year.
I know, at the end of the day it literally
means nothing and you should do nothing based on this,
but it's it's called sell rashashana and buy yam kippor no,
thank you. How about not trying to time the market
or finding reasons to justify timing the market. But you

(13:39):
know it's this suggests that US stocks tend to fall
over the ten days that the Jewish high holidays are observed,
so investors would be better off selling beforehand and buying afterwards.

Speaker 1 (13:51):
I'm just going to say, this is crazy, right, don't
do it. This is market timing. Sell and may and
go away. There's one hundred adages like this. None of
them hold water. Some people will, you know, point to research,
you know, down, ten percent, up, whatever, Just please don't
time the market based on holidays, the time of year
when people go on vacation. It doesn't work out best

(14:13):
for you long term. Okay, if you hate your job,
many people, the answer is we're going to jump around
to a new job, and often the result of that
comes with a higher paycheck, so you would think, okay, Actually,
frequent job hopping if you are you know, better title,
better salary, better income along the way, should be a
good thing, except if you are not paying close attention

(14:38):
to those old four to one case.

Speaker 2 (14:40):
Yeah, which obviously you should be. But new Vanguard research
shows that the majority of people who change jobs wind
up putting less of their pay into their four oh
one ks, oftentimes without realizing that this is happening. And
this is because maybe we forget to sign up for
the four to one K, maybe we get auto enrolled
at a lower savings rate, you hitting that restart button

(15:02):
instead of carrying things forwards as they have been.

Speaker 1 (15:06):
Yeah, and over a four year dec era of four
decade career, right, if you think about your switching jobs
ten twelve times, what can the difference mean? Well, if
you're starting over every time, right, say you were auto
escalating by one percent every year, or how much you
were putting into that four one K, and you were
up to seven to eight percent, and then you start
a new job and you go down to three percent again, Right,

(15:28):
you're going backwards. And when you look at a graph,
it looks like a seesaw. Every time you start over,
it goes back down and then it comes back up.
And if you want to put dollars and cents to it,
it can mean as much as three hundred thousand dollars
less maybe more in retirement wealth, for someone who has
average pay over the course of their lifetime, it's kind of.

Speaker 2 (15:48):
Like you're losing momentum. But when you switch a job
like this, and you know that happens oftentimes, especially in
current generations, people are hopping jobs more often for those
those pay bombs. It's easier to get a bak up and
pay if you leave an employer rather than staying with one.

Speaker 1 (16:03):
You know.

Speaker 2 (16:04):
The idea of the four toh one K was supposed
to solve a key problem around pensions, which was that
guaranteed income coming from your employer. You work for the
same company all those years, and then you get a
paycheck for the rest of your life. It's a beautiful thing,
but it was also very expensive for employers to maintain,
especially as folks started living longer. So the four to
one K puts the decision making and the onus on

(16:26):
the individual, and that is what you have to focus on.
If you're changing jobs, you have a responsibility to make
sure that you are maintaining that four oh one K
in the way that you had been, not letting yourself
fall back to a lower contribution rate, for example, which
is where this big problem actually comes from.

Speaker 1 (16:43):
Yeah, and this is what the research shows. So sixty
percent of the time when you are switching a job,
you're getting a raise, But only forty four percent of
those who are switching jobs and getting the raise actually
either kept their investments or the amount that they're putting
into their four o one K at the same or
increased their savings. Right, many had it in the wrong direction.

(17:05):
It just doesn't work well. I mean, just you know, anecdotally,
my husband started a new job recently and I said
to him yesterday, you know, it's so fun being married
to me because these are the conversations. But I was like, Okay,
what are our investment options for your health savings account
in your four oh and K? And he was like yeah.
He was like, well, I don't know. I'm waiting on
HR to get him to me. I'm like, you've been
working there for a.

Speaker 2 (17:25):
Week, Like, yeah, wait, figure it out right.

Speaker 1 (17:27):
Exactly, this should be the first question you ask. But
this needs to be the way that we think about this.
You need to advocate for yourself. You need to understand
that for most of us, the best way to get
to retirement is this four oh one K. So losing
track of them, losing sight of them. Not knowing how
much you're putting. You know, when you're switching jobs, not
being super intentional about how much you're saving could really backfire.

Speaker 2 (17:52):
Yeah, I mean there's all kinds of issues here. It's
not just the changing of contribution rates. It's even forgetting
to sign up. I mean nearly one quarter of job
switchers fail to do so. You get a new job,
you getting a bump and pay. You should be saving more,
not spending those dollars and having lifestyle creep. You should
be saving more than your four to one k. But
some people just don't auto rolled workers. Oftentimes they're put

(18:14):
into the default default savings rate or the default investments.
Default savings rate may be lower than what the company matches,
and then you're missing out on free money even if
it is what the company matches. But you were contributing
ten or twelve percent before you switch jobs. You should
be going back to ten or twelve percent or more
if you got a raise. A real life example is

(18:34):
a twenty five year old earning sixty thousand dollars who's
automatically enrolled at three percent of pay and raises that
by one percentage point a year to ten percent would
end up with about eight hundred thousand dollars by age
sixty five. Again, this is according to a Vanguard study,
and this assumed that a fifty percent in player matching
contribution for the first six percent happens. In contrast, somebody

(18:57):
who changes jobs eight times and whose savings return to
three percent each time would have less than five hundred
thousand dollars assuming the same contribution and same match or
the same matching on those contributions. So you're potentially missing
out on three hundred thousand dollars by not taking ownership
and keeping up with what you should be doing in

(19:19):
your four oh one K.

Speaker 1 (19:20):
One of the things you have to know is what
percentage of your take compay are you putting into that
four oh one k? Right, this is something that you
should know. If you don't know, figure it out because
when you switch jobs, it's important not to take steps
backwards but to keep building. So you know, if you
were putting ten percent in and thought old job and
now you're making more rather than lifestyle creep, put it
eleven twelve percent now, right, keep working up. We would

(19:43):
say the goal should be fifteen to twenty percent. Then
you're going to set yourself up for a good life
in retirement. Here's the all Worth advice. We can't stress
this enough, the importance of having enough saved in your
four to one k to help you achieve financial independence. Next,
if you are getting rid of an old comp or
how do you make sure it's safe? How do you
wipe that personal information off of there? We'll get into that.

(20:05):
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. Im Me Wagner,
what do you do with those old devices laptops, phones?
If you're with me or if you're me, I don't
know the answer to that question normally, so we just

(20:25):
stockpile them in my basement, which I have a feeling
is not the right answer. So they're joining us, is
our tech expert daybatter? The stockpiling of old devices just
collecting dust in the basement probably not the best answer.
What should we be doing, Dave.

Speaker 3 (20:40):
Well, I mean, this is a really important question that
I think is often overlooked. And whether it's your old PC,
your Mac, your phone, or some other type of device
that could pullet data. Even a printer, for example, A
lot of modern printers, especially more enterprise great printers, have
memory and the ability to store data in them, and
hackers will often go after the printers because they know
there might be sensitive data stored in the memory of

(21:02):
the printer. So and sadly, you know how I feel
about so called smart devices. Any are Internet of things
privacy and security dumpster fire. Even some of those devices
are potentially a security and privacy concern for you. For example,
if you have a car and it's got an enfertainment
center all the new ones do, and you float your
phone into it, it's entirely possible that entertainment center has

(21:23):
sensitive data on it. So while most people, if they
think about this at all, and I think many don't,
and I fully understand that. That's why I'm glad you
wanted to talk about this today. It's more than just
your PC. If you are going to decommission and expund
a device that could contain sensitive data, you really need
to think about how to do that in a way

(21:44):
that's going to ensure sensitive data passwords, bank account numbers,
anything like that aren't still on that device, because you know,
unless you physically destroy it. Who knows where to'll end up.

Speaker 1 (21:55):
So the thought of this overwhelms me, you know, I mean,
I just it's like I don't even know. You know,
you've got pictures, you've got passwords, you've got old files,
you've got all of that stuff. So let's start there
with a PC with the laptop. What do we do?
How do we do it? I know some places will
have certain days where you can bring like old technology,
but I don't even know if that's a good answer.

Speaker 3 (22:18):
Well, it kind of depends on what what's your ultimate
goal for that old PC is? If you have a
PC that's still got some life in it, and you know,
there are plenty of charitable organizations that would love to
get their hands on that stuff because they can repurpose
it and get it to less forward to the people.
So you know, maybe you want to give it to
a family member or a kid. My first answer is
what do you want to do with it? You know,

(22:40):
if you truly have no use for it, and it's
okay to physically destroy it, and I'll come back to
that in a second, that's different than if you want
to be able to repurpose it to someone else. In
either case, though, you know, don't just go throw it
in the garbage, don't set it out and then recycling,
because again someone driving down the street that knows the
value of the data. You know, a lot of times
anyone devices stolen, they're not stealing the device because of

(23:02):
its intrinsic hardware value. They're stealing the device because of
the data on it. Right, this is the same thing.
So you know, if you have a Windows based PC,
one of the things you could do is get into
the settings and basically reset it back to the factory defaults. Now,
I want to be clear, and this is something that
will generally apply to almost any sort of device because
one of the problems, of course, is how you would

(23:23):
do this on a Mac versus a Windows based computer
versus an Android phone or whatever is going to be
a little bit different. But you know, most modern devices
have the capability to reset the device to the factory
default okay, and you know that will quote delete the
data on it. Now, I want to be clear. When
you delete data, in almost every case, you're not actually
physically removing the data. You're telling the device that space

(23:45):
is available, and it will originally be overwritten. This is
how people find themselves in trouble because they think they
have quote deleted something, but it's still there. And when
the right tools and the right skills aren't much by
the way, it's easily retrievable. But you know, doing a
factory default reset is going to be way better than nothing,
and that's going to prevent you know, casual hackers, interlopers,
et cetera, from access to that data. If you really

(24:07):
want to clean this system, you really have three choices.
You have to physically destroy it somehow you have to,
and this would be the best advice, I believe for
most people. Take it to like an e cycling center.
There are many in town. You can look this up
and say, you know, I don't need this device anymore.
They'll give you a certificate that says they know how
to use the right processes and that they you know,

(24:28):
attest to the fact that they have clean sanitized in
the business is the term that device, so that your
data is no longer on it, and then you know
they'll resell it or whatever. You can download software that
will wipe the device, that'll just overwrite the memory and
the device X number of times to make it very
very difficult to recover. But for most people, my advice

(24:49):
would be, you know, unless you want to physically destroy it,
and even then, if you don't know what you're doing,
that's question. Your best advice would be defined at a
local company that specializes in et cycle recycling used electronic devices.
Take it to them and get that certificate from them
the confirms they have securely wiped slash sanitize that device.

Speaker 1 (25:11):
I like the fact, David earlier you brought up you're
you know, you're not a fan of these Internet of
things anything that's you know, attached to the Internet, but
most of us have smart TVs, smart appliances, whatever it is. Now,
I wouldn't even think twice about it if this TV
wasn't working anymore whatever, donating in or get rid of
it without even wiping anything. So is that something too

(25:32):
that should just go back to the default settings or
what do we need to be doing with those kinds
of devices?

Speaker 3 (25:39):
Yeah, Amy, you know, I just thoroughly despise the Internet
of Things because most of this stuff is privacy and
security dumpster fire to have, you know, a perverse business
model of trying to be first to market, market share
and eese of use versus your privacy and security. And
while I'm not inherently against the idea of smart devices
that make your life more convenient place now where again,

(26:01):
these companies objectives do not really align with your objectives
as a consumer that cares about privacy and security. So
all of that said, you know, any device that has
a camera, any device that has a Microsoft, any device
to connect to the Internet and can potentially collect and
share data is a potential risk for having data that's
still on it when you get rid of it, you know,
assuming the thing isn't just completely dead and you can't

(26:23):
interface with it all. My advice would be set the
thing back to the factory defaults, which would be more
likely than not to reset all the data in there,
and then you know, destroy this thing, take it to
a recycling center something like that. You know, the data
that your smart TV would potentially have is going to
be a lot less risky than the data your work
PC that you also use to access your bank accounts

(26:46):
and so forth. But in any electronic device that can capture, store,
and send data is a potential risk, and it is
important for people to consider these sorts of things, not
only as they're purchasing them, but especially when they decide
to get rid of it.

Speaker 1 (27:00):
You bought up a car before, and it's funny that
you say that. I was recently having a conversation with
someone who had bought a used vehicle, a really nice one,
and they casually mentioned that it had been kind of
a local celebrity's wife or something like that before, and
I was like, well, how do you know that, Like,
do they tell you that when you bought it? They
were like, oh no, But when we got into the

(27:22):
car and started driving it, all of like the pin
place or at home on the computer system was their house,
so we knew it was it was theirs. And I
was like, oh, that's that's creepy. I wouldn't want to
turn in an old car and then have someone be
showing up in my driveway because they bought that car.
Would have never thought about that before.

Speaker 3 (27:44):
Yeah, two things to think about. First off, I strongly
encouraged anyone that's running a car do not connect your
phone to the entertainment in any way that it transfers information.
I mean, I get hands free calling in that sort
of thing. Some cars will support like a call only
mode where it doesn't transfer any data. But if you
rent a car and you connect your phone to it,
all your stuff gets sync into that entertainment center. You

(28:07):
turn that car back in, who knows who has access
to that or what happens to it. There's a well
documented report where a researcher went out went the junkyards,
bought entertainment centers from junk cars and was able to
recover all kinds of it, you know, sensitive intimate texts
between people and all kinds of stuff. But as far
as your own car, my suggestion to you would be,

(28:27):
when it's time to get rid of the car for
whatever reason, you go back to the dealer and you say,
I want to ensure that any of my personal information
stored in this entertainment center is white. And I would
encourage people to take even a further step. Check out
the Mozilla Privacy Not Included report on recent cars. Mos
Zilla they make web browser software and other software. I

(28:50):
have a site called Privacy Not Included that takes a
look at the so called smart device Internet of things world,
and they did a gigantic deep dive into modern cars,
and I think most people will be shocked when they
under fully understand the amount of sensitive data that's being
collected about them, not only through the phones, but through
the cameras, the microphones, the sensors and the cars. What

(29:10):
they're doing with that data, which will just further incentivize
you to understand that that infotainment center is a potential
significant risk to you when you get rid of a
car if you don't have it sanitized, slash wipe.

Speaker 1 (29:23):
It's always eye opening. Dave had our tech expert from
Interest id right what you need to do old cars,
the old devices, phones, laptops, make sure you are taking
the proper steps to protect your information and yourself. You're
listening to Simply Money presented by all Worth Financial here
on fifty five KRC the talk station. You're listening to

(29:47):
Simply Money and presented by all Worth Financial. I mean
you Wagner along with Steve. If you have a financial
question you need a little help with, there's a red
button you can click on while you're listening to the show.
It's right there on the iHeart app. Record your question.
It's coming straight to us. And first question tonight comes
from JD from Behavior.

Speaker 3 (30:04):
I have a roth Ira and just realized I contributed
too much for this year. Will I have to pay
a penalty for this mistake.

Speaker 2 (30:10):
Not necessarily. There's a form, a Return of Excess Contribution
form that you fill out and you can recharacterize it
contribution either to a traditional IRA, apply it to next
year's contributions is another option. But you know what happens
is if it stays in over the course of a
year before you file your taxes, then excess contributions are
subject to a six percent tax penalty. So it's good

(30:33):
that you caught this because we can avoid it by
by recharacterizing.

Speaker 1 (30:38):
Now, yeah, you're saying too much for this year. You
haven't filed your taxes yet, so now's a good time
to say, hey, you know, here's this form sub mintigan.
Now move this money into you know, somewhere else. You know,
put this towards twenty twenty five, put this towards you know,
an IRA whatever. But you need to move it somewhere
else so you do not get that penalty. Next question

(31:00):
from Stacy and Glendale.

Speaker 2 (31:02):
Hey, Amy, Hi Steve, is there any real difference between
a WROTH four O one K and a roth IRA
Should I use one over the other?

Speaker 1 (31:08):
Well, I would say the main difference is the limits,
right that you can put in, so you can put
a lot more into a four to one K than
an ira. And then also there is an income limit
on a roth ira. Now there are ways around it.
It's called a backdoor w roth or a roth conversion.
But you know, if you were just putting the next
dollar into one or the other, you would max out

(31:32):
on that roth ira if you make a certain amount.
So good to look into that. But what I like
that you're asking is about a ROTH option because I
actually like Wroth money a lot, and there's some advisors
out there that would argue with me, But I here's
what I love about the roth. You're paying taxes for
it now. I don't know where taxes are going to

(31:52):
go in the future. I do not have a crystal ball,
but I am going to assume they maybe go up right,
So you're locking into today's tax right now. But the
growth right the money that you put in as it
is invested and grows, you never pay taxes on that growth,
and I think there's such a benefit from that, especially
the farther away you are from retirement. Now, there's definitely

(32:13):
reasons why in retirement you also want Wroth money. But
I'm telling you if you are in your twenties thirties,
you know, not your peak earning years. Either of these
options makes a lot of sense.

Speaker 2 (32:24):
And remember you're rough for one case, tied to your
employer sponsored retirement savings plans. So yes, it does have
higher limits that you can contribute, but you're also limited
to the investments that your employer gives you to pick
and choose from. Res aro IRA is an individual retirement
account not tied to your employers, so you can pick
and choose for the most part, any investments that.

Speaker 1 (32:42):
Are available in that account.

Speaker 2 (32:44):
But you bring up good points.

Speaker 1 (32:46):
Let's go to Blue Ash now and we'll hear from Frank.
I'm sixty seven with about three hundred thousand dollars saved
for retirement. Should I invest in an annuity to help
make sure I'll always have a steady stream of income.

Speaker 2 (33:01):
Yeah, we talked about this a little bit today. Honestly,
it depends without knowing more about your financial situation, needs
and goals, Frank, I couldn't tell you exactly what you
should do on a personal basis here, but what I
can say is that if that's all you have outside
of Social Security, maybe a pension putting all of that

(33:24):
into an annuity would certainly be a mistake because you're
not going to have access to any liquid cash in
the event that you need to come up with more
than what your monthly paycheck will allow for.

Speaker 1 (33:34):
Yeah, I'm wondering why he's attracted to this. Is it
the thought of guaranteed income or is it you know,
I come across a lot of people who are just
afraid to lose a dime of what they have, And
there's other strategies out there, you know. One of them
that we've been using a lot at all with is
called a buffer DETF. You know, so if markets are down,
say twenty percent in any given year, which could be

(33:55):
kind of a normal part of the market cycle of
the business cycle, then something like BUFFERDTF can help protect
you from the first fifteen percent of that downside. Also,
though you can buy or you know, for a BUFFERDTF, specifically,
it makes more sense to hold that investment for at
least a year, but you can buy it or sell
it at any time and you don't have to pay
commission on it. So I'm wondering what exactly you're trying

(34:18):
to get out of that annuity. And I would also say,
there might be some other options that are going to
give you more flexibility, things like surrender fees you know,
pertain to annuities, and sometimes people realize this wasn't the
best thing for me, and too late right to unwind them.
It can be just a lot a lot of damage.
Let's go to kennext in Montgomery.

Speaker 2 (34:39):
We have a five to twenty nine set up for
our son. Any tips for how to best use it
when we actually start making withdrawals. So this is what
they are for. You know, A five twenty nine is
for college savings, and you're able to use that for
non reimbursed qualified expenses without paying any taxes or penalties

(35:00):
for those costs. Now, you know, I will say in
this day and age, and this is a little bit
outside the box, but let's say you have enough enough
cash flow to pay for whatever expenses might head your way.
It is worth exploring letting that money hang out and
continue to grow because now with Secure Act two point zero,
we're actually able to transition up to thirty five thousand

(35:21):
dollars of five twenty nine assets to roth IRA contributions
once the beneficiary has earned income. So you know, yeah,
it's there to use for college expenses. That's why you
saved it. It's it's easy to do because all you're
doing is taking distributions to pay for those contributor or
to pay for those expenses. But if we don't need
to use it, then this could also give a major

(35:43):
head start on retirement savings for the beneficiary that five
twenty nine.

Speaker 1 (35:47):
Yeah, as the mom of two kids who are currently
in college, love the five twenty nine. We needed a
new computer. It also goes for room and board. It
can go for a lot of things. And one thing
I am very much appreciated out of washing is they
become more and more flexible with how you can use
these five to twenty nine. So for anyone who has
little little ones or one on the way, I think

(36:08):
setting up a five to twenty nine can make a
lot of sense. Coming up next, we've got a little
Wagner wisdom. 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.

(36:29):
I mean me Wagner along with Steve Ruby, a lot
of pomp and circumstance, because what I'm about to admit
to you is a mistake. This is a Wagner's wisdom
that went awry. You know, my daughter, Grace is a
freshman at UK and she's taken a personal finance class.
I love it so much. And yesterday she sent me

(36:51):
a text and she said, I don't think I can
do my homework. And I said, well, what do you
mean you don't think you can do I'm pretty sure
you can do your homework. And she said, and we're
supposed to look up our credit score and I don't
think I have one. And I was like, how does
my child not know that she has a credit score?

(37:12):
Like what a miss as a parent. You know, I've
talked to her about, you know, credit cards, how to
be responsible, how to not spend more than you've got
coming in, how to you know, prepare for all the
cost of college and all of that. But what I
didn't talk to her about is in the background when
she makes decisions like, you know, applying for college, you know,

(37:33):
they're looking at if she were to apply for loans,
they would be looking at her credit score. They would
be looking at, you know, how responsible she is with credit. Now,
one thing you know that you find for kids that
age is it takes a while to build a good
credit score. They don't have credit history. But you have
to have the conversation about paying bills on time. You know,
if you have it, think about a thousand dollars. I

(37:55):
remember my first credit card, one thousand dollar limit. You know,
you don't need to be spending a thousand, nine hundred
and nine nine dollars every month, and so major miss there.
Make sure this is not a miss in your household.

Speaker 2 (38:06):
Right for no more than half of that, by the way,
because that's a good way your credit utilization right is
a good way to build the credit there. So did
you somberly say I'm not angry, I'm just disappointed.

Speaker 1 (38:18):
I'm disappointed in myself. I said, you can absolutely do
your homework, you absolutely have a credit score. I have
failed you as a mom. Call me later.

Speaker 2 (38:28):
I feel like this is probably a really boring dinner
conversation at one point, and she just zoned out and
forgot I don't know you or her. Yeah, because this
strikes me as something that you passionately would talk about
during a Thanksgiving dinner with everyone looking at you, like,
why is she talking about this?

Speaker 3 (38:42):
You know me?

Speaker 1 (38:42):
Well, right, the likelihood that I've brought this up before
is pretty high, and also the likelihood that she was
like snapchatting a friend during that time is also likely
has But I think you know listen, please, as your children,
you know, leave the nest and go off into the
world and go to college and get their first jobs,
if you can pass on what you have learned, and
I think being really open about your mistakes but also

(39:04):
understanding you know, basic things like paying off a credit
card each month or how much you would have to
pay if you carried a balance, but also that credit score,
how it helps you, why you need one, and how
to build a good one. All need to be part
of the conversation. Thanks for listening. You've been listening to
Simply Money, presented by all Worth Financial here on fifty
five KRC, the talk station