Simply Money

Episode Transcript

Speaker 1 (00:06):
Tonight, you're listening to Simply Money, presented by all Worth Financial.
I'm Brian James, Bob's sponseller will join us in a
few minutes. Today we got Andy Stouts. He is our
chief investment officer for all Worth Financial manages just over
twenty six billion dollars for us and boy, Andy, do
we have some headlines to talk about from this weekend?
Some things going on in the Middle East. We've got
a FED meeting coming up. Tell me what did you

(00:27):
start thinking about as soon as you poured your cup
of coffee this morning?

Speaker 2 (00:31):
Well, as soon as I poured my cup of coffee,
I was grateful for the Father's Day gift I got
for my daughter. It's a mug, so that's the first
thing I thought about. Then I did shift to the
economy and thinking about what's going on with the market,
So there was definitely you.

Speaker 1 (00:47):
Know, before hold on, before we get too deep, I
want to acknowledge that this scary stuff that a lot
of people are terrified of, that was not the first
thing on Andy Stout's mind. Andy Stout is pretty important
to the investment universe. However, you were thinking about your
own personal families because the stuff we're looking at is important,
but it's not all as terrifying as it might seem.
So I like to hear that I appreciate that point

(01:07):
of view. So yeah, please continue, Sorry to interrupt you.

Speaker 2 (01:10):
Well, no, absolutely, and that's you know, that's another good point.
And if you just think about it, it's not as
if we haven't seen volatile geopolitical type events on a
pretty regular basis. And guess what, the world keeps moving,
spinning around and everything is fine in the end. It
can definitely be you know, scary in the meantime. I mean,

(01:30):
when you saw the market reaction on Friday to the
Israel Iran missiles flying back and forth, you saw oil
spike get pretty quickly from sixty eight dollars a barrel
up to seventy eight dollars a barrel. Eventually pulled back
to around seventy two or so, but it's going to
move around a lot still. So you know, my first

(01:52):
reaction after the mug was thinking about, Okay, how might
this play out, doing a little what I call game theory,
thinking about how others might react and then what that
would mean, you know, for the investment situation, and when
you look at it, and when you think about just
from that perspective, it does help to essentially see the
bigger picture because you know there's going to be some

(02:15):
short term ups and downs that happens. We saw that
when Russia invaded Ukraine. We saw that in the twenty
twenty three regional banking crisis. You see that almost every
year on these annual debt ceiling scares that we have,
and you know, the playbook's pretty much the same. The
difference is the catalyst, but the playbook is usually the same.

(02:36):
We'll see some short term volatility, people will get nervous,
there could be some very attractive buying opportunities, but as
of right now, none of this has a major economic
input that's going to really economic impact that could push
us off into a recession. So, you know, the first
thing I thought about after the coffee was the playbook

(02:58):
and what that playbook looks like and how it has
or how it could play out over the near term.

Speaker 1 (03:04):
So speaking of the playbook, let's think about the time
of year for a second year, because it just occurred
to me, you know, as these headlines erupted over the weekend,
really starting on Friday, then what occurred to me was
that that we haven't talked about gas prices and oil
prices really much at all. And I'm not just talking
about this this past spring and early summer here. I
don't think last year it was a huge topic either,

(03:26):
which is really crazy because it was a presidential election
year last year. It seems like these are always we're
always hyper focused on oil prices, and it's this time
of year, kind of the May June timeframe where we
switched to the summer mix of oil and everybody's traveling,
we're all spending a lot more on gas and so forth.
But really that I don't remember that being a big
topic last year and not a topic this year until now.

(03:49):
Am I missing something? Andy or his oil not as
been been as important to the overall concerns about the
market as it usually is.

Speaker 2 (03:57):
Well, when you look back at last year, oil is
relatively steady. For the most part, it was between seventy
and eighty dollars dollars a barrel. I mean it got
a few times to like eighty five, but it didn't
really go much higher than that. And then we saw
a decent pullback this year, and part of that was
the concerns around what tariffs and the trade environment might

(04:21):
do to overall economic growth. That pulled oil prices back
to blow sixty dollars a barrel in early May, when
we mental a lot of that volatility. Now since obviously
jumped to seventy well, it's right around seventy two right now,
but when you look at it from that perspective, it's
a lot lower than what it had been, you know,

(04:44):
a few weeks ago compared to last year, but it's
still in the low end of that range. And if
you think about what that means for gas prices, you
know what we're paying right now, it's you know, we're
going to be still well, blow four dollars a gallon
unless we get to around one hundred dollars a barrel.
That's kind of like where you would want to where
you might expect gas prices to really spike up. But

(05:05):
as of right now, even though we're in the summer
driving season, certainly does not suggest that you know, we're
on the brink of gas prices hitting four or even
five dollars a barrel. Oil is still way too low.

Speaker 1 (05:20):
Well, that'd be a nice change. It seems like we
spend the beginning of every summer winding about gas prices
and so forth. And this is knock on wood, two
summers in a row where it didn't come up until
we had a war in the Middle East. So you're
listening to simply money on fifty five KRC. We're talking
to chief investment officer of all Worth Financial and de Stout.
So any let's let's change the focus a little bit
to inflation in general. We've got some important meetings coming

(05:41):
up this week and there's a lot of opinions out
there as to what should happen and what will happen.

Speaker 3 (05:46):
What say you, well, we uh.

Speaker 2 (05:50):
Last week we got some updates on inflation with CPI,
which is consumer inflation, and it came in, you know,
better than expected. If you looked at the monthly change
in May, it showed basically a tenth of a percent increase,
which was better than the point two percent increase. What
that means and when you look at prices on a

(06:10):
year over year basis, they're right around two point four
percent higher, which is not bad when you look at
all the headlines. Now, part of that is because of
well energy prices ironically oil being lower than where it
was a year ago. Certainly we might see a little
bit different of a print when we get the June number.

(06:30):
But right now, at that two point four percent, that
that does reflect the lower food and energy prices. If
you exclude those, you're at two point eight percent. That's
not called core inflation. So what the Fed wants is
they want their core inflation to be around two percent,
and we're still running well higher than that. And when

(06:50):
you think about what's going on this week, the big
thing is the Federal Reserve their meeting on Wednesday, well,
Tuesday and Wednesday. They adjourn their meeting Wednesday at two
o'clock and that's when they release their official statement telling
us what they think about interest rates, where interst rates
are going to be until the Fed's next meeting, and
barring some sort of intro meaning emergency, right now, Brian,

(07:14):
there's about a zero percent chance the Fed actually does
anything on interest rates this week.

Speaker 1 (07:21):
It seems like we are seeing inflation impacts. Though I
don't know if you noticed your local Kroger, but over
the weekend I saw a bunch of them that have
temporary vinyl banners hanging right on the front of the
building talking about I think it's something about one thousand
products with lower prices or something like that. And that
was interesting to me because I've never seen the I've
never seen Kroger advertise like that, and it almost seems
like they're really trying to get people's attention away from

(07:43):
kind of the assumption that inflation is here and is
a permanent thing. Now, like you mentioned, we're down on
the rent, We're getting down between two and three percent.
We've been there for a while. It seems like people
aren't ready to accept the notion that, yes, maybe inflation
isn't the thing I should have concer learn about as
much as it was two and three years ago. Do
you agree with that? Has that changed your outlook on

(08:05):
how we're investing. Do you feel like it's time to
pivot or consider pivoting to a lower inflation environment.

Speaker 2 (08:12):
I don't think we're out of the inflation woods right now,
to be honest with you, When you look at those
year over year numbers, I don't see us getting close
to the Fed's target for a number of months now.
With that said, it is trending in the right direction.
You can look at the three month date and the
six month data and you can just see that inflation
is moving basically where we wanted to move now. The

(08:35):
thing is, though you still see some broad inflationary pressures,
and there's obviously concerns around terrors which haven't had as
big of an impact as a lot of economist feared.
I mean, even Goldman Sachs came out saying, I think
it was this morning, actually they came out and said,
the terrorists haven't had the impact that they thought it would.
So even the one of the biggest investment banks in

(08:59):
the world kind of missed the mark on that one
so far. But we're certainly nowhere near where we want
inflation to be. So what's going to be really interesting, Brian,
is when the Federal Reserve this week what they're going
to release. While the interest rates are going to say
the same, they do release their quarterly Summary of Economic
projections and their dot plot. What the dot plot shows

(09:21):
is where the Fed essentially thinks interest rates might be
at the end of upcoming calendar years. And what a
lot of economists are expecting right now is that the
Fed will telegraph just one interest rate cut this year,
so pretty low from that perspective. What the feder will
also share with us, though, is the Summary of Economic Projections,

(09:43):
which shows where the FED thinks inflation might be, where
GDP might be. And when you look at the Fed's
last time they did this quarterly update, you know what
it showed was that they still saw their preferred inflation metric,
which is core PCEE, running at basically two point eight

(10:06):
percent through the end of this year, so nowhere closer
to their targets. They don't even show it getting to
the FETs target the two percent until twenty twenty seven,
so I don't think we're out of inflation. Would definitely
need to still pay attention to that, but we also
need to pay attention to the job market. I mean,
the unemployment rate is still relatively low. However, one thing
last week that I want to close on is that

(10:27):
the continuing job as claims are people still collecting unemployment
insurance hit a fresh three year high at almost two
million people. So there's a lot of nuance there. But
the important takeaway is to focus on the big picture
and the volatility and just really staying patient and looking
through that volatility.

Speaker 1 (10:47):
Super super helpful and we're so glad you're on the
team to help us guide clients through this and the
general listening public as well. Thanks to Any Stoutter, chief
investment officer for all Worth Financial. Coming up next, if
the market drops ten percent, would your portfolio be a Okay,
we'll talk about bufferdtfs why they could be a smarter
way to ride out that storm. You're listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the

(11:08):
talk station.

Speaker 4 (11:13):
You're listening to Simply Money presented by all Worth Financial.
I'm Bob Sponseller along with Brian James. Hey, if you
can't listen to Simply Money every night, subscribe and get
our daily podcast. And if you think your friends could
use some financial advice, tell them about us as well.
Just search Simply Money on the iHeart app or wherever
you wherever you find your podcast.

Speaker 3 (11:35):
Straight ahead at six forty three.

Speaker 4 (11:36):
Why the set it and forget it approach might fail
you after age sixty? All right, tonight we're going to
delve into a strategy that more investors are asking about lately.
Buffer ETFs. What are they and why do they even matter?

Speaker 3 (11:53):
Brian? What are they? Bob?

Speaker 1 (11:55):
Well? At the very core of BUFFERDTF is an exchange
traded fund, right, so an exchange trade fund is a
very collective term. It's like saying kleenex is the word
for tissues. An exchange traded fund does not really tell
you anything about what's underneath it. It could be an index fund,
it could be a pile of bonds, it could be
a whole lot of different things. So these are very
specific types of exchange traded funds or ETFs that offer

(12:15):
some level of downside protection. These are set up to
limit your losses to a certain point. You know, the
buffer might be ten percent. The market goes down fifteen
percent on my statement is only going to go to
I will see that it only took a ten percent hit.
There is there is a stop to the downside. Now,
of course, there's no you know, there's no free rides here, Bob.
There's also a cap to the upside. So what you're
doing is you are setting buffers on the downside and

(12:37):
on the upper side. But the benefit of these, though,
is that they trade their exchange traded funds. They trade
all day every day, so you're not locking yourself into
any kind of time structure of those kinds of things.
So these are for people who are really just kind
of looking for in the short run. You know, maybe
I'm about to retire, I'm about to transition. Things are
going to happen here. Maybe I want to have something
in my portfolio to take the stress off of that

(12:59):
the market may not cooperate when I need it to.

Speaker 4 (13:02):
Yeah, and there's you know, in terms of implementing a
strategy like this, you know, I know, what are folks
here at all worth doing? It's not just buying one
of these buffer ETFs. It's it's building a portfolio of
them that work together and developing an actual strategy. And
I will add this too, This is not a this
is not a do it yourself proposition. In my opinion,

(13:25):
these things have different caps. They have you know, higher
fees and a lot of cases you got to watch
the taxes, the tax impact of trading in and out
of these things. Uh, it can get pretty complicated in
a hurry, but it is a very good strategy that
does give you a lot of flexibility as opposed to
some of the other things out there that people use

(13:47):
to mitigate investment risk, like indexed annuities or things like that,
which are embedded with you know, extremely high fees, surrender charges,
lock up periods. This is a lot more flexible approach
to manage some downside risk in your portfolio.

Speaker 1 (14:04):
Yeah, and we're definitely not saying that everybody should run
out and get these These are things to understand and
consider maybe adding to your portfolio if you happen to
check the right boxes. But you know, in those index
based annuities, we don't think annuities are evil by any
stretch of the imagination. They're tools, right. A tool is
just used for a specific purpose. If you got the
purpose use the tool. If I got a hammer in

(14:24):
my hand, I can build a birdhouse with it, or
I can hit somebody in the head. So these different
investment products serve different purposes. The scary thing about annuities
in this case is that they do lock up. You
don't have the ability to pull out whenever you might want,
as opposed to a BUFFERDTF, which again they trade all
day every day, so you could change your position pretty quickly.
Now we're certainly not advocating that you do that, because

(14:45):
Bob already kind of hinted at it. If you happen
to have a gain in one of these and you
go ahead and sell it out, then that's most likely
going to be a short term gain because we're trying
to use these to ride out a shorter term market
period and you build a gain in that's a short
term gain which as taxable as income.

Speaker 4 (15:02):
Well, and Brian, I that's why I like these things
again for certain situations because of the flexibility that's embedded
in this strategy. If we have a change in the
economic environment, you know, a big change in interest rates
or tax law, or a market correction, you can adjust
on the fly and protect that downside risk and then

(15:23):
and then change and adapt the portfolio as economic conditions change,
or your personal financial goals liquidity goals, spending goals might change.
So it's a great strategy because it can it can
evolve and adapt to the changing things going on in
the economy or with the client's personal you know situation. Brian,

(15:45):
I know you've talked to clients about you know, bufferdts
yourself and your practice. Can you give us an example
maybe where this has been a good fit for somebody
and where where did.

Speaker 3 (15:55):
You use it, you know, with an actual client.

Speaker 1 (15:57):
So in the past I've been I've been doing this
almost three decades now, and in the past, bonds or
fixed income we're kind of the the agreed upon rudder
for the portfolio to keep things on the straight and narrow.
But over the past several decades we've seen bonds move
more in the direction of the of the overall stock market.
So that doesn't mean bonds are a bad investment either,
But at the same time, this is another alternative where

(16:19):
you can put a little bit in there to kind
of straighten out the overall ups and downs of the portfolio.
And like I mentioned that, the specific scenarios I'm thinking
of where clients where we have used this is where,
for example, perhaps we have let's say we have two spouses.
One spouse makes all the financial decisions, the other spouse
is kind of arms length away only wants to be
involved when he or she has to be well. Then

(16:40):
if the financial deciding spouse passes away all of a sudden,
surviving spouse, you know, unexpectedly has to get up to
speed really really quick on things and all, and they
may be super nervous about all these about the ups
and downs of the market. They need a cycle or
two to maybe get used to it. So that's a
case where bufferdtfs can temporarily lessen distress that that person

(17:02):
might be feeling because they don't know the ups and
downs of the market. So we've used those in those
cases because it is a shorter term scenario, and then
they can get used to kind of dip a toe
in the water and get used to the ups and downs,
and then we can talk about whether it continues to
be necessary. These are not and really nothing nothing is
set it and forget it and forget about it forever.
That's not the case here. These aren't magical things that
guarantee upside and no downside. That's not the point. It

(17:23):
offsets the stuff that drives the upside, because that anything
invested in the stock market, of course, is going to
have its bumps, and barfad ETFs can smooth it out
without forcing you to make a long term commitment to them.

Speaker 4 (17:35):
You're listening to Simply Money presented by all Worth Financial.
I'm Bob Sponseller along with Brian James Bryan. In the
example that you cited, which I think is a good one.
I think the key here is you were talking to
folks that had, you know, maybe limited experience with the
ups and downs of the financial markets and the stock market,
and I run across people that just they know they

(17:56):
need to earn a positive return on their money that
outpaces inflation, but they just do not want to be
sixty seventy eighty percent in stocks, which we know is
the asset class that outperforms everything else over.

Speaker 3 (18:10):
The long term. But sometimes people don't care about that.

Speaker 4 (18:13):
They say, look, that's fine, I get it, but I
don't want to sit there and watch my portfolio decline
by twenty percent or fifteen percent, even in the short term.
I want some protection embedded in my portfolio, and that
can be a great place for these And you brought
up bonds. I mean, look, twenty twenty two is a
great example historically that you know, the old traditional approach

(18:36):
to acid allocation, just put a bunch of money in
bonds and that'll cushion the blows, so to speak. That
did not work so well in twenty twenty two when
the Federal Reserve raised interest rates, you know, seven times
in one year. Bonds took a hit, stocks took a hit,
A lot of things took a hit. And that's where
something like a buffer etf strategy could have helped people

(18:57):
weather that albeit short term storm and have them not
in a situation where they're upset or panicking about their portfolio.

Speaker 1 (19:05):
Yeah, so I want to throw out one quick thought
because you went started to go down this path of
settling for something that beats inflation versus just trying to
grow as much as I can. If I've got a
financial plan, then that means I know what I need
and I may not need as much growth as I
wanted in my twenties and thirties. If I have a
certain rate of growth that makes my plan work, then
it's okay to put these things in there to buffer
around that. But that means I will not keep up

(19:27):
with the overall market and I don't have to.

Speaker 4 (19:29):
Here's the all Worth advice. You don't need to risk
everything to grow. There are smarter ways to play defense. Next,
we'll show you how to make smart spending moves that
secure your financial future in the first ten years of retirement.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to

(19:54):
Simply Money presented by all Worth Financial. I'm bob'spon seller
along with Brian James. Retired or planning to retire soon,
This next segment is for you because how you spend
in the first ten years of that retirement period can determine.

Speaker 3 (20:11):
How long your money lasts.

Speaker 4 (20:13):
And we're talking about something I think a lot of
us have heard about or read about. There's been TV
commercials about it, the retirement red zone.

Speaker 3 (20:22):
Brian, what is.

Speaker 1 (20:23):
That, well, Bob, the retirement red zone is that time's
that couple years where you start going, huh, pretty soon,
I'm gonna have to turn on this money machine and
make it work for me so that I can quit
getting out of bed when I don't want to anymore.
So this is the most vulnerable stretch of your life,
and you're making a transition from saving suspending, and that
is a huge mental shift, Bob. I think that you've

(20:45):
seen this too, but a lot of clients really really
struggle with the idea that I have to rely on
my own savings. I've never done that before. It's a
huge psychological hurdle to get over because we all have
ground into our heads over decades. I have got to save, safe, save.
I cannot touch these dollars. That's not allowed. It's a
failure if I tap into my retirement savings. That is
a massive hurdle. We all tend to hide behind that

(21:07):
in terms of I just got to keep working, gotta
keep working. And some people work well beyond when they
could have retired because they're too scared to tap into
those retirement assets. Again, that's where I written financial plan
comes in well, and.

Speaker 4 (21:20):
There's another risk ca all this, and and some people
we don't see this a ton, but some people, Brian,
they retire and they're not working. Maybe they're a little bored.
They're fine looking for something to do. So they're like,
all right, we're going to splurge on some things, you know,
three or four big trips, remodel the kitchen, giving money
to kids, and you know what, before long, they've depleted

(21:42):
a lot of money in a very in a very
short amount of time. Again, we don't see that a lot,
you know, often, but it does happen. And sometimes we
got to talk people off the ledge from doing too
much too soon.

Speaker 1 (21:55):
Right, And that's that's an understandable desire. I've been working
my rear end off. If I'm married, my spouse, I've
been both been you know, just hitting it so hard,
and we're just tired and we want to celebrate and
do some things. And we feel like we've been successful,
and that's great and you should do that. And the
last person who should be discouraging you from doing it
is your financial advisor. However, all of you need to
agree on this is what we can get away with,

(22:15):
but here's what we can't. And so that's where this
that's where a full projection will come into play. In
other words, taking a look at what your resources are,
which is your streams of income that might be so security,
it could be pensioned, maybe there's an inheritance or some
real estate out there, something like that that's spitting out
income for you. And then looking at your piles of assets.
These are your iras and your investments. You've got piles

(22:36):
of money and streams of income, and then a long
discussion about what do we actually need this to do.
That's living expenses, the stuff we have to deal with
the rest of our lives. That's perhaps there's still a
mortgage in the mix, or you're supporting kids or maybe
your own parents or whatever. Let's figure out what these
costs are. Now that we have a combination of the
resources and the needs, we can run some projections, and

(22:56):
across those projections we will mix up the rates of
return on the market, because there's something called sequence of
returns risk, which simply means that if the market takes
a hit in early in my retirement, that's going to
have a bigger impact than if it happens later. And
this is something that happened to a lot of people
in twenty twenty one when we went over the cliffs
for a little while in twenty twenty two.

Speaker 4 (23:17):
Yeah, this sequence of return risk is real, and it's counterintuitive.
I mean I I was shocked to see the impact
of this when I first started to look at this,
you know, many years ago, and even very experienced, very
intelligent clients have a hard time grasping this at first.
Blush because when you're accumulating money, you know, saving money,

(23:39):
you really don't care what the year by year return is.
You care about what the average return is because you're
not spending any money from your four to one K.
Once you start to convert this, you know, mass of
accumulated wealth into a paycheck, you know, to replace your paycheck,
volatility matters, and if your long term return is identical

(24:03):
to what it was when you were saving and investing,
if that if that return gets volatile in the short term.
While you're pulling money out every month or every quarter
or every year, that money, once it's pulled out cannot
be replaced at all. And that's why you got to
manage this sequence of return risk all while what you
were starting to talk about in your example of cash

(24:25):
flow planning, Yeah, a.

Speaker 1 (24:26):
Good financial professional and anybody worth their salt in this
industry is gonna help you come up with a spending
strategy where everyone agrees upon here's what we need and
here's where we're gonna get it from. We're gonna hit
the roth ira first, or maybe we're gonna hit the
traditional ira first, or perhaps it's something else entirely, but
we have a plan and if something happens, as life
tends to do, because because God has a sense of humor,

(24:48):
so if something zigs when we wanted to zag, well
then we know how we're going to handle that. That
lessens the stress a lot and it prevents us from
making bad decisions. Taxes play a massive role in this, Bob,
because you know, obviously different things get taxed differently, and
depending on your own situation as well as the overall
situation we've got in the country, we may want to
choose from one account versus another so that we can

(25:10):
maximize the efficiency of those taxable distributions.

Speaker 4 (25:14):
Well, and having that first one to two years of spending,
one to two years of planned spending completely out of
harm's way, you know, in a high yield savings account
or short term bonds or something like that can help
cushion the blow as well, and it's critical that you
developed a strategy to get that in place. Here's the
all Worth advice your early retirement year, set the pace,

(25:35):
spend smart and your money will last. Next, why automated
investing can fail you when you need it most. You're
listening to Simply Money presented by all Worth Financial on
fifty five KRC the talk station. You're listening to Simply

(25:56):
Money presented by all Worth Financial. I'm Bob Sponsorer along
with Brian James. Do you have a financial question you'd
like for us to answer. There's a red button you
can click while you're listening to the show right there
on the good old iHeart app. Simply record your question
and it will come straight to us straight ahead. A
five minute task that could save you from financial fraud.

(26:19):
In the good news, it's totally free, all right, if
you're over sixty and still relying on a set it
and forget it approach with your investments, we need to
talk look target date funds, auto rebalancing, and low maintenance portfolios.

Speaker 3 (26:36):
Brian.

Speaker 4 (26:36):
They're all great when you're saving, but once you retire,
it can quickly become an entirely different ballgame.

Speaker 3 (26:44):
That's right, Bob.

Speaker 1 (26:45):
And then the reason that happens is because now your
money has a different job description. Your pile of money's
job description for probably thirty, maybe even forty years was
just to grow, just be a bigger pile, and that's
all I need for the first chunk of my life.
But now that we've successfully created that pile and transitioned
into retirement or are transitioning, now, it's about cash flow,
isn't it, Bob. We need more than just a bigger piles,

(27:07):
and so it becomes about which accounts are we going
to hit first, and that triggers certain taxes. Later down
the road, you'll be dealing with required minimum distributions. You
have to work that in, and certain methods that you
follow to simply pay your bills can cause things like
medicare to premiums to spike. That's something called IRMA, which
is our MAA is one of these fancy acronyms that

(27:27):
everybody learns about once they retire, which simply means that
if two years ago I had a bunch of income,
then I might see a spike in my Medicare premiums.
And that's never a fun thing. Sometimes it's unavoidable, but
it's better to see things, see these things coming on
the horizon. So what about Social Security, Bob, have you
had anybody with any issues they are getting that settled in?

Speaker 3 (27:46):
Well, we always have to run the number.

Speaker 4 (27:47):
I mean again, people always ask, you know, and it's
human nature. It's for as soon as somebody is willing
to write you a check every month, you know, the
default position position is yep, sign me up. I want
to take get send me that money. But the point
you brought up, it's important to run some projections on
how that's going to impact your income, taxes, your future

(28:09):
Medicare premiums, all that kind of stuff. And that's why
it's important to do some advanced planning. And Brian, I
want to get your take on target date funds because
we we run into a lot of folks that come
to us, you know, to hire us to do this
kind of planning for them and it you know, they're
always they always come to us, are usually come to
us with that default you know position in their four

(28:32):
to one K plan, a retirement fund. You and I
haven't talked a whole lot and kicked this back and forth.
I'm interested in your thoughts on the pros and cons
of target date funds, especially as someone enters these retirement
years now.

Speaker 1 (28:47):
In contrary to the way we kicked off this segment,
I do think there are some times where a set
it and forget it approach is okay. If you're a
young person, uh, and you're just getting started with that
four oh one K and it's literally got a few hundred,
few thousand dollars in it, a target date fund can
be a perfect solution. However, even in this case, if
you are if that's what you're looking at, look under
the hood and just make sure you know what it owns.

(29:08):
So it may look like a super aggressive fund it's
targeted for twenty sixty five forty years from now. I
saw one the other day, Bob that had twenty percent
bonds in it, and that's not something a twenty year
old needs. Twenty year old needs it definitely a set
of forget it an aggressive approach. Now, on the other hand,
when you're on the back end of this, I kind
of I like to use a golf analogy here. That
twenty year old is standing on the tee of a

(29:28):
six hundred yard golf hole, and there is little debate
about which club they need to pull out of the bag,
the big fat one, and they're gonna swing out of
their shoes. It's okay, you're gonna be in the rough.
You're gonna be you know, you'll miss the fairway from
time to time, but you can recover. Now the closer
I get to the green, when I'm fifty sixty yards out,
now I got a choice. What am I hitting today?
Which way is the wind going? Which club do I hate?
Which club do I think I have to have confidence in?

(29:50):
You gotta be more specific the closer you get to
the goal. And so that's what we're talking about here.
Target date funds don't deliver on that requires for specificity
when I get super close to that today goal of mine.

Speaker 4 (30:01):
Yeah, I love that golf analogy because it's hitting pretty
close to home. Now you're talking about my golf game, Brian.
I mean, I stand out there on the tee with
a five hundred and some yard par five.

Speaker 3 (30:11):
I pull out the driver.

Speaker 4 (30:13):
Well intentioned, but I hit that little seventy yard worm
burner and hack it to the left. I got no
shot of getting to that green anywhere in regulation, and
it puts me behind the eight ball even before I
get started. And I think that's a good analogy to
use for your twenty five year old client. So let's
talk about what we do suggest, you know, when we

(30:34):
talk about a withdrawal strategy.

Speaker 3 (30:37):
And the coordination and everything we're talking about.

Speaker 4 (30:39):
To get people set up the right way for retirement income.

Speaker 1 (30:44):
Yeah, so I think a lot of this has to
do with what outcome do I want. There are some
people out there, Bob, who are in a situation where,
you know what, I don't really care about taxes. Maybe
I don't. I don't have kids, and taxes are going
to be what they are. I would rather live my life.
I'm not really worried about tax efficiency. And that's that's
an okay. As long as people understand, you know, what
is the tax impact of your various decisions going to be?

(31:06):
That is an okay. Outcome what I would say is
not okay, is having no idea what's going to happen
and just saying I really don't care and throwing caution
to the wind and kind of ignoring all of the impacts.
But yeah, some people say, you know what, I'm not
worried about taxation on my require minimum distributions down the road.
It's just not important to me. On the other hand,
there are others who will say, you know what, I
just don't I don't trust this government. I feel like

(31:26):
taxes are going to go up, and I want to
do everything I can to control. So in that case,
you might be you might be a person who chooses
to pull your taxation forward. In other words, you know
a lot of times people will retire in their sixties
and maybe have some savings or some cash to decide
they can live off of, and they are sitting on
you know, some years where they are not in a
bracket at all. They're literally not paying taxes because there's

(31:48):
literally no income, maybe a little bit spit out from
a money market fund or something like that. To me,
that is not something to be celebrated. That is a
missed opportunity because we ought to be filling the ten,
the twenty two, maybe even the twenty four percent bracket
with roth conversions. And that's what I mean when I
say pulling taxation forward, not waiting until I'm seventy three
or seventy five when my require minimum distributions come in

(32:09):
and I got no choice, but rather converting proactively paying
taxes now spending some of that money I've got on
the sidelines to buy the tax freedom of my pre
tax dollars before I have to pay the piper.

Speaker 4 (32:22):
Good stuff, Brian. And here's the thing. This doesn't have
to be overly complex. It just has to be intentional.
You don't need twenty different accounts, but you do need
one cohesive plan, and that plan does need to be
built to evolve. Because life after sixty isn't static. Things change,
your money should be flexible enough to change with it.

(32:43):
Here's the all Worth advice. Retirement isn't the finish line.
It's just the next phase, and your investments need to
graduate along with you.

Speaker 3 (32:52):
Next.

Speaker 4 (32:52):
One of the simplest and smartest things you can do
today to protect yourself and your family. You're listening to
Simply Money, presented by all Worth Financial on fifty five
KRC the talk station you're listening to Simply Money, presented
by all Worth Financial.

Speaker 3 (33:12):
I'm Bob Sponseller along with Brian James.

Speaker 4 (33:15):
Let's talk about something that could literally take you five
minutes but save you thousands of dollars potentially, and that's
freezing your credit. Brian, this is so simple, it's free
to do. This is the closest thing to a no brainer.
We're probably gonna talk about here as far as I know.

Speaker 1 (33:34):
Yeah, freezing your credit simply means ain't nobody gonna open
a credit line in your name, including you. So what
this means is you're contacting to various credit bureaus and
you were jumping through their hoops to have your credit frozen,
meaning nobody can apply for anything. Obviously, you don't want
to do this right around when you're if you're gonna be,
you know, actually needing your credit, you're gonna have a
mortgage or or something like that. But the good thing

(33:56):
is this is not a permanent decision. You're simply freezing
it for the time being. You also, of course have
the right to unfreeze it when you do need it.
But it is, like you said, it is a very
very easy way to protect yourself from somebody stealing your identity.

Speaker 4 (34:09):
Yeah, and let's make sure we separate freezing your credit
from identity theft protection. You know, some service that you
pay for and subscribe to. And we're not saying don't
do that too. What we're saying is just freezing your
credit if you're in a situation where you just know
you're not gonna need or want to borrow any money
anymore or for the foreseeable future. This again is a

(34:30):
no brainer, because most identity theft starts with a new
credit application. Somebody is trying to impersonate you and borrow
money in your name, and a credit free stops that
at the source. No lender can approve a new line
of credit without your explicit permission to unlock your report. Brian,

(34:52):
I've done this personally, you know, for myself, and it's beautiful.
It's like putting a padlock on your front door. It
doesn't stop people from trying, but it sure does stop
them from, you know, getting in.

Speaker 1 (35:04):
Yeah, and I would throw out there too, don't think
that just about yourself. Let's not be uh, let's not
be selfish here. You've got family and uh people, other
people you worry about. So if you've got kids out there,
then dude, here's a way to kill two birds with
one stone. First thing, put them on your and put
them on as authorized users on your credit card. That's
going to allow them to start building credit because they're
gonna inherit your score when they become independent. As soon

(35:25):
as you've done that, freeze their credit. Don't just freeze yours,
freeze theirs too, because they are they have Social Security numbers,
they are living beings who can have credit as well. Uh,
their identities get stolen too. And because they're not as
connected of course as the adults in this situation, a
lot of times that can't surface until it's way too late.
Kids will find out years later when they're applying for
you know, sometimes student loans or or a mortgage down

(35:47):
the road, that there's been some debt that's been unpaid forever,
and then nobody has any idea what it is. So
that's why it's important to freeze these things. And Bob
I would throw out there too. Another way that people
are stealing identities is by by looking at places where
you already have some kind of a presence. Right if
you're a client of a bank, then you have the
ability to do online banking. If you haven't set it up,

(36:08):
that means anyone can do it who has the right
amount of information for you. I have a lot of
clients that will say, you know, I don't trust the internet.
I just don't want to do these kinds of things.
And that's all fine, you don't have to use it,
but I would still suggest set up the online profile
because that way, if somebody changes the password, you're going
to get notified on your phone in the mail, and
you know a lot of different ways versus if you
never set it up at all and you'll never hear

(36:29):
that somebody.

Speaker 3 (36:30):
Has done that.

Speaker 1 (36:30):
You can also do that with the federal government. They
have a system called id ME. That is another way
that people that is going to be right for you know,
for people stealing identity. So own those things. You don't
have to use them, but I would definitely own them
and get them set up yourself so that you know.

Speaker 3 (36:43):
That you did it well.

Speaker 4 (36:45):
And from a practical standpoint, again, this is easy to do,
but you do have to go online to do this.
So there are three credit bureaus out there, Equifax, Experience,
and TransUnion, and you do need to take the steps,
and it's very quick and it's very free. You got
to freeze your credit at each bureau and Brian, you know,
we talk about the Sandwich generation all the time. This

(37:07):
is a good five to ten minute exercise that we
should sit down with our kids to do. And then
maybe at the same time or in a follow up meetings,
sit down with our parents and do this. People sometimes
in their seventies or eighties, they and for good reason,
they don't know what's real and fake out there. We
counsel them about identity theft all the time. The last

(37:28):
thing somebody in their mid eighties wants to do is
sit down, you know, under their own devices, by themselves,
and navigate through these credit bureau websites. This is a
good thing to do for our parents and for our
kids to just lock everything up at the same time.
It's quick and easy to do.

Speaker 1 (37:45):
Yeah, simple steps. There are There are a lot of
things out there that we can do that don't require
a whole lot of energy, and this is really an
easy one. Pour a cup of coffee and jump on
these three websites and go lock your credit and that
of those you love.

Speaker 3 (37:56):
Here's the all worth advice.

Speaker 4 (37:57):
A credit freeze is one of the easiest, smartest ways
to guard your identity.

Speaker 3 (38:02):
Do it, and do it today. Thanks for listening.

Speaker 4 (38:06):
You've been listening to Simply Money, presented by all Worth
Financial on fifty five KRC, the talk station