September 12, 2025 • 38 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian explain why it now appears absolutely certain that lower interest rates are on the horizon. Plus, they share the smart way to avoid a tax bomb and bring you their Ask the Advisor segment.
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Episode Transcript
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Speaker 1 (00:06):
Tonight, Well Byatt now appears absolutely certain that lower interest
rates are on the horizon. Plus the Smart Way to
avoid a tax bomb, and our award winning Ask the
Advisor segment you're listening to Simply Money, presented by all
Worth Financial on Bob Sponseller along with Brian James Well.
On Monday, we told you that there were going to
be two inflation reports coming out this week that the
(00:28):
Fed would be paying very close attention to heading into
their September seventeenth meeting. And those two reports are the
Producer Price Index and the Consumer Price Index. Today we
got the latest PPI number. Brian, walk us through it.
Speaker 2 (00:46):
Before I get into that, I want to know what
award we won for Ask the Advisor. I mean, it's fabulous,
but I wasn't invited to that celebration.
Speaker 3 (00:54):
Can you expand on that, Brian?
Speaker 1 (00:56):
It's Bob's everyone wins a trophy award?
Speaker 3 (00:58):
Okay, gotcha trying.
Speaker 1 (01:00):
I'm just trying to keep I'm just trying to keep
your self esteem as high as we can keep it.
Speaker 3 (01:05):
How about anticipation? The word these two? Yeah, who's word death?
Checking on the radio? First place? Check your checks in
the mail? All right? Fair?
Speaker 2 (01:11):
Enough, all right, silliness, all right? So what are we
talking about today today? Super sexy stuff here? Producer price
index and consumer price index today is the PPI. So
the producer price index, this is what This is what
companies pay for the resources that they use to create
the stuff that we go to the cash register and
pay for. And that's when we complain about the CPI.
(01:34):
But today we're talking about the PPI. Uh And the
reason for this is this is these are the prices
that manufacturers, farmers, suppliers have to deal with do their jobs.
It is important because if they wind up paying more,
guess what, that's trickled down and there's a good chance
that that gets passed through to you as the consumer
where we deal with PPI. So we're CPI on the
consumer end. So why are we talking about this? The
(01:55):
headline PPI for August was two point six percent. That
means businesses are paying that much more than they were
at this time last year for those raw materials that
they use. The ind acs actually fell month to month, right,
So that's the number. It went up, but it went
up year over year, but it's actually down month to month.
That's a little bit unexpected. Because Wall Street economists, we're
looking for a little bit of a gain in there.
(02:15):
We've been on a bit of an upward path, but
we took a step back this month.
Speaker 1 (02:20):
Well let's not forget you know, depending on which economists
we listened to, a lot of folks have been expecting
the PPI to continue to climb because of tariff policy.
So you know, this headline report actually, you know, indicates
that tariffs, at least at this point, are not as bad,
you know, from an inflation standpoint as feared, you know,
(02:41):
going going all the way back to April when we
had Liberation Day and the market tanked for a couple
of days or a couple of weeks, and I think
that's why, you know, we've seen the market recover and
hold steady. You know, steady doesn't mean it's always going
to go up, you know, for infinity here, but at
least it's good to see this lower PPI number. It's
(03:01):
good news in the short term. Tomorrow, the consumer Price
Index report comes out, and we'll have you we'll have
you definitely covered on that as well. Well. Let's get
into the latest job market data. Brian, I almost had
to laugh when I saw this you know, it's not funny.
It's just indicative of, you know, for everyone that was
(03:22):
getting on President Trump for replacing leadership at the Bureau
of Labor Statistics. I think this number, you know, calls
out the reason perhaps why he did that. We saw
the US payrolls estimated down jobs created from April of
twenty twenty four through March of twenty twenty five, so
(03:42):
encompassing one year, we got a nine hundred and eleven
thousand job revisioned down over the last year. Brian, I mean,
I to me, it just speaks of we're not getting
good data, and I think I think this department needs
to upgrade how they get data. I'm hearing things again,
(04:03):
as we've talked about, they collected through phone calls, which
nobody answers their phone anymore, and faxes. For heaven's sake,
what about using the internet, sending some type of encryptied
link to actual HR representatives at this country, using something
called the internet and getting better data. Because in all seriousness,
(04:24):
the FED is relying on this data, and this report
that just came out proves that we're we're not getting
good data. It needs the whole thing needs to be improved.
Speaker 2 (04:34):
I don't disagree with with the overall notion of improving
the process, Bob, But how do we know this data
is any better than than what we were getting before.
I'm sure, yes, the process is always don't antiquated, but
they don't replaced by by an administration that is a
little bit a little bit away from necessarily being driven
by the truth. And so I don't know. I just
(04:55):
because we've come up with new numbers that say the
old numbers were wrong, doesn't tell me that the new
numbers are any good either. I would love the idea
that we could potentially do something more efficient as long
as it as long as it can't be abused for
someone's political gain. I would be much more comfortable if
we were past this era of everything I do should
only benefit me politically, and I don't really care about
(05:17):
any other outcomes. That's all that matters, because unfortunately the
American people generally don't push back against that. As we've
seen for the past several administrations, not including the current
or including the current one, but also last twenty years.
Speaker 1 (05:27):
I'd say, all right, well, we might have to just
agree to disagree on this.
Speaker 3 (05:32):
And that is accurate you're not wrong. It is one
it accurate about it.
Speaker 1 (05:35):
No I And I'm trying to be a political here.
I'm just saying, if you get if you get numbers
that are one million jobs off over the last year,
I don't care who's in the White House, who's trying
to score political points. It's bad data. The data we're
getting needs to be improved. That's the only point I'm
trying to make here. You know, we could put Mickey
(05:55):
Mouse in the White House. I just want good data.
And you know, let's leave it there, all.
Speaker 2 (06:01):
Right, Let's go with the data that we have and
what does it mean, because that's really our job.
Speaker 3 (06:07):
Our and kind of go with that.
Speaker 2 (06:08):
So anyway, so what this means, assuming we're gonna this
is the information we have, so let's react to it.
So US job growth with this translates to US job
growth far less robust through the year than was previously reported,
and that's resulting in mounting pressure on the Federal Reserve
to lower interest rates because obviously the Federal Reserve has
a twofold mandate managed fiscal policies and get us as
(06:31):
close to full full employment as we possibly can. If
it's too expensive for businesses to do business. Then one
of the levers the federal reserve pools is to lower
interest rates to make it easier, and that should result
in jobs and economic growth.
Speaker 3 (06:42):
And that's the cycle that we've gone through.
Speaker 2 (06:44):
So the downward revision was about nine hundred and eleven
thousand jobs, or six tens of a percent. That's still
just a revision. The final figures on this are due
early next year, so there are multiple processes that we
go through to verify the actual information that we had.
But before this report came out, Pyroll's data indicated that
employers had added nearly one point eight million jobs in
(07:05):
the year through March on a non seasonally adjusted basis.
That's an average of one hundred and fifty thousand a month.
This the revision now shows average monthly job growth was
roughly half of that.
Speaker 1 (07:15):
All right, and you know this impacts sentiment across the board.
I mean, let's face it, the labor market is weakening.
We're not anywhere close to a recession at this point,
but it is cause for alarm. So the New York
Fed Survey of Consumer Expectations shows now that the perceived
chances of finding a new job within three months if
(07:38):
you lost your job has dropped to just under forty
five percent, and that's the lowest level we've seen since
that survey was created back in twenty thirteen. So that's
not good news on the confidence side. And you know,
we just we added just twenty two thousand jobs in August.
Employment take up to four point three percent. That's the
(07:59):
high highest unemployment percentage we've had in four years. So
we're seeing a weakening labor market somewhat tame inflation. I
would think this gives the Fed all the reason it
needs to start to lower interest rates, but we'll find
out in about a week. You're listening to Simply Money,
presented by all Worth Financial on Bob Sponseller along with
(08:20):
Brian James. Brian, let's pivot to everyone's favorite topic, social
security and the ticking time bomb out there. We've got
a new proposal out there. I don't know if it'll
ever see the light of day, but walk us through
it because this is interesting and it's at least an
attempt to try to fix the problem.
Speaker 2 (08:39):
Yeah, as a financial planning NERD Bob, I love this
stuff because every interaction I have with clients, I'll have
somebody who says, well, here's my social security what it's
proposed to be, but we all know that's going away, right, Well,
that's incorrect, that's not the case.
Speaker 3 (08:53):
Today's topic is a little different. But let's leave it
at this.
Speaker 2 (08:56):
As long as people are paying fight attacks, as you're
going to get a social Security check. It may go
down if they don't make any changes, but there's going
to be a check. Now, why are we talking about this?
There is a brand new proposal in Congress called the
You Earned It, You Keep It Act. The acronym for
that is yay yikia, which isn't awesome, So I'm hoping
they're going to kind of rethink that. But anyway, the
(09:17):
whole point of this is coming from Reuben Diego and
Angie Craig.
Speaker 3 (09:20):
They're both on the Democratic side.
Speaker 2 (09:21):
But it would completely eliminate federal income taxes on social
Security benefits, beginning as early as next year. And it
goes further than temporary deductions the change. This change would
be permanent. Sounds like this is a big win for retirees, right,
tax free social security? Who would say no to that? However,
we can't, and I do like that this is out
there it's what's going to get it shot out of
the Skybob. But I do like that somebody said, yes,
(09:43):
it would be nice to do this, but it costs that,
and here's how we're going to pay for it. So
to pay for this tax cut, and that is what
it is. It's a tax cut. This bill proposes raising
the payroll cap. Today no matter how you are, even
Warren Buffett only pays fight at taxes on his first
one hundred and seventy six thousand dollars worth of income.
They're going to raise that to include earnings above two
(10:03):
hundred and fifty thousand dollars. So this will raise taxes
on current workers to eliminate taxes on Social Security benefits.
Speaker 1 (10:11):
All right, And Brian, you know, again keeping put the
politics out of it, and you've talked about this umpteen
different times on this show, and I agree with you.
We just wish our politicians would just level with the
American people and go about fixing these problems and be
honest about what it's going to take to fix it.
And I think one of the options that's been being
(10:33):
bantered about for years now is raising that earnings cap,
obviously to bring in more revenue because the trust fund's
going to run out here in under eight years. This
is at least a proposal out there forget about the
you know, tax free social Security. We got to fix
social security long term. I think in the current political environment,
(10:54):
this is probably going to get shot out. You know,
it'll never see the night of day or light of day.
But at least it's a proposal. Maybe it'll come back
up later when they actually have to start talking about
fixing the system that's clearly broken.
Speaker 2 (11:09):
Right now, let's backtrack just a little bit here, because
there was a recent change as part of the One
Big Beautiful Bill Act that went into effect July fourth,
that did not eliminate taxes on soci security outright. The
administration did allow that to get out there, and they
were really never clear about it. But all that happened
is a temporary six thousand dollars deduction for seniors sixty
five plus twelve thousand for couples that helped about eighty
(11:31):
eight percent of beneficiaries avoid taxes on their benefits from
twenty five to twenty eight. But it's not permanent. It's
just a little window of time, and it gave them
a little bullet to say that they had eliminated taxes
on soci scurity bitif, which was not the case. It's
very temporary, So yeah, this bill is it looks to
put it in place permanently, but it also addresses what
the actual cost of this will be, which which is
what's going to get it blown out of the water unfortunately.
(11:53):
But what I'd like to say is that this is
not new. Proposals to fix Social Security hit the floor
of Congress every single year, and I am committing Allworth's
own Jason Scott to research how often this happens.
Speaker 3 (12:05):
Because we just talked about it a little bit. He's
gonna do it anyway.
Speaker 2 (12:07):
But I am fascinated by this, and I think people
need to know that attempts have been made, they're always
shot down for political reasons. So we will hear more
about this in the future.
Speaker 3 (12:15):
Look forward to it. All right.
Speaker 1 (12:17):
When someone says tax free, should you believe them, We'll
tell you when to run the other way. Next, 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 on Bob sponseller along
(12:38):
with Brian James. If you can't listen to Simply Money
Live every night, subscribe and get our daily podcast. Just
search Simply Money on the iHeart app or wherever you
find your podcasts. Straight ahead, real questions from real listeners.
When to pull the retirement trigger, what to do if
your kids don't want to be involved in your family business.
(13:00):
We've got our answers coming up at six forty three.
All right, most of us spend our entire financial lives
trying to minimize taxes. So when someone shows up with
a product, any product, oftentimes an annuity or a life
insurance policy, and tells you it offers quote tax free income,
you want to believe them. But here's the problem. The
(13:22):
phrase tax free is often used in ways that are
technically true but practically misleading and oftentimes very misleading.
Speaker 3 (13:31):
Brian Candy.
Speaker 2 (13:33):
Yes, So one of the big offenders here is the
life insurance industry. And for those of you in that industry,
I'm not about to bast the idea of life insurance
retirement plans.
Speaker 3 (13:42):
Oh come actually are well hold on.
Speaker 2 (13:45):
There are actually our situations where this can be good,
But I think it gets abused because for the result
of selling an insurance policy. But anyway, let's talk about
life insurance retirement plans.
Speaker 3 (13:55):
The idea is this, it's.
Speaker 2 (13:56):
A cash value whole life or universal life policy of
variable universal life. You can invest inside of an insurance policy.
It's kind of like a four. Oh okay, you can
pick different mutual funds that kind of thing. Much more
complicated than that. There is the cost of insurance, right.
There's a death benefit attached to these, so there are
expenses that are involved that are much greater than if
you just invested in a similar pile of mutual funds
(14:18):
anywhere else. But you overfund the policy, meaning put more
cash into it than you need to create the death benefit,
and you actually minimize the death benefit because that's not
really what you're after. That's a nice feature, but you
don't want to pay for any more death benefit than
you have to. So why would I bother doing this? Well,
the reason is because it is possible to take loans
(14:38):
against that death benefit, and those loans are tax free.
Nobody pays taxes for having received a loan, even if
it's from a bank for a mortgage, or from a neighbor.
Speaker 3 (14:47):
Or from your own life insurance policy. So that's the
whole point.
Speaker 2 (14:50):
Pile a bunch of cash into it, and then for
the rest of your life take out loans against it.
And as long as as long as you never as
long as you don't take out too much is borrow
too much against it. Then when you actually pass, the
death benefit will simply be reduced by the amounts of
whatever the loans you've taken.
Speaker 3 (15:06):
So where does this make sense? Bob?
Speaker 2 (15:09):
If you've got hundreds of thousands of dollars of extra
cash laying around, or really good cash flow, and you're
a youngish and reasonably healthy, then this can make a
lot of sense.
Speaker 3 (15:17):
Where does it drive me nuts?
Speaker 2 (15:18):
When I have a twenty five year old who has
sold a life insurance policy and there's no more money
in it than they would put it into a roth Ira,
and the reason they bought it is because their college
dormmate sold it to them as a new member of
the sales team of an insurance company.
Speaker 1 (15:32):
All right, Brian, have you ever used one of these
things with a client?
Speaker 2 (15:36):
Yeah, I'm working with one right now, and actually we
did not set it up as a great example. I'm
liter literally sent an email last night. They might be
listening and hello if you are. But anyway, so they
brought it to us as part to bring they'd already
put it in place. They brought it to us as
part of their financial plan. And they are the post
your children. They are what I just described lots of
cash flow, good idea of They understand how it works,
(15:57):
they understand the sacrifices. One of the big things I
didn't mention. You sign up for one of these, you
got to die with it. If you ever take all
the money out, everything you borrowed becomes taxable, and it
will totally blow things out of the water. But in
that case, that is a good example of a way
they understood what they're getting into, they understood the complicated
pros and cons associated with it, and they've got things
going on far beyond that. It's simply a one component
(16:18):
of a much more complicated financial plan in that case.
Speaker 1 (16:21):
Yeah, I've used one of these in the past as well,
and it's for all the reasons you talked about. Younger folks,
very high income, chance to sock some money away and
it all works great. One other thing I want to
point out on these things, it can work great until
life changes. In this particular situation. These folks were thirteen
fourteen years down the road paying into this thing, and
(16:43):
then all of a sudden they wanted to buy a
second home in Texas, and where did they go to
get the money? They borrowed the money out of this
life insurance contract. Well, that throws off the whole you know,
tax free pension thing down the road because you've just
yanked out a bunch of the money.
Speaker 3 (17:00):
So we had to get into.
Speaker 1 (17:01):
An in depth study on how to fix this thing
and you know, keep from creating a tax nightmare and
also have it still makes sense from a rate of
return standpoint. So we ended up just stopping all future
premium payments, lowering the death benefit to an amount that
the cash value would currently support for the rest of
(17:21):
their life. The client's happy. We walked away happy, but boy,
there are a lot of situation. Yeah, it's it was
a very near miss from a tax and rate of
return standpoint. I'm glad I've only used this one time
in my over thirty year career, because the point here
is it takes away a ton of flexibility and there's
(17:43):
just so many more and better ways to skin the
cat from a life insurance and investment and retirement plan
than having everything piled into one of these one size
fits all solutions makes it.
Speaker 2 (17:58):
You got to look for this too, is on the
uity side, So another version of this pitch shows up
with annuities with particular focus on fixed index annuities that
have guaranteed income writers.
Speaker 3 (18:07):
These again, these are tools.
Speaker 2 (18:09):
If I'm holding a hammer in my hand, I can
build a birdhouse with it, or I can hit myself
in the head.
Speaker 3 (18:13):
It's just a tool.
Speaker 2 (18:14):
I got to understand what it's for. So some of
the things that you'll hear from people looking for commissions
on these is that part of your income is going
to be tax free. Well that sounds great, but there's
nothing here's the trick. There's nothing the irs has said
about these particular investments that says these are tax free
and nothing else is. All that means is that that
a portion of those payments is the return of your principle.
That's the same cases if you stick it in the
(18:35):
bank and pull it back out, You're not paying any
taxes on that because it's just the return of the principle.
So that's all grumpy news. Let's talk about where it
does work. Bob what actually is tax free?
Speaker 1 (18:44):
Well, things like wroth iras tax free growth if you
meet the rules five twenty nine plans for college savings
when used properly for education, and one of our favorite strategies,
health savings accounts for qualified medical expenses. Those are truly
three tax free plans. And let's not forget about municipal
bonds if you really are in a super high tax bracket,
(19:07):
those can make a lot of sense too. And let's
face it, even life insurance death benefits are almost always
income tax free. But again, just focus on getting the
death benefit you need to protect your family. Don't pile
a whole bunch of other things into this that just
complicate matters and create some landmines down the road. Here's
(19:28):
the all Worth advice. Always ask what tax free really means,
because it rarely means free. All right, before you hit
the unsubscribed button on those unwanted emails, listen to our
next segment with our cybersecurity expert Dave Hatter. You're listening
to Simply Money presented by all Worth Financial on fifty
five KRC the talk station. You're listening to Simply Money
(19:55):
presented by all Worth Financial on Bob sponseller along with
Brian James, joined to by our tech and cybersecurity guru,
mister Dave Hatter. We always love having Dave on the show. Dave,
thanks for making time for us tonight. And we've got
a real common and important topic to cover, and that
is unwanted emails. We came across an article in the
(20:17):
Wall Street Journal here recently about what all the things
that are happening with trying to delete unwanted emails, and
some of that stuff was news to me and I'm
anxious for you to dive into us and educate us
on how to handle this stuff.
Speaker 4 (20:32):
Well. First off, guys, as always, thanks for having me on.
I appreciate the opportunity to try to raise awareness about
these things. And yeah, I thought this article was very timely.
We all get tons and tons of spam, whether it's
be an email or now text messages, and I'm sure
you guys are getting some of those too, And it's
really important for people to understand three concepts here. Hey,
the volume of this stuff keeps going up, and they
(20:54):
will come at you anywhere. They can could be social media,
could be email, could be text, et cetera. To all
of these things rely on spoofing. Spoofing is the sort
of nerdy term for the idea that virtually anything that
can be digitized can be fake. Whether it's an email,
it's an entire website, it's a text message, it's a
phone call, you know, from a number that looks legit
(21:15):
but isn't. Spoofing, unfortunately, is very easy for the bad guys.
And then finally, there's usually a social engineering aspect. Right,
you get a text, there's some crisis you have to
attend to. And obviously people want to stop getting all
this stuff, which I fully understand and respect. But the
bad guys understand that people want to get off these lists.
They want to quote unsubscribe, and you know, for legitimate
(21:36):
businesses you have to follow the cant Spam Act. You
have to give people an option to unsubscribe from this stuff. Well,
the bad guys know them, so a new tactic and
at at best it's a way to confirm that you're alive. Right,
you get an email or a text message, there's a
quote unsubscribe option if you will when you click that,
At best, you've just told them you exist. Right, So
(21:57):
that's that's the best thing that can happen. The worst
thing that can happen is when you click that link.
Either a they want you to log in. They've got
some very well spoofed credential page where you're going to
enter use the name of the password they capture that
they know people use the same user names and passwords
across multiple sites. Now they're off to the races, potentially
or possibly when you click that link, you download some
(22:18):
kind of malware, keystrokelogger, ransomware, something like that.
Speaker 1 (22:22):
So you know, this is a while there.
Speaker 4 (22:25):
It is still a legitimate thing to unsubscribe for emails,
and I'll talk more about that in a minute. You
need to be very wary of anything you get that
has an unsubscribed option unless you are absolutely positively certain
that it's legit, which is very hard to do nowadays,
because it might be a guys to get you to
click that link and then do some nefarious thing to you.
Speaker 3 (22:46):
Hey, Dave, so on that topic.
Speaker 2 (22:47):
So here's what I've convinced myself that I know about this,
which isn't very much, but I'm still very falsely confident. Often,
but if these come from a company like Constant Contact
or survey Monkey or somebody who's primary You're a legit company,
but their primary role is to send out an awful
lot of emails. My understanding is that those companies obviously
due to the can Spam Act you mentioned that that
can threaten their very existence, so they absolutely.
Speaker 3 (23:09):
Have to, uh, you know, follow those rules. Is it
is that?
Speaker 2 (23:14):
My understanding was if I n subscribe from Constant Contact,
then that will wipe me out of a lot of
different things they might be sending out. Uh.
Speaker 3 (23:21):
Is that real?
Speaker 2 (23:22):
And I suppose those that can be spoofed as well.
Am I on the right path there?
Speaker 4 (23:26):
They definitely could be spoofed, And I mean, you're you're
generally right, although understand, like you know, many companies use
constant contract or Mailchimp or using CRMs like HubSpot to
send that emails. And you're right, can spam requires legitimate
business businesses to give you an option to get out
of that stuff.
Speaker 1 (23:43):
However, you know.
Speaker 4 (23:44):
If if constant Contact is being used by three different
companies and you've somehow gotten on their mail list, when
you unsubscribe from one, it's not going to unsubscribe you
from the others. Right, all of that said, though, yeah,
your your hunt is exactly right. Legitimate companies are going
to honor your request to get out. It's illegitimate companies
or companies kind of operating at the edges of legitimacy.
(24:06):
And then frankly, you know bad guys out there who
are using spam and unsubscribe as a way to get
to you and convince you that, hey, I'm going to
reduce the amount of garbage that I'm getting by clicking
this link.
Speaker 1 (24:19):
All right, Dave, you talked about being wary of clicking
on that unsubscribed link. I mean, talk to the normal
person out there. I mean, I don't know we got
seems like a lot of people are either on Apple
or let's just say Gmail. You know, what should you
be doing to screen yourself out from all this junk email?
Just to clean things up and to avoid being spoofed
(24:41):
or taken advantage of What are the practical steps you
tell people to take to clean this stuff up?
Speaker 4 (24:48):
And so the first thing always with this stuff is awareness,
knowing that it is at least a possibility that anything
you get could be spoofed, right and operating with you know,
some skepticism and some caution. The second thing then is
you know, if you're if you have a high level
of confidence legit all right, go ahead and choose unsubscribed.
But the safer methodology is to either a let's say,
(25:10):
let's just pick Amazon for example. You've bought stuff from Amazon,
You're on various mail lists. You open up a web browser,
you go to Amazon dot com, you log into your
Amazon account, you go to the communication settings or whatever
they call it, and then you start to unsubscribe yourself
from your mail list. You are initiating the transaction, You're
always in control of it. You're not clicking the links, etc. Right.
(25:31):
That's always the best way to avoid any sort of
spoofing is you start a transaction with a non legitimate site.
The other thing you can do is in your mail client,
whatever that might be, whether it's Gmail on the web,
Outlook on your computer, or whatever. When you get a
bogus email or even something like a text, you know,
and even if you're not sure it's bogus, you just
want to get off the list, just report it as
(25:52):
junk or whatever they call it. Right, right click on it,
open it up, whatever you need to do in your
particular mail environment, and just say report junk or report
spam or whatever they call it. While you'll still keep
getting those emails, they'll just automatically go to your junker
spam folder. You go clear that out occasionally. You don't
have to click anything. It vastly reduces reduces the risk
(26:13):
that you're going to be lulled into some false sense
of security and click on the wrong thing. That's the
two best ways to get rid of it with minimal
risk to you report this junker spam or log into
the company that send it to you, and you know
unsubscribed that.
Speaker 1 (26:26):
Way, so if you do report these unwanted emails as
junk or spam, something does actually happen and it and
it gets diverted into a junk folder. I mean that's
I'm not joking around. This is good stuff to learn.
I didn't know that, Yeah, I mean that would happen.
Speaker 4 (26:43):
It's going to depend on you know, your mail platform.
And this same kind of logic applies to text. Right,
you get these weird texts, Hey Bobby, are you're meeting
me for lunch today? Or this kind of weird stuff,
it's best not to interact with this stuff. Report to
this junk block it block center. Again, the terminology might vary,
but the concept is the same red than you click
(27:04):
any links or respond to it, report it as junk
or spam using whatever technique is available to you. And
if you're not sure, that's something you can look up online.
But once you've said this is junk, then you should
not see them anymore. Right, Once it hits your mail
client outlook, whatever it is, it should just automatically throw
(27:24):
that at the junk folder. If you just go out
and clear those things out once in a while, should
be good to go again with minimal risk to you.
Speaker 1 (27:32):
Yeah, and then you'll get the occasional message from somebody saying, hey,
I emailed you, I tried to contact you and I
couldn't reach you. I'd rather have one or two of
those every six months than get inundated with this stuff
that I never wanted in.
Speaker 3 (27:47):
The first place.
Speaker 1 (27:47):
All right, great stuff is always from our tech and
cybersecurity expert, Dave Hatter.
Speaker 3 (27:53):
Thanks again, Dave.
Speaker 1 (27:53):
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. I'm Bob sponseller
along with Brian James. Do you have a financial question
for us. There's a red button you can click while
you're listening to the show right on the iHeart app.
(28:16):
Simply record your question and it always comes straight to us. Brian,
let's kick things off with Rachel in Lovelin. She says,
our net worth is around two and a half million dollars.
Do we know if our liability insurance is really keeping
up with the risk? Brian, This liability thing, this insurance
stuff keeps coming up almost every day. People want to
(28:37):
know more about it.
Speaker 3 (28:38):
Yeah, lots of questions around that.
Speaker 2 (28:40):
So yeah, I mean, so that's not necessarily your net
worth being around two and a half million. First of all, congratulations.
That's tough to get to in this day, in this
day and age. So obviously you're feeling sensitive that we
need to protect us right now. We got something to
protect because somebody could be sniffing around it. The presence
of all those dollars doesn't necessarily expose you in any
other way.
Speaker 3 (28:59):
It's what what is your situation?
Speaker 2 (29:01):
Do you do you have young drivers in the house,
do you have you know, do you own a business
that could where you're creating products that five years after
you retire, something could go wrong with and then you'd
be kind of you'd be you'd be liable for something
down the road. So I guess it's more about the
idea of what what are the exposures that you have.
We don't have a lot of detail here other than
(29:21):
your net worth, but I think it's definitely a question
worth asking. I would definitely call your property casualty people.
First thing they're going to tell you about is this
is another well well worn refrain. Here is an umbrella policy.
I think everybody ought to have an umbrella policy. I
should have had one. Didn't get my attention until my
P and Z guy said, hey, dummy, you got one
young driver now and two behind them. Probably ought to
(29:42):
have one in place. So understand your situation. Talk to
your trusted P and C representative. They'll help you what
you should understand, what you should have. All right, So
we're gonna move on to David in Montgomery, who has
got grandkids. He wants to help out with college costs,
and he's asking if five nine plans is the best option,
or or is there something else out there?
Speaker 3 (29:57):
What do you think, Bob Well, David, I would.
Speaker 1 (29:59):
Say, in almost every situation, the five twenty nine plans
are wonderful. Again, it's one of the few truly tax
free benefit plans out there. I mean, the money goes
in after tax, but then it's never taxed again, including
all the growth, as long as that money's used for
qualified education expenses. They're wonderful tools. And even if your
(30:20):
grandkids don't go to college, there's some other creative things
you can do on the back end, you know, converting
them to wrath iras or things like that to give
your grandkids a great start. The only time I generally
recommend not using these is if you're, you know, one
to two years away from going to college, if your
kid's already sixteen years old and you never put any
(30:43):
money away. I mean, these things work just like rawth iras.
The longer you could take advantage of that tax free compounding,
the better deal they're going to be. But some some
would counter what I just said and say, well, at
least I want the State of Ohio tax deduction. Even
if I throw it in a five point twenty nine
plan for six months and leave it in a money
(31:03):
market account, you can get some tax benefits from doing that.
So in almost every situation, five twenty nine plans are wonderful.
You're just gonna get more bang for the buck if
you start early and take full advantage of all that
tax free compounding. All right, let's move on to John
and Mason. He says, I've got one million dollars in
(31:24):
concentrated company stock. Would an exchange fund be the smart
way to diversify without triggering immediate taxes? Brian, this is
right in your wheelhouse.
Speaker 3 (31:34):
Yeah, this week, This comes up all the time.
Speaker 2 (31:36):
So a million bucks in concentrated company stock, an exchange
fund is only going to be an option if this
stock is free and unencumbered, if you're still working for
Let's pretend this is P and G. I don't know
if you're talking about and I'm making this up. We
don't know where John works, but let's pretend it's P
and G and he's talking about his profit sharing drusts, Well,
there's nothing you can do about that because until you
actually retire, because you're kind of stuck there with that
(31:56):
employer and that company stock.
Speaker 3 (31:58):
That's just an example.
Speaker 2 (31:59):
So what I'm going to assumed, based on your question
is that this is just the stock that you happen
to own, and you can do whatever you darn well
please with it. So, yes, the purpose of an exchange
fund is for you to take a pile of stock
and put it into a pool along with other people
who have different, different companies but similar situations, too much
of one stock that they don't want to sell because
they don't want to pay the taxes on it. So
(32:20):
what you do is you contribute your actual shares in
kind as is you do not sell. You put them
in the pile, and then in exchange you receive a
proportion of the pile back. So if somebody has too
much p ANDNG, somebody's got too much Eli Lilly, somebody's
got too much Kroger, you all throw throw it into
the pile, and all of a sudden you have a
three stock portfolio instead of a one stock portfolio. Obviously
that's overly simplified, but the whole point is to spread
(32:42):
the risk out from one of those companies taking a
major hit at the exact wrong time in your life.
So yeah, that's a good thing to sniff out as
long as you have full control over that stock. Paul
in fort Wright, Paul says his family business is thriving,
but the kids are just not interested. Jen two doesn't
want to take it over, So how can they start
thinking about a sale with out causing some family drama there.
Speaker 3 (33:01):
That's a great question, Bob.
Speaker 1 (33:03):
Well, Paul, I've actually been in this situation, per you know, personally,
my wife and I we've gone through that process and
it wasn't so much that our kids, you know, weren't interested.
They just warnted a place. They were too young and
too inexperienced to be in a position to take the
business over. So my advice is keep, you know, just
because you're dealing with kids here and you're worried about drama,
(33:27):
focus on your business. It sounds like you've you've worked
very hard to build a successful business. Congratulations on that.
Don't stop acting and behaving like a responsible business owner
just because there's kids in the mix. So run it
like a business, make the good decisions from a business standpoint.
The only thing I would add is sit down and communicate.
(33:49):
Sit down with your kids and explain it to them.
Here's the situation that we're in, here's what we're thinking
about doing and why, and we just want to get
it all on the table so there is no drama,
there's no misunderstanding and the business belongs to you, not
your kids. You built it, not them. So if there's
a little weeping and gnashing of teeth here, deal with it,
(34:10):
get it out on the table and move on and create,
you know, cash in that equity that you've worked so
hard to build. That's my advice, all right, Lisa and
terras Park. She says, we've been charitably inclined for years,
but now we'd like to involve our adult children. Is
it better to use a donor advice fund or set
up a family foundation?
Speaker 2 (34:31):
Brian, Yeah, so we don't have a ton of time here,
so I'm gonna do this a little bit quickly.
Speaker 3 (34:35):
But a family foundation, you know my.
Speaker 2 (34:37):
Opinion, I think we really need to be looking at
about five million dollars in up that you want to
contribute to charity. There are a lot of administrative costs
and charges and complicated stuff that has to happen to
make that. Even though it sounds awesome to be able
to I would love to say there's the James Family
Foundation out there, not really an option right now, but
a donor advised fund can accomplish the same thing for
(34:58):
a lot less contribute because you'll be able to get
the family together.
Speaker 3 (35:03):
It's very simple to set up.
Speaker 2 (35:04):
You'll be able to get the family together and have
everyone agree upon who what charity do we want to
benefit this year. The whole point of a donor advice
fund is putting a bunch of money in at once,
taking the tax deduction now, but deciding later over years,
how you want to distribute it. So start there and
look for opportunities to do a family foundation later.
Speaker 1 (35:21):
All right, coming up next, we've got Brian's bottom line
where he's going to tackle a very important topic and
that's sequence of return investment risk. You're listening to Simply
Money presented by all Worth Financial on fifty five KR
see the talk station.
Speaker 3 (35:38):
Let's get this.
Speaker 1 (35:39):
You're listening to Simply Money presented by all Worth Financial
on Bob Sponseller along with Brian James. And it's time
now for Brian's bottom line.
Speaker 3 (35:46):
Hit it, Hit it, Brian.
Speaker 2 (35:48):
We're gonna talk about sequence of returns risk today, Bob.
Speaker 3 (35:51):
So what that is?
Speaker 2 (35:51):
That's not it's not about the average return you get
when you When we do financial plans using spreadsheets, sometimes
we'll say well I got a pile of money and
it's going to return me six percent on average, so
I'll just extrapolate that out through the rest of my life.
That's all great, but it doesn't take into account what
the market can do in any given time because God
thinks he's funny. Sequence of returns. Risk is about when
you get the good returns and more importantly, when you
(36:12):
get the bad returns.
Speaker 3 (36:13):
Because it's gonna happen. If you're drawing down money in retirement.
Speaker 2 (36:16):
A bad year early on can permanently hurt you far
more than the same bad year later in retirement. So,
for example, if you retired in twenty twenty one, your
first year was twenty twenty two, that hurt a lot.
For somebody who retired in nineteen ninety five and then
twenty twenty two hit that didn't hurt him so much.
Speaker 3 (36:32):
They might not have been happy, but it didn't change
the outcome.
Speaker 2 (36:35):
So so let's picture quick example here, two retirees of
a million dollars and eed fifty thousand dollars a year,
same average return over twenty years, let's say six percent.
If the first one has a market downturn of the
first three years we're retired, where the second one has
the downturn in years fifteen to seventeen. Then the first
one who took that hit up front is going to
run out of money, probably five to seven years earlier,
(36:55):
even though they both had the same long term return.
Speaker 3 (36:58):
So what do we do about this?
Speaker 2 (37:00):
Well, when we do financial plans here, we always have
we take the approach the overly simplified six percent every
year like clockwork. And those are the words I actually
use in the meeting. If everything is great, nothing bad
ever happens. Again, here is your outcome with your six
percent average rate of return or eight percent or whatever
the risk tolerance is. Then right next to that, immediately
we're going to say, here's what happens if you get
(37:20):
punched in the mouth on day one of retirement. Let's
just make twenty five percent of your financial assets go poof.
Run all these numbers again, and let's make sure your
ship still floats. And where I want people to be
comfortable with is that may happen and we can't control it.
Speaker 3 (37:33):
That is not a failure. It's just life.
Speaker 2 (37:35):
Sometimes it rains. We need to make sure that your
boat can hold, can keep the water out. So let's
make sure it floats even if we get a bad
sequence of returns, risk where we take a massive hit
up front. If we can't, then we might have to
think differently about our expectations and retirement. So make sure
you're looking at both ways, hunky door approach and what
happens if I get punched in the mouth.
Speaker 1 (37:54):
Thanks for listening. Tune in tomorrow we'll talk about how
to de risk a concentrated stock position in three these
simple steps you've been listening to Simply Money, presented by
Allworth Financial on fifty five KRC, the talk station
Tonight, Well Byatt now appears absolutely certain that lower interest
rates are on the horizon. Plus the Smart Way to
avoid a tax bomb, and our award winning Ask the
Advisor segment you're listening to Simply Money, presented by all
Worth Financial on Bob Sponseller along with Brian James Well.
On Monday, we told you that there were going to
be two inflation reports coming out this week that the
(00:28):
Fed would be paying very close attention to heading into
their September seventeenth meeting. And those two reports are the
Producer Price Index and the Consumer Price Index. Today we
got the latest PPI number. Brian, walk us through it.
Speaker 2 (00:46):
Before I get into that, I want to know what
award we won for Ask the Advisor. I mean, it's fabulous,
but I wasn't invited to that celebration.
Speaker 3 (00:54):
Can you expand on that, Brian?
Speaker 1 (00:56):
It's Bob's everyone wins a trophy award?
Speaker 3 (00:58):
Okay, gotcha trying.
Speaker 1 (01:00):
I'm just trying to keep I'm just trying to keep
your self esteem as high as we can keep it.
Speaker 3 (01:05):
How about anticipation? The word these two? Yeah, who's word death?
Checking on the radio? First place? Check your checks in
the mail? All right? Fair?
Speaker 2 (01:11):
Enough, all right, silliness, all right? So what are we
talking about today today? Super sexy stuff here? Producer price
index and consumer price index today is the PPI. So
the producer price index, this is what This is what
companies pay for the resources that they use to create
the stuff that we go to the cash register and
pay for. And that's when we complain about the CPI.
(01:34):
But today we're talking about the PPI. Uh And the
reason for this is this is these are the prices
that manufacturers, farmers, suppliers have to deal with do their jobs.
It is important because if they wind up paying more,
guess what, that's trickled down and there's a good chance
that that gets passed through to you as the consumer
where we deal with PPI. So we're CPI on the
consumer end. So why are we talking about this? The
(01:55):
headline PPI for August was two point six percent. That
means businesses are paying that much more than they were
at this time last year for those raw materials that
they use. The ind acs actually fell month to month, right,
So that's the number. It went up, but it went
up year over year, but it's actually down month to month.
That's a little bit unexpected. Because Wall Street economists, we're
looking for a little bit of a gain in there.
(02:15):
We've been on a bit of an upward path, but
we took a step back this month.
Speaker 1 (02:20):
Well let's not forget you know, depending on which economists
we listened to, a lot of folks have been expecting
the PPI to continue to climb because of tariff policy.
So you know, this headline report actually, you know, indicates
that tariffs, at least at this point, are not as bad,
you know, from an inflation standpoint as feared, you know,
(02:41):
going going all the way back to April when we
had Liberation Day and the market tanked for a couple
of days or a couple of weeks, and I think
that's why, you know, we've seen the market recover and
hold steady. You know, steady doesn't mean it's always going
to go up, you know, for infinity here, but at
least it's good to see this lower PPI number. It's
(03:01):
good news in the short term. Tomorrow, the consumer Price
Index report comes out, and we'll have you we'll have
you definitely covered on that as well. Well. Let's get
into the latest job market data. Brian, I almost had
to laugh when I saw this you know, it's not funny.
It's just indicative of, you know, for everyone that was
(03:22):
getting on President Trump for replacing leadership at the Bureau
of Labor Statistics. I think this number, you know, calls
out the reason perhaps why he did that. We saw
the US payrolls estimated down jobs created from April of
twenty twenty four through March of twenty twenty five, so
(03:42):
encompassing one year, we got a nine hundred and eleven
thousand job revisioned down over the last year. Brian, I mean,
I to me, it just speaks of we're not getting
good data, and I think I think this department needs
to upgrade how they get data. I'm hearing things again,
(04:03):
as we've talked about, they collected through phone calls, which
nobody answers their phone anymore, and faxes. For heaven's sake,
what about using the internet, sending some type of encryptied
link to actual HR representatives at this country, using something
called the internet and getting better data. Because in all seriousness,
(04:24):
the FED is relying on this data, and this report
that just came out proves that we're we're not getting
good data. It needs the whole thing needs to be improved.
Speaker 2 (04:34):
I don't disagree with with the overall notion of improving
the process, Bob, But how do we know this data
is any better than than what we were getting before.
I'm sure, yes, the process is always don't antiquated, but
they don't replaced by by an administration that is a
little bit a little bit away from necessarily being driven
by the truth. And so I don't know. I just
(04:55):
because we've come up with new numbers that say the
old numbers were wrong, doesn't tell me that the new
numbers are any good either. I would love the idea
that we could potentially do something more efficient as long
as it as long as it can't be abused for
someone's political gain. I would be much more comfortable if
we were past this era of everything I do should
only benefit me politically, and I don't really care about
(05:17):
any other outcomes. That's all that matters, because unfortunately the
American people generally don't push back against that. As we've
seen for the past several administrations, not including the current
or including the current one, but also last twenty years.
Speaker 1 (05:27):
I'd say, all right, well, we might have to just
agree to disagree on this.
Speaker 3 (05:32):
And that is accurate you're not wrong. It is one
it accurate about it.
Speaker 1 (05:35):
No I And I'm trying to be a political here.
I'm just saying, if you get if you get numbers
that are one million jobs off over the last year,
I don't care who's in the White House, who's trying
to score political points. It's bad data. The data we're
getting needs to be improved. That's the only point I'm
trying to make here. You know, we could put Mickey
(05:55):
Mouse in the White House. I just want good data.
And you know, let's leave it there, all.
Speaker 2 (06:01):
Right, Let's go with the data that we have and
what does it mean, because that's really our job.
Speaker 3 (06:07):
Our and kind of go with that.
Speaker 2 (06:08):
So anyway, so what this means, assuming we're gonna this
is the information we have, so let's react to it.
So US job growth with this translates to US job
growth far less robust through the year than was previously reported,
and that's resulting in mounting pressure on the Federal Reserve
to lower interest rates because obviously the Federal Reserve has
a twofold mandate managed fiscal policies and get us as
(06:31):
close to full full employment as we possibly can. If
it's too expensive for businesses to do business. Then one
of the levers the federal reserve pools is to lower
interest rates to make it easier, and that should result
in jobs and economic growth.
Speaker 3 (06:42):
And that's the cycle that we've gone through.
Speaker 2 (06:44):
So the downward revision was about nine hundred and eleven
thousand jobs, or six tens of a percent. That's still
just a revision. The final figures on this are due
early next year, so there are multiple processes that we
go through to verify the actual information that we had.
But before this report came out, Pyroll's data indicated that
employers had added nearly one point eight million jobs in
(07:05):
the year through March on a non seasonally adjusted basis.
That's an average of one hundred and fifty thousand a month.
This the revision now shows average monthly job growth was
roughly half of that.
Speaker 1 (07:15):
All right, and you know this impacts sentiment across the board.
I mean, let's face it, the labor market is weakening.
We're not anywhere close to a recession at this point,
but it is cause for alarm. So the New York
Fed Survey of Consumer Expectations shows now that the perceived
chances of finding a new job within three months if
(07:38):
you lost your job has dropped to just under forty
five percent, and that's the lowest level we've seen since
that survey was created back in twenty thirteen. So that's
not good news on the confidence side. And you know,
we just we added just twenty two thousand jobs in August.
Employment take up to four point three percent. That's the
(07:59):
high highest unemployment percentage we've had in four years. So
we're seeing a weakening labor market somewhat tame inflation. I
would think this gives the Fed all the reason it
needs to start to lower interest rates, but we'll find
out in about a week. You're listening to Simply Money,
presented by all Worth Financial on Bob Sponseller along with
(08:20):
Brian James. Brian, let's pivot to everyone's favorite topic, social
security and the ticking time bomb out there. We've got
a new proposal out there. I don't know if it'll
ever see the light of day, but walk us through
it because this is interesting and it's at least an
attempt to try to fix the problem.
Speaker 2 (08:39):
Yeah, as a financial planning NERD Bob, I love this
stuff because every interaction I have with clients, I'll have
somebody who says, well, here's my social security what it's
proposed to be, but we all know that's going away, right, Well,
that's incorrect, that's not the case.
Speaker 3 (08:53):
Today's topic is a little different. But let's leave it
at this.
Speaker 2 (08:56):
As long as people are paying fight attacks, as you're
going to get a social Security check. It may go
down if they don't make any changes, but there's going
to be a check. Now, why are we talking about this?
There is a brand new proposal in Congress called the
You Earned It, You Keep It Act. The acronym for
that is yay yikia, which isn't awesome, So I'm hoping
they're going to kind of rethink that. But anyway, the
(09:17):
whole point of this is coming from Reuben Diego and
Angie Craig.
Speaker 3 (09:20):
They're both on the Democratic side.
Speaker 2 (09:21):
But it would completely eliminate federal income taxes on social
Security benefits, beginning as early as next year. And it
goes further than temporary deductions the change. This change would
be permanent. Sounds like this is a big win for retirees, right,
tax free social security? Who would say no to that? However,
we can't, and I do like that this is out
there it's what's going to get it shot out of
the Skybob. But I do like that somebody said, yes,
(09:43):
it would be nice to do this, but it costs that,
and here's how we're going to pay for it. So
to pay for this tax cut, and that is what
it is. It's a tax cut. This bill proposes raising
the payroll cap. Today no matter how you are, even
Warren Buffett only pays fight at taxes on his first
one hundred and seventy six thousand dollars worth of income.
They're going to raise that to include earnings above two
(10:03):
hundred and fifty thousand dollars. So this will raise taxes
on current workers to eliminate taxes on Social Security benefits.
Speaker 1 (10:11):
All right, And Brian, you know, again keeping put the
politics out of it, and you've talked about this umpteen
different times on this show, and I agree with you.
We just wish our politicians would just level with the
American people and go about fixing these problems and be
honest about what it's going to take to fix it.
And I think one of the options that's been being
(10:33):
bantered about for years now is raising that earnings cap,
obviously to bring in more revenue because the trust fund's
going to run out here in under eight years. This
is at least a proposal out there forget about the
you know, tax free social Security. We got to fix
social security long term. I think in the current political environment,
(10:54):
this is probably going to get shot out. You know,
it'll never see the night of day or light of day.
But at least it's a proposal. Maybe it'll come back
up later when they actually have to start talking about
fixing the system that's clearly broken.
Speaker 2 (11:09):
Right now, let's backtrack just a little bit here, because
there was a recent change as part of the One
Big Beautiful Bill Act that went into effect July fourth,
that did not eliminate taxes on soci security outright. The
administration did allow that to get out there, and they
were really never clear about it. But all that happened
is a temporary six thousand dollars deduction for seniors sixty
five plus twelve thousand for couples that helped about eighty
(11:31):
eight percent of beneficiaries avoid taxes on their benefits from
twenty five to twenty eight. But it's not permanent. It's
just a little window of time, and it gave them
a little bullet to say that they had eliminated taxes
on soci scurity bitif, which was not the case. It's
very temporary, So yeah, this bill is it looks to
put it in place permanently, but it also addresses what
the actual cost of this will be, which which is
what's going to get it blown out of the water unfortunately.
(11:53):
But what I'd like to say is that this is
not new. Proposals to fix Social Security hit the floor
of Congress every single year, and I am committing Allworth's
own Jason Scott to research how often this happens.
Speaker 3 (12:05):
Because we just talked about it a little bit. He's
gonna do it anyway.
Speaker 2 (12:07):
But I am fascinated by this, and I think people
need to know that attempts have been made, they're always
shot down for political reasons. So we will hear more
about this in the future.
Speaker 3 (12:15):
Look forward to it. All right.
Speaker 1 (12:17):
When someone says tax free, should you believe them, We'll
tell you when to run the other way. Next, 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 on Bob sponseller along
(12:38):
with Brian James. If you can't listen to Simply Money
Live every night, subscribe and get our daily podcast. Just
search Simply Money on the iHeart app or wherever you
find your podcasts. Straight ahead, real questions from real listeners.
When to pull the retirement trigger, what to do if
your kids don't want to be involved in your family business.
(13:00):
We've got our answers coming up at six forty three.
All right, most of us spend our entire financial lives
trying to minimize taxes. So when someone shows up with
a product, any product, oftentimes an annuity or a life
insurance policy, and tells you it offers quote tax free income,
you want to believe them. But here's the problem. The
(13:22):
phrase tax free is often used in ways that are
technically true but practically misleading and oftentimes very misleading.
Speaker 3 (13:31):
Brian Candy.
Speaker 2 (13:33):
Yes, So one of the big offenders here is the
life insurance industry. And for those of you in that industry,
I'm not about to bast the idea of life insurance
retirement plans.
Speaker 3 (13:42):
Oh come actually are well hold on.
Speaker 2 (13:45):
There are actually our situations where this can be good,
But I think it gets abused because for the result
of selling an insurance policy. But anyway, let's talk about
life insurance retirement plans.
Speaker 3 (13:55):
The idea is this, it's.
Speaker 2 (13:56):
A cash value whole life or universal life policy of
variable universal life. You can invest inside of an insurance policy.
It's kind of like a four. Oh okay, you can
pick different mutual funds that kind of thing. Much more
complicated than that. There is the cost of insurance, right.
There's a death benefit attached to these, so there are
expenses that are involved that are much greater than if
you just invested in a similar pile of mutual funds
(14:18):
anywhere else. But you overfund the policy, meaning put more
cash into it than you need to create the death benefit,
and you actually minimize the death benefit because that's not
really what you're after. That's a nice feature, but you
don't want to pay for any more death benefit than
you have to. So why would I bother doing this? Well,
the reason is because it is possible to take loans
(14:38):
against that death benefit, and those loans are tax free.
Nobody pays taxes for having received a loan, even if
it's from a bank for a mortgage, or from a neighbor.
Speaker 3 (14:47):
Or from your own life insurance policy. So that's the
whole point.
Speaker 2 (14:50):
Pile a bunch of cash into it, and then for
the rest of your life take out loans against it.
And as long as as long as you never as
long as you don't take out too much is borrow
too much against it. Then when you actually pass, the
death benefit will simply be reduced by the amounts of
whatever the loans you've taken.
Speaker 3 (15:06):
So where does this make sense? Bob?
Speaker 2 (15:09):
If you've got hundreds of thousands of dollars of extra
cash laying around, or really good cash flow, and you're
a youngish and reasonably healthy, then this can make a
lot of sense.
Speaker 3 (15:17):
Where does it drive me nuts?
Speaker 2 (15:18):
When I have a twenty five year old who has
sold a life insurance policy and there's no more money
in it than they would put it into a roth Ira,
and the reason they bought it is because their college
dormmate sold it to them as a new member of
the sales team of an insurance company.
Speaker 1 (15:32):
All right, Brian, have you ever used one of these
things with a client?
Speaker 2 (15:36):
Yeah, I'm working with one right now, and actually we
did not set it up as a great example. I'm
liter literally sent an email last night. They might be
listening and hello if you are. But anyway, so they
brought it to us as part to bring they'd already
put it in place. They brought it to us as
part of their financial plan. And they are the post
your children. They are what I just described lots of
cash flow, good idea of They understand how it works,
(15:57):
they understand the sacrifices. One of the big things I
didn't mention. You sign up for one of these, you
got to die with it. If you ever take all
the money out, everything you borrowed becomes taxable, and it
will totally blow things out of the water. But in
that case, that is a good example of a way
they understood what they're getting into, they understood the complicated
pros and cons associated with it, and they've got things
going on far beyond that. It's simply a one component
(16:18):
of a much more complicated financial plan in that case.
Speaker 1 (16:21):
Yeah, I've used one of these in the past as well,
and it's for all the reasons you talked about. Younger folks,
very high income, chance to sock some money away and
it all works great. One other thing I want to
point out on these things, it can work great until
life changes. In this particular situation. These folks were thirteen
fourteen years down the road paying into this thing, and
(16:43):
then all of a sudden they wanted to buy a
second home in Texas, and where did they go to
get the money? They borrowed the money out of this
life insurance contract. Well, that throws off the whole you know,
tax free pension thing down the road because you've just
yanked out a bunch of the money.
Speaker 3 (17:00):
So we had to get into.
Speaker 1 (17:01):
An in depth study on how to fix this thing
and you know, keep from creating a tax nightmare and
also have it still makes sense from a rate of
return standpoint. So we ended up just stopping all future
premium payments, lowering the death benefit to an amount that
the cash value would currently support for the rest of
(17:21):
their life. The client's happy. We walked away happy, but boy,
there are a lot of situation. Yeah, it's it was
a very near miss from a tax and rate of
return standpoint. I'm glad I've only used this one time
in my over thirty year career, because the point here
is it takes away a ton of flexibility and there's
(17:43):
just so many more and better ways to skin the
cat from a life insurance and investment and retirement plan
than having everything piled into one of these one size
fits all solutions makes it.
Speaker 2 (17:58):
You got to look for this too, is on the
uity side, So another version of this pitch shows up
with annuities with particular focus on fixed index annuities that
have guaranteed income writers.
Speaker 3 (18:07):
These again, these are tools.
Speaker 2 (18:09):
If I'm holding a hammer in my hand, I can
build a birdhouse with it, or I can hit myself
in the head.
Speaker 3 (18:13):
It's just a tool.
Speaker 2 (18:14):
I got to understand what it's for. So some of
the things that you'll hear from people looking for commissions
on these is that part of your income is going
to be tax free. Well that sounds great, but there's
nothing here's the trick. There's nothing the irs has said
about these particular investments that says these are tax free
and nothing else is. All that means is that that
a portion of those payments is the return of your principle.
That's the same cases if you stick it in the
(18:35):
bank and pull it back out, You're not paying any
taxes on that because it's just the return of the principle.
So that's all grumpy news. Let's talk about where it
does work. Bob what actually is tax free?
Speaker 1 (18:44):
Well, things like wroth iras tax free growth if you
meet the rules five twenty nine plans for college savings
when used properly for education, and one of our favorite strategies,
health savings accounts for qualified medical expenses. Those are truly
three tax free plans. And let's not forget about municipal
bonds if you really are in a super high tax bracket,
(19:07):
those can make a lot of sense too. And let's
face it, even life insurance death benefits are almost always
income tax free. But again, just focus on getting the
death benefit you need to protect your family. Don't pile
a whole bunch of other things into this that just
complicate matters and create some landmines down the road. Here's
(19:28):
the all Worth advice. Always ask what tax free really means,
because it rarely means free. All right, before you hit
the unsubscribed button on those unwanted emails, listen to our
next segment with our cybersecurity expert Dave Hatter. You're listening
to Simply Money presented by all Worth Financial on fifty
five KRC the talk station. You're listening to Simply Money
(19:55):
presented by all Worth Financial on Bob sponseller along with
Brian James, joined to by our tech and cybersecurity guru,
mister Dave Hatter. We always love having Dave on the show. Dave,
thanks for making time for us tonight. And we've got
a real common and important topic to cover, and that
is unwanted emails. We came across an article in the
(20:17):
Wall Street Journal here recently about what all the things
that are happening with trying to delete unwanted emails, and
some of that stuff was news to me and I'm
anxious for you to dive into us and educate us
on how to handle this stuff.
Speaker 4 (20:32):
Well. First off, guys, as always, thanks for having me on.
I appreciate the opportunity to try to raise awareness about
these things. And yeah, I thought this article was very timely.
We all get tons and tons of spam, whether it's
be an email or now text messages, and I'm sure
you guys are getting some of those too, And it's
really important for people to understand three concepts here. Hey,
the volume of this stuff keeps going up, and they
(20:54):
will come at you anywhere. They can could be social media,
could be email, could be text, et cetera. To all
of these things rely on spoofing. Spoofing is the sort
of nerdy term for the idea that virtually anything that
can be digitized can be fake. Whether it's an email,
it's an entire website, it's a text message, it's a
phone call, you know, from a number that looks legit
(21:15):
but isn't. Spoofing, unfortunately, is very easy for the bad guys.
And then finally, there's usually a social engineering aspect. Right,
you get a text, there's some crisis you have to
attend to. And obviously people want to stop getting all
this stuff, which I fully understand and respect. But the
bad guys understand that people want to get off these lists.
They want to quote unsubscribe, and you know, for legitimate
(21:36):
businesses you have to follow the cant Spam Act. You
have to give people an option to unsubscribe from this stuff. Well,
the bad guys know them, so a new tactic and
at at best it's a way to confirm that you're alive. Right,
you get an email or a text message, there's a
quote unsubscribe option if you will when you click that,
At best, you've just told them you exist. Right, So
(21:57):
that's that's the best thing that can happen. The worst
thing that can happen is when you click that link.
Either a they want you to log in. They've got
some very well spoofed credential page where you're going to
enter use the name of the password they capture that
they know people use the same user names and passwords
across multiple sites. Now they're off to the races, potentially
or possibly when you click that link, you download some
(22:18):
kind of malware, keystrokelogger, ransomware, something like that.
Speaker 1 (22:22):
So you know, this is a while there.
Speaker 4 (22:25):
It is still a legitimate thing to unsubscribe for emails,
and I'll talk more about that in a minute. You
need to be very wary of anything you get that
has an unsubscribed option unless you are absolutely positively certain
that it's legit, which is very hard to do nowadays,
because it might be a guys to get you to
click that link and then do some nefarious thing to you.
Speaker 3 (22:46):
Hey, Dave, so on that topic.
Speaker 2 (22:47):
So here's what I've convinced myself that I know about this,
which isn't very much, but I'm still very falsely confident. Often,
but if these come from a company like Constant Contact
or survey Monkey or somebody who's primary You're a legit company,
but their primary role is to send out an awful
lot of emails. My understanding is that those companies obviously
due to the can Spam Act you mentioned that that
can threaten their very existence, so they absolutely.
Speaker 3 (23:09):
Have to, uh, you know, follow those rules. Is it
is that?
Speaker 2 (23:14):
My understanding was if I n subscribe from Constant Contact,
then that will wipe me out of a lot of
different things they might be sending out. Uh.
Speaker 3 (23:21):
Is that real?
Speaker 2 (23:22):
And I suppose those that can be spoofed as well.
Am I on the right path there?
Speaker 4 (23:26):
They definitely could be spoofed, And I mean, you're you're
generally right, although understand, like you know, many companies use
constant contract or Mailchimp or using CRMs like HubSpot to
send that emails. And you're right, can spam requires legitimate
business businesses to give you an option to get out
of that stuff.
Speaker 1 (23:43):
However, you know.
Speaker 4 (23:44):
If if constant Contact is being used by three different
companies and you've somehow gotten on their mail list, when
you unsubscribe from one, it's not going to unsubscribe you
from the others. Right, all of that said, though, yeah,
your your hunt is exactly right. Legitimate companies are going
to honor your request to get out. It's illegitimate companies
or companies kind of operating at the edges of legitimacy.
(24:06):
And then frankly, you know bad guys out there who
are using spam and unsubscribe as a way to get
to you and convince you that, hey, I'm going to
reduce the amount of garbage that I'm getting by clicking
this link.
Speaker 1 (24:19):
All right, Dave, you talked about being wary of clicking
on that unsubscribed link. I mean, talk to the normal
person out there. I mean, I don't know we got
seems like a lot of people are either on Apple
or let's just say Gmail. You know, what should you
be doing to screen yourself out from all this junk email?
Just to clean things up and to avoid being spoofed
(24:41):
or taken advantage of What are the practical steps you
tell people to take to clean this stuff up?
Speaker 4 (24:48):
And so the first thing always with this stuff is awareness,
knowing that it is at least a possibility that anything
you get could be spoofed, right and operating with you know,
some skepticism and some caution. The second thing then is
you know, if you're if you have a high level
of confidence legit all right, go ahead and choose unsubscribed.
But the safer methodology is to either a let's say,
(25:10):
let's just pick Amazon for example. You've bought stuff from Amazon,
You're on various mail lists. You open up a web browser,
you go to Amazon dot com, you log into your
Amazon account, you go to the communication settings or whatever
they call it, and then you start to unsubscribe yourself
from your mail list. You are initiating the transaction, You're
always in control of it. You're not clicking the links, etc. Right.
(25:31):
That's always the best way to avoid any sort of
spoofing is you start a transaction with a non legitimate site.
The other thing you can do is in your mail client,
whatever that might be, whether it's Gmail on the web,
Outlook on your computer, or whatever. When you get a
bogus email or even something like a text, you know,
and even if you're not sure it's bogus, you just
want to get off the list, just report it as
(25:52):
junk or whatever they call it. Right, right click on it,
open it up, whatever you need to do in your
particular mail environment, and just say report junk or report
spam or whatever they call it. While you'll still keep
getting those emails, they'll just automatically go to your junker
spam folder. You go clear that out occasionally. You don't
have to click anything. It vastly reduces reduces the risk
(26:13):
that you're going to be lulled into some false sense
of security and click on the wrong thing. That's the
two best ways to get rid of it with minimal
risk to you report this junker spam or log into
the company that send it to you, and you know
unsubscribed that.
Speaker 1 (26:26):
Way, so if you do report these unwanted emails as
junk or spam, something does actually happen and it and
it gets diverted into a junk folder. I mean that's
I'm not joking around. This is good stuff to learn.
I didn't know that, Yeah, I mean that would happen.
Speaker 4 (26:43):
It's going to depend on you know, your mail platform.
And this same kind of logic applies to text. Right,
you get these weird texts, Hey Bobby, are you're meeting
me for lunch today? Or this kind of weird stuff,
it's best not to interact with this stuff. Report to
this junk block it block center. Again, the terminology might vary,
but the concept is the same red than you click
(27:04):
any links or respond to it, report it as junk
or spam using whatever technique is available to you. And
if you're not sure, that's something you can look up online.
But once you've said this is junk, then you should
not see them anymore. Right, Once it hits your mail
client outlook, whatever it is, it should just automatically throw
(27:24):
that at the junk folder. If you just go out
and clear those things out once in a while, should
be good to go again with minimal risk to you.
Speaker 1 (27:32):
Yeah, and then you'll get the occasional message from somebody saying, hey,
I emailed you, I tried to contact you and I
couldn't reach you. I'd rather have one or two of
those every six months than get inundated with this stuff
that I never wanted in.
Speaker 3 (27:47):
The first place.
Speaker 1 (27:47):
All right, great stuff is always from our tech and
cybersecurity expert, Dave Hatter.
Speaker 3 (27:53):
Thanks again, Dave.
Speaker 1 (27:53):
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. I'm Bob sponseller
along with Brian James. Do you have a financial question
for us. There's a red button you can click while
you're listening to the show right on the iHeart app.
(28:16):
Simply record your question and it always comes straight to us. Brian,
let's kick things off with Rachel in Lovelin. She says,
our net worth is around two and a half million dollars.
Do we know if our liability insurance is really keeping
up with the risk? Brian, This liability thing, this insurance
stuff keeps coming up almost every day. People want to
(28:37):
know more about it.
Speaker 3 (28:38):
Yeah, lots of questions around that.
Speaker 2 (28:40):
So yeah, I mean, so that's not necessarily your net
worth being around two and a half million. First of all, congratulations.
That's tough to get to in this day, in this
day and age. So obviously you're feeling sensitive that we
need to protect us right now. We got something to
protect because somebody could be sniffing around it. The presence
of all those dollars doesn't necessarily expose you in any
other way.
Speaker 3 (28:59):
It's what what is your situation?
Speaker 2 (29:01):
Do you do you have young drivers in the house,
do you have you know, do you own a business
that could where you're creating products that five years after
you retire, something could go wrong with and then you'd
be kind of you'd be you'd be liable for something
down the road. So I guess it's more about the
idea of what what are the exposures that you have.
We don't have a lot of detail here other than
(29:21):
your net worth, but I think it's definitely a question
worth asking. I would definitely call your property casualty people.
First thing they're going to tell you about is this
is another well well worn refrain. Here is an umbrella policy.
I think everybody ought to have an umbrella policy. I
should have had one. Didn't get my attention until my
P and Z guy said, hey, dummy, you got one
young driver now and two behind them. Probably ought to
(29:42):
have one in place. So understand your situation. Talk to
your trusted P and C representative. They'll help you what
you should understand, what you should have. All right, So
we're gonna move on to David in Montgomery, who has
got grandkids. He wants to help out with college costs,
and he's asking if five nine plans is the best option,
or or is there something else out there?
Speaker 3 (29:57):
What do you think, Bob Well, David, I would.
Speaker 1 (29:59):
Say, in almost every situation, the five twenty nine plans
are wonderful. Again, it's one of the few truly tax
free benefit plans out there. I mean, the money goes
in after tax, but then it's never taxed again, including
all the growth, as long as that money's used for
qualified education expenses. They're wonderful tools. And even if your
(30:20):
grandkids don't go to college, there's some other creative things
you can do on the back end, you know, converting
them to wrath iras or things like that to give
your grandkids a great start. The only time I generally
recommend not using these is if you're, you know, one
to two years away from going to college, if your
kid's already sixteen years old and you never put any
(30:43):
money away. I mean, these things work just like rawth iras.
The longer you could take advantage of that tax free compounding,
the better deal they're going to be. But some some
would counter what I just said and say, well, at
least I want the State of Ohio tax deduction. Even
if I throw it in a five point twenty nine
plan for six months and leave it in a money
(31:03):
market account, you can get some tax benefits from doing that.
So in almost every situation, five twenty nine plans are wonderful.
You're just gonna get more bang for the buck if
you start early and take full advantage of all that
tax free compounding. All right, let's move on to John
and Mason. He says, I've got one million dollars in
(31:24):
concentrated company stock. Would an exchange fund be the smart
way to diversify without triggering immediate taxes? Brian, this is
right in your wheelhouse.
Speaker 3 (31:34):
Yeah, this week, This comes up all the time.
Speaker 2 (31:36):
So a million bucks in concentrated company stock, an exchange
fund is only going to be an option if this
stock is free and unencumbered, if you're still working for
Let's pretend this is P and G. I don't know
if you're talking about and I'm making this up. We
don't know where John works, but let's pretend it's P
and G and he's talking about his profit sharing drusts, Well,
there's nothing you can do about that because until you
actually retire, because you're kind of stuck there with that
(31:56):
employer and that company stock.
Speaker 3 (31:58):
That's just an example.
Speaker 2 (31:59):
So what I'm going to assumed, based on your question
is that this is just the stock that you happen
to own, and you can do whatever you darn well
please with it. So, yes, the purpose of an exchange
fund is for you to take a pile of stock
and put it into a pool along with other people
who have different, different companies but similar situations, too much
of one stock that they don't want to sell because
they don't want to pay the taxes on it. So
(32:20):
what you do is you contribute your actual shares in
kind as is you do not sell. You put them
in the pile, and then in exchange you receive a
proportion of the pile back. So if somebody has too
much p ANDNG, somebody's got too much Eli Lilly, somebody's
got too much Kroger, you all throw throw it into
the pile, and all of a sudden you have a
three stock portfolio instead of a one stock portfolio. Obviously
that's overly simplified, but the whole point is to spread
(32:42):
the risk out from one of those companies taking a
major hit at the exact wrong time in your life.
So yeah, that's a good thing to sniff out as
long as you have full control over that stock. Paul
in fort Wright, Paul says his family business is thriving,
but the kids are just not interested. Jen two doesn't
want to take it over, So how can they start
thinking about a sale with out causing some family drama there.
Speaker 3 (33:01):
That's a great question, Bob.
Speaker 1 (33:03):
Well, Paul, I've actually been in this situation, per you know, personally,
my wife and I we've gone through that process and
it wasn't so much that our kids, you know, weren't interested.
They just warnted a place. They were too young and
too inexperienced to be in a position to take the
business over. So my advice is keep, you know, just
because you're dealing with kids here and you're worried about drama,
(33:27):
focus on your business. It sounds like you've you've worked
very hard to build a successful business. Congratulations on that.
Don't stop acting and behaving like a responsible business owner
just because there's kids in the mix. So run it
like a business, make the good decisions from a business standpoint.
The only thing I would add is sit down and communicate.
(33:49):
Sit down with your kids and explain it to them.
Here's the situation that we're in, here's what we're thinking
about doing and why, and we just want to get
it all on the table so there is no drama,
there's no misunderstanding and the business belongs to you, not
your kids. You built it, not them. So if there's
a little weeping and gnashing of teeth here, deal with it,
(34:10):
get it out on the table and move on and create,
you know, cash in that equity that you've worked so
hard to build. That's my advice, all right, Lisa and
terras Park. She says, we've been charitably inclined for years,
but now we'd like to involve our adult children. Is
it better to use a donor advice fund or set
up a family foundation?
Speaker 2 (34:31):
Brian, Yeah, so we don't have a ton of time here,
so I'm gonna do this a little bit quickly.
Speaker 3 (34:35):
But a family foundation, you know my.
Speaker 2 (34:37):
Opinion, I think we really need to be looking at
about five million dollars in up that you want to
contribute to charity. There are a lot of administrative costs
and charges and complicated stuff that has to happen to
make that. Even though it sounds awesome to be able
to I would love to say there's the James Family
Foundation out there, not really an option right now, but
a donor advised fund can accomplish the same thing for
(34:58):
a lot less contribute because you'll be able to get
the family together.
Speaker 3 (35:03):
It's very simple to set up.
Speaker 2 (35:04):
You'll be able to get the family together and have
everyone agree upon who what charity do we want to
benefit this year. The whole point of a donor advice
fund is putting a bunch of money in at once,
taking the tax deduction now, but deciding later over years,
how you want to distribute it. So start there and
look for opportunities to do a family foundation later.
Speaker 1 (35:21):
All right, coming up next, we've got Brian's bottom line
where he's going to tackle a very important topic and
that's sequence of return investment risk. You're listening to Simply
Money presented by all Worth Financial on fifty five KR
see the talk station.
Speaker 3 (35:38):
Let's get this.
Speaker 1 (35:39):
You're listening to Simply Money presented by all Worth Financial
on Bob Sponseller along with Brian James. And it's time
now for Brian's bottom line.
Speaker 3 (35:46):
Hit it, Hit it, Brian.
Speaker 2 (35:48):
We're gonna talk about sequence of returns risk today, Bob.
Speaker 3 (35:51):
So what that is?
Speaker 2 (35:51):
That's not it's not about the average return you get
when you When we do financial plans using spreadsheets, sometimes
we'll say well I got a pile of money and
it's going to return me six percent on average, so
I'll just extrapolate that out through the rest of my life.
That's all great, but it doesn't take into account what
the market can do in any given time because God
thinks he's funny. Sequence of returns. Risk is about when
you get the good returns and more importantly, when you
(36:12):
get the bad returns.
Speaker 3 (36:13):
Because it's gonna happen. If you're drawing down money in retirement.
Speaker 2 (36:16):
A bad year early on can permanently hurt you far
more than the same bad year later in retirement. So,
for example, if you retired in twenty twenty one, your
first year was twenty twenty two, that hurt a lot.
For somebody who retired in nineteen ninety five and then
twenty twenty two hit that didn't hurt him so much.
Speaker 3 (36:32):
They might not have been happy, but it didn't change
the outcome.
Speaker 2 (36:35):
So so let's picture quick example here, two retirees of
a million dollars and eed fifty thousand dollars a year,
same average return over twenty years, let's say six percent.
If the first one has a market downturn of the
first three years we're retired, where the second one has
the downturn in years fifteen to seventeen. Then the first
one who took that hit up front is going to
run out of money, probably five to seven years earlier,
(36:55):
even though they both had the same long term return.
Speaker 3 (36:58):
So what do we do about this?
Speaker 2 (37:00):
Well, when we do financial plans here, we always have
we take the approach the overly simplified six percent every
year like clockwork. And those are the words I actually
use in the meeting. If everything is great, nothing bad
ever happens. Again, here is your outcome with your six
percent average rate of return or eight percent or whatever
the risk tolerance is. Then right next to that, immediately
we're going to say, here's what happens if you get
(37:20):
punched in the mouth on day one of retirement. Let's
just make twenty five percent of your financial assets go poof.
Run all these numbers again, and let's make sure your
ship still floats. And where I want people to be
comfortable with is that may happen and we can't control it.
Speaker 3 (37:33):
That is not a failure. It's just life.
Speaker 2 (37:35):
Sometimes it rains. We need to make sure that your
boat can hold, can keep the water out. So let's
make sure it floats even if we get a bad
sequence of returns, risk where we take a massive hit
up front. If we can't, then we might have to
think differently about our expectations and retirement. So make sure
you're looking at both ways, hunky door approach and what
happens if I get punched in the mouth.
Speaker 1 (37:54):
Thanks for listening. Tune in tomorrow we'll talk about how
to de risk a concentrated stock position in three these
simple steps you've been listening to Simply Money, presented by
Allworth Financial on fifty five KRC, the talk station
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