December 3, 2025 • 37 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian reveal a stunning stat: just two companies—Alphabet and Nvidia—are responsible for a third of the S&P 500’s returns this year. If you think you’re diversified just because you own an index fund, think again. They dive into the historical precedent for today’s market concentration, the real risks of overexposure to big tech, and what smart investors should consider instead—including equal-weight ETFs, buffered products, and direct indexing.
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Episode Transcript
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Speaker 1 (00:05):
Tonight a rather stunning statistic about the S and P
five hundred that should serve as a warning or maybe
a wake up call about potential lack of diversification. You're
listening to Simply Money, presented by all Worth Financial. I'm
Bob Sponseller here with Brian James and Brian we talk
about it all the time, the S and P five hundred,
(00:26):
the bellweather, so to speak, of the broad US market
And as I think most people know, the index contains
the five hundred largest US based companies, and we know
that there are a handful of companies that make up
much of the market cap of this index. You and
I have been talking about this all year now, but
(00:46):
listen to this. Two companies now dominate the S and
P five hundred is up about seventeen percent this year.
But Alphabet otherwise known as Google and Navidia are responsible
for one third of that gain of that broad index,
just two companies. And remember there's five hundred companies in
that index.
Speaker 2 (01:06):
Yeah, I think a lot of people were well aware
that the S and P five hundred means five hundred companies.
The tougher part of it is, I think our brains
want to say, well, okay, that must mean you add
up the prices of all those and then you divide
it by five hundred and boom, there's your index. That
is not how it works. The S and P five
hundred is what's known as capitalization weighted. The bigger you
are the bigger of a portion of the S and
(01:26):
P five hundred you make. So that's why alphabet and
Video two of the biggest companies in the universe. Therefore
they their moves swing a bigger bat than everybody else's.
So big tech stocks are representing generally represent about half
of the S and P five hundreds gains historically. And
guess what, Bob, I did some historical research. I know
you love when I do this, so.
Speaker 1 (01:46):
I do love it and we joke about it. But
it's very valuable.
Speaker 2 (01:50):
Well good, because I got some cool ones for you today.
So let's go through history. How has this happened before?
And the answer is kinda. So in the nineteen seventies
we had what was called the nifty fifty and these
were there. These are industrial names out of blast from
the past, so IBM, Xerox, and Polaroid. You know, remember
the days when those are the ones you talked about
at the water cooler. Even then, though, concentration levels were
(02:13):
way below because the economy just didn't have the scale
effects that came with the technology boom.
Speaker 1 (02:17):
All right, before you go any further, you mentioned polaroid.
I have to ask you're probably young enough. Have you
ever taken a photograph with a polaroid camera where that,
you know, the actual picture spits out the film and
the picture or you wait too young to have seen that.
Speaker 2 (02:33):
I'm not even I'm not as young as you might think,
but I have an aunt in law who still has
one and breaks it out, you know, over the holidays.
I anticipate seeing that thing over the next.
Speaker 1 (02:42):
Film, isn't it here?
Speaker 2 (02:42):
Yeah? I'm not sure where she gets the film for
this stuff anymore. Imagine it's got a little pricey. Can't
run down to Walmart for it anymore. But anyway, Yeah, So,
so then that that was the nifty to fifty. Those
were the three big names, and there were forty seven
other ones. Those were the ones that drove that entire index.
Nineteen nineties and the tech boom began, and then at
the beginning it was all Microsoft, Cisco, General Electric, and Intel,
(03:06):
but even at that point, the top five stocks only
made up twenty percent, actually less than twenty percent back
in nineteen ninety nine. And then all of a sudden
after the two thousand and eight financial crisis, once the
initial panic had subsided, money began to flow into these
index funds and low volatility winners. We were focused on
companies with strong balance sheets because of the PTSD that
two thousand and eight gave us, and this gave a
(03:28):
kind of a steady, winner take all environment. The bigger
companies got the more money they saw because people were
kind of chasing performance after that. So Ever, since then,
it's become for a while it was the Magnificent seven.
We've talked about them until you know, somewhat recently and
most recently it's been the mag three Apple, Microsoft, in Nvidia,
which are now at the highest concentration in S and
(03:49):
P history. Those top three alone account for about twenty
to twenty two percent of the index. We have not
seen that since AT and T was the monopoly in
the nineteen thirties.
Speaker 1 (03:58):
Bob, that is great research, and seriously, all joking aside,
very healthful, you know, helpful. I think hope our listeners
feel the same. Now, what do we do about it?
What are the risks out here? We talk about over
concentration all the time, you know, especially folks locally here
that have a boatload of money and stocks like Procter
(04:19):
and Gamble and Kroger and ge. But you know when
when it starts to get overweighted, you know, in the
index like this, a lot of people have a false
sense of security thinking that they're diversified. And they are,
but volatility can creep up in a hurry if any
of these big companies have an earnings blip or some
kind of you know, regulation or litigation come down the pike.
(04:42):
There are a number of things that can take even
a great company for the long term off track and
really inject a lot of short term volatility into a
portfolio that most people never saw coming and more importantly,
they don't want to have in their portfolio. I think
the good news on this, you know, when I look
at and I like to study stocks, I think, as
(05:03):
you know, Brian, I mean on a valuation basis, I
think the good news is Google and na Video by
no sense, are dramatically overvalued on a pe basis and
growth basis when you compare it to companies let's say,
like a Palenteer or something like that. But you know,
put all that aside. I mean, and we talk about
(05:25):
this all the time. Anything can happen in the short
term to really add a lot of volatility to any
of these stocks, and I think we just need to
be aware of it, so talk about what we should
do about it.
Speaker 2 (05:36):
So, yeah, we want to make sure that we're taking
advantage of what the what the index gives us in
terms of it's one investment we can make that will
spread out the spread out the risks. But at the
same time, you know, we can see some suffering in
one one part while the other parts are performing very well,
but the capitalization the effect kind of mutes that a
(05:56):
little bit. So I'm thinking back to twenty twenty two, Bob,
when we had we actually had an end boom. Most
people just remember that the market fell apart in twenty
twenty two. Tech got hammered, a lot of things got
completely pounded. Energy, believe it or not, was up fifty
percent in twenty twenty two. That was the best performing
S and P five hundred sector in decades. Industrials and
utilities also held up well, but because the technology side
(06:18):
was getting so hammered. Remember this is when they were
literally laying off tens of thousands of people that the
good things that were happening in other sectors completely disappeared
and faded into the woodwork just didn't have an impact.
Speaker 1 (06:29):
Well. And a lot of these companies that are these
high flyer growth companies, especially in the small cap space,
they are dependent on cheap access to money. And when
the Federal Reserve raised interest rates like they did seven
times in twenty twenty two, that makes the cost of
doing business go up significantly and profits tank as a result.
Speaker 2 (06:49):
But go ahead, Yeah, so let's go through some examples
here and what happens and what does it feel like,
and what we should we be doing about it. So
example one here is what we call a windfall. Ye,
So imagine at the start of twenty twenty five, you've
got this broadly diversified portfolio, got a little bit of everything,
sixty percent S and P five hundred, twenty percent bonds,
maybe twenty percent in alternatives or maybe cash. Because Alphabet
(07:12):
and Nvidia have done what they've what they've done, then
you see the index portion jump about twenty five percent,
and that makes your overall, and that, honestly, Bob, that
takes people's eyes off the off the road because you
just see that your dollar amounts of your statements are
going up. Therefore, I've got other things to do today.
I just know I'm making money. You know, overall, you
might be looking at a fifteen eighteen percent return. That
feels great, patch yourself on the back. But at the
(07:34):
same time, remember what we're talking about here. Thirty four
percent came out of two stocks. The rest of these
companies barely moved, meaning that those two stocks could drag
everything back under.
Speaker 1 (07:42):
Yeah, a third of that growth, a third of your
total return in this you know diversified index fund came
from two companies. That's really what we're trying to highlight here.
Speaker 2 (07:51):
Yeah. So then let's fast forward a few years, right,
so maybe there could be you know, regulatory crackdowns on
big technology or perhaps AI high hype cools. That's what's
driving the market right now, is this AI is brand
new and we don't know, you know yet what the
impact is going to be. Well, that could lead to
a forty percent drop in megacap tech names oversay a
couple of years. Why would that happen? Because the market
(08:14):
will have perceived that perhaps these things aren't quite as
baked as we thought they were in terms of AI,
or maybe the rules change on how much freedom technology
has to just keep running, running wild, and that's going
to drag your index to portion down in a huge,
huge way. So that could be down twenty percent. Other
parts of your portfolio could be doing okay. So then
if this is something that's happening while you are in
(08:35):
the run run up to retirement, now all of a
sudden you need cash just because it's time to draw
off the next egg you've been building. That could force
you to sell after a big drop, which is what
we call sequence of returns risk. We don't get to
control that. We have to prepare for it because I
might retire at a time just before the market's going
to take a big dip. Doesn't happen often, but it
does happen, so we should prepare for it.
Speaker 1 (08:55):
Yeah. Absolutely, let's talk about missed opportunities if we don't
really diversify our portfolio. And Brian, going back to the
whole AI conversation, I mean, if we go back to
when the Internet became ubiquitous here in the late nineties,
early two thousands, all the early money rushed into the
internet infrastructure names, and it took some time for companies
(09:19):
to actually make profits from using the Internet gathering efficiencies
from the Internet. And I believe, just an opinion, I
think that the same thing's going to apply to alternative
investments or AI stocks. Meaning if this thing really is
a thing, and I do believe it is, you're going
to start to see over time, all companies in all sectors,
(09:41):
whether they're quote unquote AI or not, they're going to
use AI tools and use that to be more efficient
in the operation of their business. And that should, you know,
raise all boats over time. My point being, now might
be a good time to look at a truly more
diversified strategy. I'll throw one on ETF out there. The
(10:01):
symbol is r SP. It's just an equal weight S
and P five hundred fund. I'm not this is not
a recommendation. I'm just saying there are things out there
where you could just equalize your diversification and risk a
little bit by spreading things out, and that really does
give you a more diversified group of holdings that would
(10:24):
take some certainly some volatility out of the equation.
Speaker 2 (10:27):
Yeah, for sure, And I think that's a great suggestion
to consider. And again, what what Bob's talking about there
is the opposite of what the S and P five
hundred is. We just got done talking about how it's
how the S and P five hundred is capitalization weighted,
meaning the bigger you are, the more of a percentage
you make up of the index that that that take
your symbol Bob gave is is one where you literally
(10:48):
do take the price of all five hundred and divide
it by five hundred and that that's your index. So
the difference is you're not going to see the same
performance is if you look at it historically, you're not
going to see as much. So the ten year annualized
return for the pure S and P five hundred cap
weighted is about fourteen percent versus eleven percent for the
S and P. However, there's a lot less volatility in
(11:11):
terms of the difference of the drawdown between the two
because of the difference in the calculation of the index.
So something to consider if that is a concern for you,
But you have to understand the differences when technology runs.
The pure S and P five hundred cap weighted is
going to look fantastic. The more evenly balanced, equal weighted
one is going to quote unquote underperform, but that should
(11:32):
be expected. It's going to have less volatility as well.
Speaker 1 (11:34):
Some other things to consider again just to smooth out
this volatility and get some true diversification in your portfolio
are maybe some actively managed portfolios in the large cap space.
No one's wanted to really talk about that for years
now because of the higher fees and underperformance. I think
those are starting to at least come into the conversation
(11:55):
now because you know, a good manager is going to
recommend they're going to recognize some you know, over allocation
to maybe some inflated valuations here and spread the exposure
more broadly, things like private equity. And we've talked about
bufferdts before, where you you know, put some caps on
the upside protect yourself on the downside. There's a lot
(12:17):
of things that you can do to still have the
exposure we need to have in stocks, but do it
a little smarter in the in the realm of diversification
and downside protection. Here's the all Worth advice. In a
market where two or three stocks can move the needle
for everyone, the smartest portfolios aren't the most concentrated, they're
(12:39):
often the most balanced. Should you take social security early
and invest the money and quote unquote beat the system,
don't do anything before you hear our next segment on
this topic. You're listening to Simply Money, presented by all
Worth Financial on fifty five KRC the talk station. You're
(13:02):
listening to Simply Money presented by all Worth Financial unbop
Spondseeller along with Brian James. I think you're too wealthy
to worry about health insurance premiums. Think again. Even people
earning one hundred thousand dollars or more are having to
cut back on other things just to cover medical costs.
We'll explain why and how to make sure you are
(13:23):
not getting caught off guard. There's somewhat of a viral
piece of retirement advice bouncing around social media right now,
and it goes something like this, take security early at
sixty two, invest those Social Security checks and you'll come
out ahead. It sounds clever. Why wait for a bigger
(13:43):
check later when you just could get that money now,
put it into the market and potentially grow it, especially
if the market gives us, let's say, eight percent average
annual rates of return, which you know, as a reminder,
doesn't happen every year. So let's walk through the logic
of this quote unquote strategy. Brian.
Speaker 2 (14:01):
Yeah, So this is something that I've been hearing a
lot about from clients who have been forwarding me these
videos of this guy walking in the woods and walking
through the math of why he feels this is a
good idea and it's not the worst idea in the world.
I'm glad that people are out there thinking about these
what's the right thing to do that that is the
right thing to do right, consider it and look at
it and understand it. But as we've gone through, you
(14:23):
know what I've done for these folks who have sent
this to me is let's go back to your financial plan,
which we've had in place for years, and let's play
with it. The nice thing about having a financial plan
is that when these questions, these things that make us
go hmmm, come up, we can model them in a
plan that we've been running for seven or eight years,
and you can see directly what the impact is. I
think a lot of people respond to this because they
don't have a plan, and now all of a sudden,
(14:43):
a YouTube video seems to make them think that they do.
So let's go, let's kind of walk through why are
we talking about this in the first place. Well, why
wait for a bigger check later when you could get
that money now and vast potentially grow it. That just
makes all the sense in the world, right, especially if
the market returns eight percent a year. But remember it
does always and if you start doing this in a
rough year like twenty two, well then you're never gonna
(15:04):
get the math to work. So if you take social
Security at sixty two, Bob, you're gonna get about thirty
percent less than if you wait until full retirement age,
which is gonna be sixty six or sixty seven, somewhere
in between depending on when you were born. So the
theory says, if you invest those smaller checks aggressively throw
them all in the stock market, then you can outpace
that bigger check that you'd get if you waited. So
(15:24):
that's the claim in a perfect world, that's that where
markets always go up, nothing bad ever happens. And that's
the way people do this analysis in a spreadsheet, which
gives us a nice linear gain. They don't add any
risk to it. Then that looks great, but all right,
hey it's that football.
Speaker 1 (15:40):
Before we move forward with the butt I want to
ask you, because you've been doing this a long time,
like I have, how many clients do you actually have
who have ever done this? Actually take these checks and
invest them. Because the people I've seen that take Social
Security early they do one of two things. They spend
that money now, which there's nothing wrong with that, they
(16:01):
uses it as part of their income stream, or we
just find that their bank savings account just balloons and
balloons and balloons. If for people that don't need the
money and they're sitting there earning a very low rate
of return on that cash, that's what I actually see
happen in the real world. How about you.
Speaker 2 (16:19):
Yeah, absolutely, because we're all human, right, It's kind of
a pain in the buttet to figure out, here's my
socialecurity check and then I'm going to go set up
a monthly bank ach or something like that to have
that money pulled into my investment account. So a lot
of people simply just don't do this, or some people
think I'll just do it monthly. I'll write a check
every month.
Speaker 1 (16:36):
Oh you won't.
Speaker 2 (16:37):
Nobody does that kind of thing. Forever. And I would say,
you know, as far as that, the break even tends
to be in the in the early to mid eighties
between waiting on social Security and filing for it as
soon as possible. And I'll tell you what the pivot
point is, Bob. I've done this a number of times.
Every time we do this analysis. The pivot point tends
to be, you can benefit more from Social Security if
(16:59):
your other alternate by filing for sociecurity early. If your
other alternative is only pre tax dollars. In other words,
if you're somebody who put away several million dollars in
a four to oh one k and it was all
pre tax because that was the only choice, then that means,
of course, if you need let's say one hundred thousand
dollars a year out of that to live off of,
then you're gonna have to pull out more like one
hundred and twenty five to pay the taxes on it.
(17:20):
Social Security is taxed more favorably, so it may make
sense in that case to go ahead and rely on
Social Security a little earlier and therefore let your investments
run a little bit longer. Conversely, if you happen to
have a pile of taxable dollars that aren't going to
get taxes harshly, then it may make sense to let
Social Security continue to grow at it's eight percent and
(17:40):
then start selling off your assets at fifteen percent capital
gains to live off of to create money to cover
those expenses. That seems to be to me, that's the
bigger question than pulling this money out and pretending I'm
going to invest it systematically over time, which people just
don't tend to do.
Speaker 1 (17:55):
I could not agree more. And I think that's a
wonderful explanation of the pros and co that you just
provide it, because you know, when we do these analyzes
in our head or even with this software that you
and I use, I mean, you got to make You've
got to make a few assumptions, and you've got to
be right, you know, to quote unquote beat the system.
You got to assume a rate of return, you got
(18:16):
to guess on when you're gonna die good luck with that.
And you got to evaluate your tax situation and where
your other cash flow is gonna come from. There's a
lot of things that you need to factor in, and
none of us are smart enough to get all three
of those things, right, And that's why I think, to me,
use social Security for what it's there for, a guaranteed
(18:36):
source of income, and uh, don't try to get too
cute with turning it into a you know, short term
investment vehicle. And like you said, run the numbers and
look at the taxability of your income sources and hopefully
you come up with a good solution.
Speaker 2 (18:51):
And I'll also throw out, Bob, the kind of folks
who are looking for this information, which, first of all,
it's not it's not bad information. It's fantastic that people
are thinking of how do I optimize, how do I
do this, and they're looking to the internet for that information.
There's nothing wrong with that. These are folks who are
doing a lot of detailed inspection and trying to make intelligent,
educated decisions. That is not at all a bad thing.
But the next thing they're going to run across are
(19:12):
things such as the required minimum distribution. So if I'm
in a situation where where later I'm worried about my rmds,
which is when I'm forced to take money out, then
I'm going to be wanting to do Roth conversions. If
I'm going to do Roth conversions, in my early retirement years.
Then turning on that social security check is going to
rob me of some of the lower parts of the
tax brackets that I could otherwise be using to do
(19:33):
roth conversions. And not to mention, you could run into
something called IERMA which may drive up your Medicare premiums
based on your income. So none of these techniques have
zero impact on anything else.
Speaker 1 (19:43):
It's all connected, and it's getting more and more complicated
rather than easier to do this analysis. I've talked about
a couple of recent client meetings I've had in the
last few weeks, you know, exactly on these topics that
you just covered. When you start running these cash flows
through good tax software, yeah, you got to worry about
the urb attacks on Medicare. You got to worry about
(20:03):
the phase health of this deduction that the seniors are getting.
You know, the quote unquote social security is free deduction.
There's a lot of factors to consider, and it's not
just a back of the cocktail napkin, you know calculation.
Here's the all Worth advice. Don't trade a guaranteed income
stream for life for a risky bet in the markets.
(20:24):
If you don't need social security at sixty two. Don't
let social media convince you to sabotaze your long term plan.
Coming up next, we're going to talk about why cyber
security crimes against seniors are becoming literally a family emergency
and what you can do about it. And I think
this is a timely discussion now that we're entering the
(20:45):
holiday season and more and more families are together and
have an opportunity to talk about and help out our
senior loved ones. You're listening to Simply Money presented by
all Worth Financial on fifty five KRC the talk station.
You're listening to Simply Money presided by all Worth Financial.
(21:07):
I'm Bob sponsor A along with Brian James, joined tonight
by our technology and cybersecurity guru, mister Dave Hatter. Dave,
it's always great to have you with us tonight. You
want to talk about elder scams and this is something
that seems to be growing and growing in regularity, and
it's something we all need to be aware of and
(21:28):
make plans to prevent.
Speaker 3 (21:30):
Yeah, guys, sadly this appreciate you having me on. It's
always I think this is an important topic because you know,
I have elderly parents I know many of your listeners do,
and this is a growing concern. So just one stat
and this is a great site for folks, by the way,
just for general stats and information. The Internet Prime Complaints
Center IC three, which is run by the FBI. They
(21:52):
put out a fraud report every year that's got all
kinds of stats in it. And again the site is
just useful in a lot of ways. I encourage people
to bookmarkt IC three dot gov. Elderfront losses hit four
point eight eight billion and twenty twenty four, a staggering
forty three percent jump from the previous year. The average
senior victim lost over eighty three thousand dollars. And then
(22:13):
another good site for some insight into this is the
Federal Trade Commission FTC FTC dot gov. So here's a
headline from a public service announcement they put out, business
and government impersonators go after older adults life savings. And
then they have some stats in there too they say,
in fact, reported losses of over one hundred thousand dollars
(22:33):
increase nearly sevenfold from twenty twenty to twenty twenty four.
So you know, I hate to always be the doomsday guy,
the guy with the ten four hat always warning about
this stuff. But you know, I don't want to see
people lose their entire life savings. And is we spend
more time online and every facet of our lives working, education,
you know, school, you name it, think about it. What
(22:56):
are you not doing online nowadays? It just creates that
many more attack vectors for the bad guys. You're throwing
things like artificial intelligence and the ability to generate, to
clone someone's voice, to generate incredibly realistic videos, incredibly realistic texts,
to kind of eliminate all the old school tells like well,
I got an email asking me to do something weird
and I need to send gift cards to the hamlet
(23:17):
and county sheriffs can arrest me, but the grammars all
weird and so forth, All that's gone. The bad guys
have access to low cost or free tools that make
it really easy for them to run these sort of
scams at scale. And again, you don't have to take
my word for it. You can see what the FBI
is saying, you see what the FTC is saying. And
at one last point, and then I'll let you guys
(23:37):
start asking some specific questions. Is you know this. Again,
the documentation is all out there. The scams are increasing,
They're targeting elderly people in some cases, but you know,
we're all subject to all kinds of scams, and this
kind of education is important, as is a healthy dose
of skepticism and vigilance. You know, the hamlet and Kunty
sheriff is not going to call you and tell you
(23:59):
that because of a parking ticket, they're coming. It's three
to arrest you if you don't buy gift cards or
send an inmode payment, right, they don't operate that way.
Speaker 2 (24:08):
Hey, hey, Dave, So yeah, and those are those are
those are all great examples. But you're right, this isn't
new news anymore. And I think but the one, the
one that is new is the to me is the
deep fake stuff. I don't think we've even scratched the
surface on that. I have yet to hear a story,
you know, about somebody losing an awful lot of money
yet to that. But that is coming and it's going
to be huge. So these articles you said is extremely
(24:28):
helpful here, but they reference an awful lot about cyber insurance.
So I don't want to drag you off course here,
But is this something that we should be considering. I mean,
maybe we all have home insurance, we have fire insurance,
we got flood insurance in some case. Is it we
at a point where we should all consider cyber insurance?
Do you think?
Speaker 1 (24:43):
Uh?
Speaker 3 (24:44):
I think it's worth it as a business, absolutely, But
I also find that many small businesses that I talked
to about this stuff in my real job, I'm now
talking about this all the time and trying to help business.
Speaker 2 (24:55):
Come on, David, this is your real job. Yeah.
Speaker 3 (25:00):
You know, people will say, well, I've got cyber insurance,
I don't have to care about this. And I just
like to remind folks, well, your fire insurance does not
keep your building from burning down. You know, ideally it
helps you recover should that happen. So you can't just
say well, I got insurance, I'm good to go.
Speaker 1 (25:14):
Right.
Speaker 3 (25:14):
You need a strategy where you're trying to parden your environment,
defend yourself against these kind of attacks. Be smart, be vigilant,
move slow, and then you know, be resilient. Part of
that resilience, you know, in addition to backups and so forth,
might be insurance.
Speaker 1 (25:30):
You know, as an.
Speaker 3 (25:30):
Individual, does it make sense to get some kind of
personal cyber insurance. Maybe, especially if you have a lot
of risk, if you're a high net worth person. But
I think there's a lot of things you can do.
Speaker 1 (25:40):
Guys.
Speaker 3 (25:40):
Again, the first step is always knowledge, right. I mean,
you can't defend against something you don't know about. Knowledge, skepticism.
It's doing the simple things we talk about all the time, strong,
unique passwords, multifacture authentication. It's also doing things like freezing
your credit. I'm sure you guys would agree. You know
my card I have frozen, mind, Yeah, and until I
(26:02):
need to get credit, I keep it frozen. I unlock
it when I need it, and I lock it back.
You know, it's not foolproof, but you know you're raising
the bar. You're making yourself a much more difficult target
for the bad guys because in most of these cases,
especially you know, these targeting of elders, they're not specifically
targeting individuals. They're going for low hanging fruit. And if
(26:23):
you take the kind of advice we're given out here,
if you harden yourself, if you do these basic practices,
you're going to be a much more difficult target. They're
just going to move on. And again, the skepticism, you know,
I encourage any of your listeners pick up the phone
and try to call Microsoft or Google and get help.
And my point is they are not looking at your
computer and going, hey, I think you've got a virus.
(26:45):
I'm going to call you up today and tell you
let me help you remove this virus. If you get
a call, an unsolicited call from a company that claims
you have some kind of virus and they want to
help you, the likelihood that that is not a scam
is probably greater than all three of us getting hit
by a meteor. Right now, it is a scam, right,
So again, vigilance, knowledge, skepticism, and you know, when you
(27:09):
look at the numbers. One of these reports say there's
eighty five trillion dollars in wealth out there in the
Baby boom and Silent generation. The bad guys know this, right,
They know there's an enormous amount of money. They know
in a lot of cases, older people may not even
be aware that it's possible to create a very you know,
a perfect deep fake audio or video. And you know,
(27:30):
you guys mentioned there is documented evidence already more in
a corporate setting of large scale fraud that's been perpetrated
using deep fake voice cloning and videos. I encourage your
folks go look up the story about the Ferrari CFO
who got a nearly got deep fake voice cloned into
fraud from the so called Ferrari CEO.
Speaker 1 (27:51):
And these are people that know each other personally.
Speaker 2 (27:53):
This gave us a segment maybe for next week. I'm
going to write that one now.
Speaker 3 (27:58):
It's why I wouldn't to look into it, well documented.
Speaker 1 (28:01):
Dave, I was going to ask about the whole phone
thing and voice cloning.
Speaker 2 (28:06):
Yeah, so I'll just ask it this way.
Speaker 1 (28:08):
I mean, are we now at a point where it's
just because I know what I do. I never answer
my phone ever, ever, ever, unless I know who's calling me.
I just don't answer my phone. Are we at the
point now where our advice to folks, especially elderly and
maybe vulnerable folks, just give that blanket advice, do not
(28:28):
answer your phone unless you know who it is. Are
we at that point?
Speaker 2 (28:33):
Is that the best way to protect folks?
Speaker 3 (28:35):
I think? So I can tell you I do not
ever answer my phone from a number I don't recognize,
and I'm even sometimes skeptical if it is an number
I do recognize. Because keep in mind, guys, spoofing, which
in my mind is the biggest driver of all this
creating something that looks realistic but isn't. It's fairly easy
to do in any digital mechanism. It's really easy to
send a phone call from any number you want if
(28:58):
you know what you're doing, and it does not require
a lot of SI. So you know, if I could
find one of your two cell phone numbers, or if
I happen to have it, I could easily spoof a
call that would look like it came from your cell phone.
I could easily send a text that looks like it
comes from you. And you know, same thing with emails.
So skepticism, vigilance, don't answer the phone if it's important.
They'll leave a message, or they'll contact you some other way.
(29:20):
Go read what the government says. You know, IRS, FBI.
They are not going to call you and tell you
some terrible thing is going to happen to you if
you don't make it in when a payment by five PM.
They don't operate that way, and they state that clearly
on their own websites. So again there's there's tons of
useful information out there that can help people avoid these
kind of scams. FTC, dot gov, IC three dot gov.
(29:43):
But it all starts with skepticism and caution like don't
answer your phone. If you don't recognize the number, they'll
leave a message, and if they don't, must not be important.
Speaker 1 (29:52):
All right, good stuff as always, Dave. 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. Bob Sponseller along with Brian James. When
we talk about inflation, most people think groceries, housing, putting
(30:15):
gas in their car, But lately there's one category that's
quietly draining wallets, especially for high income earners, and that's healthcare. Brian,
it really is becoming a topic of conversation, or should
be for everyone. Share some new data that's just come
out from our friends at Mercer.
Speaker 2 (30:37):
So new report from this is a Mercer is a
big global consulting firm. So in twenty twenty six, employees
could see their total health benefit costs jump nearly seven percent.
That's the biggest spike we've seen, Bob in fifteen years.
So that translates to average cost per employee pushing over
eighteen thy five hundred bucks per year. That's the cost
at the company level, but of course the total cost
(31:00):
there and the employees share in that by paying their
premiums on each and every each and every paycheck. That's
not just sticker shock though, that's structural, right. This is
not only the premiums going up. We're using more medical services.
There are more prescriptions, and we are aging as a population.
So we're just starting to see the impact of all
this wonderful technology and advances we've seen extending life expectancy
(31:22):
are things are just starting to add up now. And
of course we've got the ever present desire for profit
from the companies who bring us these wonderful solutions, so
that of course has to has to maintain a certain
margin as well. Then there's more chronic issues out there,
more treatments, just more stuff that we're doing, and it
adds up.
Speaker 1 (31:39):
Yeah, and it's not just retirees. I mean, if you're
a fifty five year old executive, say with a four
hundred thousand dollars annual income, you're still feeling this. According
to a recent survey from Key Bank, thirty percent of
people making six figures or more say healthcare is now
their most impactful cost of living increase more than groceries,
(31:59):
more than housing, you know, more than a lot of things,
which tells you something. Even with people with high incomes
are having to start there, they're starting to have to
make difficult choices. It we're gonna one way or the other.
And I don't want to get into a political conversation here,
but one way or the other, we are going to
need to bend the cost curve in this country on
(32:21):
healthcare because it really is getting out of hand. And
when everybody feeling the pain, you know, not just high
income earners or low income earners, I think that's the
time where the phone calls to congressional leaders will go
up and they'll be forced to get in a room
and maybe fix some of this. But yeah, it's a
(32:41):
real issue, and it's coming up more and more in
the you know, review meetings that we're having with clients.
Speaker 2 (32:46):
Yep. And so here's what we should be doing now.
We might maybe we're a little late on this segment
here because I think we're pasted for most people were
past enrollment period. But if you want to take advantage
of this and try to protect yourself read in detail
the stuff you get every November that gives you your
options for your health care insurance. And really what I'm
getting at here is look in depth at that high
(33:06):
deductible plan that's the one that might look don't rule
it out because it looks more expensive and you might
have more premium to pay out of your pocket. That
also comes along with a health savings account and your
ability to make tech triple tax advantaged investments. The dollars
that flow in are deductible on the way in if
you make sure they are invested, and that is a
huge step that gets overlooked. Make sure it gets invested
(33:28):
in something, and that may require you to move it
from one financial institution to another. Then those investments also
will grow tax deferred, and if it's used for health
care expenses down the road, then it will come out
tax free. The fun thing is you do not have
to use expenses that you had during that current year
you're taking the distribution. You can pull receipts from fifteen
years ago and use that claim that to take a distribution,
(33:49):
So you could be taking tax free dollars out to
go on vacation as long as you have prior receipts
you haven't used before to cover those expenses, so give
that some thought.
Speaker 1 (33:57):
Here's the all with advice. Rising healthcare costs aren't just
a line item anymore. They are a growing concern and
growing risk to a sound financial plan. Understand your insurance
benefits plan, use a tax advantage tool like an HSA
like Brian's has talked about, and make sure your financial
plan is built to absorb this kind of cost volatility.
(34:21):
Coming up next, I've got my two cents on how
to get out in front early and get a head
start on retirement. 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 with Brian James. Hey, Brian, I
(34:44):
know we were joking around a little bit on yesterday's
show about some of the conversations I was having with
you know, a large group of family members over Thanksgiving,
you know, the younger crowd was sitting around late at night.
We're all watching football, they're playing cards, and I start
to get peppered with questions and the one that that
really is still in my head here is my my niece,
(35:06):
who I think is I don't know, twenty two years old.
She's like, Uncle Bob, when am I going to be
able to retire? This young lady's probably only been working
for about six months. And I looked at her and
I said, hey, spend a little bit less money than
you make and put the difference away in a stock market,
you know, index fund, and do that for about forty
(35:28):
years and you'll be absolutely fine. And she looked at me,
and so did the group of i'll call them youngsters
in the room, Like I had four heads. And I
was talking to my son, our middle son, who's twenty
eight later, about that, and he's like, yeah, Dad. He's
like when I look at my friends, the average, I
would say, on average, my friends in peer group, they're
(35:50):
spending one one hundred and fifty to two hundred dollars
every weekend just eating out and drinking out. You know,
that's the kind of money that they're spending on this
kind of stuff. So I want to throw out one example.
And here's the other thing. I'm not knocking the younger
folks or disrespecting them at all at all, because one
of the things I really admire about a lot of
(36:12):
them is they work out a lot, they stay in
tremendously good shape, so there is a lot of discipline
there and I see that. So I want to throw
out one mathematical example, just going back to basics here,
that everyone maybe could share with their young loved ones
here over the holidays. If you take one hundred dollars
(36:33):
a month, so you know, this is money that you
would otherwise spend on a fan duel account or buying
a few drinks at the bar. One hundred dollars a month,
throw that into a roth ira and let's just say
you earn eight percent per year, and you do that
starting at age twenty five, and do it for forty years,
so that gets you to sixty five. You want to
(36:54):
know what you've got at the end of that forty years, Brian,
I would probably do these It's three hundred and forty
five dollars. That's just taking a little bit of money
and diverting that from some of these wasteful ways. Some
of this money is being spent and that that gets
people off to a great start. And what I find,
and I've seen this with my own adult children. Once
(37:14):
we can get them started and they actually see the
money go into account, see it start to grow in
the market. The lightbulb goes off and they start saving
even a little bit more.
Speaker 2 (37:27):
Yep, couldn't agree more. I think that's great advice and yeah,
great to share with your families you're going to be
seeing over the next several weeks.
Speaker 1 (37:33):
Thanks for listening tonight. You've been listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
talk station
Tonight a rather stunning statistic about the S and P
five hundred that should serve as a warning or maybe
a wake up call about potential lack of diversification. You're
listening to Simply Money, presented by all Worth Financial. I'm
Bob Sponseller here with Brian James and Brian we talk
about it all the time, the S and P five hundred,
(00:26):
the bellweather, so to speak, of the broad US market
And as I think most people know, the index contains
the five hundred largest US based companies, and we know
that there are a handful of companies that make up
much of the market cap of this index. You and
I have been talking about this all year now, but
(00:46):
listen to this. Two companies now dominate the S and
P five hundred is up about seventeen percent this year.
But Alphabet otherwise known as Google and Navidia are responsible
for one third of that gain of that broad index,
just two companies. And remember there's five hundred companies in
that index.
Speaker 2 (01:06):
Yeah, I think a lot of people were well aware
that the S and P five hundred means five hundred companies.
The tougher part of it is, I think our brains
want to say, well, okay, that must mean you add
up the prices of all those and then you divide
it by five hundred and boom, there's your index. That
is not how it works. The S and P five
hundred is what's known as capitalization weighted. The bigger you
are the bigger of a portion of the S and
(01:26):
P five hundred you make. So that's why alphabet and
Video two of the biggest companies in the universe. Therefore
they their moves swing a bigger bat than everybody else's.
So big tech stocks are representing generally represent about half
of the S and P five hundreds gains historically. And
guess what, Bob, I did some historical research. I know
you love when I do this, so.
Speaker 1 (01:46):
I do love it and we joke about it. But
it's very valuable.
Speaker 2 (01:50):
Well good, because I got some cool ones for you today.
So let's go through history. How has this happened before?
And the answer is kinda. So in the nineteen seventies
we had what was called the nifty fifty and these
were there. These are industrial names out of blast from
the past, so IBM, Xerox, and Polaroid. You know, remember
the days when those are the ones you talked about
at the water cooler. Even then, though, concentration levels were
(02:13):
way below because the economy just didn't have the scale
effects that came with the technology boom.
Speaker 1 (02:17):
All right, before you go any further, you mentioned polaroid.
I have to ask you're probably young enough. Have you
ever taken a photograph with a polaroid camera where that,
you know, the actual picture spits out the film and
the picture or you wait too young to have seen that.
Speaker 2 (02:33):
I'm not even I'm not as young as you might think,
but I have an aunt in law who still has
one and breaks it out, you know, over the holidays.
I anticipate seeing that thing over the next.
Speaker 1 (02:42):
Film, isn't it here?
Speaker 2 (02:42):
Yeah? I'm not sure where she gets the film for
this stuff anymore. Imagine it's got a little pricey. Can't
run down to Walmart for it anymore. But anyway, Yeah, So,
so then that that was the nifty to fifty. Those
were the three big names, and there were forty seven
other ones. Those were the ones that drove that entire index.
Nineteen nineties and the tech boom began, and then at
the beginning it was all Microsoft, Cisco, General Electric, and Intel,
(03:06):
but even at that point, the top five stocks only
made up twenty percent, actually less than twenty percent back
in nineteen ninety nine. And then all of a sudden
after the two thousand and eight financial crisis, once the
initial panic had subsided, money began to flow into these
index funds and low volatility winners. We were focused on
companies with strong balance sheets because of the PTSD that
two thousand and eight gave us, and this gave a
(03:28):
kind of a steady, winner take all environment. The bigger
companies got the more money they saw because people were
kind of chasing performance after that. So Ever, since then,
it's become for a while it was the Magnificent seven.
We've talked about them until you know, somewhat recently and
most recently it's been the mag three Apple, Microsoft, in Nvidia,
which are now at the highest concentration in S and
(03:49):
P history. Those top three alone account for about twenty
to twenty two percent of the index. We have not
seen that since AT and T was the monopoly in
the nineteen thirties.
Speaker 1 (03:58):
Bob, that is great research, and seriously, all joking aside,
very healthful, you know, helpful. I think hope our listeners
feel the same. Now, what do we do about it?
What are the risks out here? We talk about over
concentration all the time, you know, especially folks locally here
that have a boatload of money and stocks like Procter
(04:19):
and Gamble and Kroger and ge. But you know when
when it starts to get overweighted, you know, in the
index like this, a lot of people have a false
sense of security thinking that they're diversified. And they are,
but volatility can creep up in a hurry if any
of these big companies have an earnings blip or some
kind of you know, regulation or litigation come down the pike.
(04:42):
There are a number of things that can take even
a great company for the long term off track and
really inject a lot of short term volatility into a
portfolio that most people never saw coming and more importantly,
they don't want to have in their portfolio. I think
the good news on this, you know, when I look
at and I like to study stocks, I think, as
(05:03):
you know, Brian, I mean on a valuation basis, I
think the good news is Google and na Video by
no sense, are dramatically overvalued on a pe basis and
growth basis when you compare it to companies let's say,
like a Palenteer or something like that. But you know,
put all that aside. I mean, and we talk about
(05:25):
this all the time. Anything can happen in the short
term to really add a lot of volatility to any
of these stocks, and I think we just need to
be aware of it, so talk about what we should
do about it.
Speaker 2 (05:36):
So, yeah, we want to make sure that we're taking
advantage of what the what the index gives us in
terms of it's one investment we can make that will
spread out the spread out the risks. But at the
same time, you know, we can see some suffering in
one one part while the other parts are performing very well,
but the capitalization the effect kind of mutes that a
(05:56):
little bit. So I'm thinking back to twenty twenty two, Bob,
when we had we actually had an end boom. Most
people just remember that the market fell apart in twenty
twenty two. Tech got hammered, a lot of things got
completely pounded. Energy, believe it or not, was up fifty
percent in twenty twenty two. That was the best performing
S and P five hundred sector in decades. Industrials and
utilities also held up well, but because the technology side
(06:18):
was getting so hammered. Remember this is when they were
literally laying off tens of thousands of people that the
good things that were happening in other sectors completely disappeared
and faded into the woodwork just didn't have an impact.
Speaker 1 (06:29):
Well. And a lot of these companies that are these
high flyer growth companies, especially in the small cap space,
they are dependent on cheap access to money. And when
the Federal Reserve raised interest rates like they did seven
times in twenty twenty two, that makes the cost of
doing business go up significantly and profits tank as a result.
Speaker 2 (06:49):
But go ahead, Yeah, so let's go through some examples
here and what happens and what does it feel like,
and what we should we be doing about it. So
example one here is what we call a windfall. Ye,
So imagine at the start of twenty twenty five, you've
got this broadly diversified portfolio, got a little bit of everything,
sixty percent S and P five hundred, twenty percent bonds,
maybe twenty percent in alternatives or maybe cash. Because Alphabet
(07:12):
and Nvidia have done what they've what they've done, then
you see the index portion jump about twenty five percent,
and that makes your overall, and that, honestly, Bob, that
takes people's eyes off the off the road because you
just see that your dollar amounts of your statements are
going up. Therefore, I've got other things to do today.
I just know I'm making money. You know, overall, you
might be looking at a fifteen eighteen percent return. That
feels great, patch yourself on the back. But at the
(07:34):
same time, remember what we're talking about here. Thirty four
percent came out of two stocks. The rest of these
companies barely moved, meaning that those two stocks could drag
everything back under.
Speaker 1 (07:42):
Yeah, a third of that growth, a third of your
total return in this you know diversified index fund came
from two companies. That's really what we're trying to highlight here.
Speaker 2 (07:51):
Yeah. So then let's fast forward a few years, right,
so maybe there could be you know, regulatory crackdowns on
big technology or perhaps AI high hype cools. That's what's
driving the market right now, is this AI is brand
new and we don't know, you know yet what the
impact is going to be. Well, that could lead to
a forty percent drop in megacap tech names oversay a
couple of years. Why would that happen? Because the market
(08:14):
will have perceived that perhaps these things aren't quite as
baked as we thought they were in terms of AI,
or maybe the rules change on how much freedom technology
has to just keep running, running wild, and that's going
to drag your index to portion down in a huge,
huge way. So that could be down twenty percent. Other
parts of your portfolio could be doing okay. So then
if this is something that's happening while you are in
(08:35):
the run run up to retirement, now all of a
sudden you need cash just because it's time to draw
off the next egg you've been building. That could force
you to sell after a big drop, which is what
we call sequence of returns risk. We don't get to
control that. We have to prepare for it because I
might retire at a time just before the market's going
to take a big dip. Doesn't happen often, but it
does happen, so we should prepare for it.
Speaker 1 (08:55):
Yeah. Absolutely, let's talk about missed opportunities if we don't
really diversify our portfolio. And Brian, going back to the
whole AI conversation, I mean, if we go back to
when the Internet became ubiquitous here in the late nineties,
early two thousands, all the early money rushed into the
internet infrastructure names, and it took some time for companies
(09:19):
to actually make profits from using the Internet gathering efficiencies
from the Internet. And I believe, just an opinion, I
think that the same thing's going to apply to alternative
investments or AI stocks. Meaning if this thing really is
a thing, and I do believe it is, you're going
to start to see over time, all companies in all sectors,
(09:41):
whether they're quote unquote AI or not, they're going to
use AI tools and use that to be more efficient
in the operation of their business. And that should, you know,
raise all boats over time. My point being, now might
be a good time to look at a truly more
diversified strategy. I'll throw one on ETF out there. The
(10:01):
symbol is r SP. It's just an equal weight S
and P five hundred fund. I'm not this is not
a recommendation. I'm just saying there are things out there
where you could just equalize your diversification and risk a
little bit by spreading things out, and that really does
give you a more diversified group of holdings that would
(10:24):
take some certainly some volatility out of the equation.
Speaker 2 (10:27):
Yeah, for sure, And I think that's a great suggestion
to consider. And again, what what Bob's talking about there
is the opposite of what the S and P five
hundred is. We just got done talking about how it's
how the S and P five hundred is capitalization weighted,
meaning the bigger you are, the more of a percentage
you make up of the index that that that take
your symbol Bob gave is is one where you literally
(10:48):
do take the price of all five hundred and divide
it by five hundred and that that's your index. So
the difference is you're not going to see the same
performance is if you look at it historically, you're not
going to see as much. So the ten year annualized
return for the pure S and P five hundred cap
weighted is about fourteen percent versus eleven percent for the
S and P. However, there's a lot less volatility in
(11:11):
terms of the difference of the drawdown between the two
because of the difference in the calculation of the index.
So something to consider if that is a concern for you,
But you have to understand the differences when technology runs.
The pure S and P five hundred cap weighted is
going to look fantastic. The more evenly balanced, equal weighted
one is going to quote unquote underperform, but that should
(11:32):
be expected. It's going to have less volatility as well.
Speaker 1 (11:34):
Some other things to consider again just to smooth out
this volatility and get some true diversification in your portfolio
are maybe some actively managed portfolios in the large cap space.
No one's wanted to really talk about that for years
now because of the higher fees and underperformance. I think
those are starting to at least come into the conversation
(11:55):
now because you know, a good manager is going to
recommend they're going to recognize some you know, over allocation
to maybe some inflated valuations here and spread the exposure
more broadly, things like private equity. And we've talked about
bufferdts before, where you you know, put some caps on
the upside protect yourself on the downside. There's a lot
(12:17):
of things that you can do to still have the
exposure we need to have in stocks, but do it
a little smarter in the in the realm of diversification
and downside protection. Here's the all Worth advice. In a
market where two or three stocks can move the needle
for everyone, the smartest portfolios aren't the most concentrated, they're
(12:39):
often the most balanced. Should you take social security early
and invest the money and quote unquote beat the system,
don't do anything before you hear our next segment on
this topic. You're listening to Simply Money, presented by all
Worth Financial on fifty five KRC the talk station. You're
(13:02):
listening to Simply Money presented by all Worth Financial unbop
Spondseeller along with Brian James. I think you're too wealthy
to worry about health insurance premiums. Think again. Even people
earning one hundred thousand dollars or more are having to
cut back on other things just to cover medical costs.
We'll explain why and how to make sure you are
(13:23):
not getting caught off guard. There's somewhat of a viral
piece of retirement advice bouncing around social media right now,
and it goes something like this, take security early at
sixty two, invest those Social Security checks and you'll come
out ahead. It sounds clever. Why wait for a bigger
(13:43):
check later when you just could get that money now,
put it into the market and potentially grow it, especially
if the market gives us, let's say, eight percent average
annual rates of return, which you know, as a reminder,
doesn't happen every year. So let's walk through the logic
of this quote unquote strategy. Brian.
Speaker 2 (14:01):
Yeah, So this is something that I've been hearing a
lot about from clients who have been forwarding me these
videos of this guy walking in the woods and walking
through the math of why he feels this is a
good idea and it's not the worst idea in the world.
I'm glad that people are out there thinking about these
what's the right thing to do that that is the
right thing to do right, consider it and look at
it and understand it. But as we've gone through, you
(14:23):
know what I've done for these folks who have sent
this to me is let's go back to your financial plan,
which we've had in place for years, and let's play
with it. The nice thing about having a financial plan
is that when these questions, these things that make us
go hmmm, come up, we can model them in a
plan that we've been running for seven or eight years,
and you can see directly what the impact is. I
think a lot of people respond to this because they
don't have a plan, and now all of a sudden,
(14:43):
a YouTube video seems to make them think that they do.
So let's go, let's kind of walk through why are
we talking about this in the first place. Well, why
wait for a bigger check later when you could get
that money now and vast potentially grow it. That just
makes all the sense in the world, right, especially if
the market returns eight percent a year. But remember it
does always and if you start doing this in a
rough year like twenty two, well then you're never gonna
(15:04):
get the math to work. So if you take social
Security at sixty two, Bob, you're gonna get about thirty
percent less than if you wait until full retirement age,
which is gonna be sixty six or sixty seven, somewhere
in between depending on when you were born. So the
theory says, if you invest those smaller checks aggressively throw
them all in the stock market, then you can outpace
that bigger check that you'd get if you waited. So
(15:24):
that's the claim in a perfect world, that's that where
markets always go up, nothing bad ever happens. And that's
the way people do this analysis in a spreadsheet, which
gives us a nice linear gain. They don't add any
risk to it. Then that looks great, but all right,
hey it's that football.
Speaker 1 (15:40):
Before we move forward with the butt I want to
ask you, because you've been doing this a long time,
like I have, how many clients do you actually have
who have ever done this? Actually take these checks and
invest them. Because the people I've seen that take Social
Security early they do one of two things. They spend
that money now, which there's nothing wrong with that, they
(16:01):
uses it as part of their income stream, or we
just find that their bank savings account just balloons and
balloons and balloons. If for people that don't need the
money and they're sitting there earning a very low rate
of return on that cash, that's what I actually see
happen in the real world. How about you.
Speaker 2 (16:19):
Yeah, absolutely, because we're all human, right, It's kind of
a pain in the buttet to figure out, here's my
socialecurity check and then I'm going to go set up
a monthly bank ach or something like that to have
that money pulled into my investment account. So a lot
of people simply just don't do this, or some people
think I'll just do it monthly. I'll write a check
every month.
Speaker 1 (16:36):
Oh you won't.
Speaker 2 (16:37):
Nobody does that kind of thing. Forever. And I would say,
you know, as far as that, the break even tends
to be in the in the early to mid eighties
between waiting on social Security and filing for it as
soon as possible. And I'll tell you what the pivot
point is, Bob. I've done this a number of times.
Every time we do this analysis. The pivot point tends
to be, you can benefit more from Social Security if
(16:59):
your other alternate by filing for sociecurity early. If your
other alternative is only pre tax dollars. In other words,
if you're somebody who put away several million dollars in
a four to oh one k and it was all
pre tax because that was the only choice, then that means,
of course, if you need let's say one hundred thousand
dollars a year out of that to live off of,
then you're gonna have to pull out more like one
hundred and twenty five to pay the taxes on it.
(17:20):
Social Security is taxed more favorably, so it may make
sense in that case to go ahead and rely on
Social Security a little earlier and therefore let your investments
run a little bit longer. Conversely, if you happen to
have a pile of taxable dollars that aren't going to
get taxes harshly, then it may make sense to let
Social Security continue to grow at it's eight percent and
(17:40):
then start selling off your assets at fifteen percent capital
gains to live off of to create money to cover
those expenses. That seems to be to me, that's the
bigger question than pulling this money out and pretending I'm
going to invest it systematically over time, which people just
don't tend to do.
Speaker 1 (17:55):
I could not agree more. And I think that's a
wonderful explanation of the pros and co that you just
provide it, because you know, when we do these analyzes
in our head or even with this software that you
and I use, I mean, you got to make You've
got to make a few assumptions, and you've got to
be right, you know, to quote unquote beat the system.
You got to assume a rate of return, you got
(18:16):
to guess on when you're gonna die good luck with that.
And you got to evaluate your tax situation and where
your other cash flow is gonna come from. There's a
lot of things that you need to factor in, and
none of us are smart enough to get all three
of those things, right, And that's why I think, to me,
use social Security for what it's there for, a guaranteed
(18:36):
source of income, and uh, don't try to get too
cute with turning it into a you know, short term
investment vehicle. And like you said, run the numbers and
look at the taxability of your income sources and hopefully
you come up with a good solution.
Speaker 2 (18:51):
And I'll also throw out, Bob, the kind of folks
who are looking for this information, which, first of all,
it's not it's not bad information. It's fantastic that people
are thinking of how do I optimize, how do I
do this, and they're looking to the internet for that information.
There's nothing wrong with that. These are folks who are
doing a lot of detailed inspection and trying to make intelligent,
educated decisions. That is not at all a bad thing.
But the next thing they're going to run across are
(19:12):
things such as the required minimum distribution. So if I'm
in a situation where where later I'm worried about my rmds,
which is when I'm forced to take money out, then
I'm going to be wanting to do Roth conversions. If
I'm going to do Roth conversions, in my early retirement years.
Then turning on that social security check is going to
rob me of some of the lower parts of the
tax brackets that I could otherwise be using to do
(19:33):
roth conversions. And not to mention, you could run into
something called IERMA which may drive up your Medicare premiums
based on your income. So none of these techniques have
zero impact on anything else.
Speaker 1 (19:43):
It's all connected, and it's getting more and more complicated
rather than easier to do this analysis. I've talked about
a couple of recent client meetings I've had in the
last few weeks, you know, exactly on these topics that
you just covered. When you start running these cash flows
through good tax software, yeah, you got to worry about
the urb attacks on Medicare. You got to worry about
(20:03):
the phase health of this deduction that the seniors are getting.
You know, the quote unquote social security is free deduction.
There's a lot of factors to consider, and it's not
just a back of the cocktail napkin, you know calculation.
Here's the all Worth advice. Don't trade a guaranteed income
stream for life for a risky bet in the markets.
(20:24):
If you don't need social security at sixty two. Don't
let social media convince you to sabotaze your long term plan.
Coming up next, we're going to talk about why cyber
security crimes against seniors are becoming literally a family emergency
and what you can do about it. And I think
this is a timely discussion now that we're entering the
(20:45):
holiday season and more and more families are together and
have an opportunity to talk about and help out our
senior loved ones. You're listening to Simply Money presented by
all Worth Financial on fifty five KRC the talk station.
You're listening to Simply Money presided by all Worth Financial.
(21:07):
I'm Bob sponsor A along with Brian James, joined tonight
by our technology and cybersecurity guru, mister Dave Hatter. Dave,
it's always great to have you with us tonight. You
want to talk about elder scams and this is something
that seems to be growing and growing in regularity, and
it's something we all need to be aware of and
(21:28):
make plans to prevent.
Speaker 3 (21:30):
Yeah, guys, sadly this appreciate you having me on. It's
always I think this is an important topic because you know,
I have elderly parents I know many of your listeners do,
and this is a growing concern. So just one stat
and this is a great site for folks, by the way,
just for general stats and information. The Internet Prime Complaints
Center IC three, which is run by the FBI. They
(21:52):
put out a fraud report every year that's got all
kinds of stats in it. And again the site is
just useful in a lot of ways. I encourage people
to bookmarkt IC three dot gov. Elderfront losses hit four
point eight eight billion and twenty twenty four, a staggering
forty three percent jump from the previous year. The average
senior victim lost over eighty three thousand dollars. And then
(22:13):
another good site for some insight into this is the
Federal Trade Commission FTC FTC dot gov. So here's a
headline from a public service announcement they put out, business
and government impersonators go after older adults life savings. And
then they have some stats in there too they say,
in fact, reported losses of over one hundred thousand dollars
(22:33):
increase nearly sevenfold from twenty twenty to twenty twenty four.
So you know, I hate to always be the doomsday guy,
the guy with the ten four hat always warning about
this stuff. But you know, I don't want to see
people lose their entire life savings. And is we spend
more time online and every facet of our lives working, education,
you know, school, you name it, think about it. What
(22:56):
are you not doing online nowadays? It just creates that
many more attack vectors for the bad guys. You're throwing
things like artificial intelligence and the ability to generate, to
clone someone's voice, to generate incredibly realistic videos, incredibly realistic texts,
to kind of eliminate all the old school tells like well,
I got an email asking me to do something weird
and I need to send gift cards to the hamlet
(23:17):
and county sheriffs can arrest me, but the grammars all
weird and so forth, All that's gone. The bad guys
have access to low cost or free tools that make
it really easy for them to run these sort of
scams at scale. And again, you don't have to take
my word for it. You can see what the FBI
is saying, you see what the FTC is saying. And
at one last point, and then I'll let you guys
(23:37):
start asking some specific questions. Is you know this. Again,
the documentation is all out there. The scams are increasing,
They're targeting elderly people in some cases, but you know,
we're all subject to all kinds of scams, and this
kind of education is important, as is a healthy dose
of skepticism and vigilance. You know, the hamlet and Kunty
sheriff is not going to call you and tell you
(23:59):
that because of a parking ticket, they're coming. It's three
to arrest you if you don't buy gift cards or
send an inmode payment, right, they don't operate that way.
Speaker 2 (24:08):
Hey, hey, Dave, So yeah, and those are those are
those are all great examples. But you're right, this isn't
new news anymore. And I think but the one, the
one that is new is the to me is the
deep fake stuff. I don't think we've even scratched the
surface on that. I have yet to hear a story,
you know, about somebody losing an awful lot of money
yet to that. But that is coming and it's going
to be huge. So these articles you said is extremely
(24:28):
helpful here, but they reference an awful lot about cyber insurance.
So I don't want to drag you off course here,
But is this something that we should be considering. I mean,
maybe we all have home insurance, we have fire insurance,
we got flood insurance in some case. Is it we
at a point where we should all consider cyber insurance?
Do you think?
Speaker 1 (24:43):
Uh?
Speaker 3 (24:44):
I think it's worth it as a business, absolutely, But
I also find that many small businesses that I talked
to about this stuff in my real job, I'm now
talking about this all the time and trying to help business.
Speaker 2 (24:55):
Come on, David, this is your real job. Yeah.
Speaker 3 (25:00):
You know, people will say, well, I've got cyber insurance,
I don't have to care about this. And I just
like to remind folks, well, your fire insurance does not
keep your building from burning down. You know, ideally it
helps you recover should that happen. So you can't just
say well, I got insurance, I'm good to go.
Speaker 1 (25:14):
Right.
Speaker 3 (25:14):
You need a strategy where you're trying to parden your environment,
defend yourself against these kind of attacks. Be smart, be vigilant,
move slow, and then you know, be resilient. Part of
that resilience, you know, in addition to backups and so forth,
might be insurance.
Speaker 1 (25:30):
You know, as an.
Speaker 3 (25:30):
Individual, does it make sense to get some kind of
personal cyber insurance. Maybe, especially if you have a lot
of risk, if you're a high net worth person. But
I think there's a lot of things you can do.
Speaker 1 (25:40):
Guys.
Speaker 3 (25:40):
Again, the first step is always knowledge, right. I mean,
you can't defend against something you don't know about. Knowledge, skepticism.
It's doing the simple things we talk about all the time, strong,
unique passwords, multifacture authentication. It's also doing things like freezing
your credit. I'm sure you guys would agree. You know
my card I have frozen, mind, Yeah, and until I
(26:02):
need to get credit, I keep it frozen. I unlock
it when I need it, and I lock it back.
You know, it's not foolproof, but you know you're raising
the bar. You're making yourself a much more difficult target
for the bad guys because in most of these cases,
especially you know, these targeting of elders, they're not specifically
targeting individuals. They're going for low hanging fruit. And if
(26:23):
you take the kind of advice we're given out here,
if you harden yourself, if you do these basic practices,
you're going to be a much more difficult target. They're
just going to move on. And again, the skepticism, you know,
I encourage any of your listeners pick up the phone
and try to call Microsoft or Google and get help.
And my point is they are not looking at your
computer and going, hey, I think you've got a virus.
(26:45):
I'm going to call you up today and tell you
let me help you remove this virus. If you get
a call, an unsolicited call from a company that claims
you have some kind of virus and they want to
help you, the likelihood that that is not a scam
is probably greater than all three of us getting hit
by a meteor. Right now, it is a scam, right,
So again, vigilance, knowledge, skepticism, and you know, when you
(27:09):
look at the numbers. One of these reports say there's
eighty five trillion dollars in wealth out there in the
Baby boom and Silent generation. The bad guys know this, right,
They know there's an enormous amount of money. They know
in a lot of cases, older people may not even
be aware that it's possible to create a very you know,
a perfect deep fake audio or video. And you know,
(27:30):
you guys mentioned there is documented evidence already more in
a corporate setting of large scale fraud that's been perpetrated
using deep fake voice cloning and videos. I encourage your
folks go look up the story about the Ferrari CFO
who got a nearly got deep fake voice cloned into
fraud from the so called Ferrari CEO.
Speaker 1 (27:51):
And these are people that know each other personally.
Speaker 2 (27:53):
This gave us a segment maybe for next week. I'm
going to write that one now.
Speaker 3 (27:58):
It's why I wouldn't to look into it, well documented.
Speaker 1 (28:01):
Dave, I was going to ask about the whole phone
thing and voice cloning.
Speaker 2 (28:06):
Yeah, so I'll just ask it this way.
Speaker 1 (28:08):
I mean, are we now at a point where it's
just because I know what I do. I never answer
my phone ever, ever, ever, unless I know who's calling me.
I just don't answer my phone. Are we at the
point now where our advice to folks, especially elderly and
maybe vulnerable folks, just give that blanket advice, do not
(28:28):
answer your phone unless you know who it is. Are
we at that point?
Speaker 2 (28:33):
Is that the best way to protect folks?
Speaker 3 (28:35):
I think? So I can tell you I do not
ever answer my phone from a number I don't recognize,
and I'm even sometimes skeptical if it is an number
I do recognize. Because keep in mind, guys, spoofing, which
in my mind is the biggest driver of all this
creating something that looks realistic but isn't. It's fairly easy
to do in any digital mechanism. It's really easy to
send a phone call from any number you want if
(28:58):
you know what you're doing, and it does not require
a lot of SI. So you know, if I could
find one of your two cell phone numbers, or if
I happen to have it, I could easily spoof a
call that would look like it came from your cell phone.
I could easily send a text that looks like it
comes from you. And you know, same thing with emails.
So skepticism, vigilance, don't answer the phone if it's important.
They'll leave a message, or they'll contact you some other way.
(29:20):
Go read what the government says. You know, IRS, FBI.
They are not going to call you and tell you
some terrible thing is going to happen to you if
you don't make it in when a payment by five PM.
They don't operate that way, and they state that clearly
on their own websites. So again there's there's tons of
useful information out there that can help people avoid these
kind of scams. FTC, dot gov, IC three dot gov.
(29:43):
But it all starts with skepticism and caution like don't
answer your phone. If you don't recognize the number, they'll
leave a message, and if they don't, must not be important.
Speaker 1 (29:52):
All right, good stuff as always, Dave. 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. Bob Sponseller along with Brian James. When
we talk about inflation, most people think groceries, housing, putting
(30:15):
gas in their car, But lately there's one category that's
quietly draining wallets, especially for high income earners, and that's healthcare. Brian,
it really is becoming a topic of conversation, or should
be for everyone. Share some new data that's just come
out from our friends at Mercer.
Speaker 2 (30:37):
So new report from this is a Mercer is a
big global consulting firm. So in twenty twenty six, employees
could see their total health benefit costs jump nearly seven percent.
That's the biggest spike we've seen, Bob in fifteen years.
So that translates to average cost per employee pushing over
eighteen thy five hundred bucks per year. That's the cost
at the company level, but of course the total cost
(31:00):
there and the employees share in that by paying their
premiums on each and every each and every paycheck. That's
not just sticker shock though, that's structural, right. This is
not only the premiums going up. We're using more medical services.
There are more prescriptions, and we are aging as a population.
So we're just starting to see the impact of all
this wonderful technology and advances we've seen extending life expectancy
(31:22):
are things are just starting to add up now. And
of course we've got the ever present desire for profit
from the companies who bring us these wonderful solutions, so
that of course has to has to maintain a certain
margin as well. Then there's more chronic issues out there,
more treatments, just more stuff that we're doing, and it
adds up.
Speaker 1 (31:39):
Yeah, and it's not just retirees. I mean, if you're
a fifty five year old executive, say with a four
hundred thousand dollars annual income, you're still feeling this. According
to a recent survey from Key Bank, thirty percent of
people making six figures or more say healthcare is now
their most impactful cost of living increase more than groceries,
(31:59):
more than housing, you know, more than a lot of things,
which tells you something. Even with people with high incomes
are having to start there, they're starting to have to
make difficult choices. It we're gonna one way or the other.
And I don't want to get into a political conversation here,
but one way or the other, we are going to
need to bend the cost curve in this country on
(32:21):
healthcare because it really is getting out of hand. And
when everybody feeling the pain, you know, not just high
income earners or low income earners, I think that's the
time where the phone calls to congressional leaders will go
up and they'll be forced to get in a room
and maybe fix some of this. But yeah, it's a
(32:41):
real issue, and it's coming up more and more in
the you know, review meetings that we're having with clients.
Speaker 2 (32:46):
Yep. And so here's what we should be doing now.
We might maybe we're a little late on this segment
here because I think we're pasted for most people were
past enrollment period. But if you want to take advantage
of this and try to protect yourself read in detail
the stuff you get every November that gives you your
options for your health care insurance. And really what I'm
getting at here is look in depth at that high
(33:06):
deductible plan that's the one that might look don't rule
it out because it looks more expensive and you might
have more premium to pay out of your pocket. That
also comes along with a health savings account and your
ability to make tech triple tax advantaged investments. The dollars
that flow in are deductible on the way in if
you make sure they are invested, and that is a
huge step that gets overlooked. Make sure it gets invested
(33:28):
in something, and that may require you to move it
from one financial institution to another. Then those investments also
will grow tax deferred, and if it's used for health
care expenses down the road, then it will come out
tax free. The fun thing is you do not have
to use expenses that you had during that current year
you're taking the distribution. You can pull receipts from fifteen
years ago and use that claim that to take a distribution,
(33:49):
So you could be taking tax free dollars out to
go on vacation as long as you have prior receipts
you haven't used before to cover those expenses, so give
that some thought.
Speaker 1 (33:57):
Here's the all with advice. Rising healthcare costs aren't just
a line item anymore. They are a growing concern and
growing risk to a sound financial plan. Understand your insurance
benefits plan, use a tax advantage tool like an HSA
like Brian's has talked about, and make sure your financial
plan is built to absorb this kind of cost volatility.
(34:21):
Coming up next, I've got my two cents on how
to get out in front early and get a head
start on retirement. 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 with Brian James. Hey, Brian, I
(34:44):
know we were joking around a little bit on yesterday's
show about some of the conversations I was having with
you know, a large group of family members over Thanksgiving,
you know, the younger crowd was sitting around late at night.
We're all watching football, they're playing cards, and I start
to get peppered with questions and the one that that
really is still in my head here is my my niece,
(35:06):
who I think is I don't know, twenty two years old.
She's like, Uncle Bob, when am I going to be
able to retire? This young lady's probably only been working
for about six months. And I looked at her and
I said, hey, spend a little bit less money than
you make and put the difference away in a stock market,
you know, index fund, and do that for about forty
(35:28):
years and you'll be absolutely fine. And she looked at me,
and so did the group of i'll call them youngsters
in the room, Like I had four heads. And I
was talking to my son, our middle son, who's twenty
eight later, about that, and he's like, yeah, Dad. He's
like when I look at my friends, the average, I
would say, on average, my friends in peer group, they're
(35:50):
spending one one hundred and fifty to two hundred dollars
every weekend just eating out and drinking out. You know,
that's the kind of money that they're spending on this
kind of stuff. So I want to throw out one example.
And here's the other thing. I'm not knocking the younger
folks or disrespecting them at all at all, because one
of the things I really admire about a lot of
(36:12):
them is they work out a lot, they stay in
tremendously good shape, so there is a lot of discipline
there and I see that. So I want to throw
out one mathematical example, just going back to basics here,
that everyone maybe could share with their young loved ones
here over the holidays. If you take one hundred dollars
(36:33):
a month, so you know, this is money that you
would otherwise spend on a fan duel account or buying
a few drinks at the bar. One hundred dollars a month,
throw that into a roth ira and let's just say
you earn eight percent per year, and you do that
starting at age twenty five, and do it for forty years,
so that gets you to sixty five. You want to
(36:54):
know what you've got at the end of that forty years, Brian,
I would probably do these It's three hundred and forty
five dollars. That's just taking a little bit of money
and diverting that from some of these wasteful ways. Some
of this money is being spent and that that gets
people off to a great start. And what I find,
and I've seen this with my own adult children. Once
(37:14):
we can get them started and they actually see the
money go into account, see it start to grow in
the market. The lightbulb goes off and they start saving
even a little bit more.
Speaker 2 (37:27):
Yep, couldn't agree more. I think that's great advice and yeah,
great to share with your families you're going to be
seeing over the next several weeks.
Speaker 1 (37:33):
Thanks for listening tonight. You've been listening to Simply Money,
presented by all Worth Financial on fifty five KRC, the
talk station
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