Announcer: Would you like an opinion on a financial matter you're dealing with? Whether it's about retirement, investments, taxes, or 401(k)s, Scott Hanson and Pat McClain would like to help you by answering your call to join "Allworth's Money Matters." Call now at 833-99-WORTH. That's 833-99-W-O-R-T-H.

Scott: Welcome to "Allworth's Money Matters." Scott Hanson.

Pat: And Pat McClain.

Scott: Glad you're with us today as we talk about financial matters. Take a look at what's happening in the world of finance, the financial markets, [crosstalk 00:00:41]

Pat: The world of the world. The world of the world. It is...

Scott: I am fascinated by what's going on in the Ukraine. Just fascinated how they have been able to...

Pat: Have you been...I mean, because it's been top of news for months now.

Scott: Yeah.

Scott: First thing you get up, read the latest stories in "The Times" and in "The Journal" and...

Scott: I actually check...

Pat: ..."The Post" and...

Scott: I do. I actually would check "The New York Times" multiple times a day.

Pat: You do?

Scott: Yes.

Pat: On this story?

Scott: On this story. It is...

Pat: In the implications it has on the financial markets and investors and in the world.

Scott: And it is...I gotta tell you, you know, we should always remember never right off the underdog. I mean, just unbelievable the resilience of the Ukrainian people and as a nation, how they've come together and not all of them, actually, some of them are separatists and they want it, but it is.

Pat: Well, on the economic...I mean, crippling economic impact on Europe right now is just fascinating.

Scott: Oh, my. Oh, my. My. And it will change the global economics, oh, for at least the next, you know, since...

Pat: 50 years.

Scott: So, Pat and I, we've both been practicing advisors for 30+ years, right? So, doing this program for 27 years and we talk about financial matters and take your calls and that sort of thing, and talk about what's going on in the world. But if you think about, from a standpoint like it was...in the 90s, as the '90s went on, they made a bigger deal about investing international and having your money overseas and having a global portfolio and why that was so important for investors, right?

Pat: Yes.

Scott: And then if you...

Pat: But may I, Scott?

Scott: Yes. That's [crosstalk 00:02:27]

Pat: It oftentimes...it actually...

Scott: I'm sorry. Otherwise, it would just be me with the microphone.

Pat: It oftentimes ignored how much U.S. companies actually had overseas in your [crosstalk 00:02:37]

Scott: Contributor.

Pat: Your exposure anyway.

Scott: Yes. Like maybe it's headquartered in the United States. It's a U.S. company, but the majority of their revenues and profits come from overseas.

Pat: Correct. So, the investment world was, "Oh, you've gotta use this overseas." And we're like, 'Yeah. I think I got enough." Or there's quite a bit there anyway, just through my U.S. exposure to...

Scott: And then I think when China started opening, which by the way, you still cannot as a foreign investor own a Chinese company. You can own some sort of a vehicle that potentially shares in the success or lack thereof of the company, but it's still controlled by the government.

Pat: That's correct. Don't pretend it isn't.

Scott: You don't have a real ownership because it's...yeah.

Pat: Yes.

Scott: And of course, you've been an investor in China the last couple of years it's not been good for you at all, particularly with the continued lockdowns that they've been doing. It's just been hampering. And then Europe. I mean, if you think...if you thought, "I'm just gonna get out of the emerging markets, I'm gonna stick with some of the more established markets," Europe has been a disaster. I mean, there's factories shutting down because they don't have the energy.

Pat: Yeah. And it's not gonna fix itself anytime soon. Not gonna fix itself anytime soon. And then you look at, you know, we're still feeling repercussions of the EU and the breakup inside of that. And don't think that...

Scott: Brexit and all that?

Pat: Brexit is the first one you're gonna see. In fact, we were on the air back there when they actually formed the EU and I remember thinking...in fact, we talked about it. I don't know if it's such a great idea to throw your economic prosperity or future in with a bunch of other countries that you have no, really, interest in other than that you think it's gonna make cross...

Scott: Cultures are completely different. Languages are different.

Pat: Correct. The economics are different, types of systems are different. It is still a big experiment.

Scott: [inaudible 00:04:32] you said Great Britain even the...it'll be interesting to see.

Pat: Well, what's Germany gonna do? You know, they have been the powerhouse in Europe in terms of a growth global economy. Just the powerhouse.

Scott: Yep. Big time.

Pat: And quite frankly, you know, when they talked about the, you know, what was? They called it the "PIGS", right? Was it...

Scott: Portugal, Italy...

Pat: Greece and Spain. Those change periodically, right? They used to call them the PIGS.

Scott: That was on the news.

Pat: Which were...Germany was subsidizing them, but Germany could then. And they started then changing some of the pension plans in those countries, the government programs, in order to quit the spending, the government spending because Germany was insisting on it, but Germany stayed in. Britain left, and...

Scott: Well, I tell you...

Pat: Germany, if they go through a deep recession, which is highly likely.

Scott: Well, you saw the new prime minister of the UK, the first thing she did was to cap energy prices for two years for consumers, six months for businesses, two years for households to cap the price of energy. I'm thinking if you have a shortage of something and you take away the profit incentive, how does that help things?

Pat: Yeah. You mean not let the laws of supply and demand actually work itself out?

Scott: Yeah. I think from an investor standpoint it's just a reminder that you need to prepare for anything.

Pat: Yes.

Scott: And one never knows what might happen. And look, we talk about diversification, all financial advisor people talk about diversification. Diversification is not a way to get rich. You don't diversify to gain wealth. Had Bill Gates diversified when Microsoft first got to the million or $2 million, he wouldn't be worth anything.

Pat: In all fairness, I'm guessing Bill Gates probably diversified his first couple of hundred million dollars.

Scott: Made sure that yes. Made sure they got to the point and make, well, as everybody should. Make sure whatever you've got at risk and particularly if it's in a single company or single industry or single property, whatever that, if that thing goes south, it's not gonna derail your lifestyle.

Pat: Your lifestyle, right? And then after that, it's all like...

Scott: It doesn't make as much different...

Pat: They call it the house money if you were in Vegas.

Scott: Look, unless you've got 50 million plus of investible assets, you probably need some pretty strong diversification.

Pat: Yes.

Scott: And as you get closer to that time in life where it's retirement age, whether you plan to retire or not, you don't have the years to make back up if something goes south on you.

Pat: And who knows? I'll share a story. I had a friend that was developing a hotel and he showed me the business plan and he said, "What can go wrong?" He was developing it two years before COVID.

Scott: Okay.

Pat: He said to me, "What could go wrong?" And I was talking about how much of his own net worth he was going to put in it. He said, "What can go wrong?" I said, "I would, you know, bring in some..."

Scott: And how old was he?

Pat: He was in his 60. I said, "I'd bring in some other investors in order to diversify risk." He said, 'What could go wrong?" After COVID...he had opened in the middle of COVID. I asked him... When I said at the time he said, 'What could go wrong?" I said we don't have enough time in the day to actually talk about all the things [crosstalk 00:08:03] that could possibly go wrong.

Scott: All things that could wrong.

Pat: And I said, "And even if we did, we're going to miss some." After COVID, we were talking and I said, "Do you remember that conversation?" And he said, "Yes." And I said, "Would a national lockdown [inaudible 00:08:19] earn your realm of probabilities? Was it ever, ever even there? I know it wasn't in mine." And he said, "No." And that's the point of diversification. It's okay to take some risk. Fact. And it might be...frankly, there might be better opportunities of investing in Europe today than other parts of the world because of the uncertainty. Yes. Yeah. I think it's a great time to invest in equities. Could it get better in the future? Most certainly. Which means good prices continue to fall. But is it a good time? Yeah. Now? Yeah. I think so. I think it's probably a good time.

Scott: If you've got the time horizon.

Pat: Yeah. Yeah.

Scott: Always comes back to how long you've got to...could go. Of course. Inflation has been going like it's...

Pat: It's hard to tell though.

Scott: What's hard to tell?

Pat: It's hard to tell...well, most certainly is inflationary. My wife and...

Scott: I know my...well, my son, I talked to him the other night and he said he paid $12 a pound for ground turkey.

Pat: Where was this turkey raised?

Scott: I don't know, but he's like, "Whatever." He just moved to Phoenix and his first store he went to he said, "I'm not going back to that store." Because it cost me 12 bucks a pound for turkey.

Pat: Oh, good for him. I mean, paying attention. My wife was telling me the other day how much it is to, you know, go shopping. And she is a frugal, frugal shopper.

Scott: You sound like one of those old-school. What do you mean your wife went shopping? You don't ever shop?

Pat: I will shop occasionally.

Scott: Okay.

Pat: She likes it. I think.

Scott: Okay. Oh, my. Anyway. But first of all, if you wanna be part of the program, I'd love to take your call to join us, 833-99-WORTH is our contact number. And if you call that number, I'll schedule time to get you on the air. 833-99-WORTH. You can also send us an email questions@moneymatters.com. But inflation was announced this last week on Tuesday or whatever it was. Inflation numbers came out. 8.3% or whatever it was. It was like...I was actually...I was kind of expecting a little more decline in inflation than we saw because we're a lot of economists there.

Pat: That was my point when I said it's kind of because we started to see gasoline prices fall.

Scott: Yeah. Let's anyway. We've got Andy Stout join us. Andy Stout is Allworth's chief financial...chief investment officer and I wanna hear his perspective on things. Andy, thanks for being part of our program.

Andy: Thanks for having me, Scott.

Scott: So, Fed announced...who announced the inflation on Tuesday? Somebody announced it. Not the Feds. [inaudible 00:11:01]

Andy: The BLS.

Pat: Bureau of Labor Statistics?

Andy: Yeah.

Scott: Okay. And it was what? Eight something?

Andy: 8.3% on a year-over-year basis was a headline number, which includes every single item that consumers purchase.

Scott: What were you guys expecting on your team?

Andy: Well, a little bit lower. And when if you look at it, if you look under the hood and in the details, there were a few things that took economists, you know, by surprise. Now, we were expecting it to be a little bit lower than the 8.3%. The reason we got to the drop was just the drop in oil prices coming from what? $120 a barrel over the past couple of months, now around $85 to $90 a barrel. So, that certainly contributed to the drop. However, there's other, what I call stickier parts of the inflation underlying components, which are remaining more elevated and suggesting that the Fed is not even close to being done with their job.

Pat: And what would those sticky underlying components be? Give us a couple of examples, please.

Andy: Well, the biggest one is shelter costs or your rents, if you will. That makes up about 32% of total inflation and that just came in much higher than what was expected. So, if you look at all of that data, the shelter costs were about 0.6% higher compared to where they were the prior month. Actually, 0.7%, sorry. And that just keeps going higher and higher. And that's probably not going to be slowing down anytime soon. Part of the reason is because rents don't have a very quick reaction to what's going on in the economy. If you think about your lease that you might have, you know, you could renew it annually, right? So, the landlord may not be able to make adjustments right on the spot. It might be a few months down the road before they can make the adjustment to reflect what's going on in the economy. That means we're going to see probably shelter costs influencing inflation at least through the early part of next year.

Pat: So, they have a very long tail?

Andy: Exactly. Yeah. And also looking at medical care costs, were a little bit higher than what was expected. And just in general, you know, food prices remained high. The only good thing about this report, Pat, was a drop in energy prices. Other than that, it was just bad all around.

Pat: And Andy, some of these costs increase as a result of, you know, we talk a lot about how energy prices drive this, but those sectors that you just mentioned seem to be kind of a hangover from the pandemic where there was a lot of movement in housing, prices went real low for a little while on rents, and then...

Scott: And skyrocketed.

Pat: And they skyrocket. And then a lot of people have left the medical community. Are we seeing a hangover from the pandemic which is causing a lack of supply? And the supply chain in building new houses was certainly slowing down.

Andy: No. I think it's a little bit different to that. I think if you look at the components that are moving the most, those tend to be influenced by wage inflation a little bit more. So, what you're seeing here suggests that wages are driving the overall inflation numbers. So, that's why it makes the Fed job even trickier to try to pull things back. So, whether we're looking at housing, I mean, housing is gonna...you're gonna see housing prices come down quicker than anything else, but they're so closely tied to mortgage rates. But if the rents are going to stay elevated, you're going to see healthcare costs elevated. You know, if you look all...I mean, there hasn't really been much of a reprieve in car prices as well. So, just looking pretty much across the board, everything is being lifted up right now. That's going to put the Fed in a bad spot when they go to meet next week on the 21st of September, deciding what they're going to do in terms of raising rates.

Scott: Is it...

Pat: But how much...I'm sorry, Scott. How much of it is liquidity in the marketplace? Just people sitting on piles of cash.

Andy: How much is inflation there?

Pat: Yeah. How much is it driving? Like if I have tons of cash right now, I'm willing to pay more for an automobile than I would've if I don't have $10,000 or $20,000 in the bank.

Scott: That's right. You got 50 grand saved up for a car is a little easier than if you have nothing saved for the car.

Pat: That's right. And people saved up a lot, at least enough for decent down payments.

Andy: No. That's true. And if you look at the savings rate with all the fiscal money and stimulus that the government threw into the economy, people had been saving a lot. And that actually probably discouraged some workers from working. So, they could just...they didn't have to work because they already had enough money saved up and they can just enjoy life however they want. With that all being said, what you're seeing now is the saving rate has come down and it's estimated that people are pretty much out of money as far as what they've been built up and saved. So, that savings rate had been a factor, Pat, but I would say it's pretty much a non-factor at this point in time. That's part of the reason we saw some people re-enter the labor force last month.

Scott: Inflation is such an interesting thing. And because it's been so long since we had this high of an inflation, most of us haven't really experienced it. I'm 55, 56. I remember as I...I mean, I graduated high school in 1984. That's with the tail end of inflation. So, I remember my family complaining about it, but it didn't really impact me. And even if you're 65 today, it was in the first decade of your career when your wages were going up and it didn't. So, I think for most of Americans, particularly those that are getting close to retirement age, like this is a...like, how long is this gonna last? Because if every year prices go up 6%, 8%, 9%, I mean, it makes a difference on how much money you need to save for retirement.

Andy: Oh, yeah. It certainly does. I don't think it's going to stay at this rate for a while at all. I mean, it's going to be problematic in the shorter run. But if we look out into the intermediate term, now what we see is we can take a measure of where inflation is expected to be. We can look at it a few different ways. One way is to look at where the bond market expects inflation to be by looking at what's called TIPS, which are Treasury Inflation-Protected Securities, looking at the yield of their versus the difference in normal government bonds. And that difference is basically what inflation is being priced in to the market and what's being expected. So, if you look one year ahead from today, as of right now at least, what you're expected to see, what the bond market believes is that CPI which was released today which showed 8.3% bond market. And I think this is a little bit of a Pollyanna vision, if you will. They're pricing in 2.2%.

Scott: Wow.

Andy: That's CPI. 12 months CPI at 12 months from now. I don't necessarily believe that, but...

Scott: That's the broad market, right?

Andy: Yeah.

Scott: That's the collective...

Pat: The wisdom of the market.

Scott: The consensus.

Pat: Yeah.

Andy: Correct. That's correct.

Scott: So, Fed is meeting again next week, right? This coming week to announce rates. Three-quarters percent, is that what everyone is expecting?

Andy: Well, that's what everyone was expecting prior to this week's CPI report. There's now about 25, 35% chance of a full 1% rate hike when the Fed meets. So, they'll definitely do at least 0.75% when they raise rates. There is an off chance that you might see a percent hike in there.

Pat: And talk about the inverted yield curve a little bit. Will you? Because that's always an exciting talk.

Andy: Let me tell you, Pat. That's a really [crosstalk 00:18:47]

Pat: Usually, if someone is talking about like a winning sports team I say, "How about that inverted yield curve?"

Scott: Okay.

Andy: Well, take a step back. What does it actually mean? That means short-term interest rates are higher than long-term interest rates, which is not the normal when the economy is growing. And what you see right now is that short-term interest rates, whether you're looking at the two-year bond or a one-year treasury bond compared to a 10-year treasury bond, the shorter-term rates are higher than the longer-term rates. And what that indicates is that there is excess economic risk out there. Now, think of your risk reward, right? So, you're incentivized to invest in areas that are higher risk because you get a higher reward. Well, there's higher risk in the short run, a higher risk of a recession. And that's one reason you could say that the short-term rates are higher than long-term rates.

Another thing to keep in mind is that a long-term bond like a 10-year treasury bond, that's really just a one-year bond rolled over nine more times after it matures. So, what's actually priced into that longer-term bond is rate cuts. So, we know the Fed is raising rates in the short run, but the market's pricing and rate cuts longer out. Now, why is it price and rate cuts? Well, because they're expecting the economy will slow and the Fed will have to drop down those short-term rates.

Pat: That's interesting.

Andy: Riveting. I know.

Pat: Yeah. No. It's interesting. So, basically, the market is saying the Fed has maybe gone too far and at some point in time, they're not gonna be able to just keep these rate increases in place. They're gonna have to lower them in order to step on the gas in order to speed up the economy. Is that what you just said?

Andy: Yes. That is what I said. Actually, the market's pricing and rate cuts next year. So, [crosstalk 00:20:33]

Scott: Well, there's the good news. I was gonna try to finish things with, "What's some good news?" And that's some good news.

Andy: Oh, I got some good news for you.

Scott: Okay.

Andy: We've been through this many times in every single time of the economy. Every single time, the market has gotten through it. Rough patches aren't fun, but you get through them.

Pat: That's it...

Scott: All right. That's about it.

Pat: Listen, I believe that.

Scott: Thanks, Andy.

Pat: I believe that

Scott: I appreciate your perspective on things and...

Andy: No. Absolutely. Thanks, guys.

Scott: Yeah. I'm glad you joined us. It's funny because you could flip on the TV, articles and you could read all kinds of doomsday scenarios. Someone is always trying to sell something, right?

Pat: Oh, we see it all over.

Scott: Absolutely. You know it's fascinating. We're gonna go to calls here in a moment. I was reading an article about these Bitcoin miners and...so the companies exist just to mine Bitcoin. So, I think it started by people doing it in their basement or whatever, and then they got sophisticated. Now there's actual companies that you can invest in that are Bitcoin miners. So, they have all this expensive equipment and use all this energy throwing out random numbers until they hopefully get one right, and then...I don't quite know how it works, but it's something along those lines. [crosstalk 00:21:40]

Pat: Yeah. They figure out an algorithm that gives them a supposed limited cash of Bitcoin.

Scott: So, they get a...yeah. But with the energy too, they got a double whammy. Energy price is on the upswing and Bitcoin price is down. And so, they were saying they can't even unload the equipment because the equipment is not worth money.

Pat: Wait, does this sound like almost any other commodity in the world like gold or silver when the price of gold drops at the mining companies or oil? Which one of the reasons the oil prices have gone up is because so many came offline and couldn't even sell their rigs. Two years ago, there was no demand for oil. So, this Bitcoin just turned into any other commodity, but actually doesn't produce anything. Is that what you just said?

Scott: I don't know. I don't know what Bitcoin becomes. I don't know if 20 years now Bitcoin is still a common cryptocurrency or we've moved past Bitcoin. I have no idea.

Pat: I don't either.

Scott: What I do know is if you somehow miss out on being an investor in Bitcoin and you have done a decent job saving and getting yourself financially independent, it's not gonna have any difference on your life. If you're over overweight in that area and things don't work out, it can certainly have a disastrous impact on your life.

Pat: I've received an email from a gentleman this week asking me if I would be on his crypto broadcast, and I thought to myself, 'You've obviously haven't listened to our show very much."

Scott: Maybe you should have been.

Pat: I'm not going on that show.

Scott: With the eight listeners.

Pat: I have no idea how many listeners and I'm not going on that...

Scott: 10 listeners.

Pat: ...to argue some theoretical asset class that has never produced anything. Can't produce anything. At least with gold, you can wear it. It's used in industrial manufacturing.

Scott: You can make a front tooth or something with it.

Pat: You can. You can make pens, jewelry. Crypto?

Scott: You can't try crypto. Correct.

Pat: I mean...

Scott: You can use it to buy an NFT.

Pat: Okay. All right.

Scott: I don't know how you show off your NFT though, either. At least if you drive a Lamborghini, people see your bright green Lamborghini. If you're into that sort of thing.

Pat: Oh my.

Scott: I don't have a Lamborghini, nor desire.

Pat: I don't. My car is white.

Scott: Nor any desire to have a Lamborghini. But anyway, we'd love to take your calls if you'd like to join us. 833-99-WORTH is our number. 833-99-WORTH. We can talk about all things financial. And we're gonna talk here with Bob in Arkansas, Bob, you're with "Allworth's Money Matters."

Bob: Oh, hey, Scott and Pat. Greetings from Northwest Arkansas.

Scott: Well, thank you.

Bob: Hey, I've got...other than crypto, no, I'm not gonna ask about that. A couple of questions. This is...

Scott: By the way, really quick. I think I was only in Arkansas once super briefly, so it didn't count. But my son just rode his bike through Arkansas and broadcast across the United States. He said Arkansas was his favorite state. And he says people were not only super friendly, but everything was stunningly beautiful. He loved it. For what it's worth.

Bob: Oh, yeah. I live up in the Northwest part of Arkansas. You know, home to Walmart, Tyson, and J.B. Hunt. So, it's absolutely a beautiful place. I moved away and then came back six years later because my wife and I missed it so much.

Pat: That's nice. So, what can we do for you? Thank you for your commentary in the travel show, Scott.

Bob: Well, I wanna get your perspective on a couple of [crosstalk 00:25:08]

Scott: I just wanted to be there. I'm in Northern California. It's smoke-filled with the fires, we can't have or run the air conditioner because we gotta...can't charge an electric car because we gotta shut down the power. Arkansas sounds pretty nice.

Pat: Listen, Scott. Scott. Scott, I believe that if you really wanted to be in Arkansas tomorrow, you could be in Arkansas tomorrow.

Scott: All right. Fair enough. Bob, continue, please.

Bob: All right. Well, hey. A question. I wanna get your perspective on how I'm thinking about social security. So, I've got a situation where I just turned 60, my wife is 61, so she's a year older and she is only gonna qualify for spousal benefits. She did a great job, stayed home with our four boys, and raised perfect gentleman over her kind of 38, 39 years of being a mom. And so, now I'm starting to work through...I'm always a planner, so I'm planning ahead obviously. And so, I'm trying to work through how I should think about claiming for social security because when I break out the Excel spreadsheet and I start looking at claiming strategies, I kept thinking, okay, you know, assuming a long long life expectancy later is going to be better, but given she can only claim when I claim and that her, you know, essentially there's no benefit to her benefit or there's no increase to her benefit by waiting beyond her...I guess my full retirement age. Am I actually better off trying to claim a little bit earlier? So, you know, I'm thinking that I probably wanna claim at 65 or 66 when she would turn 67.

Scott: Are you working or retired?

Bob: Well, that's kind of another story too. I've tried to retire a couple of times, but I've been told I have to find a place to be between 9:00 and 4:00 Monday through Friday.

Pat: Yes.

Bob: So, I am working part-time, let's put it that way, at various sort of endeavors.

Pat: And so, there used to be...years ago, there was a thing where you could actually do what's called file and suspend and then your spouse could actually...

Scott: Yeah. That's gone.

Pat: ...but they got rid of that. And that was a technique we used to use quite a bit with clients, but that is now gone.

Scott: When is your full retirement age? Sixty-six and a half or 66?

Bob: I'll be 67.

Pat: Sixty-seven.

Bob: I was born in '62.

Pat: And what is your net worth, excluding your residence?

Bob: Around $5 million.

Pat: Okay. And what will your income...let's leave social security out of it. Let's say you retired at 65. What do you think your income would be?

Bob: Oh, just from basically drawing from my investments?

Pat: Yes. Or pension.

Bob: Okay. No pension. So, strictly a combination of brokerage, 401(k), and lots of accounts that I have that makes $5 million kind of...

Pat: What do you have in your 401(k)? Taxable retirement accounts.

Bob: About three and a half.

Pat: Okay. 1.5. So, your income would be a couple of...

Scott: Well, your required minimum distributions are gonna be over $100,000.

Bob: Right.

Pat: Much more than at age 72, right?

Scott: Assuming there's some growth between now and 72.

Pat: Yeah. So, we've got 12 years. So, here's what...we're not gonna give you the answer you want, which is you want an answer. If you were sitting...

Scott: Well, there are some...first of all, there are some much more sophisticated software programs done on an Excel spreadsheet that deals with this very topic because there's 80-some odd ways you can claim social security.

Pat: But that's not his risk. Your risk is legislative risk. Your risk is legislative risk. So, I am 60. I turn 60 in November the 28th if you wanna send something. I think about it and I will postpone that decision until I quit working. And obviously, you can start taking social security earlier if you quit working and it makes sense. But the reality is between now and then, we're going to watch what happens legislatively. And your danger, the danger that you have is that they're gonna say you have too much money and you can't get social security or we're gonna tax more of your social security.

Scott: Yeah. When your required minimum distribution is $150,000, $200,000, you know.

Pat: They're gonna say, "Hey, look, you don't need this anymore."

Scott: That would be my concern if I were in your shoes.

Pat: So, you wanting to...

Bob: Yeah. Well, it sounds like what you'd argue then would be...argument would be to go sooner rather than later.

Pat: That's right. That is right.

Scott: When you get your full retirement age.

Pat: That's correct.

Scott: I wouldn't until beforehand.

Pat: No. I would not do it beforehand.

Scott: Because you're still working some, right?

Bob: Yeah. Consulting and some part-time stuff. Yeah. Exactly. But I mean, not, you know, it's probably about a third of the income I was making before. So...

Pat: But when you quit working and actually if you were with one of our advisors and they said, "When you quit working," I wouldn't even say "When you say you quit working," I'd say six months after you say you quit working because you might go back after that. You can always stop social security. You should start it as soon as you possibly can because of the legislative risk involved with you losing social security. And it could happen any time between now and the day of your death where they say, "Hey, look, we don't have enough money in the social security trust fund, we need to make some cuts." Who do they cut? The person that's living solely on social security or, you know, fat cats like you, Bob...

Scott: Millionaires.

Pat: ...who have saved well and worked hard and...

Scott: That's right.

Pat: But that's who it's gonna affect. So, you can't put that into a spreadsheet. Legislative risk it's...you cannot put that in the spreadsheet. From what we know now, you should take it as early as you possibly can. So, the theory that we have is if you don't need it and you're not working, take it as quickly as you can. If you really need it...

Scott: Or even may probably...if you mostly need it, wait as long as possible.

Pat: Wait as long as possible so that you...

Bob: Yeah. Well, so would you take it then at 62? [crosstalk 00:31:19]

Pat: If I wasn't working.

Bob: If you weren't working. If I wasn't working. Got it.

Pat: Yeah. But you shouldn't do it because you're probably gonna be working. And I wouldn't wanna take...

Bob: Yeah. I don't...

Pat: What's that?

Bob: I said I think you're right. I mean, unless I can find a place to be from 9:00 to 4:00 during the week where I can, you know...

Pat: You can always get on the bus and just drive around right around on the back of the bus. Yeah. No, no. You should take it as soon as you're sure that you have left the workforce permanently or pretty sure. You can always suspend social security once you start it. If you go back into the workforce, you should start it because it's...I can tell you if I was 62 and was not working, I would start social security at 62, regardless. It didn't matter whether I needed it or not because my feeling is there's going to be cuts between now and the day I die.

Scott: Well, you're in a financial situation where you're not gonna be dependent upon social security for your retirement income.

Pat: Much like Bob.

Scott: Much like Bob.

Pat: Much like many of our listeners. Much like many of our listeners.

Bob: Right. Okay. Yeah. That's great. I mean, I was thinking earlier, but you've...

Pat: You know why? Because one thing...well, none of these calculators take into impact. What's the probability of not receiving 100% of those future payments? So, if you are gonna go buy a bond today, let's say a 30-year bond from the U.S. government, you know, the government is gonna pay you back because they could just keep printing the dollars. So, it's super easy for them to pay it back. If you're gonna buy a 30-year bond from some company, you're gonna say, "Hmm, what's the likelihood of them paying back?" You're gonna demand a higher interest rate than the government would give you because there's...even if it's a small chance, there's some chance that that company is not gonna exist. So, you would factor that in. And that's what so many...none of these calculators factor that in whatsoever. What if you bought a 30-year bond from the government and the government got to decide that it could stop payments whenever it wanted because you have too much money? What would you do? You'd say, "I want my interest as early as I possibly can."

Bob: Right.

Pat: If you were forced to buy a bond.

Scott: Now, nobody knows what's gonna happen in the future with social security, right? It's anyone's guess. What we do know, the trust fund is scheduled to run out of money in '32 or '33, somewhere in there. There's not enough money. If they don't make any changes, there's gonna be an automatic it's about 22% cut across the board. There's no way an 88-year-old widow who's getting $822 a month is gonna have a 22% reduction. Politically, it's not possible. So, eventually, this is the third way off for Congress, that's why they never touch it. Eventually, they're gonna be forced to because if they do nothing, all their constituents who are retired are gonna get hurt. And they're not gonna want that. They're gonna go to where the least pain is. That's our opinion. And that's the people that can not have much pain.

Pat: Yeah. Your thoughts, Bob?

Bob: Yeah. Yeah. No. It definitely makes sense. Okay. Do I have time for one quick question?

Scott: Sure.

Bob: Other question. Long-term care for me, I had a mother that passed away from dementia, and so as I thought about, you know, kind of my financial situation or our financial situation, my wife wants to definitely stay in the house that we have until we both pass away. And so, as I thought about potentially long-term caregiving, there is a bit of history in my family, although right now I'm in really good health. Should I think about getting long-term care for me or insurance or should I just self-insure given my level of assets?

Scott: Well, you can easily self-insure. You can easily self-insure.

Pat: And if you were to choose to insure some portion of this, I wouldn't be so concerned about a year or two of long-term care, which is most long-term care. It's only a year or two. If you're gonna ensure anything, it's the multiple-year dementia, 5, 10+ years, right? So, what that would mean is using some sort of policy that has a really long waiting period, maybe even a two-year waiting period, and then as much benefit as you can get. I don't know if anyone's still writing lifetime benefits anymore.

Scott: But if you think about the waiting period before the policies pay in, it's...

Scott: Same as deductible.

Pat: All it means is deductible. The higher you're deductible on your house and your car, the lower the premium payments because the insurance company doesn't take it till the big risk hit in. And so, you can ensure easily your whole lifetime in long-term care with these sorta assets and assuming that you continue to manage them in a responsible manner.

Scott: And you might wanna look at there's some single premium...we're not huge fans of permanent life insurance just because they're so often missold, but there are some interesting products out there, single pay, whole life or single pay universal life that have a long-term benefit, long-term care rider. And it's essentially the same as having this long-term waiting period because you burn through your first dollars first before the...

Pat: Your deposit.

Scott: Yeah. So, you might put in $100,000 or $150,000, or $200,000. It's your asset, you don't use it. There's a death benefit there when you eventually pass away. If you do need long-term care, you spend your dollars first. So, it's a kind of accomplished. I mean, if you said, "I definitely want long-term care insurance," we would probably steer you that route first, but...

Pat: You can self-insure.

Scott: You can self-Insure easily.

Bob: Okay. Okay. All right. Great...yeah. Great information. So, thank you.

Scott: All right. I appreciate you being a listener to our podcast.

Pat: I assume.

Scott: Yes. You assume? You assume he listens to our podcast.

Pat: I assume that's how he got this.

Scott: He's in Arkansas.

Pat: That's why I assume. We're not in the air n Arkansas.

Scott: We're not broadcasting too many stations anymore.

Pat: Yeah.

Scott: I mean, the terrestrial radio itself is on the down road spiral a bit, isn't it?

Pat: Yeah.

Scott: Hey, real quick. We were talking about social security. We wanna let you guys know we have a social security virtual workshop coming up. The workshop is "Five Steps to Unlocking Social Security." And not everyone is like Bob who we just had a conversation with, right? The majority, vast majority of Americans are going to need their social security to rely on some income, and not only that. I mean, if you save well maybe and you're trying to figure out how do I maximize, there's different ways you can do things. And some, but like, are you trying to maximize for the...have the maximum amount of dollars to pass to your heirs? Are you trying to maximize as much income during your lifetime, etc.? And so, we'll cover all these things. September 21st and September 22nd is the virtual workshop and yours truly will be the presenter.

Pat: You're presenting this?

Scott: Yes, sir. So, simply go to allworthfinancial.com/workshops to register. Again, September 21st, September 22nd, allworthsfinancial/workshops.

Pat: All right. And Scott, while we're promoting our firm Allworth, I went...

Scott: The shameless act of...

Pat: Well, I went through and read some of our podcast reviews as I am apt to do.

Scott: Let me, my guess is you spent more time on the negative reviews.

Pat: Maybe. So, I...

Scott: Then you get all frustrated.

Pat: And then no, I don't get frustrated because some of them are...well, they promote their business on the show and, you know, they need to stop promoting their business on the show. Look, say those in the reviews if you want, or just go to this virtual workshop, learn something the same way you're listening to this podcast, and then don't use our services if you don't want to. It's not gonna bother us, right? We put it out there in the world. This is what we do, this is who we are. If you've got an interest in engaging us for your financial planning or investment needs, then do so. If you just wanna consume all the information that we put out there and not pay us a dime for it, then do that as well.

Scott: Then do so. Yes. Of course.

Pat: Or just go ahead and write more negative reviews.

Scott: So that Pat can get frustrated late at night...

Scott: I don't get frustrated.

Pat: ...when he can't sleep.

Pat: It's hard for me to understand people sometimes. It's just like, "I'm a long time listener and they promote their show." Well, then quit listening. I mean, that might be the...

Scott: Oh, is that what people are complaining about?

Pat: Yeah. It might be the...

Scott: If we promote a firm.

Pat: Yeah. Of course, I promote my firm. I'm a businessman. Would you not want me to promote my own firm?

Scott: No. Don't promote your firm. Yeah. I don't know why promotions [inaudible 00:39:58].

Pat: We're not running commercials in our podcast. That's not how we're making any money. No. And for good reason, because we've been approached a number of times over the years. Like we're fiduciaries, right? So, we have a legal duty to put our clients' interests ahead of our own as our being running a financial advisory firm. And we gotta be careful. I mean, we could say, oh, sure. Mortgage brokers, mortgage company, we can go insurance company, go ahead and...

Scott: Advertise here. But we [inaudible 00:40:28]

Pat: So, that's enough on that subject. But if you do listen to our podcast, please be kind enough to leave us a review.

Scott: Yeah. Because Pat will read the review and will be frustrated.

Pat: So, it's time for "The Money Matters House Call."

Scott: House call?

Pat: Where we check in on a caller from the past show to see how they're doing.

Scott: Yeah. So, essentially, this is...we're trying not to segment. I think this is the third time we've done it or something. And you can let us know if we like it or not on and...

Pat: You know, I got this from listening to "Click & Clack" years ago, the Tapit brothers, which was a call-in radio...

Scott: Do they still run that?

Pat: I don't know if they still run it, but I was a fan of it. I don't know anything about cars, but I enjoyed the show. And they would follow up six months after they gave someone a recommendation about how their caller would fix a car or whatever. And then they would follow up to see how it went. And so, I thought, let's see if we could do it with money.

Scott: All right.

Pat: That's how we came to this.

Scott: Well, in October of last year, we spoke to a guy named Dave. Dave's not an Allworth client, but he called us. Not sure if he's a radio listener or podcast listener. Regardless, we still love him. You wanna know whether it was a good idea to invest in crypto at the time. Last October, I don't know where Bitcoin was, but things were sky high, for sure. So, here's a clip from that call.

Dave: I'm in my late 50s, I'm a fairly conservative investor, I've got a pretty nice 401(k), I own a house with quite some equity, probably $1.5 million in equity, I have a small investment account, I've got some stocks, and then I also I've been working for the last seven years for a company that's been very generous with RSUs. And as I vest in those, I have a tendency to want to divest because I'm very heavy in that one company and so I wanna...so I sell them, not all of them, but quite a bit of them to divest. And as I sell them, it frees up a little bit of cash and I look around and I think, you know, what do I wanna invest in? And then I start reading about Bitcoin, Ethereum, cryptocurrency. And from what I'm reading, every single person who's ever touched Bitcoin is now a multi-billionaire and everybody is rich. And I've always thought of that as a very shaky, very nebulous, not something I'd wanna get into. I'm a little bit risk-averse, I'm a little bit more conservative, but everyone seems to be jumping on the bandwagon. And I'd like to hear from someone who knows what they're talking about, what they think of that.

Pat: So, I don't think anyone really knows how this Bitcoin story is going to end.

Scott: That's right. That's why it's so volatile. There are some strange things behind it. And this whole concept to have to mine it where it takes energy. But I mean, the majority of our power in the world still comes from fossil fuels. So, we are taking fossil fuels to mine a digital product.

Pat: That does...

Scott: I mean, it makes no sense from that standpoint. Why would you create anything like that?

Pat: So, if no one really knows how it's going to end, I see it as highly, highly, highly speculative. And by the way, when you read about everyone that touches it turns to gold. That's true because that's the narrative. If you read it and said everyone that touched this thing lost all their money, then you wouldn't...

Dave: And it wouldn't be a story. The press wouldn't touch it.

Pat: There wouldn't be a story, right? There wouldn't be a story behind it. If you go to TikTok or any of the other social media pages...

Dave: Isn't that where I'm supposed to get my financial advice from?

Scott: Only the short videos. Yeah.

Pat: Yeah. It's there. I wouldn't...if I was, I wouldn't touch it unless you had hundreds of millions of dollars and you could throw something at it and not worry about it. But you said you're a relatively conservative investor.

Dave: I am. And I don't have...

Scott: I don't have a dime in it.

Pat: I don't have a penny in it.

Scott: How much would you wanna actually allocate even if you wanted...you're not gonna bet enough that it's gonna impact your livelihood.

Pat: What scares me more than anything is the exchanges that you hold it on.

Dave: Right. The Coinbases and all those other ones that are...

Pat: Yeah. I just read a story of the guy in Canada. He had this own thing in every...$250 million, fakes his own death in the Middle East. Boom. Done. Gone.

Dave: Yeah. Yeah.` I understand. So, that makes me feel a little bit better knowing that you guys are not yet ready to recommend it even to the non-risk averse.

Scott: No, no.

Dave: So, I have one more follow-up question and it's a little bit similar and I've also been reading a lot about NFTs, artwork that's created digitally that, you know...

Patt: I don't get it.

Dave: ...the board apes.

Pat: Yeah. Non-fungible tokens.

Dave: Yeah. Exactly.

Pat: I don't get it. I don't get it.

Dave: Okay.

Pat: You know, because it's the people that played Pokemon cards when they were younger are now grownups. And now they get to trade Pokemon cards but in a digital format. I don't get it.

Scott: I think it's all based on the greater fool theory. There's gonna be a greater fool in the future who will pay more than what you paid for it.

Pat: But then again, I don't...

Dave: Well, I mean, if...yeah. If you look at some of them, people were buying them for $500 and they're worth $50,000 now.

Scott: There's no question. There's no others. There's no question. There's probably billionaires or at least multi-millionaires off cryptocurrency buying them.

Pat: But there's a market for tennis shoes as well that are limited editions.

Dave: Yep.

Pat: So, that was Dave back in October of '21. And we have Dave here with us today. Welcome back to the show, Dave.

Dave: Hey, guys. Thanks for having me.

Pat: Thank you for joining us again. What a difference a year makes.

Dave: What a difference a few months. What a difference a few months make, huh?

Scott: Yeah.

Dave: Yeah, No kidding.

Dave: You guys are sounding very prescient, very ability... You have an ability to...you said something about volatile and a lot of people losing money, and don't invest in Bitcoin unless you were willing to lose it, I think is some of the things you told me, and boy, a lot of that proved true. The volatility has been off the charts.

Scott: And it's not because we can have any sort of prediction of the future, it's just that we've seen enough of these over the years. And look, who knows. I mean, Bitcoin might go back up to hit new highs. I don't know. Well...

Dave: I think one thing I've learned since our conversation the last time besides the fact that you would probably be foolish to invest money that you were not okay to lose. It's almost like going into a casino and saying, 'Okay. I've got this $100. If I lose all $100, I'm gonna get a couple of cocktails and I'm not gonna be sad if I lose it all." I think that is kind of it. But one thing I have learned is I do think that there is some validity to the idea of blockchain technology.

Scott: A hundred percent. Totally agree with you.

Dave: Yeah. The technology behind it I think has some valid purpose in life.

Scott: I totally agree with you. I don't quite understand it just like I don't understand how my iPhone works either.

Pat: But it's a digital ledger.

Scott: I can understand the benefits and the digital ledger, and why that...there's clearly a commercial use for that.

Dave: Yeah. Digital ledger. That's exactly right.

Scott: But seems like the argument of Bitcoin so often people would point to the benefits of the digital ledger as the reasoning behind why Bitcoin or some other crypto makes a lot of sense have said that's just a product that's built upon that technology, it's not... So, yes. I believe the technology could be transformative, but that one particular product that was built may or may not be transformative.

Dave: That's right. I mean, I kind of look at it like almost like the internal combustion engine. The internal combustion engine was a great piece of technology, but the people who bought Edsels or conveyors may not agree with it.

Pat: That's right. That's right. And you know what?

Scott: And Dave, there might be some at this point saying, "Look how bad we've destroyed the planet as a result." And we buy combustible engine.

Pat: But what was interesting in listening to that is I had forgotten the conversation completely about the exchanges. And the exchanges are the ones that just have been. And by the way...

Scott: Because the trading volume is way down.

Pat: Yeah. Well, not only that is that they oftentimes were actually paying interest that they couldn't afford and...

Scott: That's right. Toss the cards.

Pat: You know, when Coinbase underwrote was it, it used to be Staple Center, now it's Coinbase Center. I got this right?

Dave: That's right.

Scott: Is it Coinbase center? Is that what they call it?

Pat: Yeah. It used to be Staple.

Scott: Whatever it is now. It's a crypto of some sort.

Pat: Yeah. Oh, is it crypto or...it's one of those things.

Scott: I mean, it's crypto.

Pat: It's crypto.com, right? When that happened...

Dave: There was one that had Coinbase's name. I believe it was one that had Coinbase.

Scott: Oh, got it.

Pat: But when that started happening, I thought, "Man, we're pretty close. We're getting close. We're getting close."

Scott: So, Dave, I guess you did not invest in any crypto last year.

Dave: I sure didn't. And, you know, based on the value at the time and the value now, I think I don't remember exactly, but I know it was in the 50s. I think it was 52 or 54, or 55,000. And it's, I, I don't keep a close eye to I think the 20s. Yeah. It's about 20. So I would've lost if not more, I would've lost minimum 50% of my investment had I done it. So I'm happy to take your advice, but you guys hit it on the head was don't invest money that you're not willing to lose and you might lose all of it, especially if these exchanges suddenly disappear and go away. And there's really no, the moment you get into the digital ledge world, there's not a lot of regulation. It doesn't seem, that's another thing I've learned.

Scott: Not now. It's coming...

Dave: Doesn't seem really highly regulated, which is attractive to some people, but certainly not attractive when it comes time to let's find my money. Where did my money go?

Pat: It's not now, but it will be regulated.

Scott: Dave, thanks for joining us again. Really appreciate it.

Pat: Thank you, Dave.

Dave: Love it. Thanks so much for your advice. And I'm gonna continue on a well-advised investment strategy that you guys recommend to me.

Pat: I appreciate it.

Scott: You know what's interesting, Pat, is you still read articles about how someone lost their life savings by some crypto bank. And I'm always fascinated that, one, people are foolish enough to not have any sort of diversification and put all their life savings in some crypto bank that's supposedly paying them 18%. And two, even more interesting is the fact that they're willing to expose themselves in some sort of national format of telling their story.

Pat: Yeah. Well, I had an Uber driver tell me he put his whole life savings into it. Six months ago, he was telling me, he asked me what I did...

Scott: You were his last Uber ride and he was telling you?

Pat: What's that?

Scott: You were gonna be his last Uber ride. Because he was making so much money on crypto.

Pat: He was... Anyway, it's... But the idea that it's not being regulated that's one of the reasons they've been able to pump it so much is because it's not regulated because none of the rules surrounding traded securities surrounds these and it will be regulated soon, and it will stop all this social media hype and all this garbage that goes around it.

Scott: Cuz pump and dump stuff.

Pat: Yes.

Scott: Yeah. All right. Hey, it's been great having you with us. We appreciate we're glad we have an audience, frankly. It's what why we continue to do the program. So thank you for being part of Allworth's Financial's, "Money Matters." I'm glad you were with us. We'll see you next week.

Announcer: This program has been brought to you by Allworth Financial, a registered investment advisory firm. Any ideas presented during this program are not intended to provide specific financial advice. You should consult your own financial advisor, tax consultant, or an estate planning attorney to conduct your own due diligence.