Steve S.: Tonight, is bad news starting to mean bad news? You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach, along with Steve Hruby. You know, ever since the Fed started raising interest rates to fight inflation, Wall Street's happy when economic indicators show a slowing economy. That's because it's supposed to signal that interest rate hikes could be ending. You heard us say, "bad news is good news," but now we're worried about increased recession fears, and that's why a lot of people are wondering whether markets now see bad news maybe as bad news. Joining us to make sense of all this is Allworth chief investment officer, Andy Stout. Hey, Andy, let's start by talking about the jobs report that came out on Friday. What did that report tell us?

Andy: Well, overall, it showed the trend in the labor market is starting to weaken, or starting to soften, if you will. If you look at the number of jobs that employers added last month, they added 236,000. That's a good number. That was actually a little bit better than expected. Economists were looking for 230,000 jobs. But compared to the prior month, it was lower. The prior month was 311,000, or 326,000, it was revised to that level. But when we look at the bigger picture, that number, while healthy, is moving lower. And it's actually, this 236,000 new jobs that employers added was actually the lowest since 2020.

And when we look at other parts of the jobs report, and we see the unemployment rate, it actually strengthened a bit. It dropped from 3.6% down to 3.5%. That happened even as the labor force participation rate increased, meaning more people started to look for a job. So, when we look at the job market, we see employers adding people, adding new jobs, but at a slower rate, lowest since 2020. We do see the unemployment rate still being pretty strong.

But one of the more important things, when we look at the jobs report, Steve, is the inflation component, or the average hourly earnings. What we saw on that was that it inched up a little bit from the prior month, from 0.2% on a month-over-month change to 0.3%. As a result, the year-over-year number came in at 4.2%. So, in other words, wages are 4.2% higher than the same time last year.

Steve S.: So, is this one of those bad news is good news things, or is this transitioning more towards bad news is bad news, meaning we might slide into that recession that we keep asking about, Andy?

Andy: Well, it's gonna be a lot more than just the jobs report, especially from last week. We got some other big, important economic readings. We have some surveys for the manufacturing and services side of the economy, and both of those surveys came in weaker than expected. The manufacturing survey showed that that part of the economy has contracted for the fifth straight month. The services side of the survey is barely expanding now. It was expanding at a pretty healthy clip, but it's certainly pulled back.

And when you look at what the driver for the drop in both of those, well, it was new orders. New orders on the manufacturing, and new orders for services. That tells you that the broader demand picture is a little bit weaker, and that's a concern, right? Because we were in the bad news is good news before, because recession risk was low, and we wanted the Fed to stop hiking or the [crosstalk 00:03:32.969] stop hiking. Now, you see higher recession risks, so that's when things start to transition to bad news is bad news, because that could be a recession, that could be lower corporate profits, and that has a bigger effect on the capital markets.

Steve S.: Yeah, but isn't that the whole point of what the Fed's been doing this whole time? I mean, people are making it sound like, "Oh, my goodness, we're gonna go into a recession. We gotta start worrying about that now." But the whole point of the Fed raising interest rates is to reduce demand, and slow down the economy. These numbers are exactly what we were expecting, aren't they? Or hoping for, I should say.

Andy: Kind of, kind of. I mean, no, not quite. And here's why. Because, I'll call it the economy, if you will, was hoping for the infamous soft landing, the soft landing where the Fed is able to bring down inflation... And, you know, inflation is moving in the right direction, to be clear, but bring down inflation, reduce demand, to the point where the economy is still growing, and inflation comes down. That's kind of, like, the Goldilocks scenario. And that had been on a lot of people's radars for a variety of reasons. But because of the turn in the data on a few different areas, it might be turning a little bit too much, and that's making that soft landing possibility, you know, less and less likely, as the data starts to contract more and more, and it raises that risk of recession.

Steve S.: You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach, along with Steve Hruby. And if it's Monday, we must be talking to Andy Stout, the chief investment officer from Allworth Financial. So, Andy, the jobs report came in more or less as expected, and no huge surprises necessarily. I keep going back to there are still, well, we used to say two jobs for every unemployed person, but it's around 1.7 jobs for every unemployed person. Is this the new normal?

Andy: Well, I don't know if it's the new normal because what we've seen in the labor market data, we just talked about the monthly jobs report, which is by far the most important, but there are other clues to what the job market looks like when we look at other indicators. For example, you're talking about the number of job openings. And what we saw there on the number of job openings from last week was that they fell from 10.6 million to 9.9 million. That's a drop of roughly 630,000. Economists were looking for decline of roughly 300,000. So, we saw the job openings drop even more than expected.

Steve S.: Big difference, yeah.

Andy: Yeah. And that's a good thing from the Fed's perspective, because it's still a pretty high number. Still shows there's some underlying strength in the economy, but you're starting to see that labor market weaken. So, you're seeing that trend show weakness, or softness. Then we had another jobs report, which showed the same softness. So, that's the trend we were talking about before, when we think about the labor market. And here what I'm talking about is initial jobless claims, or when people file for unemployment benefits when they're laid off for the first time. What happened was the government applied a seasonality adjustment to the historical data series. So, what it resulted in showing was that there are a higher number of people collecting unemployment benefits than what was previously thought.

Now, some economists thought the older, or the unrevised numbers, they were artificially low because of COVID. And essentially, this is correcting for that. So, what we've seen is that the number of reported continuing claims, or not just the first-time filers, but people filing on an ongoing basis, that actually was revised higher from the week before last, from 1.69 million to 1.82 million. That's a sizable jump and a sizable difference, just on a revision from where we thought we were to where we actually were. So, when we look at that data, and, you know, I mentioned before that ISM Services survey, how they're showing the economy, you know, not quite as strong as we thought, that, those surveys are made up of many different underlying components.

Another component that I would like to mention, I already talked about the new orders coming in weaker, is the employment component. Now, when you look at the employment side of the manufacturing, and the employment side of the services, you know, what we see is that the manufacturing one declined deeper into contraction, and the services is barely expanding. So, let's put all this employment data together, okay. We have the number of job openings declining more than expected, and the ratio of job openings to unemployed, you know, declining. We have the manufacturing employment contracting, we have the services employment barely growing, we had a sizable adjustment upward in the number of people filing for jobless claims or unemployment benefits, and we had the lowest level of employers adding new jobs since 2020. That all paints the picture of a cooling job market. And the question is, is it cooling enough for the Fed to pause and/or...

Steve S.: Exactly.

Andy: ...reverse interest rates?

Steve S.: I need to pivot a little bit, and shift gears, because we've been talking a lot about banking over the last few weeks. And I'm curious to hear your perspective, Andy, as to whether or not that crisis has been averted. And with everything that you just shared with us, what if the Fed does need to keep increasing interest rates? How might that have a continued effect on banking?

Andy: Well, as far as the Fed and what they'll do with interest rates, right now, the market, based on securities that trade from, you know, Wall Street traders, it's what's called the Fed Fund futures, that allows us to see a probability of what the Fed might do. Right now there's a 70% chance of one more quarter-point rate hike for the remainder of the year, and then that's it.

Steve S.: And that's in May, right? May 3rd.

Andy: Yeah, on May 3. So, on 5/3, or Fifth Third day, for locals here in the Cincinnati region. So, after that, though, then there's about a half-point of rate cuts priced into the market for the remainder of the year. And a lot of that, how that plays out, will be determined by some economic releases this week. But before, you know, we dive into that, you know, it's, the banking issue is also a factor that the Fed needs to take into consideration. But when we look at the amount of borrowing of banks have done from the Fed, it's really plateaued off over the past few weeks. So, it doesn't appear that things are getting worse from that perspective.

So, to answer your question, you know, is the contagion or the crisis behind us? More likely than not, yes, but you can never rule anything out. And if the Fed were to get much more aggressive than what they are, if they do more than a quarter-point rate hike, you know, that will cause possibly some other cracks to form, because you don't know how everything is connected until something breaks sometimes, right?

Steve S.: So, what's the likelihood of them increasing interest rates again, beyond the 25% in May, and that their pricing in at 70% chance?

Andy: I would say it's close to zero.

Steve H.: That's good.

Andy: And, I mean, you can see that in the Fed Funds dot plot.

Steve H.: Some good news.

Andy: Yeah. So, the Fed, every quarter, and we got this in March when they last met, they release a dot plot, which is basically where each member of the Fed believes interest rates will be at the end of the upcoming calendar years. And what they had, as far as, like, the median or middle dot showing, was just one more quarter-point rate hike, and then they were done. And Chair Powell, at his press conference, following that meeting, said there was no rate cuts priced into any of the Fed members' views. So that would tell you that they expect one more quarter-point rate hike and then to hold it steady.

The market has a little bit of a disagreement there. You know, they can see that quarter-point rate hike, 70% chance right now. But that's followed by rate cuts after that in the second half of the year. Whether or not that comes to fruition will certainly depend on some data that comes out this week. And also, more importantly, more importantly, what happens with the economy in the second half of the year.

Steve S.: Well, we'll certainly be looking for that. Great perspective as always from Andy Stout, chief investment officer from Allworth Financial. Here's the Allworth advice. Don't make emotional financial moves right now as recession talk amps up. You don't wanna miss out on the eventual upswing that always takes place. Coming up next, the impact that two companies have on the entire S&P 500 and you. You're listening to "Simply Money" on 55KRC, THE Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach, along with Steve Hruby. If you can't listen to "Simply Money" every night, just subscribe to get our daily podcast. You can listen to it the very next morning after we air, during your commute, at the gym, whatever you happen to be doing. And if you think you've got some buddies that can use some financial advice, tell them to search "Simply Money" on the iHeart app, or wherever you get your podcasts.

Straight ahead, do you have enough money in your 401(k) for your age? How you compare to your peers, and why it may not matter, at 6:43. You know, Hruby, I love golf. I play golf, I watch it. The Masters was on this weekend. Other than Saturday when they got rained out. It was awesome. But you can imagine there's some serious money that gets spent down there by... and you can't call them customers. They're called patrons.

Steve H.: You can't call them customers?

Steve S.: No.

Steve H.: Why not?

Steve S.: Because it's Augusta. They are patrons at Augusta.

Steve H.: Interesting. Well, Augusta National, they'll do about $70 million in merchandise sales this week.

Steve S.: In one week.

Steve H.: Seventy million dollars. That's $10 million a day, a million dollars an hour, $16,000 a minute, and $277 every second. Did the math.

Steve S.: Somebody got a new calculator.

Steve H.: I know. I did the math. Isn't that incredible?

Steve S.: You know, I've been to one professional golf tournament my whole life, and it was kind of cool. It really was. It was The Phoenix Open, and they get some pretty serious money for some merchandise. Augusta is well-known for having really inexpensive food items, and that, you know, pimento sandwich, I don't know what the appeal is, but it's big down there. Buck and a half still. Buck and a half. There is no food item that costs more than $3, and even a beer, and who's gonna drink beer at Augusta? It's gotta be wine, I would think. But even that's five bucks. That's, you know, less than half the price of watching a Reds game. But merchandise, not so cheap. They're gonna get some money.

Steve H.: I'm not a golfer, but I know people that have told me that I need to attend. They've told me over and over again, and it sounds like one giant party filled with people that have money and enjoy partying.

Steve S.: Yeah. Although Augusta is a little bit more class, yeah. It's different than The Phoenix Open, let's put it this way. There was a rumor, and I don't know if it's true or not, but a guy last year spent $36,000 on merchandise, at Augusta.

Steve H.: Why?

Steve S.: I know. Lot of friends. Lot of [crosstalk 00:15:03.835].

Steve H.: I don't know. That doesn't... Yeah.

Steve S.: Obviously had it.

Steve H.: So, yeah, the key takeaway here is if you go, watch your spending, because you don't wanna get in debt. How about that?

Steve S.: Yeah, exactly. Exactly. Hey, one of the hallmarks of this show is explain why... We always preach diversification, why it's so important, and even within that there's diversification, there's still some risk. And what a lot of people don't realize, there are some companies in particular that just, they account for more than you would expect of some of the major indexes. And one example is in the S&P 500, the 500 largest U.S. companies, completely dominated by just two companies.

Steve H.: Yeah, it's really crazy. This is Apple and Microsoft.

Steve S.: Yeah.

Steve H.: Now, more than $15 trillion in assets, from pension funds, endowments, insurance companies, are linked to the performance of the S&P 500.

Steve S.: [crosstalk 00:15:56] everybody invests in at least the S&P 500.

Steve H.: Yeah, absolutely. And here's the thing. This is one of those tricky situations where you think you have a high level of diversification, it's a little technical, but what it boils down to is the S&P 500 Fund, for the most part, the one that we see in our 401(k), is going to be market cap-weighted.

Steve S.: What's that mean?

Steve H.: Meaning the largest companies have the biggest effect on the underlying price fluctuations of that fund. So, when you have an S&P 500 fund inside of your 401(k), you are investing very heavily in just two companies.

Steve S.: Well, we used to call that stock overlap. And, you know, you wanna have money in different mutual funds, different exchange-traded funds. That's diversification. And 99.9% of the people never look inside of the indexes to see, "Okay, this stock is in that index, but it's also in this other index, and I own more of it than I realized. I'm not as diversified as I thought." And I think that's the point we're trying to make about Apple and Microsoft, which can be a good thing. I mean, during the banking crisis, I mean, it just popped up out of nowhere two weeks ago, and banking stocks got absolutely hammered, yet the Standard and Poor's, during that week, was up 3.5% Why? Well, in large part because Apple and Microsoft had a good week.

Steve H.: Yeah, they were immune to the banking crisis. They're boosted by artificial intelligence. You know, Apple rose 11.4% during the month, Microsoft 15.6%. That's not tied to banking. So, when regional banks were getting hammered, that was a good thing for our portfolios, for your 401(k).

Steve S.: Yeah. Here's the weird part, is, if you just took those two stocks, Apple and Microsoft, and said, "Okay, how big of a sector would these two stocks be?" it would be the third-biggest sector of the S&P index. I mean, you've got, obviously, tech is the biggest chunk of the S&P. Healthcare, number two. This would be the third, just these two stocks. Not a group of stocks, these two stocks. So, you know, if they have a good day, chances are the S&P had a good day. If those two stocks have a bad day, chances are the S&P has a bad day.

Steve H.: Yeah. And how did this happen, you might be asking? So, this is post-Great Recession. Low interest rates for a great period of time made borrowing cheap, and pushed investors to seek out higher returns from what were then considered riskier companies, the growth tech companies, like Apple and Microsoft, which just excelled for many, many years to be where they are today.

Steve S.: Yeah. So, you know, here's what we've got with what I call the FAANG stocks. FAANG is Facebook, Amazon, Apple, Netflix, Google, and of course, a couple of them have changed names. They account for about 15% of the Standard and Poor's 500. So, you know, technology really drives the bigger indexes. And I think that's one of the big takeaways from here, sometimes for the better, sometimes for the worse. If you go back to 2022, the Standard and Poor's 500 was down 20%. Everybody knows. Last year was a lousy year, but it would have been down maybe 15%, 16% if tech didn't get hammered more than any other sector. That was a period of time where these two stocks dragged the S&P down further than if they weren't part of the S&P.

Steve H.: I've had folks that I work with asking me, you know, "Look, I've looked at the return of the S&P 500 for the past 10 or 15 years. Continuously, it's outperformed the market," they say. But when we don't diversify across many different indexes, what you're put into is a situation where, if you're just in the S&P 500, it's Microsoft and Apple. So, 2022 was a kick in the teeth, even though we're talking about earlier this year, where it helped us when banking was on the flip side of that.

Steve S.: And I think that's the key takeaway, is diversification isn't just the S&P 500. It's using other indexes also. Here's the Allworth advice. When Apple and Microsoft do well, it has a major impact on the S&P 500. Just make sure you're well-diversified and you can absorb the times when those companies don't fare so well.

Coming up next, many Americans aren't dipping into their retirement accounts to pay for things. That's the good news. The bad news? Well, we're gonna talk about that next. You're listening to "Simply Money" on 55KRC, THE Talk Station.

You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach, along with Steve Hruby. You know, for a lot of people, inflation has really hit your pocketbook really hard, so much so people are not only dipping into their retirement accounts, they're doing something we don't like to see. But it's happening. They're digging in and accumulating more credit card debt. We're gonna be joined by Britt Scearce, mortgage lender and credit expert from WesBanco, who serves as our local expert on these subjects. Britt, you came across a staggering number as it relates to credit card debt. What did you find?

Britt: Well, we did a poll and said that 72% of those with credit card debt have added to it in the last year.

Steve S.: Seventy-two.

Britt: And that makes perfect sense to me. Yes, 72%. So, it's not, you know, just a few folks that are starting to spend a little more. It's quite a number.

Steve S.: Wow. And this debt crisis, it's not just impacting lower-income families. This is all groups are being affected by this, and taking it on. Correct?

Britt: You're exactly right. I mean, even people with higher incomes are starting to add more credit card debt, because, as the Fed has continued to raise interest rates, and things like food have gone up, and I see all these jokes going around talking about how much eggs are. People [crosstalk 00:21:52.515].

Steve S.: Yeah. It's not a joke if you need eggs, though. It's crazy.

Steve H.: I have two eggs for breakfast every day, and I'm almost broke now.

Steve S.: Yeah.

Steve H.: [inaudible 00:22:01.111] It really is something. It's unfortunate.

Britt: Yeah. So, we've seen debt rising, and here's the thing. That's becoming even more expensive because what has happened with interest rates on credit cards? Credit cards are tied to prime, which goes up every time the Fed raises the short-term Fed funds rate. So, guess what? Credit card balances are gonna be increasing even faster from the interest, in addition to the usage, and payments are going up. You know, if you have any kind of a variable type of debt, that is tied to prime, that's gonna go up every time the Fed raises rates, well, guess what? Those payments are going to continue to go up. And we've definitely seen, you know, millennials haven't been quite as bad as, you know, baby boomers and Gen Xers, but we've definitely been feeling the brunt of all these extra expenses, and we've been adding to this debt.

Steve S.: Well, obviously, a reason is inflation. I mean, it's costing a lot more to fill up your tank and buy groceries. But, you know, we're okay with using credit cards, if you pay them off every month, but these numbers are telling me people are adding to the balances, and you've been very open about your past history. How do you tackle this? How do you, first of all, stop putting money onto your credit card that you know you can't pay off? And then, how do you get those balances back down to zero?

Britt: You're gonna have to actually do a budget. You're gonna have to...

Steve S.: The B word.

Britt: I prefer to call it a spending plan.

Steve S.: Yeah, exactly.

Britt: I prefer a spending plan. Because that's more telling your money what to do, rather than feeling restricted, you know, through a budget. But, you know, at some point, you have to take inventory. You have to actually take a look at where the money goes every month, instead of wondering where it went. So, track your money, find out where it's going, look for areas that you can cut. I mean, we don't necessarily need maybe all the subscription services and everything that we might have. I mean, sometimes we wanna watch one show, and we go and we buy a streaming service for $15 a month, you know, when we don't necessarily need to do that. Right? [crosstalk 00:24:16.299]

Steve H.: Sounds familiar at my house. So...

Britt: So, you know, if you feel that, you know, you just don't have enough month at the end of the money, well, you're gonna have to start making some changes. And you're gonna have to figure out how to make a few cuts, and maybe employ the debt snowball, where you list all of your debts from smallest to largest, you know, you stop adding to any of the debt, and you start adding extra payments, you pay minimum payments on everything except your smallest debt. Pay extra, you know, to that smallest debt, and get it to go away faster so that you get some mental wins, and then take that minimum payment and add it to the next one. That's the debt snowball.

We're also finding a lot of folks right now are realizing, "You know what? I might need to pick up an extra, you know, part-time job. Or maybe I should start taking some of that overtime at work if they're gonna offer it." We actually have to be intentional about getting rid of this debt, because this is a real drain on your finances.

Steve S.: You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach, along with Steve Hruby. And we're talking to Britt Scearce, mortgage lender at WesBanco, about all of the credit card debt that people seem to be accumulating even more these days. And Britt, it's, you know, there are a lot of programs, a lot of apps that you can download, that will help you with this. But there's nothing wrong with tracking your spending by just taking a legal pad out and just seeing where the money is going. I mean, that still works, right?

Steve H.: It's a start.

Britt: It absolutely does work. In fact, a lot of times, low-tech works better than the high-tech stuff. But, you know, there are a lot of things. A lot of your financial institutions have great, you know, checking accounts that do round-up for savings, and things of that nature. And, you know, certainly, there are plenty of spreadsheets and, you know, all kinds of different programs that can help you with tracking your spending and so forth. The main thing is, none of them work if you don't use them.

Steve H.: Exactly.

Britt: And if we're simply just, you know, the paycheck hits your checking account, and you just keep doing whatever, and you don't pay really any attention, thinking that, "Hey, I'll just out-earn all this," you know, that's great, as long as earnings continue to go up and so forth. But, you know, as the debt mounts and everything, that's gonna be a big drain on your future. And credit card debt, rates are only going up, right?

Steve S.: Absolutely. And we appreciate the, you know, tangible advice that listeners can use to get a handle on their debt, and ideally reduce credit card debt. Now, you know, shifting gears a little bit, I wanna talk about the difference between bad debt and good debt. You know, tell us about that. Is there such thing as good debt?

Britt: Well, you know, I would prefer there be no debt for families, right? I mean, that's, you know, if you have no payments, you can pretty much do whatever you want, right? But [crosstalk 00:27:13.855]

Steve H.: But you'd be out of a job. You're a mortgage lender.

Steve S.: Yeah, what would you [crosstalk 00:27:16.272]

Britt: I know.

Steve H.: Let's be careful, Britt. Come on.

Britt: It seems counterintuitive for me to say, hey, you know, it's a good idea to pay your house and everything off, right? But you're right. If you're gonna have debt, it's better to be managed, with mortgage debt. You know, mortgage debt would be considered good debt. It's, you know, you have an asset that is most likely going to be appreciating that you have that debt on...

Steve S.: Sure.

Britt: ...you have interest on mortgage debt that could be potentially deducted, you know, potential tax deductions on that. Bad debt would be consumer debt. That would be your credit card debt. That would be the debt that's at 15%, 18%, 19%, 20% interest, that if you, you know, have a $7,000 balance, that it's probably gonna take you 23 years to pay off. And, you know, you're gonna pay, you know, many times over what you charged, if you pay minimum payments.

Steve S.: Great advice from Britt Scearce, mortgage lender at WesBanco. Thanks again, Britt. You're listening to "Simply Money" on 55KRC, THE Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach, along with Steve Hruby. If you've got a financial question you'd like for us to answer, well, there's a red button you can click on while you're listening to the show on the iHeart app. Just record your question. It goes straight to us. We do listen to it. We may even put you on the air.

Straight ahead, how much cash should you carry around? What about credit cards? We're gonna tackle all of it. You know, Hruby, people that, you know, come in my office, one of the questions, sometimes they don't ask it, but everybody's wondering, how do I stack up? Am I doing okay? And one of the, you know, largest portions of just about everybody's wealth is what have you got in your 401(k)? Well, the answer is it depends on your age, but I'll tell you what. There was a big survey that was done by Vanguard, that gives us some pretty good data to tell you where you stand.

Steve H.: Yeah, they analyzed 5000... I'm sorry, 5 million retirement accounts.

Steve S.: Five million, yeah.

Steve H.: Yeah, much larger than 5000. Five million retirement accounts, on its "How America Saves" reports. And according to the recent findings, the average 401(k) balance was $141,542. That was in 2021. So, we have an answer, Steve. I just don't know how much I care to give it. Because it doesn't matter. Financial planning is about creating a lifestyle that you want to live today, and making sure that your money lives as long as you do in the long run. So, comparing yourself to others, I just don't see a ton of value in it, if I'm being completely honest.

Steve S.: Yeah, but more money in retirement helps you live a heck of a lot better lifestyle.

Steve H.: It sure does.

Steve S.: And the good news out of this is, that number, even though I think $140,000 is on the low end of what I would like to see people with, it's 10% higher than it was in 2020. And that includes... I mean, that's a good thing, that we see at least some sort of increase. Now, of course, you gotta break that down by age, because if you're 35, you're not gonna have as much as you're gonna have when you're 65. So, if you're between 35 and 44, the average 401(k) balance, it's a little bit under 100 grand, about $97,000. Forty-five to 54 years old, about 180 grand. Sixty-five and older, and I'm getting close to that number, the average is $280,000.

I'm a little concerned about that, because if you stick with a guideline of, okay, I can draw 4% off of my 401(k) balance and most likely not outlive my money, 4% of 280,000, it's about 1000 bucks a month. I mean, it helps, but it's not a lifestyle change here, I think, for most people.

Steve H.: That's kind of a hole in this study here because it only looked at 401(k)s, not all investments that people have. What about those that change jobs and did a rollover to an IRA, and now they're working with somebody...

Steve S.: Well, good point. Yeah.

Steve H.: ...that's helping them with those investments? So, that's a hole here in the study. Plus, the median balance was way lower. And the median prevents outliers from skewing the data. These are, you know, high earners that might have a couple million dollars in their 401(k).

Steve S.: So, median is half of all the people in the study were below this number, and the other half were higher.

Steve H.: Exactly.

Steve S.: So, if you've got one person with 10 million bucks in their 401(k), it doesn't blow the curve.

You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach, along with Steve Hruby. And we're talking about a Vanguard study that helps you understand where are you at? Are you above average or below average on what you've saved up on your 401(k)? So, you know, we're looking at, all right, there's some rules of thumb, supposedly, and one of the things that I've heard is, you should have saved about 10 times your annual salary in your 401(k) by the time you're ready to retire. So, if you make 80 grand, you should have 800 grand in your 401(k). What do you think? Is that something you can agree with?

Steve H.: This is an old Fidelity study. That's what that is. 10X at 67.

Steve S.: You know a little bit about that company.

Steve H.: I do. You know, I've never disclosed the big brokerage firm in town that I've worked for in the past, but, you know, don't ask me how I know, but they actually amended those figures to 12 times your ending income, at 67.

Steve S.: Have they? Okay.

Steve H.: Yeah. That was quite some time ago. It was 10 years ago or so. So, that figure went even higher.

Steve S.: But what I don't like about rules of thumb like that is, all right, does that mean the guy with the $400,000 mortgage at retirement needs to have the same amount of money as the person with zero debt?

Steve H.: Exactly. That's why I made my comment at the beginning of our segment today. These averages don't matter as much when you're working with a fiduciary financial planner that's gonna tailor your plan to your needs.

Steve S.: I don't think there's any rule of thumb that matters about how much you have in retirement. And by the way, good point about, okay, this really should be IRAs and 401(k)s, and joint investment accounts that we're looking at. Because those rules of thumb, I don't think any of them make any sense. I think you should throw them right out the window. But one I think everybody should keep in mind is, "All right, but how much do I need to live on?" Well, you can kind of plan on a 4% distribution rate from your combined investments in retirement and probably not outlive it. So, in other words, if you've got a million dollars between 401(k)s, IRAs, joint investment accounts, a million dollars, 4%, $40,000 a year. I think that's something to keep in mind.

Steve H.: So, if you're listening today, and you're comparing yourself to these averages, these numbers that we're sharing, what do you do to increase your balance if you don't like what you hear? So, don't stop when the markets take a hit. A lot of folks that I work with are like, "Hey, the markets are down. Should I stop contributing to my 401(k)?"

Steve S.: That's when you should double down.

Steve H.: Yeah. If things are on sale, then maybe now's a good time to buy.

Steve S.: You buy them now. Yeah.

Steve H.: Stay invested. Don't try to time the market. You know, on the flip side, if you're comfortable taking some risk, and you can stomach the ups and downs, knowing that the markets are like walking up the stairs while playing with a yo-yo, if you can stomach the risk, maybe increase it a little bit.

Steve S.: Well, this is long-term money.

Steve H.: Exactly.

Steve S.: It's your retirement account. It's not money that you're gonna need in the next year or so. So, if you're gonna take any extra risk in any type of account, usually it's in your retirement account...

Steve H.: Your long-term.

Steve S.: ...but stay within your risk tolerance. Stay within your comfort zone. Here's the Allworth advice. Make the most of your 401(k). For most people, it's the single largest investment account that you're gonna use to grow your money. Coming up next, we're talking about cash and credit, and how much you should have in your wallet. You're listening to "Simply Money" on 55KRC, THE Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach, along with Steve Hruby. You know, Hruby, there used to be a saying, "cash is king." How many people actually carry cash around in their wallets anymore?

Steve H.: Four in 10 Americans say...

Steve S.: Oh. You happen to have [crosstalk 00:35:21.596]

Steve H.: Yeah, you set me up for this one. I know the answer, Steve. Four in 10 Americans say none of their purchases in a typical week are paid for using cash. This is according to a 2022 survey from Pew Research Center.

Steve S.: I'm willing to guess that out of those 4 in 10, all 4 of them are under the age of 40. I mean, this is where me, as the old guy, I always keep cash. I always have cash in hand, just in case, small purchases, things like that. And I know both of my sons say, they're like, "Dad, what are you doing? You don't need that anymore."

Steve H.: You know, my wallet is sitting on the table next to me.

Steve S.: Yeah. You're broke.

Steve H.: I have cash.

Steve S.: You do?

Steve H.: Yeah. Oh, I got more than you in my wallet right now.

Steve S.: I doubt that.

Steve H.: Yeah, we'll compare it after the show. Honestly, there's less and less reasons to carry cash, but even plastic is being used less. Which is insane to me. So, what I mean by that is 59% of Americans say they increased their use of digital payment methods last year. So, you know, this is Zelle, Venmo, those types of things.

Steve S.: Venmo, Zelle, yeah. Do you use those?

Steve H.: I use my credit card as much as I possibly can. So, you're carrying around cash, I'm gonna be the old curmudgeon carrying around credit cards, like, why are we using all these electronic payments?

Steve S.: I use credit cards too. Yeah.

Steve H.: Yeah, I mean, I get points on it. I put as much as I can onto it. I've never paid interest on my credit card. And I have a savings account that gets beefed up every month from cash back.

Steve S.: But, you know, I get Venmo and Zelle. And one of these days, I'm gonna open up an account with one of them. Because it does make things easier, you know. You don't have to have $80 handy if you're buying something from a neighbor, or, you know, you have to reimburse your kid or something like that. [crosstalk 00:37:01.021]

Steve H.: My social circle involves younger individuals than you, and I've been forced to use Venmo in the past, so I've actually opened that. I have that, and it is handy if you're splitting the bill at something like, you know, a big meal.

Steve S.: I'm just worried that if I send cash through Venmo, my kid's gonna clean out my checking account. That's what I'm worried about. All right. So, how much cash do most people keep on hand?

Steve H.: So, average of about $67 is how much the average American carries, at this point [crosstalk 00:37:29.142].

Steve S.: And, you know, that number makes sense to me, because I usually have, you know, 20, 40, 50, 60 bucks in, you know, on hand at any point in time. [crosstalk 00:37:36.352]

Steve H.: Yeah. There's a recommendation that I saw out there that says maybe $30 to cover small transactions, like buying from a food cart, for example.

Steve S.: Yeah. You know, it's interesting, because I saw in this article that there was a guy, a professional poker player from New York, and he said he never keeps more than 150 bucks in his pocket, and his quote was, "You should never keep more in your pocket than you're willing to lose."

Steve H.: I like that.

Steve S.: In New York City, that's a real serious concern.

Steve H.: I really like that. Now, I'm one of these individuals... I recently cleaned out my wallet. I'm a recovering George Costanza wallet person. I literally carry my wallet in my front pocket because it used to be so thick it was giving me back problems.

Steve S.: Problem out of your back.

Steve H.: Yeah. And I've worked that out over the years. I'm very happy that I have a much thinner, more presentable wallet.

Steve S.: Well, good. And from the looks of it, you need to buy a new one, by the way.

Steve H.: Well, that's... Okay. Now, I get to tell a quick story, because...

Steve S.: Would you pay for a new wallet with cash? That's the [crosstalk 00:38:30.704]

Steve H.: My wife tried to get me a wallet several years ago, but this was a gift from my late grandfather, so I can't.

Steve S.: You can't.

Steve H.: No.

Steve S: Hey, thanks for listening. Tune in tomorrow. We're gonna talk about four ways to save on taxes. You've been listening to "Simply Money," presented by Allworth Financial on 55kKRC, THE Talk Station.