Steve Sprovach: Tonight, while banking fears are easing, but are we about to see gas prices rise again? You're listening and "Simply Money" presented by Allworth Financial. I'm Steve Sprovach along with Steve Hruby. OPEC just made a move. You might not have even seen this yet, but it seems that this might not... Good news for Wall Street, bad news for Main Street, a lot going on. Allworth Chief Investment Officer Andy Stout joins us as he does every Monday. Andy tells me about what Saudi Arabia and OPEC did and how it's gonna affect the average person.

Andy: What the cartel did was they basically removed one million barrels a day from the market. So they're cutting production by a little bit more than a million barrels a day, this has an immediate impact on lifting oil prices, which will in turn flow through to gas prices. So if you're at the gas station and the prices look a little bit higher than yesterday, you now know why.

Steve Sprovach: Well, and this isn't good news for inflation is it?

Andy: No, not at all. I mean, if you look at energy, in general, and crude oil and where it's been, it will certainly have effects. So crude oil, it got about 8%, higher this morning, last I looked we were about 6% higher, so a barrel of crude oil was trading around 80%. And these energy prices, they do flow into the inflation picture. And when you just look at the overall inflation picture, the biggest component is shelter. I mean, that's 35% of the weighting for the overall CPI. But when you look at energy, it comprises about 7% in total, so it's not a huge impact, but it has a flow-through effect to other areas. And that's where you might see it hit. And even just this morning, you heard St. Louis Fed President, James Bullard out there talking about the impact of oil on inflation and what it means for the Fed. The short answer is he doesn't know yet. So a lot of [crosstalk 00:02:12] when it comes to that.

Steve Sprovach: So shifting gears a little bit, easing banking fears seemed to boost the market last week. It appears for now that the Treasury and Federal Reserve successfully calm some of the panic around the banking sector. Do you think that the banking crisis is over?

Andy: I would say the chances of any major financial crisis large-scale banking crisis are pretty low. When you look at everything that's gone on, the emergency measures by the Federal Reserve by the Treasury where essentially they're backstopping all losses for banks. So when you look at it from that perspective, you know, the industry has been provided a lifeline by the Fed, and they're taking them up on it. Banks have borrowed from the Fed a tremendous amount over the past three weeks in order to shore up their balance sheet. The problem was/or is, I should say, is even though their banking crisis might be over, that lifeline, the shoring up of their balance sheets, what that's going to result in is less bank lending. And that means less consumer spending, consumer spending makes up 70% of the economy, that's gonna slow down the economy. On the flip side, though, that also will probably slow down inflation.

Steve Sprovach: Well, that's the whole point of what the Fed is trying to accomplish. I mean, nobody wanted a banking crisis, but they wanna slow down demand and that's what seems to be accomplished. Were you surprised that this expanded outside the U.S.? I mean, Credit Suisse is...I don't think a lot of Americans realize that's a 160-something-year-old bank that is a bedrock in Europe, one of the largest banks over there, and they fell completely apart. Did that catch you by surprise that expanded, you know, the concern over to Europe?

Andy: Well, not really. And here's why, at least on Credit Suisse. I mean, they're a train wreck, a slow-motion train wreck. I mean, there's scandal after scandal with...

Steve Sprovach: So you knew there were problems.

Andy: Yeah, I mean, their stock was already trading around $2 a share. It's not like it was the most shocking thing in the world. But when you look at what's happened with them, you can see why the U.S. banking crisis did absolutely push Credit Suisse over the edge. Over the past, you know, four years they were spying on outgoing executives, there was some corporate espionage. They had some big losses from some high-profile hedge funds because they didn't really do great due diligence on the riskiness involved in there. There was a huge data leak last year where 30,000 customers' information was revealed. But when we saw who those customers were, it was people involved in drug trafficking, money laundering, and torture.

Steve Sprovach: Oh, super.

Andy: Yeah, so if you actually looked at the history of Credit Suisse, there's a lot of stigma there. In the fourth quarter, they had...I believe it was a record amount of deposits being pulled out from there. So you had all these nerves already, rising nerves surrounding Credit Suisse and then you had this stuff going on over here in the U.S. And that just pushed anybody who might have had a higher than the uninsured deposit to pull money out. And essentially, you know, we ended up having to see UBS come in and buy out Credit Suisse in order to keep the contagion in check.

Steve Sprovach: You're listening and "Simply Money" on 55KRC. I'm Steve Sprovach, along with Steve Hruby. And if it's Monday, we must be talking to Andy Stout. Andy is the Chief Investment Officer of Allworth Financial right here in Cincinnati. 

Andy, we just wrapped up the first quarter and I think it caught a lot of people by surprise, with all the negative news out there. It actually was a pretty decent quarter for both stocks and bonds. Kind of summarize what we saw in the first three months of this year for me, if you don't mind.

Andy: Absolutely. So I won't take up month by month because it's starkly different every month.

Steve Sprovach: A little bit of a roller coaster. Yeah.

Andy: Yeah. January was really strong. February was really weak. March was decently strong. And when you put it all together, you have the S&P 500, which is your 500 largest companies here in the U.S., they were up 7.5% for the quarter. That's a really good number. The Dow meanwhile, it was up only about...not even 1%, it got to 0.9%. So your blue chips, they did struggle a little bit more than the S&P 500. So having a little bit broader exposure certainly was a good thing in the first quarter. And when you look across the pond, you look at international stocks, they also had a pretty good quarter overall, gaining about 7%. Now, you know, within the U.S., you know, I mentioned the Dow didn't do quite as good, but even there's different areas of the market, some do better than others. Small-cap stocks, for example, they were only up about 2.7%. So, you know, they were certainly a lagging factor.

And here's the really good news for investors who are really frustrated with how their bonds performed last year, which I totally get. Bonds did pretty well, a 3% quarter is a very strong quarter for bonds. And that's what the aggregate bond index did. And corporate bonds did a little bit better than treasuries, long-term bonds did a little bit better than short-term bonds. So again, I think it kind of like drives home the point not to put all your eggs in one basket, because if you were looking back at 2022 and thinking about, you know, where was the best place to invest? Or what index may have done really, really well? Well, the Dow Jones Industrial Average, you know, that stood up not too bad compared to everything else. It fell about 6.87% in that general area, which was better than the S&P 500, which was down 18%. So a big spread there where the blue chips did better. But then it flips around this quarter, and you have the Dow Jones barely up to a percent or not even to a percent and the S&P about 7.5%. So not putting all your eggs in one basket. I know it's an overused financial cliché.

Steve Sprovach: But it works.

Andy: But it works. That's right, and you got to stick to it because what happens, Steve, is asset classes go in and out of style on a very regular basis. You never know which one is going to be the best performer or the worst performer. I mean, you can tilt in certain ways, but having good diversification across the board really helps to minimize that overall volatility. And that allows you to stay invested, that allows you to sleep at night, that allows you to have financial peace of mind.

Steve Sprovach: As much as I like hearing this good news, Andy, you know, I have a lot of folks that I work with that are asking me, "Are the markets reacting too soon? Or do you think that the Fed has maybe stuck its landing?"

Andy: Oh, I don't think the Fed stuck any landing.

Steve Sprovach: I mean, there's still a chance of a recession right?

Andy: Yeah, there is. I mean, if you look at just what's going on out there our leading economic indicators, you know, they do point to a slowdown. There's a lot of economists who think there will be a recession in the second half of this year and one of the main reasons we talked about the bank side of the world, they are pulling back on lending, that will slow down economic growth. And you will start to see the job market soften a little bit more than it has. Where it becomes an issue is, what does that mean for the consumer, which their spending makes up 70% of the economy? I was looking at some research over the weekend and 60% of your lower income...the lowest income houses, the bottom 60%, they only have access savings of one to three months.

So, in other words, they wouldn't really be able to weather any sort of economic storm too well. And that's where, you know, when you have this weakness that could possibly happen in the not-too-distant future, you look at where the points of pain might be, and that one really does stick out. And I think that could be why, you know, if it does happen, that we ultimately do slip into a recession. It wouldn't shock me.

Steve Sprovach: Quickly, Andy, what do we have coming up this week? What should we be expecting?

Andy: Oh, this week's a big week. Already this morning, interestingly, we got a survey update on the manufacturing sector, and it came in weaker than expected. That's a good thing because what that means is that it puts those Fed rate hikes off the table or pulls the likelihood down. And people wanna see the end to the rate hikes because that is an equity market positive. So we did have that. Also, we will get an update on the services sector. Whether it's expanding or contracting, it's probably expanding. Because if you look at the overall economy, we're tracking, based on the data released so far, around 3.2% GDP for the first quarter, which is really, really good. But what's going to be the most important thing to watch is going to be the job report, the job market report on Friday, even though the markets closed, we're still going to get this update. The economists believe that employers added about 240,000 jobs in March and that the unemployment rate remained at 3.6%. We'll also be watching very closely average hourly earnings, looking at that wage inflation because that also has a big implication for the Fed and what they do with the rate hikes.

Steve Sprovach: Great perspective as always from Andy Stout chief investment officer of Allworth Financial. Thanks, Andy. Here's the Allworth advice, the stock market, yup, it's performing better than it did last year, which is why you wanna stay invested during tough times. It allows the investments to ride the upswing. Coming up next, when will the government not have enough money to pay Social Security benefits in full? The new timeline is next. 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, we wanna give you a heads up about an opportunity to get your questions answered about Social Security. We have virtual workshops called the Rule of Five. They are on April 11th and April 13th at noon, and on April 15th at 10:00 am. Just go to allworthfinancial.com, to sign up, it's totally free. So Hruby, speaking of Social Security, what's the question you and I get asked every day? When should I take it?

Steve Hruby: Yeah. When should I take it?

Steve Sprovach: When should I take it?

Steve Hruby: When will it run out?

Steve Sprovach: Exactly. Well, yeah, we've got good news and bad on that.

Steve Hruby: That one's coming up more.

Steve Sprovach: Yeah, the answer in recent years has been a little bit more complicated. Because whether the trust fund that pays out the benefits will run out of money, it's not the question of if, it's a question of when and we've got a new timeline on that.

Steve Hruby: I knew you were gonna kick it to me for the bad news, Steve. The new timeline, Social Security retirement trust fund is projected to run dry in 2033, which is one year earlier than previously estimated.

Steve Sprovach: So I hope everybody loved their pay raise. I mean, everybody that was drawing Social Security was excited about it. I'm like, "I get why you're excited. But there's still the same amount of money going into it. More money out, same money in means it's gonna run out sooner. I mean, it's not rocket science."

Steve Hruby: Common sense. Yeah, what would happened is they lowered their GDP estimates as well as labor productivity. And, of course, that's because of updated figures on inflation and U.S. economic output. So, yeah, this is gonna create some problems.

Steve Sprovach: And, you know, I don't want...there's a big misconception that, "Wait a second, you mean it's gonna dry up? I don't get a paycheck?" No.

Steve Hruby: Yes, that is not correct.

Steve Sprovach: No, that's not the problem. The problem is that the excess funds, the so-called trust fund is gonna run out. And from that point, the people paying in, is the only money coming in, there's no excess to draw from, from a trust fund. And the estimate is, you'll still get about 75% of your benefit if Congress does nothing.

Steve Hruby: I'm gonna give an exact figure on this one, Steve because it's on the news, 77%.

Steve Sprovach: Okay, that makes me feel not better.

Steve Hruby: Wonderful. No?

Steve Sprovach: And, you know, we've got to take a hard look at some of the other issues going on because, what is the Fed battling right now? They're battling inflation, okay? They're trying to reduce demand. Bad news is good news and that means more people out of work means, okay, that's good for bringing inflation down, but that's less money being paid into Social Security. I mean, all of these things that the Fed wants a slowdown in the economy, a possible recession, hopefully not a serious one, that's gonna reduce gross domestic product. That's gonna reduce income coming into the system. You know, it's not gonna get a lot better anytime soon.

Steve Hruby: Not without action. But, you know, I do need to share some other good news, some facts that came out in this report.

Steve Sprovach: Good news.

Steve Hruby: Yeah, good news.

Steve Sprovach: Okay. All right.

Steve Hruby: It projects that the trust fund partly covers Medicare Part A, your hospital benefit.

Steve Sprovach: That's the hospital side. Yeah.

Steve Hruby: Yes. Well, the way it's worded, it's still gonna run out in 2031, but that's three years later than the date that the trustees used last year. So always trying to find the positive here, Steve.

Steve Sprovach: I know. And here's what worries me is, we've got a national debt problem going on where, you know, if Congress and the president don't put their heads together and come up with a budget plan, this country is out of money by June, that's three months away. And they're not apparently worried about it because they're not talking to each other. Here's a problem with Social Security that affects a lot of people and that's 10 years away, you think they're gonna start working on that now? No, they might not be working on it with three months remaining because that's the way this country's governing bodies seem to be. If it's screaming at you so loud that you have to address it, you will. But this is politically just not something that that they wanna get on right away.

You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach along with Steve Hruby, and we're talking about Social Security and how it looks like it's gonna run out of money one year earlier than projected just one year ago.

Steve Hruby: Yeah. Obviously, the potential impact here is scary. A 23% cut is...that can represent a major hardship for all but the most affluent people. That's the bottom line here. And let's talk about why that's happening a little bit. You talked about surplus versus, you know, them taking out more than they bring in. And when Social Security started, there was 30 workers for every single 1 retiree, 30 to 1 ratio. Now [crosstalk 00:17:07].

Steve Sprovach: And you know what else... But before we go any further, what else was going on is you were able to draw at age 65. You know what the average lifespan of an American was when Social Security came out?

Steve Hruby: A little bit lower than it is now.

Steve Sprovach: Sixty-five. Yeah, exactly. So, in other words, there were very few people that had to draw, and 40 people paying in for every retiree, not the same way today, now it's different

Steve Hruby: Yeah, three and a half workers for every one retiree. So this created a surplus in earlier years, not the case anymore. And 2021, the trust fund paid out more than it took in for the very first time.

Steve Sprovach: But you know what the problem is? Me. The problem is me.

Steve Hruby: It is. Thanks a lot, Steve.

Steve Sprovach: Because I'm in my 60s, I'm on the tail end of that baby boomer generation. And you know, it's like the snake that swallowed the pig. I mean, there are a lot of baby boomers that are heading into or already are in retirement. It's, you know, and I brought this up before it's, you know, I'm one of four. That was a small family in my neighborhood, my wife was one of nine, you don't see that going on anymore. So you've got fewer people coming through, and I guess call it the pipeline, fewer people coming through the pipeline, paying for more and more retirees who are living longer and longer. Mortality, the average age of death in this country is not 65 anymore it's in the low 80s. You know, so you've got people that are drawing in a lot of cases from age 62, maybe as long as 82 for 20 years, and you've got fewer people paying in. The problem solves itself in another generation. But today, no, it's gonna probably get a little worse before it gets better.

Steve Hruby: Now, we do wanna make it clear that it's very unlikely that Congress is gonna slash any benefits for current individuals collecting Social Security.

Steve Sprovach: They've never done that, too many registered voters.

Steve Hruby: Exactly. Or those within 10...even within 10 years of retirement.

Steve Sprovach: Yeah, they phased in last time.

Steve Hruby: What are they gonna do to fix it? So obviously, a lot of different ways they can do this. Some combination of kicking the retirement age up, maybe removing early retirement, reducing benefits. Means testing is one I've heard talked about Steve, that's really [crosstalk 00:19:05].

Steve Sprovach: I don't like that.

Steve Hruby: Oh, neither do I. Nobody...

Steve Sprovach: I don't like that at all.

Steve Hruby: That's the thing. Nobody's gonna be happy about what choices need to be made if it's taxes, less benefits.

Steve Sprovach: You know where... I'll tell you, one thing they can do and you'll get almost zero pushback right now there's a cap on your earnings that you're gonna be taxed on for Social Security. If you make more than $160,000, I know there aren't a lot of people that make more than that, but you don't pay anything in the Social Security over $160,000. Yeah, that first 160. Yep, that goes to Social Security. Why does it stop? I think just lifting and eliminating that cap to me, that's a gimme.

Steve Hruby: Yeah, it is.

Steve Sprovach: I don't know. We'll see. They've got to get together. They've got to do something. And they've got to do it sooner than later. Here's the Allworth advice, maybe the politicians should pay attention to this and start taking care of Social Security 10 years early instead of the last month.

Coming up next, Amy, and our financial fitness expert are in next to discuss what you can do to make sure your children and grandchildren are getting the money lessons that they need that are the keys to their financial success. You're listening to "Simply Money" on 55KRC, the talk station.

Amy: You're listening to simply money. I'm Amy Wagner along with Steve Sprovach. I don't know about you but if you've got children or grandchildren who are teenagers, some of them just get it when it comes to money, a lot of them do not. As someone who has four teenagers in her home. This is a topic that is near and dear to my heart, which is why I'm so glad that Al Riddick from Game Time Budgeting is joining us tonight. He's written a book about raising "Smart Money Teens." So he's got some great advice for us.

Al: Yes. Well, ma'am Amy. Well, thank you so much for allowing me to be on the show again. And I appreciate you mentioning my book "Money Smart Teens." First of all, I have to tell the audience, as I got older, I began to wonder, why didn't I learn more about money as a child. So I answered the question myself by saying, "You know what, what do I wish I had learned about money before I became an adult?" So I wrote my book "Money Smart Teens" to answer that question, and I broke the lessons down into four different sections. First of all, let's teach kids about just understanding what money is and how it flows through the economy, then let's talk about making money, saving money, and spending money. So when you think about the average teenager, to me, if they can master those four different subject topic areas, it's going to help them have a better relationship with money down the road.

Steve Sprovach: Well, AI, am one of those people that grew up in a house like that, there were no money lessons growing up. And I think, in hindsight, it's because when your parents are broke, it's a taboo subject, it's a subject to stress. So if you're a kid that grew up in a house like I did, where do you start? What's the first area that you wanna concentrate on?

Al: So to me, if you grew up in a household where money is not discussed and, Steve, you and I probably grew up in a similar fashion, you know. But to me, one of the firsts thing I would want to know is, where does money come from? Now, that's a very simple question, Steve. So most young people will say money comes from work. But then if you dig a little bit deeper, you start to learn that, guess what, we have this organization that actually prints money, or makes money, you know, the Bureau of Engraving and Printing or the U.S. Mint, right, that makes the coin.

Now, obviously, paper money isn't used as much anymore. But to me, it's still always good to understand where money comes from. And then how does money go from being manufactured to actually existing inside of a banking institution or credit union? Those types of questions, they kind of always eluded me, or the answers to those questions growing up. And that's another reason that I wrote my book. But for that average teen, you definitely wanna know where money comes from. But then I think it's also good to know what expenses does my parents, or do my parents incur that allow me to live the life I live? I think that's a very cool question to ask your parents.

Amy: And Al, I'm just thinking about in my family, three of our kids have their own jobs, they're getting paychecks for the first time. So what do you say to teenagers who've never had, like, probably a steady income, and now there's some money coming in? How do you make sure that they understand how to think about that paycheck responsibly?

Al: So I think one of the best questions you could ask that teen, let's sit down and talk about your life and some of the goals that you have. And let's break that down into short-term goals as well as long-term goals. Let's just be real, most young people, obviously, they wanna hang out with their friends, you know, they wanna dress a certain way, or maybe buy the latest tech gadgets

Steve Sprovach: Long-term is tomorrow, right?

Amy: Tuesday.

Al: But, you know, I think it's cool when you get them to understand that, you know, if you want that latest new cellphone, and let's just say it costs, I don't know, 800 bucks, how many hours of sweat equity do you have to exert on your job in order to be able to buy that cellphone? So if you make it, I don't know, 10 or 15 bucks an hour, you know, there's a lot of life energy just to be able to get the latest tech gadget. And I think by doing that, young people will start to look at their life in a different way and realize that maybe some of the things you want it actually costs you too much life energy in order to get it.

Amy: Okay. And so, Al, beyond just those paychecks, right? I mean, this is the age when a lot of kids are starting to drive, cars, insurance, gas, what's a good way for families to start thinking through those things?

Al: So this is just my opinion, Amy, and being that you have 4 teens, of course, you can elaborate on it, right? What I think, like, when that child starts to drive, now, obviously, not everywhere they go will be a necessity, right, some of those things will just be for fun. What if you told the child, "You know what, every now and then maybe you're gonna have to fill up the tank." Because you need them to feel what it feels like for an adult or even them as a teen to have expenses. You know, nothing in life is free, as you both know, but I think that's a good opportunity to educate that child about the expense of having a car. Or you could say, "You know what, just by you having the ability to drive, our insurance premiums went up by X amount. So what if you kick in maybe 10%, or 15%, or 20% of the cost because, again, it's you that wants to drive." You know, so that could be another way to teach them about, like, the total cost of ownership, and some of the costs that they might not be thinking about when they get behind the wheel.

Steve Sprovach: It's interesting you bring that up because it reminds me of a story. You know, my older son was one of the youngest in his grade, so he was watching all of his buddies get new cars, and in some cases, literally brand new cars from their parents.

Amy: Wow.

Steve Sprovach: Yeah, and so he...and he said, "Dad..." and this is literally 20 years ago. "Hey, Dad, I turn 16 Saturday, what kind of car am I getting?" And immediately I said, "I don't know how much you got in your savings account?" And his jaw dropped. But we had both of our boys pay for their own cars. And you know what, they never wrecked them. And their buddies all had accidents and everything else because they had their own money tied up. That seems to be a lesson that has not been passed from generation to generation any more of your kids really need to pay for their own stuff. Or, I mean, are you finding that also?

Al: Steve, I love the example that you just gave and I'm gonna take it a step further. Yeah, I love the fact that your kids pay for their own cars. But what if you had sat down with them, and I'm not saying you didn't, but you know, let's just say they financed a little bit of the car, right? Or you may have borrowed some money to buy the car. I'm just speaking hypothetically. How cool would it have been if you sat down with them and said, "Well, this is the annual percentage rate, this is the monthly payment, and this is the total cost of the car by the time you finish paying off the loan." I think just by letting them even hear the word amortization schedule, you know, that would [crosstalk 00:27:24] their curiosity, you know.

Steve Sprovach: I love it.

Amy: It's all eye-opening, right?

Al: I know, right? Not only might they end up financing the car, you know, that might happen where they wanna finance their home or even a college education. But all of those are learning opportunities that sometimes we might not take advantage of.

Steve Sprovach: Well, you're talking about communication and communication about money between parents and children. And that's everything communication solves 99% of the issues here.

Al: Definitely, and you must have been talking to my wife, Steve, because that's something that I need to do a better job of, you know. Yeah, but...

Steve Sprovach: We all do.

Al: ...on a serious note, you know, I think communication is the key. Anytime you have conflict or you wanna learn something, you know, it takes communication in order to move forward in that particular space in your life. So when it comes to money, I'm one of those people. I believe that it's almost impossible to communicate too much because money is something that we deal with each and every day of our lives. When it comes to young people I think the more that they are exposed to the right mindset, the right behaviors, and the right systems with money. It should allow their lives to end up being a lot better and a lot more financially fruitful than ours ever could be.

Amy: There are so many important conversations that you need to be having with your kids their entire lives, but certainly when they're teenagers. And amortization is one of the most important as far as the trajectory of the rest of their lives. Great advice from Al Riddick, of course, from Game Time Budgeting, you're listening to "Simply Money" here on 55KRC, the talk station.

Steve Sprovach: You're listening to "Simply Money" presented by Allworth Financial, I'm Steve Sprovach along with Steve Hruby. Do you have 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 listen to them and we might even put you on the air.

Straight ahead the red flags to look for when you're booking a vacation rental. So, Hruby, we're wired to focus on the here and now and I think that's a healthy thing. I catch myself worrying all the time about the future. Not today, but tomorrow, the day after that, and so on. But when it comes to your money protecting your future is kind of important.

Steve Hruby: Yeah, I mean, that's what we help individuals do, individuals and families do for a living. That's how we make our living. So first thing you need to do is have a vision. Now, it seems like a no-brainer, but what does retirement actually mean to you? How will you spend your days? What are your needs versus your wants?

Steve Sprovach: Yeah, it's not just about I don't have to work anymore, I get to sleep in late. And I can tell you from personal experience.

Steve Hruby: Rubbing it in.

Steve Sprovach: Well, no, I'm closer to retirement than I am at the start of my career, and it's not a bad idea to talk about this with your spouse. Because I learned real quick that my idea of living in retirement might not be hers. A great example. So my wife is from Minnesota. Great family up there. I love going up there to visit her family. And I just said, "Hey, is that someplace she would wanna live in retirement?" She said, "No, it's cold up there." Well, I'm with her on that. But you know, I wanted to make sure, okay, I don't wanna assume she does or doesn't wanna live there. That's called communication. Not a bad thing to do when you're talking about retirement.

Steve Hruby: No, no, not at all. Not at all. We also need to put a realistic price tag on your goals. What will these goals cost you? How might inflation and taxes affect these goals depending on where you live? You're bringing that up.

Steve Sprovach: Well, and I hear people every once in a while, I don't know why this number is still out there. So I guess I just need 80% of my current income. Is that what I should know...? No. Where does that come from? You know, I have found there are a fair number of people that spend more in retirement than they did when they were working. That's not unusual.

Steve Hruby: I talk about it with folks that I work with. When you hit retirement, oftentimes you hit the ground running, it's your go-go years. You get a little bit older, you slow down, slow-go years, you're knocking on the door to, you know, end of plan as we would call them, those are your no-go years. Oftentimes you have greater expenses right into retirement.

Steve Sprovach: Well, you didn't work this hard for this many years saving money. And you know, money's going out in all different places but I kind of put it in the 401k because I need that for retirement. You didn't do all that. So you can sit at home and watch "Oprah" in retirement. I mean, you wanna enjoy yourself, especially in the years where your health, hopefully, is pretty decent, because you don't tend to get healthier as you get into your 80s' and 90s'.

Steve Hruby: Exactly.

Steve Sprovach: You know, so my opinion is if you don't spend more money than you expect in the first two years of retirement, you're doing it wrong.

Steve Hruby: Yeah, I agree wholeheartedly.

Steve Sprovach: It's not the cutback years.

Steve Hruby: Yeah, absolutely. So what about creating... How are you going to replace your paycheck in retirement?

Steve Sprovach: Exactly.

Steve Hruby: Creating an income plan is important too because once we understand our costs, we need to know how we're gonna pay for them. So Social Security, are you fortunate enough to have a pension? How will your investments create income?

Steve Sprovach: A question I've got for a lot of people is have you gone on to ssa.gov, which is the Social Security website, to get your current benefits? And I'll bet you it's probably about 75%, "No, I haven't done that. I just look at the report when they mail it to me," they don't do that anymore.

Steve Hruby: Yeah, you gotta log in. Also, check your earnings records.

Steve Sprovach: There are mistakes.

Steve Hruby: Have you ever done that? I've heard of people having mistakes on that and there's a number you can call to get it fixed. If your earnings record is inaccurate, that means, your benefits that you might get paid for through Social Security are gonna be off too.

Steve Sprovach: You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach, along with Steve Hruby, and we're talking about not just how much money you need to live in retirement, but where the money comes from.

So I think that's a great point, Steve. Okay, let's have a rough idea of your spending. And by spending, I mean, this is not the time you cut back. This is not the time you say, "Well, I really don't need cable." If you're watching cable now and you enjoy it, you should want cable in retirement, you know. So the only costs I think that are gonna be cut back, maybe a little commuting expense. Maybe you're not buying as many clothes because you don't have to get dressed up to go to work or anything like that. But that's, I mean, what else is there? You're gonna be spending every other dime that you've been spending, and now you've got to start budgeting for travel and things that you wanna do.

Steve Hruby: That's where some of...you brought it up earlier that 80% figure a lot of that comes from taking out from what you're no longer saving towards retirement.

Steve Sprovach: Right, like your 401k. Yeah.

Steve Hruby: Exactly. But you are gonna need to do something with your time when you transition into retirement. How are you gonna spend your time? Let's talk about asset allocation a little bit. We could talk about this all day, but it's important to make sure that you have that diversified balanced portfolio, kind of find a sweet spot for the level of risk that you're comfortable taking, how much you need to take to meet your financial goals, and your ability to take risk based on your financial situation.

Steve Sprovach: I know more than a couple of people that are 80%, 100% stock for that matter while they're working. Is that appropriate in retirement? I'm not sure.

Steve Hruby: Not unless you have two years of cash sitting on the sidelines. But I think there's probably better ways to handle it with a more diversified approach across the board. Because you can't just sit in too much cash because that's a guaranteed way to lose purchasing power in your dollars especially when we've had inflation.

Steve Sprovach: That's where inflation kills you. Yeah, exactly. So what do you do? The bottom line is, okay, let's take a look at how much you need to spend realistically without cutting costs. Where does the money come from? Social Security and distribution from your investments. And watch out for taxes because a lot of people forget about that side. Make sure you account for taxes and maybe sit down with a financial pro, a good financial advisor that can help you through all this. Here's the Allworth advice, if you want financial freedom later in life, we advise you protect that freedom now.

Coming up next, how to keep from getting scammed booking a vacation rental, 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 a lot of families, retirees, they're not staying in hotels necessarily when they go away. And they're taking a hard look at rental apartments or rental homes and going on sites like Airbnb, VRBO. But there's a problem out there that's starting to become a big problem. Do you know what you're getting when you go on those sites?

Steve Hruby: Yeah, the scary thing here is that people are getting scammed. You can face fraud in the form of fake listings or attempts to move you off-site as a way to scam you. This is something that you need to be careful of if you're not booking a hotel.

Steve Sprovach: Yeah, I was shocked when I was reading this. I just assumed that, "Okay, these are pictures of the place." But it's not always the case sometimes they use stock pictures that have nothing to do with the property that they're renting.

Steve Hruby: Yeah, Airbnb and VRBO, they bring these listings together. Obviously, there's ways that they can try to reduce scams, but some of these are still going to fall through the cracks.

Steve Sprovach: So what do you do?

Steve Hruby: Be careful, be diligent, make sure that you're doing some research. You know, the due diligence is important. There's even, you know, talk of taking pictures, the pictures that they have on these listings, and doing a reverse Google image search to see if those pictures have been used somewhere else.

Steve Sprovach: I wouldn't know how to do that personally

Steve Hruby: Ask a grandchild.

Steve Sprovach: Yeah, exactly.

Steve Hruby: I think it's a good idea.

Steve Sprovach: But you know, that's great advice because I've done this and, okay, they don't give you the exact address till after you book. Well, I think rule number one is, I'm not gonna use Venmo or Zelle, I'm gonna use a credit card, if I'm booking any kind of place, even if it's, you know, a Hilton or something like that. I always use that because you got some recourse if it turns out not to be what it's presented as. And I think if you've got a renter, if you've got a landlord that says, "Oh, no, I only take Venmo, I only take Zelle."

Steve Hruby: Too bad, next.

Steve Sprovach: That's a big red flag.

Steve Hruby: Oh, yeah. If you use a credit card, you're letting your bank take on the risk, that's the key here. The same thing with a cancellation policy, make sure that there is some kind of cancellation policy with what you're booking in case you need to make a change. And if you're using that credit card, that's gonna put that risk back onto your bank.

Steve Sprovach: So even though they don't give you an exact address, you can usually call it down to, you know, an intersection. It's not too hard. And then if you go on Google, Google Maps and it's got a pool advertised, for instance, look at all the homes with pools, and you're probably gonna be able to match up the pictures, if they're legitimate, with a Google Street View. And if you find that, then you can start backing out and taking a look at, are there restaurants around, does it look like a halfway-decent neighborhood? I've done this and some of them, yeah, they're in a nice neighborhood. Some of them they're not. So do your research before you sign on the dotted line.

Hey, thanks for listening. Tune in tomorrow. We're gonna talk about how to lower your chances of getting audited by the IRS. You've been listening to "Simply Money" presented by Allworth Financial on 55KRC, the talk station.