Amy: Tonight, are you paying attention to the economic numbers? Because the next couple of weeks could hold the key to where inflation is ultimately heading. You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. Steve, this is the time of the year when usually, like, between Thanksgiving and Christmas, all you're thinking about is shopping and decorating. You don't have think about the markets and economic data. Not so much with this year, right?

Steve: You're assuming I don't think about the market and business and finance 24/7. Come on. It's what I do. But, yeah. It's a time of year you want just relax a little bit, and enjoy this time of year. And we got a lot going on, Amy. We got a lot going on.

Amy: Yeah. No relaxing, no downshifting this year. So, that's why joining us tonight of course, is Allworth's Chief Investment Officer, Andy Stout, managing billions of dollars from right here in Cincinnati. So you know he's not downshifting, he's paying close attention to the markets. Let's talk about where we are right now, because, Andy, yeah, I think for a lot of people, this is a time of year when maybe you wouldn't pay such close attention to these things. But the Federal Reserve is on course to hike rates again this month, or next month, I guess, and a lot of people are paying attention to what the data is telling them.

Andy: Yeah. And you look at what the data is telling us, Amy, and is that the Fed is definitely going to hike. That's pretty much a done deal. The question is how much they'll hike when they convene on December 14th. Most likely it'll be half a point, which is a little slower than what we saw in the prior four meetings where they hiked by a staggering three-quarters of a point, lifting the Fed funds rate, which is the interest rate our central bank controls to 3.75% to 4% range. So, looking at a little bit of smaller, and that's pretty much done deal. The real question, Amy and Steve, is what happens in 2023? That's where the uncertainty comes up, because there's a lot of unknowable unknowns as to how the economy and market will progress, and what's going to affect us then. So, a lot to pay attention to.

Steve: Well, and I think that's what surprises everybody is, you know, you have economic news come out and market may be up or down a little bit, but when the Fed talks, when the Fed gives any indication of what they're going to do, it'll drive the market 400, 500, 600 points. And, you know, it's nice to see stocks make a move in the last couple of months, Andy. I think October 1st is when we saw this latest rally. But, you know, we saw this movie back in mid-June when stocks, they were up 17% because the Fed was expected to pivot, to stop raising rates and eventually reduce rates ideally sometime in 2023. Well, that didn't happen, because we lost that 17% gain and found a new low, and here we are doing it again. Is this time different? Is this time for real where stocks may have reached bottom and are just on their way continuing back up to where they were going in the last year?

Andy: Well, predicting the stock market is obviously, as you know...

Steve: I thought I was going to get you to do that. Come on, Andy.

Amy: Come on. You've got a crystal ball.

Andy: I could tell it was a loaded question right from the beginning.

Steve: Who, me? I'm deeply offended.

Andy: From a seasonality perspective though, this is the best time of the year, that mid-October to basically mid-January. Historically, stocks have performed quite well during that time period. Obviously, history doesn't always repeat itself and there's no guarantee for anything like that, and we'll never try to predict what will happen because we know in the short run, anything can happen. In the long run, history has proven time and time again that stocks and bonds have trended higher over time, and it's been worthwhile and rewarding, and beneficial to have stayed invested.

But now, you know, to your point, you know, have we seen this before? Yes, we have seen this before earlier this year when got back up to just about these levels where we're at right now. And then as you stated, you know, the market, you know, dropped back lower. The question is, will that happen again? Certainly a lot of unknowns and a lot will depend on the Fed and whether or not they pivot, and probably more importantly, you know, if they do pivot, if they do start to slow it down, what does that mean for the economy, right? Does that mean that we're able to slow the economy down enough to avoid a recession, or if there is a recession, have it be mild? Or has the Fed gone so overboard already that a hard landing or a deep recession is in the carts?

Amy: You're listening to "Simply Money" here on 55KRC as we're joined by Andy Stout, our Chief Investment Officer, making sense of what's going to happen maybe in the coming weeks in the markets and the economy. You know, I think what the Federal Reserve if asked would say is like, "Man, we can only control what we can control, right?" You've got Russia invading Ukraine earlier this year, but now we've got China, and this kind of zero-tolerance policy to COVID, and the impact that's having. And I'm just wondering, as we've kind of been saying, "Well, this supply chain issue is supposed to work its way out by then." Now we have kind of a whole new set of issues coming out of China. How do you see that playing out?

Andy: Well, China is expected to, you know, relax their zero... It's called their zero-COVID policy, and, you know, President Xi Jinping and China has been sticking to that. And it does appear that probably what a lot of economists are thinking maybe around the second quarter of next year, there will be a pretty substantial pivot by then from China's perspective on this zero-COVID, because there's a lot of unrest, right? I mean, you're seeing it in the news, a lot of protests, probably more protests than China's seen in a very long time. It's affecting companies here in the U.S.

You know, you've probably heard about one of Apple's major suppliers, Foxconn, and with its factory in China essentially being, you know, shut down or severely restricted resulting in likely a 6 million iPhone pro-deficit in terms of what was expected for the quarter because they can't get what's needed from the Foxconn factory. So, these are all things that you're seeing in the news. But, you know, there is some good recent information related to this, because where China's... They call it their iPhone city, they're starting to relax some COVID control starting on November 30th.

So, this is probably a good thing from, you know, Apple's perspective and some other manufacturers. So, a little bit of good news there, but there's still a long way to go with the zero-COVID because it does have a substantial impact on the global economy, global demand, global supply chains. So, I think it would be a welcomed shift away from zero-COVID if China does follow through with this.

Steve: Well, I mean, that's the whole basis of inflation is, you know, the more supply you can produce, the... You know, if the demand stays the same, that's going to bring prices down. And that's been one of the problems, hasn't it been? Not just with China, but across the world where production is not at its normal levels, shipping is not at its normal levels. Are you seeing supply chains start to ease a little bit?

Andy: Oh, absolutely. It was reported over the weekend in the Wall Street Journal I was reading, that there are now no ships off the coast of California. You remember how there was hundreds of ships waiting to unload, and we're down to zero.

Amy: That's amazing.

Andy: So that, essentially, you know, been resolved. And there's some other data that I like to follow. There's what we call these purchasing manager indexes or basically managers, purchasing managers are surveyed, asked about their situation, what they're seeing in a current basis, and they're asked about order backlogs, or asked about inventory levels. And those two things specifically are telling in terms of the supply chain issues, and we're seeing substantial improvement there as well. So, those have actually gone from a restrictive territory to more of a supportive territory. So, that's great news from a supply chain perspective.

But as, you know, we've been talking, there's still the issue of China going out there with their zero-COVID. And all that really does, Steve and Amy, is to encourage, and you're seeing this already, encourage these companies to onshore, I mean, bring back to the U.S., or diversify away from China. I mean, Apple is looking to add some factories in India right now. So, for this very, very reason.

Amy: You know, Andy, I've been doing this show for years now, and I know that normally this time of year we're talking about kind of year-end tax planning and that kind of thing. We're not necessarily digging into job market data, inflation data yet. As we know, this year has been anything but normal. You've got the Fed members giving like 10 speeches this week. What are you keeping a close eye on? And do you think this year kind of feels different, because there's just so much attention on the economy and data that we don't normally... I know you look at this stuff all the time, but most people aren't necessarily into the details of all of this day in and day out like we are this year.

Andy: Yeah. And one thing that really sticks out right now, and probably more so compared to quite some time, is that good news is bad news and bad news is good news to an extent. So, the markets had a pretty nice run-up, right, over the past couple of months. I know we had a, you know, pretty sizable hiccup up yesterday. But in general, the market strength is really because of a lot of recent economic data, pointing to a slowing economy. A slowing economy isn't necessarily a good thing, right? I mean, because the economy is slowing.

However, the Fed, if it has to hike aggressively to fight inflation, that's going to slow the economy down even more in the future. So, in other words, why we're seeing some strength right now in the face of a slowing economy, is that the market's thinking like this, it's better to have a little less economic upside now to reduce the chance of a more considerable downside later.

Steve: Well, and I'm reading a lot of articles, especially on MarketWatch, which I think is a good consolidator of all these different viewpoints. But there's some consistency of, "Hey, we're getting into a recession." There's bad news on the horizon. Isn't that the whole point of what the Fed was trying to do? Not necessarily put us into a recession, but slow the economy down. I mean, this to me is the expected outcome of the Fed moves. Are you seeing it any differently?

Andy: No, absolutely. I mean, they're trying to achieve that soft landing, right, which is slow the economy down enough to bring down demand. Because as you said at the beginning, Steve, and you were talking about inflation being a supply and demand. You know, inflation's a characteristic of that. You know, what the Fed wants to do is bring down demand. So you raise rates to make the cost of borrowing more expensive. You know, people spend less, that's lower demand, that's lower spending. That should in theory bring down prices of things, and that also means less spending slows down the economy.

Now, the Fed doesn't want to slow it down so much that they push us into recession. But that's a tough thing to do, because all these rate hikes, it's unknown as to what the actual impact is going to be, because one thing is that they happen with a lag, or the economic impact happens with a lag. So, what they did six, nine months ago, that's just now really affecting the economy. What they're doing now probably won't affect the economy too much until, you know, June of next year, somewhere in that range. So the Fed doesn't even have any strong idea of what the economic impact will ultimately be from what they're doing. So, it's a very inexact science. I mean, certainly they're doing their best and doing what they think is the right thing. There's no question about that. However, they don't know if they're doing the right thing, and that's what the unknown is.

Amy: Yeah. Quite the tight row pact, right, that they're having to try to pull off right now. I would not want to be the one up there. I'm glad it's Jerome Powell, not me. Here's the Allworth advice, it's worth keeping an eye on the news. Of course, the next couple of weeks we all are. Just be careful not to make any major financial moves based on the headlines. Focus on your holiday shopping list, or your outdoor decorations instead. Coming up next, a look at how Black Friday and Cyber Monday sales went, and whether those can predict the future when it comes to the economy. You're listening to "Simply Money" here on 55KRC, The Talk Station.

You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. If you can't listen to our show every night, well, subscribe and get our daily podcast. Listen to it on your way into work the next morning, when you're at the gym, and if you've got friends who could just use maybe a little bit of money advice, spread the word to them. You just search "Simply Money" on the iHeart app or wherever you turn to to get your podcast. Coming up at 6:43, a fantastic way to save for college that you can do in addition to a 529 plan. Another day, some more bad headlines for crypto. Man, it just does not end.

Steve: It gets better and better, doesn't it?

Amy: You know, several weeks ago, you know, kind of it was posed, it was kind of the thought put out there of like, "Is this kind of the beginning of the end for crypto?" And I remember being like, "No. You know, like, no. But I don't know." I mean, we're getting to the point where there's bad news after bad news. And here's the latest, crypto firm, BlockFi filed for Chapter 11 bankruptcy protection here in the U.S. And of course, they've got a lot of creditors, they've got a lot of, you know, debts in this. But also, one of their outstanding debts is a loan to, yes, FTX. And it's like the seven degrees of Kevin Bacon. Everything comes back to FTX right now, and what a mess it is.

Steve: It sure does. A mess doesn't begin to describe it. And here's the thing that I don't get, FTX, I mean, by now I think everybody knows the story. You know, they're still trying to find somewhere around a billion dollars that just went missing. I mean, absolutely no supervision, no accounting checks and balances. I mean, like, it was run by a bunch of 30-year-olds, which it kind of was.

Amy: It really was.

Steve: But, I mean, FTX was touting the fact that they were bailing out the other companies in cryptocurrencies to basically make that system solvent, and take away any concerns you have. Yet they had to borrow 275 million from BlockFi. So when FTX went down, BlockFi goes down, and you just have to wonder how many more dominoes are there before this thing either goes away, which I don't think it will go away. Or gets regulated enough to be just another asset class. That's the question everybody's got.

Amy: Well, keep in mind, FTX was the gold standard for these exchanges to which all others looked up to. So, as we look at the debacle that this has become, man, in fact, we're not the only ones looking at it. You've got a hearing in Congress this week, right? One of many that are probably going to be these public inquiries into what went wrong. I want to talk now about your shopping. Did you go shopping on Black Friday or Cyber Monday? I don't even want to ask you about shopping. You don't even...

Steve: I'm not allowed to. You know how that is.

Amy: You're banned from all retailers.

Steve: No, actually... No. It's interesting. I did run down to Target and...

Amy: Did you buy something for yourself? Because that doesn't count.

Steve: On Friday night, I went down to Target and it was empty.

Amy: Oh, wow.

Steve: And they said it was a zoo earlier in the day. Remember how I told you I liked those OLED TVs?

Amy: You bought yourself something. I knew it.

Steve: They absolutely had a 55-inch OLED for 450 bucks.

Amy: Man, that's way better than what they were when you first started looking at them.

Steve: Yeah. They were, like, two or three grand a couple of years ago. And I showed a lot of self-control. I walked past it. Because, I mean, there are wants and there are needs. And my wife says, "If I don't want it, you don't need it." So, yeah.

Amy: Oh, I like the way it works in your house.

Steve: I walked past it.

Amy: You're the only one who walked past it because a record $9-plus billion was spent for Black Friday. Cyber Monday, sales are supposed to be through the roof as well. And I think the interesting thing is the question of, is the fact that so many of us are still spending so much money, an indicator of where the economy is going?

Steve: Yeah. Two years ago I would've said, "Yeah, people are spending, this is great for the economy, great for the market, great for my 401(k)." Now, I don't like hearing good news, because it tells the Fed, "Hey, maybe we should keep raising interest rates, because this thing is not slowing down." And so I get nervous when I see things like this. And we are spending as only American consumers can spend. I mean, we're just spending like absolute crazy right now. It was a fantastic Black Friday, the numbers were up substantially. And you know what? The numbers are starting to come in for Cyber Monday, another record. It's incredible.

Amy: You know what worries me about all of the spending? Lots of things worry me about the spending. But, buy now, pay later, right? Where you get the object as soon as you want to buy it online, and then you pay installments after that, right? And you could just see how that stacks up on top of each other. Buy now, pay later has been through the roof. I also want to bring up a stat, because I don't know if you saw it, but I thought of you as soon as I saw it.

Steve: What's that?

Amy: We were talking about during the pandemic the fact that the savings rate in the United States, the average savings rate got above 30%. And you and I at the time, [crosstalk 00:17:49] oh, yeah, we said, "This isn't going to live." In September, the average savings rate in the U.S., 3.1%

Steve: Now we're talking. We're getting back to being America. Yeah.

Amy: As we head into this holiday spending season, right?

Steve: USA.

Amy: Exactly. Just keep that in mind. And there's a guy out there that talks about the fact... And he is a MarketWatch contributor, someone who is a finance analyst, Mark Holbert, talks about can we look at how we're spending this holiday season and see whether that actually can be kind of extrapolated out and looked at, this is where the market is going, this is where the economy is going. And he says, "Yeah, probably not."

Steve: Well, you know, when we set records over Black Friday, and it's become such a huge event. I don't remember this when I was growing up. I mean, my parents did not get all worked up and, you know, race out at 4:00 AM Friday morning by any stretch. But, yeah. It's become such an event that people spend, like, crazy and there are some good deals. So, I definitely get it. And then the buying tails off. And so the numbers are extreme over Black Friday weekend, and then they kind of peter out and tend to be a little bit below average between that point and the holidays. And, you know, investors being investors, they get overly excited about the numbers, and then they start to say, "Oh, maybe not so fast." And they start to worry, and you might see a dip in some retail stocks. Who knows? But, yeah. It's just the way things work.

Amy: Here's the Allworth advice. Trying to figure out what Black Friday and Cyber Monday sales mean for the economy, right, going forward in 2023, that's like kind of trying to time the market, something we absolutely do not recommend. We also need to mention that today is Giving Tuesday. You were talking about the fact that you don't remember Black Friday being a thing growing up. It seems like Giving Tuesday has been around forever. It's actually only been around for 10 years.

Steve: Yeah. And, you know, I have mixed feelings about it. It's good to donate. I mean, you feel good when you give money away. I certainly love to support causes that I feel strongly about. But what really, I guess, bums me out a little bit, Amy, is so many people don't give hardly anything over the course of the year, and they need to have a day set aside to remind them, "Oh, yeah. Maybe I should do something good with our with our money." I would love to see everybody give on a regular basis. Yeah, at least we got one day a year.

Amy: Well, these are uncertain economic times. Would you be prepared if you got laid off? We've got Julie On The Job with what you need to hear next. You're listening to "Simply Money" here on 55KRC, The Talk Station. You're listening to "Simply Money." I'm Amy Wagner, along with Steve Sprovach. One of the things we've been talking about a lot on this show, layoffs, and they started in the tech industry. We've had Amazon, we've had Meta, thousands and thousands of people. But they're starting to trickle down to maybe your friends, people you know about, companies that you live by. And joining us tonight is Julie On The Job, Julie Bauke, with some great tips on, hey, if you're concerned about this, because let's face it, it could happen to any of us, how do you get and stay prepared for the fact that a layoff could be coming your way?

Julie: Oh, my gosh, yes. And I am just so vocal about this. I think you always have to be ready to walk in the door and be told, "Today's your last day." And I think if you see that...

Amy: I was going to say, Julie, someone was just saying to me, like, "I haven't had a resume in 20 years. I don't know if I could do one if I had to." But that's the exact wrong mindset, isn't it?

Julie: Exact wrong. What happens is, if you look at, "Oh, my gosh, my resume's bad. I'm not on LinkedIn. Oh, I don't have time to look for a job." What you do is, you are in effect talking yourself into staying in a job that might not be right for you, and then you hang on as long as you can. And if you're in a job that's not right for you, or you really aren't a strong performer, you're increasing your chances of being on the layoff list, you know.

Amy: So what do we do?

Julie: So it's like you've got be ready. What if... So, you know, what if you're sitting at your job and you get a call from a recruiter or your dream company, the company that you never thought you'd get to work for. But now they've heard about you from someone. They're like, "Send over your resume." I mean, that's when people scramble, and they just throw together something that's terrible.

Amy: Yeah. Panic sets in.

Julie: They don't set their story in the right way. Yeah. So operating from a point of desperation and hurry. And same thing, if you get told on Friday, "You don't need to come back on Monday," you're not going to be operating from a position of strength and leverage. You're going to be in a panic mode, you're going to be desperate, and you will settle for something much less than you could have if you would have taken a more long-term strategic approach to, "I always have to be ready." And I think 2008 taught some people some things, because... Not everybody. But that was the first layoff I saw where companies really went deep into the muscle and bone versus, you know, getting rid of people who maybe their jobs weren't as necessary to the mission, as some others or low performers. I saw in 2008 super strong performers who thought they were safe. It was really... 2008 was really a lesson in, "I don't care how good you are, no one is ever 100% safe."

Amy: I'm a big proponent, Julie, of controlling what you can control. And I think you can easily get really anxious about, "Gosh, I'm seeing all these headlines and hearing about these layoffs, and I'm so worried about it happening to me." Obviously, you can't control if you're laid off, but you can control how prepared you are.

Julie: Oh, my gosh.

Amy: You mentioned having kind of that resume ready, but what other steps should we be taking so at least if we get that incredibly emotional news, we have a starting point, right? We have somewhere to begin.

Julie: Yes. Yes. So resume LinkedIn profile. And if your LinkedIn profile is half filled out with no picture, you know, that's almost worse than not having one because it says you don't take your career seriously. A LinkedIn profile, an up-to-date LinkedIn profile puts you in play at all times in a good way. You can be found. You know, 20 years ago you had to send a resume out to lots of people, you know, and it was just this crazy sort of you had to take control of it. If you have an up-to-date LinkedIn profile, you're always in the market. So, resume, LinkedIn profile, and then, you know, really being ready to answer some key questions. "Tell me about yourself. What do you want to do next?" You have to be thinking about what the next step is in your career.

And when I say step, this is where people get like, "Well, you know, I'm happy where I am." I don't necessarily mean up a ladder. I mean, unless you are a year or two from retirement, and of course, depending on your profession and industry, you probably will change jobs again. And so why wouldn't you be prepared by knowing what that next job might be? What do you want to do more of? What do you want to do less of? And you guys know at "Simply Money" because of what you're focused on, if you don't operate with strength and negotiate as you go into that next role, and you're leaving money on the table, it's not just the difference in what you accepted and what they were willing to pay. But it compounds over the years, and you just...

You know, you really, really hurt yourself in the long run when you're thinking about your retirement, because you didn't negotiate hard when you moved into a new job. You know, women, unfortunately, are the worst. And so I think it's not just being prepared from a tool standpoint, but also with some sort of self-knowledge about what's your next best move, and then what's the market paying, what you should you be looking for? And it's never been more transparent than it is right now in terms of what jobs pay. And so you have to become a student, not just yourself and what you're good at, and what's valued by you at your employer and the market, but also, you know, what is the market paying? You know, what is the market... What's the market looking for? How marketable are you? What can you do to stay marketable? Because not only does that affect, you know, your today salary, but it will affect your retirement as well.

Amy: Julie, we've been in this interesting period where we've been calling it the great resignation, where employees are the ones who have all the leverage. You have your finger on the pulse of these things. Has the pendulum swung back the other? I mean, where are we in this process? Is there any leverage that employees have? Or has it already shifted to employers?

Julie: No. You know, it was always going to come back a little bit, but it's never going back to the way it was. When you think about... What I know to be true is that everything that's happened in the job market to give us the job market we have today was coming. It was on the way. All COVID did was speed it up. And so to say that, "Well, now that we're past COVID, things are going to go back to like they were," that really ignores all the other factors that play into what's created this job market. And so, you know, it will normalize a little bit, in that I think, you know, we're seeing some employees want to go back in the office. Some people actually like a hybrid model. Work from home doesn't work for everybody.

And there's all kinds of flexible ways that smart and progressive employers are looking to get the work done. And so all of this last couple years, including how COVID shoved it forward, has really woken up the smart employers to say, "We can't do this like we did in the past." So if you are one of those who's run by somebody who says, "We need to get back to how it was five years ago," you are also going to be one of those employers who complains about not being able to find good people. And when people say, "Nobody wants to work," I always say, "You know, in truth, that's really not true." In fact, that's a lazy response. The truth is that nobody wants to work for you in your current situation, culture, and environment. And that's what's really hard for people to get their minds around and act on.

Amy: So you're saying this shift is a permanent shift, right? We're not going back.

Julie: It is. Yep. It's definitely a permanent shift. But... And also, if you just look simply at the numbers, there... You can't... In the last few years, you know, a bunch of new adults weren't born, you know, to take these jobs over. So, you know, this "talent shortage," whatever you call it, has a lot of factors in it as well. And it's not ever going back to what it was, but it will go back into some modified version, and really, a new way of working, which from where I sit is pretty exciting.

Amy: I like your point, Julie, that whether it is a layoff that you're facing or just the dream job has come down the pike, being ready for either at any time with your updated resume, with an updated LinkedIn profile is going to have you kind of ahead of the curve. Great insight as always.

Julie: Yes. Be ready to act at all times.

Amy: Yes. Great insights, Julie. Thank you so much, Julie On The Job, Julie Bauke. You're listening to "Simply Money" here on 55KRC, The Talk Station. You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. Do you have a question you'd like for us to answer about money? Well, there's a red button you can click on when you're listening to the show on the iHeart app. It's super easy to do. Record your question and it's coming straight to us. We'd love to talk about it right here on the show. Straight ahead, the do's and don'ts of that retail credit card that every single checkout person is throwing your way this holiday season. There's one do, and lots of don'ts. We've got what you need to think about. And when we think of saving for college, I hope most of you think about the 529 plan. But there's actually some other effective tools out there. Let's start with the 529 plan, though.

Steve: Well, that's the most popular, and I think it should be. I mean...

Amy: Love these. Yes.

Steve: Yeah. And as a grandparent, I love them because grandparents, yes, can put money away for their grandchildren's educations. Here's the basics of a 529 plan. It acts kind of like an IRA. You open up a 529 generally in the state you live, but you're not limited to that. I happen to have set up an Ohio plan for my grandkids. And by doing that, you can invest in a variety of different investments. They're basically mutual funds, stocks, bonds, whatever combination you want. And as long as that money is used by that grandchild for a qualified educational expense, books, tuition, you know, that sort of stuff, the money comes out tax-free.

So it's a really good deal, and they are super, super flexible. They can go to any college in the world that they want to. It's still... Or at least in the United States, it's still going to be tax-free on the distribution if used for that purpose. And, you know, if the one kid turns out to be a real screw-up, you're allowed to give that money to a different kid or grandkid kid. It's treated like a rollover. So, yeah, it kind of keeps them maybe on the straight and narrow.

Amy: We love 529s, but I think they initially kind of got a bad wrap because they sort of came out in the form of those prepaid tuition plans, right? Where you had to prepay for the credits, your child had to stay in state. You know, they got...

Steve: I still get questions like that from people. "You know, doesn't that mean they have to go to an Ohio school if you have an Ohio plan?" No, that's the old prepaid tuition, where basically you paid tomorrow's tuition today. Totally different. Yeah.

Amy: Yeah. And I think those are so ingrained in so many people's minds that they don't realize, "Okay, now actually these have transformed into something very different now." And there's all kinds of flexibility about, you know, say your child gets a scholarship, or decides to do something else and not go to college, it can easily be transferred to someone else. And even if they were to go to a trade school, often trade schools and room and board and other things like that can be covered by 529. So, lots of flexibility within these plans.

Steve: Yeah. And if they do get a scholarship, the flexibility includes, okay, you can use it for other expenses up to the amount of your scholarship awards. So you're not penalized for being a good student, or being a superb athlete, or something like that. They're not a bad deal. But there's another way to put money away for college. I'm not a huge fan, but I know some other advisors are using Roth IRAs.

Amy: I think when these are especially helpful is for people like you, right? You're the grandparent who's helping the child save for college. And so it allows you to save money in that kind of tax advantage account. And then here's the deal for so many people, when you get to the age of taking those required minimum distributions out. You know, there's the concern of that bumping up to the next tax level, and what are we going to do with this money, and how can we use it? You can actually use a Roth IRA as a version of a 529. And here's the thing, it doesn't count against your child or your grandchild's FAFSA form, right? Which it doesn't count against... It doesn't look like an asset that they have that would make schools say, "Oh, you're not going to get the scholarship money, or these grants, or whatever, because here's this money that your grandparents have in this Roth IRA."

Steve: And, Amy, you're getting to the point. You're only a year or two off where you have to understand those five letters, FASFA, because...

Amy: Knocking on the door. Yes.

Steve: Oh, yeah. I mean, that is the form that every parent fills out when their kids are going to college, and that determines what their aid eligibility is. It determines everything. Even if they're not going to get financial aid because you make too much, it determines grants, it determines scholarships, it drives everything. So that's why some advisors are looking at Roth IRAs as an alternative for college funding. There's a guy named Jim Mahaney out of Maverick's Retirement Services in New Jersey, and his opinion is, you know what? The Roth is not considered an asset on the FAFSA form. So, if you're under age 59 and a half and have a kid going to college, you can still take out your principal and not pay any tax on that, because it's after tax in a Roth. You already paid your tax on that. I'm not sure I like that, but some people are using it for college funding.

Amy: Yeah. It's an option, right? And I think the key here is to understand, first of all, all of your options, also understand the importance of filling out that FAFSA form, what that is used for, and the fact that ultimately your income has far more impact on that than what you've saved. So keep that in mind. Here's the Allworth advice. Make sure you're working with a qualified financial planner to help you decide whether the 529 plan or Roth IRA will better serve your child. It could be one, it could be the other, maybe it's both. You have options, and that's the key.

Coming up next, thinking of opening a retail credit card this holiday season? Buyer beware. We'll explain why next. You're listening to "Simply Money" here on 55KRC, The Talk Station. You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. Do you know anyone who opened up a credit card at the store where they recently shopped, and they said that, "Oh, I got a great deal. They gave me 20% off and a coupon in the mail." Buyer beware. Steve, there's a store that I went into recently, and the pressure to...

It was not only the pressure. And she said, "Here's how much you would save." And then she said, "Are you sure? Think what you could do with that money that you're saving." And then she got the person at the register next to her also involved in the conversation. And I wanted to say, "How are you people incentivized to get people to sign up for these credit cards?" Because whatever it is, it is a huge incentive. And, you know, I think you normally spend so much this holiday season that any kind of discount sounds great. The problem that you're not thinking through is, another credit card with an incredibly high interest rate attached to it may not be the best thing.

Steve: I don't think they're fiduciaries, Amy. I think that's a safe thing to say.

Amy: That lady at that cash register was definitely not a fiduciary working in my best interest, I'll tell you that much.

Steve: Well, here's the wild part. I remember a number of years back Congress was... They were working real hard to bring the interest rates down on credit cards, because the rates were crazy. Well, guess what? The maximum rates on credit cards are back up to 30%. You know, so some of these cards that, you know, you think they're helping you out, "Hey, you can save 20 bucks on that purchase just by opening a credit card account." If you're late on your payment or decide to carry about 30%, I mean, usually you pay that kind of interest when you borrow it from a guy that has a last name that ends in a vowel.

Amy: Vinny.

Steve: Yeah. "Hey, buddy, you know, come over here. I can give you some money, you know." That's crazy.

Amy: Exactly. Yeah. And you mentioned that 30% kind of average interest rate for those retail cards. The average normal credit card rates, bad enough 19%. I think you got to look at it this way, especially if you're buying, like, holiday gifts or whatever. I think about the fact that whatever I buy is likely broken or lost, or not even being used by, I don't know, say February or March of that year, and then you're going to still be paying it off in July. Like, does that make sense for that 10% off or 20% off that you're getting at the register? It just doesn't make sense. But, man, I'm telling you, it is full-court press. There is a lot of pressure at these registers now to sign up for these cards.

Steve: Yeah. I don't care if it's 50% because I'm going to pay it off before the end of the statement. You know, if you pay it off every month, it doesn't really matter. But apparently only 13% of the people out there listen to us, because that's the number of people that pay off their balances every month. So, you know, if you're not going to pay off your balance, just be really, really cautious when you're opening up a new credit card.

Amy: And we talked about this earlier, but I think it's also worth bringing up again. Another option for, I think, a lot of people to buy more things this year are those buy now, pay later programs, and those are becoming just incredibly popular. And my concern this holiday season is, "Okay, I couldn't afford this, but if I pay $10 for it now and I keep paying it off, I can't afford that." You stack 10 things like that on top of each other, and then you rack up a couple of these, you know, retail credit cards and carry balances, you're going to end up in a world of hurt. Here's the Allworth advice. It's certainly tempting to get that discount right then and there. It's shortsighted. Look at your financial picture down the road, you probably don't need another credit card. Thanks for listening tonight. Tune in tomorrow. We're back to the basics when it comes to investing. You're listening to "Simply Money" presented by Allworth Financial and 55KRC, The Talk Station.