Amy: Tonight, money and life lessons from the most famous investor of all time. You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. Most the time, Steve, you know, I've got a house full of teenagers, and they come home and they say something and it is like it is the law. And I'm like, "Where did you hear that from? Take it with a grain of salt, you know." "Oh, this person is an expert. This person is an expert, they're an influencer, I saw them on TikTok or YouTube."

Steve S: Somebody out of TikTok, Yeah, yeah.

Amy: Yes, of course, the know-all-be-all. And I don't put a lick of stock into what most people say, quite honestly, unless that person is Warren Buffett. And then I take notice, and then I usually read his quotes several times because it's like, as it washes over you, it just makes so much sense.

Steve S: The original influencer.

Amy: Yes.

Steve S: And, you know, he's in his 90s.

Amy: And he should be, he's earned that title.

Steve S: You know, you hear stories about Warren Buffett. And by the way, I consider him the best investor ever in the history of this country. I mean, but the guy's got such common sense comments. He's like the Will Rogers of our time. Boy, did I just date me. Half the people out there are saying, "Will, who?"

Amy: "Who's Will Rogers?"

Steve S: Yeah, but no. And, you know, the thought is that this guy came from humble beginnings and worked his way up. And a lot of that is true. But you know, what's interesting is, he had so many jobs when he was not even in his teens. When he was 10, 15 years old, I mean, he wasn't just delivering newspaper. Here's how smart he was, when he was delivering newspapers, when he did his tax return at age 15, he actually deducted the cost of his bicycle and his watch, because they were necessary. The guy was thinking already, I'm dead serious.

Amy: Well done little teenage Warren. I love it. Yeah. Always with the business mind, right?

Steve S: Exactly.

Amy: But this is someone who... And this is kind of the backbone of the show, where we talk about how to live in a "Simply Money" way. It's to not live above your means. And Warren Buffett has done exactly that. I mean, the man has got more money than I could ever even dream of. He still lives in the same home in Omaha, Nebraska he bought in 1958. By the way, that house wasn't a million-dollar house at that time.

Steve S: No, I'm sure of that.

Amy: He paid $31,000 for that house, still lives there to this day.

Steve S: Amazing. I mean, that's pretty cool. And, you know, everybody in the world is talking about, "Well, you know, gotta move up. You know, we've got a bigger family, we need a bigger house."

Amy: The concept of starter house, right?

Steve S: Yeah.

Amy: You know, everyone says, "Well, I'm still in our starter house. I feel like we're behind or whatever." He's living in his starter house, right?

Steve S: He is. Yeah.

Amy: And in that whole concept, that whole mindset, he doesn't even buy into that, he's living in a house, and it's a good house.

Steve S: I can relate to that. We lived in our starter house for 33 years. You know, and you save a lot of money when you do that.

Amy: But even the concept of that. Even the concept of that, though, it makes it sound like you should be doing better. And you're just going to start there, but you're gonna end up somewhere else. He always knew "This is not a starter home, this is just our home."

Steve S: Well, he's the type of guy, and I can't relate to this part. He doesn't think, you know, cars are anything special, they're to get him from point A to point B.

Amy: I get that, you don't.

Steve S: Yeah, exactly.

Amy: He drove the same Buick forever, a Buick.

Steve S: And you could say he's a real cheapskate. But, you know, in his view, you know, let's talk about living below your means.

Amy: That's it.

Steve S: All that's saying is if you make $1,000 over a week, you spend less than $1,000. My parents never got that concept.

Amy: A lot of people don't.

Steve S: If they made $1,000 a week, they spent $1,100 and wondered, "Okay, how are we gonna pay off this credit card?" But, you know, that's really what he's talking about is spending less than you earn at every stage of your life. And, you know, it's like, how do you lose weight? Well, you eat less and exercise more? How do you get wealthy? Well, spend less than what you make...

Amy: And invest more.

Steve S: ...is a good starting point, you know, and he lived that, he didn't just talk about it, he lived that.

Amy: You know, another thing that he does, which is really interesting is you kind of take a deep dive into his life. He is not someone... I mean, he has got a lot of people who works for him. He owns a lot of businesses. You know, a lot of people report to him, at the same time, he is not a meetings person. He is a do not waste my time. And Charlie Munger is a well-known partner of decades and decades, kind of makes fun of him. He says, "If you were to look at Warren Buffett's calendar on any given Tuesday, maybe there's a haircut, a half hour in there." You would think it would be like, you know, Berkshire Hathaway meeting and this meeting, and that meeting and, you know, this Zoom call with investors and blah, blah, blah. Uh-uh, he leaves so much time to think. How many of us in our busy lives nowadays actually take time to think and where do we think the economy is going and what are good bets when it comes to investing? This guy spends a lot of time just thinking through things. Nobody does that anymore.

Steve S: Crisis management is not a goal in life, yet for 99% of the people, myself included, I think...

Amy: That's kind of how we live, from one crisis to another.

Steve S: Oh, yeah, that's just Tuesday, you know. And I see this with a lot of extremely wealthy people is they set aside time to think. And that is so important. Because if you don't ask yourself at least once a week, "Tell me again, why I'm doing this right now?" Okay. And I think the pandemic taught a lot of people a lesson, you know, all of a sudden, you don't have that time spent commuting to work, and you're working out of your house. And maybe you're finding that you have extra time to do things. And I think a lot of people rethought, "Where am I at in life? Why am I doing this? Why am I pounding my head against the same wall at this job?" And that's one reason I think we saw a lot of job changes. Whether it's a job change, your personal life, whatever the case is, taking even 10 minutes out of a day and saying, "You know, tell me again, why I'm doing this. Why am I doing it this way," is so important for growth as an individual and for your career.

Amy: You're listening to "Simply Money" tonight here on 55KRC, as we talk about the best all-time investor, at least in our eyes, and that's Warren Buffett. You know, there's TikTok influencers, social media influencers, there's also economists that make tons of predictions that we often revisit on this show and say, "That didn't turn out so well." This is not a man, though, that you can say that about very often. Most of the things he touches kind of turns to gold. But he's super transparent about how it works. There's not this smoke and mirrors about how do you make this happen, and what is it, and how is the investing? In fact, he is not someone who buys into investing in things that isn't really simple, that he doesn't understand completely.

Steve S: I think a lot of people think to get rich, you have to come up with something new, you have to find the angle. You know, it's like the guy at the casino that says, "I figured out a system in craps." No, you didn't, you got lucky, you know. And Warren Buffett is not big on luck. He's big on research and understanding the inherent value in anything, whether it's a stock, whether it's something that he needs for his personal, or whatever the case is, he understands value. And one of the big things that he talks about is, "Okay, stock prices sometimes are crazy, either crazy high or crazy low. If you understand what's behind that investment, what it should be worth in its inherent value, then you can determine, is this a cheap price or is this an expensive price?" And it's really in a lot of ca-... I'll give you an example. I bought Ford stock years and years ago, in the middle of 2008, the debacle, everything goes down, Ford was trading at $2 a share. And I thought, "You know what? If that company doesn't go out of business, it's probably gonna be worth a little more than $2 when everybody thinks that the world is coming to an end." And guess what? It did go up. Now that's an individual stock, it was play money for me, and it worked out, I'm not proposing Ford stock or, you know, putting a lot of money into individual stocks. But, you know, that's what Buffett does on a much grander scale, he looks at the inherent value, and if there's something good going on there, and he can understand what the value of that company is, he just may buy it through his company.

Amy: This isn't a guy that jumped in on crypto, when everyone was sort of jumping in on crypto, even tech stocks, right? He is not owner of Facebook. In fact, he finally bought Apple, but let's face it, I mean, I think by now everyone thinks Apple has a pretty good business plan, a pretty good product, and probably will be around for some time. He does own, you know, stocks or shares in Apple now, but he was not an early adapter into any of those things. And he's always said...

Steve S: No, not a trendsetter.

Amy: Yeah. No, he's not. And I think for so many investors, the point you made earlier, you're thinking, "I have to be the first one to get on this," right? "There has to be some kind of trick to this." And there's really not, it's thinking long-term, it's living beneath your means, it's making sure you're investing in a company that you understand and that truly holds value. All of those things over time have really kind of turned out pretty well for him.

Steve S: And, you know, one of the things, and he talks about this an awful lot, is overcome your fear of risk. And the way he puts it is kind of interesting. It's everything that has risks involved in it, understand the amount of risk. You know, he looks at the track record and says, "You know what? In the long run, stocks outperform bonds. In the long run stocks average 10%." His words, not mine.

Okay, risk comes from not knowing what you're doing. I think a lot of people equate risk in the stock market with today's value versus tomorrow's. It's, you know, not where is that company going to be a year or two from now. And when he says long-term, he's not talking 50 years down the road. You know, I don't know what length of time he's thinking about, but I know it's longer than one day, you know. And when you buy stock in a company that the company is growing and becoming more profitable, eventually your portion of ownership is gonna be worth more. That's all he's saying. And the proof is in the pudding, he's done extremely well.

Amy: Okay, well, would you hear this? And this is kind of a universal kind of rule for investing, but sell when the market's up, buy when the market is down, sounds so simple when you say it. Well, of course, that's what you want to do. Well, ask yourself, have you been tempted this year? The market has been down. Were you tempted to sell when the market was down, right?

Steve S: Yeah, a lot of people have.

Amy: And that is the exact opposite of where someone like Warren Buffett has found success through the years, you know. I mean, he, nerves of steel, because he understands the cycles of the market. He understands the business cycle and how these things work. So years like this year, well, uncomfortable, and I'm sure Warren Buffett has lost money like the rest of us probably have in our 401(k)s. But he knows long-term, the American economy is bigger than the daily headlines that we're dealing with right now.

Steve S: Warren Buffett has been around and has been a successful investor a lot longer than my 40-year career. So, I have heard these things for 40 years. And, you know, you adopt some of these things, you know, when they have truth behind them when you see the way they work out. And, you know, I love his comment of, "Be fearful when others are greedy, and vice versa."

Amy: And greedy when others...

Steve S: Exactly. And you know what? When people were starting to get all excited, you know, when we saw that markets were going crazy, prices were going crazy, I was getting nervous because I know what Warren Buffett would do. And, you know, when things are cheap, that's when everybody else is scared.

Amy: Sound advice.

Steve S: You know, when everybody's scared, that drives stock prices down, and that's when the bargains can be had. I'll bring up Will Rogers one last time. Will Rogers said...

Amy: Twice in one show. Okay.

Steve S: In the '30s when I was a kid, Will Rogers said, "Only buy stocks that go up, if they don't go up, don't buy them." And think about that a little bit. But, you know, there's some truth to it, you know, nobody wants a stock that is down because that's during times of fear, and yet, that's when Warren Buffett buys. And that's how he's made millions.

Amy: One other point I wanna make about him too is we talked about, yeah, he lives beneath his means, but he also is a big believer in doing what you love when you have that money, right? Life is short. And there was kind of a great way that he says, like, "Do a job that you love, because you love doing it." And he kind of adds that or uses the way of it's just like saving up for sex for old age, right? Like, "I'm gonna have time for that later, so we're gonna get to that then." He's like, "Spend your money too as you're going." And I think it's funny, but it also kind of makes sense, right? Like, enjoy these things while they're coming, but also keep that long-term investor way of thinking about things.

Here's the Allworth advice, live below your means, spend wisely, investing for the long term, you're going to reap the rewards just like Warren Buffett has. How much life insurance do you need? We're gonna tackle that plus whether it's better to buy or lease that next car, next. You're listening to "Simply Money" here on 55KRC, The Talk Station.

Steve S: You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach. If you can't listen to "Simply Money" every night, subscribe to get our daily podcast, you can listen the following morning, during your commute, at the gym, where you won't see me. And if you think your friends could use some financial advice, tell them to search "Simply Money" on the iHeart app, or wherever you find your podcast.

Straight ahead at 6:43, "The Signs You'll Run Out of Money in Retirement." You know, everybody's got questions about money, what's yours? Email us at asksimplymoney@allworthfinancial.com or use that red button that you can click on while you're listening to this show on the iHeart app, just record your question, it gets to us, we listen to those.

Free advice, here today to help is Allworth adviser, Steve Hruby. Hey, Steve, we've got some questions we wanna run through. And John in Mason is asking, "I recently started listening to the show and I'm trying to pick up on some of the investing concepts you talk about. How do I pick which companies to invest in, and which ones not to?"

Steve H: Good question, John. My gut reaction is to turn it around on you and ask why do you want to invest in individual security?

Steve S: Yeah, sounds like he's talking about stocks, individual stocks.

Steve H: Yeah, that's exactly how I read that. And Steve, do you invest in any individual stocks in this day and age?

Steve S: I literally twice in my career, and that was play money, that was money I could afford to lose. You know, my concern about individual stocks is you might have something like an Enron, and all you need is one stinker and it could crush you if you put serious money into it. I'm much more comfortable with mutual funds and ETFs.

Steve H: Yeah, folks that I work with in this day and age, you know, they're always asking me, "Can my 401(k) go to zero?" And ultimately, when you have diversified mutual funds inside your 401(k), the answer is "no." Unless the global economy turns on its head, that's not gonna happen. With an individual security, just like Steve said, Enron tells us a story that is not a good one. So I would ask John, why do you want to?

Steve S: Yeah, exactly. And the point about mutual funds and exchange-traded funds is, all right, if you do have a stinker in there, it's 1 of maybe 300, 400 different stocks. So if it goes bust, you don't even notice it, you know. So, it's just a risk reduction strategy by using investments like that. All right, Alex in Bridgetown is asking, "I'm thinking of leasing a car, but everybody tells me it's a bad idea. How come it's a bad idea? What do you think?"

Steve H: I mean, at the end of the day, do you wanna drive a car that you can't afford, because if you want to, then here's your opportunity, you lease it. Now, that's not the whole story. You buy a car, you own it at, you know, the end of the term, leasing it, what you're really doing is you're paying for the depreciation of the vehicle. And in recent history, with global disruption and supply chains, chip prices went up, vehicle prices went up. It gave people opportunities to actually turn around and sell that lease at the end of the term when they bought out of it, earn a profit. Have you leased vehicles before, Steve?

Steve S: I have and they've kind of worked out for me. One I'm thinking of, I bought after my lease was up because I really liked the car. And, okay, I'd like to own this for a longer period of time. I think the problem with leasing a car when people say it doesn't make a lot of sense is, are you really buying a car that you can't afford? And this is the way that you can get into it? Well, that's why most people are leasing is to get a car that they couldn't afford to buy otherwise, and that doesn't make financial sense. And every salesman in the world is gonna tell you, "You know what? If you take the money that you would have put down on that car and instead invest it, you'll be better off." You know what percentage of people do that?

Steve H: Zero. Yeah.

Steve S: Zero. Yeah. It's a way for a salesman to sell a more expensive car than most of the people he deals with can afford, you know. So I'm not a big proponent of leasing, but the times I've done it, it's worked out for me. So I think that's a personal decision for yourself, Alex, and just don't do it to get into a car that you couldn't otherwise afford.

You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach, along with Steve Hruby, and we're going over your questions, answering things that you wanna know. And Kathy in Greenhills asked, and I think this a good question. She's got 4 kids aged 10, 12, 15, and 18. And Kathy wants to know, "How much term life insurance should I have? Is there a ballpark number?"

Steve H: Kathy, I like that she asked the question about term life insurance, because at the end of the day, when you make comparisons in costs between term and whole life, for example, you're gonna get 10 times more at that premium. With 4 children between 10 and 18 years old, there's a lot of expenses on the horizon, depending on whether or not you're paying for college, for example, you know, rule of thumb, maybe a million, but between a million and 2 million worth of premium or worth of...

Steve S: Why did you come up with that number? Where's that come from?

Steve H: Covering college, covering missed wages.

Steve S: Yeah, it's expensive to raise kids.

Steve H: Exactly.

Steve S: And, you know, if you're out of the picture, you know, whatever the reason is, that you're not around anymore, that's money that you can't earn, that otherwise would provide for your kids. And you start throwing college into the picture, I mean, 4 years of college alone is, you know, $200,000, $300,000, $400,000. And if you've got four kids and wanna make sure they're covered until they're out of college, it's gonna take a lot of money. All you have to do is shop for what's the cost of a million dollars of term life insurance, versus either universal life or whole life, and you're gonna see a monster difference in costs.

All right. Peter in Arizona says, "I'm a transplant from Cincinnati, and still listen to your podcast. I've been working at my current company for two years, thinking of changing jobs. Somebody told me I might not get my company match if I leave, I don't understand why. Help me out."

Steve H: Vesting schedule. Think of it as your golden handcuffs. When you put money into your 401(k), that money is yours. When you get a match from your employer, oftentimes, there's a vesting schedule, maybe you get 20% every 1 year for 5 years before you walk away with that company match. So that is something you certainly want to look into before you make any decisions about changing jobs because maybe you finish out the year and you get 20% more.

Steve S: Okay, so the money you put into your plan, that's your money.

Steve H: It is.

Steve S: I mean, you never worry about that going away. But the money the company gives you, yeah, that may very well have a vesting schedule, ask Human Resources they'll be able to tell you, "Yes, that's yours also or only a percentage." Coming up next, the important do's and don'ts of including your in-laws in your estate planning. You're listening to "Simply Money" on 55KRC, we are The Talk Station.

Amy: You're listening to "Simply Money." I'm Amy Wagner along with Steve Sprovach. You know, you often hear of relationships between people who get married and their in-laws, sometimes they're shaky, sometimes they're great. And if you are those in-laws and you are planning your trust, your will, do you leave something to your son-in-law to your daughter-in-law? Joining us tonight to look at this sticky issue is, of course, our estate planning expert from the law firm of Wood + Lamping, Mark Reckman.

Mark, you know, I've seen both cases. I've seen where people have amazing relationships with their sons and daughters-in-law, and I've also seen the exact opposite, and I'm sure you have too.

Mark: Well, that's right. And whether you include them in your estate plan is entirely a personal choice. Some folks really love their kids' spouses, and they want to include them. And that's fine, it's easy, it's completely doable.

Amy: Okay. So, where do you get started? And even determining whether this makes sense for you, right? Because I think for a lot of people, even if you really like your son or daughter-in-law, you're thinking, "Well, if I'm leaving money to my children, they're going to benefit from that as well."

Mark: Well, that's right. And the majority of people do not include their in-laws. And there are a few different rationales for this, Amy, probably the most common rationale is, "My son's wife has her own parents and her own grandparents, her own line of inheritance, my son is not included in their estate plans. That's the way it should be." Or another rationale is, "I'm leaving money to my son, that is one household and everybody in it will benefit from that gift. I do not need to itemize my daughter-in-law too. And if I do, if I put her name on that inheritance, it could lead to conflict between them over how the money is used."

A third rationale, which is the most common is, "I don't know what's gonna happen to my child's marriage." And commonly, people feel like money comes down through the bloodline, and they wanna keep it in the bloodline.

Amy: Although I have also seen times when that son-in-law, that daughter-in-law is maybe even closer to the family, to the parents than their actual child. I think of caregiving situations where maybe a daughter-in-law is taking care of a sick mother-in-law or a sick father-in-law, and they become incredibly close. What about those kinds of situations?

Mark: That's absolutely right. There are many wonderful in-law relationships, and caregiving is a big factor. My wife was the primary caregiver for my parents in their older years. So this happens all the time. And so, there's lots of good reasons to vary from the common practice. If you do go that route, there are a few things you can do to sort of make it easy. One is to simply include them, along with your son or daughter as a person to receive the gift together. And that's all good. But probably equally common is the parent who doesn't get along with their daughter or son-in-law at all. And it could be personality. I had a case on my desk about a year ago, where the parents were convinced their daughter-in-law was a communist. And that was so offensive to them that under no circumstances today want her to ever benefit from this money, even for $1.

Amy: And how do you protect your money when this person is married to your child?

Mark: Well, there are a few choices. Number one, you can leave the money to your own child and to your own child only. Now in most states, that money will then become your child's separate property. If you tell your child not to co-mingle the inheritance with their spouse, then it will remain that child's separate property. Now, that's not terribly reliable, because it's only as reliable as your kids are.

Another common practice is to leave your child's inheritance in the trust, and you appoint your own child as the trustee of that trust, so that he or she is in charge of her own money, but it's kept in a separate fund. Now, this provides some protection, it's not rock-solid. But often that's enough understanding of course that your child could be pressured to take the money out of the trust. And even if your child is strong enough to leave the money in the trust, it can still be a point of conflict with the spouse.

Probably the safest method would be to leave your child's inheritance in a trust with a third-party trustee. That offers the greatest protection, it takes your child off the hot seat, however, it's expensive. You have to pay the trustee for managing the money. And you could be sending a message to your child that you don't trust them or that there's some problem. And often people don't wanna hurt other people's feelings.

Amy: I was just gonna say there's the legal aspect of this, Mark, but then there's also the relational aspect of this.

Mark: You bet.

Amy: I mean when someone feels really strongly about something not being left to a son-in-law or daughter-in-law, how does that play out with their own relationship with their kids? I imagine that can be really tough.

Mark: Well, that's right. And, you know, many people take the attitude, "It's only money and I'm gonna be dead." Other people say, "This is money that I earned, or that it came from my parents, and I want it to stay in the bloodline." This is a really emotional flashpoint for some people, and not so much for others.

Amy: So, Mark, when people are thinking through estate planning, there's just so many different scenarios. I think for many people, it's you have the strong feeling about whatever it is, right? Maybe if you're in a second marriage, or it's daughters-in-law and sons-in-law or grandchildren, whatever it is, what's the best thing to do, you know what you want, but maybe you don't know how to do it legally? I know, obviously, finding an estate planning attorney is the first step. And then they've probably seen just about everything like you have, right?

Mark: Well, that's right. And I think communication is the key. It starts first though, by sitting down and talking with your spouse, or if you're not married, thinking through your own wishes, and decide what the big picture goal is, and then meet with a lawyer and find out what the options are. Because sometimes, knowing what your options are, helps refine your thought process.

A trust is a very, very common tool to implement these kinds of things if we're talking about, you know, a few hundred thousand dollars or more. You know, if you're talking about a hundred thousand dollars or less, trusts are less commonly used. But a trust is a great way to set up a separate fund that can be managed separately and maintained separately, so that everybody knows where it comes from and everybody knows what the rules are, regarding its use.

Amy: I just think when people hear estate planning, it sounds like you need to have millions of dollars, but correct that.

Mark: Well, that's right. Estate planning actually applies to any asset, any money, and particularly people who own a home. Nowadays real estate is probably the largest part of a lot of people's estate. But that's real money. And so irregardless of the size of the estate, you still wanna be clear about who gets it and what conditions, if any, are placed on it.

Amy: So much to think through. But the key is thinking through it, talking about it, and then taking action with your own estate planning. Great insights, as always, from Mark Reckman, our estate planning expert from the law firm of Wood + Lamping. You're listening to "Simply Money" here on 55KRC, The Talk Station.

Steve S: You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach. Do you take a lunch break? Why it's so important that you do, that's coming up straight ahead. Yeah, you know, in a perfect world, your money is gonna outlive you, but that's not always the case. There are some important signs you can identify early on to know whether or not you're gonna outlive your money. I know this is something I have seen many times over the years when somebody walks in. And that's usually their first question is, "Am I gonna outlive my money? Will I run out of money during my lifetime?" Well, joining us now is Allworth Adviser, Steve Hruby. And Steve, I'm sure you've seen this over the years, somebody walks in and either says, "I'm worried about not having enough money," or, "Am I gonna have enough money?" And man, you might see within 30 seconds, wow, they might not.

Steve H: Yeah. I mean, it's a conversation that's one of the hard parts of this career path, I would say is dropping heavy news on people about not having enough money, but at the same time, being somebody that we can share ideas with to change behaviors and ideally close gaps between where you are and where you need to be to make sure that you don't outlive your money.

Steve S: Exactly. And, you know, I'll run a financial plan and I'll assume, you know, 92 for men, 94 for women. And, you know, I'll get some pushback sometimes saying, you know, I've literally had people say, "There's no way I'm gonna get to that point. If I live to be 80, I'll be lucky." And my answer is usually, "Well, what if you got the worst luck in the world and you're healthy and living well, and you're gonna live past 80? Shouldn't we plan for that?"

Steve H: Oh, yeah. I say we plan for the worst in all scenarios, not just with investment stuff.

Steve S: And the worst being that you live a long time.

Steve H: Well, yeah. Worst case scenario you live... So the folks that I work with think they're gonna kick the bucket at 80. I ask them what are they going to do if they live to 110?

Steve S: Yeah, exactly.

Steve H: And worst case scenario, you're going back to work when you're 88 years old, and that's no fun. When I retire, I wanna stay retired. I have no desire to go back to work and become a barista when I'm 90 years old.

Steve S: Or you don't wanna start practicing saying, "Welcome to Walmart," when you're 80 years old.

Steve H: Exactly.

Steve S: You know, so okay, how do you identify that and what do you do? You know, it's obvious, this person is spending themselves down to zero, and if they live past let's just say 75, they've got problems. What do you do?

Steve H: I mean, that's why we build financial plans, show them the numbers, show them what happens, ask questions. Who's the oldest person you know?

Steve S: Yeah. I've got people that I've been dealing with 20, 25 years that are well into their 80s.

Steve H: Exactly. It's a scary thought outliving your money and making sure that you don't underestimate your life expectancy is the first point that we're going to make.

Steve S: Okay, so, all right. You've got a plan put together, your adviser says, "Okay, if everything goes smoothly, you should be good no matter how long you live, except there's one problem, you don't have long-term care insurance." And it's only about one out of every seven people even have long-term care insurance. Does everybody need it?

Steve H: Not everybody needs it, Steve, in my opinion, because there are opportunities to self-insure, those are the individuals that have millions of dollars. Do I have millions of dollars? No. Am I gonna self-insure? Probably not. That's where long-term care comes into play, because you mentioned same figure, actually, one in seven need long-term care for more than five years. Yet half of adults turning 65 today don't have it.

Steve S: Yeah. And, you know, that's what, to me, various types of insurance are about, you need life insurance, at least during your working years to cover what can go wrong. I mean, if you get run over by a truck, and you're 55 years old, and maybe you've got a spouse that doesn't work, and 4 kids that aren't in college yet, yeah, your financial plan just went out the window if you don't have life insurance.

Well, in retirement, life insurance isn't as important in a lot of cases, not necessary. But long-term care might be a concern. If you've got Alzheimer's in the family, that's a big issue. And what you don't want to do is have the healthy spouse go bankrupt, because the non-healthy spouse is in a nursing home for 10 years. And if you priced out nursing homes, that adds up. That's the purpose of long-term care.

Steve H: Private room, on average, in a nursing home. $102,000 per year. So if you're going to self-insure you better be prepared. If you're not, the alternative is long-term care or Medicaid.

Steve S: You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach along with Steve Hruby, and we're talking about how to identify problems that you may run into in retirement to keep you from running out of money. Okay, so we've got, you know, a couple things covered, know your budget, live within your means, have some long-term care insurance if you're not super wealthy and can self-insure. What are some other pitfalls that you can fall into in retirement?

Steve H: Well, a lot of the times I work with folks who transition into retirement and they start spending more than maybe they thought they were going to, they didn't plan for what I call that is, you know, knocking on the door to retirement, you're getting ready to transition, you finally open the door up, you have all this free time. Those are your go-go years, that's where you're spending a lot of money. And then you have your slow-go years where you start to wind it down, your no-go years. So when we build a financial plan for folks, we do write that into the plan. If you haven't done that, then you run the risk of spending too much money to stay social, stay busy.

Steve S: I've got something that I've unfortunately run across more than a couple of times, you got to lend money to your kids. And, you know, it's gonna happen, you know, there's going to be some problems in life. But when it gets to the point where it's putting you, as a retiree, at risk of bankruptcy, it's an issue and you've got to address it.

Steve H: Yeah, my daughter's 7, so I haven't loaned her any money at this point. In the future, who knows? Colleges certainly will...

Steve S: She'll hit you up.

Steve H: I'm sure she will, she does. But when it comes to loaning money to your kids in retirement, a lot of the folks that I work with have questions about college, for example, "Can I afford to help my children or my grandchildren pay for their college expenses?" When we build a financial plan, I ask them, "Looking at your long-term cash flow, your children can borrow money for college, but can you borrow money for retirement?"

Steve S: Yeah, yeah. All right, final point, I think is worth talking about. All right. So, you're comfortable with the 4% distribution rule, guideline, however you wanna look at it. You've got a million dollars in your investments, and you figure, "Okay, that'll generate $40,000 a year of income, plus Social Security, we'll be fine." How about taxes?

Steve H: Yeah, surprise. You have a big unexpected expense, you need to take out a $50,000 distribution from your IRA. There's gonna be a tax hit on top of that if you have all pre-tax dollars.

Steve S: Here's Allworth advice, failing to prepare is preparing to fail. Get with a qualified financial professional who can help you plan for all of the above reasons. Coming up next, "Why Taking a Lunch Break is So Critically Important." You're listening to "Simply Money" on 55KRC, we are The Talk Station.

Amy: You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner along with Steve Sprovach. This is again, one of those things I think that you I are completely different on.

Steve S: What's that?

Amy: Lunch breaks.

Steve S: I don't miss many meals. Have you seen me lately?

Amy: I'm not talking about missing meals. But I actually think you're really smart and good about kind of setting boundaries for lunch breaks at work. And I'm horrible, I eat lunch at my desk. I don't take a break. I keep barreling through emails and projects and things like that. But there's research out there that shows that your way is actually the much better way.

Steve S: You have to. You have to do this, and my wife as an example, very similar to you. You know, I'll go home at supper time and she'll say, "Yeah, I'm kind of hungry, I missed lunch." I'm like, "What do you mean, you missed lunch? What happened?" "I just got sidetracked."

Amy: She's busy, she forgot to eat.

Steve S: That never happens to me.

Amy: I don't forget to eat.

Steve S: Around 11:00 I hear my stomach, and it's saying, "You're not gonna miss this one."

Amy: Yeah. No, I am not a proponent of missing meals. That doesn't happen to me, but I bring them to my desk and I work through it. And research shows that actually, most of us do better concentrating in about 90-minute intervals. Beyond that, our brain is just kind of fried, we all had that feeling before. So kind of taking this mid-day break to get away from your desk, separate yourself from those emails, from those projects, from your boss, whatever it is that you need, a little break is rejuvenating, it's good for you to do. And also getting up and walking around, getting some exercise, getting those juices flowing, also a good thing.

Dana, [SP] one of our brilliant, brilliant writers here has always done it the right way. And she said, "You know, we came from this news background where you didn't leave your desk, you were chained to it, there's breaking news or whatever." And she's like, no, she would remove herself, she would go into the break room. And she would watch a show while she ate just to get her brain completely off of work. There's something to be said for that.

Steve S: Well, and, you know, we're a financial show, and we're talking about, you know, eating lunch, but this plays right into what are you doing for your career? How can you be more successful? How can you be more efficient and make more money? And I learned this in college, believe it or not, I mean, I was a double major and, you know, running around doing... You know, I had a radio show in college. I was pulling tons of credits and, you know, working 30 to 40 hours a week. I was going nuts in college. So when it came time to study time, I had to crunch. And I made it a point, for me it was every hour, it wasn't 90 minutes, every hour, walk away. I don't care how focused you are on the subject matter at hand, walk away, take 10 minutes and do something totally unrelated. It might have involved a beer in college. But seriously...

Amy: Probably.

Steve S: ...but you got to walk away and the work life is no different. I don't care how important the project is, what you're working with, you've got to take a mental break, walk away and then refocus. And I'll tell you what, a lot of times in my case, at least, I approach a solution that I wouldn't have gotten to if I didn't set aside time and do something else during that project. You have to.

Amy: That's a great point. Well, I can't tell you how many times you're, like, not thinking about that thing. And all of a sudden it pops into your head and you're like, "That's the answer to it." Right? And as I was sitting at my desk looking at it for two hours today, I couldn't come up with that answer. It's the same thing that we always say about vacations. You feel like it's a badge of honor that you should be wearing if you don't take your full vacation days. And we've always said, that's insane, you don't gain anything from that. First of all, that's a benefit, there's money tied to that. So you're saying, "I don't need this money that you're giving me to take this time off." Secondly, like, getting away and recharging and having that break. Study after study after study shows it's the best thing for you.

Okay, well, we're not talking about taking a week off, we're talking about an hour in the middle of your day. It makes so much sense to do it. Know yourself, know the cycle that works best for you. Thanks for listening tonight. We hope you'll tune in tomorrow. We're talking about, big changes coming to retirement rules, what you need to know. You've been listening to "Simply Money," presented by Allworth Financial, here on 55KRC The Talk Station.