Two Stocks Are Driving the Market — Is Your Portfolio at Risk?
On this week’s Best of Simply Money podcast, Bob and Brian reveal a stunning stat: just two companies—Alphabet and Nvidia—are responsible for a third of the S&P 500’s returns this year. If you think you’re diversified just because you own an index fund, think again. They dive into the historical precedent for today’s market concentration, the real risks of overexposure to big tech, and what smart investors should consider instead—including equal-weight ETFs, buffered products, and direct indexing.
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Bob: Tonight, a rather stunning statistic about the S&P 500 that should serve as a warning or maybe a wake-up call about potential lack of diversification. You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller here with Brian James.
And Brian, we talk about it all the time, the S&P 500, the bellwether, so to speak, of the broad U.S. market. And as I think most people know, the index contains the 500 largest U.S.-based companies. And we know that there are a handful of companies that make up much of the market cap of this index. You and I have been talking about this all year now. But listen to this, two companies now dominate. The S&P 500 is up about 17% this year. But Alphabet, otherwise known as Google, and NVIDIA are responsible for one third of that gain of that broad index, just two companies. And remember, there's 500 companies in that index.
Brian: Yeah, I think a lot of people were well aware that the S&P 500 means 500 companies. The tougher part of it is, I think that Brains want to say, well, okay, that must mean you add up the prices of all those, and then you divide it by 500, and boom, there's your index. That is not how it works. The S&P 500 is what's known as capitalization weighted. The bigger you are, the bigger of a portion of the S&P 500 you make. So, that's why Alphabet and NVIDIA, two of the biggest companies in the universe, therefore their moves swing a bigger bat than everybody else's. So, big tech stocks are representing, generally represent about half of the S&P 500's gains. Historically... And guess what, Bob? I did some historical research. I know you love when I do this.
Bob: I do love it. And we joke about it, but it's very valuable. I am glad...
Brian: Well, good, because I got some cool ones for you today. So, let's go through history. Has this happened before? And the answer is, kind of. So, in the 1970s, we had what was called the Nifty Fifty, and these were industrial names out of blast from the past. So, IBM, Xerox, and Polaroid. Remember the days when those were the ones you talked about at the water cooler. Even then, though, concentration levels were way below because the economy just didn't have the scale effects that came with the technology boom.
Bob: All right, before you go any further, you mentioned Polaroid. I have to ask, you're probably young enough, have you ever taken a photograph with a Polaroid camera where, you know, the actual picture spits out the film in the picture? Or are you way too young to have seen that?
Brian: No, I'm not as young as you might think, but I have an aunt in law who still has one and breaks it out over the holidays. I anticipate seeing that thing over the next several weeks here.
Bob: It's fun, isn't it?
Brian: Yeah. I'm not sure where she gets the film for this stuff anymore. I imagine it's got a little pricey. I can't run down to Wal-Mart for it anymore. But anyway, yeah, so then that was the Nifty Fifty. Those were the three big names and there were 47 other ones. Those were the ones that drove that entire index 1990s, and the tech boom began. And then at the beginning, it was all Microsoft, Cisco, General Electric, and Intel. But even at that point, the top five stocks only made up 20%, actually less than 20% back in 1999. And then all of a sudden, after the 2008 financial crisis, once the initial panic had subsided, money began to flow into these index funds and low volatility winners. We were focused on companies with strong balance sheets because of the PTSD that 2008 gave us. And this gave a kind of a steady winner-take-all environment. The bigger companies got, the more money they saw because people were kind of chasing performance after that.
So, ever since then, for a while, it was the Magnificent Seven. We've talked about them until, you know, somewhat recently. And most recently, it's been the Mag Three, Apple, Microsoft, and NVIDIA, which are now at the highest concentration in S&P history. Those top three alone account for about 20% to 22% of the index. We have not seen that since AT&T was the monopoly in the 1930s, Bob.
Bob: That is great research. And seriously, all joking aside, very helpful, I think. Hope our listeners feel the same. Now, what do we do about it? What are the risks out here? We talk about over concentration all the time, you know, especially folks locally here that have a boatload of money and stocks like Procter & Gamble and Kroger and GE. But, you know, when it starts to get overweighted, you know, in the index like this, a lot of people have a false sense of security thinking that they're diversified, and they are, but volatility can creep up in a hurry. If any of these big companies have an earnings blip or some kind of regulation or litigation come down the pike, there are a number of things that can take even a great company for the long-term off track, and really inject a lot of short-term volatility into a portfolio that most people never saw coming, and more importantly, they don't want to have in their portfolio.
I think the good news on this, you know, when I look at... And I like to study stocks, I think, as you know, Brian. I mean, on a valuation basis, I think the good news is Google and NVIDIA, by no sense, are dramatically overvalued on a PE basis and growth basis when you compare it to companies, let's say, like a Palantir or something like that. But, you know, put all that aside, I mean, and we talk about this all the time, anything can happen in the short term to really add a lot of volatility to any of these stocks, and I think we just need to be aware of it. So, talk about what we should do about it.
Brian: So, yeah, we want to make sure that we're taking advantage of what the index gives us in terms of, it's one investment we can make that will spread out the spread out the risks. But at the same time, you know, we can see some suffering in one part while the other parts are performing very well. But the capitalization effect kind of mutes that a little bit. So, I'm thinking back to 2022, Bob. We actually had an energy boom. Most people just remember that the market fell apart in 2022. Tech got hammered. A lot of things got completely pounded. Energy, believe it or not, was up 50% in 2022. That was the best performing S&P 500 sector in decades. Industrial utilities also held up well, but because the technology side was getting so hammered. Remember, this is when they were literally laying off tens of thousands of people, that the good things that were happening in other sectors completely disappeared and faded into the woodwork just didn't have an impact.
Bob: Well, and a lot a lot of these companies that are these high-flyer growth companies, especially in the small cap space, they are dependent on cheap access to money. And when the Federal Reserve raised interest rates like they did 7 times in 2022, that makes the cost of doing business go up significantly and profits tank as a result. But go ahead.
Brian: Yeah. So, let's go through some examples here and what happens and what does it feel like and what should be doing about it? So, example one here is what we call a windfall year. So, imagine at the start of 2025, you've got this broadly-diversified portfolio, got a little bit of everything, 60% S&P 500, 20% bonds, maybe 20% in alternatives or maybe cash. Because Alphabet and NVIDIA have done what they've done, then you see the index portion jump about 25%. And that makes your overall... And that honestly, Bob, that takes people's eyes off the off the road because you just see that your dollar amounts of your statements are going up, therefore, I've got other things to do today. I just know I'm making money. You know, overall, you might be looking at a 15%, 18% return. That feels great. Pat yourself on the back. But at the same time, remember what we're talking about here, 34% came out of two stocks. The rest of these companies barely moved, meaning that those two stocks could drag everything back under.
Bob: Yeah, a third of that growth, a third of your total return in this diversified index fund came from two companies. That's really what we're trying to highlight here.
Brian: Yeah. So, then let's fast forward a few years, right? So, you know, this could be regulatory crackdowns on big technology or perhaps of AI hype cools. That's what's driving the market right now, is this, AI is brand new and we don't know yet what the impact is going to be. Well, that could lead to a 40% drop in mega cap tech names over, say, a couple of years. Why would that happen? Because the market will have perceived that perhaps these things aren't quite as baked as we thought they were in terms of AI, or maybe the rules change on how much freedom technology has to just keep running wild. That's going to drag your index portion down in a huge, huge way. So, that could be down 20%. Other parts of your portfolio could be doing okay.
So, then if this is something that's happening while you are in the run up to retirement, now, all of a sudden, you need cash just because it's time to draw off the nest egg you've been building. That could force you to sell after a big drop, which is what we call sequence of returns risk. We don't get to control that, we have to prepare for it because I might retire at a time just before the market's going to take a big dip. It doesn't happen often, but it does happen, so we should prepare for it.
Bob: Yeah, absolutely. Let's talk about missed opportunities if we don't really diversify our portfolio. And Brian, going back to the whole AI conversation, I mean, if we go back to when the internet became ubiquitous here in the late '90s, early 2000s, all the early money rushed into the Internet infrastructure names. And it took some time for companies to actually make profits from using the internet, gathering efficiencies from the internet. And I believe, just an opinion, I think that the same thing is going to apply to alternative investments or AI stocks. Meaning, if this thing really is a thing, and I do believe it is, you're going to start to see over time all companies in all sectors, whether they're "AI" or not, they're going to use AI tools, and use that to be more efficient in the operation of their business. And that should raise all boats over time.
My point being, now might be a good time to look at a truly more diversified strategy. I'll throw one ETF out there. The symbol is RSP. It's just an equal weight S&P 500 fund. This is not a recommendation. I'm just saying there are things out there where you could just equalize your diversification and your risk a little bit by spreading things out. And that really does give you a more diversified group of holdings that would take certainly some volatility out of the equation.
Brian: Yeah, for sure. And I think that's a great suggestion to consider. And again, what Bob's talking about there is the opposite of what the S&P 500 is. We just got done talking about how the S&P 500 is capitalization weighted, meaning the bigger you are, the more of a percentage you make up of the index. That ticker symbol Bob gave is one where you literally do take the price of all 500 and divide it by 500 and that's your index.
So, the difference is you're not going to see the same performance. If you look at it historically, you're not going to see as much. So, the 10-year annualized return for the pure S&P 500 cap weighted is about 14% versus 11% for the S&P. However, there's a lot less volatility in terms of the difference of the drawdown between the two because of the difference in the calculation of the index. So, something to consider if that is a concern for you, but you have to understand the differences, when technology runs, the S&P 500 cap weighted is going to look fantastic, the more evenly balanced equal weighted one is going to, quote unquote, underperform. But that should be expected. It's going to have less volatility as well.
Bob: Some other things to consider, again, just to smooth out this volatility and get some true diversification in your portfolio or maybe some actively managed portfolios in the large cap space. No one's wanted to really talk about that for years now because of the higher fees and underperformance. I think those are starting to, at least, come into the conversation now. Because a good manager, they're going to recognize some over allocation to maybe some inflated valuations here, and spread the exposure more broadly. Things like private equity. And we've talked about buffered-ETFs before where you put some caps on the upside, protect yourself on the downside. There's a lot of things that you can do to still have the exposure we need to have in stocks, but do it a little smarter in the realm of diversification and downside protection.
Here's the Allworth advice, in a market where two or three stocks can move the needle for everyone, the smartest portfolios aren't the most concentrated, they're often the most balanced. Should you take Social Security early and invest the money and quote "beat the system"? Don't do anything before you hear our next segment on this topic. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. Think you're too wealthy to worry about health insurance premiums? Think again. Even people earning $100,000 or more are having to cut back on other things just to cover medical costs. We'll explain why and how to make sure you are not getting caught off guard. There's somewhat of a viral piece of retirement advice bouncing around social media right now, and it goes something like this, take Social Security early at 62, invest those Social Security checks, and you'll come out ahead. It sounds clever. Why wait for a bigger check later when you just could get that money now, put it into the market, and potentially, grow it, especially if the market gives us, let's say, 8% average annual rates of return, which, as a reminder, doesn't happen every year? So, let's walk through the logic of this "strategy", Brian.
Brian: Yeah, so this is something that I've been hearing a lot about from clients who have been forwarding me these videos of this guy walking in the woods, and then walking through the math of why he feels this is a good idea. And it's not the worst idea in the world. I'm glad that people are out there thinking about these. What's the right thing to do? That is the right thing to do, right? Consider it and look at it and understand it. But as we've gone through, what I've done for these folks who have sent this to me is, let's go back to your financial plan, which we've had in place for years, and let's play with it. The nice thing about having a financial plan is that when these questions, these things that make us go, "Hmm," come up, we can model them in a plan that we've been running for seven or eight years, and you can see directly what the impact is. I think a lot of people respond to this because they don't have a plan. And now all of a sudden, a YouTube video seems to make them think that they do.
So, let's kind of walk through, why are we talking about this in the first place? Well, why wait for a bigger check later when you could get that money now and invest to potentially grow it? That just makes all the sense in the world, right? Especially if the market returns 8% a year. But remember, it doesn't always. And if you start doing this in a rough year like '22, well, then you're never going to get the math to work. So, if you take Social Security at 62, Bob, you're going to get about 30% less than if you wait until full retirement age, which is going to be 66 or 67, somewhere in between, depending on when you were born. So, the theory says if you invest those smaller checks aggressively, throw them all in the stock market, then you can outpace that bigger check that you'd get if you waited. So, that's the claim in a perfect world, where markets always go up, nothing bad ever happens. And that's the way people do this analysis in a spreadsheet, which gives us a nice, linear gain. They don't add any risk to it. Then that looks great. But I don't think it's that simple.
Bob: Before we move forward with the but, I want to ask you, because you've been doing this a long time like I have, how many clients do you actually have who have ever done this, actually, take these checks and invest them? Because the people I've seen that take Social Security early, they do one of two things. They spend that money now, which there's nothing wrong with that. They use it as part of their income stream. Or we just find that their bank savings account just balloons and balloons and balloons for people that don't need the money. And they're sitting there earning a very low rate of return on that cash. That's what I actually see happen in the real world. How about you?
Brian: Yeah, absolutely. Because we're all human, right? It's kind of a pain in the butt to figure out, "Here's my Social Security check. And then I'm going to go set up a monthly bank ACH or something like that to have that money pulled into my investment account." So, a lot of people simply just don't do this. Or some people think, "I'll just do it monthly. I'll write a check every month." No, you won't. Nobody does that kind of thing forever. And I would say, as far as that, the break-even tends to be in the early to mid-'80s between waiting on Social Security and filing for it as soon as possible.
And I'll tell you what the pivot point is, Bob. I've done this a number of times. Every time we do this analysis, the pivot point tends to be, you can benefit more from Social Security by filing for Social Security early if your other alternative is only pre-tax dollars. In other words, if you're somebody who put away several million dollars in a 401(k) and it was all pre-tax because that was the only choice, then that means, of course, if you need, let's say, $100,000 a year out of that to live off of, then you're going to have to pull out more like $125,000 to pay the taxes on it. Social Security is taxed more favorably. So, it may make sense in that case to go ahead and rely on Social Security a little earlier, and therefore, let your investments run a little bit longer. Conversely, if you happen to have a pile of taxable dollars that aren't going to get taxed as harshly, then it may make sense to let Social Security continue to grow at its 8%, and then start selling off your assets at 15% capital gains to live off of, to create money to cover those expenses. To me, that's the bigger question than pulling this money out and pretending I'm going to invest it systematically over time, which people just don't tend to do.
Bob: I could not agree more. And I think that's a wonderful explanation of the pros and cons that you just provided. Because when we do these analyses in our head, or even with the software that you and I use, I mean, you got to make a few assumptions, and you got to be right to "beat" the system. You got to assume a rate of return. You got to guess on when you're going to die. Good luck with that. And you got to evaluate your tax situation and where your other cash flow is going to come from. There's a lot of things that you need to factor in. And none of us are smart enough to get all three of those things right. And that's why I think, to me, use Social Security for what it's there for, a guaranteed source of income. And don't try to get too cute with turning it into a short-term investment vehicle. And like you said, run the numbers and look at the taxability of your income sources, and hopefully, you come up with a good solution.
Brian: And I'll also throw out, Bob, the kind of folks who are looking for this information, which first of all, it's not bad information. It's fantastic that people are thinking of, how do I optimize? How do I do this? And they're looking to the internet for that information. There's nothing wrong with that. These are folks who are doing a lot of detailed inspection and trying to make intelligent, educated decisions. That is not at all a bad thing. But the next thing they're going to run across are things such as the Required Minimum Distribution. So, if I'm in a situation where later I'm worried about my RMDs, which is when I'm forced to take money out, then I'm going to be wanting to do Roth conversions. If I'm going to do Roth conversions in my early retirement years, then turning on that Social Security check is going to rob me of some of the lower parts of the tax brackets that I could otherwise be using to do Roth conversions. And not to mention, you could run into something called Irma, which may drive up your Medicare premiums based on your income. So, none of these techniques have zero impact on anything else. It's all connected.
Bob: And it's getting more and more complicated rather than easier to do this analysis. I've talked about a couple of recent client meetings I've had in the last few weeks exactly on these topics that you just covered. When you start running these cash flows through good tax software, yeah, you've got to worry about the Irma tax on Medicare. You've got to worry about the phase out of this deduction that the seniors are getting, the "Social Security is free deduction". There's a lot of factors to consider. And it's not just a back of the cocktail napkin calculation.
Here's the Allworth advice, don't trade a guaranteed income stream for life for a risky bet in the markets. If you don't need Social Security at 62, don't let social media convince you to sabotage your long term plan. Coming up next, we're going to talk about why cybersecurity crimes against seniors are becoming literally a family emergency, and what you can do about it. And I think this is a timely discussion now that we're entering the holiday season and more and more families are together and have an opportunity to talk about and help out our senior loved ones. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. Joined tonight by our technology and cybersecurity guru, Mr. Dave Hatter. Dave, it's always great to have you with us. Tonight, you want to talk about elder scams. And this is something that seems to be growing and growing in regularity, and it's something we all need to be aware of and make plans to prevent.
Dave: Yeah, guys, sadly, it is. I appreciate you having me on as always. I think this is an important topic because I have elderly parents. I know many of your listeners do, and this is a growing concern. So, just one stat. And this is a great site for folks, by the way, just for general stats and information. The Internet Crime Complaint Center, IC3, which is run by the FBI, they put out a fraud report every year that's got all kinds of stats in it. And again, the site is just useful in a lot of ways. I encourage people to bookmark it, ic3.gov. Elder fraud losses hit $4.88 billion in 2024, a staggering 43% jump from the previous year. The average senior victim lost over $83,000.
And then another good site for some insight into this is the Federal Trade Commission, FTC, ftc.gov. So, here's a headline from a public service announcement they put out. Business and government impersonators go after older adults' life savings. And then they have some stats in there, too. They say, in fact, reported losses of over $100,000 increased nearly seven-fold from 2020 to 2024. So, I hate to always be the doomsday guy, the guy with the tinfoil hat, always warning about this stuff. But I don't want to see people lose their entire life savings. And as we spend more time online in every facet of our lives, working, education, school, you name it, think about it, what are you not doing online nowadays? It just creates that many more attack vectors for the bad guys. You're throwing things like artificial intelligence, the ability to clone someone's voice to generate incredibly realistic videos, incredibly realistic text to kind of eliminate all the old school tells like, "Well, I got an email asking me to do something weird and I need to send gift cards, and the Hamilton County Sheriff's going to arrest me, but the grammar is all weird," and so forth. All that's gone. The bad guys have access to low cost or free tools that make it really easy for them to run these sort of scams at scale. And again, you don't have to take my word for it. You can see what the FBI is saying, see what the FTC is saying.
And at one last point, and then I'll let you guys start asking some specific questions, is, again, the documentation is all out there. The scams are increasing. They're targeting elderly people in some cases, but we're all subject to all kinds of scams. And this kind of education is important, as is a healthy dose of skepticism and vigilance, you know. The Hamilton County Sheriff is not going to call you and tell you that because of a parking ticket, they're coming at 3 to arrest you if you don't buy gift cards or send a Venmo payment, right? They don't operate that way.
Brian: Hey, Dave. So, yeah, and those are all great examples, but you're right. This isn't new news anymore. But the one that is new to me is the deepfake stuff. I don't think we've even scratched the surface on that. I have yet to hear a story about somebody losing an awful lot of money yet to that, but that is coming, and it's going to be huge. So, these articles you sent us extremely helpful here, but they reference an awful lot about cyber insurance. So, I don't want to drag you off course here, but is this something that we should be considering? I mean, maybe we all have home insurance, we have fire insurance, we got flood insurance in some case. Are we at a point where we should all consider cyber insurance, do you think?
Dave: I think it's worth. As a business, absolutely. But I also find that many small businesses that I talked to about this stuff... Because in my real job, I'm out talking about this all the time and trying to help businesses protect their assets.
Brian: What do you mean your real job. Come on, Dave, this is your real job.
Dave: Yeah. People will say, "Well, I've got cyber insurance. I don't care about this." And I just like to remind folks, well, your fire insurance does not keep your building from burning down. Ideally, it helps you recover should that happen. So, you can't just say, "Well, I got insurance. I'm good to go." You need a strategy where you're trying to pardon your environment, defend yourself against these kind of attacks, be smart, be vigilant, move slow, and then be resilient. Part of that resilience, in addition to backups and so forth, might be insurance. You know, as an individual, does it make sense to get some kind of personal cyber insurance? Maybe, especially if you have a lot of risk, if you're a high net worth person. But I think there's a lot of things you can do, guys. Again, the first step is always knowledge, right? I mean, you can't defend against something you don't know about. Knowledge, skepticism, it's doing the simple things we talk about all the time. Strong, unique passwords, multi-factor authentication. It's also doing things like freezing your credit. I'm sure you guys would agree. My credit is always frozen.
Brian: I've frozen mine.
Bob: Yeah, mine's frozen.
Dave: Until I need to get credit, I keep it frozen. I unlock it when I need it, and I lock it back. You know, it's not foolproof, but you're raising the bar. You're making yourself a much more difficult target for the bad guys. Because in most of these cases, especially, you know, these targeting of elders, they're not specifically targeting individuals. They're going for low hanging fruit. And if you take the kind of advice we're given out here, if you harden yourself, if you do these basic practices, you're going to be a much more difficult target. They're just going to move on.
And again, the skepticism. You know, I encourage any of your listeners, pick up the phone and try to call Microsoft or Google and get help. And my point is, they are not looking at your computer and going, "Hey, I think you've got a virus." I'm going to call you up today and tell you, "Let me help you remove this virus." If you get a call, an unsolicited call from a company that claims you have some kind of virus and they want to help you, the likelihood that that is not a scam, is probably greater than all three of us getting hit by a meteor right now. It is a scam, right? So, again, vigilance, knowledge, skepticism.
And when you look at the numbers, one of these reports say there's $85 trillion in wealth out there in the baby boom and silent generation. The bad guys know this, right? They know there's an enormous amount of money. They know, in a lot of cases, older people may not even be aware that it's possible to create a perfect, deep, fake audio or video. And you guys mentioned, there is documented evidence already more in a corporate setting of large scale fraud that's been perpetrated using deep, fake voice cloning and videos. I encourage your folks, go look up the story about the Ferrari CFO who nearly got deep fake voice cloned into fraud from the so-called Ferrari CEO. And these are people that know each other personally. This is a real thing.
Brian: I think you just gave us a segment maybe for next week. I'm going to write that one down.
Dave: It's a wild story. Look into it. Well documented.
Bob: Dave, I was going to ask about the whole phone thing and voice cloning. So, I'll just ask it this way. I mean, are we now at a point where it's just... Because I know what I do. I never answer my phone ever, ever, ever, unless I know who's calling me. I just don't answer my phone. Are we at the point now where our advice to folks, especially elderly and maybe vulnerable folks, just give that blanket advice, do not answer your phone unless you know who it is. Are we at that point? Is that the best way to protect folks?
Dave: I think so. I can tell you, I do not ever answer my phone from a number I don't recognize. And I'm even sometimes skeptical if it is a number I do recognize, because keep in mind, guys, spoofing, which in my mind is the biggest driver of all this. Creating something that looks realistic, but isn't, is fairly easy to do in any digital mechanism. It's really easy to send a phone call from any number you want if you know what you're doing and it does not require a lot of skills. So, you know, if I could find one of your two cell phone numbers, or if I happen to have it, I could easily spoof a call that would look like it came from your cell phone. I could easily send a text that looks like it comes from you. And, you know, same thing with email.
So, skepticism, vigilance, don't answer the phone. If it's important, they'll leave a message or they'll contact you some other way. Go read what the government says, you know, IRS, FBI, they are not going to call you and tell you some terrible thing is going to happen to you if you don't make a payment by 5 p.m. They don't operate that way and they state that clearly on their own websites. So, again, there's tons of useful information out there that can help people avoid these kind of scams, ftc.gov, ic3.gov. But it all starts with skepticism and caution like, don't answer your phone if you don't recognize the number. They'll leave a message and if they don't, must not be important.
Bob: All right. Good stuff as always, Dave. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. When we talk about inflation, most people think groceries, housing, putting gas in their car, but lately, there's one category that's quietly draining wallets, especially for high income earners, and that's healthcare, Brian. It really is becoming a topic of conversation or should be for everyone. Share some new data that's just come out from our friends at Mercer.
Brian: So, new report from... Mercer is a big, global consulting firm. So, in 2026, employees could see their total health benefit cost jump nearly 7%. That's the biggest spike we've seen, Bob, in 15 years. So, that translates to average cost per employee pushing over 18,500 bucks per year. That's the cost at the company level. But of course, the total cost there and the employees share in that by paying their premiums on each and every paycheck. That's not just sticker shock, though, that's structural, right? This is not only the premiums going up, we're using more medical services, there are more prescriptions, and we are aging as a population. So, we're just starting to see the impact of all this wonderful technology and advances we've seen extending life expectancy. Things are just starting to add up now. And of course, we've got the ever present desire for profit from the companies who bring us these wonderful solutions. So, that, of course, has to maintain a certain margin as well. There's more chronic issues out there, more treatments, just more stuff that we're doing, and it adds up.
Bob: Yeah, and it's not just retirees. I mean, if you're a 55-year-old executive, say, with a $400,000 annual income, you're still feeling this. According to a recent survey from KeyBank, 30% of people making six figures or more say health care is now their most impactful cost of living increase, more than groceries, more than housing, more than a lot of things, which tells you something. Even with people with high incomes, they're starting to have to make difficult choices. And I don't want to get into a political conversation here, but one way or the other, we are going to need to bend the cost curve in this country on health care because it really is getting out of hand. And when everybody's feeling the pain, not just high income earners or low income earners, I think that's the time where the phone calls to congressional leaders will go up, and they'll be forced to get in a room and maybe fix some of this. But, yeah, it's a real issue, and it's coming up more and more in the review meetings that we're having with clients.
Brian: Yep, and so here's what we should be doing. Now, maybe we're a little late on this segment here because I think for most people, we're past enrollment period. But if you want to take advantage of this and try to protect yourself, read in detail the stuff you get every November that gives you your options for your health care insurance. And really what I'm getting at here is, look in depth at that high deductible plan. That's the one that might look... Don't rule it out because it looks more expensive and you might have more premium to pay out of your pocket. That also comes along with the health savings account and your ability to make triple tax advantage investments.
The dollars that flow in are deductible on the way in. If you make sure they are invested, and that is a huge step that gets overlooked, make sure it gets invested in something and that may require you to move it from one financial institution to another. Then those investments also will grow tax deferred. And if it's used for health care expenses down the road, then it will come out tax free. The fun thing is you do not have to use expenses that you had during that current year. You're taking the distribution. You can pull receipts from 15 years ago and use that, claim that to take a distribution. So, you could be taking tax-free dollars out to go on vacation as long as you have prior receipts you haven't used before to cover those expenses. So, give that some thought.
Bob: Here's the Allworth advice, rising health care costs aren't just a line item anymore, they are a growing concern and growing risk to a sound financial plan. Understand your insurance benefits plan. Use a tax advantage tool like an HSA, like Brian just talked about, and make sure your financial plan is built to absorb this kind of cost volatility. Coming up next, I've got my two cents on how to get out in front early and get a head start on retirement. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. Hey, Brian, I know we were joking around a little bit on yesterday's show about some of the conversations I was having with a large group of family members over Thanksgiving. The younger crowd was sitting around late at night. We're all watching football. They're playing cards. And I start to get peppered with questions. And the one that really is still in my head here is my niece who I think is, I don't know, 22 years old. She's like, "Uncle Bob, when am I going to be able to retire?"
This young lady's probably only been working for about six months. And I looked at her and I said, "Hey, spend a little bit less money than you make. And put the difference away in a stock market index fund. And do that for about 40 years, and you'll be absolutely fine." And she looked at me and so did the group of, I'll call them youngsters in the room, like I had four heads. And I was talking to my son, our middle son, who's 28, later about that. And he's like, "Yeah, dad." He's like, "When I look at my friends, I would say, on average, my friends and peer group, they're spending $150 to $200 every weekend just eating out and drinking out. That's the kind of money that they're spending on this kind of stuff."
So, I want to throw out one example. And here's the other thing. I'm not knocking the younger folks or disrespecting them at all, because one of the things I really admire about a lot of them is they work out a lot. They stay in tremendously good shape. So, there is a lot of discipline there. And I see that. So, I want to throw out one mathematical example, just going back to basics here that everyone maybe could share with their young loved ones here over the holidays. If you take $100 a month, so this is money that you would otherwise spend on a FanDuel account or buying a few drinks at the bar, $100 a month, throw that into a Roth IRA, and let's just say you earn 8% per year. And you do that starting at age 25 and do it for 40 years, so, that gets you to 65. You want to know what you've got at the end of that 40 years, Brian?
Brian: I bet it's got...
Bob: You probably do this things. It's $345,000. That's just taking a little bit of money and diverting that from some of these wasteful ways, some of this money is being spent. And that gets people off to a great start. And what I find, and I've seen this with my own adult children, once we can get them started and they actually see the money go into account, see it start to grow in the market, the light bulb goes off, and they start saving even a little bit more.
Brian: Yeah, couldn't agree more. I think that's great advice. And, yeah, great to share with your families you're going to be seeing over the next several weeks.
Bob: Thanks for listening tonight. You've been listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
And Brian, we talk about it all the time, the S&P 500, the bellwether, so to speak, of the broad U.S. market. And as I think most people know, the index contains the 500 largest U.S.-based companies. And we know that there are a handful of companies that make up much of the market cap of this index. You and I have been talking about this all year now. But listen to this, two companies now dominate. The S&P 500 is up about 17% this year. But Alphabet, otherwise known as Google, and NVIDIA are responsible for one third of that gain of that broad index, just two companies. And remember, there's 500 companies in that index.
Brian: Yeah, I think a lot of people were well aware that the S&P 500 means 500 companies. The tougher part of it is, I think that Brains want to say, well, okay, that must mean you add up the prices of all those, and then you divide it by 500, and boom, there's your index. That is not how it works. The S&P 500 is what's known as capitalization weighted. The bigger you are, the bigger of a portion of the S&P 500 you make. So, that's why Alphabet and NVIDIA, two of the biggest companies in the universe, therefore their moves swing a bigger bat than everybody else's. So, big tech stocks are representing, generally represent about half of the S&P 500's gains. Historically... And guess what, Bob? I did some historical research. I know you love when I do this.
Bob: I do love it. And we joke about it, but it's very valuable. I am glad...
Brian: Well, good, because I got some cool ones for you today. So, let's go through history. Has this happened before? And the answer is, kind of. So, in the 1970s, we had what was called the Nifty Fifty, and these were industrial names out of blast from the past. So, IBM, Xerox, and Polaroid. Remember the days when those were the ones you talked about at the water cooler. Even then, though, concentration levels were way below because the economy just didn't have the scale effects that came with the technology boom.
Bob: All right, before you go any further, you mentioned Polaroid. I have to ask, you're probably young enough, have you ever taken a photograph with a Polaroid camera where, you know, the actual picture spits out the film in the picture? Or are you way too young to have seen that?
Brian: No, I'm not as young as you might think, but I have an aunt in law who still has one and breaks it out over the holidays. I anticipate seeing that thing over the next several weeks here.
Bob: It's fun, isn't it?
Brian: Yeah. I'm not sure where she gets the film for this stuff anymore. I imagine it's got a little pricey. I can't run down to Wal-Mart for it anymore. But anyway, yeah, so then that was the Nifty Fifty. Those were the three big names and there were 47 other ones. Those were the ones that drove that entire index 1990s, and the tech boom began. And then at the beginning, it was all Microsoft, Cisco, General Electric, and Intel. But even at that point, the top five stocks only made up 20%, actually less than 20% back in 1999. And then all of a sudden, after the 2008 financial crisis, once the initial panic had subsided, money began to flow into these index funds and low volatility winners. We were focused on companies with strong balance sheets because of the PTSD that 2008 gave us. And this gave a kind of a steady winner-take-all environment. The bigger companies got, the more money they saw because people were kind of chasing performance after that.
So, ever since then, for a while, it was the Magnificent Seven. We've talked about them until, you know, somewhat recently. And most recently, it's been the Mag Three, Apple, Microsoft, and NVIDIA, which are now at the highest concentration in S&P history. Those top three alone account for about 20% to 22% of the index. We have not seen that since AT&T was the monopoly in the 1930s, Bob.
Bob: That is great research. And seriously, all joking aside, very helpful, I think. Hope our listeners feel the same. Now, what do we do about it? What are the risks out here? We talk about over concentration all the time, you know, especially folks locally here that have a boatload of money and stocks like Procter & Gamble and Kroger and GE. But, you know, when it starts to get overweighted, you know, in the index like this, a lot of people have a false sense of security thinking that they're diversified, and they are, but volatility can creep up in a hurry. If any of these big companies have an earnings blip or some kind of regulation or litigation come down the pike, there are a number of things that can take even a great company for the long-term off track, and really inject a lot of short-term volatility into a portfolio that most people never saw coming, and more importantly, they don't want to have in their portfolio.
I think the good news on this, you know, when I look at... And I like to study stocks, I think, as you know, Brian. I mean, on a valuation basis, I think the good news is Google and NVIDIA, by no sense, are dramatically overvalued on a PE basis and growth basis when you compare it to companies, let's say, like a Palantir or something like that. But, you know, put all that aside, I mean, and we talk about this all the time, anything can happen in the short term to really add a lot of volatility to any of these stocks, and I think we just need to be aware of it. So, talk about what we should do about it.
Brian: So, yeah, we want to make sure that we're taking advantage of what the index gives us in terms of, it's one investment we can make that will spread out the spread out the risks. But at the same time, you know, we can see some suffering in one part while the other parts are performing very well. But the capitalization effect kind of mutes that a little bit. So, I'm thinking back to 2022, Bob. We actually had an energy boom. Most people just remember that the market fell apart in 2022. Tech got hammered. A lot of things got completely pounded. Energy, believe it or not, was up 50% in 2022. That was the best performing S&P 500 sector in decades. Industrial utilities also held up well, but because the technology side was getting so hammered. Remember, this is when they were literally laying off tens of thousands of people, that the good things that were happening in other sectors completely disappeared and faded into the woodwork just didn't have an impact.
Bob: Well, and a lot a lot of these companies that are these high-flyer growth companies, especially in the small cap space, they are dependent on cheap access to money. And when the Federal Reserve raised interest rates like they did 7 times in 2022, that makes the cost of doing business go up significantly and profits tank as a result. But go ahead.
Brian: Yeah. So, let's go through some examples here and what happens and what does it feel like and what should be doing about it? So, example one here is what we call a windfall year. So, imagine at the start of 2025, you've got this broadly-diversified portfolio, got a little bit of everything, 60% S&P 500, 20% bonds, maybe 20% in alternatives or maybe cash. Because Alphabet and NVIDIA have done what they've done, then you see the index portion jump about 25%. And that makes your overall... And that honestly, Bob, that takes people's eyes off the off the road because you just see that your dollar amounts of your statements are going up, therefore, I've got other things to do today. I just know I'm making money. You know, overall, you might be looking at a 15%, 18% return. That feels great. Pat yourself on the back. But at the same time, remember what we're talking about here, 34% came out of two stocks. The rest of these companies barely moved, meaning that those two stocks could drag everything back under.
Bob: Yeah, a third of that growth, a third of your total return in this diversified index fund came from two companies. That's really what we're trying to highlight here.
Brian: Yeah. So, then let's fast forward a few years, right? So, you know, this could be regulatory crackdowns on big technology or perhaps of AI hype cools. That's what's driving the market right now, is this, AI is brand new and we don't know yet what the impact is going to be. Well, that could lead to a 40% drop in mega cap tech names over, say, a couple of years. Why would that happen? Because the market will have perceived that perhaps these things aren't quite as baked as we thought they were in terms of AI, or maybe the rules change on how much freedom technology has to just keep running wild. That's going to drag your index portion down in a huge, huge way. So, that could be down 20%. Other parts of your portfolio could be doing okay.
So, then if this is something that's happening while you are in the run up to retirement, now, all of a sudden, you need cash just because it's time to draw off the nest egg you've been building. That could force you to sell after a big drop, which is what we call sequence of returns risk. We don't get to control that, we have to prepare for it because I might retire at a time just before the market's going to take a big dip. It doesn't happen often, but it does happen, so we should prepare for it.
Bob: Yeah, absolutely. Let's talk about missed opportunities if we don't really diversify our portfolio. And Brian, going back to the whole AI conversation, I mean, if we go back to when the internet became ubiquitous here in the late '90s, early 2000s, all the early money rushed into the Internet infrastructure names. And it took some time for companies to actually make profits from using the internet, gathering efficiencies from the internet. And I believe, just an opinion, I think that the same thing is going to apply to alternative investments or AI stocks. Meaning, if this thing really is a thing, and I do believe it is, you're going to start to see over time all companies in all sectors, whether they're "AI" or not, they're going to use AI tools, and use that to be more efficient in the operation of their business. And that should raise all boats over time.
My point being, now might be a good time to look at a truly more diversified strategy. I'll throw one ETF out there. The symbol is RSP. It's just an equal weight S&P 500 fund. This is not a recommendation. I'm just saying there are things out there where you could just equalize your diversification and your risk a little bit by spreading things out. And that really does give you a more diversified group of holdings that would take certainly some volatility out of the equation.
Brian: Yeah, for sure. And I think that's a great suggestion to consider. And again, what Bob's talking about there is the opposite of what the S&P 500 is. We just got done talking about how the S&P 500 is capitalization weighted, meaning the bigger you are, the more of a percentage you make up of the index. That ticker symbol Bob gave is one where you literally do take the price of all 500 and divide it by 500 and that's your index.
So, the difference is you're not going to see the same performance. If you look at it historically, you're not going to see as much. So, the 10-year annualized return for the pure S&P 500 cap weighted is about 14% versus 11% for the S&P. However, there's a lot less volatility in terms of the difference of the drawdown between the two because of the difference in the calculation of the index. So, something to consider if that is a concern for you, but you have to understand the differences, when technology runs, the S&P 500 cap weighted is going to look fantastic, the more evenly balanced equal weighted one is going to, quote unquote, underperform. But that should be expected. It's going to have less volatility as well.
Bob: Some other things to consider, again, just to smooth out this volatility and get some true diversification in your portfolio or maybe some actively managed portfolios in the large cap space. No one's wanted to really talk about that for years now because of the higher fees and underperformance. I think those are starting to, at least, come into the conversation now. Because a good manager, they're going to recognize some over allocation to maybe some inflated valuations here, and spread the exposure more broadly. Things like private equity. And we've talked about buffered-ETFs before where you put some caps on the upside, protect yourself on the downside. There's a lot of things that you can do to still have the exposure we need to have in stocks, but do it a little smarter in the realm of diversification and downside protection.
Here's the Allworth advice, in a market where two or three stocks can move the needle for everyone, the smartest portfolios aren't the most concentrated, they're often the most balanced. Should you take Social Security early and invest the money and quote "beat the system"? Don't do anything before you hear our next segment on this topic. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. Think you're too wealthy to worry about health insurance premiums? Think again. Even people earning $100,000 or more are having to cut back on other things just to cover medical costs. We'll explain why and how to make sure you are not getting caught off guard. There's somewhat of a viral piece of retirement advice bouncing around social media right now, and it goes something like this, take Social Security early at 62, invest those Social Security checks, and you'll come out ahead. It sounds clever. Why wait for a bigger check later when you just could get that money now, put it into the market, and potentially, grow it, especially if the market gives us, let's say, 8% average annual rates of return, which, as a reminder, doesn't happen every year? So, let's walk through the logic of this "strategy", Brian.
Brian: Yeah, so this is something that I've been hearing a lot about from clients who have been forwarding me these videos of this guy walking in the woods, and then walking through the math of why he feels this is a good idea. And it's not the worst idea in the world. I'm glad that people are out there thinking about these. What's the right thing to do? That is the right thing to do, right? Consider it and look at it and understand it. But as we've gone through, what I've done for these folks who have sent this to me is, let's go back to your financial plan, which we've had in place for years, and let's play with it. The nice thing about having a financial plan is that when these questions, these things that make us go, "Hmm," come up, we can model them in a plan that we've been running for seven or eight years, and you can see directly what the impact is. I think a lot of people respond to this because they don't have a plan. And now all of a sudden, a YouTube video seems to make them think that they do.
So, let's kind of walk through, why are we talking about this in the first place? Well, why wait for a bigger check later when you could get that money now and invest to potentially grow it? That just makes all the sense in the world, right? Especially if the market returns 8% a year. But remember, it doesn't always. And if you start doing this in a rough year like '22, well, then you're never going to get the math to work. So, if you take Social Security at 62, Bob, you're going to get about 30% less than if you wait until full retirement age, which is going to be 66 or 67, somewhere in between, depending on when you were born. So, the theory says if you invest those smaller checks aggressively, throw them all in the stock market, then you can outpace that bigger check that you'd get if you waited. So, that's the claim in a perfect world, where markets always go up, nothing bad ever happens. And that's the way people do this analysis in a spreadsheet, which gives us a nice, linear gain. They don't add any risk to it. Then that looks great. But I don't think it's that simple.
Bob: Before we move forward with the but, I want to ask you, because you've been doing this a long time like I have, how many clients do you actually have who have ever done this, actually, take these checks and invest them? Because the people I've seen that take Social Security early, they do one of two things. They spend that money now, which there's nothing wrong with that. They use it as part of their income stream. Or we just find that their bank savings account just balloons and balloons and balloons for people that don't need the money. And they're sitting there earning a very low rate of return on that cash. That's what I actually see happen in the real world. How about you?
Brian: Yeah, absolutely. Because we're all human, right? It's kind of a pain in the butt to figure out, "Here's my Social Security check. And then I'm going to go set up a monthly bank ACH or something like that to have that money pulled into my investment account." So, a lot of people simply just don't do this. Or some people think, "I'll just do it monthly. I'll write a check every month." No, you won't. Nobody does that kind of thing forever. And I would say, as far as that, the break-even tends to be in the early to mid-'80s between waiting on Social Security and filing for it as soon as possible.
And I'll tell you what the pivot point is, Bob. I've done this a number of times. Every time we do this analysis, the pivot point tends to be, you can benefit more from Social Security by filing for Social Security early if your other alternative is only pre-tax dollars. In other words, if you're somebody who put away several million dollars in a 401(k) and it was all pre-tax because that was the only choice, then that means, of course, if you need, let's say, $100,000 a year out of that to live off of, then you're going to have to pull out more like $125,000 to pay the taxes on it. Social Security is taxed more favorably. So, it may make sense in that case to go ahead and rely on Social Security a little earlier, and therefore, let your investments run a little bit longer. Conversely, if you happen to have a pile of taxable dollars that aren't going to get taxed as harshly, then it may make sense to let Social Security continue to grow at its 8%, and then start selling off your assets at 15% capital gains to live off of, to create money to cover those expenses. To me, that's the bigger question than pulling this money out and pretending I'm going to invest it systematically over time, which people just don't tend to do.
Bob: I could not agree more. And I think that's a wonderful explanation of the pros and cons that you just provided. Because when we do these analyses in our head, or even with the software that you and I use, I mean, you got to make a few assumptions, and you got to be right to "beat" the system. You got to assume a rate of return. You got to guess on when you're going to die. Good luck with that. And you got to evaluate your tax situation and where your other cash flow is going to come from. There's a lot of things that you need to factor in. And none of us are smart enough to get all three of those things right. And that's why I think, to me, use Social Security for what it's there for, a guaranteed source of income. And don't try to get too cute with turning it into a short-term investment vehicle. And like you said, run the numbers and look at the taxability of your income sources, and hopefully, you come up with a good solution.
Brian: And I'll also throw out, Bob, the kind of folks who are looking for this information, which first of all, it's not bad information. It's fantastic that people are thinking of, how do I optimize? How do I do this? And they're looking to the internet for that information. There's nothing wrong with that. These are folks who are doing a lot of detailed inspection and trying to make intelligent, educated decisions. That is not at all a bad thing. But the next thing they're going to run across are things such as the Required Minimum Distribution. So, if I'm in a situation where later I'm worried about my RMDs, which is when I'm forced to take money out, then I'm going to be wanting to do Roth conversions. If I'm going to do Roth conversions in my early retirement years, then turning on that Social Security check is going to rob me of some of the lower parts of the tax brackets that I could otherwise be using to do Roth conversions. And not to mention, you could run into something called Irma, which may drive up your Medicare premiums based on your income. So, none of these techniques have zero impact on anything else. It's all connected.
Bob: And it's getting more and more complicated rather than easier to do this analysis. I've talked about a couple of recent client meetings I've had in the last few weeks exactly on these topics that you just covered. When you start running these cash flows through good tax software, yeah, you've got to worry about the Irma tax on Medicare. You've got to worry about the phase out of this deduction that the seniors are getting, the "Social Security is free deduction". There's a lot of factors to consider. And it's not just a back of the cocktail napkin calculation.
Here's the Allworth advice, don't trade a guaranteed income stream for life for a risky bet in the markets. If you don't need Social Security at 62, don't let social media convince you to sabotage your long term plan. Coming up next, we're going to talk about why cybersecurity crimes against seniors are becoming literally a family emergency, and what you can do about it. And I think this is a timely discussion now that we're entering the holiday season and more and more families are together and have an opportunity to talk about and help out our senior loved ones. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. Joined tonight by our technology and cybersecurity guru, Mr. Dave Hatter. Dave, it's always great to have you with us. Tonight, you want to talk about elder scams. And this is something that seems to be growing and growing in regularity, and it's something we all need to be aware of and make plans to prevent.
Dave: Yeah, guys, sadly, it is. I appreciate you having me on as always. I think this is an important topic because I have elderly parents. I know many of your listeners do, and this is a growing concern. So, just one stat. And this is a great site for folks, by the way, just for general stats and information. The Internet Crime Complaint Center, IC3, which is run by the FBI, they put out a fraud report every year that's got all kinds of stats in it. And again, the site is just useful in a lot of ways. I encourage people to bookmark it, ic3.gov. Elder fraud losses hit $4.88 billion in 2024, a staggering 43% jump from the previous year. The average senior victim lost over $83,000.
And then another good site for some insight into this is the Federal Trade Commission, FTC, ftc.gov. So, here's a headline from a public service announcement they put out. Business and government impersonators go after older adults' life savings. And then they have some stats in there, too. They say, in fact, reported losses of over $100,000 increased nearly seven-fold from 2020 to 2024. So, I hate to always be the doomsday guy, the guy with the tinfoil hat, always warning about this stuff. But I don't want to see people lose their entire life savings. And as we spend more time online in every facet of our lives, working, education, school, you name it, think about it, what are you not doing online nowadays? It just creates that many more attack vectors for the bad guys. You're throwing things like artificial intelligence, the ability to clone someone's voice to generate incredibly realistic videos, incredibly realistic text to kind of eliminate all the old school tells like, "Well, I got an email asking me to do something weird and I need to send gift cards, and the Hamilton County Sheriff's going to arrest me, but the grammar is all weird," and so forth. All that's gone. The bad guys have access to low cost or free tools that make it really easy for them to run these sort of scams at scale. And again, you don't have to take my word for it. You can see what the FBI is saying, see what the FTC is saying.
And at one last point, and then I'll let you guys start asking some specific questions, is, again, the documentation is all out there. The scams are increasing. They're targeting elderly people in some cases, but we're all subject to all kinds of scams. And this kind of education is important, as is a healthy dose of skepticism and vigilance, you know. The Hamilton County Sheriff is not going to call you and tell you that because of a parking ticket, they're coming at 3 to arrest you if you don't buy gift cards or send a Venmo payment, right? They don't operate that way.
Brian: Hey, Dave. So, yeah, and those are all great examples, but you're right. This isn't new news anymore. But the one that is new to me is the deepfake stuff. I don't think we've even scratched the surface on that. I have yet to hear a story about somebody losing an awful lot of money yet to that, but that is coming, and it's going to be huge. So, these articles you sent us extremely helpful here, but they reference an awful lot about cyber insurance. So, I don't want to drag you off course here, but is this something that we should be considering? I mean, maybe we all have home insurance, we have fire insurance, we got flood insurance in some case. Are we at a point where we should all consider cyber insurance, do you think?
Dave: I think it's worth. As a business, absolutely. But I also find that many small businesses that I talked to about this stuff... Because in my real job, I'm out talking about this all the time and trying to help businesses protect their assets.
Brian: What do you mean your real job. Come on, Dave, this is your real job.
Dave: Yeah. People will say, "Well, I've got cyber insurance. I don't care about this." And I just like to remind folks, well, your fire insurance does not keep your building from burning down. Ideally, it helps you recover should that happen. So, you can't just say, "Well, I got insurance. I'm good to go." You need a strategy where you're trying to pardon your environment, defend yourself against these kind of attacks, be smart, be vigilant, move slow, and then be resilient. Part of that resilience, in addition to backups and so forth, might be insurance. You know, as an individual, does it make sense to get some kind of personal cyber insurance? Maybe, especially if you have a lot of risk, if you're a high net worth person. But I think there's a lot of things you can do, guys. Again, the first step is always knowledge, right? I mean, you can't defend against something you don't know about. Knowledge, skepticism, it's doing the simple things we talk about all the time. Strong, unique passwords, multi-factor authentication. It's also doing things like freezing your credit. I'm sure you guys would agree. My credit is always frozen.
Brian: I've frozen mine.
Bob: Yeah, mine's frozen.
Dave: Until I need to get credit, I keep it frozen. I unlock it when I need it, and I lock it back. You know, it's not foolproof, but you're raising the bar. You're making yourself a much more difficult target for the bad guys. Because in most of these cases, especially, you know, these targeting of elders, they're not specifically targeting individuals. They're going for low hanging fruit. And if you take the kind of advice we're given out here, if you harden yourself, if you do these basic practices, you're going to be a much more difficult target. They're just going to move on.
And again, the skepticism. You know, I encourage any of your listeners, pick up the phone and try to call Microsoft or Google and get help. And my point is, they are not looking at your computer and going, "Hey, I think you've got a virus." I'm going to call you up today and tell you, "Let me help you remove this virus." If you get a call, an unsolicited call from a company that claims you have some kind of virus and they want to help you, the likelihood that that is not a scam, is probably greater than all three of us getting hit by a meteor right now. It is a scam, right? So, again, vigilance, knowledge, skepticism.
And when you look at the numbers, one of these reports say there's $85 trillion in wealth out there in the baby boom and silent generation. The bad guys know this, right? They know there's an enormous amount of money. They know, in a lot of cases, older people may not even be aware that it's possible to create a perfect, deep, fake audio or video. And you guys mentioned, there is documented evidence already more in a corporate setting of large scale fraud that's been perpetrated using deep, fake voice cloning and videos. I encourage your folks, go look up the story about the Ferrari CFO who nearly got deep fake voice cloned into fraud from the so-called Ferrari CEO. And these are people that know each other personally. This is a real thing.
Brian: I think you just gave us a segment maybe for next week. I'm going to write that one down.
Dave: It's a wild story. Look into it. Well documented.
Bob: Dave, I was going to ask about the whole phone thing and voice cloning. So, I'll just ask it this way. I mean, are we now at a point where it's just... Because I know what I do. I never answer my phone ever, ever, ever, unless I know who's calling me. I just don't answer my phone. Are we at the point now where our advice to folks, especially elderly and maybe vulnerable folks, just give that blanket advice, do not answer your phone unless you know who it is. Are we at that point? Is that the best way to protect folks?
Dave: I think so. I can tell you, I do not ever answer my phone from a number I don't recognize. And I'm even sometimes skeptical if it is a number I do recognize, because keep in mind, guys, spoofing, which in my mind is the biggest driver of all this. Creating something that looks realistic, but isn't, is fairly easy to do in any digital mechanism. It's really easy to send a phone call from any number you want if you know what you're doing and it does not require a lot of skills. So, you know, if I could find one of your two cell phone numbers, or if I happen to have it, I could easily spoof a call that would look like it came from your cell phone. I could easily send a text that looks like it comes from you. And, you know, same thing with email.
So, skepticism, vigilance, don't answer the phone. If it's important, they'll leave a message or they'll contact you some other way. Go read what the government says, you know, IRS, FBI, they are not going to call you and tell you some terrible thing is going to happen to you if you don't make a payment by 5 p.m. They don't operate that way and they state that clearly on their own websites. So, again, there's tons of useful information out there that can help people avoid these kind of scams, ftc.gov, ic3.gov. But it all starts with skepticism and caution like, don't answer your phone if you don't recognize the number. They'll leave a message and if they don't, must not be important.
Bob: All right. Good stuff as always, Dave. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. When we talk about inflation, most people think groceries, housing, putting gas in their car, but lately, there's one category that's quietly draining wallets, especially for high income earners, and that's healthcare, Brian. It really is becoming a topic of conversation or should be for everyone. Share some new data that's just come out from our friends at Mercer.
Brian: So, new report from... Mercer is a big, global consulting firm. So, in 2026, employees could see their total health benefit cost jump nearly 7%. That's the biggest spike we've seen, Bob, in 15 years. So, that translates to average cost per employee pushing over 18,500 bucks per year. That's the cost at the company level. But of course, the total cost there and the employees share in that by paying their premiums on each and every paycheck. That's not just sticker shock, though, that's structural, right? This is not only the premiums going up, we're using more medical services, there are more prescriptions, and we are aging as a population. So, we're just starting to see the impact of all this wonderful technology and advances we've seen extending life expectancy. Things are just starting to add up now. And of course, we've got the ever present desire for profit from the companies who bring us these wonderful solutions. So, that, of course, has to maintain a certain margin as well. There's more chronic issues out there, more treatments, just more stuff that we're doing, and it adds up.
Bob: Yeah, and it's not just retirees. I mean, if you're a 55-year-old executive, say, with a $400,000 annual income, you're still feeling this. According to a recent survey from KeyBank, 30% of people making six figures or more say health care is now their most impactful cost of living increase, more than groceries, more than housing, more than a lot of things, which tells you something. Even with people with high incomes, they're starting to have to make difficult choices. And I don't want to get into a political conversation here, but one way or the other, we are going to need to bend the cost curve in this country on health care because it really is getting out of hand. And when everybody's feeling the pain, not just high income earners or low income earners, I think that's the time where the phone calls to congressional leaders will go up, and they'll be forced to get in a room and maybe fix some of this. But, yeah, it's a real issue, and it's coming up more and more in the review meetings that we're having with clients.
Brian: Yep, and so here's what we should be doing. Now, maybe we're a little late on this segment here because I think for most people, we're past enrollment period. But if you want to take advantage of this and try to protect yourself, read in detail the stuff you get every November that gives you your options for your health care insurance. And really what I'm getting at here is, look in depth at that high deductible plan. That's the one that might look... Don't rule it out because it looks more expensive and you might have more premium to pay out of your pocket. That also comes along with the health savings account and your ability to make triple tax advantage investments.
The dollars that flow in are deductible on the way in. If you make sure they are invested, and that is a huge step that gets overlooked, make sure it gets invested in something and that may require you to move it from one financial institution to another. Then those investments also will grow tax deferred. And if it's used for health care expenses down the road, then it will come out tax free. The fun thing is you do not have to use expenses that you had during that current year. You're taking the distribution. You can pull receipts from 15 years ago and use that, claim that to take a distribution. So, you could be taking tax-free dollars out to go on vacation as long as you have prior receipts you haven't used before to cover those expenses. So, give that some thought.
Bob: Here's the Allworth advice, rising health care costs aren't just a line item anymore, they are a growing concern and growing risk to a sound financial plan. Understand your insurance benefits plan. Use a tax advantage tool like an HSA, like Brian just talked about, and make sure your financial plan is built to absorb this kind of cost volatility. Coming up next, I've got my two cents on how to get out in front early and get a head start on retirement. You're listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.
You're listening to "Simply Money", presented by Allworth Financial. I'm Bob Sponseller along with Brian James. Hey, Brian, I know we were joking around a little bit on yesterday's show about some of the conversations I was having with a large group of family members over Thanksgiving. The younger crowd was sitting around late at night. We're all watching football. They're playing cards. And I start to get peppered with questions. And the one that really is still in my head here is my niece who I think is, I don't know, 22 years old. She's like, "Uncle Bob, when am I going to be able to retire?"
This young lady's probably only been working for about six months. And I looked at her and I said, "Hey, spend a little bit less money than you make. And put the difference away in a stock market index fund. And do that for about 40 years, and you'll be absolutely fine." And she looked at me and so did the group of, I'll call them youngsters in the room, like I had four heads. And I was talking to my son, our middle son, who's 28, later about that. And he's like, "Yeah, dad." He's like, "When I look at my friends, I would say, on average, my friends and peer group, they're spending $150 to $200 every weekend just eating out and drinking out. That's the kind of money that they're spending on this kind of stuff."
So, I want to throw out one example. And here's the other thing. I'm not knocking the younger folks or disrespecting them at all, because one of the things I really admire about a lot of them is they work out a lot. They stay in tremendously good shape. So, there is a lot of discipline there. And I see that. So, I want to throw out one mathematical example, just going back to basics here that everyone maybe could share with their young loved ones here over the holidays. If you take $100 a month, so this is money that you would otherwise spend on a FanDuel account or buying a few drinks at the bar, $100 a month, throw that into a Roth IRA, and let's just say you earn 8% per year. And you do that starting at age 25 and do it for 40 years, so, that gets you to 65. You want to know what you've got at the end of that 40 years, Brian?
Brian: I bet it's got...
Bob: You probably do this things. It's $345,000. That's just taking a little bit of money and diverting that from some of these wasteful ways, some of this money is being spent. And that gets people off to a great start. And what I find, and I've seen this with my own adult children, once we can get them started and they actually see the money go into account, see it start to grow in the market, the light bulb goes off, and they start saving even a little bit more.
Brian: Yeah, couldn't agree more. I think that's great advice. And, yeah, great to share with your families you're going to be seeing over the next several weeks.
Bob: Thanks for listening tonight. You've been listening to "Simply Money", presented by Allworth Financial on 55KRC, THE Talk Station.