Steve: Tonight, a hotter than expected inflation report. You're listening to "Simply Money" presented by Allworth Financial. I'm Steve Sprovach, along with Andy Shafer, who's in for Amy tonight. Andy, this was not the news we were expecting. We've been seeing, you know, inflation coming down pretty consistently, and the numbers that came in weren't exactly what we were hoping for.

Andy: Well, we were hoping for a little bit more cooling off of the inflation rate.

Steve: Sure.

Andy: The good news is that the annual rate of inflation dropped to its lowest levels in 15 months. And so, you know, that's down to 6.4%. The bad news is that it only dropped 0.1%. And most experts thought it would be a lot lower than that.

Steve: Yeah, exactly. You know, there are so many different indexes that are called inflation rates. I want to tear into that a little bit. I mean, that is kind of good news that inflation is lower than where... I think the peak was 9.2% back in June. But, you know, the experts, the analysts out there that come out with "this is what we expect it to be when the numbers are announced on Tuesday," they were off. They thought it would be lower. And, you know, we gotta take a look at why, and one of the reasons is housing costs.

Andy: Yeah. Housing costs are interesting, though. And, you know, sometimes, I don't think that's a good depiction of where we are as far as inflation is concerned.

Steve: Why is that?

Andy: Well, because a lot of it lags. You know, so, for instance, rentals are including in housing costs. And let's say, you know, you have an 18 months lease on your apartment that you started a year and a half ago. Well, those don't fall off yet, you know. So, you know, that can be a little misleading. But, you know, housing costs and higher gas prices counted for most of the increase. Gasoline rose at 2.4% in January. But it's very confusing because there's so many different inflation data points that it's hard to really kind of unwind it and sift through all the minutia to figure out exactly what's going on. But ultimately, you know, when you have economist expectations and they're missed, even though that it's lower, it can be disappointing from a market standpoint.

Steve: It can. And the market was a little bit disappointed, but, you know, these weren't catastrophic numbers. And we interviewed Andy Stout, chief investment officer of Allworth Financial on Monday. And Andy expected the numbers not to be real great today, so, good for him. But he wasn't concerned because the trend is lower. And, you know, I think that's the key. By the way, you made a great point about rents. If you've got a lease, it's usually a one-year lease. Now, leases when you're talking rents, they're gonna be going up as home prices skyrocket like they did over the last two or three years. That's pretty much ended. And if you get a little bit frustrated because there's a six, maybe eight-month lag time between what the Federal Reserve does and how those increased interest rates work their way through the economy before you see it actually gain traction and reduce inflation, it's gonna be at least a year with rent. So, I think you're right. I think that number will take care of itself. But, you know, gas prices up 2.4% in January, groceries up 0.4%, you know, we're still seeing increases, but they're slower increases. Like, I guess that's something there.

Andy: It is. But, you know, for the investor, it's a little bit concerning because, you know, that might signal, you know, more hikes for the Federal Reserve.

Steve: And that's a concern, right?

Andy: Right. But they're looking at a number of different data points. You know, there's core inflation, which basically strips out food and energy, and that fell...

Steve: Nobody needs that, losing energy, right?

Andy: And that fell from 5.7% to 5.6%. Again, very minimal drop.

Steve: But it's a drop.

Andy: It is a drop. And the Fed considers it a little bit more accurate predictor of future inflation trends. But, you know, with grocery prices, you know, that hits home for everybody. And, you know, that actually rose 0.4% in the first month of the new year, and that was the smallest increase in 17 months. So, there's some silver lining there. Now, it rose, but it's the smallest increase in over a year and a half. And so, that's a good sign for prospects of slowing inflation as well.

Steve: Well, when you see eggs go up to 10 bucks a dozen, I mean, that's ridiculous. But, you know, that's temporary. You know, there's some major issues going on just decimating the, you know, chicken population in the country with bird flu and all that sort of stuff. But, you know, give it three or four months, I don't have a really big concern about that. You know, so, I'm joking about, well, nobody needs energy or food, but, you know, what they're trying to do with core inflation numbers is take out the most volatile components. I'm gonna break it down even more. There's a super core CPI index. That's where you cut out rents. And, you know, that gives you a different idea of how other prices are increasing or decreasing. And, you know, then we can get into PCE, which is what the Federal Reserve takes a hard look at.

PCE is basically the consumer price index, the inflation index, but adding in costs for rural residents, which, you know, the CPI is urban and adding in health costs, which obviously that's important. So, that's what the Federal Reserve pays attention to. And this has brought up a whole new concern about potential interest rates increasing in the future.

You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach, along with Andy Shafer. And we're talking about today's inflation numbers that weren't what we were hoping for, but they're not as bad as maybe some people feared. And I think what we should talk about, Andy, is, all right, these numbers, now that they're out, what do you think they're gonna make the Federal Reserve do at their next meeting in March?

Andy: Well, I think we're already seeing some data points that suggest that probably a few more interest rate increases, you know? So, we constantly monitor the probability of rate hikes, you know? And we were anticipating at least another 0.25% hike and then possibly two more 0.25% hikes. Now, the probability is for likely three more 0.25% hikes after this recent data. And, you know, when Fed Chair, Powell, announced a few weeks ago that the disinflation process has begun the markets like that, because that was looked at as a dovish stance by the federal chair. And I typically watch those news conferences, Steve. Yeah, I actually block out time to be able to watch them a little bit. And it's interesting to watch the markets fluctuate in the volatility between some of his comments and some of the...

Steve: Oh, it's immediate.

Andy: Oh, it's so interesting to me and fascinating because, you know, you have short-term investors that, you know, prey on every word that comes out of Fed Chair, Powell's mouth. But I think the key is to understand that, you know, yes, this probably was a little bit warmer of a reading than we would like because ultimately, we wanna see the Fed start to taper down their interest rate increases. But in the big picture, we are seeing prices start to come down. And that's a positive sign.

Steve: It is. And, you know, I agree with you 100%. The Fed meets again in March. And, you know, the average person here is, '"Oh, I guess interest rates are going up again." Yeah. But we're talking an expectation of a 0.25%. It's not like, you know, a few months ago where, "Oh, it's 0.75%. Oh, my goodness. Mortgage rates went from 2.6 to 7% in how much time? Three weeks?" I mean, these were radical changes. So, okay, they meet again in March, maybe a 0.25% there. Three months ago, Andy, we were thinking that that would be the end of it, that the Fed would just kind of wait and see, you know, okay, all these interest rate increases, how is that slowing the economy down? Let's let it work its way through the system. And with this data today, 0.25% and more likely at their... They don't have an April meeting, but they have a May meeting. Another 0.25% in May, maybe another 0.25% in June. That would bring them up over 5%. And, you know, we were hoping for a pullback, the Fed actually reducing interest rates later on this year. I'm starting to hear talk now that they may keep rates up around this 5% level into 2024.

Andy: Well, and I think you want to keep a bird's eye view of how this all works and how it might pertain to you. You know, it's possible as you continue to increase interest rates that it might push us into recession. And usually, we don't find that out from the National Bureau of Economic Research until months after the fact. However, I think investors at this point... remember, the markets are predictive indicators of how we feel about the economy looking out six months to a year. So, investors are looking past that. You know, we already assume recession to some degree, and that's why the market fell significantly last year. But now, we're looking at, what does the economy look like in the fall? And what does it look like towards the end of the year? And the reality is, when we come out of a cyclical recession, which this would be, which is different from an event-driven recession like 2020, or a structural recession like 2008, we usually enjoy some of the longest emotional robust bull markets throughout history. So, I think the moral of the story is, you know, there's gonna be some volatility, but I think brighter days are ahead.

Steve: So, you're not real worried about a recession.

Andy: No.

Steve: You think it's basically, it's already been priced into the market.

Andy: I do think that.

Steve: To some degree.

Andy: And furthermore, there's jobs available. So, you know, even if we go through a recession, the average consumer has the ability to earn a wage, right? There's still two jobs out there for every person looking for a job.

Steve: That's amazing. Yeah. Yeah.

Andy: So, as long as there's jobs available and the labor market is fairly solid, I'm not overly concerned from a market standpoint.

Steve: You know, I'm with you on that because I still don't get why the labor market is as strong as it is. I think there's a lot going on behind those numbers. And honestly, I think a lot of it is demographics. You know, there aren't a lot of families having 8, 9, 10 kids like my family and my wife's family anymore. And so, there's just fewer workers out there. So, I don't think that's gonna change any time soon. But to me, a recession that you would fear is one where, you know, if you didn't lose your job, your next door neighbors probably did. And that's when people just...they can't buy anymore. You know, that's the bottom line. So, you know, we're hoping for what's considered a soft landing. And a soft landing is where there's not a lot of layoffs, that the recession is very short-lived. And I kind of agree with you that maybe the rise we've seen out of this market since October or November of last year is kind of predictive, because markets tend to run six to eight months ahead of the news. That's why in March and April of 2009, we were still looking at a potential financial collapse in this country, and yet, stocks started taking off.

Andy: You know, and that's a good lesson. You know, if you panicked towards the end or the middle of October during the down period and you got outta the markets, you know, you're missing 6, 7, 8% return of just from them then until now. And, you know, some people say, "Well, maybe we retest that lows possibly." But maybe we haven't. And if you're not back in the markets at this time, maybe that train's already left the station.

Steve: Well, I'm gonna make a point about what the good news is out of this higher inflation than expected, and that's interest rates. Now, the Fed only controls really one interest rate the overnight federal funds rate, which has nothing to do with what people borrow directly, you know? But banks pay us along those higher rates and charge more on car loans, mortgage rates go up. They're all indirectly affected by these changes in federal funds. And we're not seeing it at a lot of local banks. I mean, money market rates have not moved up as much as I would've expected at this point. I checked a couple local banks in Cincinnati. They're still paying 0.01% on balances of $100,000 or more on their money market funds, which is ridiculous.

Andy: Which is interesting, and that's gonna cause a slowdown too, because the cost of borrowing is still higher. You know, the prime rate, which is about 3% higher than the Fed's funds rate, is basically the best interest rate you can get on the loan. And I have a loan on my home and on my car, and I recently gotten both of those. And those were fairly high. So, the cost of borrowing is higher, but the return, that what you can get from an investment in fixed income is lagging behind that cost of borrowing.

Steve: It's lagging behind. But there are some local banks and credit unions that are above 2.5% on money market rates. So, if you're not getting that kind of rate on your bank's money market, let them know you're not happy and go out and start shopping. Here's the Allworth advice. The Fed's fight against inflation. Yeah, it's pretty far from over. So, expect continued market volatility, but remember, we're in this for the long run. Coming up next, the rise of FC Cincinnati from a financial standpoint and common tax questions. They're gonna be answered. You're listening to "Simply Money" on "55KRC THE Talk Station."

You're listening to "Simply Money" presented by Allworth Financial. I'm Steve Sprovach, along with Andy Shafer. If you can't listen to "Simply Money" every night, subscribe to get our daily podcast. You can listen the next morning after we air during your commute at the gym, wherever you happen to be. And if you think you've got some buddies that can use some financial advice, tell them too. Just search the "Simply Money" on the iHeart app or wherever you find your podcast straight ahead, about 6:43, the major part of retirement planning that usually goes overlooked. Andy, you know I'm a big FC Cincinnati fan. And it's amazing what a brand new franchise has not just done to this city and in kind of a rundown area of the city, but in dollars and cents, they have become a very valuable club.

Andy: The valuation has risen to $560 million according to recently released estimates from Forbes. And that actually ranks right in the middle in the MLS as the 14th most valuable franchise out of 28 clubs, which is remarkable because we're fairly new. So, you know, I enjoy those games too, Steve. I've been down to a few of them. The stadium is awesome. You know, my sister and her family, I have two nephews and a niece, they have season tickets, and it's just a neat event. The atmosphere's great. It's two hours long. It's not like a baseball...

Steve: Two hours, exactly. It's not a four-hour marathon like going to a Reds game. I love the fact that you know it's gonna be two hours.

Andy: Right. I mean, there's a time limit on it. And the concessions are easy to get to. The parking's great. So, I think it's a gem in the city, and I'm glad that we have a franchise now because you can tell that there's a lot of momentum behind it.

Steve: Oh, no question. And, you know, when they first announced the ownership group behind it, and obviously Carl Lindner III is one of the big names behind it, I knew right off the bat, okay, this is not something that's a flash in the pan and underfunded that they're gonna do it and they're gonna do it right. So, I signed on as a season ticket holder when they were at Nippert, right in the very beginning.

Andy: That was fun when they were at Nippert too.

Steve: And it was also a lot cheaper. And I had good seats because I was an early sign on. I think they were 10 bucks a seat per game for some pretty darn good soccer. They're not $10 seats anymore. I'll just say that.

Andy: Well, that's smart marketing, right? You know, you want to get people's interest, so make it affordable. And then, you know, once you get that taste in your mouth and you're hooked, that's smart. And just like you said, once we knew that the Lindners were behind it, you know, which is a family that, you know, is well respected here for the philanthropy that they do, their success with the tennis tournament out near Kings Island, you knew that the backing was there and that it could be very successful. So, yeah, I'm thrilled with what we've seen from FC Cincinnati. And I do really enjoy going down to the games.

Steve: Well, and if I can't use one of my tickets, if I couldn't use a Reds' ticket and I left two of them sitting on my dashboard with my windows open on my car, when I got back, I would find four. I mean, it's not exactly a ticket you can sell real well on the aftermarket. With FC Cincinnati, it's such a high-demand ticket that it's hard not to, you know, break even or make a couple bucks. Here's the thing about FC Cincinnati. I mean, their revenues are right up there with New York City FC, New York Red Bulls. I mean, they're up there with the big boys on revenues generated, but they paid for their own stadium. That's not tax dollars. And most people don't realize that tax dollars paid for Great American, Paul Brown, FC Cincinnati paid every dime to build that stadium.

Andy: Well, not only that, there's a $300 million mixed used development coming in just north of TQL Stadium too.

Steve: That's huge. That's gonna be cool.

Andy: That was, you know, part of the original deal. So, you know, there's gonna be apartments, shops, and restaurants I would say probably similar to what OTR looks like today. And, you know, and that's just off of there, off Central Avenue. And I'm very familiar with that area, so that's gonna be real neat. But I think the most fascinating thing to me is how FC Cincinnati is, you know, speaking of the Cincinnati Reds catching up on our other local teams, you know. You know, they valued the Reds shortly before last season, about 1.2 billion. So, you know, FC Cincinnati is already half of that as far as their worth is concerned. And soccer's a growing sport. And as much as I love the Reds, I fear that baseball is starting to fade to some degree. So, the future's bright for FC Cincinnati.

Steve: Oh, there's no question about it. All right. So tax season, it's pretty much here. I mean, people are getting their 1099's right now. And I think there's a lot of questions. I want to kind of at a very high-level, take a look at some of the more common questions you and I hear. And obviously, the first is, you know, "Boy, I just got back from my accountant. How come I owe so much?"

Andy: Well, there's a lot of reasons. And hopefully, you just made more money. You know, that's ultimately why you might owe some more. But you also wanna look at maybe you're withholding too much...or too little from your paycheck. You know, there are changes in tax codes. And, you know, maybe you have some higher income with more than usual and changes in deductions. So, those are some basic reasons why you might owe a little bit more on your taxes.

Steve: Well, I think if you claim too few allowances, you're gonna get in trouble. And unfortunately, it's too late now to fix it. I mean, you're just dealing with the aftereffects of, "Okay. I should have had more withheld from my paycheck. So, since I didn't, I owe more." That's why I'm gonna argue the best time to meet with your accountant is when they're not busy in October and November and get a rough idea, "Am I withholding enough money? Should I start setting aside money now for what's gonna happen in April so this doesn't happen again?" I think that's one of the big things to do.

Andy: I think that's a good idea. And often, with my clients, you know, we talk about that November and just try to get an estimate of where you are. But, you know, another reason is, you know, a lot of times people these days have more than one job. I mean, if you have a side hustle where you're just bringing in straight revenue, you know, that could change as well. And you wanna make sure that you use estimated quarterly payments to cover that liability because the IRS is very particular about that. So, if you do have a side hustle, you do have a side job, make sure that you're keeping an eye on your quarterly estimated payments.

Steve: Oh, it could kill you.

Andy: Yeah. Otherwise, it's gonna be a red flag, and the IRS is gonna come snooping around.

Steve: Yeah. I've got a very talented daughter-in-law, great photographer, started her own business and found out all about that negative...

Andy: I bet she did.

Steve: Well, it's not just you've got a set aside money for quarterly taxes or else you're gonna pay a penalty, but you pay both sides of social security. And most people don't realize that you see you've got a social security deduction coming outta your paycheck. If you're self-employed, you pay the half that the employer pays, also, because you are your own employer. You basically pay double social security compared to if you were an employee. And that's the difficult part. Here's the Allworth advice. A qualified tax professional can help you wade through these confusing waters. So, don't pull your hair out. See a professional. Coming up next, how scammers are trying to target you on this Valentine's Day and beyond. You're listening to "Simply Money" on "55KRC THE Talk Station."

You're listening to "Simply Money" presented by Allworth Financial. I'm Steve Sprovach, along with Andy Shafer. Andy, it's Valentine's Day. And, you know, we gotta talk about some of the scams that are out there that target people around Valentine's Day. And the big one, obviously, it's the romance scam, and they're still out there.

Andy: Yeah. This breaks my heart. You know, the romance scam is basically, you know, works something like this. You post a dating profile on, you know, one of those social media platforms, which is, you know, dating sites and things like that. And there might be a promising match that pops up, you know, somebody that's good-looking, smart, funny, very personable, you know, that shows interest in you. And before you realize what's happening, you feel like, you know, "This could be something great for me." But a lot of times, they can be scams.

Steve: Yeah. And, you know, I spent a lot of time out in Arizona. We've got a son, his wife, and three of our grandkids out here. And I was reading the Arizona local news. They actually found the Nigerian prince out here or one of them. Let's put it that way.

Andy: Yeah. I'm sure there's more than one.

Steve: Well, that was one of the old scams. And, you know, here's a guy. The guy's name is Kingsley Ibhadore. He is from Nigeria. He lives in the Phoenix area. And allegedly, he has scammed women for almost $3 million. Now, the first thing that surprised me was the Secret Service is the group that was investigating this. I thought they just protected the president, but they go after scams like this. And the numbers were staggering. This guy by himself scammed, almost allegedly $3 million from these women. And, you know, you say to yourself, "Well, there's no way I'm gonna fall for that." I know I have half a dozen examples, you probably do, of people that we know that have been scammed, whether it's romance or just outright investment fraud or whatever the case is. It is pretty common.

Andy: It is common. And I think, you know, you might say, "Well, it's probably some of those specific dating sites that are, you know, pretty obscure." The reality is there's more than a third of people who lost money to a romance scam in 2021, reported that it was started on Facebook or Instagram. And those are two of the most popular platforms that many different generations of users are a part of. So, you know, I think you want to be careful in that regard because it's not just the obscure sites, dating sites, and things like that. It could be simply a scam on Facebook or Instagram as well.

Steve: Yeah. And here's the numbers. If you go back to when they really started tracking this stuff in 2017, we've seen an increase to 56,000 complaints in 2021. And in dollars and cents, since 2017 to 2021, about a six-fold increase in actually dollars scammed. The numbers for 2021, almost a half a billion dollars, $547 million were scammed through these types of fraudulent online activities. Those are the numbers that are reported. I mean, you know that for everyone that's reported, there's two or three people too embarrassed to even talk about this thing. So, what can people do to protect themselves?

Andy: Yeah. I think there's some things that you want to keep in mind. You know, first of all, if your potential mate claims to live in another part of the country or abroad for business or a military deployment, you know, that's, that's a red flag. If they seem overly smitten and eager to get to know you better, you know, if it seems too good to be true, it probably is, you know? Yeah. If I'm a 4 and a 10 is trying to reach out to me, there's something fishy about that.

Steve: You're pushing it. Three, you're a three, Andy at best. But here, at some point, they're gonna get to money. And I think that's the issue. And they may spend months cultivating this online relationship with you. But at some point, they're gonna get to money, and they're gonna make it an urgent reason that you have to do something. That's a big old red flag.

Andy: Well, and a lot of times what they'll do is they'll say, you know, "I promise to pay you back." You know, they'll keep you asking for more until you realize it's a scam and cut them off. And they're hard to track too, you know? You know, between 2018 and 2019, you know, the court documents for, you know, that Nigerian prince says that he opened up 24 bank accounts. Now, to me, you know, how do you not find a red flag there? But maybe that's part of the reason that they were able to find him as well.

Steve: Yeah. Yeah. Well, I'm gonna give you an example of somebody I know personally that lost $35,000. And we're past the point of gift cards and, you know, the real basics. This person was taken by a sophisticated scam where she was told to hit this link. By the way, a lot of times, these links are the first red flag that you should look at, but it was on a text. Hit this link because there's a problem with your bank account. These people knew which bank she banked with. I mean, people do go on social media, and they find out a lot about you. They knew which bank she banked at. She thought she was given an 800 number to the security department of her bank. And no, it was a different bank. And she was told, "We're aware of this problem. We've seen this before. We're your bank. We're here to protect you. We've already set up your safe account that is fully secure that we will watch for any fraudulent activity. You just need to move your money over to this new safe account." Well, guess what? She did, and $35,000 later, that money was in a different country. That's a bad one.

Andy: That's scary. And I think it's more common than you think. I think there's some ways to protect yourself, though. And even if you're not technologically savvy, you know, one of the things that I do if I'm struggling with anything technological is look for the youngest person in the room to help me. That includes my nieces and nephews. But the point is that you can use profile photos using Google's image search if that same picture shows up elsewhere. You can also do some other searches on the background of this information from whoever the suitor may be. But be real careful about the personal information that you provide on dating profiles, right? So, you might wanna keep that if you are. You know, and this is the way that the world's going now. But if you are on dating services and things like that, be very protective of the information that you provide, not only on your profile, but for potential suitors as well.

Steve: Yeah. And don't be afraid to bring your kids into the picture, because chances are, they're smarter with technology than you are. I know mine certainly are. Here's the Allworth advice. If it sounds too good to be true, usually it is. Do your homework, and don't compromise your financial security. Coming up next, one of the most important parts of retirement planning that you might not be thinking about. You're listening to "Simply Money" on "55KRC THE Talk Station."

You're listening to "Simply Money" presented by Allworth Financial. I'm Steve Sprovach, along with Andy Shafer. Hey, if you've got a financial question you'd like for us to answer, there's a red button you can click on while you're listening to the show on the iHeart app. Just record your question. It comes to us. We listen to those. We'd love to get you on the air. Coming up straight ahead, smart ways to lower your energy costs. All right, Andy, so, you and I are in the business of dealing with people who are trying to accumulate their wealth prior to retirement. But you know what? Obviously, that's important. But once you're retired, you've gotta worry about, "Okay, where's the cash flow coming from?" Most people focus on the accumulation. And, you know, savers don't always become spenders, and cash flow in retirement is extremely important.

Andy: Well, and I think if you don't have a financial plan, it can be very scary. I think there's a lot of focus on wealth accumulation and not so much on a reliable cash flow. And that cash flow can consist of social security, potential pensions, maybe you have some rental properties that bring in some income, but also, distributions, regular recurring distributions from your retirement accounts. And so, you know, you want to take a look at each one of those to determine how much cash flow that you have. But also, understand what your budget is and how much you need to generate from those different various sources so that it does meet your income needs in retirement.

Steve: Well, that's a great point. You just made me think of my brother-in-law, great guy, very smart, very successful in real estate. He's getting about retirement age, and he doesn't plan on... he doesn't know how he's gonna retire. And the reason is he's not sure what it takes. And this is my interpretation, but he doesn't know how much he spends. And if you don't know how much you spend, you don't know how much you need coming into the house. I used to say to people, "If you had one checking account and you needed that filled up every month to cover everything that you're gonna do that month, how much would it take?" And most people, pretty much everybody says, "I don't know." Nobody thinks that way.

Andy: And that's a hard exercise to go through. You know, that's key in our business when we talk to clients is, you know, we can't project, you know, how much you're gonna have at the end of your life or whether you're gonna have a healthy retirement unless you have a budget. And I know that that's a four-letter word to most people. Nobody likes doing a budget. I don't like doing it. But particularly in retirement, once you don't have your employment income anymore, it's super important to understand what you spend. Now, you know, you might say, "Well, you know, once I go through an exercise of trying to understand what I spend..." And, you know, what I usually advise is go through a year's worth of spending on a monthly basis because there's different periods of time in the year that you spend more money, sometimes in the summers when you're taking vacation, over the holidays. So, you wanna look at your finance from an annual standpoint and come out with a figure that you think is reasonable on a monthly basis. And then, let's say it's $5,000, but maybe you have accumulated enough wealth where you could potentially spend more. Maybe you could spend $7,000 or $8,000 a month and your plan remains healthy. And that's the good part of communicating to clients is that, hey, as long as you have a plan in place, we can look at the numbers and tell you what you can spend. And maybe it's more.

Steve: Yeah. And I think you bring up the difference between what's financial security versus financial freedom. For most people, financial security is having, you know, a big old number 401(k) hit that million dollar mark or million and a half, 2 million, whatever the number is. That's maybe financial security, but it's not freedom because really what you're living on in retirement is cash flow, money coming in. Okay. Social security, we've got that. Probably don't have a pension. Maybe you're lucky enough that you do have a pension, but okay. That's some cash flow coming in. Where does the rest of the money come from? And that's where it gets a little sticky. If you're in real estate, you know, maybe you have some rental income. Okay. That helps. But, do you wanna be a landlord the rest of your life? You know, it's having enough cash flow. And that's really what we're talking about, sufficient cash flow, not to get by, but you didn't work this hard to get by. You want to thrive. You want to enjoy retirement and, and life is for living. You want to do the things that you weren't able to do while you were working.

Andy: Yeah. And there's a lot of times, you know, I'll speak with clients that will have millions of dollars, and they don't feel like they're financially free. You know, I have some clients that are, you know, very disciplined Germans, like my folks that maybe... you know, I try to encourage them to spend more. But, you know, in my folks' generation, you know, you get in these habits of saving and saving and saving, and it's hard to get out of them.

Steve: It's hard to turn a saver into a spender, right?

Andy: Correct. And so, I try to encourage people that have some financial wealth accumulated to spend more, particularly if you don't have legacy or charity goals to pass onto your beneficiaries. There's not a certain number there. You know, you just want to make sure that it's sustainable. But also, whatever it is you like to do, if you're in that position, I try to encourage them to do more of it. So, it works both ways, I think, Steve. Sometimes, it's hard to get people to spend their money too.

Steve: Yeah. And we use, it's more of a guideline. And be careful about this number. But if you're in your mid 60s, 4% of the total invested assets that you've got, it is a rough number that maybe you can plan on living off of that. In other words, you got a million dollars in 401(k)s and IRAs. Well, okay, that's $40,000 a year coming in, plus your social security. If you're married, your spouse's social security. Maybe that'll give you an idea of how much money's coming in. But unless you know how much you need to thrive and survive, it doesn't really help you. You really need to come up with those numbers of what does it take you to live comfortably and enjoy what you want to do in retirement. Here's the Allworth advice. Accumulating your wealth is obviously important, but just as important is understanding how much money you'll need once you decide to stop working. Coming up next ways to cut energy costs that only take minutes of your time. You're listening to "Simply Money" on "55KRC THE Talk Station."

You're listening to "Simply Money" presented by Allworth Financial. I'm Steve Sprovach, along with Andy Shafer. You know, it's something that's pretty easy to do, quick to do, but for some reason, not everybody does it. We're talking about the amount of time it takes to lower energy costs. And with energy prices these days, Andy, this is something we gotta start paying attention. You're building a house. This is something I'm guessing you're having conversations with your builder about.

Andy: We are. I think, for most people, we really are watching our energy costs now, and particularly with the heat and air conditioning, you know, within your home. I think, a misconception is is that your heater has to work harder to heat a cold house than it does to keep a home warm. But your home will always heat at the same rate regardless of how cold it is inside. So, you know, my wife and I, we're building a house. And those are some things that we're trying to consider about ways that we can conserve energy, you know, things like, you know, having very good insulation. We are putting a fireplace in. And we had a conversation about whether we're going to have a full wood-burning fireplace, and we decided on an insert that is more energy efficient than having a part...

Steve: They can throw a ton of heat out.

Andy: Yeah. They're great, and we're really looking forward to that. But there are ways that you can do that. I think, you know, the typical household spends about $4,400 on utility bills. And it doesn't make sense to expend energy if you're not home. So, you know, if you plan on being away from home for an extended period of time, turn off your heater so you're not paying for that heat all day or at least reduce the amount that you have coming out into your home if you're not gonna be there.

Steve: Well, you brought up a point I want to talk a little more about because we moved about three years ago from a house that was built in the '50s. And houses that were built in the '50s, it was a basic, you know, two-bedroom brick ranch. And if the wind blew hard, you could feel it inside. I mean, there was no insulation in the walls, very little in the roof. I took care of that after I moved in. But, you know, you literally felt drafts. It had the old aluminium jalousie windows. So, we would literally, on humid really cold days, we would have frost on the inside of the aluminium on the windows. And, you know, we wound up replacing that over the years. So, when we moved into a newer house... actually, it was one that was built in the '40s, but it was rehabbed. And the first thing I looked at was the insulation. And the people that rehabbed this house put about 2 inches of foam outside of the existing structure and massively insulated the attic. I'm shocked at the impact good insulation has on reducing energy costs. It's incredible.

Andy: Yeah. And I think that a lot of times, if you're considering getting your insulation redone or even putting in new windows, you know, you're thinking, "Man, I don't really wanna bite the bullet on that cost. You know, we're watching our dollars right now and our pennies." And, you know, I think if you put it in perspective and you can understand the savings that you're gonna have in the long run and how much cozier and comfortable your house could be, it's worthwhile to look into it a little bit more thoroughly to see if it's something that you can afford because it will pay off down the road for you.

Steve: Yeah. You know what bugs me about talking about this is I was around in the '70s during the energy crisis and Jimmy Carter years. We're doing it again. We're talking about reducing your thermostat, insulating your house. Yeah, there's some better technology out today like LED lights that I want to talk about a little bit. But we're going back to the future. I mean, we're talking about the same stuff we were talking about back in the '70s. I'm not sure that's progress, but that's where we're at these days. And, you know, LED lights, I converted my home to almost a 100... I think we might be a 100% LED lights, which, you know, yeah, they cost, you know, maybe four or five bucks, a light bulb, 75% savings on LED lights. And you wouldn't know the difference when you turn on a light. It's not the early, you know, fluorescent lights that, you know, flicker a little bit and stuff like that. That's a serious amount of energy savings.

Andy: Yeah. I didn't realize that it was, you know, that significant of a difference. So, you know, that's good advice for me moving forward when we start to get...move into our new house. But, you know, there is some technological help as well. You know, you can have a smart thermostat. I have some friends that, you know, you're able to control your home's temperature from your phone and change it for different types of the day and have a schedule for it. And even shut it on and off. Now, I'm kind of old school in that regard, and I don't want to have smart technology in my home. But when you start thinking about maybe the benefits of something like this, if you're gonna be gone away from your house for a period of time, it might make sense to at least consider it.

Steve: We bit the bullet.

Andy: Yeah. Did you? How do you like it?

Steve: We bit the bullet because, you know, we might go out to Arizona to visit grandkids for a week or so at a time. And, you know, we wanna make sure, okay, what's the temperature back in Cincinnati? I don't want it 72 when I'm not there, you know, so we'll turn it down to 50 or 55. I also don't want the pipes to freeze in the winter time.

Andy: Correct.

Steve: So, you know, some people turn off their heat, not in the winter necessarily, certainly in the summer, but, you know, that's something that you can do through a smart thermostat that, yeah, maybe you give up a little privacy, but, you know, it gives you some peace of mind. And to me, that's worth it. Hey, thanks for listening. Tune in tomorrow. We're gonna help you avoid all the noise that's out there. You've been listening to "Simply Money" presented by Allworth Financial on "55KRC THE Talk Station."