Amy: Tonight, we're talking retirement mistakes that might not only haunt you for the rest of your life, but could even affect your loved ones after you. You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner along with Steve Hruby. Years ago, I remember hearing someone kind of presented this way for the first time, like our biggest job as financial advisors is to prevent people from making mistakes with their money that they can't recover from. Anything else is secondary to that. But pulling money out of the markets during a crucial time and not putting it in, those are mistakes that people cannot recover from. And when it comes to retirement, getting certain things wrong can absolutely change the entire trajectory of what those years look like. So, tonight, let's really kind of drill down on some of these that we would say, "Hey, everyone makes money mistakes. I've made some. Have you?"

Steve: No.

Amy: You would never admit to making a...I literally...

Steve: Not a single one. Why are you even asking me that question?

Amy: I was just trying to tee you up to just be believable with everyone and say, "I've also made money..." You can't even do that.

Steve: I can't think of one, Amy.

Amy: So, Steve Hruby is the only person on the planet who's never, ever made a money mistake. So, we're just going to move forward, and you're just going to have to just know that he's perfect. And so, every word that he says is going to be absolutely spot on.

Steve: Thank you.

Amy: For the rest of us near mortals who have made money mistakes, we know some of those, you kind of learn from and you move on, and others you spend the rest of your life regretting. We want to make sure you're not making those.

Steve: Exactly. So, at the end of the day, one of the primary goals of financial planning, not only is it to help you from not making mistakes, but it's to make sure that your money lasts longer than you do with the expectation that you're going to be around for a very long time. So, in no particular order, some of the biggest mistakes that we see that folks regret, putting off saving for retirement. This is one of the biggest regrets. There's always a survey, and this one was done by Forbes of Americans, and baby boomers especially express regret at a much higher rate than younger respondents as far as not saving early enough.

Amy: Yeah. And why is it for the boomers? Well, because those are the people who are currently either retiring or in retirement, right? And they know. It's like they've gotten to this point, and you always feel like, "Oh, there's always more years ahead. So, once I get through this vacation, once I pay off this medical bill, once I get out of this credit card that I am, I'm going to start saving," and then something else comes. Well, they have the experience of being at the point of retirement and looking back, "Okay, I'm out of time. I'm out of time. Wish I would have started saving early." And for most people, you start even thinking seriously about retirement in your 40s or 50s. But man, if you had started saving for it in your 20s or 30s, that's when you've got that beautiful time and that power of compounding.

Steve: And don't get me wrong, earlier generations are going to have the same regret, too, especially...

Amy: They're just not there yet.

Steve: Yeah, I mean, that's just by default. The data just simply isn't there. But with a pivot moving away from pensions to retirement planning falling on your shoulders as an individual investor via our workplace savings plans, primarily 401(k)s, if we put off saving and we don't let compounding interest to help our money make more money for us, then that's going to be a regret for every single generation moving forwards. Now, speaking of 401(k)s, another regret that we see are folks borrowing from their 401(k)s.

Amy: I can't tell you how many times through the years someone has walked through the doors here and said, "I had this bill come up. I didn't expect it. I've decided to help my kid pay for..." Whatever it is, there's a thing. And then, the knee-jerk reaction to that is always, "I'm going to take money out of my 401(k)." And I understand why that is because you get this statement, you likely see that that money is growing over time, you're not currently using it, it almost feels like a waste to your current self because, oh, money is there. I actually had friends several, several years ago who bought a BMW.

Steve: With a 401(k) loan?

Amy: A very nice car with a down payment pulled out of their 401(k). It just made me nauseous.

Steve: There are certain circumstances where we're absolutely borrowing from your 401(k) as...

Amy: Is your only option.

Steve: Yeah, as a last resort. It can be your only option. And you got to do what you got to do in some situations, but...

Amy: But often I would say it's not the only option.

Steve: Yeah, that's the key here. If it's not the only option and you go right towards that, because when you borrow from your 401(k), you're taking away compounding interest. And again, with generations current and future not having pensions and the 401(k) being the primary bucket that we generate income from in retirement, if we take away the ability to let those dollars grow for us, then that's a big problem.

Amy: It's the beauty of a pension. Not only the fact that it's your employer that's put it, but you can't touch the money. It was never available to you before you got to retirement. I would say my one kind of major issue with a 401(k) is that...it's like the good and the bad. It's on you, but it's also good that it's on you because you have the ability to control that. Also, you have the ability to take money out of it. And I've seen far too many people turn to that. I've also, though, seen some workplace programs that offer some additional education around this. And you'll go to put in the paperwork to have the money withdrawn and another screen will come up and say, "Have you thought through X, Y, and Z first?" It kind of gives you kind of rudimentary look at the impact to you long term by taking the money out. And I think, gosh, even just having that extra little moment of pause to say, "Is this really my only option? Are there other things that I could do?" And to really look at the numbers in black and white in front of you and say, "Oh, I take this money out now. Here's likely the impact it's gonna have down the road."

Steve: Yeah. Once upon a time, when I started in this industry years ago, I was in a 401(k) customer service role where a big part of our job was processing hardship withdrawals and loans.

Amy: I bet that was eye-opening.

Steve: It was. It was very eye-opening. And you're right, there are programs and systems in place now that can show the impact of that. So, if you're considering one, maybe take a look and see how that could affect you.

Amy: You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner along with Steve Hruby, as we talk about mistakes when it comes to retirement and your money that you may not be able to recover from, right? We want to make sure that you're protecting yourself from those. One, of course, is just waiting too long to save. Another is you're saving in your 401(k) and you're taking money out of it. And another one is you're avoiding the stock market altogether. You know it's going to go up, but you also know it's going to go down at some points in those down periods of time that volatility is too much for you to handle.

Steve: Yeah, this is why we need to step back and develop a financial plan and understand what financial goals we're working towards, how much we have to save, how much risk we need to take to meet those financial goals. At minimum, understand your risk tolerance because the markets, we do reach periods of volatility. I think everybody knows that. That's the ticket to play. You're going to experience a volatility, but at the same time, the markets are like walking up the stairs while playing with a yo-yo. Stole that from Nathan Bachrach, I'm going to say it...

Amy: It's a good one.

Steve: ...for the rest of my career because I love it. It's a great analogy.

Amy: It's a great visual.

Steve: Yeah. And the markets will be higher over the long run, but there's going to be bumpy periods where things go down. Now, it's important to also remember that the only way to keep up with inflation over the long run is with stocks. Sitting on the sidelines in cash, being in too much bonds, it's not going to keep up with inflation, and you are going to safely lose purchasing power on your dollars. Stocks are the only way to keep up with inflation over the long run. So, whether or not you're saving now and you have a long runway or you are retired, we still need to have stocks to help us not lose purchasing power on our money.

Amy: I remember years ago, this was probably the first time I spoke to a huge group of people who were retired. It was actually a church in Kenwood. And I was sitting at the table, we were eating lunch, and the people at the table were all saying, you know, "Now that there's not the paycheck coming in, you know, I'm looking at my investments. It makes me a little bit nervous. And I'm just wondering, you know, like, what can I put my money in where I'm not going to lose any, but it's still going to grow?" I was like, "There's a magic seed that you can plant in your backyard, and there's just going to be a money tree that grows, and you're going to be good to go." I wish I could say that, right? As the afternoon wore on, every single person I came into contact with was literally looking for the same thing.

Steve: The unicorn fund is what it is.

Amy: Yes. Yeah. "I am afraid of the stock market because I'm afraid of any losses at the same time. What can I put my money in that grows?" And all I can do is point you to TINA. There is no alternative better than the stock market over time. Now, you can adjust how much exposure you have to the stock market. And that, of course, makes a lot of sense as you retire, but you have to have enough exposure. To your point, we've seen inflation at 9%-plus over the last couple of years. If you had your money out of the stock market and there was zero growth in it, can you imagine how nauseous you'd be every day looking at just that money eroding in your accounts and there's nothing you can do about it?

Steve: It's dangerous because you don't see it. You don't feel it. There's no red numbers when you're parked in cash on the sidelines. So, it's a way to safely guarantee losses. And by the way...

Amy: Go broke safely.

Steve: Yeah. And I was talking about this with a prospective client once, and I said, you know, "The unicorn fund." And they said, "What's the ticker for that?"

Amy: We'll get back to you on that one.

Steve: Yeah. I think they didn't understand what I was getting at. So, another mistake that we see folks make is downsizing your 401(k) contributions while you're working. In a perfect world, we find a way to maybe do an automatic increase program so that when your income goes up each year, you put away another percent or two. But there are situations where I've seen people that have taken on debt and they've said, "Well, you know, I can pause some of those contributions for now and tackle that debt while I get my finances back in order." If there's free money on the table, that is not the solution.

Amy: We talk about living off of the 50-30-20 rule, and this is like 50% of what you're bringing home goes to your absolute needs. Your mortgage if you have your house, rent if you don't, your utilities, your major bills that are coming in. Thirty percent, that's the fun money that you have, going out on the weekends, planning trips. And then 20%, we would say, is what you save. Here's the deal, though. That 20%, I would say, is the non-negotiable part. And also, of course, we know the 50%, the needs, your bills, those aren't going to change. So, if for a while you're looking at another expense, taking money out of what you're putting into the 401(k) isn't the answer. It might be less vacations, it might be less eating out. I get that it's less of the fun stuff, but over time, you're going to be glad you made that decision, putting money into the 401(k) and then saying, "Oh, I'm just going to back off my contributions this month." It's not going to build that sustainable kind of retirement that most of us know wants to get to retirement and being like, "Oh, well, we can eat out at Taco Bell today." Nothing against Taco Bell. It's great food, but you may want more than Taco Bell at some point. You may not have the option if these are the kinds of decisions that you're making.

Steve: Exactly. Yeah. So, finding a balance between how you're living your life now, how much you're saving now so that you continue to live the life that you want when you make the transition into retirement is very important.

Amy: Steve Hruby has never made a money mistake.

Steve: Thank you.

Amy: For the rest of us mere mortals, we need to make sure that we're not making mistakes we can't recover from, which is the "Simply Money" point. We're all going to make mistakes. All of us. I'm calling your wife after the show because I know you've made them.

Steve: Well, she makes mistakes.

Amy: Many of them you learn from and move on. The key, though, is to avoid making mistakes that you cannot recover from, especially when it comes to retirement. Next, you want to retire early? Great. Here's the question for you. How are you going to pay for your healthcare? We'll look at your options next. You're listening to "Simply Money," presented by Allworth Financial here on 55KRC, THE Talk Station. You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner along with Steve Hruby. If you miss anything on a show one night, you don't have to miss the show at all, we've got a daily podcast for you. Just search "Simply Money." It's right there on the iHeart app or wherever you get your podcasts.

And straight ahead at 643, how and when to take advantage of a Roth account. Does it make sense for you? We'll look at that. Okay, so thousands of people aren't working by the time they turn 65. Regardless of what their plan is, there's all kinds of studies out there that say it just doesn't happen. Whether it's your choice, whether it's your boss's choice, lots of things can go wrong. The problem with that 65 age as being the magic age is that's when you qualify for Medicare. Before then, if you are no longer working, the major question that you have to ask yourself, and I think for those who are doing it on their own, planning to retire early, this is the major hiccup for most people. How are you going to pay for healthcare?

Steve: And it can be a big one because it is expensive.

Amy: Big cost.

Steve: Those costs add up very quickly. Now, I want to be clear that just because healthcare is expensive, it doesn't mean that you can't retire early without proper planning and resources. I have folks I work with that are terrified sometimes to make the transition into retirement, even though we plan for the added expense that will exist when you pull the plug early and need to pay for coverage to some capacity.

Amy: Yeah, so we think the key here is understanding what it looks like because let's face it, when we're working, we're a little bit spoiled.

Steve: We are.

Amy: Whatever healthcare premium that you're paying is a tiny percent. In fact, the average employer pays 78% of what you would pay if you've got a single coverage plan, 66% if you've got a family plan. That's a big share of what that plan looks like. In fact, the average single coverage, close to $8,000 for a family coverage, $22,000. All of a sudden, you went from paying a small portion of that to all of that, $8,000, $22,000 if it's for both of you. That's a huge thing to understand. And I think to your point, it's not that you can't do it, but you have to have the knowledge and you have to have the plan first, or you get to that point and, "I'm going to jump all in. I'm going to retire early. Oh, I didn't think about this."

Steve: Yeah, I didn't think about the increased premium that you're going to have to pay because, you know, when we build plans and other financial advisors build plans and people are planning on retiring early, we will inflate the cost of healthcare significantly before 65 years old. How we fill that gap is, you know, some of the stuff we're going to look at today. So, first of all, COBRA. So, this is when you separate from your employer. You can maintain up to 18 months of coverage that you have grown used to. It's the same coverage that you had through your employer.

Amy: But...

Steve: But, yeah, this is a big one. The cost can easily be four to six times the premium that you were expecting because your employer is no longer covering that portion that they had been.

Amy: It's all on you.

Steve: Yeah, so we are spoiled to an extent. But this gives us a lot of flexibility so that we don't have to change doctors, for example. It's the same exact coverage, but it comes with a big price tag.

Amy: Another option that you have, you know, especially if you think about the fact that if you want to retire at the age of 61 or 62, 18 months of COBRA...

Steve: doesn't cut it.

Amy: ...even if you can afford, it's not long enough to get you to 65. So, okay, what about the exchange, right? The Affordable Care Act, the Marketplace, it's usually far less expensive than probably the plan carrying the entire premium that your employer was paying for you. And if you have to make less than $200,000 in income to qualify in some parts of the country, you can also get, though, a federal subsidy. So, you're paying for these premiums, but you're getting some money for it. And it's also an option if you make more than that. Here's, I think, the problem with that Marketplace. When President Obama first enacted this and first came to the Marketplace, there were all kinds of options. All these insurance companies were offering everything. Well, I think as time has gone on, there's less and less options in that Marketplace. And the problem is...and I talked to a family about this a few years ago who lives in northern Kentucky, they both do freelance work. They don't have the option of an employer paying a lot of the premium. They have to get it through the Marketplace. There were no options in the state of Kentucky for them to be able to take their children to a pediatrician in Kentucky.

Steve: Come on.

Amy: Literally, that's how limited the options were. And I think people across the country are kind of finding some hiccups in this Marketplace. It was just not a perfect plan. If this is the route that you think you're going to go, I would say do a deep dive on this one. Do your research on the plans that you are looking at. Try to think through every possible scenario to make sure that you really do have the coverage that you need here.

Steve: Yeah, it's a tricky one because if you do find a plan that works for you from the Affordable Care Act on the exchange, then it can reduce the expenses significantly depending on our income situation. If we have no income, then you can conceivably get coverage as long as it's actually covering every member of your family at a very low cost. And as opposed to private insurance, ACA plans, they don't allow coverage to be canceled based on pre-existing conditions.

Amy: Which is nice.

Steve: So, the private insurance, which is the next option, they can disallow you for coverage based on prior health conditions. So, it's a tough one because as you said, you know somebody in Kentucky, that ACA wouldn't even cover their children. So, that's obviously a disaster that's not going to work.

Amy: Yeah. Unless they were going to drive like an hour and a half away to Louisville to see a pediatrician every time, which no one wants to do that, it just wasn't a perfect situation or anywhere close to that for them. There's a last resort. It could be through a Social Security disability designation if that were to work out for you. But I would say probably one far more likely option, if you can find it, is, you know, a lot of people will retire. They'll be just burnt out on what they've always been doing, and they'll look for like a little late-career pivot. And maybe that doesn't even involve full-time work. Maybe it's part-time work. But there's a lot of employers out there, Starbucks, Trader Joe's, that are offering health insurance coverage to their employees. So, you have more flexibility, right? Maybe you don't have to work full-time, but you're also getting part of this coverage paid for.

Steve: And to be clear, these companies, they offer health insurance for part-time workers. That's the key here.

Amy: To attract good workers, right?

Steve: Exactly. So, if you wonder why your barista is 63 years old, that could be a very real reason.

Amy: Or while you're paying $9 for that cup of coffee.

Steve: Well, just don't go to Starbucks. That's outrageous. But that is a good point because, you know, there are opportunities for those that maybe want to step back. They're not looking at retirement, they're looking at financial freedom, meaning they don't have to do their high-stress job, very demanding. They're working nights, they're working weekends. But they're worried about health coverage. You can make the transition to a part-time job with minimal responsibility and still receive health insurance through that employer.

Amy: Here's the Allworth Advice. If you do want to stop working before 65 or you're forced to, you've got to have a plan for that. If you have no choice, though, understand there are options out there. Do your homework. Coming up next, this is a weird one, but how to keep down the cost, yes, of dying. You're listening to "Simply Money," presented by Allworth Financial here on 55KRC, THE Talk Station. You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner along with Steve Hruby. There is the saying, "Nothing in life is guaranteed, except for death and taxes." And we often focus on taxes on this show, but tonight, we're going to focus on the dying part. And, of course, specifically, this is "Simply Money," the cost of it. I mean, I think this is something that many of us don't worry about until while we don't because we're gone. But it costs a pretty penny to die.

Steve: Yeah, unfortunately. It's...

Amy: It's not fair.

Steve: I know it really isn't. And this is something that we talk about with folks that we work with, estate planning, end-of-life planning. It's important because these costs are becoming kind of astronomical. The median cost of burial in 2023 was $10,000. That's a 6% increase from 2021. And that figure includes a cost for everything prior to burial, including a casket, but didn't include the actual cemetery plot or monument or gravestone marker if you want to go all out and have a huge...

Amy: So, $10,000 to die and get put into a casket. But other than that, you're going to have to pay even more.

Steve: There's added costs.

Amy: It's insane. It is absolutely insane, which is interesting because I was actually just thinking about this recently, how funerals that I've gone to recently, a lot more people have been cremated than buried. And I was thinking, "Well, I don't know what's the reason." People are...

Steve: Cheaper.

Amy: It's actually cheaper. There's a monetary reason. There's a significant difference between how much you're going to pay to be cremated and how much you're going to pay to be buried. And for loved ones who are left behind having to shoulder this pretty enormous cost, sometimes they have to make the decision on what's the cheapest option.

Steve: Yeah, I mean, that's why it's important to have the conversation while you're still around so that your wishes are fulfilled in, you know, the transition to death here. It's important that we set those expectations about what we want. And, you know, the cost, by the way, of cremation with a container and urn, 2023, $6,000.

Amy: That's crazy.

Steve: That is crazy. That's way too much. I just want to be, you know, wrapped in a sheet and thrown in the Ohio River. How about that?

Amy: That's actually not an option.

Steve: Why not?

Amy: So, yeah, it's just not a thing. All those bodies floating in the river would be really gross. So, that's not a thing.

Steve: All right. Lake Erie, where I'm from in Cleveland.

Amy: No, none of these things are options. You know, it's interesting. I just recently heard that some people who are spreading ashes in places have gotten in trouble because they don't have permission to, and it's like desecrating an area or whatever. So, there's lots of rules really around like, you know, you want to do it at...someone wanted to do it at a ballpark because it was like their...I don't know, it was like a dealer's fan or something like that. Lots of things to think through here. My grandparents actually, you know, they were in their 90s when they passed away, and they did the pre-planning. And there was a gift to us in that they had made the decisions for themselves. And the reason why I say that it was a gift is because my mom passed away at the age of 60. She was way too young. She died of cancer. She didn't go, you know, and plan all these things. So, it was a very emotional time. We had just lost her. We're heartbroken. And then, you were put in this room with all these caskets, all these options. At the time, nothing, it was like the most expensive thing was the only thing that I wanted because it seemed like the best thing for her. If my mom was still there, she would be like, "What?"

Steve: "What are you thinking? Don't do that."

Amy: "Why would you pay that for that for me?" But it is such emotional time. And so, I actually think that this is a very loving gift to your loved ones, regardless of how old you are, is to at least put aside some money or spell out some wishes about what you would want so that people aren't in this very heartbreaking place trying to make decisions that have very large financial implications for them on what you would want. So, I think it's a very nice act of love to not only have it written down or planned for, but communicate that with your loved ones.

Steve: You know, you really do bring up a good point because loss, obviously, emotional, when we're emotional, it can drive poor money decisions. You know, this is the only thing that would make me happy, the $20,000 casket and the headstone. So, planning accordingly so that, you know, your mother in this situation could have said, "What are you thinking? Don't get me that..." It is a real opportunity to provide a service to your loved one.

Amy: Yeah. In that moment, you could have given me the largest monument, and I would say, "That's exactly what she needs."

Steve: "This is what we need." Yeah.

Amy: "Sixty thousand dollars, no problem." You know, and then my dad's looking at me like, "Well, I don't know about that," you know? And so, I just think in that state of grief, it's a really difficult decision to be making. And for those of you that it's a big deal, like environmentally, there's actually green options. And there's a lot of Americans who say they would be interested in exploring green funeral options. And again, I think there's probably options out there that most of us have no idea about. And we don't like to think about these things. I always laugh. I always had this list of things to do, this running list of things to do. I think estate planning was on that list for about 18 months because it was just like, "Oh, this is the icky part. I want to do all the other things, but not the estate planning." Even though I knew something were to happen to me, that's the nicest thing I can do to my family is to have all those things planned out in advance.

Steve: Professionally, I find it to be the one that I need to bug people the most about to...

Amy: Doesn't surprise me.

Steve: ...actually do their homework. And I tell folks I work with, "I'm gonna keep bugging you about this until you get it done or you tell me shut up." One of two things is gonna happen, and for the most part, people say, you know, "Bug me about it till I get it done," because it is easy to put this stuff off. By the way, you brought up the green stuff. Planting a tree with cremated remains is a thing, creating soil out of human remains. I know interesting stuff, this one, creating tattoo with ink infused from the cremated ashes

Amy: That's the grossest thing ever.

Steve: I know these are things that people are doing. No judgment here. You know, you do what you want. But, you know, my green plan is when no one is looking, because apparently it's illegal...

Amy: It's not bad, yeah.

Steve: ...wrap me in a sheet and throw me in the river.

Amy: Oh, my gosh. You see, though, on social media, people crowdsourcing GoFundMes to help cover funeral expenses. And I think, you know, that is just a telltale sign of the fact...

Steve: It's a testament to...

Amy: Yes, that it's so expensive. And there's also some laws out there that people are trying to say, "Hey, we need to be really upfront about the cost of what these things, you know, before people are walking in heartbroken." And apparently, you do have to disclose, if someone is calling or they're in person, the cost of things. People do things online nowadays, right? It's funny. Several years ago on this show, we actually started talking about the fact... And I don't know if you know this. You can buy a casket from Costco. And there's other options of like end-of-life things that you can buy from Costco. And I think it's just a testimony to the fact that it's so insanely expensive that we need to have lower-cost options. But when someone is passed away and you're walking into that funeral home, that is not what you're thinking about.

Steve: Yeah, that's a good point. So, you know, sit down, talk to your financial advisor, have the conversation with your family. Again, as you put it, it is a service to your family to plan ahead for these matters.

Amy: Yes, an act of love. Absolutely. Please don't skip that one. Here's the Allworth Advice. The last thing you want are your loved ones grieving and going into debt at the same time. So, get those financial affairs in order before that happens. And unfortunately, none of us know when that's going to happen. Coming up next, we've got some tricks that could potentially save you thousands of dollars in taxes. What you need to think about. You're listening to "Simply Money," presented by Allworth Financial here on 55KRC, THE Talk Station. You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner along with Steve Hruby. Do you have a financial question that's keeping you up at night? You and your spouse are just not on the same page about? There's a red button you can click on while you're listening to the show. It's right there on the iHeart app. Record your question. It's coming straight to us. We'd love to help you figure it out.

And straight ahead, are you one of those people who's always on, always connected, always checking your email? Well, there's actually a negative impact of that. We're going to get into that coming up in just a few minutes. One of the things we talk about, especially with just comprehensive financial planning, is there's a tax strategy part of this. And we're not talking about just tax preparation, the part that you do in April, but a year-round strategy that if done right, executed right, can save you thousands of dollars in your own pocket rather than paying it to Uncle Sam. And one of those is putting money into a Roth IRA or a Roth 401(k).

Steve: Yeah, so I'm always a fan of finding ways to pick up a stick and poke Uncle Sam right in the eye with it.

Amy: Sign me up for that.

Steve: Yeah. And accumulating Roth is a way to diversify your future tax liability that enables to do just that in retirement when we're trying to pull from different buckets to be as tax-efficient as we can. So, let's talk a little bit about how there are ways to save for Roths if you make too much money. So, the limits for 2024, $7,000 contribution if you're under the age of 50, $8,000 if you qualify for the catch-up contributions. But your income levels have to be below a certain limit. If you're a single filer, that limit is $146,000. If you're married filing jointly, $230,000. If we're above those thresholds, what do we do?

Amy: Well, I want to be clear here, too. When it comes to a Roth 401(k), those same income limits do not apply. This is only for the Roth IRA. If you are close to that, you and your spouse make $245,000 and the cutoff is $230,000, you're like, "Oh, I'd actually really like to take advantage of that Roth IRA. I just can't." There are some things that you can do in order to lower that taxable income. And one of them, and these are all things, too, by the way, that are going to help you later in life when it comes to retirement, maxing out those 401(k) contributions, right? Not only getting the full company match, but the maximum amount that by law you can put into those accounts every year lowers your taxable income and can get you potentially within that threshold where you can put money into that Roth IRA.

Steve: Yes, as long as you're putting the money pre-tax into your 401(k)...

Amy: That's a good point. Not the Roth 401(k).

Steve: Yeah, that removes that money from your income. So, it lowers the income that you've earned, which lowers where you fall on that threshold to be able to make Roth IRA contributions separate from your 401(k). Another way to lower your income further is the health savings account. One of your favorite types of investment vehicles because it is triple tax-advantaged. When you put money into the HSA, it is a deductible contribution. If it's deductible, then that can lower us in that threshold to be able to make the Roth IRA contributions.

Amy: And then that money grows...

Steve: In the HSA.

Amy: ...tax-free. Yes, and then you can also take it out tax-free for qualified medical expenses. There's literally nothing else like it that the government options...a gift from the government. So, I say if a high-deductible healthcare plan makes sense for you...and listen, I get it. For some families, it doesn't. If there's chronic illnesses and things like that, a high-deductible plan may not make sense. But if this does make sense to you, an HSA is a great tax planning tool, retirement planning tool. It can be used in lots of different ways. There's lots of flexibility there. So, that can be one thing. And you can put, if you're an individual, up to $4,100, families up to $8,300, right? So, again, you're putting money into something that's going to help you later, at the same time lowering your taxable income that can put you into that threshold where then you can put money into that Roth IRA.

Steve: Yeah, absolutely. So, how about making the most of your deductions? So, this is a tax filing, tax planning maneuver combined. For example, if you're a member of the armed forces on active duty and you move because of a change in your station, you might be eligible to claim a moving expense tax deduction. And any way that we can lower our taxes in this situation, remember, the conversation we're having right now is a very specific one. It's ways to enable yourself to save money in a Roth IRA. If you're right up against that income limit, then we can still find ways to reduce that to make the Roth IRA contribution. So, in this situation, making the most of your deductions when you file.

Amy: Yeah. And if you own your own business, so self-employed, there could be some options there as well. I want to talk about, though, another option for you if you make too much money. And this is a backdoor Roth, right? Backdooring money into a Roth IRA. And this is also an option where you put money into a traditional IRA first, and then it gets converted to a Roth. So, you're paying the taxes at that point of conversion, but it's actually a relatively easy thing to do.

Steve: Yeah, it's confusing the first time you do it. I think that's the way to look at this.

Amy: Well, it's almost like, "Wait, you can do that? It doesn't even make sense that you can do that," you know?

Steve: Yeah, it's a loophole because you're not making a contribution to a Roth IRA. You're converting to a Roth IRA.

Amy: Immediately, though.

Steve: Yeah. Now, this is something that you do need to sit down and talk to a CPA, a CFP, a fiduciary planner that can help you map out what that strategy looks like the first time you do it because it is an easy one to make mistakes. For example, for Roth backdoor conversions, if you have traditional IRA or rollover IRA money and you try to implement the strategy, it creates a tax nightmare. So, you need to have a certain situation for this to even be an option that I would ever recommend.

Amy: But in the situation that we're talking about...

Steve: It's wonderful.

Amy: ...where you're putting money into, so you know that money is coming directly out of your account into that, it can make a lot of sense. You know, we're talking about a Roth IRA, and I think we need to back up from this and say, "Does this even make sense for everyone?" There are some people where it makes a lot of sense and some people where we would say, "You shouldn't even consider this."

Steve: Yeah, a lot of it depends on how high your income is, how close you are to retirement. There's a lot of moving parts here. But, you know, if you're knocking on the door to retirement, you're making a ton of money and you're about to transition to lower paychecks, why would you voluntarily pay more taxes now? We can always convert later, but it's a case-by-case basis where you really need to sit down and talk to a financial planner.

Amy: On the flip side, we just went through several years ago a change in the tax structure, and most of us are at a lower tax bracket than we were maybe even five, six, seven years ago. And if you think, as you look at the sort of landscape of the U.S. and our debt situation, and you think, "Hmm, where are taxes going to go in the future?" You might come to the conclusion that you might be paying more in taxes in the future, in which case it might make sense then to lock in today's tax rate now. So, this is an option for you. And I would say, hey, if this is something you're thinking about, just make sure you've got a fiduciary, someone who's going to put your best interests ahead of theirs, an advisor who's working with you to help you make sure you're doing it the best way for you. Here's the Allworth Advice. A qualified financial pro can best help you decide whether a Roth retirement account is actually right for you. Coming up next, how to unplug from work without all the guilt. You're listening to "Simply Money," presented by Allworth Financial here on 55KRC, THE Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner along with Steve Hruby. I think the concept of work-life balance is talked about a heck of a lot more now than it ever was before. Steve, where do you fall on the spectrum? Are you someone who when you're at home on the weekends and you're getting work emails, are you constantly checking them or are you able to unplug?

Steve: I am not able to unplug.

Amy: I'm not either.

Steve: I have bad habits. I have my work email on my phone. I'm not answering calls on the weekend if one comes through. I don't typically answer the emails unless it's more of an urgent situation, which is very uncommon.

Amy: You just let the anxiety build because you know they're coming in?

Steve: I know what I'm going to have to tackle come Monday morning. And that's obviously not the best practice.

Amy: Eight out of 10 of us actually say, "Admit, we check our work email after hours." It's like the good and the bad of technology. Now, your work email is in your pocket at all times. It used to be you had to log in. You may not even have a laptop at home. Now you constantly have access to it. I have to say Steve Sprovach, who just retired, he was old-school and always...and this was one way where I actually was a little bit jealous of him.

Steve: Yes, me too.

Amy: He worked 9 to 5, his butt off. I mean, Monday through Friday, he was in the office. He wasn't skipping out early. He was constantly involved with his clients. When he left this building...

Steve: He was done. There was nothing.

Amy: ...he left the building. He was not checking his emails on a Saturday night. He was not 8:00 at night being like, "Oh, I just got this email. I need to be thinking through this." No, he was able to unplug. And I think that for a lot of us, we would admit on the days when we fully unplug, we're far better off the next morning when we get to work.

Steve: Yeah, absolutely. And, you know, there was a survey, it was Harvard, Notre Dame, University of North Carolina. They came together, and they looked at 194 full-time employees across a range of occupations and industries. And they had them complete three surveys a day for two weeks. And the findings were interesting.

Amy: Yeah. Actually, the people who unplugged felt shame about it the next day when they got to work. And they said, "Okay, it wasn't just that they felt shame, those that actually felt ashamed for taking time for themselves, they were more likely to cut corners at work, sometimes in ethically questionable ways." This is such a conundrum.

Steve: It is.

Amy: I think it's so interesting because I think most of us would agree it's healthier. I was just sitting in talking to a client last week, and he talked about the fact that for the first time ever over Christmas this year, he took a couple of weeks of vacation, and he did not check his work email. He said, "My wife and I had more quality time than we have ever, ever had." He's 65. He said, "I really never thought about retiring before. All of a sudden now, I like the concept of it because I enjoyed not being constantly tethered to work." So, I think there's a lot of great emotional benefits of it if you're not tied to that shame.

Steve: That's a good point. And I did manage to do it once.

Amy: One time?

Steve: Yeah, one time per the recommendation of my boss. When I went on a big trip to Europe and Africa, which was kind of a once-in-a-lifetime thing for me, they said, "Delete the app from your phone." And I did. And it was wonderful. It took a week or so to get used to it, but I recommend it.

Amy: Yes. I think you have to be able to do it and not feel shame, and then you reap the benefits. Thanks for listening tonight. You've been listening to "Simply Money," presented by Allworth Financial here on 55KRC, THE Talk Station.