Amy: Tonight, dealing with inflation that's a little bit, well, sticky. Bitcoin breaks through to everyday investors. And get your thinking caps on, we're going to play Retirement Fact or Fiction. You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner, along with Steve Hruby. A lot to get to tonight, so let's get going. We've been talking about this kind of leading up to all week long. Inflation numbers out today. We're looking at it, and certainly so is the Federal Reserve.

Steve: Yeah, so first of all, overall inflation, this is the prices that we pay for goods and services when we go to the grocery store, whatever we're buying, rose a little bit more than expected in December. So the CPI increased by 0.3% month to month, which brings the current inflation rate at 3.4% on average, which means that's how much more we're paying than this time last year for things.

Amy: Some perspective here, right? Three-tenths of a percent. We say more than expected, while the economists, super smart muckety-mucks, were predicting a 10th of a percent. So this is not like, "Oh, my gosh, go running for the hills." We're looking at 9% interest rates like we were a year ago. No. Overall, I would say we're still trending in the right direction. In fact, really what the Federal Reserve, our nation's central bank, looks at is not these overall inflation numbers, but core inflation, right? It strips out food and energy costs because they're just so volatile. They're so all over the place. And the core inflation rate came in at 3.9%, and we saw 4% in November. So this is the number that the Fed is looking at, and this is trending down, which I think they would look at as a pretty good thing.

Steve: This is the important thing. So what I was talking about with overall inflation, that doesn't have as significant of an impact on what the Fed might do moving forwards as the trending down of core inflation. Again, as you said, with stripping out in food and energy costs. So obviously, at this point, the Fed is going to take the data. They're going to mull it over. They meet at the end of the month. I'm not sure exactly when they're going to cut rates. Obviously, this is...

Amy: Come on, you've got a crystal ball up your sleeve.

Steve: I know, right? I certainly can't wait till we make that pivot and start talking about that, because all last year it was, how much longer are they going to raise rates? How long are they going to pause? Right now we are in that pause. Markets predict the first rate cut in March. I'm not so sure. Senior Fed officials, they say that's a little premature. Even Andy Stout himself, chief investment officer of Allworth Financial.

Amy: Smartest guy I know.

Steve: I know, right? So he's leaning more towards probably a May interest rate cut. Obviously, we're going to see soon enough, but this is something for the Fed to mull over.

Amy: Well, and I think everyone could agree we want interest rates to go down. At the same time, the concern for the Federal Reserve is you prematurely cut them, and then inflation gets out of control again. Their goal here is a 2% inflation rate. So when we're talking about, you know, upper threes or three and a half, we're not necessarily at a bad place. In fact, if you think about when you go on a diet, right? I totally overindulged in December, January 1st, I was like, "Okay, hitting it hard." When I get on the scale, you know, for the first few days of the year, I was like, "Oh, it is so easy for me to take off weight," right? Those pounds just shed. Well, now it's like every day, it's kind of the same, maybe inching down just an ounce or two. And that's kind of how it is. The closer you get to that goal, the harder it is to kind of take off that weight.

Well, same is with this inflation rate. It's going to be harder and harder the closer we get to 2% to get to that 2%. I would say, though, looking at these numbers overall, nothing to worry about. In fact, what we're seeing, as the slight bounce up, goes back to shelter costs. And we've been saying this for a while. Most people, when you think about it, when you rent a place, you usually rent it year to year. And so you probably signed that lease, you know, a year or so ago and at a higher rate because rent was up a ton last year. And so as those leasing agreements expire, and people start to sign new ones, this is, I think, when we'll finally see housing costs go down. But listen, that takes a while.

Steve: It does. Yeah, there's a lag effect. It takes about a year because of the length of the typical lease agreement. Now, I want to go back to something you said a minute ago about making sure...the Fed making sure that they're not going to be too quick to act as far as cutting interest rates are concerned, because Fed Chairman Powell, he's been pretty open and honest about this, wanting to learn from predecessors, those that came before him. And if we look at Volcker back in the early '80s, they raised interest rates too fast. They raised them... They decreased them too soon. And they slammed the economy into a double dip recession.

Amy: Yes.

Steve: So there's a lot of thought that goes behind whether or not we're pausing, how long we're pausing, when we're going to decrease. We don't want to do it too soon to slow the economy too much. So there's a lot going on here. And, you know, I'm going to go with Andy and say maybe May, unless something changes.

Amy: We'll hold you to that. We're coming back to this in May to see if you're right.

Steve: We will.

Amy: You're listening to "Simply Money..."

Steve: Well, I'm copying off the smartest guy we know.

Amy: You are the second smartest guy I know...

Steve: Oh, thanks, Amy.

Amy: ...behind Andy Stout. You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner along with Steve Hruby, as we digest the latest inflation numbers and say, hey, listen, the headlines are going to say it's up, but we're saying don't run for the hills. The overall trend in core inflation, which is the really important number, is trending down toward that goal of 2%. We think that's a really good thing. And there's another major headline out there today that we want to get to. And this is about Bitcoin ETFs. For the first time ever, the SEC has approved ETFs that invest directly in Bitcoin. So basically, Bitcoin is available to everyday investors. This is a significant change, and one that even a few days ago we thought SEC probably wasn't going to approve.

Steve: Yeah, this is a surprise. I was a little skeptical that this was going to go through.

Amy: Me too.

Steve: Remember, ETFs, exchange traded funds, you can trade it on the market. Previously, you'd have to get a Bitcoin wallet or a coin wallet to do that, to purchase any kind of cryptocurrency. Now, the everyday investor is going to be able to do this very easily.

Amy: Yeah, it becomes a lot more convenient, right? You needed the wallet. You needed to go to an exchange. It was a whole new world. It kind of feels like the wild, wild west. And now you're kind of going to that same menu of options that you have as investments, whether you're looking at your regular brokerage account, or in some cases, you know, retirement funds, you know, going in there and saying, "Oh, okay, yeah, an ETF that tracks Bitcoin, you know, you can think...sign me up for that." So I have lots of feelings about this. Most of them aren't new. My concern about this is with the SEC saying, "Okay, we're good to move forward with this." We've been talking a lot about the fact that there's just no regulation, right?

Steve: Exactly.

Amy: This doesn't necessarily mean there's new regulation on it. It just means that the SEC is allowing it to happen. And I think for a lot of everyday investors feeling like, "Oh, the SEC is putting their stamp of approval on this. I should probably go ahead and invest in it."

Steve: Yeah, that's a great point. People may think that this is safe. If the SEC says it's something that we can invest in, then it's fine. But there is still incredible volatility behind such a speculative investment like Bitcoin. The price swings that we see on this, monumental. And the problem here is there's no historical data to know what's going to happen in the long term. So when you're planning for an income stream later on in life, financial planning is about making sure that your money lasts longer than you do with the expectation that you're going to be around for a long time. You brought up retirement funds. If an individual sees a Bitcoin ETF, and they look and they see that recent history shows incredible gains because it is so volatile, maybe they end up putting too much of their retirement money into a volatile asset like crypto, Bitcoin in this case. And when we have that inevitable pullback, that swing, something happens, we get a curveball like an exchange crumbling, like we saw last year, that traded Bitcoin, then this could have a major impact on the everyday investor.

Amy: I think you just make a great point, too. Bitcoin is a kind of cryptocurrency, and it's probably the first one that we started talking about, the most well-known. But there's all different kinds of others. They're not backed by anything, right? When you buy stock, you're buying a piece of a company. So Steve and I could this afternoon decide that we're going to start Allworth Coin or WAG's Hruby [SP] Coin, whatever we want to call it.

Steve: Great idea.

Amy: I know. I like it. But it would literally be based on nothing, and people could start investing in it. And I think that's the concern here, too, is that now that the SEC is saying, "Okay, we can put Bitcoin in exchange-traded funds. How is it that tomorrow we're not going to be able to invest in Dogecoin, or WAG's Hruby Coin, or whatever you want to call whatever cryptocurrency that you would like to come up with? So, again, still lacking in regulation. It just appears, I think, maybe to some investors that at this point it's more mainstream because the SEC is allowing it in exchange-traded funds.

Steve: Yeah, I would say be cautious, to put it lightly. This is the type of thing where when folks ask me my take on it, what I think they should do. If you have a solid financial foundation, if you have little debt, if you have an emergency fund, if you're saving a lot in your retirement accounts, you have a plan that shows that you can support yourself to and through retirement, if you want to be speculative on the side with a little bit of play money, sure. But leveraging this as a means to grow wealth, to support yourself to and through retirement, there are incredible risks in doing it.

Amy: And I like that you use that word "speculative." You know, last year, late last year, I went to the Texas RIA Summit. And if that sounds riveting, it is as riveting as you would think.

Steve: Yeah, I would have fun.

Amy: All day long panels of people who are in our industry talking about, you know, different topics. And I thought, "Okay, here we go. It's going to be an entire day about crypto." The only time that crypto was really talked about was on a panel of people talking about speculative investments.

Steve: Interesting.

Amy: Right? Yes. And this is where you're really gambling. This is not the bread and butter stuff that you want to be part of your investments, part of your plan for your future. Here's the Allworth advice. We can't emphasize this enough. Please speak with your fiduciary financial advisor, someone who's putting your best interests first, before you invest in anything like the cryptocurrency market. Coming up next, one of our favorite things, we tear apart an article to make sure that you have the right information. You're listening to "Simply Money" presented by Allworth Financial here on 55KRC, the talk station.

'Cause I'm the taxman
Yeah, I'm the taxman

Amy: You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner along with Steve Hruby. If you can't listen to "Simply Money" every night, you do not have to miss a thing. 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 coming up, we're going to play everybody's favorite game, a little Retirement Fact or Fiction. We think you'll probably learn something from it. All right, we started this segment with Beatles "Taxman" because, yes, we are 18 days away from when you can start filing those taxes. It is not like the countdown to the Super Bowl for many of us because it's just not quite as exciting.

Steve: Way more boring than the song, but January 29th is when the IRS will begin to accept your 2023 tax returns. Most taxpayers, they must file by April 15th. That's the deadline to avoid penalties unless you get an extension. But obviously, the earlier you file, the better. Remember, IRS free file. This is something that exists as software online. And this opens tomorrow. For those of us that have an adjusted gross income in 2023 of less than $79,000, you're able to use that software online to process your return.

Amy: And I'm glad you brought this up, too, because I've seen statistics on this. And there's so many people that qualify for using this. Free, super easy to use.

Steve: And they don't use it.

Amy: Yet nobody uses it, yes. So if you make less than $79,000 a year, please, please take advantage of that. The IRS is expecting close to 130 million individual tax returns by that deadline. And as of the end of December last year, the average refund was north of $3,000, $3,167.

Steve: Too high.

Amy: Yeah. If you are paid biweekly, that's $122 roughly extra in that paycheck. I don't know about you, Steve, but I'll take $120 extra in my pocket every pay period.

Steve: Yeah, I've said it before. I would rather owe the IRS $300 than get back $3,000. Because what that means is I'm essentially using my own money to better my life and my family's life, to save, to spend it on whatever I might want, rather than giving Uncle Sam an interest-free loan, which is exactly what happens when you get a refund.

Amy: Turning now to one of our favorite topics, gold. And we're not saying this because we're huge proponents of it. We're saying because there's an article out there that we just saw that we want to put into some perspective for you. I mean, and honestly, truthfully, we would love to print it out and rip it up. The title of it is "Three reasons to buy gold for your kids." I mean, have you lined up to do this for Nova?

Steve: Not even close.

Amy: Do you have gold bars laying all over your house for your child?

Steve: Not even a little bit. Yeah. 529 and a taxable count on the side that very little goes into at this point because I'm focused on my own retirement. We're actually going to talk about that later, too. Or tomorrow. But anyways, this article, "Three reasons to buy gold for your kids," it's kind of preying on emotion and certainly has an agenda. If you're looking for reasons to buy gold or not buy gold, you might stumble across this. And I don't like how it is written. You said it yourself. I would like to print this thing and rip it off or rip it apart. So the first thing it says...claims is that gold is always a hedge against inflation. So if you look back at the data, really, in reality, the only way to keep up with inflation over the long term is through stocks, not gold.

Amy: Yeah. Actually, just googled this earlier today, just to get a visual on this. And I've looked at it many times before, and this is looking at gold and how it's tracked historically versus the S&P 500. So I found a graph going back to 1990. The entire graph has the S&P 500 way, way above gold, except for one year, like 2011, they kind of come together, and then it goes back apart again. The S&P 500 is way higher. And they sell this all different kinds of ways. And I agree with you, they're preying on your emotions where they're saying, "Hey, listen, gold is a great hedge against inflation." They'll also sell it during times of volatility, like, "The stock market's all over the place," or earlier last year, 2023, when the bond market is down again, like, "Hey, gold is the best place to be." During those times, you're going to see commercials all over the place. They're selling you something. And again, I just want to remind you, yes, that the best place historically, going back to 1928, has been to be invested in the stock market. It outpaces gold almost every year.

Steve: Yeah, and it's a little frustrating when the article talks about the stock market because what it compares gold to is an individual security. Of course. So I agree with what the article says. If you're investing in an individual stock, yes, it can go belly up. It can go away. We talked about that earlier this week. Enron, that's a good example. What about Boeing? It's not completely belly up, but it's suffering some issues from the recent...

Amy: Right, great example.

Steve: ...accident on one of their planes. So, yes, it cherry picks data. This article cherry picks data to say that stock can go away. Now, obviously, gold isn't going to go away. So when they make that comparison, they're not wrong. But when you cast a large net into an ETF through many different stocks, that's not going away. So I don't like how they're cherry picking the data to prey on your emotions in an attempt to sell you gold on behalf of your children.

Amy: Yeah, well, they're essentially comparing it to two things, an individual stock or a savings account. Okay, well, nobody's saying you put all of your money into a savings account. Right? I mean, that will completely be eroded over time by inflation. And then we would never, ever say, "Hey, buy gold or buy an individual stock." We're not proponents of that either. So, yes, absolutely. They're cherry picking the data that they're putting into this article to try to sell you something. And then I think for a lot of investors, it's difficult to wrap your brain around the fact that you own a piece of the company. There's no actual...I mean, most of us don't have a stock certificate in front of us that we can touch and say, "We own this." And stock is something that you feel like, "Okay, I can see it. I can touch it." I get that. But again, just because it's something that is a little more tangible doesn't mean the results are more tangible from investing in it.

Steve: Yeah, the article goes on to say if you have investments on behalf of your children, if you own an ETF, stocks, whatever, then potentially you might have to sell when those investments are down to generate cash for your child. Yes, again, this is an accurate statement because the markets go up and down. It's like walking up the stairs while playing with a yo-yo. That's what Nathan Bachrach used to say. But that's also insinuating that gold isn't going to fluctuate in value.

Amy: Exactly.

Steve: It is.

Amy: Yes. Gold's value goes up and down just like anything else that you can invest in.

Steve: The more we talk about this article, the more I'm offended by it.

Amy: It's ridiculous, actually. Yeah. I think it's like assuming that we're all morons, but, you know, you can easily see these things. And especially for someone who gets a little nervous about the volatility of the stock market, buying into these things overall just makes me super nervous. And, you know, I just...I think about talking about buying it for your children. We've always said on the show there's two reasons to buy gold. So in this is if you're looking at it specifically for your children, we would say the only reason would be to buy them a necklace or something that says, "I love you," or, "I'm sorry." Right? So when they're telling you, "Hey, there's three reasons, they're great ones. And this is why they're better than any other options." No, we would say, "Hey, it's the basic bread and butter." Diversified index accounts and those kinds of things, those are where you're going to make the difference. Don't be buying your kids gold bricks, please, please. Here's the Allworth advice. There's two reasons to buy gold. And we'll say this over and over again. It's to say, "I'm sorry and I love you." Don't let any of these headlines or articles with an agenda derail you from smart long term investing. Coming up next, how to stop accumulating debt once and for all. 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. If 2024 is the year for you when you say, "Okay, once and for all, I'm going to get out of debt." Where do you even begin? Well, tonight, our credit expert, Britt Scearce, is joining us here on the show with where do you even get started? And, you know, Britt, I love that you're talking to us about this because it's not something that you're telling us from some, you know, scholastic... You've done this. You've lived it. You've been in debt yourself. You've pulled yourself out. You've gotten to a really great point. So you're not like on some high horse here telling people what to do that you've never had to do yourself.

Britt: That's right, Amy. I've lived this. And, you know, first off know that, you know, a lot of times people feel like this is just like, "Oh, I'm ruined forever. I have so much debt. I'll never be able to recover." And I want you to know there is hope. Now, you know, you can't just hope that it goes away and not do anything. You know, if you find yourself digging yourself into a hole that you want to get out of, the first step is to put the shovel down. You've got to stop adding new debt. And, you know, make a mental...just put a stake in the ground that says, "Okay, I'm going to get serious about this. Because a lot of times what happens is, you know, it is so easy to get a debt. I mean, credit cards are easy to use. It's easy to just set up payments automatically to just go to your credit cards. Obviously, when you swipe your credit card, it doesn't feel like you're spending money. They've even done some studies that say that, you know, you spend like 10% to 12% more by using a credit card versus cash. You know, and that using cash actually registers as pain in your brain. So you've got...

Amy: Yeah. It's a psychological thing, right? As much as it's like an entire shift in how you think as well as your actions following the way that you're thinking.

Britt: Exactly. So, you know, first stop betting. Number two, you know, get a handle on your spend. You know, I don't know if anyone's done... I've done this before, but I don't know if you've done this, Amy. Have you ever just written down every single thing you spend money on every month?

Amy: Yes.

Britt: I mean, every...I'm talking 10 cents for the bubble gum machine. I'm talking everything. And then you take a look at it. You're like, "Wow. Do I really need the Disney Channel, Netflix, Hulu, and Prime?"

Amy: Right. Drives my husband crazy. I actually do this on a pretty regular basis just to kind of track things. It's maddening to him. But I also think you kind of got to do it as at least a starting point to say, "Okay..." And to your point, I think, Britt, like if you knew you were spending $250 a month on subscriptions, would you change something about that? Right? Probably yes.

Britt: Yeah. And so you take that inventory, and then at that point, devise a plan. You know, obviously you can make some cuts. There are opportunities to get maybe a side hustle to bring in some extra income or work a little overtime if that's possible on your job. And then, you know, develop a spending plan, and an actual, you know, strategy for eliminating debt, whether it be... You hear a lot of different types of strategies for paying down credit card debt, like the debt snowball or the avalanche method. You know, the avalanche method is to pay off your highest interest rates first, and pay minimum payments on everything else, you know. Or you can do the debt snowball, which is pay minimums on everything, list your debts from smallest to largest and pay extra on your smallest debt, and make as many of those go away as fast as possible because you get those mental wins.

And, you know, sometimes we also have to make some decisions that, "You know what, I know our family loves to take these certain vacations. We like to do these certain things." Well, maybe for, you know, one year, depending on how much debt you have and that sort of thing, you know, maybe for one year, we do a staycation and we use the $5,000, $6,000, $7,000, $10,000 or whatever that would have gone toward, you know, some extravagant vacation, you know, it goes to paying down debt. And then next year we can pay cash. You know, once we have no debt, we can actually save for that vacation and pay cash for it. So, you know, those are some decisions that we have to make.

Amy: Britt, you're talking about, you know, passing up vacations and things like that. I think for a lot of people, it's like, "Oh, but that's something we look forward to every year." Well, you understand, but it's like kind of what are the lesser of two evils right now? Not going on that vacation and finally getting yourself out of debt, or staying in that hole and continuing to dig that hole deeper and deeper. It's going to take some...a little bit of sacrifice, maybe a lot of sacrifice in order to get out of there.

Britt: Exactly. And, you know, it's temporary. Here's the thing that whenever I'm coaching someone know that this...you don't have to live on this tight budget where you can't do anything. You know, this isn't for the rest of your life. This is this is a strategy and a game plan for 6 months, 12 months, you know, 24 months, depending on what your debt situation is. In many cases, people really, once they get focused, they are amazed at how efficient they can become at making that debt go away.

Amy: It probably changes, though, how you look at spending long term, maybe for the rest of your life, right? All of the things that felt necessary before, once you cut them out and you realize, "I'm actually fine without these things," I think it probably just changes your whole outlook on how you spend.

Britt: It does. You know, I know when I first started digging out of my own situation 30 years ago, I ended up...it was tough because I would actually start on the right path, and be really disciplined for a little bit. And then I would fall off the wagon, and I would like make a mistake or...

Amy: It's like a diet.

Steve: Well, it is. Or, you know, usually it's some repair happens, you know, "Oh, my gosh, I have to spend 1,200 bucks on this," whatever, car repair, or whatever. So, you know, the other step after you get your spending plan kind of in place, and you kind of get an inventory, you need to start an emergency fund, and start that even if it's small, even if it's only $1,000 or $2,000. Get an emergency fund in place so that you don't have to go into debt if there is some sort of, you know, life thing happening, you know, a car breaks down, or you end up with a medical bill, or something of that nature. You know, those emergency funds can really be, you know, very helpful in keeping you from adding to the debt.

And then, of course, once your debt's paid off, you want to get that emergency fund up to six months' worth of living expenses. And, you know, from there, you can worry about ramping up things like retirement savings and that sort of thing. And I know initially starting out, that seems tough. But when you're doing that inventory, and as you make cuts, and as you try to get a little extra income, you know, perhaps you could even have a garage sale, sell stuff on eBay, whatever, get yourself that emergency fund. And that'll really put you in at least a little bit of more peace of mind that you know, "Okay, if something does happen, I don't have to add more to my debt."

And I actually got to the point personally that once I started attacking one particular debt... Nowadays we have a lot more electronic means to do this. You know, I would make multiple payments on the same debt. It's like, "Oh, I've got some more money. I'm going to send a little more to that." And I would just get obsessed with making the debt go away. And I think until you...

Amy: You got addicted to the success of it, right?

Britt: That's right. And I think once you really kind of get into that mode, that mindset, you know, you'll be amazed at what you can accomplish. Absolutely, put...

Amy: Great advice is always from our credit expert, Britt Scearce. 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've got a financial question that's keeping you up at night, or you and your wife or husband aren't on the same page about something, there's a red button you can click on while you're listening to the show right there on the iHeart app. Record your question. It's coming straight to us. We'll help you figure it out. And straight ahead, we've got a reminder, right? The safest ways to pay for things. Scammers are out there everywhere. We want to make sure you know how to protect yourself. It is time for everyone's favorite game.

And we kind of joke about this kind of as a game. But I think it is...the reminder here is there's all kinds of myths out there and in gray areas when it comes to retirement, and making smart decisions about your money and your financial future. So we just want to get everyone to make sure that you've got a firm foundation on what you know and what you understand about these things. So first one, fact or fiction, is your time horizon, right? So the amount of time that you need that money to be invested is more important than your risk tolerance when it comes to saving for retirement.

Steve: You know, this is gray, but I would say fiction. Now, I put a lot of thought into this because at the end of the day, your risk tolerance, if you're taking too much risk and you're losing sleep over the volatility of your investments, then you risk making an emotional decision that can lead you to sell to cash or try to time the market. So when it comes to building that holistic portfolio based on your financial plan, we do like to look at things like your need to take risk, your ability to take risk, your tolerance. But if you're taking too much risk than you can possibly tolerate, then that can blow the whole thing up.

Amy: I'm going to say one is not more important than the other. They're both incredibly important, and they're both things that we absolutely take into account the very first time we sit down with investors in figuring out what your long-term financial plan is, right? We need to know, can you sleep at night if you're invested in this amount of stocks versus bonds? We also need to know, do you need this money in 5 years, 10 years, or are you 25 years away from retirement? All of those things are going to affect the advice that we would give about how to invest and what to invest in. So that's a tricky one, but I think it's fiction because both are incredibly important. Here's another one, fact or fiction. You're better off putting money in a Roth IRA than a traditional IRA if you're a younger person.

Steve: So remember, Roth IRA, you put money into this retirement account on an after-tax basis, and all the earnings moving forwards for you are tax-free for the rest of your life. That happens when you turn 59 and a half, and the money has to have been in the account for 5 years. Traditional IRA, there's a deductible contribution, so you can actually lower your taxes today. Again, this is a gray one, but generally speaking, I would go with fact with those gray areas because you have a longer time horizon. If you are younger, then there is more time for your money to grow tax-free. There's also probably a situation where your income is going to rise over time, so you're putting that money into an account, paying the taxes now, and capitalizing on that long-term growth potential. Outliers would be if you're an incredibly high-income earner today, if you need a tax deduction that you can get from making a traditional IRA contribution. But generally speaking, we'll say fact.

Amy: Yeah. Generally, this is true, right? Because with a Roth, you're going to have whatever you're making, say, when you first get out of college versus what you're making in your 40s or 50s. And I think in a lot of cases, a Roth can still make sense at any point for different reasons. But yes, especially if you're a younger person and likely making less money, it can make a lot of sense. Next fact or fiction, it's generally better to wait as long as you can to claim Social Security.

Steve: Since this was worded as generally, I will just straight up say fact. This is an easy one. I don't have to get all gray with this one because you get 8% more per year between full retirement age, which is for most of us 67 years old, until you defer until 70. That's a huge opportunity. It's hard to guarantee 8% rate of return. And essentially, that's what you're getting when you defer your Social Security payments. It kicks back the break-even point a little bit further until you're older. But if you live past that age, then you've gotten more back from Social Security than you ever could have if you collected earlier than 70.

Amy: You hit the key word, and it's guaranteed. On a show where we talk about money and investments, it's very rare that we can use the word guaranteed, but it is. It's a guaranteed 8%. There's nowhere else that you can get that. So I think regardless of what age you are, when you think about Social Security, you should plan a strategy around being able to put off taking it as much as you possibly can because, again, guaranteed 8%. There's nowhere else you can get that. Here's fact or fiction. The S&P 500 is a better index to track than any of the others, such as the Dow Jones or NASDAQ.

Steve: I mean, when we're making those comparisons, I would say sure, fact. It casts a larger net. It's 500 U.S. large-cap company stocks versus the Dow, which is 30 companies. The NASDAQ focuses on tech. So, yeah, fact. It's going to cast a larger net.

Amy: Yeah, fact because of how this is worded. If it said the Russell 2000, then not so much because then you're looking at 2,000 different companies, 2,000 different stocks. You know, I think it's good to have a general knowledge of how these different indexes differ. But, you know, I think the key here is to understand what's diversified. So, yeah, as far as this is worded, I would say this is also fact. Let me give you another one, fact or fiction. The 4% distribution rule remains a solid strategy.

Steve: I still like it. What it says is that if you take 4% out of a portfolio that is in a balanced investment allocation, then that money can typically last you for about 30 to 40 years. So it gives you a high-level rule of thumb to understand how long your money might last versus how much you're pulling from it. If you go up to 5%, same factors, balanced portfolio, cuts it down to about 20 or 30 years of longevity for those assets.

Amy: I think it's a great place to start. And I think everyone likes a formula that you can just plug in some numbers and have an easy answer.

Steve: Yeah, easy.

Amy: Just understand that we're all different. Our retirements are different. Our savings are different. So I think 4% rule is a great place to start. But it would probably be more individual for you. And I also don't think it's the same percentage every year. Some years you're going to take out more. Some years you're going to take out less. Coming up next, we've got the safest ways that you can pay for things, and the ways that aren't safe at all. What you need to know to protect yourself. You're listening to "Simply Money" presented by Allworth Financial here on 55KRC, the talk station.

You've been hit by
You've been hit by a smooth criminal

Amy: You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner along with Steve Hruby. You know, there's stories out there all the time. You probably know someone in your family or a close friend who's gotten scammed. And so we think this is a really important topic to talk about tonight. And this is the safest ways to pay for things. Whether you're in person or buying things online, some ways of paying for things are going to be safer than others.

Steve: Yeah, so the safest in-person way, your contactless payment options, like your tap-to-pay credit card. Do you have a tap-to-pay credit card?

Amy: I do. You know, it's funny though. I was thinking about this. It takes me a long time in my brain to adjust to new ways of doing things. So I still insert the chip card rather than tap it. And I was actually getting gas the other day, putting the chip card and was thinking, "Why am I doing this?" I know actually that it's safer just to tap it, right? Because when you tap it, then actually the credit card company comes up with an individual number, right? That can only be used once. And so it's a much safer way of doing things. When you put that card in, often there's devices that can be put on those machines. I'm still adapting to this, but yeah, yeah. Those tapping, that's the smartest, safest way to pay.

Steve: I feel like sometimes I just kind of stand there looking like an idiot trying to figure out where I'm supposed to tap my card to make the payment.

Amy: Just hitting it all over the place. Yeah, me too.

Steve: Yeah, because you used to hand it to the person, then you used to swipe, and now we have this chip technology. Now we have this contactless where we just tap it on there. And you bring up a good point. We'll throw it back to the intro song, these smooth criminals. They create these actual contraptions that they can put on top of where you would scan or even insert your card to take a reading off that. It's terrifying.

Amy: Yeah. So they're getting your information and you don't even know. You'd think you're just getting gas.

Steve: Exactly. So, you know, your best bet is the contactless payment. Second to that is the chip. Third to that would be actually swiping or we could talk about e-checks, which is similar to an ACH payment. It uses the same network. Slight differences. Obviously, this is a digital version, a version of a check that pays the money just like an ACH. Harder to scam than using a debit card, for example, which is last on the list.

Amy: I think that there's a matter of convenience here. Like with an e-check, it's like, you know, how often do you actually write checks? This would be a safer version of writing a check, yet you're not going to get an e-check every time you have to pay for something. You know, there's more steps involved in this. But definitely if you've got a recurring payment or something like that, this can make a lot of sense. So I think those are great things to think about if you're paying for something in person. But let's face it, Steve, for most of us, we do a lot of our shopping online these days. We're paying for things online. And credit cards, when you're paying online, are the safest way to go.

Steve: Yeah, absolutely. So what you're doing, you're putting risk on the bank that supports your credit card. That's what happens at the end of the day because there's protections. There's federal law where you can only be liable for up to $50 on fraudulent charges. So the bank takes on that risk in exchange for hoping that you're going to end up paying them interest on the debt that you carry on your credit card. So using your credit card online is a safe way to pay. Whereas if you're using a debit card, that pulls directly from your bank account. It doesn't flow through to put the risk on the bank. So there's an added level of liability if you come across a fraud situation where somebody is scamming you.

Amy: And, of course, the worst way to pay for something, cash. There's zero recourse. Once that money has left your hand, if it's someone that's not legitimate, there's no getting that back. Thanks for listening tonight. We hope you're going to tune in tomorrow. We're talking about how to navigate those difficult family dynamics, we all have them, so that you can retire on time or maybe retire at all. You've been listening to "Simply Money" presented by Allworth Financial here on 55KRC, the talk station.