Steve S.: Tonight, the news we wanted to see, the rate of inflation dropped again. You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach, along with Steve Ruby. Ruby, these were good numbers. This was important. I mean, we get wrapped up over inflation. It determines what the Fed is gonna do. And we were expecting a decent drop in inflation. And actually, the numbers came in below our best expectations.

Steve R.: Yeah. We got the decent drop and more.

Steve S.: Yeah, exactly.

Steve R.: What we're talking about is headline inflation rate or CPI, which is the amount we paid for everything in June, was 3% higher than last June. Now, that doesn't sound very nice when I say it that way.

Steve S.: It was 9% last year.

Steve R.: Exactly. That's why it's great news.

Steve S.: This is good.

Steve R.: Because in May even, the rate was 4%. So, 3% is actually the lowest rate since March of 2021.

Steve S.: This is awesome. You know, when I saw that, the estimate was, okay, we should expect the number to come in around 3.1. I'm thinking to myself, "Well, it's 4% last month. That's a big drop."

Steve S.: That's a stretch.

Steve R.: That would be really nice. But, you know, if it's 3.3 or 3.4, I guess that's okay. And here comes in at 3.0. Nice.

Steve R.: The markets have liked it so far.

Steve S.: Well, that's gonna happen.

Steve R.: It sure is. Yeah.

Steve S.: You know, that's gonna happen.

Steve R.: Remember, the headline inflation rate accounts for everything that we buy. So, the main reason for the lower inflation rate is grocery and gas prices went down. So, huge monthly increases. And the consumer prices back in 2022, those have actually dropped out of the yearly calculation for inflation as well.

Steve S.: Exactly. Yeah. We're getting a little bit more than a year, so those really bad numbers are falling off. Yeah, that's a good thing. But core inflation, yeah, we're making improvements, but not quite down to 3% yet.

Steve R.: Yeah. So, this is where it's without grocery and gas prices. And then this is the rate that the Fed prefers. Grocery and gas prices, they can be very volatile month to month, so they're gonna look at something with a little bit less volatility. And that rate sits at 4.8%.

Steve S.: Yeah. And that's higher than we would want to see it. They want that rate down to 2%, which, it'll get there, but it's gonna take a lot more time.

Steve R.: But still good news, Steve, because it's trending down.

Steve S.: Well, that's the whole point. And you know, people will say, "Well, wait a second, it's not like we don't eat and we don't drive. Why don't we include that?" If the price of gas drops 30 cents a gallon for whatever reason and everything else, when you go to Kroger, you spend an extra 50 bucks more than you were expecting. Okay. As far as you're concerned, things are getting worse. And that's why you strip out these costs of food and gas that bounce all over the place, you know? It just gives you a more realistic idea of what the real trend is. So, okay. That's getting better, but not quite where we want it. I'm still happy with that.

Steve R.: Yeah. With that in mind, what do you think the Fed's gonna do on July 25th, 26th?

Steve S.: Oh, it's a given.

Steve R.: It's a given at this point?

Steve S.: It's a given, yeah. They meet, actually two weeks from today, July 25th and 26th. Two weeks from today is the 26th. And that's when they make their announcement, usually about 2 in the afternoon. No question in my mind, they're gonna do a 0.5% increase, which I'm not sure they need to do anymore, but it's not like they're gonna ask me what I think. Shocking.

Steve R.: No, they're not. I mean, they don't listen to this show and take what we say into consideration.

Steve S.: You know, at some point, you've gotta believe when the Fed says, "Oh, we're gonna do two more rate increases this year," you gotta believe that there's a good likelihood that they're gonna do two more rate increases.

Steve R.: Yeah. You don't say.

Steve S.: Yeah. Exactly. And, you know, the point I think we should make is Wall Street has already pretty much baked in that as a given.

Steve R.: The assumption about the hike?

Steve S.: Yeah. In other words, the only surprise would be if they don't, which would be a heck of a nice surprise. But, you know, it's not gonna happen. I think it's pretty much a given another 0.5% increase in interest rates July 26.

Steve R.: So, why do you think that the core rate is being stubborn at this point, sticking?

Steve S.: Yeah. You know, there's two things going on that are making it real tough. And that's a good question. One of them is wage inflation. I mean, the job market is crazy tight, and I don't think that's gonna change anytime soon. I think that's more a function of demographics. There aren't as many working age people and there's a whole bunch of older people that are retired that still want to go out to dinner and do things like that. So, I think wage inflation is pretty much stuck. And that's one of those inflation numbers that it doesn't come down quickly at all. And it could go into a death spiral and make things really bad. So, I'm kind of encouraged it's not that. The other is shelter, housing. Yeah.

Steve R.: Housing. So, housing costs, it's the single biggest influence on inflation, and that's not slowing quite as quickly as they had expected.

Steve S.: You know what's crazy, is, and we've talked about this, Cincinnati is one of, and in some months the hottest market in the country for housing. I think the average number of days a house is on the market in Cincinnati right now is about three days. So, if something's on the market more than a week or two, it's either got major issues going on or it's severely overpriced, or both. I mean, little Cincinnati, you know, the hottest real estate market. I think part of that is you got a lot of people with 30-year mortgages at, you know, 2.8, 2.9% they don't want to give that up and take out a 7... I mean, 30-year mortgages are up around 7%.

Steve R.: Yeah. It's a monster compared to what people have grown used to over these last several years.

Steve S.: Exactly. You're listening to "Simply Money," on 55KRC. I'm Steve Sprovach, along with Steve Ruby. And we're talking about the inflation numbers that came out this morning, and why they are so good. And that's a trend that I hope continues. But I wanna talk about a couple of other things before we break here. And one of them is the President of the New York Federal Reserve, his name is John Williams, he just went on the record. He had an interesting interview, and he doesn't, not only think that the U.S. economy is gonna slow down and hit its weakest point until next year, he's not even sure we're gonna have a recession.

Steve R.: You might ask who cares what he thinks, but he's actually a key advisor and has the ear of Fed Chair Jerome Powell. So, he said at the beginning of this year, he was thinking that 2023, we would see some of the weakest growth, but that changed after the first quarter growth came in above 2%. In other words, he was wrong and he pivoted about what he was gonna say.

Steve S.: I'll give him a break though, because, you know, we want them to make some predictions, we want to have an idea of where they stand, but, you know, the smart people make no bones about it. If the data changes, my opinion's gonna change.

Steve R.: Yeah, you're right.

Steve S.: And there's new data coming in every day on the economy from all different directions, some good, some bad, most of it, somewhere in the middle. But you know what, I give him credit for saying, "Hey, you know, the numbers weren't..." We saw the first quarter GDP in the United States over 2%. And he's saying we may actually finish out this year at a little bit better than 1%. Now, that's not, you know, fantastic 3 or 4% growth. But when the Fed is trying to slow down the economy with, you know, the last big slowdown and rate hike increase that happened in the late '70s and early '80s throwing us into not one, but two brutal recessions. If we can pull this off without a recession and get just decent, maybe 1%, 1.25% growth in the economy and get inflation down 2%...

Steve R.: And get inflation down.

Steve S.: Yeah. I mean, you're just nailing it. We'll sing.

Steve R.: So, he is more in the thought that there's going to be that soft landing that everybody has been hoping for and that the Fed has been chasing. That's where they do bring down inflation without tanking the economy. And that's what this gentleman thinks.

Steve S.: Yeah. And I'll tell you what else I was reading, is, you've got the Minneapolis Fed president, his name is Kashkari. He's talking about, you know what, we've had some issues in the banking sector, and I think we need to start changing the stress testing that we're going to be doing for banks to include higher inflation and higher interest rates. What a shock. You know that...

Steve R.: Yeah, I know, right?

Steve S.: I mean, you know, here's the Federal Reserve in charge of interest rates, and they run stress tests. And this is the big knock that happened with the California banks that went under just a couple of months ago, that the stress test, which they passed, did not include a scenario for higher interest rates. And that to me is just mind boggling that the Fed who changes interest rates doesn't protect the economy by stress testing banks on higher interest rates. It blows me away.

Steve R.: Yeah. I mean, this is one of those things where regulations get a bad name, but when...

Steve S.: You gotta have some.

Steve R.: Yes, exactly. When we're talking about the banking industry, there has to be some. And these banks, make no doubt about it, they're still gonna make money even when they face regulations. But the point here is to make sure that they're not making greedy, risky decisions that can put the entire bank at risk, just like SVB, for example.

Steve S.: Exactly. Exactly. And I'm the last guy that says we need a ton of regulations, but all you have to do is look at cryptocurrency market to see what happens when there's no regulations.

Steve R.: Yeah. We're gonna be talking about that coming up,

Steve S.: Yeah, exactly. You know, so, what's interesting is a guy named Michael Barr, he's the vice chairman for supervision at the U.S. Federal Reserve. So, in other words, he's the guy, vice chair, I suppose, he's not completely in charge, but a pretty important guy. He's in charge of making sure the banks are solvent, that they are safe. And he's talking about and proposing that we enhance risk-based capital rules to the big banks so that we increase their amount of reserves. It's a fancy way of saying, "Yeah, we want the big banks to have more cash on hand in case things happen with the economy."

He's the same guy that's in charge of supervision. Same guy that was asleep at the switch when Signature Bank and SVB went under, you know? So, to me, him saying you need more cash on hand, a little bit late.

Steve R.: Yeah. And keep in mind that some of these risk-based capital rules that Steve's talking about, the threshold is currently a bank that has $700 billion in assets. So, these are the big players...

Steve S.: These are huge.

Steve R.: ...that actually have some of these regulations. What Michael Barr, the vice chair of supervision, again, for the Fed is advocating for, and it's a multi-year effort, is to have the same rules for banks that have $100 billion or more. So, this is gonna include some of those mid-sized banks that they didn't really think could have that much of an effect on the economy if they went under. But we had this banking crisis that threw a wrench and some of the plans that the Fed had with raising interest rates.

Steve S.: And that's fine. You want to have more cash on hand. Tell you what, that's gonna hurt the profits of the bank because...

Steve R.: Yeah. But they're still fine. These big banks are making it just fine. These midsized banks are gonna make it just fine.

Steve S.: Yeah, I suppose. But I just wanna see a more real world test.

Steve R.: Well, these same regulations existed in the past. That $100 billion threshold existed in the past. They got rid of the regulations and then this happened. So this guy just wants to bring it back.

Steve S.: Okay. But don't you think they need to do a little bit more? When you have huge banks go under in the space of, what, about three weeks? We have three major U.S. banks go under. To me, whatever the system is, it tells me they're not doing their job, it needs to be fixed, and let's address it. So, people like you and me don't have to worry about, "I wonder if my bank's okay."

Steve R.: Yeah. And this is where I'm in the ballpark of, you know, some regulation is good.

Steve S.: Yeah, no question. Coming to a 401(k) near you, cryptocurrency. Oh boy. We're gonna talk about that next. 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 Steve Ruby. Hey, if you can't listen to "Simply Money" every night, subscribe to get our daily podcast. You can listen the next day during your commute, at the gym, whatever you happen to be doing. And if you think you've got some friends that could use some advice, tell them too. Just search "Simply Money," on the iHeart app or wherever you get your podcasts. Straight ahead at 6:43, ways to get the most from social security. And it might not be what you think. I think you're gonna enjoy some of the ideas we've got.

All right, Ruby. So, federal regulators. First, it was Wells Fargo. Now they're going after Bank of America for pretty much the same thing, allegedly. Well, Bank of America's being a forced to pay over $100 million to customers for allegedly charging illegal junk fees, withholding credit card reward, and opening fake accounts. I can't believe this.

Steve R.: Yeah, and that's exactly what it was for Wells Fargo.

Steve S.: It's ridiculous. Yeah.

Steve R.: Oh boy, I hate hearing stuff like that.

Steve S.: Well, they have sales contests. Why do you have a sales contest at a bank? Some teller is gonna be saying, "You know what, I could use an extra 25 bucks. Maybe I'll..."

Steve R.: Yeah. I can win this by opening bank account accounts for clients that didn't know they're getting a bank account. That is just such a terrible thing to do.

Steve S.: Allegedly. Allegedly.

Steve R.: I mean, they're being forced to pay.

Steve S.: That's $100 million. It's big money.

Steve R.: Well, yeah. It depends on who you're talking to. If you're talking to Bank of America, not so much. They're a publicly-traded company. So, I've looked, and in 2022, revenue was $92 billion. Net profit, $26 billion. So, do they take that $100 million out of it?

Steve S.: This is like you or me saying, "Hey, give me two bucks." Yeah, okay, whatever. Yeah.

Steve R.: Not even. It's nothing. But the Consumer Financial Protection Bureau, CFPB, said in a statement on Tuesday that the bank was ordered to pay an additional $90 million in penalties to the CFPB, and then $60 million in penalties to the Office of Comptroller of the Currency.

Steve S.: Plus $100 million to customers. Crazy.

Steve R.: Yeah, it is.

Steve S.: Yeah. I don't know why they don't learn their lessons, but they've got 68 million customers. I think they own Merrill Lynch, don't they?

Steve R.: Yeah, they do.

Steve S.: Bank of America?

Steve R.: Mm-hmm.

Steve S.: Yeah. I mean, this is a huge, huge company, but apparently, allegedly, they were doing some bad things. I don't care if $100 million is a drop in the bucket to them, it's a lot of money.

Steve R.: Yeah. It was targeting people and doubled double dipping on the fees imposed to individuals that had insufficient funds in their accounts. See, those are those that overdraft.

Steve S.: So people that are broke got hit twice?

Steve R.: Yeah. They were getting hit with a $35 overdraft fee. And then again, and sometimes even again on top of it.

Steve S.: Okay. Coming to a 401(k) near you, cryptocurrency. I have a hard time believing this. With all the problems going on and all the risk in the cryptocurrency world, despite all the danger, it could be mainstream. And it looks to me like BlackRock is trying to be first in line to have an ETF that may become available in your 401(k).

Steve R.: Yeah. They're leading the charge on that. BlackRock is the world's largest asset manager, and they did file an application with the SEC, the Securities and Exchange Commission, to create an exchange-traded fund that would be available inside of your employer-sponsored retirement savings plan. Now, following suit in that, Invesco, WisdomTree, Valkyrie Bitwise.

Steve S.: Oh, they're all gonna get in on the act.

Steve R.: Of course, they are. They wanna make money off of people that are investing in Bitcoin inside of their 401(k). This scares me though,

Steve S.: Do you think?

Steve R.: Yeah. This is one of those things where, you know, folks that I've worked with, before they worked with me, I've run into several situations where when they enroll in their 401(k) for the first time, they look at the investment mixes and they see the ones that perform the best and they put all their money in that.

Steve S.: Oh, this one went up 30% last year. I'd be crazy not to put all my money in it.

Steve R.: Yes. And when you have a volatile investment option like one that's backed by Bitcoin, you're gonna have some periods of time that look pretty nice, but you're also gonna have periods of time where that goes down very, very quickly.

Steve S.: Yeah. Anything that goes up a ton can go down a ton. That's the bottom line. You know, I learned a long time ago, just because there's a mutual fund or an exchange-traded fund that invests in a certain sector, doesn't mean it's a good area to invest in. I mean, mutual fund companies and exchange-traded fund companies, they don't make their money on performance, they make their money on the amount of dollars in that investment.

Steve R.: Yeah. The expense ratio inside of the fund.

Steve S.: Exactly. So, if they're charging 1% and there's $100 million in it, well, guess what? They're making a lot of money. If there's a billion dollars in it, they're making 10 times more, you know? So, it's really, if you see a new ETF or a new mutual fund, it's really targeted by the marketers. It's not necessarily targeted by the smart people that say, "This is a great area we want to invest in." And with the interest in cryptocurrency, you can bet you're gonna see some of these show up in your 401(k)s. Question I've got is, alright, your employer has a fiduciary responsibility to watch over the investment choices in your 401(k). If they put cryptocurrency there and somebody loses a lot of money, are they gonna be at risk? That's where it gets dicey.

Steve R.: It is a really good question, because there's a fiduciary responsibility on your employer to ensure that they give you options that can help you fulfill your financial goals based on the investments that are available. Franklin Templeton, they appear optimistic about adding a Bitcoin ETF into portfolios, making it a regular pot of portfolios once regulations become clear. So, you know, again, I hate always talking about regulations, but this is one of those areas where it does make sense.

Steve S.: Well, and you're gonna have some employees say, "Hey, I want you to add that to my plan. That's something I think is a smart place to put my money." And they're gonna be under pressure to put these in 401(k)s. I'd be surprised if they don't. But my guess is they're gonna wait for a little more regulation because you don't need an FTX situation.

Steve R.: Exactly. Then there's an issue with risk on the employer offering 401(k)s to the employees.

Steve S.: Exactly. Speaking of FTX, man, there was an article in "The New York Times" that really went into detail about the implosion of FTX. FTX is the big exchange of cryptocurrency that went under.

Steve R.: It was Sam Bankman-Fried.

Steve S.: Sam Bankman-Fried. Yes, Sammy boy. Man, that thing blew up. And Tom Brady, you know, we've talked about Tom Brady was fronting for him. You know, he was basically saying this is a good investment. And when FTX went kablooie, you know, we were talking about Tom Brady lost $30 million, which tom Brady maybe is not a ton of money, but it's still not a good day. And then I read in this "New York Times" article, well actually, when he was touting FTX, he got paid $30 million in mostly FTX stock. So, basically, when that money went out the window, he worked for free.

Steve R.: Yeah. He's already a mega-millionaire.

Steve S.: It was nothing out of his pocket to speak of.

Steve R.: Yeah. There's celebrities that can afford to take on some of these higher risks. Some others, they got looped into endorsements from FTX or Paris Hiltons, Snoop Dogg, Reese Witherspoon, Matt Damon, Shaq, Lindsay Lohan, the list goes on. These people can afford to take the risk, especially when they were paid in FTX stock, it just means they worked for free. They still got their millions.

Steve S.: But they talked the average person into doing it, and some of these people got hurt pretty bad.

Steve R.: Yeah. And here's the key takeaway, is making sure that you aren't taking unnecessary risk that you can't afford.

Steve S.: Here's the Allworth advice, millionaire, celebrities, yeah, they can afford a dance with this kind of danger, but most of us can't and could end up making the worst financial decisions of our lives. Coming up next, what you can learn from retirees' regrets. 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 Steve Ruby. You know, Ruby, there's a line in Frank Sinatra's song "My Way" that goes, "Regrets, I've had a few." I know you wanted me to sing that.

Steve R.: You said you were gonna sing it.

Steve S.: No, it's not gonna happen.

Steve R.: Oh, come on.

Steve S.: No. Many retirees, they say the same thing. Some of their regrets can become your lessons. I've talked a lot about my dad and some of the mistakes he made. And, you know, it's fairly common that when people retire, especially when it wasn't necessarily their choice, it was their company's choice, you're not quite ready for it emotionally, financially, all of the above. And there are some things that we can take a look at that if you haven't retired yet, maybe you wanna listen to some of these ideas and not have these regrets.

Steve R.: Yeah, good idea. So, University of Michigan survey, this was a health and retirement study for Americans over the age of 50 that was recently conducted, shared that nearly 6 out of 10 participants regretted not saving more for retirement.

Steve S.: I think everybody wishes they had more money, you know.

Steve R.: Of course. Yeah. Four in 10 regretted not buying long-term care insurance.

Steve S.: That surprised me. That really did because I think the numbers are only 7% of retirees have long-term care. So, in other words, a lot of people are realizing, "I don't have it. I wished I did."

Steve R.: Yeah. It could be a whole segment in and of itself because that's one of those things where it's expensive.

Steve S.: Well, I mean, let's talk about, okay, I wish I had more money. And we talk about the 4% rule, the 4% guideline, but, you know, I wanna throw out some numbers. A million dollars is a lot of money, but if you've got a million dollars in your 401(k), IRA, all of the above, that's $40,000 a year you can draw out on an annual basis. And chances are, not even come close to ever running outta money. Forty thousand dollars a year on top of social security is a pretty good number for most people, but most people don't. They don't have a million dollars in retirement.

I think if that's your target to at least have $30,000 or $40,000 of additional income, you've gotta figure out, okay, how old am I right now? How old do I hope to be when I retire? What do I need to change so that I do have a million dollars? And a good business financial calculator can give you that answer. It's not rocket science.

Steve R.: Yeah. Or you're welcome to work with a fiduciary financial planner. You know, a big part of what we do in the industry is making sure that people don't have these regrets. So, you know, 4 in 10 regretted not working longer according to this study. Now, it didn't specify if it was because they didn't save enough or because they got bored. Two in 10 regretted taking social security too early.

Steve S.: Yeah. And that's one of those things, yeah, you've got a year, and most people don't realize this. If you draw social security early and say, "You know what, I shouldn't have done that," you've got up to a year after your first payment where you can pay social security that money back and say, "Oops, sorry, make believe it didn't happen and I'm gonna draw it out later," you know. But if you're past that year or if you're like, "Well, I kind of need that money. I'm spending it. So, I guess I'm gonna draw it early." Everybody would like to have more money coming in from social security later, but a lot of people draw it at 62, earliest chance they get.

Steve R.: So, how can you, the listener plan to not have some of these regrets? So, long-term care insurance, let's talk about that for a minute. For those that are considering long-term care planning, including, you know, a nursing home, assisted living expenses, that can deplete your assets very quickly if you are not covered. And somebody turning 65 today has almost a 70% chance of needing some kind of long-term care insurance.

Steve S.: Yeah. I know you have, I certainly. Matter of fact, I had a discussion yesterday on this subject with someone, the older you get, the more likely you are to wind up in long-term care. I always had the attitude of, "Yeah, but you know what, the sweet spot is 62 to 65 to buy it because before 62, you know, come on, why am I spending this money?"

Steve R.: Yeah. It's just money out of the door.

Steve S.: "It's gonna be decades before I need it." And then at 60, I had open heart surgery, I had triple bypass. Well, guess what? Now, the equation has changed for long term. I'm still gonna get long-term care, but it's tougher to qualify for and it's more expensive. So, I changed my mind completely, my attitude completely on long-term care. Yeah, maybe you do wanna consider it when you're younger just in case something like that happens.

Steve R.: Yeah, exactly.

Steve S.: So, the whole key is, make sure you at least make an informed decision before you retire on some of these subjects. You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach along with Steve Ruby. And we're talking about some of the regrets retirees have that they wished they had done differently before they retire.

Steve R.: Let's account for inflation. Nearly two-thirds of retirees said inflation and the rising cost of living was the biggest financial shock that they experienced in retirement.

Steve S.: Well, we don't have inflation these days, do we?

Steve R.: Come on. Yeah, I know, right? This is a survey done from January to March of this year by Ed Jones in The Harris Poll. And respondent cited that inflation being more than they expected, was accounting 22% for dental expenses, 20% for major home repairs, declines in investment value. All of these combined can really throw a wrench in making sure your money lasts longer than you do.

Steve S.: I think there's a lot of people that are surprised at, why did the Federal Reserve step in and raise rates so much so quickly, inflation got up to 9%? It'll probably come back down soon. Because it destroys financial plans. I mean, that's really the bottom line. Ask any retiree lucky enough to have a corporate pension who's maybe 20 years post-retirement, that $800 a month or $900 a month or whatever the number is, ain't buying what it bought when they first retired 20 years later. I mean, that's the bottom line. It just does not.

And that's also why, and not that I'm anti-CDs and safe investments and bank investments, yes, some of your money should be there. And I'm not into the stock market just because, well, that's what I do for a living and everybody should. No, you've gotta stay at least on par and ideally a little bit ahead of inflation with what your money is doing for you. And CDs on average, you know, if you're getting 3% and inflation is at 3%...

Steve R.: Not gonna cut it.

Steve S.: ...you're not getting anywhere. That's the bottom line. Inflation is a real bugaboo. Not today, not tomorrow, but 5, 10 years down the road, it will change your life, and not in a good way.

Steve R.: That's why it's so important to stay invested. Stocks over the long term, if we look back in the past couple of 100 years, stocks are the only thing that has outpaced inflation beyond everything else.

Steve S.: Yeah. And if you haven't, and I hate to bring this subject up, but if you haven't done this type of planning and set the stage, unfortunately, you may be one of those people that say, "Okay, I've got a spouse that's going in a nursing home, I don't know what to do." Maybe your last resort is a reverse mortgage or a home equity line of credit or something like that. Not a place you wanna be. Here's the Allworth advice, failing to plan, it's planning to fail.

Coming up next, three ways to boost your social security payment that doesn't just involve taking it later. 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 Steve Ruby. Do you have a financial question you'd like for us to answer? Well, 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 goes straight to us. Straight ahead, we're gonna explore the different ways to budget. Let's see what resonates with you. All right, Ruby, so comes to social security. We talk about it because there's 81 different ways you can draw it but, you know, there's certainly some strategies better than others, but we usually talk about some of the, you know, more straightforward, well-known ways. There's some other ways that you can make sure you maximize your benefit.

Steve R.: Yeah. So, first of all, work a full 35 years.

Steve S.: Well, that's important.

Steve R.: Yeah, I know. Your benefit amount is calculated not just at the age of which you apply, but your highest 35 years of income. This means that your social security payout calculation, if there's any zeros in those years, then that's gonna bring down the average quite a bit.

Steve S.: Yeah. And that's a concern, and I've dealt with this where, you know, maybe there's an early retirement offer going through your company and, "Oh, wait a second, I'm only 60 years old and it's two more years before I can draw social security." That's two years of not paying in. That's gonna kill my social security. My experience is, it'll reduce it, but not drastically.

Steve R.: Yeah. These are small differences, but nonetheless, that's something to keep in mind.

Steve S.: It is. And what happens when you're in your 36th and 37th year of work is generally your peak earning years are gonna be, you know, later in your career. You know, you've gotten the promotions and you're making more money and all that good kind of stuff. And, you know what, that 36th year is gonna knock off the first year where you were working, you know, maybe part-time or you know, some 10 bucks an hour, whatever the case is. So, every year you continue to work past that 35th year is taking off one of those low-paying early years. And since your social security benefit is calculated on the highest 35 years, now you start to see an impact on what your actual benefit is going to be.

Steve R.: Yeah, absolutely. So, let's talk about in 2023, the benefits of delaying. We talk about this all the time. You can collect at 62 at the youngest. For most people this point, if you were born in 1960 or later, 67 is your full retirement age, 70 is when you max it. The absolute maximum benefit that you can earn at these key ages, at 62 is just about $2,600, 66 is $3,500, 70 is about $4,600.

Steve S.: Yeah. And big difference if you wait, if you can afford to wait, you know. And we talk a lot about the break even. Well, but it's 11, 12, 13, maybe 15 years before you pull more money out of the system by waiting. Are you gonna live that long? Are you gonna live those extra 14 or 15 years? That's a concern.

Steve R.: It sure is.

Steve S.: All right. I want to talk a little bit for the spouses who maybe have been divorced, because this is really, really important. Generally, the first thing you're gonna look at with social security is, what's my benefit? You get on ssa.gov, that's the website to check your social security benefit, and it's gonna tell you what your benefit is based on what you paid into the system.

Steve R.: That's right.

Steve S.: But if you were married for more than 10 years and divorced and have not remarried...

Steve R.: That's the key.

Steve S.: Yeah. Have not remarried, you are eligible to draw on your ex-spouse. And guess what? They don't need to know about it.

Steve R.: They won't know about it in fact, unless you tell them. You call like, "Hey, thanks for the benefits, I appreciate it."

Steve S.: But this is a big deal. You know, if your ex had a good-paying job and has a large social security benefit, you may be eligible for half of what they receive even though you haven't been married for years to them. Again, as long as you were married, 10 years [crosstalk 00:31:48] that previous marriage. If you were married 10 years, you can get up to half of what your ex-spouse's social security benefit is. They don't know about it, it doesn't come outta their pocket. And that may be substantially larger than your personal benefit. Very important, and not a lot of people are aware of this.

You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach along with Steve Ruby, and we're talking about features of social security that may not be well known that will allow you to draw a better benefit. Okay. We talked about ex-spouses, how about current spouses?

Steve R.: Yeah. I mean, the same thing goes there. If your current spouse has a bigger benefit than you do, then you're able to collect half of the benefit once you reach full retirement.

Steve S.: Whichever's higher.

Steve R.: Yeah. Whichever's higher, your own...

Steve S.: You have that choice.

Steve R.: Yeah. If theirs is higher is what I should say. Thank you for the correction.

Steve S.: My wife falls into this category. She always work, you know, a lot of times at the church that we belong to, and sometimes it was part-time, sometimes it was full-time. Well, guess what? Churches don't pay a lot of money. I mean, that's just the way it works.

Steve R.: Not typically, no.

Steve S.: Yeah. I mean, she's done some good work and she has a personal benefit, but it would pay her better if she drew a spousal benefit, which is half of my benefit. And that doesn't affect my benefit. When I decide to draw a social security, I'll get what I get based on what I paid into the system. And if she draws a spousal, it'll be half of what I receive and does not reduce my benefit. I am shocked at how many people that are thinking about drawing social security that don't realize, "Wait a second, I thought I only was able to draw what my social security report says is my benefit." And they don't think about their spousal benefit.

Steve R.: Yeah. This is another one of those areas where sitting down with a fiduciary financial planner can shine some light on some of these strategies that maybe you were not aware of.

Steve S.: I've sat down with people, you know, husband and wife, and I'll say that, a lot of times the wife is the lower earner of the two. And I'll say that, and explain the spousal benefit, "You're kidding me. How come I never knew about this, you know? Wait a second. He still gets what he gets and I get mine in addition to his?" Yes. It's called a spousal benefit and you need to know about it if you don't already know about it.

Steve R.: So, one thing I do wanna shine some light on is your social security statement is not always accurate.

Steve S.: No kidding. The government... Wait a second. Wait a second.

Steve R.: I know. I've seen this with my own eyes, with folks that I work with logging into ssa.gov and you can look at your earnings record. If your earnings record has some numbers that are wrong, there's a number that you can and should call to make that adjustment because that's gonna have an effect on what you receive from social security for the rest of your life.

Steve S.: Yeah. And they will fix it. They're gonna require some sort of proof. I mean, expect that, but you definitely want to check the earnings history, and if they show either a zero or a really low number and you know you were working that entire year, paying into the system, definitely follow up with social security. Because when you draw your benefit, it's based on what they have on their records. Here's the Allworth advice, it's best you hire a fiduciary financial advisor to make sure you get the most outta your social security benefit.

Coming up next, we're talking about different kinds of budgeting. Let's see which one works for you. 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 Steve Ruby. If you wanna manage your money, and I hate to use the B word, but it all starts with having a budget. But there's different ways of going about it. It doesn't mean you have to sit down and say, "Hey, Hun, what are we spending here? We gotta cut back." Because that is a non-starter, at least in my household. Let's talk about some ideas on how you can go through, I call tracking your spending without the pain.

Steve R.: Yeah. I mean, there's different ways that you can build a budget and right now, there was a study done by the National Foundation for Credit Counseling that showed only about half of Americans actually keep doing budget.

Steve S.: I think that's optimistic. I don't even think it's half.

Steve R.: Yeah, I do too, actually. Just being in the industry for as long as I have been...

Steve S.: Yeah. People, they are ashamed to say, "No, I don't watch my spending."

Steve R.: Yeah. Well, let's talk about those that do and maybe those that might want to because there's ways that might work for you and there's ways that might not. One is the zero-based budget. It's simple. Your income each month minus your expenses must equal zero. In my opinion, a little bit too much accounting. If you like numbers and spreadsheets and spending time on it, go for it.

Steve S.: And it's not me.

Steve R.: No, it's not me either, but there's certainly people I work with that are. How about the anti-budget?

Steve S.: I love the anti-budget, and I've got a modification to that I use in my house. The anti-budget is just saying, hey, you pick an amount every month that you want to either put in the savings or use to pay off additional debt. You start with that and take that out first and the rest of the money is for you to spend on whatever you want to spend. What I do is just an offshoot of that. Every single month, and I've been doing this for years, I track, okay, how much is gonna go for these fixed expenses, some credit cards, like the one I use for going out to dinner, I use an estimate, you know, whether it's 200 bucks, 300 bucks, whatever the number is, and I put that in every month and then I figure out, "Okay. If that's what I spend on these known items, what's leftover goes into savings?"

And at the end of the month, I look at, "Did I put that much in savings or less?" If I put less in, I figure out, "All right, where'd the money go? I gotta watch out a little bit better." It keeps me on my toes.

Steve R.: Yeah, it sure does. I mean, that's a good way to look at it. I like the anti-budget because you pay the boring stuff first and then you live with the leftovers, but you have to have leftovers to make that happen.

Steve S.: Exactly. How about the Dave Ramsey envelope?

Steve R.: Yeah, envelope. This one's good for people that have a history of buying stuff that they don't need. So, if you've had trouble with credit cards in the past, really what you're doing is you're putting cash in envelopes. If you have no cash left in the envelope, you're not making a purchase.

Steve S.: Well, and that's why it's tough to do. I know a couple of people that have gone through this system. It works, but it's a brutal life change. Hey, thanks for listening. Tune in tomorrow. We're gonna play a little retirement fact or fiction. You've been listening to "Simply Money," presented by Allworth Financial, on 55KRC, THE Talk Station.