Steve S.: Tonight, "The questions you must address when you meet with a financial advisor." You're listening to "Simply Money" presented by Allworth Financial. I'm Steve Sprovach along with Steve Hruby, who is in for Amy tonight. So, if you work with a qualified, and I'm going to keep coming back to this word, fiduciary financial advisor, congratulations, good for you. Study after study shows you could get as much as a 4% greater return just by doing that one thing over the course of your lifetime. But if you're one of those people that are just out there shopping for a financial expert and don't know where to turn, there's some critical questions you might want to ask that are very important during that first meeting.

Steve H.: Yeah, I think it goes without saying that the very first question when you're meeting with a prospective financial advisor, you're shopping around, you're ready to pull the trigger on that is, "Are you a fiduciary?"

Steve S.: And this is a word, it's finally getting out there. I'm hearing people use that term and 20 years ago, it was a totally different language, you've never heard it. Why is that so important?

Steve H.: So, in simple terms, a fiduciary financial advisor is required by law to put their client's best interests ahead of their own.

Steve S.: "By law, that's the key phrase. Not just good guy ethical, it's the right thing to do, by law.

Steve H.: Yeah. And while not all advisors follow these guidelines, those who do are mostly affiliated with registered investment advisor firms as opposed to a big bank, a brokerage firm, places like that. So, it's important to start with the question, "Are you a fiduciary?" If not, why work with them?

Steve S.: Well, I mean, that's the key phrase. In the old days there, it was rare that you would find a fee-based investment advisor and not that that is a requirement to be a fiduciary, but they generally go hand in glove. But it's more and more common now, I've seen a trend in the industry not just heading that direction, but basically say, "This is the future." And it's rare not to have a fiduciary working out there but there are plenty.

I think one of the first things...and you can get caught up in the alphabet soup of designations, you know, you've got Steve Hruby or Steve Sprovach and you've got some letters after your name. Some are meaningless. I mean, some you can go out literally and just do a seminar over a weekend, maybe even just a four-hour session at a hotel and by passing a really easy exam, you can get some sort of designation and I don't want to go into them because there's literally hundreds. But others are really, really important like CFP, CFA, ChFC, they mean something.

Steve H.: Yeah, those are the ones that you want to look for. So, when you're sitting down in your meeting with a potential financial adviser, once again, to partner with, "Are you a fiduciary? And what are your credentials?" The first one to look for, Certified Financial Planner, this is backed by the Certified Financial Planner Board of Standards, also known as the CFP Board. This is an advisor that's going to have expertise in financial planning, taxes, insurance, estate planning, retirement savings, investment management, all across the board. So, you kind of think of them as the quarterback to your financial relationship.

Steve S.: Yeah, and it's not that they're going to be the expert in all of those fields but they've got a broad base of knowledge that...the best way I can explain a CFP in the financial industry, it's like getting your masters. I mean, it's basically a master's level program and it's one of those things that the exam in and of itself weeds a whole lot of people out. I know it's changed, but when I took it, it was over two full days with I think a 60% failure rate. It was ridiculous. It's not one of those things you take lightly.

Steve H.: Yeah, it's a monster. Steve and I were both certified financial planners and, you know, we have been for years and it is one of those certifications that...again, it doesn't make you an expert in everything because if you have folks that I work with, they'll have their own estate planning attorney, they'll have their own CPA. While we have an expectation to have a certain level of knowledge about these different areas, sometimes we fold in other experts to help tie it all together.

Steve S.: Yeah. I thought I knew a lot about a lot of different aspects of the business over the course of, you know, more than a couple of decades. But once I entered the CFP program, you realize, "Okay, there are different types of trusts, there's a lot of different types of trust." You know? And certain things can be written in that can't be done in other fashions, and little things like that that mean a lot. So, you know, if you do work with somebody who's a CFP, number one, the standard of conduct of all CFPs are that...one of the features is they must be a fiduciary. So, if you see CFP, they're going to be a fiduciary. CFA, Certified Financial Analyst, that's for the brainiacs. That's a serious designation.

Steve H.: Yeah, I like how you put that, Steve. Oftentimes, these are the guys and gals behind the scenes that are building your investment portfolio.

Steve S.: They're the actual money managers more often than not.

Steve H.: Yes, but I do know some really great advisors in the industry that are CFAs and they're client-facing because just like the CFP exam, it's a monster. There are many expectations, lots of criteria you need to meet to even sit for the exam, and they specialize in areas like accounting, economics, ethics, just like a CFP, money management, securities analysis. Generally, the brainiacs...

Steve S.: Exactly. You're listening to "Simply Money" on 55KRC presented by Allworth Financial. I'm Steve Sprovach along with Steve Hruby, and we're talking about what you need to ask a potential investment advisor before you hire them. One area certainly is credentials. We've covered CFP, we've covered CFA. Chartered Financial Consultant, that's a legitimate designation also.

Steve H.: Yeah, so you want to look again, CFP, CFA, ChFC. The ChFC, it's issued by the American College of Financial Services. It's similar to the CFP. I don't want to call it CFP lite.

Steve S.: It's not lite, no.

Steve H.: It's not, because it's another monster, you know, credential that once you get, you have a lot of knowledge about a lot of areas. But what I have seen is more insurance professionals hold the ChFC.

Steve S.: Yeah, I think it's on par with CFP just issued by a different college. But yeah, again, part of their standard of conduct is they must be a fiduciary. So, again, I think that's important. So, remember that word, fiduciary, and ask that potential advisor, "Are you a fiduciary?" Okay, firm values, you know, how do you go about building portfolios? I think really, what you want to look at is, "Is your firm building the portfolio for me? Is it a one-off? Are they custom portfolios? Is this a robo-advisor?"

Steve H.: Yeah, are they using machines to make decisions?

Steve S.: Exactly. And not that that's bad, but you want to know that going in.

Steve H.: Yeah, there's people that think the markets are efficient and that they're going to do what they're going to do. There's also advisors that try to beat the markets. More often than not, that's not going to happen and sometimes you're paying more for those that are chasing after gains rather than focusing on the efficiency.

Steve S.: Well, one of the phrases...and I'm not saying, again, it's bad, you just want more clarification is, are they building a portfolio in their words tailored to your needs? What does that mean? I mean, are they buying individual stocks that they think are going to be along the lines of what your investment goals are? Well, individual stocks, by definition, are going to have more volatility than mutual funds or exchange-traded funds. Does that mean on the bond side, they're laddering bonds? Are they using options?

Steve H.: That's a good question.

Steve S.: Okay, questions to ask your advisor, "How are you building this portfolio? What's your strategy? What's your firm values?"

Steve H.: Yes. How about the question, "Are you primarily a financial planner or an investment advisor?"

Steve S.: Yeah, I think that's important because there are people out there...and I saw a business card where a person called themselves a financial engineer. What is that?

Steve H.: I have no idea. I would call them and ask like, "What are you?"

Steve S.: Yeah, "What makes you an engineer in the financial world?" But financial planner, I think should be the basis of any relationship because, yeah, you can invest and maybe this guy is gonna make you more money than that person. But does it work with your retirement goals? Is it gonna keep you from running out of money as you age out, you know, as you get older?

Steve H.: An investment advisor might just send you a questionnaire that helps determine your tolerance for taking risks. That's very important because you can't take more risks than what you're comfortable taking.

Steve S.: But it's a little piece of the puzzle.

Steve H.: Yeah, when you build out a financial plan that determines whether or not your money is going to last longer than you do based on lots of assumptions, it also determines your need to take risks and your ability to take risks. So, in my opinion, anyways, you shouldn't really be managing investments without building a financial plan.

Steve S.: You know what my favorite question is? My favorite question is, "How do you get paid?" And shut up. Okay, let them explain it. Okay, don't say, "Do you get paid by fees? Do you get paid by commission?" Those are the follow-up, but just say, "How do you get paid?" And if you hear and I have had people tell me they have heard this, "Oh, it comes from the company, it doesn't come out of your pocket." How does that work? Right?

Steve H.: It doesn't.

Steve S.: It doesn't. I mean, that to me is the biggest red flag when they say, "No, it doesn't come out of your pocket, the company pays me." No, you're potentially making an investment and some of those investment dollars might go through a big circuitous route, but they get back to the advisor's pocket. I think a salary is more preferential than commission because if an advisor is saying, "No, I work on commission-only," if you're considering rolling over $1 million and this is a 7% commission, he's got 70,000 reasons why he thinks that might be the perfect deal for you.

Steve H.: Yeah, isn't that amazing? It really is.

Steve S.: Yeah, that's a conflict.

Steve H.: It is, yeah. I mean, I would suggest searching for advisors where the majority of their income comes from a salary because that inherently will remove conflicts of interest. So, the different ways that you can end up paying for an advisor, though, first of all, is assets under management.

Steve S.: And that's probably the most common.

Steve H.: Yeah, it's very typical. This is where you pay a percentage fee based on the assets that the advisor manages. And the expectation is that on top of that, they should be providing fiduciary financial planning to help determine how that portfolio should be handled.

Steve S.: Yeah, and I usually hear 1% is a fairly common fee, but I'll throw a big asterisk on that because that tends to be the fee on larger dollar amounts. If somebody's doing comprehensive financial planning and doing a lot of work for you before you actually invest money, there is an investment there. And if you're only considering $100,000 or $200,000, they might have a minimum.

Steve H.: Yeah, that's true. I mean, you can find certainly a robo-advisor that's only going to manage your investments and not do financial planning for even lower figures. So, you know, you get what you pay for in that situation is what I would say.

Steve S.: Well, there's also truly fee-based planners where, "Okay, I just need a financial plan, I have no assets I want anybody else managing," you can find an advisor that will charge you hopefully a fair fee for just doing that or an hourly fee. Okay? They are out there. And if that's what your need is, maybe that's the best way to go.

Steve H.: Yeah, exactly. That's for individuals that don't have assets to manage or maybe they're self-directed, they get joy out of picking and choosing their own investments, but they want to have a full understanding of their financial plan, how long their money will last, do they have the right insurance, do they have the right estate plan, things like that.

Steve S.: And I think, okay, if you just want somebody to help you invest or maybe be a second opinion to look over your shoulder, are you doing the right things, maybe truly fee-based planners is the way to go. But sometimes you want not just financial planning, but, "You know what? I could use some tax help. Okay, I want coordination with someone that's going to help not just with investments but also taxes. And by the way, I probably can use an updated will and legal documents." I think it's a good question to ask, "Do you have these capabilities? Are they included in the fee or are they separate fees?"

Steve H.: Yeah, "Is this in-house? Is this something that your company can do for me holistically?" Financial planners oftentimes help with tax planning. Tax filing is different in and of itself and if there is a tax division attached to that firm, then tax filing is a service that you should be able to receive at that point.

Steve S.: Here's the Allworth advice, the more questions you ask a potential financial planner, the easier it's going to be to find the right match. Coming up next, "Why half will not stay employed into their 50s and what to do about it." That's coming up. 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 Hruby. Hey, if you can't listen to "Simply Money" every night, just subscribe to get our daily podcast. You can listen the next morning during your commute, at the gym, whatever you happen to be doing.

And if you've got some friends that could use some financial advice, tell them too. Just search "Simply Money" on the iHeart app or wherever you get your podcasts. Straight ahead at 6:43, you've got questions? Well, we've got the answers. We're going to do, "Ask the advisor." All right, so, you know, how long do you plan on working? I have had people tell me, "Well, until I can't work because I can't afford to quit work." Sometimes life takes the answer out of your hands and you end up working less than you thought.

Steve H.: Yeah, so there was an alarming study that we saw recently. It's only about half of Americans work continuously throughout their 50s.

Steve S.: In other words, half the people at some point have an interruption either that they decided to have or their company decided to give them.

Steve H.: Well, yeah, that's a good way to put it. So, this was according to an analysis of Health and Retirement Study data by three different researchers who actually got together and wrote a book about it. And, you know, among the top reasons, like you said, being laid off or pushed out of work, health concerns, caregiving responsibilities for potentially an aging family member. While low-income workers are most likely to be affected, this issue does span all demographics.

Steve S.: Yeah, it's across the board and, you know, it's a really big deal. I don't think anybody plans on leaving a job they're happy with when they're in their 50s because when you think about it, when you're in your 50s, I don't know how it's gonna affect you with your kid but I was in my 50s and had two kids in college at the same time. You know, this is not a ton...there's lots of incentives to save money once you hit 50, there's some catch-up contributions and things like that. But this is the...to me at least, it was the high spending years. I mean, this was the period of time where I had more money going out the door than I ever had up until that point, again, mainly because of college.

Steve H.: Yeah, a common advice too, it assumes that you're going to increase your savings in your 50s because that's when catch-up contributions become available.

Steve S.: Yeah, yeah, like your IRA, you get to put an extra 1,000 bucks a year away in an IRA once you hit 50 or above, but that might be the year you need to actually pull money out and some people have to do that.

Steve H.: Yeah, especially for those out of work. You know, at that point, it's becoming impossible to save, you're potentially forced to do the opposite. Instead of making catch-up contributions, you may have to raid a retirement account to pay for...

Steve S.: That number blew me away, half of everybody out there have lost their job at some point or have left their job for whatever reason in their 50s during the highest spending years. So, you know, it could be impossible to say, but if you're in that lucky position where you can put money away, let's talk a little bit about some of the features once you turn 50 that you can do.

Steve H.: Yeah, so don't wait to save is the moral of the story here. Workers age 50 and over, the catchup contribution, Steve mentioned the IRA limit, the extra 1,000. Inside of a 401(k) or whatever workplace employer-sponsored retirement savings plan you have, it's an additional $7,500 that you can put in the year you turn 50 years old.

Steve S.: Yeah, and every year thereafter.

Steve H.: Yeah. And unfortunately, only about 16% of eligible workers actually made these contributions in 2022.

Steve S.: Because half of them are out of work, right?

Steve H.: I guess so, right? And half of them run into a speed bump in their 50s anyways. And that 16% figure, that comes from Vanguard's "How America Saves" report in 2023. It's a scary thought that if you're not taking advantage of this and life throws you a curveball, the very opposite, again, could happen where you have to pull from these accounts.

Steve S.: You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach along with Steve Hruby, and we're talking about...and I like your phrase, speed bumps. A speed bump that can hit you while you're in your 50s because a recent study said, "Yeah, about 50% of the people in their 50s have been out of work at some point during that decade between age 50 and age 60." So, okay, let's go over some numbers then. I mean, yeah, you want to save up as early as possible because of the power of compounding. If you weren't able to, you got to play some catch-up. But let's talk about if you are smart and do start putting a few extra bucks away in your early 20s, how much can that add up then?

Steve H.: $475 a month to a retirement account at the age of 22, on average, you'll have about...

Steve S.: Basically a car payment.

Steve H.: Yeah, $2.4 million when you're 67. Think about that. So, this is something to talk to your children about, potentially grandchildren about, $475 a month at 22 equals $2.4 million when you're 60s.

Steve S.: That's a huge number. I mean, that's a huge number.

Steve H.: If you don't get started until you're 32 10 years later, then at that point, it's 1.1 million at 67. If you don't start until 42, less than half a million dollars.

Steve S.: So, literally, by starting 10 years earlier, 22 instead of 32, you get an extra million dollars. I mean, that's a big...more than a million dollars. That's a big number.

Steve H.: If anything, this is an argument for why it is much more important to begin saving early because when we hit our 50s, if life throws us a curveball, we need to be prepared.

Steve S.: And if you're like me, I was a late saver, I had a lot of stuff come up early in life, okay, well, you just have to...if you can't put that money away, you got to think about reducing expenses.

Steve H.: Yeah, that's a good point. Keep at least six months' worth of expenses in a liquid emergency fund. For those that anticipate a harder time landing a job, it becomes that much more important to be prepared with that emergency fund.

Steve S.: Yeah, I think you want to at all stages of life have a handle on your spending. I mean, not just what goes out the door, but why? What it's going towards? Why are you spending that money? You know? Yeah, you want to go out to dinner, you have a certain lifestyle you want to maintain, but do you really need Netflix and Apple TV and every other subscription that you're paying for? Okay, maybe you do but you know these are the things you can kind of dish off, you know, if you wind up losing your job.

Steve H.: Worst comes to worst.

Steve S.: Yeah, exactly. Here's the Allworth advice, never assume anything and plan for everything. Coming up next, we're tackling the important topic of life insurance, what kind do you need? Some answers coming right up. 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 Hruby. You know, it's one of the most important aspects of the financial planning process, what kind of life insurance should you have? How much? Turns out, a lot of people are getting it wrong.

I want to first talk about...and I'm not one of those people, Steve, that says, "You should only buy term insurance, everything else is garbage." It's not true. I mean, there are places for other types of life insurance and I personally think life insurance is one of the basics. It's the foundation of anybody's financial plan, especially when they're younger. With that said, term has a place and it is a pretty important type of life insurance, but I don't think a lot of people understand what term life insurance is.

Steve H.: Yeah, well, term life insurance, it only pays out a death benefit during a specified term, so 10, 20, 30-year policies. Unless they're renewed when the coverage lapses, that's gone. So, the strategy there is to align it with maybe your retirement timeframe.

Steve S.: Which is what I did, I bought term life insurance that expires the year I retire. And the reason is, do I need life insurance after I retire? Well, if I don't have any income, what am I protecting?

Steve H.: Yeah, you're not replacing income at that of your life.

Steve S.: Exactly, which, prior to retirement, it's the most important thing I want to protect for my family is my income if something should happen to me. So, term is generally the cheapest form of life insurance and a lot of people in our industry are going to say, "That's the only type you should have because it is the cheapest and covers you for only the years that you need it." I think you need to understand that, yeah, it's not building up any cash value, it's not building up any value, all you're getting is a death benefit, but, you know, half a million dollar policy may only cost you 40 bucks a month.

Steve H.: Yeah, ideally, it's a sunk cost anyways because you've got to be on that term and the money is just there to protect you in case something happened.

Steve S.: So, other types of life insurance are going to be more expensive. So, anything you pay into the insurance policy over and above the cost of the pure life insurance, that goes into the insurance company's pocket, but they provide some guarantees and some other features that may make sense for you.

Steve H.: Yeah, exactly, and that's going to follow you for the rest of your life.

Steve S.: And that's why they call permanent life insurance.

Steve H.: Exactly. Now, again, Steve said the misconception that the only thing you need to have is term policies, there are situations where a permanent policy makes sense. Your permanent policies are certainly more popular by salespeople within the industry. About 60% of people that bought policies in 2021 according to the American Council of Life Insurers bought permanent policies as opposed to the other 40 that bought term policies.

Steve S.: And here's my question, and I know you can't answer it because nobody can...

Steve H.: Well, how do you know? Maybe I can, Steve. Fire away, let's hear it.

Steve S.: You're not that bright.

Steve H.: Thanks.

Steve S.: I kid. No, but there is a compensation issue in the life insurance industry and the question I've got is, does this mean 60% of the people really needed that permanent policy? Or are there potentially some agents out there that say, "Okay, I would rather make $4,000 on the sale of this life insurance policy than $400?" Why do I come up with those numbers? Well, one of the general rules in life insurance is the first-year premiums are paid out as a commission. So, if you're in a $35 or $40 a month term policy, that's going to make the agent a whole lot less money than a #350 or $400 a month permanent policy. That's a big incentive to maybe justify a permanent policy.

Steve H.: I feel like I can answer your question, Steve. You answered it yourself. This is why there's a bad rap on permanent policies versus term policies is because oftentimes, the commission that the insurance salesperson receives for selling a permanent policy is much higher than the commission that they receive if they sell a term policy.

Steve S.: Now, you may still need that policy but how do you know? You know, that's the problem. And there are different types of permanent policies: universal, whole life, variable life. We get into some very confusing features as well as some other options of, "Yeah, you can borrow against the money," you know, there's going to be projections that show the growth. The bottom line is you're paying a lot more into the policy to have those additional features, and to me, the only one that's really important to me is, "Will this death benefit be guaranteed?" I mean, I've got a family member that had a major medical issue fairly young in life, and permanent life insurance is key.

Steve H.: Yeah, you bring up a good point. You know, when you might need permanent life insurance is if health status changes and it becomes that much more difficult to pick up another term policy after the term is up if you need to. What about special needs children?

Steve S.: Exactly, that's a topic that needs to be addressed. You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach along with Steve Hruby, and we're talking about different types of life insurance and when you need them and when you don't. Okay, special needs, good topic.

Steve H.: Yeah, I mean, if there's a special needs child and you may need to tap into money from the policy that you have built up over the years and you have a term policy, then that's not an option. If you have a universal or a whole-life policy, then you may be able to pull assets from that policy to help pay for existing or future costs in life.

Steve S.: Okay, so how much do you need? Again, here's where compensation, I think, creates a conflict of interest because if an agent sells a $2 million policy, he's gonna make a whole lot more money than if he sells you a half-a-million dollar policy. How do you know it's in your best interest as the consumer to buy the smaller policy or possibly the larger policy?

Steve H.: Well, it's a loaded question and I think sitting down with a fiduciary financial planner that has your best interests in mind is the key. A registered investment advisor firm that has insurance capabilities under their roof to at least search out the best policy that you need based on your financial plan, that's really the answer.

Steve S.: Yeah. And I think for some people, it's eye-opening because it may be a large amount. I mean, when I was younger and my kids were still, you know, not in college or in college and, you know, they were dependent on my income, no question, I needed a much larger dollar amount than in later years closer to retirement and it's just me and my wife, you know? So, that's where you need to gauge, "Okay, do I need a larger amount for these years but a smaller amount for later years?" And that's where a good fiduciary will help you determine your need at different aspects in life because it does change over time.

Steve H.: What about situations where you see somebody having both term and permanent life insurance?

Steve S.: Nothing wrong with that, right? Nothing wrong. There's no rule that says you can't have term insurance for the big need during certain years at much lower costs, but maybe a little bit of a permanent need, whether it's a burial policy or something else, maybe convertible into long-term care insurance. We're seeing more of these hybrid policies where it's a death benefit feature that can be converted to help pay costs in later years for potential nursing care.

Steve H.: Yeah, even buying a term policy that has a convertible term policy attached to it, what this does is it gives policyholders the option to convert their term policy into a permanent one once the term has ended. So. there's all kinds of different features to explore.

Steve S.: you bet. Here's the Allworth advice, it's not just the amount of life insurance you need, you need to make sure you have the right kind and I think a fiduciary investment advisor can help you determine that. Coming up next, we're answering your questions about taxes, inheritances, and Social Security. 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 Hruby. Straight ahead, some of the easiest ways to save money starting immediately.

So, if you've got a financial question you'd like for us to answer, just click the red button while you're listening to the show on the iHeart app. We listen to all of those and we'll happily put you on the air. Robert wants to know, he says he's turning 75 in December and he's wondering how to lessen the taxes for my kids' inheritance. He's got several taxable 401(k) investments. Before we answer that, I want to say there's a misconception with a lot of people that inheritances are going to be taxed. No, talk to your tax advisor, but inheritances as a general rule, and for that matter, life insurance, is not taxable to the recipient. But maybe an investment like a 401(k), that the distributions may be taxed.

Steve H.: Exactly, and the gift tax threshold right now was just so darn high, over $20 million for a married couple right now. But maybe Robert is within that asset level. So, the first thing I want to talk about is if you're turning 75 in December, you're going to be processing required minimum distributions. There's something called a qualified charitable distribution, where you give your RMD directly to a charity and you do not have to pay the taxes on it. It's a nice little way to poke Uncle Sam in the eye with a stick.

Steve S.: And if you don't need that money, why pay tax on it? And if you're charitably inclined, kill two birds with one stone.

Steve H.: There's also lifetime gifting if this applies. If you're married, you can give up to $17,000 per person in the relationship to, say, a child or a grandchild each year without having to file a gift tax.

Steve S.: And Robert, you didn't say if you're married, but if you are, this $17,000 can be given to one of your children. Your wife can also give $17,000 to one of your children, to your child's spouse, whatever the case is, $17,000 per year. And I'll give you another one. We talk a lot about Roth conversions and I'm not sure they're suitable for everybody out there. But Roth conversion is basically saying, "Hey, I'm going to pay the tax out of my 401(k), so my kid doesn't have to when they receive it as a Roth." Yeah, your kid is going to have to take distributions from a Roth that they inherit from you, but you already paid the tax on it.

Steve H.: Yeah, be careful with that one. Talk to your tax advisor because you could kick yourself into a higher tax bracket and add new expenses into your life today.

Steve S.: Yeah, good point. So, Stacy says she's 58 years old and she makes about $75,000 and has $1.7 million in a 401(k), $600,000 in cash in CDs. Her husband gets a pension of, get this, $8,000 a month. That's a heck of a pension. And on top of all that, and again, she's only 58, $2,200 a month from three rental properties. Well, I don't know what the three properties are worth but that can be another million in assets there. So, in other words, $8,000 a month in pension, $2,200 a month in rental income, and they spend about $100 grand a year, which accounts for the $8,000 plus $2,200. Her question is should I take Social Security as soon as she is able?

Steve H.: This is an easy one. The answer is, "Probably not, unless."

Steve S.: Yeah. Congratulations, man. She's nailing it.

Steve H.: Yeah, what I mean by that is, no, you defer your Social Security as long as you possibly can to guarantee the biggest payout as long as you live a certain amount of time unless longevity is not on your side. So, it's a bit of a grim topic but, you know, if her husband knows that one of them has a timeframe left, then perhaps you collect earlier.

Steve S.: I think the key is the $8,000 a month pension and $2,200 a month from three rental properties. Most people don't have that.

Steve H.: Yeah, this covers their fixed expenses.

Steve S.: Yeah, exactly. So, you know, if you don't have that type of income, yeah, you may want to draw Social Security as early as possible, which for pretty much everybody, 62. That's a tough question. Again, you want to ask a fiduciary investment advisor, but Stacy's nailed it and I think she should wait also.

Steve H.: Don't need to do it.

Steve S.: Yep. Bruno says he's 66, just retired with Social Security paying him $1,539 a month. And he also has a 403(b), which, you know, most hospital workers have that instead of a 401(k), worth about $480,000 and another $40 grand in cash. Would an annuity to supplement his Social Security be a decent option for him? He might be in a higher tax bracket, is there anything that can lower his tax bracket?

Steve H.: Oh, geez. Excuse me. For Bruno, I mean, it depends on his expenses. At this point...because especially if you're gonna kick yourself into a higher tax bracket and remove your portfolio assets to generate more guaranteed income, I would say likely no, unless you're terrified of the markets.

Steve S.: Well, and here's the thing, he's got almost half a million dollars, right? So, if he pulls 4% out of that, okay, that's about $20 grand a year. On top of Social Security, that's another $18 grand a year. So, okay, it's about $40 grand, a little bit under $40 grand a year. If he spends $30 grand a year, that's fine and dandy.

Steve H.: There's no need whatsoever.

Steve S.: But you make a good point. Maybe he's worried about the market and he wants an annuity where he's got guaranteed income for life, whether he lives to be 120 or not. The problem I would have in his case with an annuity is, once you annuitize or once you get that guarantee for life, you no longer have access to the principal in pretty much all cases.

Steve H.: Exactly, that's the downside because at that point, your emergency fund is there and that's it.

Steve S.: Yeah, so if you want a guarantee for life, that's one thing. If you want access to principal, that's another. Be real careful, Bruno. That's a tough call. Okay, Jeff is asking, "Given the noise in the current market and the whiplash in bonds and stocks, what stock bond allocation do you recommend for somebody planning to retire in the next two years?"

Steve H.: I'm not a big fan of giving a generalized recommendation I would say.

Steve S.: No, no, everybody is different.

Steve H.: You need to sit down with a fiduciary credentialed financial planner and build out your plan because that's going to tell you the risk that you need to take to meet your financial goals, the ability to take risks based on your financial situation, and [crosstalk 00:34:22].

Steve S.: But he's obviously saying noise in the current stock market, whiplash, he's using phrases that tells me, "Okay, he's paying attention to a lot and he's nervous about all the things going on, positive and negative." I think that's a legitimate concern. The bond portion generally is considered the shock absorber, so, you know, are you willing to reduce your returns to have less volatility in your investment mix? You know, that's a tough call and I'm not sure where he is, you know, on the spectrum on that.

Steve H.: Exactly.

Steve S.: Coming up next, some of the easiest ways to save money right away. 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 Hruby. You know, there's some aspects of financial planning that can be pretty darn daunting and confusing like, you know, taxes and estate planning and all that sort of stuff. But there's some easy things that you can do right now that are no-brainers, nice and simple, in no particular order that can save you a ton of money.

Steve H.: Make a list before going to the grocery store.

Steve S.: All right, I'm gonna interrupt you there. If you're female, don't allow your husband to go to the grocery store.

Steve H.: Oh, God, yeah. That's a good advice.

Steve S.: My wife doesn't let me go and we save a lot of money as a result. I buy everything she doesn't want me to have.

Steve H.: Yeah, they had bags of snow crab on sale last time I went grocery shopping, I bought like three of them.

Steve S.: Oh, listen to you. Listen to you. I'm thinking more along the lines of a Kit Kat bar and you're buying snow crab.

Steve H.: No, it was such a good deal. Like I Googled it, I was like, "Oh, my God, this really is a good deal," and my wife never buys this so I bought some and it's in our deep freeze in the basement. So, make a list, and don't send your husband to the grocery store.

Steve S.: There you go. Well, I think that's key but, you know, there's more things in our household...and this is something that I struggle with, I think a lot of people struggle with. Every once in a while, you know, my wife works hard and, you know, "Hey, you mind going out tonight?" "No, I love going out," and that's not good for my waistline, it's not good for my bank balance, it's expensive. Maybe consciously think about how many times a week you want to go out to dinner and limit it to that number of times.

Steve H.: That's a good idea because those expenses add up quickly. Same thing with DoorDash. Do you have that app?

Steve S.: I don't do it, I am not that lazy.

Steve H.: Ooh, it's wonderful, though. You should try it out but don't do it too much.

Steve S.: No, no, I will not do DoorDash, that's just...if I can't hop in my car to go out and get something, I shouldn't be eating it. That's the way I've looked at it.

Steve H.: Well, maybe you're changing my perspective and I'll delete the app.

Steve S.: This is, "Do what I say, not do what I do," in most cases, okay?

Steve H.: Yeah, fair enough.

Steve S.: I think one of the big things that I learned is just pay attention to your subscriptions. "Ted Lasso," Apple TV, okay? Like it. Then I started watching "Silo," love the show, okay? But I've also got Netflix, I've also got MLB because I want to watch the Reds when I'm not around in Cincinnati. You know, there's a lot of subscriptions that if you don't pay attention, they're gonna add up.

Steve H.: Yeah, your bank app will sometimes do a pretty good job of summarizing subscriptions that you have and make recommendations about which ones to drop because those will add up quickly. What about shopping around for new car insurance?

Steve S.: Okay.

Steve H.: This isn't an everyday thing but it's something that I get joy out of maybe once a year when I successfully bring down my rates. You can even call your existing insurance company and have that conversation.

Steve S.: I did something that made a big difference in a lot of my spending when I go out. I got old.

Steve H.: Hey, look at that. Good for you.

Steve S.: And I used to be, "Well, senior discount? No, why would you even ask me?" Now, I'm like, "Hey, do you have a senior discount?" I'm saving some serious money out there just because I'm old.

Steve H.: Oh, that's good stuff. I'll remember that next time we're at lunch. As soon as we walk in, I'll be like, "Hey, this guy..."

Steve S.: You want to get my senior discount, don't you?

Steve H.: Yeah, "Do I get his senior discount if he pays?"

Steve S.: Yeah, yeah. "Hey, Steve, would you buy two dinners so I can have one of yours at your price?" No, I'm not going to do that for you.

Steve H.: Sure you will. Come on.

Steve S.: Nice try, nice try.

Steve H.: What about the 24-hour shopping rule? Before you make a major purchase, sleep on it.

Steve S.: Oh, no, no, no, come on.

Steve H.: That's a good idea.

Steve S.: Have you ever...let me ask you this, have you ever had a package delivered and not had a clue that you ordered it?

Steve H.: Every day. It's my wife that gets them sent.

Steve S.: Is that right?

Steve H.: Yeah.

Steve S.: Oh, that's funny. Hey, thanks for listening. You've been listening to "Simply Money" presented by Allworth Financial on 55KRC, the Talk Station.