Amy: Tonight, we're talking about why the Fed's move to skip an interest rate hike isn't the real story, or maybe the whole story. You're listening to "Simply Money," presented by Allworth Financial, I'm Amy Wagner, along with Steve Sprovach. We have a very special treat for you on a Thursday night. As you know, our Chief Investment Officer, Andy Stout, always joins us on Mondays, but you know, yesterday was kind of a big day, and so Andy is joining us today to help us make sense of what the Federal Reserve did yesterday. A little bit of, I don't know if you would say mixed messaging, I don't know. How do you characterize it, Andy?

Andy: I would say the message was pretty clear from the Federal Reserve. They are going to continue to be aggressive in their fight to quell inflation. Even though they did not hike rates, the messaging from the press conference from what's called a dot plot, and I'm sure we'll get into that in a minute, it all suggested that the Fed is not close to finishing their fight.

Steve: Well, and obviously, they don't think we're done with inflation because it's come down from over 9% to around 4%, but they wanna see 2%. What I'm wondering, Andy, is if they came out and said, "Yeah, we're gonna probably have two more rate increases, at least in July, expect a quarter percent there," why did they skip June? If they know they're gonna raise rates?

Andy: The skipping of June was more about slowing down the pace of rate hikes. That's something Fed Chair Powell really highlighted in that he wanted to slow down the pace, and really focus on getting to a level, and likely holding at that level for a period of time. So keeping rates higher for longer to bring down inflation. Now, the market's not quite buying what the Fed is selling. And I would say what the Fed was doing yesterday in Jerome Powell specifically, I would call it more, you know, job owning the market, if you will, to convince them that they're going to keep rates high to bring down inflation. Because if they come out and talk about bringing rates down or cutting rates, that's immediately going to result in easing monetary conditions, which would possibly make it even more difficult to get inflation under control, possibly reversing course.

Amy: You know, Andy, it's funny because we have been saying that on the show for months. I mean, the markets, and the other economists, and things like that have been saying, "Okay, but when in '23 are they going to start cutting rates?" And I think Chair Powell has been really, really clear about this, "Hey, not in '23, not in '23," every way that he could possibly say it. And we kept saying it too, like, the data that we're seeing, it doesn't make any sense to cut rates necessarily this year. Yet the markets really turned a deaf ear on it. Is it yesterday? Did that message finally get out loud and clear?

Andy: A little bit. I wouldn't say loud and clear. So, if you look at...

Amy: Just clear?

Andy: Yeah, clear-ish. So, when you look at what the market's pricing in, and we can see that by looking at what's called Fed Fund Futures, which is basically investment securities at trade-up levels suggesting where the Federal Reserve will have the Fed Funds Rate at different meetings. So, you can see if the market's expecting hikes, or if it's expecting cuts. Right now, it's still pricing in a cut really later on this year, in the December, early January period of 2024. Market's only pricing in one more hike. And even though the Fed said they're looking for two hikes, and Powell even said they're not even thinking about cuts for a couple of years, that's not even on the horizon.

Steve: So, he's saying not even next year at this point for a rate cut?

Andy: Yeah. But again, I think that's the job owning. He has to talk up a tough Fed. I mean, that's part of it.

Steve: Yeah. I get that. But, you know, if the chairman of the Federal Reserve says they're not gonna cut rates, and the chairman of the Federal Reserve controls when those rates are cut, why doesn't Wall Street believe him?

Andy: Because we believe, we meaning the proverbial Wall Street, what these analysts and what the economists think, they think that what's going to happen when the Fed keeps rates high, that's going to essentially slow down the economy bringing inflation down in the process. And it's going to slow it down so much that the economy might fall into a recession, and that's when the Fed would cut rates. So, Powell has to say this. He has no choice but to say this.

Steve: So you think this is about investor confidence more than what he's actually gonna do? Is that fair?

Andy: I wouldn't say investor confidence, I would say it's more about keeping inflation expectations under control.

Steve: Okay. Gotcha.

Amy: You're listening to "Simply Money," tonight here on 55KRC presented by Allworth Financial, as Andy Stout, our Chief Investment Officer, joins us on a day he doesn't normally join us with big news to talk about what the Federal Reserve did yesterday, to help us make sense of that. You know, Andy, obviously, the goal here of the Federal Reserve has always been to bring inflation under control, hence these rate hikes. But there is some data out there that's suggesting, you know, stronger GDP, and, you know, inflation's still strong, strong employment. The labor market has, in many cases seemed impervious to what they're doing. So, how do you bring down inflation if so many factors continue to seem to be working against the Fed?

Andy: Well, some are working against the Fed, but there are cracks emerging, which should bring down inflation and allow the Fed to pause and slow down. And I think we probably, at least at this point, we do get one more rate hike at the next meeting in late July. But when you look at the underlying data, when we did see the unemployment rate jump up from 3.4% to 3.7% last month, if we look at initial jobless claims, which are people filing for first-time unemployment benefits, they've jumped up too. The last couple of weeks, we've seen the highest ratings in a couple of years. So that will flow into the broader job market when we're thinking about where the unemployment rate might be by the year-end.

I know when we look at the Federal Reserve specifically, and this was yesterday, they put out what's called their quarterly economic projections. And they think the unemployment rate will be at 4.1% by the end of the year. Now, admittedly, that's lower than what they thought in March. They thought it was gonna be 4.5% in March, so, but still higher than where we're at right now at that 3.7. So they think it's going to deteriorate a little bit. And 4.1, let's just be clear, it's still a very low number by any historical measurement.

Steve: Well, it is. And that's what I'm wondering. I mean, the whole concept is slowing down the economy through higher interest rates. And a slower economy is gonna mean fewer jobs, higher unemployment, and, you know, that's the bad news part of what the Fed is doing. Yet we're still seeing wage growth, we're still seeing a strong jobs market. I mean, can you have inflation come down to 2%, and still have a strong labor market?

Andy: Can you? Yes. Will you? Probably not.

Steve: Yeah. Yeah. This is almost unprecedented to see that, right?

Andy: Yeah. So what you're talking about is the soft landing you hear a lot about, which is basically where the Fed is able to get inflation under control without pushing us into a recession. The Fed has not had a very good track record of actually doing that. So I wouldn't be surprised if they do what they've done in the past, which is hike us into a recession. Now, when that recession comes, I mean, that's tough to say, Steve and Amy, when you look at what the economist had expected, go back to last November, economists expected a recession to have begun in January. It hasn't happened.

Economists currently expect the recession to begin in the second half of this year, specifically in the third quarter, which, you know, starts in just a few weeks. So will it happen? I mean, the data's still... It's still hanging in there. I mean, we had some decent retail sale numbers come out this morning suggesting consumers are still spending. But I mean, again, I mean, we are seeing some cracks in the job market. You know, we're seeing some weakness in consumer sentiment. And I do think that this will weigh on the economy when we fall into a recession, because we will, I mean, it's just part of the normal business cycle. You know, time will tell on that one.

Amy: Okay. Andy, for those that don't know you on a personal level like Steve and I do, you are as mild-mannered as you sound, as you come across on the show, without a doubt. So it kind of surprised me a couple of years ago when you came out pretty strong against Fed Chair Powell, their actions. You spoke up pretty candidly about the fact that you thought he had made some mistakes in things that he said and in some of the actions that...

Steve: He's slow to do anything.

Amy: Yes. So, here's my question for you. Because I know you're gonna be so honest about this, I'm really interested to hear. We're a year into this cycle, over a year into this cycle of rate hikes. If you were to give the Federal Reserve our nation's Central Bank a grade on how they've done so far to this point, as we are at the point now of a pause, what's the grade that you give, and why?

Andy: I would give them a B. I mean, based on... I mean, hindsight's 20/20. When you look at the data that was available at the time, I think the Fed probably did make the right decisions at the time. Now, hindsight's 20/20, they should have done something different. But knowing how everything will evolve, I mean, there's so many intricacies in the financial plumbing and how things all go together in terms of, you know, the transitory inflation that was thought because of COVID. I mean, they were faced with COVID, right? And what the implications are of the economy. That's something that no Federal Reserve has had to deal with that where the government just globally really just shut down all economies across the world. You can't really model that financially. So, knowing what they knew at the time, I think they probably were making the right decisions. I don't really have much of a problem with that. Hindsight, obviously, they could have done things differently.

Steve: Okay. You, you mentioned the dot plot a little bit earlier. And for those that aren't familiar with the term, it's pretty much where the other Fed members can literally put a dot on a chart that is their opinion of where interest rates need to go. And they do it anonymously. There are no names attached to it. It looked like a shotgun blast this time around. I mean, there was a lot of differences of opinion, which is not normally... I mean, you might have one or two outliers, but this time around, there's a lot of different opinions on where rates need to go. Does that concern you?

Andy: Well, I don't think it was really much different than prior dot plots, just to be honest. But what we saw on the dot plot was a big move upwards. So, while the Fed didn't do anything in interest rates, their prior dot plot, which, again, shows where the Fed members think rates should be at the end of upcoming calendar years. And what we like to specifically like look at is what's called the median dot, or it's the middle one. And that kind of gives you an idea of what the Fed is thinking in terms of where they might put interest rates. If you go back to the March update, they had for the end of the calendar year, this year, the federal funds rate at 5.1%, which is basically where we're at right now, middle of the 5% to 5.25% range. It's been lifted up.

And right now, it's up by half a point. That was a much bigger increase than anyone expected. Most were expecting really just a quarter-point increase on that dot plot. So, when you think about it from that perspective, that's where the, what's called hawkishness from the Fed came through the most. So looking at that dot plot shows that the Fed being hawkish. And what that means is they're really very, very concerned about fighting inflation and they're not going to give up. And that's their number one goal right now. They're less concerned about the economy slowing down. So, that was a big jump.

Now, the reason there was such a big jump, most likely is because you are starting to hear dissenting voices among the Fed where some people think we should pause for longer, and rates are good, we need to see how the data comes in because of monetary policy lags. But the hawks, the people who are really wanting to raise rates, they're getting louder and louder and they seem to be more and more of them. So, because of that, you're seeing that lift up. Now, putting this all together, why was it such a big lift even from the people who are not as hawkish? Well, speculation is that the Fed could have easily seen some dissenting votes among them. So, this was kind of like an olive branch to the hawks. Like, Hey, we'll lift up the median dots if you stay unanimous on holding rates where they're at.

Amy: And that's such a big deal because they've been unanimous since what, 2005?

Steve: Yeah.

Andy: Yep.

Amy: Yeah.

Andy: There hasn't been much dissension at all recently here. So, it's going to be really interesting when we get to the end of July, that next meeting. Fed chair did say that that meeting is a live meeting, which means anything can go.

Amy: Interesting. Well, we'll be looking forward to that. Andy, I give you all the credit in the world. I give credit where credit is due. And the Wall Street muckety-mucks have not always been right. And I know that no one has a crystal ball in this. But you have been pretty spot on about saying, "Hey, this is where I think the Fed's going next." And we very much appreciate your perspective on all this. Here's the Allworth advice. There's still work to be done to get inflation down to that 2%, that goal mark. That likely means more volatility. So, just keep your focus on the long-term. Don't make any financial moves based on emotion or the headlines of that day.

Coming up. Did we just enter a bull market? How to react if we're there? You're listening to "Simply Money," here on 55KRC, the Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. If you can't catch our show every night, you don't have to miss the thing because we've got a daily podcast for you. You can listen to it any anytime. Just search Simply Money. It's on the iHeart app or wherever you get your podcast. If you think maybe you're on the right track to retirement, what you might be missing, this is key. It's ahead at 6:43.

Okay. So when you have looked at your 401(k) over the past year and I have said don't look at it daily because you'll make yourself crazy. It's been all over the place. Right? We have had a volatile, turbulent, rollercoaster, you pick the word you wanna use here. But it has been quite a year in the market. So, if I were to tell you that we are now in a bull market territory, you might think I'm a crazy person, but I'm actually not.

Steve: Well, we think that anyway.

Amy: Well, at least not in this case.

Steve: Well, you know, but what's a bull market? The market's up 20%. Guess what? The market's up from its bottom back in October. The market's up 20%. Why don't you feel good about it? Well, when it goes down 20%, like it did in 2022, when you look at it being up 20% now, you're back to where you... Actually, you're not even quite back to where you were before because it takes more than a 20% increase to make up for a 20% loss. So nobody's feeling great about, wow, this is a great bull market and happy days are here again. There's still a lot of questions on the horizon, whether you're looking at the banking industry, whether you're looking at the Federal Reserve direction, the economy in general. But we are up 20%. Technically, that's a bull market.

Amy: Well, and I think the message about markets and these cycles is for those of you who got spooked over the past year and you checked your 401(k) at one point and you said, "I'm gonna totally switch the way that this is invested. I'm gonna pull some money out. I'm gonna go to cash, I'm gonna get far less conservative."

Steve: "I'm not gonna throw more good money after bad." I love that one.

Amy: Exactly. Exactly right. And Andy Stout just mentioned in our last segment we were talking, he said, you know, a bull market is always coming. Right? A recession is always coming. Both are normal parts of a very normal business cycle. The part that we don't like, of course, is the bear market, the downturn. But bull markets are always coming. And then if you go back to 1949, historically, look back on how many of these markets we've had. Well, 11 bull markets and 11 bear markets. So, then it's like, well, that's a toss of a coin. Why would I do that? Then you look at the length, right, of those markets. Bull markets on average last five and a half years, bear markets, a little more than a year. So when you put that all together, you know, on a long timeline, you're like, "Ah. I mean, markets are up far more than they're down."

Steve: But you don't remember it that way. That's the weird part.

Amy: You know, you only remember the bad parts, the loss.

Steve: Well, it's not just the market going down and your 401(k) balance going down. There's a lot of headlines. And man, you can't get away from the bad headlines in a bear market, in a downmarket, because they're not only... You know, forget newspapers and all that stuff. Every time you turn on TV, every time you go on the internet, it's doom and gloom. And that just, man, that will drag you down. And you remember the negative comments way more and for a lot longer period than you do the positive comments. But that's the way it works. You're absolutely right. And, you know, here's the thing, Amy, if you buy into markets always recover, why would you even think that way? Because they always have. You know, we're batting... You know, I'm a baseball guy.

Amy: You are.

Steve: We're batting 1000, okay? We have never seen markets not recover. Even when you go into the depression after 1929, they have always recovered. So, unless the next bear market, the next down market is the very first time in history markets don't recover, you've gotta assume you're gonna be okay. And that's where the rub is. Because if you make an emotional decision and just bail to keep from the proverbial throwing good money after bad, now you gotta get back in. And I can't think of anybody that got out at the end of 2021 and avoided 2022 and said, "Hey, here's the bottom, I'm back in 100%." It's just that lights don't turn green all at once. There's always a question.

Amy: Well, and you know, I'm a huge Warren Buffett fan girl. And this is one of my favorite quotes though, but he says, "You should be greedy when others are fearful and fearful when others are greedy." You know, you and I are having conversations all the time off-air. And I remember, I think in 2020, when the pandemic was first coming in, markets were... And we were both like, "We're putting money in." You know?

And then like last year, you know, early last year, markets were way down, we're putting money in, you know. And not because we're brilliant people, I like to think that we are, but more than that, we've just seen how this works. You know? You're buying things on sale, yet for whatever reason, many people don't look at that when it comes to investing in the markets. And I think, okay, so if now we are in this place where, I don't know, maybe we're getting a little bit of a breather, I would say now is the time when you build your boat, your financial boat.

Take stock of where you are. You know, do you need to rebalance? Are you sleeping okay at night? Were you sleeping okay at night over the past year when things were all over the place? Don't build that boat during a storm. But if there's a breather now, now it's time to take a look at things.

Steve: Yeah, I agree. And don't forget bonds. And I don't want to go into a long-winded discussion, but bonds got beaten up really bad in 2022 because interest rates went up. Well, guess what? When interest rates come down, bonds go back up in value. And the interest rates will come back down at some point. So, just remember, there is the potential for money to be made in the bond market also.

Amy: Here's the Allworth advice, stay invested during bear markets, and then you can reap the rewards of bull markets, which as we've said, lasts much longer. Okay. So, is changing careers a life-or-death situation? Is it something that maybe you could pull off? We're gonna take some of the fear away from that next, with our expert. You're listening to "Simply Money," here on 55KRC, the Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. I am an open book, we all know that. I share everything that's going on in my life with my kids and my family. And so I was really open when last year, my husband and I bought some businesses, and then I decided to get a little more involved in running them. And I thought it was gonna be a great idea because I love managing people, I like leading people. So I thought, "This is gonna be a great transition."

Steve: What can go wrong, right?

Amy: What could possibly go wrong? Until I jumped in and then I realized that everything is wrong about this, and I felt like this failure. I felt like, you know, I should be good at this and I'm not. And I was all in, and now it's not working out. So, joining us tonight to make sense of this is our good friend, Julie Bauke from the Bauke Group. Julie on the job, knows things, all things when it comes to careers. And Julie's actually one of the people that I turned to during this time. And one of the first things that you and I said was... When I said I feel like such a failure and I tried something and it didn't work, and it's so overwhelming, why don't we normalize this? You know. Why don't we make it normal that people try things and some of them work and some of them don't, but we can pivot mid-career and it doesn't have to be scary.

Julie: Yeah. The first thing we have to do, especially depending on your age, and also depending on what advice you're getting from maybe your boomer parents or grandparents, is let's let go of the idea, the old idea that you find a job and you hang on for dear life as long as you can, and that's the right way to do it. It is the wrong way to do it on so many levels. And it's not... Let me back up. I don't mean that's wrong for everybody. But it's not the only way to approach your career. And I have found personally and through others that one of the best ways to find out what you're good at is dare to be not so great at something. That's a point of learning.

Like, I always think about how I learned to be a leader. I learned more from the worst boss I ever had than I did from the best boss I've ever had. And so, why are we looking at, just because you found out that there are certain types of, or certain roles in managing people that you don't like and or you're not good at, all that is, Amy, is a data point.

Steve: Well, I'm with you 100% Julie, because I think you can learn both from failure of others as well as your own failures. I think you learn more from that because you retain that knowledge. You don't forget when you screwed up or when things didn't work out that way and you promise yourself, "I'm not gonna let that happen again." But, I mean, one of the things that I've seen, and I saw a very close friend jump both feet into a new business that she didn't know anything about from a very good salaried position and take a lot of money out of investments and the bank to go into a new business that she had never done before.

I mean, that's something that you've gotta watch out for, don't you think? I mean, you've gotta have a plan and ease into it.

Julie: Absolutely. Yeah. And, you know, so, there's a lot between just jumping into something without any reflection, any self-awareness, any backup plan, any thought, any building relationships with people who can help guide you. That's just foolish, unfortunately. And a lot of us, you know, have had that experience. But then we learn from it and say, "Okay, what do I now know about myself that I didn't know about myself before?" And certainly, like, when I talk to people who are doing a, let's say, a regular job where they have full-time hours, full-time benefits, a typical corporate job, and they really want to jump off and do something maybe wildly different. They wanna start something, they wanna become self-employed. There are all kinds of things you can do to figure out so that you are mitigating the risk when you do jump. So, you're moving forward with knowledge, with a plan, with support, with resources, with all the things that are gonna help make you successful. So when you jump from one... Yeah, when jumping from one...

Steve: And maybe a safety net.

Julie: ...thing to another. Yeah, absolutely. Yeah. You know, it's pretty well known from people who started their own thing that however long you think it's gonna take, double it. Because even sometimes our most optimistic projections never come to be, and now we're stuck. And so unless you have the runway, the money, the whatever, to really just get out there and start at the bottom and figure it out, which most of us don't, you have to start building toward what your next best thing is.

And in my opinion, it has to start with self-awareness. You know, what am I good at? What do I like to do? What have I liked in my last job? You know, what do I... And unfortunately, Amy talked... In Amy's situation, she said, "You know, I really thought I was gonna like this. And I got into it and realized not only do I not like it, but I'm not good at it." Huh. If I was talking to Amy prior to when she made that jump, there are probably some things that I could have asked her or given her insight around or sent her in search of that would've allowed her, let's say, to put her toe in the water and maybe figure out if she didn't like it before she was fully submerged.

Amy: Why did we not have this conversation before, right? It's so true.

Julie: Yeah, Amy.

Amy: I know, I know the answer that we want is just, call Julie.

Steve: So we're learning from Amy's failures. That's what I'm hearing.

Amy: That's fine. It's fine.

Julie: That's right. That's right.

Amy: I'm happy to put them out there. One of the things that Julie and I talked about was, you know, my dad, Gary Wagner, he retired from the same company where he interned. I mean, to your point, the boomer generation, that is exactly what the norm was. So, I've talked to other people though, not even just recently, but, you know, just friends over the past few years that are very much mid-career, you know, in some of their highest earning years, but they're just not fulfilled. They're not loving what they do. And the thing that always holds them back is, but what else could I do?

And one of the things that you and I did was this very practical list. Right? What would you like to do more of? What do you like to do less of? What are absolute, like, deal breakers, this cannot be any part of my job? And the funny thing was, as we're doing this, it's like, I love to communicate with people, I love to help people financially, I love to empower them. Well, I'm probably doing a good part of what I should be doing, which was great to find out. But sometimes we don't ever give ourselves the opportunity to just stop and say, "Now, what do I really enjoy doing?" So, can you just give us some of the practical steps for anyone feeling stuck on how to get started here?

Julie: Yeah. You know, let's say that you've spent 20 years selling office furniture. And when you look at your list, your catalog of who you are, there's what you know. And so in this case, with this person, she knows office furniture. Great. But she also... Those are her nouns. She knows the customers who buy office furniture, and she knows a lot about office furniture. So, the problem is, most people in that situation, in this example, she would've said to herself, "Well, who else is gonna hire somebody who sells office furniture?"

So what she's doing here is not giving herself credit for the full range of what she knows. So, she knows office furniture, she knows people who buy office furniture. She also knows how to sell. She knows how to manage accounts. If she's been through the last few years, she knows how to manage a downturn, you know, in the market, let's say. She knows how to make customers happy. And so, we get really stuck on our nouns, I'll call it, and we don't realize that so much of what we do is transferable.

I mean, if you're now interviewing at a food company, they don't care about your office furniture knowledge. What they care about is all the other stuff. How did you go about your job? What relationship did you build? And so you've gotta separate out your nouns and your verbs. So, what are the things that you do, you've been complimented for, things you do well, what do you enjoy doing? And as you alluded to, it's that more of less, of never again. What do I wanna do more of if I look back?

And so I say, look back over your whole career, not just your last job. What are the things that you've done in those jobs that you felt really powerful, you felt confident, you got complimented on, you really enjoyed. And pull them from all your jobs, not just your last job. And if you come up with 8 to 10 things that you say, "You know what, I'd like to do as much or more of this." That is an amazing, really powerful start to having those conversations.

It's equally important that you do the other side, which is, "What do I never wanna do again?" And part of it might be, I never wanna be on call. Like in your career, Amy, when you were in TV, you were called to these scenes where you had to show up. And it might be you had your kids' activities going on, it might be in the middle of the night, and you did it because it was a part of your job. But it's okay to say, "I did it. I never wanna do it again."

Amy: Never again. Please.

Julie: And so putting a stake... Right?

Amy: Exactly.

Julie: It's putting a stake in the ground. Yeah. And you've gotta be willing to do that.

Amy: Julie, quickly...

Julie: And that's where we get stuck.

Amy: How can people get ahold of you? If there's anyone, like, listening, they're like, "Yes, this me. How do I figure out this mid-career pivot? You know, if you're saying it's normal, how do I get there?" How do they find you?

Julie: We are on @thebaukegroup.com. We're in the middle of launching our new website. So, hopefully, that will go off without a hitch, but it rarely does. But yeah, we actually offer coaching around, our new coaching option that if you go there, and it's not up yet, we are actually offering a new coaching program where we help you with just that, figuring out what your next step is, resume, LinkedIn profile that you can execute on whenever you're ready. But it's really just getting you focused in the right area, becoming self-aware, how do you talk about yourself.

It's a really powerful process because I noticed that when you and I did it, you even sat up straighter and said, "Well, wait a minute, you know, this is me. You know, this is who I am, and I'm proud of who I am." There's so many others...

Amy: Grateful for your work, Julie.

Julie: ...that are so deep in the hole... Right So deep in the hole, they can't pull themselves out.

Amy: Yes. Yes. So, if you are in this place, Julie is a great resource, the baukegroup.com. You're listening to "Simply Money," here on 55KRC, the Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. Straight ahead, we've got the do's and don'ts for those of you who are trying your best to pay off some debt. Okay. So, there's a lot of people and a lot of studies out there, and Steve and I, we've talked about it many times on the show, that say, your biggest fear in retirement is outliving your money. But there's actually people on the other end of that spectrum who say, "I'm gonna be great. I am totally good. I'm ready for retirement. I've saved. I've done everything I need to." And they're actually off. They're not as ready as they think they are.

Steve: Yeah. This is almost just as bad. I mean, pretty interesting...

Amy: Both sides of the spectrum are scary, right?

Steve: Yeah. Pretty interesting study by the Center for Retirement Research at Boston College. They're looking at the wealthy people, and rich folks have the opposite problem. Their problem is too rosy. They haven't had to worry about money for most of their adult lives in a lot of cases. And the problem there is they're just not worried enough. They haven't crunched numbers. Things will take care of themselves. And the problem is, when you're used to a huge amount of income and that stops in retirement, well, maybe you should have put pencil to paper a little bit more.

Amy: Well, you mentioned a huge amount of income, but what a lot of people in this situation don't think about is, how much are you consuming? How much are you spending...

Steve: Exactly. Yeah.

Amy: ...as it's coming in? I remember Ed Fink, one of our founders, talking about, within the same week, two different women came in, two different clients. One happened to be a Westsider, and she had a little bit of a pension and modest social security coming in. She had money left over every month. The other one though, was this doctor who made just boatloads of money and then also spent boatloads of money.

Steve: Boatloads plus, yeah.

Amy: And could hardly keep their head above the water. And so I think for people in this situation, yes, you might have this beautiful six-figure, whatever it is, salary, but if you don't put pencil to paper and say, "But what am I spending? What am I gonna need in retirement?" You could be really far off.

Steve: Well, and some of the assumptions, and it's not just average people that, you know, are just winging it. I mean, I'm reading studies. I read a study by Pew Research, which is one of the more reputable research groups out there that use the assumption of, you probably need at least 75% of your income during your working years to live on on retirement. Where does that come from, Amy? I mean, that is a really bad assumption.

In my book, if you don't spend more money the first two years of retirement than what you were spending in your last year of working, you're doing it wrong. I mean, the whole point of retirement is enjoy life. And there's a pretty darn good chance you're gonna spend more in retirement because you're gonna travel, you're gonna do things you've been putting off than you were when you were working and spending 40 hours a week doing something maybe you didn't necessarily wanna do, work, but it didn't give you as much time for the travel that you wanted to do in retirement.

Amy: Well, I've always said that. I've said, okay, on days when I'm working right, 8:00 to 5:00 or whatever it is, you know, I'm not spending money.

Steve: 11:00 to 1:00, but go ahead.

Amy: Yeah, 11:00 to 1:00, noon to 12:30, whatever you wanna look at. On the days when I'm working, you can't spend money. I mean, unless you're spending all of your time on Amazon. But, you know, when you think about weekends, okay, now we're going places. We're probably maybe eating out. We're, you know, maybe going to a movie, or play golf, or whatever it is. We're spending more money. Well, that's what retirement is. You're not working anymore. So I think looking at that with kind of eyes wide open.

And another reality for this group of people is social security does not replace as much of your income as it does for lower and middle-class income earners. And so that's not kind of the safety net that it might be for other people. So, you gotta go into this with eyes wide open. Here's the Allworth advice. Make sure you've got a rock-solid understanding of how much you plan to spend in retirement, so you can build a rock-solid portfolio that's gonna help get you there. Coming up next, how to keep debt from becoming actual disaster. You're listening to "Simply Money," here on 55KRC, the Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. Debt. I mean, for those who have it, regardless of what stage of your life. It used to be, you know, debt was really common when you're in your 20s, you're getting out of college, you've got that college debt, you know, don't have the income. But studies are showing more and more people, even later in life, taking on more and more debt, whether it's you're taking on student loan debt and all different kinds of things that never happened before.

So, we're speaking to everyone here when we're talking about debt, not just a certain group of people, because there's a lot that are dealing with this. The first step, I would say, to getting it under control is the absolute scariest, and it's tallying it up.

Steve: Well, you can't fix a problem until you confront a problem.

Amy: Exactly.

Steve: And I went through this with a family member, and it was really interesting. I had such a hard time getting this person to think in terms of what's the balance? What do you owe on this credit card? What do you owe to this group? And I kept getting, well, it's $45 a month. No, no, no. What's the total debt? You've gotta do that. By the way, one of the things you don't wanna do is what the U.S. government does, and that's take a cash advance to make your minimum payment on your credit cards. Okay?

We don't wanna be doing that. But no, you've gotta confront it. And there are some mistakes that you've gotta watch out for. And, you know, part of that is don't replace debt with debt. And this is a problem. A lot of people figure, "Okay, I've got a 0% credit card offer. I'm just gonna put all my other credit cards on that one because that way I'm not paying any interest while I'm solving the problem." I have never seen that work for somebody, Amy.

Amy: Yeah. It's shifting things around, right? So you've gotta have, first of all, that big number. And even if it's a scary number, at least it gives you a starting place. But second, then you need a strategy for how you're going to get this under control. And to your point about your family member, a strategy is not paying the minimum. That does not cut it. You are literally going to be paying, first of all, thousands and thousands of dollars more to pay off that debt than you ever would. And second, you're never going to climb yourself out.

So, whether it is cutting back on spending, whether it is looking at the highest interest level first, and then paying that down, or whatever works for you, but figuring out a strategy. At the same time, not letting yourself continue to charge more or take on more debt at the same time. Exactly.

Steve: Yeah. It's kind of like, you know, losing weight. You didn't put on the weight overnight, you're not gonna get rid of it overnight. Same with debt, it's gonna take some time and it's gonna take a shift in your attitude. Put the credit cards away.

Amy: Well, and I like that actually, you brought up the fact of losing weight, because there's all these pills out there and these easy solutions, and none of those work for losing weight. The same with debt. There are all these things out there that promise that, you know, it can just, you transfer this or 0% here. There's all kinds of fine print though that actually can make these things far worse.

Thanks for listening tonight. We hope you're gonna tune in tomorrow. We're talking about mid-year financial checkup. What you gotta be doing right now. You've been listening to "Simply Money," presented by Allworth Financial, here on 55KRC, the Talk Station.