Amy: Tonight, why right now is the best time to shore up your financial plan. You're listening to "Simply Money," presented by All Worth Financial. I'm Amy Wagner, along with Steve Hruby. If you've listened to the show for any amount of time, you've heard us say, you do not build the boat during a storm. In other words, right, as an investor, you don't wait for markets to get bad, you don't wait for the economy to get bad, you don't wait for your personal situation to get bad to say, I should figure this out. Times like now, when hopefully, there is a lull, are when you build the boat.

Steve: And we talk about financial planning every day. Planning is not something that you're necessarily being reactive about. It's about being proactive. So we're going to talk about why now is the time to build the boat, that is. A couple of weeks ago, we talked about something called the VIX Index. That's the consumer Fear Index. And it tracks the price of options that are used to hedge against the stock market downturns. That's really what it is. And what it does is it measures how much traders actually expect prices to fluctuate. Anything below 20 signifies calm. Now, last week, the VIX dropped to 12, 12. This is the lowest level in five years.

Amy: Why are we so low? I think several things. You've got the Federal Reserve raising interest rates in order to try to bring down inflation. And there were so many people making headlines over the past couple of years, as the Federal Reserve has kind of been on this mission, saying, we're going to see a recession. We're going to see the worst recession we have ever seen in the history of this country. All of these crazy predictions, none of them have come true. At the same time, corporate profits, right, companies are doing pretty well. We just came out of an earning season. Most companies are reporting really good earnings. And as a result, I think there's a lot of people who feel like, okay, I feel pretty good when I check my 401(k), I feel pretty good about the stock market in the near term. I feel pretty good about the economy. And as a result of that, this VIX Index is looking pretty good.

Steve: Yeah. And inflation has finally cooled, just a little bit. It wasn't much.

Amy: Yes, it's working.

Steve: Yeah. It's been slowing for a while, but it's finally officially cooled. Went down a little bit. So there's a lot going right right now. And if you add in artificial intelligence that's just booming and driving the markets for huge gains, between Apple and Nvidia. We've also talked recently about Nvidia carrying the S&P 500 forwards, almost all by itself. Yeah. Investors have a lot to be happy about, and that's reflected in the VIX, showing that they expect calmness on the horizon. So what do we do with that information? History shows that periods of, we'll call it, extreme market calm rarely last. So that the VIX traded in line with current levels for most of 2005 to 2007 before surging, get this, above 80, above 80 during the 2008 financial crisis.

Amy: Nobody wants to think back to that time, but let's do that for a second, right? I mean, people were buying houses that they couldn't afford. Banks and lenders were giving loans to anyone who could fog a mirror. We were building this house of cards during this time. Everyone felt pretty good about things. Now, listen, I am not saying that because VIX is at this level, that you should be running for the hills, because it signals this is coming. But I also know that... We can, talk about this VIX measurement, but I want you to think about your own life. Because I think there's a lot of people, a lot of investors, during this time, who feel so good about what your investments are doing. And most of the time, when you check your 401(k), it's probably been up lately, and you start to think, what else? What else can I do? And I think back to several years ago, we had been in another period of relative calm. Markets seemed like the only possible direction they could go was up. We got a call here at All Worth, from an investor who was in his 90s, and he said, "Put me 100% in stocks." Why? Did he need to take on more risk? Was he worried about running out of money? Nope, nope. He just thought, I can't possibly lose during this time, right? And it was like, okay, during a time when the markets are doing really well, you go back to your financial plan and you say, "Okay, I'm feeling a little greedy. Does this still make sense? Does it still go according to my plan?" And that's why we say you build the boat for the good times when you get a little greedy, and you build that boat for the bad times when the water gets really, really choppy and you're thinking of jumping off of that boat.

Steve: Yeah, that's a great point. I had a gentleman in my office last week, 86 years old, 86 years old. Fairly conservative investor, has been for many, many years. And he said, "Hey, Steve, I think now might be the time to kick my risk up."

Amy: Now's the time? Okay.

Steve: And why is that?

Amy: And what was his answer?

Steve: Everything feels great. The markets are up. Okay, so you waited until the markets are up? Now, they're going to continue to go up over the long term. I'm confident that that will be the case. But right now, it's easy to be, I guess, let our guard down, when everything is good. We have very little Fear Index right now. There's been surprises, as far as what you talked about earlier, with interest rates maybe heading downwards later this year, inflation ticking downwards. There's a lot to be happy about. The markets are doing quite well. So remember the term be fearful when others are greedy and greedy when others are fearful?

Amy: I was just going to say that.

Steve: Yeah, that's what I brought up to him. And he was like, "You know, that's a good point. I think I am going to just stay the course."

Amy: Yeah. And that's why you build the boat, right? Because it gives you the opportunity to keep coming back to safe waters when you start to push yourself into some place that could lead you somewhere really uncomfortable when it comes to your money. You're listening to "Simply Money," presented by All Worth Financial. I'm Amy Wagner, along with Steve Hruby, as we talk about building the boat, the financial boat, right? You don't wait until the storm comes and then think, "I gotta figure this out." You do it during times like right now, right? We're talking about this VIX measurement, where most investors are feeling pretty good about the market. There's no major... I mean, who knows what could happen tomorrow? We know that going back over the history of this country, but I don't think there's anything that anyone's incredibly fearful about right now. But I want to also point out, Steve, that we're talking about economic conditions. We're talking about market conditions. I was speaking with someone yesterday who got laid off on Friday, right? Almost 60 years old, not ready for retirement yet, not sure about what the future holds. Never has done a financial plan, right? And it's like, coming to us during the storm. If they had a financial plan before then, then it's like, okay, this is a slight detour. What can we handle, right? What can we do here? How can we rearrange things? But when you have no boat to even start from, you're in choppy waters, you're in the water, it's really hard then to build the boat and pull yourself out of that.

Steve: When you're partnered with a fiduciary financial planner that has a financial plan built for you, it helps you understand how you need to adjust, or maybe not need to adjust, if life throws you a curveball. An example that would be getting laid off prior to planning to retire. What do we do in that situation? What do we need to do, if anything? When you have that financial plan built and you're working with a fiduciary financial advisor, they're able to give you the guidance and direction because they plan for contingencies. You know, I have a lot of fun building financial plans and trying to blow them up, showing people, all right, here, if you live way too long and your investments don't go in your favor, and you need to spend a lot more money than you're anticipating. How do you fare? And when we can not blow up a plan realistically, that's a really great place to find yourself. So that's the equivalent of having that boat and understanding that when you come into your advisor's office and say, "Hey, maybe now's the time that I increase my risk," they can point to the plan and be like, "You don't need to. Why are you asking..."

Amy: Yeah. Why take on unnecessary risk?

Steve: Yeah, that's based around greed, is what it is.

Amy: We're talking about building the boat. And hopefully we've convinced you by now that it is a good time for you to do it, if you have not already. Let's get down to brass tax here. How do you do it? Right? We would say start with building that financial plan, making sure that you are truly diversified, understanding your 401(k). For most of us, it's the number one vehicle we're going to have to get to retirement. Yet you don't know what you're invested in. You don't know what the rules are. You get tempted to take money out of it. Know the 401(k), have kind of a long term time horizon and sort of thought process behind that.

Steve: Yeah. And again, I've said this plenty since I've been doing this show, the financial plan will shine light on the risk that you need to take with your investments, that you can afford to take based on your financial situation. And then understanding yourself and maybe going through a questionnaire is going to shine light on your tolerance for risk. So it kind of helps find the sweet spot for your long term investment strategy. Now, that long term investment strategy can change over time, but it doesn't need to change just because the markets are calm, according to the VIX and the S&P 500 is surging because of a couple of different stocks. That doesn't mean that, hey, now I need to make my portfolio much more risky so that I can be greedy and chase after these gains. It shows you your long term asset allocation that you need to have, no matter what is happening around in the markets. You know an example that you said that there's not a lot to be fearful of right now. I know a lot of people are emotionally attached to the fact that it's an election year.

Amy: Yes, that's true. People are fearful about politics, right?

Steve: Yeah, no matter what side of the aisle you're on, the markets are still going to drive forwards. We had Apollo Lupescu on the show recently, and he took a deep dive into... He's from Dimensional Fund Advisors. And took a deep dive into what that really means for our investments, and over the long term, not a whole heck of a lot.

Amy: Yeah. You're making a good point, too, about the election. And here's the thing, you can't control who's going to end up in Oval Office. You can't control what happens, what their policies are, anything to do with that. You can't control what's happening with the markets or the economy, but you can control your personal financial situation. And I think that's why building the boat is so incredibly important. And I would say, first step here is shoring up the emergency fund, right? Because when the first start of storm comes and the storm clouds are moving in, if you do not have that emergency fund, you're going under. It doesn't matter, right? So that's where you start. Then you build the other things up around it, and then you keep going back to kind of that place, right? The safe place on the boat, when you're starting to get greedy, when you're starting to get scared. But now we would say, is a great time to start building it. Here's the All Worth advice, if there was ever a time to solidify your financial plan, we're telling you it is now. Markets will not remain this calm forever, and you certainly never know what's going to happen next week, right, when you walk into work or when you get a diagnosis, anything can happen. Coming up next, should you tweak your portfolio with tax cuts set to expire at the end of next year? We're going to tackle that very important question next. You're listening to "Simply Money," presented by All Worth Financial here on 55KRC THE Talk Station.

If you can't listen to our show every night, you don't have to miss a thing we talk about. We've got a daily podcast for you. Just search "Simply Money" on the iHeart app or wherever you get your podcast. Straight ahead at 6:43, we're going to help you inflation proof your portfolio. What you need to do there. You know what, Steve, I think you are a pretty good girl dad. And one of the reasons why I say that is because your daughter and your wife both love Taylor Swift, and you have gone to extreme levels to try to figure out a way to get them to these concerts. And because of that, you know, first of all, how popular she is, how high demand she is, and how insanely expensive these tickets are. She is like a force into the economy unto herself.

Steve: It really is something. And yeah, so far I haven't succeeded. But also part of it...

Amy: You've tried.

Steve: Yeah. For as much as my wife likes to spend, she is kind of reasonable about this one.

Amy: That's good.

Steve: The way the ticket prices are, you could literally take a European vacation for, like, three weeks, and splurge.

Amy: Cheaper than you could see her here on U.S. soil.

Steve: In Indianapolis, yes, to drive to Indianapolis and see her. It's ridiculous. But listen to this. Her Eras Tour, it's causing so much consumer spending in the UK, the Bank of England may actually delay making an interest rate cut in September. Isn't that amazing? That's ridiculous.

Amy: Yeah, she's really inflating the entire economy herself. As crazy as it sounds, I remember when she was here, and it was like the entire downtown transformed. It wasn't just about a concert. It was about what you wore. It was about friendship bracelets. You know, there was like an entire festival that kind of came up around the stadium, and all these people coming in from all over the place. And, yeah, I think it's amazing what a force this one woman is. And we were talking about this earlier, like, she has... First of all, she's a brilliant songwriter, but even if you don't like her music, you have to respect her ability as a business woman.

Steve: Oh, yeah, to pull in that many fans and create this much...

Amy: Singlehandedly change the economy of the UK and hold off interest rate changes. Like, that's amazing to me.

Steve: The tour in UK, it's clashing with the time period where key inflation data is going to come out. So they have to look at that. There's important people sitting around a room thinking about all these numbers, and then they're sitting down and thinking, "Well, let's think about the Taylor Swift factor." Which, by the way, there was also earthquake readings detected almost four miles from a recent show that she performed in the UK. Earthquakes, moving the economy.

Amy: Yes, people dancing at her show, they're moving the earth and they're moving the economy. I just have never seen anything like it.

Steve: It's crazy.

Amy: Switching gears now, if you haven't heard about this, this is an important thing to understand. Some significant tax cuts that most of us have come to know and enjoy are set to expire at the end of next year, at the end of 2025. And it might make you wonder, should I be doing something in anticipation of that?

Steve: You know, most of the people I work with, I am talking to them about this. It's an opportunity to capitalize on Roth conversions at a time period where tax rates are going to be a little bit lower. So for filling up to 12% tax bucket, or the 22%, or the 24% tax bucket, what that means is you're taking pre tax dollars that you have inside of your 401(k), or a traditional or rollover IRA, and you're converting them to Roth. In doing so...

Amy: So you pay taxes on that now.

Steve: Yes, you're paying taxes on it now. But those dollars will then grow tax free for the rest of your life and no longer be subject to required minimum distributions when it comes time to do them.

Amy: Gives you all kinds of flexibility, right, when you have money in a Roth account. And what I've come across, more often than not, is even people who have saved incredibly, incredibly well, have a ton of money in tax deferred accounts. So, you think you have a million or a million and a half dollars in that 401(k), that sounds great, but when you start to pull money out of that account, you have to pay taxes on that money. Now, we're at historically low tax rates in this country right now, where do you think things are going to go in the future? Right? When you think about spending, and debt, and all of those things, I think most people come to the same conclusion, regardless of where you sit politically, regardless of what side of the aisle you're on, right? Not red, not blue, green. How is this going to affect my money? I think it's reasonable to think tax rates are going to go up in the future. So you're locking in tax rates today. And to your point, Steve, then that money grows, so much flexibility with that money after that, because you're not paying taxes on it. If you get to 75 and you don't need that money, you don't have to pull it out and pay taxes on it. The government isn't telling you what to do with your money at that point.

Steve: Yeah, it's a bit of a tax bomb for very good savers who have massive 401(k)s. They don't think about it. Let's say they retire at 65 and they have $1.5 million in their 401(k), and then 10 years from then when they're 75, they have 3 million. And the RMDs that they're forced to take out at that point are more than they actually need. Then they're paying higher taxes on dollars that they don't need at that point in time. Now, there's other strategies we could explore at that point, but getting ahead of it and locking in on these Roth conversions before 2026 when current tax laws are set to sunset, is why I'm talking about this with most of the people that are in my office.

Amy: I think on the flip side, right? Many times we say, do not make long term financial decisions based on anything that's going on in the economy right now or politics. It's kind of like this makes sense anyway, but it particularly makes sense now because we think that these factors will actually have an impact in the next year or two, right? So it's not...we wouldn't say you make a significant financial decision based on anything that the government is doing. I think this time, though, is a bit of an exception to that rule.

Steve: This time it's is different.

Amy: Yes. We always say this time is... You know, this time is different, is a terrible way to think about things. I will say this time does feel different, and it likely is. And this is a strategy you can employ just to give yourself more flexibility in the future.

Steve: Yeah, there are areas that we need to be particularly cautious about, though. Because if you kick yourself too high in taxes today, let's say you're knocking on the door to 65 and you're going to be taking out Medicare. What can happen is, if you're married, filing jointly, and your income goes slightly above $200,000, then your Medicare Part B premium is going to go up too. So there are intangibles. If you go above 250,000 in conversions, there's some additional taxes that fall into place. So you need to sit down and talk with a fiduciary financial planner to see how this makes sense in your financial plan. But you also need to sit down with a CPA or a tax advisor to sign off on it, somebody that's actually helping you with your filing of taxes. Because there are things that you can get wrong, and it can become more expensive than actually beneficial.

Amy: Right. You can think, okay, well, yeah, if tax rates are going up, I'm going to move all this money over this year. You kick yourself into a higher tax bracket. You kick yourself into a situation where now you're going to pay more for Medicare. And that's why we would say, definitely surround yourself with a group of professionals. And I would also say one other sort of caveat to think about here is, we would say Roth conversions really make sense if you have money on the sidelines, where you can pay that tax bill. If you're pulling money out of that account and you have to use that money then to pay the tax bill, it makes a lot less sense.

Steve: Yeah, it just feels strange to voluntarily pay a tax bill. But remember, when you plan accordingly, you're doing so at your own benefit, because it will actually save you taxes in the long run.

Amy: Here's the All Worth advice, these are perfect scenarios when using a fiduciary financial pro really pays off to tell you, does this make sense for me right now? Coming up next, a great lesson about how to overcome FOMO when it comes to your money. You're listening to "Simply Money," presented by All Worth Financial here on 55KRC THE Talk Station.

You're listening to "Simply Money," presented by All Worth Financial. I'm Amy Wagner, along with Steve Hruby. You like to think it doesn't affect you, FOMO, fear of missing out, when it comes to your money, but for anyone who was on social media or pulled up to one of their kid's soccer games and that other person had that brand new car, how do they afford it? I think we are all impacted by that. Joining us tonight, of course, is our good friend Al Riddick with Game Time Budgeting. Al, I use you as an example all the time of just the best way to live, to assign jobs to every dollar that comes into your household. You got to tell me that you have been impacted by FOMO?

Al: Yes, I have, Amy. And you know I always have a story for you.

Amy: I love your stories.

Al: So a couple of weeks ago, my wife sent me an email, and this email contained a coupon for buy one get one free at a restaurant that I frequent quite often. Now, the sad part was she sent this email on, like, the 30th of the month. However, the coupon expired in 24 hours. So all of a sudden, Amy, I started feeling a little bit of anxiety, or stress, or pressure about the urgency to use this coupon. But the funny part was, I had just eaten at this restaurant two days before. So luckily, I took a split second just to think about my situation. So I posed two questions to myself. Do I really want this? And number two, do I really need this? Because at the end of the day, that BOGO coupon is basically 50% off of each dish. But I look at it this way, I save 100% by not making the purchase. So at the end of the day, Amy, I turned FOMO, which is the fear of missing out, into JOMO, which is the joy of missing out.

Amy: Oh. And I love the phrase...like, rephrasing it that way and thinking about it that way. Several years ago, when Groupons were really big, I bought a couple of Groupons to favorite restaurants that we had. And then I would always realize, oh, my gosh, this is about to expire. So, you know, you pay X amount of dollars for it. And so then we were trying to figure out a way to juggle everyone's schedules and get us into that restaurant. And I realized, like, I'm not saving any money on this. And I think there's a lot of kind of tips, and tricks, and ploys out there trying to suck us in.

Al: That is so true. And it can come in the form of a number of different ways, because when we think about social media, just as an example, since you alluded to that earlier, I don't know about you, but sometimes I do scroll through one of these social media apps. And I'm always amazed at some of the lives that people seem to be living. I'm like, they're vacationing in these countries that you can hardly pronounce. And then it looks like everybody just about is taking a private jet these days. And I'm like, I really don't think there's that many people out here...

Amy: Who are your friends, Al?

Steve: I don't think I've seen any of my friends taking private jets on social media.

Amy: Beyoncé? Are you hanging with Beyoncé?

Al: I know, right? But some of the things that people do put on social media, you almost just have to know that all of this stuff cannot be real. And unfortunately, when you routinely see these types of images, I don't care who you are, at some point in your life, it's going to start to impact the way that you might think about your life. And for some people, you might begin to believe that your life is not as fulfilling as some of the individuals that you're looking at on social media. And I'm of the opinion that what you're looking at on social media, it's just video clips of a person's life. However, you have not seen the movie, so you have no idea of what their life is really like on a day to day or week to week basis.

Steve: Yeah, it's not a fair comparison, if you don't get to pull back the curtain and see what's actually happening. Actually, Steve Sprovac would share a funny story about this from time to time. He said that growing up in his neighborhood, there was a family, whenever they bought a new car, and you better believe they only bought new cars, they would leave the sticker on it to show everyone in the neighborhood how much they paid for that vehicle. Even before social media, there was , you know, a form of FOMO in a situation like that.

Amy: Absolutely.

Al: That is crazy. But, you know, when I hear a story like that, my first question is, did you pay for it in cash, or did you decide to make payments? Because that's two different stories that you're trying to tell.

Steve: That would have been a very funny question for him to ask them.

Amy: Al, I think you make a great point here, because we don't know the specifics of how someone is affording something, or if they can. I've joked for years that with social media, if someone's posting about a vacation, or a new car, or whatever the thing is, that there should be some fine print there that says, "Here's my credit score and here's how much I paid for this. And did I go into debt for it?" Right? I think if you were looking at someone's social media and you were like, "Oh, they've got a 600 credit score, and they're getting $20,000 worth of credit card debt." All of a sudden, that vacation doesn't look so amazing, but we just don't know those details about people.

Al: That is so true. And you just reminded me of something, Amy. Hopefully it applies to the conversation that we're having. I think it does. But one of the things that I used to always say is, daydreaming with money you do have is better than living the dream with money you don't. So a lot of these individuals that might have the low credit score, you can still make yourself appear as though you have money. But the sad part is, a lot of the people walking around that "look rich," they're actually broke. And most of the people who I have encountered in life that look broke, are actually people that are very, very wealthy. So that's kind of always intriguing to a guy like myself.

Amy: Al, you have a success story about someone that you have kind of been coaching. And I think it speaks to this whole FOMO point. Because if you are going to get serious about really getting your financial health into order, and paying off debt, and just putting yourself in a place where you you can really be successful, you absolutely have to tune out things like social media, and the FOMO, and other people are doing this, or going here, or buying this thing, so we need to do that. Tell us about this story.

Al: So there's a young lady that hired me to be her financial fitness coach. So we connected about three years ago, Amy. And at the time, this young lady had about $66,000 in student loan debt. That's graduate school and undergrad, right? So, throughout a series of, of course, conversations and coaching sessions, to give her the right mindset, behaviors, and systems with her money, she just posted a note on Facebook not too long ago that basically said she has now become debt free. So she paid off $66,000 in 36 months. She's only 32 years old, by the way, Amy. So, when I sit back and just think about the rest of her life, I don't think she can yet even begin to imagine the impact that that one decision to be intentionally focused with money for three years, how that's going to impact probably the next 50 years of her life.

Amy: Talk about FOMO.

Steve: She can now , you know, roll forward to other things, like, I don't know, maybe saving for retirement. There's a little bit of bias shining through there.

Al: Oh, definitely.

Steve: Yeah, I think that's a great opportunity for her to step up to the plate and maybe catch up or get on track. That's a great story.

Al: Oh, definitely. This young lady, luckily, not only was she able to pay down debt, she was also saving at the same time for retirement, because she does have a very nice corporate job. So she obviously was taking advantage of all of those benefits. But I was just applauding the fact that she was able to exert that level of focused intensity at her age. Because I'm about to be 50 this year, and most people her age, you know, they're hanging out, living what they call their best lives, no matter what the cost. But to be that young and that focused on creating the financial future that she desires, I just get excited every time I think about it. Because I often tell people, Amy and Steve, I don't know what it's like to be high from a drug, but when I can help a person achieve debt freedom, that's like a natural high for me.

Amy: Well, and Al, the fact that she posted about it on social media, there's the kind of a beautiful irony there. I mean, if you're gonna get FOMO, get FOMO about paying down your debt. So for her to put that out there, right, other people who are 30s should be like, "Oh, okay, she's early 30. She's already paid off all of her student loan debt. Sign me up for that. What did she do?" You know, I think sometimes we aren't real enough with social media when it comes to money. And maybe we should be, and we'd all learn something from that. So Al, thank you for sharing that story. Great advice about how to overcome FOMO and our lives. You're listening to "Simply Money," presented by All Worth Financial, here on 55KRC THE Talk Station.

You're listening to "Simply Money," presented by All Worth Financial. I'm Amy Wagner, along with Steve Hruby. If you've got a financial question, you and your spouse aren't on the same page about or it's just keeping you up at night, there's a red button you can click on while you're listening to the show, right there on the iHeart app. Record your question, it's coming straight to us. And straight ahead, skimping on insurance, why that could backfire, especially right now. Inflation, right, we don't give it a lot of thought until years like the past few years, and then you realize, like, gosh, this really does make a difference. It's like a corrosive material that can slowly wear down your portfolio over time. We often call it the silent killer of retirement. So, now that everyone's eyes are wide open to the impact of inflation, let's talk about what we can do to sort of inflation proof our investments.

Steve: So, avoid holding too much cash, first and foremost. This is something that I find myself constantly talking about with folks, because there is such thing as too much cash. When cash simply isn't keeping up with inflation, which it's not going to, then you are losing purchasing power over the long term. You need to have that sweet spot for your emergency fund. So, when you're actively employed, you're in the accumulation phase of retirement planning, three to six months of liquid cash is fine, depending on if you're a single or a double income household. When you transition into retirement, maybe a year or two, if you want to be very conservative, because in that situation, you're buying time against market fluctuations for the rest of your investment assets. But too much cash is a guaranteed way to lose money safely.

Amy: Another thing you have to understand is, and this is going to be very unique and individual for each person. What's your risk tolerance? How much exposure to the stock market can you handle? Right? I talk about sort of the Goldilocks moment here. How can you eat well later in life, in retirement, and still sleep well, still have that peace of mind? This is a very individual thing for everyone. But what I find that's super interesting, Steve, is, many times, when people are working, you feel really comfortable being aggressive in your investments, right? Because you still have money coming in. So if you're checking your 401(k) and it's way down, it doesn't feel as scary because you still got a paycheck coming next Friday. When that changes, right, when you get closer to retirement and you start to look at that amount in that 401(k) and say, this is what I have to live off of for the rest of my life. So many people want to crawl up in the fetal position around that money and say, "Get me out of the stock market. I don't want to deal with these dips anymore." The problem with that is, there have been so many advances in healthcare that if you are a healthy person at the age of 65, you can reasonably expect to live to the age of 85 or 95. And curling up in the fetal position around that money is the worst thing you can do, because then that money isn't growing. And that's what you need it to do in order to last through retirement.

Steve: Yeah, the best thing to keep up with inflation over the long term is proven to be stock. Time and time again, stock is what's going to help you beat inflation. So having some combination of stocks, bonds, cash bonds, there to provide a cushion or a pillow to soften the blow against inevitable stock downturns, cash to smooth out the volatility of the entire portfolio. But you have to keep some stock in retirement, or else your money is not going to keep up with inflation. If we're talking about inflation proofing your portfolio, that's one of the other things, stock. You got to keep it.

Amy: You're listening to "Simply Money," presented by All Worth Financial. I'm Amy Wagner, along with Steve Hruby, as we talk about, how do you inflation proof your investments, right? Several things that we would say you really need to think through. And one of those could be delaying Social Security payments. When you look at the stats, most people claim Social Security the very first day that you can when you turn 62. Okay, well, that might make sense, but it also might not. And when you look at how much more you are guaranteed to make every year after that, that you delay, up to full retirement age, and then through the age of 70, if you're worried about inflation, and you can get a guaranteed 8% return, right, a guaranteed 8% growth on how much you're going to get for Social Security, it can make a lot of sense to wait to claim that benefit.

Steve: Yeah, it's hard to have your investments guarantee an increase of 8% every year, but that's what happens between full retirement age and the age of 70. So deferring Social Security is a way to make sure that you're going to get more money back, as long as you live long enough. There's break even points that a financial planner can help you map out that shows if you defer, then you're going to get this much more money back than you ever possibly could have by reaching X age, which could be 78, for example. But it makes sure that your money lasts longer. Again, you mentioned it earlier, but planning for health care costs, people are living longer. If you hit 65... We've had segments on longevity literacy.

Amy: Yeah, understanding how long you live.

Steve: Yeah. If you hit 65 years old, there's a 25% chance that a man is going to see 92, a 25% chance that a woman is going to see 94 years old. And the longer we're around, the more health care expenses bump up. So planning accordingly by saving maybe in Amy's favorite vehicle, a health savings account, and investing with those dollars and using them accordingly, is a great way to keep up with inflation long term.

Amy: Well, yeah, and I just think it makes so much sense to be thinking through a health savings account. Because if you can push that money forward for inflation... You know, pulling back the curtain here, when we build a financial plan, we put in extra inflation for health care. Because those health care inflation costs far outpace the regular cost of inflation. It's so interesting because I know lots of DIYers that will build their own plan, and they'll run their spreadsheets, and they'll say, "Oh, these numbers, they definitely work." And then I always say, "Did you plan for inflation?" "Oh." "And did you plan for a higher cost of inflation for healthcare?" "Well, I didn't really even build healthcare into the..." Right? And it's like these are all the things you have to think through in order to say, with confidence, I'm going to be okay. Here's the All Worth advice. The name of the game right here is to always outperform inflation. You got to know how to do that. Coming up next, why being underinsured is a no no, regardless of the current cost of it. You're listening to "Simply Money," presented by All Worth Financial, here on 55KRC THE Talk Station.

You're listening to "Simply Money," presented by All Worth Financial. I'm Amy Wagner, along with Steve Hruby. We've talked many times in the show over the past couple of years about inflation, how much everything costs so much more. One of those things being insurance. And I think because you look at that insurance bill and you feel a little nauseous, there can be that temptation, I'm just going to cut back on my coverage, right? And we would say, hey, that's the worst thing you put could probably do.

Steve: Yeah. So slowing inflation obviously doesn't mean cheaper car insurance.

Amy: Nope.

Steve: According to CPI data, the year over year cost of car insurance from April of 2023 till April of 2024, increased by 22.6%.

Amy: Ouch.

Steve: Yes. Now, despite paying more for your policy, inflation also indirectly lowers the financial protection that your car insurance provides.

Amy: So, think about that, right? You are, first of all, already upset by how much you're paying for that premium on that car insurance. Then you get in fender bender. And, you know, you're thinking to yourself, well, this is going to be, I don't know, like, two, $3,000 to fix or whatever. And they come back, you know, it's five or $6,000 to fix, right? You're thinking, what the heck? And you don't have enough coverage to pay that entire cost, then you're left with, am I going to pay this out of pocket? Do I let this go? Right? And so, because things are costing so much more, right? It's like this terrible cycle. The cost of your insurance is going up because it costs more for your insurance company to cover these things, but then you also have to make sure that you've got the right amount of coverage so that if something were to happen and it's catastrophic, great, you're not paying this out of pocket.

Steve: Yeah, it's a bummer, because you're paying more for less. And the solution is actually reaching out to your insurance and making sure that you have the appropriate coverage limits, taking into consideration what's happened with inflation. And, you know, it can be surprisingly affordable, based on some data that we've seen recently. Your liability limits, if you increase from 25/50/25 to 50/100/50, that might just be $5, to $10, or $15 more per month, to get that much more coverage in the event that something were to happen.

Amy: You just mentioned something that I think is really important to point out. You said, work with your agent to make sure that you've got the proper coverage. Okay, when's the last time you called your insurance agent? Right? You've got to figure out whether you've got the proper coverage. But also, they're never going to call you proactively and say, "Hey, I just realized you could save a little bit by enrolling in a safe driver program." Or I just realized... This conversation works both ways. You're going to figure out whether you've got the right kind of insurance, and also whether there can be any savings. And also it kind of stinks that it's on you, but shopping around can save you. You need to make sure you've got the right kind of coverage, but you also need to do the research to get it at the best price. Thanks for listening. We hope you're going to tune in tomorrow. We're talking about the most important financial advice people say they ever received. You've been listening to "Simply Money," presented my All Worth Financial, here on 55KRC THE Talk Station.