Amy: Tonight, the Fed speaks, plots out where interest rate cuts might go in the future, and man, markets go wild. You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Ruby. Steve, I find this incredibly interesting, the relationship between the Fed and markets ever since the Fed has kind of embarked on this path to try to get inflation down by raising interest rates. One man speaks, and markets react.

Steve: Could you imagine having that much power and responsibility?

Amy: I would like to have that much power in my house. I would like to speak and have teenagers respond accordingly. I don't even have that power. So to your point, no, I do not even begin to fathom what it's like to speak and have markets respond.

Steve: I get it. It's crazy how much they have to think about the words that they're going to say when they're talking about what the plans are for interest rates, and it really can move the markets, just like we're talking about with yesterday. So the Federal Reserve, they maintained the interest rates where they were, but they also hinted that they will indeed be decreasing rates, probably this year.

Amy: Yeah. And I think what the Fed did came as zero surprise. But it's like when someone is speaking to you and you're in a room and, like, you know what they're about to say is really big. So you really lean in. That's what markets have been doing, leaning in every time Fed Chair Jerome Powell speaks to try to say, is there anything we can parse out of this that sounds really good to us?

And as they leaned in yesterday, what they heard was really, really good to them. He spoke to reporters after that announcement. And when they said, when are you going to lower rates? He said that the first reduction would likely be at some point this year. Dude did not make a promise. He did not, right? He just said it would likely happen at some point this year. And that was news that everyone wanted to hear.

Steve: Exactly. That's what the markets are waiting to hear, that it's actually going to happen this year. Last year, there was anticipation that it would have probably happened already, but as we know, inflation is sticky, and it takes time for the increases that have been happening to actually have an impact. When the data comes in, sometimes it comes with new information, like it did recently, and the numbers with inflation weren't quite as good as what we were expecting. Nonetheless, enough time has gone by, and the economy is still chugging along to the point where now they can come out and say, sure, yeah, we're going to go ahead and decrease this year. It probably won't be in May or June, but maybe a few times this year, and then the markets have their reaction and they hit all-time highs.

Amy: I think the markets were a little concerned. It was like that thing in the back of your head, like, oh, this data came in. It wasn't great. So what is the Fed going to do with it? You know, are they going to pivot? Is there going to be a mention of the possibility of not cutting at all this year? You know, and so I think just that mention of, hey, I think we're probably still on track to start cutting this year, even though some of this data came in and it wasn't great, it wasn't exactly what we wanted to see. And I think Fed Chair Powell has been really open about the fact that, hey, we do not expect this like straight line forward of we're raising interest rates and then every data point that has to do with the economy afterwards that you would expect to fall in line.

We don't think it's all going to fall in line that easily. And we know that the closer we get to that 2% target goal, the harder it's going to get. So we think the major takeaway of what Fed Chair Powell said yesterday was like, just because we got this data does not mean we are freaking out. Does not mean we're backpedaling on the plan. In fact, we're likely going to stay the course here. You will likely, he didn't say definitely. He didn't say probably. He said likely see rate cuts sometime this year.

Steve: Even with all of this, you know, good news that the markets like to hear, there were still little caveats that emphasized that projections are not a predetermined plan. It's not a for sure thing. You know, these forecasts, they're subject to change based on incoming data with inflation with the labor market. So the seed has still been planted that, yes, we threw the bone to the markets and gave some good news that we're probably going to decrease a few times this year officially, however still subject to change.

And this is all because Powell has made it clear from the beginning that he doesn't want to relive and recreate the mistakes of some of his predecessors, Paul Volcker, most notably in the early '80s, who cut interest rates too quickly and then slam the economy into a double-dip recession. So they've learned from the mistakes of those before them, and that's why there's been so much wishy-washy, very careful verbiage when they're talking about what their plans are. And this time they gave more of a signal that yes, it's probably going to happen this year. When I say it, I'm talking about interest rates going down.

Amy: I think not only is Powell not trying to recreate, right, learn from Volcker's mistakes, I think he's also learning from his own mistakes. I remember when he first came into this position, you know, we had kind of a little bit of a downtick. He mentioned... I remember it was toward the end of the year, and he just spoke kind of off the cuff about where he thought things were going. And it was like in real time watching the markets like tank, tank, tank, tank. I think at least... I don't know him. I don't have drinks with him on the weekend, but I have to think he came away from that situation like, wow, shouldn't do that again. Like what I say, right, they take seriously, the markets are going to move on a dime based on me. And I think since then, he has learned to be very measured with his words.

Don't let the markets be taken by surprise, right? I'm going to tell you where I think we're going. I'm going to be very conservative about what I say. And if there's something else that the Fed does called the dot plot, and this is where the members of the Fed kind of put where they think we're going to move as the year progresses in the future. And in December, the kind of prediction at that point was that we were going to cut rates four times this year. Now and in gosh, December seems like it was years ago based on how all of this has, you know, taken place so far this year. But now that dot plot is showing three interest rate cuts. I don't think it's a bad thing.

Steve: Well, just to be clear, when you're saying three, that's 10 of the officials saw three or more quarter-point cuts this year.

Amy: Good point.

Steve: Nine voting Fed members, they anticipate two or fewer cuts. So this isn't set in stone. There's even not full agreement amongst those that actually make these decisions. Some are saying maybe three or more, some are saying two or less.

Amy: You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Ruby, as we digest everything that happened with the Federal Reserve and the markets yesterday, going bonkers after Fed Chair Powell's remarks that, hey, maybe we will likely see rate cuts start this year. You know, and there's big banks and major economists that make these big predictions all of the time. And many of them had been saying that they felt like the American economy was heading for a recession. And now some of those are starting to kind of make an about-face.

Steve: Yeah, Vanguard, I think most of us have heard of that company.

Amy: Yeah. Kind of big.

Steve: Yeah, they're saying that recession is no longer a baseline for 2024. This is their latest forecast and still says that a soft landing is entirely possible. They've revisited their forecast for stronger U.S. gross domestic product GDP from 0.5% up to 2%.

Amy: Yeah, that's huge.

Steve: That's a big jump. They've lowered their projections for year-end unemployment from 4.8 to 4%, not as big of a jump but still significant, painting the picture as to why they would believe that a soft landing is in the forecast.

Amy: Keep in mind, these are predictions we've seen many, many times, especially over the past few years, these predictions made, and then they're really off base. But I do think the fact that they are so optimistic about the American economy certainly is a good thing. And you mentioned that soft landing. And just want to remind what that is.

It seems like a year, year and a half ago, it was like this unicorn that the Fed would not be able to do. And by saying that, it means, you know, could the Fed possibly increased interest rates in order to bring down inflation? And you would expect as the normal course of events that would follow that the economy would tighten so much that we would tighten into a recession. People would be very worried about their jobs. That's the hard landing, the recession.

And it seems like... I mean, you talk about Vanguard and all of these big banks and economists, many, many, many of them, the overwhelming majority, we're all saying there's no way out of this other than a recession. And now it's looking like when we continue to get these unemployment numbers in that maybe actually the Federal Reserve has sort of walked this very narrow and tightrope. And I have said before, it's like the miracle on the Hudson, right? How do you land the airplane on that water? All the things have to work exactly together in a perfect situation. And it appears maybe the Fed has pulled that off.

Steve: TBD. We shall see. I mean, a recession is going to happen eventually. We just don't know if it's going to be this time around because of the action from the Fed. They purposely slow the economy to bring down inflation. But yes, the soft landing, technically possible. Vanguard seems to think it's the case. At the end of the day, I think as long as you have a sound financial plan and you're planning for it accordingly, because it's a natural part of the business cycle, that it's maybe not as important as many would think, even though when you're in it, sure can be scary not to talk about saying recessions are no big deal when we're in it. But over the long term, they are going to happen.

Now, I do want to pivot just for a minute here and talk about what we can do to take advantage of the high-interest rate environment that we're in. We've talked about this before. It's making sure that when you have cash parked on the sideline and checking your savings, that we're taking advantage of some of the vehicles that exist to us, such as CDs, Treasuries, money markets, high-yield savings accounts. I'm not talking about taking that money that you have earmarks for retirement and investing it in those vehicles, because we still need to be in stocks for protecting against inflation over the long term and growing our assets. But putting those dollars to work for short-term goals and intermediate-term goals with the vehicles that we have available, now might be a good time to do that before interest rates fall.

Amy: You make a great point. I think that does make a lot of sense about doing that with your short-term money. But do not pivot because of this volatility and because of sort of the unknowns here to saying, I'm just going to move all of my money, right? I can make 5% now. I'm just going to move everything into one of these accounts and just get it out of the market, right? We know that long-term, the market continues to outpace inflation, and that's the best place for those long-term dollars.

So anything you're thinking about for retirement or long-term goals, we would say that probably should still be invested. But yes, that emergency fund should absolutely be earning a little bit of money at this point. Take advantage of the silver lining in all of this. Here's the Allworth advice. There should be a purpose for all of your dollars. Just make sure you don't get it all mixed up. Coming up next, even more evidence of why leaving your 401(k) alone is just your best bet. You're listening to "Simply Money," presented by Allworth Financial, here on 55KRC, THE TALK Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Ruby. If you can't catch our show every night, you don't have to miss a thing. Because, as you know, we've got great advice here. You don't want to miss it. We've got a daily podcast for you. Just search "Simply Money." It's right there on the iHeart app. Coming up at 6:43, fear should never drive a financial decision. We'll get into one place where we specifically see people making a major decision that affects them. And we're talking to the tune of maybe tens of thousands of dollars. We came across an article on a news website recently that we want to say, hey, if you have seen this, if you have thought about this, if you have considered this, no, we do not think this is a good idea. And this has to do with what you should do for those of you who get a tax refund.

Steve: Yeah, this article says you should consider using your tax refund to invest in gold. We've heard this before, especially here during periods of market volatility, during periods of uncertainty. The companies that sell gold, oftentimes they don't even own it themselves or hold it. They're just brokering a commission to get gold into your hands or into your portfolio, which is a whole different story. They're just trying to prey on fear to make that money. Come on, using your income tax return to buy gold.

Amy: I want to back up from this a little bit because we are not fans of actually getting a return at all in any...

Steve: Yeah, that's the problem in and of itself.

Amy: Yeah. So it's essentially the government regifting your money back to you. Many people don't think of it that way. It's like, oh, free money that fell out of the sky that the government has decided to get us. Ooh, free money, what can I do with it? Maybe I invested in gold. Okay Well, let's give you a little historical perspective here. For the last 100 years, gold on average increases in value about 1% a year. S&P 500, right, the 500 largest companies that make up the American economy, if you were invested in all of them, you get an average of 10.5% increase for every year. This is going back the last 100 years. So, you know, I hate how these gold bonkers... Yes, they drive on fear and greed all the time, pushing those buttons, both of them, one of them, hey, you've got all of this money. Here's the best place to put it. I very much disagree with this article.

Steve: As do I. Yeah, I don't think you should be getting an income tax refund. Ideally, you plan it accordingly so you're not giving Uncle Sam an interest-free loan. And when you do, maybe if you want to invest with it, put it into a diversified portfolio rather than one that doesn't particularly keep up with the markets.

Amy: If you have looked at your latest 401(k) statement, you might be feeling pretty good about yourself, right? Like, I am a really smart investor, and we would say maybe you are if you're doing one thing. But this is also, yeah, further proof of why leaving it alone is the best thing to do.

Steve: Yeah, there was a nosedive in the markets in 2022, and interest rates are going up as aggressively as they were. We had a time period that hadn't happened in 50 years where stocks and bonds went down together. So that volatility affected a lot of folks that have 401(k) plans. But since then, things have been on the up and up. Fidelity shares its data, and they are a major record keeper for 401(k) plans across the nation. So, many of us have had them at some point or another. They shared that the average 401(k) balance ended in 2023, up 14% from the year earlier. Great. That's great news. IRAs that they hold up 12% as well.

Amy: And I think there's two things that you have to consider here. One, as you're patting yourself on the back, did you do anything? No, probably not. This is the reaction of the markets being up over the past year or so. More people then get boosted over that threshold into a million dollars. And hey, 401(k) millionaires, the more we have, the better off we all are. We talk all the time on the show about the huge crisis that we have in America when it comes to retirement.

So people using your 401(k) as what it's intended, right, this investment vehicle that's going to get you into retirement and let you retire well, is fantastic. Where I do want to give you a pat on the back is for those of you who put that money into that account religiously, right? Every time that paycheck hits, a part of it goes into that and then you don't touch that money.

Steve: Yeah, I mean, that's what caused these numbers to go up, not just the markets going up, but when they're down and you're continuously putting money into your 401(k) through your paychecks, through deductions, that means you're buying when the markets are low, you're buying when things are on sale, so that when they do come back up, you capture the opportunity of buying low. That's a wonderful thing when volatility is happening for those that are putting in and aren't trying to time the markets. This is a testament to what that causes, which is your portfolio to grow all too often.

Once upon a time, I worked in a 401(k) customer service role, and it was very challenging for me because it was before I was licensed and before as a certified financial planner. I took phone calls from folks that they would call in and say, hey, I saw something online, and it scared me, and I want to sell all of my investments and stop contributing to my 401(k). And I'd have to say, great, you reached the right place. I'm happy to help you with that. Anything else? And I would have to shut off their contributions and move them to cash.

Amy: Was that like the most soul-sucking thing you could possibly do?

Steve: My palms are sweating just talking about it right now.

Amy: Oh, my gosh, me too.

Steve: Just the memory of that. So the folks that did that did not capture these benefits that Fidelity is talking about here, for example, 2023, all accounts across the board up 14%. You try to time the market and get it wrong, you stop contributing, you're not going to be in that bucket.

Amy: Yeah. From practical standpoint, I do get it. There's no judgment here. Say you're 35, 40 years old, and, you know, some kind of financial hardship has hit, right? You didn't expect this medical diagnosis, and now all these bills are coming in or, for many people, though, it's something far less than that, far less dire than that. I had, you know, friends who took money out of their 401(k) in order to put the deposit on a BMW, right? Definitely, not the way to go.

But you see on your statement that you've got this large chunk of change, and many of us are wired to think of ourselves in the now and not our future selves. And I think we have to do that when it comes to these 401(k)s of, okay, is this the only option for me? Do I even need this thing? Is there any other way out of this other than to touch this money? Because when I do, what I am doing is stealing money from my future self.

Steve: Yeah, that's the type of conversation I wish I could have had when I worked in this 401(k) customer service role. Actually, I did get licensed. It motivated me to move up as quickly as I could so I could begin having those conversations and stop people from shooting themselves on the foot. But you bring up a good point. Some people have nowhere else to turn, and in that situation, you got to do what you got to do. But for people buying a BMW?

Amy: I know.

Steve: Buying a boat? You don't need to do a 401(k) loan to do something like that. You are making a mistake at that point.

Amy: I know. Like, it crushes my insights when I hear people making decisions like that. And while we talk about these great stats, right, more and more people are keeping money into their accounts. And more and more people are becoming 401(k) millionaires. The number of people who took a loan from that 401(k), including for hardship reasons, like we're talking about ticked up. So it was at 7.8% at the end of 2022. Last year, 8.9%. So more and more people are touching that money. And we would say that's the last thing you should do.

Here's the Allworth advice. The best thing you can do with your 401(k), nothing. Let it ride, except continue to contribute to it and then check in from time to time, is this still indicative of my risk tolerance? And also, you know, do I need to rebalance these dollars? The only thing we would say you need to do with it. Coming up next, a look at whether the housing market could play a role in who's elected president. You're listening to "Simply Money," presented by Allworth Financial, here on 55KRC, THE TALK Station. You're listening to "Simply Money," presented by Allworth Financial. And Amy Wagner, along with Steve Ruby. I don't know if you've noticed yet, but we have a presidential election coming up this year, and this affects how we feel about a lot of things. But interestingly, the housing market could have an impact on how you vote or how you feel about that election.

Joining us, of course, is our real estate expert, Michelle Sloan, "Sloan Sells Homes" found here every Sunday on 55KRC. Sunday afternoon, you can listen to that show here, as well as the owner of RE/MAX Time. You know, I think it's interesting, Michelle, because many of us feel very passionately about our politics, but we don't realize how far-reaching that is. You say the real estate market's also going to have an impact here.

Michelle: No question. Actually, each and every presidential year, the real estate market takes notice because there are promises made by candidates, and whether or not those promises come true, you know, that's another story. But usually, the market is fairly healthy leading up to a presidential election. We are finding, though, that depending on what each presidential candidate says will either make us feel negatively or positively towards them.

So, President Biden said that maybe he's going to be able to give each new homeowner a $400 a month to help pay their mortgage. Well, that sounds all well and good, but you know, you have to think for those of us who aren't first-time home buyers, who's going to pay for that? I mean, that's what I think personally. You know, so there are a lot of promises being made, there are a lot of deals that are being discussed, but nothing is firm. But the facts are that you need 80% more in income than you did in 2020 to purchase a home, and that is kind of outrageous, don't you think?

Amy: Yes. I saw that the other day and thought, that is crazy. And explain that a little bit. So we're saying that before the pandemic, you could get by with a certain income. Now you have to make 80% more in order to afford those monthly home expenses. Who's making 80% more than they were four years ago? Not most of us.

Michelle: I don't know. And that's why we are sort of stuck because now home buyers on average need a little over $100,000 to comfortably afford a median home like a $300,000 home. That's a $47,000 increase from 2020. Most of our incomes have only gone up maybe 10%, 15%, if you're lucky, 20% in the last three or four years. So that really has... And again, it affects most first-time home buyers because most first-time home buyers are maybe in their 20s, early 30s, and they're not making that much.

Even if you combine two incomes, making over $100,000 is extremely difficult. And the average mortgage today and I find this is... You know, because I remember my first mortgage how much it was. The average mortgage today is $2,200, and that doesn't even include utilities. So, that's kind of something that most buyers don't realize until they really start looking into it a little more deeply. So, promises made by presidential candidates may catch someone's attention.

Amy: You know, I like that you're making this point because we hear from the investor perspective, right, during presidential years, people saying, oh, if this candidate gets in, I'm pulling my money out of the markets. We have the perspective of historical, like looking back over history and saying, well, here's what the markets usually do and this is why we would say you should stay invested. You have the perspective of the promises that are made by presidential candidates and then the reality, right? What really makes an impact?

So, I love that your point is we're struggling to be able to afford homes at this point. What else do you think? From a real estate perspective, as you've been in this business for a long time and have so much experience, what are you looking for? And honestly, does whoever is in the Oval Office even really make a huge difference when it comes to your industry?

Michelle: That's a loaded question, Amy.

Amy: Sorry.

Michelle: I mean, I honestly can't wrap my own brain around that because there are so many factors. I will say historically, in the real estate industry, we do see that interest rates tend to go down just a little bit, just like I think gas prices maybe goes down a little bit during the... Because the person that's currently in office wants to stay in office. They do whatever they can to influence the market around us in order to make everybody feel kind of warm and cozy. But in the grand scheme of things, it's a lot of promise, and will it truly affect our bottom line? Probably not because it's such... It's much bigger than any one person.

And right now, with the way the market is and the way we expect it to be, the market is going to continue to be very heavily a seller-driven market because very few homeowners are putting their homes on the market. There are more buyers than sellers. And, you know, we are expecting another interesting summer that we are coming up about...you know, coming into. And so, you know, it's like, hold on tight because it's just going to be more of the same. There's such a need for homes right now. I mean, we need like 55 million homes. Just like people can't afford an 80% increase over the last 40 years in their income, we're not going to be able to build 55 million homes. And where are we going to put them all, you know? There's so many questions right now.

But the one thing I did want to get into a little bit, Amy, if we could, is there are...there is some assistance programs available in Ohio, in Kentucky, you know, in all the different States to help home buyers with that down payment, because that's one of the biggest struggles that home buyers face today.

Amy: Well, and I think what you're doing, Michelle, is you're making a great point because so many people look to that Oval Office and say, help me. And maybe the help is more local or maybe it's some initiative that you have to take. But there is help available. So, yeah, let's talk about what that looks like.

Michelle: Absolutely. We do have to look within ourselves and should look within our states. We should also look into our local municipalities because you may be surprised to know that Cincinnati has its own program to offer assistance to lower-income earners to get into housing. There is something called the Ohio Heroes program. I love this because it can give... The Ohio Heroes program, which is offered by many banks, it's a 0.25 discount on your mortgage interest rate. There's potential for some money, but it's for veterans, police officers, firefighters, EMTs, nurses, nurse practitioners, teachers.

So the Ohio Heroes program can offer a little bit of a benefit to those heroes around us. And the thing is, I don't feel like there's enough... There aren't enough people talking about the programs that are available. And if you just go to...let's say you go to a lender, and you say, I want to buy a house. Well, they may push you towards the top three, FHA, conventional, or a VA loan. Those are your top three. But then there may be some other programs available that if you don't ask the question, do you have anything...? You have to be your own advocate, and if you don't say, hey, is there anything else that you can do for me? Do you have any other options that you have for me? And that's really important to ask those questions.

Amy: Well, I like the fact that you're saying, first of all, be your own advocate. But second of all, if you're trying to do this on your own and you don't have experience, you don't even know the questions to ask. And I think that's why working alongside kind of a veteran realtor who has been here, done that, helped others successfully get into maybe that first home can make a huge difference. Great insights, as always, from our real estate expert, Michelle Sloan. You can find her here on 55KRC every Sunday afternoon on her show, "Sloan Sells Homes," and, of course, owner of RE/MAX Time. You're listening to "Simply Money," presented by Allworth Financial, here on 55KRC, THE TALK Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Ruby. If you've got a financial question you're really struggling with right now, there's a red button you can click on while you're listening to the show. It's right there on the iHeart app. Record your question. It's coming straight to us. We'll help you figure it out. And straight ahead, spring is sprung. So what can you do when it comes to your money? We'll give you some ideas.

We talk about this all the time, right? There's, like, the investing components of making smart financial decisions. And then there is the, like, resisting all of your emotions part of that. And I would say that one actually is probably the biggest part of our job as advisors is keeping people from making bad decisions when it comes to their money because they're reacting to emotions. And tonight we're going to drill down on that a little more and talk about how this can impact you and your Social Security.

Steve: So Social Security is obviously a very important decision that most of us are going to be needing to make, when we collect it, what strategy do we use? Are we married, planning for a partner, how does that change things? I think most of us are aware that Social Security's trust fund is in danger of depletion by 2033, that is, but maybe people don't really understand what that means because if that were to happen, tax revenue would still pay about 77% of the benefits that are promised, which is clearly a hit, but it does not mean that you wouldn't get anything from Social Security.

Amy: Let's give a little background here. I mean, the Social Security system really started in the mid-1930s, right, FDR, and it was to keep people off the streets on the heels of the Great Depression and middle of the Great Depression, right? How do we help people here? And at the time, you know, you couldn't claim...

I want to say that it was still the age 65 was the earliest that, you know, you were supposed to claim or the full retirement age. In 1935, people weren't living to 65. So very few people even got to the point where they were claiming Social Security. So, all these workers paying into the system and not nearly as many people taking money out and that money built and built and built and built, right? We are not there anymore. We have the exact inverse of that.

We have more boomers retiring on a daily basis than we've ever seen in our nation's history. So you've got more retirees drawing from this money and less and less workers aging into the system. So if nothing is done to fix it, that's the shortfall. Are we ever going to get to a place where there's no Social Security benefits? No, as long as people are working, they're going to be paying this tax. You will get a portion of it. So I just kind of want to give that as the baseline of where we are right now.

Steve: And right now, that perception just isn't...people aren't aware of that. There's a recent study that showed 4 in 10 think that Social Security is going to totally run out of money before their retirement. That is not accurate. I know that this is something that you may be freaked out about. Social Security is not going to run out of money. Things may look a little bit different for those collecting past 2033...when beginning to collect past 2033, but that's only if Congress doesn't come together and actually pull their head out of the sand and make some changes.

Amy: Pull their heads out of somewhere. I won't get into that. I want to say, though, there's so many people who don't understand this. And so what happens then, how this plays out is you get to the age of 62, you say, I don't necessarily understand what's going on with Social Security, but I realize I may not be able to get the money. So let me claim it as early as I possibly can, so while I can still get it. And this is based on fear, it's also based on misinformation, right? So, for many people taking it the first day that you possibly can when you're 62 doesn't make any sense because for every year that you wait after that, you're going to make 8% more on that benefit. So you're taking this money based on false information in fear that it's not going to be there when it's just not the truth.

Steve: Yeah. So you can collect as early as 62 full retirement age if you're born 1960 or later '67. 70 is when Social Security benefits cap out. And that difference between 62 years old and 70 years old is a 30% increase in your monthly or yearly benefit. That is a lot of money that we can get back. And considering that life expectancy is up in this day and age, this is a big pivot from when it started back in the '30s.

Once you defer...and this is something that a fiduciary financial planner can sit down and help you map out very easily. Once you have a financial plan built, there's an understanding of what your expenses are and what your cash flow sources are and your investments look like, you can easily sit down and map out what your breakeven point is. What I mean by that is if you collect that X age and live past a certain date, then that's when you get more money back from Social Security than you ever could have by collecting in a different strategy such as earlier.

Amy: And there is a point we would say, hey, there's a couple of situations where it would make sense to collect, starting the first day that you can, possibly at the age of 62. One is you're in a sort of dire health situation, right? You've been given bad medical news and a diagnosis which makes you strongly believe that you would not live into your late 80s, early 90s, in which case we would say absolutely claim that benefit as early as you can, take advantage of that. Another reason would be if you don't have any other option, you cannot pay the bills, you are forced to retire or you can no longer work or whatever it is, and it is gonna be to you maybe the only way to get by, then absolutely take it at 62. But do not take it based on the fact that you are worried that it's not going to be there for you, not a reason.

Steve: You know, there are those out there that say if you are extremely wealthy on the other end of the spectrum, at some point the fix may be means testing, which means if you have the means, you don't need to get Social Security. So there is the viewpoint out there that if you are very wealthy, collect early, but for the majority of people, I don't think that's necessary.

Amy: And the good news here, because I think Social Security is incredibly confusing, is this is something we're really passionate about helping people figure out. So we actually have a workshop coming up about this, how to determine your retirement income needs, how to maximize this benefit, evaluate when the best time is for you to claim. We can help you figure that stuff out. Workshops are Thursday, April 4th at the Marriott North in West Chester, Saturday the 6th in Blue Ash. So you can save your seat, go to allworthfinancial.com/workshops.

Here's the Allworth advice, making any major financial decision based on emotion can lead you down a dangerous path. Coming up next, key financial moves to make now that spring has sprung. You're listening to "Simply Money," presented by Allworth Financial, here on 55KRC, THE TALK Station. You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Ruby.

You know, spring has sprung. And for some people, I am not one of them, that means you do your spring cleaning, right? You kind of get your house in order. I have a friend, Steve, who has like a spreadsheet of things that she takes care of, like, quarterly. And some of the stuff, I'm like, that's even a thing. You're supposed to, like, clean the vent under your microwave. I had no idea. We're not going to get into that because...

Steve: [crosstalk 00:36:41]

Amy: Yeah. We're not gonna get into that because I'm not an expert on any of those things, but I can tell you some smart things that you should be doing right now to get your financial house in order. And one of those is, hey, do you remember back in January when you made that New Year's resolution? How are you doing on that now?

Steve: Yeah, sticking to it, whatever that might be. Now is a good time to revisit it. Like you said, spring has sprung. Let's take a minute to reflect and see if we're keeping up with our resolutions. How about being smacked at in the middle of tax season? Look at your W-4 form. That's the one that determines the withholdings because we can make adjustments there. And in a perfect world, we are not getting a refund back when we file our taxes. When we do, that means we've given Uncle Sam an interest-free loan. Maybe make some adjustments there. Talk to your tax planner for feedback on what needs to happen to close that issue if it indeed exists.

Amy: And then take advantage of all of the retirement vehicles that are available to you, one of them being an IRA, right, an individual retirement account. Up to April 15th, you can still put money into that and it counts toward last year. So you could on April 14th, put the maximum amount in for 2023 and then on April 16th, put the maximum amount in again in accounts toward this year. Most people don't have that much...

Steve: That deadline also is when you file your taxes. So if you file before April 15th, then you actually have to make last year's contribution beforehand.

Amy: Good point. If you are a procrastinator and you wait until the 15th, then you have... you can do it on the 14th and again on the 16th. You know, and I think just putting as much as you can, auto-escalating what you're putting into that 401(k), making sure you're taking advantage of IRAs, I would also say health savings accounts.

And since we are in an environment where interest rates are a tick higher, take advantage of high-yield savings. If you have not moved your money yet, now is a great time to do that. It's just kind of a reset point to look through what kind of shape I'm in. Thanks for listening. We hope you're going to tune in tomorrow. We're seeing some headlines about annuities, and we just want to make sure we cut to the truth of this with you. We'll do that. You've been listening to "Simply Money," presented by Allworth Financial, here on 55KRC, THE TALK Station.