Steve S: Tonight, a new roadblock in the fight against inflation. You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach along with Steve Ruby. You know, it never fails. Last week, you know, things were somewhat calm, and then Friday happens, and right now it's hard to get through the week without some sort of economic data that causes a significant short-term ripple. So, let's talk about it. We wanna talk, since it's Monday, with Allworth Chief Investment Officer Andy Stout. Andy manages billions of dollars of investments from right here in Cincinnati. Andy, fill us in, what happened on Friday with the Fed's preferred inflation measure?

Andy: Well, what the Fed likes to look at is what's called PCE. It's their preferred inflation measure. They like it better than CPI, which is consumer inflation. And the reason they like this PCE number is because it includes more things than just consumer prices. Now, what happened last week is that economists thought total PCE or headline inflation would've increased 0.5% in the month of January, but it actually rose 0.6%, a little bit higher. But on top of that, the prior months were revised higher as well. For example, 0.1% that we saw in December was revised up to 0.2%. As a result, when we look at that year-over-year number for PCE, it was 5.4% instead of the expected 5.0%. That's a pretty big deal. And that increase, relative to where people thought it was going to come in, kinda spooked markets because it puts more pressure on the Fed to bring down inflation.

Steve R: So, do you think that this number that came out on Friday with PCE is a trend in the wrong direction or a bump on the way to lower inflation?

Andy: Well, I think we're still going to be moving lower, but the pace that we've enjoyed as far as the, I'll call it disinflation, the lower inflation readings over really the last six months of 2021, you know, that pace may not be able to be maintained. So, I think we could see, you know, lower year-over-year numbers, but maybe it doesn't improve quite as much as a lot of people hope. You know, one thing that I was looking at is what Federal Reserve Chairman Jerome Powell... And the Fed, by the way, they're responsible for controlling short-term interest rates, and they would raise them to reduce inflation, and lower them to, you know, increase inflation. Though, don't wanna increase inflation right now, so they've been raising rates. But one of the thing the Federal Reserve looks at, and Jerome Powell specifically, he likes to look at services excluding housing. And what we saw there was that in the month of January, it rose at 0.6%. That was the sharpest monthly increase since 2021.

Steve S: So, this is a problem, because, you know, the whole point of raising interest rates is to slow the economy down, and these numbers are kinda showing us maybe the economy is not slowing down, and the Fed's gonna have to raise interest rates even higher than expected. That's not the trend that we want. I mean, this is a concern to me. I wanna ask you also about wage inflation because, when wages go up, of course, if things cost more to buy, you would like to get paid more so you can continue spending $10 for a dozen eggs or whatever it costs these days. But wage inflation, I mean, that's a real problem if we see wages increase, are we...?

Andy: Well, when you look at wage inflation right now, in the...we get that on a monthly basis when the government tells us, you know, what the unemployment rate is, how many jobs employers added to the economy. And that's not gonna come out until March 10th for the month of February. But in January, so we have, you know, January's reading, we saw that there was a 0.3% increase on a month-over-month basis, which isn't that bad, but it is expected to maybe increase a little bit here for the month of February. Don't wanna be surprised if it came around 0.4% based on a lot of the data that's been coming in so far. So, yeah, there's still wage pressure, there's no question about that. And what that means is when you look at spending, personal spending will rise as well because people have more money. And also, well, things are more expensive, like you mentioned, price of eggs, although they have come down a little bit. Steve, when I was at...

Steve S: They had to.

Andy: ...Kroger over the weekend, 18 pack was $479. I noticed that was about decent amount lower than what it was...

Steve S: It's a heck of a lot better than what it was, yeah.

Andy: ...a few weeks ago.

Steve R: Absolutely.

Andy: But anyways, when we look at all this data together, and income's increasing, inflation still elevated, people are spending more. And people are actually spending more than what economists thought. So, that tells us that maybe people have a little bit more wiggle room from a spending perspective, and that actually creates more demand for things, and that higher demand, well, guess what? That's not good for inflation in general. Now, that's good to try to help keep the economy afloat, but typically, you know, law economics 101 would tell us when demand increases, so do prices.

Steve R: So, I have a million-dollar question that I have to ask, Andy. I feel like we hit you with one of these every week, but how would you rate the Fed's actions? And do you think that they're responding correctly?

Andy: I think the Feds, you know, was a little bit slow to get going at the very beginning of last year. But to be fair, they didn't know what they didn't know, and the data at that time, did suggest inflation was going to keep going down. The problem was the Russia invasion of Ukraine...

Steve R: Curveball.

Andy: ...had just started to get underway, and that created some additional inflationary pressures that was almost unforeseeable, now, at least at that point in time. And that just created some other ripple effects throughout. And then you got China's, on and off again, closing of their economy, played with the supply chain and just global aggregate demand, so. But to answer your question, is the Fed doing enough? How would I grade 'em or that? I don't know, a B-minus, I guess. Just pick a random letter out there.

I mean, they're doing the right things currently. They haven't wavered. You know, the market kept expecting the Fed to reverse course and start to cut rates and maybe not increase 'em as quick as they thought, but the market's actually now coming around more to the Fed's point of view. And what the Fed has been saying, the Fed hasn't changed what they've been saying for the past six months, but the market has been adjusting. Just as an example, if you look at where the market expects Fed Fund futures to be, and that's the interest rates that the Fed controls, the very short-term overnight rates the Fed controls, they now expect those to peak in the range of basically 5.25% to 5.5%. That's a half point higher than what the market was expecting at the beginning of the year. But nothing has changed from the Fed. It's all been the data coming in to almost validate what the Fed's stance was.

Steve S: Yeah, they've been pretty consistent. You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach along with Steve Ruby, and if it's Monday, we must be talking to Andy Stout, Chief Investment Officer of Allworth Financial. And we're trying to decipher some of the news that came out on Friday, which drove the markets down. And Andy, it was a rough week last week. I think it was the worst week we've had in the stock market so far this year. And we haven't even started talking about how likely a recession is sometime later this year. If we do have a recession, and, you know, the hope is that it's a soft landing, not a brutal recession, if we do have a recession later this year, is that already priced into the market, or could we expect more negatives in stock prices if we start heading down that path?

Andy: You know, we've already seen a decent pullback from the highs, which occurred right at the beginning of 2022, right? And to be fair, we had a bottom in there late last year around the third, fourth quarter, and the markets had a nice little rally since that point in time. Now, if you, you know, think about what you typically see in bear markets in general, historically, they've dropped about 35% when you look at a bear market, which is, you know, a drop of at least 20%. And we're not there currently because we're well off our lows, but we did get around, what, 30% of low...

Steve S: We were down there, yeah.

Andy: ...or highs. I think it was, like, somewhere around October 15th, 14th in that area is when we, you know, kind of had that bottom in the markets. And is that enough? Is the market forecast enough pain essentially to say that was the bottom? Possibly, possibly not. I mean, there's really, really no way to tell. I mean, here's a thing, I was going through a bunch of data over the weekend and I was looking at, you know, when the best days of the market happened, like, when are investors most rewarded? And what I saw was looking back really over the last 25 years or so, about a quarter of the market's best days took place at or near the beginning of the next bull market. And so, in other words...

Steve S: Coming off bottom.

Andy: ...the market starts to see these big moves on the upside well before people even realize that we're on our way to new record highs. And that's why, I mean, staying invested remaining diversified, it's so critical.

Steve R: Well, let's pivot and talk about bonds a little bit. So, the bond market closed down 12.9% last year, I believe. And, you know, at this point, I'm curious to hear your insight as to the state of the bond market, and, you know, do we have reasons for optimism on that, too?

Andy: Well, I mean, honestly, bonds are, you know, more attractive than they have been in quite some time because with interest rates having risen, I know that's not great for current bondholders, but if you're buying future bonds or bonds today going forward, you're going to get that interest rate that is now higher than where it was. And that's good because, if you just look at what explains future returns more than... I don't wanna sound too wonky, here, but it's mostly due to the interest rate level. So, the higher the interest rate level, the better their return is on a going-forward basis. So, when you put that together, bonds are really more attractive than they have been in quite some time.

Steve S: Well, that would be nice to see, a little rally in the bond market.

Steve R: Sure would.

Steve S: Yeah, especially if the Fed decides to pivot at some point later this year, early next year. Okay, so we've got some news coming up this week, what are you looking for over the next few days?

Andy: Well, it's a relatively quiet week. There's a few reports coming out that I'm watching, there's these surveys for the manufacturing and services industries expected to show manufacturing contracted in February but services expanded. We're mostly a service-based economy. I mean, it's like, if you look at the number of jobs, it's almost, like, 85% services, 15% manufacturing. So, definitely more services-based. And there's some other interesting things coming out this week. We did already get one data point, came out this morning, that's durable goods, new orders. That's a sign of manufacturing strength, if you will. It contracted, it showed that new orders fell 4.5% for the month of January. That was worse than what was expected.

Steve S: Which is kinda good news, right?

Andy: Well, you know, they're kinda, like, you know, bad news is good news sort of thing. Yeah, because if it's bad news, that means it's good news because the Fed might slow down. But that's really skewed by autos. Once you get rid of the transportation, it's actually an increase of 0.7%. So, you know, it's good for the economy, but not necessarily good for the Fed. You know, we don't want it to be too much, but we do wanna see, you know, some growth, some stability, too. Hopefully, maybe the economy can somehow avoid a recession. I mean, leading indicators, which are data points that move before the broad economy, they are signaling a slowdown over the next six to nine months. Nothing is written in stone, though. We'll have to see how the data coming in, how the Fed reacts to it, and how ultimately consumers and employers react to it.

Steve S: Great advice as always from Andy Stout, chief investment officer of Allworth Financial. Here's the Allworth advice, last week's market weakness suggests the fight against inflation. Yep, it's pretty far from over, but we encourage you to stay invested and diversified because inflation is not gonna be around here forever. You've been listening to "Simply Money" on 55KRC - THE Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach along with Steve Ruby. If you can't listen to "Simply Money" every night, subscribe to get our daily podcast. You can listen the following morning after we air wherever you happen to be. And if you think your friends could use some financial advice, tell them to search "Simply Money" on the iHeart app or wherever you get your podcast. Straight ahead at 6:43, How Much Money Do You Need to Retire? The new amount being thrown around, and why I think both of us are gonna disagree on that number.

Steve R: We will.

Steve S: All right. So we've got kind of a feel-good story to start off the week. And I read this on Saturday, this 80-year-old janitor at a school in Texas had to go back to work basically because he ran outta money, and the students at his school found out his story and they did something pretty cool about it.

Steve R: Yeah, they made a TikTok video that showed the man cleaning the halls, and then started a GoFundMe to try to get some financial help for him. Turns out that people responded, and about $270,000 [crosstalk 00:14:13].

Steve S: Staggered.

Steve R: Isn't that something?

Steve S: Yeah, that's pretty cool. The kids were hoping to raise, like, 10 grand the first day, and they wound up raising 270 grand. And it got to the point where the janitor said, "All right. Thanks. Enough's enough." They shut it down Friday night after they hit about 270,000 bucks. And that's pretty cool, but what bugs me a little bit is there were some comments that came out about this deal where people said, "This country failed this man, and, you know, our retirement system is not working if people have to go back to work." You know, I don't know about that. What do you think?

Steve R: I mean, it's probably not a feel-good story. I know you opened it up that way, but it sounds to me somewhat like somebody that maybe failed to prepare a little bit.

Steve S: Well, and, you know, that's one of the things that we're always sitting down with people, and that's their biggest concern, "Hey, I don't wanna run outta money." Okay? And here's a guy that ran outta money. So, you know, I don't know anything about him, and I don't want to disparage him by any stretch, but, you know, that's why, you know, as we approach retirement, you've gotta...you know, whether you sit down with somebody like us or do the math on your own, but you've gotta figure out, can I afford to live on the money I've got coming in? And, you know, by bad luck, living to be 85 or 90, you know, is that gonna screw up your plan? Because I've had people tell me, "Oh, I'm not gonna live past 75. I don't care if I'm outta money at that point." And guess what? Sometimes, they do.

Steve R: Yeah, we certainly plan for the worst, including living till 95 or 100 years old.

Steve S: Yeah. Yeah, exactly. I think you have to. All right, we talk all the time about how credit card debt can derail any or all of your retirement plans. Thanks to inflation, this problem is being exacerbated. We just got some numbers in, and all that money we were saving up during the pandemic, not only are we spending that money, but we're going into more credit card debt than we've ever gone into before.

Steve R: Yeah, that's a shame.

Steve S: Crazy.

Steve R: New York Fed's quarterly report on household debt and credit came out, and it shows a new record for credit card balances.

Steve S: Number one.

Steve R: Yeah, number one, congratulations, we did it. It's $986 billion.

Steve S: Yeah, [crosstalk 00:16:21] dollars.

Steve R: Yeah, which surpassed the previous record of $927 billion set in Q4 of 2019, just prior to the pandemic.

Steve S: Yeah, prior to the pandemic, we set a record, okay, not a good trend, but then the pandemic happened, people started saving up money, and they did. I mean, we were talking about that on the show, you know, month after month after month, record savings rates, and okay, now we're outta the pandemic. And this wasn't just a little bump, this was a 15% increase since the 2019 record in average credit, or in total credit card balances. That's a monster jump.

Steve R: It really is. You know, no more stimulus payments. Post-COVID world, people are spending more money now traveling.

Steve S: I can vouch for that. Yeah, I went to the Cameron Mall yesterday and didn't wind up buying anything because that place was so...it was gorgeous out, you know, and it was just jam-packed with shoppers, and it was tough to find anybody to wait on you, and I'm thinking to myself, "People aren't slowing down." The Fed wants us to, you know, slow down, they're trying to reduce demand. It ain't happening, at least at the mall.

Steve R: Are they putting it on their credit card?

Steve S: I would assume so.

Steve R: Yeah, I guess so.

Steve S: Who carries cash anymore? Right? Here's a number. I mean, separate from the whole credit card issue, we saved... And I don't know who determines what's an excess balance, but an excess amount of savings of about $2 trillion during the three years of the pandemic. We've already spent half that, and we're working on the other half, the other trillion dollars that is considered in excess. So, not only are we racking up credit card balances, but we're spending down what we saved up during that period of time, probably to pay off the credit card debt. That's not a trend that could be sustained. So, if the Fed is looking for, okay, we need to reduce demand, maybe there's just a lag time from all that extra money. But I think we're seeing it down the road...not far down the road that we're gonna be looking at people saying, "Okay, maybe I can't buy that because I'm outta money."

Steve R: Yeah, I mean, bank rate just released its annual emergency savings report, and right now, 49%, almost half of U.S. adults, either have less or no emergency savings compared to one year ago.

Steve S: Yeah, I mean, it's crazy. All right, so let's talk solutions. Sorry

Steve R: Yeah, please, let's do that.

Steve S: All right, so you've gotten your credit card balances a little bit outta whack, you can't pay 'em off every month like you should, what do you do?

Steve R: You know, I'm a huge advocate for prioritizing your interest rate. Bank rate, you know, I brought that up a moment ago.

Steve S: Yeah, great [crosstalk 00:18:49]

Steve R: Bank rate's top tip is to sign up for a 0% balance transfer card. I've known plenty of people that have done this.

Steve S: You know, I'm not crazy about that. Yeah, it makes sense if you're discipline and if you stop using your credit cards. Why do credit cards encourage transfers? Because they know people are people, and they're not gonna pay it off.

Steve R: Yeah, the thing is here, you have to pay off those debts within that 21 months or that interest comes back and kicks you in the teeth.

Steve S: Exactly. So, make sure you know what your balances are on your credit cards and put together a plan and stick with it to pay those balances off. Otherwise, you're just shifting money around. And, you know, maybe you have to put that card away a little bit.

Steve R: Yeah, it might not be the worst idea. And then, there's the B-word, too, work on a budget. Have your finger on the pulse of how the money is leaving, that way, you know, you can put that credit card in your drawer if you need to. Consider cutting your expenses if you can, side hustle, sell stuff you don't need. These are all easier-said-than-done solutions, but it's a way to bring down that credit card debt and build up that emergency fund.

Steve S: And I've been there, I can do that. If I could do it, anybody can do it. You just have to be regimented. And here's the Allworth advice. If you want financial freedom, eliminating credit card debt and having a robust emergency fund is absolutely crucial. Coming up next, Why a Review of Your password Habits is Absolutely Essential Right Now. You're listening to "Simply Money" on 55KRC - THE Talk Station.

You know, we're told time and time again, we should have very unique passwords, they should all be different for different accounts, but be honest, are you really doing this? Well, our Cybersecurity and Tech Expert Dave Hatter joins us to talk about password habits, both good and bad. Dave's cybersecurity consultant at Intrust IT. He's headed teams that have designed, developed, and deployed over 200 custom software solutions over all kinds of organizations. Dave, as always, welcome to "Simply Money." Tell me people are getting past the password of 1234..., please.

Dave: Well, first off, thanks for having me, guys. And sadly, Steve, now, people are still doing that sort of thing. Every year, you'll see the lists that come out of the 25 worst passwords or the 100 worst passwords or whatever. You know, they continuously share that people still follow these bad password practices.

Steve S: So, password of password is still a password with some people?

Dave: Yeah. Or password with, you know, @ sign instead of A in it, or, you know, 0 instead of O or something like that. And, you know, first off, the bad guys know this because, of course, every year these articles come out. And this is based off data that's been picked up from breaches and so forth. So, this isn't some nerd like me speculating, they're ingesting all of this data from breaches, the dark web, etc., and looking at people's passwords and saying, yeah, people, unfortunately, continue to underestimate the potential consequences of this. And as our entire society becomes digital, I mean, what can you not do online now? And increasingly, what are you forced to do online? So, until we have a better mechanism than passwords. And things like biometrics and all that, I mean, it's out there, it's a real thing, but, you know, it's all still somewhat in its infancy and has its own set of problems at this point.

Steve S: Sure.

Dave: You know, we're still relying on passwords. And if you're using an easy-to-guess password, whether it's, I guess it because I can look up information about you on social media and guess it, or it's easy to guess because it's on a list of bad things, or it's easily crackable because it's just not very complex, you're setting yourself up for disaster, especially if you don't incouple whatever password and credentials you're using for an account with multifactor authentication. You're making it easy for the bad guys to steal your information and probably eventually steal your money.

Steve R: So, you're talking about technology and passwords, and oftentimes when I'm creating a password, the website will tell me whether or not what I'm typing is a strong or weak password. Should we trust in what that's telling us?

Dave: You know, assuming it's a reputable website, I would say yes. Like, for example, you know, if you're on Microsoft's website trying to create an account and they're telling you where the password is strong or weak, yeah, you should trust that. But probably, the bigger thing is, you know, I know when I have these conversations with people, it's frustrating. You've got a never-ending stream of new passwords you need to create.

Steve S: Oh, yeah.

Steve R: It's constant.

Dave: It's hard to remember these things, it's frustrating. And also, the bad guys know that if people do come up with a "strong password," and in today's best thinking, that's, like, at least 12 characters, a mixture of numbers and symbols, something ideally random. And I'm gonna come back with some tips in a minute, but, you know, okay, if you come up with something and then you change it by one character for this site and one character by that site, the bad guys know this, right? They know people do these things.

Steve S: There goes my strategy.

Steve R: Yeah, right? Now, you probably still write yours down in a Post-it, Steve.

Steve S: Yeah.

Dave: Studies consistently show this. So, now this is kinda ironic, LastPass, who is one of the more well-known password managers, and until last year, I would have recommended and used, you know, they were breached, and it's a big debacle, actually. So, if you're using Last password, I strongly recommend you find a new one, Bitwarden, 1Password. But a password manager can simplify this. And LastPass did a study, and they put out a bunch of statistics, and, you know, here's some stats from their study. Sixty-two percent of people used the same password with a variation, 50% don't even change their password after some sort of breach. Now, here's one good stat, 51% of people are not trying to remember their passwords versus 44% previously. And again, this is just one study, so you take these what they're worth. But the bottom line is, I know it's frustrating to get this advice. I know this is hard to do. And it's important, though, because, again, if you're using the same password on multiple accounts, like a work account and a personal account, if I can guess your personal account password, hack it, break it, whatever, I can get into your work account and now I can really create some havoc, you know?

Steve R: Wow.

Dave: I get you fired, might put you out of business. I know this is a pain, but it's serious stuff.

Steve S: You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach along with Steve Ruby, and we're talking with tech expert Dave Hatter. Dave, you brought up something that... I've always questioned these online services to help you consolidate and see all of the passwords you've gotta have at work and at home. I mean, to me, if, okay, I'm having trouble remembering what my current password is on, you know, the dozen or so different platforms I'm gonna use at any given time, it seems to me that if I go online and give all those passwords to one company, I don't see how that's reducing my risk, it feels like I'm increasing my risk. Am I wrong?

Dave: Fortunately, yes, you are, but only in some cases. So, let me explain. You know, one way to get around the idea of using a password manager, which despite a bunch of breaches in the recent news, most experts still recommend, and I would agree, you're better off with a password manager, with a couple of exceptions. But the first thing is, if you don't wanna use a password manager, use a passphrase, right? Now, you still would need a unique passphrase for every site, but come up with a phrase, ideally more than 12 characters, but something that's easy to remember and easy to type. As long as only you know it, it's easier than some random string of mumbo jumbo, right?

Steve S: Yeah. Yeah.

Dave: But with a password manager... You know, and you can do research. There are organizations like CNET, ZDNET, "PC Magazine," Tom's Guide, where they're editors and experts that vet these things every year. So you don't have to just take Old Doomsday Dave's word for it, they're experts out there who can guide you to the right tool. Right now, I would say probably, in my opinion, 1Password is the best password manager out there. But with a password manager, right, if it's constructed correctly, you only need to know a master password. So, you come up with a long phrase that only you would know. And the way these things work is it encrypts your passwords before they ever get sent to their servers.

Steve S: Aah.

Dave: So, even if they break in and steal the encrypted data from the server, and assuming the password company is doing the right thing, they can't crack your... I mean, I can't say can't. Very, very difficult.

Steve S: [crosstalk 00:27:16].

Dave: Like, the sun may burn out. Yes, the sun will burn out before they'll crack that, right? Assuming you have a strong master password... But if you have a strong master password and you turn on multifactor authentication for your password manager, and if you're using a password manager, that's a must, right? Because you made a point, if I can break into your password manager, I got the keys to the kingdom. But assuming the password manager is using the right technology to encrypt everything before they get it, assuming you have a strong master password and MFA, you're gonna be much more secure than the old password-password we just talked about before or any of the common stuff people do.

Steve R: That's great advice. Now, you know, to kinda tie it all together for our listeners, I'm curious to hear from your perspective, what are some of the worst things you can do for a password, and some of the best things you can do for a password?

Dave: Well, anything that I could guess about you or... Remember, bad guys, especially in, like, third-world countries where they don't have jobs and money but have internet access and time on their hands, have an unlimited time, and any money they can steal from you is a win, right?

Steve R: Mm-hmm.

Steve S: Yeah.

Dave: So, you know, they know people will use things like password with the A replaced with an @ sign. They know people will use their wife's name, their dog's name, their kid's name. If I can go to your Facebook page, figure out where you went to high school, you know, what's the mascot of your high school team, what's your favorite sports team, etc., right? In many cases, that information is publicly available about people because they post it out there. And then you're using anything like that or a variation of it for a password. Bad guys know this, right?

Steve R: So maybe don't answer some of those questionnaires online on Facebook?

Dave: Don't answer those questionnaires online, or conversely, don't use any form of that as any password for any account, especially if it's a sensitive account like your bank account. You know, the hardest passwords to crack are something that's completely random. And one of the benefits of a password manager is, let's say I wanted to set up a new account with Allworth, right? You've got my financial account. With something like 1Password, when I go to create my account and it wants a new password, I can have it generate a password literally up to 256 characters of random mumbo jumbo. That is unbreakable, totally unbreakable. But I don't have to remember it because the password manager remembers it for me. I just need to know my master password and have my MFA turned on.

Steve S: Okay, so...

Dave: Does it make sense?

Steve S: Yeah, makes a ton of sense. So, your best tip, use a password manager, is that...?

Dave: Yes, because...

Steve R: With multifactor authentication.

Dave: Yes, with multifactor authentication, because then I can create a ridiculously strong, unique password for every account. I don't have to remember 'em, they're good password managers, it's all encrypted, I can use it on my phone, my tablet, my PC. So, the passwords are with me wherever I need 'em, whenever I need 'em, and all I need is the one strong unique master password and MFA.

Steve S: Great advice...

Dave: It just makes... [crosstalk 00:30:16]

Steve S: Great advice always from Dave Hatter, IT consultant, cybersecurity consultant at Intrust IT. You're listening to "Simply Money" on 55KRC - THE Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach along with Steve Ruby. Hey, if you've got a financial question you'd like for us to answer, there's a red button you can click on. If you're listening to the show on the iHeart app, just record your question. It comes to us, we listen to 'em, we may even put you on the air. Straight ahead, why it might be worth becoming a home do-it-yourselfer. Hey, this is the number one question we get asked in the office, Steve. I mean, how much do I need to retire? I remember Fidelity used to do those commercials. What's my number? And everybody's got, you know, their own answer because everybody's got a different situation, but there's a new number out, and I don't know if I agree with it.

Steve R: Yeah, new number. Do I even have to say it?

Steve S: This is ridiculous. Go ahead.

Steve R: It's $3 to $5 million. Now, this is according to a survey of 500 investors surveyed by Bloomberg. Three to five million dollars.

Steve S: Who's got that?

Steve R: Four percent of the population has that.

Steve S: I mean...

Steve R: Come on now, what is this? This is ridiculous. That's an intention-grabbing headline as far as I'm concerned to get clicks.

Steve S: No lie. I mean, if they're saying you need this much, which, okay, let's go to the low end, $3 million, I mean, like you said, it's the top 4% of the country. That's not representative of what we need around here. They must've been asking people in New York or LA where, you know, cost of living's about a hundred times higher than Cincinnati.

Steve R: That's exactly what I was thinking. You know, $3 to $5 million, that's... We've talked about the 4% rule. I'm sure people out there have heard the 4% rule. You get about 4% of return for 30 to 40 years if you have a balanced portfolio. That's somewhere between $120,000 at $3 million, and $200,000 for $5 million.

Steve S: Well, I'll give you a different way. I mean, we can do some pretty complex financial plans, and you need a financial plan if you're close to retirement or you're, you know, early stage of retirement. If you're, you know, 30 years past retirement, well, it might be too late to fix anything, unfortunately, but you could do some math in your head. I mean, just go on to ssa.gov, I mean, Social Security's website, find out what you and your spouse are drawing. And let's throw out some numbers. Let's say one of you is collecting $3,500 a month, the other's collecting 2 grand, all right, so, you know, about 5 grand, $5,500 coming in from Social Security. But maybe that doesn't meet what you need for living expenses.

All right, well, let's use some rough math. If you've got a million dollars between 401(k)s, IRAs, savings accounts, and whatnot, and very few people have even that much, you know, forget the $3 million. But just to make the math simple, if you've got a million bucks, you should be thinking, "All right, I could probably draw 4% of that for the duration, okay, and likely not run outta money." So, there's an extra $3,500 a month. So, between Social Security and 4% of a million dollars, you're on about 9 grand a month. And I would hope, especially if you don't have a mortgage in retirement, you can get by a 9 grand a month, wouldn't you think? And that's on a million.

Steve R: I would think so, yeah.

Steve S: And that's on a million. That's not on $3 million. That's why I don't know where these numbers come from.

Steve R: New York. New York, LA, exactly. So, I mean, it all depends what you're actually gonna need in retirement. Steve brought up Social Security. There's a lot of factors. How much are you gonna spend? Are you living below your needs? What about taxes? What state are you living in? That's a big one because taxes are different.

Steve S: No question. You're listening to "Simply Money" on 55KRC. I'm Steve Sprovach, and Steve Ruby's here with me also, and we're talking about how much money does it take to... What's your number to retire on? How much do you need in 401(k)s? And Bloomberg is saying at least $3 million. We're on the same page on that. I'll tell you one thing we gotta take a hard look at these days is, all right, well, how about inflation? I mean, that's a big concern.

Steve R: Yeah, I had a couple of folks that I'm working with now, and they asked me that question recently. They said, "So, what's the bigger concern? Inflation while I'm still working, or inflation in retirement?" Hands down, inflation in retirement is the big one...

Steve S: Oh, no question.

Steve R: ...because oftentimes you're in a fixed income. You don't have the ability to earn more money or find ways to earn more money unless you go back to work, or I guess make a GoFundMe, right?

Steve S: Yeah, you're gonna depend on that?

Steve R: No, thank you.

Steve S: No. No. And, you know, I was talking to somebody myself last week, whose a big chunk of his retirement planning is a pension. He's one of the lucky people to have a pretty darn big fat pension. And, you know, he was hot because of inflation because, when he decides to draw his pension, and, you know, whatever the number is, $2,000 a month, $5,000, you know, whatever it happens to be, but corporate pensions don't have cost of living increases. So, if he's drawing 2 grand a month, that's 2 grand a month 20 years from now. And if inflation runs 7%, that means in 10 years, you're able to buy half of what you could buy when you first retire.

Steve R: Cuts that pension right in half. It's terrifying.

Steve S: It's brutal. It's absolutely brutal. Here's the Allworth advice. How much money do you need to retire? The answer is different for everyone, it depends on you and your family's goals in life. Coming up next, Why you Might Wanna Consider the World of Do-It-Yourself. You're listening to "Simply Money" on 55KRC - THE Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Steve Sprovach along with Steve Ruby. Are you somebody who doesn't like to get your hands dirty? Like, you can barely hang a picture on a wall? Well, some people are overcoming their fears and they're becoming do-it-yourselfers because the price of everything is going up. Are you functional? Can you hang a picture? [crosstalk 00:35:59]

Steve R: Oh, I can hang a picture, it's just, is it gonna be straight? That's the question.

Steve S: I'm just amazed. I'm kind of handy, and that's because my dad taught me a whole bunch because my dad was always broke and had to do it himself. And I think back, my younger son in college had a roommate that...he turned to my son and said, "Hey, can you do that thing with Scotch tape so I can put a poster on the wall?" He's like, "What are you talking about?"

Steve R: Do that thing with Scotch tape.

Steve S: Do that thing. "I don't know, you were doing something with Scotch tape." And my son says, "Oh, you mean where you kinda curl it around itself so the sticky side is [crosstalk 00:36:33]."

Steve R: Make it sticky on both sides.

Steve S: This kid was so inept, I mean, absolutely, and he couldn't even put a picture on the wall.

Steve R: That is really something else.

Steve S: It is. But the price of plumbing, electrical, all that kinda stuff, it's going crazy, and I think a lot of people are learning how to do it yourself.

Steve R: Yeah, I mean, a lot of people are staying put at this point. They're making their homes their homes. They're making it their long-term place. They're taking on, you know, do-it-yourself projects, major costs to do it. So, with the consumer price index, the measure of inflation, you know, moderated to 6.4% in January, floor coverings actually rose to 13.1%.

Steve S: Oh, supplies across the board have been higher, yeah.

Steve R: Yeah, price of tools, hardware supplies went up 11.8%. So, what's that leaf, people?

Steve S: Yeah, well, also, the guy that's coming to your house, you know, he's spending more on gas. His time...

Steve R: Cost him more.

Steve S: He wants to raise his prices because he's buying stuff at Kroger just like you and me, and eggs, well, okay, maybe not $10 a dozen anymore, but it's still not where it was a couple of years ago. So, yeah, these prices are going up, and we're starting to see certain segments of the population are...you know, they're changing the way they live.

Steve R: Across the board, 71% homeowners say that inflation has caused them to do a project themselves rather than hiring a professional, 71%.

Steve S: I fixed my sink over the weekend.

Steve R: You did?

Steve S: I did. I mean, it's like, I know it's gonna cost...

Steve R: Was it Drano? Did you jump Drano down it?

Steve S: No. No. I mean...

Steve R: Nice job.

Steve S: ...I figured, okay, that leaky faucet, it's gonna cost about, you know, $100.25, $150 to get a plumber out and do it. I've repaired faucets before, not necessarily Delta faucets, and this had a different kind of internal mechanism.

Steve R: YouTube.

Steve S: YouTube is a lifesaver for that kind of stuff if you're handy whatsoever. And 10 minutes later, I had one trip to the hardware store, but, you know, 20 bucks in parts and about 15 minutes of work, done.

Steve R: What I wouldn't recommend, post-college living with a roommate, and actually my now wife, there was three of us together, we replaced a ceiling fan. That was a nightmare. I do not recommend that one. I am not an electrician, we didn't have the right things, but we got it done after a shock or two.

Steve S: Are you serious?

Steve R: Oh, yeah. This guy's a lawyer now, by the way, book smart.

Steve S: Well, one of the toughest things is holding it up over your head.

Steve R: Oh, I'm still sore from that. I think you slipped a disc or something holding it up for 20 minutes.

Steve S: I have my wife hold it.

Steve R: That was a good idea.

Steve S: Yeah, yeah. I mean, I'll take the shock. I'll take the shock. As long as she can hold it up, I'm happy. Thanks for listening. Tune in tomorrow, we'll talk about how to prepare for a windfall. You've been listening to "Simply Money," presented by Allworth Financial on 55KRC - THE Talk station.