Amy: Tonight, we're talking the true habits of those who are really successful investors, the magic of your 401(k), and everybody's favorite game, retirement fact or fiction. You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Ruby. If you are dreaming of the day when Monday comes along and you no longer have to drag yourself out of bed and across town to that job, or maybe you just want to tell your boss to take that job and shove it, there are certain things that you have to do to be able to have that choice about whether you're going to retire or whether you're going to continue working. And so that's what we're going to focus on here. Like, if you are someone who truly is working toward retirement as being a major goal, these are the things you've got to be focusing on.

Steve: Yeah, and you don't have to be a millionaire to develop these habits, but it can certainly help you develop into a millionaire. And, you know, the first step really it's common sense almost, and that's finding somewhere to start saving, that it's getting a handle on your financial situation, understanding how you're spending, how much you're earning, and spend less than you earn. It's as simple as that.

Amy: I remember when I was in college, someone came and spoke to a class, and it actually wasn't a personal finance class, but talking about the power of compounding. And at the time, I remember being like, oh, I'm still going to do that. I'm still going to do that. And then the first job came around, and I was getting literally paid, I think, in peanuts. And I mean, there was not a dime leftover to be saving for the...in the 401(k). And so I made up all the excuses in the world like people do and didn't start saving until several years after that. When I did, after a couple of years after that, looking at my 401(k) statement, I was like, aha, this is it, right, the power of compounding. I didn't start when I should have, but I did start. And I have talked to many people through the years who will say, well, yeah, I get it. And I'm putting a little bit aside. But when my kid finishes playing travel soccer or we're going to take this big family vacation this year, next year, next year.

Steve: Yep. There's always a reason that you can find or reasons that you can find why saving right now just isn't an option, but that isn't accurate. There are ways that we can... If you have a 401(k), if you have access to a 401(k), if you have access to free money via a company match, it doesn't matter how small you start, just start, put in that 1%, put in that 2%. Even if it takes a couple of years to get up to the full company match, find a way to make it happen by having an understanding of how you're spending, how much you're earning, and just spending a little bit less.

Amy: It's funny, I was talking to a friend of mine recently who feels very intimidated about money because of budgeting. Like, she hates the thought of it, and she's picturing, you know, these color-coded spreadsheets. And I said, I think a great place to start is like the 50, 30, 20 sort of way of living, right, 50% towards your needs. So it's your mortgage and the bills that you have to pay. And then 30% is your once. But the key here is the 20% that you're saving. The 30%, that's the squishy part. If you don't have 30% that can go toward the things that you want to that are fun, then you might have less to go to that. But the key is that you're automatically saving 20%. It was the craziest thing. It was like a light bulb went off in her head. She was like, that's it.

Steve: That's it. That's all I have to do. Yeah.

Amy: Yeah. And it's like, gosh, it's so easy. It doesn't have to be complicated, but you have to make saving a regular part of what you do. And it has to be automatic. It can't be, okay, well, if at the end of the month...

Steve: If at the end of the month.

Amy: ...I have... Right? You're never going to have anything left at the end of the month. It is save first. What's left at the end of the month, that's what you decide I'm going to eat out on, or I'm going to plan something fun with. But you got to make the savings automatic.

Steve: I like that you call it the squishy part, the 30%. That's where there's wiggle room to make better decisions with how you're spending your money. Because finding somewhere to get started is better than not getting started.

Amy: And I think when we talk about savings, one kind of sub-component of that, of course, is having a well-funded emergency fund.

Steve: Of course.

Amy: We would say start there. Three to six months of those critical expenses. That way, it's not if something goes haywire, it's when something unexpected, a medical diagnosis, or something breaks down, you have the money. And so you're not pulling it out of your 401(k) or putting it on a credit card.

Steve: Yeah. Life will throw you curveballs, so making sure that you are planning accordingly with that emergency fund. And speaking of a plan, let's say you're at a point in your life, you have competing financial priorities, you're trying to understand how to balance debt with supporting children and maybe older parents that need your help or whatever that might be. Again, there's always reasons that we can find why now is not the best time to save. But if you sit down with a fiduciary financial planner that can help you organize your financial needs and goals and priorities so that you can have a better understanding of what you need to save for to maintain a standard of living in the long run, then that is a great step in the right direction because think of your financial plan as a blueprint for your money.

Amy: You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Ruby, as we talk about the fact that if someday00 you want financial independence, the choice to either continue working or to walk away from that job, the things that you have to do to get there and to be successful, you mentioned developing a plan. And I think that is the foundation of it all, because you lay out what your goals are with your money. It's like giving your money a job. And I know plenty of people who really struggle. Like, they'll say, yeah, I do want to retire, but I want to go on trips too. And I really want a new car. And I really want XYZ.

If you are someone who has to be visual, I have seen this work for people, whatever retirement is going to look like for you. If it's your grandkids, if it is going to the beach or traveling more often, put a picture of it in your wallet or in your mirror. Something that every time you look at it, it's going to remind you, that's my goal. And it's kind of like your touch tree here. It's like you keep going back to that, and then you measure up all the other money decisions against them. Do I really need these things on Amazon? Do we really need to eat out for the third night this week? No, because I really want to be able to help our kids pay for college. I really want to be able to retire or choose to retire when I'm 62. It just keeps taking you back. And it's a very visual way of saying, you know, here's my goal. And I think your plan has to be a big part of that.

Steve: I would say that a robust, holistic financial plan that looks at your entire financial situation in a perfect world, it will enable you to continue living the life that you want to live up into and through retirement. So ideally, we find ways to not make sacrifices while still saving enough. Of course, there needs to have...you need to have the means to be able to do that. But a financial planner is going to help you organize that to and through retirement.

Amy: Most of us have had our lean years where we ate ramen noodles and Taco Bell when we were in college, right? Or maybe during that first job. No one wants to think about going back to that when you retire.

Steve: Yeah, no, thank you. I'm good without that.

Amy: Exactly, right? Been there, done that.

Steve: This is why we need to have a long-term mindset as well. So, this is something that is concerning to me. I saw data recently that showed that the average holding period for U.S. stocks was just 10 months in 2022, down from about five years all the way back in the '70s. That is a big concern for me because people attempting to time the market and not focusing on the long term can throw a wrench in their financial plan. And I was thinking about this a little bit. I almost feel like it's probably a symptom of easier access to information, the internet, social media, more news outlets. It's important to remember that these places that are trying to get you to watch a video to click on something on social media, they don't have a fiduciary responsibility to make sure you're making the best decision for yourself. So, focusing on the long term and blocking out some of the noise is a means to, or it's a way to be successful over the long run.

Amy: I remember when I was in college, I had a friend who, even at that time, was heavily invested in stocks. And so whenever you went into, you know, his apartment, it was always the stock ticker at the bottom of the screen, right? He had to seek that out. Gone are those days. You literally jump online. You literally jump on social media, whatever it is, we're bombarded with information. And I think it's really easy to feel like you have to do something with that information.

Steve: You don't.

Amy: Yes. Especially not with your money, because you've set that long-term plan, you've got the long-term mindset, and making adjustments to that weekly, daily, monthly is going to take you far off of the right path. And I know it almost feels like you should be doing something, but it's the exact opposite.

Steve: Charlie Munger, he was Buffett's right-hand man.

Amy: Smart guy.

Steve: Yeah, long-term vice chairman of Berkshire Hathaway Unfortunately, he passed away last year. He was in his 90s. I think he almost hit 100 years old. Nonetheless, he was a proponent of long-term investing and, obviously, the power of compounding. And his quote was investing is where you find a great few companies and then sit on your behind. He didn't say behind, but whatever on the radio. So I'm being careful. It's important to have that long-term mindset no matter what noise is out there because if you have a long-term plan, and most of us do, we want to make sure our money lives longer than we do at the end of the day, then not making decisions based on short-term noise is extremely important.

Amy: And a huge part of that is being diversified, right? Your 401(k), your investments aren't necessarily in single companies. They're index funds, attract things like the S&P 500 so that you own pieces of a lot of the large companies that make up the American economy. And then beyond that, not just stocks, but we're talking about bonds. And then maybe you've got larger companies, smaller companies, international companies, but really being truly diversified because there are going to be some years where it's a bad year for tech companies. It's a bad year for, you name it. And then, if you're diversified, hopefully, it's a good year in another sector, and that kind of makes up where your losses are.

Steve: And, you know, hopefully, it is the reality of the situation, I want to point out, because if you look at returns of different sub-asset classes, one year, one's going to be great, another year, it's going to be awful. And that means that volatility is also a time for buying. There's opportunities to rebalance. If you have cash on the sidelines, there's opportunities to put it to work. When we're investing for the long term and we do run into some volatility, remember that we can treat those potential downturns as opportunities, especially when we have a diversified portfolio.

Amy: And I think for those who are truly successful when it comes to money, when you hear the word taxes, you don't think about just tax preparation, right? That's what you do to get ready to file your taxes in April every year. I'm talking about tax planning, which happens year-round. And it's a strategy. I mean, for those of you who love sports, right, there's always a strategy behind the winningest teams. This is a strategy that you have for your money, and it's understanding the system. And I'm not saying you get to beat the system, but the more you understand it, the more money you get to keep in your own pocket. And I think this is also can be part of long-term planning and retiring successfully.

Here's the Allworth advice. It's not easy, but if you are going to adopt these habits, you're going to have a lot more choices later in life, and hopefully, they don't involve eating ramen noodles like you did in college. Coming up next, is there such a thing as good debt? We'll answer that question for you. 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 listen to our show every night, you do not have to miss a thing. We've got a daily podcast for you. All you've got to do, search "Simply Money" on the iHeart app or wherever you get your podcasts. Coming up at 6:43, retirement fact or fiction so that you know the truth and can retire better.

When it comes to thinking about retirement, most of us, the number one vehicle that we use is our 401(k). I mean, if someone were to ask you, you know, what are you using or how important is your 401(k)? Most people would agree, my 401(k) is pretty important. The problem is, how much do you know about your 401(k)? I would venture to guess that most of you spend far more time planning your summer vacation. I'm talking like doing your research on restaurants and excursions and things like that than really looking at your 401(k) statement.

Steve: That's more fun.

Amy: It's way more fun, I guess. But then what's not fun is when you get to retirement and you can't do anything because you didn't pay attention to your 401(k).

Steve: That's not fun at all.

Amy: No more travel for you.

Steve: How often do you look at your statements?

Amy: Well, I mean, I look at them more probably than I should.

Steve: You do.

Amy: I'm pretty aware of what's in there. And I would only say this is within the past 10 years, right, since I've been working here. And I'm not saying I obsess about it, but I know it, and I know it well because I also know how important it is. My grandpa had a pension. He retired from Cincinnati Milacron. He didn't have to pay attention to the little details because they were taken care of for him.

Steve: Yeah, we don't have pensions.

Amy: It's on me. It's on you. It's on anyone with a 401(k) to pay attention to the details.

Steve: Yeah, I mean, I certainly wouldn't recommend looking at your statements daily.

Amy: I don't do that.

Steve: It's a good way to get yourself ulcers or lose sleep at night because the markets are like walking up the stairs while playing with a yo-yo. Nathan Bachrach used to say that. I steal it because I love it. It's a great analogy. And your statements, by law, you're going to get them sent quarterly. Honestly, I try to practice what I preach. We've done segments on this in the past where looking at your 401(k) balance once, maybe twice a year, puts you in a better mental position because, more often than not, you're going to see green numbers rather than red numbers.

Amy: And you're talking about the numbers, and that's one key thing that you're looking at, right? You need to be checking to say, how much did I put into this over the last quarter? How much did it grow, or how much did I lose? And it doesn't mean that you necessarily do anything in response to that, but it's good information to know. And then there'll usually be another tab on there. I mean, my statement's online, or there's another sheet in what's mailed to you in your statement that looks at what you're invested in. And there are times when, you know, if the stock markets are having a really, really good year, all of a sudden you're taking on a lot more exposure to the stock market than maybe you had anticipated. And then so maybe the next time you get that statement or you wait, you know, another year, then you rebalance to get back to what you truly had meant to be as far as a stock-bond, you know...

Steve: Allocation.

Amy: Yes.

Steve: Yeah, what you're talking about is called portfolio drift and it's going to happen when the markets are on a tear. Your stocks are going to perform better than your bonds over the long term. So, if you start with a 70% stock, 30% bond, before you know it, that might be 80% stock, 20% bond.

Amy: And if you're not paying attention to it on your statement, you're going to miss it.

Steve: Yeah. So at minimum, keeping an eye on maybe the summary section of your statement, it's going to show you the current asset allocation. Now, paying attention to the investment options is important as well, because there's some out there, you know, as Steve Sprovach used to call it a good enough fund, your target date retirement fund, your life cycle fund, that's the one that has a year tied to it that's supposed to correlate to the year that you see yourself retiring. And it's kind of like taking a bus to retirement. It's a form of active management, but it's done so passively and that it gets more conservative the older that you get all by itself.

Amy: Which is not necessarily a bad concept, but I would say that for most of you, the closer that you get to retirement, that sort of one-size-fits-all approach.

Steve: You might need a tailored approach.

Amy: Exactly. It's not like if you and I were planning to retire in the same year, we would have the same goals. We would have the same plans. I mean, retirement is going to be a very individual sort of unique thing depending on the person. So, for everyone to use the same investment vehicle, right, to get there, or to use the same investments to get there doesn't make a lot of sense. So I think, you know, target date funds can be great if you're in your 20s or 30s, you're really far away from retirement, at least you're saving somewhere.

But I also think a great point that Steve Sprovach used to make too is, you know, a lot of times there's like stinkers that are put into those investments. You know, so you wouldn't necessarily choose to invest in that fund, but there's a number of funds that are thrown in there. They're going to throw some good ones and some not-so-good ones in there, right, because they have to have some people investing in these things. And so that can be where, really looking at your investment choices, working alongside a fiduciary advisor can make a really big difference.

Steve: Yeah, one of the great features of a 401(k) plan is having access to low-cost, what are called institutional funds. So you can conceivably build your own target date retirement fund in a sense, using funds that may have lower expense ratios as well. So it's not only a way to get a more tailored approach stepping away from the target date retirement fund, but it also can lower the inherent fees of investing inside your 401(k). But I will say that this puts added responsibility on you to make sure that you're keeping an eye on your statements so that you're not having portfolio drift like you were talking about earlier.

Amy: Another thing here is to understand with your 401(k), are you getting the full company match? Are you putting at least the maximum amount into that 401(k) to get the maximum number of dollars out of your boss's hands? I didn't do that for the first few years that I was working. And gosh, I wish I would have. I mean, if we want to talk about regrets and going back to redo things in your life, that would be probably the number one thing that I would do. Because I think about how much money that would be now.

Steve: I got a financial calculator. Should we write it right now?

Amy: No, I don't even want to know. I won't sleep for the next three weeks.

Steve: Yeah, there's a lot of compounding interests that you miss out on if you're leaving that free money on the table that the company you work for is willing to give you. Now, I will say on the flip side, it's important. And we don't see this all that often. But if you're one of the fortunate people that's able to max out your 401(k), which if you're over 50 years old, it's over $30,000 now with your catch-up contributions, there is such a thing as hitting the limit too early. If your 401(k) plan doesn't have what's called a true-up feature, I have seen it over the span of my career where people are so excited that they're hitting the limit in their 401(k), their contribution shut off when they hit the limit, and then they lose that match. So it's a problem that you can come across on the opposite end of the spectrum. If you're not saving enough, then you may not get that money. If you're saving too much, you may not get that money. Kind of ridiculous.

Amy: No, it doesn't seem fair, but it could be the way that your 401(k) is built. And so that's the key, right? We're talking about things that you need to understand about your 401(k) to make sure that you are maximizing it for your retirement. I think about every January when I step back into the gym, if it's been a while, right? It's like, oh, it doesn't feel natural anymore. And you're trying to relearn. Get so familiar with your 401(k) that every time that statement comes quarterly, and we're saying you don't have to check it more than that, that you know how to read those graphs, that you know how to look at the investments, that you know how to make sure to look at it in a way to say, okay, I am using this in the best way that I can to save the most that I can for my future.

Here's the Allworth advice. Your 401(k) is likely your biggest vehicle as you think about retiring, so just make sure you're taking full advantage of yours. Coming up, some people think they'll work forever, not so fast. We'll look at how to react if you suddenly get laid off. Next, 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.

Of course, nobody wants this to happen, but we've seen it happen more times than we can count. You're knocking on the door to retirement. You're doing everything you can to save, to invest, and all of a sudden you come into work one day and your boss says, you're done. It can hit you from out of nowhere, and it can completely derail a lot of you. So let's talk about, this is a very emotional time, Steve, but there's some very, you know, fact-based decision-making that has to happen.

Steve: Yeah. So, I'm going to go through a list of what happens when you have an unexpected layoff to highlight the importance of planning accordingly. Because when you're laid off unexpectedly, it's up there with unchecked credit card debt, expensive chronic health conditions. You need to think about your income, your health insurance, life insurance, disability bills, short-term savings. It's terrifying. There are a lot of problems that hit you in the face immediately when you're unexpectedly laid off.

So, what do we need to do first? What do you need to do immediately upon something like this happening? First is understanding when your income stops. So this is an understanding of your final paycheck, whether that's through regular income flow, a bonus, some kind of variable compensation. You need to understand when that paycheck is going to stop.

Amy: This is emotional for so many people, right? For many of you, if this happens, you've worked with that company, you've given them your blood, sweat, and tears for years, in some cases, decades. And so this can feel like you're coming into work one day and all of a sudden this news, and it is so overwhelming and so emotional that you forget to ask questions. It's like being in a doctor's office and you get a diagnosis that is, like, completely unexpected and you get home and you're thinking, I've got a hundred questions that I did not ask that doctor. This is often that case. So if you miss asking these questions, call HR immediately, right? Call them back and say...ask these questions. There's no shame in asking more questions. How long does my medical insurance last? I have 20 days of unpaid PTO. Is that going to be rolled onto this last check?

Steve: When will that be paid?

Amy: Yes, exactly. Ask the questions. And oftentimes, I'm not saying there's complete flexibility here, but sometimes they will work with you on some of these things. So, asking and maybe pushing a little bit in a direction isn't necessarily the worst thing. Once you get the answers, once you know how much to expect, and when that last paycheck is coming in, okay, now you've got something that you can work from.

Steve: Yeah. And understanding when your benefits kick in is important, obviously. And you need to know when your income from your job is going to stop first, because oftentimes your unemployment can't start. And it just depends on what state you live in. But your unemployment won't start until severance is paid out, for example.

Amy: Yeah. And I think the key is understanding each of those components of it. And then, I think, this is when the pain really comes in. Because once you figure out, okay, how much is coming in, and when does it stop coming in? Okay. And here's the benefits that I have moving forward. Then you have to look at your own spending. And it feels unfair. You didn't do anything to ask for this.

Steve: Yeah. Why do I have to make these changes? What's this?

Amy: Yeah. But you have to. And so it starts with pulling out your bank account. And I would say if you are someone who puts a lot in a credit card, your credit card statement, and looking at what non-essentials you are spending money on, the list of subscriptions that you have, you may have to cut a number of those. You may have to have difficult conversations with your family members. If you have kids, it may be we're not going to eat out as much. Or you got a brand new pair of Nikes for Christmas, so we're not going to get any for a while. It can affect the entire family. And I think treating it in a way that it doesn't is only going to be more harmful.

Steve: Yeah, that's a good point. I like that. And looking at it is when you're sitting down and you're scrubbing your bank statements to find out where cash flow is going and identifying ways that we can kind of trim the fat. Remember that it's short-term. This is not your new norm here. This is a stopgap while you find ways to spend less until you have regular cash flow again. So this is a temporary speed bump. But having a plan of attack in the event that life throws you one of these unexpected curveballs is very important because it is much better to plan accordingly than it is to, for example, dip into retirement assets if and when life throws us one of these curveballs. That's why we talk about the importance of emergency funds, for example.

Amy: Well, and you also talked about having a plan. And if you have a financial plan that exists before, right, this layoff...

Steve: Before, ideally.

Amy: Yes. Then it's like, this is... If you think about your financial plan as a map, then you've got a detour you're working from. Okay, how does this impact my financial plan if for four months I'm not working, if for four months I'm not putting that money into a 401(k), right? It's so much easier to have that to start from than to have this overwhelming situation that's very emotional. And you literally have no idea where to turn or where to even start because you never had a financial plan in the first place.

Steve: And if you do have a financial plan, and I've seen this happen over the span of my career, this curveball happens, and then it actually doesn't derail anything. Because we have plans in place. We have that emergency fund. We have a finger on the pulse of our spending. We already live below our means. There's obviously an emotional subject that is...you know, can be unexpected. But it's not something that you can't get through if you plan accordingly and if you attack it in the way that we're talking about today.

Amy: And I think what you have to do is to focus on what's next. What is the next right thing to do? Because it can. I've said this several times, but I can't say it enough. It's an incredibly emotional time. You feel like someone is turning their back on you. How could this possibly happen? I've worked so hard. In the midst of kind of processing those emotions, you have to somehow divorce yourself from them and say, okay, regardless of what I'm feeling about this, I have to make the best decisions for my family at this point. And it is figuring out what are the facts? What do we have to work from here?

And also, we've got Julie Bauke, Julie on the job, on the show regularly. And she always has some great advice for people who are in the situation of looking for jobs. And she also says, don't immediately run out and just apply to 7,000 open positions and you take the first one that comes in. Sometimes there can be a silver lining in these situations, even though they can be hurtful at first to say, okay, actually, now that I think about it, I didn't love something about that job that I came from. So how do I make sure I end up in a better situation moving forward? And you're really intentional about writing down and thinking through what's the best-case scenario for me moving forward? And once you figure that out, that's what you work toward. You give yourself a minute to process it and to think about, okay, ideally...

Steve: What's next?

Amy: Yeah, in ideal world, what does that next job look like?

Steve: And sometimes it's a blessing in disguise. I've seen that as well, where you find yourself in an even higher-paying job with more satisfaction.

Amy: And I also think, as we were talking about the fact that you can't take on all of the stress of it yourself. You have to talk to the family openly, to your spouse, to your children, about what this means to all of you. Your family can actually end up in a better situation financially moving forward because all the extra things that maybe you thought you needed, all of a sudden, everyone realizes you didn't need that stuff. It can be a nice little silver lining, a nice little byproduct of what started out to be a not-so-great situation.

Here's the Allworth advice. No question, a layoff is painful. Take a deep breath though, follow these steps, and understand this too shall pass. Coming up next, a little fun. We're playing some retirement fact or fiction so you can get to the truth of the matter for when you retire. 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 have a financial question that you and your spouse just cannot get on the same page on, or maybe something that's keeping you up at night, 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'd love to help you figure it out.

Coming up, you've heard some famous investing quotes, right? We talked about some earlier in the show. We've got more coming your way. And these are like words to live by when it comes to your money. When you're thinking about making a money decision, you think about some of these quotes, you might decide some things a little bit differently, and they could be game changers. We'll get to that in a few minutes. Right now, it's time to play retirement fact or fiction. Here's the first one for you, Steve Ruby. Fact or fiction. When you turn 59 and a half, you should go ahead and start taking distributions from your investment accounts.

Steve: Fiction. How can that even be fact?

Amy: Immediately.

Steve: Yeah, I mean, sure. Yes. The early withdrawal penalty that exists goes away when you turn 59 and a half. But if you're still working, why would you need to pull from that?

Amy: Yeah. We talk about the power of compounding all the time here on the show. And it's essentially the less time or the more time that money has to grow, the better off you are. So touching the money the second you can get your hands on it penalty-free doesn't make any sense at all.

Steve: Yeah. And it's a tax planning nightmare as well, because in this situation, again, if you're still working and you just pull money out for the sake of pulling money out, then you're paying potentially higher taxes on those dollars than if you allowed them to grow tax-deferred like that vehicle is designed to do.

Amy: We use the words plan and strategy a lot here, right? That's just not the best strategy for you. Here's another one, fact or fiction. There's 80 different strategies to collecting Social Security.

Steve: What's that number? It's close to 80.

Amy: I think it's 81, actually.

Steve: Is it 81?

Amy: And I think that's also for couples. And it looks at timing. It looks at ways to collect Social Security.

Steve: Realistically, there's only a handful that people use. But sure fact, yes, there's a ton of different ways to collect it. But we want to when we're making that decision, understand our financial situation, needs, and goals as they currently are today and mapped out in the future. That's why working with fiduciary financial planners is so important to build that financial plan for you because Social Security clearly is an important decision. You want to maximize how much you're going to get back from what you already put into it. So making the right decision, one of those 80-ish options, it's important. But realistically, there's only a handful that most people leverage.

Amy: It's like what we were just talking about, right? Should you take your investments out or money out of your investments when you turn 59 and a half? Probably not. Should you claim Social Security the day you turn 62? I don't know. It's going to be different for everyone. And so I think making sure that you understand how this works in a way that you can absolutely maximize it and in the wrong decision can cost you thousands, tens of thousands of dollars. I've seen that happen. So really understanding how the system works. And I think that number 80, 80 plus can sound very overwhelming, but it doesn't have to be.

Steve: It does not have to be at all.

Amy: Here's the next one, fact or fiction. If you have a different beneficiary on your retirement accounts than what you have listed in your will, the beneficiary listed on your retirement accounts will get the money.

Steve: Yeah. So this is one that might come as a surprise. It is fact. So your beneficiaries supersede other documentation that you have out there. And this can create nightmare scenarios where, unfortunately, I have heard stories in this industry where ex-spouses received money, even though somebody was remarried and had children and wanted those dollars to go to children from retirement accounts. But it went to the ex because they never made the update on the beneficiaries in their old 401(k) plan.

Any: Well, it almost doesn't make sense, right? It's like, well, I did my will, and everything's laid out in the will. So it should be fine. I don't have to go back and look at old 401(k)s or old IRAs, and that's exactly wrong. You have to go back, I would say periodically. We talk about your estate planning. You can't say, oh, yeah, I had a will. We wrote it 20 years ago. We don't need to update it. No, things change in your life, and this is one of the things you need to revisit. I don't know if I would say annually, but at least every couple of years to say, okay, are the beneficiaries I have listed on all of these accounts have a list of them?

Steve: That's part of that meeting with an attorney. Your attorney is going to ask you, or even better, slide a piece of paper across the table that says, this is based on our conversations, how you need to have beneficiaries listed in all of your accounts.

Amy: Important to understand that and then to update those.

Steve: Accordingly.

Amy: Yeah. Fact or fiction. When you leave a company, you will get any unvested funds in your 401(k).

Steve: Fiction, the unvested portion goes back to your former employer. It's the vested that you receive. So this is important to pay attention to your vesting schedule in the event that you are thinking about making a change. If you have a three-year cliff vesting schedule, for example, that means that none of the company match becomes yours until you have fulfilled that time frame of employment. There's vesting schedules where you get 20% more per year up to five years. So if you leave in year three, then you only get 60%. So that is free money that you may end up leaving on the table.

It doesn't mean that you have to stay in a job that you don't like or because, you know, you find a better opportunity. You don't accept it because you're leaving free money, but you need to recognize that if you don't meet your vesting schedule, then that money does not go to you. It goes back to the former employer.

Amy: This is one of those things that we say, you need to know your 401(k). This is definitely one of the things about your 401(k) that you need to understand. I feel like the show is one where Amy tells all the bad decisions I've made with money through my life, but I had this happen earlier in my career.

Steve: I don't tell these stories because I haven't made any bad financial decisions.

Amy: I know you are perfect.

Steve: Thank you.

Amy: I know you are. So I'll just throw all of mine out there. But yeah, I left a job. I thought I had X number of dollars in my 401(k) that I was going to roll over into my new 401(k). And then, when I saw the statement, I was like, we lost some money from here to there. Come to find out it wasn't fully vested. I think your point, Steve, is like, it's just that having the knowledge so that you can make an informed decision about this.

I have a family member several years ago who could work three more months, and she was going to get several thousand dollars more than if she retired when she had originally planned. We talked it through. She decided it wasn't worth it to her, and that's absolutely fine. But she made an informed decision. It wasn't that she retired and she thought she had this money, and then she no longer did.

Coming up next, we've got some famous words to live by if you want to be smart about your money. 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. Words to live by, right? We all have those quotes that we identify with, that we share with others, with our kids. Well, tonight, we're sharing some of our favorite words of wisdom when it comes to money and investing. You live by these, you remember these, you're probably going to end up in pretty good shape.

I like this one, John Bogle, don't look for the needle in the haystack, just buy the haystack. How many times have you talked to someone who said, like, it's this individual stock, and I have a good feeling about it or whatever? It's like, don't try to find the one company, invest in the S&P 500, for example, the 500 biggest companies that make up the American economy. Some of them are going to have good years, some of them are going to have bad years, and you're going to end up being okay.

Steve: Yeah, John Bogle, he's Vanguard. So, this is somebody that... They do have a good point. Buying a low-cost index fund and casting a large net is a heck of a lot better than sitting on one or two individual stocks that can technically lose all of their value, all of it. If one stock goes belly up inside of an index fund that has 500 different stocks, it's barely going to feel it. It's not going to move the needle. So, I completely agree with this. I'm not a big advocate for investing in too many individual stocks. Because there is inherent risk, casting at large net brings down the risk and can still get us good returns over the long run.

Amy: Here's some other really good words, especially for those of you who struggle taking on risk. How many millionaires do you know who've become wealthy by investing in savings accounts? I rest my case.

Steve: I rest my case. He answers the question.

Amy: Zero. The answer is zero.

Steve: Yeah. I mean, it's a guaranteed way to lose money safely.

Amy: Yeah, it's going broke safely because inflation is going to take a bigger and bigger chunk out of that money, especially during times. Right now, you can move your money into a higher-yield savings account and maybe make 3% or 4%. But most of the time over I can think of the course of the history since I've been old enough to save money in a savings account and it's like 0.0001%. And your money will erode.

Steve: We've been spoiled because of the high-interest rate environment that we've been in.

Amy: Recent.

Steve: Yeah, recently. And even leveraging that for long-term investments is a bad idea because your stocks are consistently the way to beat inflation over the long run.

Amy: The next one, I think you can look at and say specifically for someone who was maybe the first lines of investing in cryptocurrency, the individual investor should act consistently as an investor and not as a speculator. I think what you have to ask yourself when it comes to things like Bitcoin cryptocurrency is what is the intention for this money? If it's long-term money that you need for retirement, you don't speculate with that money. You invest that money. Play money that you have on the side and you're good for retirement, and you're good for maybe helping your kids pay for college or whatever those financial goals are that you have. Well, then fine, put the money into crypto. If it doesn't go well, it doesn't go well.

Steve: Yeah, another quote, investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas. I don't disagree with you that, you know, it's okay to have some play money in these speculative investments, but putting your entire portfolio in something speculative can derail your retirement plan.

Amy: Yeah, that's a luxury, not something that everyone has extra money. Thanks for listening tonight. You've been listening to "Simply Money," presented by Allworth Financial, here on 55KRC, THE Talk Station.