Amy: Tonight, happy, happy, joy, joy for your 401(k). Why? There's new evidence that our economy is slowing down, plus we're talking about the return of the meme stock craze. You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner, along with Steve Ruby. We've talked about this many times. The Federal Reserve, our nation's central bank, has been trying to bring down inflation, and initially they were somewhat successful, right?

By raising interest rates, we started to see it falling as one would expect. But the Federal Reserve also said, the closer we get, the more difficult it's going to be. And we have spent really much of 2024 in that place of praying every time that these new inflation numbers come out that we're going to see some progress. And here's the news, the price that you paid for goods and services in the month of April was 3.4% higher than a year ago. Three point four percent when the goal is 2%. So that's not great, but it is less than we paid in March and it's also, and this is a big point, less than Wall Street was predicting.

Steve: Yeah, that's the key here. Even though it was higher than it was a year ago, it's trending down. Finally, we've had entire segments, we've been talking about it for a long time, that getting across the finish line, the Fed targets 2% inflation rate, is going to take time. I think it's taking more time than many people anticipated. I mean, Andy Stout, Chief Investment Officer of Allworth Financial, he gave a D grade to the Federal Reserve Board a couple weeks ago.

Amy: He doesn't hold back.

Steve: No, he doesn't hold back. We originally thought, many thought, I should say, that interest rates are going to fall several times this year, five, six, maybe seven times.

Amy: December, they were saying seven times, that we would see seven rate cuts this year. We have scenario one to this point, and now we're looking at what, maybe November at the earliest?

Steve: Yes, maybe one is kind of the thought process now. But the reason why the market's like what is happening now is because the economy is showing signs of slowing.

Amy: Yeah. And we've been talking about this, but bad news is good news in this situation. You don't ever want to see the economy is slowing down, but when the expectation is that by raising interest rates that the economy would slow down, and it was just so darn resilient for so long, and you would also expect to see sort of cracks in the labor market. And that was the problem for so long. It was like, okay, here's the Fed raising interest rates. And as a result of that, you would expect that big businesses, right, with higher costs to borrow money would have to look to free up money somewhere else and might lay off people. And as people then started to worry about losing jobs, you would have them spending differently, right? Consumer spending would change.

None of those dominoes that were expected to fall actually fell. In fact, hiring continued at record levels for a long time. Well, now we're starting to see in this economic data not just these inflation numbers, but we're also starting to see jobless claims that are on the rise in other economic data that would fall in line with what you might expect to see. And that's why, again, bad news is good news right now. It's exactly what Wall Street is hoping to see.

Steve: Yeah, and regarding core inflation, by the way, that's what the Fed is really paying a lot of attention to. That's where they strip out food and energy prices because they're more volatile. That was 3.6% one year ago. We paid less than we did in March. But in fact, that 3.6 core inflation rate is the lowest rating since April of 2021. So, again, we're seeing that trend downwards and it will take some time to get us across the finish line, but that is good news.

Amy: If there's anything that the Fed has learned too, it is to project out what they think might happen so that there are no surprises. And I think Jerome Powell learned this the hard way when he took over at the Fed, right? He realized how powerful his words are. When this man speaks, if he's wearing a purple tie versus a red tie, the market responds. What he doesn't say, what he does say, how he says it, all of that carries a lot of weight. It's why on days that the Fed meets, you see markets all over the place because even as a market sort of digests the original news, then Jerome Powell has a press conference. And what he says in that press conference, markets take all kinds of cues from that.

I mean, so really what the Fed has tried to say time and time again is, "Listen, we're doing everything we can. We're digesting all the same data that everyone else is, plus probably reams more."

Steve: Yeah, a little bit.

Amy: I don't even want to think about what they're looking at. I think about when I walk into Andy Stout, our Chief Investment Officer's office, and there's 85 screens tracking a thousand different data points and my brain feels like it wants to explode. That's what the Federal Reserve is trying to digest as they make this decision. But they've also been very clear in how they communicate that, "Hey, we expect this to be stubborn and it's going to take a while." I think the interesting thing was you had Wall Street sort of fingers in the ear like, "La, la, la, we're not listening. We're still going to expect seven rate cuts this year." And now I think Wall Street is maybe coming to the reality of what the Federal Reserve has said and sort of swallowing that pill now.

Steve: We saw volatility earlier this year for that reason alone.

Amy: Absolutely.

Steve: And now the markets are loving the fact that some of these numbers are coming in reduced. Speaking of retail sales, another story that investors are cheering of currently is that April retail sales were flat, slower than what economists predicted.

Amy: Bad news is good news...

Steve: Bad news is good news. Exactly.

Amy: ...once again. You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner along with Steve Ruby as we're talking about the fact that we're getting some economic data in and bad news is good news. The economy appears to be slowing down and that's what we would expect in order for the Federal Reserve to start to lower interest rates. We just have this stubborn inflation that doesn't want to come down to that 2% goal and we're about 3.6% now. But retail sales means, and we talk about this, that consumer spending actually makes up a huge portion of our economy. We have just been spending willy-nilly really since we came out of the recession and now there seems to be for the first time a pullback, maybe a concern that you can't just job hop and get whatever you want. And maybe not only that but maybe some firms or some companies are starting to lay off. People are looking for jobs. There's more claims. And all of those things are what you would expect, again, those dominoes to fall as a result of an economy that appears to be slowing.

Steve: You couldn't pay me enough to sit on the Federal Reserve.

Amy: No way.

Steve: To have the weight of the world on your shoulders that Jerome Powell has. The words you speak move markets. No, thank you. That's insane to me. But they have been setting that expectation that there would be pain and that's what they're going for in order to slow the economy to bring down inflation. Reduced spending is again, one of those good news is...or bad news is good news type scenarios.

Now, what about recession risk? Obviously, this is a hot topic that everybody's been looking at for quite some time. Recessions are a normal part of the market. They happen. It's cyclical. It brings things back into balance. Jerome Powell has been clear that he doesn't want to... He has learned from or trying to learn from the mistakes of his predecessors back in the '80s when we slammed the economy into a double dip recession.

Amy: Paul Volcker, right? That name is sort of infamous and nobody wants their name tied to another situation like that.

Steve: Exactly. So the proverbial soft landing that people are looking for, who knows if we're going to have it. There will be a recession at some point. But again, Andy Stout, Chief Investment Officer of Allworth Financial, he puts together a recession risk scorecard based on 10 different economic factors. And it had been high. It had been what we would call red...

Amy: Yeah, in the red zone. Yes.

Steve: ...yeah, for quite some time, but it's recently pulled back to more of a medium risk scenario as far as an upcoming recession in the near term is concerned.

Amy: And what he looks at in determining that is something called leading economic indicators, right? So things that might show us a change six months in advance to say, "Hey, things are going south, maybe we should be worried about the risk of a recession." So I think it's really interesting that as this economic data starts to come in pointing toward things slowing down, we've actually moved out of the red zone to a more medium risk of a recession into that yellow zone.

I'm going to give the red light on something else right now, and this is the return of meme stocks. Not to change the subject, but this really gets my blood boiling. Meme stocks we started talking about during the pandemic. I don't know what happened. People got bored. Everyone was home. It didn't feel safe to go out. You couldn't spend money. So a bunch of not-so-genius people sat around and started to say, "We're going to stick it to the man on Wall Street. We're going to look for companies that they're shorting, so betting against thinking they're going to do worse in the future than they are now. Companies that have terrible plans for the future and we're going to start buying up all the stock." And this sort of meme craze was born. And then I kind of thought it was going to die down as people went back to work and their jobs, but maybe not.

Steve: Well, you know, I hate to give a little bit of credit to some of these people because some of them were kind of smart about this. So what they saw...

Amy: Were they?

Steve: They were because they saw hedge funds shorting companies that should have been shorted. We're talking about movie theaters closing down during pandemic shutdown.

Amy: No one was going to movie theaters during that time.

Steve: Yeah, exactly. GameStop to go buy physical copies of games when you could buy everything electronically or stream it, I guess, to play video games.

Amy: Yes. Everyone's playing Fortnite and you don't pay a dime for that. You just download it.

Steve: Yeah. So some of these people on Wall Street bets, they got together and they saw these hedge funds shorting these stocks and they said, "All right, let's all band together and we're going to buy options and do what's called a short squeeze against these companies, where eventually they'd have to close out their positions and put the money back into the stock, at which point it would skyrocket." And a group of them got it right. And a lot of people rode that path with them, but a lot of people bought in high and lost a ton of money. That's why this is awful. This is an awful thing because a lot of retail traders lost so much of their 401(k)s on what I would equate to gambling. But a handful of them did really well for themselves.

Amy: Well, and the dude who started it all known online as Roaring Kitty, which is ridiculous.

Steve: Such a weird name.

Amy: His real name is actually Keith Gill. He's a former marketer from Massachusetts Mutual Life Insurance, took to Reddit, I mean, took toward to these forums where people would band together and make these decisions. He's been silent for a few years now, as he should have been. But now, well, unfortunately, he has resurfaced for the first time in three years. He posted to social media and he talked about GameStop, and buyers and sellers went crazy. In fact, trading has been so volatile on that particular stock that trading was halted multiple times. It's funny. We're talking about how much power Jerome Powell has.

Steve: Roaring Kitty is right up there with him.

Amy: Roaring Kitty apparently has weird powers. I mean, it's just all makes me...

Steve: It's so stupid.

Amy: ...shake my head. It's so ridiculous. Oh, we are such proponents of making smart, long-term financial decisions. These meme stocks are exactly the opposite of that.

Steve: Yeah, don't get roped in.

Amy: And the problem is they got all these headlines because a handful of them did really, really well. They won the lottery. I mean, it's the equivalent of winning the Powerball. You know, they were just the lucky ones that bought at the right time and had the lucky ticket. And then everyone else who jumped on board afterwards... And there were these YOLO bets, too, of like, "Hey, just pull everything out of your retirement savings and go all in on GameStop." And people lost.

Steve: Because Roaring Kitty told us to.

Amy: As the words come out of your mouth, they're so ridiculous, yet somehow people don't see it that way. Please, if this is your children or your grandchildren, talk to them.

Steve: Or you.

Amy: Or you. Call me, please. Or please talk to them. This is not long-term investing in the stock market. Here's the Allworth advice. Don't ever get involved in buying and selling stocks because of what you read or hear on social media on some forum. Please, please, please do not do that. Coming up next, we've got an investing development that had me celebrating. It's one of my favorite things. And we'll tell you why you should be happy, too. We'll explain. 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 miss our show one night, you don't have to miss a thing. We've got a daily podcast for you. It's right there on the iHeartUp or wherever you get your podcasts. Straight ahead at 643. We've got five myths about Social Security, things that we hear people saying that make us want to pull our hair out. We're going to debunk those so you don't make stupid decisions. That's coming up in just a few minutes.

Okay, this is something I am very excited about. Happens every year, yet it makes me equally excited every year. As you know, if you listen to the show even semi-regularly, I'm a huge fan of health savings accounts. It's just a gift from the government, nothing like it, triple tax advantage. What I really appreciate is that every year you can sock more money into these accounts. We've got new information about what you can do in 2025.

Steve: Yeah, remember triple tax advantage, we're talking about HSAs. Meaning, when you contribute to a tax deduction, when you invest with the money that's in it, it grows tax free like a Roth account. Then when you take the dollars out for non-reimbursed qualified medical expenses tax free. As far as the contribution limits are concerned, for 2025 for a single health coverage, meaning just yourself...

Amy: One person.

Steve: Yeah, one person. It's going up by about $150, I believe. Two hundred and fifty dollars for family coverage. So up to $4,300 for single and $8,550 for family coverage.

Amy: We're still waiting to hear what the catch up contribution is. They have those with 401(k)s and HSAs, and those are for savers who feel like you're a little behind. You're getting in that home stretch to retirement. So if you're 55 and older, that's going to come out later this year. Right now it's at $1,000. I think if a high deductible health care plan makes sense for you and your family, it doesn't make sense for everyone. If you have a chronic condition it's going to be a lot of money out of pocket. It can still make sense. You need to run the numbers, but you would have to have a large emergency fund.

You can use the HSA over time as these expenses come up, but I think the really smart way to do it is to build up that emergency fund, pay for your medical expenses out of your pocket as they come up, put that money into the HSA. Here's the difference though. That money needs to be invested, and this is the step that so many people are missing out of. I think it's 2 in 10 who have HSAs are actually investing that money. So that money is invested, it grows, then when you get to retirement, you have this pot of money for the inevitable health care expenses that you're going to have.

Steve: That 2 in 10 figure is awful because the triple tax advantage, you have to be investing to actually capitalize on.

Amy: Sure.

Steve: If you're not investing, then you're not getting any tax-free gain, and you're losing purchasing power on the dollars that you're tucking away because they're not going to keep up with inflation over the long term. So if you have an HSA and you can afford to build that balance up and pay out of pocket for medical expenses, make sure that you're not the 8 in 10 that's just sitting in cash. Please talk to somebody and help get it invested or do it yourself.

Amy: I think most of us can admit that at some point in our lives money has been stressful. But in some circumstances, it may be many. In fact, half of Americans say that money is so stressful that it actually has a negative impact on your mental health, at least occasionally. We're talking to the point that you have anxiety, you're stressed, you're losing sleep, you're depressed. I don't know, and this is from Bankrate's latest Money and Mental Health Survey. This doesn't surprise me.

Steve: No, not at all. Money affects more Americans' mental health than work, health, current events. If you don't have enough money, it's constantly on your mind. That's not a place that we want to find ourselves. People say that money doesn't buy happiness, I think to an extent. But when you have money, you don't have these things that everyone else that doesn't is worrying about.

Amy: Steve Sprovach, who recently retired, he was one of the co-hosts on the show, used to always say, money is just a tool. But I think the deal with money is there's this mystique around it. You either use the tool and you control it, or unfortunately, money controls you. And so, when things get out of control, the anxiety over that can be overwhelming. You've got inflation at 40-plus year highs right now. We're still coming down off of this. Rising prices in your bills every time you go to the grocery store. It's harder and harder to make ends meet. It doesn't surprise me that so many people feel just overwhelmed by this. Unfortunately, too, it's my generation. Gen Xers feel the worst. We're kind of sandwiched in the middle. Someone was just saying to me yesterday that they're supporting their parents financially.

Steve: Helicopter generation is what that is. You're still caring for children, but you might also be having parents under your roof that you care for.

Amy: Yes. Right. And so, you're getting squeezed in both directions at the same time bills are costing more. I'm getting anxious actually just talking about it.

Steve: Yeah. It certainly affects mental health across the board for a lot of people. Gen X does get it the worst right now. Small actions or steps that you can take if you're worried about savings. Make those automatic company contributions or automatic contributions to your 401(k), for example. Our income goes up, even if it goes up 2% or 3% a year, and you're doing automatic contributions to that 401(k), at least you're saving more money even if it's baby steps.

Amy: If you're listening and you are really identifying with what we're talking about, I think the next great step is to come up with a financial plan. So many people that come to me stressed out about something, it's because they don't know what the answer is.

Steve: That's true.

Amy: And the financial plan gives you the answer, even if it's you have to cut back on spending or whatever it is, even if there's some painful steps that you have to take. Once you have a plan, I feel like there's so much peace of mind and knowing, "Okay, here's my next step and here's my next step." And it always amazes me how much people will stress about these things, yet they'll wait months to figure out what answers are. And usually it's not as bad as you might be thinking it is, but you've got to get that plan in place to figure out even what step you're going to take.

Steve: A lot of people think that they need to wait until they're knocking on the door to retirement to sit down with a fiduciary financial planner.

Amy: No.

Steve: That is not the case, especially Gen Xers, for example. If you have competing financial priorities between saving for your own retirement, paying for college for kids, saving for college for kids, helping support aging parents. With those competing financial priorities, if you have a plan, then you can identify ways to close gaps if there are any.

Amy: Here's the Allworth advice. One of the most important ways that you can combat anxiety over money. Get that financial plan. It will give you a sense of control. Coming up next, we're talking about how to handle a situation older couples are dealing with more than ever before. 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, as someone who knows, right, I've been through a divorce myself. Getting divorced, it's incredibly difficult on so many levels. And I will say, I'm so grateful that I have the financial background that I do, because going through that I knew exactly what smart money decisions to make. But there is a growing trend when it comes to divorce that makes these financial decisions even more difficult, and that is that people are getting divorced later and later in life.

Steve: Yeah, there's a name for it called gray divorce. And while divorce rates, they have fallen in the U.S. over the past 20 years, they're increasing for older couples. So more gray divorces than ever before. Currently, almost 4 in 10 of those getting divorced are age 50 or older at this point.

Amy: I think it kind of makes sense. I mean, I've talked to people who are in marriages, you know, through the years, not necessarily happy, but they don't want to split up while the kids are still at home, right?

Steve: Yeah, that's a big reason.

Amy: So, 50 or older, it's like, "Okay, kids are off to college or out of college, they're definitely out of the house." And maybe it's that they don't realize they don't actually like each other much until the kids are out of the house. But for whatever reason, you know, 50 or older seems to be increasing, increasing. And for those over the age of 65, the divorce rate has tripled.

Steve: Tripled.

Amy: I'm like, "You're 65. I don't know, you've made it this long. Are you sure you can't make it a little longer?" And here's the problem. Because financially, you probably have one mortgage or maybe no mortgage at all. And now you're going to take these costs, you're going to double them, right? Because you're both paying toward these things. And now everyone's going to have to have a separate house to live in and separate expenses and utilities, and things like that. And then you're going to have to take those retirement assets and you have to cut them in half.

Steve: Obviously, there's problems financially when you get divorced. Depending on the age range that you are, it can be a magnitude more difficult. Put it that way. If you're knocking on the door to retirement. Maybe the reason why, you'd mentioned children are out of the house, so you're 50 years old or so and you've held off to that point, you pull the trigger on divorce when you're 65. It could be maybe because you have different viewpoints about what retirement looks like. Maybe you did just retire and you're like, "Wow, I really don't want to spend this much time with this person."

Amy: Now we're both stuck here all day, every day, and it's not working.

Steve: "I had no idea. I haven't hung out with you this much in 20, 30, 40 years." So, when it comes to those challenges, though, when you've built that retirement savings together, splitting it, going through qualified domestic relations order for a 401(k) that's called a quadro...

Amy: Quadro.

Steve: ...this is going to create all kinds of challenges for your financial plan.

Amy: Interestingly, it affects older women more than anyone else. Women 50 and older say that they're experiencing a 45% decline in their standard of living once they get on the other side of that divorce. Only 20% of men, 1 in 5 of men are seeing that. And I think there's a number of factors for this. You know, I talked to so many women who... And I did this. When my kids were young, when I had my first child, my daughter, Grace, I was out on maternity leave and my boss called me and said, "There's someone here in the office that wants to job share. I said, Amy would never be interested in doing that because she loves her job so much."

It wasn't even out of his mouth and I was already overwhelmed by the thought of leaving this tiny little human who I loved so much, and I said, "I will job share." Well, of course, that cuts your income. Many moms are the ones who make that decision. You either leave the workforce or you maybe work part time to take care of kids, or maybe it's aging parents. But it seems to come down on women more often than men. Then you fast forward to later in life. If you're looking for a divorce, well, then there's just less assets there. I mean, look, even just at Social Security, right? Social Security is based on your highest 30, 35 years of earnings. When you back out of the workforce for a few years, that's going to take a huge dent there.

Steve: It can take a huge dent. One of the big problems here is if you haven't been able to do your own savings as a woman because you were at home, tending to children, raising a family, those types of things, it can take your savings way down and your Social Security benefit rate way down. So it causes more women to have to reenter the workforce at older ages than men. It's not a fair situation when it comes to a gray divorce for those reasons.

Amy: We make fun of me for this all the time, but when I'm out, these are the conversations that I'm having with people. I recently was with some friends in Louisville and it came around to the subject of money. I was so amazed. There's probably 10 women there. Most of them, seven or eight of them were like, "I have no idea. I don't know what we're invested in. I don't know what we have. I leave that up to my husband." Well, maybe you have the best marriage in the world, but also statistics show that women are going to outlive men. So if you are part of a relationship, a couple, and one of you is not paying attention to money, you are doing a major disservice, whether you are happily married for the rest of your life or not. First of all, I think two voices at the table are always better than one, but you never know what's going to happen to that other person.

Steve: Those are great points. When I'm working with folks, I try my best to encourage both planning partners to come in together so they have an understanding of what their financial plan looks like. A lot of times it spawns conversation and people realize that maybe they're not on the same page as far as how they visualize retirement, what they value, what's important to them. Sitting down and having those conversations together in marriage with the fiduciary financial planner can be very eye-opening. We've said it before, it almost feels like we're marriage counselors sometimes.

Amy: Yeah, often.

Steve: Very often. And having that financial plan is going to force you to have those conversations with each other so that at least there's an open dialogue around expectations and you are prepared if something were to happen either through a divorce or the loss of a loved one.

Amy: It amazes me how many couples live together and spend so much time together, yet they sit down in front of us for the first time and maybe they're 45, 50, 55, and the topic of divorce comes up and they look at each other like they're complete strangers. Like the words coming out of the other person's mouth, they've never heard. "Wait, that's your plan for retirement? I didn't know you wanted to do that, right?" And it's like, well, at least you're hearing this now. And I think when you look at these gray divorce statistics so many of these things happen because people aren't openly communicating earlier in their marriages.

I got divorced in my early 40s. It had very little financial impact on me because I knew what decisions to make. I knew not to fight for the house that we had raised the children in because we were paying for that house with both of our incomes. You get later in life, the decisions become, I mean, you're closer and closer to retirement, they become larger, more critical. And it just makes me worried for people who are not having these conversations and who are not both involved in the money decisions in the household.

Steve: Yeah, communication is key. That's a theme. If you're a regular listener to the show, having open communication about your financial situation, about what goals you have and share together is extremely important when it comes to financial planning.

Amy: I think with divorce, as it was with me, there were many years when I thought, "This will never happen to me." I would hear about other people getting a divorce and I'd be like, "That's just never going to happen to us," until it does. And this is one thing that you can do regardless of what situation your marriage is in that can just help you and protect you. And you're never going to feel like it's lost time when you spend it understanding more about your financial situations. Always time well spent. Here's the Allworth advice. Not burying your head in the sand during your marriage will serve you financially if you get divorced or whatever happens. Coming up next, we've got five myths about Social Security. As the trust fund risks running out of money we want to make sure that you are making smart decisions 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. If you've got a financial question that is just stressing you out, 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 and it's coming to us. We'll help you figure it out. And straight ahead, I've got major feelings on this. We're talking tipping and the wild amount of money people tip based purely on guilt. I'm starting to get to the point where I don't feel so guilty about this. We'll get to that in just a few minutes.

We've spoken time and time again about the troubles with the Social Security program and that its trust fund is going to run out of money in about a decade. But I think that information has led to a lot of misinformation. And I think the problem with that, Steve, is people are making uninformed decisions that will affect them for the rest of their lives when it comes to claiming Social Security.

Steve: Yeah, so pay close attention because we don't want you to be one of the uninformed that are making decisions based on misinformation. So myth number one, Social Security is or will be bankrupt. That is not the case. Social Security is not going to run out of money because the program is financed by payroll taxes. So as long as people are working, then money is going into the system.

Amy: The problem with the trust fund is when Social Security was first set up in the 1930s, the full retirement age was 65. Nobody was living to 65. So it was like this great idea, but no one actually claimed it. So the money piled up and piled up because people were working and paying into the system, yet very few people, because of health care at the time, made it to the age of 65. Well, now full retirement age is 66, 67 in most cases and we've had all these amazing advances in health care and medical breakthroughs.

Steve: People are living longer.

Amy: People are living longer and they are retiring in droves. The baby boomers are retiring in record numbers. And we don't have a large enough population that are paying into the system now. So there's this imbalance. You've got people paying into the system, but more people claiming these benefits than ever have before. If nothing is done to fix that, we just saw the new Social Security trustee report come out in just the past few days. Now they're saying in 2035, that trust fund looks like it will be depleted. Okay, if that fund is depleted, doesn't mean you're not going to get any money. It means you're going to get the latest projection I saw, 18% reduction in benefits.

Steve: Yeah, so to be clear, it is the trust fund reserves that are projected to become depleted. The analogy there would be if you personally have a financial crisis in your household and you use up your emergency fund, but you're still working and still bringing in money, that's the analogy here. So there would still be benefits and we've talked about it before. It would be a reduced benefit for everybody collecting and set to collect in the future.

Amy: One thing I do want to bring up, and this is something that I think we're just starting to get some clarity around, in the past when there has been an issue with Social Security, right? We saw this years ago when they raised the full retirement age to 67. This was across partisan lines. It was sort of a miracle. I don't know if Washington can pull that off yet again, but one of the things it did was it said, "We're not going to change anything for people who are already claiming these benefits." It now appears that those even claiming benefits would have a reduced benefit at that time, not just those that are years away from claiming: millennials and Gen Zers, but this could have a larger impact.

Again, though, this is if Congress does nothing to touch this plan. I can't imagine anything that Americans are more invested in than Social Security. I got to think Congress is going to do something, but we've had several senators on the show in the past, really grateful that they've come on. When I asked them about Social Security, and I'm telling you, I've hit them every which way from Sunday, nobody has a lot of clarity on what's going to happen here or even what they think should happen here. The problem is whatever decision they make, it's going to make some people angry.

Steve: That's the key here. Maybe I'm just naïve, but I'm with you. I do believe that something will happen, but politicians, they're not going to pull their hat out of the sand until they absolutely have to, until the 11th hour. So, myth number two, young adults won't benefit from Social Security. It's not accurate. There's going to be some kind of, and again, maybe that's just the optimist in me for some of this. There's still going to be some benefits available for younger generations, iit's just at this point without any changes, reduced.

Amy: I think that's the number one myth that we see, in so many people coming into our offices here at Alworth saying, does not count on Social Security because I know I'm not going to get any. Well, that's fine. You can build a plan that way, but it's just not the truth. No one's saying you're going to get 0%. We're saying you're going to get probably 80%. And that again, is if Congress does nothing.

Steve: If no changes happen.

Amy: Yes. And I can't imagine that voters are going to allow that to happen without Congress having to take a stab at fixing this some way. I agree. They're going to kick the can down the road as long as they possibly can, but at the 11th hour, they're going to have to address this. And who knows what they're going to do, right? They could raise full retirement age. They could means test it, meaning those who've saved more longer, better, right, might have to take a reduced benefit. And those who don't have as much money... Doesn't sound fair, right? And again, this is back to someone's going to be upset about this, but who knows what the ultimate plan is. But so many people then are saying because we don't know what they're going to do, the first day that you can possibly collect Social Security benefits at the age of 62, you should.

Steve: Yeah, this is myth number three that you're getting into here. And there are different viewpoints on this perspective. If there's going to be a shortfall and you have the means and collect as soon as you can so that you just capitalize on getting that cash flow now. If you're depending more on Social Security, and you don't have a lot of other savings, then maybe it is a good idea to continue to defer.

Amy: Another thing, another myth here that we need to talk about, and I've heard this one too, the federal government has raided the trust fund by law. Every dollar of income coming into the Social Security trust fund has to be invested in interest bearing securities backed by the full faith and credit of the U.S., right? I mean, it's by law what that money has to be used for. Not saying that that money hasn't been spent for other government needs, but it means Social Security is not worthless, right? Those IOUs that are in there, they have to be paid for.

Steve: Yeah, and backed by the full faith and trust of the U.S. government.

Amy: Hopefully that means something. Hopefully that means something. Here's the Allworth advice. Social Security was only meant to cover 40% of your income in retirement. Please remember that. Remember that when planning your financial plan. Coming up next, how to overcome the guilt around tipping. 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. Few things in recent years have gotten my blood boiling as much as this debate over tipping. We were just talking about the fact that during the pandemic, the people who were working in restaurants trying to provide meals for people going in, not sure whether it was safe or not, I had so much gratitude for them. And I think people were really generous during that time of tipping. But now people have gone back to work. Society has opened back up, right? Things have become a little more normal. As a result of that, though, everywhere you go now, they're asking for a tip. Someone is putting ice cream on top of a cone and they want $2 tip for that. They're putting donuts into a box and they're flipping that tip screen around in my face. Like enough is enough.

Steve: Yeah. Research from a polling agency called Talker Research, they polled 2000 Americans with questions about what we're calling tipflation and found out that Americans are spending about $500 a year more than they would like to. You bring up guilt. That's what this is fueled by. Just like you, when everything was shut down, as far as COVID shutdowns were concerned, I was going to restaurants and getting carry out to support local businesses. And guilt was causing me, I'd look around and be like, "Wow, I wouldn't want to be here." And these people, they are, and they're enabling this business to stay open. They're working for themselves to get a paycheck. They're giving me a delicious hamburger, whatever it is. And I was tipping graciously. But when it comes to where we are today,

Amy: We're not there.

Steve: I went to a Reds game last week or the week before, and they changed around how some of the cafeteria situation works. And they have pre-made food and then you ring it out yourself. And then a tip screen comes up.

Amy: So you're serving yourself, you're getting the food yourself, and they want you to tip?

Steve: I took a plunge, Amy. You know what I did?

Amy: What did you do?

Steve: Didn't tip.

Amy: Yes.

Steve: That's my first time, but felt wrong still.

Amy: Well, but here's the difference. You don't have someone on the other side of that screen looking at you.

Steve: There was an attendant standing around in case we had issues looking.

Amy: Did you just like try to distract them like, "Hey, look at that over there," then you hit No Tip?

Steve: Nop. I took the plunge and I did it. She was looking when I hit zero.

Amy: You felt a little guilty about that?

Steve: My palms are sweaty just talking about it.

Amy: We're spending about $40 a month on average due to the pressure of tipping. These screens that they turn around in your face. And it always surprises me because all of a sudden it's places that never asked for tips before are suddenly asking for tips. And at least my thought process is, okay, I understand that in restaurants, the hourly wage is lower because of the expectation of tips, but at other places, they're not. If you're making ice cream or donuts or whatever it is, why are you asking me to tip on this if you're already paid? It just took you 37 seconds to put those donuts in that box.

Steve: Yeah, I'll throw them a dollar maybe, but the days of giving $5 to put a donut in a box are over for me.

Amy: We've got lots of thoughts on this. Thanks for listening tonight. You've been listening to "Simply Money" presented by Allworth Financial here on 55KRC, THE Talk Station.