Amy: Tonight, even really smart people can make mistakes, especially as they're heading into retirement. You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. It's so interesting because for many of us, the closer we get to retirement, especially, we spend a lot of time thinking about it, right? And you'd think we would, like, think through all the things, but we've helped thousands and thousands of people through the years make this transition. Everyone misses something, everyone forgets something. Right? It's such a huge life transition that I don't think you can downplay the scope of change that it is.

Steve: I met with someone yesterday, Amy, that is expecting an early retirement offer today. It's kind of an open secret where she happens to work. And even though she was ready, it still is blasting a whole lot of information at, and you nailed it. At one of the biggest life decisions you're gonna make. So the best-laid plans, I mean, you know, you got a lot of decisions to make around retirement.

Forget the fact that, hey, wait a second, I'm not gonna have this paycheck anymore. I mean, that's the first thing that hits you. And then it's all right, everything else. And how are we gonna get by? And does our plan work? And what's my day gonna be like? And I don't care how smart you are, how prepared you are, how many financial plan updates you've done, you're still gonna question everything right from the get-go. And, you know, because emotions do work their way into the picture, you may make a mistake. And one of them is, okay, did I pick the correct Social Security claiming strategy?

Amy: Yeah. And there's like a gazillion different possible strategies. Yeah, and I think sometimes looking to those who've gone before you and saying, "What did you do wrong?" can be incredibly helpful. And for a lot of people, and there's study after study that shows most people claim Social Security the day, the minute, the second that they're allowed to. It is like 62 done. Done. Right?

Steve: Yeah.

Amy: And maybe that makes the most sense for you, but maybe it doesn't. Maybe waiting until your full retirement age when you're going to get more money makes more sense. Or maybe even waiting until...

Steve: Maybe 70.

Amy: Yes, exactly. For every year that you delay that decision, the amount that you're going to get in that monthly benefit changes. And there's so many different considerations that are incredibly individual there. Right? How much have you saved in other accounts? Like, how much money do you have? How much do you need that Social Security? How healthy were your parents? Have you had any kinds of diagnosis? And things like... All of those factors and so many more go into helping you determine, okay, when is the right time? And I think for many it's just you default to, "Well, this is the first day that I can claim it, so sign me up for it."

Steve: Well, sure, sure. I mean, if you're looking at, hey, paycheck is gone, I gotta replace that money somehow. Oh, Social Security, where do I sign? You know, that's kind of what goes on with a lot of people. I think the first question you need to ask yourself before you sign any Social Security papers is, am I retired retired? In other words, there are a lot of people, and this is more important if you're under full retirement age, that's something anybody that's gonna draw Social Security needs to get comfortable understanding.

What is full retirement age? For most people, it's age 67. Okay. But you want to check with Social Security what your personal full retirement age, because that's the magic age where it doesn't matter if you make a million dollars a year, there's no reduction in benefits once you hit full retirement age. But if you draw Social Security before full retirement age, you may have a pretty significant reduction in Social Security benefits if you make anything this year that the number's about 21 grand, which is minimal. I mean, it doesn't take much of a job to make 21 grand. And if you're already drawing Social Security and you're not yet 67, you're gonna have a reduction in your benefit.

Amy: So, as you know, we bought a few small businesses over the past year because as you also know, I'm a crazy person, so why would I not wanna take on more, right?

Steve: You just didn't have enough stress in your life.

Amy: Exactly. Throw something else at me. But one of the interesting things that I've learned as part of that is we have several people who have retired from their first job, claimed Social Security, and then they were just bored. They missed it. They wanted to get out of the house. They wanted something to do. They wanted to interact with people, you know, on a regular basis that were kind of outside of their home. There's a number of different reasons, but they decided they wanted to go back to work. We have to keep such a close eye on their hours, you know, and they would work more, but they're already claiming Social Security and they don't want it to have an impact on how much they're already getting in that benefit. So it is, it's something that I think for a lot of people, you think I'm done. But it's interesting because a year later, and that seems to be kind of the sweet spot for a lot of people, they decide, I don't know, am I really done?

Steve: Yeah. You're bored.

Amy: You wanna have all your options on the table. And I think claiming Social Security the minute that you can, can take some of those away.

Steve: But, you know, there are people where that does make sense. If you're over full retirement age, over age 67 for most people, it doesn't matter how much money you make.

Amy: Work away.

Steve: Yeah, exactly. But every year that you wait after full retirement age to age 70 is an 8% per year increase...

Amy: Guaranteed.

Steve: ...on your, your benefit before the inflation adjustment. So yeah, I mean, it's a huge bump. Does that mean you absolutely should wait? Not necessarily. I mean, it's not just longevity, but, you know, accidents happen. There's about a 12-year break even between drawing a lower benefit younger and a larger benefit later. So, you know, like Clint Eastwood said, "Do you feel lucky?" You know, I mean, seriously, these are things you have to think about. But for anybody who's 62, 63, I think the most consideration on whether or not you draw Social Security is, am I gonna go back to work for anybody else and make possibly more than 21 grand and change?

Amy: You're listening to "Simply Money Tonight" here on 55KRC. It doesn't matter whether you are knocking on retirement's door or decades away, this is for everyone because there are some who have gone before you that have made mistakes, and wouldn't it be nice to learn from them so you're not making the same ones? One of the big ones that I see that is really limiting a lot of people is going into retirement and taking debt with you. Mortgage, you know, bought a couple of new cars.

Steve: It's usually a mortgage.

Amy: Yeah, it's usually mortgage. But I will also say we've seen a rise in student loan debt for people in their 50s and 60s over the past, I don't know, several years.

Steve: Bought a car.

Amy: Credit card debt, like, all kinds of debts that we've seen.

Steve: Yeah. And as much as I hate seeing somebody in debt while they're retired, if you already have the debt, let's say it's a mortgage and, you know, you like your house, you don't plan on moving, you still have to have a game plan. And maybe you have tons of assets, tons of investments where, okay, I just draw money out of my 401(k) or IRA and that pays the mortgage. That's gonna get really, really old when the market is down. I mean, it really does. When you're making money hand over fist, "Hey, look at that. You know, the money I'm making and I still have the same amount after things have been going up so much, and that's paying my mortgage. What a great deal this is," wait till the market goes down and you're gonna say, "What am I doing?" I gotta get out of this deal. It'll drive you absolutely crazy. But a lot of people do it.

Amy: Another thing that people do is they're just too conservative with your investments. I saw this firsthand years ago when I first started working for Allworth. We went to a public speaking event. It was Brian, James and myself, and it was this sweet church on Kenwood Road. This great group of people, every single one of them was retired. So Brian and I got up there, we had lunch with them, they were great. The people at our table were super sweet. The first person that gets up to ask us a question is like, "You know, I worked really hard all my life. This was my job. This is what I did. I saved and saved and saved. And now I wanna live off of that money. I want it to grow, but I don't wanna lose a penny of it."

Steve: Yeah. Yeah. I wanna make money and never lose.

Amy: Where can I go? And the next person stood up and the next person and it was all variations on the same theme, which was, I worked really hard for this. I don't wanna lose a penny of it, so can I like bury it in my backyard and will it sprout a money tree? You know, and it's like, oh, as much as we wanna tell you that we've got the seeds for that money tree, you have to find the right balance for you. Right? You've gotta find a way to protect that money, but you also need it to grow. Because let's face it, I mean, we do plans at Allworth where you're living into your 90s. Maybe you don't live into your 90s, but heck, what if you do, you don't wanna outlive that money.

Steve: Amy, I'm starting to hear again, "Hey, I just wanna live off the interest." Because we're starting to earn interest on our money, right?

Amy: Yes.

Steve: And, "Hey, believe it or not, Steve, I just got 3% on an 11-month CD." That's awesome. Oh, okay. Fantastic. Finally, we're getting paid to, you know, let banks handle our money. Break that down a little bit. If that's your IRA or your 401(k), 3%, that means it's taxable income when you draw that money out. So after taxes, what is it? Two-and-a-half percent maybe? Oh wait a second. Inflation, okay, inflation is a lot higher than two-and-a-half percent. Are you really? You're getting by this year, but what happens next year? What's that buy in the year after that? I mean, you are going broke safely. So, you know, I understand some people want to be ultra-conservative. Okay, fine. If you've got enough money, maybe you can do that. But most people don't. And that's why the stock market exists. I'm not saying everybody has to be heavy in stocks, Amy, but at least get real about I need to outpace inflation. I want to keep my standard of living. It usually requires at least a little bit in stocks, and so you just have to figure out how much am I comfortable with. And that's a really personal decision.

Amy: Speaking of stocks too. One of the major mistakes that we see people making is having this affinity for one stock. One company, be it where you worked all your life or one of the hometown big companies, whatever that is. Or it's a big tech company, you name it. But I've seen it's almost like this attachment, right? Like this emotional attachment to this company on good days and on bad days and every day in between. You can always justify this reason why you own so much stock in that particular company. Well, anything could happen.

Steve: There's a big soap company in town that a big chunk of most employees' retirement account is in that company stock. And, you know, they're very generous with giving it to you. But you really should ask yourself in retirement, okay, they've been good to me, but now I have to look out for myself because I'm on my own. I'm retired. Do I want that much money tied up in any one stock? I don't care how good the company is. It doesn't mean you have to sell it all at once. I mean you can, you know, roll it over. There are strategies you can use to sell it off in bits and pieces, but the bottom line is you generally don't want to have too much of your net worth tied up in one stock. Because ask the people, you know, that were in companies that went belly up after they retired and they're gonna tell you, yeah, that was a big mistake, having a lot of money tied up in that outfit.

Amy: Another big mistake that I think people make and it's not even a mistake as much as just a lack of understanding or confusion about...

Steve: What's that?

Amy: ...how much money to withdraw from retirement accounts and which accounts to withdraw from. It's tricky. It's sticky. And I would say even if you've kind been kind of a DIYer with your money all the years that you've been investing and you've done really well, this might be the point at which you decide I'm going to get some professional help here. Right?

Steve: Yeah. Yeah.

Amy: Because this is just something that, unless you're doing this all the time, getting it right and the difference is if you get it wrong, I don't know, maybe you'll never know, but it could cost you thousands, tens of thousands of dollars just pulling money out of the wrong kind of account at the wrong time.

Steve: And it's mainly just understanding how are distributions from different accounts taxed. I mean, if it's an IRA, yeah. whatever you pull out is gonna be taxed as income. You're gonna pay a whole lot more in tax on that than if you're just drawing money out of the bank. You know. So first it's a tax decision, but don't forget about the IRAs because if you're over, you know, required minimum distribution age and forget to take the money out that you're required to take out, okay, it's not the 50% penalty it used to be, but it's still a 25% penalty. Plus you still have to take that money out, you know, so don't forget your required minimum distribution. By the way, it's not the responsibility of your advisor or your broker, or the bank to make sure you take it out. It's your responsibility. Now, they'll help you, they wanna make sure you don't make that mistake, but it ultimately rests on your shoulders. So stay on top of it.

Amy: Another big one is just overspending, right? Especially in the early years of retirement. Here's the thing. We want you to be able to spend more, but you have to know how much you can spend. You use the term spending plan. And I think that's a genius way of looking at it. What am I going to spend? How much can I spend? How much can I afford to spend? All of those considerations have to be part of it.

Steve: Oh, you can't run out of money, that's for sure. And here's my pet mistake. The people that forget about long-term care insurance, because...

Amy: Huge one.

Steve: ...if you or your spouse wind up in a nursing home, that can bankrupt you really quick. I mean, that'll make any plan go bad. Now, you might have enough money where you can self-insure, but you need to know that when you're in your 60s because if you wait till 70 or 80 to buy long-term care insurance, it gets crazy expensive. Make that decision in your early 60s at the latest.

Amy: Another biggie, right? Not having estate planning documents. Your will, your power of attorney, all very important. Here's the Allworth advice. A qualified financial planner can do a really great job of helping you avoid these mistakes before it's too late because they've helped many, many others, hopefully countless others go before you. They've seen all the mistakes that have been made Coming up next, how to know if your 401(k) is maybe too aggressive and what you can do about it. You're listening to "Simply Money" here on 55KRC, the Talk Station.

You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner along with Steve Sprovach. If you can't catch our show every single night, you don't have to miss one of them. We've got a daily podcast for you. You can listen anytime that you want. Just download our show. Search "Simply Money" on the iHeart app or wherever you find your podcast. Coming up at 6:43, tax consequences of living somewhere else during retirement. You're going there for the beach. Right? But are you thinking about the tax consequences of it? We'll talk you through that one.

I have heard many people through the years tell me how I should invest my money, be it in gold, be it in baseball cards, be it in the stock market. Everyone kind of has their thing that they think that you should invest in. But history and countless studies and financial research shows actually the best place to invest if you're looking for a higher rate of return than the inflation rate most of the time is the stock market.

Steve: But how much is enough and how much is too much, right?

Amy: There's a sweet spot. Yes.

Steve: There is. There is an absolute sweet spot. And since that's... Your 401(k) is usually where most of your money's tied up. One of the first things I ask people that want me to take a look at their stuff, "All right, how's your 401(k) invested?" "Well, I think it's mostly in mutual funds." Ah, man. That just tells me you have no clue how much is in stocks or bonds, and I get, not everybody does this for a living. This isn't the way most people grew up. I sure didn't grow up knowing anything about stocks or bonds. But you know what, if this is what you're gonna depend on how you can live in retirement, some basics are pretty important. And the number one basic, I think, is, all right, what's my ratio of stocks to bonds to cash? I mean, let's just at least get that done.

Amy: And also, what is your risk tolerance? Because that really dictates a lot of this here. And I think it's easy to say in a good year, like, bring it on. Right. I can take on anything, you know, I'm a smart investor and, well, that's great. Every time you check your 401(k), your balance is up, you can't lose. Right?

Steve: Right.

Amy: But then the first side happens.

Steve: Everybody is a genius, there's a rise in the market.

Amy: Then a year like 2022 hits and all of a sudden down, down more, down more. Every time you check your 401(k) and all of a sudden you realize you're thinking about that money a lot more than you did in the past, and maybe it's keeping you up at night. This is kind of a gut check, a reality check for actually maybe my risk tolerance isn't what I thought it was. If there's huge fluctuations up and down in how that money is invested and you're really having an issue digesting that, well, you're probably taking on too much risk.

Steve: And, you know, when I ask someone, you know, how much risk are you taking? How much risk are you comfortable with? Every once in a while they're gonna say, "Well, you're the expert. You tell me what I should be doing." No, you know you better than I know you, you know. I mean, some people are really comfortable with 100% stock. I'm not one of those people, but some people are. Some people are petrified of having a dollar in the stock market. I think the first thing you want to do is, and we call it a risk tolerance questionnaire. Every firm uses them. You can Google that term, risk tolerance questionnaire, and they all ask variations of the same kind of theme.

If you start the year with $100,000, would you like to make $10,000 by the end of the year at the risk of having $10,000 less? Would you be comfortable with losing $10,000 is the way I would look at it with the chance that you might make $10,000 or $20,000 gain, $20,000 loss. And they keep asking variations of that to get to the point of, okay, this is where I'd be comfortable. No, that's a little too crazy for me. And that will help you determine should I be 60% stock, 20% stock, no stock, 100% stock. And it really helps you. I think that's one of the first steps you should do. And most people have never done that on their 401(k).

Amy: Well, and we're talking about your 401(k), and that's an individual account, right? It's your 401(k). Maybe your spouse has one too. But for most of us, we look at that kind of retirement pot of money as both of ours. And I do remember the first time, it was my ex-husband and I, took one of these risk tolerance questionnaires. Of course, we were on absolute different ends of the spectrum. And I think that's a consideration too is, you know, both of you, if you're in different places about how much risk you can handle, you've gotta find kind of the happy medium for both of you and sort of agree to that. Not that everyone's accounts have to be exactly the same, but retirement is a common goal, right, for both of you. And so I think that has to be, and again, I'm always a big fan of communication, but I think that has to be part of it.

Steve: I'll argue that a little bit because if you're totally different on how much risk you're comfortable with, your money's your money, and his money's his money. So, you know, for you to take on more risk than you want, you might not be comfortable with that. And I'll even tack onto that. You have different buckets of money. I mean, your retirement account is meant for retirement, which if you're, you know, in your 40s, that's 20-plus years away. If you're in your 60s, that's a lot less than 20 years away. Time horizon is really important.

When do I need this money? And the shorter term that you need the money, the shorter your time horizon, probably the safer you want to be. And I think the nth degree of that is your emergency fund. Your emergency fund that you need on a moment's notice, you probably shouldn't have a dime of that invested. And that's why we say keep it in the bank, at least earn some interest in the money market. But you want full access to that tomorrow if need be. And that's why you have different buckets of money with different purposes.

Amy: Well, and not only that 401(k) for the emergency fund, but also maybe you've got a son or daughter who's getting ready to get married in the next couple of years, or they need help paying for college. That money also does not belong in a 401(k) regardless of how aggressively or conservatively it's invested. So understanding where that money belongs in and outside of that 401(k) is a big piece of this equation as well. Here's your Allworth advice. How aggressive should you be with your 401(k)? Ask yourself two questions. When do I need that money? And how much risk can I handle? Coming up next, how to prepare for your future, if you get maybe a major medical diagnosis. How do you protect your family? You're listening to "Simply Money" here on 55KRC, the Talk Station.

You're listening to "Simply Money" brought to you by Allworth Financial. I'm Amy Wagner along with Steve Sprovach. It's a diagnosis that no one ever wants to get, but we hear about it all the time. Dementia, Alzheimer's, if this is a word that you've heard lately, a diagnosis for you, or someone that you love, listen up because our estate planning expert from the law firm of Wood and Lamping, Mark Reckman is joining us tonight with some advice. Where do you go? How do you plan for the future when the future looks so unsure, Mark?

Mark: A diagnosis of dementia is a very overwhelming thing. And incidentally, there are many, many different diseases that cause dementia symptoms. Dementia is a set of symptoms. It's not a disease. It's like a runny nose. A runny nose can be caused by many different kinds of diseases. And dementia is a symptom. And it's usually accompanied by a failure of memory. Usually, it's memory loss, usually it's short-term memory loss. And it is, people think Alzheimer's. But the truth is Alzheimer's is not even in the top 10 causes of dementia. But still, it's a serious one.

So what people think about, and the way people react when they hear that a family member has dementia is that they immediately assume that that person is no longer competent. And that might be true if they're late in the disease process, but more often than not early in the disease process, dementia is not a determination of capacity. We use the word capacity to mean the legal ability to sign paperwork, the legal ability to conduct business. And early in the dementia progress, you still have capacity. So someone may be diagnosed with Parkinson's or Huntington's or Alzheimer's or all the many other multi-infarct dementia. There are many different kinds. That's not necessarily means that it's too late to put your affairs in order.

Steve: Well, that shocks me because one of the things that I constantly am asking people that I sit down with is do you have powers of attorney? Do you have legal documents in place? And, you know, "No, I meant to get to that last year." Well, yeah, you've been saying that for five years, and then I hear of a dementia diagnosis. So are you telling me that early stage dementia, you can still have the capacity to sign legal documents? And if that's the case, who makes the determination that this person is still competent to sign a document?

Mark: Well, Steve, that's exactly right. In the early stages of dementia, most people still have the capacity to sign a power of attorney. Because what the law examines is not whether or not you are 100%, but whether you understand the document you were signing, meaning that you understand you're appointing someone to be your agent. Now that decision needs to make sense. In other words, it can't be a stranger. It needs to make sense in the context of who you're appointing and who the individual is. But you still have the capacity, even with mild and even to some degree moderate dementia, you still have the legal capacity to sign. Now you ask who makes that determination. Well, the law presumes that you are legally competent until there's a determination that you aren't.

And as a practical matter, this is really determined, you know, in the marketplace. In other words, the notary is probably the first person who is asked to weigh in. Because if I signed a power of attorney, I'm gonna want to have it notarized. It's not legally required for every application, but it's legally required for enough application that it is not a good idea to sign without a notary. So you sign with the notary, the notary's gonna need to be satisfied that you know what you're signing. That doesn't mean that you've read every word, or that you understand the nuances or the details. But whether you understand that you're appointing your son to manage your money, to buy and sell your stocks, or to make medical decisions, or to have access to your medical information, that's enough to constitute capacity for signing these documents.

Amy: You're talking about the power of attorney here, Mark. But let's talk about what are the other documents that, hey, if you get this diagnosis in short order, you need to have kind of all of these sort of executed and laid out in front of you.

Mark: Well, my list starts with that financial power of attorney we just got done talking about. The next thing on my list would be a last will and testament. And this is what we call testamentary capacity. Does someone have testamentary capacity? And if they do, they can sign a will. That doesn't mean that they're 100% just like we talked about before, but as long as they know who their family members are, they roughly understand the extent of their holdings. They don't have to know the exact balance of their retirement account or their IRA, but they gotta know that it's at Allworth Financial and that it's roughly $100,000. That's sufficient.

And the third thing is that their will has to have gifts in it that makes sense in the context of who they are. In other words, a will doesn't leave everything to their gardener. If a will leaves everything to their children or to their siblings, or to people with whom they have had good relationships with, it's gotta make sense. So if you have those three elements, the ability to have 100% recall with words or even the ability the next day to remember exactly what you signed doesn't factor in. It's not a factor. As long as I'm making proper decisions at the moment I'm making them, it's actually not illegal if I don't remember it the next day.

Steve: Let me ask you this, Mark. I don't think a lot of people realize how important a power of attorney is. So let's say you never got a power of attorney and you have a major medical condition. What happens? Who can make those decisions for you if you don't have a power of attorney?

Mark: Well, we're talking now, Steve, about healthcare powers of attorney, and I'm glad you brought that up because that's the next thing on my list of really important documents. And there's two aspects to it. Number one, that document authorizes my doctor and my nurse, and my hospital to talk to my agent. Because the privacy laws that we have in this country now, which, you know, when the HIPAA laws, that's the privacy healthcare laws, when they were passed 15, 20 years ago, people just ignored them. I mean, people just acted like the law was never passed. So they went back and they revised the law and they put in some stiff penalties. And now people are scared to death of that law. And it's hard for anybody to talk to their wife's doctor or their son's doctor. They won't do it. So, one of the two key features of a healthcare power attorney is the right to get medical information, and the second key feature is the right to make medical decisions.

Amy: Something else I think worth talking about here too, Mark, is, you know, this person who has always been of sound mind and to this point obviously might own property, might own a car, their names are gonna be on the deeds and the titles and those kinds of things. Is it still safe for them to have their names on those pieces of property?

Mark: Yeah, and that's a great question. And the answer of course is it depends, but often this is the occasion to take their names off of the car title. Maybe it's a good idea to take their name off the deed to the house. If I've got dementia and I'm married, this is probably a good day for me to take my name off of the deed and put that deed into my wife's name alone. The same thing applies to beneficiary designations. I'm talking about life insurance, I'm talking about retirement accounts, I'm talking about annuities. If I own them, it might be a good idea for me to transfer ownership to my wife, but most importantly, it's important for me to review the beneficiary designations to be sure they're up to date. And one of the subtle but really important points is what difference it makes to the spouse. So for example, if my wife has a retirement account and a life insurance policy and I get dementia, she needs to decide whether or not she still wants to leave that money to me.

Amy: Great point.

Mark: Because maybe she shouldn't, if I'm demented, especially if I'm badly demented, I shouldn't be inheriting money.

Amy: You know, Mark, when I think about this, I think about just what an emotional time a diagnosis like this is. And for some people, it can be so overwhelming that you don't do anything. And I think what you need to understand is that it's a call to action, right? If a diagnosis like this comes along, there are things you can do, you probably just need to move a little more quickly. Great advice as always from Mark Reckman, our estate planning expert from the law firm of Wood and Lamping, you're listening to "Simply Money" here on 55KRC, the Talk Station. You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner along with Steve Sprovach. Do you have a financial question that's just keeping you up at night? There's an easy way to ask it of us. 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 straight to us. We'd love to talk about it with you.

Coming up straight ahead, money advice from a few people who lived maybe, like, 200 years ago. Turns out they were pretty smart when it came to money. So, we'll tell you what you can learn from them. Okay, so this happens all the time, and it happens in my house too. For one reason or another, the conversation comes up, "Hey, we've lived here all of our lives, but maybe we wanna go somewhere else when we retire." Maybe your consideration is about taxes. Maybe it's mine, which is I'm only happy when the sun is out and the sun is never out here. So why do I live here?

Steve: Wait, wintertime in Cincinnati is gray. What?

Amy: Yes. Oh, oh. I was honestly just having this conversation recently with my husband of like, I really like only feel like I'm half awake sometimes around here. But if the sunshine could be out all the time and it could be 80 all the time, I would be truly living my best life. So why do we live here? Whatever the conversation looks like in your house, if it's happening, I do think there are some considerations beyond just the weather forecast that are worth thinking through here if you're getting serious about maybe making a move.

Steve: Well, and this is a conversation I think everybody needs to make as they head into retirement of where do we wanna live? Are we gonna stay in Cincinnati or are we gonna get a vacation home? If we're thinking of moving, where? Why? What's it gonna be like? I sat down with my wife who's from Minnesota, this is years ago, and I just, you know, say, "Hey, I know you miss Minnesota and you miss your family. Would you wanna live there in retirement?" And she shot right back. I mean, "Heck no. It's cold up there."

Amy: Question answered.

Steve: Well, exactly. Well, yeah, pretty much. But, you know, there are a lot of people moving mostly to the south. I mean, Florida, Texas, Tennessee. And there are good tax reasons behind those decisions, but you know what, just because a state like Florida doesn't have a state income tax, is that the best reason to move there? It's not that simple. That's the whole issue. It's not that simple.

Amy: Here's what I've learned when it comes to taxes, and I think this is a good way of thinking through things. It is not that Florida spends less money than other states do. Right? They need less money, they're going to get it from you somehow. My first job, right out of college, I lived in western Kentucky, but like right on the Kentucky-Tennessee border. And it was so interesting to me because I had lots of friends who lived in Tennessee and they would brag their heads off about the fact that they had no state income tax in Tennessee. Great. Also then they would drive an hour to cross the border in Kentucky to go to a Walmart to buy their groceries because the sales tax was so high. You know? And it's like, okay, yes, Florida is great, no state income tax down there. But what is the state sales tax? And how many times did you pass a toll on your way from one place to another, right? They're gonna get their money somehow. And so I think kind of making these decisions based on tax situation in a certain state, it kind of all comes out in the wash.

Steve: Yeah, it kind of does, but I'll tell you what, the best 70 bucks you can spend is on TurboTax. If you're thinking of moving into a different state, just run your taxes based on you living in one state versus the other.

Amy: Oh, that's a great idea.

Steve: Yeah, that'll tell you exactly how much difference the taxation is. And then I would suggest, before you make any final decisions, rent a place for a couple of weeks, get comfortable with the area, and find out, like I did when I went out to Arizona to visit my son and his family. Okay. Property taxes out here are dirt cheap in Arizona. Okay, that's a plus if I decide to buy a place. And then I bought something that cost a little bit of money and sales tax was 10%. What? What? Ten percent? I thought Hamilton County was high. In Arizona, there's a state sales tax, a county, and a local, and they piggyback on each other. And you can literally pay different sales tax if you drive two miles to a different town. You know, so, okay. Does that mean you don't wanna live in Arizona? Not necessarily, but go in with eyes wide open, live there for a while, and see what it's like to find out. Okay, I pay less here, more here. That still works out to my advantage. The weather makes it all worthwhile, whatever the case is, but don't make a rash decision.

Amy: You know what? I think that you make a great point. As you know, I'm a huge proponent of taking kind of a test retirement. But I always actually think about it kind of like being at home where you are. But to your point, I think it's a great idea if you're seriously considering moving somewhere out of state where tax laws are different, and everything looks a little different, it makes a lot of sense to test-drive it. Go for a month, see if there's anything that catches you off guard as to, wait a second, this could be a deal breaker. If there's not, right, you can find, you know, like, oh, well sales tax was higher than I thought, but you know, still comes out okay. And I really actually do like this area and the weather and nothing's catching you off guard. I mean, one of the things in Florida is to think through like hurricane insurance and all that kind of stuff. Once you figure all of that out, you've got all the information, then I think you're kind of better armed to make the best decision for your family.

Steve: I agree. You don't wanna do what my dad did. Okay. He retired...

Amy: Go and then decide it was a bad idea.

Steve: He was so sick of living in the Northeast, he moved to Florida, you know, and found a nice, you know, reasonably priced house. Loved it for about six months and realized doctors weren't there. His friends weren't there. He hated snakes. There was a snake on his front lawn one day.

Amy: That would be enough for me too.

Steve: But he wound up selling his house two years later and moving back to where he came from and took a beating on the house. I mean, that's a perfect example of why you don't wanna rush into the decision. You want to test drive your retirement in that state before you make a final decision. And that way, you're comfortable you made the best decision with the information you had.

Amy: I feel like my takeaway from this is if you don't like snakes, make sure you go first to see what the snake population looks like. That is a great point to make. Here's the Allworth advice. Wanna live in a different state during retirement? Factor in a lot of things, including taxes before you hit the road. Coming up next, what you can learn about money from our country's founding fathers. Turns out they were pretty smart guys. You're listening to "Simply Money" here on 55KRC, the Talk Station.

You're listening to "Simply Money" presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. I don't know, they founded our country. I guess we should give them some credit for being some smart people. We're talking about our founding fathers tonight. And, you know, it's so interesting to me too, just thinking about it from the standpoint of like setting up a government in a country and all the things that they did, and even all these years later, sometimes I'm like, that was really smart. What was the conversation right behind that when they landed on this or that? So as we kind of learn more and more about the people who were part of founding our country, turns out they were also pretty smart when it came to money as well.

Steve: They sure were. I mean, what are the odds of getting a couple of dozen leaders together at a certain point in history to form a country, and still be talking about not just what they did with the Constitution, but they had good money advice? I mean, John Adams, you know, the importance of financial education, were huge proponents of financial education and, you know, we're gonna talk English, like, you know, they used to say it, his quote is, "All the perplexities, confusion and distress in America arise not from the defects of the Constitution, not from want of honor or virtue so much as from downright ignorance of the nature of coin, credit, and circulation." In other words, we set up the country right. You guys don't understand money and you need to figure out money if you're gonna get ahead in this world.

Amy: Yeah. Idiots, don't blame it on the government. It's on you you don't understand, right? How to stay out of debt and how to... Yeah.

Steve: I'd love to say we've gone so much further ahead, but go to McDonald's and see, do they have numbers on their cash registers? No. They got pictures of Big Macs and things like that. You know, we've gotta get better at financial education, but I digress.

Amy: Here's Thomas Jefferson on debt. "Never spend your money before you have earned it." So simple, yet so profound. And we've got all these payday lending programs and get your tax refund before it's in the mail. And you can buy money before you actually have the money to buy it. You can pay for it in installments, all the things, credit cards, leading people into these horrible financial situations. Don't spend it if you don't have it. Pretty simple yet so very true.

Steve: How about Ben Franklin? I mean, he's got more quotes than just about anybody who ever lived, I think. And he loved the concept of compound interest. And I've heard people say this is the best invention ever in the world. I'm not gonna use his quote because it is very hard to understand with old English.

Amy: Well, he's talking about shillings, turn to six shillings, turn to seven shillings, and now you've got three pence.

Steve: I like the translation where he says, "Money makes money, and the money money makes, makes more money." That's compounding. You know, if you've got a 3% interest rate and you just keep reinvesting and reinvesting, it's incredible. We call it the rule of 72. But if you're getting 7% on your money, that money doubles in 10 years. And that means the 5 grand becomes 10 doesn't become 15, it becomes 10 becomes 20. The 20 becomes 40, 40 becomes 80 every 10 years. It's incredible.

Amy: Some smart guys with some good advice that still stands today. Thanks for listening tonight. You've been listening to "Simply Money" presented by Allworth Financial here on 55KRC, the Talk Station.