Amy: Tonight, is there finally evidence that this could be working, yes, that Fed rate hikes are actually cooling down the economy? You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner along with Steve Sprovach. You know, Steve, I guess we can sum this up by saying we were wrong. Markets hate uncertainty, except when the surprise comes in a good way.

Steve: Good uncertainty.

Amy: Yes, exactly. Meaning inflation rates actually were better today than economists expected, and markets ate that with a spoon.

Steve: Oh, it was incredible. As soon as the news came out, markets just took off. I mean, I didn't pay attention to anything going on. The news came out at 8:30. And, you know, driving to work, turn on my computer, and futures, which means, you know, what is expected before we actually see stocks trade, futures, I thought it was a misprint, you know? They were up like 700, 800 points before the market opened. I'm like, "Oh, wow. Okay, let's read what the news was." And it was good. The inflation numbers were really a good surprise for a change.

Amy: So, let's talk about it. The yearly rate of inflation fell, right? It was 8.2%, now, it's 7.7% month to month. That's the lowest that we've actually seen since January when we weren't heading up the wrong direction. And it was much more than economists, or a little more, three-tenths more than economists were expecting.

Steve: Yeah, I'll take it.

Amy: So it was a surprise to the good side. But what the Federal Reserve is really looking at is core inflation, which is the cost of all goods when you pull out food and energy, which, let's face it, that's what we're all paying for.

Steve: Yeah, it sounds weird, but, you know, it takes out the crazy volatility. And if they pay attention to it, we got to pay attention to it.

Amy: Yes. And so that CPI rate rose three-tenths of a percent, Wall Street had been expecting about a half-a-point gain there. So, another surprise to the good side. So it was like several waves of really good news to the unexpectedly good side today.

Steve: Yeah, you said raise, I think you meant drop, but, yeah.

Amy: Drop, yeah. Sorry.

Steve: Yeah, slight kind of an important distinction, sorry to pick away at you.

Amy: Yes. No, good point.

Steve: But, no, the core rate of inflation, it was 6.6% in September, and, you know, a lot of analysts were getting excited because they were expecting it to come in a 10th of a percent lower to 6.5. I mean, that gives you an idea of how much we need good news and what they're grasping at, and it came in at 6.3%. So in other words, instead of dropping by a 10th of a percent, it dropped by three-tenths of a percent, and that's what everybody wanted to hear. It's not because you're gonna go to Kroger and things are gonna be cheap again. But the importance of it is, the Federal Reserve is seeing what they've been doing over the past 8, 9, 10 months starting to gain traction. It's starting to help bring inflation down and now you can start making a good case that at the next Federal Reserve meeting in December, maybe no more three-quarters of a point increases, maybe a half a percent. Maybe the Fed can talk about, "Hey, we're gonna pause in early 2023 and not raise rates for a while." And that's what markets want to hear.

Amy: Let's just keep this in perspective, though, because this has been such a weird year where we have almost gotten used to three-quarters of a point interest rate hikes. So half a percent is still way higher than normal, but it sounds like a major relief if that's what we see in December. And at the same time, to your point, the golfer inflation is 2%. We're still way north of that.

Steve: Yeah.

Amy: But at least we're moving in the right direction. And the problem for so long this year was every time the Federal Reserve would hike interest rates, then we would get a new round of labor data out. We would get a new round of inflation, and it was like nothing was moving. Nothing was changing. We're finally starting to see some cracks that show, hey, that lag time that we were saying it was going to take before the economy started reacting, we're seeing that reaction now.

Steve: Yeah, I mean, what are, we eight, nine months after the first rate hike increases? What's the lag time usually estimated as eight, nine months?

Amy: Six to nine months.

Steve: Yeah, exactly. You know, so there's nothing really unusual about what's going on. I think people just want it to happen quicker, you know, and, of course, everybody wants to get through this as quickly as possible. But when you're dealing with, you know, the economy the size of the United States economy, it takes a while.

Amy: Yes.

Steve: It's like trying to turn a supertanker around. Well, first you got to stop it. It's gonna take a while, and then you got to turn it, and then you got to start up in the opposite direction. It doesn't turn on a dime. I mean, it just takes a while. I'm gonna be a turd in a punchbowl for a second here, okay?

Amy: I love when you use that term.

Steve: There are some things that are a little concerning in the data that came out today. Everybody that drives a car knows that gas prices I've been working their way back up again. That's not a good sign. I hope it's not a trend. The one that bothers me, though, Amy, rents. I mean, rents went up for the month, 0.7%. I mean, that's a lot more, you know, everything else is dropping, but rents are still going up. And, you know, if you're paying rent, it's not pretty, it really isn't. And there's a lag time in that market also because leases are one-year leases. So, okay, if your landlord wants to raise rent, he's got to wait till your lease comes due. I'm hoping we're at the end of the road or close to the end of the road on that. And the other thing that I want to mention is, okay, this is good news and the Fed now has a better case for increasing rates only by half a percent of December, but they're still increasing rates by half a percent. You know, it doesn't make life that...it doesn't make it that much easier, but it's the trend that makes me excited.

Amy: Another exciting trend as we're looking at tonight what the Federal Reserve might do in December based on today's ratings, you're listening to "Simply Money" here on 55KRC. As we have this inflation number out, also jobless claims are on the rise, just a teeny, tiny, minuscule amounts, up by 7000. Still historically low, but again, it's just another kind of piece of data that if you're looking for signs that, is this working, well, it might be working.

Steve: Yeah. And, you know, here again, we're getting back to bad news is good news. The whole point of what the Fed is doing is trying to slow down the economy. Part of slowing down the economy is, well, you know what, they're gonna be some people out of work. I mean, we just saw Meta, the parent of Facebook, can 11,000 people. I mean, that's a lot of people.

Amy: Well, and on a personal level, I knew one of them. She had actually just left a job, started working there, had been there for 12 days, and then the mass layoffs came, so 12 days into it, right? And then you look about rounds. It's not just tech, right? We're starting to see other companies either saying hiring freezes or looking at layoffs. So, you know, we came from this place where it was the great resignation. And if you didn't like your boss or color of the paint on the wall in your office or whatever it was that you didn't like, you kind of have all these options on the table to go. I think and we've been saying for a while that window is closing. I think that window is just about closed at this point.

Steve: Yeah. I'll tell you what's interesting, though, is, you know, we saw the market open up crazy today. I mean, investors have been waiting for this kind of news for so long. And, you know, it just gets me back to thinking about when do the biggest, you know, we talk a lot about if you miss the 10 best days in 25 years, you miss a lot. And when do those best days happen? Usually coming off the bottom. You know? And market-timers out there, you know, they get so irritated? What do you mean we're not gonna do anything? What do you mean we're gonna sit on our hands? Well, maybe not totally sit on your hands and make some adjustments to the portfolio, but, you know, doing nothing is a decision. And when you have moves like this, the dust isn't settled. I mean, I'm not positive that we've seen the last bottom in the market, you know, we could retest it if next month's data comes in bad, you know? So it just gives just one more data point of don't try to jump in and out. Don't try to guess where the bottoms are. I don't know if October 1st was the bottom of the market during this bear market or a bottom. I mean, we thought mid-June was the bottom, and it proved to be just a bottom, and by the end of September, we found a new bottom.

Amy: Yeah.

Steve: You know, so we see these big jumps and all this volatility. Don't try to time it because if the big guys that have investment staffs being paid millions of dollars, if they can't do it, then don't think you can. You know, I can't, and I've done this for 40 years.

Amy: Well, I think when you talk about timing the market, there's a lot of people who are saying, "Well, I wouldn't time the market," right? That's what these big dogs do. But at the same time, what you don't realize is you have major reactions especially when it comes to money to two emotions, fear, and greed.

Steve: Yeah.

Amy: Most of this year, for those who are making just stupid financial decision that was based on fear, then you get a day like today, and all of a sudden, the greed kicks in, right? And, you know, what am I gonna do? I'm going to put this here, I'm gonna do that. Just stay the course, right? We had a stat on the show recently, and I thought it was super interesting. Most days when the market's up, we talk about them. It's 400s of a percent, right?

Steve: Right.

Amy: Days where you get major swings are few and far between, but that's why you wanna be in on those days, right?

Steve: Yeah.

Amy: You just never know.

Steve: Yeah. I mean, would you avoid yesterday, you know, expecting good numbers?

Amy: No. Why would you think? Yeah.

Steve: Yeah. I mean, lately, the trend has been worse than expected numbers.

Amy: Disappointing numbers that come out. Yeah.

Steve: You know, and what's really interesting is, you know, sometimes I'll get a call from somebody that's been worried and probably watching too much cable TV saying, you know, "I think I just gotta get out, it's driving me crazy." They always say the same thing. You're probably getting a lot of calls like this right now. No, no. I mean, the people that wanna do that are few and far between because most people have learned over the years from their advisors or their own experience that that's like the only bad thing to do, is jump out in try to get back in.

Amy: The worst thing.

Steve: Yeah. I think part of it is, and, you know, here's the old guy talking, but, you know, a lot of people, well, if you're under 35, you weren't an adult during 2008. So you haven't seen a really rough recession. And in 40 years, I saw, you know, I started in 1981, rough market kind of coming off of situation like we're coming off from now. 1987, okay. How about a 22% drop in the market in one day? You have no idea how many people wanted to jump out and did jump out.

Amy: That gives me anxiety thinking about it.

Steve: I know. And three months later, it was back to breakeven. You know, it was really back to where it was at the beginning of the year. 1999 to 2002, the tech bubble, that one was rough. That was three years. But if you stuck with it, you came out just fine. 2008, two years later, you're fine if you jumped out and, you know, eventually got back in, you very likely got crushed. So these things happen. You know, we're probably closer to the end than the beginning. But it's great news like this that came out this morning that gave me hope and just gave me one more reason to assume, "Okay, we're gonna keep batting 1000 on recoveries."

Amy: It was a good day, right? We'll take it. Here's Allworth advice. It appears that Fed rate hikes may be finally impacting the inflation rate. Don't get too high or too low, though, when the news causes major market fluctuations, stay the course, stick with your plan. Coming up, forget Black Friday, yet deals are already here? We're gonna look at some of them for you next. Plus, a surprise tax bill could be headed your way. We'll tell you what it is and how to get ready for it next. 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 listen to our show every single night, well, you can get our daily podcast, that way, maybe on the way to work the next morning or when you're at the gym, you can listen, and maybe you've got some friends who just need a little money help too, well, spread the word with them as well.

Search "Simply Money" on the iHeart app or wherever you find your podcast. Coming up at 6:43, nuances and confusion surrounding social security, why you can end up throwing away thousands if you don't know what you're doing. All right, Black Friday. For years, you know, it was a general assignment reporter that was like the...it was like the assignment every year. [crosstalk 00:12:59.106] Amy's Live at Meijer at 5:00 in the morning. You know, all the craziness. I don't even think for most people Black Friday is a thing anymore because stores have just started these deals so much earlier. It's almost like if you wait, you may not get what you want anymore.

Steve: It's not even waiting until after Thanksgiving. I mean, Walmart already kicked off, and they're doing their Black Friday deals online, and I'll bet you a lot of other retailers are right behind them. I'll tell you what one of the deals is that's out there. Have you ever seen these OLED TVs?

Amy: No.

Steve: Oh, my goodness.

Amy: Are they fancy?

Steve: They were. I remember a couple of years ago when we were buying a TV for our house for the basement, I was looking, and they were like six grand, but it was like better quality than walking outside and seeing stuff in the real world.

Amy: Wow.

Steve: I mean, it was just absolutely incredible. And I was thinking at the time, "Well, I'm not shelling out six grand, but they'll come down someday." They're coming down a lot, and now Walmart has got one of the big screens OLEDs for 1600 bucks. Before the sale, it was 2500. I mean, that's a deal. And these things are just, I have no idea how they do it. It's organic LEDs. I have no idea what that means, but it works.

Amy: But it works, the picture is amazing?

Steve: Yeah, exactly.

Amy: And, you know, we've got 85,000 teenagers who live in our house, and all of them have one air pod because they always lose the other one. Apple AirPods, there's a deal on those, Roombas, Samsung soundbar with a wireless subwoofer, Ninja pressure cookers. That's just to name a few, right? So there are deals out there and a lot of kind of big-name great ticket items that you might be interested in. So, you know, something to keep an eye out for. And there's no reason to wait. There's no reason to wait for Cyber Monday or Black Friday anymore because just deals are out there so early.

Steve: No. And one thing that, you know, we've talked about supply chain issues for so long. Well, they're starting to clear up a little bit. So these retailers, they're just chockfull of inventory. So there's gonna be some good deals out there. Check your retailer. I'll bet you they all jump the gun.

Amy: I wanna give you a heads-up now, right? It's been a year when probably every time you check your 401ks or your investment accounts, down, down, down. So then imagine getting a tax bill for taxes that you owe on gains this year. How does that sit with you?

Steve: I've seen this before. There's nothing like picking up your phone in February from a very, very happy person that says, "Hey, explain to me how come I have to declare gains on profits on an account that dropped substantially in a bad year." Okay, let's talk about that a little bit because I think a lot of people are gonna be surprised in February of '23 when, you know, they get 1099s like that. This is why I like exchange-traded funds, Amy.

Amy: Yes.

Steve: ETFs, exchange-traded funds, they're kind of a pared-down mutual fund where whatever they bought 20 years ago that's in the fund is probably still what they have today.

Amy: They let it ride, right?

Steve: Yeah, exactly.

Amy: It's not someone actively managing it, it's a passive investment. And we talk about actively managed funds, these are mutual funds, and there's someone who gets paid a gazillion dollars, they're usually very smart people with great credentials, who, almost on the daily, are buying and trading, and selling things based on, you know, I don't even know their horoscope or whatever it is. And the interesting thing is there's research after research out there that shows that often, these actively managed funds don't do any better than the ETFs, the exchange-traded funds, which are just kind of passively managed, right? No one is in there, you know, messing with them on a daily basis, but these mutual funds, as they buy and sell things within them, there could have been some gains this year that you might not even be aware of.

Steve: Yeah. And I'm not anti-mutual funds by any stretch. There are some good ones out there, but, you know, actively managed means they buy and sell. You're making a great point, I mean, there's somebody being paid a whole lot of money to, you know, sell at whatever profits they can generate. And, you know, even in a rough year like this, they probably had a few things they were able to sell. Well, that means that they may very well be declaring something called a capital gains distribution before the end of the year. Most mutual funds have declared it, some are waiting a little bit. If they're gonna have a capital gain, they're going to declare it relatively soon because it has to be paid out before the end of the year. And you can call the mutual fund company, you can call your advisor, you can call your custodian, there are lots of ways for you to find out, but it's probably not a bad idea to check your account if it's a taxable account. This doesn't apply to IRAs or 401ks. So, if you're worried about that, no, don't worry about it. But in a taxable account, you probably want to know where you stand so that, hey, you know, what, if you're gonna have to show $10,000, $20,000 in gains and pay tax on that, maybe you can harvest $10,000 or $20,000 of losses before the end of the year to match up against that to negate the big tax bill.

Amy: Just going to make that point. Right? Timing is everything, they always say. And at least in a year, if you will have gains, you also probably have plenty of losses to go around, which could really help smooth out that tax bill when it comes. I think the point here is understanding, right? Educating yourself, being prepared. This is just not the kind of thing that we would say, this is a fun surprise to get in the mail. You know, so kind of prepare yourself because if you do own mutual funds in a taxable account, which is money you can get your hands on at any point, and another kind of thing to think about here too is, if this is sold off in less than a year, you don't pay capital gains, you actually pay your regular income rate on average.

Steve: Ordinary income.

Amy: Yeah, which is often almost double.

Steve: It's a higher percentage.

Amy: Yeah, a lot higher than the capital gains rate. So just something to kind of have an eye on and be prepared for.

Steve: Yeah, it's not the time of year to just go to sleep and say rough year and everything else. This is a great month, your accountant probably isn't too busy. Just run the numbers, figure out what you need to do, bounce it off your account, and if you need to make some adjustments, do it before the end of the year.

Amy: Here's the Allworth advice. This is a great example of why you need to just understand that year-round tax planning is so important. Be working with a qualified professional, not just during tax season, that's tax preparation, right? This is the kind of thing that can make a difference and actually save you hundreds, if not thousands of dollars over the course of your lifetime. Coming up next, the top fall and winter maintenance projects, what you need to be doing around your house that are gonna save you money and headaches. And if you're thinking of selling that home anytime soon, definitely wanna get these things done. You're listening to "Simply Money" here on 55KRC THE Talk Station.

You're listening to "Simply Money," I'm Amy Wagner along with Steve Sprovach. It is the season, right? Fall is here, the holidays are around the corner, and yeah, the weather is changing, will be changing soon. So, what do you need to do to make sure that your home is ready for it? How can you take the best care of your home? Joining us tonight is our real estate expert, Michelle Sloan. She owns RE/MAX Time, as well as you can hear her real estate prowess every Sunday on "Sloan Sells Homes Open House," it's at 4:00 right here on 55KRC. There are certain things that we need to do this time every year. You know, I think it just gets busier toward this time of the year, you're planning, you know, meals, and you're planning holiday shopping, and all of that, but what do we need to slow down and focus on when it comes to our home?

Michelle: There's quite a number of things that you should do to button up your home for the winter. And so now's a great time before it gets too crazy. And like you said, the holidays, I'm looking at my calendar for November and December.

Amy: Yes.

Michelle: And it's already, almost every weekend is completely filled. So, you need to carve out some time to take a look at your major mechanicals inside your home. That is, the first thing I always say is, take a look at your furnace. If you have not had your furnace cleaned and checked, if you have not changed the filter on your furnace for a while, and you say, "I can't remember the last time I did that," now is the time to go ahead and make it a priority to make sure that your furnace is cleaned and checked because it's gonna help it run more efficiently. It's going to last longer. All of these things are so important. And you know what, if you have to replace that furnace, it's gonna be thousands of dollars. And who wants to do that? So a little bit of preventative maintenance is a big deal. And sometimes we just have to be reminded, "Oh, yeah, I forgot I have to do that."

Amy: And, you know, I'm thinking about it Michelle too, like, we just moved into a new home, and, you know, our trees have like three leaves on them each. They're tiny, tiny little trees. And as I'm driving around, you know, just jealous of everyone else's big beautiful trees, I'm also reminded, like, "Wait a second, it is a lot of work this time of the year, like getting these leaves up." And I think once you finally haven't like bagged into the curb, you think that's it, but we often forget about gutters and stuff like that.

Michelle: Absolutely. So, the one thing that we need to know this time of year and certainly before is that fall cleanup. Our trees, we had actually the most unbelievable fall. It was longer, I feel like, than ever. The colors were spectacular.

Amy: Yes. Nice.

Michelle: You know, it was so dry for such a long period of time. So, we had a beautiful, beautiful fall but, now we're paying the price. All of the leaves are down. And you want to make sure that you're raking them up, getting them to the curb, you wanna make sure that you wanna check your gutters to make sure that if they are full of leaves, before the snow starts to fly and before we get ice and, you know, heavy rain and stuff like that, you wanna get them out of your gutters because if you have your gutters filled with leaves and debris, number one, they'll start sprouting trees, which you really don't want in your gutters. It can also create like ice dams that will create problems inside of your home, it could rip your gutters completely off of your home. So, definitely take... Or if you have to hire somebody to clean out your gutters, which is, you know, certainly something that a lot of people will have to do, do it, but get it scheduled so that it is done before the snow flies because you're gonna have a hard time getting somebody out there if it's slippery, and wet, and cold, and icy. So, it is really important.

Amy: You're listening to "Simply Money" here on 55KRC. We are joined by our real estate expert, Michelle Sloan, talking about what we need to do to make sure our homes are ready for this upcoming winter season. We have also been talking a lot on the show, Michelle, about inflation. We're paying so much more for everything from grocery bills, to gas, to, yes, energy bills, which is, I think, why right now is a great time to look around our house before it gets to 20 degrees outside, which is my least favorite time of the year and say, "Okay, how can I make it less drafty? How can I cut out on these energy bills?"

Michelle: And it's not that difficult. So, the nice thing is, and, again, you have to take the time to do it or hire someone that will take the time to do it. But, you know, heat loss and energy loss through doors, windows, cracks in our home, it contributes to about 20% of our energy bill. So, if you're tight, you're gonna save 20%. If it's not and you've got, you know, little pockets of air coming and blowing through and drafty mist coming in and...you know, you're really throwing money out the door, you might as well just suck it right out. And so now's a great time to look at your home in a way that you don't usually look at it really closely because a lot of us just go ahead and pull into the garage, go into the house, and never really look at the outside of our home. So around doors and windows, you wanna make sure that all of the gaps are properly caulked.

Amy: It's funny that you say that. Just the other day, I was going out into my garage and then I pulled the door shut in front of me again and thought, "Oh, that's not good. I can see light around this door."

Michelle: Exactly.

Amy: Not what I want to see. Yeah.

Michelle: No, you don't wanna see light. There's also a little test that you can do to see if you have an issue or drafty issue. You can close a door or a window, put a little strip of paper in there. If you can pull that strip of paper out with no problem, then you have an issue. And you know what else can get in there is little mice that are looking for a nice...

Amy: I don't wanna think about what else can get in there.

Michelle: I know. And the bugs and the stink bugs and I have... There must be some sort of a little hole somewhere because I get stink bugs in my bathroom. They must be coming... I don't know where they're coming from. But those little buggers, I hate them.

Amy: Yeah.

Michelle: But they always end up... So I need to look around my house too to see how they're getting in. They don't need a lot of space, right? But so caulking and then weatherstripping. Weatherstripping is fairly inexpensive. Usually, it's a peel-and-stick kind of thing, otherwise, you could put it in a track. Again, you can hire a handyman or handywoman to help you with these issues, and it will save you money in the long run. Up to 20% on your heating bills, that could be a lot of money each and every month.

Amy: Well, when you think about the fact that we're going into the holiday shopping season, everything's gonna cost more. If you can save money on the energy bill to buy all the gifts or do whatever it is that you want to do, it's a win-win. How often are you able to have these conversations? You know, with someone who's even thinking about maybe selling their home in a few years, you know, like these are the kinds of steps right now to take to shore things up so that whether you're staying at home for years, or whether you're getting ready to put on the market, everything's good.

Michelle: Absolutely. Maintenance in your home is the number one way that you can actually keep increasing the value of your home. And so, you know, right now, like I said, if you're using the caulk and you have the weather-stripping on and you're making sure that your furnace is all clean and everything, it will cost a heck of a lot more if you let these items just sit idle. If you go ahead and you don't paint your trim when you need to before it gets to the point where all of that wood is completely rotten and you have to, you know, replace all of the trim. So many things in maintenance is not fun.

Amy: Sure.

Michelle: I'd rather be watching a football game or, you know, whatever.

Amy: Absolutely. Like cleaning of gutters, or...yes.

Michelle: Yeah, who wants to do that? But, you know, a couple of hours of prevention is definitely the way to go. It will help you get more for your home when it does come time to sell, and that's why I like to go through these things. You know, certainly, on a quarterly basis, there's always something you could be doing around the house.

Amy: Worth the investment of your time. Great insights, as always, from Michelle Sloan, our real estate expert. Of course, she owns RE/MAX Time. You can catch her show, "Sloan Sells Homes Open House," every Sunday at 4:00 right here on 55KRC. Do this maintenance. Make sure your house is ready for the holiday season for the winter just like you're getting your whole family ready. 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. You know, people are worried that they're gonna lose their job, of course, as the economy starts to slow down. So, we've got some important things we would say, hey, check these boxes, make sure you have these things done should maybe you end up being laid off, you'll be in much better shape then. Do you have a financial question you want us to answer? We've got a new way that you can talk directly with us. It's super easy. There's a red button you click on while you're listening to the show on the iHeart app. Just click on that button, record your question, it comes straight to us. We're gonna use it during our Ask the Advisor segment. And we just got one from a listener named Ken.

Ken: Hey, guys, let's talk about Social Security. In four years, I will be old enough to draw my full Social Security benefit. Now, I was told that I could, without penalty, still work, I make about 90 grand a year, and draw my full Social Security benefit. Is that true?

Steve: Yes, most likely, as long as you're talking about, when you say full Social Security, I'm assuming full retirement age. Yeah. And you'll hear FRA band-aid about whenever people are talking about Social Security. For most people, that's age 67. So, yeah, Ken, if you're gonna be drawing full Social Security for retirement age, that's where the income limitations go away. You can make $900,000 with no reduction in your Social Security benefit. Taxes, that's a little different story.

Amy: Yes, right. You have to plan for that. But let's talk about if you are already claiming Social Security and you're working or going back to work and you're not full retirement age, because I think this is also a really confusing thing for people. So, if you're claiming, and many people do, claim as soon as you cross that line to 62, if you're working and you make above a certain amount, and it's not a lot, you could get, it was over $19,560, then that money is reduced for every $2 over that limit, Social Security is gonna hold $1 back.

Steve: Yeah. And that's why when people, you know, get laid off or retire early, maybe at 62, and they ask me, "Should I start collecting my Social Security?" My first question is, "Well, are you retired, or are you, you know, is there a possibility if a job falls in your lap that you just love, you might go back to work?" "I don't know, I don't want to say never." Well, that's an important question for you to answer first.

Amy: Yeah.

Steve: It really is because let's say you retire at 62, you draw Social Security, and you get this consulting job that pays you lots of money for very little time involved. Okay, the limitation, like you said, is only $19,560 bucks on earned income. So, if they pay you 40 or 50 grand, you may see a good chunk of that benefit wiped out, you know?

Amy: Yeah.

Steve: So, I tell people, why don't you wait until you're absolutely positive you're not gonna work anywhere before you file for Social Security? Play it a little bit on the safe side. It's not the end of the world if that happens. My sister did it, she had a reduced benefit until she retired, retired. And then she starts collecting full Social Security again. So, it's just something to think about on income limitations.

Amy: We have a family friend who was taking Social Security, had been for a couple of years. It was before her full retirement age. And then she got this job offer that was really interesting to her. It was at this historic home. They wanted her to kind of run it and all these event planning things and fundraising. And it was super exciting to her, and she said, "Okay, I figured out if I work just a few hours a week, right? It'll keep me below that threshold." She ended up working so much more than that, right? But it was, you know, she didn't want it to impact her Social Security benefit. And so, ultimately, she ended up working for free for a lot of the time because she was putting all these hours into it.

So, just make sure you understand what you're getting to. I also wanna mention just one caveat here, too. If you are in a place where you do go back to work after you start claiming Social Security, it's not that Social Security keeps that money. It's not that you lose that benefit ultimately. Once you stop working, they start paying out, or once you reach full retirement age, they start paying back out that money that they had held back when you were working, it's just paid out over the lifetime of that benefit, right?

Steve: Exactly. Okay. So, we've established if you draw Social Security before full retirement age, there are limitations on income. After full retirement age, no limitations on income, but what is income? Okay, it's interesting, Social Security has a different definition of what is earned income that counts against that $19,560 limitation that's different from the IRS. If you take distributions in retirement from your IRA, as an example, yeah, that's earned income, you're gonna pay tax on it. It doesn't count against that $19,000 limit on Social Security benefits.

Amy: This is like a paycheck.

Steve: It's a paycheck.

Amy: Yes.

Steve: It's earned income from work, okay? So, that's an important distinction. I didn't even think that some people might, you know, misunderstand this until like, you know, I had a client, "I'm not sure I want to take money out this year because that'll put me over the limit." "What limit?" "The Social Security limit." "Ah, okay." So, let's get that out of the way. If you work and earn income from that employment, yes, that may very well count against the limitation, distributions from IRAs, no.

Amy: Yeah. And, Ken, another thing I think that's worth mentioning, right? You said you're four years away likely from your full retirement age, you know, and then would your Social Security benefit be impacted by how much you're making? No, but for every year beyond your full retirement age, up to the age of 70 that you don't claim that Social Security benefit, it's a guaranteed 8%. And, listen, in years like this year, guaranteed 8% sounds pretty darn good. So, just file that away. You've got some time to figure it out. But it might make sense to you and for you to wait beyond that full retirement age to claim. So, lots to think about here. And just a reminder, right? If you've got a question like Ken's about Social Security, about financial planning, about the advisor you're working with, anything that comes down to money, well, we've always got answers. Just go to the iHeart app where you're listening to us. There's a red button right there, you can click on it, your question comes straight to us.

Steve: It scares me you don't know my friends. I'm very nervous right now.

Amy: If you know Steve Sprovach, please, please reach out to us because I would really like to hear from you. Coming up, are you, or maybe someone you know, just worried about losing their job right now? Lots of talk about a recession, we're gonna help you prepare for any eventuality. That's next. You're listening to "Simply Money" here on 55KRC THE Talk Station. You're listening to "Simply Money" presented by Allworth Financial. I'm A my Wagner along with Steve Sprovach. You know, every once in a while, we need to do a segment not to scare you, but just to prepare you. Lots of talk about a recession coming. You know, we don't think that the sky is falling, but we do also know that when a recession comes, people lose jobs, right? Companies' profits go down, and as a way to just make sure that the numbers look good, people get laid off. And we've already started to see that, especially over the past few weeks in the tech sector.

Steve: Yeah, no question. I mean, Meta, Facebook's parent, 11,000, 13% of their workforce. And I think, you know, is there gonna be a recession first quarter of '23? Yeah, a good possibility. I don't know. I mean, there's still a possibility of a soft landing. The numbers that came out today for inflation were very encouraging. But let's be realistic, you know, when the Fed talks about there has to be some pain, what they're talking about is people are gonna lose their jobs. So, yeah, what do you do? Well, number one, get those unemployment benefits. If you got laid off, get your money, it's coming to you.

Amy: Immediately.

Steve: Immediately, yeah.

Amy: And I think a lot of people, because so many people were laid off at the beginning of the pandemic, especially if you were in retail, or restaurants, the service industry, and wonder like, "Wait, if I get laid off again, do I qualify?" Yeah, you likely qualify for those benefits you've been paying back into the system. I think a huge one too is understanding immediately what your options are for health insurance.

Steve: Oh, it's scary, isn't it?

Amy: Yes.

Steve: I mean, the money involved is crazy. I just signed up for 2023 benefits.

Amy: Yup, me too.

Steve: And yeah, it shows, you know, what the employer's contribution is. It's a ton. I mean, what you're paying, which is a lot, is a fraction of what that policy actually costs. So, one of your choices on health insurance is COBRA, C-O-B-R-A. And that, you can actually use COBRA health benefits for up to 18 months. And that is keeping your existing plan that you had when you were working for the company still be your plan. The problem with COBRA is, it's probably your most expensive choice, yet so many people say, "Well, I like that plan. I'll just stick with it," and then they get sticker shock when they get billed on it. So, you wanna look at alternatives.

Amy: Yeah, with COBRA, you're paying 100% of that benefit, right?

Steve: Yup.

Amy: You're not sharing it with a boss. You're not understanding how much of the tab that the boss picked up until you get that bill forward too. Yeah. So, maybe going on the exchange might be your best option, but just understand it, and ask HR, right, when you get laid off, how long will my health insurance continue to last to cover me? That's really important to know. And then it's kind of getting back into understanding, okay, looking for a job again, what does this look like? Maybe it's been a while since you've had to make a resume, right?

Steve: Yeah, and networking still counts. Even though everything's online, if you've got connections, they might be able to get...

Amy: I still think it's the biggest factor.

Steve: It makes a ton of sense.

Amy: Yes. So, yes, networking is good, putting the word out. And also, though, you can't have just one resume that works for everything. You've got to figure out a way to make sure that you're tailoring that resume to each posting.

Thanks for listening tonight. Tune in tomorrow. We are talking about what you should be doing and where you should be at with your investment plan at different stages of your life. You've been listening to "Simply Money" by Allworth Financial here at 55KRC THE Talk Station.